After being embroiled in several lawsuits taking issue with the quality of its garments and tax charges in the last year, the clothing retailer LuLaRoe is now facing a class-action legal claim from four sellers alleging that the multi-level marketer is a "pyramid scheme."
In a lawsuit filed on October 13th, plaintiffs Stella Lemberg, Jeni Laurence, Amandra Bluder, and Carissa Stuckart argue that the company breached California law on six counts including unlawful, fraudulent, and unfair business acts and practices, untrue or misleading advertising, and breach of the covenant of good faith and fair dealing. The complaint alleges that, in April of 2017, LuLaRoe promised sellers that, in the event they wanted to cancel their agreement with the company, they would receive a 100 percent refund of all wholesale inventory that they had purchased to sell, including shipping charges, with no conditions or exceptions. However, by September of 2017, LuLaRoe was not paying shipping charges and was honoring "at most" a 90 percent refund, costing the plaintiffs thousands of dollars, the complaint alleges.
The complaint claims LuLaRoe operates on a multi-level marketing model, "otherwise known as a pyramid scheme." While the Federal Trade Commission distinguishes between multi-level marketers and pyramid schemes, multi-level marketers including Herbalife and the Venma Nutrition Company have faced "pyramid scheme" litigation in the past few years, as Francie Diep reported last December. According to Yahoo News reporter Alexandra Mondalek, the October 13th lawsuit represents the first time that LuLaRoe has been identified as a pyramid scheme in litigation.