Heartland Automotive Services, a franchisee of Jiffy Lube, has agreed to pay $47 million to settle a class-action lawsuit accusing it of spamming
millions of consumers with text ads for discounts.
If approved by U.S. District Court Judge Jeffrey Miller in the Southern District of California, the deal would resolve allegations that the company's text ad campaign violated the Telephone Consumer Protection Act. That law requires companies to obtain users' express consent before sending them text ads. Companies that fail to do so are liable for $500 per violation.
Earlier this year, Miller rejected Heartland's argument that the TCPA unconstitutionally limits the company's free speech rights.
The litigation dates to last year, when several consumers sued Heartland -- as well as the marketing company TextMarks -- for sending unsolicited text messages advertising a "1 time offer" for 45% off an oil change. The messages were sent to 2.3 million consumers in April of 2011, according to court papers.
The proposed settlement calls for Heartland to offer consumers discounts of around $17 for any Jiffy Lube service. The deal also requires Heartland and TextMarks to agree to an injunction banning them from sending text ads unless recipients consent in writing.
who sued Heartland and TextMarks will receive around $4,750,000 to cover attorneys' fees and court costs.
The consumers' lawyers argue in court papers filed this month that the eight-figure deal should be approved -- although it calls for Heartland to pay less than $500 per consumer. "TextMarks was financially unable to contribute to any meaningful settlement relief and Heartland’s financial condition was such that the creation of a cash settlement fund sufficient to mail each person a check approaching the $500 statutory damage amount was impossible," the lawyers say.
Seattle-based cyberlaw expert Venkat Balasubramani says the relatively large $47 million settlement reflects the fact that the federal Telephone Consumer Protection Act is "very plaintiff friendly."
He adds that SMS ads are a "high risk" proposition, given the possibility that ads will be sent to consumers who haven't consented. "It's doable with a clear opt-in, but companies seem to screw it up," he says. "If these big companies can't do it right, there's some disconnect going on."