September 20, 1996 6:30 PM PDT

AOL billing case settled, for the moment

A California court today tentatively agreed to accept a settlement with America Online and its customers over allegedly misleading billing practices, but the judge presiding over the case reserved the right to change his mind.

Under the settlement, AOL agreed to provide many subscribers with one free hour, and customers who spent more than $300 during the five-year period would receive one additional hour for each $300 in charges. The company also agreed to improve its billing procedures.

"I find the amount of the settlement to be fair, reasonable, and adequate," San Francisco Superior Court Judge James Robertson said. "In fact, the aggregate amount may be greater than the damages."

But the judge held out the possibility of amending his ruling: "In light of the importance of this matter, I could change that tentative decision in the course of preparing a written statement."

Robertson said another hearing on the matter would be held on October 25. He is requiring both AOL and the plaintiffs in the class-action suit to draft a statement restating their case and submit it by Friday.

The class-action suit charges that consumers were not made aware that billings for online time were rounded up to the next full minute. AOL also was charged with adding 15 seconds to each session for "connection" time and with occasionally billing customers for time spent in designated "free" areas.

Robertson also raised the possibility that he may review the legal fees of the 18 law firms that were involved on the plaintiffs' behalf. Some plaintiffs complained that the lawyers would make out better financially in the case than themselves.

The AOL lawsuit has gained widespread publicity as many lawyers and observers painting it as a landmark case. But AOL is not the only ISP to confront online billing difficulties: Microsoft Network (MSFT) announced today that is trying to clear up a massive billing problem that dates back to June and admits will take a month or two until the situation is able to be completely resolved.

"This case has the potential to set a precedent for pricing plans for online services and features," Laurence Schonvrun, a Berkeley attorney representing some AOL customers, said during today's hearing.

At the beginning of today's hearing, AOL's attorneys said the settlement, which was reached in July, should satisfy those filing the suit. "Every AOL customer has received the best amount of compensatory relief," attorney Oliver Koppell said.

At least some plaintiffs, though, complain that the proposed settlement isn't enough. Still others say the case has been blown out of proportion and represents a common potential billing problem throughout all industries, especially the phone companies.

The case, while the first of its kind for online billing, is similar to well-worn actions taken for years against the telecommunications industry. From time to time, consumers complain that they get overcharged for phone calls because of different practices for rounding calls to the nearest minute.

Such a lawsuit now is pending against Sprint, for example. The long distance carrier denies the charges.

David Cassell, the creator of the AOL Watch Web page was disappointed by the judge's tentative decision. "AOL subscribers have been mistreated by the service and now by its own lawyers," Cassell said. "This is just another reason to go to ISPs for better service."

The parties involved in the case this morning did reach an agreement with one plaintiff, James Croak, to drop his involvement in the class-action suit against AOL.

Croak said he has videotapes that prove he was overcharged in August 1995. The deal with Croak guarantees a "significant amount" of lawyer fees will be put into the settlement fund based on Judge Robertson's decision, according to Croak's lawyer James Sturdevant.

 

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