Commentary on SEC v. W. J. Howey Co. et al.

Kristin Johnson

Abstract

"The defendant, Mr. Howey, had a prominent citrus grove in Florida. Mr. Howey sold real estate contracts with a warranty deed along with a service contract to manage the citrus grove on the land to mostly non-Florida residents staying at a local hotel he owned. The SEC filed suit claiming that Mr. Howey’s real estate contract, warranty deed, and service contract constituted an investment contract. The feminist perspective accounts for the power imbalance between Mr. Howey, a man in a town in which everything bears his name including the town itself, and the purchasers, travelers unaware of practicalities of the citrus business. This power imbalance was characterized by information asymmetry and fraud. The feminist rewritten opinion examines how the Howey test developed in the original opinion is both too detailed and too flexible, which fails to foster a responsible and inclusive investment culture. The commentary argues had Mrs. Howey, who had a significant role in cultivating the land, been given more consideration and protection in the original opinion that securities regulation could more adequately protect employees from exploitation."