A Monterey jury has awarded $650,000 to a Cleveland couple after finding their distribution contract was wrongly terminated by Starlight International of Monterey, a multilevel marketing company that distributes dietary supplements. Richard and Tammie Fugo sued Starlight in November 2000, claiming the company terminated their distributorship without explanation that August just as they were poised to reach top-rung success in the network marketing firm. On Friday, a Monterey Superior Court jury awarded the Fugos $50,000 in income they should have collected since their termination and $600,000 in future income.Steven Goldberg, president of Starlight International, did not immediately return telephone calls on Tuesday. His attorney, Steven Karic of Los Angeles, declined to comment on what he said was "ongoing litigation."
Founded in 1992 by Goldberg, a former Hollywood producer, Starlight sells nutritional supplements billed as promoting health and weight loss and products intended to fight stress and aging.The company, headquartered on Garden Road, is a multilevel distributorship in which independent contractors work their way up through various sales levels by recruiting new distributors into the network. The "upline" distributor then takes a cut of his "downline" distributors' profits.
Between April 1996 and August 2000, according to their lawsuit, the Fugos had risen four levels from bottom-rung distributors to "Emerald Star" rank and were told they were only one step away from the upper-most "Diamond Star" level.
Then, on Aug. 14, 2000, they received a fax informing them their contract was being terminated for unspecified "ethics" violations. Asking for further explanation, they were told only that they had been overly controlling their downline distributors, according to court papers.The Fugos' attorney, David Eisenstein of Scottsdale, Ariz., maintained that the company violated its own policies by terminating the contract without explanation or warning and that the termination benefited at least one distributor who inherited the Fugos' distributorship.An expert on multilevel marketing testified the Fugos would have earned more than $1 million in the 46 years Tammie Fugo could be expected to continue working.The company argued that it had suspended the Fugos in 1999 for "disseminating unauthorized promotional materials... making unauthorized claims about Starlight's products and mentioning medical conditions," and warned the couple that further violations of company procedures would result in their immediate termination.
Starlight attorney Karic told jurors the Fugos' business was worthless, given that their tax returns indicate they had lost money in all but one year between 1997 and 2000, and that their income for July 2000 was 25 percent less than the same period in 1999.Karic also argued that Starlight's sales as a whole had declined dramatically since August 2000, forcing the company to reduce its prices.He asked the jury to award nothing. Eisenstein asked for $1.3 million.The Fugos said they are pleased with the verdict. While their initial lawsuit accused the company of being a "pyramid scheme" - an allegation that was later dropped - they said they still believe in the company.
"We love the company and we love their product and it's unfortunate it had to come to a jury trial," Richard Fugo said. "We tried to talk to them for three months (and) had no choice but to turn to the courts."
