LuLaRoe clothes company faces class-action lawsuit

ARAPAHOE COUNTY, Colo. -- Bags of clothes are piled up in Liz Keenan’s home office, racks of clothes are taking over Kimberly Jarrett’s family room. Both women invested thousands of dollars in the popular clothing company LuLaRoe and now worry they could be out some serious cash.

Denver-based KMGH talked to and exchanged messages with at least 15 different women, they all told a similar story about a business they loved and broken promises.

The California-based company was slapped with a class-action lawsuit accusing it of running a pyramid scheme. The company fired back saying that the lawsuits are “factually inaccurate and misinformed,” The Associated Press reported.

“Plaintiffs and so many other consultants were never able to realize any actual profit and, as a result, they failed,” the Oct. 23 filing says. “They failed even though they were committed and put in the time and effort. They failed because they were doomed from the start.”

Keenan said she started selling LuLaRoe about a year ago after she fell in love with the company’s comfy dresses. The mom of two teenage boys works part-time as a massage therapist and wanted a new challenge.

“You heard stories. You know, I know one lady -- she was able to buy her house full out, and her husband was able to retire. You know, you hear those stories and I knew her personally,” said Keenan.

She spent about $6,500 to start up her business and estimates she has bought somewhere around $15,000 in clothes. She resigned this summer and the company sent her an email stating she would get a 100-percent refund if she mailed the leftover clothes back.

Keenan says she was in the middle of a move and by the time she went to mail the clothes back, the company had cancelled that offer.

“It was very disappointing, it just kind of made you sick to your stomach,” said Keenan. She has 15 tote bags full of clothing that she wants to sell, it’s probably worth at least $5,000.

Keenan is far from alone. KMGH’s Liz Gelardi talked with a woman from Westminster, Colorado who believes she has anywhere from $20,000 to $25,000 in inventory. A woman from Greeley says she is left with $4,000 and a single mom from Ft. Collins has $2,000 worth of inventory crammed in a two-bedroom apartment with her kids.

The women who talked to KMGH about their experiences all wanted a way to make a little extra money and like the appeal of working from home. Some of the women who were “trainers” -- meaning they had people working under them said they did make money.

Kimberly Jarrett said she met lots of friends through LuLaRoe and said it really helped her family have a better life. She decided to part ways because she felt like the company’s values shifted.

“They had their policies and they ended this offer and it hurt a lot of people and it hurt two of my personal teammates,” said Jarrett.

She has an estimated 500 pieces of clothing sitting in her living room. Ex-retailers feel like they’ve been left with no choice but to discount the items even though they had been told not to.

LuLaRoe is offering a 90 percent refund, but several women told KMGH they’ve been waiting months to get their money back. Jarrett said if she sent the clothes back she would have to pay for shipping and all her bonuses would be deducted from the amount she was owed.

Many of the same consultants also told KMGH they knew what they were getting into and understood they would be taking on some when they opened a business. They also expressed concern about hurting the other consultants if they sold their merchandise at a discount.

“The people that are trying to hold on I wish them all the best and I want them to hold on and I want them to succeed… but I’m just going to have to watch and hope for best for them,” Jarrett said.

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