Tele-Communications Inc. dodged a potential $50 million
class-action judgment when a Chancery Court judge in Chicago ruled last week that the
plaintiffs had not proven that the company's $5 late fee was excessive.
The class action included every TCI customer in Illinois
who had paid a late fee in the last 10 years.
Judge Aaron Jaffe of the Illinois Circuit Chancery Court
granted the defense's motion to dismiss the suit after the subscribers' lawyer,
Phil Friedman, had presented 16 days of evidence for the consumers' claim.
TCI attorneys argued that late fees can't be judged by
the last customer subjected to them. Rather, all customers must bear a share of all costs
(data warehousing, outbound collections calls, multiple mailings) related to collections.
In court, Rick Werber, attorney for TCI, drew a parallel to
the airline industry. The last passenger to run up to the jet before it takes off
can't offer to pay a few dollars for extra fuel and the peanuts he eats. As do the
rest of the passengers, he has to pay his share of the cost of buying and staffing the
plane, renting gates and so on.
"I think the judge related to that," said Werber.
The attorney was especially pleased with the verdict since
Friedman and the expert witnesses he called were the same group that had achieved
victories and large judgments in Baltimore and Washington, D.C.
Friedman, however, said he will immediately appeal.
"I'm a bit shocked," he said. The issue will
really be decided at the appellate court level, he predicted.
For instance, the Baltimore case -- in which a jury found
that TCI's late fees are excessive and ordered a $7 million rebate -- has been argued
before the Maryland Court of Appeals. Friedman believes the lower court's ruling will
be upheld.
Another Illinois suit, against Multimedia Cablevision Corp.
in Kings County, was settled. Under the terms of the settlement, Friedman can't
disclose the terms, he said.
The state's cable operators were ebullient over the
judge's ruling.
"We always knew this was a valid business
practice," said Gary Maher, president of the Cable Television and Communications
Association of Illinois. "These suits are driven by lawyers out to make a fast
buck."
The CTC tried to head off further late-fee suits last year
with a bill that would set a statewide, legally recognized standard for late fees.
However, the bill was buried in a bill on waste water, leading critics to charge the cable
lobby with trying to sneak the legislation in through the back door. Even though the
tactic is legal, it embarrassed state representatives, who were forced to admit they
hadn't read the bill they supported. The issue never went to the Senate.
The day of the judge's dismissal "was one of the
better days of my life," Maher said. "The situation has been a nightmare, and
these suits are a joke."
Late fees TCI charges throughout the state should remain
about $5, except for Chicago. There, both TCI and Prime Cable agreed, as a term of their
franchise renewals, to charge no more than $1.50 for an initial late fee. However, if the
amount goes uncollected for 17 days, the operators are released to charge a higher
"reasonable amount."
