Andrew F, Halaby (ASB #017251) David G. Barker (ASB #024657) Peter R. Montecuollo (ASB #031596) i COPY SNELL & WILMER LLP. One Arizona Center SAA INT 400 E. Van Buren, Suite 1900 Fee 08204 Phoenix, Arizona 85004-2202 Telephone: 602.382.6000 IAEL K. JEANES, CLERK | Zax MICHAEL E-Mail: ahalaby(@swlaw.com = J) BRKER = n or ® DEPUTY CLERK Attorneys for Plaintiff Isagenix International, LLC IN THE SUPERIOR COURT OF THE STATE OF ARIZONA IN AND FOR THE COUNTY OF MARICOPA ISAGENIX INTERNATIONAL, LLC, an Arizona limited liability company, Nogy 2017-001317 Plaintiff. COMPLAINT y | (Commercial Court Eligible) SEVILLE KO, an individual, Defendant. Plaintiff Isagenix International, LLC (“Isagenix”), for its complaint against defendant Seville Ko, alleges as follows: THE PARTIES 1. Isagenix is an Arizona limited liability company with its principal place of business located at 155 E, Rivulon Boulevard, Gilbert, Arizona 85297 2. Upon information and belief, defendant Seville Ko is a Kansas citizen who resides in Overland Park, Kansas. JURISDICT! This Court has jurisdiction over this matter pursuant to A.R.S. § 12-123 ‘And venue is appropriate in this Court pursuant to A.R.S. § 12-401(1) because defendant | resides outside of Arizona and plaintiff resides in Maricopa County, Arizona.3 4 Snell & Wilmer 4, Pursuant to Isagenix’s Policies and Procedures (“P&Ps"), defendant agreed to resolve claims arising out of violations of the P&Ps in Maricopa County, Arizona Defendant therefore has waived any and all objections to personal jurisdiction by agreeing to resolve disputes with Isagenix in Arizona. However, upon information and belict, defendant also has purposefully availed himself of the privilege of doing business in Arizona, by contracting with Isagenix in Arizona, sending and receiving payments and produets to and from Arizona, and personally enrolling Arizona citizens into his Isagenix business organization from which defendant profited. 5. The Court therefore has personal jurisdiction over defendant based on his purposeful availment of doing business in Arizona, What is more, defendant engaged in intentional wrongful conduct, expressly aimed at Isagenix in Arizona, knowing that the wrongful conduct would cause damage to Isagenix in Arizona, Defendant has derived ane continues to derive profit from his wrongful conduct aimed at the forum, FACTUAL BACKGROUND 6. _ Isagenix is a network marketing company, formed in 2002, that develops and manufactures systems for weight management, long-term wellness, and skincare, which are promoted with the help of'a network of tens of thousands of independent contractors (“associates”). Isagenix sells its products to hundreds of thousands of customers in the United States, Canada, Puerto Rico, Mexico, Colombia, Hong Kong, Singapore, Taiwan, Malaysia, Indonesia, Australia, and New Zealand. Isagenix strives to impact world heath and free people from physical and financial pain. 7. Isagenix associates are independent contractors, not employees or agents of Isagenix. They are eligible to ea commissions and bonus ineome from sales of Tsagenix products, Bach Isagenix associate interested in building an Isagenix business can refer customers to Isagenix and help others do the same, and the associate who personally enrolls a customer is referred to as the customer's “sponsor.” A sponsor is eligible to earn commissions and bonuses on sales of Isagenix products to those he or she personally enrolls and others in the sponsor's Isagenix business organizationSnell & Wilmer Depending on a sponsor's efforts and success in referring customers and mentoring other associates, his or her business organization may consist of thousands of customers and associates. 9. To assist associates in building an Isagenix business, Isagenix provides sponsors and associates with a wealth of confidential and proprietary information that belongs to Isagenix, including marketing plans and strategies, products, purchases pricing, relationships with vendors and suppliers, and the identities of and contact information for associates and preferred customers (“Confidential Information”). 10. The Isagenix business model rests largely on preserving the integrity of each associate's business organization. Accordingly, Isagenix’s P&Ps contain non-solicitation and confidentiality provisions designed to protect those business organizations. ‘The P&Ps s relationship with Isagenix and state that an associate — during the term of that associat for one year thereafter — may not solicit or encourage another associate or customer (0 join another network marketing or direct selling company. ‘The P&Ps also define and restrict associates’ use of Isagenix’s Confidential Information. As a matter of custom, practice, and company policy, associates work hard to preserve the confidentiality of contact information for associates in their individual business organizations, as well as other Confidential Information. Isagenix works vigorously with its associates to preserve the confidentiality of that information, including, among other things, ensuring that sociates and employees know and understand that they have a continuing obligation to preserve Isagenix’s confidential business information even after they sever their relationships with Isagenix. Further, employees and associates understand that Isagentx takes these precautions to protect a legitimate business interest and that if the employees or associates do not honor their obligations, Isagenix will be irreparably harmed. 11. Indeed, all associates acknowledge and agree that this Confidential Information belongs to Isagenix and must be kept completely confidential for as long as Isagenix deems that information to be confidential. Moreover, associates agree that they will not, directly or indirectly, use or disclose any Confidential Information for anypurpose unrelated to their Isagenix business, whether during the term of their association with Isagenix or thereafter, 12, Because Isagenix sells its products through customer referrals by its associates, maintaining a robust force of skilled and knowledgeable associates is a critical component of Isagenix’s business model. ‘To maintain and support that independent sales fori Isagenix invests substantial time, energy, and resources in training associates and fostering beneficial business relationships among associates and customers. 13, Successful Isagenix associates possess skills developed by Isagenix’s training programs, along with strong ambition and work ethic. These skills and attributes cause successful associates to be in high demand among other companies that rely on independent sales forces similar to Isagenix’s. Isagenix vigorously competes for talent with many other such companies, and works hard to attract and retain associaies by providing them the best possible opportunities. 14, Successful Isagenix associates also possess extensive business relationships fostered by Isagenix. These relationships, along with the Confidential Information associates receive from Isagenix, are highly valuable to other associates and companies, regardless of the fact that such companies may happen to sell different products than Isagenix, who can use them to raid the ranks of Isagenix’s associates in ways that violate Isagenix’s P&Ps. 15, Isagenix therefore has a legitimate and protectable business interest in retaining its associates, and Isagenix associates who leave the company are uniquely positioned to harm Isagenix by using their business relationships fostered by Isagenix and the Confidential Information they received from Isagenix to raid associates, 16. Defendant Ko became an Isagenix associate on January 21, 2012, and agreed to be bound by Isagenix’s P&Ps, Ko reached the rank of 1-Star Crystal Executive, and had hundreds of people in his Isegenix business organization. Ko had access to contact information for all of the over 180 associates he personally enrolled, 17. Asan Isagenix associate, especially considering defendant's rank and6 1 sizable business organization, defendant was privy to a variety of Confidential Information that belonged to Isagenix. Isagenix provided this information to defendant in furtherance of what the company hoped would be successful efforts by Ko to develop not only more sales of Isagenix products 10 customers and associates, but also more successful Isagenix associates through business organization development. 18. As part of his agreement to be bound by Isagenix’s P&Ps, defendant agreed to maintain the secrecy of, and to refrain from using for any purpose other than in connection with his Isagenix business organization, Isagenix’s Confidential Information The P&Ps do not prohibit defendant from participating in other business ventures, even when those ventures compete dir tly with Isagenix, But the P&Ps contain a non- solicitation provision under which defendant agreed not to solicit or encourage. directly or indirectly, any associate or preferred customer to join or work with another network marketing or direct selling company — during the term of defendant's relationship with Isagenix and for one year thereafter (the “non-solicitation period”). Defendant further agreed that he would not introduce, promote, or sell other business ventures, goods, ot services to any associate or preferred customer during the non-solicitation period. 19. In December 2016, Isagenix received reports that defendant was soliciting Isagenix associates to leave Isagenix for and/or surreptitiously participate in World Global Network Co., another network marketing company that also does business as Wor(|)d Global Network Co. and Helo (collectively, “Helo”). According to communications sent by defendant to Isagenix associates, defendant's network marketing operations under Helo included sales of wearable electronics. 20. On or about December 10, 2016, Ko left a voicemail for Isagenix in which he expressed his desire to resign his status as an Isagenix associate. On December 13, 2016, Isagenix accepted Kos resignation. In a letter dated that same day. Isagenix reminded Ko of his obligations under the P&Ps, including the prohibition from recruiting any Isagenix associate or preferred customer to another network marketing or direet selling company for a period of 12 months20 21, Unbeknownst to Isagenix, defendant continued to wrongfully recruit Isagenix associates to Helo. Defendant engaged in these actions while still bound by the obligations he owed to Isagenix under the P&Ps, including the non-solicitation provision, 22. For example, on January 4, 2017, Ko sent a text message to a leading Isagenix associate. In that message, Ko stated: Hey girl! You married to your business or keep your options open... jk Seriously just hit equivalent to § star in 5 weeks (133 eycles) Wvith my Wearable tech company, 90 days in the US and | have a spot ont my power leg, with my upline who did $1 Mil in sales his 3rd week, Are you and Shane open to talking? Could totally build undercover also. Love ya! 23, The associate Ko attempted to recruit is « highly successful associate for Isagenix, with thousands of associates in her business organization. While Ko was not successful in recruiting this associate, his wrongful action violated the non-solicitation provision of the P&Ps. 24, In addition, Ko has made multiple attempts to recruit Isagenix associate Kaylin Hobbs to Helo, including a February 2, 2017 text he sent to Ms. Hobbs purported!y describing his compensation from Helo and stating, “IF things ever change feel free to reach out.” 25. Defendant also made unsolicited contacts to various other Isagenix associates, encouraging them to leave Isagenix and join Helo. Upon information and helief, defendant engaged in a pattern of repeated communications to these associates, and successfully recruited Isagenix associates Nikki Rogers and Dr. Scott Roethle, likely among others. 26. On information and belief, defendant continues to solicit, direotly and indirectly through Rogers and Roethle, Isagenix associates to join Helo, Defendant has been engaging in these activities in violation of his obligations under the P&ePs, and using Isagenix’s Confidential Information to identify and pursue these targets. As a result of defendant's wrongful conduct, Isagenix associates have reported considerable impact (o 61 || their businesses, including lost sales. 2 27. Upon information and belief, defendant intentionally violated the P&Ps, Tle 3 || intended to cause injury to Isagenix; was motivated by spite oF ill will; and/or acted to + || serve his own interests when he knew, had reason to know, or consciously disregarded the 5 || substantial risk that his conduct would cause significant harm to Isagenix. 6 28, By intentionally raiding Isagenix’s associates, defendant has unjustly 7 |) capitalized and traded, and continues to unjustly capitalize and trade, on the goodwill 8 || associated with the Isagenix brand. Defendant also has stolen Isagenix associates and, 6 || with them, has stolen potential customers — both the associates themselves and the 10 || customers they could have enrolled in the future. Because of this wrongful conduct 11 | tsagenix has lost revenue from product sales that may never be recovered. Isagenix 12 | therefore has been irreparably harmed by the loss of its associates, customers, intellectual 13 |] property, revenue, and goodwill. 29, Yet the full extent of the harm to Isagenix’s business caused by defendant's conduct can be difficult to gauge. In addition to the loss of potential customers, there is Snell & Wilmer Joss of proven, successful associates whose future production is difficult to predict, Those = 17 || who stay with Isagenix may be demoralized by the losses from their busine 18 || organizations, and consequently may become less effective associates 19 COUNT ONE 20 BREACH OF CONTRACT au 30. _ Isagenix incorporates by reference the statements and allegations contained 22 || in the preceding paragraphs. 2B 31, The P&Ps, to which defendant agreed to be bound, constitute a valid and 24 || enforceable contract between Isagenix and defendant. 25 32. The contract imposes on defendant a duty not to solicit Isagenix associates 26 | during his relationship with Isagenix and for a period of 12 months following the 27 | termination of his relationship with Isagenix 28 33. The contract also imposes on defendant a duty not to use Isagenix’s20 Confidential Information for any purpose unrelated to his Isagenix businesses. whether during the term of his association with Isagenix or thereafter 34, Defendant has breached and continues to breach the contract. 35. _Isagenix has performed its duties under the contract, complied with the material provisions of the contract, and has a right to seek relief under the contract. 36. As a direct and proximate result of defendant’s breach of the contract, Isagenix has suffered and will continue to suffer irreparable harm and economic damages. 37, Moreover, it was foreseeable that lsagenix would suffer damages if defendant disclosed or used Isagenix’s Confidential Information or solicited Isagenix associates in violation of the contract. 38, _ Isagenix is entitled to recover its reasonable attorneys’ fees and costs pursuant to the P&Ps, to which defendant agreed to be bound, and A.R.S. §§ 12-341 and 12-341.01(A). COUNT TWO BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING 39. Isagenix incorporates by reference the statements and allegations contained in the preceding paragraphs. 40. — Implicit in all contracts is the covenant of good faith and fair dealing that imposes on each party a duty of good faith and fair dealing. 41. Defendant prevented Isage ix from receiving the benefits and entitlements || that isagenix reasonably expected to flow from the parties’ contract, thereby breaching the implied covenant of good faith and fair dealing existing in that contract 42, As adirect and proximate result of defendant’s breach of the implied covenant of good faith and fair dealing, Isagenix has suffered and will continue to suffer irreparable harm and economic damages. 43. This count arises out of contract. Accordingly, Isagenix is entitled to is costs and reasonable attorneys’ fees under A.R.S. §§ 12-341 and 12-341.01(A).Snell & Wilmer COUNT THREE VIOLATION OF ARIZONA TRADE SECRET ACT 44, Isagenix incorporates by reference the statements and allegations contained in the preceding paragraphs. 45. During the course of his relationship with Isagenix, defendant had access 10 Isagenix’s confidential business information 46, Atall relevant times, Isagenix undertook reasonable steps to safeguard its confidential business information. 47, _ Isagenix’s confidential business information constitutes “trade secrets” as | the term is defined in A.R.S. § 44-401 because it is information: a. From which Isagenix derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and b. That is the subject of efforts to maintain its seerecy that are reasonable under the circumstances. 48. Pursuant to the contract entered into by defendant, and under A.R.S. § 44- 401 er seq., defendant owed Isagenix a duty to protect those trade secrets to which he had access, 49. Defendant violated those duties by knowingly misappropriating and wrongfully using Isagenix’s trade seerets for defendant's own benefit to compete against Isagenix on behalf of himself and the entities he now is associated with, knowing or having reason to know that the trade secrets were acquired by improper means. 50. ‘Asa direct and proximate result of defendant's unauthorized | rnisappropriation and use of Isagenix’s trade secrets, Isagenix has suffered and will continue to suffer irreparable harm and economic damages. 51. Isagenix is entitled to an injunction for actual and threatened misappropriation pursuant to ARS. § 44-402.E = 3 & 52. __Isagenix is entitled to compensation for all actual damages and unjust enrichment pursuant to A.R.S. § 44-403(A) 53, __Isagenix is entitled to its reasonable attomeys’ fees pursuant to A.R.S. § 44- 404(3). S. § 44-403(B) 54. Isagenix is entitled to exemplary damages pursuant to AR. because defendant’s misappropriation and wrongfiul use of Isagenix’s trade secrets was willful and malicious. COUNT FOUR (COMMON LAW UNFAIR COMPETITION 55, Isagenix incorporates by reference the statements and allegations contained in the preceding paragraphs, 56. In addition to its rights in its trade secrets, Isagenix has rights in other confidential information. 57. Defendant improperly used Isagenix’s confidential information. Defendant’s actions described herein violate Isagenix’s common law rights and constitute unfair competition. 59. Defendant committed these acts of unfair competition willfully, maliciously. and in conscious disregard of Isagenix’s rights, with the intent to injure Isagenix. 60. Asa direct and proximate result of defendant's actions, Isagenix has suffered irreparable harm and economic damage. COUNT FIV TORTIOUS INTERFERENC 61. _ Isagenix incorporates by reference the statements and allegations contained in the preceding paragraphs. 62. The P&Ps imposed on defendant a duty not to solicit Isagenix employees to another network marketing or direct selling company during his association with Isagenix and for a period of 12 months thereafter 63. Defendant improperly solicited and induced other Isagenix associates 103 4 || him or for his benefit, Jeave Isagenix and join Helo. On information and belief, defendant also improperly sociates to breach their contracts with Ls induced other Isagenix genix by inducing them to solicit additional Isagenix employees to leave Isagenix and join Helo. 64. Asa direct and proximate result of defendant's conduct, Isagenix has suffered and will continue to suffer irreparable harm and economic damages. 65. Defendant committed these acts willfully, maliciously, and in conscious disregard of Isagenix’s rights, with the intent to injure Isagenix. COUNT SIX UNJUST ENRICHMENT 66. _ Isagenix incorporates by reference the statements and allegations contained in the preceding paragraphs. 67. Defendant has been enriched, and Isagenix has been impoverished, by defendant's unjustified and unauthorized actions. PRAYER FOR RELIEF | WHEREFORE, Isagenix respectfully requests that the Court enter judgment against defendant in Isagenix’s favor and prays for the following relief: A. Apreliminary and permanent injunction forcing defendant Seville Ko and his attorneys, officers, agents, affiliates, directors, members, managers, subsidiaries, servants, employees, and any and all other persons acting in concert or participating with i to refrain from any and all use, disclosure, or dissemination to others | of any Isagenix confidential business information; | ii. to immediately return all of Isagenix’s confidential business information in defendant's possession, without retaining any copies, whether in whole or in part, of that information; iii to refrain from soliciting, recruiting, inducing, or otherwise encouraging any Isagenix associates or preferred customers to join or work with any other network marketing or direct selling company or to leave Isagenix; and | -ll-iv. to act or refrain from acting in any other manner as this Court deems | P appropriate. B. Foran award of compensatory damages in an amount to be prov: including but not limited to damages for actual loss to Isagenix and for any unjust enrichment by defendant. C. Foran award of punitive damages in an amount to be proven at tial D. Foran award of costs and reasonable attorneys” fees, including under the P&Ps, and under A.R.S. §§ 12-341, 12-341.01(A), and 44-404(3). E. Foran award of exemplary damages pursuant to A.RS, § 44-403(B). F. _ Allsuch other relief as the Court deems just and proper. DATED this 3rd day of February, 2017, Peter R. Montecuollo. Attorneys for Plaintiff Isagenix International, LLC.