Herbalife pyramid scheme class action lawsuit

Class action lawsuit claims Herbalife is a pyramid scheme.

New deadlines have been set in a class action lawsuit accusing Herbalife International of America Inc. of operating a pyramid scheme, indicating that settlement negotiations may occur within the next year.

U.S. District Judge Beverly Reid O’Connell set June 16, 2014 as the deadline for hearing arguments to certify the class action lawsuit on behalf of all persons who were Herbalife distributors from April 2009 to the present. O’Connell also ordered both sides to enter into private mediation and settlement discussions no later than Feb. 23, 2015.

If the Herbalife class action lawsuit is certified, the company could potentially face millions of dollars in liability from the company’s 400,000 distributors.

The lead plaintiff in the case, Dana Bostick, sued Herbalife in April 2013, claiming he was “doomed from the start by an Herbalife marketing plan that systematically rewards recruiting over retail sales.”

Bostick is a former distributor for Herbalife and claims to have spent approximately $3,439 on Herbalife products, tools, coaching, websites, and incidental expenses. Despite his best efforts, he was only able to recruit one person — a close friend — and was unsuccessful at selling Herbalife products because he had to do so at nearly full retail value. Bostick alleges that Herbalife “is comprised of a hierarchy of distributors, with the various levels determining eligibility for discounted Herbalife products and other benefits.”

Herbalife had tried to have the class action lawsuit dismissed in October, but O’Connell denied the motion based on the financial evidence Bostick had presented. O’Connell ultimately found that Bostick presented adequate evidence to classify Herbalife as a pyramid scheme, based on the unfair distribution of profit loss and gain.

In Bostick’s presentation, he showed that distributors actually pay to have the opportunity to sell Herbalife products and only receive rewards when they recruit new participants or sell the products.  For Bostick, he paid $95.55 for an “International Business Pack,” which was supposed to be a marketing starting kit, containing everything that they may need in becoming a successful distributor.  O’Connell agreed that the evidence Bostick presented showed that the company’s business model meets the definition of a pyramid scheme, and dismissed Herbalife’s request.

The class action lawsuit claims that Herbalife violated Section 327 of the California Penal Code, which prohibits schemes that require an individual to pay money in exchange for the possibility to receive compensation for recruiting others to work.

Bostick alleges Herbalife did exactly this by giving their distributors virtually no opportunity to earn a profit on Herbalife’s products, because the multi-level marketing company (MLM) sets the suggested retail price of the products.  The rates are exceedingly high, with the company offering extra incentives to their top distributors with recruiting bonuses, the class action claims.  Many distributors found it difficult to sell these products to customers when they are available online for significantly cheaper.

Herbalife had allegedly reeled in their distributors with promises of a quick road to a lavish lifestyle, and building a steady income to retain that wealth.  Instead, due to the required products the distributors were required to buy themselves, the top distributors allegedly only earned $0.46 to $0.64 in recruiting bonuses.

In court documents, Herbalife argued that Bostick could not have been fooled in such a way because he had read a statement which revealed the distributors’ modest earnings before he had signed.  On average, a distributor would earn $2,900 a year, while a medium compensation level had been $741.  Additionally, Herbalife argued that Bostick exerted very little in trying to sell the products, and had made no attempt to return them.

While Bostick’s legal team acknowledged his lack of effort to sell the products, they argued that it did not change the fact that the company had violated California state law against pyramid schemes.  The fact that recruiters of Herbalife get paid whether or not the distributors sell the products was the main attribution of this violation.

Both Herbalife and Bostick will have the chance to mediate before any trial is decided, and seem to be confident in their arguments.

Plaintiffs are represented by Dracht and Thomas Foley with Santa Barbara, CA-based Foley Bezek Behle & Curtis, LLP. Herbalife’s counsel includes Jonathan David Schiller, Jonathan Sherman and Karen Paik of New York-based Boies Schiller & Flexner LLP

This Herbalife Pyramid Scheme Class Action Lawsuit is Dana Bostick v. Herbalife International of America Inc., et al., Case No. 2:13-cv-02488, in the U.S. District Court for the Central District of California.

UPDATE: On Oct. 17, 2014, Herbalife asked a federal judge to push back pre-trial deadlines again as the parties finalize the terms of a class action settlement.

We tell you about cash you can claim EVERY WEEK! Sign up for our free newsletter.

Please note: Top Class Actions is not a settlement administrator or law firm. Top Class Actions is a legal news source that reports on class action lawsuits, class action settlements, drug injury lawsuits and product liability lawsuits. Top Class Actions does not process claims and we cannot advise you on the status of any class action settlement claim. You must contact the settlement administrator or your attorney for any updates regarding your claim status, claim form or questions about when payments are expected to be mailed out.

ATTORNEY ADVERTISING

6 Comments

  • S Donovan January 30, 2014

    I had become a distributor for Herbal life in 2006 with similar circumstances as Bostick in the 2009 Law suit against herbal life. The difference is I tried to sell the product back to Herbal Life but was told that they couldn’t do that. I am wondering if there is a law suit out there now that I could join to try and re-coop some of my money.
    Any comment would be appreciated

    • Connie May 1, 2014

      I would love to join in the class action also if I could find out how. Please let me know if you know how. I just sent to the dump product that I could not sell and Herb life had not interest in buy back from me. I sold OK but did not make any money because the more you sell, the more the pressure you to buy and have on hand….. Such fraud is only a pyramid game and after I saw the Owner died of drugs, I knew I was taken for a ride.

  • evelyn khan May 24, 2014

    I also want to join this settlement if anyone knows how please contact me

  • Rene July 22, 2014

    I would like to join this class action lawsuit as well. I read that in California the deadline to join was January 2014? What about Tx.? Herbal life’s CEO should be on American Greed here pretty soon for what he’s done! I paid about $3,500 for the gold packet which would make me a supervisor! I was also told that if I purchased this” gold packet” i had more opportunity for more $$$ I never made a single penny even though i tried hard to sell their products. I also tried to return the product and was told i could not…If someone knows how I could join the lawsuit please contact me . Thanks.

  • Top Class Actions October 22, 2014

    UPDATE: On Oct. 17, 2014, Herbalife asked a federal judge to push back pre-trial deadlines again as the parties finalize the terms of a class action settlement.

  • Dee November 4, 2014

    Between purchasing product and supplies from the website and business cards, and teeshirts etc I am in the hole over $1000. and I made a total of $35. UGH!!! I like the products but was told that I am not allowed to put anything other than positive things on my facebook and they all had to be Herbalife related. I am also being pushed to get on calls and attend meeting (Which cost me money to go to). I am making the up line richer and me and my family poorer.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

View all: , ,