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AOL's Terms & Conditions Can't Avoid Class Action; Union Liable for CAN-SPAM Violation
August 14, 2007
AOL'S TERMS & CONDITIONS CAN'T AVOID CLASS ACTION
The Washington State Supreme Court recently struck down America On Line’s effort to use its terms and conditions to avoid a class action lawsuit. As a result, a group of customers, each with relatively small damages, may aggregate those claims and proceed with a class action.
The case arose when a group of AOL customers complained that AOL violated the Washington state consumer protection act by creating unauthorized secondary accounts, charging subscribers for those accounts, and failing to fully credit subscribers who did not authorize the additional accounts.
While the customers’ emotions ran high, their damages were low, ranging from $23.90 to less than $250. The customers sought to bring a class action in order to aggregate the damages and make the lawsuit worth their collective whiles.
In response, AOL asked the court to dismiss the suit, arguing that the AOL terms of service required that any suit be brought in Virginia, a jurisdiction that conveniently enough does not permit class action suits.
Although the trial court agreed with AOL’s argument, the intermediate appellate court reversed, finding that the forum selection clause could not be enforced because it violated public policy. The supreme court agreed.
The court focused on the public interest inherent in the state consumer protection laws, noting that individual actions not only redress individual grievances, but also vindicate the public interest and serve as an important part of the state enforcement scheme.
In situations where individual damages are too small to justify even a small claims suit, however, a class action often represents the only method for protecting the public interest. The AOL terms and conditions, according to the supreme court, impaired the ability of Washington citizens to enforce the Consumer Protection Act, and therefore violated public policy.
The moral of the case, again, is that boilerplate terms may not always perform as the drafter wishes. In short, AOL, “you’ve got a class action."
UNION LIABLE FOR CAN-SPAM VIOLATION
A United States District Court in Virginia recently ruled that e-mails soliciting membership in a labor union constitute commercial messages under the CAN-SPAM Act.
According to the court, because unions provide commercial services, e-mails sent on their behalf come within the Act, and prosecution does not violate the First Amendment.
The case arose when a labor union registered for e-mail accounts under the names of various managers at Verizon. Using those accounts, the union then e-mailed Verizon employees and recruited them to join the union.
When Verizon brought suit, alleging that the e-mails violated the CAN-SPAM Act, the union argued in a motion to dismiss that the e-mails were not commercial, and that a CAN-SPAM action would violate the union’s First Amendment rights.
The court denied the union’s motion.
The CAN-SPAM Act applies only to “commercial” e-mail messages. Under the Act, an e-mail is “commercial” if it’s “primary purpose . . . is the commercial advertisement or promotion of a commercial product or service.”
Violations of the CAN-SPAM Act include:
1. Sending unsolicited e-mails that contain false or materially misleading headers;
2. Sending unsolicited commercial e-mails that do not clearly and conspicuously identify themselves as advertisements; and
3. Sending e-mails that do not provide an automated "opt-out" feature, or that do not contain the sender's physical postal address.
The court found that the e-mails in question were commercial because they promoted union membership – which itself is a “service.” As part of its ruling, the court also determined that it was not relevant that the union was a non-profit entity, finding that the “commercial” status was not dependent on profitability (which, by the way, I guess means that Ford Motor is still a commercial enterprise).
The union could not rely on the First Amendment because the court found that the e-mails were fraudulent and misleading. By using bogus account addresses, the e-mails fraudulently purported to originate from Verizon management. The court felt that this would unfairly sway recipients to join the union.
Finding it "inappropriate to conclude as a matter of law that the emails do not violate the Act," the court denied the union's motion to dismiss the CAN-SPAM claims.
There’s no indication that the drafters of the CAN-SPAM act had unions in mind, but certainly, any use of deceptive addresses is really not a good idea!
This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.