In a nearly yearlong lawsuit between two Utah County-based multilevel marketing companies, a federal judge recently ordered one company to turn over confidential documents it had on the other.
However, U.S. District Judge Bruce S. Jenkins, in an order filed Feb. 11 in Salt Lake City, declined to grant Neways Inc. all of its injunction requests against Sisel International, including an order to stop two Sisel distributors from luring away Neways distributors in Japan.
Jenkins wrote the 23-page order after an eight-day hearing. Neways, based in Springville, sought injunctions against Sisel, based in Salem, and its distributors as part of a suit filed in May 2007 over competition between the two companies. A trial date has not been scheduled.
Neways sells a variety of nutritional, personal care and household products through networks and hierarchies of "distributors," called multilevel marketing.
Thomas Mower Sr. and former wife Dee Mower founded Neways in 1992, but the couple was forced to sell the company during divorce proceedings to Dutch company Golden Gate Capital. Thomas Mower began Sisel in 2005. Sisel also sells nutritional and personal-care products, according to the judge's order.
Both companies do a majority of their business in Japan.
Neways, in its request for a preliminary injunction, stated that Sisel improperly used confidential and proprietary information such as Neways' distributors' names, contact information, sales volume and bonus information. Neways stated that Sisel has used the information to lure Neways distributors to Sisel.
Chris Crump, general counsel for Neways, said the information also included product formulas.
The judge agreed that the information should be returned to Neways.
Sisel never thought the information it had was trade secrets. "In the course of the hearing, we offered voluntarily to return them," said Philip Hadfield, Sisel general counsel. "For us, it means nothing."
"In court, we received some of them," Crump said about the documents. "We have not seen some of them yet."
Neways also wanted the judge to prohibit five Japanese citizens, a Tokyo-based limited liability corporation and Sisel from recruiting or soliciting Neways distributors to enroll as distributors with Sisel, based on Neways' noncompete policies. The five Japanese citizens had previously worked for Neways.
Jenkins, however, split the five Japanese citizens into two groups, based on when they were hired. Three were hired before Neways had offices in Japan. Two were hired later. The two groups worked under different policies and procedures manuals.
While Jenkins ordered three Japanese distributors to stop recruiting from Neways, he determined two distributors who worked after the Japanese offices opened could not be held to the same standard because their policy handbook was too ambiguous about noncompetition rules.Neways asked that Sisel be prohibited from recruiting Neways distributors, but Jenkins did not think there was enough evidence to show that Sisel was involved.