It’s official. The long fought Pokorny Class Action lawsuit has finally been resolved. Unlike the last Pokorny / Quixtar settlement, which was delayed by the judge (or denied, depending on who you ask), this one seems to be sticking. If you were a Quixtar IBO between January of 2003 to February of 2012, you might be eligible to take a slice of the settlement pie. The official settlement page with instructions can be found here. I’ve summarized the key ingredients of the settlement below. I’ve also included direct quotes from the settlement beneath my summary.
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1) Provide 90 refund period for registration fees;
2) On registration forms, explain that income claims provided to prospects represent gross, not net income; explain the availability of free training; explain the refund policy; explain the availability of retail prices on-line;
3) Maintain policies prohibiting tactics which require people to buy tools (Business Support Materials, or “BSM”) upon enrollment;
4) Enforce its retail sales rule. As stated in the settlement, they must use “reliable reported levels of sales to end-user consumers.”;
5) 5% price reduction from the 2007 pricing levels;
6) Increase its IBO training budget by $7M over 2007 levels. Such training must be provided for free to its IBOs;
7) Maintain and enforce quality control over BSMs. The standards must prevent BSMs from making misrepresentations about the Amway business;
8 ) $55M in economic relief with $34M going to a cash (reimbursements) fun and $21M going towards a product credit fund (free schwag);
9) With the cash fund, Amway must provide a cash payment of up to 20% of the IBO’s “verifiable net BSM expenditures.” The cash payment is capped at $2,000. In other words, if you spent $10,000 on tools between 2003 and 2012, you could be eligible for a $2,000 check.
10) Upon a showing of a Special Hardships i.e. bankruptcy attributable to Amway or a loss of at least $10,000, an individual can be eligible for more money (with a $10,000 cap).
CONSENT JUDGMENT & ECONOMIC RELIEF (abridged)
5.1.1 Quixtar shall modify its agreements with its IBOs to provide not less than a 90-day refund period for registration fees. The 90-day refund period for an IBO’s registration fees will begin from the time that Quixtar receives the registration fee from the IBO.
5.1.2 The application form that new IBOs are required to execute to register as a Quixtar IBO shall disclose the following information: (a) that income figures provided to potential IBOs represent gross, not net income; (b) the availability of certain free company provided training for IBOs in marketing and merchandising; (c) Quixtar’s refund policies for products purchased by IBOs; (d) the availability of a retail product price list schedule accessible on-line; and (e) that product purchases and purchases of BSM are optional.
5.1.3 Quixtar shall: (1) not compensate any IBO primarily for the act of recruiting or registering other IBOs; and (2) not require any IBO to purchase or maintain any specified amount of inventory of products or BSM. In addition, Quixtar shall maintain policies prohibiting acts or practices which require a person to buy BSM as a condition to becoming an IBO and prohibiting acts or practices which discourage buy backs of product on commercially reasonable terms. In addition, when making sales based bonus payments or incentives to IBOs who are below the Platinum PIN level, Quixtar will emphasize consumer sales by conditioning such bonus payments and incentives on reasonably reliable reported levels of sales to end-user consumers. (The phrase “end user consumer” means any individual who intends to use or uses Quixtar products.) Quixtar shall maintain policies prohibiting Quixtar, its IBOs, and companies that are authorized by Quixtar to provide training and support to IBOs from making statements or representations or taking actions contrary to (i) the application form referenced in Paragraph 5.1.2 above; (ii) the requirements of applicable state and federal law; or (iii) the requirements of Paragraphs 5.1.2, 5.1.3, or 5.1.6 of this Settlement Agreement. Quixtar shall not be liable for contempt of the Consent Judgment solely on the grounds that Quixtar’s policies are breached by its IBOs or others.
5.1.4 Quixtar will maintain for twenty-four months from the Effective Date or from June 30, 2011, whichever occurs first, a price reduction that averages at least 5% from January 2007 pricing levels to distributors across Quixtar-branded products (existing SKUs, excluding freight). . . .
5.1.5 Quixtar will increase its annual IBO training budget for product, product merchandising, business skills . . . by an average of $7 million or more over 2007 levels for twenty-four months from the Effective Date . . . such training to be provided free to IBOs.
5.1.6 Quixtar will maintain and enforce quality control over BSMs that are: (1) sold or distributed by Quixtar IBOs or by companies authorized by Quixtar to provide training and support to IBOs and (2) sold or distributed in a manner suggesting sponsorship, affiliation or approval by Quixtar. Quality control shall include standards that are designed to prevent BSMs from making factual assertions regarding the Quixtar business that contain either material misrepresentations or omissions that render a statement materially misleading. Quality control shall provide that BSMs comply with the standards and policies contained in Paragraphs 5.1.2, 5.1.3, and 5.1.6 of this Settlement Agreement. . . .
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5.2 Economic Relief Quixtar shall provide a total of $55 Million in direct economic relief (in addition to the economic value to the Settlement Class of the injunctive relief described in Subsections 5.1.1-5.1.6 above). The $55 Million in direct economic relief shall constitute a common fund composed of: (1) a $34 Million Cash Fund; and (2) a $21 Million Product Credit Fund.
5.2.1 $34 Million Cash Fund: within ten (10) business days after entry by the Court of the Preliminary Approval Order, Quixtar shall deposit the sum of thirty-four million dollars ($34,000,000.00) (the “Cash Fund”) into an interest-bearing escrow account for an anticipated distribution to Settlement Class Members and to pay administrative costs, costs of class notice, and attorneys’ fees and expenses pursuant to this Settlement Agreement and the Court’s orders. . . .
5.2.2 $21 Million Product Credit Fund: Quixtar shall provide $21 Million in free product for benefit of the Settlement Class (“Product Credit”). . . .
6. ALLOCATION OF CASH FUND AND PRODUCT CREDIT
6.1 Cash Fund. The $34 Million Cash Fund shall be distributed as follows:
6.1.1 Cash Payments. Subject to other terms herein, Settlement Class Members who are former IBOs as of the date of this Settlement Agreement, including the named Plaintiffs, with the exceptions set forth below, who have at least $100 in Verifiable Net BSM Expenditures are entitled to a cash payment of up to 20% of their Verifiable Net BSM Expenditures, up to a maximum recovery of $2,000 per claimant, or an appropriately pro-rated amount under Paragraph 6.1.4. To obtain this cash refund, Settlement Class Members must submit to the Claims Administrator the approved Claim Form together with documentation of their Verifiable Net BSM Expenditures within a 90-day refund period as specified in the approved form of Notice. The Claims Administrator may accept receipts, credit card records, or other proof of purchase as documentation.
6.1.2 Special Hardships. Settlement Class Members who are former IBOs as of the date of this Settlement Agreement, including the named Plaintiffs, who either (i) can show that their recruitment into and operations of their Quixtar business caused them to file for personal bankruptcy or (ii) can show a loss of at least $ 10,000 from operating their Quixtar business, may apply for a special hardship award not to exceed 20% of their loss. A Special Master, who shall be appointed by the Court with input from Plaintiffs’ Counsel and Quixtar at the time of final approval of the Settlement Agreement, shall determine whether each claimant for a special hardship award has made this showing. The Special Master shall then prepare a schedule of recommended special hardship awards, if any, to each claimant and submit the schedule to the Court for final approval of the awards. The special hardship awards shall be governed by the following:
a. No individual shall receive a special hardship award greater than $ 10,000.
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