Class Action: LuLaRoe Is a Pyramid Scheme that ‘Preys on Stay-At-Home Mothers’

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LuLaRoe has been slammed with a proposed class action lawsuit that outright alleges the company is a pyramid scheme that “preys on stay-at-home mothers” while prioritizing recruitment of new “consultants” over profits. 

Filed in California, the 59-page complaint kicks off by explaining that the primary income of defendants LLR, Inc.; LuLaRoe, LLC; Lennon Leasing, LLC; and the companies’ owners has been driven through their ability to recruit new consultants, who pay thousands to buy in for the opportunity to sell clothing, as opposed to sales of products. In fact, the case’s three named plaintiffs allege that LuLaRoe operates as a classic pyramid scheme and that thousands who signed on with the company—purchasing significant amounts of inventory for the privilege of joining—were doomed to failure from the start given that the company puts recruitment before sales.

Those at the top of the pyramid, the case says, received the lion’s share of the profits reaped from new consultant buy-ins while those at the bottom shouldered the load of actually moving LuLaRoe’s wares. LuLaRoe’s founders, defendants Mark and Deanna Stidham, essentially sit at the very top of the pyramid, allegedly bringing in “hundreds of millions of dollars in profit for themselves on the backs of women who are seeking legitimate business opportunity” from which they can earn money while still having time to spend with their families.

Moreover, LuLaRoe apparently made material misrepresentations and omissions with regard to its “buy more-sell more” line of thinking for consultants. The plaintiffs, former LuLaRoe consultants from Pennsylvania, South Carolina and California, claim LuLaRoe, while touting its full 100-percent return policy, did not disclose to proposed class members that the quality of its products was declining, nor that the market for such was saturated.