May 16, 2011
Win! Court Rejects DirectBuy Class-Action Settlement That Offered Little or No Benefit to the Class
Public Citizen Attorney Ensures Claims of Wronged Consumers Are Not Released for Nothing
WASHINGTON, D.C. – A federal judge has rejected a proposed settlement of a class action brought against membership-buying service DirectBuy for misrepresenting that members could buy products at cost. Public Citizen represented a class member who objected to the terms of the proposed settlement because it would provide almost no relief to class members but would require them to release a broad range of claims against DirectBuy. In a decision issued today, U.S. District Judge Janet C. Hall agreed with the objectors and denied the settling parties’ request for approval of their settlement.
DirectBuy is an Indiana-based company that markets itself as providing its members the opportunity to buy “direct” from manufacturers without hidden fees or markups. The class-action lawsuit alleges that DirectBuy accepts rebates and discounts from manufacturers without passing the savings on to members. Other cases against DirectBuy allege that the company uses high-pressure sales tactics that induce consumers to purchase DirectBuy memberships for as much as $7,000 in some states. Many DirectBuy members are dissatisfied with the service because of the prices and selection that DirectBuy offers and the fees that it charges, which sometimes result in no or minimal savings compared to the prices offered by traditional retailers.
In rejecting the proposed settlement that would have released the claims of more than 836,000 consumers in exchange for an extended DirectBuy membership period, the judge found that the plaintiffs in the case had substantially undervalued the strength of the settled claims and that the relief proposed was meager in light of the potential recovery against DirectBuy. Thus, the court concluded that the settlement was not fair, reasonable or adequate.
“We are pleased that the judge agreed with our argument that the proposed settlement was essentially a coupon of little or no value to the class,” said Michael Kirkpatrick, the Public Citizen attorney representing one of the objecting class members. “Absent class members should not have valuable claims released in exchange for so little.”
Thirty-nine state attorneys general filed an amicus brief in support of the objectors, arguing that the proposed settlement should be rejected.
Class-action settlements require court approval, Kirkpatrick said. Because the court rejected the proposal, the case will now continue to be litigated.
Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C.