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In re Vertrue Inc. Marketing & Sales Practices Litigation

United States Court of Appeals, Sixth Circuit

April 16, 2013

In re: Vertrue Inc. Marketing and Sales Practices Litigation
v.
Vertrue, Inc., fka Memberworks, Inc.; Adaptive Marketing, LLC, Defendants-Appellants. Vertrue Plaintiffs, Plaintiffs-Appellees,

Argued: November 17, 2011

Appeal from the United States District Court for the Northern District of Ohio at Cleveland. Nos. 1:09-vm-75000–75013Patricia A. Gaughan, District Judge.

COUNSEL

ARGUED:

Darrel J. Hieber, SKADDEN ARPS SLATE MEAGHER & FLOM LLP, Los Angeles, California, for Appellants. Eric Alan Isaacson, ROBBINS GELLER RUDMAN & DOWD LLP, San Diego, California, for Appellees.

ON BRIEF:

Darrel J. Hieber, J. Russell Jackson, SKADDEN ARPS SLATE MEAGHER & FLOM LLP, Los Angeles, California, Robert N. Rapp, CALFEE HALTER & GRISWOLD LLP, Cleveland, Ohio, for Appellants. Eric Alan Isaacson, Frank J. Janecek, Jr., Amanda M. Frame, ROBBINS GELLER RUDMAN & DOWD LLP, San Diego, California, Jack Landskroner, LANDSKRONER GRIECO MADDEN, LLC, Cleveland, Ohio, for Appellees.

Before: KENNEDY [**] , GIBBONS, and KETHLEDGE, Circuit Judges.

OPINION

JULIA SMITH GIBBONS, Circuit Judge.

This matter arises from a multidistrict litigation proceeding, encompassing thirteen putative class action suits challenging the sales and marketing practices of Vertrue, Inc. and Adaptive Marketing, LLC. On April 16, 2010, the district court entered an amended Memorandum of Opinion and Order, granting in part and denying in part the defendants' motion to dismiss. The district court dismissed the plaintiffs' claims for negligent representation and for money had and received, all claims asserted under state law consumer protection statutes, all RICO claims, and all claims for which fraudulent concealment tolling is required. It allowed the remaining claims to proceed. The district court denied the defendants' motion to strike the class allegations.

On November 17, 2011, we heard oral argument in this appeal. After argument, the appeal was held in abeyance based on the bankruptcy petitions of the defendants-appellants. In a status report dated January 3, 2013, the parties advised that they stipulated to "lift the bankruptcy stay for the limited purpose of allowing this appeal to proceed." The bankruptcy judge approved the stipulation on November 27, 2012. In this posture, we affirm the decision of the district court.

I.

Vertrue, operating as MemberWorks, Inc. ("MWI"), sells membership programs allowing customers to benefit from discounts on a number of products and services. In their consolidated complaint, the plaintiff-purchasers allege that Vertrue and the other defendants made unlawful charges to customers' accounts, luring them into the membership programs through television advertisement and sale of a so-called "bait" product. When interested customers called the company to purchase the bait product, the company recorded their credit or debit card information and read them a script about the membership program. The complaint alleges that the script deceived customers by indicating that "free" materials would be sent to them in the mail. Vertrue would then mail a membership card and place a recurring annual charge of $60-$170 on the customer's credit card, which would only be removed if the customer called to cancel his membership.

Affected purchasers filed thirteen cases in various jurisdictions challenging this practice. The cases were consolidated in the Northern District of Ohio, and the plaintiff-purchasers filed a consolidated amended complaint, alleging that Vertrue's scheme violates the Electronic Funds Transfer Act ("EFTA"), the Racketeer Influenced and Corrupt Organizations Act ("RICO"), and state consumer protection statutes. The plaintiffs also assert claims for conversion, unjust enrichment, fraud, negligent misrepresentation, and "money had & received." Vertrue filed a Motion to Dismiss and Strike Claims and Class Allegations Under the Statute of Limitations. On April 16, 2010, the district court entered an amended Memorandum of Opinion and Order, granting in part and denying in part the defendants' motion to dismiss. The district court dismissed the plaintiffs' claims for negligent representation and for money had and received, all claims asserted under state law consumer protection statutes, all RICO claims, and all claims for which fraudulent concealment tolling is required. It allowed the ...


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