The most recent post on LuLaRoe’s Instagram account is a dedication to the company’s founder DeAnne Stidham on her birthday. Alongside the image of a blonde, smiling Stidham – who, according to the company’s (since-edited) website, was a single mother of seven children when she launched LuLaRoe in 2012 – are messages praising the 60-year old for “striving to make everyone feel loved and appreciated,” serving as LuLaRoe’s “gorgeous and fearless leader,” and “starting and sharing this amazing business.”
The Instagram post paints a remarkably prettier picture than the dark allegations with which courts across the country are currently grappling. Look beyond the glowing messages and the portrait of Stidham, and you will see that complaints filed in a growing number of states allege that that same ordinary-looking woman is the mastermind behind an ugly multi-billion dollar pyramid scheme, one that has allegedly bilked women across the country of millions of dollars and is being likened to – according to allegations in at least one of a handful of pending lawsuits – an organized criminal operation.
The implosion of LuLaRoe has been swift. It was barely a couple of years ago that the growth potential for the company seemed inexorable. In a matter of 4 years of launching the multi-level marketing company from her home in California, Stidham and her husband were at the top of a thriving business. LuLaRoe maintained a roster of tens of thousands of commission-based sellers scattered throughout the U.S. Fueled largely by stay-at-home moms in search of a bit of extra cash and Facebook posts that boasted about LuLaRoe’s comfortable clothing, including its much-buzzed-about printed leggings, LuLaRoe would ultimately bring in over $1 billion in annual revenue.
But the company’s ascent came to a screeching halt in 2017 when it was hit with not one, but two, class action lawsuits, respectively alleging that LuLaRoe “improperly and fraudulently adds a surcharge to purchases disguised as a ‘sales tax’ that does not exist,” and that it has engaged in unfair, unlawful, and fraudulent business practices by advertising and selling defective leggings, prompting thousands of unsatisfied LuLaRoe customers to complain.
These lawsuits would soon be followed by additional actions, at least one of which would seek as much as $1 billion in damages, all of which would paint LuLaRoe as little more than a toxic “pyramid scheme.” A very recent suit, which was filed by the company’s key supplier, Province Industries, asserts that the troubled apparel company has not only stopped paying its bills, but its founders have engaged in efforts to “shield assets” from their creditors by creating shell companies to purchase everything from $2 million race cars and $60 million private jets to sprawling estates in Wyoming and South Carolina.
In setting forth 10 different causes of action against LuLaRoe and asserting that the Stidhams are actively attempting to circumvent the law, Province Industries’ suit was one of most damning of the nearly 20 cases that have been initiated … until this past week when the state of Washington filed a case of its own.
Washington State Attorney General Bob Ferguson announced on Friday that his office has filed suit against LuLaRoe in state court for allegedly “misrepresenting and failing to honor its refund policies in violation of the state Consumer Protection Act.” In a statement on Friday, Ferguson said, “LuLaRoe tricked consumers into buying into its pyramid scheme with deceptive claims of high profits and refunds for unsold merchandise. Instead, many Washingtonians lost money and were left with piles of unsold merchandise and broken promises from LuLaRoe. It’s time to hold LuLaRoe accountable for its deception.”
A rep for LuLaRoe said the claims made in the Office of the Attorney General’s lawsuit are “completely without merit” and revealed that the company plans to fight vigorously against them.
As of now, Washington is the first state to take action against LuLaRoe.
*The case is State of Washington v. LuLaRoe, 19-2-02325-2 SEA.
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