Verizon Wireless faces class action over ETFs Potential
payout could reach $1B
By Jeffrey Silva, January 28, 2008 - 1:30 pm EDT
An arbitrator has certified a huge class action against Verizon Wireless that
potentially could cost the No. 2 mobile phone carrier close to $1 billion in
refunds of early termination fees.
“I find the claimants have complied with the criteria for class
certification,” wrote Eugene I. Farber, a former federal judge and senior
arbitrator-mediator for the American Arbitration Association in White Plains,
N.Y. “My decision is also motivated by my conclusion that as a matter of
equity and fairness, millions of class members are entitled to adjudication of
the central common questions of fact or law in this arbitration related to
whether the $175 early termination fee imposed by respondents Cellco
Partnership d/b/a Verizon Wireless … is based upon an unenforceable liquidated
damage clause.”
A trial date has not been set, but could begin by the middle or latter part of
this year.
“This ruling is a tremendous victory for Verizon Wireless subscribers,” said
Scott Bursor, counsel for the plaintiffs. “After four years of extremely
hard-fought litigation in several courts and in arbitration, this ruling
ensures that Verizon customers who have been charged illegal early termination
fees will have an opportunity to prove their claims on a class-wide basis and
to seek a refund of nearly a billion dollars worth of illegal charges."
Bursor said Farber’s 35-page ruling to certify the class action has historical
significance. “It is the largest class ever certified in arbitration, with
approximately 70 million members of the subscriber class,” he said. “It is
also the largest class ever certified on a contested motion in any type of
forum, litigation or arbitration."
A Verizon Wireless spokesperson declined to comment because the arbitration
remains pending. Verizon Wireless is believed to have challenged Farber’s
ruling in federal appeals court. However, it is unclear whether the
arbitrator’s action -- not a final decision on the merits of the case itself
-- can be appealed as a legal matter.
In 2006,Verizon Wireless announced a new policy to prorate ETFs. T-Mobile USA
Inc., Sprint Nextel Corp. and AT&T Mobility subsequently announced similar ETF
policy changes last year. Senate legislation co-sponsored by Sens. Amy
Klobuchar (D-Minn.) and Jay Rockefeller (D-W.Va.) would mandate prorated ETFs
for the entire cellular industry.
ETFs have triggered a slew of lawsuits against mobile phone carriers in recent
years. National cellular association CTIA petitioned the Federal
Communications Commission in 2005 to declare ETFs part of the wireless rate
structure and therefore preempted by federal law. FCC Chairman Kevin Martin
has signaled he will not grant CTIA’s petition, but plans to hold one or more
hearings on the imposition of penalty fees in a variety of communications
sectors.
