Misrepresentations and pyramid selling
The case
On October 23rd 2009, plaintiff Kerry Murphy filed a motion in Federal Court for certification of a class proceeding against defendants Amway Canada and Amway Global, and seeking permission to bring this class proceeding.
The defendants distribute products through Canada through so-called “independent business owners” (“IBOs”), who receive compensation for the supply of the products to newly recruited distributors. In so doing, Defendants operate a multi-level marketing plan (“MLMP”).
Mr. Murphy’s motion alleges that in operating their MLMP, the defendants have systematically and continuously omitted to provide accurate information to IBOs in respect of the compensation that IBOs may ultimately earn. The Defendants sell dreams of wealth, independence and success when in fact the overwhelming majority of IBOs lose money and over half give up within one year.
The motion alleges that the defendants have violated their obligations under the Competition Act, by making false representations in the promotion of a MLMP and by operating a “pyramid selling scheme” (that is, a system where the only way to profit is to recruit other salespeople into it).
Soon after Murphy’s initial motion, the defendants brought a motion to stay his claim, arguing that a clause in his and all class members’ contracts obliged IBOs to bring any claim for over $ 1000 before a private arbitration tribunal. On November 23rd, 2011, the Honorable Richard Boivin granted this motion and stayed Mr. Murphy’s claim. The Federal Court of Appeal confirmed Mr. Justice Boivin’s decision on February 14th, 2013.
Following this setback, Mr. Murphy decided, instead of abandoning his claim, to reduce the amount sought for himself to $ 1000, and to amend his claim to ask for permission to only represent the proposed class members for the portion of their claim under $ 1000. Claims under $ 1000 are not covered by the arbitration clause the defendants successfully invoked. Mr. Justice Boivin lifted the stay and allowed Mr. Murphy’s amended claim to go forward on October 9th, 2013. His decision was confirmed by the Federal Court of Appeal on May 27th, 2014.
The basis of Mr. Murphy’s claim and the class he seeks to represent remain unchanged. The only change to Mr. Murphy’s claim is that he will be able to obtain a maximum of $ 1000 in compensation, if his claim is successful, for the members of the class described above.
Are you a class member?
The plaintiff Kerry Murphy filed a motion in Federal Court for certification of a class proceeding seeking permission to bring this class proceeding on behalf of the following class:
All persons residing in Canada who distributed Defendants’ products at any time after October 15th, 2007, excluding defendants’ employees, their affiliates and family members.
Case progress
The hearing on the certification of the class proceeding took place on December 9th and 10th 2014, before the Honorable René LeBlanc. Mr. Justice LeBlanc has announced that he will render his decision in July of 2015.