LuLaRoe CEO Mark Stidham and president DeAnne Stidham are among the defendants named in the suit, which was filed in King County Superior Court on Wednesday.
The suit accuses LuLaRoe of operating an "illegal pyramid," making misleading income claims, and encouraging its consultants to focus more on recruitment than selling clothes to customers.
"In sum, LuLaRoe's business model was a pyramid scheme," the suit states.
The company's "marketing and sales activities, misleading income and lifestyle claims, emphasis on recruiting and inventory purchases over emphasis on sales to consumers outside the LuLaRoe organization, and inventory loading practices ensure that the primary business opportunity with LuLaRoe was through recruitment."
LuLaRoe and the Stidhams did not immediately respond to requests for comment on the lawsuit.
Business Insider reported in December that the Washington Attorney General's office was investigating LuLaRoe.
LuLaRoe is also facing a $63 million lawsuit from its chief supplier, Providence Industries, which alleges the clothing company has failed to pay its bills for seven months. LuLaRoe has denied the claims in the lawsuit.
SEE ALSO: LuLaRoe is facing mounting debt, layoffs, and an exodus of top sellers, and sources say the $2.3 billion legging empire could be imploding
