Grenader v. Spitz

Rule of Law:

For the purposes of the intrastate offering exemption under § 3(a)(11) of the Securities Act of 1933, the residence of a general partnership is its principal place of business, not the individual residences of its general partners.

Facts:

• A partnership, Three Forty Five Management Co., was formed by Milton Spitz, Henry Spitz, and Jerome Spitz to sponsor a cooperative conversion of an apartment building in New York.
• The partnership's principal place of business was in New York.
• Two of the general partners, Milton and Henry Spitz, were residents of New York.
• The third general partner, Jerome Spitz, was a resident of California.
• The partnership offered and sold shares in the cooperative corporation only to residents of New York.
• The partnership did not register the offering of shares with the Securities and Exchange Commission (SEC), believing it was exempt.
• The offering statement for the cooperative did not disclose Jerome Spitz's California residency, the profits of the partners, or certain details about the building's depreciation.

Procedural Posture:

• Various tenants filed a lawsuit against the partnership sponsor (Three Forty Five Management Co.) and the cooperative corporation (34557 Corporation) in the U.S. District Court for the Southern District of New York.
• The complaint alleged violations of federal securities laws, including failure to register the offering, and violations of state law.
• The defendants filed an answer asserting as an affirmative defense that the offering was exempt from registration under the § 3(a)(11) intrastate exemption.
• The plaintiffs filed a motion for partial summary judgment, seeking to strike the defendants' affirmative defense and obtain a ruling in their favor on several claims as a matter of law.