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and the nature of the investment in Blythe II, they exercised the
due care that a reasonable and ordinarily prudent person would
have exercised under like circumstances. For the reasons set
forth below, the Court does not agree with petitioners'
contentions.
First, the principal flaw in the structure of Blythe II was
evident from the face of the very documents included in the
offering. A reading of the R & D agreement and licensing
agreement, both of which were included as part of the offering,
plainly shows that the licensing agreement canceled or rendered
ineffective the R & D agreement because of the concurrent
execution of the two documents. Thus, the partnership was never
engaged, either directly or indirectly, in the conduct of any
research or experimentation. Rather, the partnership was merely
a passive investor seeking royalty returns pursuant to the
licensing agreement. Any experienced attorney capable of reading
and understanding the subject documents should have understood
the legal ramifications of the licensing agreement canceling out
the R & D agreement. However, petitioners never consulted an
attorney in connection with this investment, nor does it appear
that they carefully scrutinized the offering themselves.
Secondly, in making their investment in Blythe II,
petitioners relied on the advice of their certified public
accountant, Mr. Hulse, and Mr. Sheets, who was a promoter for the
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