Source: http://openjurist.org/549/f2d/342/bell-v-health-mor-inc
Timestamp: 2015-09-05 06:19:57
Document Index: 57588548

Matched Legal Cases: ['§ 77', '§ 1302', '§ 78', '§ 240', '§ 45', '§ 1341', '§ 1302']

549 F2d 342 Bell v. Health-Mor Inc | OpenJurist
549 F. 2d 342 - Bell v. Health-Mor Inc Home
549 F2d 342 Bell v. Health-Mor Inc 549 F.2d 342
Fed. Sec. L. Rep. P 96,007Willie BELL, Jr., et al., Plaintiffs-Appellants,v.HEALTH-MOR, INC., et al., Defendants-Appellees.
No. 75-1485.
March 24, 1977.Rehearings Denied May 24, 1977.
Terrence E. Hall, New Orleans, La., for Health-Mor, Inc.
Robert O. Mansell, G. Gale Roberson, Chicago, Ill., Lawrence J. Molony, New Orleans, La., for defendants-appellees.
The case before us raises two questions. First, whether an arrangement commonly known as a referral sales agreement can be an "investment contract" and therefore a security within the meaning of the federal Securities Acts, 15 U.S.C. §§ 77a et seq., 78a et seq. Second, whether a private right of action may be implied from the federal Mail Fraud and Lottery statutes, 18 U.S.C. §§ 1302, 1341.
Defendants-appellees sell vacuum cleaners door to door, on a time-payment basis with the resulting consumer installment notes immediately discounted to financial institutions. The average price of a vacuum cleaner is approximately $380 and its cost to the vendor is approximately $75. A vendee is given an "Ownership Dividend Certificate" which entitles him to receive $10 for the name of each potential customer he submits to the sellers, provided that the person on the list is "qualified" (under criteria established and applied by the vendors) and that the person actually submits to a sales demonstration of a vacuum cleaner.
Plaintiffs-appellants are purchasers of the vacuum cleaners. When their referral fees fell well below their expectations, they brought a class action against the appellees seeking damages and rescission of all sales agreements alleging: (a) violations of the 1933 Securities Act (1933 Act), the 1934 Securities Exchange Act, 15 U.S.C. § 78a et seq. and Rule 10b-5 thereunder 17 C.F.R. § 240.10b-5 (1976); (b) violations of sections of the Federal Trade Commission Act, 15 U.S.C. § 45; and (c) violations of the Federal Mail Fraud statute, 18 U.S.C. § 1341 et seq. and the Federal Lottery statutes, 18 U.S.C. § 1302 et seq. The district court sua sponte dismissed the complaint for lack of subject matter jurisdiction on the grounds that the referral sales agreement was not a security within the meaning of the federal Securities Acts, and that a private right of action could not be implied from either the Mail Fraud or the Lottery statutes.1 This court reverses in part, vacates in part, and remands the case.