Why Did USANA get Slapped?
Tracy Coenen has a nice post about the Usana lawsuit against Barry Minkow, Usana Health Sciences loses Big in Court
Here is the Court Order in the Usana Lawsuit.
Minkow was sued by Usana in connection with the report he released. When the lawsuit was brought, I questioned whether it would survive a SLAPP motion - a motion to dismiss.
Here are some quotes from the Judge.
"The hallmark of a SLAPP suit is that it lacks merit, and is brought with the goals of obtaining an economic advantage over a citizen party by increasing the cost of litigation to the point that the citizen party's case will be weakened or abandoned, and of deterring future litigation."
What are the elements of a SLAPP motion?
"USANA must show "there is a reasonable probability [it] will prevail on the merits at trial" by "show[ing] both that the claim is legally sufficient and there is admissible evidence that, if credited, would be sufficient to sustain a favorable judgment."
And what did the Court conclude?
"Ultimately, under California's anti-SLAPP statute, the court strikes the first, second, third, and fifth claims for relief from the amended complaint."
Only the Federal cause of action remains - injunctive relief for Minkow "manipulating the stock price." This is a bit odd because Minkow continues to release damaging reports about Usana and they haven't actually tried to bring the injunction on.
In the end, Usana was judged to have brought a lawsuit so devoid of merit that even if everything they said could be proved, they would not prevail at law.
The Judge was convinced that this lawsuit was essentially designed to increase Minkow's legal costs to the point that he would have to give in to Usana's demands. And so, Usana got SLAPPED.
Read More From BizOp News
February 8, 2008
USANA Recruiting Down
According to the Salt Lake Tribune, Usana posts hefty sales, but Recruiting Down"
"After reporting the company's sixth year of record sales and earnings, Usana Health Sciences' chief financial officer said the company will be looking for opportunities that could result from the deteriorating U.S. economy. "
But, there is more trouble: USANA is having trouble recruiting.
" The fourth quarter in North America it experienced softer-than-expected sales and associate numbers."We attribute this decline primarily to the toll that various false allegations have taken on our associates during 2007," said Dave Wentz, the company's president. "We believe that these challenges are now largely behind us."
Wentz was referring to a report released last year by Barry Minkow, an investigator who spent time in prison for securities fraud but now runs a business known as the Fraud Discovery Institute.
Minkow's report, which was initially cited in The Wall Street Journal's well-known "Heard on the Street" column, contended that Usana's business model was "primarily based upon sales to a continuously collapsing pool of associates that need to be replaced monthly and yearly."
So the associates are not recruiting? Why? And shouldn't this be disclosed to the new associates?
