Cellphone Termination Fee Cases, In re

California Court of Appeal · 2010 · Contracts

186 Cal. App. 4th 1380 (2010)

Updated July 26, 2026

ContractsClass action settlementSettlement noticeIncentive awardsclass actionsettlementnoticepublication notice

Facts

Verizon charged a flat $175 early termination fee to customers who canceled cellular contracts before the contract term ended. After trial had begun in the California action, the parties reached a settlement requiring Verizon to create a nonreversionary $21 million common fund, from which fees, costs, and payments to class members who paid or were assessed an ETF would be made, and prohibiting Verizon from using flat-rate ETFs in new personal wireless agreements for two years. Notice was provided by mailed notice to identified ETF Assessed Class members, a short-form publication notice in national newspapers, and a detailed website notice with claim forms, settlement documents, and frequently asked questions. Objectors argued the notice was misleading because Subscriber Class members might think they could share in the fund and because the notice did not disclose the size of the class; they also challenged $10,000 incentive awards to the named representatives.

Issue

Was the class settlement notice legally adequate where the short-form notice directed class members to a website for detailed information and did not disclose the total size of the class? Were $10,000 incentive awards to the named class representatives an abuse of discretion or a breach of fiduciary duty to absent class members?

Rule

In a class action settlement, notice must fairly apprise class members of the terms of the proposed settlement and the options open to them, and the trial court has virtually complete discretion as to the manner of giving notice. Perfection is not required, and notice need not specify class size so long as it states the aggregate settlement amount, the deductions to be made, and the formula by which recoveries will be determined. Incentive awards to named plaintiffs are permissible and discretionary when justified by the representatives' efforts, risks, and assistance to the litigation, and they must not be disproportionate to the time and energy expended.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

A proposed consumer class settlement in California creates a $12 million nonreversionary fund for customers who were actually charged a recurring account-closing fee. The settlement administrator publishes a short newspaper notice in Dallas, Phoenix, and Miami that briefly describes the case and directs readers to a website and claim form, both of which clearly explain that customers who merely had contracts containing the fee provision, but were never charged the fee, receive only injunctive relief.

An objector argues the notice is inadequate because the short newspaper notice, viewed alone, could make all contract holders think they are entitled to cash. How should the court rule?

Explanation. Notice in a class settlement must fairly apprise class members of the terms of the settlement and their options. The court has virtually complete discretion as to the manner of giving notice, and the notices are assessed together rather than in isolation. A brief publication notice may direct class members to a website and claim form containing the details, so long as the combined materials clearly explain that only certain members may receive monetary relief.