AT&T Mobility Wireless Data Services Sales Tax Litigation
Record Setting Consumer Class Action
Introduction
The Class Action Case
Bartimus Frickleton Robertson Rader represented a nationwide class of AT&T Mobility customers against AT&T Mobility. The case claimed that the telecommunications giant improperly charged and collected sales tax on internet access service from its customers. After the United States District Court for the Northern District of Illinois appointed our firm lead class counsel, Bartimus Frickleton Robertson Rader negotiated the settlement of one of the largest consumer class-action cases in U.S. history, with $912 million being recovered on behalf of the class. Our aggressive but cooperative approach to this litigation resulted in an excellent solution for all parties.
Details
The Investigation
Congress passed the Internet Tax Freedom Act (IFTA) in 1998. The IFTA placed a moratorium prohibiting state and local governments from taxing Internet access. This meant that state and local governments could not impose sales taxes on the monthly payments that customers made to their Internet providers, and Internet service providers such as AT&T Mobility could not collect such taxes from their customers.
Bartimus Frickleton Robertson Rader discovered that telecommunications giant AT&T Mobility was collecting sales tax on Internet access services and remitting it to state and local governments. The firm filed lawsuits in 46 states against AT&T Mobility seeking to recover the wrongfully collected taxes for a class of AT&T customers.
All of the cases were centralized in the United States District Court for Northern District of Illinois. The Court appointed Bartimus Frickleton Robertson Rader as lead counsel to represent a class that consisted of nearly 50 million consumers.
Challenge
The Challenge
Part of the challenge the case presented was that the tax money AT&T had improperly collected was no longer possessed by AT&T. Instead, AT&T had remitted those monies to the states and local governments in which its customers lived. Thus, in order to recoup the wrongfully collected taxes for the class members, lawsuits had to be filed against thousands of state and local governments. To further complicate matters, each of these thousands of taxing jurisdictions had their own unique rules defining who could file a claim for a tax refund. Some jurisdictions allowed the customers to bring refund actions, while some required that the refund action be brought by the entity that collected and paid the tax—AT&T.
Bartimus Frickleton Robertson Rader developed a unique solution that allowed the class and AT&T to work together to recoup the near $ 1 billion the state and local governments owed back to AT&T customers. A settlement agreement with AT&T was reached and approved by the Court, which resulted in the class and AT&T jointly pursuing more than a thousand tax refund actions all across the country.
Process
Achieving More Through Cooperation
Many lawyers think the only way to achieve a result is through a no-holds-barred, scorched-earth approach. Sometimes though, the best way to achieve a result is to think creatively about how to solve the problem the case has created for the opposing party. In this extraordinary case, Bartimus Frickleton Robertson Rader recognized that the best and most efficient way to achieve a recovery for the class they represented was to work with AT&T to right the wrong. Shortly after filing the cases, our firm reached out to AT&T, let them we know we had discovered a mistake on their part that had created a business problem, and further let them know that we were interested in helping them find a business solution to that problem that would benefit the class of their customers. Through aggressive but collaborative negotiations, we were able to craft and implement a solution that involved our firm working collaboratively with AT&T to recover nearly $1 billion in state and local sales tax that customers never should have paid.
Results
The Results
Ultimately the settlement resulted in approximately $912 million being recovered on behalf of the consumer class. This is one of the largest and most complex consumer class actions in the history of the United States.
