A multi-million dollar lawsuit is accusing the founders of LuLaRoe of hiding tens of millions of dollars in shell companies to avoid paying their creditors.
According to Bloomberg, Los Angeles-based clothing maker MyDyer, which was LuLaRoe's main clothing manufacturer, is now suing the company for $48.7 million for unpaid products and services. In addition, MyDyer is suing Mark and DeAnne Stidham, LuLaRoe's founders, accusing the couple of setting up more than 20 limited liability companies in a “scheme to hinder, delay and defraud” its creditors.
MyDyer has requested that the court seize LuLaRoe’s assets while the case is pending. While LuLaRoe has yet to answer the lawsuit, Mark Stidham filed a response to oppose the receiver request, as well as a writ of attachment that showed LuLaRoe has paid MyDyer more than $1.8 billion over the years and that the unpaid amount was “a very small fraction of the overall business.” Stidham also claimed that MyDyer has overcharged LuLaRoe in the past and that payment schedules were never strictly enforced.
MyDyer isn't the only business associate upset with LuLaRoe. Many former LuLaRoe sellers have complained that they have not received refunds for unsold items after the company scrapped its 100 percent buyback policy and replaced it with a complex – and much less generous – model.
“We call it LuLaMath,” says Kelly Ludwig-Johnson, who had about 1,100 articles of unsold clothing when she decided to stop selling for the company last March. With the new restrictions, only 79 of them were eligible for a refund. Although Ludwig-Johnson sent those items back in May, she’s still waiting for the $1,187 refund, and the company has not responded to emails.
So in September, she contacted the attorneys general in both her home state of Oregon and in California, where LuLaRoe is based. The response the Oregon AG received from the company is that it was processing the refund requests, but that it's a “time-consuming process.”
“I know $1,187 isn’t a lot. It’s not going to break me, but there are thousands of people like me out there,” said Ludwig-Johnson. “It’s hard knowing Mark has million-dollar cars and people are owed millions in refunds.”