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Plaintiffs to Appeal in Multimillion-Dollar Fight Over EarthLink Termination Fees
Fulton County Daily Report
March 20, 2009
Lawyers for a class of plaintiffs suing EarthLink over millions of dollars of allegedly unfair early termination fees will appeal last month's ruling by a Fulton County, Ga., judge that the Atlanta-based Internet service provider does not have to return any fees charged to class members' credit cards.
Page Perry partner David J. Worley, who served as local plaintiffs counsel for Bruce V. Spiva and Kathleen Hartnett of Washington, D.C.'s Spiva & Hartnett, said Superior Court Senior Judge Alice D. Bonner already has issued a certificate of review.
At issue were $149.95 fees charged to EarthLink customers when they canceled their services or, in the case of the three class representatives, merely upgraded their services or moved residences.
The Feb. 18 order by Bonner, who serves in the court's Business Division, said that Georgia's "voluntary payment doctrine" did not allow her to disturb agreements customers signed with EarthLink that clearly stated that the fee would be applied if the service was canceled before the initial term expired, and that users agreed to provide a credit-card account to EarthLink to be used for any charges to their accounts.
Said Worley, "Our essential argument is that this is not really a voluntary payment case, because these payments were not made voluntarily by the plaintiffs. They had the fees put on their credit cards involuntarily, and were never notified about it."
In response to Bonner's order, the plaintiffs lawyers' filings reiterated that the fees were unrelated to the company's cost of establishing service and were instead "improperly intended to deter customers from ending their relationship with EarthLink."
Further, they wrote, the service agreement with EarthLink does not clearly state that the early termination fees will be charged to customers' credit cards, but merely refers to "additional usage or services."
Worley said "tens of thousands of people, at least" would be affected by Bonner's order.
EarthLink's lead lawyer, David L. Balser of McKenna Long & Aldridge, said that "millions of dollars" were at stake.
"The ruling eliminates all the damage claims for the members of the class who actually paid the early termination fee," said Balser, who worked the case with partner Nathan L. Garroway and Tracy L. Klingler, of counsel to the firm.
"There's still a claim for injunctive relief before the court, but the claim for recovery has been dismissed."
UPGRADES AND CANCELLATIONS
In the 2005 complaint, three EarthLink customers said their contracts provided "that cancellation of the Earthlink [sic] services 'before the initial term of the agreement ends will result in a $149.95 charge.'"
The three all kept their service in place for more than the one-year initial term -- but ran into trouble when they either upgraded their service or moved. According to the complaint, Deborah Eaves of Chicago signed up for EarthLink's DSL service in 2002. In 2004, she upgraded her DSL service, and "was specifically told by Earthlink she could cancel the higher speed service without incurring a termination fee," the complaint said.
Dissatisfied, she canceled the high-speed service a week later and went back to her dial-up connection "on a month-to-month basis without entering into any new contract or agreeing to an early termination fee," the complaint said.
Later that year, Eaves canceled her EarthLink service completely, and her credit card was charged the early termination fee. Eaves was not notified of the billing, and when she attempted to dispute it, the complaint said, EarthLink "refused to reverse the charge."
Plaintiff William O'Hara signed up with EarthLink in 1999, and between 2002 and 2004 he moved three times.
"Each time O'Hara restarted his DSL service, Earthlink began a new twelve month contract term," says the complaint. "Earthlink used its practice of restarting the clock on O'Hara's contract whenever he moved as a basis for charging him an early termination fee, even though he had been an Earthlink customer for several years and Earthlink sent him no new equipment when he moved."
When he moved from California to Washington state in 2004, his new neighborhood was not served by EarthLink DSL. O'Hara sought to change to EarthLink's cable connection service, which was available, but "was informed that he would still be charged an early termination fee, even if he used the only available high-speed option provided by Earthlink in his area," the complaint said.
Boulder, Colo., resident David Tegart signed up with EarthLink in March 2003, and in July 2004 moved elsewhere within the city. He asked to have his DSL service moved, but over the course of several months was unable to do so, said the complaint.
In November 2004, Earthlink charged Tegart an early termination fee, "even though he had not changed his service," the complaint said. Tegart eventually had that fee refunded, but his experience left him wishing to change to another provider.
The complaint, filed in 2005, added that "the company now claims that Tegart is subject to a new twelve month contract period starting from November 2004 (when the company finally got his service restarted), and that if he cancels service prior to November 2005, he will be charged an early termination fee."
The suit said that, in 2005, more than 5.1 million EarthLink customers were subject to the fee, which it described as "an illegal penalty and not lawful liquidated damages for early termination."
Claiming unjust enrichment, breach of contract, conversion and unconscionability, the suit asked the court to enjoin EarthLink from continuing to collect the fees, order EarthLink to return the fees it had collected and contact any credit reporting agencies it may have contacted about customers who ordered their credit card companies to contest the fees and have the reports removed from their credit history.
'VOLUNTARY PAYMENT'
But in her order, Bonner said that those customers who have already paid the fees have no basis to seek recompense.
"Pursuant to the voluntary payment doctrine, '[p]ayments of claims through ignorance of the law or where all the facts are known and there is no misplaced confidence and no artifice, deception, or fraudulent practice used by the other party are deemed voluntary and cannot be recovered,'" she wrote, quoting Georgia law.
Bonner's order did not apply to class members who canceled their EarthLink service and had the charge removed from their credit cards, or to current EarthLink customers who are subject to the fee if they cancel, she wrote.
Balser defended the judge's order, and the fees.
"When you sign up for a year, there are significant costs to the provider," he said. "It's our position that this is a reasonable cost for early termination."
EarthLink continues to assess the fees, he said, and has no intention of changing the practice.
The case is Eaves v. EarthLink, No. 05CV97274 (Fult. Sup. Ct.).
