November 2009
by Matt C. Bailey

As American business approaches the last steps to paperless operation, a debate continues to rage in the courts as to whether electronic communication is sufficient to provide legal notice in class action litigation.

Generally, courts that reject class notice via email and Internet publication have done so based on perceptions that electronic methods are uncontrollable, and therefore incapable of satisfying minimum due process requirements. The ease and frequency with which electronic communications may be replicated and republished have led some courts to conclude that such means risk distorting the notice approved by the court (Reab v. Elec. Arts, Inc., 214 F.R.D. 623, 630631 (D. Colo. 2002)). Other courts have cited these same features as conducive to widespread apathy, rendering electronic class notice ineffective. (See Karvaly v. eBay, Inc., 245 F.R.D. 71, 91–92 (E.D.N.Y. 2007).)

To courts favoring electronic notice, these criticisms are unprincipled. Notice made by print media, such as first-class mail or publication in a general-circulation newspaper, is itself susceptible to widespread republication using electronic media. (See Krzesniak v. Cendant Corp., 2007 U.S. Dist. LEXIS 95145, at *6 (N.D. Cal. Dec. 17, 2007).) Moreover, effecting notice by traditional methods does not overcome hurdles of under-inclusiveness or an apathetic response. (See Reg'l Transit Auth. v. Miller, 156 Wash.2d 403, 415 (2006), reasoning that "[j]ust as it is impossible to assure that anyone will look at a particular web site, it is equally impossible to assure that anyone will purchase, much less read, a newspaper"; and Larson v. Sprint Nextel Corp., 2009 U.S. Dist. LEXIS 39298, at **3233 (D. N.J. Apr. 30, 2009), reasoning that a response rate of .4 percent of current customers "is suggestive evidence that the Bill Insert did not provide 'notice' to those 14.8 million customers.")

Although many courts are willing to view e-notification as the "best notice practicable" when the underlying claims arise from transactions on the Internet (Browning v. Yahoo! Inc., 2007 U.S. Dist. LEXIS 86266, at *13 (N.D. Cal. Nov. 16, 2007)), e-notification may be viewed as superior to traditional methods in many non-Internet cases as well.

For example, e-notification is more efficient than first-class mail, not only because email costs as little as 2 cents per message, but also because it allows the sender to track whether notice was both received and opened. As one Georgia court recognized, such tracking permits evaluation of the notice plan based on "actual notification." (SEC v. Global Online Direct, Inc., 2007 U.S. Dist. LEXIS 88819, at **4–5 (N.D. Ga. Nov. 29, 2007).)

And though evidence that some class members receiving email messages have deleted them will not necessarily invalidate a notice program under current standards (Browning at 21–22), the ability to track actual notification enables the use of targeted follow-up notices to specific class members at very little cost (Global Online Direct at 5–6).

Similarly, publication on a dedicated website also offers a means of tracking whether class notice was actually viewed (See, e.g., In re Lupron Mktg. & Sales Practices Litig., 228 F.R.D. 75, 85 (D. Mass. 2005), and it may be implemented at relatively little cost. Unlike newspapers, such websites can be made active by using targeted banner ads and sponsored keyword search terms that are designed to direct Internet traffic to the notice. (See Fresco v. Auto Data Direct, Inc., 2007 U.S. Dist. LEXIS 37863, at *21 (S.D. Fla. May 14, 2007).)

Though email and websites clearly are superior platforms for affecting low-cost, interactive notice that can be evaluated and enhanced in real time, the effectiveness of notice transmitted to cell phones or PDAs remains uncertain. At least one court has contemplated the use of text messaging (Larson, 2009 U.S. Dist. LEXIS 39298, at *47 (D.N.J. Apr. 29, 2009)). To date, however, no published authority has approved this medium for providing class notice.

One potential obstacle to e-notification via texting is the Telephone Consumer Protection Act (TCPA) of 1991 (47 U.S.C. § 227). The statute makes it unlawful for any person or entity to "make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice ... to any telephone number assigned to ... a cellular telephone device." (47 U.S.C. § 227(b)(1)(A)(iii).) The term call under the TCPA has been interpreted to include text messages (Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 952 (9th Cir. 2009)). Unless the sending entity has "prior express consent" from intended text-message recipients, it risks statutory fines of $500 per violation, as well as treble damages.

Yet for purposes of giving class notice, in many instances text messaging may be exempt under the Federal Communications Commission's broad interpretation of "prior express consent." In a January 4, 2008, declaratory ruling, the FCC concluded that prior express consent existed for debt-collection purposes "if (1) the wireless number was provided by the consumer to the creditor, and (2) that such number was provided during the transaction that resulted in the debt owed." (See 2008 F.C.C. LEXIS 56, at **16–17.)

The FCC's analysis could logically be extended to encompass texting class notice concerning the return of funds obtained through a prior transaction in which consumers had provided their cell-phone numbers as a means of contact. However, notice likely would need to be provided by the defendant, or by a third party contracted by the defendant. Although the FCC has concluded that "[c]alls placed by a third party collector on behalf of that creditor are treated as if the creditor itself placed the call" (2008 F.C.C. LEXIS 56, at *17), it is clear the exemption will not apply unless the third party has some form of privity with the entity that secured prior express consent (Satterfield, 569 F.3d at 955). This uncertainty may lead some defendants to oppose text notification, especially where the existence of prior express consent is uncertain.

In sum, not only are email and website notifications capable of ensuring that class members receive the "best notice practicable" under current due process standards, but the unique features of such media also stand to alter previous perceptions of minimum due process requirements. Effectively harnessed, the low-cost, interactive features of electronic communication can enhance the value of class counsel's representation to the class, potentially boosting actual participation in a claims-made settlement. But as electronic communications continue to move to more immediate, mobile formats, the ability to harness and use these interactive benefits remains an open legal question, as well as an intriguing possibility.

Matt C. Bailey, a senior associate with Khorrami Pollard & Abir in Los Angeles, is cochair of the firm's Class Action Practice Group.