AOL Settles Billing Lawsuits

America Online has agreed to settle a pair of class action lawsuits brought on behalf of subscribers to the online services of AOL and its CompuServe unit. They allege AOL and CompuServe continued to bill them after the plaintiffs asked for their subscriptions to be cancelled.

AOL "vigorously denies any liability" related to the allegations, but agreed to settle to avoid the "undue burden and cost" of further litigation and to resolve the matter, AOL says in a statement released jointly this week with the Locks Law Firm, one of the firms representing the plaintiffs.

However, as part of the agreement, AOL also has agreed to make changes in its procedures to prevent post-cancellation charges in the future, according to the publication notice in the Web site, which contains documents related to the cases and the settlement.

The class action lawsuits in Oklahoma and California will be dismissed as a result of the settlement agreement, whose final court approval will be addressed at a hearing on October 21, 2004 in Drumright, Oklahoma, according to the statement.

"As part of this agreement, AOL will make refunds available to those AOL and CompuServe subscribers who tried to terminate their service, thereafter were billed for service, and who wrote or telephoned AOL before April 6, 2004 to request a refund," the statement reads.

Making a Deal

The proposed settlement calls for AOL to provide refunds of up to 4 months of subscription fees, at a rate of $21.95 per month. How much of a refund a plaintiff receives will depend on his or her specific claim. Separate from the settlement fund, AOL has also agreed to pay the plaintiffs $3 million for attorney's fees and costs.

The proposed settlement class consists of all AOL subscribers and former subscribers in the U.S. who allegedly incurred post-cancellation charges between June 7, 1996 and April 6, 2004 and who allege that they were wrongfully charged for subscriptions at any time after they attempted to cancel, according to the publication notice.

To receive a refund, a member of the settlement class has to file a claim. The claim forms can be found, along with other documents related to the cases, on the Web site.

"We're pleased that we're in the process to bring this matter to conclusion and pleased we were able to reach this settlement," says Nicholas Graham, an AOL spokesperson.

Ongoing Cases

However, this settlement doesn't close the book on this matter for AOL, because there is other ongoing litigation related to this improper billing issue. "We're aware of other pending litigation matters on the same subject in other states, some brought by attorneys general and others by private parties," Graham says. He didn't know how many such cases are ongoing.

An attorney for the plaintiffs didn't immediately return calls seeking comment, but all the plaintiffs' attorneys believe the settlement is fair, adequate, reasonable, and in the best interests of the plaintiffs, according to the publication notice.

One case is Clough v. AOL, case number D-CJ-2001-13, in the District Court for the Twenty-Fourth Judicial District, Drumright Division, Creek County, Oklahoma. This case covers a nationwide class of plaintiffs. The other case, which covers only California, is Mendoza v. AOL, case number 827047-2, in the Superior Court of Alameda County, California.

The plaintiffs' main allegation is that when subscribers instructed AOL or CompuServe to cancel their subscriptions, following the instructions provided by the companies in their terms of service, AOL and CompuServe "either failed to process the cancellation request or reactivated the subscription after cancellation as the result of a third party, such as a family member or friend, using the account without authorization," according to the publication notice. This resulted in subscribers being improperly billed, the plaintiffs say, although AOL denies all of the plaintiffs' allegations.

Judge Joe Sam Vassar of the Twenty-Fourth Judicial District court gave preliminary approval to the settlement on May 26. He will preside the October hearing where final approval will be sought.

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