Usana class action suit, AP News
Independent distributors filed a proposed class-action lawsuit on Thursday accusing Usana Health Sciences Inc. of fraud and deception, the latest public-relations blow for the marketer of vitamins and nutritional supplements. The lawsuit against West Valley City-based Usana was filed in California state court on behalf of hundreds of low-level distributors in California, one of the company's biggest markets, which has tough multilevel marketing laws.San Diego class-action lawyer Alexander Schack is seeking an injunction stopping Usana from doing business in California.
The lawsuit seeks damages for ''downline'' distributors left with thousands of dollars of losses each after paying for business ''kits'' and products they said they couldn't sell at inflated prices.
''Despite a diligent effort consisting of time, money and energy, my Usana business failed miserably,'' Christopher Crane, the 23-year-old lead plaintiff, said in an affidavit.
Crane is no ordinary distributor. He was recruited by Ladd McNamara, a Usana figurehead who quit the company's medical advisory board last month after The Wall Street Journal reported his medical license had been suspended in Georgia and Ohio. Crane is a childhood friend and one-time roommate of McNamara's son.
This is rather interesting news, for all multi-level marketing schemes. We will be interested to see how this plays out.
The reason why this suit is important for all multi-level marketing schemes is that several tenets of the business model may be tested in this lawsuit.
For example, is it misleading to not disclose the average drop-out rate and to later explain, that your distributors are largely volunteers?
Second, do you have to disclose what if anything you know about the amount of inventory not sold to the general public?
Third, do you have dislcose the distribution of earings that your independent distributors made?
All in all, this lawsuit may make the DSA regret not pre-empting the field by supporting the FTC's new business opportunity rule.
