Appeal from the United States District Court for the Southern District of California Michael M. Anello, District Judge, Presiding, D.C. No. 3:02-cv-00601-MMA-AJB.
The opinion of the court was delivered by: O'scannlain, Circuit Judge
Argued and Submitted May 6, 2010 -- Pasadena, California
Before: Diarmuid F. O'Scannlain and Richard C. Tallman, Circuit Judges, and Frederic Block, Senior District Judge.*fn1
We must decide whether consumers can pursue claims against a company that allegedly deceived them into buying memberships in a discount club.
In response to a television advertisement, Patricia Sanford purchased Tae-Bo fitness tapes over the phone in February 1999. West Corporation ("West") operated the call center that received Sanford's call. Pursuant to West's joint marketing agreements with MemberWorks, Inc. ("MWI"),*fn2 a West operator read Sanford the following sales script in an effort to "up-sell" a membership in the "MemberWorks Essentials" program:
Mr(s). _____, for purchasing Tae-Bo today, we're sending you a risk-FREE 30-day membership to ESSENTIALS, a service designed to SAVE YOU 20% from leading stores such as EXPRESS and FLORSHEIM, plus reward savings at VICTORIA'S SECRET, TJ MAXX, PIER ONE and TARGET, PLUS additional savings on eyewear, beauty products, haircuts, and more! After 30 days, the service is extended to a full year for just $6 a month, billed annually in advance to the credit card you're using today. If you want to cancel, just call the toll-free number that appears in your kit in the first 30 days and YOU WON'T BE BILLED. So look for that kit in the mail, OKAY?
Sanford had no recollection of hearing the script, agreeing to the free trial membership, or receiving the membership kit in the mail. Because she did not cancel her trial membership, her credit card was charged a $72 annual membership fee in March 1999. In January 2000, her credit card was charged an $84 renewal fee.
Preston and Rita Smith had a similar experience after purchasing various so-called "bait products" over the phone, including Tae-Bo videos, Nad's hair removal products, and Tai Vital Basics. The Smiths alleged that they were also read the sales script and, without their knowledge or consent, billed repeatedly for their membership in MemberWorks Essentials. They did not, however, allege whether it was Preston or Rita who placed each particular phone call.
On March 28, 2002, Sanford filed a putative class action against MWI*fn3 asserting a claim for violation of the federal Unordered Merchandise Statute, 39 U.S.C. § 3009, as well as state-law claims for conversion, unjust enrichment, and fraud. The district court granted MWI's motion to compel arbitration of Sanford's individual claims and dismissed the class claims as moot. After the arbitrator found for MWI on all claims except for Sanford's claim for restitution under the Unordered Merchandise Statute, the district court granted MWI's motion to confirm the arbitration award and denied the Smiths' motion to ...