LuLaRoe – a multi-level marketing company that sells leggings – is currently taking fire from both their sellers and their supplier.
The company’s chief clothing supplier, Providence Industries, recently filed a lawsuit against LuLaRoe for nearly $49 million. The lawsuit claims LuLaRoe has avoided paying their bills for the last seven months, Business Insider reports.
The supplier’s lawsuit accuses the legging company of being insolvent. Mark and DeAnne Stidham – the founders of LuLaRoe – are being accused of using shell companies to hide their assets, so that they can continue to afford their extravagant lifestyles while avoiding payment of their debts.
In total, the lawsuit identifies 17 different limited liability companies all connected to Mark and DeAnne, and all were founded between July and December of last year. The suit claims that the Stidhams used these shell companies to purchase millions of dollars in vehicles, real estate, private aircrafts, and other expensive assets. The lawsuit accuses the LuLaRoe founders of using these limited liability companies to “hinder, delay, and defraud the creditors.”
The supplier also claims in the lawsuit that an attempt was made to confront Mark on September 7 of this year, regarding his past due bills, to which he allegedly responded by saying, “Look guys, I am not going to pay you guys a f***ing 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 f*** everything.”
LuLaRoe's supplier said the leggings company hadn’t paid its bills for seven months while its principals, Mark and DeAnne Stidham “lavished themselves with luxurious lifestyles” https://t.co/98j2tG0ufe— The Wall Street Journal (@WSJ) December 4, 2018
Just hours after news of the lawsuit broke, LuLaRoe wasted no time sending an email out to their sellers claiming that the lawsuit was nothing more than an attempt to “strong arm” the company into paying a hefty unfounded settlement.
“We believe the claims in this case are completely without merit and will fight vigorously against them,” LuLaRoe penned in an official statement to Business Insider regarding the lawsuit.
According to a separate piece by Business Insider, their chief supplier isn’t the only one currently unhappy with the multi-level marketing company. Dozens of sellers are also reporting that LuLaRoe is charging them for chunks of inventory not actually being delivered.
Part of what has the sellers so unhappy is the level of difficulty that goes into getting a refund from LuLaRoe — after being charged for inventory which they allegedly never receive. According to sellers, the company prefers to offer credits for future orders as opposed to issuing refunds. There are even some sellers who do not get a refund or credit following the delivery issue.
Dozens of LuLaRoe sellers claim the company repeatedly charged them for products it never delivered, then failed to refund them for the missing items https://t.co/sQCmvbNfba— Business Insider (@businessinsider) December 5, 2018
“They never issued a refund for missing items. It was always a credit,” said Danielle O’Meara, a former LuLaRoe seller who closed her business two months ago. She had been selling the product for more than a year, according to Business Insider.
“I recently canceled my business and have requested the credits be refunded to me and they refuse to refund to my card stating that is not policy, they will only send a check; however, they have yet to send a check.”
A second seller – who requested to remain anonymous – told Business Insider that they recently placed an order for 80 units and only received 20, despite being charged for all 80. Instead of issuing a refund, the company provided the seller with a $500 credit for the missing product toward their next purchase.
The sellers that spoke to Business Insider described the credits instead of refunds as a “vicious cycle.”
This “vicious cycle” appears to be something that LuLaRoe sellers have been dealing with for over two years.