Plaintiff asserted claims under, among other things, the federal securities laws, in connection with its investment in Houma Sports Entertainment, LLC (LLC), the parent company of an arena football team. Plaintiff claimed that at the time it acquired its interest in the LLC, Defendant Terrebonne Parish Consolidated Government (TPCG), the owner and operator of the venue where the team played, provided it with false projections and misrepresented that the LLC was operating profitably when, in reality, it was operating at a substantial loss.

Defendant moved for the summary judgment dismissal of the federal law securities claims, arguing that the LLC membership interests at issue here are not “securities” within the meaning of the securities laws. In denying the motion, the Court first noted that the term “security” is broadly defined in the federal statutes, and includes, among other things, an “investment contract.” The Court then found that “investment contracts” include a contract pursuant to which a person invests money in a common enterprise with the expectation that (i) there will be profits, and (ii) “the efforts made by those other than the investor are the undeniably significant ones... which affect the [profitability] of the enterprise.”

Defendant argued that Plaintiff’s investment did not qualify as an “investment contract,” because Plaintiff had exercised significant control over the investment, including participating in the negotiations for the purchase of the arena football franchise and signing various contracts and checks on behalf of the LLC. The Court disagreed, finding that a genuine issue of material fact existed regarding Plaintiff’s role in the management of the LLC and the significance of Plaintiff’s efforts to the success of the LLC relative to the efforts of third parties. Among other things, the Court noted evidence in the record that reflected that another individual appeared to have a substantial role in the franchise negotiations and in the management of the LLC. (Sudo Properties, Inc. v. Terrebonne Parish Consol. Government, 2008 WL 2623000 (E.D.La. July 2, 2008))