Regulators intervene in Bostick vs. Herbalife settlement

A federal settlement in the Bostick lawsuit against Herbalife threatened to lock victims out of future fights with the company—until regulators stepped in and blocked it.

The class-action suit accused Herbalife of running a "fraudulent pyramid scheme." Under the original settlement terms, plaintiffs would have had to surrender all claims against the company, barring them from pursuing any additional legal action afterward. The deal won preliminary approval last year but hasn't been finalized yet.

As the settlement neared completion, state attorneys general grew concerned. They contacted the plaintiffs' lawyers to make sure the agreement wouldn't interfere with their own ongoing investigations into Herbalife. The result was a crucial amendment filed March 6.

The revised language explicitly states that the settlement cannot "limit the right of any Class Member to provide information, file complaints or cooperate with any federal, state, or local government agency" related to the case. It also protects regulators' ability to investigate and prosecute their own claims.

Thomas G. Foley Jr., one of the plaintiffs' attorneys, wrote in a March 10 court filing that his team had conferred directly with attorneys general in multiple states to prevent Herbalife from burying language in the settlement that would silence victims from cooperating with investigators.

The stakes became clearer in a second amendment. The SEC, FTC, New York Attorney General's Office, and Illinois Attorney General's Office secured explicit language guaranteeing that class members remain free to participate in any future regulatory recoveries or state-led 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 wrote in the 22-page filing.

The timing is significant. Just days before the amendment appeared in court filings, the New York Attorney General's Office had subpoenaed at least one individual to testify before a grand jury as part of its Herbalife investigation. Details remain sealed, but the specific mention of New York's office in the settlement amendment suggests the investigation is active and serious.

What regulators prevented here is a common playbook in corporate settlements: strip victims of their ability to help authorities build cases. By burying release language deep in settlement documents, companies can effectively shut down government investigations by preventing witnesses from coming forward. The attorneys general saw it coming and cut it off.

The Bostick settlement is still pending final approval from the court. When it arrives, class members will have their payout—but they'll also retain the right to talk to regulators, testify before grand juries, and support ongoing investigations. Herbalife won't be able to use the settlement as a shield against government scrutiny.

🤖 Quick Answer

What was the main concern of state regulators regarding the Bostick v. Herbalife settlement?

How did regulators intervene in the settlement agreement?
State attorneys general contacted plaintiffs' lawyers to express concerns about the settlement's restrictive language. Their intervention resulted in a crucial amendment filed on March 6 that revised the agreement's terms to protect regulatory authority and victims' rights.

What did the original settlement require from plaintiffs?
Under the original terms, plaintiffs in the class-action lawsuit would have been required to surrender all claims against Herbalife, effectively barring them from pursuing any additional legal action against the company in the future.

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