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July 2012

Court Preliminarily Approves $38 Million Class Settlement Arising from Retailer's Customer Rewards Program

In the class-action lawsuit entitled In Re EasySaver Rewards Litigation, the District Court for the Southern District of California has granted preliminary approval of a settlement potentially valued at more than $38 million.  This settlement demonstrates the potential exposure to retailers offering loyalty and rewards programs to their customers.

Plaintiffs consist of an estimated 1.3 million online consumers who completed purchases on defendant Provide Commerce’s retail websites and who were subsequently enrolled in a rewards program run by Regent Group, Inc. d/b/a Encore Marketing International.  Plaintiffs allege that Provide Commerce transmitted the consumers’ personal and payment information to Regent Group without the consumers’ consent, and that the consumers were involuntarily enrolled in the rewards programs and charged without their consent, constituting fraud, violation of California’s Unfair Competition Law, the California Consumers Legal Remedies Act, the Federal Electronic Funds Transfer Act, breach of contract, breach of the implied covenant of good faith and fair dealing, invasion of privacy and negligence.  Defendants deny the allegations and contend consumers were fully informed throughout the enrollment process that their information was to be transmitted to the third party running the rewards program, that consumers would be charged for their membership and that consumers were required to take affirmative action to acknowledge their understanding and acceptance of the conditions.  After three years of litigation and substantial discovery, the parties reached settlement which awards to each claimant a pro-rata share of a $12.5 million cash fund for restitution of non-reimbursed membership fees, as well as a $20 online credit at Provide Commerce’s websites.  The Court has set a final fairness hearing in December to hear any objections to the pending settlement.

This case represents one of several recent cases in which courts have attempted to look at not just disclosures made during online transactions, but the process through which such disclosures are made, in determining whether an online practice is deceptive.  Such cases demonstrate the importance of carefully evaluating rewards and loyalty programs to ensure compliance with federal and state law.  Retailers collecting consumer information should carefully review not only their contractual disclosures, but also the overall consent process, to ensure that customers' personal information is collected or transmitted with their knowledge and consent.

 

 

Commercial Litigation

Jordan S. Altura
David A. Chasin


Commercial Litigation

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