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Federal judge rules in Herbalife's favor in RICO complaint
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Federal judge rules in Herbalife's favor in RICO complaint

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Herbalife manufacturing plant, located on Temple School Road, has at least 750 employees in Winston-Salem.

A federal judge in Florida significantly reduced — but didn’t eliminate — the legal exposure facing Herbalife Nutrition Ltd. in a potential $1 billion class-action lawsuit filed in September 2017.

Judge Marcia Cooke, with the Southern District of Florida, granted Monday dismissals of certain claims in the lawsuit, but gave plaintiffs 30 days to file a second amended complaint.

Herbalife could not be immediately reached for comment on the ruling. The company has more than 750 employees at its East Coast production plant in eastern Winston-Salem.

At least eight plaintiffs, comprised of Herbalife distributors, made claims under the federal Racketeer Influenced and Corrupt Organizations law, or RICO, related to Herbalife live sales events. The current complaint involves six plaintiffs.

Cooke wrote in his 14-page ruling that the plaintiffs failed “to meet the higher pleading standards required for civil RICO cases.”

“Due to similar pleading deficiencies, most of plaintiffs’ state law claims also fail.”

“Finally, the court dismisses without prejudice the civil conspiracy and unjust enrichment claims for failing to meet basic pleading requirements.”

The plaintiffs have sought damages from Herbalife and at least 43 individual defendants identified as “top distributors” in court documents and considered as “the highest earners and collaborators” with the company.

The focus of the complaint is the “Circle of Success” events that the plaintiffs claim was not touched on by the Federal Trade Commission in its $200 million settlement with Herbalife related to its business practices.

The complaint says there could be thousands of potential class-action plaintiffs who have spent thousands of dollars attending the Circle of Success events and “have received no benefit from doing so, despite defendants’ constant barrage of guarantees to the contrary.”

In August 2018, a judge ruled to allow the shifting of four plaintiffs from a Florida court to Herbalife’s home state of California.

That judge agreed that four of the plaintiffs are required to enter arbitration with Herbalife since they signed a distributor agreement with a valid arbitration clause. That ended the legal case in Florida.

Herbalife and the individual defendants said in their motions that the plaintiffs overall have failed to state an actionable claim.

Both groups also say some plaintiffs agreed to participate in a $15 million class-action settlement in May 2015 involving Herbalife vs. five former distributors who claimed the company operates a pyramid scheme and misled participants about how much money they realistically could make.

Cooke ruled the plaintiffs failed to prove that the defendants’ acts “proximately caused them injury.”

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@rcraverWSJ

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