Company’s FTC settlement has no effect on standing of consolidated class action

Everything Old …

Back in February, VIZIO, one of the world’s largest manufacturers of “smart” televisions, reached a $2.2 million settlement with the Federal Trade Commission (FTC) and the New Jersey attorney general’s office. The company had been accused of installing spy software in its televisions that allegedly captured the viewing data of 11 million customers without their knowledge.

The complaint centered on VIZIO’s “smart interactivity feature,” which promised to customize viewer content but informed viewers that the feature would collect data as well – “second-by-second information about video displayed on the smart TV” as well as sex, age, income and other private household information.

In addition to the $2.2 million fine, the settlement mandated that the company prominently disclose the program and obtain consent for its data-collection and data-sharing practices, and required the company to delete data collected before March 2016.

… Is New Again

Consumers launched similar complaints in 2015, which were consolidated into a class action before the Central District of California. The consolidated complaint alleged that with the undisclosed data collection program, VIZIO had violated the Video Privacy Protection Act and the Electronic Communications Privacy Act.

In March, VIZIO moved to dismiss the complaint. The court dismissed certain of the putative class’s claims, but preserved fraud and federal privacy law violation claims. Those claims, in turn, were challenged by VIZIO in April by a motion to dismiss that, in part, claimed the settlement with the FTC rendered the consumer complaints moot. VIZIO claimed that the settlement represented “relief that directly benefits the putative class in this action and replicates the very relief Plaintiffs seek.”

The Takeaway

The Central District didn’t buy VIZIO’s argument, issuing its order at the end of July denying the motion to dismiss. The court maintained that the settlement wasn’t sufficient to end the consolidated complaint, holding that while the agreement with the FTC may have made it simpler to stop VIZIO from spying in the future, it did not mean that the company wouldn’t return to that activity.

As this case demonstrates, companies that reach settlement with state or federal regulators in the area of consumer protection should not assume that such a settlement will end the inquiry. A regulatory settlement will not block a consumer class action.