Judge Rules Sprint Early Terimation Fees are Illegal
July 29, 2008 – 9:17 pmEarly termination fees that cell phone carriers charge customers who break service contracts took a big hit when a judge said charges by Sprint Nextel violate California state law.
In a tentative ruling issued today, the judge said Sprint will have to pay $18.3 million to customers who sued over the fees and credit $54.8 million to those who were charged but did not pay the fees.
The same judge is considering other lawsuits against telecommunications companies over their early termination fees, which can range from $150 to $225. This month Verizon Wireless agreed to pay $21 million to settle an identical lawsuit just as trial was starting.
Alameda County Superior Court Judge Bonnie Sabraw rejected Sprint’s argument that a state court had no business deciding an issue the company said should be left for federal authorities. And while her ruling isn’t legally binding outside the state, it cut to the heart of an ongoing debate in other state courthouses and in Washington, D.C., over the fairness of the fees.
Wireless carriers say early termination fees are necessary so the companies can recover the cost of mobile phones, which they subsidize when customers sign long-term service contracts.
At a public hearing last month, the FCC sketched out a plan in which the cancellation fees would be reduced over the life of the contract. Three companies - T-Mobile, AT&T and Verizon Wireless - already do that and Sprint said it would begin prorating its fees next year.
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