Lund v. Arbonne Intern., Inc.

• Decision Date: 21 December 1994
• Docket Number: L-1
• Court: Oregon Court of Appeals
• Parties: Kay LUND, Appellant, v. ARBONNE INTERNATIONAL, INC., a Utah corporation; B.J. Vollstedt, individually and as an agent for Arbonne International, Inc.; and Joyce Raker, individually and as an agent for Arbonne International, Inc., Respondents. 91-3659-; CA A82007.

Page 817

887 P.2d 817

132 Or.App. 87

Kay LUND, Appellant, v. ARBONNE INTERNATIONAL, INC., a Utah corporation; B.J.

Vollstedt, individually and as an agent for Arbonne

International, Inc.; and Joyce Raker, individually and as

an agent for Arbonne International, Inc., Respondents.

91-3659-L-1; CA A82007.

Court of Appeals of Oregon.

Argued and Submitted Oct. 14, 1994.

Decided Dec. 21, 1994.

[132 Or.App. 88-B] Robert E. Bluth, Medford, argued the cause for appellant. With him on the briefs was Frohnmayer, Detherage, Pratt, Jamieson, Turner & Clarke, P.C.

Peter R. Chamberlain, Portland, argued the cause for respondent Arbonne International, Inc. With him on the brief was Bodyfelt Mount Stroup & Chamberlain.

Cynthia A. Wiens, Medford, argued the cause for respondents B.J. Vollstedt and Joyce Raker. With her on the brief was Cowling & Heysell.

Before ROSSMAN, P.J., and De MUNIZ and LEESON, JJ.

De MUNIZ, Judge.

Plaintiff brought this action against defendant Arbonne International, Inc. (Arbonne), for, inter alia, breach of contract, violation of the Unlawful Trade Practices Act (UTPA), ORS 646.605 et seq, interference with business relations and defamation. Plaintiff alleged claims against defendants Raker and Vollstedt for defamation and intentional interference with contractual relations. The trial court granted defendants' motions for summary judgment. We affirm.

Arbonne is a company that develops and produces beauty and skin care products that are marketed through "consultants." To become a consultant with Arbonne, the individual fills out an application in which the individual acknowledges that he or she will work as an "independent contractor." When the application is filled out and a fee paid, the individual is considered "registered" with the company. In January, 1987, plaintiff filled out an application and became a registered consultant.

Raker and Vollstedt were already Arbonne consultants. Raker had "sponsored" Vollstedt, and Vollstedt sponsored plaintiff. The significance of sponsoring a person as a consultant is that the sponsor receives commissions on all of the sponsored consultant's sales, and on the sales of all people whom that consultant, in turn, sponsors into the sales network. This sponsorship network is referred to as the consultant's "down line." Thus, plaintiff was in Vollstedt's "down line" and both Vollstedt and plaintiff were in Raker's "down line."

In 1990, plaintiff also became a consultant for a different company. Shortly thereafter, Arbonne instituted a policy that an Arbonne consultant could not directly or indirectly sponsor any Arbonne consultant to sell products or services for any other company, a practice known as "cross-sponsoring." In August, 1991, Vollstedt wrote a letter to Kochen, the corporate executive officer for Arbonne, requesting that plaintiff be "deregistered." On September 19, 1991, Kochen wrote to plaintiff, alleging that she had violated the policies relating to cross-sponsoring, and gave her ten days in which to send a "satisfactory written response" that she had not violated Arbonne's policies. Plaintiff responded but, on October 19, Arbonne deregistered plaintiff.

Plaintiff first assigns error to the summary judgment for Arbonne on her breach of contract claim. She argues that the trial court erred in concluding that the parties had an "at will" relationship that either party could terminate and that there was no duty of good faith and fair dealing in the contract. Plaintiff alleged that she "was not an employee, agent or legal representative of Arbonne International," but was an "independent contractor" who "operat[ed] under an implied contract." She alleged that her deregistration, which was "without just cause or justification," was a breach of the implied contract and the duty of good faith and fair dealing between the parties.

On appeal, plaintiff appears to have abandoned her position that Arbonne breached an implied contract. Rather, the gist of her argument is that Arbonne's right to deregister her was limited, because her application did not reserve a right for Arbonne to terminate the agreement at will and because Arbonne's policy manual states that a consultant may be deregistered for violating policies. She argues that there are questions of fact as to whether the agreement was an "at will" agreement, whether plaintiff violated any policy and whether Arbonne acted in good faith.

We conclude that, even under the position plaintiff now takes, the trial court did not err in granting summary judgment on the claim. Plaintiff acknowledges that, generally, the rule in Oregon is that a contract for an indefinite period may be terminated at will when reasonable notice is given. ¹ Anderson v. Waco Scaffold & Equip., 259 Or. 100, 485 P.2d 1091 (1971); Fleming v. Kids and Kin Head Start, 71 Or.App. 718, 722 n. 1, 693 P.2d 1363 (1985). Here, the only agreement between plaintiff and Arbonne was the 1987 application for registration. It does not set out a definite period for the relationship. We conclude that the agreement established an "at will" relationship.

We also reject plaintiff's argument that Arbonne's policy statement changed the "at will" relationship. Personnel policy statements may create contractual obligations between an employee and an employer. Yartzoff v. Democrat-Herald Publishing Co., 281 Or. 651, 576 P.2d 356 (1978). However, even assuming that the same obligations may be created in an independent contractor relationship, the policy manual here does not limit Arbonne's right to terminate the relationship at will. Instead, it reinforces that right by specifically reserving for Arbonne the unilateral power to make a final decision to terminate the relationship. ²

Plaintiff argues that, even if the agreement was one at will, Arbonne's right to terminate it was limited by the obligation of good faith and fair dealing. Plaintiff's position is that the doctrine of good faith has been developed to effectuate the reasonable contractual expectations of the parties, Best v. U.S. National Bank, 303 Or. 557, 563, 739 P.2d 554 (1987), and that allowing Arbonne to terminate the agreement here deprived her of all the benefits of her hard work and investment. Arbonne responds that, while the law imposes a duty of good faith in the performance of contracts, that duty does not reach the right to terminate an at-will contract, even for a bad cause. Sheets v. Knight, 308 Or. 220, 233, 779 P.2d 1000 (1989).

In U.S. National Bank v. Boge, 311 Or. 550, 814 P.2d 1082 (1991), the defendant counterclaimed for breach of the bank's duty to act in good faith after the bank moved to foreclose on loans it had made to the defendant. The Supreme Court summarized its previous holdings on good faith:

"The obligation of good faith does not vary the substantive terms of the bargain or of the statute, nor does it provide a remedy for an unpleasantly motivated act that is expressly permitted by contract or statute. As this court noted in the common law context:

" 'The law imposes a duty of good faith and fair dealing to facilitate performance and enforcement of the contract where it is consistent with and in furtherance of the agreed-upon terms of the contract or where it effectuates "the reasonable contractual expectations of the parties." Best v. U.S. National Bank, supra, 303 Or. at 563, 739 P.2d 554.

" 'The foundation of the at-will employment agreement is the express or implied understanding that either party may terminate the contract for any reason, even for a bad cause. A duty of good faith and fair dealing is appropriate in matters pertaining to ongoing performance of at-will employment agreements. It is not appropriate to imply the duty if it is inconsistent with a provision of the contract.' Sheets v. Knight, [supra, 308 Or. at 233, 779 P.2d 1000]." 311 Or. at 567, 814 P.2d 1082. (Emphasis deleted.) ³

We have held that the agreement here was an at-will relationship that either party could terminate on reasonable notice. The motives of the party terminating that relationship are irrelevant to a claim for breach of contract. See Bliss v. Southern Pacific Co. et al., 212 Or. 634, 321 P.2d 324 (1958). Arbonne did not violate any duty of good faith or fair dealing in regard to plaintiff's deregistration.

Plaintiff next assigns error to the trial court's grant of summary judgment on her claim against Arbonne for violation of the UTPA. The trial court concluded that the Act does not apply to this agreement. Plaintiff asserts that her allegations were that Arbonne violated ORS 646.608(1)(e) ⁴ and ORS 646.607(1). ⁵ Under both of those provisions, a person engages in an unlawful practice if the prohibited acts are done in connection with "real estate, goods or services." Under ORS 646.605(7), "real estate, goods or services" means

"those which are or may be obtained primarily for personal, family or household purposes, or which are or may be obtained for any purposes as a result of a telephone solicitation, and includes franchises, distributorships and other similar business opportunities * * *."

Arbonne argues that the UTPA is intended to regulate consumer transactions, not business or commercial transactions, Denson v. Ron Tonkin Gran Turismo, Inc., 279 Or. 85, 90 n. 4, 566 P.2d 1177 (1977); Investigators, Inc. v. Harvey, 53 Or.App. 586, 590, 633 P.2d 6 (1981), and that the 1973 amendment to ORS 646.605 ⁶ to include franchises and distributorships did not broaden the scope of the legislation to apply generally to nonconsumer transactions. Plaintiff argues that there is an issue of fact as to whether the UTPA applies, because the marketing scheme of Arbonne is "precisely the type of franchise, distributorship, or similar business opportunity referred to in the statute."

Even assuming that plaintiff is correct that the statute is broad enough to reach the distributorship ⁷ here, the record on summary judgment does not show that there are...