Dana Bostick, a former Herbalife distributor, will bring his racketeering lawsuit against the company to a US Federal court. The 68-year-old retired contractor first filed his complaint in April, accusing Herbalife of operating an "inherently fraudulent pyramid scheme" that rewards recruitment over actual product sales.
Bostick's 68-page complaint, filed under federal corruption and racketeering laws, claims the company is an "inherently fraudulent pyramid scheme." He also cites California's "endless chain" law, which specifically prohibits such schemes. Federal racketeering statutes allow for triple damages in successful cases. Bostick himself joined Herbalife as a distributor in April 2012.
The retired general contractor alleges he failed to earn money because "he was doomed from the start by an Herbalife marketing plan that systematically rewards recruiting over retail sales." He states Herbalife promotes "outlandish statements" about potential earnings. But the plan, Bostick charges, "pays millions to those few at the top at the expense of many at the bottom."
Bostick detailed his efforts, including buying and using Herbalife products, establishing three websites, and paying for coaching sessions focused on recruitment. Yet, "the only recruit he made was a long-time friend." He claims to have spent $3,000 on products he neither consumed nor gave to family members.
Philip Dracht, Bostick's lawyer, confirmed his client spent thousands acquiring Herbalife products but saw minimal sales profit. Dracht explained, "The retail profits are not there because of all this discounting." Other Herbalife distributors, Dracht added, pressed Bostick to buy more leads to increase earnings, a cost his client could not afford.
The lawsuit also seeks class-action status. It asserts that approximately 88 percent of Herbalife's 500,000 US distributors earn no money from their involvement.
Herbalife has previously settled similar lawsuits, often with undisclosed payouts. This time, however, the company opted to contest the allegations in court. Herbalife filed a motion for dismissal, which a judge denied last Tuesday.
U.S. District Judge Beverly Reid O'Connell rejected Herbalife's motion to dismiss. She stated that Bostick's allegations were substantial enough to move forward to trial. Herbalife had argued Bostick's claims lacked sufficient merit for the case to proceed, a position Judge O'Connell did not accept.
A Herbalife spokeswoman responded to the ruling. She noted, "While the court concluded that Bostick had adequately alleged a claim against Herbalife, it expressed no view of the merits of that claim." The spokeswoman also stated that Herbalife maintains policies to deter inventory loading. She added that "Herbalife will establish these facts for the court and seek dismissal."
The spokeswoman confirmed Herbalife's intent to present these facts in court and seek a dismissal of the case.