Maryland Late-Fee Law Prevails in Court

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A Maryland judge upheld the controversial retroactive portion of a recently enacted late-fee law and tossed out the potential class-action suits filed to challenge it.

But the plaintiff's chief attorney said the lower-court ruling would be appealed. The plaintiffs will try to bypass intermediate state courts in favor of a hearing by Maryland's highest court.

At issue is verbiage in the late-fee law-approved earlier this year by the state legislature at the urging of a variety of industries-that protects those businesses and their late-fee policies retroactive to 1995.

The Legislature took up the issue of late fees following a 1999 state Court of Appeals decision in a landmark late-fee case against United Cable of Baltimore LLC, now an AT & T Broadband property.

The consumer plaintiffs won their challenges at every level of state courts. The highest court, the Court of Appeal, agreed that the operator's late fee, which amounted to 6 percent of a consumer's basic bill, was excessive.

Also, late fees should be subjected to a "reasonableness" test, the panel added. The judges also opined that 10 cents might be an appropriate fee.

The latter statements sent service industries scurrying to craft a law legalizing late-fee amounts.

They argued to the legislature that the wording of the appeals ruling declared "open season" for late-fee litigation. To demonstrate, they submitted advertisements seeking plaintiffs for class-action lawsuits.

Further, other witnesses were attorneys who had already filed, or intended to file, late-fee actions, including a class-action suit on behalf of 1 million phone consumers.

The service industries made a convincing argument to legislators, and the late-fee bill went into law, setting the legal amount for a past-due bill at $5, or 10 percent of the unpaid bill, whichever is smaller.

The bill protects industry policies between 1995 and the time of its passage. This language affected consumers who were already the subject of incomplete class-action lawsuits against cable late fees in Montgomery, Prince Georges, Baltimore and Harford counties.

Litigators immediately went to court, filing a flurry of potential class-action suits to protect the rights of consumers. Those suits were consolidated, and on July 5, Judge J. Norris Byrnes ruled in Baltimore County Circuit Court that Comcast Corp., the subject of the suit, did not have to pay refunds because the state law was constitutional.

Ron Rubin, attorney for the consumers, said he would file a bypass petition within the next 30 days. That mechanism allows an appeal to jump to the state's highest court-the seven-man Court of Appeal, the same panel that issued the "reasonableness" ruling.

"I think there's a fair chance they'll take it. This is clearly unconstitutional," Rubin said.

Separately, in the case that spurred the late-fee debate, reports indicated that perhaps as much as $7 million of the judgment will end up in city coffers, rather than consumer pockets.

When United Cable lost its late-fee challenge in 1997, a Circuit Court judge ordered the operator to refund $7.59 million to consumers who paid late fees. That amount grew to more than $8 million because the operator, confident of a reversal, continued to charge the contested late-fee amount during the appeals process.

Estimates indicated that this would amount to about $3.60 per consumer. But apparently that amount is not compelling enough to consumers to justify digging out three-year-old bills and filling out claim forms.

According to a report to the city from the operator, about $1 million in claims have been submitted. Consumers have until Sept. 5, but the company doubted that many more refunds would be sought.

The balance would end up in a children's-education trust fund established by the city and administered by a three-person administrative board, including Baltimore's cable director.

"Consumers had their chance to make a claim," said Phillip Friedman, plaintiff's attorney in the United Cable case. "Either way, cable has to pay. I hope to replicate the result elsewhere."

Friedman has late-fee cases pending in several other jurisdictions.

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