Class Action Litigators Stalking Dot-Coms

Earlier this week, America Online became the latest e-commerce giant to be slapped with a class action lawsuit.

Filed Monday in the Eastern District Court of Virginia on behalf of subscribers, the lawsuit against the online giant alleges that some subscribers who installed the new AOL version 5.0 software encountered a bug that prevented them from using other Internet Service Providers.

Additionally, the lawsuit alleges that AOL “fraudulently concealed” the problems with its new version, and seeks millions of dollars in damages for users who were affected by the bug.

AOL Denies Charges

AOL spokesman Rich D’Amato denied Wednesday that version 5.0 of AOL’s software prevents customers from using other Internet accounts, maintaining that the lawsuit has “no basis in fact or law.”

However, Lloyd Gathings, a partner with Alabama-based Gathings, Kennedy and Associates — one of the law firms representing the plaintiffs — said that AOL was aware of the bug in version 5.0, but released it “either intentionally or with reckless disregard of the consequences.”

The lawsuit seeks an injunction that would force AOL to stop shipping the software or to disclose the risks of installing it. The suit also seeks $1,000 (US$) in damages for each member of the class.

Could Damages Run into Billions?

Since AOL has estimated that 1.5 to two million of its users have accounts with other ISPs, damages could theoretically total as much as $2 billion. Nonetheless, many analysts consider such an outcome unlikely to occur, and I agree with them. Why?

I subscribe to AOL, but I also use a broadband cable connection, which stays connected 24 hours a day. When I downloaded AOL version 5.0, I did not experience any problem connecting through my cable provider or AOL. My high-speed Internet provider even advertised that it is compatible with AOL.

While I am not saying that other subscribers are not having difficulties, I just cannot imagine what AOL would have to gain by creating such a problem intentionally. If there was a problem, it was likely unintentional, not some great fraud perpetrated on AOL’s users.

Lawsuit Mania

It has been less than a month since a similar class action lawsuit was filed in Washington state alleging that Toysrus.com spoiled Christmas for an untold number of children by failing to deliver goods in time for the holiday.

The suit claims that the e-tail branch of the brick-and-mortar toy giant deceptively accepted orders for Christmas presents that it knew it could not deliver — even though the company has since given hefty rebates to these customers in an attempt to make up for the inconvenience.

Righting a Wrong or Business Move by Lawyers

The AOL suit seems to me to be more of a business move by the lawyers than a real attempt to use the courts to right some egregious wrong.

While users may have been inconvenienced, were they really harmed to the tune of $1,000 per person? I doubt it. The lawyers who filed the lawsuit, moreover, likely have little concern for those users.

These attorneys have latched onto a defendant with deep pockets, and have one goal in mind: To make it so uncomfortable for AOL that it settles for several million dollars. It is the business of these lawyers to look for people like AOL to sue, much like it is AOL’s business to let people chat online.

Innocent Until Proven Guilty Now Irrelevant

While we live in a country in which we are taught to think of people as innocent until proven guilty, those kinds of concepts are almost meaningless these days.

Aggrieved shareholders will end up with some type of service discount for their inconvenience, whether real or not, while the lawyers who brought the suit will receive one third of the settlement in cash.

So the question I have to ask is, “Who’s next?” The money that has flowed into the dot-coms is attracting class action lawyers who troll the industry looking for the next mistake by a big name. The only thing safe to predict is that more suits are coming.

What do you think? Let’s talk about it.