Verizon Settles Lawsuit Over Early Termination Fees
Thu Jul 10, 2008 6:02 am
Verizon Wireless has agreed to pay $21 million to settle a lawsuit filed by California customers upset with the company's early termination fees.
Early termination fees, charged when a wireless subscriber breaks a contract before it ends, have been in the sights of the Federal Communications Commission, where Chairman Kevin Martin wants to construct a national framework for the way they are assessed.
Wireless carriers have long enforced penalties of as much as $175 on subscribers who leave their one-year or two-year service contracts early. The carriers argue that the fees are a necessary measure because the companies pay for a part of the initial cost of the cell phone, and need to recoup those expenses.
The settlement covers all of the lawsuits throughout the nation, according to a Verizon spokesman.
"We are recovering cash that would be available to Verizon mobile phone customers who paid fees to end their contracts early," said Alan Plutzik, an attorney for the customers. Plutzik said its unclear how many Verizon customers will be eligible to share in the settlement, a decision that will ultimately be up to the judge.
Customers of six companies sued the carriers in 2006 in Alameda County Superior Court alleging that the fees violate California law.
Sprint Nextel faced trial first in Alameda County Superior Court last month. The judge has not yet issued a decision on the legality of the fees in California in that case.
Jury selection began last month in Verizon's trial, which will be halted now that an agreement has been reached. AT&T is next up for trial, Plutznik said.
Federal Communications Commission chairman Kevin Martin last month laid out a plan to regulate the fees, saying he was skeptical that the lawsuits would adequately resolve all pending issues about the unpopular fees. The industry supports Martin's proposal to prorate the fees in exchange for immunity from state lawsuits.
