Wholeliving v. Tolman (2004) , 344 F.Supp.2d 739 (2004)

Is Brain Garden an illegal pyramid scheme, and if so, does enforcing the non-compete agreement with Tolman unlawfully sanction illegal activity?


The court held that Brain Garden was not an illegal pyramid scheme, and that even if it was, Tolman had failed to show how enforcement of the non-compete would have sanctioned illegal activity. The court found that Brain Garden's internal policies strictly enforced the FTC approved Amway rules that prevented inventory loading by distributors. Also, the court held that a company was not an illegal pyramid merely because a distributor made commissions on the personal purchases of other downline distributors. The company's policies prevented pyramid behavior from distributors, a claim that was supported by reports and order statistics of the company. Further, the TRO prevented conduct that was not in and of itself illegal, and even if the Company were operating an illegal pyramid scheme, enforcement of the TRO would not have had any effect on the supposed illegal conduct.

Full case and case summary also available online at: http://www.mlmlegal.com/legal-cases/Wholeliving_v_Tolman-2004.php

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Published In: Civil Procedure Updates, MLM / Direct Sales Updates, MLM Consulting / Network Marketing Updates

Reference Info:Federal, 10th Circuit, Utah | United States

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