American wireless carrier Sprint Nextel faces $1.2 billion class-action lawsuit

06 November 2008

American wireless carrier Sprint Nextel Corp. has a major problem on its hands - it has been hit with a federal class-action lawsuit that seeks reimbursement for over $1.2 billion in early termination fees the company charged subscribers since 1999. Early termination fees, or ETFs, are charges typically incurred by subscribers when they break out of their contracts early.

The companies argue that the fees are a necessary way to recoup the subsidies paid out to keep cellphones cheap. The consumer-advocacy groups argue the fees unfairly restrict consumers from switching services. The issue is being debated in courts around the country and at the Federal Communications Commission.

The lawsuit follows a legal defeat suffered by Sprint in July when a California judge ruled the wireless carrier would have to pay $73 million for its early-termination fee practices. The same attorney for the California case, Scott Bursor, widened the scope to a national class-action suit and is seeking a broader refund.

In the California case, ''we proved that the fees bear no relation to any cost incurred by the company,'' Bursor said in a Monday release. ''And we proved that the fees were established as an arbitrary penalty to try to prevent dissatisfied customers from leaving. Now we will prove that the fees violate federal law as well.''

The current federal class-action suit, filed on 29 October in a US District Court in California, alleges that the $150 to $200 fees violated the Federal Communications Act and laws in every state, and says the fees from 1999 to present total about $1.2 billion.

Bursor was also involved in a $21 million settlement about early-termination fees with Verizon Wireless and is involved in pending legal action about the fees against other leading wireless carriers.