LuLaRoe announced it has entered into a settlement agreement with the Office of the Attorney General of the State of Washington. The lawsuit was filed by the Attorney General’s Office on January 23, 2019 against LuLaRoe and three individuals, and alleged that LuLaRoe was operating as an illegal pyramid scheme.
This recent settlement specifically states that none of the defendants admitted liability or violation of any laws, and was reached after more than 40 depositions and over 175,000 pages of documentation from LuLaRoe were obtained.
The trial was expected to begin on February 16, 2021 and last 12 weeks.
“Given the expenses LuLaRoe incurred in defending this lawsuit, it made sense for LuLaRoe to pay the settlement we agreed upon,” said Mark Stidham, LuLaRoe’s Chief Executive Officer. “Even though we believed we would win the case eventually–whether at trial or on a subsequent appeal–the expense would be enormous and the amount of time senior management would have had to devote to the litigation during the trial would have been a distraction from our business.”
As part of the settlement, LuLaRoe will pay the State of Washington $4,750,000 for “costs and reasonable attorney’s fees incurred by Washington in pursuing this matter, monitoring and potential enforcement of this Consent Decree, or for any lawful purpose in the discharge of the Attorney General’s duties.”
“We are proud of what we have accomplished in the State of Washington and nationally by giving entrepreneurs–mostly women–the opportunity to own and operate their own businesses selling our clothing,” Stidham said. “Since 2016 Washington Independent Fashion Retailers have reported at least $185 million in retail sales to over 180,000 customers. LuLaRoe has paid Washington over $13.5 million in sales tax. The settlement with the Attorney General’s Office allows us to refocus our attention where it should be–on continuing to support our Independent Fashion Retailers across the country, as well as those in the State of Washington. We are excited about the future for LuLaRoe’s Independent Fashion Retailers and for LuLaRoe customers.”
DSA Responds to the LuLaRoe settlement.
Responding to LuLaRoe’s litigation with the Washington state Attorney General, the Direct Selling Association announced it sees the $4.75 million settlement as a reaffirmation of “consumer protection principles advocated for by the DSA.” The DSA made clear that LuLaRoe is not and has never been a member of the DSA and that if they had been, an inventory repurchase program—as mandated under the settlement—would have already been in place to stay consistent with the DSA Code of Ethics.
“DSA members are committed to the highest level of consumer protection and requires our members to follow the Code of Ethics, which includes a mandatory buyback provision enforced by the DSA Code Administrator,” said DSA President Joseph N. Mariano. “We appreciate working with state legislatures and Attorney Generals on consumer protection legislation, which is now law in 26 states. Additionally, our membership worked with the BBB National Programs to create the Direct Selling Self-Regulatory Council (DSSRC), an independent self-regulatory body which monitors income and earnings claims for all direct selling businesses.”
In a press release, the DSA stated: “DSA remains committed to ensuring high levels of consumer protection among all direct selling businesses and providing clarity for new, incoming, existing and exiting salesforce members.”