WorldVentures sues Seacret, asserts breach of agreement

W

In news that shouldn’t come as a surprise, Spherature Investments, WorldVentures’ parent company, has filed suit against Seacret Direct.

Note that to keep things simple I’m going to mostly refer to Spherature Investments as WorldVentures, seeing that’s who we’re all familiar with.

Spherature Investments’ lawsuit comes amid Seacret Director openly recruiting WorldVentures affiliates for months.

As alleged in a separate lawsuit, WorldVentures asserts former President Eddie Head is recreating the company at Seacret.

In response to the allegations made in the Eddie Head lawsuit, Seacret claimed WorldVentures’ leadership

knew about, gave specific permission for, and signed-off on Eddie Head’s transition to Seacret at the end of last year.

Also missing is acknowledgement by WorldVentures that the actions they complain about in the court filing – the transition of their agents to Seacret, where they would continue to sell travel benefits were specifically agreed to by WorldVentures in a contract between the parties.

There’s a bit of contextual preamble to get to the relevant admission, but WorldVentures do acknowledge this contract exists (marked in bold below if you just want to skip to the admission).

This is best told by WorldVentures themselves, so I’m just going to get out of the way.

Prior to filing the bankruptcy cases, WorldVentures explored various options to improve their financial viability and avoid filing for Chapter 11 relief.

One such option—aimed at improving WorldVentures’ liquidity and elevating the income and morale of WorldVentures’ sales representatives—involved negotiations with Seacret regarding possible business arrangements.

On July 22, 2020, purportedly to drive additional value for its sales representatives and influenced by pressure from WorldVentures’ former President and Chief Strategy Officer, Kenneth E. Head, WorldVentures entered into a co-marketing agreement with Seacret, wherein WorldVentures made Seacret’s non-travel products available to its sales representatives to sell and supplement their income.

By allowing Seacret an expanded sales force to promote its products and, in turn, affording WorldVentures’ sales representatives additional products to sell, the parties’ relationship appeared to be mutually aligned.

Therefore, on November 10, 2020, WorldVentures and Seacret entered into a letter of intent agreement to outline Seacret’s proposed purchase of certain assets of WorldVentures.

The next day—disguised as a way to add additional value to Plaintiffs, to “protect and maintain [WorldVentures’] salesforce” and as a prelude to the asset sale—Seacret manipulated WorldVentures into replacing the co-marketing agreement with a limited solicitation agreement on far less favorable terms.

Through that agreement, Seacret obtained limited access to WorldVentures’ confidential and proprietary information related to its travel program, including WorldVentures’ sales network and information database.

Shortly after tapping into WorldVentures’ database, there was a chilling effect on asset purchase negotiations with Seacret.

Significantly, the limited solicitation agreement never authorized Seacret to solicit or to sell Seacret products directly to WorldVentures’ customers, which are defined in the agreement as its “Members.”

In fact, Section 1 (located on page 1) of the limited solicitation agreement is titled “Right to Solicit [Plaintiffs’] Sales Representatives Only”.

In spite of that express limitation, Seacret has solicited Plaintiffs’ Members that are not now, nor have they ever been, sales representatives of Plaintiffs

Even more significantly, nothing in the limited solicitation agreement (or any other agreement) authorizes or contemplates that Seacret would be starting its own membership-based travel services business offered through direct sales or marketing these services at all, and certainly not using WorldVentures’ intellectual property and trademarks.

Indeed, Seacret expressly agreed that the limited solicitation agreement “shall have no impact upon [WorldVentures’] sale of travel products to its Members or through the [WorldVentures] Sales Representatives, and that any fulfillment of such travel products by Seacret will be negotiated independent of this Agreement.”

In other words, the limited solicitation agreement prohibits Seacret from offering its own travel products to any of Plaintiffs’ sales representatives or Members without a separately negotiated contract.

No such contract exists, and indeed, it has never been discussed.

“Members” refers to WorldVentures’ retail customers, with the company alleging

Seacret has begun marketing its own membership based travel services through direct sales to Plaintiffs’ sales representatives and, upon information and belief, plans to begin selling those memberships to Plaintiffs’ Members within a matter of a few short weeks.

I’m not 100% sure what WorldVentures is getting at here.

On the surface it appears they’re objecting to Seacret soliciting their retail customers.

We know however that WorldVentures classifies both retail customers and affiliates as “members”, so this comes off as intentionally vague.

If the agreement between WorldVentures and Seacret allowed recruitment of Members, allow me to demonstrate the problem by quoting both WorldVentures’ lawsuit and their official definition of a customer.

(lawsuit)

Section 1 (located on page 1) of the limited solicitation agreement is titled “Right to Solicit [Plaintiffs’] Sales Representatives Only”.

The limited solicitation agreement never authorized Seacret to solicit or to sell Seacret products directly to WorldVentures’ customers.

(WorldVentures compensation plan, as reviewed in Sep 2019)

Customer – A person who purchases WorldVentures membership products for personal use.

A Customer may also be a WorldVentures Representative who purchases WorldVentures membership products for personal use.

By WorldVentures’ own definition of a customer above, they gave Seacret Direct permission to poach their customers (Sales Representatives).

Independent Representatives are customers, and customers are members.

This might not have been what WorldVentures had in mind. By intentionally blurring the line between customers and affiliates however, the ambiguity Seacret took advantage of is entirely be their down doing.

Another way to read this is WorldVentures trying to protect its retail customers. Historically WorldVentures has never had a significant retail customer base though, so I doubt this is what they’re pushing.

Alternatively maybe that is what WorldVentures is pushing, in order to establish that Seacret Direct violated the agreement.

The extent Seacret Direct pitched products to WorldVentures’ retail customers to isn’t clarified in the lawsuit. To me that’s telling.

The next point of contention is Seacret developing what is essentially a WorldVentures clone.

It is beyond refute that Seacret’s new foray into the travel industry is a carbon copy of Plaintiffs’ travel program.

As Seacret’s founder admitted in a video with Head—Seacret’s new president—by his side: Seacret is “tak[ing] one of the unique travel experiences in the world [i.e., WorldVentures’ travel experience] and implement[ing] the program over here at Seacret.”

It is not a coincidence that several of Plaintiffs’ former key employees have recently been hired by Seacret.

Seacret is also targeting Plaintiffs’ Members and utilizing their travel vendors, some of which have exclusivity agreements with the Plaintiffs.

I think this is a valid point made by WorldVentures.

If planning for Seacret Direct’s travel opp occurred only after they’d gained access to WorldVentures’ proprietary information (via agreement or otherwise), then that’s an issue.

For their part, WorldVentures alleges

Seacret never disclosed it was planning to use WorldVentures’ confidential and proprietary information to steal WorldVentures’ key assets (e.g., its downline organization) and open a competing business with that downline.

In addition, the agreements never gave Seacret the right to use WorldVentures’ database to recruit and solicit WorldVentures’ Members or the right to conduct business with WorldVentures’ vendors and suppliers.

In summary, WorldVentures’ asserts

the limited solicitation agreement was procured by subterfuge and without a fair exchange of value, at a time when WorldVentures’ precarious financial condition was exploited under false pretenses by Seacret.

As part of the Limited Solicitation Agreement between the parties, Seacret Direct was to pay WorldVentures $12 million for “future product-sales”.

WorldVentures claims it has been paid “less than 5%” of that.

Had Seacret revealed its true motivation for the agreements between the parties, WorldVentures’ would never have signed them.

Through its lawsuit, WorldVentures is requesting any agreements it entered into with Seacret bet “set aside”.

Alternatively, by soliciting Plaintiffs’ customers using such information and soliciting employees and sales representatives into a competing business, Seacret has breached the parties’ agreement and is tortiously interfering with contractual non-compete restrictions, prospective business relationships, and non-disclosure provisions.

I should note that this is all from the introduction of WorldVenture’s forty-one page lawsuit.

I’ve read through the whole thing and much the facts presented is evidence to back up allegations made in WorldVentures’ introduction.

These include

  • a detailed account of Eddie Head’s conduct
  • statements attributed to Seacret Direct CEO Izhak Ben Shabat
  • a description of a presentation given by top Secret sales representative Jesse Macpherson, ‘that specifically promotes … WorldVentures’ trademarked “DreamTrips” brand’
  • a description of Seacret marketing material featuring WorldVentures’ DreamTrips brand
  • details of Seacret “promotional campaigns” that “encourage WorldVentures’ current (affiliates) to cease selling WorldVentures’ travel products and services”
  • details of WorldVentures exclusive travel package provider Top Tier’s owner, Virginia Trask, providing a “substantially similar” service to Seacret via a “newly-formed company”

Causes of action WorldVentures has raised against Seacret include

  1. tortious interference with existing contracts;
  2. knowing participation/aiding and abetting fiduciary breach;
  3. trademark infringement;
  4. harmful access by computer;
  5. conversion;
  6. misappropriation of effort;
  7. avoidance of constructively fraudulent obligations under 11 U.S.C sec 548(a)(1)(b);
  8. avoidance of constructively fraudulent obligations under 11 U.S.C. sec 544 and secs 34.001 to 24.013 of the Texas Uniform Fraudulent Transfer Act; and
  9. breach of contract.

WorldVentures is seeking to halt Seacret Direct’s pending travel services launch via a preliminary injunction. Damages go without saying.

I’ve added Spherature Investments v. Seacret Direct to our case calendar. Stay tuned for updates as we continue to track the case.

Add comment

By

Recent Posts

Recent Comments