Active member of LLC can't claim securities fraud

In Robinson v. Glynn, the Fourth Circuit in a published opinion by Judge Wilkinson joined by Judge Gregory and Chief Judge Hamilton affirmed the district court's conclusion that the plaintiff's membership interest in a limited liability company was not a security on which a securities fraud claim could be based, where the plaintiff was an active participant in the company. "To do otherwise," Judge Wilkinson explained in the opening paragraph, "would unjustifiably expand the scope of the federal securities laws by treating an ordinary commercial venture as an investment contract."

Indeed, there is some authority that the fiduciary duties of LLC members to each other are quite limited. It would be quite something if they could bring securities fraud claims when things go awry.