Court Denies Class Action in Continuity Product Case3 Apr, 2012 By: Gregory J. Sater
In the never-ending war between marketers and class actions lawyers, it is always nice to hear about a victory for a marketer.
On March 6, the U.S. Court of Appeals for the Third Circuit ruled in favor of Synapse Group Inc. and against the class action plaintiffs, by affirming a lower court’s denial of class certification. Most cases are so expensive to litigate after class certification that they must be settled if the putative class gets certified. For that reason, denial of certification is a big deal for a marketer-defendant.
Synapse markets magazine subscriptions, often with introductory periods that are free or at greatly reduced prices. In its offer, Synapse discloses that subscribers will be charged in the future for automatic renewals of their subscriptions if they do not cancel. Synapse sends a notification postcard to each subscriber, prior to charging them, for such a renewal. That postcard provides a toll-free number for the consumer to call and cancel. Calling that toll-free number connects the caller to an interactive voice recognition (IVR) telephone system.
The plaintiffs claimed that the postcards providing prior notice of an automatic renewal charge were unclear and deceptive; they claimed the same thing with regard to the IVR system. For example, they alleged that the postcards provided scant information about the right to cancel and instead looked like a direct mail piece for a new subscription. Thus, allegedly, the postcard might be ignored and thrown out by customers rather than read. Likewise, the plaintiffs alleged that the IVR system was deceptive because during the cancellation process it attempted to retain the customers’ business by presenting them with save-the-sale offers.
The plaintiffs’ requested certification of a class of consumers seeking damages. That request was denied by the court because, in the its view, common issues among the class members would not predominate over unique issues, i.e., the customers’ experiences would be more different than they would be the same. The trial court concluded that it could not presume that all of the class members had been deceived by the allegedly deceptive marketing techniques.
The plaintiffs then proposed that their class be certified for injunctive relief only, rather than injunctive relief plus damages. In response, Synapse’s legal counsel – disclosure, it was my firm, Venable LLP – argued that the named plaintiffs lacked standing to sue for an injunction because they were no longer Synapse customers. Their subscriptions had been cancelled. Thus, they could not claim a likelihood of future injury from Synapse’s allegedly deceptive marketing practices.
The named plaintiffs argued, in response, that they might become Synapse customers again in the future and therefore they should have standing to seek an injunction against the company’s allegedly deceptive marketing practices.
The court noted that while the plaintiffs might decide to subscribe again in the future, they were “under no compulsion to uncritically accept magazine subscription offers” and “even if they did, they would only be harmed if they were again misled by Synapse’s renewal techniques.” That, of course, “would require them to ignore their past dealings with Synapse” so that they would be “fooled again and again.” The court found that to be purely conjectural, and held they lacked standing.
If you’re faced with a class action for allegedly deceptive marketing practices (and if you are a marketer in this country, I would predict that sooner or later you will be) you should consider whether lack of standing might be a winning defense. It was for Synapse.