The Court of Appeals held that yes, the evidence admitted in Bestline's trial was properly admitted. Bestline was found liable for deceptive trade practices in recruiting potential distributors. Beltline claimed that because the cause of action for violation of the endless chain statute was dropped, evidence of the company's endless chain activities should have been excluded from trial. The Appellate Court disagreed, saying that the evidence was still probative on the question of the company's deceptive marketing practices. The court agreed with the opinions of other state courts that the inherent fallibility of a pyramid marketing scheme makes it deceptive marketing to entice new distributors with claims of significant income potential. The appeals court also upheld a $1 million civil penalty as appropriate given that Bestline made $9 million in income from the illegal actions. Civil penalties are supposed to act as a deterrent, and despite Bestline being ordered to pay $6 million in restitution, $1 million in civil penalties was appropriate given the breadth of the company’s actions.
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MLM / Direct Sales Updates, MLM Consulting / Network Marketing Updates
State, 9th Circuit, California |
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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