Faigman v. AT&T Mobility LLC
U.S. District Court – Northern District of California
Case3:06-cv-04622-MHP

Suit Against Cingular (Now AT&T) for Providing Customers "Rewards Cards"…Faigman v. AT&T Mobility LLC
U.S. District Court – Northern District of California
Case3:06-cv-04622-MHP

Suit Against Cingular (Now AT&T) for Providing Customers "Rewards Cards" Instead of Rebates

Consumer Watchdog attorneys are representing California customers of Cingular Wireless – now AT&T -in a suit charging the company with advertising rebates that aren't even rebates. Filed on June 23, 2006, the class action alleges that the company promised customers rebates for cell phone purchases, but instead of sending checks, sent customers "rewards cards" that are not the same as cash.

As alleged in the suit, during the 2005 holiday sales period, the cell phone company engaged in a massive advertising campaign to solicit new customers by offering the Motorola Razr, one of the most popular cell phones, for "$99.99 after $50 mail-in rebate card and 2-year service agreement." Because of the enormous popularity of the RAZR and the low price at which it was offered, the promotion was likely extremely successful in garnering new customers.

Contrary to the advertising and the common sense expectations of consumers, however, customers who responded to the advertising campaign by purchasing the phone and sending in their $50 mail-in rebate cards did not receive $50.00 back. Instead, they received a "Cingular Reward Card" issued by VISA. A letter accompanying the "Cingular Reward Card" stated that the Card contains a balance of $50. However, the $50.00 "Cingular Reward Card" is not the equivalent of $50.00 cash because it contains numerous limitations and restrictions that render it far different from and inferior to cash, such as:
 

* It can be used only in certain locations displaying a Visa logo – apparently locations where the proprietor has established a relationship with Visa and has agreed to accept "Cingular Reward Cards" issued by Visa. Unlike cash, the "Cingular Reward Card" cannot be used for any purchase at any location.
* The fine print on the back of the letter reads, "This GiftCard cannot be used to obtain cash, illegal transactions, and on-line gambling activity." The "Cingular Reward Card" is thus explicitly not the equivalent of cash.
* Service charges may be applied that would automatically reduce the value of the "Cingular Reward Card" without providing an offsetting increase in the value of the Card The fine print reads "There may be a charge for GiftCard transactions in addition to regular service charges that apply to your GiftCard." There is no stated limit on the amount of the service charge.
* It expires after a certain date. If the balance is not used by that point, it is forfeited. Cash, of course, does not expire.
* Merchants may choose not to accept the "Cingular Reward Card." By contrast, all merchants must accept cash.
* The "Cingular Reward Card" must be activated. Many Cingular customers had difficulty activating their card over the internet or the provided 800 number. This serves to dissuade use of the card, resulting in the card expiring and the unused balance being reclaimed or retained by Cingular.

The company, which bought AT&T and is now operating under the name AT&T Mobility, continues to send customers "promotion cards" instead of rebate checks, although it changed some of its disclosures after this suit was brought.

Cell phone companies insist that the marketplace is very competitive. When a company advertises a specific price "after rebate," it knows that people shopping around expect that their ultimate cost will be the full price minus the rebate. AT&T's practice of issuing a gift card instead of a rebate means that people who expected to pay the lower net price actually ended up paying the full retail price. Getting a "card" that allows them to buy other goods or services is a bait and switch.

The lawsuit was transferred to federal court in San Francisco, which rejected AT&T's second motion to dismiss the case in July, 2007. Consumer Watchdog and its co-counsel, the firm of Pearson, Simon, Warshaw and Penny, asked the federal court to certify the case as a class action in August, 2008.

CASE UPDATE: The federal judge presiding over the case, the Hon. Marilyn Patel, has discussed several settlement options with attorneys for the parties. In August 2009, Judge Patel considered a proposed settlement requiring that AT&T disclose in all newspaper, television, radio and in-store advertising that the "rebate" is paid through a "promotional card." The conditions and limitations on the use of the card would also be disclosed. In addition, customers would be entitled to a flat payment of $6, upon request. The court rejected the requirement that customers submit a claim for the payment and instructed the parties to discuss alternatives.

Read our press release and the court decision rejecting AT&T's second motion to dismiss:
http://www.consumerwatchdog.org/resources/CingularRebateCaseCourtDecision.pdf
See a copy of the latest version of the legal complaint in Faigman v. AT&T Mobility:
http://www.consumerwatchdog.org/resources/CingularRebateCaseFAComplaint.pdf
Read our letter to Cingular demanding they stop the practice:
LINK
See an example of Cingular's original advertising:
http://www.consumerwatchdog.org/resources/CingularAdvertising.pdf
See AT&T's current advertising:
http://www.consumerwatchdog.org/resources/ATTOnlineAd.pdf