Stop me if you’ve read this one before. I write about a multi-level marketing (MLM) scheme and their lawyers send me an email that I’m going to be in trouble. This happened with MonaVie twice. Yesterday, a lawyer claiming to represent One24 contacted me about my article: One24 Scam. In it, I explained that the FTC has said that some multi-level marketing are actually pyramid schemes. I then showed how the FTC’s guidelines for pyramid schemes apply to One24.
The Lawyer’s Email
I received an email from Charles McMurry, corporate attorney for 124 LLC. In it he “strongly suggested that [I] remove any comments about 124 on [my] web site.” He claims that my comments are defamatory. McMurry takes exception with my implication that One24 is illegal because it is a pyramid scheme. He defends this by saying that I’m clearly wrong because it would mean that numerous large companies in the US would be under investigation. He then informs me that there is no law against MLM companies. Then he says that each state has separate statutes that govern these businesses and that there is no scam or illegal activity. For good measure he says that the 124 “sells a good product” and that it “returns a large percent of sales to its members in the form of commissions.” He then suggests that I should look more closely at the laws of regarding defamation. He then said that they “need me to remove all my negative comments about our company with the next 24 hours.” If I fail to comply he said he will pursue “legal remedies.” He closed the email by inviting me to email him or leave a phone number to call and urging that I “govern [myself] accordingly.”[Update: Since I was asked in the comments to post the email, here’s a screenshot from my Gmail account. As you can see it is nearly a year old and One24 has not responded to my latest email. Charles McMurry was unable to put forth any specific part of my article that was deemed incorrect and resorted to trying to attack me because he couldn’t defend One24’s practices. It appears that One24’s the large law firm of Grimes and Reese agrees with me since they took no further action. I tried my best to work with Mr. McMurry, but it seemed like he was only interested in preventing the consumers from obtaining important information about the company, not correct any kind of injustice.]
What is defamation?
When in doubt, one of the first places I go to is the Electronic Frontier Foundation’s Blogger’s Guide. The EFF is one of the best known and reputable sites I know. They even have a whole FAQ devoted to defamation, which comes in handy in times like these.
One of the first things the guide makes clear is that defamation is against a person. At the bottom of the page you get to a question about trade libel, which as it says, “Trade libel is defamation against the goods or services of a company or business. For example, saying that you found a severed finger in you’re a particular company’s chili (if it isn’t true).” So one of the first things to note is that One24 wouldn’t have a defamation case, they’d have a potential trade libel case (if any case at all).
Let’s put the question of trade libel vs. defamation aside for a minute. Suppose that it is defamation as Mr. McMurry claims. According to the EFF’s guide:
“The elements that must be proved to establish defamation are:
- a publication to one other than the person defamed;
- a false statement of fact;
- that is understood as
- a. being of and concerning the plaintiff; and
- b. tending to harm the reputation of plaintiff.
- If the plaintiff is a public figure, he or she must also prove actual malice.
The most important thing that I see here is that there has to be “a false state of fact.” So if I were to say that One24 is a pyramid scheme, One24 would need to prove that is not a pyramid scheme. This would be an extraordinary difficult thing to do considering the FTC’s statements as I showed in my original One24 post.
Getting back to trade libel for a second, the burden of One24 proving that it is not a pyramid scheme is backed up by this post about trade libel: “A second difference is that plaintiff is required to plead and prove that a disparaging statement is false in regard to trade libel, whereas in a cause of action the plaintiff is NOT required to plead that the statements are false in most cases.”
Furthermore I found this information about the false statements with regard to trade libel:
“3. The defendant must have made the communications knowing they were false or with reckless disregard of the truth. (Leonardini v Shell Oil Co. (1989) 216 CA3d 547.) Reckless disregard of the truth is determined on a case by case basis but essentially means that no reasonable person would have considered the defendant’s fact finding as acceptable practice prior to publishing the untrue statements. A typical situation is that the defendant claims the product is unsafe without either testing the product or investigating the claims of lack of safety in any verifiable manner.”
In this regard, not only would One24 have to prove that it isn’t an illegal pyramid scheme. It would have to prove that it wasn’t reasonable for me to suggest it was a pyramid scheme which would be extremely difficult considering this article from the FTC about MLMs and pyramid schemes.
Analysis of the Rest of the Email
The rest of the email is interesting. I should point out that the email has a few typos and grammatical errors. I wouldn’t typically point this out, because as a blogger, my posts are filled with them. However, as an official communication from a lawyer, this seems very unusual.
It also makes the common error that all pyramid schemes are investigated promptly. Bernie Madoff was operating his for more than a dozen years. There’s even a book about it. It is also worth noting that in many cases, there is no one to bring these cases to trial. The one organization that could do it, is the FTC. However, the FTC doesn’t have the budget to fight against one company, FreeCreditReport.com – it’s hard to imagine it could bring cases against every MLM company that it felt was a pyramid scheme. Furthermore, Pyramid Scheme Alert has an article about politics and why the FTC lets MLM run wild in America. I’m not a political scholar so I’ll leave that as an exercise for the reader.
Is One24 just trying to Whitewash Justified Criticism?
The final part of the email essentially demanding that I take down “negative comments” looks to me like they are trying to squash criticism. It’s important to note that the email didn’t state that I should remove “false negative comments”, but all negative comments. I’m pretty sure that I’m legally allowed to criticize a company.
My Response to One24
I returned an email to them that I don’t believe there is any defamation case to be had here.
I then strongly suggested that they consider the consequences of bringing legal action against me. There is a well-known phenomenon called the Streisand effect. Wikipedia describes it as, “primarily online phenomenon in which an attempt to hide or remove a piece of information has the unintended consequence of publicizing the information more widely.” If One24 is looking to keep the negative comments quiet, the approach they are taking has a history of backfiring.
What are you thoughts? Let me know in the comments.