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How to protect your business from class action lawsuits with Damon Wright from Gordon Rees

• John Newtson

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I’m joined by Damon Wright, Head of Advertising & E-Commerce at law firm Gordon Rees to discuss the rising dangers of Class Action lawsuits.

We dig into what they, why they are on the rise, and the most effective ways you can protect your business from individuals who target e-commerce and publishing businesses. 

Click here to download The Gordon Rees updated E-Commerce Retailer Legal Guide that covers this and many other legal issues. 


FinPub Pro is produced by The Financial Marketing Summit, the #1 networking and marketing conference for financial newsletter publishers, trader educators, and digital financial media.

John Newtson, host and founder of The Financial Marketing Summit can be reached via LinkedIn at John Newtson

John Newtson:

All right, hey everyone, it's John again from FMS, and today I'm joined again by Damon Wright, and we are going to talk about something that is not strictly the FTC cases that we've had recently, since we've talked a lot about that. There is a new thing that's been happening in a lot of the internet marketing communities. It's called class action lawsuits. I'm sure you guys are familiar with it across all kinds of things. It is a threat and it's a threat that's easily, um, from my understanding, um avoidable, um if you know about it ahead of time and kind of how to deal with it, and that's kind of what we're going to be talking about here with damon today. Um, damon also has, um.

John Newtson:

You guys remember we sent out um. Gordon reese, his law firm, put out this huge kind of of e-commerce guide on regulatory practices and things like that, and they have an updated one. We're going to send that out because it includes a lot of stuff on this. So anyway, with that, damon, thanks for being here. Thank you, john, all right. So first let's just like dive in real fast, because there's a lot to talk about here. Let's go through to begin with, just for clarity's sake, when we say class action lawsuit, what specifically?

Damon Wright:

does that mean and what is it? Yeah, so a class action lawsuit is basically a case where there are hundreds or thousands or tens of thousands of plaintiffs, and the way it starts is one person says I am suing this company because of false advertising or because I got a text message that I didn't consent to it, or whatever it may be. I'm one person, I had this experience, but I'm suing on behalf of everyone else who's had the same experience. And it just means that in the complaint there are some additional paragraphs that describe how this is widespread. Lots of people have suffered the same situation, same injuries, and it's more feasible, efficient to do this as a class.

Damon Wright:

And so what happens then is, at some point in the case, if it's not dismissed or settled, the plaintiff moves for class certification and says the plaintiff moves for class certification and says now, judge, I want you to find that this can be a class action because there are 50, 100, 1,000 people have had a similar situation. And of course, the defendant says no, no, no, this should just be in one single plaintiff case, but often or not uncommon the judge grants class certification, which now makes it a big class, which means the dollars that went from one person, and one person's purchase maybe was $1,000. Now are exponentially larger and there's certain elements that have to be satisfied to bring a case as a class action. But with internet marketers and financial publishers of course there's serious risk. We're seeing lots of cases around the country.

John Newtson:

Yeah, and I think the one thing that I remember you telling me that I think is so striking about this particular type of litigation versus what we are used to thinking of as like look, there were complaints that ended up from customers that basically were customer originated Right Right. Like, yeah, pissed off customer, they had complaints, they sent a letter to somebody that they did something. It started with one of your customers being unhappy. You had a pissed off customer, they had complaints, they sent a letter to somebody, they did something. It started with one of your customers being unhappy, which is something that we're comfortable with. What's weird or different or scary about class actions is class action lawsuits are a business model for some law firms, correct?

Damon Wright:

No doubt, no doubt, and for law firms and for some plaintiffs too. There are firms that are dedicated to nothing but sending out demand letters and filing complaints, almost like an assembly line basis, dealing with idea that this website has communicated information about the consumer to a third party because the consumer signed up for meta Facebook years ago and or it could be again. The Telephone Consumer Protection Act, text messages, email, website accessibility. There are people who are visually impaired, hearing impaired, who you know the Americans with Disabilities Act is an important act, but there are folks who have filed plaintiffs 500, 1,000 lawsuits where they're always the plaintiff and they always just happen to be coming across this website where they wanted to buy some random product, and it makes you a little skeptical right, so you basically have like a type of litigation that's originated essentially by professional and semi-pro.

John Newtson:

Oh yeah, yeah.

Damon Wright:

And some of our community goes to a trafficking conversion summit and affiliate summit and there's a big business in legal leads. Those are class action lawyers that are trying to buy leads to bring class actions. It's just another type of lead generation. So there are some folks that I meet that think that I'm there to buy leads because I want to do roundup mass tort litigation or Camp Lejeune litigation or whatever the other kind of uh big class actions are, but it's, it's a real thing.

Damon Wright:

We talked a lot about the fbc, uh, and that's an important thing, but class actions, the, the cost of defense can be in the millions of dollars and the consequence can also, of course, be in the millions of dollars, because you're talking about every single consumer that have this experience, right.

John Newtson:

so that's that's I mean. I don't know, it's so weird to me Well here's the thing we have vendors there selling class action leads essentially to lawyers at the biggest marketing conference in the industry. For marketers, it's such a bizarro world at this point.

Damon Wright:

I don't want us to get depressed, um, because there's a, there's a solution, is it? There's a lot that can be done very easily to fend this off. And, um, you want to jump into?

John Newtson:

it? Yeah, let's go like. What is it because that's that's why I wanted to do this is like it's like, here's this big threat, but it's actually a relatively simple or straightforward, I should say, way to make sure that this isn't a problem for you. So that's right, let's go to it. What is?

Damon Wright:

it. Okay, all right, all right. Okay, all right. So this is what you were talking about at the opening. It's our e-commerce retailer legal guide, and I want to talk about a couple sections of this.

Damon Wright:

The first one obviously one easy way to avoid class actions. We're going to talk about that. Then I want to talk about subscription billing. There are class actions brought over companies, internet marketers not complying with subscription billing law. Then I want to talk about the text and telemarketing. That's the Telephone Consumer Protection Act. Then email marketing there's a California statute called 17-529. There are a lot of class actions brought under this statute, so we're going to talk about how to avoid litigation there. Then, a different kind of cookie monster there are these California invasion of privacy act cases and federal wire tap cases that are really distorting the statute, but that's a big deal. And then website accessibility suits and then maybe, if we have time, I want to talk about business insurance. So these if someone takes the time to read these sections or listen to this podcast or, even better, both you're going to be in a much better spot to not have to worry about class actions and you know I linked that underneath here.

John Newtson:

So great for everybody so.

Damon Wright:

So let me let me jump down to here. All right, this is one easy way to avoid class actions. So let's just uh, step back for a second. Um. So, john, with a lot of class actions.

Damon Wright:

People are walking into a brick and mortar store. They're buying something off the shelf, um, with product or service sold online on your website. You have such a great advantage because you can easily form a contract with that consumer. If someone walks into Target or Walmart or a grocery store LL Bean, whatever they're not signing a contract. They're signing a credit card receipt, perhaps, but they're not signing a contract there at the store. But online you can form that contract, and that kind of contract is called a click wrap agreement.

Damon Wright:

If the consumer has to check a box that says I agree to the terms of sale, terms of sale hyperlinked, the simple, easy thing to avoid class actions from people who have purchased from you, that have gone all the way to the end and purchased, is to have those terms include a class action waiver and also often a mandatory arbitration provision. So the case will also not be public, it'll be an arbitration. I can't tell you how easy that is. It's such a simple thing to do, but right now there are lots of businesses selling products and services online that don't have that Right.

John Newtson:

I mean, that seems pretty straightforward.

Damon Wright:

Oh, it's super basic. It's so basic. So we explain here. Imagine that right now.

Damon Wright:

Now a litigious, opportunistic consumer is diligently searching the Internet. He goes from one e-commerce website to the next. At each, he doesn't stop to study the product images or features. He doesn't care about the product the product claims are the testimonials but he knows what he wants to find. He keeps moving his mouse, clicking the hyperlinks, visiting the checkout page and scrolling down the website terms. So this is a guy who's a pro se plaintiff, looking in the middle of the night to find a target. He's hunting on the internet Halfway through the terms, he frowns, but he clicks away, goes to the next website and keeps searching. He knows what he wants to find. He knows he'll find what he wants soon enough and finally he gets paid. Or he's found an e-commerce website that does not have a click grab contract, a mandatory arbitration provision or a class action waiver provision. He buys the most expensive product on the site, then takes a lunch break. He's going to start working on his class action lawsuit in the afternoon. But that's based on a very common fact pattern.

Damon Wright:

So what we describe here is about again, I agree to the website terms of sale and I've had clients that have told me oh, I think it might hurt conversion to have a checkbox, an unchecked checkbox. It needs to be unchecked, I've said. I've had clients, countless clients, have told me it doesn't hurt conversion, to wit, that people are filling out their name and their address and their credit card number and they're not suddenly going to go whoa, whoa, whoa. What's this box? What does it mean? Website terms? That's just not reality. It's not as ironclad. But if someone is really not excited about the unchecked checkbox, an alternative is to have language above the button that says by clicking buy below. I agree to the website terms. There are some outlier cases that say that's not enough. You basically need the check box to approximate the signature of someone to a contract. That's the affirmative action they're taking to agree. This can really insulate a business from again people who've actually bought the product. There could be class actions from others who haven't, who've just visited the site.

John Newtson:

That's really the threat, right there is that there are people who are out there going through websites, um, looking for whether or not they they know what they're looking for, right Cause they're not gonna waste their time.

John Newtson:

So they're looking at it, they're looking at the terms and is there a class action waiver, is there the other thing?

John Newtson:

And if not, then they're going after and doing things. And so the reason I think this is important, right, is you know, we I went back and looked we were about two and two years ahead of the ftc kind of stuff coming into the space, when we had brought some stuff to the fms about, like, hey, this is kind of a threat, um, and you can tell there's threats because they're happening in larger internet marketing communities, like class actions are happening now, um, and with the issue of of financial information products going more mainstream than we've been talking about for the last two years, I think that this is an area that eventually, maybe in the very near future, we're going to start to see some kind of actions, and so it's always easier to deal with it by fixing it now, before somebody attacks or goes after you, than it is fixing or dealing with the case afterwards. Oh, it's so much cheaper. That's why we thought this was important to do right now and why it's like hey, pay attention to this.

John Newtson:

This is a simple thing that can prevent a hell of a lot of headaches and a hell of a lot of fines and a hell of a lot of problems later. That's exactly right.

Damon Wright:

Now, a couple thoughts. The Shopify template doesn't have the unchecked checkbox language. You have to work to add it. It should be there. At FMS there was a fellow who did a great presentation on split testing and put up a checkout page, and I didn't want to be that obnoxious guy, but I really wanted to point out that there was one thing missing from that checkout page. You're talking about trying to tweak conversion with split testing ever so slightly, but you also want to make sure you're able to keep the money you've made. Very important, very important. Yeah, all right, so let me go now to an area where there are a lot of class actions. Go now to an area where there are a lot of class actions. Now, if you have the click wrap, you should be able to avoid this type of class action, but nevertheless, it's important to be aware of this, and that's especially for this, our community.

Damon Wright:

This has to do with subscription billing. This hypothetical here talks about Cigar of the month subscription business and people are getting the same product month after month. But you could just as easily say it's the financial finpub company blitz alert trade alert service. It's being sold on a subscription and and I think most of the folks in the FMS community are selling their digital products on subscription. So let me just cover what's needed. If you're selling a product on subscription.

Damon Wright:

It starts with three things that are very basic. One is that there has to be clear and conspicuous disclosure of the subscription billing terms. How much people are going to pay each month when they have to cancel? Two is the consumer has to provide express affirmative consent to those terms. So again, back to an unchecked checkbox is often the best way to do it. If it's so obvious this is a subscription and you're not offering a one-time purchase of something, there's a good argument that the consumer is providing express consent by just completing the transaction. But that's the second thing. And the third thing is the business has to provide a simple, easy mechanism to cancel the subscription, and there's a federal law called ROSCA that the FTC enforces. That stands for the Restore Online Shoppers Confidence Act. It requires those three things, but wait, there's more.

Damon Wright:

There are state statutes that are very much like ROSCA, except they actually require more than just those three things, and that's where, in the last couple of years, it's gotten complicated. There's a California statute, there is a Vermont statute, there's a Virginia statute, there's a DC statute, there's a North Dakota statute. Those statutes have some wrinkles and I won't go into it in great depth here. But I encourage I encourage folks to read this because the In Vermont you have to have two separate checkboxes, one for the terms of sale and another just for the subscription billing terms.

Damon Wright:

Two separate checkboxes, one for the terms of sale and another just for the subscription billing terms. In California you have to have a click to cancel button so someone can go online and cancel like that. Or you have to have this pre-formatted email that someone can. If they receive an email confirming their subscription, they can just click a link in that email to go to an email that then would be sent to the business to say I want to cancel. So there's been a real emphasis on by regulators to just prohibit save the sale efforts as well.

John Newtson:

This is definitely the dynamic right. Like everybody who sells stuff wants to create friction in the cancellation process because it helps save money, and and the regulators in the States want to reduce friction in the process and so do all with all these different kind of state regulations. Um, is it something where, like, there's one basic pattern that covers all of them?

John Newtson:

yeah, the common denominator yeah, yeah, or is it something that like oh my god, I have to actually track what state state to keep covered, because that's almost like untenable for a small business? I know, yeah, um, yeah, vermont it's funny.

Damon Wright:

I mean I don't think vermont's like a big yeah, vermont, it's funny. I mean I don't think Vermont's like a big regulatory, aggressive regulatory state. But Vermont and California both have quirks. Now if you wanted to take the common denominator test approach and satisfy both those quirks and do that for all 50 states, you could do that. If you wanna try to geo-target, so you send this type of confirmation email to California consumers and you have this type of checkout page for Vermont consumers, you could also do that. But that's a technological challenge.

John Newtson:

Yeah, that's definitely harder to do. I think people are looking for what's the one simple fix. If I do that, that covers me rather than trying to spend. I mean, some people might have the dev abilities and strong dev team in-house that they can go ahead and geo-target and things like that, but I think most people are not going to be doing that.

Damon Wright:

No, I agree. No, I think a lot of businesses are not complying with the Vermont statute. Again, it's having an extra checkbox that's the big thing that separates out the billing terms in its own statement. There are a lot of businesses that are applying the California approach the one-click to cancel the pre-formatted email, and the FTC is probably going to require cancel the pre-formatted email, and the FTC has is probably going to require that as part of a new rule coming down soon. So the idea that to cancel, you're on hold and you dropped off and they have to talk to their supervisor and then they, you know, they try to downsell, you, downsell, you downsell. I know people that do that and get great deals on xm radio, um, but um, that's the concern and so they want to make it. If you're able to buy something online in a matter of seconds, you should be able to cancel it in a matter of seconds. That's the concept, yeah nice, all right.

Damon Wright:

Well, let's talk about, uh just one thing you're saying there have already been cases around these things oh yeah, class action cases yes, hundreds, hundreds and big names, like like vitamin shop um right, spotify, I mean, you know yeah, yeah, well, I mean, that's the thing.

John Newtson:

So one just to back up and and I want to keep it moving, but, um, there's got to be a certain size of company that people are going after, right, um, or no?

Damon Wright:

I said hundreds.

John Newtson:

I really should have said tens of thousands actually yeah, yeah, tens of thousands, yeah, okay, so they're going after everybody that they can.

Damon Wright:

Yeah.

John Newtson:

Kind of just shaking the tree and seeing what falls out.

Damon Wright:

Yeah, and to go back to your point, yes, they are going after companies that a plaintiff's lawyer wants to try to figure out. What's going to be my biggest bang for the buck. If I can put in 500 hours and bring a case against a company that's doing a billion dollars and win, that's going to get me more money than 500 hours in a case against a company that's doing $5 million. Here's the thing we talked about the click wrap in the website terms. If you have that in place, you should be able to avoid the class action for violating subscription billing laws, because it would be brought by someone who already completed that purchase, who agreed to the class action.

Damon Wright:

You could still get sued individually and you can still get in problems with regulators too, but you're looking at like I've got to refund this one guy.

John Newtson:

It's a much different situation. It's a much different situation than, hey, we're going to go after everybody and send out, Because don't you have to send out If you have a class action judgment against you?

Damon Wright:

don't you have to send something out to all of your customers that they can, yes, like participate in that. That's right. Like you get to go and a lot of class actions yeah, and I should have said this, but a lot of class actions settle. But they settle by requiring notice. Go to all the class members and it's every single class member gets uh 25 or a coupon and the plaintiff's lawyers get a success fee of $2 million or something like that. And if every single class member took advantage of that offer, the total amount paid out could be in the millions of dollars, say $10, $15 million. But what happens so often is the take rate is closer to 5%, 10%. People are like oh, I don't know what this postcard is. It looks like I get $10 if I send it in and it goes in the trash. So the ultimate payout ends up being $5 million instead of $10, $15.

Damon Wright:

Right, but that's why it's a business model, because the lawyers are going to get their $2 million or whatever, yep, yep, or it could go all the way to trial and lawyers could lose or they could win. If they win, they get a judgment and then that process starts. Yeah, all right, let's talk about this is an area where there's been a tremendous amount of activity. I want to talk about the Telephone Consumer Protection Act. So this is the law that applies to text messages, sms or pre-recorded voicemail, artificial voicemail messages, sms or pre-recorded voicemail, artificial voicemail or robocalls.

Damon Wright:

A few years ago there was a US Supreme Court decision De Guede versus Facebook and it had to do with what the definition of automated telephone dialing system was kind of like a robodialer. And the Supreme Court in a 9-0 opinion said the definition in the statute is really, really narrow and because it's so narrow, these Telephone Consumer Protection Act cases that have been being brought for the last many years should not have been brought. Those defendants weren't using an ATDS, because the statute says an ATDS is a technology that's calling numbers that are randomly generated and if the numbers are stored, not randomly generated, it's not an ATDS, all right. So it was a 9-0 decision. The business community said yay, awesome, we're not going to face these TCPA cases like we did before, you could still get sued if the person was on the do not call registry and you didn't get consent. I was annoyed because I got this kind of case all right.

Damon Wright:

So anyway, business community celebrated and just the opposite thing happened rather than there being fewer cases, there ended up being many, many more cases. And the reason is because the state legislatures saw the supreme court decision and said, oh, we better jump into this, we better fill the void. And suddenly several states passed their own mini Telephone Consumer Protection Act statutes that defined the ATDS technology in the broadest way. Does that make sense? So yeah, what everyone predicted happening was counterintuitive. Just the opposite happened. So, and class action? So uh, that.

John Newtson:

So I want to, I want to take a break for a second here and just put a resource out there from uh zach westfall, who spoke down at um fms this year on, because they they are one of the phone sales is one of their big things, right, yeah, and one thing, one thing that he shared with me was that he uses dnccom Dot com yeah, which is donotcallcom.

John Newtson:

Basically there's the first letters, so the letter D, as in dog N, as in Nancy C, as in cat dot com, and it scrubs against the do not call registry, your phone, your numbers, and no litigators, and I um government agencies too, um, but I'm not sure about that, but I think known litigators and um people who have said do not call, uh. So if you're doing outbound phone sale or doing phone sales, if you're doing text messaging, um, because do not call applies to text too, right, yeah, absolutely so then you need to be scrubbing. And if you're not scrubbing, then you can almost guarantee that in some form you're in violation. If you're using SMS and SMS is very important these days because we're seeing conversion rates on SMS to our list going up and being an increasingly significant part of sales, and so that's a big thing. Dnccom for anyone who's not using it. Yep, yep.

Damon Wright:

I recommend them. So yeah, back to class actions. One person gets a couple text messages they did not want actions. One person gets a couple text messages they did not want. They didn't provide prior express written consent to receive text messages, marketing text messages. And what happens next is they file a class action on behalf of everyone. And I'm looking at something right now that 58.1% of the Telephone Consumer Protection Act cases filed last year were filed as class actions.

Damon Wright:

So you, know just one person received one person receiving a few texts suddenly becomes a case where they're saying everyone who received these texts. I've seen a situation with some really great, smart, organized clients who in one way were not so organized, where someone will reply stop. A consumer reply stop and they'll get a response back saying you've been removed. But they have that same phone number in this list or that list and that other list and they're using maybe a different texting platform and so they don't have a master unsubscribe, master suppression, so that consumer a week later gets another text from the same business from a different sending phone number and now they say I wasn't suppressed, you didn't honor my stop request and it turns out that the company needs to quickly consolidate their list and scrub. And it's really a big problem and someone just was not paying well enough attention. But this discussion here in the guide talks about how to avoid these kinds of cases.

Damon Wright:

Under the TCPA the penalties can be up to $1,500 per text. The key thing is to get prior express written consent for any kind of marketing text messages, and that's the language that looks like this I agree to receive automated calls, text messages and pre-recorded messages via an automated dialing system of our promotions firm or on behalf of. That's the telephone number I provide and understand consent is not a condition of purchase, that's it. You don't need to have this language if someone is receiving order updates and it's about their purchase, but the moment you start talking about and get a 10% discount on your next purchase, now it's gone from transactional to promotional and there's an argument that unless you have this expressed consent you could be liable. And it's an issue not just. It's not as much of an issue under the telephone consumer protection act, the federal law. Unless someone's on the do not call registry, then you do need this, but it is an issue under all these state statutes. Kind of like we were talking about the subscription billing You've got now.

Damon Wright:

Kind of like we were talking about the subscription building You've got now. New Jersey, Washington, New York, Maryland, Florida.

John Newtson:

It's a patchwork and so that's so. Just to go back a second, did you mean that if a customer let's say I have a customer who's on the Do Not Call registry, yep, am I allowed to text them or call them about their order? Yes, those are fine so yes, okay I just want to be clear.

John Newtson:

That would be transactional, right. Okay, so all this transactional, but any but. So basically, like phone and sms, do not follow what you would think of as email kind of stuff, right, just because Just because they are a customer doesn't mean you can send them whatever because you're a customer, that's right. That's right. You have to have specific permission, basically, or they could opt out not on your website from all calls and then you're legally required to abide by that. Do not call registry. That happened outside of your business relationship, but they have it there and unless they give you express permission specifically to opt into phone stuff, you can't do anything. Or?

Damon Wright:

any kind of marketing, promotional stuff. Right and no marketing, right, right, yeah, and that's a consequence of and it's a bit confusing, but if you read the guide it'll make more sense. But you need that to the extent that someone's on the Do Not Call Registry. You need that to avoid liability under the Telephone Consumer Protection Act, the Federal Act. If someone's on Do Not Call and don't have that consent and you send them a promotional text, you're liable. But then on all these other state statutes you could be liable for sending a promotional text to someone, whether or not they're on do not call.

John Newtson:

Does that make sense? I mean it does. It doesn't make me happy, I know, yeah. So so how do you, how do you manage with all the States? Cause again same issue. Well, dnccom, so they scrub states too, the state stuff.

Damon Wright:

Yeah, there are state DNC registers. And then again, am I sharing my screen now?

John Newtson:

I'm not sure, if I am, you're not currently no, okay.

Damon Wright:

How do you manage the states? I mean, this is it it? I mean there are some other things about when you can call, when you can text uh. If you're calling uh, there are state particular statutes about how quickly you have to identify with a company, you're with uh and, of course, you need to let people know if you're reporting the call. But this is this is the magic language okay.

Damon Wright:

So again, relatively simple solutions do increase friction in certain certain points, and that's you know something that's right to deal with now you know, a big issue is uh, if you're doing some type of um data monetization and you're buying someone else's list, you could be walking right into a bunch of TCPA lawsuits or a class action lawsuit, because the consumers didn't give consent to you to tax them.

John Newtson:

Right. So if you're not buying the business that has the consent. I mean, we have this different. We get this in waves. It's been a while since we've had kind of a big push of people selling lists, yeah, yeah. Yeah, it's been a while since we've had a big push of people selling lists, yeah.

Damon Wright:

If it's a business sale, certainly if it's a stock sale, most likely. If it's an asset sale, it's going to depend on the language of the privacy policy. Two that people signed up for. But yeah, just don't say hey, give me your list, I'll give you my list, and off the races for any kind of texting. Let's talk about something that's similar but different, and that is email the workhorse.

Damon Wright:

Yeah, so with email you don't need to have consent to send a marketing email. You do need to comply with can't spam act. And and then there are of course state statutes, of course california, that are kind of like mini can't spam act cases. So this discussion talks about what to do there and most of it's pretty much common sense. You can't use deceptive subject lines. You have to identify it as an ad. You can't have misleading header information.

John Newtson:

Pretty straightforward. The subject line thing, though, is kind of like that's one of those things that, based on the type of emails and stuff that we send, I mean, I guess I guess you're saying that the whole like social security says as if you're coming from social security with a sender, but like, I mean, that's such a vague thing, like subject lines are.

Damon Wright:

So yeah, you want to get someone's attention right. You know your car warranty has expired, stuff like that. Yeah, yeah, yeah, let me. Let me single out one thing that's causing problems. I am leading to a lot of lawsuits right now yes, including for some people in the FMS community. They've dealt with this. Some clients have dealt with this in the past. I have clients who are facing this now.

Damon Wright:

With any kind of email that's sent marketing email the sender is supposed to be traceable by the recipient, and what that means under the California case law is that you say, john, you get an email and you want to find out, ok, who sent me this email. This case law says you should be able to click the domain or the sending domain and does that take you to a website that says here's this company, here's where they're located, here's the official company name. That's one way you could figure out who the sender is. Another way would be if you look at the footer of the email and it would have the company name and an address and it's got to be the real company name and a real address that would tell you who the sender is. Another way could be actually, those are the two biggest ways. The two biggest ways.

John Newtson:

Yeah.

Damon Wright:

And so so often FinPub companies are using publishers who are sending out emails, and the domain doesn't lead to a website or the domain. If you search it on who is, it says domain by proxy, so you can't use the domain to figure out who the sender is, what their real company name is, what their address is. And then, if you go to the footer, it's some type of DBA, it's some PO box and it's in a state, but there's no way to show up at the PO box and find out what the real company name is, and the DBA is just something catchy. It's not the real company name. And so what happens then is the advertiser is liable for the acts of the publisher. The publisher didn't know any better. But they can create massive liability for the advertiser and there's some law firms that specialize in this type of litigation, simply saying the sender's not reasonably traceable.

Damon Wright:

Therefore the advertiser's liable and it's up to $1,000 per email and of course there are tens of thousands of emails that were sent. So the fix is to make sure the company that's the sender is identifiable a real company name in the footer, real address and if you search the secretary of state business records in that state, you should be able to find that company. Right, they need to be registered in that state, okay.

John Newtson:

Yeah, does that all make sense? That's interesting. So it's not just like hey, here's my domain name. It's down to the registered entity in the state that you're saying your site is. That's right, exactly.

Damon Wright:

Yep, yep. So this is what we're saying here. You can be exposed to liability even if you've engaged an email marketing company to send emails on your behalf. The sender not just the advertiser needs to be readily ascertainable or traceable. Ascertainable or traceable, and so it's common for an agency or network to send an email advertising a product from a privately registered domain. While they disclose the identity of the advertiser in the body of the email, the sender is never identified, and consumers are unable to locate the entity responsible for actually sending the email.

John Newtson:

So basically, if you have an agency that is sending stuff for you or you advertise somewhere and they put your ad in a list where they are not compliant with this, then you are findable. They can't find them, so they can find you, so they're going to go ahead and find you instead, because they can't find them.

Damon Wright:

That's right, yeah, so what we're saying here is email marketing companies should use a publicly registered domain name or identify themselves by a full legal name and properly registered postal address. At the bottom of each email, the sender's corporate name, including any DBA contact information, should match what's on file in the state where the email marketing company is authorized to do business.

John Newtson:

Yeah, well, I think we're thankful that a lot of our larger groups that do email have email networks are pretty good operators at this point, but there's a lot of small people out there who are selling stuff and doing stuff and you find any and all types of problems in terms of just this kind of logistical stuff that maybe they're not aware of. Everyone, be aware of it again, why we're doing these things.

Damon Wright:

All right, let me go to another topic here. This is the last year and a half. This has become the new favorite kind of claim brought by class action leaders. I like the title a different kind of cookie monster. So I think I was sharing my screen then just now, wasn't I? Nope, I'm just talking to myself.

Damon Wright:

Okay, so back in the I think, late 60s, early 70s, the California legislature maybe watched some James Bond movies or something like that, or maybe watch some James Bond movies or something like that, and suddenly we were concerned about the idea that you could have a microphone recording device in a martini, olive, toothpick or whatever you know, on your lapel. Eavesdropping, it was the concern. And so they passed the California Invasion of Privacy Act and basically saying it's illegal to report someone without their consent and California is a two-party state for purposes of phone calls. So if you're on a phone call with someone in California and you're recording it and they don't know it, you could be liable. And there are several other states that are two-party consent states like that too. So statutes intended to deal with being, you know, someone being reported without their knowledge, maybe James Bond style or something like that. Years later, 2022, 2023, 2024,.

Damon Wright:

Creative plaintiffs lawyers say I think we can use this statute to say that when a consumer visits a website and the website's collecting information about them just by virtue of their arrival at the site and then that information gets communicated to others, that that violates this California Invasion of Privacy Act statute. California Invasion of Privacy Act statute. Down to the ridiculousness of website has a chatbox feature. Consumer goes to the chatbox, says I'm interested in learning more about your products. Chatbot says oh, okay, well, let me tell you more. If that chatbox feature is actually owned and operated by a separate company that has the data, plaintiff's lawyers are saying that also is illegal wiretapping used for recording without their consent, unless you have a privacy banner or a cookie banner. So these are ridiculous cases.

John Newtson:

This is why people hate lawyers. I know these guys who come up with this stuff. I know.

Damon Wright:

So it's ridiculous and this is probably the shortest section we have in the guide. But a cookie banner consent is really the key thing. If you can say establish there's consent, then these cases are over.

John Newtson:

So that's like the GDP of the R and like pop ups that everyone's kind of at this point. I hope most people do. That's right. That's right.

Damon Wright:

That's right. Yeah, just for reference here, there have been thousands of cases brought under this California invasion of privacy act case Thousands, thousands, yeah, and a lot of arbitrations too. So most of this is happening out in the California courts. Some is happening in the Florida courts. It's again a simple fix, and being able to say that the consumer consented to any reporting at the outset basically eliminates that actually.

Damon Wright:

Let's go to one more topic and that's website accessibility lawsuits. You've spent months developing your website, the enrollment paths and checkout pages, and invested tons of money in copywriters and campaign managers to help you market and sell your products. Your new website's beautiful. You've split-tested ads, dialed in everything. Now it's time to sit back and relax and then you receive a demand letter. The letter says your website is insufficiently accessible by the firm's visually impaired clients and your beautiful new enrollment path wreaks havoc with end-user screen reading software and the lawyer demands that you immediately remove the barriers to access and write a large check to avoid a class action for violating the Americans with Disabilities Act and state and local accessibility laws. So this is common, just like wheelchair ramps and other kind of brick and mortar features of the Americans with Disabilities Act allowing people to be able to visit places of public accommodation.

Damon Wright:

Courts, for the most part, have held that websites are places of public accommodation and therefore people with various disabilities should be able to have access to these websites. The case law around the country is not consistent. Some places, some courts, have held that websites are not places of public accommodation and they're not subject to these laws. Other courts have said in other parts of the country yes, they are, but again, unless you're going to sort of geo-target, if you're going to be liable in half the states or two-thirds of the states, you might as well comply and provide the same access across all the states. Unlike the other things we've talked about here, there is not a legal hook or legal solution to these problems where you add some language to your site and you've suddenly reduced your liability or exposure tremendously. This is instead a technical issue or technological issue, and what it means is that you should, if your business um doesn't. If you have a website and you're receiving traffic to your website, you should work with a consultant or a really good website designer to make sure that you're complying with the web content accessibility guidelines and you should make sure your consultant, your website designer, understands what these guidelines require, and your website designer understands what these guidelines require, and it really has to do with making sure that the website can integrate with software that hearing impaired, visually impaired, other people with impairments, that they use to be able to access the Internet. And these are the requirements for the website. Formats perceivable, operable, understandable, robust formats perceivable, operable, understandable, robust. And so, again, not a legal solution. Here's all you need to do to really reduce liability. It's about working with someone very knowledgeable on how to make sure you comply For a while and to some extent still, and for a while and to some extent still.

Damon Wright:

There are companies that say we have a plug-in and just pay us the license fee for our plug-in and you're going to be too well protected against these kind of lawsuits. The plaintiff's lawyers have argued more and more that those plug-ins aren't sufficient and they actually create a worse user experience. And so, whereas three years ago we could represent a client and say, look, they have this software and maybe the plaintiff's counsel would say, all right, I'll settle for $10,000. Now we say we have, our client has the software, and plaintiff's counsel says, well, that just makes the problem worse and my demand's gone up. Most of these cases settle. But just to give you a sense of things 2023, there are approximately 4,300 of these lawsuits were filed against businesses with under 25 million dollars in revenue man yeah that sucks.

John Newtson:

So, um, the small guys, yeah, yeah, because it's probably they figure for settlement, in the sense like everyone's gonna try and settle because they don't want to deal with this and yeah, that's the thing.

Damon Wright:

It can be really frustrating that there are plenty of lawyers who there are some who are real zealots and are it's a I'm. I'm going to, um, I'm a you know, a warrior and I'm going to go to the mat and try to do everything I can to make as much money for the people that I represent and create as much good in the world. And that's one mentality. Another mentality is I'm going to just go after lots of companies and make a settlement demand. That's less than the cost of defense. Lots of companies and make it a settlement demand. That's less than the cost of defense.

Damon Wright:

So if it's going to cost a half a million dollars to litigate this case and the defendant knows it I'm going to start my settlement negotiations at $250,000. And they'd be stupid not to take it because even if they win at the end of the day, if they litigate and they win at the end of the day, they will have spent twice that. There's that other kind of approach. One more section to talk about, don, and if you have a couple more minutes here.

John Newtson:

Yeah, just a few more of them coming up on a deadline here in a minute, all right.

Damon Wright:

So this is a section about the benefits of business insurance and, yeah, I think it's every. Every business should make sure that they've got insurance and some of the types of claims we've talked about. You can get insurance to help with the cost of defense or cover the claim. Yeah, and that's something to use.

John Newtson:

A certain size it starts to become economical in terms of defense or cover the claim. Yeah, that's something. To use a certain size, it starts to become economical in terms of the risk reward on that, and I think this is like you know. This is all the stuff that, like you know, nobody wants to take the time to think about because it sucks. It's not about making money but it's about, like you said, keeping the money. That you know, and I'd much rather do a lot of these conversations with you, damon, than a lot more of those conversations with people who are like, hey, let me tell you about my experience in the last two and a half years dealing with this major lawsuit that I had to deal with that cost me millions of dollars and shut down my business. Those conversations suck.

John Newtson:

Everyone wants to pay attention to those because they're so interesting in, like, holy crap, let's hear what happened. Yeah, but much better to have these conversations so that you're not that case study. Nobody wants to be that case study. I don't want you to be that case study. I don't want to do any more of those episodes. Yeah, yeah, I don't want to do any more of those episodes with people from the community. I know, like everybody like, pay attention to this stuff. It's, you know it's not, you know it's it's. It's easy to get like distracted from it and be like, hey, this isn't something I can deal with right now because I got a campaign going out today, but somebody should be going through this guide and going through these things and talking to him and other. You know, just like, get this stuff handled so that you're not a future case study, please.

Damon Wright:

Yeah, yeah, please, yeah, yeah. I mean the, the e-commerce legal guide. I think I told you before we started in 2019, probably a thousand hours of legal work that's gone into that. Uh, so that's, you know, our rates. That's, that's a lot of money uh, and it could save you.

Damon Wright:

It could save you and help to make you millions of dollars. There's other sections we didn't talk about, um, so there's a lot of value there and we're giving away for free and the things we're talking about. There are things that you can implement to avoid having to pay lawyers and having to pay others a lot of money. We actually make my law firm more money when people haven't done that kind of stuff we've talked about here and then they get sued and then we're we're in the thick of it, um, but so it's, maybe it's against interest, but I'd like to help clients grow and sleep well and make a lot of money and uh, certainly we, we litigate and uh fight for our clients when necessary in court. But yeah, a lot of this is pretty simple and it can help you in a huge way.

John Newtson:

That's awesome. Yes, I'm going to link to that guide. Everybody um download it. It pass it to whoever he needs to on your team to read it. I'll link to the DNC as well. The Do Not Call scrubber and Damon, thanks for taking the time and doing this and thanks for you guys putting that guide together and everybody check it out. Thanks, john.