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Judge throws out lawsuit against Stream Energy
10:35 PM CST on Monday, November 9, 2009
A federal judge in Houston tossed out a lawsuit Monday that alleged Dallas electricity retailer Stream Energy is operating a pyramid scheme.
U.S. District Judge Kenneth Hoyt agreed with Stream in his ruling that the plaintiffs – former sales representatives for the company – are required to settle any disputes through arbitration rather than a lawsuit.
The two former sales representatives had claimed that Stream, a multilevel-marketing company that requires its sales associates to pay $329 to sell the product, was breaking the law because it didn't provide anything tangible in return for the upfront payment.
Stream argued that its sales strategy is legal and is similar to that used by other direct sales companies such as Mary Kay Inc.
Houston attorney Scott Clearman, who filed the lawsuit, had been seeking class-action status.
But the judge ruled the sales associates had agreed when they signed up with Stream to submit any complaints to arbitration.
The two sales associates could appeal the decision to the 5th U.S. Circuit Court of Appeals in New Orleans.
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