O'Shaughnessy v. Young Living Essential Oils, LC

          REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

          SUSAN HIGHTOWER, UNITED STATES MAGISTRATE JUDGE.

         TO: THE HONORABLE LEE YEAKEL UNITED STATES DISTRICT JUDGE

         Before this Court are Defendant Young Living Essential Oils, LC's Motion to Compel Arbitration, filed on June 11, 2019 (Dkt. No. 7); The Young Living Foundation, Inc., Mary Young, Jared Turner, and Benjamin Riley's Motion to Compel Arbitration and Joinder in Young Living Essential Oil LC's Motion to Compel Arbitration and Stay Proceedings, also filed on June 11, 2019 (Dkt. No. 8); and related response and reply briefs. On July 2, 2019, the District Court referred the above motion to the undersigned Magistrate Judge for Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1), Federal Rule of Civil Procedure 72, and Rule 1 of Appendix C of the Local Rules of the United States District Court for the Western District of Texas.

         I. BACKGROUND

         A. The Instant Lawsuit

         On April 12, 2019, Plaintiff Julie O'Shaughnessy (“Plaintiff”), individually and on behalf of all those similarly situated, filed this lawsuit against Defendants Young Living Essential Oils, LC d/b/a Young Living Essential Oils (“Young Living”), The Young Living Foundation, Inc. (the “Foundation”), Mary Young, Jared Turner, Benjamin Riley, and Jane and John Doe co-conspirators (“Individual Defendants”) for damages and other relief under the Racketeer Influenced Corrupt Organizations Act, 18 U.S.C. §§ 1961(5), 1962(c), and 1962(d) (“RICO Act”).

         Plaintiff alleges that “Young Living operates an illegal pyramid scheme created under the guise of selling essential oils for quasi-medicinal purposes.” Dkt. No. 1 at ¶ 1. Plaintiff avers that she, and hundreds of thousands of putative class members just like her, paid and lost hundreds (and in some cases thousands) of dollars to become Young Living Essential Rewards enrollees (“Members”) based on the promise of financial health (which Young Living calls “abundance”) and physical health, all through its brand of essential oils. Plaintiff contends that Young Living falsely represents to its Members that participation in Young Living-which necessarily requires regular monthly payments-will result in spiritual and material riches as long as they continue to solicit additional recruits to become Members of the Young Living family. “In reality, ” Plaintiff alleges, “Defendants have created nothing more than an unlawful pyramid scheme-the cornerstone of which is Young Living's emphasis on new member recruitment over the sale of products.” Id. at ¶ 4. Plaintiff contends that Defendants' activities have violated the RICO Act.

         B. The Contractual Provisions at Issue

         On May 15, 2015, Plaintiff became a Member of Young Living by enrolling online and electronically signing the “U.S. Member Agreement & Essential Rewards Enrollment Form.” See Exh. C to Dkt. No. 7 (“Member Agreement”).^[1] By signing the Member Agreement, Plaintiff acknowledged: “I have read and agree to be bound by the terms and conditions of the Agreement (which includes this Member Agreement, the Policies and Procedures, and the Compensation Plan).” Id. at p. 2. Relevant to the Motion to Compel Arbitration, the Member Agreement contains the following “Jurisdiction and Choice of Law” clause (“Forum Selection Clause”):

The Agreement will be interpreted and construed in accordance with the laws of the State of Utah applicable to contracts to be performed therein. Any legal action concerning the Agreement will be brought in the state and federal courts located in Salt Lake City, Utah. Notwithstanding the foregoing, if applicant resides in Louisiana, applicant may bring an action against YL with jurisdiction and venue as provided by Louisiana law.

Id. at p. 3 § 9 (emphasis added).

         The Member Agreement also incorporated the Young Living Policies and Procedures (“P&P”) and the Compensation Plan. Id. at § 5. The P&P contained the following arbitration clause:

If mediation is unsuccessful, any controversy or claim arising out of or relating to the Agreement, or the breach thereof, will be settled by arbitration.^[2] The parties waive all rights to trial by jury or to any court. The arbitration will be filed with, and administered by, the American Arbitration Association (“AAA”) or Judicial ...