Affirming the decision of the district court granting summary judgment to defendants, the Second Circuit has determined that a putative class action involving online loyalty programs cannot proceed.  The program at issue in the complaint involved "post transaction" marketing. In such programs, online merchants like Chase, FTD and Orbitz, enter into an arrangement with membership program marketer, Trilegiant, to permit the advertisement of membership club programs to their customers. 

The programs work as follows: in the course of completing a transaction with a merchant, a customer sees a link on the e-merchant’s website advertising a Trilegiant program.  A customer who selects the link is taken to an enrollment page for a Trilegiant membership product. The enrollment pages offer a coupon or rebate, as well as a membership in a program that makes available special discount rates on future purchases by the customer. To join the program and get access to those rebates and discounts, the customer must become a member and agree to pay monthly fees.

Plaintiffs alleged that they never agreed to sign up for a membership club with a monthly recurring fee; they did not recall entering any registration information; and they did not recall selecting “YES” to accept the terms and conditions of the program.  Thus, plaintiffs alleged, the defendants defrauded customers of membership fees by duping them into joining the programs. 

The plaintiffs also contended that the “datapass” procedure, by which the e-merchants shared their customers’ credit card and billing information with Trilegiant without requiring that the customers re-enter that information on the Trilegiant enrollment page, constituted an unlawful interception of an electronic communication.  

However, the Court found that defendants submitted sufficient evidence of consent to the datapass and program enrollment: only by providing the necessary information and clicking “yes” could an individual actually enroll in one of Trilegiant’s programs and that such "affirmative conduct evinces sufficient consent to an interception of an electronic communication." Moreover, the Court determined, plaintiffs did not identify any specific representations on the enrollment pages that were misleading.  Further, the appearance of the enrollment pages, without more, is not so confusing so as to permit a jury to find that the plaintiffs did not consent to the plain terms of the membership. 

Thus, the Court determined that because plaintiffs failed to raise a material issue of fact as to whether they consented to enrollment in the membership programs, the prohibitions of the Electronic Communications Privacy Act did not apply; and because the appellants identified no actionable fraud, they could not proceed on a theory of racketeering.

This case, as well as many recent enforcement actions under ROSCA and state law equivalents, underscores the importance of carefully designing and promoting auto-renew programs.  Ensuring that customers affirmatively consent to the terms of such programs -- and in particular to the ongoing automatic charges to their cards -- is paramount.