Wireless Providers not Liable for Content Provider Marketing Practices
Judge Miller (S.D. Ca.) issued an order a couple of weeks ago largely gutting the class action lawsuit filed against Jamster and several other entities (including wireless service providers) relating to allegedly improper marketing practices and charges around mobile content (free ringtones): In re Jamster Marketing Litigation (2009 U.S. Dist. Lexis 43592). (I guess a more accurate way of characterising the result is that the court's order lets the wireless providers off the hook.)
Background: as described by the court, the complaint alleged that minor children of plaintiffs were exposed to television advertisements which advertised "free ringtones" in response to text messages. The advertisements were promoted by Jamster and Verisign.
Discussion: at the end of the day, the court leaves a small sliver of the claims against the wireless providers standing, and rules that the service providers cannot be held liable for the misleading advertising of third parties, including the content providers.
The Rico Claim: plaintiffs brought a RICO claim, which is generally premised on an agreement to further an unlawful act or enterprise. Since plaintiffs alleged fraud or misleading conduct they were required to plead "with particularity" the instances of fraud. According to the court, plaintiffs could not specify any such enterprise: "Pleading by adjective does not comply with Rule 9(b)." Plaintiffs pointed to other cases where partners had back and forth communications regarding the type of marketing which would be used, but the court was not persuaded. I guess there was no "smoking gun" memo?
Billing Presentation Claims: AT&T argued that the dispute had to be resolved through the regulatory mechanism set forth by the California Public Utilities Code. The court rejects this argument, noting that the Public Utilities Code does not preempt claims under California's unfair competition statute.
AT&T's Liability for Misleading Content Provider Advertisements: AT&T argued that absent evidence that it actually participated in the marketing efforts of the content providers, it could not be held liable for any deceptive marketing practices. The court agreed, noting that the complaint failed to state allegations that the providers "participated or exercised unbridled control over [the] alleged false advertising [of the content providers]." This fact undermined plaintiffs claims for misleading billing statements, violations of 17200, and the California Consumer Legal Remedies Act. (This is the significant part of this ruling.)
Strike Class Allegations/Arbitration: the one light at the end of plaintiffs' dark tunnel is that the court rejects AT&T's request to strike the class allegations and to compel arbitration. Actually, the court defers ruling on this issue, hinting that it agrees with AT&T that there are "substantial hurdles confronting Plaintiffs in maintaining a nationwide class action under Rule 23."
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This is a tough one for plaintiffs. I wondered whether plaintiffs could argue disgorgement as a remedy? I thought 17200 provided for disgorgement or other equitable remedies - maybe personal involvement in the allegedly improper conduct is still a requirement?
How about statistics of chargebacks? Do the wireless service providers have any sort of duty to keep track of high rates of chargebacks on certain content or services provided by third parties?
Finally, I'm surprised the court found that the wireless providers did not have the ability to control the marketing practices of the content providers. I would assume such a provision would be in the wireless provider-content provider agreement. The wireless provider is in the chain of distribution, and you would think they want to approve of the marketing practices of the content or services sold by third parties via their platform?
Note: this isn't the first piece of class action litigation centered around marketing mobile content to minors. (See Satterfield v. Simon & Schuster, currently on appeal to the Ninth Circuit.)
Background: as described by the court, the complaint alleged that minor children of plaintiffs were exposed to television advertisements which advertised "free ringtones" in response to text messages. The advertisements were promoted by Jamster and Verisign.
A typical transaction involved the minor viewing an advertisement containing pictures of cell phones with flashing lights, rap music, voices, and sparkling effects. The advertisement provided a number in large print that shined and sparkled for consumers to text message in order to receive a ring tone.Plaintiffs alleged they were charged for the text messages and for other products and services that they "did not order or agree to have included in [their] account." They contacted wireless providers (AT&T) and were allegedly advised that AT&T "did not know how to stop the charges."
Discussion: at the end of the day, the court leaves a small sliver of the claims against the wireless providers standing, and rules that the service providers cannot be held liable for the misleading advertising of third parties, including the content providers.
The Rico Claim: plaintiffs brought a RICO claim, which is generally premised on an agreement to further an unlawful act or enterprise. Since plaintiffs alleged fraud or misleading conduct they were required to plead "with particularity" the instances of fraud. According to the court, plaintiffs could not specify any such enterprise: "Pleading by adjective does not comply with Rule 9(b)." Plaintiffs pointed to other cases where partners had back and forth communications regarding the type of marketing which would be used, but the court was not persuaded. I guess there was no "smoking gun" memo?
Billing Presentation Claims: AT&T argued that the dispute had to be resolved through the regulatory mechanism set forth by the California Public Utilities Code. The court rejects this argument, noting that the Public Utilities Code does not preempt claims under California's unfair competition statute.
AT&T's Liability for Misleading Content Provider Advertisements: AT&T argued that absent evidence that it actually participated in the marketing efforts of the content providers, it could not be held liable for any deceptive marketing practices. The court agreed, noting that the complaint failed to state allegations that the providers "participated or exercised unbridled control over [the] alleged false advertising [of the content providers]." This fact undermined plaintiffs claims for misleading billing statements, violations of 17200, and the California Consumer Legal Remedies Act. (This is the significant part of this ruling.)
Strike Class Allegations/Arbitration: the one light at the end of plaintiffs' dark tunnel is that the court rejects AT&T's request to strike the class allegations and to compel arbitration. Actually, the court defers ruling on this issue, hinting that it agrees with AT&T that there are "substantial hurdles confronting Plaintiffs in maintaining a nationwide class action under Rule 23."
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This is a tough one for plaintiffs. I wondered whether plaintiffs could argue disgorgement as a remedy? I thought 17200 provided for disgorgement or other equitable remedies - maybe personal involvement in the allegedly improper conduct is still a requirement?
How about statistics of chargebacks? Do the wireless service providers have any sort of duty to keep track of high rates of chargebacks on certain content or services provided by third parties?
Finally, I'm surprised the court found that the wireless providers did not have the ability to control the marketing practices of the content providers. I would assume such a provision would be in the wireless provider-content provider agreement. The wireless provider is in the chain of distribution, and you would think they want to approve of the marketing practices of the content or services sold by third parties via their platform?
Note: this isn't the first piece of class action litigation centered around marketing mobile content to minors. (See Satterfield v. Simon & Schuster, currently on appeal to the Ninth Circuit.)
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