Class Action Settlements: Wireless Early Termination
Most, if not all, cell phone companies have provisions in their wireless or cell phone contracts that penalize its customers for early termination of their one- or two-year agreements. Cell phone carriers have justified the fees to subsidize the cost of cell phones that are usually sold at bargain rates, if not for free. Critics have decried the practice as stifling competition.
A number of class action suits have been brought in recent years against all the major cell phone providers --AT&T, Verizon Wireless, Sprint Nextel and T-Mobile U.S.A -- alleging that the companies had charged early-termination fees to consumers who had cancelled their service within 30 days from the start of their agreement or had complained about the quality of service and cancelled. All were penalized by being charged the full termination fees, which ranged from $150 to $175.
The four major cell phone carriers were embroiled in an early-termination fees (ETF) class action suit in California in 2006. After a judge separated out the four major carriers, an Alameda County District Court judge split the defendants again and had Sprint defend its practices in a jury trial in which it prevailed. In June 2008, after the verdict was rendered, the trial court judge, in a unusual development, ruled that Sprint’s contracts were actually illegal and ordered Sprint to reimburse its customers the sum of $18.2 million.
Verizon had earlier settled the same action for $21 million. It later introduced a plan to prorate the early-termination fees based on when the customer actually terminated the contract.
On January 26, 2010, in a national class action over ETF complaints filed in New Jersey, AT&T Mobility announced it had agreed to pay its New Jersey customers $16 million in cash and $2 million in noncash benefits in settlement of an early-termination class action over flat-rate early-termination fees. Since the suit had begun, AT&T had modified its termination provision by prorating it over the life of the contract.
In the same action, Sprint Nextel agreed to pay $14 million in cash and $3.5 million in noncash benefits.
Copyright© 2012 LexisNexis. All rights reserved.