EcommerceBytes-NewsFlash, Number 3145 - September 04, 2013     2 of 4

Judge Rejects eBay's Settlement of Featured Plus Fraud Charges

By Kenneth Corbin

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A California judge has rejected the proposed settlement of a class-action lawsuit concerning one of eBay's former listing upgrades, citing "obvious deficiencies" in the agreement, including insufficient notification to members of the class and overly broad liability protection for eBay.

New Jersey-based Custom LED, a purveyor of motorcycle lighting accessories, had sued eBay in January 2012, bringing claims of fraud and breach of contract related to the listings for which sellers paid up to $39.95 for the now-defunct "Featured Plus" upgrade.

Featured Plus was a premium feature that buyers could purchase to boost the visibility of their listings. Custom LED, which sold on the eBay Motors channel, alleged that eBay's promotion of the feature carried the promise that Featured Plus listings would appear at the top of search results on eBay's core site as well as the stores section, but in practice the feature was limited to Motors.

The company complained that, contrary to eBay's promotion of the upgrade, Featured Plus items would only appear at the top of search results for queries that were initiated from a Motors page and those that were confined to Motors listings, while also excluding certain sorting criteria, such as price, listing date and geography.

eBay pulled the Featured Plus option from its general marketplace in 2009, and removed the feature from eBay Motors in February 2013.

After Custom LED brought the class-action case against eBay, the parties entered into mediation, ultimately producing a proposal for a settlement that would shield eBay from future litigation involving the Featured Plus upgrade, even if the allegations were unrelated to the current case.

Judge Jon S. Tigar, of the U.S. District Court in California's Northern District, rejected that release provision, directing the parties to limit its sweep so as not to foreclose on future, unrelated litigation involving Featured Plus.

"The court concludes that the scope of the release is overly broad, because it improperly releases any claim, known or unknown, "arising out of or relating in any way to Featured Plus!" and regardless of whether any such claim is based on the allegations in the complaint," Tigar wrote in his order denying the settlement.

"The scope of the release is much broader than what the notice discloses, as it includes all claims "related to" Featured Plus! regardless of whether or not they arise out of the allegations in the complaint, as discussed above. This deficiency may be cured by narrowing the scope of the release in a manner that tracks the breadth of the allegations in the complaint," he added.

Additionally, Tigar found that the settlement does not provide for sufficient notice to members of the class about their release of claims against eBay, and that it would not give sellers enough information to calculate the percentage of the fees they had paid to the company that they could expect to recover.

"Finally, and most importantly, the notice does not contain sufficient information as to how to receive payment, opt out of the settlement or object to the settlement. The proposed notice merely instructs class members to "follow the specific details" listed in the notice website, a link to which is provided in the notice," Tigar wrote. "The notice itself must contain this crucial information."

The judge also objected to the method proposed for compensating class members. The settlement would have set credits to sellers' eBay accounts as the default for reimbursements of Featured Plus fees, which Tigar suggested was inconsistent with the parties' description of the payouts under their agreement as a "cash" settlement. Moreover, Tigar took issue with the provision that eBay would deduct any unrelated outstanding fees that sellers owed from their settlement payouts, "even if such liabilities are unrelated to Featured Plus! fees."

Custom LED and eBay did not immediately respond to requests for comment on the court's ruling.

In rejecting the proposed settlement, Tigar gave the parties two months to submit a new motion for preliminary approval that would address the "deficiencies" he outlined in his order.


About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.


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