T-Mobile Gets Popped!

Class Action Firm Wins Full Recovery and Fees in T-Mobile $2.2 Million Settlement

Zack Needles
The Legal Intelligencer
01-18-2008

In a case that was originally worth less than a tank of gas, Haverford, Pa., class action firm Chimicles & Tikellis reached a settlement with T-Mobile USA worth almost $2.2 million, requiring the cellular services provider to reimburse class members with a net recovery of the full amount of unrefunded billing overcharges.

Counsel fees, which were also paid by T-Mobile as a condition of the settlement, totaled $1,097,808.

The settlement, which was approved by a Michigan federal court in December, put an end to a class action complaint levied against T-Mobile in 2006 alleging that the company had overcharged customers from April 2003 until June 2006 due to an internal billing system error.

According to Steven A. Schwartz of Chimicles & Tikellis, who argued the case in conjunction with E. Powell Miller, formerly of Michigan-based Miller Shea, now with The Miller Law Firm, 100 percent recoveries are uncharacteristic of most class settlements.

"We think it's very rare for a class action case," he said. Joshua C. Schumacher, an associate at Philadelphia plaintiffs class action firm Berger & Montague, said that while it was difficult to comment specifically on the T-Mobile case without knowing all the facts, a 100 percent recovery is not only uncommon, it's almost unimaginable in class action settlements.

"One hundred percent is truly a phenomenal recovery," he said. "Fifty percent would be phenomenal, but 100 percent is virtually unheard of."

According to the plaintiffs' memorandum in support of the proposed settlement, in January 2006 T-Mobile responded to the class complaint by instituting two computer programs designed to reimburse affected customers but failed to keep track of the refunds, making it impossible to know exactly how much money the company had paid back. As a condition of the settlement, T-Mobile was required to hire an outside research consultant to calculate how much of the estimated $6.7 million owed to subscribers had been paid through the automated reimbursements. The consultant concluded the company still owed about $2.2 million to its customers.

Schwartz said the company conceded to a full recovery settlement plus about $1.1 million in counsel fees relatively early in the negotiations, even agreeing to pay for the plaintiffs' notice and claims administration, despite their being no statutory provision requiring them to do so. While Schwartz said his firm never received hard numbers for those fees or for the cost of statistical analysis, it is estimated to be hundreds of thousands of dollars.

Schumacher said it's atypical for a defendant to agree to pay legal fees in addition to a full recovery.

"I would classify that as not commonplace," he said.

Schwartz believes the defendant's willingness to grant all of the plaintiffs' wishes was indicative of fear that its case wouldn't hold up at trial.

"This was truly a case where [T-Mobile] had no defense on their merits that they wrongfully collected money from their subscribers for services subscribers had already paid for," he said.

Robert Kaplan of New York-based Friedman Kaplan Seiler & Adelman, who represented T-Mobile, did not respond to a phone message before press time. A spokeswoman for T-Mobile said she could not comment on the case.

The case began in 2005 with one plaintiff, Michigan resident Chun Wing Wong, who claimed he was overcharged for Web and e-mail access based on usage even though he paid a flat monthly rate of $4.99 for unlimited access.

According to the original complaint, when Wong notified the company about the error, customer service representatives admitted to him orally and in writing that the company was aware of an internal computer glitch. Still, T-Mobile refused to fully reimburse Wong because he failed to complain within 60 days of the first incorrect bill, a company policy it refused to waive. Wong's total claim in the lawsuit complaint was for $19.75.

After Wong filed suit, T-Mobile immediately moved to compel arbitration, citing its contract with Wong, which contained an arbitration agreement and a class action waiver, but was denied. According to Judge Nancy G. Edmunds' court order denying arbitration, T-Mobile's contract with Wong stated that if the court found the class action waiver unenforceable, the case would not go to arbitration. Edmunds deemed the waiver unenforceable because it would have robbed the proposed class of its rights under Michigan's Consumer Protection Act.

Soon after, the number of plaintiffs ballooned from one Michigan resident to about 350,000 people nationwide.

Schwartz said he was amazed at the company's initial unwillingness to resolve the issue before the class was certified.

"T-Mobile could have avoided all of this for $20," he said. According to Schwartz, avoiding arbitration and being granted permission to move forward as a class action was a major hurdle for the plaintiffs to overcome before being able to negotiate a settlement on their own terms.

"Once we won that battle, we had to draw a line in the sand and demand full recovery of the unpaid overcharges," he said.

Schwartz, who, along with Miller also reached a full recovery settlement with Siemens Medical Solutions in 2005, said he hoped both cases would serve as counterexamples to those who see class action settlements as a quick way for attorneys to make a fortune and class members to make pennies on the dollar.

He said that this can occur, but holding out for a better settlement can be beneficial for both the plaintiffs and the plaintiffs' attorneys, provided the case meets certain standards.

"It has to be a strong case on merit, there has to be credibility on the plaintiffs' side that [if settlement can't be reached] they can take the case to trial and win," he said. "And plaintiffs attorneys should set their sights high in terms of what they're willing to settle for."

For now, he and Miller are two-for-two as a team in obtaining full recovery settlements.

"Hopefully we can continue that record into the future," Schwartz said.