The Court of Appeals held that given the facts in the record of the District Court, the granting of summary judgment on the claim of a securities law violation was improvident because a judge or jury could reasonably view the sales program as a single program whose profits were derived from the efforts of its distributor. Bestline Products Inc. sold products through a distributor system that rewarded the recruitment of new distributors by current distributors. Distributors could earn profits through different channels: sales to the general public, sales to other downline distributors, or through a recruitment credit earned from bringing in additional distributors at certain levels. The company literature downplayed the last component as "theoretical". Because there were realistic methods of earning profits from non-recruitment activities, the District court should not have ruled that the program was an investment contract for securities laws purposes.
Full case and case summary is also available online at: http://www.mlmlegal.com/legal-cases/Piambino_v_Bailey610F2d1306-1980.php
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