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GLEICH v. TASTEFULLY SIMPLE

December 2, 2005.

CYNTHIA GLEICH, Plaintiff,
v.
TASTEFULLY SIMPLE, INC., KIMBERLY LEOPARDO, LAURA DAVIS, LISA MACIEL, JANE DOES and JOHN DOES 1-10, and XYZ CORPORATIONS 1-10, Defendants.



The opinion of the court was delivered by: GEORGE MAROVICH, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Cynthia Gleich ("Gleich") filed a five-count complaint against defendants Tastefully Simple, Inc. ("Tastefully Simple"), Kimberly Leopardo ("Leopardo"), Laura Davis ("Davis"), Lisa Maciel ("Maciel") and multiple John and Jane Does and XYZ Corporations. Defendants Tastefully Simple, Leopardo, Davis and Maciel move pursuant to Rules 12(b)(3) and 12(b)(6) of the Federal Rules of Civil Procedure for an order dismissing the complaint.*fn1 For the reasons set forth below, the Court grants the motion and dismisses without prejudice all of plaintiff's claims.

I. Background

  For purposes of defendants' 12(b)(6) motion, the Court takes as true the allegations in the complaint. The Court also considers the exhibits attached to plaintiff's complaint (including, among others, Exhibit 1: Tastefully Simple Consultant Agreement and Exhibit 5: Tastefully Simple Policies Effective May 1, 2004). See Fed.R.Civ.P. 10(c). For purposes of the 12(b)(3) motion, on the other hand, the Court is "not obligated to limit its consideration to the pleadings." Continental Cas. Co. v. American Nat'l Ins. Co., 417 F.3d 727, 733 (7th Cir. 2005).

  Tastefully Simple is a corporation that sells food products. The complaint does not say what food products Tastefully Simple sells, but the what is less important to the case than the how. Tastefully Simple sells through a network of independent contractors, whom Tastefully Simple calls "consultants." Each consultant is expected to sell products via parties. A consultant is required to buy products (worth at least $1600 per year) from Tastefully Simple and, upon resale, earns a commission. A consultant can also earn a commission on the sales made by "downline" consultants, i.e., additional consultants recruited to Tastefully Simple and sponsored by the original consultant. Thus, as is typical of such pyramid marketing structures, one's position in the pyramid affects one's earnings, and one generally prefers to be higher rather than lower on the pyramid. It is this unsurprising jockeying for position on the pyramid that brings these parties (including two members of the same family who are on opposite sides of the litigation) to this Court.

  The first of the individual parties to join the pyramid was defendant Leopardo. Leopardo recruited her sister-in-law, plaintiff Gleich, to Tastefully Simple and is listed as the "sponsoring consultant" on the Tastefully Simple Consultant Agreement Gleich signed.

  Gleich signed a Tastefully Simple Consultant Agreement (the "Agreement") on or about October 31, 1999. By signing the Agreement, Gleich agreed, among other things: (1) "to conduct in-person informational presentations for individual consumers and/or groups through home parties or business/local/club organization presentations as [her] main source of sales, recruiting and promotion"; (2) "to sell Tastefully Simple products to ultimate consumers and not to sell or display those products or conduct parties or Tastefully Simple business through the Internet, retail stores or service establishments"; and (3) "to present Tastefully Simple career information to prospective Tastefully Simple consultants in a truthful and sincere manner and to accept the training and ongoing support responsibilities of a sponsoring consultant as stated in the current Tastefully Simple career plan." The Agreement provides that "if [Gleich] do[es] not order at least $400 retail in commissionable products every calendar quarter, [she] will no longer be considered an active consultant and [she] will lose all benefits associated with being an active consultant, product discounts, company correspondence, commissions, etc. [She would] then be considered a `deactivated' consultant." Under the Agreement, Tastefully Simple retained the right to terminate the Agreement with thirty days' notice. Finally, the Agreement contains a forum selection clause, which states:
This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota and any and all actions/arbitrations shall be venued in Douglas County, State of Minnesota.
(Agreement ΒΆΒΆ 2, 5, 7, 15).

  The Agreement does not set forth how consultants are compensated with respect to their downline consultants. That information is set out in Exhibit 5 to plaintiff's complaint, which Exhibit is entitled Tastefully Simple Policies Effective May 1, 2004 ("Tastefully Simple Policies/Consultant Guide".*fn2 Depending on one's level in the pyramid (i.e., how many and what type of consultants one recruits below her), sponsoring consultants can earn 5% "Leadership Cheques" for first-line "commissionable" orders, 3% for second-line and 1% for third-line. For example, when a consultant is promoted to Team Manager, which requires the consultant to "recruit and sponsor six first-line" consultants, she earns a 5% Leadership Cheque for first-line orders and a 3% Leadership Cheque on second-line orders. A Senior Team Mentor (who must have recruited 15 first-line consultants, five of whom must be Senior Team Managers) makes 5% on first-line, 3% on second-line and 1% on third-line sales.

  During the course of the five years after Gleich signed the Agreement, Gleich was successful at developing a network of consultants below her. As she recruited and sponsored additional consultants, she was promoted to Team Leader, Team Manager, Senior Team Manager, Team Mentor and, finally, to Senior Team Mentor. By then, she had 550 consultants below her, including defendants Davis and Maciel.

  As a sponsoring consultant, Gleich had certain responsibilities to her downline consultants. Gleich attached to her complaint a letter from Tastefully Simple's Consultant Support Lead, which letter stated that a consultant's "contractual obligations" are set out in the Consultant Guide. That document, it seems, outlines "Sponsor Requirements." To use Tastefully Simple's new verb, a sponsoring consultant is to TRIM (i.e., train, reward, inform and motivate) her downline consultants. The document also states that "[i]f a sponsor is failing to TRIM (Train, Recognize, Inform and Motivate) their [sic] first-line consultants, the sponsor may lose their [sic] downline and/or Tastefully Simple may terminate their [sic] Consultant Agreement." According to Gleich's complaint, she met her training obligations by, among other things, coaching and training her consultants, hiring motivational speakers, sending letters of recognition, conducting regular meetings, maintaining a team website, purchasing gifts to reward consultants and sending newsletters.

  Gleich's team was successful at selling Tastefully Simple's products. The team was responsible for nearly $4,000,000 in annual sales. As of 2004, Tastefully Simple was paying Gleich commissions of between $7,000 and $8,000 per month. Jill Blashak, Tastefully Simple's CEO, praised Gleich for having "truly dazzled everyone." Plaintiff alleges that things changed for the worse in October 2004, when Tastefully Simple bumped two of plaintiff's first-line consultants (Davis and Maciel) up to plaintiff's sponsoring consultant, Leopardo. Thus, as of October 2004, Davis and Maciel (and everyone below them) were considered to be below Leopardo (and no longer below Gleich) in the pyramid. (It is unclear from the complaint why Tastefully Simple bumped Davis and Maciel up to Leopardo, but a reasonable inference from the pleadings is that Davis and Maciel requested the bump-up on the grounds that Gleich was not adequately training them.) The immediate effect of the change was a 40% reduction in both the number of consultants below Gleich and Gleich's commissions. Gleich alleges that Tastefully Simple has also threatened to bump up to Leopardo a few of Gleich's other consultants, including Andrea Parham and Nancy Thrasher.

  Based in part on these allegations, Gleich asserts five claims. In Count I, Gleich asserts a breach of contract claim against Tastefully Simple. Gleich alleges that Tastefully Simple contracted (both orally and in the Tastefully Simple Policies/Consultant Guide) to provide her residual income and bonuses based on the success of her downline network and that Tastefully Simple breached the contract by bumping Davis and Maciel up to Leopardo. In Count II, plaintiff asserts a claim for tortious interference. Here, she alleges, among other things, that Tastefully Simple conspired with Leopardo, Davis and Maciel to interfere with the "contractual network of downline distributor organizations and relationships with and for the benefit of the Plaintiff[.]" In Count III, Gleich alleges that the defendants engaged in a civil conspiracy to destroy Gleich's business. In Count IV, Gleich alleges that Maciel and Davis defamed her orally and in writing by stating that Gleich had failed to "train, recognize, inform, and mentor" them. Finally, in Count V, Gleich asserts a claim for intentional infliction of emotional and physical distress and alleges that "[t]he wrongful `bump-ups' have caused much emotional distress to Ms. Gleich[.]" II. Standard on a motion to dismiss

  Dismissal is appropriate under Rule 12(b)(3) where a claim is covered by a valid forum selection clause that selects a venue elsewhere. Continental Cas. Co., 417 F.3d at 733.

  The Court may dismiss claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure if the plaintiff fails "to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). In considering a motion to dismiss under Rule 12(b)(6), the Court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in the plaintiff's favor. McCullah v. Gadert, 344 F.3d 655, 657 (7th Cir. 2003). On a motion to dismiss, the "issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer ...


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