American Eagle To Pay $14.5M To End Spam Text Dispute

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Law360, New York (December 21, 2016, 10:35 PM EST) — American Eagle Outfitters has agreed to shell out $14.5 million to settle a proposed class action accusing the clothing company of violating the Telephone Consumer Protection Act by blasting consumers with unsolicited text-message advertisements, according to documents filed in New York federal court Wednesday.

Under the terms of the agreement, which were detailed in an unopposed motion filed by the plaintiffs for preliminary approval of the pact, American Eagle and its parent company AEO Management Co. will establish a non-reversionary fund to compensate the approximately 618,289 members of the proposed settlement class who claim to have received spam texts from the retailer since April 2010. Each class member who submits a “simple claim form” will receive a cash payment, which class counsel estimates is likely to be between $142 and $285, according to the settlement.

“The proposed settlement is more than fair, reasonable, and adequate, and exceeds many approved class settlements under the TCPA on a per class member recovery,” the plaintiffs wrote in their motion.

The dispute is a combination of separate proposed class actions that were filed by American Eagle customers in New York, Florida and Illinois federal court, which the retailer successfully moved to consolidate in New York. According to the plaintiffs, American Eagle violated the TCPA by sending texts to the cell phones of the plaintiffs and at least 600,000 other unique cell phones without having prior written consent to do so or after the recipient had unsubscribed from such communications.

The plaintiffs also named telemarketing vendor Experian Marketing Solutions Inc. in their third amended complaint, but the court granted Experian’s motion to dismiss without prejudice in November 2015, ruling that the plaintiffs had failed to prove that Experian sent any of the text ads at issue. Additionally, the plaintiffs failed to establish vicarious liability because they did not prove that Experian allowed third-party texting platform provider Archer USA Inc. to act on its behalf, the judge said.

American Eagle then filed a third-party complaint against Experian, saying the marketing arm of the credit reporting company should indemnify the clothing retailer because it had a duty to obey the TCPA through its contract to provide text message advertising services. That portion of the dispute remains pending.

The settlement revealed Wednesday, which does not involve Experian, follows more than two years of active litigation that led to the production of nearly 20,000 pages of documents, including email correspondence that shed light on the control that American Eagle had over its telemarketing agents.

According to American Eagle, its marketing vendor Experian hired Archer — which filed for bankruptcy immediately after the plaintiffs sought text records data from it — to send texts on the retailer’s behalf. The data that the plaintiffs ultimately obtained from the bankrupt text messaging service provider formed the basis of the conclusion that more than 618,000 consumers should be included in the settlement class.

“As a result of the extensive discovery they engaged in, by the time the parties commenced settlement negotiations, they understood generally the size of the class, and the extent of classwide damages,” the plaintiffs said in their motion Wednesday.

The parties first met with a mediator in June, which led to the settlement agreement. Besides payments to settlement class members who file valid claims in timely fashion, the settlement fund will also cover payments to class counsel of up to $4.8 million in fees, $111,000 in litigation costs and incentive awards to the four named plaintiffs of up to $10,000 each, according to the parties’ agreement, which also seeks conditional certification of the proposed settlement class.

Any additional amounts that remain in the settlement fund will be disbursed to the National Consumer Law Center, the plaintiffs added.

The plaintiffs are represented by by Adrienne D. McEntee, Mary B. Reiten and Beth Ellen Terrell of Terrell Marshall Law Group PLLC, Frank Joseph Mazzaferro, Brian S. Schaffer and Joseph A. Fitapelli of Fitapelli & Schaffer, Keith Keogh, Michael S. Hilicki and Michael Karnuth of Keogh Law Ltd., Scott D. Owen and Patrick C. Crotty of Scott D. Owens PA.

American Eagle is represented by Richard T. Victoria, Eric R. Thompson, Craig J. Mariam and Kirstie M. Simmerman of Gordon Rees Scully Mansukhani LLP.

Experian is represented by Christopher M. Lomax, John A. Vogt, Paul B. Green and Richard J. Grabowski of Jones Day.

The case is Christina Melito et al. v. American Eagle Outfitters Inc. et al., case number 1:14-cv-02440, in the U.S. District Court for the Southern District of New York.