Refunds to cable TV users upheld

State appeals court backs $7.59 million ruling for city viewers

July 28, 1999|By Sean Somerville | Sean Somerville,SUN STAFF

The state Court of Appeals has upheld the return of $7.59 million in illegal late fees and interest payments to tens of thousands of customers of Baltimore's cable television franchise.

The ruling, which upheld a Baltimore Circuit Court judge's decision, appears to clear the way for city cable subscribers to recover about $4.50 for every $5 monthly late penalty they paid between November 1992 and September 1997.

The only recourse for United Cable Television of Baltimore LP -- formerly owned by Colorado-based Tele-Communications Inc. and now by AT&T Corp. -- is an appeal to the U.S. Supreme Court.

A lawsuit filed in November 1995 by cable subscriber Louis Burch, who believed the late fee was unfair, prompted the judicial rulings.

The case was made a class action in August 1996 on behalf of all city cable subscribers who had been charged late fees -- about 35,000 to 40,000 a month, or one-third of the city's cable subscribers, according to the plaintiffs.

"These predatory late fee practices by cable companies are nothing but a license to steal money from people's pockets," Philip S. Friedman, an attorney who represented cable subscribers in the case, said yesterday.

Company lawyers said they had not yet determined whether to appeal.

"No decision along those lines has been made at this point," said attorney Brian G. Eberle. Eberle and another lawyer declined to comment further yesterday, saying they were still analyzing the appeals court's 34-page decision, released Monday afternoon. Cable company officials also would not comment.

AT&T, which acquired the Baltimore cable operator when it purchased TCI last year, is in the process of trading several cable franchises with Comcast Corp., deals that include the Baltimore and Washington TCI franchises. The late fees that were the target of the suit were imposed under TCI's ownership.

While affirming Baltimore Circuit Judge Gary I. Strausberg's September 1997 ruling on the late fees, the appeals court reversed and sent back to Strausberg his approval of $2.5 million -- one-third of the amount recovered -- for plaintiff attorneys in the case.

In an opinion for the majority, Judge Lawrence F. Rodowsky directed the use of a "market approach" to arrive at appropriate attorneys' fees. The court should determine an "approximate percentage" paid to lawyers in "a case of comparable complexity," Rodowsky wrote.

Ruling the $5 late-payment fee "unlawful and inappropriate," Strausberg said that the charge should have been only enough to cover the costs of recouping the debt.

Calling the fee a way for the cable company to "swell its coffers of profitability, at the expense of the public," Strausberg ordered the company to reduce it to 50 cents. "The $7.59 million award includes $6.7 million in penalties and $897,015 in interest." The decision followed a similar ruling by a jury in Washington, which ordered TCI to reimburse $6.7 million to subscribers in that city.

Unless the cable operator appeals to the U.S. Supreme Court, it is obligated to give notice by mail or newspaper advertisements inviting subscribers to submit claims for refunds over a six-month period. Any unclaimed money -- possibly hundreds of thousands of dollars -- would be used for cable television education projects, Strausberg ruled.

No one in the Mayor's Office of Cable Communication, which would receive half of the unclaimed funds, was available to discuss the ruling.

Industry associations argued that the decision would amount not to a victory for consumers, but a penalty to subscribers who pay their bills on time.

In its appeal of Strausberg's ruling, United was joined by an assortment of organizations that filed friend of the court briefs, including the National Vehicle Leasing Association, the National Multi-Housing Council, the Maryland Retailers Association and the Maryland Chamber of Commerce.

United defended its fee, saying that $5 was a reasonable estimate of damages caused by late fees. The appeals court disagreed.

"Under our analysis United's actual damages are standardized at one-half of one percent per month on the overdue balance in a customer's account," Rodowsky wrote.

The different calculation used by the appeals court would amount to an even lower penalty than the one calculated by the Circuit Court -- about 10 cents.

In a dissenting opinion, Howard S. Chasanow said the appeals court had not paid enough attention to agreements between subscribers and United. "What we have in the instant case is one monthly price if the customer pays in advance, and if this is not done, then there is an additional $5 charge for extending credit when the customer has used the service before paying."

Friedman, the plaintiff's lawyer, said, "I'm thrilled not only on the individual case, but this means cable subscribers will be charged late fees commensurate with the damage they cause and they're not going to be gouged."

Addressing the question of legal fees, Friedman would say only that he has been suing cable companies over late fees since 1994 and that he has won two cases with about 40 others pending.

"I have not received one dime and I've spent hundreds of thousands of dollars trying to end the predatory practices of cable monopolies," he said.

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