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10 Myths of MLM Legal Dispute Mediation

Posted by David G. Eisenstein on Jul 10, 2017 1:17:00 PM

  •      Myth #1--That an MLM (network marketing) distributor will be able to find a lawyer who will take her case on a contingency fee basis.  This is because generally speaking MLM legal issues in a network marketing case revolve around the complicated process of deciphering how one or more of the direct selling company's policies and procedures is interpreted and applied to the legal dispute--this factor alone sets the stage for complex commercial litigation and bears little  similarity  to a "rear-end collision PI case" which is the category of cases which have traditionally been handled by PI (personal injury) attorneys working on a contingency fee, i.e. a percentage of the money recovered for the damages suffered by the victim of another driver's negligence.  
  •     Myth #2--A distributor's success in the mediation of an MLM dispute does not require the distributor to have a lawyer present at a mediation.  The network marketing company will have legal representation (usually a team of litigation attorneys and support staff) and the mlm mediator or any other lawsuit mediator is by definition a neutral facilitator of alternative dispute resolution (adr) hired by both sides to assist the parties in the process of reaching a resolution of their dispute within the confines of their direct sales mediation.  
  •      Myth #3--The company and the distributor who mediate in a direct selling legal dispute need not do any "homework" in preparation for the mediation.  Not so, since the success of the mediation, particularly when it includes an expectation of a recovery of lost commissions by the distributor due to the company separating her from her downline organization by suspension and/or termination, depends on a fairly complicated analysis of the distributor's lost income due to wrongful suspension and/or termination.  Not only does this require a significant expenditure by both sides to furnish an analysis prepared by compensation plan expert(s) based on their opinions on the amount of the loss, if any, together with persuasive documentary support for that conclusion gleaned by the expert from the company's MLM software (either getting access to those records directly from the company or on the distrbutor side, from their back office) and provide persuasive documentary support for that conclusion.
  •     Myth #4--The mlm mediator will ultimately decide which side wins the Mediation.  Not true.  The attorney-mediator never decides the case for the parties but serves as a neutral facilitator to provide the parties with the time, place, and setting for making their own deal so that they won't have to continue their dispute in court, with or without a jury, or arbitration where, in those situations, third parties make a decision which is legally binding on both sides.  Usually, in the court and/or arbitration setting, the parties have little or no "ownership" in the ultimate decision and limited direct input into the decision making process leading up to that ruling. 
  •     Myth #5--Mediation will result in a decisive win by one side or the other.  No, the process of mediation is designed to allow both sides a better understanding of each other's point of view and the risks involved in pursuing the dispute through the courts or arbitration, to vent their emotions that surely accompany the dispute, and then, to COMPROMISE their differences with the assistance of the lawyer-mediator in facilitating their resolution of their legal dispute.  Remember, and keep this in mind, the reason we read about large awards for network marketing lawsuits is that they are so unusual, infrequent, and out of the ordinary, which makes them NEWS!.  Commonly, decisions by courts, sitting with or without a jury, and arbitrators also involve compromises (you've heard the old adage, "cut the baby in half" dating all the way back to ancient scripture, but those are imposed on both sides by third parties, 
  •     Myth #6--Settlements and mediations are only for the faint of heart, and demonstrate weakness on the part of one or both sides.  To the contrary, I have found in my 40+ years of law practice that it is the best businessman or businesswoman who has the courage to compromise in the face of the risks, uncertainties, and downright injustices of American jurisprudence.
  •     Myth #7--Stubbornness is a virtue in settlement discussions. Wrong, both sides should listed carefully to what the other side is saying to them  then accordingly, recalibrate their expectations for the outcome of the dispute.  The uncompromising people in mediations almost invariably find themselves disappointed in the end result of the dispute.  Don't look at settlement negotiations and mlm mediations as involving mainly "the principle of the  thing" but see them as business decisions in the overall context of your MLM/network marketing/direct selling business, whether you are the owner or executive of a company or the key distributor who finds herself at odds with the company's management.  Think in terms of business opportunities you will lose from wasting your time and money on the anguish of prolonged mlm litigation of your mlm case, direct sales litigation, or mlm arbitration.
  •     Myth #8--An expectation that a settlement will make you feel vindicated.  Wrong again.  Attorneys have long said that "a good settlement makes both sides unhappy."  Expect a bit of an emotional letdown after a "successful" network marketing mediation with the aid of the network marketing mediator.  But again, keep your mind on what you have gained by freeing yourself from the tethers of litigation for years--giving you the opportunity to go on to enhanced achievements in business, something you know much more about than litigation, courts, and arbitrations.
  •     Myth #9--The biggest ego will prevail in the mediation of your direct sales case.  This is not so, as the very process of mediation requires an openness on the part of both sides to the wide range of opportunities which are available to build a viable settlement between the parties.  If you let your ego get in the way, you are just blocking yourself from perceiving what the situation will lend itself to in the way of mutual agreement and reasonable compromise.
  •     Myth #10--You will crush the other side at trial so why bother with mediation.  No the chances are that nothing of the sort will happen, invariably you will realize after you have spent more money than imagined or budgeted for the network marketing litigation. Truthfully, in my many years of litigation experience, mlm trial and arbitration outcomes are nearly as unpredictable as what would happen if you simply "rolled the dice" to decide the dispute.  That is why litigation of legal disputes should always be considered as a huge gamble by both sides to the dispute.

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     Mediations, while less formal than court trials and arbitrations, are still opportunities for attorneys for the parties to summarize the important factual considerations, and even some abbreviated legal arguments.

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  • The attorneys need to have some knowledge of the network marketing industry in order to be effective in mediations
  • The mediator should be well-informed on MLM issues as well so he/she can facilitate the parties reaching a settlement 
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