A proposed class action lawsuit claiming breach of contract, fraudulent business practices and misleading advertising has been filed against LookSmart over a recent change in how the company sells some of its commercial web site listings.
"LookSmart offered one thing to a lot of small businesses and signed a contract and unilaterally changed the program," said the lead attorney behind the case, Jeffrey L. Fazio, of Hancock Rothert & Bunshoft.
In April, LookSmart moved thousands of companies that previously had paid a one-time submission fee into a new cost-per-click listing program. Companies who refuse to pay the new, continuing fees risk being delisted when free credit given to them by LookSmart in association with the switchover runs out.
The move has caused outrage among some LookSmart customers who feel the company is unfairly demanding additional money from them. Legal Staffing Partners, a North Carolina company that does business as "Juris Resources," is one of those customers and the initial plaintiff in the proposed class action suit filed on May 9. If approved by the court, other parties will be able to join the case.
Legal Staffing Partners paid LookSmart $199 on or about June 12, 2001 to be listed within the directory, according to the complaint. It was then shifted unilaterally by LookSmart into the new cost-per-click program on April 12 of this year and delisted on April 15, when the $15 in free monthly credit it had been given by LookSmart was exhausted.
"Contrary to the terms of its agreement with customers, which states that no additional payments will ever be required, LookSmart is halting all internet traffic used in its search listings to those customers who made the 'one-time payment' for its services," the suit says, summarizing the contention of breach of contract.
The complaint cites statements from a past LookSmart FAQ page about its one-time submission fee programs as evidence LookSmart promised customers that no further submission fees would be charged.
"For your one-time payment, your site will be listed in the LookSmart network indefinitely. Once you submit, there is no need for additional payments and no need to submit your site to any of LookSmart's partners or affiliates," said the LookSmart FAQ page on December 17, 2000, according to the suit. It further cites, "For your one-time payment, your website will remain in our directory as long as it complies with our submission guidelines."
Previous to the suit, LookSmart had asserted to Search Engine Watch its belief to be on firm legal ground in moving "one-time fee" customers into the new cost-per-click program because the terms of the old programs granted LookSmart the sole right to change any part of the agreement at any time.
Now that a lawsuit has been filed, LookSmart said it couldn't comment on specifics but did say it believes it will win in any action.
"We believe suit is incredibly baseless. We're going to defend it vigorously," said Robert Goldberg, LookSmart's senior vice president of sales and marketing. "We feel we are in a very strong legal position."
The case was filed in the Superior Court of California, San Francisco County, where LookSmart's US operation is based. The court will now evaluate the merits of the proposed case and determine if it can go forward as a class action.
"It's approving the case to proceed, a determination that there are a lot of plaintiffs and that it makes sense to proceed with this one case rather than many and if the complaints are similar and can be tried at one time," said Fazio.
How much could this end up costing LookSmart, if it lost the case? The suit doesn't name an actual figure but asks for restitution of all money received by LookSmart through its one-time fee programs, interest, damages and attorney fees.
A ballpark figure on just the money received? Assume 90,000 customers at $199 each and you get about $18 million. The actual amount could be higher or lower, because LookSmart has had different price points throughout the history of its programs.
Hancock Rothert & Bunshoft
Hancock Rothert & Bunshoft: Contact Form
Those interested in joining the suit, if it is approved, should make contact using this form.
Legal Staffing Partners / Juris Resources
Legal Staffing Partners v. LookSmart
Text of the lawsuit filed by Legal Staffing Partners against LookSmart.
LookSmart Changes To Cost-Per-Click Listings
The Search Engine Report, May 6, 2002
Pay -- and keep paying -- or don't appear, LookSmart told existing and new listing customers in April, in a significant change to how the human-powered search engine lists web pages from commercial web sites. A full rundown on the changes.