LuLaRoe, the disgraced multilevel marketing company, has agreed to pay $4.75 million to settle a lawsuit filed by the state of Washington, as the company was accused of engaging in a pyramid scheme.
The state Attorney General Bob Ferguson announced the settlement this past Monday — an entire two weeks before the lawsuit had been scheduled to go to trial against the multilevel marketing clothing company.
Ferguson had named the company, along with its husband and wife co-founders, Deanne and Mark Stidham, as defendants as well as Deanne’s son, Jordan Brady.
Ferguson will use $4 million of the funds to pay restitution to Washington residents who “lost money, or who may have quit their job or sacrificed opportunities as a result of LuLaRoe’s deception, but who failed to make a ‘full-time’ income as LuLaRoe promised.” The state believes close to 3,000 residents will receive settlement compensation.
“LuLaRoe tricked Washingtonians into buying into its pyramid scheme with deceptive claims and false promises,” Ferguson said in the press release. “As a result, thousands lost money and two individuals made millions from their scheme. Washingtonians deserve fairness and honesty — and accountability for those who don’t play by the rules.”
Mark Stidham stated in a press release how the lawsuit was too expensive to justify continuing to fight.
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“Even though we believed we would win the case eventually – whether at trial or on a subsequent appeal – the expense would be enormous and the amount of time senior management would have had to devote to the litigation during the trial would have been a distraction from our business,” he said.
The company also admitted that while they were settling, the agreement “specifically states that none of the defendants has admitted liability or violation of any laws” and the “defendants denied, and continue to deny, any wrongdoing.”
The company will also be required to adhere to certain guidelines while operating in the state in the future.
This includes making sure people understand just how much money they can actually make through the company, by publishing an “income disclosure statement that accurately details retailer income potential.”
The company also will only be able to pay bonuses to retailers based on that person’s individual sales, instead of the ales on the retailers who report to them.
The settlement also regulates LuLaRoe’s refund policy, where LuLaRoe is required to allow new retailers to return any and all merchandise for 45 days after joining the company.
It also bans the company from applying “certain types of deductions from refund requests.”
In addition, it also states that LuLaRoe must return any merchandise that is not eligible for a refund to the retailer.
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