Categories
Legal, Laws, and Regs

Monetary damages and cellphone contracts

Recovered from the Wayback Machine.

AKMA writes on a situation too many people still face: unreasonably long cellphone contracts and outrageous termination fees. I wrote of my own experiences with cellphone termination fees last year. After reading AKMA’s post, I thought now would be a good time to provide an update to the story.

First, I paid the outrageous early termination fee bill. Regardless of whatever action I would or would not take, not paying this bill puts the account into collections and that way lies a whole other nightmare. If you don’t pay the fee, you’ll get a late payment mark in your credit report, and the cellphone companies almost immediately turn the account over for collection.

Once in collection, you’ll be hounded day and night, as mystery charges get tacked on until the final bill is so bloated, it’s like a minnow has suddenly been transformed into a whale. You’ll also most likely get sued–unpaid cellphone bills account for a significant proportion of the collection law suits filed in state courts–which gives the collection company and/or the cellphone company the edge, legally. So, not paying the fee was not an option.

I then went to town, researching the laws surrounding cellphone termination fees, how to file a small claim case in Missouri, as well as people’s experiences with termination fees (usually detailed in weblogs or forums). It was when reading through weblogs that I discovered an interesting fact.

Did you know that in many states, you can’t be charged a termination fee above and beyond the actual monetary damages suffered by the party with whom you’re terminating said contract? Even if the contract includes a clause that specifies a given amount to terminate the contract early, that amount has to bear some relationship to actual, real damages suffered by the other party.

In contract law, a provision specifying termination damages is called a liquidated damages provision. The purpose of such a provision is to state what damages would be in cases where actual damages might be difficult to assess. However, when challenged the entity behind the contract must be able to defend such a provision, either by demonstrating the difficulty or impossibility of proving such damages, or by demonstrating that the charge closely matches the actual damages suffered. From the FreeAdvice site:

Sometimes business contracts contain a “liquidated damages” provision, providing for payment of a certain fixed amount in the event of a breach. These provisions typically are upheld if the actual damages would have been extremely difficult to ascertain and the amount of the liquidated damages is reasonable. Courts generally do not enforce liquidated damages that are intended to serve as a penalty or are far in excess of the amount of damages the parties may reasonably forecast.

In all my personal investigations into consumer law, one thing I’ve discovered over the years is that contracts are not ironclad or immutable. In other words, a company can write a contract and you can sign it, but that doesn’t mean the contract or any part of it is enforceable, or that you’re forced to comply with the provisions without any other recourse.

A great disservice has been done to the American people in the last hundred or so years. We have been brought up to believe that contracts are law, as well as acts of honor, a belief reinforced by companies such as Verizon and Sprint. After all, one only has to call customer service of either of the aforementioned company to hear how the how enforceable is the company’s contract, how defenseless we are to debate or quibble with any part of it.

However, it is up to the courts to truly determine the enforceability of the contracts (a right, I want to add, which companies have been attempting to erode by adding arbitration clauses). If a contract or any part of it is not enforceable, and we research our case and come to court prepared, the courts are just as likely to side with us as the companies.

As for the indoctrinated sense of “honor” when it comes to contracts, tell me how honorable is it to charge a $500.00 fee for two cellphones, 3 and 8 years old, and failing? Or to arbitrarily change contract terms? Or force a renewal of a contract, just because you want a cellphone that works? To corporations, there is no honor in contracts, only corporate benefit and enforceability.

I digress. Returning to the concept of “liquidated damages”, the reason that cellphone companies ostensibly give for the cellphone termination fee is that the cellphone company is subsidizing the cost of the equipment, i.e. the cellphones. However, as the current spate of class action lawsuits against most cellphone providers are stating, if this is true then the termination fee should prorate, reflecting the prorated value of the equipment so provided, over time.

It is ludicrous to assume that the monetary costs to the cellphone company based on them giving you a cellphone would suddenly accrue the last month you have your contract. No, the value of the equipment, and their investment in it, would depreciate over time. The termination fee should reflect this depreciation.

(Perhaps what I should have done is offer Sprint $1.83 to cover any perceived value for two cellphones. I imagine this would be more than adequate to cover any income derived from scrapping both phones.)

Armed with anecdotal accounts and actual examination of Missouri state law, I was ready to take my case against Sprint to Small Claims court. First, though, I did a look up using Missouri’s own Case Net to see how successful people were against Sprint. Lo and behold, I found that everyone who had filed against Sprint–and there weren’t many–had won a default judgement. Why? Because it costs Sprint more to defend against the case in small claims court than to just pay the judgement.

Now, I imagine that buried in all of the agreements Sprint had sent out over the years was a clause insisting on the use of arbitration rather than the courts if people like you and me want to sue the company. However, there’s another fact about arbitration that comes into play with companies like Sprint: if I initiate a suit in small claims court, Sprint would have to send in a lawyer and file a response to have the case removed to arbitration. Then, Sprint and I would go, back and forth, about arbitration law and applicability–not to mention whether Sprint’s arbitration clause was conscionable (equally fair) and so on–until the courts either sided with me, or with Sprint.

While all this back and forth is going on, Sprint is paying for the services of a lawyer who would probably charge in the first two hours the same amount as my claim–and I can guarantee taking up more than two hours. Just because the Supreme Court has bent over backwards to kiss corporate butt in favor of arbitration doesn’t mean we have to roll over and play dead. There are arguments and defenses one can make against arbitration. Nor, since the suit originated in small claims court and according to Missouri law, can I be forced to pay the lawyer’s fees even if I lose the case. I would only lose the filing fee: $35.00.

In fact, it is the cost of the attorney as compared to the possible value of an award that leads many companies, and most likely Sprint, too, to *add a provision to their arbitration clauses that would allow small claims actions. Telecommunication, manufacturing, and most other companies outside of the finance industry add arbitration clauses to prevent class action lawsuits, not “nickel and dime” small claims cases like mine. Well, not nickel and dime to me, definitely nickel and dime to Sprint.

With all this in mind, I decided I would give Sprint another chance before going to court. I submitted a claim to the Better Business Bureau, detailing not only the problem, but also the course I would be forced to take if resolution could not be satisfied via intervention by the BBB. The important aspect of all of this is that the course I would take was one I would follow. I was not bluffing, and it was important to communicate the sincerity of my intent.

Sprint did respond just before the BBB deadline, denying my claim. The BBB asked if I would be willing to compromise. I responded back that at one point in time I was willing to compromise but Sprint was unwilling. Now, there would be no compromise: I wanted a refund of the entire termination fee and state and local taxes or I would have no recourse but to take this to court.

This week I received a check from Sprint for a full refund. I’d like to think that the reason I got the check is that Sprint is beginning to realize that it would be a more successful company working with customers, rather than “trapping” us into untenable contracts enforced with unreasonable fees. Verizon was the first cellphone company to make this determination, prorating termination fees based on how far into the contract the customer is. Other companies have followed suit, including Sprint, though its prorate program came after my termination.

I’d like to think the company saw the light, but I don’t think Sprint, or any of the cellphone companies, is there yet. Until they are, challenging the contract terms and termination fees via the BBB and small claims court, though not the ideal path, did work, at least in this instance.

I’m not advising AKMA to take the same course I did. I won’t give out legal advice, as I’m not a lawyer and I’m not qualified. Hopefully though, AKMA and others with similar cellphone termination fee problems will discover some ideas in regards to their own situations from this recounting.

*I found a copy of the most recent Sprint agreement. It does allow for small claims court cases.

Categories
Legal, Laws, and Regs

Senator McCaskill supports Arbitration Fairness Act of 2007

I’m a happy camper. I just received an email from Senator McCaskill’s office that the good Senator is supporting the Arbitration Fairness Act of 2007. I know my House Rep, Carnahan is on board. Now, I have to decide if I want to beard our state’s Republican senator, Kit Bond, on the issue.

Something about pigs flying, or hell freezing over, or something like that.

Categories
Legal, Laws, and Regs

Arbitration fairness and rape

updated See CL & P Blog for in-depth update on the hearings for arbitration fairness.

Congress had another subcommittee hearing on the Arbitration Fairness Act. The Consumerist live blogged the hearing, accompanied by the expected pithy comments. Senator Brownback kept harping on the Kansas Fence Law.

HomeOwners for Better Building publishes an opinion piece by Susan Antilla from Bloomberg, which had some very interesting information.

When Theodore Eisenberg of Cornell Law School and Geoffrey Miller of New York University School of Law studied the arbitration policies of 2,800 public companies during 2002, they found that companies were using arbitration for 37 percent of their employment contracts, but weren’t so keen on arbitration when it came to business-against-business fights between “sophisticated actors.” In all, 11 percent used binding arbitration for some contracts.

It was surprising that companies would assert that they liked arbitration’s low cost and simplicity, they wrote, yet opt for the courts when they were in disputes with other businesses.

Feingold suggested a possible reason at yesterday’s hearings, calling arbitration an “unaccountable” system where the law doesn’t necessarily apply.

Consumer crusaders echoed Eppenstein’s assertions at the Senate hearing. They are fighting powerful forces, though. The newly formed Coalition to Preserve Arbitration already has submitted testimony applauding the virtues of arbitration to both houses of Congress.

Mandatory arbitration doesn’t deprive anyone’s rights, the group said in testimony, reflecting the opinion of 19 coalition members including Sifma, the U.S. Chamber of Commerce, the American Health Care Association and T-Mobile USA.

When it’s their turn to sue, though, you rarely find corporate heavyweights racing to arbitration. The grade schooler might ponder this question after learning about those branches of government: If arbitration works so well, why don’t corporations use it when they have a complaint?

So, when corporations want to sue other businesses of equal or greater economic strength, they rush to the court systems, rather than choose arbitration. Huh, how about that. Makes you wonder about their motivations when they want to force arbitration on their customers/employees.

The Hill writes that all this legislation is part of a string of similar legislation occurring now, because of the Democrats and the American Association of Justice–that’s the trial lawyer association–finds the climate more positive to put forth their their unreasonable demands. What are some of these demands? Requiring drug makers to add safety information to drug labels and forcing courts to release vital safety and health information from court cases where the transcripts are sealed–the lousy bastards.

The Pro-mandatory arbitration group, especially National Arbitration Forum–My nominee for biggest corporate scum on earth is now trying a different tactic, since the ‘fairness’ of the arbitration process has been, more or less, blasted out of the waters. Now they’re saying if mandatory arbitration is abolished, the court systems would be overwhelmed by cases.

First, arbitration not only requires the court system, it can require it twice: once to enforce a mandatory arbitration agreement that is disputed, and the second time to uphold an arbitration decision. In fact in these cases, the results are more likely to go up through the chain of appeals than typical civil cases. They’ve been in the Supreme Court several times. So, eliminating mandatory arbitration agreements and returning arbitration to its voluntary status will, most likely, decrease the burden on the court system, rather than burden it. And hey! If arbitration is so great, people will volunteer for this alternative, right?

The biggest news on the mandatory arbitration front last week, though, was the story of Jamie Leigh Jones.

Jamie Leigh Jones was a contractor hired by Halliburton/KBR for work in Iraq. Not long after arriving in Iraq, she was brutally raped and held against her will by KBR employees–kept in a shipping container and told if she didn’t keep quiet, she’d never get a job in Iraq or back home. The only reason she escaped is one of the KBR employees guarding her lent her his cellphone, and she called her Dad. Her Dad, in turn, called his Congressional representative, Representative Ted Poe, a Republican from Texas. Poe got the State Department to go over and rescue her.

That was two years ago. Why no criminal charges? For one, the Congressional bill giving immunity to contractors in Iraq would have prevented such justice.

Legal experts say Jones’ alleged assailants will likely never face a judge and jury, due to an enormous loophole that has effectively left contractors in Iraq beyond the reach of United States law.

“It’s very troubling,” said Dean John Hutson of the Franklin Pierce Law Center. “The way the law presently stands, I would say that they don’t have, at least in the criminal system, the opportunity for justice.”

In addition, neither the Justice department nor the State department investigated the crime. Why? Because it was left in the hands of KBR to investigate the crime. The company who has shown itself to be so fair to women. The same organization that promptly ‘lost’ the rape kit collected after Ms. Jones was rescued, and who has, since, not done a thing about the crimes against this young woman.

In a statement, KBR said it was “instructed to cease” its own investigation by U.S. government authorities “because they were assuming sole responsibility for the criminal investigations.”

Halliburton has since divested itself of KBR and says it shouldn’t be named in the suit. Na ah, Halli, you were involved at the time of the crime. Since Halliburton/KBR weren’t interested in punishing those who perpetuated this crime, Ms. Jones sought the only justice she could: in civil courts. But guess what?

Since no criminal charges have been filed, the only other option, according to Hutson, is the civil system, which is the approach that Jones is trying now. But Jones’ former employer doesn’t want this case to see the inside of a civil courtroom.

KBR has moved for Jones’ claim to be heard in private arbitration, instead of a public courtroom. It says her employment contract requires it.

In arbitration, there is no public record nor transcript of the proceedings, meaning that Jones’ claims would not be heard before a judge and jury. Rather, a private arbitrator would decide Jones’ case. In recent testimony before Congress, employment lawyer Cathy Ventrell-Monsees said that Halliburton won more than 80 percent of arbitration proceedings brought against it.

NAF has company for scummiest corporation on earth.

The Daily Kos is running a campaign to get people to contact their congressional representatives and urge them to support the Arbitration Fairness Act. Right now, 60 congressional delegates have signed on as co-sponsors but the battle is far from over. The heaviest corporate hitters are turning their might to defeat this bill.

There has never been another act in Congress that so divides Corporate America from Citizen America. There has never been another act that can return justice to more people than this act. People like Jamie Leigh Jones. People like you and me.

Categories
Copyright

Den of thieves

Recovered from the Wayback Machine.

Susan Mernit has a quote from professional photographer, Lane Hartwell, about setting her Flickr stream to private because of image theft.

What spurred this on was the popular Web 2.0 Bubble video, which I also linked, and which didn’t credit any of the people whose work it used. Hartwell wrote:

Matt Hempey, the creator of the video, saw fit to give Billy Joel credit for his song, and saw fit to give himself and his group, the Richter Scales credit but failed to contact me and ask my permission to license this photo, which is marked all rights reserved. I was not credited, and there also are no photo credits for any other images that appear in the video.

Today, Wired has an article on Lane Hartwell, where she states:

“I wasn’t upset by the video itself,” Hartwell said, but the brief flash of her photograph — without compensation or credit — still rankled. “I thought, ‘Where does somebody just get the right to take this?’”

Hartwell had her lawyer issue a takedown notice to YouTube. Mathew Ingram believes that Ms. Hartwell, and her lawyer, are in the wrong when it comes to copyright:

In any case, I think Ms. Hartwell needs to remember one thing: copyright law wasn’t designed to give artists or content creators a blunt instrument with which to bash anyone and everyone who uses their work in any form, for any reason. The copyright owner’s views do not trump everything, and never have. A split second view of your photo in a parody video doesn’t — or at least shouldn’t — qualify as infringing use. Period.

A question to the lawyers: does use of a work without giving credit violate copyright law? I would assume it would, though from this page not giving credit is considered plagiarism, but not necessarily a copyright violation.

ValleyWag had an earlier writing on this, and still includes a viable link to the video. In the post, Owen Thomas writes:

I’m not a lawyer, but I’ve heard plenty of lawyers say that fair use is a murky and difficult area of copyright law. The role of photo credits in copyright law is likewise not entirely clear to me. Giving credit where credit’s due simply strikes me as the polite thing to do. And surely not that difficult.

I suspect that the members of Richter Scales were simply lazy. The photo Hartwell took of me is the first search result for me in Google Images. It’s not particularly apt, either; I was working at Business 2.0 when she photographed me.

Thomas also goes on to quote YouTube’s Terms of use, and one thing it restricts is the use of photos in slideshows without getting permission, first.

Regardless, not giving credit should be heavily discouraged, rather than applauded. The Richter Scales group did this video not for the common good, but as a way of generating attention and publicity. How, then, can they assume that the creators of the photos used in the work wouldn’t also feel the same way about their work, contained within the video?

Is it a case, then, that I can go out and grab posts from Mathew Ingram and other writers, and use these to create weblog posts, without giving credit or linking the originals, call the total a ‘parody’, or better yet, ‘art’, and Mathew would not see any harm in such? After all, I meet his interpretation of fair use: I’m using published work, parts of the whole (the whole being the entire weblog), using in a post, which will eventually fall off the main page, and I can’t see how this would hurt Mathew commercially. I mean, does he sell his posts–five for a dime?

Tom Stachowitz writes:

This woman is a professional photographer and if someone wants to use an image of hers – even if it’s for something completely noncommercial – she deserves to be respected. How can anyone reasonably assume that you can just go out and take whatever piece of creative content you like without paying for it or even making a note of where it comes from? Worse, how can people defend the practice?

To me, the payment wasn’t as much of an issue as using the work without giving credit. I imagine that if the Richter Scales group had dropped Hartwell an email, told her about the project, and promised to give credit–and then gave it–Hartwell most likely would have given them permission. But they assumed and took and basked in the glory that they received for their work, without once giving a nod to the creators of the photos. They took, they did not pass on.

TechWag did mention that the heart of this problem could be not that her photos are online, but where they’re located: Flickr. People have taken to using Flickr like fisherman take to lakes stocked with fish. Flickr has tried to limit this by putting up a DIV element covering the photo so it can’t be right click copied. To copy the photos now, you have to deliberately look for the photo in the page and access it directly to bypass this barrier. This goes beyond “Oops, I thought it was OK to copy”.

I get requests, about every week or two, typically from naturalists sites or organizations to use bird or insect photos. I’ve never said no, and have generally given the sites free run to use any of my photos, as long as they give me photo credit. Asking for photo credit does not inhibit their use of the pictures.

I’ve now posted a photo use policy in the menu, which means such sites don’t specifically have to ask permission, first–if the use is not for profit. One thing that hasn’t changed, though, is asking that I be given photo credit.

If we get to the point where we assume all photos online are ours for the taking, without giving credit, rather than advance the state of art, we may inhibit it, as more photographers choose either not to put their works online for viewing–or choose to put them behind privacy barriers. Worse, if we get to the point where it’s “OK” to take pictures, or writing, or code, or anything of this nature without giving credit, we’ve become nothing more than a den of thieves.

update

In comments to Mathew Ingram’s post, Michael Arrington writes:

Shelley, Lane’s attorney is abusing the DMCA for his/her own goals. And copyright has nothing to do with “giving credit.” It has to do with being forced to license work unless it falls under fair use, which this clearly does.

Mathew is right, you are wrong. But since Lane is a woman, it really doesn’t matter what she did as far as you are concerned. She’s a woman, so she’s right.

One could also turn that around back to Mr. Arrington: since it was a ‘woman’ photographer who issued the takedown against a ‘man’ video creator, according to Mr. Arrington, Hempsey is automatically right while Hartman’s automatically wrong.

Taking this one step further: I, a woman, disagree with Mathew, a man, while siding with another woman. And therefore, according to Arrington’s logic, that makes me doubly wrong.

Second update

bub.blicio.us has a more detailed look at the issue, both as an amateur photographer and friend to Hartwell, as well as links to several sites with comments.

Third update

Excellent coverage of commentary at Wired including a comment from Terry Gross, the IP lawyer that Hartwell hired.

Fourth

Lane Hartwell’s post on this issue.

Categories
Legal, Laws, and Regs

Fight is on for fair arbitration

The fight has started for fair arbitration. TortDeform has an extensive write-up on the second day of hearings associated with the Arbitration Fairness Act of 2007. I’m familiar with all of the cases mentioned in the testimony, and they just barely demonstrate how far reaching the problems of binding mandatory arbitration agreements are.

I noticed that the National Arbitration Forum was not asked to testify. I rather expected them to roll out Mary Pawlenty, wife of current Minnesota governor Tim Pawlenty and, I thought, NAF’s General Counsel, to testify. What I missed earlier in the year was Ms. Pawlenty stayed with NAF less than a month. I’m not surprised she left. One peek into the workings of NAF was more than enough to send her running.

Yet this is the same company one of Utah’s Congressional representatives, Chris Cannon would like to have adjudicate many of our employee civil rights, and consumer law civil cases. If I were a resident of Utah, I would take a closer look at Representative Cannon’s campaign contributors.

Deborah Williams, a Maryland woman (and another lifelong Republican) who, along with her partner Richard Welshan, had a franchise with the Coffee Beanery, which cheated her in a variety of ways. Despite a finding by the Maryland Attorney General that the Coffee Beanery committed fraud, she was forced by the American Arbitration Association to arbitrate her claims in Michigan (500 miles from her home), spent more than $100,000 on arbitration fees to the AAA. For all of her pains, the arbitrator disagreed with the Maryland Attorney General and entered a large award against her. The arbitrator also entered a “loser pays” attorneys’ fee award against her, requiring Ms. Williams and her partner to pay the Coffee Beanery’s attorneys’ fees. In the low point of the hearing, Rep. Cannon essentially tried to get Ms. Williams to agree that all of her problems were her fault for not researching the Coffee Beanery on the internet and discovering in advance that they were defrauding people. Ms. Williams described the various steps that she had taken to do due diligence about the Coffee Beanery prior to becoming a franchisee, but Rep. Cannon persisted in trying to get her to say that her problems were all her own fault.

However, this is not a Democrat versus Republican issue. There are Republicans who are also appalled at the abuses resulting from mandatory arbitration clauses.

The evidence against mandatory arbitration agreements is overwhelming, but I’m still concerned. There’s a lot of money being spent to fight the Arbitration Fairness Act. A lot. It disturbs me to realize that the money is being spread around to the Democrats, as well as the Republicans. In fact, Hilary Clinton is the second highest recipient of financial institution campaign contributions, which has really led to me to question her candidacy. At one point, I was ready to vote for her. Now, I’m not.

What’s more difficult, though, is getting people to become interested enough in the issue of fair arbitration to contact their congressional representative and encourage support for this bill. If it doesn’t bleed, blow up, blow over, or burn, America doesn’t care.

update Mandatory binding arbitration kills grandparents.