Herbalife Again Wins Dismissal of Pyramid-Scheme Lawsuit

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Herbalife Ltd.’s battle with hedge-fund manager William Ackman isn’t hurting the company in court.

The maker of popular dietary supplements again won dismissal of an investor lawsuit accusing it of lying about the legitimacy of the company’s business operations.

The lawsuit led by the Oklahoma Firefighters Pension and Retirement System claims shareholders lost money after Ackman accused the company of being a pyramid scheme.

U.S. District Judge Dale S. Fischer in Los Angeles threw out the complaint Tuesday, saying investors failed to show the company or Chief Executive Officer Michael O. Johnson knew of wrongdoing, a requirement needed to back the claims.

The judge gave the fund until Aug. 27 to file a new complaint. An earlier version of the suit was rejected by the same judge in March after he found Ackman’s claims alone weren’t sufficient evidence that Herbalife committed fraud.

Herbalife, based in Los Angeles, relies on an outside network of distributors to sell its weight-loss shakes, supplements and other nutrition products -- an approach known as multilevel marketing.

Ackman and his fund, Pershing Square Capital Management, have waged a more than two-year campaign against Herbalife, saying the nutrition company is a scam and can’t survive.

While the Tuesday ruling is a victory for Herbalife, it doesn’t bar other investors from suing if they come forward with proof that fraud led to stock losses. The case has no bearing on a Federal Trade Commission probe of Herbalife’s business practices that began last year.

Jon Tostrud, a lawyer for the investors, and Herbalife spokesman Julian Cacchioli didn’t immediately return calls for comment on the decision.

The case is In re Herbalife Ltd. Securities Litigation, 14-cv-02850, U.S. District Court, Central District of California (Los Angeles).

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