Class Action News

Class Members Who Request The Service Would Be Charged For Subsequent Months Of The Service Unless They Cancel It

The Commission has authorized the staff to file a motion for leave to file an amicus brief opposing a proposed class action settlement that preliminarily has been approved in Erikson v. Ameritech Corp., a case currently pending in Illinois state court. According to the plaintiff, Ameritech (acting through other parties) breached contracts with its voice mail subscribers and/or committed consumer fraud in connection with its sale of voice mail services. Ameritech allegedly failed to disclose that some consumers would incur additional costs over and above the monthly service subscription charge. The class action was brought by customers who subscribed to voice mail service and incurred such additional charges in connection with the service. Ameritech has denied all allegations of liability and wrongdoing, asserting that the local usage charges at issue were fully disclosed to voice mail subscribers.

The trial court dismissed the original complaint on February 15, 2001, and the appeal of the dismissal is pending. Under the terms of the proposed settlement, Ameritech would, in the future, be required to make certain disclosures regarding local telephone usage charges on its Web site and in the welcome letter and terms and conditions that it sends to new subscribers. It would also send a one-time notice to customer service representatives reminding them to make disclosures regarding local telephone usage charges to prospective customers who call to ask about or order voice mail service. The settlement would also provide for one free month of Ameritech's Speed-Dial 30 service to all class members who call in, certify that they are class members, and request this product. Class members who request the service would be charged for subsequent months of the service unless they cancel it. In addition, the settlement would require the company to pay class counsel fees of up to $971,000, pending court approval.

In its amicus brief (which is available on the FTC's Web site), the Commission objects to the settlement on the grounds that both the proposed conduct relief and the relief intended to compensate injured class members are inadequate. First, the brief states, the settlement would not require Ameritech to disclose adequately, before prospective customers agree to purchase voice mail service, that they would be charged for local calls associated with their use of the service if the calls are billed on a per-call or per-minute basis. Instead, Ameritech would only be required to provide this disclosure on its Web site and after consumers have agreed to buy the service. Second, the brief contends, the relief intended to compensate injured class members (the free month of Speed-Dial 30 service) is inadequate because it has little or no value and therefore would not fairly, reasonably, or adequately compensate class members who paid additional charges for local calls as a result of Ameritech's alleged conduct.

The brief also questions the means of disclosing information to class members regarding this compensation, and contends that the settlement is flawed because the notice of settlement fails to disclose all of the material terms of the Speed-Dial 30 offer (e.g., the cost of the service and how consumers cancel the service to avoid paying for it after the month of free service ends), and it is unclear the extent to which Ameritech would disclose fully the material terms of the offer when a class member calls to inquire about or order the service. Finally, the brief argues, the flaws in the settlement raise serious questions about the "reasonableness and fairness" of the fees it would provide to attorneys representing class members, and the court should thoroughly and carefully examine the propriety of the attorneys' fees.

Finally, the brief maintains that, whatever the merits of the case against Ameritech, the settlement would be of very dubious value to class members and perhaps even contrary to the interests of class members who fail to opt out of the settlement and as a result will not be able to pursue their individual claims against Ameritech. Thus, the brief states that the FTC staff opposes the settlement even if rejection of the settlement ultimately results in dismissal of the case.

The Commission vote authorizing staff to file the amicus brief was 5-0. Today Illinois, Indiana, Michigan, Ohio, and Wisconsin filed a joint petition to intervene and an objection to the proposed class action settlement. In filing its motion and amicus brief, the FTC coordinated with these five states. (FTC File No. P024209; staff contact is Robert M. Frisby, Bureau of Consumer Protection, 202-326-2098.)

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	Did You Know?
	There are a few criticisims to class action lawsuits. There are several criticisms of class action lawsuits. The preamble to the Class Action Fairness Act stated that class actions harmed class members with legitimate claims and defendants that have acted responsibly; adversely affected interstate commerce; and undermined public respect for the country's judicial system. Class members often receive little or no benefit from class actions.