Eberhardt invested in an unregistered opportunity with International Cattle Embryo (ICE), which was owned by Waters and involved the production and sale of cattle embryos. In exchange for an investment, ICE provided a variety of services to investors, including storing the embryos in liquid nitrogen freezers, transfer of embryos, care of any resulting calves, registering the calves, and maintaining appropriate records. Investors had the opportunity to choose to have either ICE or another facility perform the maintenance services. When ICE began to encounter financial difficulty, Eberhardt requested that his embryos be transferred to another facility, but the transfer never took place because the records needed to consummate the transfer were not kept as ICE promised.

Eberhardt sued ICE under the Securities Act of 1933 claiming that the opportunity was an unregistered security. ICE argued that the opportunities were not securities because they lacked commonality and that the success of the investment was not dependent on ICE but rather on how well the investor exercised the option of transferring the embryo to another facility.

CASE QUESTIONS

1. Who prevails and why?

2. If the court finds in favor of Eberhardt, what remedies are appropriate?