In re Jamster Marketing Litigation, MDL No. 1751, U.S.D.C. S. D. Cal. Sept. 29, 2008 (Miller, J.).
You may want to think twice about accepting an offer for a “free” download of your favorite Lady Gaga song as a cell phone ring tone. The sound that you may hear may be the ringing cash register of Jamster, a former subsidiary of Internet infrastructure provider VeriSign, which specializes in custom content for mobile devices, and which has been accused of defrauding customers into paying for ring tones that they didn’t authorize, and using deceptive marketing methods to lure consumers into purchasing its products. Say it ain’t so!
In March 2005, Charles Ford filed a lawsuit in San Diego state court against VeriSign, Jamster, Cingular, AT&T Wireless, and T-Mobile, after his young daughter unwittingly subscribed to a Jamster service in 2004. Jamster leaped to prominence in 2004 on the strength of its “Crazy Frog” ring tone, which spawned hit musical singles and remixes in world music markets, and earned the company $500 million in sales in 2005.
You know the suicide-inducing “Crazy Frog” mascot with the flying helmet, who advertises an annoying polyphonic tune that’s meant to sound like an engine, and who prances across the screen revealing his visibly small – uh — tadpole, to the consternation of parents worldwide.
The lawsuit claimed that Jamster (and its annoying Crazy Frog) lured children and teens into costly ring tone subscriptions through advertisement run heavily on TV channels that are aimed at children, such as MTV, Nickelodeon, and the Cartoon Network. The ads promise a free or single ring tone to mobile phone users who send a text message to Jamster. What the ads allegedly failed to disclose is that consumers who responded were automatically subscribed to a service to receive additional ring tones each week for which they were charged up to $5.99.
The Complaint further alleges that cellular phone providers T-Mobile, AT&T Wireless, and Cingular profited from their relationship with Jamster by receiving a portion of the Jamster subscription revenue, in return for allowing Jamster to direct-bill their customers. The wireless providers also allegedly charged their customers per-text charges for unsolicited text messages from Jamster.
According to critics, the Jamster service was so hard to unsubscribe from that customers would often cancel their entire plans just to get rid of it, and then cellular carriers would then recycle the numbers for new customers, who would then receive messages from Jamster without ever having subscribed.
Ford sought to represent a class of individuals who were charged for unauthorized mobile content on their mobile telephone bills arising from allegedly deceptive marketing practices.
In April 2005, VeriSign removed the Ford action to federal court under CAFA. After the Ford action was filed, five other complaints were filed as part of a pending MDL proceeding, which included the state-court McFerran action against AT&T in Georgia alleging that AT&T did not require adequate proof of customer authorization prior to billing for third party mobile content. In May 2008, counsel in McFerran presented a proposed settlement that provided the class with refunds equal to the amount of all unauthorized third-party mobile content damages.
In January 2006, plaintiff’s counsel in Ford filed a motion before the Judicial Panel on Multidistrict Litigation, requesting that all related cases be centralized before the court. According to the MDL Rules and the pre-trial order, the Jamster MDL parties were required to promptly advise the court of any potential tag-along action.
Only two tag-along actions were identified, the Harmon action in the Northern District of Illinois, and the Edwards action in the Southern District of Florida. The MDL panel concluded that the MDL actions involved common factual allegations that VeriSign and Jamster falsely represented to consumers that mobile customers could get a free ring tone by sending a message to Jamster or by registering on the internet, and that instead of receiving the free content, those customers then received repeated text messages for which they were charged by the defendants.
These core common factual allegations, properly characterized as deceptive marketing practices, formed the basis for the MDL’s transfer, and instructions to the Court to preside over coordinated or consolidated pretrial proceedings.
Motion for Sanctions:
In Jamster MDL action, the plaintiffs moved for sanctions against AT&T on the ground that it failed to notify the court of the McFerren litigation.
California Uniform District Court Rule 40.1 provides that whenever counsel has reason to believe that a pending action is related to another pending action, counsel shall promptly file and serve on all known parties to each related action for proceeding a notice of related case. The criteria for determining whether an action is related are, among other things, where the actions arise from the same or substantially identical transactions, happenings, or events; or involve the same or substantially the same parties or property, or call for determination of the same or substantially identical questions of law.
The parties agree that the Jamster MDL action and the McFerren action – as filed — were virtually the same action, given that the present focus of both actions was the core allegation that class members were improperly billed for third-party content.
The court, however, found that the Jamster MDL cases focused on false advertising for mobile content that resulted in the improper billing for such mobile content. McFerren, however, did not allege injuries caused by false advertising content, but focused on allegations that AT&T did not have sufficient internal controls to prevent unauthorized billing practices by mobile content providers.
The court concluded that the actions were not sufficiently related so as to impose sanctions because, even though that both actions arose from alleged acts of improper billing, the genesis of the Jamster MDL and the McFerren actions was fundamentally different. The focus of the Jamster MDL claims was that class members were misled through false advertising, and the focus of the McFerren action was that AT&T did not require adequate proof of customer authorization prior to billing for third party content.
The court found that, prior to May 2008, AT&T knew that the McFerren and Jamster MDL actions had “morphed beyond the original scope of the complaints and merged into substantially similar actions,” and that AT&T had used the legitimate litigation strategy of attempting to use the McFerren action to fold related actions to achieve a global settlement. Because AT&T moved to inform the court of the status of the McFerren action within days (or a few weeks at most), of learning of the viability of its settlement proposal, the court found no basis to impose sanctions on AT&T.
Motion to Stay State-Court McFerren Action:
The plaintiffs argued that AT&T must be enjoined from pursuing settlement in the state-court McFerren action under the All Writs Action, which enjoins a litigant from proceeding with a state-court action where it is “necessary to prevent a state court from so interfering with a federal court’s consideration or disposition of a case as to seriously impair the federal court’s flexibility and authority to decide a case.”
The proposed settlement in McFerren generally provided the class with refunds equal to the amount of all unauthorized third-party mobile content charges. Importantly, however, the terms of the settlement place the burden on the putative class members to discover any improperly billed mobile content.
The court concluded that the principles of federalism and comity were further by entry of an injunction narrowly tailored to enjoin AT&T from proceeding with the McFerren settlement as it related to the deceptive marketing claims. The court found that entry of a limited and narrowly crafted stay in the McFerren action as to the deceptive marketing claims did not interfere with the Georgia state-court action, but preventing the action from interfering with the federal Jamster proceeding consisting of MDL related actions that presented common issues involving a substantial class of individuals from many different states.
In sum, the Jamster MDL action was sufficiently advanced and presented unique circumstances such that the entry of a limited injunction to enjoin AT&T from proceeding with the settlement of the deceptive marketing claims was necessary to aid the Court’s jurisdiction. The court enjoined AT&T in the McFerren action from proceeding to settle or otherwise litigate the deceptive marketing claims encompassed within the scope of the Jamster MDL action.
The noisy, smug, and faintly obscene Crazy Frog, also known as “The Annoying One,” has now entered into CAFA lore.
Until next time: