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Appellate Law

: North Carolina Appellate Blog

Idaho Health and Home Products Company Sues Former Employees For Trade Secret Theft - And Ubiquitous News Stories Abound Regarding Longevity Payments

By Sean E. Andrussier

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The Associated Press is reporting that an Idaho health and home products company Melaleuca Inc. accuses a Utah company of raiding some of its top sales staff, infringing on company trade secrets and competing unfairly.

Idaho Falls-based Melaleuca filed a lawsuit in federal court Monday against Max International, its top sales executive and dozens of former Melaleuca sales executives.

The complaint seeks more than $10 million in damages and asks a judge to issue an injunction that would stop future sales staff raids. The lawsuit also seeks to cancel a meeting scheduled for Saturday that's described as another attempt by Max International to lure away top Melaleuca sales talent and their customer data.

"Already attempting to piggyback off of Melaleuca's success by duplicating key portions of its business model, Max now seeks to swell the ranks of its (sales) associates by raiding Melaleuca's marketing executives," the lawsuit states.

Max International, a Salt Lake City-based company, was incorporated in 2006 and produces and sells health and wellness products directly to customers.

Melaleuca, founded in 1985, sells about 350 nutritional and household products, including lotions, detergents and powdered drinks. It employs about 3,400 workers worldwide and has 700,000 customers that buy products from sales executives.

Under the company's operating guidelines, sales executives earn commissions on customer sales or by training and motivating other sales staff in gathering new customers. Each sales representative is required to maintain an extensive database, called a business report, of customer contact information and other sales executives they support. The company considers this catalog of information a trade secret.

The lawsuit accuses Max of luring Melaleuca sales staff with lucrative payments and using information from those Melaleuca business reports, causing former Melaleuca employees to violate noncompete agreements that are designed to prevent workers from using inside knowledge to benefit a direct competitor.

The lawsuit accuses Max of attracting at least eight of Melaleuca's best sales staff in the last year and encouraging each to recruit Melaleuca customers, sales staff and others.

Melaleuca is asking for a jury trial and for a judge to issue a restraining order barring Max from recruiting more Melaleuca sales staff. It also seeks a restraining order on a sales presentation planned by Max on Nov. 21 in Atlanta because it "promises to be another unlawful raid of Melaleuca marketing executives."

NOW, we're scratching our heads here in North Carolina - does anyone find it ironic that just two days ago numerous local news oranizations ran these "stories": http://www.localnews8.com/Global/story.asp?S=11526543 or http://www.trib.com/news/state-and-local/article_4d5763f8-b9c8-54ab-ad23-4806f807c95b.html and http://www.nwcn.com/news/business/Idaho-Falls-based-Melaleuca-gives-employees-longevity-payments-70199037.html and http://www.idahobusiness.net/archive.htm/2009/11/16/Melaleuca-issues-checks-to-longterm-employees.

Just wonderin' about the timing of these "news" stories . . . .

Full post as published by North Carolina Appellate Blog on November 20, 2009 (boomark / email).