LEHI, Utah—Young Living Essential Oils LC is deep into the "discovery" portion of a lawsuit that contends former executives betrayed the company through a competing multi-level marketing (MLM) venture that sells essential oils.
An amended complaint filed in Utah state court against doTERRA Inc. and former executives seeks more than $300,000 in damages.
David Stirling, former chief operating officer of Young Living and current president of doTERRA, is among several executives who left the company in 2007. Within months after separating from Young Living, the former executives launched DoTERRA, according to the lawsuit.
The former executives are accused of breaching non-compete agreements, stealing trade secrets, soliciting employees and distributors to leave Young Living, and unlawfully profiting at the expense of their former employer.
Both companies sell their products, which include dietary supplements, through an independent network of distributors.
Justin Toth, a lawyer who represents Young Living, said the original lawsuit was filed against doTERRA and its executives in 2012. The litigants anticipate taking around a few dozen depositions in the coming months, said Toth of the law firm Ray Quinney & Nebeker. Some individuals have already been deposed. Toth said Young Living intends to file a second amendment to the complaint.
Another defendant in the lawsuit is Emily Wright, doTERRA's vice president of leadership development. According to the complaint, she "was privy to the most sensitive Young Living information, including complete access to Young Living founders Gary and Mary Young."
Corey Lindley, doTERRA executive vice president and chief financial officer, told The Salt Lake Tribune few employees and distributors have come to doTERRA from Young Living.
"The reality is there’s been a tremendous turnover in their executive team over the years, and that’s created some concern for some of their employees, and some have come to work for us," he was quoted as saying.
doTERRA appears to be enjoying a period of rampant growth. In November 2009, the company generated $1 million in one month for the first time after only being in business for 20 months, according to its website. "Throughout 2012, doTERRA regularly has million-dollar revenue days," boasted the company, which broke ground in March on a $60-million corporate headquarters in Pleasant Grove, UT. At the time, the company said it employed more than 400 professional and part-time employees and anticipated doubling that number during the next five to 10 years.
Peter Tidwell, a spokesman for doTERRA, told INSIDER his company's "success has also made us a target for false claims and lawsuits."
"We believe Young Living's claims are without merit," he said.
Young Living has demanded a jury trial in the case before Utah Judge Christine Johnson of the 4th Judicial District Court. Although a trial date hasn't been set, Toth anticipates that one would be scheduled for the spring or summer 2014.
Meantime, Young Living and doTERRA are trading blows in federal court.
A complaint filed against doTERRA alleged the company is falsely advertising that its essential oils are "100% pure." In July, Young Living amended the complaint to specify 21 additional products that it claims contain man-made synthetic compounds, including essential oils, essential oil blends, skin care products and dietary supplements.
"doTERRA has obtained a segment of the market for essential oils that it would not have obtained if it had truthfully disclosed the characteristics of its products—including that the sweetness of the aromas of its essential oils is not a marker of product purity (as it claims), but instead a result of the adulteration of its essential oils with synthetic chemicals," the lawsuit alleged.
In an answer, doTERRA denied the amended complaint's substantive allegations and asserted more than a dozen "affirmative defenses." Among those defenses: doTERRA's statements are truthful, and Young Living has suffered no damages as a result of the alleged misrepresentations.
A separate lawsuit filed by doTERRA against Young Living described an alleged scheme in which Young Living manipulated laboratory results in order to defame its rival.
According to the complaint, a Young Living employee, Richard Carlson, asked an analytical chemistry testing and analysis firm (ALS) to test four samples of oil for the presence of ethyl vanilla, a synthetic compound; after testing revealed high amounts of ethyl vanilla in one sample, Carlson requested that ALS list a doTERRA product (TERRA PEPPERMINT) as the source of the sample.
Gary Young, the founder and CEO of Young Living, later referenced on Facebook a website (certifiedsynthetic.com), which contained a report that included the ethyl vanilla result, but omitted Young Living's involvement in the scheme, the suit alleged.
"The message tonight is that someone has built a web site, called Certified Synthetic.com It is very revealing and a must read. The truth is now coming out!!!! it is truly about power and greed," Young wrote .
The website is now "marked private by its owner" and cannot be accessed by the general public.
Responding to the allegations, Young Living's lawyer Toth said: "We absolutely deny that any of the results are doctored."
The federal cases are before the U.S. District Court for the District of Utah, Central Division.