United Housing Foundation, Inc. v. Forman

PETITIONER:United Housing Foundation, Inc.
LOCATION:Republic of Cuba

DOCKET NO.: 74-157
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 421 US 837 (1975)
ARGUED: Apr 22, 1975
DECIDED: Jun 16, 1975

Daniel M. Cohen – for petitioners in No. 74—647
Louis Nizer – for respondents in both cases
Paul Gonson – for the Securities and Exchange Commission, as amicus curiae, by special leave of Court
Simon H. Rifkind – for petitioners in No. 74 157

Facts of the case


Media for United Housing Foundation, Inc. v. Forman

Audio Transcription for Oral Argument – April 22, 1975 in United Housing Foundation, Inc. v. Forman

Audio Transcription for Opinion Announcement – June 16, 1975 in United Housing Foundation, Inc. v. Forman

Warren E. Burger:

The judgment and opinions of the Court in No. 74-157, United Housing Foundation against Forman, with a companion case, 74-647, New York against Forman will be announced by Mr. Justice Powell.

Lewis F. Powell, Jr.:

This case here on certiorari to the Court of Appeals for the Second Circuit involves a large New York cooperative housing project known as Co-op City.

This nonprofit project was financed and constructed under a New York law designed to provide low cost cooperative housing for low income tenants.

The project was heavily subsidized by long term low interest mortgage loans and tax exemptions.

Co-op City solicited perspective tenants by an information bulletin which described the project and included estimates of construction cost and monthly rental charges.

To acquire an apartment, a perspective tenant had to buy 18 shares of stock in the project for each room in the apartment which he was to occupy.

Construction cost greatly exceeded estimates resulting in substantial increases in the rental charges.

The plaintiffs in this suit are tenants who claimed that the information bulletin contained misstatements of fact.

The defendants are the various parties that sponsored, constructed, and now operate Co-op City.

The suit was brought in a federal court on the theory that the sale of shares was subject to the anti provision — antifraud provisions of the Federal Securities Acts.

The sole issue in the case before us is whether these shares constitute securities within the meaning of the federal Acts.

Jurisdiction of the federal court turns on this question.

The Court of Appeals answered the question in the affirmative.

We take a different view.

The plaintiffs were not investing in stock with the view to making a profit.

They were acquiring the right to occupy housing on exceptionally favorable terms.

These shares possessed none of the characteristics of instruments commonly known as securities.

Accordingly, we conclude that they are not within the purview of the Federal Securities Acts.

We reverse the judgment of the Court of Appeals.

Mr. Justice Brennan has filed a dissenting opinion in which Mr. Justice Douglas and Mr. Justice White have joined.

Warren E. Burger:

Thank you Mr. Justice Powell.