A U.S. District Court on March 21 ordered the partial dismissal of a class-action lawsuit against Financial Education Services (FES). The remaining claims in the case will now proceed to arbitration. FES had moved to dismiss the case, citing contracts signed by former distributors that mandated dispute resolution through arbitration.
The court found that FES presented sufficient evidence to establish the existence of a contract requiring arbitration. Plaintiffs, former FES distributors, did not present evidence showing they did not agree to arbitrate, were unaware of the arbitration clause, or that the clause was added after they signed the Independent Sales Representative (ISR) agreements. Their arguments that they did not receive copies of their agreements, that terms were changed without their knowledge, or that they were uncertain which version of the agreement they signed were not enough to dispute the arbitration provision.
Because the plaintiffs failed to challenge the validity or enforceability of the arbitration agreement itself, the court ruled that the case must be dismissed and sent to arbitration. This decision does not address the underlying merits of the claims brought against FES. The original complaint was filed in November 2022, and any further disputes between the parties will now be handled in arbitration.
Separately, the Federal Trade Commission (FTC) sued FES in 2022, accusing the company of operating a $467 million pyramid scheme. The trial for the FTC's case is scheduled to begin on September 17, 2024.