LuLaRoe Is An 'Endless Chain Scheme,' Says Attorney Behind Billion-Dollar Class Action Suit

LuLaRoe Is An ‘Endless Chain Scheme,’ Says Attorney Behind Billion-Dollar Class Action Suit

LuLaRoe / Instagram

LuLaRoe, the popular leggings company known for their ostentatious leggings and shady business practices, looks like it’s about to have a day of reckoning, thanks to a billion-dollar class action suit filed in California late last week.

Attorney Josh Watson of the Arnold Law Firm in Sacramento, California, filed the class action suit in late October on behalf of three former LuLaRoe consultants who say they were screwed out of thousands of dollars thanks to LuLaRoe’s shitshow of a management team and business structure. In the suit, Watson lays out his argument that LuLaRoe is functioning as an “endless chain scheme” and is therefore in violation of California’s unfair competition law.

LuLaShitIsAboutToHitTheFan.

And it’s about time.

According to court documents, LuLaRoe was founded in 2012 by Deanne Brady and Mark Stidham. By 2013, the company had grown to 10 employees, 145 distributors, and $3 million in sales. And from there, the company’s growth exploded. Currently, there are an estimated 80,000 LuLaRoe consultants in the United States and LuLaRoe posted $1 billion dollars in sales in 2016.

Hello, market saturation much?

Watson’s complaint alleges that consultants were misinformed and mislead with promises of fast cash and financial security when they signed on to become independent fashion consultants with LuLaRoe. And the suit points to the issues that thousands of consultants have been decrying for years within the company: issues with inventory quality, pressure to purchase unneeded inventory, and zero control over the products that were sent to consultants.

Christina Hinks, a former consultant and owner of the whistleblower blog, MommyGyver, has led the fight to take LuLaRoe to task for the way their business model has hurt so many financially. In fact, she’s so vocal about her concerns regarding LuLaRoe that she was slapped with a lawsuit of her very own, courtesy of LuLaRoe.

That’s right. LuLaRoe is suing her for the names of the sources who have provided her with information regarding LuLaRoe’s shady business practices. LuLaRoe can’t process refunds, but they can sue mom bloggers.

She applauds this latest round of litigation and tells Scary Mommy, “I think it’s about time.  The important point about this case is it says that all money LuLaRoe earned was done illegally. The billion-dollar price tag is simply “give us all our money back, you liars.” It was earned under false pretense, and because of that, they don’t get to keep it, according to these allegations. That’s huge.

Basically, Watson’s class action suit validates what thousands of angry consultants have been saying in Facebook groups for a long time: LuLaRoe screws women out of their hardearned money and the management team has no regard when it comes to consultants who are losing their houses, 401K plans, and savings all while they keep padding their pockets.

But that’s not even the good part of the suit.

LuLaWaitForIt.

Watson alleges that LuLaRoe is in direct violation of California law based on how they pay their consultants.

Watson tells Scary Mommy, “In California, it is illegal to pay company representatives based on a downline purchase of inventory.”

Watson says that LuLaRoe’s entire incentive and bonus schedule for consultants was based on how much inventory a consultant’s downline purchased and not based on the sales of the downline to consumers. He says the basis of their claim is that consultants are rewarded for buying inventory and not for actual sales to the consumer.

And that is illegal AF in California.

Elementary, my dear Watson.

LuLaRoe consultants are encouraged to maintain at least $20,000 in inventory and to recruit others to sign on as consultants. When a consultant builds a downline — a network of consultants who work “down the line” from her — LuLaRoe rewards the consultants with downlines that are buying hordes of whacky printed leggings en masse. So those consultants who are Instafabulous and posting pictures of fancy cruises? Yeah, it’s highly likely they left garages full of inventory they can’t sell to drink their problems away on a cruise to nowhere.

And LuLaRoe is poised to have to give back close to a billion dollars if this class action suit is successful.

So what does this suit mean if you are a consultant who has gotten screwed over?

It depends, says Watson.

After Watson filed suit in CA, three more class action suits were filed on behalf of other disgruntled consultants. “This is a wrinkle that we are working out as we speak,” he says. Watson has reached out to the other attorneys in hopes of banding together in order to maximize the restitution to the thousands of consultants who have lost their leggings to this company.

In any case, Watson urges any consultant who thinks they may be eligible for restitution to start gathering documents now, so that when a judgment is levied, it’ll be a faster process. “I would encourage consultants to gather documentation about how much they made with LuLaRoe and how much they spent or gave to the company.” He says that in cases like this, those who have accurate and detailed documentation are the ones who tend to see the most return for their efforts.

He also encourages consultants to “preserve evidence”: Keep detailed records going forward, take pictures of every piece of inventory acquired, and make sure it’s easy to access/compile. Consultants who would like more information about the class action suit details can go to the website set up by Watson’s firm.

He tells Scary Mommy, “A class action suit allows us to help as many people affected by LuLaRoe’s practices without a consultant having to go through the hard lifting of litigation.”

While it could take up to a year or longer for this suit to be settled in court, there are many people anxiously waiting to hear LuLaRoe’s answers for their blatant disregard of their customers and representatives.

And though Watson has heard from LuLaRoe’s legal team, Deanne and Mark have yet to respond publicly to this class action suit.

However, we suspect that the thought of having to pay back a billion dollars has the LuLaRoe team shaking in their “buttery” leggings.