More than 10,000 individuals in Michigan who were independent promoters of ViSalus, Inc., a multi-level marketing company of weight loss products, may be eligible to file a claim in proposed federal class action settlements.
The alert comes from the Michigan Department of Licensing and Regulatory Affairs'(LARA) Corporations Securities and Commercial Licensing Bureau (CSCL), which had issued a cease and desist order against the company in 2018. Two class action suits are in U.S. District Court for the Eastern District of Michigan. Claims must be filed by August 28, 2019.
In April 2018, the department ordered ViSalus to cease and desist from offering or selling unregistered securities in the form of equity in its “Founders Equity Incentive Plan” (FEIP) and making untrue statements of material fact or omitting to state material facts in connection with its business selling weight loss products, functional foods, energy drinks, and nutritional supplements through independent promoters through a multi-level marketing structure, contrary to the Michigan Uniform Securities Act (MUSA).
In July 2018, ViSalus and LARA entered into a Consent Order whereby ViSalus agreed to ensure that it is registered as a broker-dealer or exempt from registration requirements before offering or selling securities in Michigan, and to ensure that those securities are registered or exempt under MUSA. ViSalus also agreed to pay a $2,500 fine within 60 days, which remains unpaid to date. The full C&D Order and Consent Order can be read here.
On June 4, 2019, CSCL received notices of proposed class action settlements under the federal Class Action Fairness Act of 2005 listing ViSalus as the defendants that are listed below.
Harris et al. v ViSalus, Inc. et al. Case No. 4:17-cv-12626 (U.S. District Court for the Eastern District of Michigan)
This class action, initially filed on August 10, 2017 by six individual plaintiffs, alleges eight counts of securities fraud against ViSalus and individuals associated with ViSalus. The parties agreed to settle the claims based on the following terms:
- Class members may elect to receive a cash option, which terminates their status as an independent promoter and forfeits all rights under the FEIP. For class members that reached the rank of National Director, Executive Director, or Presidential Director, the cash option is $1,500. For class members who reached the rank of Ambassador or higher, the cash option is $4,000.
- If the class member chooses not to elect the cash option they may elect to receive a benefits option which provides enhanced compensation, free services, retention of rights under the FEIP, and other benefits.
On June 14, 2019, the U.S. District Court preliminarily approved the class action settlement. The deadline for submitting a valid election form, filing a written objection to the agreement, or filing a written notice of exclusion is August 28, 2019. For election forms and instructions, potential class members can click here or call the Settlement Administrator at: 1-855-543-5392.
Kerrigan et al. v. ViSalus, Inc. et al. Case No. 2:14-cv-12693 (U.S. District Court for the Eastern District of Michigan)
This class action, initially filed on July 9, 2014 by three individuals, alleges nine counts of fraud or malfeasance in connection with ViSalus’s independent promoters’ program. The parties indicate that there are 10,276 potential class members located in Michigan in this case. The parties agreed to settle the claims based on the following terms:
- A class member may elect to receive up to $50 and forfeit their status as an independent promoter of ViSalus products; or
- Receive a benefits options which includes a 25 percent commission rate on all sales to new customers for one year, up to $1,000 value in product purchases for the price of $650 for one year (35 percent discount), free re-enrollment as an independent promoter on the basic enrollment track, free event registration for one event, and a free Vi-Net Pro subscription for one year.
On June 14, 2019, the U.S. District Court preliminarily approved the attached class action settlement. The deadline for submitting a valid election form, filing a written objection to the agreement, or filing a written notice of exclusion is August 28, 2019. For election forms and instructions, potential class members can click here or call the Settlement Administrator at: 1-855-543-5391.
On June 13, 2019, LARA referred Liv Global, LLC, an assumed name of ViSalus, Inc., to the Department of Attorney General to determine if it violated Michigan’s new Pyramid Promotional Scheme Act, 2018 PA 186, which became effective September 11, 2018. That Act defines a “pyramid promotional scheme” as any plan or operation in which an individual gives consideration for the opportunity to receive compensation that is derived primarily from recruiting other individuals into the plan or operation rather than from the sale of products or services to ultimate users or from the consumption or use of products or services by ultimate users.
