Metropolitan News-Enterprise


Tuesday, January 5, 2010


Page 3


C.A. Upholds Fees in Class Action on Cellphone Termination Charges




The First District Court of Appeal has affirmed an award of close to $2.5 million in fees and costs to class counsel in a suit over a cellphone provider’s practice of locking phones electronically to prevent their use on other providers’ networks.

 Justice Mark Simons, writing Thursday for Div. Five, agreed with Sprint Spectrum, L.P. that Alameda Superior Court Judge Bonnie Sabraw—since retired—erred in rejecting the parties’ agreement to have the issue decided by an arbitrator. But because Sprint did not seek a writ to prevent Sabraw from hearing and deciding the matter, and did not show that she was biased or unfair in her decision, it could not show prejudice, Simons said.

The case is part of coordinated proceedings in which the plaintiffs allege that the major cellphone service providers have violated consumer protection laws by various practices, including handset locking and imposition of early termination fees. Sprint agreed to settle the handset locking claims after the judge severed those from claims over early termination fees.

 Under the settlement, the trial court certified a national class, whose members received no damages. Sprint agreed, among other things, to notify its customers of the locks and to unlock phones for customers once their Sprint contracts were satisfied.

It was also agreed that an arbitrator would decide on the total amount of costs and attorney fees to be awarded the plaintiffs, within a range of $500,000 to $2.95 million. Sabraw, however, while finding the settlement terms fair to the class and the range of potential fees reasonable, found the arbitration provision “void in its entirety because it improperly excluded the members of the class from the fee application process.”

Lodestar Value

The judge ultimately concluded that the lodestar value of the attorney’s time was about $2.3 million. She reasoned that a 25 percent discount from that amount would be justified by the plaintiffs’ partial lack of success, but that there were factors justifying a 1.25 multiplier, so that and counsel were entitled, on balance, to the lodestar amount.

The judge, however, disallowed about $300,000 of the $500,000 the plaintiffs claimed in costs, so the total award was slightly less than $2.5 million.

Simons, writing for the Court of Appeal, agreed that the judge should have enforced the parties’ agreement to arbitrate attorney fees once she agreed that the class was being treated fairly, particularly as to the range of fees and costs, which was stated in the class action settlement notice.

 “The trial court’s statements reflect a misapprehension of the limited role of unnamed class members in class actions, including in settlements,” Simons wrote. He added that “there was particularly little justification for the participation of unnamed class members in the fee arbitration because, although the amount of the fee arbitration award was of great concern to Sprint, the award would have had no direct impact on the class members, who would have received the same relief regardless of the results of the arbitration.”

Sprint’s Arguments

But Sprint’s arguments with respect to the fee award—that the benefits to the class were so insubstantial that the fees should have been well below the lodestar amount—do not establish prejudice, Simons said.

The justice explained:

“The prejudice issue in this case is not whether the outcome would have been different had the decision maker considered different evidence, instructions, or argument. Instead, Sprint must show it is reasonably probable the arbitrator would have reached a more favorable conclusion based on the same evidence and argument presented to the trial court. In this context, it is not enough for Sprint to show that a different reasonable decision maker could have rendered a more favorable fee determination. Instead, Sprint must show a likelihood that it was denied a fair and impartial determination of the issue.”

Sprint failed to meet that “onerous” burden, the jurist reasoned, noting that the award was well within the range that Sprint had agreed the arbitrator could award, that the arbitrator might have awarded the costs that the judge disallowed, and that the judge had carefully explained the reasoning behind her decision.

There is, Simons added, a preference for allowing a decision to stand where the issue is one of forum or decisionmaker selection and the aggrieved party did not seek writ review. The justice cited Gann v. Williams Brothers Realty, Inc. (1991) 231 Cal.App.3d 1698, in which the court said the aggrieved party “should not be able to play ‘Heads I win. Tails you lose’ by waiting until after judgment to seek review.”

The case is Cellphone Termination Cases, 10 S.O.S. 8.


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