# Opposition Brief — Omnitrition International, Inc. v. Webster > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386004_1150%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Opposition Brief - **Published:** January 1, 1996 - **Citation:** 519 U.S. 865 ## Text Supreme Court, U.S, es ee Pe AUG 16 1996 No. 96-82 | CLERK In The Supreme Court of the United States October Term, 1995 S OMNITRITION INTERNATIONAL, INC., JAMES FOBAIR, ROGER DALEY AND CHARLES RAGUS, Petitioners, vs. SHAUN WEBSTER AND ROBERT LIGON, Respondents. + On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Ninth Circuit ¢ OPPOSITION TO PETITION FOR A WRIT OF CERTIORARI ¢ ELIZABETH J. CABRASER Douc.ias M. Brooks WILLIAM BERNSTEIN MArTLAND & BROOKS Counsel of Record One Boston Place, 28th Floor Karen E. KARPEN Boston, Massachusetts 02108 ANTHONY K. LEE (617) 589-3990 Lierr, CABRASER, HEIMANN & BERNSTEIN, LLP 275 Battery Street, 30th Floor San Francisco, California 94111-3339 (415) 956-1000 Attorneys for Respondents COCKLE LAW BRIEF PRINTING CO., (800) 225-6964 OR CALL COLLECT (402) 342-2831 Il. Ill. TABLE OF CONTENTS ogg Ft 88 te yt . pe rere ee ere THE DISTINCTION BETWEEN “VERTICAL COMMONALITY” AND “HORIZONTAL COMMONALITY” AFFORDS NO BASIS FOR DEFENDANTS’ PETITION ............s0000. A. Petitioners Seek This Court’s Review Of An Issue That Was Addressed By Neither The District Court Nor The Court Of Appeals B. A Pyramid Sales Scheme Satisfies The Common-Enterprise Requirement Under Either Vertical Or Horizontal Common- ES oivee eb asu Cae eioreN veeeuNoeuseuss THE COURT OF APPEALS PROPERLY IMPOSED THE EVIDENTIARY BURDENS IN EVALUATING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT .................... NEITHER PETITIONERS’ IMPROPER REAR- GUMENT OF THEIR SUMMARY JUDGMENT MOTION NOR THEIR POLICY-BASED ARGU- MENT SUPPORTS THE GRANTING OF CER- fi BE Ne eto oy einer a4 ae eR 12 ii TABLE OF AUTHORITIES Page CASES Celotex Corp. ». Catrett, 477 U.S. 317 (1986)....... Edyite Curran v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 622 F.2d 216 (6th Cir. 1980), aff'd, 456 U.S. 353 (1982) occ vndaee cd heee Reames sees dS ies ae 6 Davis v. Avco Fin. Servs., Inc., 739 F.2d 1057 (6th Cir. 1984), cert. denied, 470 U.S. 1005 (1985) ........ 7 In re Amway Corp., 93 B.T.C. 616 (1979). ......50000.- 14 In re Koscot Interplanetary, Inc., 86 F.T.C. 1106 (1975), aff'd sub nom. Turner v. FTC, 580 F.2d 701 (DA. Coe. BO7DR akc vee oer ees 12 Reves v. Ernst & Young, 494 U.S. 56 (1990)........... 11 SEC v. Glenn W. Turner Enters., Inc., 474 F.2d 476 (9th Cir.), cert. denied, 414 U.S. 821 (1973).......... 6 SEC v. International Loan Network, Inc., 968 F.2d 1304 €O.C. ‘Cie: TOR ei ieee eens 8, 11 SEC v. International Loan Network, Inc., 770 F. Supp. 676 OG)... BOOBs oaks sss eee 8,9 SEC v. Life Partners, Inc., 87 F.3d 536 (D.C. Cir. 1996) . 6 ccuscvecnvancdc i ures sia eeeeere teres 8 SEC v. W.J. Howey Co., 328 U.S. 293 (1946) ...2, 4, 5, 11 United Housing Found, Inc. v. Forman, 421 U.S. 837 (2975) 2. 0s cvs evades cbaecs tee renee eek ar ee 2 RULES Rule 10 of the Rules of the Supreme Court of the United States «io... oc cs idnv sick Boek eed eae esas 5 I. INTRODUCTION Defendants-Petitioners Omnitrition International, Inc. (“Omnitrition”), James Fobair, Roger Daley, and Charles Ragus seek certiorari from reversal of summary judgment in their favor. In reversing summary judgment for Petitioners, a panel of the United States Court of Appeals for the Ninth Circuit ruled that Plaintiffs- Respondents had presented sufficient evidence to estab- lish genuine issues of material fact on (1) whether the Omnitrition multi-level marketing program is a pyramid sales scheme, and (2) whether investment in the Omnitri- tion program is an investment in a “security” under the federal securities laws. In applying the definition of “security” in evaluating Petitioners’ motion for summary judgment, the Court of Appeals plowed no new ground.! In addition, it is clear from the ruling that there was no impermissible shifting of the burden of proof on sum- mary judgment. Petitioners will have an opportunity to argue the disputed factual issues at trial. As the decision of the Court of Appeals raises no ground for the granting of certiorari, the Petition for a Writ of Certiorari should be denied. 1 If there is cause for this Court to re-examine the long- standing precedents applying the federal securities laws to pyramid marketing schemes, the appropriate time to do so would be only after the full exposition of the facts after a trial on the merits, and not after merely a “trial by affidavit.” 2 Respondents hereafter cite the Petition for a Writ of Certiorari as “Pet.” OY ll. THE DISTINCTION BETWEEN “VERTICAL COM- MONALITY” AND “HORIZONTAL COMMON- ALITY” AFFORDS NO BASIS FOR THE PETITION. The test for an investment contract “security” under the federal securities laws is whether “the scheme involves an [1] investment of money in a [2] common enterprise with [3] profits to come solely from the efforts of others.” SEC v. W.J. Howey Co., 328 U.S. 293, 301 (1946). In United Housing Found. v. Forman, Inc., 421 U.S. 837 (1975), the Court clarified the requirement that profits accrue solely from others’ efforts by articulating a practi- cal test that has become the prevailing standard: The touchstone [for deciding whether some- thing is a security] is the presence of an invest- ment in a common venture premised on a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others. Id. at 852 (emphasis added). Petitioners argue that the Court of Appeals relied on the concept of “vertical commonality” in finding that Respondents had presented sufficient evidence to with- stand summary judgment on the issue of whether the Omnitrition program involves a “common enterprise” as required by Howey and its progeny. Petitioners further argue that not only is vertical commonality an improper relaxation of the common-enterprise requirement, but also the use of vertical commonality here highlights the split among the courts of appeals that has arisen from some courts’ adoption of vertical commonality and other courts’ rejection of vertical commonality in favor of the stricter concept of “horizontal commonality.” Thus, con- clude Petitioners, the Court should grant certiorari to resolve this split and reject the use of vertical common- ality to satisfy the common-enterprise requirement. (See Pet. at 3-22.) Petitioners’ argument suffers from two fundamental flaws. First, neither the District Court nor the Court of Appeals below even addressed the “common enterprise” issue. Second, a pyramid sales scheme satisfies the com- mon-enterprise requirement under either vertical or hori- zontal commonality, and thus a rejection by this Court of vertical commonality will not change the law on pyramid schemes or the decision of the Court of Appeals in this case. A. Petitioners Seek This Court’s Review Of An Issue That Was Addressed By Neither The Dis- trict Court Nor The Court Of Appeals. In granting summary judgment for Petitioners, the District Court ruled that Omnitrition distributorships are not securities for purposes of the Securities Exchange Act of 1934 or section 12 of the Securities Act of 1933. (Appendix to the Petition for a Writ of Certiorari at 49.)% The only stated basis for this ruling was the District Court’s conclusion that, because Omnitrition distributors engaged in a certain amount of effort in participating in the Omnitrition program, their success did “not depend primarily upon the efforts of others,” and distributors 3 Respondents hereafter cite the Appendix to the Petition for a Writ of Certiorari as “App.” were not the passive investors the federal securities laws were meant to protect. (See App. 46-49.) At no point in its opinion did the District Court analyze the common-enter- prise requirement. Similarly, the Court of Appeals addressed only the requirement that profits come from others’ managerial efforts: In Glenn W. Turner [474 F.2d 476], we deter- mined that the fact that investors in the scheme were required to exert some effort did not auto- matically preclude a finding that the invest- ments were securities. Instead, we focused on the fact that the scheme’s promoters controlled the methods by which the product was sold and new members were recruited. The promoters provided the “essential managerial efforts which affect[ed] the failure or success of the enterprise.” Id. at 483. The same is true of Omnitrition’s program. Plaintiffs claim that they were taught to sell Omnitrition’s “proven plan of success” and to “catch a wave of return that was far beyond anything that [they] were involved in person- ally.” By the very structure of a pyramid 4 This is the only mention of the common-enterprise requirement found by Respondents in the District Court’s opinion: To establish that a transaction involves securities, the Court must determine whether the scheme involves an investment of money in a common enterprise with profits derived solely from the efforts of others. (App. at 47 (citing Howey, 328 U.S. at 301).) scheme, participants’ efforts are focused not on selling products but on recruiting others to join the scheme. Under the reasoning of Glenn W. Turner, this is enough to bring investments in the program within the definition of “invest- ment contracts.” (App. at 14-15 (interpolations in opinion of Court of Appeals).) As with the District Court’s opinion, at no point in its opinion did the Court of Appeals analyze the common- enterprise requirement, much less apply the concept of vertical commonality in doing so.° Thus, Petitioners want this Court to grant certiorari to address an issue which was addressed by neither the District Court nor the Court of Appeals below. Respon- dents submit that this is not one of the “compelling reasons” for which the Court grants certiorari, see Rule 10 of the Rules of the Supreme Court of the United States. Certiorari should be denied. 5 This is the only mention of the common-enterprise requirement found by Respondents in the opinion of the Court of Appeals: An investment contract is a transaction in which “the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others.” (App. at 14 (citing Howey, 328 US. at 301).) i Te B. A Pyramid Sales Scheme Satisfies The Com- mon-Enterprise Requirement Under Either Ver- tical Or Horizontal Commonality. Even if the common-enterprise requirement were an issue appropriately raised in Petitioners’ request for a writ of certiorari — and it is not - a pyramid sales scheme satisfies the requirement under either vertical or horizon- tal commonality. Thus, because what Petitioners ulti- mately seek - a rejection by this Court of vertical commonality —- would not change the decision of the Court of Appeals, certiorari should be denied. In SEC v. Glenn W. Turner Enters., Inc., 474 F.2d 476 (9th Cir.), cert. denied, 414 U.S. 821 (1973), in which a panel of the Ninth Circuit affirmed the district court’s granting of a prelimi- nary injunction against a pyramid sales scheme, the court of appeals adopted an interpretation of the common- enterprise requirement that became known as “vertical commonality,” stating, “A common enterprise is one in which the fortunes of the investor are interwoven with and dependent upon the efforts and success of those seeking the investment [i.e., the promoters or sellers] or of third parties.” Id. at 482 n.7. The court of appeals stated without discussion that the scheme in question fulfilled the common-enterprise requirement of the Howey test; analyzed the requirement of profits coming from the efforts of others; and ruled that the scheme involved a security under the federal securities laws. See id. at 481-83. The Sixth Circuit, as Petitioners correctly note, (see App. at 4, 7 & n.4, 13), has rejected vertical commonality and requires horizontal commonality. See Curran v. Mer- rill, Lynch, Pierce, Fenner & Smith, Inc., 622 F.2d 216, 222 peeeeene. (6th Cir. 1980) (“[W]e . . . reject the vertical commonality approach... . ”), aff'd, 456 U.S. 353 (1982) (affirming on issue of whether private right of action exists under Commodity Exchange Act). Nevertheless, in Davis v. Avco Fin. Servs., Inc., 739 F.2d 1057 (6th Cir. 1984), cert. denied, 470 U.S. 1005 (1985), another panel of the Sixth Circuit ruled that a pyramid sales scheme involved a “security.” In Davis, participants in the scheme sued a finance com- pany, from whom plaintiffs borrowed money to invest in the scheme, and the finance company’s manager, who had promoted the scheme to plaintiffs and solicited their loans. Plaintiffs asserted claims under the Securities Act of 1933 and the Securities Exchange Act of 1934. After a | bench trial, the district court ruled that the promissory notes given by plaintiffs for their loans, as well as plain- tiffs’ investments in the pyramid scheme, were “securi- ties” under the relevant statutes, and entered judgment in favor of plaintiffs on their Securities Act claims. See 739 F.2d at 1059-62. The court of appeals affirmed in part and reversed in part the judgment and remanded the case for further proceedings. While the court of appeals disagreed with the district court’s ruling that the promissory notes given by plaintiffs were securities, the court of appeals agreed as to the pyramid scheme investments: We do agree, however, that the DTBG adventures were securities. In this regard we concur with and adopt the analysis in S.E.C. v. Glenn W. Turner Enterprises, Inc., 474 F.2d 476 (9th Cir.), ... and S.E.C. v. Koscot Interplanetary, Inc., 497 F.2d 473 (5th Cir. 1974). We will not reiterate this analysis in the hope of keeping this opinion to a reasonable length. 739 F.2d at 1063. Indeed, Respondents have found no decision in which a court has ruled that a pyramid scheme is not a “common enterprise” for purposes of determining whether a security is involved. In SEC v. International Loan Network, Inc., 968 F.2d 1304 (D.C. Cir. 1992), for example, the court of appeals affirmed the district court’s holding that a pyramid scheme violated the federal secu- rities laws and its granting of a preliminary injunction against the scheme: As for the common enterprise element, the fortunes of investors are clearly linked to each other and to the success of ILN as an enterprise. The CFBS generates income for its investors, and for the [defendants] .. . , only through constant expansion of membership, which depends on individual recruiting and the appeal of [the promoter] Ford’s larger marketing cam- paign. Thus, the court properly found the CFBS satisfies the second prong of the Howey test as well. Id. at 1308.° In the opinion affirmed by the court of appeals, SEC v. International Loan Network, Inc., 770 F. Supp. 678 (D.D.C. 6 The District of Columbia Circuit has not adopted either vertical commonality or horizontal commonality over the other. See SEC v. Life Partners, Inc., 87 F.3d 536, 544 (D.C. Cir. 1996) (ruling that investment program involved common enterprise under concept of horizontal commonality although ruling that profits were not derived predominantly from others’ efforts) (“We need not reach, therefore, the SEC’s alternate contention that the LPI program entails ‘strict vertical commonality’ - another formulation of the common enterprise test recognized in some circuits.”) 1991), the district court noted that the pyramid scheme in question was a common enterprise under either vertical or horizontal commonality: The second element of the Howey test requires the investment to be in a “common enterprise.” This test is met whether the Court looks to Glenn W. Turner, Koscot, or the opinion of my colleague on this court in Meredith v. Conticommodity Services, Inc., 1980 Fed. Sec. L. Rep. (CCH) { 97,701 (D.D.C. 1980) (Gasch, J.). In Meredith, the court intimated that commonality requires a correlation between the profits and losses of individual investors and the fortunes of the investors as a group or with the enter- prise itself. The profits of investors in the Capi- tal Funds Bonus System are directly related to the fortunes of other investors: it is through the constant recruitment of new members in one’s “downline” that income is earned. If the people directly recruited by an Independent Represen- tative do not vigilantly spread the word “you come in, then you bring in your wife and your kids,” then that Independent Representative will not earn much income through the pro- gram. Additionally, investors’ profits are linked to the success or failure of ILN as a whole because it is the ability to proclaim the organiza- tion’s success that is the central selling point of the program. The testimonials presented in the videotape “Common Ground” illustrate the cru- cial role that the organization plays in recruit- ment. 770 F. Supp. at 691-92 (citation omitted). The observations of the court of appeals and the district court in International Loan apply equally here. As 10 stated above, the common-enterprise issue was not even discussed by the Court of Appeals below, and thus Respondenis cannot cite any such discussion now. Nev- ertheless, to rebut Petitioners’ argument, Respondents elaborate on their theory, which they briefed below, on how the Omnitrition program is a common enterprise. The fortunes of all Omnitrition distributors are linked to the success of the company and its promoters in continu- ing to attract new recruits and keep the scheme going. The “real money” promised to Omnitrition distributors by the Omnitrition marketing plan is to be made by recruiting others. It is the marketing plan devised by Omnitrition and its promoters which is the fundamental lure for new recruits. It is the managerial and entrepre- neurial efforts by Omnitrition and its promoters to pitch that plan, whether through recruitment meetings, revival- like recruitment rallies, or other devices such as promo- tional videotapes and other materials disseminated for showing to prospective distributors, which are the most important means of recruiting new distributors. Omnitri- tion receives a great deal of money from the purchase of products by its distributors. From those funds, the com- pany pays for, among other things, the recruitment ral- lies, the costs of producing promotional materials, and the compensation of its pitchpersons - all for the purpose of recruiting still more distributors. Without such efforts by Omnitrition and its promoters, the flow of new recruits will dry up, endangering the fortunes of all Omnitrition distributors. Conversely, if Omnitrition’s recruiting efforts are successful, and the company thrives, the fortunes of all Omnitrition distributors are improved by their enhanced ability to obtain new downline recruits 11 to generate income for them. Omnitrition and its promo- ters spend funds obtained from distributors on efforts to recruit more and more people, to the benefit of all distrib- utors. Thus, the Omnitrition scheme passes either the vertical-commonality or the horizontal-commoniality test. See International Loan, 968 F.2d at 1308 (“As for the com- mon enterprise element, the fortunes of investors are clearly linked to each other and to the success of ILN as an enterprise.”). Therefore, even if the common-enterprise issue were properly raised by Petitioners now, and the Court granted certiorari and (as Petitioners want the Court to do) rejected vertical commonality, the decision of the Court of Appeals would be unaffected. Thus, assuming that the Court wishes to address the issue of vertical commonality versus horizontal commonality, this case is an inappropriate vehicle to do so.” 7 Petitioners misdirect the discussion by arguing that cases applying the definition of security to real estate developments and brokerage accounts show that there would be a split among the courts of appeal on whether a pyramid scheme involves a security. (See Pet. at 8-15.) That conclusion does not logically follow. Similarly, Petitioners cite Reves v. Ernst & Young, 494 U.S. 56 (1990), for its four-part test for whether an instrument denominated a “note” is a security. (See Pet. at 22-23.) Omunitrition distributorships are neither notes nor denominated as such, and the appropriate test to apply is that applied by the Court of Appeals below: the test created in Howey for deciding whether an “investment contract” is a security. See Reves, 494 U.S. at 64 (setting forth Howey test and rejecting its application to notes). 12 III. THE COURT OF APPEALS PROPERLY IMPOSED THE EVIDENTIARY BURDENS IN EVALUATING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT. Petitioners also claim that the Court of Appeals erro- neously allocated the burdens of proof in evaluating Peti- tioners’ summary judgment motion, and, as a result, proceeded on the presumption that Omnitrition is a pyra- mid sales scheme and required Petitioners to produce evidence that it is not. (See App. at 5, 23-30.) Petitioners assert that, to discharge their initial burden on summary judgment, all they had to do was to ” ‘point[ ] out... that there is an absence of evidence to support the nonmoving party’s case.’” (App. at 23 (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)).) Petitioners also assert that the burden on Respondents “was to produce evidence of material facts in dispute on each element of their claims.” (App. at 24.) Contrary to Petitioners’ argument, the Court of Appeals did nothing inconsistent with these principles. On the issue of whether Omnitrition is a pyramid sales scheme, Respondents discharged their burden. As the Court of Appeals observed, pyramid schemes “are characterized by the payment by partici- pants of money to the company in return for which they receive (1) the right to sell a product and (2) the right to receive in return for recruit- ing other participants into the program csewards which are unrelated to sale of the product to ultimate users.” (App. at 7 (quoting In re Koscot Interplanetary, Inc., 86 F.T.C. 1106, 1181 (1975), aff'd sub nom. Turner v. FTC, 580 F.2d 701 (D.C. Cir. 1978)) (emphasis in Koscot opinion).) 13 Petitioners agree with this two-prong test but argue that Respondents did not produce evidence that Omnitrition meets it. (See Pet. at 24, 26 & n.12.) On the contrary, in both the District Court and the Court of Appeals, Respon- dents presented evidence on the operation of the Omni- trition program and explained how the program’s very structure fit the above definition. The Court of Appeals agreed with Respondents: To become a supervisor, a participant must pay a substantial amount of money to Omnitri- tion in the form of large monthly product orders .... In exchange for these purchases, the super- visor receives the right to sell the products and earn compensation based on product orders made by the supervisor’s recruits. This compen- sation is facially unrelated to the sale of the product to ultimate users because it is paid based on the suggested retail price of the amount ordered from Omnitrition, rather than based on actual sales to consumers. On its face, Omnitrition appears to be a pyramid scheme. (App. at 8-9 (first emphasis added).) Thus, the Court of Appeals concluded: Omnitrition argues that [Respondent] Webs- ter failed to submit sufficient admissible proof that Omnitrition is a pyramid scheme. We dis- agree. The mere structure of the scheme suggests that Omnitrition’s focus was in promoting the program rather than selling the products. When added to statements from Webster’s and [Respondent] Ligon’s depositions, plaintiffs 14 have produced sufficient evidence to defeat summary judgment. (App. at 10 (first emphasis added).) Given that Respondents had met their burden on summary judgment, Petitioners’ evidence was insuffi- cient to show the absence of a factual dispute on whether Omnitrition is a pyramid scheme: To rebut the pyramid allegations, Omnitri- tion relies heavily on In re Amway Corp.. 93 FTC 618 (1979), in which the FTC found Amway was not a pyramid scheme because its policies pre- vented inventory loading and encouraged retail sales. Id. at 715-16. Omnitrition argues that its formal adoption of policies similar to Amway’s was sufficient to support summary judgment. We disagree. Omnitrition has distribution rules modeled on Amway’s. However, the existence and enforcement of rules like Amway’s is only the first step in the pyramid scheme inquiry. Where, as here, a distribution program appears to meet the Koscot definition of a pyramid scheme [as shown by Respondents’ evidence], there must be evidence that the program’s safeguards are enforced and actually serve to deter inventory loading and encourage retail sales. In Amway, the ALJ made that crucial finding of fact, after a full trial. See id. at 631. Our review of the record does not reveal sufficient evidence to establish as a matter of law that Omnitrition’s rules actu- ally work. 15 Further, Omnitrition’s rules, while carefully crafted to appear like those in Amway, are weaker in operation. (App. at 10-11.) Of the three “anti-pyramiding” policies formally adopted by Omnitrition, for only one did Peti- tioners produce evidence of enforcement, and the Court of Appeals found that even that evidence was insufficient to establish that the rule in fact effectively discouraged pyramid-scheme activity. (See App. at 11-12.) The Court of Appeals did not proceed to evaluate Petitioners’ summary judgment motion from the pre- sumption that Omnitrition is a pyramid scheme. Respon- dents produced evidence that Omnitrition is a pyramid scheme. Petitioners produced some evidence purportedly showing that Omnitrition is not. The Court of Appeals ruled that, based on the evidence, there was a genuine issue of material fact on whether Omnitrition is a pyra- mid scheme. On this basis, the Court of Appeals properly reversed summary judgment. See Celotex, 477 U.S. at 325 (“Rule 56 mandates the entry of summary judgment .. . against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which the party will bear the burden of proof at trial.”) (emphasis added). While Petitioners may quarrel with the weight the Court of Appeals placed on the parties’ evidence, this matter is inappropriate for review by this Court. See Rule 10 of the Rules of the Supreme Court of the United States (“A petition for a writ of certiorari is rarely granted when the asserted error consists of erroneous factual findings or the misapplica- tion of a properly stated rule of law.”). 16 IV. NEITHER PETITIONERS’ IMPROPER REARGU- MENT OF THEIR SUMMARY JUDGMENT MOTION NOR THEIR POLICY-BASED ARGU- MENT SUPPORTS THE GRANTING OF CER- TIORARI. Petitioners improperly reargue the merits of their summary judgment motion before this Court. Petitioners contend, “(T]he Ninth Circuit Court dismissed the fact that Omnitrition’s participants’ profits result entirely from their own labors... .” (Pet. at 5.) Petitioners assert that “an IMA’s [i.e., distributor’s] earnings do not result from any effort by Omnitrition to recruit IMAs.” (Pet. at 6-7 n.3.) In both the District Court and the Court of Appeals below, Petitioners had argued that the efforts by Omunitriton distributors precluded the conclusion that Omnitriton involved a security. The Court of Appeals rejected the argument, ruling that the evidence created a genuine issue as to whether distributors’ profits resulted only from their own efforts or whether the profits depended on the “essential managerial efforts” of Omni- trition and its promoters. (See App. at 14-15 (quoting Glenn W. Turner, 474 F.2d at 482).) Certiorari should not be granted simply to allow Petitioners to reargue their summary judgment motion. In addition, Petitioners urge the Court to grant cer- tiorari on the ground that “this case is vitally important to multi-level companies and their distributors in the United States, a multi-billion dollar industry. ...” (Pet. at 5.)® Petitioners argue: 8 In support of their assertion, Petitioners cite and attach to their petition an amicus curiae brief which the Direct Selling 17 The error [of the Court of Appeals] imposes upon a multi-level company, a defendant- movant for summary judgment in this case, the burden to produce evidence that it is not an illegal pyramid scheme. . . . [T]he court has, perhaps unwittingly, established a presumption of illegality against all multi-level companies, which could force a company to trial merely by brandishing the company’s brochure. (Pet. at 29.) As explained above, there was no error (even leaving aside that the company’s own brochures and promotional materials may indeed be highly reliable and probative evidence for the trier of fact). The Court of Appeals did not rule that Omnitrition is a pyramid scheme. The Court of Appeals ruled that the parties’ evidence established a genuine factual dispute as to the matter. There is no “presumption of illegality against all multi-level companies.” To defeat summary judgment on a claim that a multi-level marketing company is a pyra- mid scheme, any plaintiff will have to produce evidence that the program meets the definition of a pyramid scheme, as Respondents did here. Nothing in the opinion of the Court of Appeals calls for the granting of certiorari. The purported importance of this case to multi-level marketing companies does not by itself support Petitioners’ request for certiorari. Association attempted to file in the Court of Appeals to support Petitioners’ petition for rehearing. (See Pet. at 5 n.2; App. at 86-117.) It is inappropriate for Petitioners to rely on the brief, as the Court of Appeals denied the Direct Selling Association leave to file it. (See App. at 84.) Vv. CONCLUSION For the foregoing reasons, the Petition for a Writ of 18 Certiorari should be denied. Dated: August 16, 1996 Respectfully submitted, ELIZABETH J. CABRASER WILLIAM BERNSTEIN Counsel of Record KAREN E. KARPEN ANTHONY K. LEE Lierr, CABRASER, HEIMANN & BERNSTEIN, LLP 275 Battery Street, 30th Floor San Francisco, California 94111-3339 (415) 956-1000 Douczas M. Brooks MARTLAND & BROOKS One Boston Place, 28th Floor Boston, Massachusetts 02108 (617) 589-3990 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386004_1150%3A2. Public record. Not legal advice.