• Skype Settles Class Action Lawsuit over Credits
  • February 12, 2010
  • Law Firm: Manatt, Phelps & Phillips, LLP - Los Angeles Office
  • Online phone service Skype settled a class action lawsuit that challenged the company’s policy of expiring users’ credits after a certain time period, for roughly $1.8 million.

    Skype is a free service for users who make Internet calls, but the company charges fees for various additional features such as voicemail and text messaging.

    Consumers purchase “credits” in order to use the features, but Skype had a policy of expiring the credits after 180 days.

    Holly Barker and Brian Carness filed a class action lawsuit against Skype challenging the expiration policy. They claimed that the credit system constituted the sale of gift certificates that could not legally expire or be subject to inactivity fees under various state laws on gift cards, deceptive practices, and consumer protection statutes.

    Pending final court approval, Skype agreed to settle the case.

    Under the terms of the settlement, the company agreed to discontinue its expiration policy. Instead, after 180 days, credits will now be considered “inactive” and subject to reactivation.

    Skype will also establish a $1,850,000 settlement fund, which will pay for the plaintiffs’ attorneys’ fees and costs, plaintiffs’ incentive awards, and a $4 voucher for a Skype credit for eligible claimants.

    Why it matters: Companies that use a credit system similar to the one at issue in the Skype lawsuit should consider gift card laws across the country. The statutes, which vary from state to state, could be interpreted broadly enough to apply to various payment systems and not just the traditional concept of a gift card.