Meadow Fresh Farms v. Sandstrom

Does the sale of $25 worth of merchandise and a $3.50 literature packet satisfy the statutory standard for an "investment" under the state securities act, and a "franchise fee" under the franchise act

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The North Dakota Supreme Court held that the de minimus fees involved in joining Meadow Fresh qualified the program as a franchise and as a security, subjecting it to both regulatory schemes. Meadow fresh sold milk powder through a MLM system. Prospective distributors paid $3.50 for a literature packet that enabled them to sell product purchased from their sponsor. After a larger order and the payment of a $25 fee, the new distributor could sponsor new distributors themselves and begin earning bonuses based on downline sales. The State alleged that the program was a security and a franchise because it met the statutory definition for both. An administrative law judge held that the program was a security, but not a franchise, and both parties appealed. The Supreme Court held that Meadow Fresh fell under both schemes because the legislature did not provide for a de minimus exceptions to the terms "investment" or "franchise fee."

Case and case summary are also available online at: http://www.mlmlegal.com/legal-cases/MedowFreshFarms_v_Sandstrom.php

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Reference Info:State, 8th Circuit, North Dakota | United States

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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