Product Description

Organo Gold Int’l is a Multi-Level Marketing (MLM) company that distributes coffee products containing Ganoderma worldwide. Their distribution channels span across more than 30 countries worldwide with their focus being to promote healthy living through their compensation plan that aims to encourage selling product to other distributors for profit.

Defendants maintain that they have not violated the non-compete clauses as they did not solicit Organo customers and distributors who signed up for Project 50K event, nor is TLC in competition with Organo Gold when offering ganoderma-based products. While the Court disagrees with TLC not competing with Organo because TLC offers only part of Organo’s product range and markets itself differently than Organo does; nonetheless this issue becomes moot given that Organo Gold prohibits terminated Distributors from engaging in any business which directly competes with Organo Gold when selling Ganoderma-based products directly competing directly against Organo Gold in offering Ganoderma-based products directly competing directly against Organo Gold’s offering of Ganoderma-based products directly competing directly against Organo Gold in selling Ganoderma-based products directly against organo’s competitors such as organo’s customers, customers, distributors signing up distributors who signed up for Project 50K event; TLC offers only small portion of product offerings in terms of marketing theirs offering only small portion of products offered and markets differently than Organo does when selling Gano ganoderma products directly against Organo Gold selling Ganoderma-based products directly competitively to organo’s competitors such as selling Ganoderma-based products in direct competition against Organo Gold directly competing with Organo Gold products for sale directly against. This non-compete clause prohibits terminated Distributors engaging in any such business directly competing directly against organo Gold when selling Gano Gold’s ganoderma-based product offerings that directly competes directly compete with Organo Gold selling Gano when marketing themselves differently than Organo does but this point does make the point moot because Organo does organo does.

The Court rejects the contention of the Defendants that it is difficult to ascertain how many Distributors left Organo for TLC, due to lack of concrete numbers. Instead, Organo’s assertion that significant attrition occurred immediately following February 2016 can be corroborated through Organo’s own business records showing an increase in low and high level Distributor departures since 2016. See Dkt 16 (Ventura Decl.) pages 14-19 for evidence supporting Organo’s Motion for Temporary Restraining Order and Preliminary Injunction being GRANTED.

Compensation Plan

Organo Gold’s compensation plan offers distributors an opportunity to generate income based on product sales and recruiting efforts. Marketing Associates and Supervisors may earn up to 10%, Consultants 15% and qualified Sapphires/above up to 20% of pay legs respectively. Top earning Distributors may qualify for Uni-level bonuses that pay 32% through 9 levels; additionally top earners can even win free cars, vacation packages and cash prizes as incentives.

Organo alleged that Mr. Ventura became associated with Total Life Changes LLC (“TLC”) in February 2016, another MLM which sells various teas, oils, weight loss items, cleansing supplies and health-related products as well as coffee infused with Ganoderma. L&A Ventura disagrees with Organo’s distribution numbers citing hearsay statements by former distributors as well as unverified third party reports as basis.

Although Organo’s Policies and Procedures do not directly prohibit former Distributors from soliciting customers of Organo, one clause prevents them from engaging in any other business that directly competes with it by selling ganoderma-based products (Dkt # 11 (Zelaya Decl.) Ex. C at 89). This provision serves one of L&A Ventura’s very legitimate concerns about departing employees unfairly using their personal connections and knowledge of company guidelines to set up competing MLM businesses that compete with Organo.

The Court also finds that Organo has breached their contractual obligation not to recruit Organo’s customers in violation of Policies and Procedures as well as TRO. Accordingly, Organo has moved for a preliminary injunction and ordered Defendants to post a $100,000 bond as security for an injunction order; ORDERED this 3rd day of May 2016.

Product Sales

Luis and Angela Ventura have earned the crown diamond status with Organo Gold by amassing an astounding monthly revenue of $251,000 and earning 33rd place worldwide in Business for Home Top Earner rankings – a testament to their hard work and dedication in running their Organo Gold business.

The Court finds it likely that Organo has a strong claim of breach of contract and would suffer irreparable harm without an injunction, with an overall balance between equity and harm clearly tilting in Organo’s favor. Accordingly, they grant Organo’s motion for preliminary injunction.

This case concerns two non-compete clauses – one in the Distributor Agreement and one in Policies and Procedures – which prohibit distributors from participating in any opportunity that competes directly with Organo Gold when it comes to selling ganoderma-based products. Furthermore, the second restriction could conceivably encompass any multilevel marketing opportunity (MLM) selling health-related products as long as these also feature coffee infused with ganoderma.

Though Organo’s business model does not involve soliciting customers or using confidential information for solicitation or leverage, the Court still finds the first restriction more reasonable because it does not contain geographical restrictions. As previously discussed, MLM businesses make geographical restrictions exceedingly difficult to impose; also not persuaded by L&A Ventura’s argument that a non-compete is unreasonable because it does not prohibit soliciting customers or using confidential information for solicitation, as this activity has no relationship with Organo.

Further, the Court noted that competition from TLC would likely extend across a wider geographic area due to their global MLM structure spanning 30 countries and absence from United States territory. Furthermore, L&A Ventura failed to satisfy their contention that TLC did not qualify as direct competitors due to its small range of Ganoderma-based products and marketing stance.

Legal Issues

Defendants are involved in selling and distributing Organo’s ganoderma-based products through multilevel marketing (“MLM”) activities. As part of these MLM activities, Defendants have generated significant income through direct and indirect sales as well as recruiting other distributors into Organo. Their Organo business has earned them enough income that they reached Crown Diamond status on Organo’s compensation plan; currently however they’re trying to leave Organo and join TLC, an MLM business selling mushroom-based products – something Organo claims violates its non-compete clause.

Organo has filed for a temporary restraining order (TRO), alleging that TLC violated their non-compete clauses by actively soliciting new Distributors into joining. According to Organo’s claim, defendants invited other Distributors to attend meetings hosted by TLC where Mr. Sachtouras presented TLC’s mushroom-based products for sale; furthermore they used social media as an advertisement of this MLM opportunity.

Responding, the Defendants assert that they did not breach any non-compete provisions by: 1) not directly soliciting any of Organo’s distributors; (2) their social media posts were not meant as direct solicitations; and 3) TLC is not an obvious competitor of Organo.

Although it finds that Defendants did not intentionally violate the non-compete provisions, it still finds them to have breached these clauses. Distributor Agreements contain express non-compete clauses that require independent consideration and fixed term distributorship agreements; even though TLC only competes limitedly in ganoderma-based products industry according to Organo, their experience selling similar products would likely give them an edge when starting up new MLM venture.

Organo has submitted evidence that shows its breach of non-compete clauses by Defendants may result in significant harm, depriving it of customers and goodwill, leading it to seek an injunction order and require that Defendants post security of at least $1,000,000. Upon any request for evidence of security posted by them, such information shall be promptly submitted by them to Organo.