By LawInspectsHerbalife Lawsuit is a class action lawsuit involving Herbalife Nutrition Limited and individuals who acted as distributors for the company. The class action lawsuit alleged that Herbalife induced its distributors to sign up for events that cost $600 or more a year, and misrepresented the value of attending such events to its distributors. Herbalife Nutrition Limited is a Los Angeles-based multinational multilevel marketing corporation that develops and sells dietary supplements, protein supplements and personal care products.
A class action lawsuit was filed against Herbalife on behalf of the company’s distributors who purchased tickets for two or more Herbalife events held in the United States between January 1, 2009 and April 6, 2023. Herbalife was accused of misleading distributors regarding the merits and benefits of attending such events, which cost $600 or more. The company denied the allegations. In November 2023, a settlement of $12.5 million was reached between Herbalife and the plaintiffs.
Allegations against Herbalife
The class action lawsuit was filed on behalf of eight distributors in the US District Court in Florida. Later, cases of four of the plaintiffs were transferred to the District Court for the Central District of California.
Major allegation leveled against Herbalife in the class action lawsuit was alleged misrepresentations made by the company to its distributors regarding the financial benefits of attending certain events known as ‘Circle of Success’ events. As per the lawsuit, the distributors were told by the company that they would get rich and qualify for everything, if they attended all the events. However, the lawsuit claimed, structuring of the events was done in such a manner that only about 100 top-level distributors of the company were really benefited, and they were allegedly paid to appear in the events.
Two of the plaintiffs alleged in the lawsuit that they spent $20,000 on attending multiple events in the period between 2011 and 2015. Another plaintiff claimed expenditures amounting to $3500 for attending the events alongside an additional $10,000 for purchasing products to qualify for higher compensation and recognition. Yet another plaintiff claimed that even though she was a part of the event production team and worked in the events, she had to spend more than $10,000 in attendance and travel fees.
As per the lawsuit, the distributors not only paid high costs to attend the events but also got trapped in a cycle of mandatory monthly purchases. The legal basis of the lawsuit was alleged violations of the provisions of Racketeer Influenced Corrupt Organizations Act, 1970. RICO is a law designed to prosecute cases of organized crimes.
The Herbalife events named in the class action lawsuit against Herbalife were Future President’s Retreat, Leadership Development Weekend, Extravaganza, Spectacular, January Kickoff, January Spectacular, Herbalife Summit, Herbalife Honors, African American Recruiting Tour, Future Millionaire Team Event, Building Your Business Workshop, Success Training Seminar, Galaxy Rally, RSM LA Experience, Herbalife Opportunity Meeting, Latin Recruit Tours, Latin Market LDW, Latin Market Future President’s Team Retreat, Latin Market Extravaganza, Mega Escuela, Scale to Success and Fin de Semana de Liderazgo.
Settlement of the Lawsuit
In April 2023, Herbalife agreed to a settlement of $12.5 million, without accepting the allegations. The settlement agreement was recorded on April 6, 2023 at the District Court for the Central District of California. In a statement, Herbalife asserted that the lawsuit held no merit, but a settlement was agreed upon by it due to the potential cost and distraction of a prolonged lawsuit.
Final approval hearing for the settlement was held on October 16, 2023. On November 16, 2023, the court granted its final approval for the settlement agreement.
Settlement Benefits
Herbalife paid $12.5 million into a settlement fund. About 60% of the settlement funds were allocated to pay individuals who filed valid claims. Rest of the funds were utilized in paying attorney’s fees, litigation costs and administrative expenses.
Eligible claimants were those distributors who had purchased tickets to two or more Herbalife events organized in the United States between January 1, 2009 and April 6, 2023. The class members were eligible to claim up to 150% of the amount they spent in purchasing tickets to Herbalife events, depending upon the number of claims filled.
Herbalife agreed to amend its corporate policies and procedures within 3 years from the date of the final approval of the settlement agreement. Among other changes, Herbalife decided to amend its US Rules of Conduct and Distributor Policies to make it clear that event attendance is neither mandatory nor a guarantee of financial success.