Class Actions: What Might Be On Your Horizon as a Direct Marketer?


Class Actions: What Might Be On Your Horizon as a Direct Marketer?

Class Action GraphicCompanies who have faced class action lawsuits, even (and maybe especially) frivolous ones, won’t soon forget the experience.  Just getting a case dismissed, or fending off class certification in the first place, can be extraordinarily costly and stressful.   The amounts at stake are often huge–with potential downsides of “per violation” penalties in the four or five figures; costly discovery exercises (including producing countless emails and attending intrusive depositions); and the specter of paying the other sides’ attorneys’ fees (which are often a large percentage of the potential recovery).

What kinds of cases might be on your horizon?

Class action lawyers are nothing if not highly creative.  With the potential for a huge attorneys’ fees recovery, and often little or no downside risk to filing, the incentive to come up with creative theories is enormous.  Direct marketers are then left to swat away at cases battling from their heels.   The latest crop of theories give a sense of the risk:

  • Did you disclose too much of a customer’s credit card number or expiration date on his or her receipt?  Federal law prohibits disclosing more than five digits of a consumer’s credit card number, or the month or year (or both) of the expiration date.  Class action attorneys are currently on the lookout of potential plaintiffs.   There are also state privacy laws that may impose even more stringent requirements.
  • Did you have “free” product promotions, but failed prominently to disclose limitations on the offer?  Such limitations need to be sufficiently disclosed in proximity to the offer, and can include responsibility for return shipping, handling charges, or other limitations or requirements, including enrollment in continuity subscriptions.  Class action lawsuits are becoming common in this area.
  • Do you impose “temporary authorization charges” on credit cards that are eventually deleted?  One major retailer is being sued in a class action over this practice because it was never disclosed in advance of the purchase, lasted seven to ten days before deletion, and caused customers to go over their credit card limits.
  • Do your gift cards have expiration dates?  Expiration dates may violate the laws of certain states, and have triggered class action lawsuits.
  • Do you send promotional text messages using automated dialing equipment?  Companies are being sued on a class action basis under the Telephone Consumer Protection Act, which can lead to substantial penalties for each text.

This is just a taste of the kinds of actions that are being filed, reinforcing the important lesson of vigilance in regulatory compliance.  It is impossible to predict all of the kinds of cases that will end up in costly litigation, but scanning the class action landscape now might help prevent a costly lesson in the future.

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