Ashley Milano  |  December 22, 2016

Category: Closed Class Actions

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mxi-xocai-settlement

A near $6 million settlement has been reached in a class action lawsuit against MXI and several individual defendants over allegations that the multi-level marketing organization is actually a pyramid scheme.

MXI is a Nevada corporation that markets a line of chocolate products called Xocai. Xocai chocolates are advertised as health products.

Three plaintiffs filed the lawsuit on May 1, 2015 (two more plaintiffs joined the case later), alleging MXI presents itself as a multi-level marketing organization, but it is in fact an illegal pyramid scheme.

In order to join MXI, participants must first pay an application fee of $39. Participants must also pay a $25 renewal fee annually. New participants must purchase Xocai chocolate at retail before they join, and then must continuously purchase either $110 or $220 worth of Xocai every four weeks depending on their rank within the organization.

Plaintiffs allege that MXI’s various policies and compensation schemes encouraged participants to “inventory load” – or buy more chocolate for the purpose of advancing in the organization rather than for retail sales. They further allege that the bulk of participant compensation comes from recruiting rather than retail sales.

The essence of the plaintiffs’ claims is that MXI’s illegal pyramid scheme has cheated thousands of participants out of millions of dollars.

Under the terms of the proposed settlement agreement, MXI and named individual defendants will establish two funds to provide two different types of compensation for Class Members.

A $4.3 million cash settlement will be used to pay Income Members, as well as service awards, attorneys’ fees and costs, costs to administer the settlement and any cy pres payment. And a product fund of up to $1.75 million in MXI credits or gift certificates will be used to compensate Consumer Members.

Along with additional settlement stipulations regarding business practices, MXI has also agreed to be enjoined from paying any compensation to its members unless at least 10 percent of the member’s group qualifying sales volume of goods or services are from preferred customer sales.

This will be incremental up until within 150 days of the settlement approval date, MXI will be enjoined from paying any compensation to its members unless at least 51 percent of the member’s group qualifying sales volume of goods or services are from preferred customer sales.

The settlement also provides $1.6 million in attorneys’ fees and expenses and a $10,000 service award for each Class Representative.

By entering into the settlement agreement, the defendants have not admitted any wrongdoing.

Class Members who wish to exclude themselves or object to the terms of the settlement must do so by Feb. 6, 2017.

Who’s Eligible

The proposed settlement agreement categorizes Class Members as “Income Members” and “Consumer Members.”

Income Members are Class Members who principally participated in the MXI program to earn income. Income Members may receive a cash award.

Consumer Members are Class Members who are not Income Members. They may receive a product award.

In general, all MXI Associates included in the Class are U.S. residents who:

  • Received less money from MXI than they paid MXI in fees or product purchases over the course of their associations with MXI, up to Nov. 3, 2016
  • Made any payment to MXI to purchase product or pay fees between May 1, 2011 and Nov. 3, 2016
Potential Award

Varies.

MXI will establish two funds to provide two different types of compensation for Class Members:

Cash Settlement Fund: $4.3 million in cash will be used to pay Income Members. The cash payment amount for each Income Member is the “Base Claim Amount” subject to the “Reimbursement Reduction” and pro rata reduction.

  • Base Claim Amount: “The Base Claim Amount is the amount of money the Income Member has ever paid MXI, less the amount of money the Income Member has ever received from MXI. The Base Claim Amount is not restricted to money paid for that particular Income Member’s MXI account and may include money paid by that Income Member for other Class Members’ accounts.”
  • Reimbursement Reduction: “An Income Member’s Base Claim Amount will be reduced by a Reimbursement Reduction where one Income Member filing a claim held the MXI account and another Income Member filing a claim presents evidence that he or she made a payment to MXI for the account. If the Income Member certifies that he or she reimbursed the payor for any amounts the payor paid on behalf of the Income Member the payor’s ‘Base Claim Amount’ will be reduced by the amount of the claimed reimbursement to yield the Adjusted Base Claim Amounts.”

This fund will also be used to service awards, attorneys’ fees and costs, costs to administer the settlement and any cy pres payment.

Product Fund: Up to $1.75 million in MXI credits or gift certificates will be used to compensate Consumer Members. This payment will be calculated using the following process:

“After eliminating duplicate submissions, the Settlement Administrator will total the number of claimants on the Accepted Consumer Claim List to yield the total number of Consumer Member claimants. If this number is 35,000 or less, then the Product Award Amount is $50. If this number is more than 35,000, then the Product Award Amount of $1.75 million will be divided by the total number of accepted Consumer Member claimants.”

Proof of Purchase

To be eligible for a cash award you must provide your MXI Distributor/Associate ID and certify that you participated in the MXI program principally to earn income. If you do not make this certification, you will not be eligible for a cash award but may receive a product award.

If you certified that you participated in the MXI program principally to earn income, and you paid for other MXI Associates’ purchases or fees (in addition to your own purchases and fees), you may be eligible to receive compensation for those payments. To receive compensation for those payments, you must provide information to the Settlement Administrator enabling it to identify the payments, such as:

  • The names of the MXI Associates for whose accounts you made payments
  • The account numbers of the other MXI Associates
  • The credit card numbers you used to make those payments
  • Receipts or invoices from those payments
  • Any other information you can provide establishing that you made those payments

Important
: You do not need to provide this additional information to establish the payments you made for your own account.

Claim Form

CLICK HERE TO FILE A CLAIM »

Claim Form Deadline

2/18/2017

Case Name

Martinez, et al. v. MXI Corp., et al., Case No. 3:15-cv-00243, in the U.S. District Court for the District of Nevada

Final Hearing

2/27/2017

Settlement Website

www.MXISettlement.com

Claims Administrator

MXI Settlement Administrator
Lain Faulkner & Co. PC
400 N St. Paul, Suite 600
Dallas, TX 75201
1-844-890-9182
E-mail: info@MXISettlement.com

Class Counsel

John P. Desmond
Justin J. Bustos
DICKINSON WRIGHT PLLC

R. Adam Swick
J.Benjamin King
REID COLLINS & TSAI LLP

Defense Counsel

Douglas Rands
RANDS SOUTH & GARDNER

Lesley Miller
KAEMPFER CROWELL

Joshua Maggard
Brian A. Howie
Edward A. Salanga
Kevin D. Quigley
QUARLES & BRADY LLP

Nathan Jenkins
JENKINS LAW FIRM

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5 thoughts onMXI Xocai Distributor Class Action Settlement

  1. Kim McRae says:

    Any chance of getting in in this? I was scanned too!

  2. Susan Anderson says:

    I wish I had known I spent a lot of money had no idea there was a lawsuit

  3. Deb Perzo says:

    Wish I would have run across this information before. Just happened to Google Xocai after going through required paperwork I had to purchase to purchase their chocolate. Very pushy & aggressive women got me to sign up to receive the chocolate at a reduced purchase price. Class action date have been discovered about a month too late. Any suggestions?

    1. Christopher Anderson says:

      Message the lawyer on case

  4. barry says:

    who wants more of the phony healthy chocolates,i don,t

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