Smith v. Gross
Ninth Circuit Court of Appeals
604 F.2d 639 (1979)
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
Holding and Reasoning (Per Curiam)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 97,000 law students since 2011. Some law schools—such as Yale, Vanderbilt, Berkeley, and the University of Illinois—even subscribe directly to Quimbee for all their law students. Read our student testimonials.
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students. Read more about Quimbee.
Here's why 175,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 14,000 briefs, keyed to 188 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.