Objections May Derail Herbalife Class Action Settlement

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A number of former Herbalife distributors who believe the proposed $15 million pyramid scheme class action settlement is inadequate are reportedly planning to object to the deal. Objections to the Herbalife settlement must be filed by March 24.

The Herbalife class action lawsuit was filed by plaintiff Dana Bostick in 2013. He argues that the company operated as a pyramid scheme and that despite their efforts at selling the company’s health products, he and thousands of other distributors ended up losing money. According to the pyramid scheme class action lawsuit, Herbalife’s promotional materials misled consumers regarding business opportunities.

Herbalife reached a settlement over the pyramid scheme allegations in late October, and the class action settlement was preliminarily approved on Dec. 2, 2014. Herbalife has denied the allegations and fought the litigation, but agreed to settle the pyramid scheme class action lawsuit to avoid the continued cost and risk of ongoing litigation.

Class Members of the Herbalife class action settlement include all persons who were Herbalife distributors or members in the United States during the period from April 1, 2009 through Dec. 2, 2014.

Under the terms of the class action settlement, Herbalife will pay a total of $15 million to members or distributors who file valid claims (“Cash Settlement Fund”). Attorneys’ fees, settlement administration fees and other costs will be paid from the Cash Settlement Fund. Class Members who submit valid claims are expected to receive a flat payment of up to $20 from the Cash Settlement Fund.

Herbalife will also pay up to $2.5 million for Class Members who return unused and unopened products, though this amount could be increased if there is money left the Cash Settlement Fund after all valid claims are paid.

Attorneys for the objectors argue that Class Members of the Herbalife settlement would probably receive less than $10, even though many of the eligible claimants spent thousands of dollars for training and products. As many as 25 percent of the eligible Class Members are reportedly designated as “supervisors,” who allegedly paid at least $3,000 to earn that title. However, the plaintiffs’ attorneys argue that the average loss suffered by supervisors is closer to $8,500.

It appears that a website has been established for the Herbalife class action settlement, but the deadline to file a claim passed on Feb. 3. It is possible that some Class Members may object to the Herbalife settlement, arguing that they were not properly notified of the claims process.

The Final Fairness Hearing for the Herbalife pyramid scheme settlement will be held on May 11, 2015. Class Members who wish to object to or exclude themselves from the Herbalife class action settlement must do so by March 24, 2015.

Herbalife is currently being investigated by federal and state regulators over suspicions that it operates as an illegal pyramid scheme.

Class Members are represented by Fabian & Clendenin PC and Foley Bezek Behle & Curtis LLP.

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

UPDATE: The Herbalife class action settlement received final approval on May 14, 2015.