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Adware Class Action Suit Against ValueClick Continues

Court rulings in late August allowed case to move on to discovery phase; lawsuit claims include breach of contract, unfair business practices.
Adware Class Action Suit Against ValueClick Continues
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Nov 8, 2007 9:00 AM PST    Text size: 
LOS ANGELES — A pair of class action lawsuits filed in April against Value Click, Inc., Commission Junction Inc. and Be Free has entered the discovery phase, setting up a legal battle with significant potential implications for adult affiliate programs and webmasters alike.

One of the lawsuits was filed by Commission Junction client Mireille Carrier in U.S. District Court in Los Angeles. Carrier alleged breach of contract, negligence and unfair business practices on the part of the defendants. A very similar lawsuit was filed in the same court by Settlement Recovery Center LLC, making the same claims.

In August, Judge Florence Marie-Cooper issued a decision granting in part and denying in part ValueClick’s motion to dismiss in both cases, dismissing the negligence claims while allowing the breach of contract and unfair business practices claims to move forward.

At their core, the lawsuit claims revolved around the assertion that ValueClick knowingly permitted adware distributors to participate in its program, and failed to consistently terminate those affiliate accounts for violating the terms of service of Commission Junction and other ValueClick programs — violations that allegedly included theft of commissions through overwriting cookies or otherwise taking credit for sales that properly should have been attributed to other ValueClick affiliates.

According to the lawsuit, one of the primary means by which adware distributors hijack traffic is through the practice of “cookie-stuffing.”

“Cookie-stuffing occurs when adware entices the end-user to click the adware affiliate link or automatically places a new cookie (i.e., forced click) on the enduser’s computer that identifies the adware affiliate,” Carrier stated in her lawsuit. “Because commissions are paid based on a ‘last cookie/click in’ basis, the adware affiliate gets credit for the commission.”

The lawsuit claimed that legitimate affiliates “suffer serious, and in many cases, irreversible losses from commission theft … Commission theft poses a direct threat to affiliates’ ability to stay in business.”

In its motion to dismiss the lawsuits, Value Click focused largely on the terms of its “publisher service agreement,” which Value Click claimed indemnified the company from liability for the actions of third parties.

“Each of the plaintiff’s claims are barred by the express terms of the [publisher service] agreement, which releases Commission Junction from liability for precisely the claims that plaintiff is making here,” Value Click argued in its motion to dismiss. “Courts repeatedly have dismissed claims — like those asserted by plaintiff here — that are based on the violation of an alleged duty that is expressly disclaimed in a voluntary agreement between the parties.”

Representing Carrier and other plaintiffs joining the class action is attorney Kasra P. Nassiri of the San Francisco law firm Nassiri & Jung. Nassiri told XBIZ that the last major development in the case was Marie-Cooper’s rulings in August that allowed the case to move ahead to the discovery phase.

Nassiri said that in cases like this, the outcome of a motion to dismiss hearing “doesn’t say much about who will ultimately prevail,” and amounts to a “gating mechanism for the judge to decide if there’s a case here.”

With respect to Value Click’s argument that its publisher service agreement indemnifies Value Click against the kind of claims made in the class action, Nassiri told XBIZ that “there are limits — you can’t indemnify yourself against everything.”

“You can’t disclaim the very service that you are contracting to provide,” Nassiri said. “You can’t promise to provide a service, and then have a disclaimer that lets you wiggle out of that promise.”

While the issues at hand involve highly technical areas of law, Nassiri said that the decision that eventually may be placed in the hands of a jury will not be terribly complicated.

“The nice thing about this is that ultimately it’s going to come down to common sense things,” Nassiri said. “It’s a good case for a jury; the real question is whether or not the parties to the contract got what they contracted for.”

Asked why the lawsuits target Value Click instead of the adware distributors directly, Nassiri said that going after Value Click was simply the direction his clients wanted to take, and added that lawsuits directed specifically at the adware distributors could also be effective.

”By going after Value Click, Commission Junction and Be Free, we’re not saying that those [adware] parties aren’t culpable, as well,” Nassiri said. “I think that they are.”

Nassiri noted that trademark law is arguably “broadly applicable to online advertising,” and said that plaintiffs have been pursuing legal strategies based on trademark claims for years.

“Is it a viable legal theory? The jury is still out on that, I think,” Nassiri said.

XBIZ was unable to reach representatives of Value Click for comment by press time.

For more information on the class action lawsuits filed against Value Click, go to CJClassAction.com

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