Ayyad, et al. v. Sprint Spectrum Limited Partnership, et. al.

The Situation

A class action lawsuit was filed in the Superior Court of Alameda, California against all major wireless operators in California in regards to early termination fees (ETFs) that the companies charge if a subscriber terminates a subscriber contract early.

NERA's Role

Experts from NERA's Communications Group were retained by Sprint and Nextel in response to the suit. Affiliated Consultant Dr. William Taylor and Senior Vice President Christian Dippon testified on the economic damages allegedly inflicted on California consumers by the ETFs and on Sprint by the early terminations.

NERA concluded that the damages to Sprint and Nextel caused by subscribers who terminated their contracts early far outweighed the ETFs charged and collected by Sprint and Nextel. The NERA team also demonstrated that subscribers typically incur an ETF due to non-payment and that Sprint collected very few of these fees from default customers.

The Preliminary Result
After a month-long trial, the California jury ruled on 12 June 2008 that the ETFs were not excessive and, consistent with the NERA experts' testimony, found that the fees were a fair reflection of Sprint's damages when customers terminate their contracts early. The jury determined that, while Sprint customers paid $73.8 million in ETFs, the breaches of contract caused losses to the company in the amount of $225.7 million. The presiding judge, the Honorable Bonnie Sabraw, filed a tentative opinion that largely nullified the jury's decision.

The Final Decision
On 4 December 2008, Judge Sabraw entered a final judgment, which found that the class was entitled to recover the $73.8 million in ETFs that was paid to Sprint but not any other amount in question. The Court prevented Sprint from trying to collect unpaid flat ETFs and required the company to provide this information to third party owners of Sprint's accounts receivables that might include ETFs.

In addition, the Court found in favor of Sprint's cross-claim against the class for breach of contract. The judgment, which quoted NERA's experts extensively throughout and relied on numbers generated by NERA's economists, found that Sprint's actual damages caused by the termination of the class members' contracts were $225.7 million. This amount was set off by the class's monetary recovery of $73.8 million, resulting in a net recovery for Sprint of $151.2 million. This amount was then reduced to zero based on Sprint's prior statement that it will not seek an affirmative recovery from the class.