Time to Short AT&T, Verizon and BellSouth?

According to Think Progress | Telcos Could Be Liable For Tens of Billions of Dollars For Illegally Turning Over Phone Records, AT&T, Verizon and BellSouth face huge liabilities for turning over millions of American’s call records to the NSA in violation of law. That potentially $1000 for each person whose call records were turned over. Millions and millions of people. Each.

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9 Responses to Time to Short AT&T, Verizon and BellSouth?

  1. Brett Bellmore says:

    The significance of this is, what? That everyone will get a class action payout of $1000, which they will immediately apply to their inexplicable $1200 phone bill that month, with the extra $200 per person going to the lawyers who organize the lawsuit?

    There comes a point where the size of a class gets so large, that it becomes transparently obvious that it’s just a way of transfering money to lawyers, because everybody else is just taking money from one pocket, and putting (some of) it in the other. The supposed plaintifs actually end up worse off as a result of lawsuits like these, and only the lawyers profit.

  2. Michael says:

    Shorter Bellmore: We should only enforce our laws against small violators, not the big ones?

    Seriously, isn’t the point of the statute to discourage this sort of behavior? And how better than to use economic incentives? So the first order objective is to incentivize telcos not to do this stuff; the second order objective is restitution to people whose legal rights were violated; and the third order objective is incetivizing lawyers to take these cases to have justice done.

    And note that not all the phone companies went along — those that didn’t now deserve to prosper relative to those that did.

  3. Brett Bellmore says:

    I’m a customer of one of those telephone companies, and if such a settlement was reached, the money I got would come right out of my own pocket, in higher bills. It’s not like they’ve got some secret stash of cash they could dip into for that big a payment. You’d be punishing ME, too. The settlement would actually leave ME, the supposed plaintif, worse off. This is a quite common thing, where the class in a class action lawsuit gets big enough.

    I got screwed over in exactly that way the LAST time I got sucked into a class action lawsuit.

    You want to discourage this sort of thing, do NOT go for a cash settlement. THAT would only have the purpose of moving around money so the lawyers would get a share of it. Go for a non-monetary settlement, like requiring the company to put in place safeguards against this happening again.

  4. Michael says:

    In a functioning market, a very significant portion of the hit (indeed all of it in a perfect market), would be felt by the shareholders, not the customers. It may be, however, that we don’t have a well-functioning market….

  5. Brett Bellmore says:

    Let’s think this through: In a properly functioning competative market, if one firm got hit with such a judgement, the stockholders would take the hit, because the firm would not have the market power necessary to make the customer take the hit. Customers would just switch to other carriers if the firm tried raising it’s prices.

    However, this is not one firm. It’s pretty much every firm BUT one. In most of the country, all the available carriers will have been effected by the judgement, since they’re all guilty. Even where Qwest DOES offer service, it’s doubtful that it has enough excess capacity to take everyone else’s customers. So it doesn’t matter that the market is reasonably competative, for purposes of this judgement, the firms WILL have effective market power.

    This isn’t a flaw in the market, it’s a basic characteristic of bringing a class action lawsuit against an entire industry, instead of a small subset of it. It turns the judgement into a universal cost of doing business, which naturally winds up reflected in the market price, instead of coming out of the hide of the stockholders.

    I think my economic reasoning here is sound. Getting a financial judgement against an entire industry will not result in effective deterence. Judgements only produce deterence where they single out a relatively small part of a given industry.

  6. Q says:

    Don’t be ridiculous. First, it will be one hell of a show to watch these telecom companies even survive this. AT&T is going to be watching its customers swarm away like rats leaving a sinking ship, and the absolute last thing they can afford to do is tell those people that they have to jack up prices to pay off the judgment they won. People just won’t stand for it, and if that means smaller companies like QWEST suddenly explode, that’s what will happen. Whether they build their own infrastructure or buy it off of Verizon when they tank, they’ll get the customers.

  7. Paul Wartenberg says:

    The significance of this is, what? That everyone will get a class action payout of $1000, which they will immediately apply to their inexplicable $1200 phone bill that month, with the extra $200 per person going to the lawyers who organize the lawsuit?

    There comes a point where the size of a class gets so large, that it becomes transparently obvious that it’s just a way of transfering money to lawyers, because everybody else is just taking money from one pocket, and putting (some of) it in the other. The supposed plaintifs actually end up worse off as a result of lawsuits like these, and only the lawyers profit.

    Posted by: Brett Bellmore at May 11, 2006 09:33 PM

    There is another reason for filing this lawsuit. Because it will hold the phone companies accountible, and remind them that if someone comes demanding information on us WITHOUT A WARRANT, they should do like Qwest did and ABIDE BY THE LAWS OF THE LAND. It’s not about the money: it’s about holding the companies accountible, if only because the real SOBs breaking the laws can’t be touched (yet).

  8. Paul Wartenberg says:

    Brett, if you’re worried that the lawsuit costs will get shuffled into your next bill, you can always sue again charging that the company is adding frivilous costs to your bill. There are other legal options at hand as well, for example if you’re worried the company’s leadership will be that corrupt or inept you could have the courts appoint a third party (something akin to a legal guardian) to oversee finances and management to ensure nothing that like can happen.

  9. Brett Bellmore says:

    “you can always sue again”

    I neither sued in the first place, nor asked anybody to sue on my behalf. But your solution DOES seem to be a good way of passing yet more money on to the lawyers involved.

    I’d like to see a solution that was optimized for preventing future abuses of this sort, NOT for transfering money into the hands of the legal profession. That’s what I’m concerned about: That the purpose of such suits is just to enrich lawyers, at the expense of the supposed plaintifs. I’ve been involved in two class action lawsuits so far, neither of which I saw any need for, and both of which ended up when all was said and done by leaving me worse off than I started. But they DID leave the lawyers who organized them pretty wealthy, so I suppose they were worth it, right?

    It’s time we dispensed with the pretense that class action lawsuits are for the benefit of the “class”. They’re for the benefit of the lawyers who bring them, with the “class” helplessly along for the ride.

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