[Infowarrior] - Sprint early termination fees are illegal, judge rules

[Richard Forno]

Sprint early termination fees are illegal, judge rules
COURT: CALIFORNIA LAW FORBIDS EARLY TERMINATION CHARGES
By Steve Johnson
Mercury News
Article Launched: 07/30/2008 01:31:13 AM PDT

http://www.mercurynews.com/ci_10039461?source=email

Californians fed up with being charged for ending their cell phone  
service prematurely won a major victory in a Bay Area court decision  
that concluded such fees violate state law.

In a preliminary ruling Monday, Alameda County Superior Court Judge  
Bonnie Sabraw said Sprint Nextel must pay California mobile-phone  
consumers $18.2 million as part of a class-action lawsuit challenging  
early termination fees.

Though the decision could be appealed, it's the first in the country  
to declare the fees illegal in a state and could affect other similar  
lawsuits, with broad implications for the nation's fast-growing  
legions of cell phone users.

The judge - who is overseeing several other suits against  
telecommunications companies that involve similar fees - also told the  
company to stop trying to collect $54.7 million from other customers  
who haven't yet paid the charges they were assessed. The suit said  
about 2 million Californians were assessed the fee.

Whether Sabraw's ruling will stand isn't clear. Experts say an appeal  
is likely, and the Federal Communications Commission is considering  
imposing a rule - backed by the wireless industry - which might decree  
that only federal authorities can regulate early termination fees.

Sprint Nextel also argued in the lawsuit that such fees - which ranged  
from $150 to $200 - were outside the purview of California law. But  
Sabraw rejected that argument.

"This is a terrific ruling," said

Chicago attorney Jay Edelson, who was not part of the case but has  
filed about 50 other suits nationwide against various cell phone  
charges.

"The phone companies have a tremendous amount of power," he added.  
"They lock you into long-term contracts and then they allow all these  
charges to be put on your bill. We have to make sure that consumers  
are protected."

"We are disappointed," said Sprint Nextel spokesman Matthew Sullivan.  
But he added that Sabraw's ruling was tentative and that she has given  
Sprint Nextel's attorneys the opportunity to file a rebuttal before  
she considers making it permanent.

Sullivan noted that similar suits have been filed in other states, but  
that Sabraw's decision was the first he knows of declaring such fees  
illegal.

Several other industry experts agreed, including John Walls, a  
spokesman with the CTIA, a Washington-based organization that  
represents the wireless telecommunications industry.

"I don't know of any state that has gone to this extent," he said,  
adding that his group believes it makes more sense to have such fees  
solely policed by the federal government.

'National framework'

"A consistent, uniform, national framework of standards is the best- 
case scenario for consumers and for the industry to serve consumers,"  
he said. "If you allow 50 states to regulate and legislate in 50  
different ways, you can create a very confusing and obviously  
inefficient service."

At a public hearing last month, FCC Chairman Kevin Martin sketched out  
a plan in which cancellation fees would be reduced over the life of  
the cell phone contract. Three companies - T-Mobile, AT&T and Verizon  
Wireless - already do that, and Sprint said it would begin prorating  
its fees next year.

The commission also is trying to resolve whether states have any role  
in regulating early termination fees, which are among the biggest  
source of complaints among wireless consumers, said spokesman Robert  
Kenny.

Fees or 'rates'?

He said the agency may decide to define such fees as "rates," which  
are subject to federal regulation under federal law. But if that  
happened, it is unclear how that might affect lawsuits in California  
and other states, Kenny said.

"That is something that will have to be addressed," he added, noting  
that the FCC hopes to resolve the issue by the end of the year.

Chris Murray, senior legal counsel for Consumers Union, said he hoped  
the California court decision would "drive a stake through the heart"  
of the industry's desire to remove state courts and state regulators  
from overseeing the fees.

That view was seconded by Scott Bursor, a lawyer for the victorious  
Sprint Nextel customers, who said the FCC likely would be persuaded by  
Sabraw's logic that states should have a role in policing the fees. If  
the FCC does limit state oversight, "it will get reversed" by the  
courts, he added.

On June 12, a jury in the Alameda County lawsuit ruled in favor of  
Sprint Nextel, determining that its customers who canceled their  
service early had breached their contracts with the company and that  
early termination fees were warranted.

But in overruling that decision, Sabraw said the jurors appear to have  
erred in assuming the fees were valid, and she took issue with the way  
Sprint Nextel determined that its customers owed the fees.

"Sprint did no damage analysis that considered the lost revenue from  
contracts, the avoidable costs and Sprint's expected lost profits from  
contract terminations," she said.

Nonetheless, Sabraw preserved a portion of the jury's verdict and used  
that to scale back the amount of refunds the suit initially had sought.

Contact Steve Johnson at sjohnson at mercurynews.com or (408) 920-5043.