FLORIDA DISCOUNT CENTERS, INC., A FLORIDA CORPORATION, ET AL., PETITIONERS,
v.
PAUL ANTINORI, JR., ETC., ET AL., RESPONDENTS; FLORIDA DISCOUNT CENTERS, INC., A FLORIDA CORPORATION, ET AL., PETITIONERS, V. STATE OF FLORIDA, BY FRED O. DICKINSON, JR., COMPTROLLER; EARL FAIRCLOTH, ATTORNEY GENERAL, AND BROWARD WILLIAMS, STATE TREASURER, AS AND CONSTITUTING THE FLORIDA SECURITIES COMMISSION, RESPONDENTS
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Florida Discount Centers operated a retail merchandising plan where participants purchased products at inflated prices and earned commissions by recruiting others, structuring an illegal pyramid scheme. The Florida Supreme Court affirmed the lower courts' findings that the scheme violated securities laws and anti-pyramid statutes.
The scheme violates Florida's securities laws and pyramid club statutes. The founders' contracts constitute 'interest in or under a profit-sharing or participation agreement or scheme' under Florida Statutes § 517.02(1), and the plan's operation method contravenes laws against chain letters and pyramid clubs.
[1] A merchandising plan involving recruitment of participants who pay a fee to earn commissions on subsequent recruitments, with the ultimate goal of opening a store funded…
[2] A scheme where participants pay for a product and are then eligible to earn money by recruiting new participants may violate statutes prohibiting pyramid clubs.
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Join FLexlaw to unlock all legal intelligence“Purchase at a cost of $320 of either a sewing machine and accessories or a set of aluminum cookware, both said to be 'nationally advertised' at a price in excess of $300, but either of which is purchased by appellant for less than $70, makes one a 'founder' eligible to earn $60 upon recruitment of each founder subsequently persuaded.”
Description of the scheme's deceptive structure—inflated pricing and recruitment-based compensation
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Join FLexlaw to unlock all legal intelligenceFlorida Discount Centers sold sewing machines or cookware for $320 that cost less than $70, making purchasers 'founders' eligible to earn $60 for recr…
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These consolidated cases are before us on petition for writ of certiorari to review the decision of the District Court of Appeal, Second District.1 That Court has certified to us that its decision passes on a question of great public interest, stating:
“Under the facts disclosed by the record, the trial judge held that the scheme followed by the appellants in this case constituted a violation of the securities law and of the statute forbidding pyramid clubs. We do not find that these questions have been passed upon previously under similar circumstances and believe that the business methods involved may be employed in other districts within the state, conceivably with conflicting interpretations of the underlying law. Additionally, this court is not agreed as to the interpretation of Chapter 517, Florida Statutes [F.S.A.].”
The trial court held the retrial merchandising plan to be a security and lottery and restrained Florida Discount Centers, Inc., from further sales thereunder. On appeal the District Court affirmed. The District Court described the plan of operation as follows:
“Purchase at a cost of $320 of either a sewing machine and accessories or a set of aluminum cookware, both said to be ‘nationally advertised’ at a price in excess of $300, but either of which is purchased by appellant for less than $70, makes one a ‘founder’ eligible to earn $60 upon recruitment of each founder subsequently persuaded. When the maximum of 3000 ‘founders’ have joined, or sooner if the appellant were *18to deem it practicable, a ‘discount’ store would be opened, capital for the venture coming from a portion of the money paid in by the founders, who would thereafter earn commissions on sales to the 100 families whose names were to be supplied by each founder.”
The District Court held that schemes of this nature contravene the law against chain letter and pyramid clubs. The decision of the District Court of Appeal, First District, in Lippincott Mortgage Investment Co. of Fla. v. Childress2 is cited in support of this holding. The District Court also found that the founders’ contracts constituted “interest in or under a profit-sharing or participation agreement or scheme” within the meaning of Florida Statutes § 517.02(1), F.S.A.
After hearing oral arguments and carefully reviewing the briefs and the record arising from this cause, we have come to the conclusion that the decision of the District Court is correct, and we hereby adopt it as the decision of this Court. Therefore, the writ is hereby discharged.
It is so ordered.
ERVIN, C. J., and ROBERTS, CARLTON and ADKINS, JJ., concur.
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Adams v. State, 443 So. 2d 1003 (Fla. 2d DCA 1983)…terprise.” Accord SEC v. Koscot Interplanetary, Inc., 497 F. 2d 473 (5th Cir.1974). In defining an investment contract under the Florida Securities Act, our courts have adopted the Howey test, as modified. Florida Discount Centers, Inc. v. Antinori, 232 So. 2d 17 (Fla.1970); Rudd v. State, 386 So. 2d 1216 (Fla. 5th DCA 1980), petition for review denied, 392 So. 2d 1380 (1981); Le Chateau Royal Corp. v. Puntaleo, 370 So. 2d 1155 (Fla. 3d DCA 1979); Bond v. Koscot Interplanetary, Inc., 246 So. 2d 631 (Fla. 4th…
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Bond v. Koscot Interplanetary, Inc., 246 So. 2d 631 (Fla. 4th DCA 1971)…ould be unenforceable and void. M. Lippincott Mortgage Investment Co. of Fla. v. Childress, Fla.App.1967, 204 So. 2d 919; Florida Discount Centers, Inc. v. Antinori, Fla.App.1969, 226 So. 2d 693; Florida Discount Centers, Inc. v. Antinori, Fla.1970, 232 So. 2d 17; Local No. 234, etc. v. Henley & Beckwith, Inc., Fla.1953, 66 So. 2d 818; 7 Fla.Jur., Contracts §§ 59-72; and 17 Am.Jur.2d, Contracts, §§ 165— 180, 216-240. The foregoing citations indicate the broad general rule that an agreement which violates a…
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Frye v. Taylor, 263 So. 2d 835 (Fla. 4th DCA 1972)…pose and operation have received judicial scrutiny and were held to be violative of the law. M. Lippin-cott Mortgage Investment Co. v. Childress, supra; Florida Discount Centers, Inc. v. [*840] Antinori, Fla.App.1969, 226 So. 2d 693, aff’d Fla.1970, 232 So. 2d 17. See also Bond v. Koscot Interplanetary, Inc., Fla.App. 1971, 246 So. 2d 631. In Bond v. Koscot, supra, this court had occasion to review the Koscot operation in the context of whether the allegations in plaintiff’s complaint against Koscot were su…
Previewing 3 of 5 citing cases — full citator treatment, depth of discussion, and citing context are member features.
Join FLexlaw to unlock all legal intelligenceAuthorities Cited
- Laucies Jackson v. Fredy, 204 So. 2d 919 (Fla. 3d DCA 1967)
- M. Lippincott Mortg. Inv. Co. OF Fla., Inc. v. Clark Childress et ux., 204 So. 2d 919 (Fla. 1st DCA 1967)
- Hayes v. State, 226 So. 2d 693 (Fla. 3d DCA 1969)
- Fla. Disc. Ctrs., Inc. v. Antinori, 226 So. 2d 693 (Fla. 2d DCA 1969)