Multilevel marketing businesses are hit or miss. Depending on whose opinion you take, MLM’s could either be the chance of a lifetime or the biggest scam anyone could ever get into. In recent years, one of the most profitable businesses in the MLM industry, LuLaRoe, has taken more of the latter stance (at least from a legal and PR perspective). Lawsuit after lawsuit has targeted the California-based fashion retail company in the last few years, and these lawsuits have come from individuals and groups involved with the company across the board. Warehouse employees, fashion consultants, production partners, and thousands of customers have all sued LuLaRoe for various reasons. Here are five of the largest lawsuits LuLaRoe has ever faced in its short history.
5. Stubblefield vs LuLaRoe – minimum of $25,000
Brandon Stubblefield was a former LuLaRoe employee who filed for a lawsuit in early 2018. According to Buzzfeed News, Stubblefield, a former forklift operator, sued the company along with other employees for racial discrimination, but the lawsuit revealed a lot more about the LuLaRoe workplace. Stubblefield presented a picture of the LuLaRoe warehouse that would leave a bad taste in any employee’s mouth. He accused LuLaRoe of being a hostile workplace, of not providing employees with meal and rest breaks, and of violating various business codes. Stubblefield also filed for wrongful termination, retaliation, and intentional infliction of emotional distress. He claimed that he reported many incidences to the Human Resources office while he was employed at the Corona warehouse. According to the suit, the company never did anything to address Stubblefield’s working situation. Stubblefield also made several complaints to Human Resources regarding his direct supervisor, and apparently, those were not addressed either. He believes that his actions eventually led to his termination.
4. Washington State vs LuLaRoe – minimum of $2 million
The state of Washington was the first state to file a lawsuit against the clothing company. Seattle Times reported early this year that the Washington Attorney General is fighting against LuLaRoe’s alleged pyramid scheme business plan. Many Washington-based LuLaRoe agents have come forward with complaints about the company’s unlawful business practices. According to the Better Business Bureau, over 400 individuals have filed complaints about LuLaRoe, and these were all from Washington alone. Many of those that sell for LuLaRoe have reported that the company makes it virtually impossible to make profit from clothing sales, and that the only way to make income from the business is by recruiting more fashion consultants. LuLaRoe claims that its consultants can make thousands of dollars in profit through the sales and marketing strategies they supposedly provide their consultants. However, many fashion consultants report minimal income, no income, or even debt at the end of a sales period. As of February this year, the presiding judge has dismissed the charges against LuLaRoe, but the case is open for an appeal.
3. MyDyer vs LuLaRoe – $48.7 million
MyDyer is a LA-based clothing company that served as LuLaRoe’s primary clothing manufacturers since 2016. Bloomberg reported back in 2017 that MyDyer filed a suit against LuLaRoe in 2016. According to the report, MyDyer accussed the founders of LuLaRoe of hiding millions of dollars in shell companies. Mark and DeAnne Stidham, LuLaRoe’s founders, have failed to pay many of their creditors despite having revenue reports of over $2 billion. MyDyer reported that the Stidhams owes the clothing manufacturer $48.7 million in various products provided and services rendered in the previous years. In support of their case, MyDyer claims that the Stidhams have opened several LLCs to cover for personal expenses, such as real estate, automobile, and private jet purchases. In a statement of defense against the allegations, LuLaRoe stated that MyDyer’s claims were false. LuLaRoe reported that they have paid MyDyer more than $1.8 billion in clothing, and that MyDyer has even overcharged the company in several occasions. LuLaRoe stated that the $48.7 million is a small portion of the overall business between the two companies, and that both companies profited from the overall success in LuLaRoe’s sales.
2. Providence Industries vs LuLaRoe - $63 million
Another organization filed a multimillion-dollar suit against LuLaRoe. MyDyer, the clothing manufacturer, happens to be a division under Providence Industries. Providence Industries sued LuLaRoe in November of 2018. According to the organization, LuLaRoe stopped paying their bills back in May 2018. From the original lawsuit, Business Insider reported a total lawsuit amount of $49 million. Providence Industries, which has been the chief clothing supplier for LuLaRoe, demanded $63 million in this lawsuit. The new filing brought to light several other million-dollar debts that LuLaRoe owed other business entities. It also brought to light new testimonies from LuLaRoe fashion consultants. The LuLaRoe agents collectively reported a total amount of $63,000 owed to them by LuLaRoe from unpaid refunds from returned inventory. Providence Industries demanded that the court seize assets amounting to roughly $34 million. While this request was denied in the first lawsuit filing, the new testimonies are making up a good case for the seizure of assets.
1. Berry, Scheffer, and Hayton vs LuLaRoe - $1 billion
The consultants of California have spoken and have sued LuLaRoe for the largest amount yet. Aki Berry, Tiffany Scheffer, and Cheryl Hayton sued the company and are speaking in behalf of all other California-based LuLaRoe consultants that have been misled into making income from the clothing company. According to a CBS News report back in 2017, LuLaRoe has caused many of its fashion consultants to go in debt in order to maintain their business afloat. Meanwhile, LuLaRoe stood to profit from it all regardless of the non-success of its lower-tier consultants. While LuLaRoe sells a business that could potentially earn any of its consultants thousands every month, many of those who have done the work for LuLaRoe have claimed that it takes a lot of personal money investment in order to see a small profit—if any at all. In fact, it costs roughly $6,000 just to become a fashion consultant. This is way above the average buy-in compared to other multilevel marketing businesses. According to this billion-dollar lawsuit, LuLaRoe instructs their consultants to keep $20,000 worth of inventory at any given time, but the likelihood of these inventories selling is close to impossible—making profit highly likely for the average consultant.
Written by Garrett Parker
Read more posts by Garrett Parker