Kavky v. Herbalife

Does the state anti-fraud statute apply to the sale of business opportunities?

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The Appellate Court held that state anti-fraud statutes do apply to the sale of businesses and business opportunities as long as the elements are met. Kavky responded to an advertisement from Herbalife soliciting distributors of the company's products. Kavky paid the fee for the distributorship, and bought 10 "pre-paid internet customers" whom he would solicit orders from. Herbalife never delivered the customer list, and Kavky sued alleging violations of the state anti-fraud statutes and common law fraud. The court held that while the anti-fraud statutes were intended to protect consumers in typical consumer transactions, the statute should not be read so narrowly as to preclude other types of fraudulent inducements to purchase. The statute was designed to protect unsophisticated consumers from deceptive tactics, the precise situation alleged in the complaint. The court ruled that the complaint was improperly dismissed.

The full case and case summary are also available at: http://www.mlmlegal.com/legal-cases/Kavky_v_Herbalife.php

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Reference Info:State, 3rd Circuit, New Jersey | United States


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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