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Kerrigan v. Visalus, Inc.

United States District Court, E.D. Michigan, Southern Division

June 14, 2019

TIMOTHY KERRIGAN, LORI MIKOVICH and RYAN M. VALLI, individually, and on behalf of all others similarly situated, Plaintiffs,
v.
VISALUS, INC., a corporation, et al., Defendants.

          ORDER GRANTING PRELIMINARY APPROVAL OF SETTLEMENT

          MATTHEW F. LEITMAN UNITED STATES DISTRICT JUDGE.

         Plaintiffs Timothy Kerrigan, Lori Mikovich and Ryan Valli (“Named Plaintiffs”) acting individually and on behalf of the Settlement Class, filed an Unopposed Motion for Preliminary Approval of Proposed Settlement (the “Motion”). The Motion seeks preliminary approval of the Named Plaintiffs' agreement with ViSalus, Inc. (“ViSalus”), Nick Sarnicola, Robert Goergen, Sr., Todd Goergen, Ryan Blair, Blake Mallen, Frank Varon, Kyle Pacetti, Jr., Michael Craig, Timothy Kirkland, Holley Kirkland, Aaron Fortner, Rachel Jackson, Tara Wilson, Anthony Lucero, Rhonda Lucero, Jake Trzcinski, Gary J. Reynolds, Kevin Merriweather, Ropart Asset Management Fund I, LLC, Ropart Asset Management Fund II, LLC, Living Trust Dated 9/30/1991 f/b/o Robert B. Goergen, OCD Marketing, Inc., Power Couple, Inc., Arrive By 25, Inc., BAM Ventures, Inc., Gooder, LLC, Red Letters, LLC, M-Power Path, Inc., A Berry Good Life, Inc., Network Dynamics America Corp., Freedom Legacy, LLC, Residual Marketing, Inc., Got Heart Global, Inc., Jaketrz, Inc., Mojos Legacy, LLC, Beachlifestyle Enterprises, LLC, Wealth Builder International, Prospex Automated Wealth Systems, Inc., 9248-2587 Quebec, Inc., Jason O'Toole, and Lori Petrilli (collectively “Defendants”) to settle all multi-level marketing related individual and class claims that have, or could have, been made, Plaintiffs' Fourth Amended Complaint. This Court, having reviewed the Motion and the exhibits, including the written settlement agreement (the “Agreement”), finds itself apprised of the issues and grants the Motion. Accordingly, IT IS HEREBY ORDERED:

         Preliminary Approval of the Agreement

          1. This Court preliminarily approves the Agreement, between Plaintiffs and Defendants, subject to further consideration thereof at the Final Approval Hearing. The capitalized terms used in this Order have the same meaning as in the Agreement unless otherwise stated in this Order.

         2. The Preliminary Approval Date is the day this Court enters this Order and sets the timing of the events leading to this Court's Final Approval Hearing. Each event shall be calculated under Fed.R.Civ.P. 6.

         3. After extensive litigation and arm's-length negotiations by experienced counsel for the Parties, the Parties executed the Agreement. The Parties' negotiations included extensive mediation proceedings, with the benefit of an experienced, neutral mediator, 4. Under the Agreement, each Class Member may elect between two alternative forms of relief: first, a Cash Option that terminates the Class Member's Independent Promoter (“IP”) status with ViSalus; and second, a Benefits Option which provides enhanced compensation, free services, and other benefits. Class Members who submit no Valid Election Form receive the Benefits Option.

         5. Under the Agreement, each Class Member who elects the Cash Option receives a cash payment of $25 or $50, subject to possible reduction depending on the number of Class Members choosing this option. The maximum amount to be paid out under the Cash Option is $4, 535, 000, and Class Members who elect the Cash Option shall be terminated as IPs and no longer eligible to receive benefits as IPs.

         6. Under the Agreement, each Class Member that does not submit a Valid Election Form shall be deemed to have elected the Benefits Option and receive all corresponding benefits, which includes these benefits (besides any other benefits to which he or she may be entitled as an IP):

a. 25% Commission Rate on all sales (both first time sales and subsequent sales) personally made by the Class Member to customers who purchase product from ViSalus for the first time after the Effective Date (i.e., new customers) for one (1) year from the Effective Date;
b. 35% Product Discount on up to $1, 000.00 in product purchases made by the Class Member at normal IP (i.e., wholesale) prices for one (1) year from the Effective Date (up to $1, 000.00 in product purchases for only $650.00);
c. Free re-enrollment as an IP on the Basic enrollment track (no purchase necessary) for one (1) year from the Effective Date;
d. Free event registration for one (1) event, if any are held, for one (1) year from the Effective Date, and if none are held within one (1) year, then free event registration for the next held event, if held within eighteen (18) months from the Effective Date; and
e. Free Vi-Net Pro Subscription for:
(i) one (1) year from the Effective Date for all Settlement Class Members who choose the free re-enrollment listed in Section (c) above and who previously paid for Vi-Net Pro; or
(ii) six (6) months from the Effective Date for all Settlement Class Members who choose the free re-enrollment listed in Section (c) above and who did not previously pay for Vi-Net Pro.

         7. The Agreement also requires the adoption of the following corporate reforms/injunctive relief for a period of three (3) years from the Effective Dated:

a. Within thirty (30) days of the Effective Date, ViSalus will publish and maintain a retail price list for all products on its corporate website which will be prominently available to all IP's and customers;
b. ViSalus will prominently disclose in the IP Application and the ViSalus Policies and Procedures that any product purchases are optional and that IPs are not required to purchase or stock inventory as a condition of doing business;
c. ViSalus will not compensate IPs primarily for the act of recruiting or registering other IPs;
d. ViSalus will maintain a policy allowing buy backs of product at commercially reasonable terms for a period of at least 30 days from purchase;
e. When making sales-based bonus payments or incentives to IP's, ViSalus will condition such payments or incentives on reasonably reliable reported levels of sales to end-user consumers (i.e., non-IP customers) and IPs who purchase product for personal consumption;
f. ViSalus will not make any false or misleading representations regarding IPs who are parties to a special compensation agreement with any IP named as a Defendant in the ViSalus Action or with ViSalus;
g. ViSalus will maintain a compliance department and have and enforce rules requiring IP compliance with applicable law; and
h. ViSalus will not make any representations regarding its current or former relationship with Blyth, the Goergen family, or its sales activity between 2010 and 2014 that are false or misleading.

         8. This Court finds that the terms embodied in the Agreement appear, upon preliminary review, fair, reasonable and adequate and warranting preliminary approval and sending notice of the Settlement to the Class Members to consider its terms before the Final Approval Hearing under Fed.R.Civ.P. 23(e).

         The ...


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