Regulators intervene in Bostick vs. Herbalife settlement
As part of the settlement in the Bostick lawsuit against Herbalife, those represented by the class-action lawsuit had to
agree to fully release Herbalife from all claims that were or could have been raised in the complaints in this action.
What that basically meant was, after the settlement was finalized, Herbalife victims would be unable to further pursue claims against the company.
The Bostick lawsuit alleged Herbalife was a “fraudulent pyramid scheme”. The proposed settlement terms were given preliminary approval late last year, however the settlement terms have yet to be finalized.
As we slowly progress towards finalization of the settlement terms, one of the more interesting stories to emerge has been that of regulatory intervention.
Seeking to protect Herbalife victims against being barred from future regulatory action against the company, various Attorneys General met with Bosticks lawyers ‘to verify a settlement agreement will not interfere with their ongoing probes into‘ Herbalife.
Citing court filings made earlier this month, Natural Products Insider write:
An amendment to the agreement filed on March 6 with the court states, in part, that the settlement shall not “limit the right of any Class Member to provide information, file complaints or cooperate with any federal, state, or local government agency in connection with any matter related to the Released Claims, nor does it purport to limit the jurisdiction or authority of any government agency to consider or investigate such claims.”
Lawyers for the parties conferred with attorneys general in several states to ensure the settlement will not interfere with ongoing investigations or “release claims which could be prosecuted by attorneys general,” Thomas G. Foley Jr., one of the lawyers representing the plaintiffs, wrote in a March 10 court filing.
Reading between the lines, regulators are ensuring that Herbalife don’t try and slip any terms into the settlement that would bar class members from assisting regulators.
This includes further investigating any claims made in the Bostick lawsuit, be it the original lawsuit itself or claims made by individual class members (both before and after the settlement is finalized and approved).
Of particular note is the addition to the settlement terms of the SEC, FTC and New York Attorney General’s Office:
“If the SEC, the FTC or the New York and Illinois Attorneys General commence administrative or other actions, Class members are not precluded by the terms of the release from participating in any future recoveries by regulatory authorities or the States Attorneys General,” Foley added earlier in the 22-page filing.
Just last week it was revealed that, as part of an investigation into Herbalife, the New York Attorney General’s Office had subpoenaed at least one individual to appear before a grand jury.
The details of the case remain a mystery, however the specific mention of the New York Attorney General in Foley’s amendment in conjunction with “any future recoveries” is not lost on me.
This is the strongest indication yet that US regulators are expecting, at least on some level, to recover funds from Herbalife. And this of course is only going to occur with an enforcement action taken against the company.
Leading on from that of course would be regulatory legal action, but that is perhaps jumping one too many steps ahead given how little we know about the various investigations currently taking place.
Playing devil’s advocate, one could also assert that US regulators are simply covering their bases. Should they file enforcement action against Herbalife, this clarification in the Bostick settlement terms would ensure no complications regarding class members.
Personally, what with regulatory investigations being ongoing for some time now, I think regulators are probably beyond covering their bases either way.
They’ve obviously got some idea of where they’re going with their investigations, and interventions like this openly suggest they plan to take action against Herbalife at some point.
That unfortunately brings us back to the current status of the various regulatory investigating taking place, which for now remain a mystery.
It’s unlikely we’ll get any concrete clarification from any of the regulators investigating until, one way or another, they decide to make a move against Herbalife.
Regarding the Bostick settlement, as per Natural Products Insider;
The deadline for filing objections to the settlement is early next week, and a hearing for final approval is scheduled for May 11 in the Los Angeles courtroom of U.S. District Judge Beverly O’Connell.
As always, stay tuned…