A federal magistrate judge in Newark, N.J., gave preliminary approval on Tuesday to an $8.4 million settlement of a class action alleging prepaid calling cards did not provide the quantity of minutes advertised.
The deal, which will come before U.S. Magistrate Judge Madeline Cox Arleo for a fairness hearing on Nov. 16, will affect hundreds of thousands of people who bought STi Prepaid cards from 2001 until the present.
Of the total settlement, $1 million will go toward free or discounted minutes and up to $7.4 million for refunds, according to the preliminary settlement.
An additional $2 million will go toward attorney fees and costs.
The complaint, in Ramirez v. STi Prepaid LLC, 08-1089, alleged that the cards, both rechargeable and nonrechargeable, did not provide the number of minutes advertised, and that voice prompts did not tell users making calls how many minutes they had left.
The plaintiffs alleged violations of New Jersey, California, Connecticut, Florida, Massachusetts, Tennessee, New York, Washington and West Virginia laws against unfair and deceptive trade practices.
Specifically, they said the defendants engaged in unjust enrichment as well as fraud and misrepresentation and violated the New Jersey Consumer Fraud Act.
The defendants created a "massive scheme to deceive and/or mislead customers" in the cards' manufacture, marketing and distribution by not providing the promised minutes, the plaintiffs alleged. In addition, they allegedly "engaged in calculated silence and did so because of the prospect of huge profits."
Defense lawyer Edward Kole, of Wilentz, Goldman and Spitzer in Woodbridge, N.J., says his clients deny the allegations. The settlement agreement says that it should not be construed as any admission of liability.
The settlement provides that the defendants would establish a website and toll-free telephone number with information, in English and Spanish, explaining the status of the settlement and providing instructions.
Defense lawyer John Goldman of Herrick Feinstein in Princeton, N.J., did not return a call.
One of the plaintiffs lawyers, Bruce Nagel of Nagel Rice in Roseland, N.J., says he is pleased with the settlement. His co-counsel, James Cecchi of Carella, Byrne, Cecchi, Olstein, Brody & Agnello in Roseland, did not return an e-mail message.