Court Rules Against Gouging by Cell Phone Carriers
July 30th, 2008 | by Tom Harper |A judge has ruled that Ford Motor Company can no longer penalize you for trading in your Ford and buying a Chevy instead. And Safeway can’t make you pay a fine if you go across the street and shop at Albertsons.
Of course those two things never happened. But this is what cell phone companies have been doing for years. And a California judge has finally ruled against this legalized extortion. Sprint Nextel has to refund $18 million to its ex-customers who paid early termination fees. Sprint was also ordered NOT to try collecting $55 million worth of fines from their other ex-customers who refused to bend over and pay the termination fee.
A small step for common sense. Finally. The ruling came from Alameda County Superior Court Judge Bonnie Sabraw. Now that the first domino has fallen, other states will hopefully issue similar decisions.
These early termination fees are just a small part of what Bob Sullivan calls Gotcha Capitalism. Hidden fees and surcharges, booby traps hidden in the fine print on page 87 of a contract — what kind of cesspool have we sunk into? Capitalism used to be about merchants competing with each other to see who could sell the best product at the best price. Now it’s all about who can be the sleaziest douchebag of them all.
If these slippery practices are “capitalism,” then it’s also capitalism when a mechanic doesn’t do any work on your car, but tells you “OK, I rebuilt the carburetor, put in a new U-Joint and replaced all the fluids. That’ll be $1200.”
Sprint and other carriers are trying to get the FCC to come up with a federal mandate. An FCC ruling would override all state laws and invalidate all state court decisions. How convenient.
That’s funny, “States’ Rights!” used to be the conservatives’ favorite slogan. What happened?
29 Responses to “Court Rules Against Gouging by Cell Phone Carriers”
By Craig R. Harmon on Jul 30, 2008 | Reply
The courts used to enforce the terms of contracts in this country. What the hell has happened? What you think is a small step for common sense is actually a big step toward the total dissolution of contract law. I don’t know who to thank for this but I’d like to slap them soundly up side the head. Without contracts and enforcement of the same everything will go to hell.
Anyone who puts their signatures to a contract without reading and understanding it is a moron and gets what they deserve.
Contract law is simple. If it’s in the contract that you signed and you signed the contract freely of your own will, you agreed to fulfill the stated terms of the contract. Period. End of essay.
That’s the way I see it.
As for hidden fees, if it’s on the contract, even on page 87 in the small print, it ain’t hidden. It’s right there in plain sight for everyone to read. Unless the contract is in Swahili and you don’t read Swahili, tough nuggies. You signed it, you’re on the hook.
This needs to be overturned like right now or no business can be conducted. Contractees simply cannot be allowed to get out of the terms that they’ve contracted for unilaterally. If they are, and the courts let them get away with that, there will be no trust. Without trust, there will be no cooperative entering into business dealings.
Have fun in THAT world.
Simple: tell customers to read the contract before signing it.
Next problem…?
By Tom Harper on Jul 30, 2008 | Reply
Craig: There’s the letter of the law and then there’s the spirit of the law. People who refuse to pay a ridiculous “early termination fee” are violating the letter of the law. Companies that charge hidden fees and have hidden clauses buried in the fine print are violating the spirit of the law.
“…there will be no trust. Without trust, there will be no cooperative entering into business dealings.” Gee, we wouldn’t want that to happen now, would we. This isn’t exactly a “trusting” environment we’re in already. Everybody from cell phone carriers to credit card companies to car rental agencies is pulling the same sleazy shit, and the public has had it. These suckerpunch tactics may not be illegal but they’re slippery and unethical.
If you got shortchanged by a mechanic (like I was comparing in the post), wouldn’t you want some sort of action taken? Or would you just blame yourself? “I knew I should have brought so-and-so along with me and had him look under the hood and make sure they really did rebuilt the carburetor and replace the u-joint. My bad.”
But you’re right about one thing. This probably will be overturned. The cell phone lobby will probably instruct their harem (formerly known as “congress”) to pass a federal law that allows these underhanded tactics and deletes all contradicting state laws.
By Craig R. Harmon on Jul 30, 2008 | Reply
Tom,
Not even remotely comparable. If I fail to read a contract I sign, that’s my bad. If my mechanic is negligent or fraudulent, that’s his bad. I don’t know how to repair cars. That’s why I pay a mechanic to do that. I can read. When my mechanic tells me he’s done work he hasn’t done and has billed me for, that’s fraud. When a communications company tells me in a contract that, by signing my name, I am subject to fees and I am negligent by failing to read what is plainly spelled out for anyone who simply bothers to read, that’s not fraud on the communications company’s fault; that’s my fault. There is nothing underhanded about enforcing terms of a signed contract that are plainly spelled out in the contract.
There IS no spirit of the law. There is only letter, spelled out for all to read if they will simply do so. ‘Spirit of the law’ is the refuge of the negligent, those who want special dispensation for what can only be their own negligence or perfidity.
There’s an old and very wise saying. It’s so old it’s in Latin: caveat emptor, which is translated as ‘let the buyer beware’.
By Craig R. Harmon on Jul 31, 2008 | Reply
‘Spirit of the law’ is also the refuge of lawyers seeking big payoffs in court attempting to convince a judge to allow his clients (as many as possible so that he can collect as large a fee as possible for destroying contract law) to get off scott-free after breaking the terms of a contract that they signed, a contract plainly stating the very terms his negligent or perfidious clients now wish to void.
By Craig R. Harmon on Jul 31, 2008 | Reply
Vocabulary glitch in the above. “perfidity” should read “perfidy” = “The act of violating faith or allegiance; violation of a promise or vow, or of trust reposed; faithlessness” - Webster’s Revised Unabridged Dictionary (1913)
By Craig R. Harmon on Jul 31, 2008 | Reply
And yes, this is an environment of trust. If I can get out of terms of my contract, freely entered into, then so can the other party. The ONLY way to have an environment of trust is to hold each party to a contract to those (and only those) terms stated within the contract to apply to each. When one party is allowed to break a contract and a government becomes party to allowing that to occur, there can never again be trust between potential contracting parties. Only by applying terms of contract clearly spelled out and freely entered into can trust be maintained. And no, I don’t think you want to live in a world without even the possibility of enforcing contracts, where courts are complicit in allowing contracting parties to break contract. The whole rule of contracts breaks down. Capitalism requires that parties freely enter into agreements the terms of which they have been informed and into which they freely enter. The only other alternatives are a fascist league between totalitarian government and industry or governmental cooption of private means of production: Socialism properly-called.
That’s how I see it.
By Craig R. Harmon on Jul 31, 2008 | Reply
Put another way, the choice comes down to this: individuals and corporations free to join cooperatively together under contracts freely entered into and judicially upheld or governmental coercion. Your choice.
By Craig R. Harmon on Jul 31, 2008 | Reply
And when we’re talking about judges allowing contractees to break contract absent the actual breaking of laws, it’s not just governmental coercion, it’s ARBITRARY governmental coercion. Good-bye rule of law. When people and corporations cannot predict how courts will rule on laws on the books, rule of law flies out the window and entering into contracts becomes a crap-shoot with an arbitrary judge who is willing to change the rules mid-dice-throw.
By Badtux on Jul 31, 2008 | Reply
I will point out that CELL PHONE COMPANIES ARE GOVERNMENT-GRANTED MONOPOLIES. You cannot open a cell phone company to compete with these monopolist colluders, because only government-sanctioned cell phone companies are allowed to operate.
Contracts work only when you can negotiate contracts because there is competition. Contracts extracted via force or extortion — “yous gonnsa signs our contract, or else, capiche?” — are not valid, and never *HAVE* been valid, except in the demented minds of “free market” advocates who believe that government-sanctioned monopolies are a free market. Unfortunately, until now individuals have been forced to sign these contracts to receive telephone service (and for many of us a land line is *not* a viable option, and with pay phones having gone the way of the dodo, we can’t do the old pager-and-phone-booth thing that we did back in the day), despite the fact that there is no competition and these are government-granted monopolies with no free market and no freedom to negotiate contracts.
In short, government has been forcing people to sign these contracts via granting a monopoly to the cell phone companies, and now is saying “well, now maybe we won’t enforce these contracts”. What government giveth (monopoly), government can taketh away (enforcement of monopoly-enforced collusionary contracs).
By Badtux on Jul 31, 2008 | Reply
Especially hilarious are people who claim that government-granted monopolies can arbitrarily collude and force the EXACT SAME CONTRACT (you can NOT go to any of the major cellular providers and not have to sign the contract) onto people and that this is a “free market”. This is no different from the Mafia holding a knife to your throat and saying, “you will sign this contract giving me your money for the next two years, capiche?”. Contracts extracted via force are worth a bucket of warm shit.
By Badtux on Jul 31, 2008 | Reply
Now, as for contract law, in the old subdivision where I bought a home in Phoenix the original deed required you to sign a contract to enforce the deed restrictions, and amongst the deed restrictions were deed restrictions forbidding the sale of the home to “niggers, indians, and Mexicans”. Yes, that was the actual language. IT IS ESTABLISHED LAW THAT CONTRACT TERMS WHICH VIOLATE THE LAW ARE INVALID AND UNENFORCIBLE. You cannot require me to sign a contract that requires one of us to perform an illegal act. The judge in question determined that collecting the termination fee was an illegal act. It is ESTABLISHED LAW that contract terms calling for committing an illegal act are invalid.
Unless, of course, you’re saying that I should be sued by my neighbors for violating the deed restrictions by selling my house in Phoenix to a Mexican (which I did) and forced to buy the house back and reimburse my neighbors for their expenses in enforcing the deed restriction prohibiting selling to “niggers, indians, and Mexicans”. Are you truly saying that a contract which calls for an illegal act (discrimination against Mexicans) should be enforced by the government?!
By Craig R. Harmon on Jul 31, 2008 | Reply
Badtux,
Then the solution is to get the government out of the business of granting monopolies. Great! De-regulate! Did you work in the Reagan administration?
Of course, there’s always an option. Don’t agree to the contract. Simple. No coercion by anyone. Really, are you sure Badtux isn’t a nom de guerre for F. A. Hayek or Milton or Rose Friedman?
And which laws did the contracts violate? I saw nothing anywhere about violating laws. What I saw was a judge making shit up, hence my characterization of it as arbitrary governmental coercion and a destruction of the rule of law (but, as always, if I’m wrong on that score, I’d love to be corrected). People must know in advance what the rules are so that they can adjust their conduct and business dealings ahead of time. Your home contract may have necessitated that you use such language and that language might have required you to break the law but until I see some evidence that there was a pre-existing law that these contracts violated, I stand by what I’ve said.
But other than that, I agree with you Badtux. Governmental coercion is bad. Always. So let’s get on with demanding that government deregulate private businesses tout de suite, okay?
By Gorbe on Jul 31, 2008 | Reply
The question is if there was a contract. We don’t contract to to business with Safeway or Albertson’s, a contract that might stipulate penalties for shopping elsewhere.
Unless this is some sort of unwritten arrangment, I don’t see how a judge could negate fines that were stipulated in a contract signed by a consumer.
Believe me, I’m no fan of corporations or how they use lawyers to screw average Americans out of billions by writing long, difficult-to-understand contracts. But, as far as I know, contracts are still binding.
By Craig R. Harmon on Jul 31, 2008 | Reply
Gorbe,
A judge can do anything he pleases until an appeals court judge comes along and tells him otherwise.
Part of the problem, from my point of view, is I haven’t found a copy of the actual ruling (if one even exists on the web to be found) and so I don’t know what the judge’s actual argument was. All I have to go on is the CNN report. While that doesn’t mention anything about the contract violating existing statutes, that doesn’t mean that it didn’t. It just means I don’t know.
On that, Badtux is right. A contract to violate the law is a null and void contract. It cannot be upheld. But the judge deciding, sui sponte, that provisions of a lawful and freely entered into contract are, nevertheless, NOW, because he says so, unlawful, that’s where the rule of law breaks down. People must be able to order their lives according to rules that they can know ahead of time. Arbitrary rulings cannot be foreseen and, so, cannot be avoided ahead of time.
I’m all for making contracts that are understandable but difficulty of understanding doesn’t, in my opinion, displace from either party the responsibility for reading and understanding any contract ahead of entering into it.
Here’s the thing, my rule of thumb: if it’s in a contract, especially in small print, you can be sure of two things: one, it’s important that you know and understand what it says because, two, it will come back to bite you on the ass if you don’t do due diligence on one.
By Craig R. Harmon on Jul 31, 2008 | Reply
Oh, and three, one should never depend upon the other party to the contract to explain the contract for you.
By Craig R. Harmon on Jul 31, 2008 | Reply
Signing a contract one has not read makes as much sense and is as risky as legislators voting for bills they haven’t read and presidents signing into law bills they haven’t read.
By Badtux on Jul 31, 2008 | Reply
Craig, where did you get your degree in radio engineering, out of a cracker box? You can’t de-regulate cellular service because of the laws of physics, which laugh at the laws of man. Entities that use the public airwaves are always going to have to be a government-granted monopoly because of the nature of the public airwaves — if two people try transmitting at the same time, all you get is garble. So somebody has to be given a unique license to transmit on a specific channel. There are four channel ranges usable to transmit in any given area for cellular phone purposes. Thus someone has to have a government-granted monopoly in any given area to transmit on those four channel ranges.
As for the rest of your contract talk, when we are talking about a government-granted monopoly all of that is drivel. What government giveth, government can taketh away. Cellular companies don’t *have* to operate under government rules. They shouldn’t have signed the contract to operate under government rules if they didn’t want to abide by it. They always have the option of just not signing the contract. Then they won’t be providing cellular service and will be living under a bridge, of course, but if I don’t have cellular service I won’t have a job and will be living under a bridge so fair is fair, a contract is a contract, right? Right?
By Craig R. Harmon on Jul 31, 2008 | Reply
Badtux,
There is one big difference between the situation you describe with governmentally required identical contracts and the mob. One is always free to refuse to sign a communications company’s contract whereas the mob says, “You either do business with us at the level of business we say or we’ll torch your store, break your legs or off your wife and kids.”
Slight difference there.
It is actually possible to get along in this world without a cell phone.
By Badtux on Jul 31, 2008 | Reply
And BTW, government overrules contracts all the time when it’s in the public interest. Here in California, for example, non-competition clauses in employment contracts (the kind that say that if you leave employer X, you cannot work in any job that’s in the same business area for Y years) have been declared null and void by the state Supreme Court, because a) it is a taking of a fundamental human right (the right to work) which cannot be taken away by human contract, and b) it is contrary to the public interest, which lies in a free and open market for labor that is not hindered by restrictive contracts. Employers hate this ruling. Employees love it. Which is why California every year has 50% of the patents granted in the entire United States — creative people go where employers cannot collude to deprive them of their fundamental human right to work, leaving states where in order to work you basically have to sign a contract that you’re a slave for the next N years.
Let us not forget that contract law exists to serve the public interest, not vice-versa. In fact, my assertion is that today contract law is fundamentally broken. The major issue that has completely destroyed contract law is that entities with a government grant of limited liability (”corporations”) are treated as if they are private individuals with equal consequences for breach of contract. They are not. If a corporation breaches a contract, nobody loses their home to a court judgement. Nobody loses their retirement savings to a court judgement. Nobody loses their car to a court judgement. Nobody loses any more than what they’ve already invested in the business. If a private individual breaches a contract, he can very well lose his home, his transportation, his retirement savings, everything. So when a private individual and a corporation enter into a contract, IT IS ALREADY A FUNDAMENTALLY BROKEN TRANSACTION because the consequences of breach of contract are unequal due to the government grant of limited liability. If the owners of a corporation could lose their home, their car, their retirement savings, everything, when the corporation violated a major contract, then it would be a transaction workable under traditional English contract law, which held that the owners of a business are responsible for the actions of the business. But this is not the case. Government is protecting those owners from the consequences of their business’s action. Government is doing this for a reason — otherwise nobody would buy stock in a business and it would become impossible to operate a modern economy due to lack of liquidity — but the fact remains that GOVERNMENT INVOLVEMENT HAS FUNDAMENTALLY BROKEN CONTRACT LAW BY ENFORCING UNEQUAL CONSEQUENCES.
Lawyers and corporations, of course, are taking advantage of this fact with glee. That doesn’t make existing contract law defensible as anything other than a way for corporations to fleece individuals when we’re talking about contracts between corporations and individuals, though… the corporation has simply been granted too many privileges by government to say that this is in any way a fair and free contract generated via a “meeting of the minds”.
The problem is that everybody who has seen what has happened to contract law over the last 150 years knows it’s fundamentally broken, but it’s fundamentally broken in a way that benefits important people so it never gets fixed except in an ad-hoc way where judges override specific individual contract terms as “not serving the public interest”. Indeed, it’s hard to see how it *can* be fixed as long as there is that government grant of limited liability interfering in contract law by guaranteeing unequal consequences for breach of contract, and it’s hard to see how we could do without that government grant of limited liability since it is the only thing that allows a stock market and thus timely market-based movement of investment monies to where they are needed. In the meantime, we get judges poking their noses in from time to time declaring that given contract clauses are “not in the public interest”. In the case of cellular phone companies, what government giveth, government can taketh away — they’re government-granted monopolies, so oh well. If they don’t want to operate under government rules, they have the choice of handing in their government transmitter licenses, right? In other cases, like the employment contract restrictions in California, it’s a series of ad-hoc rulings attempting to prevent major employers from colluding to deprive employees via contract of a major human right. But they would have never needed to do this in the first place if not for the fact that contract law is currently fundamentally broken.
By Badtux on Jul 31, 2008 | Reply
Craig, before cell phones I could get along with pagers and pay phones. BUT THERE ARE NO LONGER ANY PAY PHONES. My profession requires that people be able to reach me when I’m on call. People can’t reach me, I get fired and live under a bridge.
Your statement was dangerously, dangerously close to “let them eat cake.” In fact, far too much of what you’ve been saying is dangerously close to “let them eat cake.” They killed Marie Antoinette. Just sayin’. “Let them eat cake” is lousy public policy for more than that reason, but that reason alone should be good enough.
By Craig R. Harmon on Jul 31, 2008 | Reply
Okay, I give. I just don’t know what I’m talking about. I’m bowing out.
By Lisa on Jul 31, 2008 | Reply
Get the prepaid wireless phone.
Youd’ think the goevernment would be satisified with the profits they make off a gallon of gas.
By Craig R. Harmon on Jul 31, 2008 | Reply
But I don’t see how a judge invalidating a contract lawfully entered into does anything to fix what you admit to be a broken contracts system. It’s really nothing more than tyranny. That’s what tyranny means. One individual, unaccountable to anyone, on an ad hoc basis, deciding to invalidate contracts in the absence of laws or regulations known in advance by all parties. At least by requiring and upholding contracts lawfully entered into, the rule of law is preserved and we don’t go down The Road to Serfdom.
But as I say, I don’t know what I’m talking about. Interesting conversation. Thanks.
By Craig R. Harmon on Jul 31, 2008 | Reply
In short, if the public good requires at least altering the status quo, fine. Congress should change the law or the governmental agency regulating government established monopolies should change the regulations and, thenceforth, all parties who enter into contracts in the future will know in advance what will be required of each party to the contract and each party will be able to predict what a court will rule should one party breach the contract.
By Badtux on Jul 31, 2008 | Reply
Uhm, judges here in California are appointed by the Governor, who is elected, and are subject to retention elections. It’s called “democracy”, not “tyranny”. You might want to read up on it someday :-).
As for the case of the judge “breaking” a contract term, if that contract term violates another contract (the contract between the State and the cell phone company wherein the State grants the cell phone company the right to use that bandwidth), then that contract term is null and void or else the cell phone company has to give up its right to operate. You cannot void the terms of a prior contract with a different party (the contract between the State and the cell phone provider) by making a second contract with another party altogether.
The question is what exact legal argument the judge made in this case — a legal argument based on the public good (i.e., that the contract term violated a fundamental human right), a legal argument based on California corporation law regulating public utilities (a contract term that violates the law is null and void), or a legal argument based on the cell phone company’s original contract for the bandwidth. But to say that this judge is “acting like a dictator” without that specific knowledge is utter nonsense and drivel, and you know it.
By Dusty on Jul 31, 2008 | Reply
Everyone can piss and moan to their hearts content..but you can bet your ass that Sprint will be taking this baby all the way up the judicial system to the Supremes..which will probably uphold Sprints right to gouge folks that are unhappy with their service for whatever reason.
By Dusty on Jul 31, 2008 | Reply
oh, and I forgot..Great points BadTux!!!
By Craig R. Harmon on Jul 31, 2008 | Reply
Badtux,
As for judges being subject to retention elections, I didn’t know that. But being subject to retention elections doesn’t mean that the judge is upholding the rule of law or not making it up after the fact or even ruling arbitrarily and coercively. The majority may just like the way the judge makes things up and be happy with arbitrary and coercive rulings. It says nothing about the judge upholding the rule of law. Before WWII, progressives LIKED fascism and communism and socialism and wanted that for America. So popular votes are no guarantee that the rule of law is being upheld.
1. I haven’t seen or read anything about this particular contract (between company and customer) breaking any particular provision of the contract between state and the companies or that it ran contrary to any law. While that would invalidate the contract with the customers, I’ve seen nothing about that in the CNN write-up.
2. Surely if the judge had ruled that the contracts with the customer abridged some fundamental human right, that would have been mentioned in news reports, I would think.
3. I don’t see how voiding contract terms that were stated up front and agreed to by both parties advances the public good. As I’ve argued, what advances the public good is all parties to a contract knowing in advanced exactly what is required of each party and the ability to predict how a court would hold when one or another party breaks the terms of the conttract.
It would help to be able to read the ruling, I agree. I can only go by the information I have access to. So okay, in the absence of knowing what argument the judge was relying on, I shouldn’t be suggesting that the ruling is the wrong one.
By Craig R. Harmon on Jul 31, 2008 | Reply
Okay, according to this short AP article, the ruling cited California law which the contracts broke. The Judge rejected the argument that federal law trumps state law. Strange. The order of supremacy of law is: Constitution, federal law, state law, municipal law. So I wonder what theory the judge used to reject that order of supremacy.