Young Living Sued Again For Operating A Pyramid Scheme
Another class action lawsuit has been filed against Young Living Essential Oils for operating a pyramid scheme. Back in April I reported on a class action lawsuit against them.
Here is what Young Living says about their business opportunity:
Imagine a career that becomes a community, where wellness is a way of life and doing what you love leads naturally to opportunities for success. Being a Young Living member goes beyond simply building a rewarding business, however. You’ll also enjoy extensive networking opportunities, exclusive hands-on experiences, and a strong sense of community.
With dedicated support from Young Living and your team and a comprehensive compensation plan, you can take control of your future by building a rewarding business. You’ll have the entire Young Living family by your side to encourage you every step of the way.
Here are the details of the case against them:
Young Living purports to sell essential oils when, in reality, it sells a convincing lie—the irresistible promise of financial success and “generous, industry leading compensation” by joining its unlawful pyramid scheme.
Plaintiff Lindsay Penhall and hundreds of thousands of putative class members just like her, paid and lost hundreds (and in many cases thousands) of dollars to become Young Living distributors or “Members” based upon Defendant’s false promise to “transform your financial future.”
Of course, the promise of riches was simply the hook used to grow Young Living’s base of recruits, which is the true purpose of the organization and the source of immense profits for Defendant—at the expense of its Members.
Young Living falsely represents to its Members that participation in Young Living—which necessarily requires hefty monthly payments—will result in material riches as long as they continue to solicit additional recruits to become Members of the Young Living family.
But that promise is nothing more than a pipe dream for Young Living’s millions of Members. In reality, Defendant has created nothing more than an unlawful pyramid scheme—the cornerstone of which is Young Living’s emphasis on new Member recruitment over the sale of its products.
Indeed, in 2016, the median monthly income of 94% of Members was $0 a month, and the average monthly income was a dismal $1 a month. But these amounts do not include the hundreds of dollars in costs Members incurred each year just to remain eligible to earn commissions. When these costs are accounted for, at least 97.5% of Members lost money rather than earned money working for Young Living in 2016. In fact, in 2016, the average Member lost $1,175.
And Members did not fare any better in 2018. Nearly 89% of Members earned on average $4 for the year. And, again, this does not include the hundreds of dollars in costs incurred by Members to achieve that dismal $4 annual income. Similar to 2016, at least 96.7% of Members lost money in 2018 rather than earned money working for Young Living.
Through this class action, Plaintiff and the putative class seek to hold Defendant accountable for its illegal and deleterious conduct, which has injured hundreds of thousands of unwitting consumers who put their faith in Defendant’s empty promises.
Founded in 1993 by Gary D. Young, Defendant claims to be the world leader in essential oils. Defendant describes its essential oils as “aromatic, concentrated plant extracts that are carefully obtained through steam distillation, cold pressing, or resin tapping.”
Defendant’s purported vision is to “bring Young Living Essential Oils to every home in the world.” Defendant’s vision is also a lucrative one: In 2017, sales of Defendant’s more than 150 essential oils exceeded over $1.5 billion. In addition, Defendant’s revenues have increased over 800 percent over the last 6 years.
Defendant also touts its purported values: “Always be honest. Young Living prides itself on strict compliance policies that keep us honest and transparent. Acquiring these characteristics can help us continue to progress the company.” In addition, Defendant instructs its Members to “be sure to use good judgment[.]”
But in practice, Defendant has fallen far short of upholding its self professed values. For example, Defendant’s founder, Gary D. Young, was prosecuted for practicing medicine without a license. Mr. Young also ran a now shuttered “Young Living Research Clinic” in Springville, Utah (subsequently replaced by a Young Living clinic in Ecuador) where he employed a quack physician convicted of manslaughter. Mr. Young is also alleged to have nearly killed a patient through vitamin C infusions, which caused renal failure.
Even more, in 2014, the U.S. Food and Drug Administration sent a warning letter to Defendant for falsely promoting its products as viable treatments for certain viral infections, including Ebola, Parkinson’s disease, autism, diabetes, hypertension, cancer, multiple sclerosis, dementia, and other serious health issues.
In 2017, Young Living pleaded guilty to federal charges and paid $760,000 for illegally trafficking certain oils in violation of the Lacey Act and the Endangered Species Act. Utah’s U.S. Attorney called Young Living’s natural resource violations “substantial.”
In 2018, Young Living was ordered to pay $1.8 million for pursuing a lawsuit in bad faith against a competitor.
But most pernicious of all is that Defendant’s immense wealth is derived from a vast, illegal pyramid scheme that has caused countless unwitting victims to lose substantial sums of money.
In May 2018, Plaintiff Lindsay Penhall joined Young Living as a distributor (or Member) after learning about it from another Young Living Member. Lindsay worked as a Young Living distributor from May to December 2018.
In deciding to become a Young Living Member, Lindsay relied on Young Living’s material misrepresentations concerning the financial success she would likely achieve by becoming a distributor of Defendant’s essential oils. Specifically, Lindsay believed she would earn significant income through recruiting others to become Young Living Members and part of her downline.
To join Young Living, Lindsay purchased a premium starter kit and approximately $300 worth of essential oils. Thereafter, Lindsay began making monthly payments to Young Living in order to satisfy her PV requirement and to ensure she could receive the potential commissions of her downline.
Of course, like the overwhelming majority of Members, Lindsay found recruitment difficult, notwithstanding the fact that Lindsay expended considerable time and money in her recruitment efforts. Indeed, Lindsay organized classes, giveaways, and other recruiting events to which she invited friends and others in an attempt to recruit new Members. Lindsay even constructed a display of Young Living products at the store where she worked and spoke with numerous customers about Young Living products in an effort to recruit new Members. Notwithstanding her efforts, between May and December of 2018, Lindsay was only able to recruit two new Members.
Yet, during that time, Lindsay bought product month after month even though she didn’t need it and had no hope of re-selling it to someone else. Moreover, Young Living never questioned whether Lindsay was re-selling at least 70% of her purchases.
By the time Lindsay realized she had been victimized by Young Living, she had purchased approximately $2,150 of product, but had only “earned” commissions of approximately $300 from her downline. Accordingly, Lindsay did not receive the benefit of her bargain and suffered an injury in fact.
Lindsay describes her experience working as a Young Living distributor as extremely stressful. But Lindsay’s experience is hardly an aberration; rather, it is typical of the experience of most Young Living Members.
Had Young Living disclosed to Lindsay that most Members lose money rather than earn money, Lindsay would never have become a Young Living distributor. Similarly, had Young Living disclosed that it was an illegal pyramid scheme, Lindsay would not have become a distributor. And, had Young Living not misrepresented the financial success Lindsay was likely to achieve and/or the “income opportunity,” Lindsay would not have become a distributor.
You don’t need to do anything to be considered a part of this class action. If this case settles, anyone who was affected should be able to claim whatever compensation the court awards.