Koch v. Hankins,

928 F.2d 1471 (9th Cir. 1991)

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Nature of the Case

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Facts

The parties involved were primarily doctors and dentists who invested between $23,000 and $500,000 each in general partnerships formed to purchase land for the production of jojoba. Ds included a number of Ps' accountants and lawyers who promoted the partnerships. The investments were primarily undertaken in part for tax purposes and allegedly were promoted to the investors on that basis. There were 35 different general partnerships, and each partnership purchased 80 acres of land from selling corporations owned by the promoters. There was a total of 2,700 acres and 160 investors involved in all the various general partnerships. The investors claimed that the structure of the general partnerships was just a dodge as it was impracticable to farm jojoba in 80-acre parcels and that each was merely part of a 2,700-acre plantation. The partnerships shared common management contracts, and purchase agreements, a common field office, and under a common management paid by cooperative funds paid for that purpose between the 35 general partnerships. The operation and structure of each partnership was basically boilerplate agreements. Ds claimed that they were separate entities and that there was significant evidence of various activities by the general partners in each of their partnerships. Ps claimed that their roles were essentially passive and there was evidence that none of them had any experience in running a farm and even the operating general partners were merely conduits for materials created by the promoters. The investments proved unsuccessful, and this lawsuit was the result. The district court ruled on summary judgment that the contracts were not investments and Ps appealed.