Logourl black

Smith v. Gross

Ninth Circuit Court of Appeals
604 F.2d 639 (1979)


Facts

Gerald and Mary Smith (plaintiffs) responded to a promotional newsletter from Gross (defendant) soliciting investors to raise earthworms for sale. Gross told the Smiths that very little work was required in raising earthworms, that earthworms double in quantity every 60 days, that Gross needed the Smiths’ help in the common enterprise of supplying earthworms to the bait industry, and that success was guaranteed because Gross would repurchase any earthworms produced by the Smiths for $2.25 per pound. The Smiths brought suit against Gross and other corporate defendants for violation of federal securities laws. The Smiths claim they would not have purchased any earthworms without Gross’s promise to repurchase worms at $2.25 per pound, and that earthworms multiply at a much slower rate than that promised by Gross. The Smiths allege that they could achieve the profits promised by Gross only if the multiplication rate was as fast as promised, and if Gross purchased that product at $2.25 per pound. The Smiths allege that the promised $2.25 per pound is ten times greater than the true market price for earthworms, and that Gross could pay the promised price only by selling their product to new investors at inflated prices. The district court dismissed the suit for lack of subject matter jurisdiction, finding that there was no security involved in the transaction.

Rule of Law

The rule of law is the black letter law upon which the court rested its decision. To access this section, start your 7-day free trial of Quimbee for Law Students.

Issue

The issue section includes the dispositive legal issue in the case phrased as a question. To access this section, start your 7-day free trial of Quimbee for Law Students.

Holding and Reasoning (Per Curiam)

The holding and reasoning section includes:

  • A “yes” or “no” answer to the question framed in the issue section;
  • A summary of the majority or plurality opinion, using the CREAC method; and
  • The procedural disposition (e.g. reversed and remanded, affirmed, etc.).

To access this section, start your 7-day free trial of Quimbee for Law Students.

Here's why 73,000 law students rely on our case briefs:

  • Reliable - written by law professors and practitioners not other law students.
  • The right length and amount of information - includes the facts, issue, rule of law, holding and reasoning, and any concurrences and dissents.
  • Access in your class - works on your mobile and tablet.
  • 10,442 briefs - keyed to 137 casebooks.
  • Uniform format for every case brief.
  • Written in plain English - not in legalese and not just repeating the court's language.
  • Massive library of related video lessons - and practice questions.
  • Ability to tag case briefs in an outlining tool.
  • Top-notch customer support.
Start Your Free Trial Now