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partners are subject to change and that such failure misleads a reasonable investor to believe that three specific Class A limited partners would manage the Partnership indefinitely; and (2) the failure to disclose that the Class A partners are able to transfer their partnership interests to one another. The debtor objected to the proofs of claim.
Issues: Whether there were material omissions in the Partnership's prospectus so that the Investors may rescind their investments.
Rules: "An omission of a fact is material if 'there is a substantial likelihood that a reasonable investor would consider it important in deciding to invest.' Statements of opinion or "puffing" are to be expected of securities dealers and are generally not actionable under the TSA... 'an omission is material if there is a substantial likelihood that proper disclosure would have been viewed by a reasonable investor as 'significantly altering the total mix of information made available.' ... 'the focus under the Texas Securities Act is on the conduct of the seller or issuer of securities, i.e., whether they made a material misrepresentation, not on the conduct of individual buyers.' Thus, it is 'no defense that the investor could have discovered the truth by exercising ordinary care.' An investor is, however, held to a reasonable investor standard. ... The test for the reasonable investor is an objective one, which inquires 'whether the information disclosed would have been misleading, on those points about which the information's adequacy is questioned, to a reasonable potential investor who read the information as a whole.'" (citations omitted).
Holding: The prospectus did not materially omit the information for which the Investors seek rescission. The debtor's objection is granted.
Reasoning: The court first provided an exhaustive summary and quoted from a number of sections of the Partnership's prospectus. Ultimately, the court felt that the language of the prospectus itself, along with the General Partner's partnership agreement that was attached to the prospectus, "expressly notifies potential investors that the General Partner, and not the other Class A limited partners, has exclusive control over the management decisions [of the Partnership]." Additionally, because the prospectus specifically qualified any of its statements to the language of the General Partner's partnership agreement, which was provided to the Investors, the court said that "a reasonable investor would have reviewed the Partnership Agreement and would have read and understood the actual language of the buy/sell provision contained therein." In fact, the court found that the prospectus itself accurately described the provisions in the partnership agreement allowing Class A investors to buy or sell their interests in the General Partner to each other. Thus, "a reasonable investor, upon reading this provision of the prospectus, would have understood that the Class A limited partners may transfer partnership interests between themselves and that such a transfer could result in the Class A units being consolidated in the General Partner as a Class A Unit holder." And as for the Investor's second argument, the court likewise found that the prospectus accurately described, to a reasonable investor, that "although some of the Fund General Partner's management decisions are subject to the approval of the Investment Committee, the Fund General Partner may select the persons comprising that committee. That the Memorandum does not explicitly state that the Fund General Partner may select 'employees of Perry Properties' to comprise the Investment Committee does not constitute an omission of material fact. It is enough that the Memorandum informs potential investors that the Fund General Partner has unfettered discretion to appoint members of the Investment Committee."
Facts: LTV Steel Company declared chapter 11 bankruptcy in 2000. After LTV became administratively insolvent, the UST appointed the Official Committee of Administrative Claimants (the "ACC") and, in September 2005, the bankruptcy court issued a standing order (the "Standing
