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Sprint Nextel Facing $1.2 Billion Lawsuit

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Sprint Nextel is facing a class action lawsuit over its early termination fees, which potentially could cost the company as much as USD1.2 billion. Earlier this year, the company lost a USD73 million lawsuit over the early termination fees, but the new lawsuit is seeking to upgrade that to a class action and hence act on behalf of all the company's customers.

The lawsuit alleges that the US$150-$200 fees violated the Federal Communications Act and laws in every state of the country, and says the fees between 1999-2008 amount to around USD1.2 billion.

The lawsuit is being promoted by New York based Scott Bursor, who has a track record in winning class-action lawsuits. In the California case, "we proved that the fees bear no relation to any cost incurred by the company," Bursor said in a statement. "And we proved that the fees were established as an arbitrary penalty to try to prevent dissatisfied customers from leaving," he said in the note. "Now we will prove that the fees violate federal law as well."

However, the Californian decision is only provisional, and it could still rule in favour of Sprint, although that is unlikely.

Last month, the company announced a new termination fee (ETF) policy. Under the new policy, Sprint's ETF of $200 will decrease by $10 increments per month beginning in month six of a wireless customer's contract. Nine months later (the 15th month of the contract), Sprint customers have the lowest pro-rated ETF fee in the industry of $100. What's more, the ETF could drop as low as $50 before a customer's contract term expires.

Rival operator, Verizon Wireless also settled a class-action lawsuit over early termination fees for $21 million in July. Scott Bursor was also involved in that lawsuit.

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