Judge Gives Final OK to Herbalife Class Action Settlement

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Yesterday, a California federal judge granted final approval to a $15 million class action settlement over allegations Herbalife International of America Inc. operates as an illegal pyramid scheme.

The Herbalife class action lawsuit was filed by plaintiff Dana Bostick, who alleges the company systematically rewards recruitment of new Herbalife distributors over actual retail sales of its products. Bostick filed the Herbalife class action lawsuit on behalf of a Class of individuals who were Herbalife distributors since 2009.

According to Bostick’s Herbalife class action lawsuit, individuals can become an Herbalife distributor by simply finding an existing distributor to sponsor them and then by paying $99.95 for an Herbalife International Business Pack or $57.75 for a mini International Business Pack.

In a decision handed down May 14, U.S. District Judge Beverly Reid O’Connell granted final approval to the Herbalife settlement, which creates a $15 million class action settlement fund to compensate individuals who joined Herbalife primarily as a business opportunity (instead of for personal or household use of products) and lost money while pursuing that opportunity. The Herbalife settlement also provides $2.5 million to compensate Class Members who return unopen and unused Herbalife products. In addition to providing cash benefits to Class Members who filed claims, Herbalife also agreed to make significant changes to its business policies, which must be maintained for three years from the date of final approval of the class action settlement.

According to the final approval order, more than 1.5 million people may have been eligible for benefits from the pyramid scheme class action settlement. A total of 7,457 Class Members reportedly filed claims for the Herbalife settlement. Judge O’Connell noted that 687 requests for exclusion and 20 objections to the class action settlement have been submitted, though some objections were withdrawn. Judge O’Connell addressed the concerns of the remaining 18 objectors but found that the Herbalife settlement terms were fair, adequate and reasonable, and warranted final approval.

Under the terms of the Herbalife class action settlement, Business Opportunity Claimants who purchased less than $750 worth of Herbalife products or who could not demonstrate a loss will receive a $20 flat rate payment. Claimaints who purchased more than $750 worth of Herbalife products will receive the lesser of the estimated total loss or 75 percent of the amount paid for the products. According to the final approval order, the average payout from the Herbalife class action settlement will be $1,101.48, and the largest award will be more than $98,000.

The Herbalife class action settlement was preliminarily approved on Dec. 2, 2014, and the final fairness hearing was held on May 11.

Bostick is represented by Philip D. Dracht of Fabian & Clendenin and Thomas G. Foley Jr., Robert A. Curtis and Justin P. Karczag of Foley Bezek Behle & Curtis LLP.

The Herbalife Pyramid Scheme Class Action Lawsuit is Bostick, et al. 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.