District Courts Graz (3 R 174/21m) Hubert Freidl’s Lyoness fails again in court!

The mother of all Lyoness companies, Lyoness Europe AG based in Buchs, Switzerland, has once again been dismissed by a court. 

The substantiation regarding the place of jurisdiction was rejected by the court and the lawyers’ usual confusion tactics did not score any points at Graz Regional Court either. Hubert Freidl is not likely to be pleased by the fact that another legally binding judgment has been handed down in the Lyoness hometown of Graz, Austria, especially since the big IPO has been announced. Against the background of judgments like this one, it is hard to identify whether a company is ready for a stock exchange listing, even despite claims that Lyoness has nothing to do with myWorld. Hubert Freidl’s explanation next year is awaited impatiently. 

A further challenge against this decision is inadmissible (Sec. 502 (2) of the Code of Civil Procedure (Zivilprozessordnung, ZPO), Sec. 519 ZPO). 

This is an excerpt from the current ruling of Graz Regional Court dated 21 September 2022 in which Lyoness Europe AG requested a revocation of a previous ruling. 

Excerpt: 

3.1. In this regard, the Appellate Committee (Berufungssenat) holds the legal opinion (inter alia hg 3 R 212/20y) that the relevant decisions of the Supreme Court mentioned by the court of first instance on 4 Ob 10/19b and 9 Ob 40/18z (inadmissible snowball system) correspond to the established case law of the Supreme Court on this subject (RS0102179) and fit seamlessly into the first decision of this chain of cases (5 Ob 506/96 = SZ 69/69), pursuant to which in the case of a pyramid game functioning like a snowball system – whether there is an opportunity for winning ultimately depends on chance – the nullity of the entire contract is to be assumed. This view is also shared by literature (e.g. Graf in Kletecka/Schauer, ABGB- ON^1.05 § 879 marginal no. 45 with further references). 

The general terms and conditions amended by the defendant in comparison to the facts underlying these decisions of the Supreme Court cannot change this legal status either, because these new terms and conditions, as the plaintiff rightly emphasized at first instance, only attempted to camouflage and disguise the “old” business model. Furthermore, the defendant’s system is geared towards an ongoing injection of capital, without the payments made by the so-called members or sales agents being matched by an noteworthy consideration. 

With explanations of the business model that were unclear in terms of content and ultimately incomprehensible, the defendant attempts to mislead future members or so-called “independent Lyconet marketers” and to give them the impression by making opaque promises that their advertised business model makes economic sense. In the present case, too, the plaintiff, who according to the established facts had never been active as an entrepreneur, came into contact with the defendant only with the intention of being able to shop (more cheaply) subject to discounts and to receive a percentage back. The plaintiff did not understand the business model and its conditions for reasons that were comprehensible to the Court of Appeal. 

From the perspective of the defendant, in the view of the Senate, a clause that payments made by its “marketers” (contractual partners) will not be refunded is imperative, because otherwise the snowball and pyramid system it has established purely for the procurement of capital would collapse relatively soon for lack of capital due to the merely rudimentary other services and other sales in connection with a purchase. The same applies to the purchase of the “discount voucher” that is still relevant in this case, the function and content of which remain completely unclear even after close study of the terms and conditions. This “voucher” also serves only to inject capital. The business contents described in the defendant’s terms and conditions are – broken down to their substance – in fact only deliberately opaque and misleading descriptions of the defendant’s business model, which upon final analysis turns out to be a pure castle in the air. According to the legal opinion of the Court of Appeal, the contracts concluded by the defendant on the basis of its general terms and conditions are – irrespective of the question of unfair business practice – immoral pursuant to § 879 (1) of the Austrian Civil Code (Allgemeines Bürgerliches Gesetzbuch, ABGB). Taking into account all the circumstances of the contract including all clauses, it is clear that there has been a gross violation of the legally protected interests of the contracting parties and thus an immorality according to § 879 (1) ABGB. In the present case, there is a blatant one-sided disadvantage of the respective contractual partner by the defendant; a weighing of interests clearly shows a gross violation of its legally protected interests (cf. RS0113653; cf. 4 Ob 142/21t; vgl Bollenberger/P. Bydlinski in KBB⁶ § 879 ABGB Rz 5 with further references; Graf aaO § 879 Rz 112 with further references; hg 3 R 212/20y, 3 R 51/20x).