Brown v. E.F. Hutton Group, Inc.

Kay Brown and other unsophisticated investors (plaintiffs) invested in an oil and gas limited partnership after E.F. Hutton Group (Hutton) (defendant) account executives orally described the investment as low-risk; the accompanying brochure and prospectus, however, characterized the investment as low-risk relative to typical oil and gas deals while explicitly referring investors to a lengthy "Risk Factors" section detailing that the properties might never produce oil or gas as anticipated or at all, and the prospectus cover warned that no representations beyond those in the prospectus itself were reliable. After the investments became worthless, the investors sued Hutton under § 10(b) of the Securities Exchange Act on an unsuitability theory; the district court granted Hutton summary judgment, and the investors appealed.