Last updated on April 23, 2015
Herbalife, the maker of weight-loss and nutritional products, won the dismissal of a lawsuit.
Los Angeles District Judge, Dale Fisher, dismissed the lawsuit brought on by pension holders who said Herbalife fraudulently portrayed themselves as a legitimate company. Shareholders claimed to have lost money because the company was actually an illegal pyramid scheme.
Judge Fischer rejected claims in the class action lawsuit about other news concerning a Massachusetts senator, a probe by the Federal trade Commission and weak quarterly results. He did not agree that the company had fraudulently inflated its stock price.
“Just as black swans may exist, there may theoretically be some form of opinion that is factual or revelatory in nature such that it qualifies as a corrective disclosure,” Fischer wrote in a footnote.
“Such an opinion would need to reveal to the market something previously hidden or actively concealed. That is not this case.”
The lead plaintiffs in the class action suit are the Oklahoma Firefighters Pension and Retirement System and the City of Atlanta Firefighters’ Pension Fund. Their lawyer, Maya Saxena, said the plaintiffs are considering whether to amend their complaint.
Herbalife has long denied it is a pyramid scheme and said they welcomed Judge Fischer’s decision.
“We are confident in the strong fundamentals of our business model and remain committed to helping people and communities improve their nutrition,” it said.
In a separate case, Herbalife will receive a verdict on May 11 from a different Los Angeles federal judge in regard to the company’s $15 million settlement with distributors who claim the company misled them.
Distributors say Herbalife often misleads them, exaggerating how much they can earn and that its success relies more on recruiting other distributors than selling its products.