A federal judge has ruled that a class-action lawsuit against Nu Skin involving more than 100,000 former distributors can proceed.
The suit, filed five years ago, alleges that Nu Skin Canada Inc. violated the Utah Pyramid Scheme Act as well federal securities laws."While a few Nu Skin distributors earn large sums of money based on purchases by `downline' distributors, the vast majority of distributors lose their investments and ultimately drop out," stated a news release from Gilman and Pastor, the Boston law firm representing the plaintiffs.
Of 126,079 distributors who signed up with the Canadian operation between 1991 and 1994, 93,096 dropped out, said a plaintiff's motion filed in June 1997. Doug Brooks, an attorney with the Boston firm, said the figures are raw numbers and could not say whether they represented everyone in the class.
In a class-action lawsuit, members of the class bring their individual complaints together against the defendant and share in any damages that are collected if the plaintiff wins the suit.
However, Nu Skin attorney Richard Hartvigsen called the class "extremely limited in scope," saying it will only include executive-level distributors involved in the operation before 1994. Hart-vig-sen said he believed the class had fewer than 10,000 people.
Last year, the courts denied class certification in the suit because of the strict requirements of fraud claims against Nu Skin Canada, Brooks said. He explained that fraud requires each individual plaintiff to be judged by a stringent set of regulations in order to be included in the class.
The plaintiff, Natalie Capone, was able to get class-action approval by only certifying for the two charges of violating the Utah Pyramid Scheme Act and federal securities law.
"We feel the courts did the right thing, and we are eager to pursue this to its end," Brooks said.
Nu Skin public relations director Kara Schneck said the law firm's news release on the ruling was "irresponsible and mischaracterizes" the suit and Nu Skin's business. "We are confident of our position in this case," she said.
Nu Skin is pushing ahead for an early trial date. "We feel we are in the right," Hartvigsen said.
According to court records, efforts to resolve the case out of court were unsuccessful.