Direct-selling apparel company LuLaRoe faces another class-action complaint, this time one that demands $1 billion in restitution.
The complaint, which names three plaintiffs and represents thousands of LuLaRoe “consultants,” as they’re called, is the second in 10 days to accuse the company of being “an endless chain scheme,” or what California law refers to an illegal pyramid scheme, according to the Federal Trade Commission.
“Plaintiffs and so many other consultants were never able to realize any actual profit and, as a result, they failed,” the Oct. 23 filing says. “They failed even though they were committed and put in the time and effort. They failed because they were doomed from the start.”
LuLaRoe issued an official statement in response to the complaint filing, saying:
“LuLaRoe has grown exponentially over the last four years. Our success has made us the target of orchestrated competitive attacks and predatory litigation. We take all litigation — regardless of its lack of merit — seriously. We have not been served with the recent complaints, but from what we have seen in media reports, the allegations are baseless, factually inaccurate and misinformed. We will vigorously defend against them and are confident we will prevail.
LuLaRoe’s focus is to support the more than 80,000 Independent Fashion Retailers who make retail sales to consumers. Our Leadership Bonus Plan only includes incentives that reward retail sales to consumers. As a result of our business model, Independent Fashion Retailers have sold more than $2 billion of LuLaRoe apparel directly to consumers from January to October 2017, far more than double the same period in 2016. These sales have put hundreds of millions of dollars in the pockets of Independent Fashion Retailers across America who are building their own small businesses.”
The newest class-action complaint follows one filed on Oct. 13, which was the first to allege in a legal capacity that the company is running a fraudulent pyramid scheme, and was organized after the company made changes to its 100 percent guarantee return policy. LuLaRoe consultants who are named as plaintiffs in that case, much like the Oct. 23 filing, allege the company falsely guaranteed a promise of financial freedom and empowerment, based on the idea that consultants purchase inventory from the company to sell on their own to the public.
But, the consultants claim, real advancement within the company’s structure means purchasing more inventory, even if that means incurring personal debt, and recruiting other unknowing people so as to move up the LuLaRoe ranks.
Other litigation against LuLaRoe claims that the company charged erroneous taxes to its consultants through its proprietary payment system and sold defective inventory, specifically leggings with holes and tears before being worn.
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Alexandra Mondalek is a writer for Yahoo Style + Beauty. Follow her on Twitter @amondalek.