Putative Class Action Case Denied Class Certification

Apr 29, 2022
By DSJ Staff

LifeVantage Corporation defeated certification of a putative class, alleging that LifeVantage independent distributors were defrauded because LifeVantage allegedly operates a pyramid scheme.  In denying the plaintiffs’ motion for class certification, the Utah federal court focused on the substantial evidence LifeVantage provided demonstrating personal consumption and retail sales of LifeVantage’s products.

The two named plaintiffs in the lawsuit sought class certification on behalf of virtually all of LifeVantage’s distributors who allegedly lost money participating in LifeVantage.  The plaintiffs’ class definition assumed that all consumption by distributors should be treated as a loss and that no product resales occurred. In essence, the plaintiffs claimed that every distributor of LifeVantage was defrauded even if a distributor participated only to consume LifeVantage’s products or to resell products within his or her community.

But LifeVantage (1) demonstrated that numerous distributors joined simply to consume the products they bought at a discount, while others resold those products, and (2) argued that such consumption and resale was not accounted for in the plaintiffs’ proposed model to identify class members that allegedly “lost money.”

Given LifeVantage’s concrete evidence, the court held that individual issues of damages would predominate over common issues of the putative class. The court found “the evidence to prove damages varies from class member to class member and must be evaluated on an individualized basis.” The court also noted that “[Plaintiffs] did not even attempt to show how individualized damages determinations could be carried out in a way that will not destroy the efficiencies gained by aggregating the class’s common issues.”

Importantly, the court’s decision has wide-ranging application throughout the direct selling industry because the court explicitly held that personal distributor consumption must not be disregarded.  Similarly, the court rejected the plaintiffs’ attempts to brush aside concerns about retail sales, again noting the evidence suggested potential class members did engage in such sales.  Through these findings, the court’s decision not only extinguished the plaintiffs’ proposed class, but also helped to demonstrate that LifeVantage, and similarly situated direct selling companies, are legitimate companies and not pyramid schemes, contrary to the plaintiffs’ allegations.

LifeVantage is represented by John Sanders, Rex Mann, Katrina Eash, and Becca Loegering of Winston & Strawn LLP.

  • April 2022