# Matek v. Murat > Court of Appeals for the Ninth Circuit · November 25, 1988 · 862 F.2d 720 URL: https://www.frixlaw.com/law-library/cases/8966054 ## Case - **Full name:** Budimir MATEK Eleanor Matek Martin Matek Marijan Dusevic Mario Forgiarini Mary L. Forgiarini John Zivkovic Judith Zivkovic Vinco Marich Cvita Marich, and Rex Martin Carolyn Martin David A. Hill Diane S. Hill Ruth Thayer v. Joseph MURAT Veronica M. Murat Chester J. Hummel Celia A. Hummel Ronald A. Lebetsamer Minor, Popeny & Lebetsamer Port Welding & Machine Works, Inc. Profit Sharing Trust Fund West Coast Diesel, Inc. Orange Production Credit Association, Defendants-Appellees Budimir MATEK Eleanor Matek Martin Matek Marijan Dusevic Mario Forgiarini Mary L. Forgiarini, and Rex Martin Carolyn Martin David A. Hill Diane S. Hill Ruth Thayer v. Joseph MURAT Veronica M. Murat Port Welding & Machine Works, Inc. Profit Sharing Trust Fund West Coast Diesel, Inc., Defendants-Appellants Budimir MATEK Eleanor Matek Martin Matek Marijan Dusevic Mario Forgiarini Mary L. Forgiarini John Zivkovic Judith Zivkovic Vinco Marich Cvita Marich, and Rex Martin Carolyn Martin David A. Hill Diane S. Hill Ruth Thayer v. Joseph MURAT Veronica M. Murat Chester J. Hummel Celia A. Hummel Ronald A. Lebetsamer Minor, Popeney & Lebetsamer Port Welding & Machine Works, Inc. Profit Sharing Trust Fund West Coast Diesel, Inc. Orange Production Credit Association, Defendants-Appellees Budimir MATEK Eleanor Matek Martin Matek Marijan Dusevic Mario Forgiarini Mary L. Forgiarini Rex Martin Carolyn M. Martin David A. Hill Diane S. Hill Ruth Thayer v. Joseph MURAT Veronica M. Murat Chester J. Hummel Celia A. Hummel Port Welding & Machine Works, Inc. Profit Sharing Trust Fund West Coast Diesel, Inc., and Ronald A. Lebetsamer Minor, Popeney & Lebetsamer, Defendants-Appellants Budimir MATEK Eleanor Matek Martin Matek Marijan Dusevic Rex Martin Carolyn M. Martin David A. Hill Diane S. Hill Ruth Thayer v. Joseph MURAT Veronica M. Murat Port Welding & Machine Works, Inc. Profit Sharing Trust Fund West Coast Diesel, Inc., and Ronald A. Lebetsamer Minor, Popeney & Lebetsamer, Orange Production Credit Association, Defendants Budimir MATEK v. Joseph MURAT Veronica M. Murat Port Welding & Machine Works, Inc. Profit Sharing Trust Fund - **Court:** Court of Appeals for the Ninth Circuit - **Decided:** November 25, 1988 - **Citations:** 862 F.2d 720; 1988 WL 124305 - **Precedential status:** Published - **Opinion:** Concurrence by Canby - **Judges:** Canby, Pregerson, Wiggins - **Cited by:** 38 later opinions in the Frix Law Library ## Citator (automated) - **Red flag:** Abrogated on other grounds by Holden v. Hagopian, 978 F.2d 1115 (1992). - Negative treatments: 3 - Distinguished by: 0 - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/8966054 ## How later opinions describe it (automated extraction) - acknowledging promoters’ concerns that “an interest marketed as a general partnership might thus be transformed into a security simply because its holder is not diligent or knowledgeable in exercising his rights under the agreement” - finding a general partnership not a security where no 12 USSEC V. SCHOOLER practical impairment to exercising partnership authority had been shown - applying Williamson test and holding no security alleged, as partnership agreement "provided the plaintiffs with sufficient power to protect their investments," and they "made no showing and are unable to show they were prevented from exercising their powers under the agreement" ## Opinion text CANBY, Circuit Judge, concurring: I agree with everything Judge Wiggins has said about the pendent claims, the surety bonds, and costs. I also agree with the result reached on the securities question, but my analysis differs from that of the majority. The majority properly rejects a “bright-line” rule on the ground that “substance and not form controls.” Supra, at 727. It also states, again correctly, that economic realities must govern: A nominal general partnership created pursuant to state law may in reality operate more like a limited partnership, the functional equivalent of a public offering of preferred stock. Id. at 727. I find considerable tension, however, between this rejection of formalism and the majority’s holding that appears to give controlling effect to the terms of the partnership agreement. Thus, the majority rejects the last two prongs of the test of Williamson v. Tucker, 645 F.2d 404, 424 (5th Cir.), cert. denied, 454 U.S. 897 , 102 S.Ct. 396 , 70 L.Ed.2d 212 (1981), which permit consideration of the investor’s lack of knowledge and experience, and his or her dependence upon some unique ability of the promoter or manager. Supra, at 731. To me, it is difficult to determine whether a general partnership may “in reality operate” like a limited partnership unless I am permitted to look beyond the terms of the agreement itself. Such evidence may have an important bearing on the nature of the interests that were offered and sold, and the expectations of the parties at the time they entered the transaction. See Williamson, 645 F.2d at 424, n. 14 . While I agree that “an investor who claims his general partnership ... interest is an investment contract has a difficult burden to overcome,” id. at 424 , I would not preclude the investor from meeting that burden with facts extrinsic to the partnership agreement. In *735 deed, we considered such evidence in Deutsch Energy Co. v. Mazur, 813 F.2d 1567 (9th Cir.1987) (general business expertise of investor), and Stone v. Millstein, 804 F.2d 1434, 1439 (9th Cir.1986) (investor’s actual participation in business), although in both cases we concluded that the facts established that no security was involved. Perhaps the majority’s rule is not so absolute as it seems. The opinion states that “appellants made no showing and are unable to show that they were prevented from exercising their powers under the agreement.” Supra at 731. The opinion also seems to suggest that general partnership interests may be treated as securities if they are “only masquerading as general partnership interests.” Id. at n. 8. To show that the investor is unable to exercise powers granted on the face of the agreement, or that the agreement is “masquerading,” it would seem necessary to resort to extrinsic facts. I would make that implication explicit, and would not exclude whole categories of evidence such as the lack of sophistication of the investor, or reliance on the expertise of the promoter or manager. I concur in the result reached by the majority, however, because I agree with its statement that plaintiffs failed to meet the requirements of the Williamson test. Supra, at n. 15. The undisputed evidence of plaintiffs’ sophistication, participation, and exercise of the powers of partnership refutes their contention that they entered the partnership as essentially passive investors. Id. Under the rule I would apply, plaintiffs have not borne the heavy burden of showing that their interests were other than the general partnerships set forth in the agreement. Their securities claim accordingly fails. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/8966054. Public record. Not legal advice.