The Court of appeals held that a claim that is plainly frivolous or insubstantial should be dismissed for lack of subject matter jurisdiction. The Plaintiffs successfully made a colorable claim that the payment of a finder’s fee for potential door-to-door vacuum sales customers could be considered a security under federal law. The program could have been construed as a security if the referral fee was the product of the efforts of the company, or it could be a legitimate business opportunity if it was the product of the efforts of the vendor. Because the Court of Appeals was unable to determine the answer on the record of the District Court, they reversed.
This case is also available at: http://www.mlmlegal.com/legal-cases/Bell_v._Health-Mor.php.
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