Vistage is telling Chairs and Members that “Vistage investigated these allegations and determined that the claimed improprieties arose out of a consulting relationship and other business transactions unrelated to Vistage.”
After 3 years of litigation, Direct List LLC, has won a $2mm + costs and legal fees trial verdict against former Vistage Chair Phil Kessler. A Federal Court jury unanimously found Kessler responsible for:
1. Intentional Fraud;
2. Intentional Interference with Prospective Economic Advantage;
3. Negligent Interference with Prospective Economic Advantage;
4. Misappropriation of Trade Secrets; and
5. Violation of the California Comprehensive Computer Data and Fraud Act.
A copy of the Federal Court Jury’s Verdict Sheet can be found HERE.
Despite what Vistage claims, the Fraud claim is about Confidential Information Learned through the Vistage Relationship, as you can plainly see from our word for word winning argument in the Trial Brief:
Plaintiffs’ Claims Against Mr. Kessler for Fraudulent Misrepresentation
Both Mr. Salu and Direct List have alleged a claim for Fraud against Mr. Kessler. To establish a Fraud claim under California law, Plaintiffs must establish a) a misrepresentation; b) with knowledge of its falsity; c) made with intent to defraud; d) justifiable reliance by the recipient of that misrepresentation; and e) resulting damages. Small v. Fritz Companies, 30 Cal. 4th 167, 173 (2003).
Plaintiffs’ Fraud claim focuses upon Mr. Kessler’s continuing promises to Plaintiffs that confidential information learned through the Vistage relationship would remain confidential. Mr. Kessler also specifically advised Plaintiffs concerning Direct List’ business – including about employee compensation — in February and April, 2015 after being told by Mr. Salu that he was planning to move to Florida and just weeks before he stole the Direct List business.
As the crux of Mr. Kessler’s defense is based upon the idea that Direct List employees were unhappy about their compensation and came to Mr. Kessler for help; his misrepresentations to Salu regarding these issue while he was still serving as a mentor and coach are telling. While Mr. Kessler contends that even if he “made a major mistake,” he did not have the requisite intent at the time these representations were made.
Plaintiffs contend and will prove otherwise. Plaintiffs will prove that it is more likely than not that Mr. Kessler’s efforts to defraud Plaintiffs began from the moment Mr. Kessler learned that Mr. Salu would move to Florida. Mr. Salu plainly relied on the representations from his coach and mentor, Mr. Kessler, that all Vistage discussions would be confidential. Because of these representations, Mr. Salu became an open book for Mr. Kessler about Direct List’s business. This was necessary for him to receive suitable guidance from Mr. Kessler. Mr. Kessler certainly intended for Mr. Salu to rely on his advice; Mr. Salu was paying $1,300 per month to do so.
Mr. Salu’s reliance was reasonable. All Vistage Chairs and Vistage Members are subject to confidentiality requirements. Vistage’s business of coaching and mentoring high-level business executives and CEOs literally could not exist without maintaining that confidentiality. It was reasonable for Mr. Salu to expect that Mr. Kessler would abide by his oath of confidentiality. Ultimately, a great many business relations depend upon one party’s assumption that the other will abide by their contractual duties. Such assumptions are not unreasonable.
As noted supra, Mr. Kessler learned so much about Direct List from Mr. Salu that he did not need to perform any due diligence before opening an identical company and investing over $100,000.00 in seed money. Mr. Salu and Direct List’s damages from Mr. Kessler’s fraud are straightforward – the value of the company that was stolen from Plaintiffs. Direct List no longer exists and has no value, and Mr. Salu’s indirect ownership interest in the entity has evaporated.