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LuLaRoe hit with $1 billion class-action lawsuit alleging pyramid scheme

California clothing company LuLaRoe has been hit with a $1 billion class-action lawsuit that alleges the company recruited women and coaxed them into a pyramid scheme.

The Riverside Press-Enterprise first reported on the 27-page federal lawsuit that was filed on Oct. 23 in California.

In the suit, three former consultants from Sacramento claim the company deceived recruits.

LuLaRoe is known for its colorful leggings and various types of women's clothing.

The company heavily relies on women to buy their merchandise and sell it out of their homes.

The suit alleges that recruits were offered part- and full-time pay to sell the company's goods from home, but then left thousands with unreturnable merchandise as they were pulled into a business model that was not profitable.

The company went so far as to suggest the women take out loans, run up credit cards and even sell their breast milk in order to build up their stock, the lawsuit claims.

The suit says the company left many in financial ruin with mountains of unsold goods, and that as many as 80,000 people paid thousands up front for the inventory.

Another suit takes aim at changes in the company's refund policy for its sellers.

LuLaRoe, which reportedly had $2 billion in sales this year, called the suits baseless and inaccurate.

"Our success has made us the target of orchestrated competitive attacks and predatory litigation," according to a company statement. "We take all litigation — regardless of its lack of merit — seriously. We have not been served with the recent complaints, but from what we have seen in media reports, the allegations are baseless, factually inaccurate and misinformed. We will vigorously defend against them and are confident we will prevail."

The Corona-based company was founded in 2012 by DeAnne Stidham, according to LuLaRoe's website.

Stidham, the website says, was a struggling single mother trying to balance work and home-life while raising her seven children.

After meeting dress wholesalers and previously having success in network-based marketing, she launched LuLaRoe with the help of her husband, according to the site.

Information from the Associated Press was used in this report.

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