MDL No. 2132

JUDICIAL PANEL ON MULTIDISTRICT LITIGATION

2010 U.S. Dist. LEXIS 10390

February 5, 2010, Filed

PRIOR HISTORY: Ganezer v. Directbuy, Inc., 571 F.3d 846, 2009 U.S. App. LEXIS 13676 (9th Cir. Cal., 2009)

CORE TERMS: centralization, convenience, factual questions, oppose, oral argument, proposed settlement, centralize, transferee, settlement

JUDGES: [*1] John G. Heyburn II, Chairman. Robert L. Miller, Jr., David R. Hansen, * Frank C. Damrell, Jr., Kathryn H. Vratil, W. Royal Furgeson, Jr., David G. Trager.
* Judge Hansen took no part in the decision of this matter.

OPINION BY: John G. Heyburn II

OPINION
ORDER DENYING TRANSFER

Before the entire Panel *: Plaintiff in an action in the Southern District of Indiana has moved, pursuant to 28 U.S.C. ? 1407, to centralize this litigation in the Southern District of Indiana. This litigation currently consists of four actions pending as follows: an action each in the Central District of California, the District of Connecticut, the Southern District of Indiana, and the Eastern District of New York, as listed on Schedule A.

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* Judge Hansen took no part in the decision of this matter.

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Plaintiffs in the Central District of California action support the motion in its entirety. Plaintiffs in the Eastern District of New York action initially opposed centralization and, alternatively, supported selection of the Eastern District of New York as the transferee district; however, at oral argument, these plaintiffs expressed their support of centralization in the District of Connecticut. Plaintiffs in the District of Connecticut action [*2] oppose centralization and, alternatively, favor transfer to the District of Connecticut. Defendants 1 oppose centralization.

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1 DirectBuy, Inc.; United Consumers Club, Inc.; DirectBuy Holdings, Inc.; UCC Distribution, Inc.; Beta Finance Company, Inc.; National Management Corporation, Inc.; Trivest Partners IV, Inc.; and The Sequoia Group — Thousand Oaks LLC (collectively DirectBuy defendants).

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At oral argument, attorneys for plaintiffs supporting centralization expressed concern that they were “frozen out” of settlement discussions in another action. We do not consider the DirectBuy defendants’ apparent preference to negotiate with certain plaintiffs’ counsel over counsel for other plaintiffs as particularly relevant to our primary statutory inquiry — whether centralization of actions containing common factual questions will serve the convenience of the parties and witnesses and further the just and efficient conduct of the actions. See 28 U.S.C. ? 1407(a). Regardless of our decision on centralization, if (as some plaintiffs presume) plaintiffs in one or more of the actions reach a nationwide settlement with the DirectBuy defendants, plaintiffs in the non-settling actions should reasonably [*3] anticipate an opportunity to object to the proposed settlement at any fairness hearing regarding the proposed settlement.

We have long held that the convenience of counsel “is not by itself a factor to be considered under Section 1407 in the Panel’s decision whether to order transfer or in the selection of a transferee forum for a group of actions. Only if the inconvenience of counsel would impinge on the convenience of the parties or witnesses would the convenience of counsel become a factor to be considered by the Panel.” In re Anthracite Coal Antitrust Litigation, 436 F.Supp. 402, 404 (J.P.M.L. 1977). Plaintiffs supporting centralization have failed to make such a showing.

Otherwise, this is a close case; one which in other circumstances we might centralize. The actions may share some factual questions regarding the DirectBuy defendants’ marketing practices. Movant has failed to convince us, however, that these common factual questions are sufficiently complex and/or numerous to justify Section 1407 transfer at this time. Defendants and some of the plaintiffs oppose centralization as unnecessary. Two of the cases predate by a considerable time those filed by the plaintiffs supporting [*4] centralization. On the basis of the papers filed and hearing session held, we are not persuaded that the benefits of Section 1407 centralization are sufficient to outweigh the objections. The parties are encouraged to employ alternatives to transfer to minimize whatever possibilities may arise of duplicative discovery and/or inconsistent pretrial rulings. See, e.g., In re Eli Lilly and Co. (Cephalexin Monohydrate) Patent Litigation, 446 F.Supp. 242, 244 (J.P.M.L. 1978); see also Manual for Complex Litigation, Fourth, ? 20.14 (2004).

IT IS THEREFORE ORDERED that the motion, pursuant to 28 U.S.C. ? 1407, for centralization of the actions listed on Schedule A is denied.

PANEL ON MULTIDISTRICT LITIGATION

/s/ John G. Heyburn II

John G. Heyburn II

Chairman

Robert L. Miller, Jr.

David R. Hansen *

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* Judge Hansen took no part in the decision of this matter.

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Frank C. Damrell, Jr.

Kathryn H. Vratil

W. Royal Furgeson, Jr.

David G. Trager
SCHEDULE A
Central District of California

Phil Ganezer, et al. v. DirectBuy, Inc., et al., C.A. No. 2:08-8666
District of Connecticut

Christopher Wilson, et al. v. DirectBuy, Inc., et al., C.A. No. 3:09-590
Southern District of Indiana

Brian Vance v. DirectBuy, Inc., et al., C.A. [*5] No. 1:09-1360
Eastern District of New York

Jamila Swift, et al. v. DirectBuy, Inc., et al., C.A. No. 1:09-4067

If you want to experience one of the most painful, hard sales pitches in the universe, then accept an invitation to an open house at a Direct Buy showroom. If you have ever suffered through a lengthy sales pitch for a time share or remember your absolutely worst experience in a car dealership, then you have a hint of how awful the Direct Buy sales pitch is. From reading many comments from people all over the US who have also been suckered into a Direct Buy showroom there is a highly structured sales pitch given everywhere.

The process consists of three time-wasting stages: first spend time with small talk with a smiling sales person, then get herded into a room with other couples attending the open house to hear a much more detailed sales presentation, including several videos and lots of clever question and answer sessions with the audience. Following that you are taken back for another private conversation with the first sales person who is clearly the closer; that is when you really get the high pressure treatment designed to get you to sign up that day and pluck down about $7,000 for a ten year membership (though the price seems to vary with location). If you don?t sign up that day you are told that it will cost another $1,000 at a later time.

With the original invitation to the open house you are told that you will get a 30 day free membership. But that membership is very limited. What really angered me was that there was no piece of literature that we were given to look at with details about membership rights and costs that we could take with us. Talk about a high pressure sales pitch!

After my bad experience I discovered that there is a national class action lawsuit against Direct Buy for fraudulent marketing. Here is what the suit claims: The company misleads customers by promoting a $5,000 membership fee which entitles members to purchase a wide array of goods at wholesale prices with no markup, and that it makes no profits other than from the membership fees. In reality, it makes a substantial profit from product markups, exorbitant shipping and handling fees, and tens of millions in annual rebates from manufacturers that it conceals from customers.

I know lots of Direct Buy members will surely write in that they are very happy and satisfied. Scammers, rip-off artists and thieves like Bernie Madoff are so successful because such a large fraction of people are dimwits or just too busy to carefully examine things. And once someone pays more than $5,000 upfront for a membership they are psychologically programmed to conclude that they have made a smart choice.

Here is my bottom line: The very nature of the sales pitch used by Direct Buy says something very, very negative about the company and what it is selling. The way I was treated was not appreciated and I do not want to patronize a company that uses such tactics.

I have since learned that every telemarketer in their call centre is obliged to pressure at least 10 new suckers per month into buying a $5000 membership. Stay away!