Once again, a court has ruled against an MLM’s “binding arbitration” contract as a shield against consumer lawsuits. The recent ruling against the MLM, Stream/Ignite, may enable a current consumer lawsuit to proceed. Like all other MLMs, Stream/Ignite used the arbitration clause to argue that consumer victims had no legal right to sue in court.
October 5, 2010, the United States Fifth Circuit Court of Appeals held that Ignite’s arbitration provision is “illusory and unenforceable.” The Court observed “Ignite essentially could renege on its promise to arbitrate by merely posting an amendment to the agreement on its website.” The Fifth Circuit returned the case to the district court for further proceedings.
Stream/Ignite, like other MLMs, combines a relatively high upfront fee, monthly fees and product purchases to generate its revenue. In the words of the lawsuit, “The defendants have created, operated and maintained a pyramid and endless chain scheme. Specifically, the defendants induced (plaintiffs) and others to invest in the “Ignite Services Program” … for $329.00 and purchase an “Ignite Homesite” web page for $29.00 a month for the right to recruit new individuals to do the same with false promises of enormous profits.”
The company uses the typical MLM pay plan that authorizes each new recruit to recruit other salespeople, forever, ignoring or denying the existence of market saturation or market size limits. Ignite resells gas and electric service to consumers in some states deregulated to allow resellers. Ignite lures customers to pay fees to also become an Ignite salesperson and join the “endless” pay plan.