There has been a Class Action Lawsuit against Smile Direct which is a direct selling company from which it derives its income. The group’s main business opportunity is to sell the products of certain companies to individuals who have signed up via the Smile Direct website. The lawsuit revolves around the fact that the group is actually a scam and that money can be made and lost from direct sales of items like lip balm, toothpaste, mouthwash etc.
Class Action Lawsuit Against Smile Direct
The class action lawsuit revolves around the claim that the companies which are marketed through the Smile Direct website do not operate legitimately. These companies operate more like middle men and therefore they do not pay taxes on the income that they make. They also do not pay social security or Medicare tax, and they get a ‘pass-through’ tax credit on the amount of income that they earn from selling direct to consumers.
These direct sales companies get their commission from the direct selling company and then divide that amount amongst themselves. There is no independent control over these companies, so many of them end up getting paid so little that it is not possible for them to survive.
A class action lawsuit was brought against Smile Direct and they settled out of court without going to court.
This means that the case was settled out of court avoiding both time and court costs. The settlement meant that Smile Direct was agreeing to a class action lawsuit in the event that any legal actions were brought against them. The class action lawsuit covered all of the direct selling companies who had joined up with Smile Direct and agreed to pay taxes on their earnings and pay a portion of social security and Medicare tax.
The lawsuit also says that the group has a motive to keep members from leaving the program.
It would be difficult for the group to increase their numbers if it is known that their members are not making money. The company simply targets certain demographics and targets the teenagers who are making most of the money. The lawsuit states that this is unfair and unjustifiably denying funds to people just because they belong to a specific group.
Many state representatives have been contacting the IRS about the Smile Direct situation.
Both houses of Congress have already sent articles of class action to the IRS regarding this matter. This could be a big problem for the company if they are found to have violated the law. State attorneys general have also made formal complaints about the matter. The class action lawsuit is seeking an amount of at least $60 million to compensate all past and present and future medical expenses that resulted from the direct selling company’s negligence. They also want compensation for pain and suffering, lost wages, future income loss, and other similar items.
Smile Direct could easily lose a lot of money if they are found liable for not properly disclosing their compensation and benefits and using their position as a direct selling club to their advantage.
If you think that you have been a victim of direct selling fraud, you should contact an experienced direct selling attorney today to discuss your case. The lawyer will be able to evaluate your case and see what your best opportunity may be.