Court Finds Webloyalty Rewards Program Disclaimers Sufficient to Defeat Misrepresentation Claims — Berry v. Webloyalty

[Post by Venkat Balasubramani]

Berry v., Inc., et al., 10-CV-1358-H (CAB) (S.D. Cal.; Apr. 11, 2011)

This is another online membership program case. Plaintiff purchased tickets from using his debit card. He alleges that he was offered a $10.00 discount and, when he took advantage of this discount, he unwittingly signed up for a rewards program operated by a third party that resulted in monthly recurring charges. Plaintiff asserted a variety of claims, including for unfair business practices against defendants. Based on the disclosures at the time of the transaction, the court rejects the claims and dismisses the case.

The court cites to and reproduces the disclosures in its order, and finds that:

the explicit and repeated disclosures that Defendants made in their enrollment page suffices to defeat the . . . claims.

Plaintiff cited to Keithly v. Intelius, where the court found that disclaimers did not defeat a plaintiff’s claim of being misled into signing up for a rewards program. (“Intelius May be Liable for Deceptive Online Marketing Practices Based on Third Party Transaction at Checkout.”) The court notes that in contrast to Keithly, in this case, the customer was not taken through a byzantine transaction process. Here, the plaintiff took a “voluntary step to click on the coupon offer” that looks like it was presented in the page before the checkout page. As the court notes, in all, the plaintiff “took three affirmative steps to accept the terms of the club membership,” and had an opportunity to decline. The court held that the disclaimers around the offer were “sufficient to place reasonable consumers on notice that they are entering into the Shopper Discounts & Rewards club and that they are accepting the offer by clicking on the ‘YES’ button.”

The Defendants used the same strategy used by defendants in similar cases to focus on the screenshots of the signup process and thereby limit discovery. Defendants initially presented the screenshots. Plaintiff challenged the authenticity of the screenshots. The court allows limited discovery into the issue of authenticity, and plaintiff is unable to come up with anything to adequately challenge the authenticity of the screenshots. As a result, the court takes judicial notice of the screenshots and adjudicates the issue on the basis of the pleadings and the screenshots of the signup process. The court also takes judicial notice of the acknowledgment page, confirmation email, and account history as well. This is a good strategy on the defendants’ part to narrow the case and take a case that may have otherwise resulted in a potential discovery quagmire and focus it on the individual signup process for the plaintiff in question.

This case is distinguishable from Keithly on the basis that in Keithly, the checkout process was much more convoluted. On the other hand, in Keithly, the court expressly cites to the “least sophisticated consumer” standard, and there’s no such reference by the court in this case. The implication is that any consumer who is duped into signing up for the rewards program in this case is per se unreasonable. In addition, although it did not apply to the conduct in question since it had not been enacted at the time of the transaction, the recently passed “Restore Online Shoppers’ Confidence Act” speaks directly to the issue of post-transaction offers that result in recurring charges for the consumer. The statute prohibits the passage of credit card or billing information from one online merchant to another, finding that:

[t]he use of a ‘data pass’ process defied consumers’ expectations that they could only be charged for a good or a service if they submitted their billing information, including their complete credit or debit card numbers.

Plaintiff tried to rely on this and requested that the court take judicial notice of this Congressional finding, but the court says that the Congressional statements issued in the statute “are subject to dispute.” Ordinarily, it does not make sense for a court to take judicial notice of a particular industry practice since the experience in a particular case may vary, but I wonder if the court should have given greater weight to the findings, at least with reference to the question of whether a particular online practice was reasonable. As to the point quoted above which relates to billing information being transmitted to a third party, there is no dispute that Webloyalty engaged in this practice and that Congress thinks it’s sufficiently out of touch with consumers’ expectations that it should be prohibited. Either way, it’s worth mentioning what the statute covers:

– before obtaining billing information, the third party seller has to clearly and conspicuously disclose the material terms of the transaction;

– the fact that the third party seller is not affiliated with the initial merchant has to be disclosed to the consumer;

– the third party seller has to obtain (directly from the consumer) the consumer’s billing information, name and address and contact information, along with the consumer’s affirmative consent.

The statute imposes a blanket ban on the practice referred to as “data-pass” – i.e., disclosure of the consumer’s credit or debit card or other account information by the initial merchant to the third party merchant. The statute also prevents “negative option marketing,” where a merchant interprets the consumer’s failure to take action as assent for future charges.

Previous posts:

Fifth Circuit Blesses Vistaprint’s Rewards Program Sign-Up Process — Bott v. Vistaprint USA Inc.

Internet Rewards Program Class Action Survives Initial Motion to Dismiss — In re Easysaver Rewards

Intelius May be Liable for Deceptive Online Marketing Practices Based on Third Party Transaction at Checkout — Keithly v. Intelius

Intelius Dodges a Bullet Over Allegedly Deceptive Online Marketing Practices — Hook v. Intelius

h/t: “Screenshotapalooza:Webloyalty disclosure sufficient as a matter of law” (Professor Tushnet) (“The court, however, found that the disclosures were prominent enough that no reasonable consumer could have been fooled by them (essentially deeming all the people who feel cheated by programs of this type unreasonable).”)