Cellphone Termination Fee Cases

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Cellphone Termination Fee Cases
Court California Court of Appeal for the First District
Citation 193 Cal.App.4th 298
Date decided March 3, 2011

Facts

Sprint Corporation charged early termination fees (ETFs) for its cell phone clients.

Sprint offered cell phone contracts lasting 1 or 2 years. ETFs could be $200.

Procedural History

Sprint customers filed a class-action lawsuit.

The jury found that Sprint had collected over $73 million dollars in ETFs from the class members. These early terminations had in turn cost Sprint $225 million in damages.

The trial judge found the ETFs Liquidated Damages (a penalty).

The trial court enjoined (prohibited) Sprint from collecting additional early termination fees (ETFs); Sprint was ordered to cough back $73 million in restitution. At the same time, the $225 million damages were to be offset in Sprint's favor. To sum it, the court announced that neither party would be allowed to recover anything.

The customers demanded a new trial.

Issues

Can the presumption against a liquidated-damages provision in a consumer contract be overcome without evidence that the proponent conducted an analysis attempting to match the damages to its actual losses?

Arguments

Sprint argued that it made a reasonable endeavor to calculate is ETFs.

Holding

No. The presumption against liquidated-damages provisions in a consumer contracts can't be overcome unless the proponent shows it conducted an analysis attempting to match the damages to its actual losses.

Judgment

Affirmed.

Rule

Judge Bruiniers: A liquid-damages (penalty) clause in a consumer contract is presumed void under California law.

Comments

Sprint Corporation was merged into T-Mobile US in April 2020.

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