AT&T settles cramming lawsuit

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Case in Point

February 5, 2013

AT&T settles cramming lawsuit 

The class of AT&T customers—who were charged for services they did not order—alleged RICO violations, unreasonable communication fees, breach of contract, tortious interference with a contract, breach of trust, and violations of California utilities and business codes. Nwabueze v. AT&T Inc.

AT&T, Inc., had a billing system that allowed third-party service providers—such as automobile clubs and credit repair companies—to attach their charges to AT&T customers’ landline phone bills. The third-party companies sent the charges to billing aggregators, which forwarded them to AT&T. The aggregators and the phone company received a portion of the service company’s profits. The only information a service provider or billing aggregator needed to charge the customer was a phone number. AT&T did not require any verification that the customer actually ordered the service.

Many AT&T customers fell victim to “cramming,” in which they were charged for services they did not order. Because the charges can be minimal and are usually billed under generic terms like “voice mail” and “web services,” consumers often didn’t realize they had been crammed, and when they did notice the charges, it was hard to get a refund. The Federal Communications Commission and several states began investigating AT&T and other telecommunications companies.

Joy Nwabueze was twice charged $12.95 by Voicemail Club, Inc., for voicemail services she didn’t order. AT&T refused to give her a full refund.

Nwabueze filed a class action against AT&T and several subsidiaries, alleging RICO violations, unreasonable communication fees, breach of contract, tortious interference with a contract, breach of trust, and violations of California utilities and business codes.

AT&T eliminated third-party billing in September 2012. It subsequently agreed to provide class members who are current customers with a billing credit for any unauthorized third-party charges. Former customers will be reimbursed in full for unauthorized charges. The court has preliminarily approved the settlement.

Citation: Nwabueze v. AT&T Inc., No. 3:09-cv-01529 (N.D. Cal. Jan. 16, 2013).

Plaintiff lead counsel: AAJ member John G. Jacobs, Bryan G. Kolton, and David Schachman, all of Chicago; and Jeffrey F. Keller, San Francisco.


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