WEST VIRGINIA

CERTIFIED TO BE A TRUE AND EXACT COPY OF THE ORIGINAL

CIVIL ACTION NO. 01-C-263M

U.S. DISTRICT COURT
FILED AT WHEELING, WV
AUG 12 2003
NORTHERN DISTRICT OF WV
OFFICE OF THE CLERK

DIANA MEY,

Plaintiff, Individually And On Behalf Of A Class Of All Persons and Entities Similarly Situated

V.

HERBALIFE INTERNATIONAL, INC., THOMAS STILES, PAMELA STILES, NANCY WILLIS AND DANA WILLIS,

Defendants

COMPLAINT — CLASS ACTION

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In 1991, Congress enacted the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, to regulate the explosive growth of the telemarketing industry. In so doing, Congress recognized that “unrestricted telemarketing … can be an intrusive invasion of privacy …” 47 U.S.C. § 227, Congressional Statement of Findings #5. Specifically, in enacting the TCPA, Congress outlawed telemarketing via unsolicited automated or pre-recorded telephone calls, finding:

“Evidence compiled by the Congress indicates that residential telephone subscribers consider automated or prerecorded telephone calls, regardless of the content or the initiator of the message, to be a nuisance and an invasion of privacy.”

“Banning such automated or prerecorded telephone calls to the home, except when the receiving party consents to receiving the call … is the only effective means of protecting telephone consumers from this nuisance and privacy invasion.”

47 U.S.C. § 227, Congressional Statement of Findings ##10 and 12.

This consumer class action concerns widespread institutional disregard for the TCPA by Herbalife International, Inc. (“Herbalife”), a well-known multi-level marketing organization that markets and distributes health care products via a distribution network. Upon information and belief, over the past four years, hundreds of thousands of unsolicited pre-recorded telephone calls have been made by or on behalf of Herbalife, and with the knowledge, consent, approval and/or acquiescence of Herbalife, to residential phone numbers throughout West Virginia, as part of a campaign to promote Herbalife products and recruit distributors, all in violation of the TCPA and the privacy rights of citizens of West Virginia.

THE PARTIES

1. Diana Mey (“Plaintiff” or “Ms. Mey”), files this complaint on behalf of herself and all persons similarly situated.
2. Ms. Mey at all times relevant to this Complaint was a resident of Wheeling, Ohio County, West Virginia.
3. Defendant, Herbalife, is a corporation organized and existing under the laws of the State of Nevada having its principal place of business at 1800 Century Park East, Los Angeles, California.
4. Defendants, Pamela and Thomas Stiles, reside at RD2 Parkway Estates, New Cumberland, West Virginia 26047. Mr. and Mrs. Stiles engaged in illegal telemarketing practices throughout the State of West Virginia to promote Herbalife.
5. Defendants Nancy and Dana Willis reside at 2949 Oaklawn Street, Columbus, Ohio. Mr. and Mrs. Willis engaged in illegal telemarketing practices throughout the State of West Virginia to promote Herbalife.

THE LEGAL BASIS OF THE CLASS CLAIMS

6. This class action arises from the repeated violation by the defendants of federal law prohibiting privacy violations via invasive telemarketing practices.
7. The claims of Ms. Mey and the class of persons represented by Ms. Mey arise pursuant to the provisions of the TCPA which prohibits unreasonable invasions of privacy via certain telemarketing practices.
8. The TCPA prohibits the use of an unsolicited pre-recorded phone message to advertise the sale of goods and services. 47 U.S.C. § 227(b)(1)(B); 47 C.F.R. § 64.1200.
9. The TCPA also explicitly requires that all artificial or prerecorded telephone messages shall, at the beginning of the message, state clearly the identity of the business, individual or other entity initiating the call and shall state clearly the telephone number or address of such business or entity. 47 U.S.C. § 227(d)(3)(A).
10. The TCPA, 47 U.S.C. § 227(b)(3), further provides a private right of action in state court, as follows:

A person or entity may, if otherwise permitted by the laws or rules of court of a state, bring in an appropriate court of that State, (A) an action based on a violation of this subsection or the regulations prescribed under this subsection to enjoin such violation, (B) an action to recover for actual monetary loss from such a violation, or to receive $500 in damages for each violation, whichever is greater, or (C) both such actions.

11. Ms. Mey brings this action individually and as the representative of all members of a class pursuant to Rule 23 of the West Virginia Rules of Civil Procedure.
12. None of the class members are believed to have individual claims in excess of $50,000.

HERBALIFE’S DISTRIBUTION NETWORK

13. Herbalife is a multi-level marketing organization that markets and distributes products via a distribution network of over one million distributors.
14. Herbalife compensates each distributor through a structure of bonus and commission payments based upon the amount of product purchased by both the distributor and those recruited to Herbalife by the distributor (the “down-line”).
15. Distributors who reach a monthly volume threshold are promoted to the Supervisor level.
16. Supervisors who maintain monthly volume requirements are paid royalties on the product purchased by their down-line.
17. By meeting various volume and recruitment targets, Supervisors can ascend in the Herbalife hierarchy from World Team, Global Expansion Team, Millionaire Team and President’s Team.
18. The President’s Team includes an additional five levels, the highest being the Chairman’s Club.
19. Herbalife delegates to President Team members the responsibility and authority to recruit and train new distributors, to develop and distribute training materials, and to conduct training seminars for distributors.
20. Herbalife works closely with President Team members to develop and implement new strategies for increasing sales and distributor productivity throughout the entire distributor organization.
21. President Team members have the opportunity to obtain a bonus which, in part, is based upon their participation in Herbalife sponsored training and motivational events.
22. Herbalife involves its President Team members in sales, training, motivation and strategic planning efforts.

HEBRALIFE’S CONTROL OVER THEIR AGENTS

23. Herbalife has, at all times, had the right to control its distributors as evidenced by the following facts.
a. All distributors purchase extensive training materials from Herbalife which teaches distributors how to establish, market and grow their Herbalife business.
b. Follow up training is provided to distributors by Herbalife via frequent training seminars, phone conferences, web sites, voice mail and an individual sponsor network.
c. Herbalife provides its distributors with scripts of exactly what distributors should say when promoting Herbalife products.
d. All Herbalife distributors contractually agree to abide by Herbalife’s Code of Conduct, rules, regulations and procedures, as a condition of being approved as an Herbalife distributor.
e. Herbalife has, at all times, had the right to control and discipline its distributors for violating Herbalife’s rules, regulations, policies and procedures as amended from time to time by Herbalife at its discretion.
f. Herbalife requires its distributors to hold trade secrets in confidence for three years after termination.
g. During the term of the distributorship, and for three years following termination, Herbalife distributors are barred from participating in a “competing business of business activity.”
h. Herbalife, in its absolute discretion, may immediately suspend and/or terminate a distributor upon written notice with cause.
i. Herbalife, in its absolute discretion, may immediately suspend and/or terminate a distributor upon 30 days written notice without cause.
j. Herbalife charges each distributor an “annual processing fee”. A copy of the terms an Herbalife distributorship must abide by are attached at Tab A.
k. Herbalife specifically controls and regulates the manner in which distributors market Herbalife products via its “U.S. Internet, Mail Order And Lead Generation Regulations”, a copy of which is attached at Tab B.

HERBALIFE PROMOTES USE OF AUTO-DIALERS TO GENERATE NEW LEADS