In my email this morning, I got this notice about a proposed class action settlement with Verizon Wireless due to some alleged misdeads in the way they handled roaming charges. The beginning part sets the scene, but note the bits I’ve highlighted:
A proposed settlement has been reached with Verizon Wireless (“Verizon Wireless”) in a class action, Cowit, et al., v. Cellco Partnership d/b/a Verizon Wireless, No. A0505869 (Ct. of Common Pleas,Hamilton County, Ohio), related to a lawsuit about whether Verizon Wireless failed to provide roaming service without any roaming charges under the America’s Choice II Calling Plan. Verizon Wirelessdenies all of the claims.
WHO IS INCLUDED? The Settlement Class includes all current and former customers of Verizon Wireless who, since February 21, 2005, subscribed to its America’s Choice II Calling Plan. If you are a member of the Settlement Class, you have certain rights and options, such as submitting a claim for benefits, requesting exclusion from the settlement, or objecting to the settlement.
SETTLEMENT BENEFITS. In summary, current Verizon Wireless customers whose calling plan provides for a specific allowance of minutes as part of their monthly access fee automatically will receive 25 additional wireless calling minutes, which they can use for a period of one year, or, in the alternative, if these class members submit a Claim Form they can receive a transferable PIN for 40 calling units, which will be valid for 24 months, that can be used to make domestic or international long distance calls. Current Verizon Wireless customers whose calling plan provides for an unlimited number of minutes as part of the monthly access fee will automatically, without filing a Claim Form, receive a transferable PIN for 40 calling units, which will be valid for 24 months, that can be used to make domestic or international calls. Former Verizon Wireless customers must submit a Claim Form to receive a transferable PIN for 40 calling units, which will be valid for 24 months, that can be used to make domestic or international calls. You can submit your claim online at www.cowitsettlement.com or by mail. The claim deadline is November 8, 2011.
This is called a coupon settlement, and it’s a total ripoff. The class members — who are supposedly the victims of Verizon’s perfidy and the clients of the lawyers who negotiated this deal — get at most 40 minutes of long distance calling. How much is that worth?
Looking at prepaid plans in my area, I see one for 450 minutes for $44.99 which is about 10 cents a minute, so the settlement here is worth $4.
But that’s not the only way to compute the value of 40 minutes of long-distance talk time. If you go over your pre-paid minutes, Verizon charges between 25 and 45 cents per minute, which works out to a value as high as $10 to $18 per settlement.
On the other hand, Verizon’s costs are essentially fixed — they already own or lease all the towers, computers, and trunk lines they need to provide service. A few extra users spending class-action minutes wouldn’t increase their costs, so the cost to Verizon of giving out minutes on their own network is essentially zero.
Then again, the settlement includes international calling, which may involve real costs to buy time on international trunk lines. The per-minute rates for these calls run as high as $2.99, which makes the settlement worth a whopping $119.60. Of course, that’s only for people who don’t have a calling plan. And only if they need to call Afghanistan.
So what’s the right value? Well, I think I have a good argument that if you use the only proper method of calculating the value of this settlement, it’s a big fat zero.
Here’s why: I cancelled my Verison Wireless account when I got my iPhone (Verizon iPhone hadn’t come out yet) so all I get out of this is a PIN number good for 40 minutes of free long distance. However, I have unlimited free long distance on my home phone. My mobile phone has limited minutes, but I never come close to using them all, so I have thousands of unused rollover minutes and hundreds of them age out every month. Finally, I don’t ever have to make international calls.
My guess is that I’m pretty typical, in that most mobile phone users already have calling plans that provide all the minutes they could ever use. They will never have a need for the 40 extra minutes this settlement provides. Therefore, the value of this settlement to most people is zero.
You could argue that the settlement still hurts Verizon and teaches them a lesson, which is one of the justifications for class action suites, but that’s a matter of policy. It’s not what counts here. The lawyers who are supposed to represent me in this deal are supposed to look out for my best interests, so only my interests matter. And since this is worth nothing to me, it means my lawyers have failed me.
Speaking of my lawyers (Richard S. Wayne of Strauss & Troy and Jeffrey P. Harris of Statman, Harris & Eyrich), how much will they get? That’s not in the email they sent me, but you can find a hint in the FAQ on the settlement website:
How much will the attorneys be paid and who will pay it?
The attorneys for the plaintiffs and the class have worked on this case for more than 5½ years including appeals to the Supreme Court of Ohio. They will submit a request for attorneys’ fees, expenses, and incentive awards for the Class Representatives in an amount not to exceed $6 million. The Court will determine the amount of any attorneys’ fees and expenses awarded to class counsel, which will be paid by Verizon Wireless and will not affect the benefits to the class under the Settlement.
Six million dollars? Holy crap!
So the lawyers want to get paid millions of dollars because they put in over five years of work on this thing, even though the value to their supposed clients is nearly zilch. What is it that Mark Bennett always says? “Gunfighters don’t charge by the bullet.”
If they think long-distance minutes are such a great idea, why don’t they accept them in payment for their services instead of asking for cash? I’m tempted to suggest that the class action statutes should be amended to require lawyers to accept the same kind of payment that they get for their clients. (I was vaguely under the impression that the Class Action Fairness Act of 2005 already did something like that, but I’m obviously mistaken.) Or else their payment should be based on the actual value of these payments that are redeemed by the clients. I’ll bet it’s less than 10% for something like this.
I think probably the best solution would be to require that all class action settlements must be in cash and cash only, but I’d sure like to hear from someone who’s given this a little more thought.