updated 03:25 pm EDT, Tue July 29, 2008
Sprint Loses ETF Lawsuit
Sprint became the potential center of a legal precedent today in a ruling in a California court that would have the carrier pay $73 million in refunds. The decision follows a case in which former customers argued that Sprint had unfairly charged some customers early termination fees (ETF) for ending their service before the end of their respective contracts. The plaintiff's lawyers argue that their win is a blow against ETFs as well as against carriers' hopes to protect them through a proposed FCC deal, which would override state lawsuits in exchange for moderate concessions on the fees.
"This ruling sounds the death knell for the industry's petition seeking a preemption ruling from the FCC -- a ruling the industry has never been able to win in court," says attorney Scott Bursor.
Most carriers offer exemptions for changes in service or other special circumstances but otherwise charge a fee meant to discourage subscribers from abandoning a contract in mid-term, depriving the provider of some of the money it hoped to recover by subsidizing the phone. Critics have accused carriers of simply trying to collect extra profits from departing customers and in the past have successfully forced trade-offs, such as gradually reducing the fee over the length of a contract.
Sprint is not the only firm facing penalties for discounts and is joined by Verizon, which agreed to settle for $21 million to avoid a definitive ruling, and an ongoing suit against AT&T.
The defendant has up to two weeks to answer to the ruling and potentially soften the results but would set a precedent if legally required to pay compensation, supporting both the AT&T case as well as future complaints that would accuse carriers of unfair ETF rates.
ETFs became a particular sticking point in the US Congress after the introduction of the original iPhone. With no approved option to unlock the Apple device, customers unhappy with their service must not only pay extra to leave but also can't unlock their phones to use them with T-Mobile.