Herbalife distributor wins suit

The Arizona Republic, November 24, 1998
By Jane Larson

An Herbalife International Inc. distributor won $620,000 in damages and the right to future income from her business when a Maricopa County Superior Court jury returned verdicts Monday against the network marketing giant.

Mary Fallow, a former Mesa resident who now lives in Idaho, put her head in her hands and cried as the verdict was read.

Fallow, her husband, Dan, and her stepson, Clint, had sued California-based Herbalife, alleging it breached contracts and failed to follow its own rules in determining royalties and policing its distributors' networks. That cost them millions of dollars in lost bonuses and potential income, the family claimed in its civil lawsuit.

Jurors also awarded Dan Fallow $22,500 in damages on his claim that the company failed to pay him for a "sting" operation he said he conducted against European counterfeiters of Herbalife products. Fallow argued in the lawsuit that he had helped Herbalife fight the counterfeiters in exchange for favorable treatment of his wife's and son's distributorships, but that the company reneged on the deal.

That failure on Herbalife's part cost Mary Fallow $470,000 in bonuses and royalties since 1992, Fallow attorney Thomas Littler had argued, and made up the bulk of Monday's jury award.

Mary Fallow had sought future damages, which could have sent the award into the millions of dollars, Littler said. Jurors rejected that request, but giving her the right to her old distributorship could make up for it, he said.

Littler had argued during closing arguments last week that the company did not follow or uniformly enforce its own rules. Monday's verdict sends a message to the company that "if you make an agreement, live up to it," he said.

Herbalife's chief counsel, Bob Sandler, called the rules issue a "red herring" in the case. He said the company's rules are the same ones followed by other big network marketing companies, and that the jury was sympathetic to Mary Fallow as a mother seeking to support her family.

Jurors sided with Herbalife on several of its counterclaims in the suit. Dan and Clint Fallow were ordered to pay $61,000 to Herbalife for breaching its rules against dual distributorships, and the company's request to terminate its relationship with Clint Fallow was granted.

Mary Fallow said the verdict means she will finally get checks from sales by her "down line" of distributors after 2 1/2 years of no income and mounting debts.

Herbalife will appeal the case, defense lawyer Matt Hodel said.

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