Category Archives: Robert FitzPatrick

Class action against Amway Canada thrown out

Well, “thrown out” is probably not a technically correct legal term, but the result is the same. Back in 2009 a pair of disgruntled IBOs, husband and wife Kerry Murphy and Cheryl Rhodes, of Cloverdale, British Columbia, filed a class action lawsuit against Amway Canada. This  of course made news with the anti-Amway brigade, but funnily enough some other news didn’t – way back in November of last year, the Court sided with Amway and said their complaint should go through Amway’s arbitration system.

I should clarify – not their complaint. In what has to be one of the least successful attempts at a class action ever, Murphy and Rhodes launched this lawsuit and promoted their class action through press releases and websites. The result? Well, in a class action, one of the tasks of the Judge is to determine if there is a sufficiently large group of people with the same grievance. In May 2011, his wife Cheryl Rhodes curiously withdrew from the class action. So we’re down to one, and in the judgement, the Judge had this to say –

the plaintiff has only provided evidence of one claim – his own for the amount of $15,000. …. Absent any convincing evidence of multiple claims or multiple defendants, the issue of the reasonableness of a partial stay is simply not triggered.

So it became his complaint. Just Kerry Murphy. No Cheryl Rhodes, and nobody else stood up to offer further claims. It gets even worse for Mr Murphy-

THIS COURT ORDERS that the defendant’s Motion to Stay and to Compel Arbitration is allowed. Costs shall be awarded to the defendant.

It seems to me highly likely that the defendants (Amway) costs for a case like this are going to far, far exceed the $15000 Murphy claimed he lost doing Amway during his four times as an IBO. I notice looking through the court records that  Robert FitzPatrick provided an affidavit in support of Murphy and Rhodes. I have little doubt that anti-MLM zealots like FitzPatrick encouraged this action.

FitzPatrick and his ilk are causing real financial damage to people by leading them astray with their falsehoods and anti-mlm zealotry.

Murphy has appealed the case. I feel sorry for him.

Len Clements launches a podcast

One of my favourite commentators on the Network Marketing industry is Len Clements of MarketWave Inc. Len has been very much at the forefront of defending the industry against anti-mlm zealots like Robert FitzPatrick and Jon Taylor. He unfortunately has had a tendency to repeat some of the unfair generalizations about Amway that are based on the behaviours of some Amway affiliated groups, but his work in promoting a professional view of Network Marketing and debunking myths is in my opinion without peer.

This week Len has launched a podcast, an online radio show, where you can hear Len talk about various industry issues. In this first episode he talks about some controversies surrounding NWM companies Zrii and YTB Travel and the “bias” against NWM that companies like Verizon, PayPal, and eBay have in their terms of service. His segment on the challenges currently being faced by YTB Travel is an excellent coverage of the legal status of multi-level marketing and what makes something a potential pyramid or not. Len is of the the opinion that YTB Travel setup may cross the line, and I’m afraid I have to agree with him.

I heartily recommend you give his Inside Network Marketing podcast a listen. It’s about 1h15m long, but that’s the great thing about a podcast – you can pause it and continue listening whenever you want!

Pokorny and Blenn vs Quixtar et.al update – Arbitration denied

In a California case two former IBOs, Jeff Porkony and Larry Blenn, are attempting a class action lawsuit against Quixtar, Britt WorldWide, World Wide DreamBuilders and associated parties, alleging Quixtar is an illegal pyramid scheme in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO).

As per most previous litigation, Quixtar’s first step was to claim the whole thing should be sent through Quixtar’s arbitration and dispute resolution procedures. To summarize the courts view –

“The Quixtar arbitration agreement is simply too tainted to be saved through minor adjustments. Therefore, though mindful of the strong state and federal policies favoring arbitration, the Court holds that the entire Quixtar ADR scheme is unconscionable and unenforceable.”

In essence, the court found the whole arbitration procedure unfair for IBOs. It highlighted the fact that IBOs below platinum did not even have the opportunity to vote for representation on the IBOAI board which “negotiated” the agreement, and then Quixtar itself can ignore it if it choses. Interestingly, in this case the court was reviewing the new “updated” dispute resolution procedure, which had been modified following concerns raised in earlier cases. Furthermore, the court also struck down the BSMAA provisions, which should have governed the part of this dispute between IBOs.

I’ve said this before, but I’ll say it again anyway – I agree with the court, Quixtar’s arbitration provisions are unfair. The only proviso I’d add to that is that I’m not sure whether a “rank and file” IBO going up against a multi-national, multi-billion dollar corporate would have a particularly “fair” chance in the normal legal system either. If anyone has some suggestions for a better system, I’m open to hearing it. Having read the original Porkony & Blenn complaint, I suspect they’d be saved much embarassment behind closed doors, it really is a poorly formulated case.

There is one interesting aside in the court documents, and that is that the court struck out the declarations of two “purported experts” on behalf of the plaintiffs. The phrasing implies the court found these “experts”, Stephen Hayford and Robert FitzPatrick, were anything but. Stephen Hayford appears to be a JAMs arbitrator, and I’m guessing his testimony related to the arbitration procedure.

Robert FitzPatrick is a well known anti-mlm zealot who has unilaterally decided all MLMs are illegal pyramids, and then rants against the evils of MLMs, when in fact he’s ranting against the evils of illegal pyramids. Just recently I listened to him in an interview where he attacks Amway and brings up this case as well as the recent TEAM class action case in California claiming Quixtar is an illegal pyramid. To give you an idea of his level of “independence” as an expert – he completely fails to mention the TEAM case had been thrown out!

Update: Many of the court documents are now available at Amway Wiki – Pokorny & Blenn vs Quixtar, Inc. et.al.

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Great News for all Network Marketers

As many North American readers would know, in 2006 the US Federal Trade Commission (FTC) proposed a new Business Opportunity Rule which, as written, would require multi-level marketing opportunity promoters to provide prospects with a whole range of new information, such as names of other local participants, lawsuits, etc etc etc. It also imposed a mandatory 7-day waiting period before a person could join.

The MLM and Direct Selling Industry argued that the requirements were not only unduly burdensome on legitimate companies, they would in fact have little effect on illegitimate companies. The FTC has agreed, and MLMs are effectively exempt from the proposed new rule.

There is some very interesting information in the full FTC discussion paper. One area of discussion was the problem of declaring average incomes, when many people join purely for the purpose of receiving “wholesale pricing”. Shaklee for example, revealed that 85% of folk who join that company do so for that reason.

The FTC included summaries of the claims of the bogus “consumer advocates” Pyramid Scheme Alert (Robert FitzPatrick) and Consumer Awareness Institute (Jon Taylor) but appeared unswayed by their arguments that MLM are effectively all illegal pyramids. One particular line from the Jon Taylor’s CAI which always makes me laugh –

“[i]t is extremely rare for MLM victims to recognize the fraud in an MLM program without intensive de-programming by a knowledgeable consumer advocate”

Good grief, get a life Jon.

Folk have argued that the UK BERR and the FTC have recently been in regular contact regarding MLMs. In particular a number of critics have claimed the BERR case has put MLM, and in particular, Amway, under strong FTC scrutiny. If this paper is any reflection of what the FTC and BERR have discussed, then it augurs well for that case.

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Amway UK & Ireland – Is this the problem?

As you probably know, Amway , Britt WorldWide , and Network 21 are currently involved in a dispute with the Department of Trade and Industry in the United Kingdom (see other posts on the situation here)

In order to gain more understanding of the issues, I’ve been studying the United Kingdom law about what they give the unfortunate name of “pyramid selling”. The relevant legislation is Statutory Instrument 1997 No. 3. Now, like most legislation, it’s not written in such a way as to make it easy for untrained folk to understand, however a “plain english” warning that is included in the legislation is quite straightforward. You’ll find this warning on the Amway Europe and Amway UK & Ireland websites as well  as Amway literature and the literature and websites of virtually every MLM company with operations in the UK. It says –

1. It is illegal for a promoter or a participant in a trading scheme to persuade anyone to make a payment by promising benefits from getting others to join a scheme. Continue reading

MYTH: It’s a pyramid if most products are bought by IBOs

Many critics like to claim that Amway and other MLMs are a “product based illegal pyramid scheme”. The claim is that they are illegal pyramid schemes because the majority of products are consumed by “members of the scheme” and not retail customers. It’s quite common for them to also claim that in the FTC vs Amway, the FTC declared Amway not an illegal pyramid scheme because of these retail customers. Continue reading

MYTH: 70% Retail Sales Rule

Is it dishonesty or just ignorance? If you search around the posts of critics of Amway and Quixtar on the internet, something you’ll see regularly is reference to something like “The 70% Retail Sales Rule”.

Here for example, on Pyramid Scheme Alert, the claim is made

A 70% retail requirement level has been applied in various agreements between state Attorneys General offices and multi-level marketing companies charged with violating pyramid scheme statutes.

and

At least 70% of product must be sold at retail to consumers who are not also Amway distributors.

Continue reading