Herbalife, the global nutrition company, accused of operating a pyramid scheme issued a statement regarding the court’s final approval of its class action settlement with former distributors.
“As we have consistently stated, we believe that the settlement was fair, reasonable and adequate to class members,” said Herbalife.
The controversial nutrition company also noted the findings of the court that the low number of claimants was not surprising. According to Herbalife, substantial survey results showed that most people join the company as discount consumers of its products.
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy Read More
Herbalife class action settlement details
On Thursday, the U.S. District Court for the Central District of California granted final approval to the $15 million settlement related to the class action lawsuit filed by Dana Bostick and other distributors against Herbalife.
In a legal filing, Eric Robin of Kurtzman Carson Consultants indicated that 7,547 class-action claims were filed against Herbalife by its former distributors. They claimed that the company operates a pyramid scheme and misleads distributors regarding their potential profits.
Robin said 114 claimants would receive more than $10,000 in the business opportunity category, 329 claimants would receive over $5,000 and $1,655 claimants would receive more than $1,000. The total potential payout for the claimants is around $7.39 million. Approximately 30% of the settlement funds ($5.25 million) would go to attorney fees.
Herbalife also allocated as much as $2.5 million to pay class-action members who filed valid return claims for unused and unopened products. According to Robin, the total value of the return claims was $938,280.
In October last year, Herbalife agreed to settle the class-action lawsuit filed by Bostick. The company emphasized that the settlement “does not contain an admission of liability or wrongdoing.” Herbalife also asserted that the case against it had no merit.
At the time, Herbalife explained that it decided to settle the class-action lawsuit because of the potential cost and distraction, disruption and burden of prolonged litigation on the company and its management team.
Herbalife remains under investigation
Herbalife disclosed in its recent regulatory filing that it is still under investigation by the Department of Justice (DOJ). The filing indicated that the DOJ asked the company to provide information about certain members and others in connection with the allegations of its business practices.
The company also previously received inquiries from the Federal Trade Commission (FTC), Securities and Exchange Commission (SEC), and other government agencies.
Herbalife anticipated that these government agencies may “determine to seek information from the company and other persons relating to these same or other allegations” in the future.