Pampered Chef v. Alexanian

804 F. Supp. 2d 765, 2011 U.S. Dist. LEXIS 76135, 2011 WL 2746460
CourtDistrict Court, N.D. Illinois
DecidedJuly 14, 2011
Docket10 C 1399
StatusPublished
Cited by21 cases

This text of 804 F. Supp. 2d 765 (Pampered Chef v. Alexanian) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pampered Chef v. Alexanian, 804 F. Supp. 2d 765, 2011 U.S. Dist. LEXIS 76135, 2011 WL 2746460 (N.D. Ill. 2011).

Opinion

MEMORANDUM OPINION AND ORDER

JEFFREY COLE, United States Magistrate Judge.

INTRODUCTION

The Pampered Chef is a direct sales company that sells kitchenware through home parties hosted by family and friends of the members of its sales force, who are *770 independent contractors. Jewels by Park Lane is another direct sales company that sells jewelry. Pampered Chef has taken umbrage at the loss to Park Lane of several of what it calls its most valuable, upper-level “Directors,” who are highly-placed individuals in the pyramidal sales structure used by Pampered Chef and others in the direct sales industry. The defecting Directors were free to leave Pampered Chef whenever they chose. However, under their contracts, they were not free to solicit or recruit any Pampered Chef Director or any of its 58,000 sales consultants to join them at another direct sales company. Also, the Directors could not permit anyone to use the names of any of Pampered Chefs nationwide salesforce for recruiting or promoting the sales of another company’s products or services.

The Second Amended Complaint (“Complaint”), insofar as is pertinent at this juncture, alleges that defendants, Sandy Alexanian, Don Funt, Christine Laurich, Valerie Newton, Elaine Schutter and Sybil Goade, breached their Pampered Chef Director agreements by “directly and unabashedly soliciting and recruiting members of Pampered Chefs sales force to join the sales force of Park Lane.” (Complaint, ¶ 183). The Complaint charges Lori Mitchell and Shannon Pell, who are affiliated with Park Lane, with tortious interference with the Pampered Chefs contracts with the Directors and/or with tortious interference with Pampered Chefs business expectancy with its consultants and Directors by inducing the defendant Directors to provide names of Pampered Chef consultants and Directors whom Mitchell and Pell could and did solicit to join Park Lane. (Complaint, ¶¶ 202-207, et. seq.). Pampered Chef seeks a preliminary injunction against Ms. Mitchell and Ms. Pell. 1

Resolution of a motion for preliminary injunction and resolution of a case on the merits involve “significantly different” inquiries. University of Texas v. Camenisch, 451 U.S. 390, 393, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981). Since “[t]he purpose of a preliminary injunction is merely to preserve the relative positions of the parties until a trial on the merits can be held,” id. at 395, 101 S.Ct. 1830, a plaintiff need not prove its case in full, and the court’s findings of fact and conclusions of law are not binding at a trial on the merits. Id. See also IDS Life Insurance. Co. v. Sun-America, Inc., 103 F.3d 524, 530 (7th Cir.1996).

This case, however, has taken a path different from the abbreviated course envisioned by the cases. In addition to two days of testimony, the parties’ submissions were voluminous. Collectively, they consisted of 12 three-inch spiral binders of numbered exhibits, totaling perhaps 10,000 pages. Additionally, there are 5 volumes of deposition transcripts, totaling approximately 500 pages, plus an additional 800 pages of exhibits to the depositions. This was in advance of the parties’ briefs, to which were attached a number of exhibits. To encourage some factual organization, the parties were instructed even before the briefing was completed to comply with Local Rule 56.1 solely as it pertained to the presentation of facts. [Dkt. # 168], Of course, this is not a summary judgment case, and the parties were aware of the very limited purpose for which the organizational structure provided by a Rule 56 statement of facts was resorted to. 2 The motion for preliminary injunction is here *771 for determination by limited consent pursuant to 28 U.S.C. § 636(b)(1)(c).

I.

FACTUAL BACKGROUND 3

Pampered Chef is a direct sales company that sells its kitchen wares through home parties hosted by family and friends of the members of its sales force. (Plaintiff’s Amended Local Rule 56.1 Statement (“Pl.St.”), ¶ 1; Ex. 1, Tr. 87:13-16; 369:2-370:15; 535:25-536:3). That force is made up entirely of independent contractors— none are employees. (Pl.St., ¶ 2; Ex. 1, Tr. 246:20-247:16; 447:5-7). That is common in the direct sales industry. Direct sales is a method of distributing products, employed by many similar companies. (Pl.St., ¶ 3; Ex. 1, Tr. 369:16-370:15; 443:8-444:6; 448:5-25). Pampered Chefs sales force is nearly 60,000 strong, broken down into a hierarchy of about 55,000 “consultants,” 2,500 “senior consultants,” and 1,000 team leaders at the top. (Defendants’ Local 56.1 Statement of Facts (“Def.St.”), ¶ 1; Ex. A, Tr. 623). The consultants come and go — in droves and with unremitting consistency. The turnover rate is about 60% annually, and they are replaced as quickly as they are lost. (Def.St., ¶ 3; Ex. A, Tr. 633).

For example, in 2008, Pampered Chef lost approximately 30,000 consultants, but gained an equal number in the same time period. In 2009, Pampered Chef lost 37,-000 consultants, but added an equal amount of new consultants. From January 1, 2010 through October 1, 2010, Pampered Chef lost 20,000 consultants, but gained 24,000 new ones. (Def.St., ¶ 3; Ex. A, Tr. at 632:22-633:22). This rapid and consistent turnover is consistent with the historically high rate of turnover in the direct sales industry. See infra at 788.

To move up in the hierarchy and become a Director, a consultant must recruit a certain number of other people to become consultants. (Def.St., ¶ 4; Ex. B, Jonas Dep. at 60:18-68:19). Directors are compensated on the basis of their sales, the sales of their recruits, and the sales of their recruits’ recruits. (Def.St., ¶ 4; Ex. E, Capinegro Dep. at 143: 8-144:1; Ex. L (Pampered Chef Policy Guide), at 15-33). Above the Director level, there is Advanced Director, Senior Director, Executive Director, Senior Executive Director, and National Executive Director. (Def.St., ¶ 4; Ex. B, Jonas Dep. at 60:18-68:19; Ex. K; Ex. L at 15-33). To ascend the ladder from Director to Advanced Director and above, a Director must recruit more people and have their recruits recruit more people and so on. (Def.St., ¶ 4; Ex. A, Tr. at 86:19-90:3; Ex. B, Jonas Dep. at 60:18-68:19; Ex. L at 15-33). As of August 2010, there were 18 National Executive Directors, who earned an average of $282,031 per year. At the same time there were 1,347 base level Directors, who earned approximately $14,205 per year on average. (Def.St., ¶ 7; Ex. C at TPC 000923, 000926).

Pampered Chef changed the rules in 2009. Those who had already qualified as base-level Directors in 2008, no longer qualified in 2009. The consequence, of course, was less income for those affected. (Def.St., ¶ 8; Ex. A, Tr. at 171:11-172:1; 322:22-323:23).

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Bluebook (online)
804 F. Supp. 2d 765, 2011 U.S. Dist. LEXIS 76135, 2011 WL 2746460, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pampered-chef-v-alexanian-ilnd-2011.