Court Says FTCR Can't Sue Cell Phone Company Under New Ballot Measure
Los Angeles, CA -- Nextel used a 2004 ballot measure that voters were told would stop "shakedown" lawsuits to get a lawsuit charging the cell phone company with unfair billing practices thrown out of court today. The case was brought against Nextel in 2003 by the Foundation for Taxpayer and Consumer Rights (FTCR) for unilaterally imposing a $2.50 monthly charge on customers just to get an itemized bill.
FTCR, a non-profit, non-partisan organization, brought suit against Nextel for its billing practices, and three cell phone companies for other abuses, under California's consumer protection statute, the Unfair Competition Law. In November, 2004, big business groups funded a measure on the California ballot, Proposition 64, which they advertised to voters was needed to stop frivolous or "shakedown" lawsuits. But in dozens of motions filed in courts across the state, defense lawyers representing Nextel and other cell phone defendants argued that Proposition 64 prohibits consumer advocacy groups like FTCR from challenging illegal conduct in court. They also claim that the initiative applies retroactively to suits filed before the measure was passed, even though the initiative does not say that, and initiative sponsors explicitly stated it was not retroactive.
A Los Angeles Superior Court dismissed the case in a hearing this morning, agreeing with Nextel's argument that FTCR was barred from bringing suit under Proposition 64. The court also refused to allow FTCR to amend the case in the name of Nextel customers angry about the billing practices.
"Nextel's corporate lawyers used Proposition 64 to avoid accountability to angry customers for its unfair billing practices," said Harvey Rosenfield, one of the lawyers representing FTCR. "Consumers across the country are fed up with Nextel's billing tricks and other abuses. FTCR will fight to give these consumers their day in court."
Consumer Group Acts to Protect Public When Government Fails
The cell phone industry has successfully blocked both state and federal regulation of its practices. In 1996, Congress deregulated cell phone rates and the Federal Communications Commission has refused to take meaningful action against a torrent of complaints about cell phone abuses. In California, the California Public Utilities Commission (PUC) watered down the long-awaited "Telecommunications Bill of Rights" in 2004, issuing a version that reflected the cell phone industry's intense lobbying of the agency and then-Governor Gray Davis. But even that modest series of protections -- guidelines on billing format, and the right to return a phone within thirty days without paying an Early Termination Fee -- was too much for cell phone companies. The industry enlisted Gov. Schwarzenegger to denounce the Bill of Rights, inexplicably complaining that it would "shift jobs out of California." This year, Schwarzenegger replaced two pro-consumer commissioners on the PUC, and the PUC immediately voted to withdraw the Bill of Rights.
Absent effective regulation of the industry's abuses, FTCR determined that the only way to protect the public against illegal and unfair conduct was to go to court.
FTCR vs Nextel
The Nextel suit, filed in October 2003, charged that the company unilaterally ceased providing a fully-itemized, printed bill to consumers, making it impossible to determine the accuracy of the bill. In the first month of the new billing policy, all of Nextel's California customers were improperly charged for four spam text messages, as the suit alleged, and the charges were concealed by the non-itemized bills. Nextel now demands $2.50 per month to mail an itemized bill for calls that exceed a customer's plan minutes. The suit demanded that Nextel stop charging people for the fully itemized bill and for spam text messages and make refunds.
Nextel asked the court to dismiss the suit in 2004, arguing that if consumers didn't want to pay for the previously free itemized bill, they could go to the library and obtain their billing information through the internet, or keep a personal diary of all the calls they make. Nextel also claimed that federal law prohibits lawsuits challenging Nextel's practices. But Superior Court Judge David Workman ruled against the company, allowing the case to proceed. Today, the Judge allowed Nextel to invoke Proposition 64 to block the suit.
Initiative Sponsors "Lied to Voters"
The state Supreme Court has agreed to decide whether Proposition 64 applies to lawsuits, such as FTCR's, filed before the measure was approved. Apart from the retroactivity issue, it is now clear that Proposition 64, funded by $15 million from big industry, was drafted to make it more difficult to sue corporations that break the law.
"The big business sponsors of Proposition 64 lied to the voters and the news media," Rosenfield said. "Before the election, they told us Proposition 64 was going to stop frivolous lawsuits but consumers would still be protected. After the election, they are telling the courts that Proposition 64 prevents non-profit organizations from filing legitimate lawsuits on the public's behalf to stop illegal overcharges and other unlawful practices. The voters were deceived. This attempt to escape responsibility by locking the courthouse door will have to be corrected by the voters at the ballot."
FTCR's co-counsel in the lawsuits against Nextel and other phone companies is Jordan L. Lurie of the Weiss & Lurie firm in Los Angeles.
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