Herbalife Seeks to Arbitrate Potential $1 Billion Class Action

This May 11, 2016, photo shows an area of the Herbalife corporate office in Los Angeles. (AP Photo/Damian Dovarganes, File)

(CN) – A federal judge in Miami may soon decide if a class action lawsuit against nutritional supplement giant Herbalife will continue to trial.

U.S. District Judge Marcia Cooke in the Southern District of Florida will preside over a hearing on Wednesday on two motions filed by the publicly traded company to change venue from Florida to California and force the plaintiffs into arbitration.

Eight former distributors filed the complaint against Herbalife in September 2017, alleging the company duped them into attending “Circle of Success” events that cost thousands to attend.

“Herbalife business opportunity participants are told that they must ‘attend every event’ if they want to be successful,” the complaint states, “and that they must ‘qualify for special treatment at these events by making large monthly purchases of Herbalife’s products.”

The complaint details former distributors’ unsuccessful efforts to achieve financial success through the company.

Jeff and Patricia Rodgers say they attended almost every event from 2011-2015 to no avail.

“Yet religious adherence to the Circle of Success did not lead to financial success for Jeff and Patti Rodgers,” the complaint states. “They didn’t quit Herbalife; after years of fruitless toil, they simply ran out of money to lose.”

The couple claims to have lost more than $100,000.

The plaintiffs also named dozens of the top distributors in the company as defendants.

The plaintiffs claim hundreds of thousands of former distributors could join the class action and damages could top $1 billion.

Herbalife has been beset by lawsuits for years by some who consider the multi-level marketing business model a pyramid scheme.

In 2015, the company settled with some distributors for $15 million over allegations they could not sell their products for a profit and a restrictive return policy.

A year later, Herbalife settled with the Federal Trade Commission for $200 million after an investigation into claims the company was essentially a pyramid scheme (though the FTC never actually used such language).

The company agreed to several measures as part of the settlement including a promise to not misrepresent how much income distributors can make and extending the return policy for the initial membership shipment.

But the Miami lawsuit contends the FTC’s actions left in place the events, which it called the “most effective fraud in the arsenal of Herbalife.”

In pretrial motions filed with the court, Herbalife attorneys argued the former distributors signed contracts mandating arbitration of any disputes. One motion states the agreements “could hardly be broader.”

“They apply to all disputes or claims between Herbalife and the plaintiffs as well as disputes arising from or relating to plaintiffs’ relationships with other distributors, such as the individual defendants,” according to the motion.

Herbalife, headquartered in Los Angeles, also maintains the lawsuit should be transferred to California.

Herbalife has 4 million members, according to its website, with net sales of $4.4 billion in 2017.

The company’s communications department did not immediately respond to a request for comment.

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