September 30, 2008

Callahan, McCune & Willis Announces AT&T Enjoined From Proceeding With Inadequate Settlement in Its Own Backyard

A Federal Judge in San Diego enjoined AT&T from proceeding with a proposed settlement for charges associated with deceptive marketing claims on its customers' mobile phone bills. AT&T entered into this settlement in a Georgia state case less than 2 months after it was filed earlier this year. This rushed settlement was an effort by AT&T to eliminate the enormous exposure it faced in connection with a multidistrict litigation pending in San Diego, California since 2005 and which has been the subject of much media attention. According to Robert W. Thompson of Callahan, McCune & Willis, APLC, lead counsel for the plaintiffs in the multidistrict litigation in San Diego, "The proposed settlement in Georgia was entirely unacceptable. It placed the entire burden on AT&T customers to prove that the charges were unauthorized and would have resulted in a very small payout. It was just a method for AT&T to try and get out of their wrongdoing cheaply."

In a sharply worded ruling, Judge Jeffrey Miller lambasted the proposed settlement as inadequate to protect the rights of the plaintiffs. "The structure of the settlement appears designed to limit a consumer's incentive and ability to adequately assess their claims." This comes on the heels of a Federal Court Judge in the Northern District of Illinois criticizing one of AT&T's lawyers for making false statements under oath in connection with another case against AT&T.

This legal battle stems from a lawsuit filed by Charles Ford against AT&T for unauthorized charges it placed on its customers' cellular phone bills. According to the complaint, AT&T placed charges on customers' bills whenever aggregators and third party content providers, such as Jamster! told AT&T that its customers had ordered certain products without any oversight by AT&T to ensure that the charges are authorized or accurate. In fact, the complaint alleges many customers did not order products or that charges were the result of fraudulent advertisements directed mostly to children such as Ford's daughter. Because AT&T kept a percentage of the amount billed on behalf of third party providers AT&T had no incentive to stop this practice or help its customers. Since these practices started, consumers have paid billions of dollars for third party charges on their cellular phone bills.

After the Ford lawsuit was filed, various similar lawsuits sprung up across the nation. In 2006 a judicial panel coordinated these lawsuits in a multidistrict litigation in San Diego, California. The coordinated actions seek to have all third party charges that were improperly placed on consumer bills by AT&T given back to the customers. AT&T has vigorously fought this class action lawsuit. For more than three years AT&T has sought to have the lawsuit thrown out of court by arguing customers were obligated to arbitrate their claims and not to bring a class action. This argument was thrown out of court and AT&T appealed. According to Thompson, "First AT&T failed to avoid liability to millions of consumers through their unconscionable arbitration agreement. When that failed, AT&T tried to get out from under this litigation by selling out the class."

In order to accomplish its goal, AT&T turned to a small plaintiff's law firm out of Chicago that had filed a case against AT&T many months after the Ford action. After their initial discussions with AT&T the Chicago lawyers filed a lawsuit in AT&T's backyard in Atlanta, Georgia, where AT&T is headquartered, and entered into a settlement agreement in that case that would release AT&T and all of its third party providers from any liability for claims of unauthorized billing in exchange for $4.3 million in attorneys fees and a claims process that is sure to result in little payout to AT&T's customers. AT&T obtained Court approval of the settlement without ever having advised the counsel or the court in the nationwide multidistrict lawsuit what they were doing.

In light of the Court's ruling, the multidistrict litigation will go forward and AT&T will be forced to provide certain information regarding its practices. The plaintiffs in San Diego will be seeking class certification on behalf of the class as soon as such information has been provided.