Modere has failed to secure an injunction over allegations of raiding by former promoters.

Back in March Modere sued Amber DeLoof, Brynn Lang, Marina Simone and their respective companies for raiding Modere to promote Frequense.

In challenging Modere’s motion for a Temporary Restraining Order and preliminary injunction, DeLoof, Lang and Simone raised two primary arguments; lack of jurisdiction and whether Modere not likely to succeed on the merits of its case.

On jurisdiction, the court found that because DeLoof, Lang and Simone had signed “Social Marketer Agreements” with Modere, “they … consented to personal jurisdiction in this court.”

On Modere being likely to succeed on the merits of its case, the court found that Modere’s Social Marketer Agreements were

  • executed in good faith;
  • necessary to protect goodwill; and
  • reasonably limited in time and geographical area

Thus, Modere has demonstrated that the non-solicitation and non-compete clauses of the contracts at issue are likely
enforceable.

Where things fell apart for Modere was the court finding that DeLoof’s, Lang’s and Simone’s personal companies (the “corporate entities”), were deemed “relevant contractual parties”.

To overcome this, Modere argued that DeLoof, Lang and Simone were members of the corporate entities.

What resulted was the court finding that DeLoof, Lang and Simone did violate the terms of Modere’s Social Marketer Agreements, but that their conduct didn’t extend to their corporate entities.

Considering the evidence of Defendants’ allegedly violative conduct … the court is satisfied that it … would constitute recruiting under Section 4.9.1.2 of the Policies and would thus be violative of the Social Marketer Agreement’s non-solicitation agreement.

Additionally, the court is satisfied that it is likely that the actions and social media activity by Ms. DeLoof and Ms. Lang, as described above, in connection with their Frequense business, would constitute the building of a competing network marketing or direct selling company and would thus be violative of the Black Agreements’ prohibition on non-competition during the 90-day period subsequent to the termination of the Social Marketer Agreement.

Modere argues either that the individual Defendants are, in fact, contract parties (which, for the reasons laid out above, this court rejects) or that the individual Defendants are liable under the contract by operation of Section 4.4 of the Policies.

Simply stated, Modere’s position that its agreement with the Defendant business entities rendered the individual Defendants liable for the obligations of the entities is contrary to basic tenets of corporate identity and contract law.

If Modere truly wanted every member of a business entity to be bound by the contractual promises of the business entity, thus upsetting longstanding, well-settled blackletter principles of corporate law, it should have required a personal guarantee or require that all members of the entities sign in their individual capacities.

TL;DR: DeLoof, Lang and Simone violated their Social Marketer Agreements by raiding Modere to build their Frequense downline.

Because they signed said agreements with shell companies however, the court opted to not hold the DeLoof, Lang and Simone individually accountable.

While this seems absurd from a logical standpoint (corporate identities can’t go out and recruit people), the court noted they were bound to reach this conclusion based on how Modere itself set up its Social Marketer Agreements.

This result may seem formalistic, but it is demanded by the parties’ contractual arrangements and the design choices fashioned by Modere itself.

Modere elected to allow individual distributors to substitute corporate entities as contractual counterparties, and now asks this court to disregard that decision (and the corporate form altogether).

As a result of its findings, the court denied Modere’s motion for a TRO and preliminary injunction on May 17th.

As at time of publication there are no further entries on the case docket. Whether Modere will continue with the case remains to be seen.

 

Update 3rd July 2024 – Modere has abandoned its Frequence cross-recruiter lawsuit.