In a move that’s making waves through the entire mobile industry, an Alamedia County Superior Court judge has issued a tentative ruling ruled that the early termination fees Sprint charges its customers for prematurely backing out of their cell phone contracts violate California law. Judge Bonnie Sabraw also found Sprint must pay some $18.2 million to customers who have been charged the fees, and stop attempting to collect some $54.7 million in fees they’ve assessed to other customers.
The ruling comes as part of a class-action lawsuit challenging the validity of the fees. In June, a jury had ruled in favor of Sprint-Nextel, finding that customers who terminated their contracts early were in breach and that early termination fees were therefore justified. However, Judge Sabraw found the jury had erred in assuming the fees were valid, and disagreed with the manner in which Sprint determined whether customers owed the fees.
Industry watchers say an appeal of Sabraw’s ruling is expected, and the judge is letting Sprint file a rebuttal before she moves to make the ruling permanent.
If Sabraw’s ruling stands, it will be the first time a lawsuit over early termination fees has actually found the practice to be illegal. Numerous consumer advocacy groups have decried the mobile industry’s use of early termination fees to lock customers into contracts, which they say inevitably leads to abuses of power and jacking up customers’ bills. Other parties – including the mobile industry itself – note that if there’s to be any regulation of the way mobile carriers manage termination policies, it ought to be handled by the federal government rather than states. At a public hearing last month, FCC chair Kevin Martin outlined a possible plan that would mandate termination fees be reduced over the lifetime of a mobile service contract.
