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


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."

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

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