Is this the end for LuLaRoe?
The latest lawsuit against LuLaRoe may be the end. That, topped with some shady ass behavior by their CEO and retailers fleeing the company I am calling it. LuLaRoe is canceled. Oh, yea…do not miss the part below where the CEO basically tells everyone to fuck off.
Looking at the turbulent past of LuLaRoe
If you aren’t familiar with the considerable legal troubles facing LuLaRoe (LLR), let’s have a quick chat. Before this November 29, 2018 lawsuit seeing 48 million in damages, there are at least 17 pending actions against LLR. I am only covering a fraction of the backstory. In April 2017 a class action lawsuit was filed against LLR by consumers complaining of the pants ‘shredding like wet toilet paper’…side note, I have had that experience with these leggings too. Consumers product dissatisfaction was reaching a high, and the reviews on sites like the Better Business Bureau were scathing. It seems that LLR attempted to abate the flood of retailers closing up shop and selling product at deep discounts online by altering their return policy. LLR was allowing retailers to return their product for a 100% refund with free shipping. This came to an abrupt halt in September 2017.
In October 2017 LuLaRoe was hit with a federal class action suit seeking 1 Billion in damages. It was also hit with smaller lawsuits from retailers left with unsellable inventory that they couldn’t return due to the change in refund policy. The Billion dollar suit is from the retailers claiming that the company was a pyramid scheme and induced retailers to purchase between $6,000 and $20,000 in inventory. The lawsuit alleges that retailers were consistently pushed to buy more stock.
Look, LuLaRoe fundamentally doesn’t meet the definition of a Pyramid Scheme because actual products are being sold (I have a drawer of leggings to prove it). However, the business practices here are questionable, and the LuLaRoe profit structure is not very friendly to its retailers. Furthermore, the abrupt switch in the return policy indicates a company that doesn’t have any qualms about screwing over those who are selling its products. This kind of behavior makes it easier for me to understand the allegations in the current suit.
The 48 Million dollar lawsuit against LuLaRoe
So let’s get into what is going on now in Providence Industries, LLC v. LuLaRoe, LLC, et al. First the plaintiff company, Providence Industries, LLC., is an apparel design, manufacturing, and supply company who was supplying leggings to LLR and securing other suppliers. The actual debt owed to this company is over 33 million in unpaid invoices. THAT IS THE ACTUAL DEBT!!! This suit has ten causes of actions or things Providence is alleging that LLR did wrong, including Breach of Contract and Fraud. This case is pleaded with some particularity and lots of tea. Stated differently, the facts contained in this complaint, if true, outlines founders of a company who were willfully siphoning off money while giving zero fucks about the quality of their product or the retailers selling it.
You may think I am being harsh. I promise I am not. The complaint states that when CEO and co-founder of LLR Mark Stidham was approached by plaintiff company about the outstanding millions he said: “look, guys, I am not going to pay you guys a fucking dime unless a judge orders me to pay it, and Deanne and I will take our two to three hundred million dollars to the Bahamas, and fuck everything.” (Providence v. LLR RIC 1825263 pg 13 ln. 28 – pg 14 ln. 2). Really Mark? You going to take your two to three hundred million earned exploiting moms selling leggings and bounce to the Bahamas while telling everyone else to fuck off?
What pisses me off is that this company (which, as of 12/1/18, is still accepting retailer applications on their website) preys on moms looking to make extra money for their family. Promising on its website that you can ‘Be your own boss,’ ‘Have more time for what matters,’ ‘Live your best life’ and ‘Achieve your Dreams!’ The real story seems to be that Mark was blaming the failure of this company on the very retailers who built it while not giving a shit about the decrease in quality of their clothing that was likely responsible for the decline in sales. AND, while retailers are being screwed by the return policy, this complaint alleges that Mark is buying himself cars valued at $700,000 and $2 million, private planes, and a multimillion dollar ranch.
Not only was Mark Stidham allegedly blowing through funds that should have been paying suppliers, but the complaint points to over 15 shell companies which were incorporated in December 2017 to shield LLR assets. Now the courts may be able to get into those corporations to get some funds back, but the funds aren’t going to get back to the retailers who believed that this company could provide them a business that would enhance their lives. It really seems that the Stidham’s don’t give a shit about their retailers though. An interesting article on Racked.com covers a training webinar where Mark lit into retailers for not selling enough, calling them ‘stale’ and saying that their customers were ‘stale.’ The retailer who spoke to Racked said that Mark’s “comment struck me as that of a man who feels superior to anyone who goes against him, particularly women.” Smith told racked “that she often felt his comments on the weekly calls had an underlying threatening tone.” Seems to me that this is precisely the kind of guy who would take his money to the Bahamas while flipping everyone else the finger.
If I were a LLR retailer, I would be done after reading this suit. To any retailers trying to get your money back from inventory, I wish you the best of luck because you deserve better than this. However, the writing is on the wall, and I will update this post when LLR files for bankruptcy because I Imagine it won’t be that far off.
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Emily D. Baker, Esq.
Badass Lawyer for Online Business
Emily has been running business for 15 years and has ove 13 years of legal experience. She spent 10 years at the Los Angeles County District attorney's office where she truly learned to be a solopreneur. Emily has built her consulting and speaking business from the ground up, in her garage jamming out to 90's music. She specializes in no BS practical advice for the starting and scaling online entreprenur. Emily will tell you what the business gurus can't in a way that is both hillarious and empowering.