LivingSocial Agrees to $4.5 Million Settlement of Consumer Class Action

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LivingSocial, a website which sells discount vouchers on items ranging from yoga classes to racecar driving lessons, has agreed to settle a class action lawsuit alleging that the company violated consumer-protection laws that mandate a minimum five-year redemption period for gift certificates. See In re LivingSocial Mktg. & Sales Practices Litig., No. 11-0472 (D.D.C.). The Joint Motion for Preliminary Approval of Settlement is available here.

LivingSocial issues its vouchers in the form of gift certificates marketed as “group coupons.” The plaintiffs allege that LivingSocial attempted to circumvent consumer-protection laws by misleading purchasers into believing that they must redeem the gift certificates prior to the printed expiration dates (often just weeks from the date of purchase) or else lose the entire value. This was allegedly done in order to accelerate the redemption of gift certificates and to induce additional gift certificate purchases.

The proposed settlement requires LivingSocial to modify its practices so that the vouchers it issues will not expire for at least five years from the date of purchase, consistent with the federal Credit Card Accountability Responsibility and Disclosure Act of 2009. The Credit CARD Act mandates that LivingSocial and similar companies, such as the popular Groupon site, abide by the longer of the five-year limit or the limit set by state law.

The multi-district litigation comprises five class actions filed by consumers in California, Washington, Florida, and the District of Columbia, which were consolidated in the United States District Court for the District of Columbia. The proposed settlement awaits judicial approval as the action enters the notice phase, pursuant to Federal Rule 23.