William Warren, Jeffrey P. McCormick, James Heelan and Gaven Pelling, Defendants. Supreme Court, Special Term, New York County, Part I. May 13, 1981.
Defendants allege that they are in the business of selling cosmetics.
They have an elaborate marketing plan described both in the plaintiff's and defendants' papers. Plaintiff characterizes the plan as one in which the emphasis is on recruiting new people to the company's organization rather than sales. While plaintiff's papers are noticeably lacking in the absence of affidavits of inspectors with firsthand knowledge of defendants' operations, the description of the operations of Phase II Systems, Inc. by both plaintiff and defendants is one that would lead the court to believe that the defendants are operating a chain distributor scheme. An investment can be a purchase of property. The formula gets more complicated as the distributor continues to recruit new salesmen and progresses from distributor to silver level to the top or gold level.