A federal court in Washington recently denied approval of a class action settlement for a case brought against Classmates.com alleging privacy violations. In April 2010, the court gave preliminary approval to a class settlement over defendant’s marketing and electronic privacy practices. The litigation focused on Classmates’ targeting of unpaid users with e-mails encouraging them to upgrade to a paid membership. Classmates would suggest that one or more individuals of interest to a user had viewed that user’s online profile or signed their online “guestbook.” Only by upgrading to a paid membership could a user identify who has shown an interest in them. According to the plaintiffs, users are often disappointed to discover that, contrary to Classmates’ representations, no one of interest has shown an interest in them. Also at issue were allegations that Classmates embedded cookies in its e-mails that allowed users to bypass the secure login gateway to their accounts. If a user forwarded those e-mails to others, he or she would inadvertently give the e-mail recipients the same ability to bypass the gateway and thus gain access into the sender’s account. In an attempt to settle, the Plaintiffs offered a $2 coupon to use for purchasing a Classmates membership, or to pay class members a $3 cash payment in lieu of the $2 coupon. The court rejected this offer of settlement, asserting that the coupon would go unused, that any injunctive relief would not stop any of Classmates practices that led to this action, and that most members of the class were not offered the $3 cash payment.

TIP: This case is a reminder that when engaging in e-mail marketing campaigns, companies should think beyond CAN-SPAM requirements. If messages include features that could put users at risk if the messages are forwarded, liability might arise under deceptive trade practices allegations.