Many of us learned about multlievel-marketing company and purveyor of women’s clothing LuLaRoe in 2021, when dueling documentaries about the company’s rapid growth and decline were released. As featured in those documentaries, the company was the subject of extensive litigation and investigations as to its relationships with its “fashion retailers” — i.e., those recruited to participate in the company’s scheme.
The company’s practices with respect to final consumers were the subject of a Ninth Circuit opinion issued today. A district court had certified a class of Alaska consumers who argued they had incorrectly been charged sales tax based on the location of the “fashion retailer,” as opposed to their own location. The error was the result of a point-of-sale system, “Audrey,” that LuLaRoe provided to its “retailers,” but did not require they use. LuLaRoe had refunded the improperly collected taxes, but did not pay customers interest that might have accrued from the time of purchase to the time of refund.
On appeal, the Ninth Circuit reversed the grant of class certification. In so doing, the court rejected LuLaRoe’s arguments that the small amount of money that would be owed to many class members as interest — for many, between one and five cents — was too small to confer standing. Even a fraction of a cent, the court held, would support standing. The court also found that LuLaRoe’s claim that some class members may have overpaid sales tax “voluntarily” was purely speculative, and thus could not defeat predominance. But LuLaRoe did produce evidence that 18 class members had received discounts designed to offset improper sales tax, and that the district court failed to properly consider whether such discounts created a predominance issue.
Thus, it is back to the district court for another look and another round of briefing– somewhat ironic given LuLaRoe’s emphasis on how little the case is worth.
