Monday, August 31, 2009 – Dallas Business Journal
This is an ongoing problem in the MLM industry that needs better resolution in the courts. It is the large number of legal issues that occur when distributors, who legally are independent contractors, decide it is time to move on to a different MLM company. Very often their company will terminate them. The distributors end up suing their companies for wrongful termination and the companies sue their distributors for contract violations usually arising out of non-compete and downline raiding clauses.
Below is an news excerpt that discussed the latest of such lawsuits. In this case, the distributors won:
A Dallas County jury recently awarded $1.9 million in damages against Carrollton, Texas-based AdvoCare International LP after finding it engaged in deceptive trade practices and unfairly canceled agreements with two of its distributors.
AdvoCare, which is a multilevel marketer of nutritional supplements and skin-care products, unfairly canceled agreements with distributors Bruce and Teresa Badgett of Arlington, the district court jury found.
According to the Badgetts’ lawsuit, the two were active and profitable marketers of AdvoCare products for more than a dozen years before their distributorship was canceled by the company in 2006 “based upon vague and trumped-up charges.”
Advocare is planning to appeal, of course. But there is a good chance that this will become a precedent case that will be helpful to distributors in the future.
Tip: One of the things to consider when joining any MLM opportunity is the history of the relationship of the company with it’s independent contractors. Some companies are known for terminating their reps quickly and have a reputation for being very litigious. This falls into the company section of our “12 Critical Success Factors.”
Whole story at: Dallas Business Journal
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