According to records filed today in U.S. federal court, Herbalife Ltd has finally agreed to settle the class action lawsuit of paying $15 million to avoid a Class Action Lawsuit. Herbalife is a multi-level marketing company which relies on independent vendors who sell Herbalife products to customers and resell them to others for a profit. The company operates many different marketing plans such as one, two, and three-tier programs.
Herbalife operates a legal pyramid scheme known as a “multi-level marketing” plan. In this plan, distributors are encouraged to recruit other distributors into their scheme in order to receive commissions and bonuses. However, distributors in Herbalife do not actually earn any money until they successfully recruit new distributors into the plan. Herbalife representatives often recruit their best prospects, knowing that the best prospects will be paid a high commission by Herbalife.
Herbalife settled the Class Action Lawsuit by paying a massive amount to resolve the claims that the U.S. Federal Court placed on it. The Class Action Lawsuit charged Herbalife with being an illegal pyramid scheme and a securities fraud. Herbalife agreed to pay the claims in full but was found not guilty on the criminal charges. The Securities and Exchange Commission also accused Herbalife of being a fraudulent and unregistered business enterprise. The company was required to pay a fine and remove its name from all of the New York Stock Exchange listings.
When Herbalife settled the Class Action Lawsuit in federal court, it was determined that it had fulfilled its obligations to settle the claims and would now pay benefits to the distributors of its product. But the company was still required to pay its attorneys who negotiated the settlement with the federal court. Herbalife distributed the Class Action Lawsuit to attorneys for a fee. Distributors who were not represented by an attorney were not entitled to any compensation. These claims determined that Herbalife was not an illegal scheme but was just a scheme to collect compensation.
The complaint stated that the defendants did not show any sympathy towards the distributors because they did not represent them in the Class Action Lawsuit. Also, it was found out that most of the so called top distributors in Herbalife were actually middlemen who collected a small part of the profits which went to the main distributor. It was further found out that most of the companies which are associated with Herbalife are nothing more than fronts used by the true distributors to defraud people.
Herbalife settled the Class Action Lawsuit by paying the claims to the class plaintiffs, which included innocent distributors who were not entitled to any settlement because they did not consult an attorney. Most of the distributors involved in the Class Action Lawsuit received financial compensation because they had to drop several distributors of Herbalife which was very difficult for them to do. Herbalife was also forced to reimburse the money which was given to the attorneys who handled the lawsuit.