Court Tells Sprint To Refund Fees for Early Termination
By Cecilia Kang
Washington Post Staff Writer
Wednesday, July 30, 2008; Page D01
http://www.washingtonpost.com/wp-dyn/content/article/2008/07/29/AR2008072901200.html?nav=rss_technology
Sprint Nextel was wrong to charge customers penalty fees of $73 million
for early termination of cellphone contracts, a California court ruled
yesterday, offering encouragement to customers of other companies who
have filed similar suits around the nation.
Sprint must pay $18.3 million in cash to users who paid
early-termination fees; another $54.8 million must be credited to users
who were charged but didn't pay the fees, Alameda County Superior Court
Judge Bonnie Sabraw said in her decision, which is open to comment until
Aug. 5, when the final ruling will be made.
The penalties are not legal under California law, the judge said. They
are not rates, as argued by the carriers, which allows consumers to sue
in state courts.
Although the decision only affects California customers, Sprint,
T-Mobile and other wireless carriers are trying to protect themselves
from suits there and in other states by lobbying the Federal
Communications Commission to adopt new federal rules governing such
penalties, removing them from state jurisdiction.
"This gives great momentum to cases in other states," said Pamela
Gilbert, a Washington attorney representing the California plaintiffs.
"And if the FCC turns around now and gives the companies the
get-out-of-court-free card, it means the FCC is going to be condoning
what was past illegal behavior and letting the companies off the hook
for illegal behavior."
Sprint said the decision underscores the need for a national policy on
early termination fees. Other carriers, including Verizon, also have
lobbied the FCC for such a policy.
"A national regulatory framework protects customers from a confusing
patchwork of state regulations," said Matthew Sullivan, a spokesman for
Sprint. He said the company hasn't determined whether it will fight the
decision, saying it is focused on responding to the proposed rule.
This month Verizon Wireless settled its early-termination lawsuits for
$21 million. The company, which is a joint venture between Verizon
Communications and Britain's Vodafone Group, said the litigation was a
distraction for the company.
Carriers charge $150 to $200 in early-termination fees on two-year
contracts, a tactic consumer groups say is used to lock in subscribers
so they can't move to competitors. Those contract terms are often
applied even when a subscriber moves to a region where the carrier
doesn't offer service. And in the case of Sprint, a family with four
phone lines can be charged as much as $700 for leaving a family plan
early, according to the suit.
The carriers argue that the fees are necessary to make up for the costs
they incur offering lower prices on phones and devices.
The wireless trade group CTIA has filed a petition asking the FCC to
determine that the fees are really rates so that the agency can cement
its authority over them. Joe Walls, a spokesman for the CTIA, said the
California decision wouldn't necessarily prevent the FCC from doing so.
"This is just the latest step," he said.
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