Have you heard of LuLaRoe? It’s company popular for it’s “vibrant print leggings and affordable casual wear.” Unfortunately, it’s in a spot of legal trouble. It turns out a class-action lawsuit has been filed against the company, labeling it as a pyramid scheme. The lawsuit itself is being taken on by the same lawyer who just won a “$25 million settlement against Trump University for charges related to fraudulent business practices,” Amber Eck. She will represent four named plaintiff’s and “thousands of consultants” across the country. The lawsuit alleges “six charges of unlawful, fraudulent, and unfair business practices, advertising, and breach of contract under California law.”
Have you heard of LuLaRoe? It’s company popular for it’s “vibrant print leggings and affordable casual wear.” Unfortunately, it’s in a spot of legal trouble. It turns out a class-action lawsuit has been filed against the company, labeling it as a pyramid scheme. The lawsuit itself is being taken on by the same lawyer who just won a “$25 million settlement against Trump University for charges related to fraudulent business practices,” Amber Eck. She will represent four named plaintiff’s and “thousands of consultants” across the country. The lawsuit alleges “six charges of unlawful, fraudulent, and unfair business practices, advertising, and breach of contract under California law.”
But what is LuLaRoe? What are LuLaRoe consultants? For starters, LuLaRoe is a “multilevel marketing company” that sells comfortable women’s clothing. LuLaRoe consultants are people who essentially “pay for the privilege of selling merchandise to their own friends and social networks.” According to reports, consultants are “required to purchase an onboarding package of $4,925 to $9,000 worth of inventory” and are encouraged to keep investing, “a.k.a. purchase more inventory.” They’re also encouraged to keep about “$20,000 worth of merchandise at all times.”
Okay, so it’s a multilevel marketing company. There are a lot of those around nowadays, what makes LuLaRoe different from others? Well, the lawsuit is going after the “company’s buy-back guarantee, which offered consultants the option to return inventory for a full refund and exit the company.” Unfortunately for consultants, “the buy-back program was reportedly reversed in September, leaving consultants with thousands of dollars of unwanted merchandise on their hands.”
Additionally, the plaintiff’s in the case allege that LuLaRoe is “set up as a pyramid scheme,” and said “consultants were encouraged to max-out their credit cards with inventory purchases, all of which would be refunded at 100 percent, plus free shipping, should the consultants decide to stop selling for LuLaRoe.” With the abrupt cancellation of the policy, though, this is no longer true.
But what is a pyramid scheme? There are a number of different definitions “of what legally constitutes a pyramid scheme,” and laws surrounding pyramid schemes vary state to state. One definition from the Legal Information Institue at Cornell University defines a pyramid scheme as “unsustainable, illegal business model where investment returns are typically from principals of investments or membership fees instead of from the underlying investment gains.”
In a recent statement Eck said:
“We’re focusing on the misrepresentation and breach of contract to the consultants. This case is reminiscent of [the Trump University lawsuit. [It] wasn’t multilevel marketing, but it was an up-sell scheme. This case is reminiscent of that.”
This isn’t the first time LuLaRoe has faced legal issues, though. In fact, it’s currently battling “multiple other class-action lawsuits and an F score from the Better Business Bureau.” One of the other lawsuits against it was filed earlier this year and alleges “that the company charges buyers a trumped-up sales tax even if they live in a jurisdiction that does not tax clothing.” That particular lawsuit is still pending.
Sources:
LuLaRoe Is Getting Sued for Being a ‘Pyramid Scheme’
LuLaRoe is facing a class-action lawsuit from consultants who call it a ‘pyramid scheme’
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