In a case over Sprint Spectrum’s early termination fee in its cell phone contract, the California Court of Appeal took a close look at the “injury in fact” language in the state’s unfair competition law, Proposition 64.
In the May 16, 2007, decision, Meyer v. Sprint Spectrum L.P., the court found the plaintiffs to have alleged that “Sprint improperly included certain illegal and unconscionable terms in its customer service agreement. Plaintiffs did not allege Sprint had asserted or threatened to assert those terms against them.” The court held that plaintiffs lacked standing to assert a claim and threw the case out.
The court determined that the language “injury in fact” and “lost money or property as a result of unfair competition” creates a two-part test. Under that test, to have suffered an injury in fact, a plaintiff must have (1) spent money due to the defendant’s acts of unfair competition, (2) lost money, or (3) have been denied money owed to him.
The court found that plaintiffs had not suffered any injury in fact. They had not alleged that they had been required to pay any money out of their own pockets (other than the fees they paid for their cellular telephone service), had lost money or property, or had been denied any money that was rightfully theirs.
Significance: The focus of the lawsuit was Sprint’s early termination fee, which is commonplace in cell phone service agreements. Plaintiffs’ firms argue that the fee is illegal, especially in cases in which service was cancelled by the subscriber after complaining about inadequate service and dropped calls. A number of states, including New Jersey, Arizona, and Massachusetts, are considering bills to protect cell phone customers against excessive fees.