USA - "fees" on telephone bills

Appeals court reinstates claims vs AT&T unit

A California appeals court on Thursday reinstated a class action lawsuit against AT&T Inc's Cingular Wireless, brought by consumers who said the mobile carrier had illegally passed a state business tax on to them.

The case is the second in recent weeks to address the issue of what constitutes a wireless "rate," governed by the Federal Communications Commission, and what is a "fee" and whether fees can be regulated by the states.

Consumer advocates who intervened in the case described it as a "shot across the bow" of wireless carriers which they accused of charging improper fees, and a "slap in the face" to regulators who failed to prevent it.

"The FCC and state regulators sat on their hands and let them get away with it and finally ordinary people took matters into their own hands ... and they won," said Regina Costa, telecommunications researcher for The Utility Reform Network.

Cingular is now fully owned by AT&T (T.N) and operates under that brand.

AT&T spokesman Marty Richter said the company has "not yet had an opportunity to study the opinion, but we believe we have a strong case and will continue a vigorous defense."

The decision is the second significant court loss over billing issues for the wireless industry. A state court in Alameda County, California ruled last month that early termination fees violate state law in a class action lawsuit against Sprint Nextel Corp (S.N).

In the Cingular case, the Ninth U.S. Circuit Court of Appeals disagreed with the federal trial judge in Seattle who dismissed the consumers' claims on the grounds that the Federal Communications Act prohibits some state law claims against mobile phone carriers.

The appeals panel ordered the trial court to determine whether it has jurisdiction over the lawsuit, which alleges breach of contract, unjust enrichment, and violation of Washington's Consumer Protection Act.

Plaintiff Jared Peck, a former Cingular Wireless employee, sued the carrier in 2006 after finding that his bill for wireless service included a 31 cent charge for Washington's Business & Occupation tax.

The state Supreme Court has ruled that businesses may pass on the charge to customers, but only if disclosed and negotiated in the final price of the goods or services.

Companies may not add the charge as one of several fees and taxes after the purchase price was agreed upon, the high court said.

The appeals court found, however, that the Cingular surcharge had not been disclosed in its contract.

In addition to The Wireless Association, The Utility Reform Network, and the National Association of State Utility Consumer Advocates also intervened in the case.