Cellphone Termination Fee Cases

193 Cal.App.4th 298 (2011)

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Nature of the Case

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Facts

Lawsuits were filed against D and other cellular service providers alleging that the ETF's violated California consumer protection laws and constituted unauthorized penalties under section 1671. A judge certified a class. D adopted term contracts incorporating the $150 ETF in May 2000. After D's August 2005 merger with Nextel, D increased the amount of the early termination fee to $200. D assessed ETF's totaling $299,473,408 during the class period, and collected $73,775,975. D's experts contended that an ETF is a part of the price the consumer pays for the 'bundle' of the handset and cellular service and is part of the quid pro quo for the rate reductions included in long-term plans. D sought to prove that its actual damages were substantially greater than the fees charged. An expert opined that D suffered damages of $987 million from early terminations. The jury returned a verdict with special findings as follows: '1. What is the total dollar amount of early termination fees that plaintiffs and the class members paid to Sprint? $73,775,975. 2. Did plaintiffs and the class members breach their contracts with Sprint? Yes. 3. State the total dollar amount of Sprint's actual damages, if any, caused by early terminations of plaintiffs' and class members' contracts: $225,697,433.' The damages found by the jury were the exact amount of ETF's charged to class members, but which were unpaid. The trial court held the ETF’s unlawful under 1671. The court ordered restitution to the class in the amount of collected ETF's ($73,775,975); enjoined D from further efforts to collect ETF's assessed during the class period; and ordered D to advise third party assignees of uncollected claims of the court's order. The court then, while questioning the validity of the jury's verdict on damages, applied the setoff in favor of D resulting from the jury's verdict and determined that neither the class nor D would be entitled to any monetary recovery. The setoff did not affect the injunctive relief granted. The trial court found that the ETF was a liquidated damages clause; thus 1671 was violated.