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The Pampered Chef v. Sandy Alexanian

July 14, 2011

THE PAMPERED CHEF, PLAINTIFF,
v.
SANDY ALEXANIAN, DON FUNT, CHRISTINE LAURICH, LORI MITCHELL,
VALERIE NEWTON, SHANNON PELL, ELAINE SCHUTTER AND SYBIL GOADE, DEFENDANTS.



The opinion of the court was delivered by: Magistrate Judge Cole

MEMORANDUM OPINION AND ORDER

INTRODUCTION

The Pampered Chef is a direct sales company that sells kitchenware through home parties hosted by family and friends of the members of its sales force, who are independent contractors. Jewels by Park Lane is another direct sales company that sells jewelry. Pampered Chef has taken umbrage at the loss to Park Lane of several of what it calls its most valuable, upper-level "Directors," who are highly-placed individuals in the pyramidal sales structure used by Pampered Chef and others in the direct sales industry. The defecting Directors were free to leave Pampered Chef whenever they chose. However, under their contracts, they were not free to solicit or recruit any Pampered Chef Director or any of its 58,000 sales consultants to join them at another direct sales company. Also, the Directors could not permit anyone to use the names of any of Pampered Chef's nationwide salesforce for recruiting or promoting the sales of another company's products or services.

The Second Amended Complaint ("Complaint"), insofar as is pertinent at this juncture, alleges that defendants, Sandy Alexanian, Don Funt, Christine Laurich, Valerie Newton, Elaine Schutter and Sybil Goade, breached their Pampered Chef Director agreements by "directly and unabashedly soliciting and recruiting members of Pampered Chef's sales force to join the sales force of Park Lane." (Complaint, ¶183). The Complaint charges Lori Mitchell and Shannon Pell, who are affiliated with Park Lane, with tortious interference with the Pampered Chef's contracts with the Directors and/or with tortious interference with Pampered Chef's business expectancy with its consultants and Directors by inducing the defendant Directors to provide names of Pampered Chef consultants and Directors whom Mitchell and Pell could and did solicit to join Park Lane. (Complaint, ¶¶202-207, et. seq.). Pampered Chef seeks a preliminary injunction against Ms. Mitchell and Ms. Pell.*fn1

Resolution of a motion for preliminary injunction and resolution of a case on the merits involve "significantly different" inquiries. University of Texas v. Camenisch, 451 U.S. 390, 393 (1981). Since "[t]he purpose of a preliminary injunction is merely to preserve the relative positions of the parties until a trial on the merits can be held," id. at 395, a plaintiff need not prove its case in full, and the court's findings of fact and conclusions of law are not binding at a trial on the merits. Id. See also IDS Life Insurance. Co. v. SunAmerica, Inc, 103 F.3d 524, 530 (7th Cir. 1996).

This case, however, has taken a path different from the abbreviated course envisioned by the cases. In addition to two days of testimony, the parties' submissions were voluminous.

Collectively, they consisted of 12 three-inch spiral binders of numbered exhibits, totaling perhaps 10,000 pages. Additionally, there are 5 volumes of deposition transcripts, totaling approximately 500 pages, plus an additional 800 pages of exhibits to the depositions. This was in advance of the parties' briefs, to which were attached a number of exhibits. To encourage some factual organization, the parties were instructed even before the briefing was completed to comply with Local Rule 56.1 solely as it pertained to the presentation of facts. [Dkt. # 168]. Of course, this is not a summary judgment case, and the parties were aware of the very limited purpose for which the organizational structure provided by a Rule 56 statement of facts was resorted to.*fn2 The motion for preliminary injunction is here for determination by limited consent pursuant to 28 U.S.C. §636(b)(1)(c).

I.

FACTUAL BACKGROUND *fn3

Pampered Chef is a direct sales company that sells its kitchen wares through home parties hosted by family and friends of the members of its sales force. (Plaintiff's Amended Local Rule 56.1 Statement ("Pl.St."), ¶ 1; Ex. 1, Tr. 87:13-16; 369:2-370:15; 535:25-536:3). That force is made up entirely of independent contractors -- none are employees. (Pl.St., ¶ 2; Ex. 1, Tr. 246:20-247:16; 447:5-7). That is common in the direct sales industry. Direct sales is a method of distributing products, employed by many similar companies. (Pl.St., ¶ 3; Ex. 1, Tr. 369:16-370:15; 443:8-444:6; 448:5-25). Pampered Chef's sales force is nearly 60,000 strong, broken down into a hierarchy of about 55,000 "consultants," 2,500 "senior consultants," and 1,000 team leaders at the top. (Defendants' Local 56.1 Statement of Facts ("Def.St."), ¶ 1; Ex. A, Tr. 623). The consultants come and go -- in droves and with unremitting consistency. The turnover rate is about 60% annually, and they are replaced as quickly as they are lost. (Def.St., ¶ 3; Ex. A, Tr. 633).

For example, in 2008, Pampered Chef lost approximately 30,000 consultants, but gained an equal number in the same time period. In 2009, Pampered Chef lost 37,000 consultants, but added an equal amount of new consultants. From January 1, 2010 through October 1, 2010, Pampered Chef lost 20,000 consultants, but gained 24,000 new ones. (Def.St., ¶ 3; Ex. A, Tr. at 632:22-633:22). This rapid and consistent turnover is consistent with the historically high rate of turnover in the direct sales industry. See infra at 34.

To move up in the hierarchy and become a Director, a consultant must recruit a certain number of other people to become consultants. (Def.St., ¶ 4; Ex. B, Jonas Dep. at 60:18-68:19). Directors are compensated on the basis of their sales, the sales of their recruits, and the sales of their recruits' recruits. (Def.St., ¶ 4; Ex. E, Capinegro Dep. at 143:8-144:1; Ex. L (Pampered Chef Policy Guide), at 15-33). Above the Director level, there is Advanced Director, Senior Director, Executive Director, Senior Executive Director, and National Executive Director. (Def.St., ¶ 4; Ex. B, Jonas Dep. at 60:18-68:19; Ex. K; Ex. L at 15-33). To ascend the ladder from Director to Advanced Director and above, a Director must recruit more people and have their recruits recruit more people and so on. (Def.St., ¶ 4; Ex. A, Tr. at 86:19-90:3; Ex. B, Jonas Dep. at 60:18-68:19; Ex. L at 15-33). As of August 2010, there were 18 National Executive Directors, who earned an average of $282,031 per year. At the same time there were 1,347 base level Directors, who earned approximately $14,205 per year on average. (Def.St., ¶ 7; Ex. C at TPC 000923, 000926).

Pampered Chef changed the rules in 2009. Those who had already qualified as base-level Directors in 2008, no longer qualified in 2009. The consequence, of course, was less income for those affected. (Def.St., ¶ 8; Ex. A, Tr. at 171:11-172:1; 322:22-323:23). In the aftermath, there were approximately 1,000 fewer Directors in 2010 than there were on December 31, 2009, when there were approximately 3,021 Directors. The change also made it more difficult to qualify for certain consultant levels, and many people were demoted. (Def.St., ¶ 8; Ex. C at TPC 000926; Ex. A, Tr. at 636:22-638:3; Ex. B, Jonas Dep. at 199:1-6).

It was during this period -- from about March 2008, when Valerie Newton, the first Director left Pampered Chef, through about April 2010 -- that 13 Directors and 4 Consultants left Pampered Chef and moved to Park Lane. (Def.St., ¶ 33; Ex. A, at 595:17-25). Defendants, Alexanian, Funt, Laurich, Newton, Goade, and Schutter ("Director defendants"), were among them. (Pl.St., ¶ 4; Ex. 1, Tr. 234:24-25; 361:15-19, 22-24; 235:18-22; 86:2-5; Ex. 2, Alexanian Dep. at 5:5-8, 19:23-20:7, 158:11-21; Ex. 3, Funt Dep. at 5:8-10, 22:4-20, 30:21-23; Ex. 4, Goade Dep. at 9:1-4; 65:7-8; 10:25-11:3).

At the time they became Pampered Chef Directors, they signed Independent Sales Director Agreements, which included confidentiality and non-solicitation provisions:

F. Confidentiality

1. Director acknowledges that Company has provided Director and Director has received from the Company special training and knowledge and the Company has given Director access to trade secrets and other valuable information which is confidential and proprietary in nature. Director understands and confirms that all such trade secrets and other valuable information constitute the exclusive property of the Company. During the term of this Agreement and for two years after termination of this Agreement, Director shall hold in strict confidence and shall not, directly or indirectly, disclose or reveal to any person or use for the personal benefit of Director or anyone else any trade secrets and other confidential or proprietary information of any kind that has been obtained by or disclosed to Director as a result of Director's position in the Company's independent contractor field sales force.

I. Non-solicitation

1. Director agrees that Director has received valuable consideration from the Company in the form of specialized training and sales management training in connection with the Director's business opportunity with the Company. Director also acknowledges the receipt of valuable publicity, goodwill and promotional support from the Company to enhance Director's business success. In consideration of the awards, rights and privileges contained in this Agreement, Director agrees that, beginning as of the date of this Agreement and continuing for two years after the effective termination date of this Agreement, Director (a) will not engage, directly or indirectly in soliciting, inducing or recruiting any person whom Director knows or has reason to believe is then under contract as a member of Company's independent contractor sales field to sell products or services other than those sold by Company or to terminate their business relationship with the Company whether such solicitation or inducement is for Director's own benefit or that of others; and

(b) will not use, or knowingly permit any other person to use any names, mailing lists or other information which Director has obtained during Director's association with the Company for recruiting, or for promotion of the sales of any other company's product or services. (Pl.St., ¶ 5; PX 76, PX 92, PX 93, PX 95, PX 96, PX 58, Goade Dep. Exs. 4 and 5; Ex. 1, Tr. 90:13-21; 242:5-18; 245:11-13; 364:9-11; Ex. 2, Alexanian Dep. 67:19-68:9). The motion for preliminary injunction is not based on any claim of breach of the confidentiality provision, but solely on the nonsolicitation clause.

In its statement of facts, Pampered Chef claims that agreements such as those signed by its Directors are "standard in the direct sales industry and are critical to Pampered Chef because its sales force is completely voluntary and can leave at any time." (Pl.St., ¶ 7). As support for the assertion, Pampered Chef relies on the testimony of John Fleming, (Pl.St. , ¶ 7; Ex. 1, Tr. 447:25-448:4; 245:20-246:19; 580:23- 581:11), whom it called as an expert . Mr. Fleming never testified that all direct sales companies had non-solicitation clauses in their contracts. All he said was that "virtually all of the direct selling companies with which [he was] familiar utilize some form of independent contractor agreement for their independent sales force. . . ." (Pl.St. , ¶ 7; Ex. 1, Tr. 447:25-448:4 (emphasis supplied)). Moreover, the non-solicitation clause -- the focus of this litigation -- is not even a standard feature of Pampered Chef's contracts: None of the almost 60,000 consultants who comprise the independent sales force are bound by such a restriction, and thus are free upon leaving Pampered Chef to solicit any other consultants or Directors. (Defendants' Response to Local Rule 56.1 Statement ("Def.Rsp."), ¶ 7)(Ex. A, Tr. at 575:23-576:6; 599:9-19; 623:4-22; Ex. B, Deposition of Jean Jonas ("Jonas Dep.") at 254:2-8.).

Mr. Fleming was called to explain the effects on Pampered Chef and other similarly structured companies in the direct sales industry that occur when a Director is lured away by another company. He claimed that when a "high level consultant" leaves the company, the company becomes "vulnerable because of broken trust, broken relationships, and fractured belief causing injury to the corporation which cannot be quantified." (Pl.St., ¶ 8; Ex. 1, Tr. 448:15-25; 452:5-454:2; 455:20-456:4; Pl.St., ¶ 9; Ex. 1,Tr. 456:7-20; 477:25-478:8; 480:13-481:10). Here is a sampling of what he said:

Q: What happens when people at the higher level are pulled out in a short period of time to go to a competitor of another direct selling organization?

A: Well, if this is the target, and this person --

Q: By "this" you're referring to whom, the consultant with the organization?

A: The consultant who leads the organization. If this person is the target, then obviously the whole organization becomes vulnerable to whatever decisions might be up there. So now you get broken trust. You get broken relationships. You get fractured belief. And you have all these things going on within the organization possibly as well as outside the organization, because the other organization is just like this one that are a part of ABC. (Pl.St., ¶ 9; Ex. 1,Tr. 456:7-20). Mr. Fleming's testimony is discussed in greater detail infra at 41, et seq.

Defendant, Christine Laurich, one of the exiting Directors, testified that Pampered Chef provided the Directors with the following:

a. Creation and maintenance of online cluster reports to allow members of its sales force to see information about their downline, including sales and recruiting information (Ex. 1;Tr. 236:22-237:6);*fn4

b. Creation and maintenance of The Pampered Chef's website for use by its consultants and Directors (Tr. 237:10-13; 238:25-239:10) (Ex. 1);*fn5

c. Creation, maintenance and design of personal websites for use in consultants' personal businesses (Tr. 237:14- 238:1) (Ex. 1);

d. Support staff available to help consultants with any problems they had with their respective businesses (Tr. 238:2-13) (Ex. 1) and customer service numbers for Pampered Chef customers to call with issues (id. at 14-16) at no cost to the sales force members;

e. Warranties for defective products at no charge to consultants (Tr. 239:13-18) (Ex.1);

f. Design and creation of catalogs and brochures for consultants to use to sell products (Tr. 239:24-240:4) (Ex. 1);

g. Free credit card processing for ease of purchase at no cost to consultants (Tr. 240:5-13) (Ex. 1);

h. Monthly promotions for hostesses and guests at no cost to consultants (id. at 14-20) (Ex. 1):

i. Creation, development, and testing of recipes for consultants to use at shows (Tr. 240:23-241:7) (Ex. 1);

j. Creation of a seasonal DVD provided to each consultant to show how each new product is used and each new recipe is made (Tr. 241:8-18) (Ex. 1);

k. Development of free online classes available to consultants (id. at 19-23) (Ex. 1); and

l. Overrides on commissions of their downline consultants. (Tr. 244:24-245:1) (Ex. 1).*fn6

(Pl.St., ¶ 6). Consultants were provided with items (b)-(k). (Def.St., ¶ 6; Ex. A, Tr. at 236:18-245:1). Ms. Laurich had to pay for the use of item (c), the personal website. (Def.St., ¶ 6; Ex. A, Tr. 237:14-19). She understood that she could leave The Pampered Chef's sales force at any time, and that nothing in her contracts prohibited her from selling jewelry for Park Lane or from selling for any other direct sales company. (Pl.St., ¶ 13; Ex.1; Tr. 245:20-246:19).

Defendant Shannon Pell has been a Park Lane National Director since 2007. Part of her job is helping top executives from other direct sales programs transition to Park Lane. (Pl.St., ¶ 14; Ex. 1, Tr. 495:11-14; 497:15-498:5). She interviews prospective sales people and trains new recruits. (Pl.St., ¶ 17; Ex. 6, Pell Dep. at 16:17-17:17; 18:20-19:5). Ms. Pell would not characterize what she does as recruiting. She said she informs the interviewees about the benefits of Park Lane and how they can participate. (Pl.St., ¶ 24). She earns $200,000 a year. (Def.Rsp., ¶ 17; Ex. A, Tr. at 497:7-10, 524:22-526:5).

Previously, Ms. Pell held the same type of position at another direct sales company, PartyLite, where she worked for 21 years. (Pl.St., ¶ 18; Ex. 1, Tr. 534:8-18; 535:7-13). As a result, she is familiar with the agreements sales people sign at both PartyLite and Park Lane, and assumes that consultants at other such companies sign "some kind" or "some form" of agreement as well. (Pl.St., ¶¶ 19-20; Ex.6, Pell Dep. at 60:10-61:21). And, she is aware that Pampered Chef is another direct sales company. (Pl.St., ¶ 21; Ex. 1, Tr., at 535:25-536:3). But as for specific clauses, Ms. Pell said she did know what the PartyLite contract contained. (Def.Rsp., ¶ 18; Ex. A, Tr. at 548:14-550:4). She claimed to be unfamiliar with the term "non-solicitation provision" until this lawsuit. (Def.Rsp., ¶ 18; Ex. A, Tr. at 551:5-17; Ex.F, Deposition of Lori Mitchell ("Mitchell Dep.") at 301:1-20; 302:21-304:2; 304:13-25).*fn7

Her claims not to know the contents of her agreements at PartyLite and not to have heard the term nonsolicitation until this suit are certainly open to serious question. The difficulty is that her version does not conform with the realities of how a sophisticated business woman like Ms. Pell functions in the business environment in which she has long participated. Inferences that may be drawn from the evidence in a particular case is governed by a rule of reason, "fact finders may properly 'use their common sense' and 'evaluate the facts in light of their common knowledge of the natural tendencies and inclinations of human beings.'" United States v. Ayala, 887 F.2d 62, 67 (5th Cir. 1989). I do not credit Ms. Pell's denials.

Ms. Pell said she never heard the topic of whether any potential Park Lane recruit already had a contract with another company discussed at Park Lane. (Pl.St., ¶ 22; Ex. 1, Tr., at 536:21-537:23). She has never discussed with anyone from Park Lane how to respond to a recruit's question regarding his or her contract with another direct sales organization, but she admitted that those questions have arisen. (Pl.St., ¶ 23; Ex. 6, Pell Dep., at 110:2-7; 109:11-21). At her deposition, she testified:

Q: So if I understand it correctly then, no one has ever, in your presence when you were presenting a business opportunity, said to you in words or substance, hey, is there any problem with my doing this because of my contract or words to that effect? A: If that were said to me, I would say I don't know. I don't know your contract. (Pl.St., ¶ 23)

Q: Well, has anyone ever said that to you?

A: I would say probably. Could I say who? No. I'm sure -- (Ex. 6, Pell Dep., at 109:11-21).

Ms. Pell never received any training or instruction from Park Lane about the recruitment of individuals affiliated with other direct sales organizations. (Pl.St., ¶ 25; Ex. 6, Pell Dep., at 70:1-6). But, the Park Lane Executive Training Guide -- the training guide for independent consultants at the executive and management level -- teaches that one way to build a business for Park Lane is to recommend "direct appointments" of those with experience in direct selling. (Pl.St., ¶ 26; Ex. 6, Pell Dep., at 144:14-145:8; 165:10-169:3; PX 106).*fn8 Such candidates are identified through recommendations within Park Lane. (Pl.St., ¶ 26; Ex. 6, Pell Dep., at 175:3-12).

That is how most of the defendant Directors were brought into the Park Lane fold, with the exception of Ms. Newton. (Pl.St., ¶ 27; Def.Rsp., ¶ 27). In turn, each of those people provided Ms. Pell -- or whomever was "interviewing" them -- names of successful members of Pampered Chef's sales force who would likewise be eligible for direct appointment with Park Lane. (Pl.St., ¶ 27; Ex. 8, Mitchell Dep. at 27:4-11; 59:25-60:3; 77:3-14; 81:6-10; 81:19-82:10; 83:11-25; 84:17-25; 85:1-18; 102:15-19; 104:1-10; 104:13-25; 110:3-111:11; 127:21-129:14; 130:1-13, 132:5-15; 150:20-151:15; 154:9-20; 170:24-171:1; 171:22-172:25; 173:11-15; 174:14-18; Ex. 9, PX 100 Mitchell 000010, 74, 78, 53-55, 59, 115-121; Ex.1, Tr. 374:5-8; 374:22-375:23; 376:1-379:6; 416:1-22; 418:11-14; Ex. 10, PX 101 Newton 000010-18; Ex. 11, Newton Dep. 220:23-221:13).

Ms. Pell met with Pampered Chef Directors Funt and Laurich while they were with Pampered Chef and offered them positions with Park Lane. (Pl.St., ¶ 31; Ex. 1, Tr. 247:20-23; 502:22-24; 506:19-507:6). Ms. Pell never asked Mr. Funt whether he had any form of an agreement similar to her agreement with PartyLite. (Pl.St., ¶ 32; Ex. 1,Tr. 536:14-20).*fn9 Ms. Pell asked him to describe what a good month for him would be at Pampered Chef and told him how much that would allow him to make with Park Lane. (Pl.St., ¶ 32; Ex. 1, Tr. at 539:18- 540:6). She did not tell Mr. Funt that the reason for bringing him in at Park Lane was so he would recruit people from Pampered Chef. In fact, she said it was "made clear that" the position he was offered at Park Lane was based on his experience and "[w]hether he decide[d] to recruit or sell a thing he would still be a sales vice president." (Def.Rsp., ¶32; Ex. A, Tr. at 506:19-507:6).

Ms. Pell was present when Mr. Funt and Ms. Laurich resigned from Pampered Chef and told their "downlines" that they were joining Park Lane. (Pl.St., ¶ 29; Ex. 1, Tr. 248:23-250:20; 531:8-532:13). Then, Ms. Pell pitched the downline on the business opportunity at Park Lane. (Pl.St., ¶ 30; Ex. 1, Tr. 248:23-250:20).

Christine Laurich also gave Ms. Pell the names of several members of Pampered Chef's sales force to join Park Lane including Kim McGee, Angela Harris, Krysia Moore, Sybil Goade, Laura Harrison, Theresa Jennings, Shannon Cerra, Joan Bischoff, Doina Heinz, and Jana Arkell. (Pl.St., ¶ 59;Ex. 1, Tr. 252:19-254:3; 256:11-257:1; 258:15-260:8; 261:16-264:20; 266:14-20; 271:3-276:1; Ex. 9, PX 100; Ex. 13, PX 89). These were people Ms. Laurich knew solely through her affiliation with Pampered Chef. She told them about Park Lane, but neither invited nor encouraged them to join Park Lane. (Def.St., ¶ 59; Ex. A, Tr. 253:5-14). She provided their names to Ms. Pell because they had high levels of sales and strong recruiting numbers. (Pl.St., ¶ 59; Ex. 1,Tr. 264:24-265:9; 270:4-25). Park Lane's policy, set forth in their brochure, was that any recommendations be of those at her level or higher. (Def.Rsp., ¶ Ex. A, Tr. at 259:22-261:15). Ms. Pell forwarded Ms. Laurich's list to her colleague at Park Lane, Lori Mitchell. (Pl.St., ¶ 60; Ex. 8, Mitchell Dep. at 150:20-151:15; 154:9-20; Ex. 9, PX 100 Mitchell 000078).

Defendant Lori Mitchell had been the National Director of Executive Management for Park Lane since 1999. (Pl.St., ¶ 33; Ex. 8, Mitchell Dep. at 6:21-7:2). Prior to that, she was affiliated with the pioneer of direct selling, Tupperware, from 1965 to 1993. (Pl.St., ¶ 34; Ex. 8, Mitchell Dep. at 183:13-184:15). Ms. Mitchell had a contract when she signed on with Tupperware, and signed another agreement when she was promoted within the ranks of Tupperware. (Pl.St., ¶ 34; Ex. 8, Mitchell Dep. at 186:11-21). Similarly, she also signed a contract when she moved to Park Lane to become a Director. (Pl.St., ¶ 35; Ex. 8, Mitchell Dep. at 190:1-7; Ex. 12, PX 7). She did not know the specific provisions of her contracts with Tupperware or whether those agreements contained similar restrictions to the restrictions at issue in this case. (Def.Rsp., ¶ 35; Ex. F, Mitchell Dep. at 184:1-8; 184:10-15; 187:8-189:22; 302:21-304:2). Like Ms. Pell, Ms. Mitchell said she was unfamiliar with the term "non-solicitation clause" until this litigation. (Def.Rsp., ¶ 35; Ex. F, Mitchell Dep. at 190:4-20, 192:4-11, 304:13-23; Ex. A, Tr. at 550:14-551:12).

This aspect of her testimony is not credible. In fact, Park Lane's agreements have a one-year non-solicitation clause that states Directors shall not "call upon, solicit, divert or take away any of the company's employees or Independent Contractors." (Def.Rsp., ¶ 35; Ex. 12; Pl.St., ¶ 36; Ex. 8, Mitchell Dep. at 340:13-341:12; 342:4-9; Ex. 12, PX 7). Ms. Mitchell said she was not aware of any direct selling organization that does not have a requirement for a signed agreement similar to the Park Lane agreement but, then again, her experience is limited to two companies -- she didn't "know any other contract or if there were any." (Pl.St., ¶ 37; Ex. 8, Mitchell Dep. at 218:20-219:2; Def.St., ¶ 37; Ex. F, Mitchell Dep. at 219:9-19).

In 2009, Ms. Mitchell earned close to $280,000, which was based almost exclusively on the number of recruits she brought to Park Lane. (Pl.St., ¶ 38; Ex. 8, Mitchell Dep. at 7:3-15; 9:3-17; 10:8-11:10; 11:7-10; 71:11-16). For example, she received a commission when Defendants Chris Laurich and Don Funt joined Park Lane. (Pl.St., ¶ 47; Ex. 8, Mitchell Dep. at 143:1-5; 147:23-25). Only $2,000 of her earnings was based on sales she personally made. (Pl.St., ¶ 39; Ex. 8, Mitchell Dep. at 7:18-8:13). Ms. Mitchell gets names of potential recruits from individuals within Park Lane -- sometimes from Joyce Salela -- calls them to set up an interview to talk to them about the Park Lane business opportunity, and she asks them about their sales accomplishments. (Pl.St., ¶ 40, 48; Ex. 8, Mitchell Dep. at 27:16-28:22; 37:25-40:10; 79:6-19; 91:10-19; 27:4-11; 77:3-14; 95:8-16; Ex. 9, PX 100 Mitchell 000053, 57).

She never asked the prospects whether they were subject to any form of written agreement with their present companies because she didn't think it was relevant. (Pl.St., ¶ 44; Ex. 8, Mitchell Dep. at 219:5-8; 220:9-13; 221:18-24). All she does is "present the Park Lane program, and that's it." (Def.St., ¶ 44; Ex. F, Mitchell Dep. at 221:18-222:5). Ms. Mitchell doesn't handle the actual interviews -- in the case of the names she got from Ms. Laurich, for example, she passed them along to Ms. Pell -- but she sometimes sits in. (Pl.St., ¶ 45; Ex. 8, Mitchell Dep. at 31:4-32:2; 40:11-12; 150:20-151:15). For example, she set up and attended Sandy Alexanian's interview, where she received an offer to join Park Lane. (Pl.St., ¶ 45; Ex. 8, Mitchell Dep. at 40:11-12; 41:25-42:3; Ex. 2, Alexanian Dep. at 123:11-20). She got the lead on Ms. Alexanian from Mr. Funt, who actually gave her a list of prospects. (Pl.St., ¶¶ 53-54; Ex. 8, Mitchell Dep. at 59:25-60:3; 81:6-10; 81:19-82:10;170:24-171:1; 171:22- 172:25; 173:11-15; 174:14-18; 180:6-18; Ex. 9, PX 100 Mitchell 000054, 115). Ms. Mitchell also attended Ms. Alexanian's introductory show for Park Lane. Generally, at introductory shows, like that, she talks about the business opportunity at Park Lane. (Pl.St., ¶ 48; Ex. 8, Mitchell Dep. at 41:4-18; 44:8-10).*fn10 Ms. Alexanian told her downline she was resigning from Pampered Chef at that show; she told Ms. Mitchell shortly before that. (Pl.St., ¶ 49; Ex. 8, Mitchell Dep. at 45:18-46:2).

Diana McDermott was another Pampered Chef prospect, whose name she got from Mr. Funt. (Pl.St., ¶ 55; Ex. 8, Mitchell Dep. at 83:11-25; 84:17-25; 172:6-13; Ex. 9, PX 100 Mitchell 000055, 000118). When Ms. Mitchell called her, she told her that she had been recommended for a specific sales position with Park Lane that focused on leadership development, meaning recruiting more people to Park Lane. (Pl.St., ¶ 56; Ex. 8, Mitchell Dep. at 85:1-18; Ex. 9, PX 100 Mitchell 000055).

Valerie Newton joined Park Lane in January 2008. (Pl.St., ¶ 61; Ex. 1, Tr. 368:14-23). At the time, she was still a Pampered Chef Director, and remained one until March 2008. (Pl.St., ¶ 61; Ex. 1, Tr. 368: 8-10). While still with Pampered Chef, Ms. Newton recruited or tried to recruit Pampered Chef's salespeople for Park Lane, including Marsha Hriz, Andrea Terry, April Dumond, Shawna Tipton, Duska Mills, Robin House, and Defendants Don Funt and Elaine Schutter (Pl.St., ¶ 62; Ex. 1, Tr. 374:5-8; 374:22-375:23; 376:1-377:7; 414:24-415:24; Ex. 8, Mitchell Dep. at 102:15-19; 132:5-15; Ex. 11, Newton Dep. 220:23-221:13; Ex. 9, PX 100 Mitchell 000010; Ex. 10, PX 101). With the exception of Ms. Hriz, who was her neighbor and best friend, and Ms. Terry, she knew each of these people only through her affiliation with Pampered Chef. (Def.Rsp., ¶ 62; Ex. A, Tr. at 399:24-400:4; Def.St., ¶ 17; Ex. A, Tr. 400:5-21). Some of those recruited were among the most successful Directors in the organization, which is what motivated her to try and recruit them. (Pl.St., ¶ 62; Ex. 1, Tr. 384:19-22; 414:24-415:24).

Ms. Hriz and Ms. Terry were Pampered Chef consultants, as opposed to Directors. (Def.Rsp., ¶ 62; Ex. A, Tr. at 374:5-8, 400:15-24). Ms. Newton didn't know Ms. Terry from Pampered Chef. Ms. Dumond and Ms. Tipton joined Park Lane after expressing an interest in the company. (Def.Rsp., ¶ 62; Ex. A, Tr. at 427:21-428:6). Beginning in July 2009, Ms. Newton sent emails to Ms. Mitchell providing her with the following names of several additional referrals, along with their success rates: Michele Ambrosius, Melanie Hague, Joyce Salela, Tanya Broslawsky, Jae Hilgers, Sally Schubert, Leanne Chacksfield, Robin House, Gail Shendelman, Don Funt, Tish Jones, Sue Size, Jaime Early, Tammy Mayfield, Janice Verace, Pam Gibbs-Fitzgerald, Sara Pruisner. (Pl.St., ¶ 64; Ex. 10, PX 101 Newton 000010-18). Ms. Newton did not tell any of the people she referred to Ms. Mitchell that she had passed their names along to Park Lane. (Pl.St., ¶ 65; Ex. 1, Tr. 388:3-389:7).

She hoped that these referrals would be placed on her team, thus entitling her to a commission for their recruitment and future sales. (Pl.St., ¶ 66; Ex. 1, Tr. 376:25-378:19). That is exactly what happened. (Pl.St., ¶ 67; Ex. 1,Tr. 378:17-379:6; 416:1-22). She specifically gave the names to Ms. Mitchell because she knew that Ms. Mitchell was the person to send lists of potential recruits to for the recommendation program. (Pl.St., ¶ 68; Ex. 1,Tr. 418:11-14). But Ms. Mitchell did not direct her to do so. (Defendant. Rsp., ¶ 64; Ex. A, Tr. at 402:14-403:5).

Ms. Mitchell met with Gail Shendelman -- one of the leads from Ms. Newton -- regarding a position with Park Lane. She knew Ms. Shendelman was a Pampered Chef Director. (Pl.St., ¶ 69; Ex. 8, Mitchell Dep. at 99:11-24; 100:11-101:4; 104:1-25; 106:1-22; Ex. 9,PX 100 Mitchell 000058).

When Mr. Funt resigned from Pampered Chef on December 11, 2009, (Pl.St., ¶ 70; Ex. 3, Funt Dep. at 22:7-9), he had already entered into an agreement with Park Lane, having been recommended by Ms. Newton. (Pl.St., ¶ 70; Ex. 3, Funt Dep. at 30:21-23; Ex. 10, PX 101 Newton 000013). Even before leaving Pampered Chef, Mr. Funt began providing names of Pampered Chef salespeople to Ms. Mitchell. (Pl.St., ¶ 71; Ex. 9, PX 100 Mitchell 000054). Mr. Funt gave Ms. Mitchell a seven-page document, entitled "More from Don Funt," containing over fifty names and telephone numbers of members of Pampered Chef's sales force. (Pl.St., ¶ 72; Ex. 9, PX 100 Mitchell 00054, 115-121).

Ms. Mitchell also contacted Elaine Schutter for a position with Park Lane. (Pl.St., ¶ 73; Ex. 8, Mitchell Dep. at 107:10-108:9; Ex. 9, PX 100 Mitchell 000059). Later, Ms. Schutter provided Pampered Chef leads to Ms. Mitchell and told her that she did not want those persons knowing she was the source of the referrals unless they joined Park Lane. (Pl.St., ¶ 74; Ex. 8, Mitchell Dep. at 110:3-111:11; Ex. 9, PX 100 Mitchell 000059). If those leads joined Park Lane, under certain circumstances, both Ms. Schutter and Ms. Mitchell would be paid commissions. (Pl.St., ¶ 76; Ex. 8, Mitchell Dep. at 111:7-23; Def.Rsp. ¶ 76; Ex. A, Tr. 522:14-524:14). One of those leads, Katie Ketchum, later joined Park Lane. (Pl.St., ¶ 75; Ex. 8, Mitchell Dep. at 127:21-129:14; 130:1-13; Ex. 9, PX 100 Mitchell 000074). Joyce Salela also provided Ms. Mitchell with leads for her recruiting efforts, including Pampered Chef Director Karen Daniels, and Mitchell contacted them. (Pl.St., ¶ 52; Ex. 8; Mitchell Dep. at 27:4-11; 77:3-14; 95:8-16; Ex. 9; PX 100 Mitchell 000053, 57).

It is common knowledge that, within Park Lane, Ms. Mitchell is the person to whom referrals should be sent. (Pl.St., ¶ 51; Ex. 8; Mitchell Dep. at 294:16-19). Ms. Mitchell has been receiving lists of people to call since 1999, but said she does not ask anyone to send them to her. They know to do so by word of mouth or the fact that she is listed as national Director of Executive Management on the company's website. (Def.St., ¶ 51; Ex. F, Mitchell Dep. at 293:15-294:19).

II.

ANALYSIS*f ...


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