Verizon Settles Suit Over Rental Fee

Verizon Communications Inc. will pay as much as $88 million to settle allegations that it charged nearly 170,000 California customers monthly rental fees for rotary-dial phones they no longer used, according to a settlement reached this week.

Los Angeles County Superior Court Judge Peter D. Lichtman approved the class-action settlement Tuesday.

Attorney Marc Coleman, who filed the lawsuit on behalf of four Verizon customers, said Verizon customers could be reimbursed for 90% of the rental fees they paid between 1994 and 2001, plus 6% interest per year. The maximum refund will be about $500 per phone, he said.

Coleman estimated that the settlement could cost Verizon up to $88 million. But the New York-based phone company said it was too soon to put a dollar figure on the agreement.

Verizon did not admit any wrongdoing as part of the settlement.

“Settling this matter was in the best interest of our customers and the company,” Verizon said Wednesday in a statement.

The suit was initiated in October 2000 by retired Long Beach physician David Cundiff, his wife and another couple.

“My wife was poring over the phone bill and she noticed a line item for ‘equipment rental,’ ” said Cundiff, 52, who writes books about health matters. “It was just $3 or $4, but she compared the bill to our neighbor’s, and he didn’t have that.”

Cundiff said he didn’t know what equipment he and his wife were renting -- the couple had purchased a modern touch-tone phone in the late 1980s. When he called the phone company seeking an explanation, he was told he had been sent a letter in 1988 telling him he would be charged rental fees if he didn’t send back his rotary phone. (At the time, the phone company was GTE Corp.; it merged with Bell Atlantic Corp. to become Verizon in June 2000.)

“I told them I never got that letter,” Cundiff said. “They offered me a six-month refund but I said that wasn’t good enough.”

The suit charged the phone company with “misrepresenting these rental charges” that had been paid by some customers for as many as 16 years.

“Customers thought it was for wiring or the junction box, and they kept paying it,” Coleman said Wednesday. “How could they be expected to know what it was for?”

He noted that other phone companies made explicit statements in their monthly billings that customers who did not turn in their old phones would be charged rental fees.

The lawsuit estimated that Verizon improperly collected millions of dollars in rental fees.

Claim forms will be sent to Verizon customers starting in March, Coleman said. Customers who don’t fill them out but are shown on Verizon billing records to have paid the rental fees will be eligible for a $50 coupon good for calling cards or phone equipment, he said.

The settlement also calls for Verizon to pay plaintiffs’ attorney fees amounting to $1.7 million and to donate $1 million to local charities. The agreement was first reported by the Daily Journal, a legal publication based in Los Angeles.

Verizon shares fell 25 cents Wednesday to $40.91 on the New York Stock Exchange.