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Angie's List earmarks $4M for lawsuit settlement

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Angie’s List has reached a tentative settlement of a 2012 lawsuit alleging that it automatically renewed membership fees at a higher rate than members were led to believe.

The settlement, which has not yet been submitted to U.S. District Court in Indianapolis, prompted the company to set aside $4 million during the fourth quarter. That sum chopped about  7 cents from earnings that analysts expected to be 12 to 13 cents per share.

Even so, Angie’s List reported a rare profit in the fourth quarter of $2.8 million, or 5 cents a share.

“We’re optimistic we’re going to get this wrapped up,” Angie’s List Chief Financial Officer Thomas Fox told analysts, referring to the lawsuit. It wasn't referred to directly in the conference call, but an Angie's List spokewoman confirmed Wednesday morning that executives were referring to the membership-fee suit.

In late 2012, Philadelphia resident Marie Fritzinger filed a suit seeking class-action status that accused the contractor-reviews company of “systematic and repeated breach” of its membership agreement.

Members provide a credit or debit card that Angie’s List keeps on file to allow for automatic renewal. The suit alleged that Angie's List misrepresented the terms of renewing memberships, and charged more costly rates than members were led to believe.

Fritzinger also alleged that longer-tenured members were hurt by a 2010 change in 30 of the company's most-mature markets. Members would be allowed to select one of three categories to access—auto service providers, home contractors and or health care providers—or purchase a bundled premium membership for all three categories.

She alleged the company renewed more tenured members at the higher rate, without notification.

Richard Shevitz of Cohen & Malad, Fritizinger’s local attorney, confirmed the tentative settlement but told IBJ he couldn’t comment on the specific terms. The lawsuit was filed as a class-action case, which means the terms likely will be publicly disclosed if the court approves the deal.

Meanwhile, Angie’s List faces at least three other lawsuits filed since December that also seek class-action status.

In those cases, members allege Angie’s List executives haven’t been forthcoming about an evolving business model that now relies mostly on advertising revenue from the service providers that its members review, rather than from members' subscriptions.

The suits contend that officers and directors last year provided a rosy picture of the company’s prospects even as they dumped many of their own shares and conducted membership-pricing experiments that suggested the company's growth prospects might be limited.

During the fourth quarter, revenue from memberships rose 29 percent, to $17.7 million. But revenue from service providers rose 57 percent, to $51 million, over the same quarter in 2012.

The firm said that it had nearly 2.5 million paid memberships as of Dec. 31.
 

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  • Sorry - I view AL as a Scam
    Two years ago, I called AL to inquire about the services offered and the method for getting "First Page Status" when a client of AL started looking for a contractor. I was told that if I elected to pay a higher monthly advertising fee AL would guarantee that my company always came up on the First Page. When I asked how this could happen when Angie looked directly into the camera and claimed "No one can pay to be on Angie's List!" and the person I was speaking with explained, you would still need clients to write something nice about your services, but the addition fees would guarantee you more business since you would be on the First Page of all inquiries.
  • DF works for Angie
    DF - your choice of words proves you work for Angie. Nice try but its impossible to verify ANY online reviews. The FBI cant even keep their websites safe
  • In Reality...
    the customer "reviews" are to be taken with a grain of salt. As someone else described, I too had an issue with a contractor after a bathroom remodel gone terribly awry, including the loss of a change order that had my credit card number that they were too scared to tell me about (they finally told me about a week later). I threatened a negative review on Angie's List if they did not compensate me for being such a disaster. They reduced my bill by about a third, and I did not post any review at all. I have had horrible experiences with Angie's List contractors, and positive experiences with contractors who advertise on Craigslist.
  • More Lawsuits
    They better set aside more money.. They have more class action lawsuits to settle as well. They have a bad business model to begin with. They are getting bad publicity all over the place.. Investors will soon get tired of Angies List never turning a profit.
  • Renewals
    Does anyone recall the disaster of the low cost markets AL tried to do that lasted like 2 days? Imagine the backlash when they simply wipe out member fees and become a service provider advertising company only. Too bad nobody out there realizes Billy Boy and Scamgie are only in this Titanic long enough to cash out their shares...
  • AL has a sugar daddy
    No worries about the $4M. Angie & Co. can always just get the City or State to fork over some more taxpayer money if they're in a bind. Their $2.8M profit for the last quarter would like disappear in a cloud of smoke if not for their taxpayer subsidies.
  • Playing Both Sides
    The problem I have with Angie's List is that they play both sides. If you do get a negative review, they can get buried if said company wants to pony up some cash to AL. It is a complete joke and they lose all integrity in this practice.
  • Who of us is above reproach?
    Trust but Verify. This applies to remarks by members of AL. This applies to recommendations by close friends, colleagues and family. Who among us claims to be flawless? Understand the data you have access to, make it work for you. Own your decisions by taking responsibility each step of the way. AL provides data that you can make useful for your own benefit. Perhaps the complainers are flawed in how they make use of the data.
  • Integrity
    How can you trust the reviews of vendors by "customers" when the company host company has no integrity.
  • No Offense
    Michel, no offense taken. In my experience I have reviewed member remarks of contractors I intended to contract, brought them out to assess the need and provide a proposal and typically hired one of them. During the process leading up to the point of hire I always compared my experience to what I gleaned from member responses as a way of further scrutinizing my selection of a contractor. Once the work was complete I further compared my experience to that which I learned in the remarks and I haven't been disappointed yet either in terms of the selection process or the finished work product. I'd say that is unmistakable value in its truest form. (No, I do not work for AL nor own shares of stock. I speak for myself.)
  • Discount for Good Review
    I hired a contractor from Angie's List that had one of those gold medal reputations. He did complete the work required , but did not represent the five star, gold medal status. After the work was completed, he calls me and proposes a 10% discount off my bill if I give him positive review.
  • Trust?
    DF - really hope to not offend here, but your comments seem planted from AL's marketing machine. "someone you trust to refer you..." really? Anyone paying attention to this company's practices over time should be aware that unbiased reviews is not an accurate description of thier "services". The framework of their product, the supposed users' reviews, aren't truly biased. Human nature/typical behavior - people engage in these reports when they're unhappy and much less likely so when things go well. And one's expectations aren't always reasonable/accurate... which can result in an unfair evaluation where the contractor really has no forum to present the other side. "No, ma'am you can't conveniently upgrade your laminate countertop to marble just because you had water damage, at no upcharge... Sorry, sir I was in your driveway the last 2 appointments and no one was home - yes, I understand that "something came up at work" but I can't just sit in your driveway for an extra half hour with no call from you..." Oh, you're going to report me to Angie's List. This company has been a house of cards for quite some time. But they sure do throw some good parties for their employees.
  • Me to, but did not sue
    I have been a long time Angie's list subscriber, and I was upset when they did an automatic renewal. Rather than sue, I called the company. They backed out the charges. I think I renewed at $35/year, but I renewed for 4 or 5 years. Angie's List did a stupid thing, but it did not even cross my mind to sue, but maybe I am just not greedy enough.
  • Don't Lose Site
    For those that have used the service of Angie's List you will know that the most valuable aspect of their service are the reviews offered willingly by its members. How many of you wish you had a friend or someone you trust to refer you to a contractor? How many of you have hired a contractor only to have them provide less than desirable work output? The honest member reviews take the guess work out of the selection process. $39/year after paying much less? Isn't it worth it?
    • interesting
      It is interesting that the person who made the last comment was auto-renewed at $39. I was auto-renewed at approximately $70, even though I told them I wasn't interested in auto or health reviews. After I talked with them on the phone, they lowered the renewal rate to approximately $50, but certainly didn't go down as low as $39. I wonder what the renewal rate really is?
    • Renewal
      Based on this article, I just checked my status. I signed up last year to try it out since I got a deal for $12 for the year. I did not realize it was a self renewing membership and the new rate was going to bump to $39. I just cancelled. Angie's list is not the unbiased company they advertise themselves to be. They give preference to the companies that provide coupons or "big deals" and they take their cut. It's clearly evident when more than half of their revenue is from advertising for these service providers.

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