LuLaRoe Customers Say Refund Isn’t Enough to End Sales Tax Class Action

LuLaRoe customers are arguing against a dismissal motion of their sales tax class action lawsuit, saying the refund program isn’t enough to cover actual financial injuries.

Plaintiff and Class representative Katie Van recently argued that the refund she was paid only compensated the tax amount that the leggings company overcharged her but failed to compensate her additionally for her injury-in-fact.

“LuLaRoe attempts to frame its refunds as proactive, yet argues that its partial remedy means that it should escape liability for the millions of dollars of interest, statutory and punitive damages imposed by law,” the motion said. “Once again, LuLaRoe attempts to shift the cost and consequences of its known system failures (and its decision to knowingly overcharge customers) to its consumers.”

Van filed her LuLaRoe class action lawsuit in September 2018. She argued that she and other Alaska consumers were wrongfully charged sales tax after the leggings retailer failed to account for states that do not charge sales tax.

The improperly charged sales tax allegedly stems from the retailer’s Audrey point of sale system. Audrey was adopted by the company in 2015 so that LuLaRoe could better keep track of taxes. However, this system allegedly resulted in the company paying too much is sales tax. To counteract this, LuLaRoe announced that it would be charging sales tax based on the location of the company representative.

The changes in sales tax policy reportedly resulted in fraudulently charged sales tax on more than 72,000 transactions involved an Alaska consumer between April 2016 and June 2017.

In October 2018, LuLaRoe fought back against the sales tax class action, arguing that it had refunded all improperly charged sales tax. The company claimed that Van “has not and cannot allege any concrete and particularized injury beyond the overcharged sales tax, for which she has already received a refund.”

However, Van argues that she and other Alaska consumers are entitled to further damages. Van’s argument specifically cites damages based on LuLaRoe’s tort of conversion, when the company allegedly took fraudulent sales tax intentionally regardless of legality.

Additionally, Van claims that she and the proposed Class are owed interest for the time that LuLaRoe was in possession of the allegedly fraudulent sales tax as well as punitive and statutory damages under Alaska law.

Finally, Van states that the refund program did not provide any sort of accounting to consumers – meaning that they had no “reasonable means” of checking the accuracy of refunds issues by LuLaRoe.

Based on these alleged shortcomings of LuLaRoe’s refunds, Van argues that the court should deny the company’s motion to dismiss.

Van and the proposed Class are represented by Bruce Carlson, Kelly Iverson and Kevin Tucker of Carlson Lynch Sweet Kilpela & Carpenter LLP; and James Davis Jr. and Goriune Dudukgian of the Northern Justice Project LLC.

The LuLaRoe Sales Tax Class Action Lawsuit is Van, et al. v. LLR Inc. dba LuLaRoe, et al., Case No. 3:18­-cv-­00197, in the U.S. District Court for the District of Alaska.

UPDATE: On Aug. 18, 2020, the sales tax class action lawsuit against LuLaRoe survived a dismissal motion after the judge found the claims were valid.