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Wednesday, June 19, 2024 | Back issues
Courthouse News Service Courthouse News Service

9th Circuit Tosses Class|Action Against MWI

(CN) - The 9th Circuit affirmed the dismissal of a racketeering class action accusing MemberWorks Inc. of tricking people into buying discount club memberships.

Lead plaintiffs Preston and Rita Smith and Patricia Sanford claimed that MWI, now called Vertrue Inc., lured them into annual memberships when they purchased certain "bait products," such as Tae-Bo fitness tapes or hair-removal products.

MWI telemarketers allegedly told them the company would send them a "risk-free 30-day membership" to Essentials, a service that purportedly offers discounts to Express, Victoria's Secret, TJ Maxx, Pier One and other retailers.

After 30 days, the membership was extended to one year, and consumers were automatically billed $72, or $6 per month, if they didn't cancel when they received their membership kits in the mail.

The plaintiffs said the membership kits were made to look like junk mail, so consumers would toss them without cancelling.

A three-judge panel in Pasadena, Calif., ruled that the Smiths failed to plead their case with enough specificity to survive dismissal.

"The Smiths failed to allege which of them made any of the telephone calls to purchase the various bait products and, thus, who was a party to the alleged misrepresentations," Judge Diarmuid O'Scannlain wrote.

He said Sanford lacks standing to pursue the federal complaint, because she "bargained away" all claims in her settlement against MWI in state court.

O'Scannlain affirmed dismissal of the Smiths' wire and mail fraud claims, along with their claims under the Racketeer Influenced and Corrupt Organizations Act, the Unordered Merchandise Statute, and the Electronic Fund Transfer Act.

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