Background

Jean Thompson, owner and president of Thompson Petroleum Corporation (TPC), developed a business relationship with Michael Mann, founder and CEO of Anchor Capital GP LLC, a private equity investment brokerage. Beginning in 2022, Thompson invested millions through a family holding company into Anchor-managed funds. In September 2024, Mann requested a loan from Thompson to buy out an Anchor partner, which Thompson agreed to provide contingent upon Mann supplying a personal financial statement and loan guarantee. The parties memorialized the arrangement through a Secured Promissory Note, Security Agreement, and Personal Guaranty, later amending the agreement when Mann sought additional funds for another partner buyout.

The relationship deteriorated in mid-2025 when Thompson sought to inspect collateral securing her loans. After multiple requests for books and records went unsatisfied—particularly Mann's refusal to provide an audited personal financial statement—Thompson declared an Event of Default, accelerated the loan in July 2025, and sued the following month. Plaintiffs' First Amended Petition apparently asserted claims under the Texas Securities Act, premised on the theory that the promissory note constituted a "security" subject to the TSA's protections.

The Dispute

Defendants moved for partial summary judgment on a threshold issue: whether the promissory note qualified as a "security" under the Texas Securities Act. This determination was dispositive of plaintiffs' TSA claims. The court framed the "pivotal issue" as requiring application of the U.S. Supreme Court's test from Reves v. Ernst & Young, 494 U.S. 56, 63-64 (1990), which established a four-factor framework for distinguishing notes that are securities from those that are ordinary commercial loans.

The Court's Analysis

Judge Whitehill's memorandum opinion, while truncated in the available text, clearly resolved the central question. The court stated unequivocally:

After applying the Supreme Court's test in Reves v. Ernst & Young, 494 U.S. 56, 63-64 (1990), the court concludes that the Note is not a TSA security. Accordingly, the court grants defendants' motion.

The Reves test presumes that every note is a security unless it bears a "family resemblance" to one of several enumerated categories of non-securities, including loans by commercial banks for current operations. Courts apply four factors: the motivations of the buyer and seller, the plan of distribution, the reasonable expectations of the investing public, and whether an alternative regulatory scheme reduces the risk. While the opinion does not detail the court's application of each factor, the holding indicates that the Note—issued to finance a partner buyout in a private equity firm, secured by collateral, and negotiated between sophisticated parties with personal guarantees—bore the hallmarks of a commercial loan rather than an investment security.

Significance for Texas Commercial Practice

This decision provides important guidance for private lending transactions in Texas, particularly in the private equity and alternative investment space. It confirms that promissory notes issued in the context of business financing—even when the borrower operates an investment firm—will not automatically trigger Texas Securities Act liability simply because the borrower's business involves securities. The ruling protects lenders who structure transactions as secured loans with traditional loan documentation from unexpected exposure under securities laws.

For practitioners, Thompson underscores the importance of transaction structure and documentation. The presence of traditional loan features—security agreements, personal guarantees, collateral inspection rights, and negotiated terms between sophisticated parties—all weighed against characterizing the instrument as a security. The decision also demonstrates the Business Court's willingness to resolve threshold legal issues through summary judgment when the contractual terms are unambiguous and the Reves factors point decisively in one direction. Lenders and borrowers alike can take comfort that Texas courts will apply established federal securities law precedent to distinguish genuine investment contracts from commercial lending arrangements.