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Sprint Loses Early Termination Fee Case, May Pay $73 Million

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NEW YORK (Dow Jones) Sprint Nextel was dealt a major blow in its early termination fee case when a California judge ruled it would have to pay $73 million.

The decision could bode poorly for the various trials that are taking place throughout the country, as well as the Federal Communications Commission's attempts to make wireless carriers exempt from these state court cases.

"This ruling sounds the death knell for the industry's petition seeking a preemption ruling from the FCC - a ruling the industry has never been able to win in court," said Scott Bursor, an attorney representing the plaintiffs.

Early termination fees are incurred when a customer breaks their wireless contract before it ends, and is an issue debated in state courts and with Federal Communications Commission.

Consumer advocacy groups argue that it unfairly restricts consumers from switching service. Carriers argue that the fees are a necessary because they subsidize a part of the cellphone and need to recoup those expenses. But most carriers have already changed their early termination fees to be more flexible.

The ruling has Sprint paying its former customers roughly $73 million in refunds.

Bursor was quick to declare victory.

"Now that the ruling is in, the outcome is clear," he said. "We won this trial. And Sprint lost. Convincingly."

Sprint, however, doesn't believe the case is over.

"We're reviewing the ruling," said Matthew Sullivan, a spokesman for Sprint. "We will have an opportunity to respond."

The judge's ruling is tentative, he said. Sprint has roughly two weeks to come up with a response, and Judge Bonnie Sabraw of the Alameda County, Calif., Superior Court will make a final decision.

Sullivan declined to comment on how the ruling would affect the various other state cases or the FCC decision.

"We're just focusing on the California case," he said.

Signaling the decision, Verizon Wireless earlier this month agreed to settle all of its lawsuits over early termination fees for $21 million, avoiding a drawn-out legal dispute.

"This suit was a distraction," said spokesman James Gerace at the time. "This was a quick way to resolve it."

AT&T also faces similar lawsuits over early termination fees.

Sprint recently traded at $8.44, down 2 cents, early Tuesday.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

(END) Dow Jones Newswires

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