Former LuLaRoe Consultants Suing For “Billions” In New Lawsuit

Former LuLaRoe Consultants Suing For “Billions” In New Lawsuit April 22, 2019
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Former LuLaRoe consultants are suing the company alleging the company stole millions if not billions of dollars from them through an illegal pyramid scheme. The class-action lawsuit filed in California is demanding the company pay back the consultants and bar LuLaRoe from operating and promoting the pyramid scheme.

In a Federal Court in March, attornies for a group of consultants provided the sordid details in the class-action filing.

According to the suit, LuLaRoe is a fraudulent pyramid scheme that preys on stay-at-home mothers. The company promotes the business as a way for mothers to make extra income for their families. LuLaRoe recruits women to join the company and promises that they will be able to sell their clothing.

Despite the claims made by the company to recruits, the suit alleges the company ran an illegal pyramid scheme from 2013-mid-2017. Additionally, they allege that LuLaRoe knew the company was an illegal pyramid scheme while they recruited women to join the company.

From the company’s inception until at least mid-2017, LuLaRoe paid the majority of their commissions and bonuses on the recruitment of new members. New members purchased start-up packages ranging from $5,000 to $9,000.00.

Members were given massive bonuses for bringing in new consultants to the pyramid. In fact, the rewards and commissions far exceeded the money consultants made in retail sales.

In order to gain new recruits, the company misled the women about the amount of money they could make by providing inaccurate financial statements. The suit alleges LuLaRoe told consultants to buy more clothing each month. They promised that by “buying more” that the consultant would “sell more.”

LuLaRoe enticed consultants to buy more by promising a 100% refund and buyback program. Also, the plaintiffs claim that LuLaRoe omitted that the quality of their clothing declined and that the market was saturated. At the height of LuLaRoe, more than 80,000 women worked as consultants.

At sales conferences, Deanne Stidham, the owner of the company, had sales leaders disclose their income publically. The women shared that they averaged $85,000 to $307,000 in bonuses for recruiting new members. However, their retail sales dwarfed the bonuses. The women said their retail sales ranged from $12,500 to $37,000 a month.

LuLaRoe did not pay bonuses or commission to members based upon their retail sales. Instead, the company lavished huge incentives to members to recruit new consultants into the pyramid. With onboarding costs ranging from $5,000-$9,000, there was a lot of money to be made in recruiting.

Despite the fact that most women struggled to sell their products, the company required that consultants purchase inventory every month. As a result, consultants ended up having garages and storage units full of clothing that they could not sell. However, the people at the top of the pyramid made millions off the losses of those at the bottom.

The suit points out that Washington State Attorney General is currently suing LuLaRoe for the same illegal structure.

Next, the plaintiffs allege that the company used sales calls to lie to consultants. In “opportunity calls.” DeAnne misled women about the amount of money they could make.  She promised women could make a full-time income by only working part-time. Additionally, she insisted consultants could make $50,000 a month.

DeAnne encouraged the woman to flaunt their sales and income to recruit others into the scheme. She consistently told women to “buy more” so they could “sell more.” However, she failed to disclose to the women that they would not be able to sell the clothing due to market saturation.

As a result of the lies, thousands of consultants lost vast sums of money. The plaintiffs in the case lost tens of thousands of dollars. Many found themselves in massive credit-card debt. Others faced foreclosure and bankruptcy due to their involvement in the company.

Attornies for the plaintiffs are asking for damages of “millions if not billions” of dollars. Additionally, they are asking the court to bar the company from promoting and recruiting anyone into the scheme. The suit also seeks money for restitution and exemplary damages.

The new class-action lawsuit is not the first of its kind against LuLaRoe. In 2017, a similar class-action suit sued the company for billions of dollars. That suit is currently in mediation. LuLaRoe is facing a lawsuit in Washington state brought by the attorney general. Then LLR is still battling a former supplier in a nearly $50 million suit for failing to pay for products.

Despite the legal wranglings, LLR carries on with business as usual. The company continues to recruit new members and rolls out new lines of clothing. Mark and DeAnne Stidham appear unphased that their lavish lifestyle has been built by ripping others off.

With more than a handful of civil cases against the company, there are still no criminal filings against LLR for fraud.

As the company continues to sink, many consultants dream of the day that DeAnne and Mark are escorted from their home in handcuffs. Until then, we will have to watch how the cases play out in court.

 

*Katie Joy is a columnist and hosts Without A Crystal Ball on Patheos Non-Religious Channel. She writes articles on parenting, disability advocacy, debunking pseudoscience, atheism, and crimes against women and children.

She co-hosts the YouTube show, “The Smoking Nun,” with Kyle Curtis on The Non-Sequitur Channel. The show airs weekly and tackles pseudoscience, current events, and crime stories.

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What Are Your Thoughts?leave a comment
  • Martin Penwald

    “sell more”, yes, but to who?

    Just a question about the numbers : $12000/month is incredibly high. Isn’t there a timesca!e typo, there?

  • Tawreos

    I don’t feel sorry for these people. They bought into something with dollar signs in their eyes and no though about how they would actually sell enough to make those dollar dreams a reality. Any time someone gives me a slick sales pitch, I wonder how bad the product is that needs the pitch to be so slick.

  • Katie Joy

    Nope, those are the numbers from the lawsuit.

  • Berlzebub

    It was a little over ten years ago that a coworker’s wife found an online ad for “data entry and sorting”. Send the lady a $5 fee for… whatever, and when the time came she would send you the data to input and upload. For the $5 fee, you could work part time and make $5k a week. She registered both herself and my coworker, and they roped in one of my other coworkers. I was asked more than once, but said no. I also added, “Anything that sounds too good to be true is.”

    Fast forward to the day it’s supposed to go live. Magic hour comes, and then goes. Several hours pass, and an online forum for it begins to show questions. The FBI is called, and an hour or so later, the address the woman gave is visited. She isn’t there, neither is her furniture, nor the collection of fees that were sent to her. I don’t know how many signed up, but judging by my coworker’s wife involvement in the forum it wasn’t a small amount.

    My coworker’s wife sends an email, which will probably never be read. It was scathing, and heartbreaking. Several of those who entered were unemployed, and/or trying to get out of debt. Since I didn’t join I wasn’t involved in the conversations between my coworkers who did. Only one complained to me, until I reminded him of what I’d said, multiple times, when they tried to convince me to join. I also reminded him of his response to me. “It’s only $5.”

    Between my coworker, his wife, and my other coworker, they’d roped in enough people to make a dozen who joined up. Some of those who joined were seeing dollar signs, but others were seeing a way out of debt. That simple post about the FBI visit shattered the hopes of several, and the dreams of others. I felt bad for them, but I didn’t give the coworkers I’d warned any sympathy. Of course, most got mad at me, but I honestly didn’t care. I even pointed out that the reason they’re mad at me is they can’t find the person I’d warned them to not send money to.

  • chemical

    No, these MLM / pyramid schemes really want you to move that amount of product in that time period. The reason why these MLM pyramid schemes make so much money is because they put the sales people on the hook if the product fails. If you decide to “work” for them (and I put work in quotes since you’re never classified as an employee, so they can skirt labor laws, too), you pay for the product, they ship it to you, and then you are responsible for the markup, distribution, etc. I think with LuLaRoe, you can’t even choose what you want to sell, either — they just send you whatever they want to get rid of. It’s kind of like working at McDonald’s, but if you don’t sell enough hamburgers then you have to pay McDonald’s for the hamburgers other people didn’t buy. Actually, working for McDonald’s is a much better deal than working for LuLaRoe.

    You end up making a lot less than minimum wage, if you even manage to turn a profit in the first place, which most people won’t.

  • Dana W

    Goggle “lularoe fails” for a good laugh. Its hard to understand how anybody thought this wasn’t utter trash.

  • Lambchopsuey

    The women shared that they averaged $85,000 to $307,000 in bonuses for recruiting new members. However, their retail sales dwarfed the bonuses. The women said their retail sales ranged from $12,500 to $37,000 a month.

    Pedantic quibble: In order for “their retail sales” to “dwarf the bonuses”, that means that their retail sales would need to be several TIMES LARGER than the bonuses. That was clearly not the case. Here is how the sentence could have been written to be grammatically correct:

    The women shared that they averaged $85,000 to $307,000 in bonuses for recruiting new members. However, their retail sales WERE dwarfed BY the bonuses. The women said their retail sales ranged from $12,500 to $37,000 a month.

    Alternatively, one could say that the women’s retail sales were eclipsed by the bonuses.

    If these MLM scams are so lucrative, why aren’t the menz getting involved?

  • Lambchopsuey

    If the product is so great, why isn’t it being sold in regular stores?

  • persephone

    I believe the bonuses were for a year, while the sales were based on a month.

  • persephone

    What gets me about these MLM schemes is that many of these products could be sold and businesses built over time. But the founders are all in such a hurry to make money that building a business for the long-term doesn’t seem to even cross their minds.