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Class Action Defense Cases-Hall v. Sprint: Illinois State Court Upholds Class Action Treatment Of Class Action Challenging Early Termination Fees Charged Cellular Phone Customers

Class Action Certification of 48-State Class Proper because Sprint-Drafted Choice-of-Law Provision Selected Kansas Law to be Applied to Class Action Claims Illinois State Court Holds

Plaintiff filed a putative class action in Illinois state court against her wireless communications provider, Sprint, alleging various state law claims for relief each premised on the theory that early termination fees are unlawful penalties. Hall v. Sprint Spectrum L.P., 876 N.E.2d 1036 [Slip Opn., at 1-2 (Ill.App. 2007). The class action complaint alleged in part violations of Illinois’s Consumer Fraud and Deceptive Business Practices Act and sought to prosecute a state-wide class action under the statute, but alleged further violations of other state consumer protection statutes and sought to prosecute a nation-wide class action as to those claims. Id., at 2. Defense attorneys opposed plaintiff’s motion for class action certification, but the trial court granted the motion. Id., at 1. The defense appealed, and the Illinois appellate court affirmed the order granting the lawsuit class action treatment.

The class action complaint alleged that plaintiff had entered into a one-year contract with Sprint for two separate lines and agreed to pay a $150 early termination fee if she canceled service within that year: Within the one-year period, Sprint canceled plaintiff’s service because of nonpayment but refused her request to cancel her contract unless she paid the amounts owed, including the early termination fee. Hall, at 1-2. Plaintiff paid the entire amount demanded by Sprint on one of her lines, including the $150 early termination fee, but she could not afford to pay the termination fee on the second line and “Sprint refused to cancel the account and stop the accrual of charges unless [she] paid the early termination fee for the second cell phone number.” Id., at 2. This amount was never paid, id. Instead, plaintiff filed her class action lawsuit challenging the early termination fees as “unlawful penalties.” Id. Ultimately, the trial court granted plaintiff’s request for class action certification of a 48-state class action, id.

After the trial court granted class action treatment, plaintiff amended the class action complaint to include an express choice-of-law provision that Sprint had placed in its service agreements which provided that Kansas law governed any disputes. Hall, at 3. Defense attorneys moved for reconsideration of the class action certification order, but the motion was denied. Id. The defense then sought and obtained leave to appeal the trial court’s order certifying a 48-state class action, id., at 4. The defense advanced two arguments on appeal: (1) that Kansas law “cannot be applied extraterritorially,” and (2) that Kansas law cannot be applied to “noncontractual claims, such as statutory fraud.” Id., at 4-5.

The court of appeal disposed of the first argument by noting that “the parties chose to apply Kansas law”; in essence, Sprint could not be heard to complain that the “broadly worded choice-of-law provision” that it drafted was not enforceable. Hall, at 5. As the Court explained at page 5, “Sprint’s choice-of-law provision states that the agreement should be governed by the law of Kansas. The only issue in this case is the validity of the early termination fee, and by the parties’ own choice, that issue is governed by Kansas law. The fact that Kansas law might not otherwise apply is irrelevant, because the parties chose to apply Kansas law.”

With respect to whether Kansas law could be applied to noncontractual claims, the Illinois Appellate Court’s analysis of led it to conclude that the choice of law provision was sufficient to permit the Kansas statutory fraud claims to be applied across the 48-state class. See Hall, at 7-9. The application of Kansas law would not violate Sprint’s due process rights under Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 821-22 – which held in pertinent part, “Kansas must have a ‘significant contact or significant aggregation of contacts’ to the claims asserted by each member of the plaintiff class, contacts ‘creating state interests,’ in order to ensure that the choice of Kansas law is not arbitrary or unfair. [Citation.] *** When considering fairness in this context, an important element is the expectation of the parties.” – because the choice-of-law provision instilled in class members the expectation that “Kansas law would govern their consumer fraud claim.” Id., at 10.

Finally, the appellate court rejected defense arguments that class action certification was not warranted because of “lack of commonality, intraclass conflicts, and an inadequacy of representation.” Hall, at 11-12. That discussion may be found at pages 12 through 16. Accordingly, the appellate court affirmed the trial court order certification of a 48-state class action against Sprint. Id., at 16-17.

NOTE: Preliminarily, the appellate court rejected the defense argument that the trial court certified the 48-state class action based on its application of Illinois law or on the application of consumer protection laws of various states; as the Appellate Court held at page 4, “it is clear from the trial court’s order that the class certification was not predicated upon the application of the Illinois Consumer Fraud Act or the differing statutory and common law standards of 48 states” but on “the application of Kansas law based on the choice-of-law provision contained in Sprint’s form contract.”

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