## Facts

- Stephen Murphy founded and controlled Intertie, a California company involved in financing, constructing, and managing cable television systems.
- Intertie promoted roughly 30 limited partnerships to which it sold cable systems, typically financed with cash down payments and nonrecourse promissory notes, and then leased the systems back.
- Intertie, through this program, raised about $7.5 million from more than 400 investors.
- Most partnership interests were sold through a broker-dealer, International Securities Corporation.
- The SEC sued alleging (1) unregistered offers and sales in violation of Securities Act § 5 and (2) antifraud violations, including Rule 10b-5.
- The district court granted summary judgment on the registration claims, held a bench trial on fraud (Murphy presented no evidence), and entered a permanent injunction barring future violations and requiring Murphy to mail the order to present and future business associates and investors.
- Murphy appealed the registration ruling, the permanent injunction (including the mailing requirement), and asserted procedural and due process errors, including denial of his Rule 41(b) motion to dismiss after the SEC’s case-in-chief on fraud.

## Issues

1. Whether the limited-partnership interests were securities and were sold in an unregistered public offering in violation of Securities Act § 5, or instead qualified for the § 4(2) private-offering exemption and then-applicable Rule 146.
2. Whether the sales across the roughly 30 partnerships should be treated as separate offerings or as a single integrated offering for registration and exemption analysis.
3. Whether the district court properly entered permanent injunctive relief, including requiring Murphy to mail the injunction order to associates and investors.
4. Whether summary judgment on registration and the denial of Murphy’s Rule 41(b) motion on the fraud counts violated due process or otherwise required reversal.

## Decision

- The Ninth Circuit affirmed the permanent injunction and the judgments on both the registration and antifraud claims.
- The court held the limited-partnership interests were securities and that the sales were properly analyzed as one integrated offering rather than as isolated partnership offerings.
- Treating the distribution as integrated, the court held it did not qualify for § 4(2) or Rule 146 because the aggregated offering involved hundreds of investors, substantial capital raising, broker-dealer solicitation, and inadequate access to issuer financial information.
- Summary judgment on the registration violations was proper because the asserted disputes were not material to the exemption analysis.
- The permanent injunction, including the mailing requirement, was within the district court’s equitable discretion.
- The district court did not err in denying the Rule 41(b) motion, and Murphy failed to show that the registration ruling improperly affected the fraud adjudication.

## Legal Principles

- Limited-partnership interests offered and sold to investors can constitute securities subject to federal registration and antifraud provisions.
- For Securities Act § 5 and exemption analysis, multiple related transactions may be treated as a single integrated offering when they are part of a common plan of financing and distribution.
- The § 4(2) private-offering exemption and related safe harbor conditions require a genuinely nonpublic distribution, including limited offerees, appropriate investor sophistication or access to information, and offering practices consistent with a private placement.
- Use of broad solicitation channels and distribution to a large number of investors supports characterization as a public offering requiring registration.
- In SEC enforcement actions, courts may grant forward-looking equitable relief reasonably aimed at preventing future violations, including disclosure-type requirements tied to the injunction.

## Conclusion

The Ninth Circuit upheld liability and injunctive relief against Murphy, concluding that Intertie’s partnership sales functioned as a single integrated, unregistered public offering that did not satisfy private-offering exemptions, and that the district court acted within its discretion in ordering prophylactic measures and rejecting Murphy’s procedural challenges.


Securities & Exch. Comm'n v. Murphy, 626 F.2d 633 (9th Cir. 1980)