In $1B law­suit, dis­trib­u­tors say Her­bal­ife events were a sham

The Charlotte Observer (Sunday) - - Business - BY CURT AN­DER­SON As­so­ci­ated Press

Pa­tri­cia and Jeff Rodgers fig­ured they did ev­ery­thing right to get rich sell­ing Her­bal­ife health and per­sonal care prod- ucts. They at­tended all of the “Cir­cle of Suc­cess” events, brought in new re­cruits, met their quo­tas on buy­ing Her­bal­ife goods to sell and even set up a store­front shop.

But they didn’t get rich. In­stead, Pa­tri­cia Rodgers es­ti­mates the cou­ple lost over $100,000, in­clud­ing about $20,000 spent on at­tend­ing Her­bal­ife events. Now, the cou­ple and others are su­ing the multi-level mar­ket­ing com­pany that sells its prod­ucts through a net­work of dis­trib­u­tors who re­cruit more dis­trib­u­tors. The po­ten­tial class-ac­tion case could in­volve more than 100,000 plain­tiffs and might mean as much as $1 bil­lion in dam­ages.

“We did ev­ery­thing they told us to do. We at­tended ev­ery event. We trav­eled and we spent money. And we didn’t get suc­cess­ful like they said we would,” Rodgers said in an in­ter­view at the cou­ple’s home in Hal­lan­dale Beach, Florida. “You get in­volved in it, it’s al­most like a cult men­tal­ity.”

Los An­ge­les-based Her­bal­ife, a pub­licly traded com­pany with 2017 net sales of $4.4 bil­lion, has long been em­broiled in lit­i­ga­tion and reg­u­la­tory ac­tions over its busi­ness prac­tices, which have been com­pared by some to a pyra­mid scheme. A spokes­woman de­clined to com­ment for this story, al­though Her­bal­ife at­tor­neys are seek­ing to get the law­suit dis­missed or moved from Florida to a Cal­i­for­nia court.

Her­bal­ife lawyers say in court pa­pers the dis­trib­u­tors now su­ing the com­pany in Mi­ami were not spe­cific in how com­pany state­ments in­flu­enced them into mak­ing bad de­ci­sions.

“Plain­tiffs’ fail­ure to spec­ify how they were mis­led by these al­leged mis­rep­re­sen­ta­tions is fa­tal” to many key claims, the lawyers wrote.

To be­come a dis­trib­u­tor, a per­son must be re­cruited by an ex­ist­ing dis­trib­u­tor, ac­cord­ing to the com­pany’s web­site. The new re­cruit also must pur­chase a “Her­bal­ife Nu­tri­tion In­ter­na­tional Busi­ness Pack” ex­plain­ing how the busi­ness works and how to be­come a spon­sor. The new dis­trib­u­tor buys Her­bal­ife prod­ucts at a dis­count and sells them, of­ten part-time, in hopes of mak­ing a profit.

In 2016, the com­pany set­tled a Fed­eral Trade Com­mis­sion case for $200 mil­lion. It cen­tered on Her­bal­ife’s busi­ness model be­ing based on re­cruit­ment of dis­trib­u­tors rather than ac­tual sales of its prod­ucts, such as pro­tein shakes, vi­ta­mins and skin care items. One year ear­lier, an­other law­suit by Her­bal­ife dis­trib­u­tors ended in a $17.5 mil­lion set­tle­ment.

In the FTC case, the agency said in a state­ment that “only a small mi­nor­ity of dis­trib­u­tors have made any­thing near what the com­pany prom­ises” through pro­mo­tional ma­te­ri­als show­ing how they lived in ex­pen­sive homes, drove lux­ury cars and took ex­otic va­ca­tions.

“A large ma­jor­ity of dis­trib­u­tors made lit­tle or no money and a sub­stan­tial per­cent­age lost money,” the FTC said.

The case in Mi­ami fed­eral court is dif­fer­ent, said plain­tiffs’ at­tor­ney Etan Mark. It tar­gets the sys­tem of high-en­ergy events known as “Cir­cle of Suc­cess” that dis­trib­u­tors are ca­joled into at­tend­ing all over the coun­try at their own ex­pense. They are touted as the sup­posed key to learn­ing how to be­come wealthy – all the while sign­ing up more peo­ple to be­come dis­trib­u­tors in what’s called the “down­line.”

A com­mon com­pany re­frain was: “If you go to all of the events, you qual­ify for ev­ery­thing – you will get rich,” ac­cord­ing to the law­suit. An­other was: “These cru­cial events pro­vide you with the skills you need to take it to the next level,” court doc­u­ments show.

“They felt like they were chas­ing a ghost. It’s the event you missed that would have changed your life,” Mark said. “These tens of thou­sands of peo­ple in this case lost money. I be­lieve the vast ma­jor­ity of peo­ple lose money through the Her­bal­ife op­por­tu­nity.”

U.S. District Judge Mar­cia Cooke in Mi­ami is hear­ing the case and a trial is set for Septem­ber 2019 if the case isn’t re­solved be­fore then.

LYNNE SLADKY AP

Pa­tri­cia Rodgers of Hal­lan­dale Beach, Fla., and others are su­ing Her­bal­ife, a com­pany that has a busi­ness model some­times com­pared to a pyra­mid scheme.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.