Xxxxx Today. In 2004, the United States Supreme Court again applied the Xxxxx test in SEC x. Xxxxxxx.159 In Xxxxxxx, business owners purchased payphones from ETS Payphones, Inc. (ETS).160 In addition, the buyer entered a lease, management agreement, and buyback agreement with ETS.161 ETS selected the site, installed the phone, arranged for phone service, collected the coins, handled repairs, and generally maintained the payphone.162 The buyer received a guaranteed eighty-two dollars per month, plus “a [fourteen percent] annual return” on his or her investment.163 The buyback agreement, into which a majority of buyers entered, provided that the buyer could return the phone within 180 days and ETS would refund the purchase price.164 ETS’s solicitation materials trumpeted “‘an exciting business opportunity…[with] the potential for ongoing revenue generation that is available in today’s pay telephone industry.’”165 In a unanimous decision, the Court held that the scheme constituted an investment contract.166 The case focuses on investor protection and “in tone and analysis reads very much like Xxxxx.”167 The Court began its analysis with an explanation of the legislative intent surrounding the Securities Acts, namely “‘to regulate investments, in whatever form they are made and by whatever name they are called.’”168 The Court also highlighted Congress’ reasons for including the term 159 540 U.S. 389 (2004). 160 Id. at 391 (explaining that Xxxxxxx Xxxxxxx was the CEO of ETS). 161 Id. 162 Id. at 391-92. 163 Id. at 391. 164 Id. at 392. 165 Id. 166 Id. at 397; see also 2 XXXXX XXXX & XXXX XXXXXXXX, SECURITIES REGULATION 512–16, 514 (Supp. 2005) (noting that Justice X’Xxxxxx, “perhaps in an unconscious bow to post-Enron jurisprudence,” wrote the decision with a populist tone). 167 2 LOSS & XXXXXXXX, supra note 166, at 516. 168 Xxxxxxx, 540 U.S. at 393 (quoting Reves x. Xxxxx & Xxxxx, 494 U.S. 56, 61 (1990)). “investment contract” in the definition of “security,” noting that Congress chose this term in light of state courts’ broad interpretation of the same term in their blue sky laws.169 The issue facing the Court was whether an investment scheme that “offered a contractual entitlement to a fixed, rather than a variable, return” constituted a security.170 In reaching its conclusion, the Court refused to “read into the securities laws a limitation[,] not compelled by the language[,] that would…undermine the laws’ purposes.”171 The Court explained that it did not find any distinc...
