Zrii Lawsuits: 2009 Revolt, Lease Judgment, and Jeunesse Suit

The Zrii lawsuits span roughly a decade and fall into four clusters: the 2009 suits Zrii filed in Delaware, California, and Utah against former insiders and the competitor LifeVantage after a mass walkout; a lease-breach judgment the landlord Tech Center 2000 won against Zrii and founder William F. Farley personally; a 2015 suit Jeunesse LLC brought against Zrii alleging distributor poaching; and consumer-watchdog findings about Zrii’s marketing claims. The 2009 cases settled after LifeVantage paid Zrii $400,000, the lease case ended with the Utah Court of Appeals affirming a judgment of about $795,871 against Zrii in 2015, and Zrii itself was acquired by Zilis LLC in January 2021.

The 2009 Revolt and the Suits Zrii Filed

Zrii was a Utah-based multi-level marketer of nutrition and personal care products, founded in 2008 and led by Chicago businessman William F. Farley. In late 2008 and early 2009, roughly 35 employees, some claiming co-founder status, tried to buy Farley out through a new entity called Wellness Acquisition Group Inc. Farley refused. A mass walkout of employees and distributors followed in February 2009.¹

On February 16, 2009, Zrii sued in three jurisdictions. The company alleged that former managers, employees, and independent distributors had run “a scheme to take control of the company through illegal and deceptive means.”²

Delaware: The Chancery Injunction

The headline case was Zrii, LLC v. Wellness Acquisition Group, Inc., C.A. No. 4374-VCP, in the Delaware Court of Chancery. Zrii alleged breach of contract, breach of fiduciary duty, civil conspiracy, and related torts, claiming the defendants downloaded confidential data, damaged company computers, disrupted distribution, staged the walkout, and coordinated with the competitor LifeVantage to recruit Zrii distributors. Two defendants had signed six-month non-solicitation agreements; two others had served as Zrii officers.³

On September 21, 2009, the court granted Zrii a preliminary injunction. It found a reasonable probability Zrii would prevail on civil conspiracy and enjoined the defendants for three months from using Zrii’s trade-secret information or recruiting Zrii distributors to any other network-marketing company, LifeVantage included. The court noted the merits would likely be resolved through arbitration or litigation in Utah.³

California and Utah

In California federal court, Zrii sued LifeVantage directly, alleging a conspiracy to take over or destroy the company. In Utah state court, Zrii named 31 former lower-level employees as participants in the alleged conspiracy.⁴

How the 2009 Litigation Ended

In December 2009, LifeVantage announced a settlement. It paid Zrii $400,000, and the parties exchanged mutual releases and agreed to dismiss the California, Delaware, and Utah cases with prejudice. The California suit was dismissed the week of December 23, 2009; the Delaware case was dismissed on December 22, 2009.⁵⁴

The Utah dismissals were conditional. The 31 lower-level defendants would be released if they dropped their own wage claims and counterclaims against Zrii. Former senior managers and Zrii co-founders Curtis Call and Clint McKinlay were reportedly left out of the settlement and were not indemnified against future action by Zrii or Farley.⁴

What Former Insiders Alleged About Farley

The suits ran alongside serious counter-allegations. Seven top distributors, led by Jason Domingo, sent a letter demanding Farley’s resignation and citing his “behavior both in personal and profession life.”⁶ Former insiders told the Salt Lake Tribune that Farley treated Zrii as a “personal piggy bank,” alleging he drained a $1.5 million line of credit, took a $500,000 personal loan from company funds, and used Zrii and Zrii Foundation money for personal expenses including landscaping at a home in Maine.⁷

Former VP of Finance Bart Graser filed an affidavit with the Utah Attorney General alleging Zrii had not registered or remitted sales taxes in various states, producing a $2.7 million liability as of February 2, 2009, and that collected sales tax was deposited into the operating account and spent on general expenses. Former insiders also alleged company contributions to Rep. Jason Chaffetz’s congressional campaign were booked as “office supplies,” and that Zrii had accumulated $7.5 million in vendor liabilities and was “practically insolvent.”⁷

Farley denied the general mismanagement claims and said the company was “without debt,” but declined to address the specifics on the record.⁷ The available record does not show any state enforcement action following Graser’s affidavit.

The Tech Center 2000 Lease Judgment

The walkout produced collateral litigation. In October 2008, Zrii had signed a three-year lease for an office building still under construction, with rent starting near $21,000 per month and rising to about $25,000, plus a tenant improvement allowance of up to $611,760. Farley personally guaranteed the lease. After the walkout, Zrii announced it could not occupy the building.⁸

The landlord, Tech Center 2000 LLC, sued Zrii and Farley. The trial court found Zrii had breached the lease and awarded roughly $795,871 covering rent shortfalls, late fees, interest, and commissions, with a $168,854 credit to Zrii for the amortized portion of the improvement allowance.⁹

On November 27, 2015, the Utah Court of Appeals affirmed in full. It rejected Zrii’s arguments that the improvement allowance made the rent indefinite, that the walkout was impracticability or frustration of purpose, and that the landlord should have mitigated by selling the building for $3.245 million instead of trying to relet it. Internal business reversals, the court held, are foreseeable risks borne by the tenant, and Farley’s personal guarantee remained enforceable. Tech Center 2000 also recovered its appellate attorney fees.⁸

Jeunesse v. Zrii: The Role Reversed

In December 2015, Zrii was on the receiving end of the same kind of claim it had once pressed. Jeunesse LLC, a Florida direct seller, sued Zrii in the U.S. District Court for the Middle District of Florida, alleging distributor poaching and trade-secret misappropriation. Jeunesse claimed Zrii recruited Shah Khan, a high-ranking Jeunesse distributor, knowing he was bound by a three-year non-compete, and that Jeunesse’s former general manager Paul Lim gave Zrii confidential distributor information, including downline reports and genealogical trees, to help recruit more Jeunesse distributors. Jeunesse sought $1.1 million in liquidated damages under Khan’s agreement plus additional unspecified damages.¹⁰ The outcome is not reflected in the available record.

Marketing and Health-Claim Scrutiny

Zrii also faced consumer-watchdog scrutiny, though not a lawsuit on this front. In 2017, TINA.org reviewed members of the Direct Selling Association and reported that Zrii materials marketed supplements as treatments for arthritis, cancer, diabetes, hepatitis, autism, and high blood pressure, among other conditions, without appropriate substantiation. Many of the flagged URLs had been taken down by the time TINA.org audited them in summer 2017. Both Zrii and the DSA were notified.¹¹

A separate TINA.org review between June and November 2017 found unsubstantiated income claims used to promote the Zrii business opportunity, including promises of “huge bonuses,” “lucrative car payments,” and the chance to “live your dream.” Zrii was notified in December 2017. A September 2018 follow-up did not confirm the flagged claims had been removed.¹² No government enforcement action against Zrii on these marketing issues appears in the available record.

What Happened to Zrii

On January 9, 2021, Zilis LLC, a hemp-derived CBD direct seller, announced it had acquired Zrii. Terms were not disclosed. Zilis said it bought Zrii primarily for its Latin American footprint, taking on operations in Colombia, Costa Rica, Ecuador, Guatemala, Mexico, Panama, and Peru, and setting up a new Latin American headquarters in Bogota. Zilis CEO Steven Thompson said the company was “adding the Zrii platform to Zilis” and welcomed “the entire Zrii organization to the Zilis family.”¹³

1
Deseret News. Ex-Workers Seek to Take Over Zrii
2
CVN. Zrii LLC v. Wellness Acquisition Hearing
3
Potter Anderson. Zrii LLC v. Wellness Acquisition Group Inc.
4
Salt Lake Tribune. Zrii Settlement and Litigation Details
5
LifeVantage Investor Relations. LifeVantage Announces Settlement of Zrii Litigation
6
Salt Lake Tribune. Zrii Executives Allege Mismanagement
7
Salt Lake Tribune. Zrii Allegations of Mismanagement
8
FindLaw. Tech Center 2000 LLC v. Zrii LLC
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Midpage. Tech Center 2000 LLC v. Zrii LLC, 363 P.3d 566
10
TINA.org. Jeunesse LLC v. Zrii LLC Complaint
11
TINA.org. Zrii Health Claims Database
12
TINA.org. Zrii Income Claims Database
13
Direct Selling News. Zilis Acquires Zrii and Its Latin American Market Presence