“Court rules Sprint Nextel termination fee illegal” |
| Court rules Sprint Nextel termination fee illegal Posted: 07 Mar 2011 09:26 AM PST Sprint Nextel illegally charged more than 400,000 Californians $150 or $200 for early termination of their cell phone contracts between 2000 and 2007, a state appeals court has ruled. Whether the customers get all or any of their money back depends, however, on the outcome of a retrial ordered by the court in Thursday's ruling. At issue is whether the company lost more money from the termination of its contracts than it gained by collecting the fees. Regardless of the outcome, the case has changed practices in the telecommunications industry, Alan Plutzik, a lawyer for the Sprint Nextel customers, said Friday. He said all major companies now prorate their termination fees so that customers who change providers in the final months of a one-year or two-year contract pay less than those who switch in the early months. Previously, the companies charged the same fee throughout the contract period, a practice that the court found to be an illegal penalty in Sprint Nextel's case. "This is a change that we believe was in response to our litigation," Plutzik said. He said he and his colleagues reached monetary settlements in separate lawsuits against Verizon, T-Mobile, AT&T and Cingular. Sprint said it disagrees with the ruling and is reviewing its options. The company could appeal to the state Supreme Court. Sprint charged customers $150, starting in 2000, for failing to complete their long-term contracts - either by withdrawing voluntarily or by being cut off for not paying their bills - and increased the fee to $200 after merging with Nextel in 2005. The company said the fee was part of the cost of service, allowing it to reduce monthly rates and charges for handsets. But the First District Court of Appeal in San Francisco agreed with an Alameda County judge, who presided over a trial of the class-action suit in 2008, that the fee was a penalty that could not be legally enforced in a consumer contract. The court said a Sprint executive, Bruce Pryor, testified that the main purpose of the fee was "to prevent customers from leaving." The company might have justified the fee as an estimate of the losses it suffered from early contract terminations, but it made no effort to determine those losses before imposing the charge, the court said. Opposing experts assessed the company's losses at the 2008 trial and differed widely - Sprint's witness said the company lost $987 million in customer revenue during the nearly eight years covered by the suit, while a witness for the customers said the company saved nearly that much in costs of service and had a net loss of only $17.6 million. Sprint collected $73.8 million in termination fees during that period. The jury pegged the company's losses at $225 million - the amount the company billed for additional termination fees and was seeking to collect - but Superior Court Judge Bonnie Sabraw ruled that the evidence failed to show Sprint had actually lost that amount, and ordered a new trial on the issue. She also prohibited the company from collecting the additional fees. The retrial, before a new jury, would determine whether customers get a refund. This article appeared on page D - 1 of the San Francisco Chronicle This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php |
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