Cellphone Termination Fee Cases | 193 Cal.App.4th 298 (2011)
You pay if you stay, and you pay if you leave. That’s how Sprint ran its cellphone business. Sprint charged early-termination fees, or E T Fs, to customers who exited their service contracts early. But the fees were themselves terminated in the Cellphone Termination Fee Cases.
Sprint offered cellphone contracts for durations of one or two years. These contracts charged E T Fs as high as two hundred dollars when a customer’s service terminated early. The fees applied to terminations initiated by the customer and terminations declared by Sprint. Lawsuits challenging these fees were consolidated and tried as a class action in a California superior court.
The jury found that Sprint had collected over seventy-three million dollars in E T Fs from the class members. The jury also found that the class members breached their contracts with Sprint by ending them early, costing Sprint over two hundred twenty-five million dollars in damages.
The trial judge characterized the fees as liquidated damages and found them unenforceable because they were effectively a penalty. Applying the jury’s findings, the court enjoined Sprint from collecting unpaid fees and ordered Sprint to pay over seventy-three million dollars in restitution for those it had collected. But the court also offset the jury’s two-hundred-twenty-five-million-dollar damages figure in Sprint’s favor and ruled that neither side would be entitled to recover from the other.
One month later, the court granted the plaintiffs’ motion for a new trial on the issues of Sprint’s damages and setoff, because the court believed the jury misunderstood or misapplied its instructions. Sprint appealed the new-trial grant to the Court of Appeal. Both parties appealed other aspects of the court’s judgment.