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AT&T to impose $175 early iPhone cancelation fee - Page 2

post #41 of 117
TMobile is $200 bucks for each line... I'm in middle of 2-yr contract.
post #42 of 117
the more I'm reading about SIM cards I also think they might through some "custom" SIM our way... meaning that the physical shape of the card will only work with those issued by AT&T.

low tech solution to a high tech problem.
post #43 of 117
Quote:
Originally Posted by Neruda View Post

What states could those be? Please get back with an answer after you do some research.

Just a speculation, states have some pretty weird laws on the books. Montana comes to mind, however I'm not pressing the point. $175 is way better than being on the hook for the whole thing.

m

Life is too short to drink bad coffee.

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Life is too short to drink bad coffee.

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post #44 of 117
Quote:
Originally Posted by Neruda View Post

A contract is a contract. If you sign it, even if it is a contract of adhesion or you don't read it, you are bound by its terms. If you don't like the terms, don't sign/buy the phone. Caveat emptor.

Very good advice.
post #45 of 117
Quote:
Originally Posted by SMN View Post

Putting aside whether this would be a good or bad policy, it's not how the law works in any jurisdiction in the U.S. that I'm aware of.

Really? Then you should be able to provide ample, specific examples rather than generalizations. Please name the jurisdictions and provide the appropriate case law.

Quote:
Originally Posted by SMN View Post

The $175 cancellation fee is a liquidated damages clause which, since it isn't justified here by a subsidy on the phone, runs a very substantial chance of being deemed an unenforceable penalty clause

The validity of this depends on whether the cancellation fee is a liquidated damages clause that is tied to the price of the phone. First, the fee could be imposed for simply breaching the contract, period. The contract itself could provide for such a fee regardless of whether or not the fee is justified because the phone is not being subsidized. These are some of the policy questions you alluded to. Second, the fee could be for breaking the two year service contract, not to recoup costs from any phone subsidy.

Quote:
Originally Posted by SMN View Post

(As far as contracts of adhesion go, you're quite wrong on that as well - they get less judicial deference almost everywhere, but the specifics of how that works is a hotly contested issue in the law right now - but here that will just be subsumed as one of the several factors in the liquidated damages analysis.)

Less juducial deferrance does not make contracts of adhesion unenforceable. How how am I quite wrong exactly? Contracts of adhesion are enforceable and are a necessity in a capitalist society (policy argument). Read Carnival Cruise Lines. If a jurisdiction clause on the back of a cruise ship ticket is enforceable, why wouldn't this fee be?
post #46 of 117
Quote:
Originally Posted by Neruda View Post

Really? Then you should be able to provide ample, specific examples rather than generalizations. Please name the jurisdictions and provide the appropriate case law.

Run a Westlaw search in the ALLSTATES database for:
CO(high) & "liquidated damages" /s "unenforceable penalty"

Here's a list of authorities from state supreme courts. Every single one of them says that liquidated damages clauses are unenforceable if they represent a penalty rather than a reasonable measure of actual damages:

Quote:
1. H Olsen v. T.A. Tyre General Contractor, Inc., 907 A.2d 146, 2006 WL
2661140, Unpublished Disposition, Del.Supr., August 24, 2006

2. Wisconsin Auto Title Loans, Inc. v. Jones, 290 Wis.2d 514, 714 N.W.2d
155, 2006 WL 1419645, 2006 WI 53, , Wis., May 25, 2006

3. H Delaware Bay Surgical Services, P.C. v. Swier, 900 A.2d 646, 2006 WL
1419394, 24 IER Cases 1239, , Del.Supr., May 22, 2006

4. H Bates Advertising USA, Inc. v. 498 Seventh, LLC, 7 N.Y.3d 115, 850
N.E.2d 1137, 818 N.Y.S.2d 161, 2006 WL 1273810, 2006 N.Y. Slip Op.
03640, , N.Y., May 11, 2006

5. H Board of Educ. of Talbot County v. Heister, 392 Md. 140, 896 A.2d 342,
2006 WL 940680, 208 Ed. Law Rep. 819, 24 IER Cases 702, , Md., April
13, 2006

6. H TAL Financial Corp. v. CSC Consulting, Inc., 446 Mass. 422, 844 N.E.2d
1085, 2006 WL 802472, , Mass., March 31, 2006

7. H BMG Direct Marketing, Inc. v. Peake, 178 S.W.3d 763, 2005 WL 3077425,
49 Tex. Sup. Ct. J. 84, , Tex., November 18, 2005

8. C Sheehan & Sheehan v. Nelson Malley and Co., 121 Nev. 481, 117 P.3d 219,
2005 WL 1906919, , Nev., August 11, 2005

9. H Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 2005 WL 1186289, 162
Oil & Gas Rep. 511, 48 Tex. Sup. Ct. J. 671, , Tex., May 20, 2005

10. C American Car Rental, Inc. v. Commissioner of Consumer Protection, 273
Conn. 296, 869 A.2d 1198, 2005 WL 756772, , Conn., April 12, 2005

11. JMD Holding Corp. v. Congress Financial Corp., 4 N.Y.3d 373, 828 N.E.2d
604, 795 N.Y.S.2d 502, 2005 WL 729150, 2005 N.Y. Slip Op. 02565, ,
N.Y., March 31, 2005

12. S. Brooke Purll, Inc. v. Vailes, 850 A.2d 1135, 2004 WL 1171382, ,
D.C., May 27, 2004

13. C Arrowhead School Dist. No. 75, Park County v. Klyap, 318 Mont. 103, 79
P.3d 250, 2003 WL 22455530, 182 Ed. Law Rep. 915, 20 IER Cases 872,
2003 MT 294, , Mont., October 28, 2003

14. C Carr-Gottstein Properties, Ltd. Partnership v. Benedict, 72 P.3d 308,
2003 WL 21419020, , Alaska, June 20, 2003

15. C Varney Business Services, Inc. v. Pottroff, 275 Kan. 20, 59 P.3d 1003,
2002 WL 31840896, 148 Lab.Cas. P 59,714, 19 IER Cases 861, , Kan.,
December 20, 2002

16. H Lewis v. Premium Inv. Corp., 351 S.C. 167, 568 S.E.2d 361, 2002 WL
1787986, , S.C., August 05, 2002

17. H Progressive Data Systems, Inc. v. Jefferson Randolph Corp., 275 Ga.
420, 568 S.E.2d 474, 2002 WL 1517841, 02 FCDR 2090, , Ga., July 15,
2002

18. H Huntington Eye Associates, Inc. v. LoCascio, 210 W.Va. 76, 553 S.E.2d
773, 2001 WL 755404, 144 Lab.Cas. P 59,356, 18 IER Cases 1303, , W.Va.,
July 06, 2001

19. United Cable Television of Baltimore Ltd. Partnership v. Burch, 354 Md.
658, 732 A.2d 887, 1999 WL 540309, , Md., July 26, 1999

20. H Gordonsville Energy, L.P. v. Virginia Elec. and Power Co., 257 Va. 344,
512 S.E.2d 811, 1999 WL 100444, , Va., February 26, 1999

21. C O'Brian v. Langley School, 256 Va. 547, 507 S.E.2d 363, 1998 WL 774519,
130 Ed. Law Rep. 1358, , Va., November 06, 1998

22. C Wandler v. Lewis, 567 N.W.2d 377, 1997 WL 411495, 1997 SD 98, , S.D.,
July 23, 1997

23. Aurora Business Park Associates, L.P. v. Michael Albert, Inc., 548
N.W.2d 153, 1996 WL 284560, , Iowa, May 22, 1996

24. BankWest, N.A. v. Groseclose, 535 N.W.2d 860, 1995 WL 455499, , S.D.,
August 02, 1995

25. C Van Velson Corp. v. Westwood Mall Associates, 126 Idaho 401, 884 P.2d
414, 1994 WL 587052, , Idaho, October 27, 1994

26. Wallace Real Estate Inv., Inc. v. Groves, 124 Wash.2d 881, 881 P.2d
1010, 1994 WL 544305, , Wash., October 06, 1994

27. Wasserman's Inc. v. Township of Middletown, 137 N.J. 238, 645 A.2d 100,
1994 WL 406939, , N.J., August 02, 1994

28. Brooks v. Bankson, 248 Va. 197, 445 S.E.2d 473, 1994 WL 248434, , Va.,
June 10, 1994

29. C Mason v. Fakhimi, 109 Nev. 1153, 865 P.2d 333, 1993 WL 530299, , Nev.,
December 23, 1993

30. H Loomis v. Lange Financial Corp., 109 Nev. 1121, 865 P.2d 1161, 1993 WL
530904, , Nev., December 22, 1993

31. Lake Ridge Academy v. Carney, 66 Ohio St.3d 376, 613 N.E.2d 183, 1993
WL 187792, 82 Ed. Law Rep. 1181, , Ohio, June 16, 1993

32. C United Air Lines, Inc. v. Hewins Travel Consultants, Inc., 622 A.2d
1163, 1993 WL 112117, , Me., March 31, 1993

33. Phillips v. Phillips, 820 S.W.2d 785, 1991 WL 260013, , Tex., December
11, 1991

34. Highgate Associates, Ltd. v. Merryfield, 157 Vt. 313, 597 A.2d 1280,
1991 WL 197966, , Vt., August 23, 1991

35. H Jessen v. Jessen, 810 P.2d 987, 1991 WL 67057, , Wyo., May 03, 1991

36. C Technical Aid Corp. v. Allen, 134 N.H. 1, 591 A.2d 262, 1991 WL 33844,
, N.H., March 13, 1991

37. Lefemine v. Baron, 573 So.2d 326, 1991 WL 1326, 16 Fla. L. Weekly 27, ,
Fla., January 03, 1991

38. C Christacos v. Blackie's House of Beef, Inc., 583 A.2d 191, 1990 WL
194428, , D.C., December 07, 1990

39. C 301 Dahlgren Ltd. Partnership v. Board of Supervisors of King George
County For and on Behalf of Dahlgren Sanitary Dist., 240 Va. 200, 396
S.E.2d 651, 1990 WL 137911, , Va., September 21, 1990

40. H Joseph F. Sanson Inv. Co. v. 268 Ltd., 106 Nev. 429, 795 P.2d 493, 1990
WL 101021, , Nev., July 18, 1990

41. Pacheco v. Scoblionko, 532 A.2d 1036, , Me., October 30, 1987

42. C Taylor v. Sanders, 233 Va. 73, 353 S.E.2d 745, , Va., March 06, 1987

43. H Koenings v. Joseph Schlitz Brewing Co., 126 Wis.2d 349, 377 N.W.2d 593,
, Wis., November 26, 1985

44. C Prentice v. Classen, 355 N.W.2d 352, , S.D., September 26, 1984

45. Wassenaar v. Panos, 111 Wis.2d 518, 331 N.W.2d 357, 40 A.L.R.4th 266, ,
Wis., March 29, 1983

46. C W.L. Scott, Inc. v. Madras Aerotech, Inc., 103 Idaho 736, 653 P.2d 791,
35 UCC Rep.Serv. 956, , Idaho, October 15, 1982

47. Court Rooms of America, Inc. v. Diefenbach, 425 N.E.2d 122, , Ind.,
September 01, 1981

48. Walter Motor Truck Co. v. State By and Through Dept. of Transp., 292
N.W.2d 321, , S.D., May 21, 1980

49. C Smith v. King, 100 Idaho 331, 597 P.2d 217, , Idaho, July 02, 1979

50. H Fortune Bridge Co. v. Department of Transp., 242 Ga. 531, 250 S.E.2d
401, , Ga., October 18, 1978

51. Truck Rent-A-Center, Inc. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420,
361 N.E.2d 1015, 393 N.Y.S.2d 365, , N.Y., February 24, 1977

52. C Local 34, State, County and Municipal Emp. of Am. Federation of State,
County and Municipal Emp., AFL-CIO v. Hennepin County, 310 Minn. 283,
246 N.W.2d 41, , Minn., September 17, 1976

53. Southeastern Land Fund, Inc. v. Real Estate World, Inc., 237 Ga. 227,
227 S.E.2d 340, , Ga., July 09, 1976

54. C Growney v. C M H Real Estate Co., 195 Neb. 398, 238 N.W.2d 240, , Neb.,
February 05, 1976

55. C B & L Painting Co., Inc. v. United Pac. Ins. Co., 165 Mont. 259, 527
P.2d 554, , Mont., October 29, 1974

56. Swenson v. File, 3 Cal.3d 389, 475 P.2d 852, 90 Cal.Rptr. 580, 1970
Trade Cases P 73,368, , Cal., October 29, 1970

57. C Dave Gustafson & Co. v. State, 83 S.D. 160, 156 N.W.2d 185, , S.D.,
February 13, 1968

58. Medak v. Hekimian, 241 Or. 38, 404 P.2d 203, , Or., June 30, 1965

59. C Camp v. Cohn, 151 Conn. 623, 201 A.2d 187, , Conn., May 12, 1964

60. C Berger v. Shanahan, 142 Conn. 726, 118 A.2d 311, , Conn., November 15,
1955

61. C Wade & Dunton v. Gordon, 144 Me. 49, 64 A.2d 422, , Me., February 28,
1949

62. C Mid-Continent Life Ins. Co. v. Goforth, 193 Okla. 314, 143 P.2d 154,
1943 OK 244, , Okla., June 15, 1943

63. C Factory Realty Corp. v. Corbin-Holmes Shoe Co., 312 Mass. 325, 44
N.E.2d 671, 166 A.L.R. 384, , Mass., October 29, 1942

64. C Malone v. Levine, 240 Mich. 222, 215 N.W. 356, , Mich., October 03,
1927

Is that sufficient authority for you?
post #47 of 117
Quote:
Originally Posted by Neruda View Post

There is a choice here.

Oh, that's right. I can get an iPhone with AT&T, AT&T, or even AT&T. I like those choices.

Quote:
Originally Posted by Neruda View Post

AT&T is forcing people to sign contracts?

If they're going to buy an iPhone, yeah.

Quote:
Originally Posted by Neruda View Post

There is a choice here.

Commit to AT&T for two years or don't buy an iPhone at all. Nice choices.

Quote:
Originally Posted by Neruda View Post

If you don't like the terms, don't buy it. No one is forcing anyone to do anything.

As you might have figured out by my previous comments, I balk at those who say I have a "choice."

The fact of the matter is: If I want an iPhone there's only ONE way to get it. I have to get a 2-year service contract at whatever rates they decide to charge and if I don't like the service I get to pay $175 to back out.
Living life in glorious 4G HD (with a 2GB data cap).
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Living life in glorious 4G HD (with a 2GB data cap).
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post #48 of 117
Quote:
Originally Posted by Neruda View Post

Um, you wrote:
What justification does AT&T have for such a fee in this situation?

Louzer replied that it is a contractual justification. He answered your question.

Quote:
Originally Posted by Neruda View Post

Sorry to nick-pick, but AT&T is forcing people to sign contracts? People are being forced to buy this phone against their will now? Are they?

There is a choice here. If you don't like the terms, don't buy it. No one is forcing anyone to do anything.

Are you slow?

I get that there's a contract. And I get that no one has to sign it.

The question was "how do they justify that charge"?

"Because they put it in the contract" isn't a answer.
post #49 of 117
Quote:
Originally Posted by Louzer View Post

And when you get service better then you expected,...

On a cell phone? Riiiiight.

No one I've ever known has said they get too good of a signal or that their phone doesn't drop calls as much as it should.
Living life in glorious 4G HD (with a 2GB data cap).
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Living life in glorious 4G HD (with a 2GB data cap).
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post #50 of 117
Quote:
Originally Posted by Neruda View Post

The validity of this depends on whether the cancellation fee is a liquidated damages clause that is tied to the price of the phone. First, the fee could be imposed for simply breaching the contract, period. The contract itself could provide for such a fee regardless of whether or not the fee is justified because the phone is not being subsidized. These are some of the policy questions you alluded to. Second, the fee could be for breaking the two year service contract, not to recoup costs from any phone subsidy.

Nope, my point was that this is precisely what is NOT permitted. A contract provision that provides for a specific penalty in the event of a breach is known as a liquidated damage clause. Liquidated damage clauses are only enforceable if (a) it would be very difficult or costly for a court to ascertain what the actual amount of damages caused by the breach is (as measured by the difference between where the non-breacher would be had the contract been fully performed and where the non-breacher actually is as a result of the breach), and (b) the amount in the liquidated damages clause constitutes a reasonable estimate of what the actual damages might be.

A fee "imposed simply for breaching the contract" - that is, one that isn't to compensate the non-breacher for actual damages (or a reasonable measure thereof), but rather intended solely to penalize the party for breaching the contract - is unenforceable. (There are very good policy justifications for this, but I'm not going to get into them here.) Such a penalty clause is unenforceable, as per the cases I listed.

-S.
post #51 of 117
Quote:
Originally Posted by Neruda View Post


The validity of this depends on whether the cancellation fee is a liquidated damages clause that is tied to the price of the phone. First, the fee could be imposed for simply breaching the contract, period. The contract itself could provide for such a fee regardless of whether or not the fee is justified because the phone is not being subsidized. These are some of the policy questions you alluded to. Second, the fee could be for breaking the two year service contract, not to recoup costs from any phone subsidy.

Yes, but doesn't it (as some on this thread have touched upon already) seem highly likely that the fact that you are paying full price for the iPhone, suggest that the phone company will not need to charge so much per month for voice and/or data plans. And, if they do supply a 'reduced cost' (one might say 'subsidised') monthly fee relative to voice and data plans for subsidised phones, they will expect recompense for breach of that contract and the loss of their income both in the future and up to the point of cancellation compared with more expensive voice/data plans.

Overall, I'd see this cancellation fee is great news as it entirely fits with the prospect of reduced cost of voice or data (or both).
post #52 of 117
Quote:
Originally Posted by SMN View Post

Run a Westlaw search in the ALLSTATES database for:
CO(high) & "liquidated damages" /s "unenforceable penalty"
Is that sufficient authority for you?

That's just great. If this is a liquidated damages clause with an unenforceable penalty. I gave you reasons why it is not, so you're case law is not controlling. Any cases on point? Involving cell phone contracts? Don't think so, but I'm looking forward to another list of cases.

Oh, and I highly doubt that you read these cases before you send them to me. You wouldn't do that when writing a brief and presenting cases as legal authority to a court, would you? Oh, and btw, unpublished decisions are not authoritative in most if not all jurisdictions.
post #53 of 117
Quote:
Originally Posted by wilco View Post

Are you slow?

I have to be slow, otherwise, I could never get you to understand the obvious.

Quote:
Originally Posted by wilco View Post

"Because they put it in the contract" isn't a answer.

Take the "isn't a" out of the above statement and replace it with "is the" and you've got it.
post #54 of 117
Quote:
Originally Posted by CosmoNut View Post

Oh, that's right. I can get an iPhone with AT&T, AT&T, or even AT&T. I like those choices.

There is another, more fundamental choice. Buy it or don't. I would like to be able to buy a Ferrari from GM at GM prices, but it ain't gonna happen.
post #55 of 117
Quote:
Originally Posted by Neruda View Post

That's just great. If this is a liquidated damages clause with an unenforceable penalty. I gave you reasons why it is not, so you're case law is not controlling.

I'm afraid you don't understand what "liquidated damages" means. Liquidated damages is a term of art that refers to any provision that specifies the amount of damages within the contract. Hence, this is a liquidated damages provision.

In any case, my aim here was not to get into an argument with a non-lawyer over what the law is. I just wanted to correct the misstatements of law so that others reading this thread will understand that, contrary to what some have asserted, there's a substantial likelihood that the fee here would be found unenforceable if challenged in court. Anyone interested is of course welcome to research the question themselves, or if anyone has actual questions (rather than baelessly insisting that the law is as they think it should be), I'd be happy to hear them.

-S.
post #56 of 117
I just love how all the IANALs are here are thinking they can easily outsmart AT&T's highly paid legal department.
post #57 of 117
Quote:
Originally Posted by SMN View Post

I'm afraid you don't understand what "liquidated damages" means. Liquidated damages is a term of art that refers to any provision that specifies the amount of damages within the contract. Hence, this is a liquidated damages provision.

You mistake my understanding of what a liquidated damages clause is with my disagreement that this is a liquidated damages clause with an unenforceable penalty. In other words, I disagree with you that this is a liquidated damages clause with an unenforceable penalty, that doesn't mean that I don't know what a liquidated damages clause is.

Quote:
Originally Posted by SMN View Post

In any case, my aim here was not to get into an argument with a non-lawyer over what the law is.

Um, how do you know what I am or am not?

Quote:
Originally Posted by SMN View Post

I just wanted to correct the misstatements of law so that others reading this thread will understand that, contrary to what some have asserted,

Misstatements of law. It seems that you and I disagree on the facts (the damages clause enforcebility) and you are unable to provide any case law that is on point. Give me one case holding that a cancellation fee in a cell phone contract was unenforceable? I don't mean to suggest by the question that there isn't any case law, I just want to see it.

Quote:
Originally Posted by SMN View Post

there's a substantial likelihood that the fee here would be found unenforceable if challenged in court.

Substantial likelihood? Where is the case-law then on the non-enforceability of cellphone cancellation fees?

Quote:
Originally Posted by SMN View Post

Anyone interested is of course welcome to research the question themselves, or if anyone has actual questions (rather than baelessly insisting that the law is as they think it should be), I'd be happy to hear them.

Funny. Speaking of baseless, this is exactly what you've done. All your arguments boil down to policy reasons: why contracts of adhesion are bad/get less judicial deference, why these kinds of fees should not be enforced...ect.
post #58 of 117
Here we go again... this is not news. If any of you bothered to read your current cell phone contracts (as long as you're not month-to-month), nearly all cell services have a penalty for breaking the contract. Ho-hum.

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Proud AAPL stock owner.

 

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post #59 of 117
Quote:
Originally Posted by SMN View Post

I'm afraid you don't understand what "liquidated damages" means. Liquidated damages is a term of art that refers to any provision that specifies the amount of damages within the contract. Hence, this is a liquidated damages provision.

In any case, my aim here was not to get into an argument with a non-lawyer over what the law is. I just wanted to correct the misstatements of law so that others reading this thread will understand that, contrary to what some have asserted, there's a substantial likelihood that the fee here would be found unenforceable if challenged in court. Anyone interested is of course welcome to research the question themselves, or if anyone has actual questions (rather than baelessly insisting that the law is as they think it should be), I'd be happy to hear them.

-S.

Just a naive question here:
Could AT&A argue that the damages in this situation are due to the loss of potential income from the service plan fees? I mean, they agreed to a contract under the understanding that they could offset their infrastructure costs with a minimum stream of income every month, that would last for at least 2 years.
post #60 of 117
Quote:
Originally Posted by Kolchak View Post

I just love how all the IANALs are here are thinking they can easily outsmart AT&T's highly paid legal department.

Yeah. Like Apple/AT&T's legal departments haven't looked into this.

AT&T: Charging this fee is probably illegal, buuuut, what the hell, let's do it anyway.

BTW, has this even been confirmed yet? All this arguing based on nothing more than speculation.
post #61 of 117
Quote:
Originally Posted by lfmorrison View Post

Just a naive question here:
Could AT&A argue that the damages in this situation are due to the loss of potential income from the service plan fees?

Read one me my replies to .S. I made a similar argument. You can't assume that the cancellation fee is tied to the phone and not to the cancellation of the service contract, and vice versa, I suppose.
post #62 of 117
Quote:
Originally Posted by Neruda View Post

There is another, more fundamental choice. Buy it or don't. I would like to be able to buy a Ferrari from GM at GM prices, but it ain't gonna happen.

That's not quite a similar analogy. But imagine this...

"We here at Tirelli® are introducing today our revolutionary new iTire 100 Premium Tire. It's an amazing tire, and we think you're gonna love it. Its improved handling eliminates accidents, improves gas mileage by 25%, and its new CarbonTouch technology actually absorbs carbon dioxide from the air--reducing your car's environmental impact the more you drive. And it's only available... on all GM vehicles."

post #63 of 117
i'm a real lawyer and i can bet you that at&t's lawyers looked into the validity of the clause regarding their cancellation fee.

or it could be that the phone is subsidized behind the scenes, hence the fee, etc.
post #64 of 117
A lot of these arguments hinge on the assumption that the iPhone isn't subsidized. I don't remember any official statement saying whether or not that is true. If the unsubsidized price of the device is $200 higher, then a $175 cancellation fee isn't that bad. The difference between subsidized and unsubsidized is probably all profit for AT&T anyway.
post #65 of 117
.....
post #66 of 117
Having worked at a wireless carrier once, I know this sucks and prepaid is much better, though North American carriers lose their shirts on prepaid.

All the terms for existing AT&T contracts are available on the web. $175 is not new. $36 activation is not new. It is not damage recovery, it's absolutely legally enforceable as a contract cancellation fee.

"If phone is returned within 3 days, activation fee will be refunded. If phone is returned within 30 days in like-new condition with all components, early termination fee will be waived. All other charges apply."

When you breach an apartment lease with a landlord, you're expected to pay for all of the rent up until the end of the lease, provided the landlord has proof that they've tried to re-rent the apartment. You can challenge this in court, but if they prove they advertised & showed the place as much as any other openings they have, you have a burden to pay.

Wireless carriers, recognizing that too onerous a contractual burden will keep people away from mobiles altogether, have simplified this by just requiring a lump-sum payment. $175 is better than a few years ago, where I've seen requirements in the $400-500 range.

The reason for this fee is that carriers spend massive fixed costs ($billions) on the radio towers and network + IT infrastructure to support it. Secondly, they spend *ridiculous* amounts of money on marketing, sales, and promotions to gain customers. No, that's not your problem, it's theirs, and yes, there is plenty of waste.

The way they recoup it is by ensuring "break even" revenue for every customer vs. the average amount of money they spent to acquire that customer. This is the basis for the contract & cancellation fee pricing.... An activation fee + cancellation fee (around $225) might still be a loss, in their metrics.

This is the sacrifice that Apple made - one to North American mobile phone market idiosyncracies. They could have started their own MVNO (mobile virtual network operator) with their own terms, with all of its annoyances and pains, or they could have gone with an existing carrier like AT&T. The latter probably has a better comfort level for non-Apple nerds.
post #67 of 117
Quote:
Originally Posted by lfmorrison View Post

Just a naive question here:
Could AT&A argue that the damages in this situation are due to the loss of potential income from the service plan fees? I mean, they agreed to a contract under the understanding that they could offset their infrastructure costs with a minimum stream of income every month, that would last for at least 2 years.

That turns out to be an interesting question, but I think the answer is no. (Disclaimer: This is off the cuff, don't rely on it as actual legal advice but rather consult a lawyer in your jurisdiction first, etc etc.

Let me begin with an analogy. Let's say I promised one year ago to buy a goat from you today for $100, and now today I refuse to buy it. Let's also suppose that you could sell that goat on the market today for $80. What damages are you entitled to? You expected to have $100 and no goat, but instead you have a goat worth $80. You're entitled to sue me for the difference, which is $20. (Note that if the contract we signed a year ago said that if I breach the contract I have to give you $500, a court would refuse to enforce that as against public policy. As I've said, there's good reason for that; see, e.g., Richard Craswell, "Contract Remedies, Renegotiation, and Efficient Breach," 61 S. Cal. L. Rev. 629.)

Now, let's say that I promise to a two-year service contract with AT&T and cancel after one year. What are the damages? It turns out that we can't really apply the same reasoning so well. On the one hand, AT&T can now sell the extra bandwidth I'm not using to someone else (presumably at the same rate), so the damages are zero. On the other hand, AT&T probably wasn't 100% capacity limited, so they probably could have sold a plan to that other guy anyway, so they've lost the full value of my contract. The problem is that cell service providers' costs are mostly fixed costs (infrastructure), and the marginal cost for any particular individual user are basically zero.

In an earlier post I laid out the two conditions for a liquidated damages clause being unenforceable:

Quote:
Originally Posted by SMN View Post

Liquidated damage clauses are only enforceable if (a) it would be very difficult or costly for a court to ascertain what the actual amount of damages caused by the breach is (as measured by the difference between where the non-breacher would be had the contract been fully performed and where the non-breacher actually is as a result of the breach), and (b) the amount in the liquidated damages clause constitutes a reasonable estimate of what the actual damages might be.

What we've just seen is that the cost structure of the cell phone service industry is such that condition (a) is met -- it's very hard to figure out what the actual cost of providing service to any particular user are. (The best we can do is probably an average - how much is the total cost of AT&T's infrastructure divided by the maximum users it can handle? But any estimate of this won't have very good precision, because the maximum number of users depends on things like how they're distributed geographically relative to where the capacity is, etc, and because the average user might not reflect this particular user.) In that case, a court will accept the parties' estimate of damages as agreed to in a liquidated damages clause IF that estimate is reasonable (condition (b)).

However, I think it's highly unlikely that condition (b) is met here. First, the $175 cancellation fee is a flat fee, regardless of how many months are left in your contract, so it doesn't track costs at all and thus isn't a "reasonable estimate" of actual costs. There's a famous case involving a lease for a grocery store, and the contract said that in the event of a breach the penalty would be based on the average monthly gross revenue, and the court refused to enforce it because if it were tracking costs it should be based on the NET revenue, not the gross revenue; this is similar (indeed, this does an even worse job of tracking costs). Second, according to what others are reporting here, the $175 flat fee is the same as what AT&T charges to terminate plans where the phones are subsidized (or even free). The cost of breach to AT&T in those cases is clearly higher than the cost in this case due to that extra expense, yet they charge the same fee; that's another sign that the $175 fee isn't actually a reasonable estimate of the cost of breach.

For these reasons, I don't think a court is likely to accept the $175 amount as a reasonable amount of damages, and it won't enforce it. (But again: this is a common law issue that will vary state by state, and I don't know how the analysis might be different in any particular jurisdiction; but most operate somewhat like this.) So what will a court do? It'll probably ask both sides to submit evidence suggesting what the actual costs are, then come up with its own best estimate -- probably the "average cost" measure I suggested earlier (which is a bad measure, but better than the $175 flat fee!).

One final catch: the cost of litigating this, for an individual consumer, is probably much more than $175, so most would be likely to just pay the fee and not challenge it. However, if you got together enough consumers who this happened to, it might be ripe for a class-action; at that point it could be cost-effective. I don't think any litigation is likely here, unless you have a lawyer who wants to leave the plan and argue this pro se on his own time; but I still think the answer is that it likely would be found unenforceable.

-S.
post #68 of 117
Quote:
Originally Posted by icibaqu View Post

i'm a real lawyer and i can bet you that at&t's lawyers looked into the validity of the clause regarding their cancellation fee.

This is -- please pardon me -- quite a lame, tiresome argument. I hear this all the time, with respect to lawyers, analysts, accountants, doctors, engineers: "they are high-paid professionals, so they must know what they doing."

If so, company legal departments would be winning their cases 100% the time. But, ask Merck. Ask Philip Morris. Ask Enron. I can provide hundreds of similar examples........
post #69 of 117
Quote:
Originally Posted by SMN View Post

For these reasons, I don't think a court is likely to accept the $175 amount as a reasonable amount of damages, and it won't enforce it. (But again: this is a common law issue that will vary state by state, and I don't know how the analysis might be different in any particular jurisdiction; but most operate somewhat like this.) .

For the sake of avoding redundancy, I won't directly reply to your post and will quote parasubvert instead:

Quote:
Originally Posted by parasubvert View Post

All the terms for existing AT&T contracts are available on the web. $175 is not new. $36 activation is not new. It is not damage recovery, it's absolutely legally enforceable as a contract cancellation fee.

Companies have 25+ years of imposing cellphone cancellation fees. They are enforceable. What is the precedent that says otherwise?
post #70 of 117
Hey Sirus20x6 - went to your website to check out your "info"... I LOLd at all the spam you have in place of article comments. No real comments to be found, and your piece on the iPhone is as full of holes as a paid analyst. Thanks for wasting my time.

Y'all argue all you want, one week and 6 hours from now I'll be playing with my new iPhone.

Time to leave work and ride into Boulder and do some Apple/AT&T recon

Z
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post #71 of 117
Yes the $175 is normal with Cingular/AT&T the reason I think they are doing this is to prevent their customers from switching when Apple rolls the phone out to other providers. Most of the top end smart phones when they first launch are from $399 to $499.
post #72 of 117
Quote:
Originally Posted by SMN View Post

Putting aside whether this would be a good or bad policy, it's not how the law works in any jurisdiction in the U.S. that I'm aware of. The $175 cancellation fee is a liquidated damages clause which, since it isn't justified here by a subsidy on the phone, runs a very substantial chance of being deemed an unenforceable penalty clause (this is a matter of common law that will vary state by state, so it's hard to say much in general). It'll be very interesting to see how this pans out.

Huh?!?!

I'm not saying that I'm not disappointed by this but I'm not totally in shock over it either.

Any long time DSL subscribers in the house? I happen to be way to far from the CO but when I thought I would have been in a position to get DSL I remember that one of the things I didn't like with DSL was the **required** 2 year contract.. Now since I never got anywhere near far enough to actually be in a position to sign such a contract I don't know... but... I would have to imagine that those who did sign up on a 2 year DSL contract were in-fact obligated to pay some form of early termination penalty.... I would imagine the same holds true for auto leases and a host of other things where you sign and initial by the big black X.

Can any 'under contract' DSL users chime in?


Edit...

Linky: http://www.consumersunion.org/blogs/..._broadban.html

On broadband providers charging ETFs:

Quote:
AT&T (Including SBC and BellSouth) - $99 ETF
Cablevision - No ETF
Charter - No ETF
Comcast - No ETF
Earthlink - $149 ETF on 1 year DSL contract
Qwest - $200 ETF on 2 year high speed Internet contract
Time Warner Cable - No ETF
Verizon DSL - $79 ETF
Verizon FIOS - $69 ETF

I see no reason why AT&T couldn't do the same....

Dave
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post #73 of 117
Whaaaa? What is going on in this thread?

1) Yes, it is normal to have these fees.
2) Yes, these fees suck and are good for corporations and bad for consumers.
3) Yes, I'm sure there are legitimate legal questions about such cancellation fees.
4) Yes, cell phone companies like AT&T really, really suck.
post #74 of 117
Quote:
Originally Posted by Neruda View Post

I would like to be able to buy a Ferrari from GM at GM prices, but it ain't gonna happen.

We're not talking about the Ferrari. We're talking about the GAS in the Ferrari. This is like paying full price for the Ferrari and then Conoco saying that you have to buy THEIR gas each month for two years and if you decide to stop buying THEIR gas then they charge you for it.

I want to be able to choose who I pay for minutes/data just like I choose where I buy the gas for my car and chose what apartment I live in and what ISP to surf the Web with.

I also don't like being dictated to on how much I'm required to line a particular company's pockets...ESPECIALLY when it doesn't include subsidizing the phone I'm using.

I'm on month-to-month for AT&T DSL with no contract. That's from day one of service. If I've paid full price for the iPhone why should there be a service contract other than to squeeze as much money out of each and every customer as possible?
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post #75 of 117
Quote:
Originally Posted by CosmoNut View Post

I'm on month-to-month for AT&T DSL with no contract.

No contract from day 1?!?! I'm betting that when you first signed up you certainly were under contract. Especially if that story I linked to above is true and even if you *were* able to get DSL w/o a contract those days seem over to me.

Dave
Apple Fanboy: Anyone who started liking Apple before I did!
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post #76 of 117
Quote:
Originally Posted by CosmoNut View Post

I want to be able to choose who I pay for minutes/data just like I choose where I buy the gas for my car and chose what apartment I live in and what ISP to surf the Web with. I also don't like being dictated to on how much I'm required to line a particular company's pockets...ESPECIALLY when it doesn't include subsidizing the phone I'm using.

What you want does not directly dictate how Apple/AT&T sell the iPhone. Just because other companies (GM/Ford) have policies that are more to your liking (Ferraris) doesn't mean that Apple has to have them. If you don't want to line a company's pockets for a phone "that does not include subsidy", you don't have to. Buy a Treo or whatever... My original point (and analogy) about your choice as a consumer stands.
post #77 of 117
Quote:
Originally Posted by DaveGee View Post

No contract from day 1?!?! I'm betting that when you first signed up you certainly were under contract.
Dave

I just signed up in about late April. I recall being surprised that there was no contract. They may not have required one since I also got (gasp!) home phone service.
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post #78 of 117
Quote:
Originally Posted by Neruda View Post

What you want does not directly dictate how Apple/AT&T sell the iPhone. Just because other companies (GM/Ford) have policies that are more to your liking (Ferraris) doesn't mean that Apple has to have them. If you don't want to line a company's pockets for a phone "that does not include subsidy", you don't have to. Buy a Treo or whatever... My original point (and analogy) about your choice as a consumer stands.

Not buying isn't the only way to influence corporations. Bitching about them to others is also a perfectly legitimate way to voice consumer opinion. I really don't get this "we shouldn't ever criticize corporations" attitude.
post #79 of 117
Well, should the plans with AT&T be really unattrative and we find out that the iPhone *is* unlocked, it would be cheaper for me to sign up with AT&T and then cancel after a month then to have to cancel my T-Mobile service.
post #80 of 117
Quote:
Originally Posted by BRussell View Post

Not buying isn't the only way to influence corporations. Bitching about them to others is also a perfectly legitimate way to voice consumer opinion. I really don't get this "we shouldn't ever criticize corporations" attitude.

Well, endlessly whining on online forums is just pissing in the wind. If you want them to change, bitch *to them*. I can't tell you how many people will get online to whine, bitch and moan, but when you ask them "Have you {mailed/told/called/sent a bug report to} the company in question?" you get back "I don't have time for that!" Ha. Some people just prefer bitching to actually having the situation change to where they don't have anything to bitch about.

Gather grassroots support if applicable, organize a letter writing campaign if you like, but if the end result isn't getting the information *to the company in a direct way*, it's a waste of time. Companies need to be told what's wrong before they have any incentive to change, and they need to be told directly. Otherwise you're not being an effective consumer, just part of the problem.

IMO.
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