LuLaRoe News

LuLaRoe Reaches Settlement in Alaska Sales Tax Lawsuit

Npros.com | 1/9/2026

LuLaRoe has reached a settlement in a federal lawsuit accusing the clothing direct seller of improperly charging sales tax on purchases shipped to customers in Alaska, according to a notice filed in the U.S. District Court for the District of Alaska.

The notice, filed January 8, 2026, said plaintiff Katie Van and LuLaRoe had reached an agreement in principle, were finalizing settlement documents and would file a dismissal within 60 days. Terms were not disclosed. The suit, Van v. LLR, Inc., had sought 36 million dollars in damages.

Van filed the case in 2018, alleging LuLaRoe collected sales tax on clothing sold to customers in jurisdictions that do not impose such a tax. Class certification was denied in December 2023 after the court found that common proof could not be used to determine which putative class members were injured. LuLaRoe has said it refunded the erroneous sales tax charged on purchases in the state.

California Jury Awards More Than 164 Million Against LuLaRoe in Supplier Fraud Case

Press Release | 11/11/2024

LOS ANGELES, November 11, 2024 --

A Riverside County, California, jury awarded Cresden LLC more than 164 million dollars against LuLaRoe and related defendants after a two-month trial, plaintiffs' counsel Bird Marella announced. Cresden will also seek attorney fees as the prevailing party.

The jury found that the defendants breached written sourcing agreements covering tens of millions of dollars of products, orchestrated fraud tied to their multi-billion-dollar business model and tried to hide resulting revenues. The case followed about six years of litigation between the apparel supplier and the multilevel marketer.

The verdict adds to LuLaRoe's legacy legal exposure from its rapid expansion and subsequent collapse in distributor and supplier relationships.

Court Dismisses Ponkey Pyramid-Scheme Class Action Against LuLaRoe With Prejudice

Court Filing | 9/5/2024

A federal judge in the Central District of California on September 5, 2024 dismissed with prejudice a proposed class action that former consultant Jessica Ponkey brought in March 2021, alleging that LuLaRoe operated an unlawful, fraudulent pyramid scheme.

The court granted the motion by LuLaRoe parent LLR, Inc. to dismiss the first amended complaint. It found valid and enforceable the one-year limitations period in the LuLaRoe Independent Consultant Program agreement, which made the claims time-barred because they were filed years after the plaintiffs became consultants. Because the parties agreed the claims depended on that provision being invalid, the court denied leave to amend as futile.

The case had been reopened in 2023 after the Ninth Circuit reversed an earlier order compelling arbitration. Ponkey filed a new appeal to the Ninth Circuit on September 18, 2024.

Alaska Federal Judge Denies Class Certification in LuLaRoe Sales Tax Suit

Court Filing | 12/5/2023

U.S. District Judge Joshua M. Kindred of the District of Alaska on December 5, 2023 denied plaintiff Katie Van's renewed and amended motion for class certification in Van v. LLR, Inc., a suit accusing LuLaRoe of charging sales tax that Alaska buyers did not owe.

The case centers on LuLaRoe's Audrey point-of-sale system, which from 2015 to 2017 charged tax based on each retailer's location rather than the buyer's, so Alaskans who bought from out-of-state retailers paid tax they did not owe. LuLaRoe later issued refunds. Van sought to represent buyers who paid the tax and had no discount identified on the transaction, under Alaska's consumer protection law.

After the Ninth Circuit vacated an earlier class certification in March 2023, LuLaRoe submitted retailer declarations showing that many retailers offset the improper tax with discounts, free shipping, free products, credits or vouchers that were not consistently recorded on invoices. The court found that determining which buyers suffered an actual injury would require individual inquiries that would overwhelm common questions, though it rejected LuLaRoe's separate voluntary-payment argument. LuLaRoe sells clothing through independent fashion retailers.

Ninth Circuit Reverses LuLaRoe Arbitration Orders in Ponkey Class Action

Court Filing | 7/31/2023

The U.S. Court of Appeals for the Ninth Circuit on July 31, 2023 reversed and remanded district-court orders compelling arbitration and confirming an arbitration award in Jessica Ponkey v. LLR, Inc., a putative class action against LuLaRoe and related entities. The panel held the arbitration agreement unenforceable under California's unconscionability sliding-scale test.

The court cited oppressive procedural terms and substantive one-sided provisions, including confidentiality, fee-waiver and arbitration-exemption features that favored the company, and concluded the offending terms could not be severed to preserve the agreement. The ruling returns the dispute to federal court rather than binding arbitration.

LuLaRoe is a multilevel marketer of women's clothing sold through independent retailers; the Npros directory lists the company as LuLaRoe.

LuLaRoe to Pay 4.75 Million to Resolve Washington Pyramid Case

Washington Attorney General | 2/2/2021

Washington Attorney General Bob Ferguson said LuLaRoe will pay 4.75 million dollars to resolve a consumer protection lawsuit that accused the apparel seller of operating a pyramid scheme.

The resolution, filed in King County Superior Court, bars LuLaRoe from operating a pyramid scheme and requires clearer disclosures to retailers. The company must publish an income disclosure that accurately describes what retailers may earn, base bonuses on retail sales rather than on merchandise bought by independent retailers, and audit whether sales are to real consumers. New retailers must be allowed to return all inventory for a full refund, including shipping, within 45 days of joining. Seasonal or nonreturnable inventory must be flagged before purchase.

Ferguson said 4 million dollars will go to Washington retailers who lost money, with checks expected for about 3,000 people. The other 750,000 dollars will partly cover the cost of the investigation and the case. The office said every Washington retailer who lost money under the challenged structure will receive restitution.

The lawsuit was filed in January 2019 against LuLaRoe and several executives. It alleged unfair and deceptive claims about how profitable a retailer business would be, an unlawful bonus structure, and an unfair refund policy. Ferguson said the conduct violated the Washington Consumer Protection Act and the state Antipyramid Promotional Scheme Act. Since January 2014, more than 3,600 Washington residents had joined as retailers. Startup packages ran from 500 dollars to 5,000 dollars, and buyers could pick a clothing style but not specific sizes or prints.

The state said income claims, including suggestions of full-time pay for part-time work and very high monthly sales, were not representative. Posted income disclosures were described as incomplete, outdated, or focused on recruitment bonuses in a way that hid overall losses. The office said two retailers with large downlines made more than 5 million dollars in profit combined from 2016 to 2019, while more than a third of retailers reported losses. A promised 90 percent refund on certain unsold inventory was, the state said, so unpredictable that retailers called the math LuLaMath, and some waited months or received nothing.

Washington Court Unseals LuLaRoe Founder Testimony in Pyramid Case

Npros.com | 9/22/2020

A Washington state court has let the attorney general's pyramid-scheme case against LuLaRoe continue toward trial after unsealing deposition testimony from the company's founders.

On August 28 the court denied LuLaRoe's request to end the case before trial. Trial was then set for February 16, 2021. Washington had sued the California clothing company more than a year earlier, alleging it operated as an illegal pyramid scheme in which bonuses depended on recruiting other distributors, called independent fashion retailers, rather than on sales to retail customers. The state says the bonus plan used until July 2017 rewarded purchases inside a distributor's own network, including inventory the distributors bought themselves.

The unsealed filings include December 2019 depositions of co-CEOs DeAnne Brady, also known as DeAnne Stidham, and her husband Mark Stidham. Brady said she did not know her salary. She also said she did not know the FTC rules on income claims, and she treated unusual earnings stories as acceptable when they were true and told face to face, including a claim that a retailer made $25,000 in the first month. She said an average retailer could make $3,000 to $5,000 a week based only on what people told her, because the company had little more than email in 2013, 2014, and 2015. She denied posting bonus checks on Instagram, then was shown posts of herself signing them, including one that said she was signing big bonus checks.

Washington's papers say that under the pre-2017 plan, 163 distributors in the state earned bonuses even though they lost money at retail, 35 percent had a retail loss, and 34 percent still had an overall loss after bonuses. Two Washington mentors earned bonuses of $2,285,321 and $2,926,893 over four years while a third of their teams lost money. One of them said at a late 2017 company event, "I got overpaid while people on my team were failing."

Stidham could not say who prepared LuLaRoe's 2016 income disclosure statement, where the numbers came from, or whether one was issued in any other year. He said the 2014 compensation plan did not really push retail sales, and that from the day it launched he knew people might order extra inventory to qualify for bonuses, to look higher ranked, or to help a sponsor's check. In a 2017 video he told distributors the plan change was meant to insulate the company from FTC violations by making sure product was sold to consumers instead of used to build a pyramid. DeAnne's son Jordan Brady, also a defendant, was recorded telling distributors the company needed to get away from being a pyramid scheme, because a sponsor could keep pushing a recruit to buy, or even pay for her inventory, to enlarge a bonus check. Another son, Kenneth Brady, vice president of sales, said at a February 25 deposition that he would want leaders to encourage their teams to buy more inventory even if they could not sell it. Stidham agreed LuLaRoe was paid when distributors ordered product both before and after the 2017 change.

The state argued that lower wholesale and retail volume after July 1, 2017 does not protect the company, because Washington's pyramid law covers schemes that have not collapsed. By April 2019, dozens of LuLaRoe distributors, including eight in Washington, had filed for bankruptcy, against Brady's claim that the business could deliver a family's financial freedom.