The Effect of the Internet on Class-Action Settlements

In "Create a Game Plan From Notable Class Actions," commercial litigator Barry B. Cepelewicz comments about two recent class-action settlements that were scuttled by organized Internet opposition:

Businesses should remember that the Internet has given consumers a powerful voice to share everything from recommendations to boycotts. In the process, it has also given potential plaintiffs an effective tool for organizing. When calculating the PR value of settling versus litigating, a corporate defendant should carefully consider that some kinds of settlements may be more valuable than others.

The Netflix and Netgear settlements, for example, have been criticized as clever marketing ploys disguised as consumer redress. Under the Netflix settlement as initially proposed, after customers got their month of free upgraded service, they would be automatically enrolled in an upgraded program and charged an additional monthly fee unless they unsubscribed.

Objectors organized an impressive resistance and developed an alternative settlement, expected to be approved shortly, with terms far more favorable to consumers.

In my experience, organized Internet opposition to class-action settlements is the exception, not the rule. Its likelihood increases in proportion to the precentage of class members who are Internet-savvy. The two examples that Cepelewicz cites, both involving two Internet-dependent companies, demonstrates this point.

In cases involving Internet-savvy class members, lawyers for both sides must be prepared to respond on the Internet to any opposition that develops there. As the Netflix case demonstrates, such opposition can swiftly take on a life of its own. In the Internet age, ignoring a tidal wave of online criticism is an extremely bad policy that may lead to a rejection of the settlement by the court.

Rather than ignore online criticism, lawyers should set up a website to address it. The website can be used not only to respond to speficic criticism, but also to explain why the settlement is beneficial to the class as a whole. This is the same issue lawyers will be required to address later at the preliminary and final approval hearings.

If lawyers use the Internet to respond publicly to criticism, they will be communicating their message in a format that Internet-savvy class members can best understand. Even better, if those Internet-savvy class members are writing about the settlement online, online etiquette will compel them to link to the lawyers' online response, guaranteeing that the lawyers' message will be heard. There's no better way to correct misinformation in the online age.

Comments

[Mark Lyon]

I posted the SonySuit.com website shortly after I learned of the dangers caused by Sony BMG's XCP Copy Protection (and found that it was the cause of many of the problems with my "school" laptop - including weird crashing during exams). It attracted over 100,000 visitors during the course of the lawsuit, and I think it had a positive impact on moving the class action from "behind closed doors" and "out into the public". Unfortunately, the consumers still didn't get what I consider reasonable compensation for their damages.

[Clin Neg Blogger]

Good article, it probably has to be argued though that the benefits of the internet in putting together a class action, in my opinion, far outweigh the drawbacks