Smith v. Gross
Ninth Circuit Court of Appeals
604 F.2d 639 (1979)
Relevant factsFree
The Smiths (plaintiffs) invested in raising earthworms based on Gross's (defendant) promises that little work was required, worms multiplied rapidly, and Gross would repurchase all output at $2.25 per pound -- a price roughly ten times market value, achievable only by Gross recruiting new investors at similarly inflated prices; the district court dismissed for lack of jurisdiction, finding no security was involved.
IssueFree
Whether the federal securities laws apply where there is an investment of money in a common enterprise, with profits to come solely from the efforts of others.