MonaVie vs. XOWII, et al

“On or about November 20, 2009, Plaintiff Laurel Cook filed, on behalf of herself and those similarly situated, a Complaint and Demand for Jury Trial in the San Diego Superior Court against efusjon, Inc. and several individual defendants. Plaintiff alleged that the efusjon Energy Club was an illegal pyramid scheme. Defendants vigorously defended the action and continue to deny that the efusjon business is an illegal pyramid scheme or violated any law. The Parties engaged in a confidential mediation and through this process were able to settle their dispute under mutually agreeable terms. Defendants’ agreement to settle this matter is in no way an admission of liability.”

The specifics of the settlement are confidential.

I was recently on his show and we engaged in a long discussion about the state of the network marketing industry. We discussed the differences between legitimate MLMs and pyramid schemes, Amway’s recent efforts to get their sales force under control, and a host of other topics affecting the industry today. I hope you find it informative.

Click here for the Len Clements / Kevin Thompson interview.

*As a small tip, you can right link for the interview above and select “Save As” and download the mp3 to your desktop. I prefer to play audio files in iTunes so I can play, fast forward, etc.

Presentation Notes

These Defendants are willfully capitalizing on Plaintiffs’ valuable reputation and intellectual property rights to lure consumers into ordering their Infringing Products on the false premise that they have been tested or recommended by Ms. Winfrey and/or Dr. Oz when they have not.  Defendants are fabricating quotes or falsely purporting to speak in Dr. Oz and/or Ms. Winfrey’s voice about specific brands or products that neither of them has endorsed.  Defendants conduct has gravely injured Plaintiffs’ reputations.

As a MLM lawyer in the network marketing industry, it always interests me when a network marketing company get sued. Usually, the alarm bells go off when a company gets sued for operating a fraudulent pyramid scheme, usually as a class action lawsuit or a regulatory action. It’s sort of like driving by the scene of a car accident…you can’t help but stare. In this case, those allegations are never made. But there’s still a lesson to be learned from this lawsuit. Network marketing companies will always be held accountable for the actions of their sales force, regardless if the company condones the behavior or not. In my opinion, monavie will be fine with this lawsuit. If monavie can demonstrate a history of cracking down of false and misleading statements about Oprah’s “endorsement” of monavie (which I’m sure they can), the plaintiffs will have no case. But if the history of enforcement is lacking and monavie allowed itself to benefit from the misstatements, it’ll be a different and very expensive scenario.

I’ve personally worked with Monavie’s compliance department and I know first hand they’re one of the best compliance departments in the industry. With monavie, distributors are required to get all training materials approved by the compliance department before they can use them in the field. If distributors in monavie were using tools that implied Oprah’s endorsement, I’m guessing the tools were unauthorized.

Amway dealt with stronger allegations in both the UK and in the United States with the Pokorny class action lawsuit. Those actions alleged that Amway distributors were purposely misrepresenting the Amway opportunity and luring prospects into other fraudulent schemes. In the UK case, Amway tried arguing that it cannot be held liable for practices employed by its independent sales force. The judge took exception to the argument and made the following statement in the Order:

I do not agree.. . . Amway cannot reap the benefit of such misstatements or misrepresentation without accepting the proper consequences flowing from the means by which that benefit was obtained. It permitted itself to be surrounded with a penumbra of impropriety, and took the advantages to its business thereby gained.”

Since Amway benefited from the misrepresentations made by distributors, the judge said they cannot shift blame.

There’s a lot to be learned from this lawsuit. I know companies that wish they could throw their hands up and blame their sales force, but since it’s a common enterprise between the company and the sales force, they’re all in the same boat. If you’re an executive at a network marketing company, it’s time to tighten those screws on your rusty compliance department. If the department has holes in it, a few bad apples could cost the company a fortune.

Harpo Productions Lawsuit — Oprah & Dr. Oz Suing More Than 50 Corporations