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LuLaRoe Pyramid Scheme Class Action Lawsuit 2021

Consumer Class Actions

LuLaRoe Pyramid Scheme Class Action Lawsuit 2021

LuLaRoe, an American multi-level marketing company, was charged with a class action lawsuit due to allegations that it implements a pyramid scheme.

The Class Action Lawsuit

The lead plaintiff, Jessica Ponkey, filed the class action lawsuit against LuLaRoe in a Central California federal court in March 2021.

The class action lawsuit asserts that the company practices an illegal pyramiding scheme.

Plaintiff Allegations

Jessica Ponkey alleges that LuLaRoe targets stay-at-home mothers in their pyramiding scheme. 

She adds that the company deceives these mothers by recruiting them to be consultants by paying for initial start-up capital.

In return for the capital, the consultants are allegedly promised to earn income by selling LuLaRoe items.

The class action declares that since its creation in 2013, the company has earned billions of dollars from the initial capital paid by their recruited consultants.

It adds that up until 2017, the company generates most of its income primarily from recruitment rather than selling its products.

The lead plaintiff argues that the company has also deceived its recruits into buying more products to sell since LuLaRoe implements a 100% return policy.

However, she contends that this is false marketing to earn more since the company knowingly hid vital information from its consultants.

She complains that the company did not inform their recruits about the low quality of their products.

The complainant also adds that the company provided false income statements to deceive their consultants into buying more products.

Jessica Ponkey, a Michigan resident, adds that she first joined the company as a consultant in March 2017.

She adds that she has bought LuLaRoe’s products until December 2018.

However, the lead plaintiff alleges that she has not earned and only suffered significant loss due to the company’s business model.

Pyramid Scheme

The lead plaintiff argues that this practice is similar to a pyramid scheme, and it is likely to cause recruits to lose money, especially if they were not able to find recruits.

She complains that recruits are unfortunate to fail in their venture since the business model is focused on generating income from recruitment instead of product sales.

The complainant contends that the pyramid system was designed so that only the ones at the top earn income.

In particular, the class action lawsuit states that Mark Stidham and DeAnne Brady, founders of LuLaRoe, are the only ones who have unlimited income potential based on the pyramid scheme since they are the ones at the top.

The husband and wife started LuLaRoe in 2013. It is a multi-level marketing company that sells clothes through its “consultants.”

Individuals would need to avail of an onboarding package amounting from $2,000 to $9,000 to be consultants.

Consultants can earn from selling the clothes that are included in the package. They can also earn from the Leadership Bonus Plan. 

The Leadership Bonus Plan is a compensation structure that allows consultants to earn based on the number of recruits they have and the number of LuLaRoe items they buy.

It allegedly is likened to a pyramid scheme that has been the company’s primary source of revenue.

Editor’s Note on LuLaRoe Pyramid Scheme Class Action Lawsuit 2021:

This article is published to inform you of the latest class action lawsuit charged against LuLaRoe due to an alleged pyramid scheme.

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