A recent $14 million Costco settlement shows how easily claims can be filed for misleading subject lines under Washington’s Commercial Electronic Mail Act (CEMA). CEMA is a state law originally enacted in 1998 that prohibits sending commercial emails with false or misleading subject lines, or sending text messages without consumer consent, to Washington residents. A surge of CEMA-related litigation arose after the Washington Supreme Court’s ruling in Brown v. Old Navy, LLC in April 2025. In Brown, the court rejected a narrower interpretation that CEMA prohibited only subject lines that misled consumers as to the nature of the email (in other words, whether the email was commercial in nature), instead favoring a broader interpretation that a subject line violates CEMA if there is any false or misleading information present. In response to the wave of class-action lawsuits that followed, the Washington legislature enacted HB 2274 amending CEMA on March 23, 2026. The amendment reduces statutory damages from $500 to $100 per violation and adds a knowledge requirement for liability. However, because HB 2274 is not retroactive, any litigation that began before the law’s effective date of June 11, 2026, will continue under the prior statute.

The Costco settlement arises out of one such lawsuit. This class action suit alleged that Costco misled customers and violated Washington law by sending marketing emails with subject lines that used misleading pretenses to encourage consumers to open them. The parties agreed to a $14 million settlement pending Court approval in October of 2026. This settlement is a cautionary tale on how easily consumers can file complaints based on common marketing tactics such as email subject lines.

The Lawsuit

Costco is alleged to have sent email advertisements that violated CEMA and the Washington Consumer Protection Act by including time-specific limitations that were untrue or misleading in the email subject line and other misrepresentations around promotion terms. Examples alleged in the complaint include a statement that it was the “last day” to access “Member-Only Saving,” when the promotion in question was still offered after that day; and a subject line advertising “Hot Buys” available for “5 Days Only,” when at least one of the items featured was listed at the same sales price a few days earlier. One email advertised an “extension” of a promotional offer for a free gift card in exchange for spending a certain amount of money on Costco’s website; however, the duration of the sale had been predetermined prior to the start of the sale. These examples, the Complaint alleged, were false and misleading under Washington law.

What This Settlement Means for Businesses

Consumers don’t need to buy anything to sue and routine marketing emails can trigger liability. The growing volume of cases and settlements is a risk for any business sending promotional emails, even for businesses that operate outside of the state of Washington.  Though the recent amendment to CEMA reduces statutory damages and introduces a knowledge requirement, businesses should nevertheless remain vigilant when crafting marketing communications to consumers. Consider developing an internal marketing policy that describes the company’s obligations surrounding CEMA compliance (or if you don’t operate in Washington, similar state laws) as well as compliance with other marketing communications laws like CAN-SPAM, note examples of prohibited subject lines, and outline procedures to swiftly address customer complaints.

The settlement agreement is available here.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.