Herbalife International of America Inc. has won a $1.55 million verdict in a legal dispute involving Eastern Computer Exchange, a computer equipment reseller. A federal jury in California determined that Eastern fraudulently concealed a $20 million order of Dell computer equipment, which Herbalife asserts was never authorized. The case, which centered around an unauthorized purchase of business continuity and disaster recovery (BCDR) equipment, concluded on Friday with the jury awarding Herbalife compensatory and punitive damages.
The dispute began in 2022 when Herbalife filed a lawsuit against Eastern and a former Herbalife executive, Gerry Berg, who allegedly brokered the unauthorized deal for the equipment. The jury found that Eastern had intentionally withheld information about the $20 million order placed for the equipment in October 2020, and that the company had attempted to deceive Herbalife by concealing the deal.
In the lawsuit, Herbalife contended that Berg, who had been hired as Vice President of Infrastructure and Operations in 2020, bypassed corporate procurement procedures and executed a multimillion-dollar agreement with Eastern without approval. The deal was ultimately exposed as a fraudulent transaction after Herbalife began investigating the purchase and consulting with Deloitte.
After deliberating for less than a day, the jury awarded Herbalife $750,000 in compensatory damages and $800,000 in punitive damages. The punitive damages were granted due to Eastern’s conduct being deemed malicious and reckless, as one of the company’s higher-ups acted with disregard for Herbalife’s rights.
The case involved complex claims of fraudulent orders and improper contract formation, with Herbalife denying the existence of any valid agreements for the Dell equipment. Despite an ongoing services agreement with Eastern, the company maintained that no binding contract was created regarding the BCDR equipment.
“We are pleased with the jury’s decision and the recognition of the severity of the actions taken by Eastern and the former executive involved,” said a representative from Herbalife. “This ruling demonstrates the importance of protecting corporate integrity and ensuring that all business transactions are conducted with transparency and honesty.”
Herbalife was represented by Robert H. Platt, Donald R. Brown, and Alexandra N. Hill of Manatt Phelps & Phillips LLP. Eastern Computer Exchange was represented by Martin R. Fox and Scott E. Shapiro of MFox Law Group Inc.
