Pre-Paid's Pickle Gets Juicier

"The group's business was going gangbusters," said one sales associate. "But now, they're going to get into something else."

Two years ago, angry sales associates went so far as to file a class-action lawsuit that accused Pre-Paid of treating them unfairly. But the lawsuit, seeking more than $300 million in damages, recently failed to secure class-action status in an Oklahoma court. So the individual plaintiffs -- including some former Pre-Paid stars -- are simply seeking retribution for themselves.

Pre-Paid, which has reserved only $3 million for litigation despite a mountain of pending lawsuits, clearly needed the victory.

"Pre-Paid is pleased with this development in this case," the company said, "and will continue its vigorous defense against the plaintiffs' claims."

The company announced the Sept. 23 ruling along with its production numbers on Thursday. It did not, however, report a similar action -- allowing another associate lawsuit to move forward -- that went against it this summer. Nor did it provide any update on a series of customer lawsuits, seeking more than $800 million in damages, that are headed for trial in Mississippi.

There, Pre-Paid will face a former U.S. attorney -- representing dozens of unhappy customers -- who has accused the company and its local "provider" law firm of colluding to defraud the public.

The Real Deal

At least one insider, who recently left a provider law firm in another state, contends the company does in fact mislead innocent consumers.

"Litigation is expensive -- always and everywhere," the person said. "But the problem is that this fact is concealed from the consumers who, as with so many other aspects of the plan, are told that litigation is 'covered.'"

Pre-Paid charges roughly $25 a month for a policy that simply provides discounts -- instead of full coverage -- for such common legal problems as bankruptcy and divorce. Moreover, the company covers only a handful of the pretrial hours normally needed when customers are actually sued.