Cellphone Termination Fee Cases

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.

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.

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?

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

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.

Affirmed.

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

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