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Consumer News Release

For immediate release -- Wednesday, September 20, 2000.
Contact Bob Brammer - 515-281-6699

State Wins Round One vs. U.S. Cellular

Two Federal Courts have ruled that Iowa's state courts have jurisdiction to consider the consumer protection matter, as the Attorney General's Office argued.

DES MOINES. Rulings by two Federal Court judges have cleared the way for Attorney General Tom Miller to proceed with a consumer protection lawsuit against U.S. Cellular in state court, as sought by Miller's Office.

The suit filed by Miller in Polk County District Court on April 11 alleges that U.S. Cellular used deceptive and misleading advertisements to induce consumers to sign cell phone contracts, and then penalized consumers by charging hefty "break fees" if they canceled their contracts.

The latest ruling came when Federal District Court Judge Michael Melloy dismissed a complaint filed by U.S. Cellular in Iowa's northern district Federal Court in Cedar Rapids that had argued that the Attorney General was preempted by federal law from enforcing state consumer protection statutes against cellular telephone companies. A similar ruling was issued last month by Judge Robert Pratt of the Federal Court southern district in Des Moines.

"We are very pleased that this important matter is cleared to move forward in Iowa courts where it belongs," Miller said. "This is a consumer protection action to protect Iowa consumers."

Judge Pratt of the U.S. Federal District Court Southern District in Des Moines issued his ruling August 7, sending the case back to state court for trial. Judge Melloy of the Northern District, in a ruling dated September 15, dismissed U.S. Cellular's federal litigation there, saying the "case presents predominantly state law issues" which can be "better adjudicated in state court." The Attorney General's Office received Melloy's ruling this week.

Miller said the Attorney General's office has received 482 complaints from consumers against US Cellular, most in the last couple years.

Background: the lawsuit filed in April

Miller said the consumer protection lawsuit filed in April alleges that U.S. Cellular sometimes has used misleading advertisements to entice consumers to sign long-term contracts, and then effectively prevented consumer from canceling the contract by illegally imposing "break fees" up to $300.

"For example, the company offered 'free, unlimited weekend calls,' but our suit alleges that the company changed its definition of 'weekend' to eliminate free calls on Fridays," Miller said. "Then, consumers who decided to cancel were told they would have to pay the break-fee. That is illegal and it is unfair, and the advertisement was misleading," he said.

The lawsuit also alleges that U.S. Cellular advertised free offers such as free statewide calls, free telephones and free minutes, but sometimes failed to honor the offers.

"Consumers who wanted to cancel because they felt they were misled or because the company imposed unauthorized charges learned they were stuck with paying the high break fees," Miller said.

The suit alleges that U.S. Cellular break fees are illegal. Miller said Iowa consumer credit law gives Iowa consumers a right to cancel "executory contracts" - contracts that are payable in more than four installments, that provide for service in four or more installments, and that defer debt. In executory contracts, consumers cannot be held liable for charges they have not yet incurred as of the date of cancellation, regardless of contracts that might say otherwise.

Miller said consumers who wish to file a complaint against United States Cellular may contact his Consumer Protection Division by calling 515-281-5926 or by writing to: Consumer Protection Division, Hoover State Office Building, Des Moines, IA 50319.

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