Suit Alleges Ambit Multi-Level Marketing Contrary to Federal Law

An Ambit Energy consultant has filed a suit against Ambit alleging breach of contract, and that Ambit's multi-level marketing network is a "pyramid scheme" contrary to federal law.

Such suits are par for the course with respect to multi-level marketing. To date, no suit alleging that multi-level energy marketing is prohibited by federal law has been sustained, though several are pending.

Much of the suit, filed by Nicole Gubin and her business, BH Seven LLC, relate to prosaic compensation issues which do not have market-wide implications.

However, the suit also alleges that Ambit's form of multi-level marketing is a "pyramid scheme which makes false and misleading statements that constitute deceptive acts or practices in violation of Section 5(a) of the Federal Trade Commission Act." The suit also makes allegations under RICO.

Accordingly, adjudication of these allegations could have impacts beyond the contractual dispute between the plaintiff and Ambit.

An Ambit media representative was not available after business hours. However, an Ambit representative told Reuters, which first reported the suit, that Ambit has, "done nothing to defame, defraud or otherwise damage Ms. Gubin, and we are confident these allegations as stated will be shown to be groundless and without merit."

Plaintiffs are seeking in excess of $1 billion, and also seek to permanently enjoin and restrain Ambit from its business, soliciting, or enrolling customers and consultants in New York, Pennsylvania, Maryland, and Texas.

The suit, filed in U.S. District Court for the Eastern District of New York, is Nicole Gubin and BH Seven LLC v. Ambit Energy LP et al., no. 11-2483.