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April 12, 2011
Attorneys general oppose DirectBuy’s class-action lawsuit settlement

SEATTLE – Washington Attorney General Rob McKenna joined the attorneys general of 34 states, the Commonwealth of Puerto Rico and the District of Columbia, in objecting Tuesday to the settlement of a private, class-action lawsuit against DirectBuy, Inc., because it offers no real benefit to consumers.

DirectBuy stores are independent franchises that charge thousands to join, as well as yearly fees. Customers are told they can purchase goods from manufacturers and suppliers at actual wholesale cost. The lawsuit (Wilson et al v. DirectBuy, Inc., et al) accused Indiana-based DirectBuy of fraudulent misrepresentation because the company allegedly received kickbacks and incentives from suppliers and manufacturers, which inflated the cost of the goods. The lawsuit alleged thatDirectBuy did not disclose this arrangement to customers until early 2009.

Attorneys general took issue with the proposed settlement in a 36-page amicus curiae brief filed in U.S. District Court in Connecticut. The brief was signed by at the attorneys general of Connecticut and Tennessee, with McKenna and other attorneys general listed as supporters.

“The proposed settlement is, in essence, a sales vehicle for defendants designed to drive current and former customers into membership renewal contracts and to the same manufacturers and suppliers from whom defendants have acknowledged receiving kickbacks and incentives,” they wrote.

The Washington Attorney General’s Office has received nearly 50 complaints from consumers who paid as much as $5,530 to become members of DirectBuy.

The attorneys general say the proposed settlement would not prohibit similar conduct by DirectBuy in the future and the proposed attorneys’ fees were excessive and disproportionate compared to ”the scant relief” offered to consumers.

A hearing on the proposed settlement is scheduled for May.


DirectBuy amicus brief

DirectBuy motion for leave to file brief

Media ContactKristin Alexander, Media Relations Manager – Seattle, (206) 464-6432

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