Competitors • Suits by Utah County-based multi-level marketers allege theft of trade secrets, fake lab tests and false advertising.
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Two Utah companies that sell therapeutic oils with purported healthy properties are suing each other, alleging the theft of trade secrets, faked lab tests, false advertising and "pure" products contaminated with unnatural substances.
Young Living Essential Oils of Lehi and upstart competitor doTERRA of Orem have filed dueling lawsuits in state and federal courts, setting up an intense legal battle between companies that take in tens of millions of dollars in annual revenues from the sale of rival products.
Both companies are multi-level marketers, meaning they recruit thousands of independent distributors who can sell directly to customers and earn commissions on sales to distributors recruited into a hierarchical network called "downlines."
Young Living Essential Oils was founded about 20 years ago by D. Gary Young, who cites degrees in nutrition and naturopathic medicine and has had legal and regulatory entanglements in the past.
DoTERRA was formed in 2008 by a fired chief operating officer of Young Living, David N. Sterling, and other former executives, top employees and distributors.
The two companies see each other as leading competitors in the market for the oils that have nutritional or therapeutic properties after they are extracted from plants. Some of the products are lavender, peppermint, wintermint and frankincense as well as blends of different oils.
The product rivalry spilled into state court last year when Young Living Essential Oils alleged in a lawsuit that doTERRA and former executives "built doTERRA by stealing Young Living's trade secrets, violating their duties to Young Living and improperly recruiting Young Living's employees and distributors to leave Young Living," one of its attorneys, Justin Toth of Ray Quinney & Nebeker, said in an email.
But Corey Lindley, doTERRA executive vice president and chief financial officer, said the companies' oil sources and manufacturing are distinct and there have been few distributors and employees that joined doTERRA from Young Living.
"The reality is there's been a tremendous turnover in their executive team over the years," Lindley said, "and that's created some concern for some of their employees and some have come to work for us."
DoTerra and its parent company, Thrive Holdings, shot back last month with a federal court lawsuit. It alleges employees and officers of Young Living created a false sample of a DoTerra product spiked with a chemical additive and then posted the result of a lab test showing the contamination on a website right before its distributor convention in Salt Lake City.
The altered lab report in essence "accused doTerra of adding a substances to its peppermint oil that causes death," the lawsuit says.
A day after the doTERRA lawsuit was filed, Young Living came back with its own federal lawsuit that alleges an independent French laboratory had tested doTERRA oils and found various contaminants. The complaint accuses doTERRA of falsely advertising the pureness of its products in order to capture business from Young Living and lure away distributors.
Stephen Quesenberry, a Provo lawyer with Durham, Jones & Pinegar who represents doTERRA, denies any contamination in the company's products and pointed to the timing of the lawsuit and its use of a testing laboratory outside the United States.
"It's interesting the day [after] they get hit with this very factual and detailed lawsuit they turn around and file this very retaliatory, slap-back lawsuit based on this foreign lab," he said.
The lawsuits are asking for what potentially could be tens of millions of dollars from their rival depending on who might end up winning and on what claims. Trial dates have yet to be set.