Wakaya Perfection counterclaim details Youngevity vendetta, infidelity
On January 18th Wakaya Perfection filed their answer to Youngevity’s lawsuit.
For the most part the company denies the claims laid out against it.
Individuals identified herein and other distributors of Wakaya’s products neither are agents of Wakaya nor speak for or on behalf of Wakaya, that Wakaya’s compensation plan speaks for itself, and that the statements selectively quoted herein have been taken out of context and given a self-serving characterization by Youngevity.
That much was expected. What’s particularly interesting though are the allegations that follow in Wakaya’s counterclaim.
In their counter-claim, Wakaya go ham on the victim card and portray Youngevity as a spiteful company.
Rather than accept responsibility for their own misdeeds, (Youngevity, its) board members (and) the founder of the company … engaged in a concerted campaign to destroy Wakaya in its infancy.
Acting out of personal spite and without any legal justification, (Youngevity) threatened any Youngevity distributor who expressed an interest in working with Wakaya, either in addition to or instead of working for Youngevity.
On information and belief, (Youngevity’s) goal was to prevent Smith from successfully launching Wakaya and to punish Smith for his perceived disloyalty to Youngevity—a disloyalty that existed solely in the minds of (Youngevity management).
Wakaya claim Youngevity drove away high-ranking affiliates from Wakaya, who otherwise had a legal right to jump ship. The termination of Youngevity affiliates who left for Wakaya was part of a “vendetta and without legal justification”.
Specific allegations of “counterproductive behavior”, infidelity and the promotion of “ill-conceived and unprofitable business decisions” are laid out against Youngevity’s founder, Joel Wallach.
Dr. Wallach frequently engaged in a pattern of traveling with and sharing hotel rooms at Youngevity events with a variety of female companions other than his wife, some of whom are Youngevity distributors.
This behavior was widely known within the Youngevity community.
Taking advantage of the influence he held as founder of Youngevity, Dr. Wallach routinely attempted to coerce distributors, including Vaughn and the Pitcocks, into inserting Dr. Wallach’s female companions into favored positions in their distributors’ organization.
The Wallach Group tolerated, and thereby condoned, this behavior, despite its highly inappropriate nature.
When the Distributor (defendants) protested about Dr. Wallach’s manipulation of their organizational structures, the Wallach Group reacted in vindictive and defensive ways.
For example, when any distributor refused to insert Dr. Wallach’s companions into his or her organization, Dr. Wallach threatened to never participate in events or otherwise help them promote their business.
Often this threat from the founder of the company was enough to compel compliance.
Wallach’s “companions” are not named in the countersuit.
When the Pitcocks objected to Dr. Wallach’s attempts to force distributors to insert his companions into their organizations—which the Pitcocks viewed as an abuse of power and highly damaging to the morale of Youngevity’s distributors—consistent with their usual practice, the Wallach Group reacted defensively and vindictively.
For example, on information and belief, Michelle Wallach fabricated emails accusing Barb of cross-recruiting, which emails were intended to discredit Barb and damage her reputation both within Youngevity and in the larger direct marketing community.
Finally losing patience with Youngevity management’s unproductive behavior, Dave left Youngevity in the fall of 2014, citing the fabricated emails and Dr. Wallach’s practice of coercing distributors to include his female companions into their organizations as his reasons for leaving.
Barb remained with Youngevity and managed her distributorships until Youngevity summarily terminated them in March of 2016.
Vaughn observed Dr. Wallach and Michelle Wallach yelling at company employees in public, intimidating and bullying distributors, and generally undermining morale.
More damning, the Wallach Group engaged in and tolerated cross-line recruiting within Youngevity.
Cross-line recruiting involves one party recruiting members of another party’s downline, and is prohibited by the Policies and Procedures.
The Wallach Group used their personal standing within the company to engage in this prohibited practice to the benefit of themselves and their favored distributors.
Although Vaughn was initially content to work for Youngevity, he became increasingly disillusioned with the company because of inappropriate and unprofessional behavior on the part of senior management, including Dr. Wallach, Michelle Wallach, and Briskie.
Fed up with the Wallachs’ self-dealing, favoritism, and unprofessional behavior, Vaughn began looking for other opportunities outside of Youngevity.
The dubious Mexico launch is also a point of contention.
At a Youngevity event in September 2014, Briskie, then Chief Financial Officer and director of international development for Youngevity, and Steve Wallach, then Chief Executive Officer of Youngevity, announced that Youngevity had completed all of the requirements for allowing Youngevity businesses to operate in Mexico.
Briskie and Steve Wallach also announced that Youngevity’s office in Guadalajara, Mexico was open and that Youngevity’s warehouse in Mexico was stocked with product to sell.
Based on this announcement, Smith began preparations to set up Youngevity distributorships in Mexico.
He booked meeting spaces and organized several large events, which cost a substantial amount of money.
However, in January 2015, the day before Smith was due to fly to Mexico to begin operations, Briskie informed him that Youngevity had not, in fact, completed the requirements to enter the Mexican market.
Upon investigating, Smith discovered Youngevity was nowhere near ready to conduct lawful operations in the country and was, in fact, shipping
Youngevity products into Mexico in furniture crates.
On information and belief, Youngevity took these measures to avoid customs inspections.
The Wallach Group announced expansions into international markets—engendering costs associated with “grand openings”—without first obtaining the required regulatory clearances for Youngevity products.
The Wallach Group approved of, or at least did nothing to stop, the smuggling of Youngevity products into Mexico.
On information and belief, the Wallach Group authorized the smuggling
The Wallach Group authorized exorbitant expenditures of Youngevity funds, such as spending $800,000 on a K cup coffee machine.
Todd Smith and Blake Graham go on to allege that statements made by Wallach are defamatory.
Dr. Wallach has stated that Smith and Graham stole Youngevity distributors; they stole money; they stole our staff; they stole thumb drives with people’s names, numbers and emails; stating that he knew for a fact that they were contacting and took people who are certain ranks within Youngevity.
Dr. Wallach stated that Smith and Graham have perpetrated crime and compared them to rapists.
Dr. Wallach further stated that Smith stole business opportunities from Youngevity and that he did it because he was desperate for money, making disparaging remarks about Smith’s family and his finances and business, stating that Smith was going bankrupt and was going to lose his house because his restaurants weren’t doing well.
These statements are false, defamatory per se, personally hurtful, and threaten to harm Smith’s and Graham’s reputations in the network marketing community.
The Wakaya counterclaim asks for declaratory judgement against Youngevity, with respect to Youngevity’s Policies and Procedures precluding affiliates from signing up with Wakaya (with respect to Californian law).
Other claims include:
- breach of contract
- breach of the covenant of good faith and fair dealing
- tortious interference with existing contractual relations
- tortious interference with prospective economic advantage
- false light
- business disparagement
- unfair competition and
- fraud/negligent misrepresentation
Looking forward, a hearing on January 27th scheduled an Early Neutral Evaluation and Case Management conference for February 28th.
Update 2nd March 2017 – As per a February 28th minute entry;
An Early Neutral Evaluation Conference was held on February 28, 2017. The parties did not reach a settlement.
A Case Management Conference was held at the conclusion of the Early Neutral Evaluation Conference. Scheduling Order to follow.
As at the time of publication the Scheduling Order has yet to be made.