Lithia text-message spam costly; TARP's farewell; high court rules in local securities lawsuit
Car dealership group Lithia Motors and its marketing agency could pay up to $175 per message to settle a lawsuit over unsolicited texts. Also, U.S. Treasury ekes out a profit on Banner Bank TARP investment; and Supreme Court rebuffs local securities lawsuit.
By Rami Grunbaum, deputy business editor, and Times staff
You think you get charged a lot for text messages?
It's nothing compared with the $175 per message Lithia Motors and its marketing agency could pay to settle a lawsuit over unsolicited texts to almost 58,000 phones last spring.
The $2.5 million settlement, awaiting final approval by U.S. District Court Judge Richard Jones, may actually pay each affected individual considerably less — as little as $30 — if everyone eligible participates, but that doesn't happen in most class-action suits.
Regardless, the numbers should be enough to get the attention of any marketer thinking of spamming potential customers' phones.
Medford, Ore.-based Lithia, the nation's ninth-largest car dealer according to Automotive News, has nine Washington dealerships. It says its marketing firm, DMEautomotive of Daytona Beach, Fla., will pay the settlement's costs.
The lawsuit and regulatory filings say Lithia sent a text message in early April 2011 to 57,800 people in 14 states, pitching used-car deals with "0% financing"; a week later it sent another message to 48,000.
Those who got the second text included 6,190 people who tried to opt out after the first one, the suit claims. Lithia blames that on "a technical error."
The lawsuit asserts the barrage violated federal and state laws barring the use of automated devices to send commercial solicitation texts to individuals without their consent.
Bainbridge Island-based Williamson & Williams, a small firm that specializes in consumer and workplace class-action litigation, sued Lithia, seeking more than $500 per message.
After mediation they reached a deal that provides a $2.5 million settlement pool — minus up to $600,000 in attorney fees and costs, $150,000 for administration of the claims, and $10,000 for the lead plaintiff in the case. That provides $1.74 million to be paid out to class members.
Eligible people who received a text would get $175; those who received a second text get an additional $150 — unless they received the message after attempting to opt out, in which case they are eligible for $500 for the second text.
But if too many claims come in, payments will be reduced: Dividing the $1.74 million among all 57,800 people would mean each gets $30. When a settlement is approved, eligible class members will be notified.
Grant Deddinger, an attorney at Lane Powell in Seattle who's representing Lithia, said it's the first time the company has been sued over text messaging. He declined to discuss details of the case, citing the pending settlement. DME did not respond to a request for comment.
TARP ekes out
profit on Banner
The U.S. Treasury Department is about to wind down its much-maligned Troubled Asset Relief Program (TARP), and that could give some Northwest community bankers migraines.
As part of TARP, Treasury invested nearly $205 billion into hundreds of banks, large and small, around the country. In the Northwest, 25 banks received more than $1.3 billion.
The strongest banks have long since repaid the money. But hundreds of smaller, weaker institutions — including 13 in Washington, Oregon and Idaho — have held onto their TARP funds as much-needed capital cushions.
Earlier this month, Treasury said it would begin selling off its remaining TARP stakes, most likely by auction. A test run of that process in late March included Walla Walla-based Banner Corp., parent of Banner Bank, which received $124 million in November 2008.
The response was decidedly underwhelming. The government's preferred shares in Banner, with a face value of $1,000 apiece, went for just $884.82, an 11.5 percent discount; after fees and expenses, Treasury cleared $108 million on the sale.
At least that was better than the 58 percent haircut the Feds took on their $39 million investment in Everett-based Cascade Financial when it was bought last year.
But Treasury did manage to eke out a profit on its Banner investment, thanks to more than $20 million in dividends it received on its preferred stock. Total rate of return, including dividends: 3.3 percent.
Treasury's biggest Northwest TARP investment was $303 million into Spokane's Sterling Financial.
After a recapitalization in 2010 in which the government exchanged its preferred shares for common stock, its stake is now worth about $109.5 million.
Locally, the banks that still have TARP money include Hoquiam-based Timberland Bancorp, Seattle's First Sound Bank and Northwest Bancorporation of Spokane.
SNL Financial, a research firm that analyzed the March auctions, noted last week that the remaining TARP banks will "likely have little to no say in the auction process and will be forced to partner with investors that they did not choose."
For bankers who've adjusted to having the Feds as a partner, "this new transition could entail a new round of headaches and lack of clarity for the future of their institutions."
— Drew DeSilver, email@example.com
rules in local
Last fall, the Seattle lawyers who sued a group of top investment banks over 55 busted dot-com IPOs had their day before the U.S. Supreme Court.
It was not a good day, judging by the unfavorable ruling the court recently issued.
"Certainly the court's decision was not the one we were looking for, but it was not fatal to the case," said attorney Dave Simmonds.
As noted before, the litigation by attorneys at Gordon Tilden Thomas & Cordell carries the name of Simmonds' daughter as the designated shareholder: Credit Suisse Securities (USA), et al., v. Vanessa Simmonds. Under the 16(b) section of the Securities ExchangeAct of 1934, shareholders can sue on a company's behalf to recover "short-swing profits" when insiders both buy and sell stock within a six-month period, even if there's no proof of trading on insider information.
The rule defines insiders as officers, directors or any person or group controlling at least 10 percent of the company's stock.
The Simmonds suit contends that in the 55 IPOs in question, the investment banks underwriting the deals and insiders at the companies constituted such a group linked by common financial interests because they deliberately underpriced IPOs to guarantee big profits to underwriters' clients and in other ways orchestrated the pricing, distribution and aftermarket buying of IPO shares.
The investment banks won the first round when U.S. District Court Judge James Robart in Seattle ruled a two-year statute of limitations had run out before the cases were filed. The 9th U.S. Circuit Court of Appeals reversed that ruling.
But the Supreme Court ruled 8-0 (with Chief Justice Roberts recusing himself) that the appeals court was wrong in applying its long-held standard that the two-year limitation on filing such cases doesn't start ticking until the alleged insiders report their transactions. It sent the case back to the appeals court for further consideration based on a two-year clock running from when a reasonably diligent shareholder could have figured out there was a basis for suing.
Simmonds said he and his colleagues can still make their argument based on that standard.
"We weren't knocked out," he said. "We are behind on points, but there's still the potential to win the case."
Comments? Send them
to Rami Grunbaum: