Tentative Ruling Strikes Phone Termination Charges

The fees that cell phone carriers charge customers who break service contracts took a big hit in a California courtroom when a judge said such charges by Sprint Nextel Corp. likely violate state law.

The judge, in a tentative ruling issued late Monday, said Sprint will have to pay $18.3 million to customers who sued over the fees and credit $54.8 million to those who were charged but did not pay the fees.

The same judge is considering other lawsuits against telecommunications companies over their so-called early termination fees, which can range from $150 to $225. This month Verizon Wireless agreed to pay $21 million to settle an identical lawsuit just as trial was starting.

Alameda County Superior Court Judge Bonnie Sabraw rejected Sprint's argument that a state court had no business deciding an issue the company said should be left for federal authorities. Although her ruling isn't legally binding outside the state, it cut to the heart of an ongoing debate in other state courthouses and in Washington, D.C., over the fairness of the fees.

The Federal Communications Commission is enduring intense lobbying over how best to handle the fees. Telecommunications companies have asked the FCC to regulate the fees and shield wireless companies from class action lawsuits in state courts, such as the one Sprint is poised to lose.

At a public hearing last month, FCC Chairman Kevin Martin sketched out a plan in which the cancellation fees would be reduced over the life of the contract. Three companies - T-Mobile, AT&T and Verizon Wireless - already do that and Sprint said it would prorate its fees next year.

Martin said he hoped the commission would make a decision in August.

FCC spokesman Robert Kenny declined to comment on the court decision specifically, but did say it wouldn't affect the agency's plans to address the issue.

Chris Murray, senior legal counsel for Consumers Union, said he hoped the California court decision would "drive a stake through the heart" of the industry's hopes for removing state courts and state regulators from having oversight over the fees.