Herbalife to pay $15M settlement in Bostick class-action case
The Bostick class-action suit filed against Herbalife isn’t quite over yet, but a settlement agreement was filed a settlement yesterday that stipulated it would pay $15 million dollars to settle the case.
An additional $2.5 million would be paid to cover “product returns”, along with “numerous changes” to its business model for at least three years.
The proposed settlement terms were granted “preliminary approval” yesterday.
The Bostick class-action case dates back to April 2013, when ex-affiliate Dana Bostick filed a 68 page complaint under Federal corruption and racketeering laws.
The complaint accused Herbalife of being an “inherently fraudulent pyramid scheme.”
Herbalife initially moved to dismiss to the lawsuit but had their motion rejected in October. At the time, Judge Beverly Reid O’Connell stated she felt that ‘Bostick’s allegations were significant enough to proceed toward trial‘.
Some fifty hours of mediation followed, however settlement negotiations remained deadlocked.
In June of this year, Bostick’s case was awarded class-action status after four additional ex-affiliates joined the proceedings.
Settlements resumed, with Herbalife now signaling that they were now ready to negotiate a settlement over letting the case go to trial.
Herbalife, which is under investigation by the Federal Trade Commission and other regulators, has denied the allegations and earlier said the suit had no merit.
But it now appears willing to accept a class-wide settlement to put a cap on its liability, sources told The Post.
The class would cover about 1.5 million people — those who joined in the US after 2009 to the present, excluding those who signed up last year after Herbalife instituted an arbitration clause in its distributor contracts.
The settlement awarded preliminary approval on Friday will now see Herbalife ‘pay $15 million in cash, plus up to $2.5 million for product returns‘.
Herbalife maintain that ‘the settlement did not contain an admission of liability or wrongdoing.’
Because y’know, when a case has “no merit” – that’s what you do.
Reading between the lines, on Bostick’s side of the case a trial would have meant significant ongoing expense. For Herbalife, they’d have likely lost and would have had to ultimately cough up far more than $15 million.
Bostick’s lawyers meanwhile are coming out on top, as their agreement with Bostick sees them ‘seek fees equal to 30 percent of the combined sum of the settlement amount‘.
So as I calculate it, that leaves around $11.9 million for Herbalife victims. How these funds will be divvied up is as of yet not clear.
under the agreement, Herbalife must make a number of changes to its corporate policies, including how it defines its distributors, paying shipping charges for products that are legitimately returned by members and making clarifications in its membership agreement to make them less confusing.
The product return fund would be available to distributors who file valid claims for the return of unused and unopened products
Perhaps we’ll finally see an accurate representation of Herbalife’s affiliate-base, with the introduction of a once-promised preferred customer class.
Herbalife currently count affiliates who earn no money as retail customers, which is grossly misleading.
“In return for the economic and corporate policy changes provided in the settlement agreement, the settlement class will agree to fully release Herbalife from all claims that were or could have been raised in the complaints in this action,” Judge Beverly Reid O’Connell said in the filing.
As I understand it, once the settlement terms are given final approval, Herbalife will be required to cough up and implement the proposed changes to their business model and corporate policies.
The FTC have previously advised that they find Herbalife’s business practices “disturbing”.
Whether the agency will separately nail the company on the ongoing problematic nature of their business model however, remains to be seen.