MLM News Report: First Quarter Financial Numbers, And Some Exciting Awards Presented

news

This has been a great week in direct sale aka network marketing as more and more companies released their first quarter numbers. Plus many of the companies are catching the eyes of folks outside of the network marketing community and are being nominated for some special awards.

VemmaNews

Good afternoon. Vemma is pleased to announce our selection as a Finalist in seven categories in the 2013 American Business Awards. The award categories range from new product of the year, to apps, to best convention of the year. Vemma Founder and CEO BK Boreyko was named a finalist in the Executive of the Year category. As finalists, Vemma and BK will ultimately be awarded Gold, Silver or Bronze Stevie® Awards in these categories. Final judging will be announced over the next four months. Read it all at Pitch Engine

copyrightdefinition

According to a recent report by the International Chamber of Commerce, it is estimated that, by 2015, piracy and counterfeiting worldwide will cost the U.S. $17 trillion and put 2.5 million jobs at risk. (Read the full report from the DSA here)

capitolsm

 

DSA Continues Proactive Liaison Activities with State Leaders

DSA’s efforts to expand and foster relationships with federal and state legislators and regulators to promote and advocate on behalf of the industry continue unabated. In light of recent industry challenges, DSA staff are seeking more opportunities for engagement, beyond their continued participation in numerous events hosted by the Republican Attorneys General Association, the Democratic Attorneys General Association, the Republican Legislative Campaign Committee and the Democratic Legislative Campaign Committee. Outreach to Attorneys General and regional Federal Trade Commission officials is part of these expanded efforts.

Earlier this month, DSA Executive Vice President Adolfo Franco and attorney Jeff Hanscom met with Idaho Attorney General Lawrence Wasden, who stated “it is precisely this type of proactive outreach that makes a huge difference as we can learn about industry issues and you have the benefit of knowing any concerns we have” concerning your industry.

This week DSA Attorney John Webb attended a luncheon with Maine Senate President Justin Alfond. Senator Alfond has a strong business background and spoke about his efforts to foster a good business climate in Maine. John discussed with him the important contributions direct sellers make to the American and Maine economies and the critical role independent contractors play in direct selling.

At the end of this week, Jeff is attending the Democratic Attorneys General Association Spring Policy Conference in Rhode Island. These meetings give DSA the opportunity to meet with a number of Attorneys General at one time and discuss current issues impacting the industry, as well as ensure state Attorneys General understand the difference between legitimate direct selling companies and illegal pyramid schemes.

Networkers In The News

Al Bala has been promoted to Chief Sales and Marketing Officer at Mannatech. Most recently he served as Executive Vice President of Sales and Marketing with the company.

Jill Blashack Strahan, Founder and CEO of Tastefully Simple, has been named to the Minnesota Women Business Owners Hall of Fame. Blashack Strahan was one of the first 25 inductees to the newly established Hall of Fame.

Direct Selling Companies In The News

Amway is investing $20 million to build a second manufacturing plant in Vietnam as part of its global manufacturing expansion. Scheduled for completion in 2015, the new facility in Binh Duong will produce the company’s Nutrilite™ brand of vitamin, mineral and dietary supplements, as well as personal care products. The existing Vietnam manufacturing site for Amway is located in the province of Dong Nai. Based in Ho Chi Minh, Amway Vietnam celebrates five years of operation in 2013.

In additional company news, Amway’s parent company, Alticor, placed 14th in the Top 20 Companies of The Patent Board’s Consumer Products industry scorecard, published on WSJ.com, for the 13-week period ending in April 2013. The ranking seeks to measure the overall strength of the company’s patent portfolio holdings with a combined measure of quality and quantity. The company ranked first in Research Intensity™, one of the categories used to determine the final ranking.

Further, the Amway Opportunity Foundation (AOF) hosted a National Summit on Corporate Social Responsibility—Sustainable Development in Delhi, India. The event was presided over by Anurag Thakur, Member of Parliament, joint secretary of BCCI and member of the Indian Olympic association, along with Samir Behl, regional president of Amway Corporation (Europe, India, Africa) and William Pinckney, MD, CEO of Amway India and chairman of the AOF. The AOF also announced the institution of AOF Young Achievers Awards—the national platform from AOF to recognize the talent and efforts of young achievers from differently abled persons from India.

The Avon Foundation for Women recently awarded $300,000 to A&G Pharmaceutical at the 11th annual Avon Walk for Breast Cancer in Washington, D.C. It is the third such award A&G has received from the Avon Foundation and will enable A&G to continue the development of the GP88 blood test for use in the fight against breast cancer.

Blyth, parent company of PartyLite and pending member ViSalus, has reported sales and earnings for the first quarter of 2013. Net sales for the three months ended March 31, 2013, decreased approximately 14 percent to $233.1 million from $270.2 million for the comparable prior-year period, primarily due to lower sales at ViSalus and, to a lesser extent, at PartyLite, while Miles Kimball reported a sales improvement. Blyth’s operating profit for the first quarter was $6 million this year versus $19.2 million last year, largely driven by the decline in sales. In the Health & Wellness segment, first-quarter net sales decreased 24 percent to $104.3 million versus $136.7 million for the same period last year, largely reflecting the reduction in promoter counts in Canada and, to a lesser extent, in the U.S. At the end of the first quarter, qualified independent North American promoters totaled more than 70,000 versus more than 92,000 promoters at the end of the prior year’s first quarter. Health & Wellness first-quarter segment operating profit was $4.2 million this year versus $18.6 million last year. Candles & Home Decor sales were $91 million in the first quarter, versus $99.8 million for the same period last year, a decline of nine percent. This decline reflects the lower levels of sales consultants in many of the company’s larger, more mature markets. PartyLite’s U.S. sales declined 21 percent versus the prior-year period. Active U.S. independent sales consultants totaled more than 12,000 at the end of the first quarter versus approximately 15,000 last year.View the full press release online.

CVSL, parent company of Longaberger, announced plans to acquire DSA pending member Your Inspiration At Home. The Australian-based company will make its U.S. headquarters at Longaberger’s headquarters in Ohio, according to CVSL spokesman and board member Russell Mack.

Herbalife has been presented with a Consumer Protection Guarantee award in Thailand. The award is given by the Consumer Protection Board, which operates under the supervision of the Office of the Prime Minister of Thailand. Presented by the Prime Minister’s Office as part of the Thai Consumer Protection Day event, the award recognizes Herbalife’s commitment to consumer protection and its dedication to providing high-quality nutrition products to Thai consumers.

In additional company news, Herbalife announced that its North American call center has been placed in the Top 20 of the Top 100 Call Center Award for 2013 from BenchmarkPortal.

Further, two of Herbalife’s corporate responsibility programs—TEAM Herbalife and Casa Herbalife—were named on the “Best Social Projects of Russia” list in 2012. “Best Social Projects of Russia” is a national program established to support the aim of the Russian government to improve social policy, based on partnership between the state, society and the private sector.

Mannatech has reported a net income of $600,000 for the first quarter ending March 31, 2013, as compared to a net loss of $1.4 million for the first quarter of 2012. Net sales for the first quarter of 2013 were $41.7 million, a decrease of 6.3 percent as compared to $44.5 million in the first quarter of 2012. Net sales for North America declined 8.9 percent to $20.5 million as compared to $22.5 million in the first quarter of 2012. Recruiting increased 16.6 percent in the first quarter of 2013 as compared to the first quarter of 2012. The number of new independent associates and members for the first quarter of 2013 was approximately 23,900, as compared to 20,500 in 2012. The total number of independent associates and members based on a 12-month trailing period was approximately 231,000 as of March 31, 2013, as compared to 227,000 as of March 31, 2012. Net sales for Europe, the Middle East and Africa declined 12.8 percent to $3.4 million as compared to $3.9 million in the first quarter of 2012. This decline was in part due to fluctuations in foreign currency exchange rates and in part due to the reduction in the number of orders processed. Excluding the fluctuation in foreign currency exchange rates, net sales for the region declined by 5.1 percent in the first quarter of 2013, as compared to the net sales for the first quarter of 2012. View the full press release online.

Mary Kay employees, volunteers and distributors recently came together to build a home with Habitat for Humanity in Dallas. Mary Kay has sponsored 10 Habitat for Humanity homes in Dallas.

Medifast, parent company of Take Shape for Life, reported financial results for the first quarter of 2013. Medifast net revenue increased eight percent to $96 million from net revenue of $88.9 million in the first quarter of the prior year. Each of the company’s three primary distribution channels, Take Shape for Life, Medifast Direct, and Medifast Weight Control Centers and Wholesale Physicians, contributed to this year-over-year revenue increase. Revenue in the direct sales channel, Take Shape for Life, increased 12 percent to $59.4 million in the first quarter of 2013, compared to $53 million in the same period last year. Growth in revenue for Take Shape for Life was driven by increased customer product sales. The company ended the first quarter with approximately 11,300 active health coaches and the average revenue per health coach per month for the quarter increased four percent to $1,720 compared to $1,650 in the first quarter of 2012. View the full press release online.

Natural Health Trends, parent company of NHT Global, announced financial results for the first quarter of 2013. Total revenues were $8.7 million compared to $9.1 million in the first quarter last year and $8.1 million in the fourth quarter of 2012. The year-over-year decrease in revenues for the first quarter reflects a change in the company’s promotional plans. In 2013, a cash promotion in Greater China runs through the entire year. In 2012, the comparable cash promotion ended at June 30. Net income available to common stockholders of Natural Health Trends was $283,000, compared to net income of $503,000 last year. Cash and cash equivalents increased to $5.2 million as of March 31, 2013, from $4.2 million at Dec. 31, 2012. Cash flow from operations increased 18 percent year-over-year. View the full press release online.

Nature’s Sunshine Products reported its financial results for the first quarter of 2013. Net sales were $96.5 million, compared with $92.9 million in the same quarter a year ago, an increase of 3.9 percent, and net sales increased 4.2 percent in local currencies. As of March 31, 2013 and 2012, total active managers worldwide were 18,200 and 19,000, respectively, while total active distributors and customers worldwide were 341,200 and 349,100, respectively. Net income was $4.9 million, compared with $7.2 million in the same quarter a year ago, a decrease of 32.7 percent. For NSP Americas, Asia Pacific and Europe, net sales for the first quarter were $53.1 million, compared with $53.9 million in the same quarter a year ago, a decrease of 1.5 percent. Active managers within the region totaled approximately 9,100 and 10,200 at March 31, 2013 and 2012, respectively. Active distributors and customers within the region totaled approximately 157,300 and 169,200 at March 31, 2013 and 2012, respectively. For NSP Russia, Central and Eastern Europe, first quarter net sales were $16.1 million, compared with $15.6 million in the same quarter a year ago, an increase of 3.5 percent. Active managers within the region totaled approximately 6,000 and 5,900 at March 31, 2013 and 2012, respectively. Active distributors and customers within the region totaled approximately 130,000 and 127,000 at March 31, 2013 and 2012, respectively. Synergy WorldWide reported first-quarter net sales were $27.2 million, compared with $23.3 million in the same quarter a year ago, an increase of 16.5 percent. Active managers within Synergy WorldWide totaled approximately 3,100 and 2,900 at March 31, 2013 and 2012, respectively. Active distributors and customers within Synergy WorldWide totaled approximately 53,900 and 52,900 at March 31, 2013 and 2012, respectively. View the full press release online.

Primerica announced financial results for the first quarter of 2013. Total revenues were $308.4 million in the first quarter of 2013 and net income was $38.8 million. In the first quarter of 2013 operating revenues increased by eight percent to $306.2 million, compared with $284.5 million in the first quarter of 2012, driven by continued growth in the Term Life business, as well as strong Investment and Savings Products sales and the favorable impact of market performance on client asset values. Net operating income was $39.3 million in the first quarter of 2013 compared with $42.4 million in the prior-year period. First-quarter salesforce results were in line with expectations as the company recruited 46,348 new representatives and life insurance licensed 7,165 representatives. The size of the salesforce was 90,917 as of March 31, 2013. View the full press release online.

Regal Ware recently awarded Nicholas Bier with an academic scholarship. He will receive $2,000 for each of his four years of college studies. To qualify for a Regal Ware Scholarship a student must be a high school senior, maintain a grade point average of 3.0 or higher, and be the child of a Regal Ware employee.

Source for most of the info above came from the Direct Selling Association

MLM Weekly News: Covering Primerica Beat Street Numbers, FHTM Legal Issues, DSA News, VidaCup Hires Jody Humphrey

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This week’s MLM news, covers some great information and some not so great news. But all in all the Network Marketing Community is growing and this last quarter of 2012 should be some history making times.

Home Business Radio Network

Primerica

Primerica profit beats estimates on robust term insurance sales Source: Primerica.com

By Aman Shah, Edited by Sriraj Kalluvila
Reuters, August 7, 2012

Life insurer Primerica Inc’s (PRI) quarterly profit rose 23 percent and came in above Street estimates on strong sales at its term-life insurance segment.

Net income for the company, which was spun off from Citigroup Inc (C), rose to $46.2 million, or 73 cents per share, for the second quarter, from $37.6 million, or 49 cents per share, a year earlier.

Operating income, a key measure of profitability for insurance companies as it excludes investment gains and losses, was 71 cents per share.

Analysts on average expected Primerica to earn 65 cents per share, according to Thomson Reuters I/B/E/S.

The company, which has been buying back shares from large stakeholders to have greater control over its operations, also authorized a share buyback program of up to $75 million.

Term-life insurance sales rose 24 percent to $162.7 million, while operating income at the segment was up 44 percent to $51.7 million.

Shares of the company closed at $27.17 on Tuesday on the New York Stock Exchange.

Representative Pete Sessions Honored with Champion of Free Enterprise Award. Source: Direct Selling Association

Rep. Sessions

Direct Selling Day at the U.S. Capitol, featuring more than 50 meetings between direct selling executives and Members of Congress and their staffs, culminated with awarding Rep. Pete Sessions (R-TX) with the Champion of Free Enterprise Award in recognition of his ongoing commitment to and support of policies that protect the interests of the millions of micro-entrepreneurs working as direct sellers in the U.S.

“Congressman Sessions understands the business community—how government can both protect and foster the growth of direct selling,” said DSA President Joe Mariano. “Over the years, he has been a trusted friend of direct selling… he understands the vital role direct selling plays in the American economy. He is an influential and trusted voice in Congress and today, [he is] a Champion of Free Enterprise.”

Rep. Sessions expressed his excitement for the award and thanked members of the direct selling industry for their continued commitment to their communities, as well as their contributions to the American marketplace.

“I understand where you’re coming from and I believe in what you’re doing,” he said. “The American Dream is about guaranteeing opportunities, not outcomes. It’s about making sure you can work to better your own life and the lives of those around you. I’m very proud to be associated with you. You, too, get the [Champion of Free Enterprise] award every day by making lives better for a lot of people.”

This presentation took place during an ice cream social on Sept. 12, to which all Members of Congress and their staffs were invited. Hundreds attended and enjoyed ice cream while browsing by a number of displays featuring company products and consultant profiles.

The ice cream social was the culmination of a day of meetings across Capitol Hill, as almost 40 member executives met with Members of Congress to introduce them to their companies and the direct sales channel.

“Direct selling is about my independent saleswoman having the freedom to operate her own business as she chooses—it’s up to her,” observed Nathan Moore (Mary Kay) during a meeting with Senator John Thune (R-SD) and his staff. “It’s the American dream especially for women entrepreneurs,” noted DSA Membership Director Nancy Burke. “We are the original social network.”

Independent contractor status, looming Department of Labor regulations, worker’s compensation and Internet tax laws all played roles in the various conversations teams of executives had throughout the day. Additionally, DSA executives, Members of Congress and their staff members discussed the impact of small businesses on the U.S. economy and the importance of ensuring opportunities for success and prosperity are available across all demographic sectors.

Among the day’s meetings, Rep. Gene Green (D-TX) spoke with member company representatives and DSA Executive Vice President Adolfo Franco about the opportunities direct selling provides. Rep. Green even shared the story of his personal connection to the industry through a friend who operated his own business with Primerica in Texas’s 29th Congressional district.

“While we’re largely a manufacturing district—we have a lot of refineries and big businesses—we also have a lot of smaller businesses,” Rep. Green said. “What I have to say is this—direct selling is a part of America. I know the role you play in the economy and I’ve seen it firsthand through [my friend’s] successes.”

Direct selling executives and DSA staff emphasized over and over again that while no current proposals were on the table—”There is no specific ‘ask’,” Joe stated—the message they were bringing to legislators was the value of independent contractor status, and the damage any changes to that would cause the nearly 16 million sellers across the country—an average of 36,000 of whom are in each Congressional district.

The excitement executives carried with them to their meetings was palpable throughout their interactions. “We’re proud to be here,” noted Angela Chrysler (Team National) to Rep. Judy Biggert (R-IL). “We’re excited to support our sales channel. The majority of our businesses are women-owned, and we’re pleased we can represent that constituency today. The economy remains a troubling point across the country, but direct selling is part of the solution.”

Additionally, those who participated in this year’s Washington, D.C., Direct Selling Day recognized the value in outreach to representatives of Congress, as well as the importance of sharing personal accounts of how direct selling empowers countless men and women throughout the country. As Policy Advisor to Rep. Tom Price (R-GA) Kyle Cormney stressed, “It is crucial that (direct sellers) go around and share their personal stories and experiences with members of government and those who are unfamiliar with the industry. As more people see the human stories behind direct selling, more people will understand the impact you have.”

The camaraderie among those who participated in this year’s Direct Selling Day on Capitol Hill was evident.

“The day’s events provided an outstanding opportunity for each of us to come together to partner with so many member companies for one common cause—to help members of government understand the role direct selling plays in empowering others to achieve their goals,” added Michelle Merriwether, Vice President of U.S. Field Development for USANA.

Female Direct Sales Leaders Gather in Washington, D.C. Source: Direct Selling Assication

Female Direct Sales CEOs

More than 20 female CEOs from a variety of direct selling companies gathered in Washington, D.C., this week to network and learn from each other, as well as to take part in the association’s Direct Selling Day on the Hill, providing Members of Congress with a unique, female perspective about what makes direct selling such a special sales channel.

“I love hearing from these women around the table!” said Susan Handley, President and Founder of Beijo. “If my story has value, that’s great, but I’m really here to learn and observe and get as much out of this as I can—it’s such a great opportunity to be here!”

This was the second such retreat planned for the sales channel’s female CEOs—individuals who understand uniquely the challenges the majority of the field faces as they try to juggle family and work obligations.

“We talk all the time about how being a direct seller offers women, in particular, a specific opportunity to create a better life for themselves and their families by working their own hours and feeling empowered by what they do. But what about the female CEOs at the top of companies? Where do they feel empowerment, especially having chosen the more traditional 9-5 option?” commented DSA Membership Director Nancy Burke. “Last year’s retreat was a powerful event for these CEOs and we felt compelled to offer it a second time so we could continue to provide these exceptional leaders in our industry with a networking and learning opportunity specifically for them.”

When joined by Karen Maples (non-member Myutiq), learning from one of their own—Meg Sheetz (Take Shape for Life)—as well as hearing from Costa Rican Ambassador to the U.S. Muni Figueres, attendees had an opportunity to enjoy female success stories and learn from others’ experiences.

“I am a woman who owns my own direct selling company in southwest Missouri—there’s no one around me like me. I need to go to a DSA meeting like this for a peer group,” noted Nancy Bogart, CEO of Jordan Essentials. “You can’t build relationships at home in a vacuum.”

The second day focused entirely on issue advocacy, as the women broke out into teams and engaged with Members of Congress on Capitol Hill, introducing them to direct selling and to their companies, all the while bringing the conversation back to the special perspective females have to offer legislators—and the effects the decisions of those legislators have on the women and families in their states.

“We’re representing the women who sell for us,” Nancy Bogart stated during one of the briefings. “We’re making our communities and the economy stronger. Direct selling is represented by the faces of women out there selling many products in many communities. We create these jobs and we want to protect their independent contractor status, and really preserve the American dream!”

DSEF

Six Ways to Build Momentum

Have you ever taken on a project that seems so complicated you don’t even know where to begin? Once you do get into it, though, you often find yourself “in the zone” where you’ve built up so much productive momentum that you feel unstoppable. The creative juices are flowing and you’re accomplishing tasks left and right. This is a great feeling, but getting there can sometimes prove to be extremely difficult. Here are some suggestions to help you get to that point with built-up momentum and maximum productive potential.

Put first things first. You may have several things to do, but tackling the most challenging task first can help you accomplish what you need to when you are freshest, starting your day. So make a list of what needs to be done, and then prioritize the list so that the most important tasks are the ones you do first. This can help you avoid distractions and help you get things done.

Remember that you are in control. You are your own boss. Although that fact does come with its fair share of stress and responsibility, it also comes with the freedom to schedule your workday to accomplish your most important tasks. Maximize the benefits of being in control by delegating tasks to team members when possible. Ask for help when you need it, and take breaks when you are feeling too overwhelmed. Sometimes, just the thought of being in the driver’s seat of your business is enough to get you through a difficult project.

Mute the negative thoughts and stay positive. You’ve no doubt heard about the power of positive self-talk. Not surprisingly, negative self-talk is just as powerful, so it’s important that you tune it out. Anytime you catch yourself having a negative thought, remember that it is only hindering your productivity, not helping it. Replace it with a positive thought or motivational message. Positivity goes a long way in building the momentum you need to accomplish your goals.

Stay focused and avoid distractions. What types of things distract you from working on the task at hand? Is it the Facebook and Pinterest buttons on your toolbar that lure you away from the task at hand? Maybe you should hide the toolbar when working. Reward yourself with some “fun” time on your social networks when you’re done with your project. Distractions come in all shapes and sizes, so identify what distracts you and put yourself in a situation where they don’t get in your way. Remain focused on your desired endgame to maintain your momentum.

Avoid negative people. Some people just default to negative behavior: constantly complaining, persistently blaming others, and always having a reason they don’t succeed. These people should not be in your immediate circle, and they certainly shouldn’t work for you, as they may bring down not only you but your team as well. Surround yourself with people who will be your cheerleaders and who are as goal-oriented as you are. You will be much better equipped to build your momentum with positive people around you.

Keep a daily/weekly accomplishment tally. The busier our lives become, the harder it gets to remember what we actually accomplished by the end of the day or week. Keep some sort of tally or list to remind you what you completed and motivate you to continue. Such a record will also serve show you how much you are really accomplishing on a regular basis.

Building momentum is crucial to continuous goal accomplishment in your business. Have you used these strategies in the past? How have they helped you? What else should be added to our list? Please share your ideas in the comments section below!

MLM Company News

Ambit Energy recently held its sixth annual conference, “Ambition 2012: Take Charge,” in Dallas. More than 9,000 independent consultants attended over a span of five days. It is estimated that the event had an economic impact of $10 million on the Dallas area. The company also announced it will be expanding in California, Illinois and Pennsylvania.

AtHome America has gone out of business.

For the third year, Amway is continuing its support of the Boys & Girls Clubs of America with a $1 million donation to support community gardens and healthy habits for children throughout the U.S. As a part of the partnership, Amway’s POSITIVE SPROUTS® program teaches kids how to plant and maintain their own edible gardens. An accompanying curriculum educates youth about nutrition, organic gardening practices and cooking from the garden.

Amway is providing $30,000 in Sustainability Grants to 10 deserving Boys & Girls Clubs who previously received community gardens from Amway. The funds are designed to assist Clubs with the maintenance of their gardens. The direct selling company is also donating 150 “Garden In A Box” kits to Boys & Girls Clubs that demonstrated an interest and need for establishing a community gardening program at their Club. The kit includes a variety of fruit and vegetable seeds and supplies Clubs need to get started. Additionally, Amway is enabling the delivery of a healthy food curriculum to 4,000 Boys & Girls Clubs nationwide, ensuring all Clubs have access to educational materials promoting healthy eating habits.

Gigi Hill has planned a tour to introduce the company and its founders to five new cities this fall. Founders Gabrielle DeSantis-Cummings and Monica Hillman will take the Gigi Hill Fall 2012 Roadshow to Virginia, Maryland, Florida, Michigan and Illinois this October.

LifeVantage has announced that its common stock has been approved for listing on the NASDAQ Capital Market. Shares commenced trading under its current ticker symbol, “LFVN,” earlier this week. Prior to the listing of its common stock on the NASDAQ Capital Market, the company’s common stock was traded on the OTC Bulletin Board.

In additional company news, LifeVantage reported its financial results for the fourth quarter and full year ending on June 30, 2012. For the fiscal 2012 fourth quarter, compared to the same period last year, net revenue increased 197 percent to $44.6 million; operating margin increased to 16.5 percent compared to 13 percent; and operating income grew 275 percent to $7.3 million. Fiscal 2012 full-year highlights, compared to fiscal 2011 full-year, include: net revenue increased 224 percent to $126.2 million; operating margin increased to 17 percent compared to 9.5 percent; operating income grew 480 percent to $21.5 million; and cash and cash equivalents grew to $24.6 million as of June 30, 2012 from $6.4 million as of the prior year-end.

FORTUNE magazine recently released its list of the Top 100 Fastest Growing Companies. Medifast, parent company of member company Take Shape for Life, is no. 46 on the 2012 list.

Neways Europe was awarded an official certificate of recognition by the Grüner Punkt (Green Dot) recycling program for reducing its greenhouse gas emissions by 12.56 kilograms of carbon dioxide in 2011, approximately equal to the annual carbon dioxide emissions generated by seven two-person households. Green Dot is the flagship recycling program of Duales System Deutschland (DSD), a Germany-based recycler.

XANGO recently celebrated its 10th anniversary with a gathering of several thousand distributors in Las Vegas. In those 10 years, the company’s salesforce has grown to have more than 2 million distributors, it’s operating in 43 countries and making more than $2 billion in cumulative revenue.

Case: 5:10-cv-00305-JBC Doc #: 75 Filed: 09/13/12 Page: 1 of 7 – Page ID#: 1052

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF KENTUCKY CENTRAL DIVISION

LEXINGTON

 

 

 

CIVIL ACTION NO. 10-305-JBC

YVONNE DAY, et al.,                                                                                              PLAINTIFFS, V.                                             MEMORANDUM OPINION & ORDER

 

FORTUNE HI-TECH MARKETING, et al.,                                                        DEFENDANTS.

 

* * * * * * * * * * *

This matter is before the  court upon  the  plaintiffs’ motion to alter  or amend the  court’s order  compelling arbitration and  dismissing this  action, R.67.  For the following reasons, the court will grant the motion.

I.     Background

The plaintiffs, as former individual  representatives (“IRs”) of Fortune Hi-Tech Marketing,  Inc. (“FHTM”), filed suit against the defendants, including FHTM, FHTM officers,  and other individuals, for alleged violations of Title 18 U.S.C. § 1961-

1968 “RICO” laws, the  Kentucky Consumer Protection  Act under KRS § 367,  and Kentucky common law torts.   The defendants moved to compel arbitration  of the claims, and the court granted the motion,  dismissing the action and submitting  all of the claims to arbitration.

The plaintiffs  now ask the court to reconsider on four grounds: (1) that the court has jurisdiction  to address the issue of whether  the alleged arbitration agreement was supported by consideration;  (2) that the court should not apply the

FAA presumption favoring arbitration  to its analysis of whether  an agreement was formed; (3) that the FHTM sponsors had no actual implied authority  to bind the plaintiffs  to an arbitration  agreement and that the plaintiffs  are entitled to a jury

trial on any factual disputes; and (4) that the plaintiffs  did not ratify  their contracts with  FHTM.  The court reviews the motion under Fed. R. Civ. P. 59 (e) for a showing of “(1)  a clear  error  of law;  (2) newly discovered evidence; (3) an intervening change in controlling  law; or (4) a need to prevent manifest injustice.” Henderson v. Walled Lake Consol. Sch., 469 F.3d 479,  496 (6th Cir. 2005).   Upon review, the court finds that it has jurisdiction  to address the issue of whether the alleged arbitration  agreement was supported by consideration and will analyze the issue accordingly.   The court will also clarify its position on the FAA presumption favoring arbitration.   However,  because the court finds that the alleged arbitration agreement was not supported by consideration,  it will not review the issues of implied authority  and ratification; rather, it will rescind its prior findings on those issues.

II.  Analysis

The court has jurisdiction  to address the plaintiffs’ consideration argument because “where the  dispute at issue concerns contract formation, the  dispute  is generally for courts to decide.” Granite  Rock  v. Int’l Brotherhood of Teamsters, 130

S. Ct. 2847,  2855-2856 (2010).   The court previously erred in applying Buckeye Check Cashing v. Cardegna, 546 U.S. 440,  445-46  (2006),  which involved a challenge to an existing agreement rather than a claim that no arbitration

 agreement was reached.  “Every contract requires mutual assent and consideration,” so an inquiry into consideration is part of the contract-formation analysis.  Cuppy v. Gen. Accidental  Fire & Life Assurance Corp., 378 S.W.2d 629,

632 (Ky. 1964);  see also Cantrell Supply v. Liberty Mut. Ins. Co., 94 S.W.3d 381,

384 (Ky. App. 2002).   Even though the plaintiffs’ argument – that the FHTM policies and procedures document is illusory and lacks consideration – implicates the entire alleged contract between the parties and not just the arbitration agreement, see Moran v. Svete, 366 Fed. Appx. 624,  631 (6th Cir. 2010),  the court has jurisdiction  under Granite Rock to review the consideration dispute because it concerns contract formation.   Even though the federal presumption in favor of arbitration  is taken into consideration when making determinations  on the scope of arbitrable issues, see  Moses H. Cone  Mem’l  Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25  (1983),  the court will not apply that presumption to the discussion of whether  an arbitration  agreement was formed, see Granite Rock, 130

S. Ct. at 2858  (2010).   The court erred in doing so in its prior opinion.

Because the FHTM policies and procedures authorize FHTM to amend the Agreement — meaning, collectively, the FHTM application and agreement, the FHTM trainer/coach agreement, the policies and procedures, and the marketing and compensation plan — at any time in its sole and absolute discretion, the agreement to arbitrate is illusory and lacks consideration.   “Consideration is an essential element of every  contract.” Floss  v. Ryan’s Family Steak Houses, Inc., 211 F.3d

306,  315 (6th Cir. 2000)(citing Cuppy, 378 S.W.2d at 632 (Ky. Ct. App. 1964)).

A promise may  act as consideration but only if “it creates a binding  obligation” on

each promisor. Id. (citing David Roth’s Sons, Inc. v. Wright and  Taylor,  Inc., 343

S.W.2d 389,  390 (Ky. Ct. App. 1961)).   When the promisor has no true fixed obligation to perform, the contract is illusory and lacks consideration.  See David Roth’s Sons, Inc., 343 S.W.2d at 391.   In this case, FHTM has no fixed obligation to arbitrate.  Even though both the FHTM application and agreement and policies and procedures contain arbitration  agreements, the policies and procedures (which are incorporated into the application and agreement, R.1-2, p.7, and supersede and prevail over any conflicting  terms in the application and agreement, R.27-1, p.4), provide FHTM the sole discretionary authority  to amend FHTM documents at any time.  R.1-2, p.7.

By retaining the  right  to amend the  documents “in its sole  and  absolute discretion,” FHTM has no binding  obligation to arbitrate.  R.1-2,  p.7; see also David Roth’s Sons, Inc., 343 S.W.2d at 390 (Ky. Ct. App. 1961).   At any point, after providing only notice of the amendment, FHTM could amend the policies and procedures or the application and agreement to either alter or remove entirely the arbitration  agreements.  This means that the unilateral-amendment provision of the policies and procedures renders illusory any alleged promise to arbitrate by FHTM, and FHTM’s promise to arbitrate cannot act as consideration for the arbitration agreement.  Floss, 211 F.3d at 315 (6th Cir. 2000);  see also Daniel Boone Coal

Co. v. Miller, 217 S.W. 666 (Ky. 1920).

The agreement to arbitrate is illusory despite the requirement that FHTM

must provide notice to IRs of any amendment to the application and agreement or policies and procedures documents.   A notice provision can constitute  sufficient consideration for an otherwise  illusory contract by limiting a party’s ability  to unilaterally amend or terminate an agreement, see Morrison v. Circuit City Stores,

317 F.3d 646 (6th Cir. 2003);  see also Seawright v. Am. Gen. Fin., Inc., 507 F.3d

967 (6th Cir. 2008).   The provision at issue, however,  does not provide for advance notice.   Amendments to any  of the  FHTM documents are  “effective upon notice to IRs that the  Agreement has been modified.” R.1-2,  p.7.   Notice is accomplished by publishing the amendment in official  FHTM materials, including posting it on the FHTM website,  e-mailing it to IRs, broadcasting it over voice mail, or including it in FHTM periodicals.  Notice  is “deemed received by the  IR upon posting.” R.1-2, p.7.

The FHTM agreement is distinguishable from the agreement in Morrison, which was upheld, because in that case an employer had the authority  to alter or terminate an agreement at the end of each year only “upon giving  thirty  days’ notice [of the amendment or termination]  to its employees.” Morrison, 317 F.3d at

667 (6th Cir. 2003).   The thirty-day  provision is significant  because the Morrison court found that it provided enough of a limitation on the  employer’s ability  to terminate or amend the agreement to constitute  consideration.   Id.  The notice provision was a promise “to  maintain the  arbitration agreement” for a specified period of time, thirty  days. Id. at 668.   In this case, the arbitration  agreement appears closer to an agreement that may  be altered with  “unfettered discretion,

Floss, 211 F.3d at 315,  than the Morrison and Seawright arbitration  agreements, which provided thirty-day and ninety-day grace periods, respectively,  before amendments became effective.  The FHTM IRs are bound by an amendment as soon as it is published, R.1-2, p.7; thus, FHTM does not promise to maintain the arbitration  agreement for a specified amount of time, and no mutuality  of obligation to arbitrate exists.

Also, the agreement to arbitrate is illusory despite the fact that the agreement contains a survival provision.   The arbitration  agreement in the policies and procedures provides that the “agreement to arbitrate shall  survive any termination or expiration of the  Agreement.” R.1-3, p.10.  The defendants argue that this provision restricts FHTM’s right to modify or eliminate the arbitration provision, which means that FHTM does not  have  an “absolute right”  to cancel or terminate the agreement.  See Hale v. Cundari Gas Transmision Co., 454 S.W.2d

680,  684 (Ky. Ct. App. 1974)(stating that only an absolute right to terminate an agreement renders the agreement illusory).   The survival provision, however,  does not eliminate FHTM’s discretion  to terminate or amend the  arbitration agreement while the underlying contracts  remain in effect; FHTM could even remove or alter the survival provision of the arbitration  agreement under the authority  of the amendment provision in the policies and procedures.

FHTM’s promise to arbitrate is illusory  and  thus cannot act as consideration for an agreement to arbitrate with  the plaintiffs.  Because this finding renders moot the  plaintiffs’ remaining arguments regarding whether  an agreement to arbitrate

was formed, the court rescinds its prior ruling on the issues of whether  FHTM sponsors had implied authority  to bind the plaintiffs  to an arbitration  agreement and whether  the plaintiffs  ratified their contracts with  FHTM.  Those issues will be resolved at the appropriate time, as either questions of law or questions of fact, after the parties have had sufficient  opportunity  for full discovery and have thoroughly  briefed the issues.  Accordingly,

IT IS ORDERED that the  plaintiffs’ motion to alter  or amend the  court’s order

compelling arbitration  and dismissing this action, R.67, is GRANTED

IT IS FURTHER ORDERED that the  court’s order  granting the defendant’

motion to compel arbitration  and dismiss or stay the action, R.66, is RESCINDED.

IT IS FURTHER ORDERED that the parties shall file a Rule 26(f) joint written report with  proposed deadlines no later than 30 days from the date of entry of this order.

Signed on September 13, 2012