## Facts

- C & M Petroleum Producers, Inc., a Georgia corporation, offered and sold fractional interests in Ohio oil and gas wells to purchasers in Georgia and Florida.
- The purchasers (including John C. and Lucy B. Meyers) paid $23,750 total for the interests.
- C & M used interstate means (including mail and telephone) to make the offers, sales, and deliveries.
- No registration statement was filed with the SEC, despite the federal registration requirement for such sales.
- After being informed the offerings violated federal and Georgia securities laws, C & M sent purchasers a letter dated May 27, 1969 offering to repurchase the interests if accepted within ten days.
- The purchasers did not accept within the ten-day period and sought additional information about the value of the interests.
- The purchasers continued to hold the interests and received income from the wells (reported as $1,472.91).
- The purchasers sued under Securities Act § 12(1) (now § 12(a)(1)) for rescissionary recovery: consideration paid plus interest, less income received, upon tender of the securities.

## Issues

1. Whether purchasers can waive the statutory recovery right provided by Securities Act § 12(1) for sales of unregistered securities, in light of the Act’s anti-waiver provision in § 14.
2. Whether purchasers’ failure to accept an issuer’s repurchase offer within a self-imposed ten-day limit, along with continued ownership and receipt of income, bars a later § 12(1) action by waiver or estoppel.

## Decision

- The Fifth Circuit reversed the judgment for defendants and remanded with directions to enter judgment for plaintiffs for the recovery specified by § 12(1).
- The court held the purchasers did not waive their § 12(1) right of recovery.
- The court concluded that the Securities Act’s anti-waiver rule prevented treating the purchasers’ inaction or conduct as a forfeiture of statutory protection.
- The court held the issuer’s repurchase letter, because it was conditioned on a ten-day acceptance period, did not constitute an unconditional offer that could bar the statutory remedy.

## Legal Principles

- A seller who offers or sells a security in violation of the Securities Act’s registration requirement is liable under § 12(1) to the purchaser for rescissionary recovery (consideration paid plus interest, less income received) upon tender, or damages if the purchaser no longer owns the security.
- Securities Act § 14 voids any condition, stipulation, or provision that binds a purchaser to waive compliance with the Act; statutory rights under the Act are not defeated by purported waiver arrangements.
- An issuer’s conditional, time-limited repurchase offer cannot operate as a waiver or estoppel barring a purchaser’s § 12(1) remedy for an unregistered sale.
- A purchaser’s statutory election of remedies cannot be unilaterally limited by an issuer’s self-imposed conditions that are inconsistent with the Act’s protective scheme.

## Conclusion

The Fifth Circuit held that purchasers of unregistered securities retained their § 12(1) rescissionary remedy despite not accepting a ten-day repurchase offer and despite receiving income from the investment, because the Securities Act prohibits waiver of compliance and the issuer’s conditional offer could not bar statutory recovery.


Meyers v. C & M Petroleum Producers, Inc., 476 F.2d 427 (5th Cir. 1973)