September 30, 2009
Fruit Juice Fever
Posted by Gordon Smith

Utah is awash in fruit juice. Tahitian Noni. Xango. MonaVie. Synaura.

But the spotlight today is on Zrii:

Zrii is a Sanskrit word that means light, luster, splendor and prosperity. As a company, as a brand and as a product, Zrii was born iconic. Bill Farley, one of the true icons of American business, realized that his years of experience and wealth of connections had prepared him to embark on an incredible journey. And that journey is Zrii.

That's just a sampling of what you get on these websites. You cannot really appreciate this industry without at least visiting some of the websites. Watch the video at Zrii ... "Deepak Chopra! Deepak Chopra! Deepak Chopra!"

But I digress. The reason I am writing about Zrii is that the Delaware Court of Chancery (VC Parsons) just issued an opinion involving the company. (Thanks, Francis!) The facts are full of intrigue revolving around an attempted coup: a covert conclave, computer sabotage, an employee walkout.

The coup was directed at Zrii founder and CEO, William Farley. Like the other companies listed above, Zrii is a multi-level marketing (MLM) business, and the main participants in the attempted coup were either officers of the company or high-level distributors. The distributors had all signed contracts in which they agreed not to solicit other Zrii distributors for six months after ending a distributor relationship with Zrii.

By the way, here is a description of one of the defendants, just so you know what we are dealing with:

Jason Domingo is a resident of California. Domingo, called the “Master Distributor,” was the senior-most Zrii [Independent Executive or "IE"] and a Ten Star IE, the highest level attainable by an IE. As the Master Distributor, Defendant Domingo’s downline [the people below him in the pyramid of distributors] included every IE and every customer of the entire company – somewhere around 70,000 people, by Domingo’s estimate. In this capacity in 2008, his first full year with Zrii, Domingo earned approximately $600,000.

Well, the coup didn't work, so the insurgents left Zrii for LifeVantage, another MLM company that sells anti-aging products. Then they proceeded to tell other Zrii distributors to follow them.

The case was before Chancery on a preliminary injunction motion, and the issues revolved around a claim of civil conspiracy, which would be governed by Utah law, though one of the elements of the claim was "one or more unlawful, overt acts," and the plaintiffs wanted to satisfy this element by reference to, among other things, a breach of fiduciary duty.

Is there any doubt that the defendants breached their duties to Zrii? Not really.

But they did it with such a flair! It's unusual to see such shamelessness and lack of nuance outside the movie theater.

Oh, and they (probably) breached their non-solicitation agreements, too.

Motion granted. The remedy? A three-month injunction.

Business Organizations, Fiduciary Law | Bookmark

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