Classmates.com Settles Lawsuit Over Phony Friends 127
Hugh Pickens writes "Techflash reports that Classmates.com has agreed to pay up to $9.5 million to its users to settle a lawsuit that accused the social network of sending deceptive emails that made people believe their old friends from high school were reaching out to connect — only to discover, after paying for a membership, that their long-lost buddies were nowhere to be found. Lawyers for the plaintiffs asserted that Classmates had 'profited tremendously from their false or deceptive e-mail subject lines and related marketing tactics.' Under terms of the proposed settlement, Classmates.com members who upgraded to premium memberships after receiving one of the 'guestbook' emails will be able to choose either a $3 cash payout or a $2 credit toward the future purchase or renewal of a Classmates.com membership. Classmates.com is also among companies that have come under scrutiny for their use of 'post-transaction marketing' tactics — in which customers are given additional offers as part of the online payment process, sometimes in such a way that they aren't aware they're also signing up to pay more. A November 2009 US Senate Committee report said Classmates made more than $70 million through its relationship with post-transaction marketing firms. The Classmates Media unit posted $58.8 million in operating profit for 2009, up more than 24 percent from the previous year, making Classmates 'the most profitable social network in the world,' according to CEO Mark Goldston."
Fraud? (Score:5, Informative)
Excuse me, but where are the punitive damages?
Re:Meetup.com (Score:4, Informative)
If you are accusing meetup.com of having phony people RSVP to your event, I kind of doubt it. What purpose would it serve? You've already paid for the subscription before anyone signs up for your event, and having a bunch of fake sign-ups certainly isn't going to help encourage you to renew your subscription in the future since you'll know they are no-shows before your next payment is due (in sharp contrast to classmates.com, where the fake stuff is used to grab your initial payment). I belong to several meetup groups, and I've never gotten the impression that the no-shows weren't real; they're just flaky people.
Re:Fraud? (Score:3, Informative)
The settlement also calls for Classmates.com to pay attorneys for the plaintiff up to $1.3 million in fees, with the court determining the actual amount. The lead plaintiffs in the case, Anthony Michaels and David Catapano, would each receive $2,500 as part of that provision.
It's a settlement; these aren't damages and Classmates.com is admitting no wrong doing.
What has happened here is that the two guys who bothered to bring suit against Classmates.com have been paid $2500 (and their attorney fees have been covered). Considering that it was a ~$10 fraud, that seems like relatively steep punitive damages in their case. Everybody else who was similarly deceived --but who didn't bother doing anything about it-- will get a whopping $3.
I'm not saying these terms are fair, just that the lead plaintiff aspect in class action lawsuits is supposed to encourage people to complain.
Re:Why would anyone take the $2 credit? (Score:3, Informative)
Class action lawsuits are *never* for the benefit of the actual aggrieved parties. They're simply cash cows for tort lawyers. Bill Lerach actually got caught *paying* people to be plaintiffs in shareholder class action suits - he went to jail for that, but how many others didn't?