Wednesday, June 21, 2006
Court of Appeal Upholds $12 Million in Fines Against Cingular Wireless
By a MetNews Staff Writer
The Court of Appeal yesterday upheld the Public Utilities Commission’s imposition of more than $12 million in fines against what is now Cingular Wireless for engaging in unjust and unreasonable pricing practices from 2000 through 2002.
During that period, Cingular agents gave inaccurate and misleading information to prospective customers regarding service coverage, provided no grace period for customers to try out the service, and charged customers an early termination fee to terminate a contract early, the commission found.
The Fourth District panel held that the fines did not violate Cingular’s due process rights, were not in excess of the commission’s jurisdiction, and were preempted by federal telecommunications laws.
Justice Richard D. Fybel, writing for Div. Three, wrote:
“[W]hile it is undisputed that all wireless providers suffer some system failures and cannot guarantee coverage at all times in all locations, the record shows Cingular’s California region was the only major wireless provider in the California market and the only Cingular region to impose an ETF without a grace period.”
Customers on a one- or two-year service contract were required to pay a $150 early termination fee, and in some cases, had to pay Cingular agents an additional fee of up to $400, the PUC found.
Cingular argued that the fines violated its due process rights because the statutes and commission order upon which they were based, and which require that Cingular provide “adequate, efficient, just, and reasonable service” to its customers, are too vague for Cingular to have known its actions violated them.
Fybel disagreed, saying:
“Even in the absence of a specific statute, rule, or order barring the imposition of an ETF without a grace period, or barring the specific nondisclosures identified by the Commission in this case, Cingular can be charged with knowing its actions violated . . . [the] requirement that it provide ‘adequate, efficient, just, and reasonable service’ to its customers.”
Fybel said that the marketplace also told Cingular its services were not just and reasonable.
“The record . . . is replete with complaints from Cingular’s customers, including complaints specific to the failure of Cingular’s service to perform as promised. Indeed, the record shows the purpose of the imposition of the ETF was to prevent ‘churn’—having customers cancel their service and obtain service from a competitor,” he said.
Fybel noted that while some “churn” was due to better deals offered by competitors, “some churn was due to the failure of Cingular’s wireless service to perform as promised.”
In rejecting Cingular’s preemption argument, the justice said that federal law bars states from regulating rates or market entry, but not customer service.
“We conclude the imposition of fines and the requirement that Cingular refund early termination fees paid by its customers were neither regulation of rates nor regulation of market entry. The principal purposes of the penalties imposed by the Commission were to compensate Cingular’s customers and to prevent further misrepresentations by Cingular.”
The court also rejected Cingular’s arguments that the commission lacks jurisdiction to directly impose penalties, and must file a superior court action to have penalties imposed, and that the order that Cingular repay early termination fees paid by customers from Jan.1, 2000 through April 30, 2002, was overbroad.
In May 2002, Cingular changed its termination fee provision to add a 15-day grace period. In December 2004, it extended the grace period to 30 days, pursuant to an order of the commission.
Justices William W. Bedsworth and Richard M. Aronson concurred in the decision.
The case is Pacific Bell Wireless, LLC v. Public Utilities Commission (Utility Consumers’ Action Network), 06 S.O.S. 3106.
Copyright 2006, Metropolitan News Company