THR, Esq. | Article Link
Media companies strike an agreement to resolve class action litigation over text message games run for 'American Idol' and 'Deal or No Deal.' Settlement includes five-year injunction and millions of dollars in pay-outs to contestants and the class action lawyers.
NBC, Fox, and many of the production companies behind some of the most successful reality TV competition shows have agreed to an extraordinary five-year injunction that will prohibit them from operating any contest or sweepstakes where viewers make a submission via text message for the possibility of winning a prize.
The agreement by the media companies, which includes a large cash pay-out, comes as part of a proposed settlement to end a class action lawsuit alleging Fox's American Idol and NBC's Deal or No Deal took advantage of viewers by running illegal lotteries.
The settlement, announced in a court filing on Wednesday in California federal court, comes after four years of hard-fought litigation that went up and down the appeals circuit.
The plaintiffs took exception to reality and game shows that gave viewers the opportunity to win prizes via text message. In the "American Idol Challenge," viewers had to answer a trivia question. In the "Lucky Case Game," viewers of Deal or No Deal chose a briefcase corresponding to the winning number.
The text-message contests were alleged to violate California Penal Code § 319, defining an illegal lottery as a contest where prizes are distributed based on chance and individuals have paid some valuable consideration to participate.
The plaintiffs, who didn't win the contest, argued that their 99 cent text message fee was that consideration.
The media companies argued that contestants were given a "free option" to participate in the contest by going to the game show website.
The district court denied a motion to dismiss. The Ninth Circuit upheld the ruling. And for the past four years, the case has been proceeding at a snail's pace tied up in all sorts of procedural issues.
Now, the parties have come to an agreement.
The proposed deal will refund the premium text message fee of 99 cents paid by the millions of folks who entered the contests.
Yes, every individual who ended up a loser in the "American Idol Challenge" will get a fat check for 99 cents. And the class action lawyers at Milberg, who took their chances by picking up this lawsuit on contingency? According to the agreement, to resolve this litigation, the media companies have agreed to pay them more than $5 million in fees and expenses!
Of course, the judge needs to approve the settlement and may not look too kindly on a deal with such disproportionate compensation. Thus, in papers to the judge, the parties are touting "one of the key achievements" as being the consent of many parties, including Fox, NBC, Edemol, Verisign, 19 Entertainment, and Freemantle, to be subject to an injunction that will enjoin them from "creating, sponsoring or operating any contest or sweepstakes, for which entrants are offered the possibility of winning a prize, where people who enter via premium text message do not receive something of comparable value to the premium text message charge in addition to the entry."
The settlement memorandum to the judge adds that this will ensure "that one of the primary benefits achieved by these litigations -- the termination of the Lucky Case Game and American Idol Challenge -- will long outlive these Actions."
In other words, the plaintiff lawyers claim the grand-prize of millions of dollars and everyone else gets the consolation of no more text message contests on TV.
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