Securities and Exchange Commission v. Glenn W. Turner Enterprises, Inc.

474 F.2d 476 (1973)

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Securities and Exchange Commission v. Glenn W. Turner Enterprises, Inc.

United States Court of Appeals for the Ninth Circuit
474 F.2d 476 (1973)

Facts

Dare To Be Great, Inc. (Dare) was a wholly owned subsidiary of Glen W. Turner Enterprises, Inc. (Turner) (defendant). Dare nominally sold self-improvement plans, including plans called Adventures III, Adventures IV, and the $1,000 Plan (collectively, relevant plans). Purchasers of the relevant plans (salesmen) received (1) the opportunity to sell plans to others, for which the salesmen would receive compensation, and (2) access to promotional material supposedly meant to improve self-motivation and sales ability. However, the principal aspect of the salesmen’s purchases of the relevant plans was the opportunity to make money by selling plans to others. Thus, the salesmen’s main task was to recruit prospective purchasers to so-called Adventure Meetings, at which Dare personnel engaged in aggressive and flamboyant sales efforts. To help with this process, Dare encouraged salesmen to project an aura of financial success by, for example, flaunting expensive cars and clothing and otherwise ostentatiously displaying the trappings of wealth. The Securities and Exchange Commission (SEC) (plaintiff) filed suit against Turner, alleging, among other things, that the relevant plans were investment contracts within the meaning of the Securities Act of 1933 (securities act) and the Securities Exchange Act of 1934 (exchange act) and thus Turner engaged in the improper sale of securities. Turner responded that the relevant plans could not be investment contracts because salesmen had to expend effort to make money and their financial success therefore did not depend solely on the efforts of others. The district court ruled that the relevant plans were investment contracts and issued a preliminary injunction prohibiting Turner from continuing to offer or sell them. Turner appealed.

Rule of Law

Issue

Holding and Reasoning (Duniway, J.)

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