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Two major wireless phone providers are under fire in separate South Florida lawsuits for allegedly deceiving their customers and the state about charges to consumers for a mobile phone emergency call system. On July 1, a class action lawsuit was filed in Palm Beach Circuit Court alleging that Sprint, beginning in January of last year, engaged in deceptive trade practices by placing a charge for the so-called e911 system on its customers’ bills that appeared to be a federally mandated fee or tax but actually was not. By listing the charge in this way, Sprint was able to advertise rates lower than those that customers were actually billed and thus gained market advantage, the suit claims. The suit, filed by attorneys at Cauley Geller Bowman & Rudman in Boca Raton, also contends that Sprint violated a state law that authorizes carriers to collect a maximum monthly e911 fee of 50 cents per phone. The fee — which Sprint collected in addition to the purported federal fee — goes to a state-mandated fund from which wireless carriers and county governments are reimbursed for their expenses in creating the emergency call system. The lawsuit has drawn the attention of state regulators, who question whether Sprint was double-billing its customers by charging them for the e911 work while also receiving reimbursement for the work from the state fund. State officials plan to question the company at a hearing today in Orlando. Similar class action suits also have been filed against Reston, Va.-based Nextel Communications. One was filed by the Cauley Geller attorneys in Broward Circuit Court on May 22; another was filed in Palm Beach Circuit Court July 2 by class action attorney Richard Greenfield, a Maryland solo practitioner, attorneys at the Philadelphia class action boutique Bolognese & Associates, and West Palm Beach attorney Christopher Larmoyeux, of Larmoyeux & Bone. Nextel and Sprint also were defendants in a December 2002 lawsuit over their e911 billings brought by Missouri Attorney General Jay Nixon. That suit was settled early this month when the companies agreed to more clearly explain the charges in their advertising and billing, and to contribute $50,000 each to a state consumer protection fund. According to the Palm Beach Circuit Court claim against Sprint, the company passed its e911 costs on to its customers in the form of a fee “apparently based on a percentage of the phone bill.” It was listed as a line item labeled “USA regulatory obligations and fees.” The fee was in addition to the state’s statutory 50-cent fee. “It doesn’t look like a lot on your monthly bill,” said lead plaintiff attorney Paul Geller, a partner at Cauley Geller. “They screw you in small amounts so no one individual has incentive to sue. It’s the quintessential class action situation.” The class representative in the suit is Kathy Flaherty, a Lake Worth, Fla., resident. She is represented by Geller, along with partner Jonathan Stein and associate Nicole Reid of Cauley Geller. Greenfield and the Bolognese attorneys are also co-counsel in the Palm Beach Circuit Sprint suit. Named defendants in the suit are Kansas City, Mo.-based Sprint Corp., Overland Park, Kan.-based Sprint PCS, and two Delaware-based Sprint entities. The suit seeks class certification for Sprint customers in Florida and elsewhere who were charged the fee, alleging they were caught up in a “nationwide bait and switch scheme.” Sprint claims 14.5 million customers nationwide. “We recognize that what we call the federal charges can be confusing to the customer,” said Nancy Schwartz, Sprint Corp.’s Florida public relations manager. “The FCC has mandated that carriers could recoup the costs of the new [e911] technology.” She said the company has spent “tens of millions of dollars to accommodate the program.” She declined, however, to comment specifically on the lawsuits. Winston Pierce, chair of the Florida Wireless 911 Board, whose members are appointed by the governor to oversee and coordinate the creation of the emergency call system, said Sprint representatives will be questioned about the company’s billing practices and its use of the state e911 fund at the board’s annual financial affairs meeting today in Orlando. The Federal Communications Commission in 1996 directed cell phone carriers to work with state and local governments to establish wireless 911 emergency call systems. The commission set a 2001 target date for the project, but, for technological and other reasons, that has been repeatedly delayed. The FCC-mandated wireless 911 program is being implemented in two phases. Phase I calls for systems that allow county emergency call centers to identify the transmission towers to which cell phone calls are made, narrowing down the caller’s location. Phase II will enable the call centers to identify a caller’s precise latitude and longitude. Wireless carriers are accommodating e911 either through handset-based or network-based methods. Sprint, Nextel and Verizon have committed to the former, gradually fitting all their cell phones with GPS-type devices. AT&T, Cingular and others have chosen the latter, upgrading their transmission towers and networks. The FCC’s original 1996 directive provided no federal funding mechanism. The commission reasoned that the companies could simply raise their rates, which are unregulated. In 1999, the FCC ruled that carriers could recover their e911 costs “either through their own rates or through an explicit State-adopted mechanism.” Florida responded to the FCC initiative with the 1999 Wireless Emergency Communications Act, part of which established the Wireless Emergency Telephone System Fund to cover carriers’ and counties’ costs in the creation of e911 systems. The fund relies on a “county-911 wireless surcharge” of 50 cents per cell phone number per month. That fee is collected by all wireless carriers, which draw on the fund for reimbursement of costs associated with implementing the emergency system. By statute, the 50-cent fee can only be adjusted downward. The Palm Beach Circuit Court suit charges that Sprint violated the statute when it imposed the purported federal fee on top of the state fee. The Palm Beach suit alleges that Sprint’s billing method led consumers into the mistaken belief that all cellular phone companies charged the extra fee, which kept customers from comparison shopping. The suit also contends that the practice kept Sprint customers ignorant of their right to terminate their service contracts, which they were entitled to do because Sprint had unilaterally raised their rates by tacking on the extra fee. Under the alleged violation of the Florida e911 fund fee cap, damages could include the total amount of money Sprint collected with its “federal fee.” Michael Weber, a founding shareholder at Feldman Gale & Weber in Miami, an intellectual property and commercial litigation firm which is not involved in the Sprint or Nextel cases, predicts that similar class action claims against wireless carriers will pop up all over the country in the aftermath of the Missouri settlement. Weber predicts, however, that there will be big legal battles over class certification. Defendants often settle if a class is certified because the cost of defending class actions with millions of class members is so high. “Just notifying the class members can run into the millions,” he said. On the other hand, Weber said, it may be hard for the plaintiff attorneys to establish damages. Expert witnesses who are economists would be needed to explain how allegedly disguising the e911 charges gave the wireless phone providers the appearance of lower rates and gained them more customers, and at what cost to consumers, he said. Weber argues that prosecution by state authorities is a more appropriate way to handle any wireless billing problems. In Missouri, Sprint and Nextel were forced to modify their billing practices and pay to support consumer protection. When private parties bring such claims, “it’s not about consumers,” he said. “It’s about consumers’ lawyers.” “That’s a fair criticism,” said Greenfield, who is the author of a number of class action claims. “If the attorney generals and the regulators did their job, I’d be out of business. But I’m someone who believes lawyers should get paid well if they get good results.” Greenfield said that the public is the ultimate beneficiary of class action lawyers’ work. “My client is more than just my plaintiffs.” On the issue of whether Sprint deceived the state and engaged in double billing, Sprint has been paid a total of $1.6 million from Florida’s e911 fund since its inception, according to state records. Sprint representative Schwartz said that the company has drawn from the state fund to cover its costs in implementing Phase I of the e911 system. She said the additional e911 charges to customers had been used solely for the implementation of Phase II. Schwartz said that the company has set the additional e911 charge at a flat 40 cents a month rather than a percentage of each customer’s total bill. The company continues to collect the 50-cent fee for the state wireless fund, as well. She said the company had sent letters to its customers explaining the charges. Winston Pierce of the Florida Wireless 911 Board said that when his panel meets today it will “try to determine whether [Sprint and Nextel] are requesting payment from us for what they’re also charging their customers. We will not have them double-dipping.”

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