Melaleuca, Inc. v. Foeller

Melaleuca, Inc. (plaintiff) used a multilevel marketing structure to sell its nutritional and cosmetic products. In 1999, Rick and Natalie Foeller (defendants) signed an independent marketing executive agreement (IMEA) with Melaleuca and became independent marketing executives. The Foellers were paid monthly commissions. Under policy 20 of the IMEA, the Foellers were not allowed to recruit Melaleuca customers to a competing business venture. Policy 20 gave Melaleuca discretion to cease paying compensation in the event of a marketing executive’s breach and provided for a forfeiture of commissions for and after the month of the violation. In June 2008, the Foellers began working with Melaleuca’s competitor Max International. The Foellers undisputedly recruited Melaleuca’s customers to the competitor while still receiving commissions from Melaleuca. The last check the Foellers received was in October 2008 for the prior month’s commissions. In November 2008, the Foellers ended their relationship with Melaleuca. Thereafter, Melaleuca learned of the Foellers’ breach. In April 2009, Melaleuca sued the Foellers for breach of contract, among other claims. Through motion practice, Melaleuca argued that it was entitled to a return of commissions that were paid to the Foellers from the date of the Foellers’ breach in June 2008. Melaleuca asserted that it was excused under policy 20 from performing the IMEA and paying commissions once the Foellers breached the contract and that Melaleuca would have stopped paying commissions if it had learned earlier of the Foellers’ breach. The Foellers opposed Melaleuca’s analysis and argued that there was a genuine issue of material fact regarding Melaleuca’s damages. The trial court ruled in Melaleuca’s favor, awarding the commissions. The Foellers appealed, arguing that Melaleuca had not properly proven damages.