The multilevel marketing company LuLaRoe has agreed to fork over $4.75 million to settle a lawsuit filed by the state of Washington accusing the company of conducting a pyramid scheme.
The state Attorney General Bob Ferguson announced the settlement in a press release two weeks prior to the lawsuit going 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 along with 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 estimates that close to 3,000 residents will receive these checks.
“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.”
In a press release announcing the settlement — Mark Stidham revealed how the lawsuit was too expensive to justify continuing to fight.
“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 additionally stated 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.”
LuLaRoe will also be required to adhere to certain guidelines while operating in the state in the future –including publishing an “income disclosure statement that accurately details retailer income potential.” This will ensure that people understand how much money they can actually make through LuLaRoe.
LuLaRoe also will only be able to pay bonuses to retailers based on that person’s individual sales, and not the sales on the retailers who report to them.
The settlement also regulates LuLaRoe’s refund policy, after several consultants complained they were stuck with thousands of dollars of merchandise they could neither sell nor return to the company.
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, LuLaRoe must return any merchandise that is not eligible for a refund to the retailer.
Ferguson filed the lawsuit against LuLaRoe back in 2019, saying how the defendants “made unfair and deceptive misrepresentations” about how much money a person could make selling the company’s clothes. In addition, the lawsuit also objected to the company’s bonus structure and refund policy.
“Today’s resolution, filed in King County Superior Court, prohibits LuLaRoe from operating a pyramid scheme. Additionally, LuLaRoe must be more transparent with retailers to avoid future deception,” the press release stated.
The Washington state lawsuit is only one of many the company has been fighting in court over the past few years.
With a background in the creative and educational fields, Amelia Finefrock is freelance writer, singer-songwriter and nanny based in Chicago.
Mamas Uncut is the place for moms online. We cover the latest news around motherhood and parenting, plus entertainment news as well – all with a mom-focused twist. Looking for parenting advice? We have plenty of it, all for moms, from moms. Our mission is focused solely on empowering moms and moms-to-be with the knowledge and answers they’re looking for. We don’t stop there though, we have expert advice on a range of topics, and all of our categories get updated multiple times a day, so if there’s one website for moms you need to bookmark, it’s Mamas Uncut. We cover it all, from the latest and trendiest baby names, in the US and all over the world, to advice for moms in the workplace, or mom to mom advice on balancing it all. Looking for an answer to a specific question you’ve have? Head over to our new answers section, where you can ask questions on a nearly endless amount of topics, and you’ll get answers fast – really fast. Mamas Uncut is more than just the place for moms, it’s the community of moms – all here to help, make friends, and more. Not sure where to start? Take a look at one of our key topic areas like Pregnancy or Relationships – if you’re looking for advice on a specific topic, there’s a pretty good chance that we’ve already written on it (a few times), or that it’s within our answers section. If you don’t have time to read the site every day, we also have a newsletter that you can control how often you want to receive – that way we send all of the must-see content for moms directly to your inbox – it’s that easy. So go ahead and take a look around, ask a question, or just keep reading, we’re glad you’re here.