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·1· · · · · ·IN THE UNITED STATES DISTRICT COURT ·1· · · · · · · · · INDEX OF EXAMINATION
· · · · · · · ·CENTRAL DISTRICT OF CALIFORNIA ·2· ·ROBERT A. PETERSON
·2· · · · · · · · · · WESTERN DIVISION
·3· · · ·By Mr. Jones................................5
·3· ·MICHAEL LAVIGNE, ET AL· · · ·)
· · · · · · · · · · · · · · · · · ) ·4· ·COURT REPORTER'S CERTIFICATE....................94
·4· · · · · · Plaintiff,· · · · · ) ·5
· · · · · · · · · · · · · · · · · ) ·6
·5· ·vs.· · · · · · · · · · · · · )No. 2:18-cv-07480-JAK
·7
· · · · · · · · · · · · · · · · · )
·6· ·HERBALIFE, LTD., ET AL· · · ·) ·8
· · · · · · · · · · · · · · · · · ) ·9
·7· · · · · · Defendant.· · · · · ) 10
· · ·_____________________________
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10· · · · · · · VIDEOTAPED ZOOM DEPOSITION OF 13
11· · · · · · · · · ·ROBERT A. PETERSON 14· · · · · · · · · · · · ·-oOo-
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13· · · · · · · · · · February 11, 2021
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14· · · · · · · · · · ·9:00 a.m. (PST)
15· · · · · ·Location:· Los Angeles, California 17
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24· ·FILE NO. J6603656
25· ·COURT REPORTER: Yvette Gallardo, CSR-CA 12889 25

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·1· · · · · · · · ·APPEARANCES OF COUNSEL ·1· · · · · · · · · ·INDEX TO EXHIBITS
·2 ·2· ·Exh. 240 -· · Report of Dr. Keep.............5
·3· ·FOR PLAINTIFF:
·3· ·Exh. 241 -· · Report of Dr. Lalich...........5
·4· · · ·MARK MIGDAL & HAYDEN
· · · · ·BY:· Jason Jones, Esq. ·4· ·Exh. 242 -· · Dr. Keep's affirmative report.32
·5· · · ·5710 Hausman Rd. West, Suite 108 ·5· ·Exh. 243 -· · Article by Dr. Peterson.......57
· · · · ·San Antonio, Texas 78401 ·6· ·Exh. 244 -· · Article by Dr. Peterson.......85
·6· · · ·Phone: (361) 985-0600
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· · · · ·Email: Cmiller-svc@tjhlaw.com
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·9· ·FOR DEFENDANT HERBALIFE INTERNATIONAL 10
10· · · ·BIRD, MARELLA, BOXER, WOLPERT
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· · · · ·NESSIM, DROOKS, LINCENBERG & RHOW, P.C.
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11· · · ·BY:· Mark T. Drooks, Esq.
· · · · ·1875 Century Park East, 23rd Floor 13
12· · · ·Los Angeles, California 90067 14
· · · · ·Phone: (310) 201-2100 15
13· · · ·Email: Mdrooks@birdmarella.com
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·1· · · · · · ZOOM DEPOSITION OF ROBERT A. PETERSON ·1· ·later than that, but I can't give a precise date
·2· · · · · ·(February 11, 2021 - 9:00 a.m. PST) ·2· ·as I sit here.
·3
·4· · · · · · · · · · ROBERT A. PETERSON,
·5· ·having been first duly sworn, testified as follows:
·6· · · · · · · · · · · · EXAMINATION
·7· · · ·BY MR. JONES:
·8· · · ·Q.· ·Good morning, Dr. Peterson.
·9· · · ·A.· ·Good morning.
10· · · ·Q.· ·Is there any reason that you can't fully
11· ·completely truthfully answer the questions here
12· ·today?
13· · · ·A.· ·No, sir.
14· · · ·Q.· ·And you submitted two rebuttal reports in
15· ·this case; is that correct?
16· · · ·A.· ·Correct.
17· · · ·Q.· ·I'm going to mark both of those reports
18· ·as exhibits at this time.
19· · · · · · MR. JONES:· I'm marking your rebuttal
20· ·report of Dr. Keep as Exhibit 240.· And I'm marking
21· ·your rebuttal report of Dr. Lalich as Exhibit 241.
22· · · · · · (Exhibits 240 and 241 are marked.)
23· · · ·Q.· ·(By Mr. Jones)· Your educational background
24· ·and your career history are included as part of your
25· ·rebuttal reports.
Page 6
·1· · · ·A.· ·In my resume --
·2· · · ·Q.· ·Is that --
·3· · · ·A.· ·Excuse me?
·4· · · ·Q.· ·Yes.· Is that information all true and
·5· ·correct?
·6· · · ·A.· ·Correct.
·7· · · ·Q.· ·I noticed that all of your degrees were
·8· ·from the University of Minnesota.· What -- what
·9· ·fields of study -- what were your fields of
10· ·study for each of your degrees?
11· · · ·A.· ·For my Bachelor's degree, it was business
12· ·generally.· For my Master's degree and Ph.D., it
13· ·was marketing, psychology and quantitative
14· ·methods.
15· · · ·Q.· ·What does quantitative methods mean?
16· · · ·A.· ·Quantitative methods in my terminology
17· ·reflects statistics and operations research.
18· · · ·Q.· ·And when were you first contacted about
19· ·participating in this case?
20· · · ·A.· ·I believe I was contacted sometime in the
21· ·Fall, and asked if I would be available to engage
22· ·in this case.
23· · · ·Q.· ·So that would be around September of
24· ·2020?
25· · · ·A.· ·According to my recollection, it was
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·3· · · ·Q.· ·And when were you officially retained in
·4· ·this matter?
·5· · · ·A.· ·I believe January 12th of this year.
·6· · · ·Q.· ·And who contacted you in the Fall of 2020?
·7· · · ·A.· ·Mr. Gopi, whatever his last name is.
·8· · · ·Q.· ·It's a tough one.
·9· · · ·A.· ·Yes, I don't want to embarrass myself.
10· · · ·Q.· ·I believe it to be Panchapakesan?
11· · · ·A.· ·That sounds about right.
12· · · · · · MR. JONES:· Did I nail it, Mr. Drooks?
13· ·You're muted, Mark.
14· · · ·Q.· ·(By Mr. Jones)· And who explained the
15· ·initial facts of the case to you?
16· · · ·A.· ·I'm not sure what you mean by initial
17· ·facts.
18· · · ·Q.· ·Did someone explain the facts of the
19· ·case to you?
20· · · ·A.· ·In my conversation with Gopi, he just
21· ·mentioned it was a class-action suit.
22· · · ·Q.· ·Have you prepared any written reports in
23· ·this matter other than your rebuttal -- your
24· ·rebuttal reports of Dr. Lalich and Dr. Keep, which
25· ·were each dated January 5th, 2021?
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·1· · · ·A.· ·The answer is no, but I don't think the
·2· ·date is correct, is it?
·3· · · ·Q.· ·I'm checking.· That's the dates I have.
·4· ·Do you have a different date?
·5· · · ·A.· ·Did you say January 5th?
·6· · · ·Q.· ·25th?
·7· · · ·A.· ·No.· The dates on my reports are January
·8· ·the 27th.
·9· · · · · · MR. JONES:· Mr. Drooks, am I looking at
10· ·the wrong thing?· You're muted, Mark.· I can't hear
11· ·you.
12· · · · · · MR. DROOKS:· I have two reports.· There
13· ·are only two reports and they appear -- at least
14· ·the ones that I have in front of me, which are not
15· ·those that are marked, but I have them up as PDFs or
16· ·signed and -- they say they're signed on January 25,
17· ·which was to my recollection a Monday.
18· · · ·Q.· ·(By Mr. Jones)· So Dr. Peterson, the copies
19· ·you are looking at are dated January 27th?
20· · · ·A.· ·Yes, sir.· But these are not signed.
21· · · ·Q.· ·To your knowledge, is there any difference
22· ·-- did you make any changes after January 25th to
23· ·the reports?
24· · · ·A.· ·No, sir.
25· · · · · · MR. DROOKS:· So, I suspect what happened
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·1· ·is that if Dr. Peterson is looking at his own
·2· ·documents in Word, they may have been opened after
·3· ·January 25, and the system redated them.
·4· · · · · · MR. JONES:· Great.
·5· · · · · · MR. DROOKS:· Dr. Peterson, if you want,
·6· ·you can just look at the ones that are marked as
·7· ·exhibits in that AgileLaw, as long as you're
·8· ·confident that the ones you are looking at are the
·9· ·same as the ones that were submitted, which you've
10· ·testified is the case, then you can just keep
11· ·looking at those.
12· · · · · · THE WITNESS:· No, there should not be any
13· ·difference, so I'll just look at the ones that I
14· ·have in front of me.
15· · · ·Q.· ·(By Mr. Jones)· That works.· Is your
16· ·rebuttal of Dr. Keep's report a complete and
17· ·accurate statement of your opinions regarding
18· ·that report and the reasons that you formed them?
19· · · ·A.· ·Yes, sir.
20· · · ·Q.· ·Is your rebuttal report of Dr. Lalich's
21· ·report a complete and accurate statement of your
22· ·opinions and the reasons that you formed them?
23· · · ·A.· ·Yes, sir.
24· · · ·Q.· ·Do you plan to testify to any opinions at
25· ·trial that are not contained within your two
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·1· ·rebuttal reports?
·2· · · ·A.· ·I do not.
·3· · · ·Q.· ·Have you been asked to, or are you
·4· ·planning to prepare any supplemental reports?
·5· · · ·A.· ·I have not been asked at this time.
·6· · · ·Q.· ·What is your hourly rate?
·7· · · ·A.· ·$750 per hour, plus expenses.
·8· · · ·Q.· ·And when was the last time before this
·9· ·matter that you charged that rate?
10· · · ·A.· ·In terms of doing work, or in terms of
11· ·giving a deposition?
12· · · ·Q.· ·Either.
13· · · ·A.· ·Well, I just completed one project.· I'm
14· ·in the middle of three other projects, and I
15· ·charged that rate for those projects.· The last
16· ·time I gave a deposition in -- excuse me -- when I
17· ·gave a deposition in January of 2019, my hourly
18· ·rate was $1,000.· When I gave a deposition in
19· ·July 2019, my rate was $750.
20· · · ·Q.· ·And what is your hourly rate in this
21· ·matter?
22· · · ·A.· ·$750.
23· · · ·Q.· ·And how many hours have you billed to
24· ·date on this matter?
25· · · ·A.· ·I don't recollect the exact hours, but
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·1· ·I have submitted an invoice in the amount of
·2· ·$34,000 plus.· So whatever that works out to.
·3· · · ·Q.· ·Did anyone assist you in the preparation
·4· ·of your rebuttal reports?
·5· · · ·A.· ·No, sir.
·6· · · ·Q.· ·Have any documents, data or information
·7· ·regarding this matter been provided to you after
·8· ·your report was issued?
·9· · · ·A.· ·No, sir.
10· · · ·Q.· ·Have you previously done any work for
11· ·Herbalife?
12· · · ·A.· ·I believe I did some survey work for them
13· ·-- for it, a couple of decades ago.
14· · · ·Q.· ·What kind of survey work?· Do you recall?
15· · · ·A.· ·I don't recall at this point.· I just
16· ·remember doing something.
17· · · ·Q.· ·Have you previously done any work for
18· ·Bird, Marella, the law firm?
19· · · ·A.· ·No, sir.
20· · · ·Q.· ·In any of the previous cases in which
21· ·you've provided expert opinions, has your
22· ·testimony been limited or excluded?
23· · · ·A.· ·There was only one matter some 30 years
24· ·ago, where a magistrate judge ruled that what I
25· ·had provided was not acceptable.· However, the
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·1· ·magistrate judge had confused my report with a
·2· ·report from the other side's expert, and the
·3· ·District Judge vacated the magistrate judge's
·4· ·ruling.
·5· · · ·Q.· ·What were you asked to do in this case,
·6· ·Dr. Peterson?
·7· · · ·A.· ·I was simply asked to provide rebuttal
·8· ·reports to the plaintiff's two experts.
·9· · · ·Q.· ·Did you review a copy of Herbalife's
10· ·marketing plan?
11· · · ·A.· ·Yes, sir.
12· · · ·Q.· ·Do you know which version of that
13· ·marketing plan you reviewed?
14· · · ·A.· ·I do not.· And my review was more a
15· ·perusal than an in depth reading of every page.
16· · · ·Q.· ·Who sent you a copy of that marketing
17· ·plan?
18· · · ·A.· ·Gopi, if I can use that -- that term in
19· ·response.
20· · · ·Q.· ·Did you review any of the events'
21· ·presentations?
22· · · ·A.· ·I'm not sure of presentations. I
23· ·reviewed some documents that had the agendas and
24· ·schedules.
25· · · ·Q.· ·Which agendas did you review?
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·1· · · ·A.· ·Well, there were some agendas given in --
·2· ·or sent to me in exhibits.· One was a -- kind of a
·3· ·comprehensive exhibit with several different
·4· ·agendas listed.· And I think the dates were
·5· ·somewhere from 2013 to 2015.
·6· · · ·Q.· ·And I'm sorry, did you say you had or had
·7· ·not reviewed any of the actual event presentations?
·8· · · ·A.· ·If by that you mean any videos or things
·9· ·like that, the answer is no I did not.
10· · · ·Q.· ·I was referring to Powerpoint, or the like?
11· · · ·A.· ·Well, I think there was a Powerpoint or two
12· ·in that comprehensive exhibit, but I don't know
13· ·which particular event that related to.
14· · · ·Q.· ·And you did not review any videos of
15· ·Herbalife events; correct?
16· · · ·A.· ·Correct.
17· · · ·Q.· ·Did you speak with any event attendees?
18· · · ·A.· ·No, sir.
19· · · ·Q.· ·Did you speak with any event organizers?
20· · · ·A.· ·No, sir.
21· · · ·Q.· ·Did you speak with anyone at Herbalife
22· ·who works in the sales and strategy department?
23· · · ·A.· ·No, sir.
24· · · ·Q.· ·Did you speak with anyone at Herbalife at
25· ·all?
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·1· · · ·A.· ·In relation to this matter, no, sir.
·2· · · ·Q.· ·Have you spoken with people from Herbalife
·3· ·prior to this matter?
·4· · · ·A.· ·Yes, sir.
·5· · · ·Q.· ·On what occasions?
·6· · · ·A.· ·I need to go back three decades.
·7· · · ·Q.· ·Okay.
·8· · · ·A.· ·I -- I've actually sat in on Herbalife
·9· ·conferences, and I had met the president, I believe
10· ·at that time, Mr. Thompson.
11· · · ·Q.· ·Let me restate my question, then:· Have
12· ·you spoken with anyone from Herbalife in the last
13· ·10 years?
14· · · ·A.· ·I don't believe so, unless it would have
15· ·been just at a direct sale and association meeting
16· ·to say hello or how are you.
17· · · ·Q.· ·Did you rely on any documents in the
18· ·preparation of your rebuttal reports that are not
19· ·listed within those reports?
20· · · ·A.· ·No, sir.
21· · · ·Q.· ·Did you request any information or
22· ·documentation from Herbalife that you were unable
23· ·to see or review?
24· · · ·A.· ·No, sir.
25· · · ·Q.· ·Is it your view that the terms direct
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·1· ·selling and multi-level marketing can be used
·2· ·synonymously?
·3· · · ·A.· ·No, sir.
·4· · · ·Q.· ·What do you see as the distinction?
·5· · · ·A.· ·Multi-level marketing is a type of
·6· ·compensation plan, and when people refer to
·7· ·multi-level marketing, you're often referring to
·8· ·a particular type of direct selling firm.
·9· · · ·Q.· ·You would agree that direct selling firms
10· ·don't necessarily need to be multi-level?
11· · · ·A.· ·Well, those are really distinct terms.
12· · · ·Q.· ·Are all multi-level marketing firms direct
13· ·selling firms?
14· · · ·A.· ·I don't know.
15· · · ·Q.· ·But not all direct selling firms are
16· ·multi-level marketing firms?
17· · · ·A.· ·Correct.
18· · · ·Q.· ·And would you consider Herbalife to be a
19· ·direct seller or a multi-level marketing firm?
20· · · ·A.· ·Herbalife is a direct selling firm using
21· ·the multi-level compensation plan.
22· · · ·Q.· ·What is a direct selling education
23· ·foundation?
24· · · ·A.· ·It's a non-profit foundation that by its
25· ·term, direct sell and education foundation, is
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·1· ·supposed to help in the education regarding direct
·2· ·selling.
·3· · · ·Q.· ·And what's meant by education in that
·4· ·context?
·5· · · ·A.· ·I don't know if I can give a precise
·6· ·answer to that, but the direct selling education
·7· ·foundation undertakes a variety of activities that
·8· ·would be termed educational activities.
·9· · · ·Q.· ·Who is being educated?
10· · · ·A.· ·I can't speak directly for the direct
11· ·selling education foundation, but my understanding
12· ·that one of its purposes is to educate college
13· ·students.
14· · · ·Q.· ·Educate college students on -- on what?
15· · · ·A.· ·On their awareness of direct selling, if
16· ·they know what direct selling is, and the activity
17· ·of direct selling, per se, as a type of marketing
18· ·activity.
19· · · ·Q.· ·And what is your current involvement with
20· ·the direct selling education foundation?
21· · · ·A.· ·I am currently on the Academic Advisory
22· ·Council.
23· · · ·Q.· ·And what does that position entail?
24· · · ·A.· ·There are, I believe, around a dozen
25· ·professors that are on this council, and there are
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·1· ·meetings twice a year that talk about activities
·2· ·that the direct selling education foundation is
·3· ·doing, or might be doing.
·4· · · ·Q.· ·Can you give me an example of some of
·5· ·those activities that have occurred over the last
·6· ·five or so years?
·7· · · ·A.· ·So, one activity is bringing executives
·8· ·from direct selling companies to campuses across
·9· ·the United States, and the activity might be termed
10· ·a direct selling day.· So the executives would come
11· ·into the classes of the -- the students at various
12· ·colleges, and talk with students and tell them
13· ·about their companies, and their experiences.
14· · · ·Q.· ·And has an event like that occurred on
15· ·your campus any time recently?
16· · · ·A.· ·No, sir.
17· · · ·Q.· ·How long have you been involved with the
18· ·direct selling education foundation?
19· · · ·A.· ·I would have to look at my resume, but I
20· ·was involved with the direct education foundation
21· ·some 32 or 33 years ago, and during that period,
22· ·back in around, say, 1990, I served on the Board
23· ·of the Direct Sell of Education Foundation; and I
24· ·was involved maybe for five years with activities
25· ·there.· And then for the next 20 years, I was not
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·1· ·involved with it.
·2· · · ·Q.· ·And then -- and then recently you've
·3· ·become involved again?
·4· · · ·A.· ·Yes.· There was a change in -- in
·5· ·administration, and somewhere around 2016 or so, I
·6· ·was asked to quote "come back", quote, and serve
·7· ·on this Academic Advisory Council.
·8· · · ·Q.· ·And has the function of the Direct Selling
·9· ·Education Foundation remained largely the same over
10· ·that entire period?
11· · · ·A.· ·As far as I know, yes.
12· · · ·Q.· ·And is the intent to increase the
13· ·likelihood that college students might become
14· ·involved in multi-level marketing for direct
15· ·selling?
16· · · ·A.· ·I would surmise that, yes, that -- that's
17· ·probably one of the objectives of the educational
18· ·process.
19· · · ·Q.· ·Can you think of an example of a multi-
20· ·level marketing firm in the last 10 years that's
21· ·had success recruiting college students?
22· · · ·A.· ·I cannot.
23· · · ·Q.· ·Do you recall if representatives from
24· ·VEMA ever came to your campus?
25· · · ·A.· ·What is VEMA?
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·1· · · ·Q.· ·So you're not familiar with VEMA?
·2· · · ·A.· ·I don't believe so.
·3· · · ·Q.· ·You're not familiar with the FTC cases
·4· ·involving VEMA?
·5· · · ·A.· ·No, sir.
·6· · · ·Q.· ·Have you received any grants for your
·7· ·work from the Direct Selling Education Foundation?
·8· · · ·A.· ·Yes, sir.
·9· · · ·Q.· ·When was the last time you received a
10· ·grant from them?
11· · · ·A.· ·Approximately 2016.
12· · · ·Q.· ·What did that grant involve?
13· · · ·A.· ·The grant was from the Direct Selling
14· ·Education Foundation to the University of Texas at
15· ·Austin; it was not to me directly.· The grant was
16· ·used to support a research study that I conducted
17· ·for the Direct Selling Education Foundation.
18· · · ·Q.· ·And what was the research study?
19· · · ·A.· ·The study had two components:· The first
20· ·component was to look at the economic impact of
21· ·direct selling, generally.· And the second was to
22· ·look at perceptions and attitudes towards direct
23· ·selling.
24· · · ·Q.· ·Was that research ultimately published?
25· · · ·A.· ·Parts of it, yes, sir.
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·1· · · ·Q.· ·Where was that published?
·2· · · ·A.· ·One part was published in Business
·3· ·Horizons; I believe another one was published in
·4· ·-- let me just look at my report to be clear here.
·5· ·When I say that I published some studies from the
·6· ·study conducted for the Direct Selling Education
·7· ·Foundation, I'm referring to the data that I
·8· ·obtained for the Direct Selling Education Study,
·9· ·and then I used those data in the other studies,
10· ·one of which was published in Business Horizons,
11· ·one of which was published in the Journal of
12· ·Personal Selling and Sales Management; one of
13· ·which was published in the International Journal
14· ·Applied Decision Sciences.· That's -- I believe
15· ·that's it so far.
16· · · ·Q.· ·And each of those were listed on page 14
17· ·or 15 of your rebuttal to Professor Keep; is that
18· ·correct?
19· · · ·A.· ·Correct.
20· · · ·Q.· ·And what did you find -- just generally,
21· ·what did you find the economic impact of direct
22· ·selling to be?
23· · · ·A.· ·Interestingly enough, the number I came
24· ·up with was very similar to what the Direct Selling
25· ·Association had come up with independently of what
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·1· ·I did.
·2· · · ·Q.· ·And what was that number?
·3· · · ·A.· ·Somewhere, I believe, in the neighborhood
·4· ·of the sales of 35.4 billion dollars.· And that was
·5· ·for a particular year.
·6· · · ·Q.· ·And was that exclusively U.S. sales?
·7· · · ·A.· ·Yes, sir.
·8· · · ·Q.· ·Have you ever done any research or do you
·9· ·have any idea what that number might be globally?
10· · · ·A.· ·Hold on.· I haven't done any research on
11· ·that.
12· · · ·Q.· ·What was the size of that grant?
13· · · ·A.· ·$135,000.
14· · · ·Q.· ·How many other times, approximately,
15· ·would you say you've received grants from the
16· ·Direct Selling Education Foundation?
17· · · ·A.· ·I believe that's the only one.
18· · · ·Q.· ·Have you received grants from other
19· ·industry organizations, direct selling or multi
20· ·level marketing industry organizations?
21· · · ·A.· ·I received a grant from Amway about
22· ·three decades ago, but that would be the only one.
23· · · ·Q.· ·What was that grant for?
24· · · ·A.· ·It was, again, to study public perceptions
25· ·and attitudes towards direct selling.
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·1· · · ·Q.· ·Do you recall the size of that grant?
·2· · · ·A.· ·Pardon?
·3· · · ·Q.· ·Do you recall the size of that grant?
·4· · · ·A.· ·$100,000.
·5· · · ·Q.· ·I'm looking on page -- it's page 9 of your ·5· ·company.
·6· ·C.V. under the grants that are listed, and I see
·7· ·two other grants from the Direct Selling Education
·8· ·Foundation, listed in 1986 and 1991.
·9· · · ·A.· ·Those were grants -- I don't recall those, ·9· ·the company?
10· ·but it must have been grants to the University of
11· ·Texas for putting on events at the University.
12· · · ·Q.· ·What sort of events?
13· · · ·A.· ·I put on an event at the University of
14· ·Texas looking at retailing through consumers, and
15· ·I had company executives and academics on campus for 15· ·company?
16· ·a couple of days presenting research.· The result
17· ·was an edited book on retailing; I don't know the
18· ·name of it, Retailing to Consumers, or something.
19· ·In that book there are chapters on direct selling,
20· ·retailing, direct marketing, and so forth.· So the
21· ·grant was used to pay local expenses for that; we
22· ·call it a workshop or seminar.· So none of those
23· ·grants came to me.
24· · · ·Q.· ·So all three times that you received
25· ·grants from the Direct Selling Education
Page 23
·1· ·Foundation, they went to the University of Texas;
·2· ·is that correct?
·3· · · ·A.· ·Correct.
·4· · · ·Q.· ·But the grant that you received from the
·5· ·Amway Corporation went directly to you?
·6· · · ·A.· ·No, that went to the University also.
·7· · · ·Q.· ·Okay.
·8· · · ·A.· ·And I believe part of it went to the
·9· ·University of New Mexico.
10· · · ·Q.· ·Have you ever received direct compensation
11· ·of any type from the direct selling or multi-level
12· ·marketing industry?
13· · · ·A.· ·I believe I did a report some years ago
14· ·for a company in Utah.· Again, that was -- it would
15· ·have been a couple of decades ago, and I can't even
16· ·recall as I sit here, what the name of that company
17· ·was.· Now, apart from that, as per my report, I sit
18· ·on the Academic Advisory Board of Cutco & Vector, a
19· ·direct selling company, and I receive a stipend of
20· ·$3,500 per year for so doing.· But that is not a
21· ·multi-level company.
22· · · ·Q.· ·So at Cutco Vector, there's only one level?
23· · · ·A.· ·I would say so, yes.
24· · · ·Q.· ·And I believe you listed another, is it
25· ·Envirotech?· Yeah, you state that you're on the
Page 24
·1· ·Board of Envirotech International?
·2· · · ·A.· ·Yes, sir.
·3· · · ·Q.· ·And how are you compensated for that?
·4· · · ·A.· ·Well, I lost $250,000 investing in the
·6· · · ·Q.· ·You say you lost -- you lost money?
·7· · · ·A.· ·I lost money.
·8· · · ·Q.· ·What kind of investment did you make into
10· · · ·A.· ·$250,000.
11· · · ·Q.· ·Was that purchasing shares, or what kind
12· ·of investment was it?
13· · · ·A.· ·I believe it was some shares, and a loan.
14· · · ·Q.· ·And was Envirotech a multi-level marketing
16· · · ·A.· ·Yes, sir.
17· · · ·Q.· ·Does that company still exist?
18· · · ·A.· ·Not to my knowledge.
19· · · ·Q.· ·Have you ever been directly involved in a
20· ·multi-level marketing company yourself as a
21· ·distributor?
22· · · ·A.· ·No, sir.
23· · · ·Q.· ·Has any member of your family ever been
24· ·involved directly in a multi-level marketing
25· ·company as a distributor?
 Page 25
·1· · · ·A.· ·I believe my daughter-in-law was involved
·2· ·in a company or two, but I couldn't give you the
·3· ·names, and I don't know when she was.
·4· · · ·Q.· ·How much were you compensated for the
·5· ·report you did for the Utah MLM company?
·6· · · ·A.· ·I don't recall at this time.· I would have
·7· ·to go back and look at my records, if I go back
·8· ·that far.
·9· · · ·Q.· ·Let me take a few guesses and see if I can
10· ·refresh your recollection as to that company.· Was
11· ·it USANA?
12· · · ·A.· ·I don't know, I would have to look at what
13· ·-- it would be listed on my resume --
14· · · ·Q.· ·Oh, okay.
15· · · ·A.· ·-- if it's -- if it's a grant from there.
16· ·If it's not, I would have to go to my consulting
17· ·files.
18· · · ·Q.· ·Have you ever been paid to speak at a
19· ·direct selling or multi-level marketing event?
20· · · ·A.· ·No, sir.
21· · · ·Q.· ·Have you ever spoke at such an event
22· ·uncompensated?
23· · · ·A.· ·I believe there are times when I've been
24· ·introduced and said a few words, yes, sir.
25· · · ·Q.· ·When was the last time that you did that?
Page 26
·1· · · ·A.· ·Oh, I would estimate maybe 2015.
·2· · · ·Q.· ·And what event was that?
·3· · · ·A.· ·That was an event by Cutco Vector.
·4· · · ·Q.· ·Did you speak with any Herbalife
·5· ·distributors in the preparation of your rebuttal
·6· ·reports?
·7· · · ·A.· ·No, sir.
·8· · · ·Q.· ·Have you ever spoken with an Herbalife
·9· ·distributor who lost significant sums of money
10· ·pursuing the business opportunity?
11· · · ·A.· ·Not that I recall, sir.
12· · · ·Q.· ·Would you agree with me that many
13· ·distributors do lose a significant amount of
14· ·money pursuing the Herbalife business opportunity?
15· · · ·A.· ·I have no direct knowledge of that.
16· · · ·Q.· ·When was the last time you spoke with any
17· ·MLM participant who had lost a significant amount of
18· ·money pursuing the Bizopp?
19· · · ·A.· ·As I sit here today, I don't think I ever
20· ·have.
21· · · ·Q.· ·Are you familiar with the complaint that
22· ·was filed by the FTC in 2016 regarding Herbalife's
23· ·business practices?
24· · · ·A.· ·Only that I know it was filed, and there
25· ·was some litigation.· I have never seen the actual
Page 27
·1· ·report.· I have never seen the consequences.
·2· · · ·Q.· ·Are you familiar with any of the FTC's
·3· ·litigation in the multi-level marketing sector?
·4· · · ·A.· ·At one time I think I looked at a couple
·5· ·of the quote, "famous", quote, cases, the Amway
·6· ·case, for example.
·7· · · ·Q.· ·You're referring to the 1970s era case?
·8· · · ·A.· ·Yes, sir.
·9· · · ·Q.· ·What about some of the more recent FTC
10· ·litigation.· Are you familiar with any of that?
11· · · ·A.· ·No, sir.
12· · · ·Q.· ·You have not read the BurnLounge case?
13· · · ·A.· ·I have not.
14· · · ·Q.· ·Have you ever cited to Dr. Keep any of
15· ·your own writings?
16· · · ·A.· ·I believe so, yes.
17· · · ·Q.· ·You have listed deposition testimony from
18· ·July 29th in a case of Tiffany Brinkley versus
19· ·Monterey Financial Services.· Which party retained
20· ·you on that matter?
21· · · ·A.· ·Financial Services.
22· · · ·Q.· ·Did you provide an expert report in that
23· ·case?
24· · · ·A.· ·Yes, sir.
25· · · ·Q.· ·What was the basic substance of that
Page 28
·1· ·report?
·2· · · ·A.· ·I need an opinion from my counsel here
·3· ·because I believe that litigation is still ongoing,
·4· ·I think, so I don't know if I can speak to that
·5· ·introduction.
·6· · · · · · MR. DROOKS:· Well, you submitted the
·7· ·report; is that right?
·8· · · · · · THE WITNESS:· Yes, sir.· I gave
·9· ·depositions.
10· · · · · · MR. DROOKS:· Yeah, so I think you can
11· ·just speak to generally what the subject matter was
12· ·and -- and what opinion you expressed in a general
13· ·-- in a general way.· And, Mr. -- Dr. Peterson, that
14· ·is because my understanding is that that information
15· ·is now public.
16· · · · · · THE WITNESS:· Okay.· Yeah, I have no
17· ·knowledge of that.· In that matter, I conducted a
18· ·survey for the defendant, and the survey addressed
19· ·the members of the potential class; it was a
20· ·class action suit to find out if -- if the
21· ·potential class members were homogeneous or
22· ·heterogeneous.
23· · · ·Q.· ·(By Mr. Jones)· And that case involved
24· ·allegations by plaintiffs, that they were being
25· ·recorded without their permission; is that right?
 Page 29
·1· · · ·A.· ·Correct.
·2· · · ·Q.· ·And have you done any other work for
·3· ·Monterey Financial Services?
·4· · · ·A.· ·No, sir.
·5· · · ·Q.· ·Do you know any ways in which Monterey
·6· ·Financial Services business overlaps with the
·7· ·multi-level marketing industry?
·8· · · ·A.· ·I have no knowledge of that.
·9· · · ·Q.· ·Okay.
10· · · · · · MR. JONES:· Okay. Let's go off the record.
11· ·10 minutes.· We're all on different time zones.
12· · · · · · (Brief recess.)
13· · · · · · MR. JONES:· Let's go back on the record,
14· · · ·Q.· ·(By Mr. Jones)· So, Dr. Peterson, let's go
15· ·over your rebuttal of Dr. Keep's report first.· I'm
16· ·going to try to do this basically sequentially.
17· ·And, again, I've marked this as Exhibit 240.· I'll
18· ·refer you to the page and line number so that you
19· ·can reference your paper copy.· So, starting on --
20· ·starting on the first page, line 10, can you tell
21· ·me why in your first sentence, under the summary
22· ·section there, you put the words Expert Analysis
23· ·within quotation marks?
24· · · ·A.· ·Well, the entire sentence says, "A
25· ·substantial portion of Keeps' report does not
Page 30
·1· ·reflect any true, quote, 'expert analysis'."· In
·2· ·other words, I'm just indicating that, in my
·3· ·opinion, there's no expert analysis in his report.
·4· · · ·Q.· ·And are you offering a legal opinion as
·5· ·to what constitutes expert analysis?
·6· · · ·A.· ·No, sir.
·7· · · ·Q.· ·So in what sense, then, are you saying
·8· ·he's not offered any quote "expert analysis",
·9· ·unquote?
10· · · ·A.· ·In the sense that he holds himself off to
11· ·be an expert in marketing.
12· · · ·Q.· ·And in the second sentence, why have you
13· ·put the word opinions within quotation marks?
14· · · ·A.· ·In that case, opinions reflects what I
15· ·thought would be his observations or conclusions,
16· ·or opinions, all kind of rolled into one.
17· · · ·Q.· ·So by putting the word within quotation
18· ·marks, did you intend to imply that Dr. Keep had in
19· ·fact not offered opinions?
20· · · ·A.· ·No, sir.
21· · · ·Q.· ·I don't quite understand, then, what --
22· ·what you intended to imply by enclosing that word
23· ·in quotation marks.
24· · · ·A.· ·So I -- that word is -- is meant to
25· ·encompass opinions in a general sense, as well as
Page 31
·1· ·what I believe he calls observations and -- and
·2· ·conclusions.· So that is just my terminology to
·3· ·reflect that general category of what he is saying.
·4· · · ·Q.· ·I apologize for my dog.· And, again, in
·5· ·line 18, you say, "Although Keeps' report offers
·6· ·six separate conclusions," and you've encapsulated
·7· ·the word conclusions within quotation marks, what
·8· ·was the purpose for enclosing that word within
·9· ·quotation marks?
10· · · ·A.· ·Again, my terminology, that conclusions
11· ·would be the same as his opinions or his
12· ·observations; I'm just trying to create a category
13· ·there instead of saying opinions, conclusions,
14· ·observations, so forth.
15· · · ·Q.· ·In line 17, you say that Dr. Keeps' report
16· ·suffers from a number of obvious logical fallacies.
17· · · ·A.· ·Yes, sir.
18· · · ·Q.· ·What is a logical fallacy?
19· · · ·A.· ·A logical fallacy is a statement -- let
20· ·me state it differently: there are different types
21· ·of logical fallacies in terms of what someone says
22· ·as opposed to what reality is.
23· · · ·Q.· ·I don't understand.
24· · · ·A.· ·May I give you an example from Keeps'
25· ·report?
Page 32
·1· · · ·Q.· ·Yes, please.
·2· · · ·A.· ·So if I look at Keeps' report, the --
·3· · · ·Q.· ·One moment, Dr. Peterson, if we're going
·4· ·to refer to it.· I'm going to mark Dr. Keeps' --
·5· ·I'm marking Dr. Keeps' affirmative report as Exhibit
·6· ·242.
·7· · · · · · (Exhibit No. 242 is marked.)
·8· · · ·Q.· ·(By Mr. Jones)· I'm sorry, Dr. Peterson,
·9· ·please continue.
10· · · ·A.· ·So if I look at Keep's report on page 29
11· ·and 30, the last basically sentence, and I read,
12· ·"Hereto, the FTC has expressed concerns: while
13· ·prospective recruits are sometimes told that some
14· ·trick representatives fail, they're also told that
15· ·lack of success cannot be blamed on the system, but
16· ·rather only on the insufficient efforts of those
17· ·who failed."· And then there's a parenthetical
18· ·statement that apparently refers to individuals in
19· ·this legal matter, Waldron depo at 35, Peterson
20· ·depo at 176, Kiosa depo at 202, Tarto's depo at 151,
21· ·closed parenthesis.· So, in my opinion this is an
22· ·illustration of a logical fallacy, where Keep is
23· ·talking about a different matter altogether, and
24· ·then trying to attribute it to Herbalife.· The
25· ·statement has nothing to do with Herbalife at all.
 Page 33
·1· ·In fact, the quotation is from a complaint filed
·2· ·by the FTC, according to keep FTC; it does not
·3· ·have anything to do with Herbalife.
·4· · · ·Q.· ·And did you review the depo citations
·5· ·provided by Dr. Keep in that parenthetical, to see
·6· ·if those related back to the FTC quote provided by
·7· ·Dr. Keep?
·8· · · ·A.· ·Well, they all relate to the actual quote
·9· ·obviously.· So I see no -- no relevance there.
10· · · ·Q.· ·Did you review those depo transcripts?
11· · · ·A.· ·No, sir.
12· · · ·Q.· ·And you see that as an example of what
13· ·sort of logical fallacy?
14· · · ·A.· ·Well, it's -- it's irrelevant to this
15· ·case and it's -- these fallacies have different
16· ·terminologies, but it could be called the -- the
17· ·authoritative fallacy.· I'm trying to look at an
18· ·authority in a different context and make an
19· ·implication to a present context.· It's a fallacy
20· ·because there is no relationship.
21· · · ·Q.· ·And if you take -- for a moment take for
22· ·granted that it is a fallacy as you're suggesting,
23· ·what's the relevance of that?
24· · · ·A.· ·Well, I'm just giving an example in
25· ·response to your question for if a logical fallacy.
Page 34
·1· · · ·Q.· ·And does the study of logical fallacies
·2· ·fall within the field of marketing?
·3· · · ·A.· ·It falls within all scientific endeavors.
·4· · · ·Q.· ·Do you consider yourself an expert on
·5· ·logic?
·6· · · ·A.· ·In the context of research, yes, sir.
·7· · · ·Q.· ·In the context of rebuttal opinions in
·8· ·this matter, are you offering yourself as an expert
·9· ·in logic?
10· · · ·A.· ·In logic, as it applies to marketing and
11· ·research.
12· · · ·Q.· ·Are you familiar with the logical fallacy
13· ·argumentum ad logicam?· That's the Latin.
14· · · ·A.· ·Maybe in a different name.· Could you --
15· ·could you tell me what that means in English.· As
16· ·I said, these logical fallacies have different
17· ·terminologies.
18· · · ·Q.· ·It's often referred to as the fallacy
19· ·fallacy.· Have you heard of that?
20· · · ·A.· ·I don't believe so, no.
21· · · ·Q.· ·I'll read you the definition. "The fallacy
22· ·fallacy is a formal fallacy of analyzing an argument
23· ·and inferring that since it contains a fallacy, its
24· ·conclusion must be false."
25· · · ·A.· ·Can you read that again a little slower,
Page 35
·1· ·please.· I see the word -- anyway, please say that
·2· ·again.
·3· · · ·Q.· ·"The fallacy fallacy is a formal fallacy
·4· ·of analyzing an argument and inferring that since
·5· ·it contains a fallacy, its conclusion must be
·6· ·false."
·7· · · ·A.· ·That's an interesting term.· So it's not
·8· ·necessary -- necessary that the conclusion be
·9· ·false.· It could perhaps not be false in certain
10· ·circumstances.
11· · · ·Q.· ·So if you are not arguing that Dr. Keeps
12· ·conclusions are necessarily false, what is the
13· ·relevance of pointing to logical fallacies?
14· · · ·A.· ·What I point out in this particular
15· ·example that -- using that fallacy example, he's
16· ·trying to imply that Herbalife or its distributor
17· ·are doing something wrong.· And the fallacy is
18· ·there's no argument there; he's simply taking the
19· ·words from a different matter and trying to
20· ·transport them to the current matter.
21· · · ·Q.· ·But, again, you did not review those depo
22· ·transcripts to see how they might relate to the
23· ·quotation from the FTC case provided by Dr. Keep?
24· · · ·A.· ·My reading is that the quotation is --
25· ·is from the FTC and not as implied by the people
Page 36
·1· ·who were deposed.
·2· · · ·Q.· ·Having just a slight technical problem
·3· ·here.· One second.· Here we go.· In line 24 on the
·4· ·same page, you state that it is, quote, especially
·5· ·imperative that stability be maintained in a multi
·6· ·level marketing context.· Why is it especially
·7· ·imperative?
·8· · · · · · MR. DROOKS:· That mischaracterizes the
·9· ·document.
10· · · ·Q.· ·(By Mr. Jones)· Okay.· Let me -- let me
11· ·rephrase the question. I'll read the whole sentence
12· ·starting at line 23: You state, quote, "because the
13· ·sales force of a direct selling company consists
14· ·of independent distributors, it is especially
15· ·imperative that stability be maintained to insure
16· ·the firm's products are sold successfully over an
17· ·extended period of time."· Can you tell me what
18· ·you meant there by especially imperative?
19· · · ·A.· ·I use the words especially imperative
20· ·because as the sentence reads, the sales force of
21· ·a direct selling company consists of independent
22· ·distributors, not employees.· So, therefore, it's
23· ·especially imperative that stability be maintained.
24· · · ·Q.· ·And what do you mean by stability?
25· · · ·A.· ·Stability that the sales force is stable
 Page 37
·1· ·both in terms of entry and exiting, and the sales
·2· ·messages and the sales efforts remain at some
·3· ·hopefully stable level.
·4· · · ·Q.· ·Well, would you agree with me that multi-
·5· ·level marketing companies have some difficulty
·6· ·maintaining, as you say, stability and/or retaining
·7· ·their distributors?
·8· · · ·A.· ·I would agree that there is turnover among
·9· ·independent distributors in direct selling, yes.
10· · · ·Q.· ·Why -- in your opinion, why is there a
11· ·high turnover rate in the direct selling multi-level
12· ·marketing industry?
13· · · ·A.· ·Well, let me preface my comment by saying
14· ·there is relatively high turnover in retailing, per
15· ·se.· In direct selling, there is high turnover for
16· ·a multitude of reasons.
17· · · ·Q.· ·What is your basis for saying that there's
18· ·high turnover in retailing generally?
19· · · ·A.· ·So, research in the retailing literature
20· ·that I read as part of marketing, and studies that
21· ·I have seen that refer to that.
22· · · ·Q.· ·What's the average turnover rate in the
23· ·retailing sector, generally?
24· · · ·A.· ·I estimate it's somewhere higher than 20
25· ·percent.
Page 38
·1· · · ·Q.· ·What's the turnover rate on average in
·2· ·the multi-level marketing industry?
·3· · · · · · MR. DROOKS:· It mischaracterizes the
·4· ·testimony.· He's already explained that multi-level
·5· ·marketing is a compensation scheme, and he's
·6· ·continually referred to direct selling.
·7· · · ·Q.· ·(By Mr. Jones)· Okay.· Would it make sense
·8· ·to you, Dr. Peterson, if for the duration of this
·9· ·deposition I refer to the multi-level marketing
10· ·industry or business model, or compensation plan,
11· ·since you and I have agreed that in fact Herbalife
12· ·is a multi-level marketer?
13· · · ·A.· ·I'm not sure what your question is, sir.
14· · · ·Q.· ·I just want to get on the same page as far
15· ·as the terminology.· I am somewhat uncomfortable
16· ·with the term direct selling, and I prefer to refer
17· ·to the industry as multi-level marketing since the
18· ·company that is at the heart of this case is in
19· ·fact a multi-level marketing company.· So if I
20· ·refer to multi-level marketing, or the multi-level
21· ·marketing industry, will you know what I'm talking
22· ·about?
23· · · ·A.· ·I believe so, yes.
24· · · ·Q.· ·Would you agree with me that in the
25· ·Internet era, direct selling organizations have
Page 39
·1· ·become more rare, and that multi-level marketing
·2· ·has become more common?
·3· · · ·A.· ·I have no knowledge of that.
·4· · · ·Q.· ·Other than Cutco, can you think of any
·5· ·other direct selling organizations?
·6· · · ·A.· ·Again, I need to clarify: Cutco is not a
·7· ·multi-level marketing company, just --
·8· · · ·Q.· ·Right.
·9· · · ·A.· ·-- so we're on the same page.
10· · · ·Q.· ·Yes, I understand that.
11· · · ·A.· ·So, again, can you please repeat the
12· ·question.
13· · · ·Q.· ·So, other than Cutco, can you think of
14· ·any other direct selling organizations?
15· · · ·A.· ·Well, there are many, many direct selling
16· ·organizations.
17· · · ·Q.· ·I'm sorry, any other direct selling
18· ·organizations that are not multi-level?
19· · · ·A.· ·I don't believe that Advocare is
20· ·multi-level anymore.· I don't think that part of
21· ·Avon is multi-level.· Southwestern Company is not
22· ·multi-level.
23· · · ·Q.· ·And Advocare and Avon recently converted
24· ·from multi-level marketing models to direct selling
25· ·models; is that right?
Page 40
·1· · · ·A.· ·I believe so, yes.
·2· · · ·Q.· ·I don't remember my original question.
·3· · · · · · MR. JONES:· Yvette, could you -- can you
·4· ·access my question easily before -- right before
·5· ·Mr. Drooks' objection?
·6· · · · · · THE COURT REPORTER:· Was it a couple of
·7· ·questions up?
·8· · · · · · MR. JONES:· Yes.· If it's a problem, I'll
·9· ·just continue.
10· · · ·Q.· ·(By Mr. Jones)· Would you agree with me,
11· ·Dr. Peterson, that there is a significant difference
12· ·between sales people in MLM, and non-MLM industries,
13· ·in that non-MLM sales people are not a primary
14· ·customer base for the products being sold?
15· · · ·A.· ·I have no knowledge of that.
16· · · ·Q.· ·On page 3 of your report, at line 26, you
17· ·say you've been an observer and researcher of
18· ·direct selling for more than 30 years.· What do
19· ·you mean there by an observer?
20· · · ·A.· ·And as I mentioned before, through
21· ·participation in the Direct Selling Education
22· ·Foundation, and as a professor and researcher, I
23· ·have observed many direct selling firms.· I've
24· ·been invited to their meetings and observed their
25· ·actual behaviors.
 Page 41
·1· · · ·Q.· ·Do you consider yourself an advocate for
·2· ·the industry?
·3· · · ·A.· ·No, sir.
·4· · · ·Q.· ·You testified that you were on the Board
·5· ·of Envirotech International.· Do you recall what
·6· ·percentage of Envirotech distributors achieved
·7· ·gross earnings that placed them above the U.S.
·8· ·poverty limit?
·9· · · ·A.· ·I have no knowledge of that.
10· · · ·Q.· ·Did Envirotech produce a statement of
11· ·average gross compensation?
12· · · ·A.· ·I don't recall as I sit here today.
13· · · ·Q.· ·Do you have any idea across the multi-level
14· ·marketing industry, what percentage of distributors
15· ·are able to achieve the gross earnings that would
16· ·place them above the U.S. poverty limit?
17· · · ·A.· ·I do not.
18· · · ·Q.· ·Section 4 of your rebuttal of Dr. Keep on
19· ·page 4, you say that retention is an acceptable
20· ·goal for a direct selling company.· Are there any
21· ·circumstances in which in your opinion retention
22· ·might not be an acceptable goal?
23· · · ·A.· ·If I treat that as a hypothetical,
24· ·retention has two dimensions, positive and negative.
25· ·And we talk about retention in marketing primarily
Page 42
·1· ·in terms of customers.· So as such, one would want
·2· ·to retain positively those customers that are
·3· ·profitable to the company, but not retain customers
·4· ·that are not profitable.
·5· · · ·Q.· ·I'm not sure I understand that. What type
·6· ·of customer would not be profitable to a company?
·7· · · ·A.· ·A customer that actually is costing the
·8· ·company money.· For example, in banking, if you
·9· ·have a customer that has a very low balance and the
10· ·customer is writing bad checks, and doing things
11· ·that cost the bank money, it would not want to
12· ·have that customer.
13· · · ·Q.· ·In the context of multi-level marketing,
14· ·though, what sort of customer would not be
15· ·profitable for the company?
16· · · ·A.· ·Again, hypothetically it could be a --
17· ·a customer who is always demanding things, always
18· ·complaining, but never purchasing.
19· · · ·Q.· ·Are there any other circumstances in
20· ·which you think retention might not be an
21· ·appropriate goal for a multi-level marketing
22· ·company?
23· · · · · · MR. DROOKS:· That mischaracterizes the
24· ·testimony.· He didn't say it wouldn't be an
25· ·appropriate goal.· He said the company would not
Page 43
·1· ·want to retain somebody, not that it would be
·2· ·inappropriate.
·3· · · ·Q.· ·(By Mr. Jones)· You can answer.
·4· · · ·A.· ·So when hypothetically you look at
·5· ·retention, generally you would want to retain
·6· ·those customers that are profitable for the
·7· ·company, whether the company is a direct selling
·8· ·company, or a manufacturing company, or a non-
·9· ·direct selling retailing company.
10· · · ·Q.· ·In the first sentence of this section, you
11· ·say group based events held by direct selling
12· ·companies have several goals.· What are you talking
13· ·about when you say group-based events?
14· · · ·A.· ·Well, group-based events are -- are events
15· ·where you have many people together.· By definition
16· ·it's a group.
17· · · ·Q.· ·And subsection two there, you state that
18· ·one of the goals may be to introduce prospective
19· ·independent distributors to the company and its
20· ·distributor network.· To your knowledge, are non-
21· ·distributors allowed to attend Herbalife's circle
22· ·of success events?
23· · · ·A.· ·I have no knowledge of that.
24· · · ·Q.· ·So you don't know if subsection two is
25· ·relevant to this case?
Page 44
·1· · · ·A.· ·It's not clear to me from what I read
·2· ·about Herbalife when distributors, through the
·3· ·documents I looked at, were encouraged to bring
·4· ·individuals to an event, whether those individuals
·5· ·were other distributors or potential distributors.
·6· · · ·Q.· ·And if I represented to you that non-
·7· ·distributors are not allowed to attend Herbalife's
·8· ·circle of success events, would that change your
·9· ·opinions at all?
10· · · ·A.· ·No, sir.
11· · · ·Q.· ·Subsection three, you state that one goal
12· ·-- potential goal may be to, quote, "reward current
13· ·independent distributors for their (usually sales,)
14· ·contribution to the company."· What is your basis
15· ·for saying that?
16· · · ·A.· ·Well, my --
17· · · ·Q.· ·The event -- oh, I'm sorry, let me just
18· ·-- what is your basis for saying that?
19· · · ·A.· ·Both my observations of direct selling
20· ·companies, and my research.
21· · · ·Q.· ·And specifically in this context of this
22· ·case, is it your understanding that Herbalife
23· ·events backed as a reward for, quote, "usually
24· ·fails"?
25· · · ·A.· ·I'm sorry, I didn't understand that
 Page 45
·1· ·question.
·2· · · ·Q.· ·Okay.· I'll rephrase it.· What is your
·3· ·intended meaning of the parenthetical, "usually
·4· ·sells" in the context of this sentence?
·5· · · ·A.· ·So I'm not referring only to Herbalife
·6· ·when I say (usually sells).· Sometimes direct
·7· ·selling companies will reward independent
·8· ·distributors for bringing potential independent
·9· ·distributors to an event to introduce them to the
10· ·event.· So somebody that brings, you know, three
11· ·non-distributors will be recognized, for example.
12· · · ·Q.· ·I understand, but that's recruiting, is
13· ·it not, more so than sales?
14· · · ·A.· ·More of that, but again, I say usually
15· ·sales.
16· · · ·Q.· ·Right.· But then the example you cited
17· ·involved recruiting, so what do you mean by
18· ·rewarding current distributors for sales?
19· · · ·A.· ·So what I'm saying here is that, point
20· ·number 3, reward current independent distributors
21· ·for their (usually sales) contributions to the
22· ·company.· And, you know, by that I'm talking about
23· ·when you bring other people, there is potential
24· ·recruits, which will increase sales, or whether
25· ·you have made certain sales goals, or you have done
Page 46
·1· ·something spectacular with respect to sales and --
·2· ·and you're recognized.
·3· · · ·Q.· ·And is that something that happens at
·4· ·Herbalife's circle of success events, to your
·5· ·knowledge?
·6· · · ·A.· ·From the documents I read, it appears to
·7· ·happen, yes, sir.
·8· · · ·Q.· ·And how -- how is that?
·9· · · ·A.· ·How is what?
10· · · ·Q.· ·Sorry, that's a terrible question.· Again,
11· ·in line 22, you state that, "Dr. Keep's factual
12· ·inference that events, primarily STS events, only
13· ·concern distributor retention" is just that, his
14· ·own assumption or inference not an expert opinion
15· ·based on any scientific methodology.· Again, in
16· ·that sentence, are you attempting to offer a legal
17· ·opinion about what constitutes appropriate expert
18· ·opinion?
19· · · ·A.· ·No, sir.
20· · · ·Q.· ·On page 5, starting at around line 13,
21· ·would you consider distributors purchasing more
22· ·products than they can profitably sell or consume
23· ·in an effort to qualify for events at the
24· ·instruction of their upline an illegitimate
25· ·activity?
Page 47
·1· · · ·A.· ·I can't comment on that.· That asks for
·2· ·a legal opinion.
·3· · · ·Q.· ·Referring to the next sentence there, do
·4· ·you know why Herbalife decided to segment their
·5· ·distributor base into distributors and preferred
·6· ·members?
·7· · · ·A.· ·I do not know why Herbalife did that.
·8· · · ·Q.· ·Do you know when they did that?
·9· · · ·A.· ·Only that it was fairly recently, I
10· ·believe.
11· · · ·Q.· ·Do you know if that was in response to
12· ·the FTC's complaint?
13· · · ·A.· ·I do not know.
14· · · ·Q.· ·Why did you consider this segmentation
15· ·relevant?
16· · · ·A.· ·Well, for a couple of reasons:· One,
17· ·according to my knowledge, the industry of direct
18· ·selling is moving in this direction to have
19· ·different segments of, quote, "customers", quote.
20· ·And that recognizes the fact, that the vast
21· ·majority of quote, "customers" quote, of direct
22· ·selling firms are what might be referred to as
23· ·preferred members.
24· · · ·Q.· ·And how is that relevant to this case,
25· ·in your opinion?
Page 48
·1· · · ·A.· ·So let me look at the sentence above
·2· ·that.· So I'm responding to the sentence before
·3· ·that where I say, quote, "but there is no reason
·4· ·why purchasing Herbalife products is illegitimate"
·5· ·closed quote.· I follow on and say, quote, "These
·6· ·preferred members", quote, who purchase only for
·7· ·their own use is not illegitimate.
·8· · · ·Q.· ·But you don't want to offer an opinion
·9· ·here today as to whether or not it would be
10· ·illegitimate for the -- the company, or its top
11· ·distributors to encourage distributors to produce
12· ·-- to purchase more products than they can
13· ·profitably sell or consume in an effort to qualify
14· ·for events.
15· · · ·A.· ·I have no opinion on that.
16· · · ·Q.· ·Do you know if Herbalife's preferred
17· ·members are permitted to attend Herbalife's
18· ·circle of success events?
19· · · ·A.· ·I do not know.
20· · · ·Q.· ·If I represented to you that preferred
21· ·members are not permitted to attend circle of
22· ·success events, then would you have an opinion as
23· ·to whether or not the existence of preferred
24· ·members was relevant to this matter?
25· · · · · · MR. DROOKS:· Vague and ambiguous as to
 Page 49 Page 51
·1· ·relevant to this matter. ·1· · · ·Q.· ·Are you prepared to accept my
·2· · · · · · THE WITNESS:· I think that's a compound ·2· ·representation that the DSA Code of Ethics is
·3· ·question.· Can you restate it? ·3· ·incorporated into the Herbalife distributor
·4· · · ·Q.· ·(By Mr. Jones)· How is the existence of ·4· ·agreement?
·5· ·preferred members relevant, if I represent to you ·5· · · ·A.· ·I would want to see the agreement first
·6· ·that preferred members are not permitted to ·6· ·before accepting your representation.
·7· ·attend circle of success events? ·7· · · ·Q.· ·Okay.· If you'll switch to the AgileLaw
·8· · · ·A.· ·First of all, I don't know if I would ·8· ·exhibit software.
·9· ·accept your representation because I do not know ·9· · · ·A.· ·Okay.· So, I go to chat?
10· ·sitting here today whether preferred members can 10· · · ·Q.· ·No, this was what you opened in your
11· ·attend or cannot attend. 11· ·browser before we started the deposition.
12· · · ·Q.· ·If you don't know, then why have you 12· · · ·A.· ·I have, it looks like, a face page.· Do I
13· ·included this as a part of your opinion? 13· ·join?
14· · · ·A.· ·Well, because when you look at that entire 14· · · ·Q.· ·I've attempted to show you what has been
15· ·paragraph, what I'm referring to is the implication 15· ·previously marked as Exhibit 11.· Can you see that?
16· ·of Keep's, that the purchase of Herbalife products 16· · · ·A.· ·Wait, I need to put a pin in here again.
17· ·is an illegitimate activity in and of itself.· And 17· ·Can you give me that again, please.
18· ·all I'm saying is there are customers of Herbalife 18· · · · · · MR. JONES:· Let's go off the record.
19· ·preferred members as opposed to members who simply 19· · · · · · (Off the record.)
20· ·purchase the product. 20· · · · · · MR. DROOKS:· We're ready when you are.
21· · · ·Q.· ·But you don't know if those members are 21· · · · · · MR. JONES:· All right.· Let's go back on
22· ·attending these events, and you are not prepared 22· ·the record.
23· ·to accept my representation that they are not? 23· · · ·Q.· ·(By Mr. Jones)· So, Dr. Peterson, I'm
24· · · ·A.· ·I do not know, and I am not prepared to 24· ·showing you what's been previously marked as
25· ·accept your representation. 25· ·Exhibit 11.· This is the 2016 version of Herbalife

Page 50
·1· · · ·Q.· ·Starting at around line 23, you state
·2· ·that you are hard pressed to understand why the
·3· ·DSA's Code of Ethics is a relevant standard in
·4· ·this matter.· What do you mean by relevant
·5· ·standard?
·6· · · ·A.· ·Just it's a relevant standard or its
·7· ·criteria against which to judge the behavior of
·8· ·Herbalife.
·9· · · ·Q.· ·So you think that the DSA Code of Ethics
10· ·is irrelevant to this matter?
11· · · ·A.· ·I do not see its relevance here.
12· · · ·Q.· ·Is that a legal opinion?
13· · · ·A.· ·No, sir.
14· · · ·Q.· ·What do you mean by relevance then?
15· · · ·A.· ·In general, Keeps is talking about
16· ·independent distributors.· But as I read the Code
17· ·of Ethics, it relates more to non-distributors or
18· ·potential distributors than actual -- actually
19· ·existing distributors.
20· · · ·Q.· ·When was the last time that you reviewed
21· ·the DSA Code of Ethics.
22· · · ·A.· ·Yesterday evening.
23· · · ·Q.· ·Do you know if the DSA Code of Ethics is
24· ·incorporated into Herbalife's distributor agreement?
25· · · ·A.· ·I do not know.
Page 52
·1· ·Sales and Marketing Plan and Business Rules.· Do
·2· ·you see the cover there?
·3· · · ·A.· ·Yes, sir.
·4· · · ·Q.· ·Now I'm taking you to page -- taking you
·5· ·to page 64 of this document.· Are you looking at
·6· ·the sample version of Herbalife's membership
·7· ·agreement?
·8· · · ·A.· ·Let me get --
·9· · · · · · MR. DROOKS:· You're going to have to
10· ·release the document so that the witness can look
11· ·around it and can blow it up, because in its current
12· ·form it's not legible on the screen.
13· · · · · · THE WITNESS:· I'm· trying to make it
14· ·large in here so I can --
15· · · ·Q.· ·(By Mr. Jones)· If you use the plus, the
16· ·magnifying glass with the plus on it.
17· · · · · · MR. DROOKS:· You have it locked.
18· · · · · · MR. JONES:· I shouldn't, Mark.
19· · · · · · THE WITNESS:· When I blow it up a little
20· ·bit, I have two pages before and it --
21· · · · · · MR. DROOKS:· Yeah, it gets too -- it locks
22· ·in on like a quarter of one page when you do that,
23· ·so you can't read it.
24· · · · · · THE WITNESS:· Yeah.· I'm not -- so it
25· ·looks like two pages on the screen.
 Page 53
·1· · · ·Q.· ·(By Mr. Jones)· Yes, that's how it is in
·2· ·the file.
·3· · · ·A.· ·Okay.
·4· · · ·Q.· ·Let me see if I can blow it up for you.
·5· ·I'm going to try it now.· Did that work?
·6· · · ·A.· ·But I miss half the screen then.· I'm
·7· ·missing --
·8· · · ·Q.· ·Yes, I'm just -- I'm trying to show you
·9· ·Section A, No. 3, under the heading Herbalife Member
10· ·Pack.
11· · · ·A.· ·Yes, sir, I see it.
12· · · ·Q.· ·Okay.· Is it blown up enough now that you
13· ·can read it?
14· · · ·A.· ·I've got my glasses.· Let me take a minute
15· ·here.
16· · · ·Q.· ·Okay.
17· · · ·A.· ·As I said during the break, I've never
18· ·seen this document before.· And I've now skimmed
19· ·it, the No. 3 under A.
20· · · ·Q.· ·Do you see where it says this document,
21· ·which is Book 4, Herbalife Sales and Marketing Plan
22· ·and Rules of Conduct, along with several other
23· ·documents that are referenced, are collectively
24· ·referred to collectively as the materials, and by
25· ·reference are incorporated herein?
Page 54
·1· · · ·A.· ·I see that.
·2· · · ·Q.· ·And now I'm taking you to page 141, this
·3· ·document.· Can you see the DSA Code of Ethics?
·4· · · ·A.· ·I do.
·5· · · ·Q.· ·So you would agree with me that the DSA
·6· ·Code of Ethics is incorporated into Herbalife's
·7· ·membership agreement, at least as of 2016?
·8· · · ·A.· ·I don't know.· It -- it appears to be
·9· ·part of the sales and marketing plan.· I don't
10· ·know if it is part of the agreement.
11· · · ·Q.· ·Okay.· I'm taking you back to page 64.
12· ·What we are looking at here on page 64 is the
13· ·sample version of Herbalife's membership agreement
14· ·as of the date of the publication of this version
15· ·of the sales and marketing plan.· Again, do you see
16· ·that?
17· · · ·A.· ·I see that, yes.
18· · · ·Q.· ·That the sales and marketing plan, and the
19· ·other documents referenced here, referred to
20· ·collectively as the materials, are incorporated
21· ·herein?
22· · · ·A.· ·To clarify for me, the Code of Ethics is
23· ·in the sales and marketing plan, and what we are
24· ·looking at is part of the sales and marketing plan;
25· ·is that correct?
Page 55
·1· · · ·Q.· ·That is correct.
·2· · · ·A.· ·I'm sorry, what is the question now?
·3· · · ·Q.· ·So on page 5 of your report, you say you
·4· ·are hard pressed to understand why the DSA Code of
·5· ·Ethics is relevant.
·6· · · · · · Does the fact that it's incorporated into
·7· ·Herbalife's membership agreement and Herbalife's
·8· ·marketing plan and rules change your opinion as
·9· ·to whether or not the DSA Code of Ethics may be
10· ·relevant to this matter?
11· · · ·A.· ·I do not believe it's relevant to this
12· ·matter.
13· · · ·Q.· ·Why is that?
14· · · ·A.· ·Well, my understanding of this matter, it
15· ·deals with generally whether attendance at the
16· ·circle of success event is related to the success.
17· ·And I don't see any relevance of the DSA Code of
18· ·Ethics in that regard.
19· · · ·Q.· ·Do you think it's important that DSA
20· ·members follow this code of ethics?
21· · · · · · MR. DROOKS:· Vague as to important.· Vague
22· ·as to DSA members.
23· · · · · · THE WITNESS:· It is my understanding that
24· ·to be a member of DSA, they have to follow the code
25· ·of ethics.
Page 56
·1· · · ·Q.· ·(By Mr. Jones)· Okay.· Thank you.· What's
·2· ·your opinion as to the reason that the DSA has a
·3· ·code of ethics?
·4· · · ·A.· ·I don't know the particular reason that
·5· ·the Direct Selling Association has a code of ethics.
·6· · · ·Q.· ·Is the code of ethics a part of the
·7· ·industry's efforts to self-regulate?
·8· · · ·A.· ·It may well be, yes.
·9· · · ·Q.· ·And is membership in the DSA -- let me
10· ·start over.· Is it your opinion that the DSA
11· ·membership gives an air of legitimacy to a multi-
12· ·level marketing firm?
13· · · · · · MR. DROOKS:· Vague as to air and legitimacy
14· ·and argumentative as to air and legitimacy.
15· · · · · · THE WITNESS:· Would you repeat the
16· ·question.
17· · · · · · MR. JONES:· Yvette, could you read back
18· ·my question so that Mr. Drooks doesn't have to
19· ·re-object.
20· · · · · · THE COURT REPORTER:· "Q. And is membership
21· ·in the DSA -- let me start over.· Is it your opinion
22· ·that the DSA membership gives an air of legitimacy
23· ·to a multi-level marketing firm?
24· · · · · · THE WITNESS:· I have no opinion on that.
25· · · · · · MR. JONES:· I'm marking Exhibit 243.
 Page 57
·1· · · · · · (Exhibit No. 243 is marked.)
·2· · · ·Q.· ·(By Mr. Jones)· Can you see the document on
·3· ·your screen, Dr. Peterson?
·4· · · ·A.· ·Yes.
·5· · · ·Q.· ·Do you recognize this document?
·6· · · ·A.· ·Yes.
·7· · · ·Q.· ·What is it?
·8· · · ·A.· ·This is an article that I had published
·9· ·with Dr. Gerald Albaum.· And Dr. Albaum is the
10· ·first author.· And the title is Multi-level
11· ·(Network) Marketing: an objective view.· And
12· ·this was published in 2011.
13· · · · · · MR. JONES:· And I'm showing the witness
14· ·page 7 of this exhibit, which was page 353 of the
15· ·article.
16· · · ·Q.· ·(By Mr. Jones)· Do you see there that
17· ·there was a section in this article regarding
18· ·Codes of Ethics?
19· · · ·A.· ·Yes.
20· · · ·Q.· ·I'm taking you to the next page, the last
21· ·sentence in this section.· I'll read it into the
22· ·record.· It says, "But adherence to an Industry
23· ·Code, if such a code exists, is often required for
24· ·membership in an industry trade association, and
25· ·many advantages accrue to a company that is a
Page 58
·1· ·member, not least of which if that membership
·2· ·implies legitimacy."· Do you see that?
·3· · · ·A.· ·No, I don't.· What page are you on?
·4· · · ·Q.· ·I'm on page -- it says 354.
·5· · · ·A.· ·354?· And you are reading what note to
·6· ·me?
·7· · · ·Q.· ·I read the last sentence before the
·8· ·section that's labeled internal consumption.
·9· · · ·A.· ·Oh, so it starts on 353.· So you are
10· ·reading the last paragraph before the heading
11· ·internal consumption?
12· · · ·Q.· ·That's correct.
13· · · ·A.· ·I didn't hear you reading that.· Do you
14· ·want to read it again, please, or have her read it
15· ·back.
16· · · ·Q.· ·Sure.· It starts with the word "But
17· ·adherence to an Industry Code, if such a code
18· ·exists, is often required for membership in an
19· ·industry trade association.· And many advantages
20· ·accrue to a company that is a member, not the least
21· ·of which is that membership implies legitimacy."
22· · · ·A.· ·Okay.· I see that.
23· · · ·Q.· ·But you don't have an opinion, as you sit
24· ·here today, as to whether or not being a member of
25· ·the DSA involving its code of ethics, grants an
Page 59
·1· ·air of legitimacy to a multi-level marketing firm?
·2· · · ·A.· ·That is correct.· It's hard to go back a
·3· ·decade, but given that I'm not the primary author
·4· ·on this, this may well have come from Dr. Albaum.
·5· · · ·Q.· ·Going back to your rebuttal report of
·6· ·Dr. Keep on page 6, you say "Based on my review of
·7· ·the materials that Keep apparently relies on,
·8· ·retention is only one of several goals of Herbalife
·9· ·events."· So you do agree that retention is one of
10· ·the goals of Herbalife events; is that correct?
11· · · ·A.· ·Yes, sir.
12· · · ·Q.· ·And when you say "Based on my review of
13· ·the materials that Dr. Keep apparently relies on",
14· ·did you review materials other than those listed
15· ·in your report?
16· · · ·A.· ·I looked at some of the things that Keep
17· ·did.· I think I had testified earlier in this
18· ·deposition that I had seen some of the agendas
19· ·and schedules for the events at question.
20· · · ·Q.· ·But did you review all of the materials
21· ·that Dr. Keep cited to in his report?
22· · · ·A.· ·I did not review all of the materials, no,
23· ·sir.
24· · · ·Q.· ·So when you -- in this sentence where you
25· ·say, "Based on my review of the materials that Keep
Page 60
·1· ·apparently relies on", what materials are you
·2· ·referring to then?
·3· · · ·A.· ·So, in Keep's report, at some place I note
·4· ·in my report that he actually quotes somebody
·5· ·saying that there are other goals than just
·6· ·retention for these events.· We can look through
·7· ·his report if we want to find specifics.
·8· · · ·Q.· ·I don't think that's necessary.· I'm just
·9· ·wondering if when you say, "Based on my review of
10· ·the materials that Keep apparently relies on," you
11· ·don't mean that you reviewed all of the materials
12· ·that Dr. Keep reviewed?
13· · · ·A.· ·No, sir.· I've already testified to that.
14· · · ·Q.· ·In section header five, you say "Keep's
15· ·remaining observations are not expert opinions."
16· ·Is this section heading intended to be a legal
17· ·conclusion about what constitutes expert opinions?
18· · · ·A.· ·No, sir.· Are we through with this article
19· ·so I can try to minimize it and get back to Zoom?
20· · · ·Q.· ·Yes, we're through with it for now, but if
21· ·you can try to just switch windows without closing
22· ·the browser.
23· · · ·A.· ·Okay.· If I can minimize this, which I did
24· ·before I thought.· Okay.· I'm back to you.
25· · · ·Q.· ·Okay.· On page 7 of your report, starting
 Page 61
·1· ·at line 5, and reading through line 7, you state,
·2· ·"It appears, however, that Keep is implying that
·3· ·there's something unethical or improper if in fact
·4· ·Herbalife exerted such control."· Do you see that?
·5· · · ·A.· ·Yes.
·6· · · ·Q.· ·And you're referring to control over the
·7· ·STS events; is that correct?
·8· · · ·A.· ·Yes, the italicized statement at the front
·9· ·of that section.
10· · · ·Q.· ·Are you aware of the elements of a civil
11· ·Ricoh claim?
12· · · ·A.· ·No, sir.
13· · · ·Q.· ·Are you aware if the operation and control
14· ·of an alleged Ricoh Enterprise was something that
15· ·plaintiffs will have to prove to the fact finder in
16· ·this case?
17· · · ·A.· ·I have no knowledge of that.
18· · · ·Q.· ·Referring you to page 8 of your report,
19· ·line 7, you say, "As such it is my understanding
20· ·that subsequent to 2009, an STS event could be
21· ·considered a business venture."· What do you mean
22· ·by that?
23· · · ·A.· ·So, my understanding is that if there was
24· ·an event that is being put on by the distributor
25· ·coordinator, it is a business venture because it
Page 62
·1· ·is an activity that I'm assuming will produce some
·2· ·revenue for the distributor coordinator, but it has
·3· ·some costs associated with it; and the result
·4· ·could be positive or negative for the independent
·5· ·distributor coordinator; as such, it's a definition
·6· ·of a business venture.
·7· · · ·Q.· ·You say that it's your understanding that
·8· ·distributor coordinators charge what would be by,
·9· ·quote, "industry standards, a nominal fee to
10· ·attend."· What is the industry standard price for
11· ·a live event?
12· · · ·A.· ·It will fluctuate, to my knowledge, from
13· ·about 30 to 50, or $60, depending upon the length
14· ·of the event.
15· · · ·Q.· ·What's your understanding of how much is
16· ·charged for an STS event?
17· · · ·A.· ·From what I read, it was somewhere in the
18· ·neighborhood of 30 to $50, with some discounts
19· ·available for early-bird purchases, or maybe -- and
20· ·also I think bulk purchases.
21· · · ·Q.· ·So wouldn't it be more correct to say that
22· ·an STS event charges an industry standard price as
23· ·opposed to how you phrase it here, which is that it
24· ·is a nominal fee?
25· · · ·A.· ·A nominal fee is my terminology, which
Page 63
·1· ·implies it is sort of an industry standard.
·2· · · ·Q.· ·So it's your opinion that it's an
·3· ·industry standard to only charge a nominal fee?
·4· · · ·A.· ·That is my understanding, yes.
·5· · · ·Q.· ·And you would consider 30 to $60 a nominal
·6· ·fee?
·7· · · ·A.· ·Yes, sir.
·8· · · ·Q.· ·Have you ever attended an event like this?
·9· · · ·A.· ·I'm not sure that I have attended an STS
10· ·event, but I've attended many direct selling events
11· ·like this.
12· · · ·Q.· ·When was the last time you attended a
13· ·multi-level marketing event?
14· · · ·A.· ·So it's been years since I've attended a
15· ·multi-level marketing event.· I've attended direct
16· ·selling events more recently.
17· · · ·Q.· ·Yeah, I'm just referring to multi-level
18· ·marketing.
19· · · ·A.· ·It could be as long ago as 15 years since
20· ·I've been to a multi-level marketing event such as
21· ·the STS event.
22· · · ·Q.· ·And you've never attended an STS event?
23· · · ·A.· ·I would say probably not. I've attended
24· ·Herbalife events, but at that time I had no idea
25· ·whether it was an STS event or -- I think it was
Page 64
·1· ·more of a corporate event.· But, again, that was
·2· ·a while ago.
·3· · · ·Q.· ·Was it more than 10 years ago?
·4· · · ·A.· ·Yes.
·5· · · ·Q.· ·Can you look at line 20 on that same
·6· ·page, and explain to me what you meant by
·7· ·"punitive and unfair."
·8· · · ·A.· ·We have different line numbers.· Okay.
·9· ·So my line 21 is related to line 20, and I wrote,
10· ·"to do otherwise would be punitive and unfair to
11· ·the independent distributor-coordinator."· That's
12· ·my line 21.· That's your 20?
13· · · ·Q.· ·That's what I'm referring to, yes.
14· · · ·A.· ·And the statement is what it is.· If an
15· ·independent distributor or coordinator puts on an
16· ·event and loses money, given that it's considered
17· ·a business venture, then distributors are probably
18· ·not likely to do that in the future.
19· · · ·Q.· ·Are you aware if Herbalife allows its
20· ·distributor coordinators, as you term it, to
21· ·profit from the operation of events?
22· · · ·A.· ·Are you ready for my answer there?
23· · · ·Q.· ·Sorry.· Yes.
24· · · ·A.· ·I think the terminology I saw was that
25· ·the independent distributor contractor could make
 Page 65
·1· ·any surplus from an event.· I don't recall seeing
·2· ·the term profit.
·3· · · ·Q.· ·Okay.· Going to page 9 of your report,
·4· ·the last sentence of the first paragraph, you say,
·5· ·"I can see no basis to conclude that Herbalife is
·6· ·responsible for any misleading or fraudulent
·7· ·statements that may have been made at such events.
·8· ·Keep does not appear to provide any evidence of
·9· ·such statements."
10· · · · · · Is it your opinion that Herbalife is not
11· ·responsible for any fraudulent statements that
12· ·may be made at STS events?
13· · · ·A.· ·My response is as in my report, I can see
14· ·no basis to conclude that.
15· · · ·Q.· ·The next sentence, you say "Keep's report
16· ·reflects an absence of scientific thinking."· Do
17· ·you claim to know how Dr. Keep was thinking?
18· · · ·A.· ·I do not have insights into his mind.
19· · · ·Q.· ·What's the relevance of that statement
20· ·then?
21· · · ·A.· ·I mean, the statement is as it's written
22· ·there.· On my line it says "summarize, Keep's
23· ·report reflects an absence of scientific thinking
24· ·in part because he does not define, quote, control
25· ·quote."· And as I indicate in my report, there
Page 66
·1· ·are various ways of looking at quote, "control,"
·2· ·quote.
·3· · · ·Q.· ·Are you familiar with the logical
·4· ·fallacy ad hominem attack?
·5· · · ·A.· ·I don't know the terminology on that, the
·6· ·Latin.· What does it mean in English?
·7· · · ·Q.· ·Would you consider the phrase absence of
·8· ·scientific thinking an ad hominem attack?
·9· · · ·A.· ·No, sir.
10· · · ·Q.· ·The last paragraph on page 9, what is the
11· ·evidence that you're referring to that suggests
12· ·that STS events facilitate, quote, "sales success"?
13· · · ·A.· ·So what I looked at, and based on my
14· ·knowledge as a marketing professor, the entities,
15· ·whether companies or individuals, distributors in
16· ·this case, will do certain actions because they
17· ·believe that those actions will help the company
18· ·or help the distributors, the sales force;
19· ·otherwise, they would not be doing them.· And the
20· ·fact that they've allegedly done thousands of these
21· ·STS events, suggests to me that both the company
22· ·and the distributors believe that doing so will
23· ·facilitate success.
24· · · ·Q.· ·Well, what evidence are you referring to
25· ·that suggests that STS facilitates sales success?
Page 67
·1· · · ·A.· ·As I just said, if -- if the company and
·2· ·the distributors didn't believe it facilitates
·3· ·success, they wouldn't be doing it.· Apparently
·4· ·they've done it over several years, and several
·5· ·thousand times.· Logically it makes no sense to
·6· ·do something if it's not working.
·7· · · ·Q.· ·So you've seen no evidence to suggest
·8· ·that STS facilitates sales success?
·9· · · ·A.· ·Other than the fact that company sales
10· ·have gone up over this period, and the fact that
11· ·this continues to be an activity.
12· · · ·Q.· ·On page 10, the last sentence of this
13· ·section, you say "to the extent that attendance at
14· ·an STS event or events, may assist in achieving
15· ·the goal, the event serves a valid purpose."· And
16· ·I believe the goal that you're referring to there
17· ·is obtaining sales; is that right?
18· · · ·A.· ·Yes, sir.
19· · · ·Q.· ·On page 11, the first full sentence,
20· ·you say, "it is illogical to imply that many
21· ·independent distributors would believe that
22· ·merely attending STS events without exercising
23· ·business acumen and putting in the time and
24· ·selling effort, will in and of itself necessarily
25· ·lead to sales success."· Why would that be
Page 68
·1· ·illogical?
·2· · · ·A.· ·Well, to me it was obvious:· Simply
·3· ·attending an event is attending an event.· But to
·4· ·-- to get the sales success, you have to go out
·5· ·and sell.· And attending an event is not selling.
·6· · · ·Q.· ·Would it be illogical to assume that
·7· ·distributors would believe what they're repeatedly
·8· ·told by members of their upline, and by the
·9· ·company's top distributors?
10· · · ·A.· ·I can't speak for all of the distributors.
11· · · ·Q.· ·But I guess we're talking about Dr. Keep's
12· ·assumptions here, would it be illogical to assume
13· ·that distributors would believe what they are told
14· ·at events by members of their upline, and by the
15· ·company's top distributors?
16· · · ·A.· ·Hypothetically, some of the independent
17· ·distributors will probably believe what the upline
18· ·or the company tells them.
19· · · ·Q.· ·The second full paragraph on page 11,
20· ·you say that statements offered a support of this
21· ·opinion are ripe with logical fallacies.· And then
22· ·you give the example, quote, from Dr. Keep's report
23· ·where he says, "misinformation present at every
24· ·event that follows Herbalife guidelines."· Why do
25· ·you see that as an unsubstantiated generalization?
 Page 69
·1· · · ·A.· ·Well, first of all, as you read the
·2· ·sentence, it says at every event.· And as noted in
·3· ·Keep's report and elsewhere, there were thousands
·4· ·of these events.· And so when you say at every
·5· ·event, that means literally every one of those
·6· ·thousand of events.· And I don't see how that
·7· ·could logically be possible without being an
·8· ·observer there.· Or actually doing empirical
·9· ·research.
10· · · ·Q.· ·But do you see in that sentence there
11· ·that there's -- Dr. Keep offers a qualifier: It
12· ·says "that every event that follows Herbalife's
13· ·guidelines."· So if Herbalife's guidelines required
14· ·what Dr. Keep considered to be misinformation to be
15· ·presented, then can you see how that sentence does
16· ·not contain an unsubstantiated generalization?
17· · · ·A.· ·No, because elsewhere Keep in his report,
18· ·I believe, talks about Herbalife's guidelines being
19· ·used in all these events.
20· · · ·Q.· ·Right.· So Herbalife has certain
21· ·requirements for its events, and Dr. Keep's opinion
22· ·is that some of those requirements required
23· ·distributors to present what he considers in his
24· ·opinion to be misinformation.· So it's not an
25· ·unsubstantiated generalization to state that any
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·1· ·event where those guidelines aren't followed
·2· ·present this misinformation; isn't that right?
·3· · · ·A.· ·Well, the statement is from Keep's report
·4· ·that, quote, "misinformation, present at every
·5· ·event that follows Herbalife's guidelines...",
·6· ·quote.· Elsewhere he says that Herbalife's
·7· ·guidelines are used for all of the events.· It
·8· ·seems to me if we look at his report that we'll
·9· ·see that.
10· · · ·Q.· ·A few sentences below that you state,
11· ·"To state that misinformation is quote present at
12· ·every event, is clearly an unproven, unrealistic
13· ·and gross overstatement."· Do you see that?
14· · · ·A.· ·Yes, sir.
15· · · ·Q.· ·Are you familiar with the logical fallacy
16· ·called contextomy?
17· · · ·A.· ·No, sir.
18· · · ·Q.· ·I'll represent to you that contextomy
19· ·fallacy is selecting or excerpting words from the
20· ·original context to distort their intended meaning.
21· ·And in this quote, you have removed Dr. Keep's
22· ·qualifier where he says "at every event that
23· ·follows Herbalife's guidelines", have you not?
24· · · ·A.· ·Repeat that.· I -- the sentence there is
25· ·a sentence.
Page 71
·1· · · ·Q.· ·Yes, but Dr. Keep didn't say misinformation
·2· ·is present at every event, did he?
·3· · · · · · MR. DROOKS:· It mischaracterizes the
·4· ·document, which quote says "present at every event
·5· ·that follows Herbalife's guidelines."
·6· · · · · · MR. JONES:· Yes, exactly.· That's the
·7· ·whole quote.· I'm talking about the quote stripped
·8· ·of context, on line 21.
·9· · · · · · Objection withdrawn, say it, Mr. Drooks.
10· · · · · · THE WITNESS:· So what's the question at
11· ·issue here?
12· · · · · · MR. DROOKS:· What you're saying is that
13· ·I've been quoted the full language five lines
14· ·earlier; there's something inappropriate about
15· ·honing in on a particular phrase five lines later.
16· · · · · · MR. JONES:· I'm not necessarily saying it
17· ·is inappropriate.· I'm just --
18· · · · · · MR. DROOKS:· Well, you're suggesting that
19· ·that -- you're suggesting that that's an example
20· ·of illogical fallacy involving taking something out
21· ·of context.· So it would be interesting to see the
22· ·authority for contextomy, including a situation in
23· ·which the complete language of the quote is
24· ·provided in the very same paragraph as the
25· ·assertion that you say is subject to illogical
Page 72
·1· ·fallacy.· So, you know, the objection stands;
·2· ·you're mischaracterizing the document, including
·3· ·you're mischaracterizing the paragraph.
·4· · · ·Q.· ·(By Mr. Jones)· Let's go to page 14.
·5· ·What I have is line 8 -- referring to Dr. Keep's
·6· ·opinion.· You state that "this statement is not
·7· ·an opinion that requires expert analysis at all."
·8· ·Do you see that?
·9· · · ·A.· ·Yes, sir.
10· · · ·Q.· ·Are you intending to offer legal opinion
11· ·there as to what constitutes relevant expert
12· ·opinion?
13· · · ·A.· ·No, sir, I'm referring to expert as I
14· ·did before, as a marketing expert, or research
15· ·expert.
16· · · ·Q.· ·I'm going to switch to the Dr. Lalich
17· ·rebuttal now.· I don't imagine it will take too
18· ·long.· Should we take another break or --
19· · · ·A.· ·I'm ready to finish.
20· · · ·Q.· ·Okay.· In your years of observing the
21· ·multi-level marketing and direct selling business
22· ·model, have you noticed an overlap with cult
23· ·tactics or coercive control?
24· · · ·A.· ·No, sir.
25· · · · · · MR. DROOKS:· Vague and ambiguous.
 Page 73
·1· · · ·Q.· ·(By Mr. Jones) Do you have any experience
·2· ·studying cults?
·3· · · ·A.· ·No, sir.
·4· · · ·Q.· ·Do you have any experience studying
·5· ·coercive control groups?
·6· · · ·A.· ·Only in the sense of Asch.
·7· · · ·Q.· ·You're referring to Solomon Asch?
·8· · · ·A.· ·I'm not a friend of his, no.
·9· · · ·Q.· ·I said you're referring to the work of
10· ·Solomon Asch?
11· · · ·A.· ·Yes.
12· · · ·Q.· ·And what is your familiarity -- your
13· ·familiarity with that work?
14· · · ·A.· ·Well, it's classic work.
15· · · ·Q.· ·You're referring to Dr. Asch's work on
16· ·conformity?
17· · · ·A.· ·Yes.
18· · · ·Q.· ·And have you ever published any papers
19· ·regarding that subject?
20· · · ·A.· ·I believe I published some proceedings,
21· ·papers, dealing with the construct that Asch is
22· ·known for.
23· · · ·Q.· ·Have you ever read 'Cults in our Midst'?
24· · · ·A.· ·No, sir.
25· · · ·Q.· ·Do you have any experience or training
Page 74
·1· ·in the field of large group awareness training?
·2· · · ·A.· ·Just in passing from my academic studies.
·3· · · ·Q.· ·Are you a sociologist?
·4· · · ·A.· ·No, sir.· I think I still belong to the
·5· ·American Sociological Association.
·6· · · ·Q.· ·On page 1 -- or I think this is marked as
·7· ·page 2 of your rebuttal of Dr. Lalich, which has
·8· ·been marked here as Exhibit 241, you state that
·9· ·Dr. Lalich's report reflects a basic -- basic
10· ·misunderstanding of the direct selling business
11· ·model.· What did you mean by that?
12· · · ·A.· ·Again, later on in the report where I
13· ·note that she says a conflate direct selling with
14· ·multi-level marketing; she saying they're one in
15· ·the same.
16· · · ·Q.· ·So when you say that she has a basic
17· ·misunderstanding, you are just talking about her
18· ·conflation of two different potential labels?
19· · · · · · MR. DROOKS:· He meant it as to just.
20· · · · · · THE WITNESS:· That's just one example of
21· ·reading her entire report.· I see no evidence that
22· ·-- can you hear me.
23· · · ·Q.· ·(By Mr. Jones)· Yes, I can hear you.
24· · · ·A.· ·Oh, I just had a sign that came across
25· ·that said my internet is unstable.· That given her
Page 75
·1· ·background report, I see no evidence that she
·2· ·understands direct selling.
·3· · · ·Q.· ·Is it your view that Dr. Lalich was
·4· ·attempting to opine on the direct selling business
·5· ·model?
·6· · · ·A.· ·She's attempting to opine on the
·7· ·Herbalife model, I believe, yes.
·8· · · ·Q.· ·You read her report as to reference
·9· ·Herbalife's business model, as opposed to the
10· ·circle of success, in particular?
11· · · ·A.· ·I would have to refresh myself, but my
12· ·recollection is that she was more focused on
13· ·Herbalife activities than she was on the circle
14· ·of success per se.
15· · · ·Q.· ·On page 3, your Section 4, headed Overview
16· ·and Observations, you've made three observations. Do
17· ·you consider these three what you call observations
18· ·to be professional opinions?
19· · · ·A.· ·Yes, sir.
20· · · ·Q.· ·And in the second paragraph, under your
21· ·Section 6, you state that "It doesn't appear that
22· ·Dr. Lalich possesses any relevant experience
23· ·regarding the nature and structure of a direct
24· ·selling organization, or even direct selling as a
25· ·business activity, which renders her opinions
Page 76
·1· ·unreliable and ultimately unsupported."
·2· · · · · · What gave you the impression that
·3· ·Dr. Lalich was opining on the direct -- direct
·4· ·selling as a business activity?
·5· · · ·A.· ·Well, when she talks about cults, she's
·6· ·implying that direct selling activities are cultic
·7· ·activities.
·8· · · ·Q.· ·Is it your view of her report that she
·9· ·painted him with that broad of a brush?
10· · · ·A.· ·It's my opinion she uses a very broad
11· ·brush in her report.
12· · · ·Q.· ·On page 5, you state that the term multi
13· ·level marketing firm is a misnomer.· What do you
14· ·mean by that?
15· · · ·A.· ·We spoke about this earlier, technically
16· ·multi-level marketing is a compensation approach.
17· · · ·Q.· ·And you state that Dr. Lalich's opinions
18· ·and conclusions are derived from, quote, "the
19· ·faulty premise that direct selling and multi-level
20· ·marketing are one in the same."· What's your basis
21· ·for concluding that Dr. Lalich has derived any of
22· ·her opinions or conclusions based on the way the
23· ·industry is labeled?
24· · · · · · MR. DROOKS:· Well, argumentative, and it
25· ·mischaracterizes his testimony and his report.
 Page 77
·1· · · · · · THE WITNESS:· Well, I mean, in that --
·2· ·that same paragraph as I write, "Lalich asserts
·3· ·that direct selling organizations are known -- are
·4· ·also known as multi-level marketing companies."
·5· ·That simply is not true, as I testified earlier.
·6· · · ·Q.· ·(By Mr. Jones)· I'm going to refer you
·7· ·back to what I previously marked as Exhibit 243.
·8· · · ·A.· ·Let's see.· How do I get to that now? I
·9· ·have to go back to the AgileLaw?· Now I need to
10· ·join again.
11· · · ·Q.· ·You shouldn't need to join again.
12· · · ·A.· ·But that -- that's what it told me to do.
13· ·Wait, let me see.· Let me see.· There, I get it.
14· ·I got it okay.
15· · · ·Q.· ·All right.
16· · · ·A.· ·Wait a minute.· Okay, 243 is the article.
17· · · ·Q.· ·In the introduction you state, "It is
18· ·known by different names, multi-level marketing,
19· ·network marketing, network marketing direct selling
20· ·organization."· Regardless of what it's called,
21· ·MLM, the label preferred here, is much maligned
22· ·form of direct selling retail channel distribution.
23· ·Aren't you doing the same thing in the beginning of
24· ·this article that you're accusing Dr. Lalich of
25· ·doing?
Page 78
·1· · · ·A.· ·This was -- to start the conversation, if
·2· ·you go further in the article, you'll see that we
·3· ·refer to multi-level marketing as a form of retail
·4· ·direct selling, that by definition has a multi
·5· ·level compensation structure.
·6· · · ·Q.· ·Page 6 of your rebuttal of Dr. Lalich.
·7· ·The first full paragraph, first sentence you state
·8· ·that, "Dr. Lalich fails to discuss or acknowledge
·9· ·any characteristics of Herbalife that differentiated
10· ·from a cult."· Does Dr. Lalich describe Herbalife
11· ·as a cult?
12· · · ·A.· ·I have to look at the report again. I
13· ·think by implication she does.· I think I have to
14· ·go back and look at her report.· You know, I can go
15· ·back and look through everything but her definition
16· ·of a cult is one that has certain characteristics,
17· ·and she concludes her report by stating that
18· ·Herbalife has those characteristics.· So minimally,
19· ·as I said, she is implying that Herbalife is a cult.
20· ·And I can go back and further look at it, but I --
21· ·she makes that implication very directly.
22· · · ·Q.· ·And you have a number of bulleted points
23· ·here in the same paragraph.· How would you say
24· ·these points differentiate Herbalife from a cult?
25· · · ·A.· ·These are illustrative points to support
Page 79
·1· ·my statement above, that, for example, not only
·2· ·does Herbalife make it relatively inexpensive to
·3· ·become a distributor (and start one's own business
·4· ·so to speak), the firm makes it easy to stop being
·5· ·a distributor.· The point is, when I look at the
·6· ·Lalich report, she talks about some of the
·7· ·difficulties of becoming a cult member and what
·8· ·cults do to the people there in, terms of letting
·9· ·them be a member of the cult and then leaving the
10· ·cult.· And here I'm just pointing out that it's
11· ·easy to -- to be an Herbalife distributor, and
12· ·it's easy to stop being an Herbalife distributor.
13· ·And here are the actual statements that illustrate
14· ·that.
15· · · ·Q.· ·Would you agree with me that there is a
16· ·difference between an Herbalife distributor
17· ·generally, which as we discussed earlier may
18· ·include preferred members, people who are not
19· ·participating in the business opportunity, and
20· ·people who are repeatedly attending circle of
21· ·success events?
22· · · · · · MR. DROOKS:· That lacks foundation as to
23· ·the vast majority of the class period.· And it's
24· ·simply a misleading and argumentative question.
25· · · ·Q.· ·(By Mr. Jones)· Okay.· Let me do better.
Page 80
·1· ·Do you know what percentage of Herbalife
·2· ·distributors, or Herbalife preferred members
·3· ·participate in the circle of success?
·4· · · ·A.· ·I do not.
·5· · · ·Q.· ·And would you agree with me that your
·6· ·bulleted points here refer to starting an Herbalife
·7· ·distributorship generally and not to participation
·8· ·in the circle of success?
·9· · · ·A.· ·That is correct.
10· · · ·Q.· ·Okay.· And would you agree with me that
11· ·Dr. Lalich's opinions focus on what happens within
12· ·the circle of success events themselves?
13· · · ·A.· ·I do not agree with that.
14· · · ·Q.· ·On page 7 of the report, you state that
15· ·the -- this is around line 21, you state that the
16· ·primary reason direct sellers leave a direct
17· ·selling company is their lack of selling success.
18· ·What is your basis for that statement?
19· · · ·A.· ·As I quote the article, Peterson and
20· ·Crittendon, line 21.
21· · · ·Q.· ·This is a recent paper written by you;· is
22· ·that right?
23· · · ·A.· ·Yes, sir.
24· · · ·Q.· ·I have not looked at that paper.· What
25· ·kind of analysis did you do to come to that
 Page 81
·1· ·conclusion?
·2· · · ·A.· ·So when you look at the references there,
·3· ·the title of that paper is using preemployment job
·4· ·motives to predict voluntary job turnover of direct
·5· ·sellers.· And based on a national sample of direct
·6· ·sellers, and I used discriminate analysis to
·7· ·differentiate between direct sellers who stayed at
·8· ·the job and direct sellers who left the job.
·9· · · ·Q.· ·Page 9, at the top, you say events tend
10· ·to be group-based because doing so simultaneously
11· ·facilitates efficiently recruiting new distributors.
12· ·But, again, how does the circle of success help
13· ·facilitate the recruitment of new distributors?
14· · · ·A.· ·Well, the context of that is starting on
15· ·the previous page.· Let me read the whole thing:
16· ·Together, the two characteristics which are the --
17· ·what -- state as the levers for direct selling that
18· ·sponsor and encourage activities and events that
19· ·would result in creating new distributors, and
20· ·increasing the probability that current distributors
21· ·will be sales productive and remain with the
22· ·company.· And then the statement, that events tend
23· ·to be group-based, because doing so simultaneously
24· ·facilitates efficiently recruiting new distributors
25· ·disseminate information about products and services
Page 82
·1· ·and rewarding and retaining current distributors
·2· ·who are productive.
·3· · · ·Q.· ·So you're saying that the group dynamic
·4· ·helps facilitate recruiting?
·5· · · ·A.· ·I do.
·6· · · ·Q.· ·But, again, I believe earlier you testified
·7· ·that you don't know whether or not non-distributors
·8· ·are permitted to attend circle of success events?
·9· · · ·A.· ·That's correct.
10· · · ·Q.· ·Then you would agree with me that if non-
11· ·distributors weren't permitted to attend circle of
12· ·success events, that those events would not help
13· ·recruit new distributors?
14· · · ·A.· ·I have no knowledge of that.
15· · · ·Q.· ·But as a hypothetical.
16· · · ·A.· ·Not even hypothetically, because reading
17· ·the part of the reports, Keep allows -- his
18· ·reference to individuals who's -- I think the
19· ·plaintiffs who joined in this lawsuit having the
20· ·process of first buying the products, and liking
21· ·the products, and then attending these events, so
22· ·given that information, I do not know whether
23· ·individuals who attend the STS events have to be
24· ·distributors or could be potential distributors.
25· · · ·Q.· ·And you didn't consider that information
Page 83
·1· ·important in formulating your own opinions?
·2· · · ·A.· ·No, sir.
·3· · · ·Q.· ·The last sentence of the second paragraph,
·4· ·you state that there are many legitimate reasons
·5· ·why motivational and inspirational speakers are
·6· ·used to improve the performance of salespeople.
·7· ·Does the existence of legitimate means to motivate
·8· ·salespeople necessarily mean that there cannot be
·9· ·illegitimate means?
10· · · ·A.· ·No.· That was just a word that I used
11· ·there, legitimate, and it doesn't -- it does have
12· ·a legal connotation.· It just -- I could use the
13· ·word valid instead.
14· · · ·Q.· ·Can you explain to me how self-efficacy
15· ·is relevant to the rebuttal of Dr. Lalich's
16· ·opinions?
17· · · ·A.· ·As I state in the report, that the
18· ·construct of self-efficacy is a phenomenon that
19· ·companies will use to -- to communicate to their
20· ·sales forces that the salespeople can make sales
21· ·and can achieve their goals.· And companies may not
22· ·use that construct or use that terminal, it's really
23· ·a part of what we call naive psychology; it's just
24· ·part -- and it doesn't apply simply to salespeople;
25· ·it applies basically to every activity.· In fact,
Page 84
·1· ·it's been studied in almost every academic
·2· ·discipline.
·3· · · ·Q.· ·And in your view, how might telling
·4· ·distributors that they should, quote, "attend
·5· ·every event", increase the self-efficacy of
·6· ·distributors?
·7· · · ·A.· ·I'd have to say that this hypothetical
·8· ·is like telling the distributors to attend the
·9· ·events.· What they learn from the events is
10· ·intended to increase their self-efficacy and
11· ·consequently improve their personal sales.
12· · · ·Q.· ·I read your paper, 'Self-efficacy and
13· ·personal selling'.· This paper was a meta-analysis;
14· ·is that correct?
15· · · ·A.· ·Which one are you referring to, please?
16· · · ·Q.· ·'Self-efficacy and Personal Selling;
17· ·review an examination with an emphasis on sales
18· ·performance.'
19· · · ·A.· ·Yes, sir, that included a meta-analysis,
20· ·yes, sir.
21· · · ·Q.· ·It was a little dense for me, but tell me
22· ·if I understood it correctly: One of your points
23· ·was that in the field of personal selling, it's
24· ·not totally clear whether the various scales that
25· ·are used to measure self-efficacy are adequately
 Page 85
·1· ·measuring the trait; is that right?
·2· · · ·A.· ·Yes, sir.
·3· · · ·Q.· ·And some aspects of self-efficacy are
·4· ·considered possibly fixed; is that correct?
·5· · · ·A.· ·Possible -- possibly what?
·6· · · ·Q.· ·Fixed, like fixed traits?
·7· · · ·A.· ·Self-efficacy is basically malleable.
·8· · · ·Q.· ·I can introduce this.· I guess I will.
·9· · · · · · MR. JONES:· I'm going to introduce this as
10· ·an exhibit.· This is Exhibit 244.
11· · · · · · (Exhibit No. 244 is marked.)
12· · · ·Q.· ·(By Mr. Jones)· You don't necessarily need
13· ·to look at it; I'm just going to read you a small
14· ·portion.
15· · · ·A.· ·Sure.
16· · · ·Q.· ·You state -- this is on the first page of
17· ·the article.· With respect --
18· · · · · · MR. DROOKS:· Give me a minute to get to
19· ·it.
20· · · · · · MR. JONES:· Yep.
21· · · · · · THE WITNESS:· I would like to see it also
22· ·here, if I can.
23· · · · · · MR. JONES:· Okay.· Sure.· Sure.· Let's go
24· ·off the record.· Ten minutes.
25· · · · · · (Brief recess.)
Page 86
·1· · · · · · MR. JONES:· We're back on the record.
·2· · · ·Q.· ·(By Mr. Jones)· Dr. Peterson, I am
·3· ·referring to your article, and I'm reading you
·4· ·the last paragraph on the first page.· And, again,
·5· ·this is exhibit 244.· The sentence says, "With
·6· ·respect to job behavior or job performance, general
·7· ·self-efficacy has traditionally been considered a
·8· ·relatively fixed distal trait analagous to a
·9· ·personality characteristic; whereas, domain self
10· ·efficacy has traditionally been considered a
11· ·proximal state that can change overtime, i.e.,
12· ·the somewhat malleable."· Can you just explain
13· ·that to me?
14· · · ·A.· ·So, when we -- what this says is when
15· ·you have self-efficacy, there are really two types
16· ·of self-efficacy, over simplified:· One type is
17· ·general self-efficacy, which tends to be close to
18· ·self-esteem.· Somebody with general self-efficacy
19· ·believes that he or she can do anything.
20· · · · · · Domain self-efficacy refers to
21· ·self-efficacy in a particular area, i.e., personal
22· ·selling.· So you need to make a distinction between
23· ·those.· For general self-efficacy, analogous to
24· ·self-esteem, is a personality trait, somebody has
25· ·a personality that they can succeed at no matter
Page 87
·1· ·whatever they do.· Domain self-efficacy refers to
·2· ·the construct that people believe they can succeed
·3· ·at a particular task.· So it's important to make a
·4· ·distinction.· And we look at personal selling, and
·5· ·in my article we're looking at domain self-efficacy,
·6· ·and that is malleable, and it can be changed due to
·7· ·three different things.
·8· · · ·Q.· ·I see.· Thank you.· And, so, there's a
·9· ·correlation between general self-efficacy and self
10· ·esteem.· And that tends to be a more fixed trait.
11· ·But your analysis concluded that as to a specific
12· ·domain, in the case of your paper personal selling,
13· ·that -- that trait may be more malleable?
14· · · ·A.· ·Yes.· The basic thought in that paper is
15· ·that the scale used to measure self-efficacy and
16· ·personal selling need work.· That's the takeaway.
17· · · ·Q.· ·And I'm just going to read you a small
18· ·part from what's marked in the article as page 67
19· ·where you state "In particular there is a growing
20· ·body of research that indicates that self-efficacy
21· ·performance relationship is bidirectional and
22· ·evidences reciprocal causality.· So if I can just
23· ·try to state that in regular English.
24· · · ·A.· ·Can you direct me where that is.
25· · · ·Q.· ·Yes, let me direct you.· I'm sorry.· Okay.
Page 88
·1· ·I tried to put it on your screen.
·2· · · ·A.· ·I've got page 67 on my screen.
·3· · · ·Q.· ·Yes.· So I read from the beginning of the
·4· ·second full paragraph.· So --
·5· · · ·A.· ·Okay.
·6· · · ·Q.· ·So what you are saying there is basically
·7· ·that the better a person is at selling, the better
·8· ·they believe they are at selling, and that makes
·9· ·them better at selling; is that right?
10· · · ·A.· ·It's kind of right, but if you go beyond
11· ·that the -- that relationship I think is somewhat
12· ·confounded by the scales that are used to measure
13· ·self-efficacy.· If you look at the scales that I
14· ·list in the article, there's some confounding there
15· ·between how self-efficacy is measured, and how
16· ·sales performance is measured.
17· · · ·Q.· ·And just reading from the beginning of
18· ·the paragraph below that, it states that there is
19· ·a stronger relationship between prior work
20· ·experience and self efficacy, than between self
21· ·efficacy and current work-related performance.
22· ·Can you explain that to me?
23· · · ·A.· ·Your prior behavior is a better predictor
24· ·of self-efficacy -- let me see.· A stronger
25· ·relationship between prior work experience of self
 Page 89 Page 91
·1· ·efficacy than between self-efficacy and current ·1· · · · · · MR. DROOKS:· You know what, let me email you
·2· ·work-related performance.· We're talking about ·2· ·about it then, because if it can't be Monday it may not be
·3· ·correlations here.· And, first of all, it's ·3· ·worth it for us.· We'll text you if we need the rough.
·4· ·important to note that this does not relate to ·4· · · · · · THE COURT REPORTER:· The signature, do I send it
·5· ·personal selling.· This is a very broad meta ·5· ·to the witness or to you, Mr. Drooks?
·6· ·analysis of many different jobs and many different ·6· · · · · · MR. DROOKS:· You can send it to me.
·7· ·ways of measuring self-efficacy and job performance. ·7· · · · · · (Deposition concluded at 1:00 p.m. PST)
·8· · · ·Q.· ·Okay. ·8
·9· · · ·A.· ·And -- I'm sorry. ·9
10· · · ·Q.· ·And so how -- how does this principle rebut 10
11· ·the opinions offered by Dr. Lalich in this case? 11
12· · · ·A.· ·As I said before, this relationship in this 12
13· ·construct of self-efficacy is basically used by 13
14· ·companies to motivate salespeople.· And as I said, 14
15· ·they may not term it self-efficacy, but they are 15
16· ·doing those activities to improve self-efficacy in 16
17· ·the hope that by doing that, the sales performance 17
18· ·will improve to the benefit of both the company 18
19· ·and the salespeople. 19
20· · · ·Q.· ·Would you agree with me that not everyone 20
21· ·is cut out for sales?· Sales is a hard job? 21
22· · · ·A.· ·I would agree with that. 22
23· · · ·Q.· ·And if a person is having trouble making 23
24· ·sales, your analysis in this paper might indicate 24
25· ·that that person's self-efficacy would be going 25

Page 90 Page 92
·1· ·down? ·1· · · · · · · DEPOSITION ERRATA SHEET

·2· · · ·A.· ·That -- that could be an implication of ·2

·3· ·the paper, yes. ·3

·4· · · ·Q.· ·And is it possible then that a person ·4· ·Our Assignment No. J6603656

·5· ·struggling to make sales, attending an event where ·5· ·Case Caption: MICHAEL LAVIGNE, ET AL

·6· ·everyone on the stage is representing that they're ·6· ·vs. HERBALIFE, LTD., ET AL

·7· ·having great success making sales, that these ·7

·8· ·events could potentially damage the self-efficacy ·8· · · ·DECLARATION UNDER PENALTY OF PERJURY

·9· ·for the person in that situation? ·9· · · · I declare under penalty of perjury

10· · · ·A.· ·I never considered that, but it would be 10· ·that I have read the entire transcript of

11· ·an interesting hypothesis to pursue. 11· ·my Deposition taken in the captioned matter

12· · · ·Q.· ·Thank you so much for your time today, 12· ·or the same has been read to me, and

13· ·Dr. Peterson. 13· ·the same is true and accurate, save and

14· · · · · · MR. JONES:· And my thanks to everyone, 14· ·except for changes and/or corrections, if

15· ·and to Yvette, the court reporter.· That's all I 15· ·any, as indicated by me on the DEPOSITION

16· ·have, Mr. Drooks. 16· ·ERRATA SHEET hereof, with the understanding

17· · · · · · THE WITNESS:· Am I supposed to stay on? 17· ·that I offer these changes as if still under

18· · · · · · MR. DROOKS:· I have no questions, and I 18· ·oath.

19· ·guess we don't need a stipulation.· Miss Gallardo, 19· · · · ·Signed on the ______ day of

20· ·we'll take, you know, a regular package of a copy, 20· ·____________, 2021.

21· ·and a mini.· Can we also get a rough, please, by 21

22· ·Monday? 22· ·___________________________________

23· · · · · · THE COURT REPORTER:· I will be out of town 23· · · · · ·ROBERT A. PETERSON

24· ·and I have a rush also due tomorrow, so that day is 24

25· ·not possible. 25

 Page 93
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·3· · __________________________________________________
·4· · Reason for change:________________________________
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22· ·Reason for change:________________________________
23· ·SIGNATURE:_______________________DATE:___________
24· · · · · · ·ROBERT A. PETERSON
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Page 94
·1· · · · · · · ·COURT REPORTER'S CERTIFICATE
·2
·3· · · · · · I, YVETTE GALLARDO, CSR No. 12889,
·4· ·Certified Shorthand Reporter, certify;
·5· · · · · · That the foregoing deposition was
·6· ·had before me at the time and place therein set.
·7· · · · · · That the testimony of the witness, the
·8· ·questions propounded, and all objections and
·9· ·statements made at the time of the examination
10· ·were recorded stenographically by me and were
11· ·thereafter transcribed;
12· · · · · · That the foregoing is a true and correct
13· ·transcript of my shorthand notes so taken.
14· · · · · · I further certify that I am not a relative
15· ·or employee of any attorney of the parties, nor
16· ·financially interested in the action.
17· · · · · · I declare under penalty of perjury under
18· ·the laws of California that the foregoing is true
19· ·and correct.
20· · · · · · Dated this 1st day of March, 2021.
21
22
23· · · · · · · · · · ·_________________________________
· · · · · · · · · · · ·YVETTE GALLARDO, No. 12889
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