The definition of a "security" for the purposes of federal securities regulations is found in § 2(1) of the Securities Act of 1933, 15 U.S.C. § 77b(1), and in § 3(10) of the Securities Exchange Act of 1934, 15 U.S.C. § 78c(a)(10). Teague v. Bakker, 35 F.3d 978, 986 (4th Cir. 1994), cert. denied, ___ U.S. ___, 115 S.Ct. 1107, 130 L.Ed.2d 1073 (1995); SEC v. Eurobond Exchange, Ltd., 13 F.3d 1334, 1338 (9th Cir. 1994); Stone, 8 F.3d at 1084-85 (discussing only § 78c(a)(10)); Resolution Trust Corp. v. Stone, 998 F.2d 1534, 1537 (10th Cir. 1993) (hereinafter "RTC") (discussing only § 77b(1)); Holden v. Hagopian, 978 F.2d 1115, 1118 (9th Cir. 1992).
Plaintiffs have also attempted to meet the "common enterprise" element of the Howey test by repleading allegations of vertical commonality. Although the plaintiffs explicitly plead that plaintiffs' fortunes were tied either to Morken's efforts or to his fortunes, see Second Amended Complaint, ¶¶ 47.g. i. ¶¶ 110-113, the standards for finding vertical commonality, see Revak, 18 F.3d at 88, S.E.C. v. Eurobond Exchange, Ltd., 13 F.3d 1334, 1339 (9th Cir. 1994), these conclusory allegations are unwarranted factual inferences or legal conclusions in light of the facts actually pleaded in the second amended complaint. Westcott, 901 F.2d at 1488.
United States v. Khan, 993 F.2d 1368, 1373 (9th Cir. 1993) (citations, internal quotations omitted). In Securities Exchange Commission v. Eurobond Exchange, Ltd., 13 F.3d 1334 (9th Cir. 1994), this court held that the specialty defense is one of personal, rather than subject matter jurisdiction, and further held that a defendant who had failed to raise the defense in his answer had waived it. Id. at 1337.
United States v. Khan, 993 F.2d 1368, 1373 (9th Cir. 1993) (citations, internal quotations omitted). In Securities Exchange Commission v. Eurobond Exchange, Ltd., 13 F.3d 1334 (9th Cir. 1994), this court held that the specialty defense is one of personal, rather than subject matter jurisdiction, and further held that a defendant who had failed to raise the defense in his answer had waived it. Id. at 1337.
Protection of the doctrine of specialty "exists only to the extent that the surrendering country wishes." SEC v. Eurobond Exchange, Ltd., 13 F.3d 1334, 1337 (9th Cir. 1993) (quoting United States v. Najohn, 785 F.2d 1420, 1422 (9th Cir. 1986)). Lazarevich was neither detained nor tried on child abduction charges.
Further, courts have consistently analyzed alleged extradition treaty violations as jurisdictional challenges.See United States v. Alvarez-Machain, ___ U.S. ___, ___, 112 S.Ct. 2188, 2190, 119 L.Ed.2d 441 (1992) (deciding whether alleged violation of an extradition treaty divested the district court of jurisdiction); SEC v. Eurobond Exchange, Ltd., 13 F.3d 1334, 1336 (stating that "[t]he purpose of the extradition process is to obtain a court's personal jurisdiction over a defendant"). This includes alleged violations of the doctrines of dual criminality and specialty.
"The protection of the rule of specialty exists only to the extent that the surrendering country wishes." S.E.C. v. Eurobond Exchange, Ltd., 13 F.3d 1334, 1337 (9th Cir. 1994) (citing United States v. Najohn, 785 F.2d 1420, 1422 (9th Cir.) (per curiam), cert. denied, 479 U.S. 1009 (1986)). In Eurobond Exchange, the office in the Swiss government responsible for international extradition cases represented to the United States Department of Justice that the rule of specialty contained in its extradition treaty did not prohibit a civil enforcement action filed by the SEC. The Eurobond Exchange court found that because the extraditing country affirmatively stated that the treaty did not apply to the civil matter, "as a matter of international comity a trial in this civil matter will not offend the Swiss."
Such risks are sufficient to meet the test for vertical commonality. S.E.C. v. Eurobond Exch. Ltd., 13 F.3d 1334, 1340 (9th Cir. 1994). LPI investments constitute a "common enterprise" under Howey.
We therefore lack jurisdiction over an interlocutory appeal to the extent it challenges the propriety of an extradition.S.E.C. v. Eurobond Exch., Ltd., 13 F.3d 1334, 1337 (9th Cir. 1994); see also United States v. Isaac Marquez, 594 F.3d 855, 858 (11th Cir. 2010) ("The extradition process, however, is the means by which a requesting country obtains personal jurisdiction over the defendant."); United States v. Vreeken, 803 F.2d 1085, 1088 (10th Cir. 1986) ("the extradition process is one whereby a court gains personal jurisdiction over a defendant"). United States v. Saccoccia, 18 F.3d 795, 800-01 (9th Cir. 1994)
Other circuits apply one or both of two more restrictive tests: horizontal commonality, under which a class of investors must share equally in the risk such that their investments rise and fall together, or strict vertical commonality, under which the investor and the promoter must share equally in the risk.Compare Goldberg v. 401 N. Wabash Venture LLC , 755 F.3d 456, 465 (7th Cir. 2014) (applying horizontal commonality); SEC v. SG Ltd. , 265 F.3d 42, 50 (1st Cir. 2001) (same); SEC v. Infinity Grp. Co. , 212 F.3d 180, 187-88 (3d Cir. 2000) (same); SEC v. Banner Fund Int'l , 211 F.3d 602, 614-15 (D.C. Cir. 2000) (same); Teague v. Bakker , 35 F.3d 978, 986 n.8 (4th Cir. 1994) (same); Revak v. SEC Realty Corp. , 18 F.3d 81, 87 (2d Cir. 1994) (same); Hocking v. Dubois , 885 F.2d 1449, 1459 (9th Cir. 1989) (en banc) (same); and Deckebach v. La Vida Charters, Inc. of Fla. , 867 F.2d 278, 281 (6th Cir. 1989) (same), with SEC v. Eurobond Exch., Ltd. , 13 F.3d 1334, 1339-40 (9th Cir. 1994) (applying strict vertical commonality as alternative to horizontal commonality). See generally Maura K. Monaghan, Note, An Uncommon State of Confusion: The Common Enterprise Element of Investment Contract Analysis , 63 Fordham L. Rev. 2135, 2152-63 (1995) (discussing circuit split).