United Cable v. Burch

• Decision Date: 26 July 1999
• Docket Number: No. 82,82
• Court: Maryland Court of Appeals
• Parties: UNITED CABLE TELEVISION OF BALTIMORE LIMITED PARTNERSHIP v. Louis BURCH et al.

732 A.2d 887

354 Md. 658

UNITED CABLE TELEVISION OF BALTIMORE LIMITED PARTNERSHIP v. Louis BURCH et al.

No. 82, Sept. Term, 1998.

Court of Appeals of Maryland.

July 26, 1999.

Robert E. Youle (Brian G. Eberle, Williams, Youle & Koenigs, P.C., Denver, CO; David P. King, Hogan & Hartson, L.L.P., Baltimore), on brief, for appellant.

Philip S. Friedman (Ifshin & Friedman, P.L.L.C., Washington, DC; Francis J. Gorman, P.C., Charles L. Simmons, Jr., Gorman & Williams, Baltimore), on brief, for appellees.

Patricia Sturdevant, Counsel for Nat. Ass'n of Consumer Advocates, Washington, DC, Michael Tankersley, Counsel for Public Citizen Litigation Group, Washington, DC, Deborah Zuckerman, Sarah Lenz

Lock, AARP Foundation Litigation, Washington, DC, for amicus curiae American Ass'n of Retired Persons.

Alan Rifkin, Rifkin, Livingston, Levitan & Silver, Baltimore, for amicus curiae Nat. Cable Television Ass'n, Cable Telecommunications Ass'n of Maryland, Delaware and the District of Columbia, Nat. Vehicle Leasing Ass'n, Nat. Multi Housing Authority, Nat. Apartment Ass'n, American Seniors Housing Ass'n, Maryland Retailers Ass'n, Intern. Furniture Rental Ass'n and Self-Storage Ass'n.

Argued before BELL, C.J., and ELDRIDGE, RODOWSKY, CHASANOW, RAKER, WILNER and CATHELL, JJ.

ORDER

The Court having considered the two motions for reconsideration and the four motions for leave to file amicus curiae memoranda or briefs, it is this 26th day of July, 1999,

ORDERED, by the Court of Appeals of Maryland, that the motion for reconsideration filed by the appellees, Louis Burch, et al., be, and it is hereby, granted, and, it is further

ORDERED that the opinion of the Court filed on June 8, 1999 be, and it is hereby, withdrawn, and the opinion filed with the date of this Order is substituted in lieu of the opinion filed on June 8, 1999, and, it is further

ORDERED that the motion for reconsideration filed by the appellant, United Cable Television of Baltimore Ltd. Partnership, be, and it is hereby, denied, and, it is further

ORDERED, that the motions of amici curiae to file memoranda, the first filed collectively by National Vehicle Leasing Association; National Multi-Housing Council; National Apartment Association; American Seniors Housing Association; Maryland Retailers Association; International Furniture Rental Association; and Self-Storage Association, the second filed by the Maryland Chamber of Commerce, and the third filed by Telecommunications Association of Maryland, Delaware and the District of Columbia, be, and they are, hereby, granted, and it is further

ORDERED, that the motion of amicus curiae, Maryland Bankers Association for leave to file brief in support of Appellant's motion for reconsideration, with accompanying memorandum of law in support thereof, be, and it is hereby, denied.

/s/ ROBERT M. BELL Chief Judge

RODOWSKY, Judge.

This class action is brought on behalf of consumer subscribers to the cable television service in Baltimore City. The action challenges the five dollar per month late fee that is charged subscribers. The Circuit Court for Baltimore City concluded that this late fee was a penalty and not an enforceable liquidated damages provision, because it unreasonably overestimated the supplier's costs resulting from late payment. We agree that the charge is a penalty, but we arrive at that conclusion because a subscriber's undertaking is a contract to pay money, damages for the breach of which are the principal balance due, with lawful interest.

The respondent, and defendant below, is United Cable Television of Baltimore Limited Partnership (United) which does business as TCI of Baltimore. United is a subsidiary of Telecommunications, Inc. (TCI), a Denver-based company, which owns and operates approximately forty cable franchises. TCI indirectly owns a majority interest in United. For the purpose of providing management support to its various local cable affiliates (cable systems), TCI is divided into geographical divisions. Each division is wholly owned by TCI. The management support provided to United and the other cable systems by the divisions includes legal, human resources, marketing, and accounting.

Approximately 112,000 residents of Baltimore are provided cable services by United. United offers its services on a month-to-month basis.

During the period with which we are concerned, namely, November 7, 1992, to the present, United offered a variety of channel service combinations and selections for which the respective monthly subscription prices varied at different times during the relevant period. The basic plan furnishes the fewest number of channels, and the circuit court used a figure of approximately twenty dollars as the subscription price for basic service.

When first instituted in June 1990, United's late fee was three dollars. The fee was increased to four dollars in February 1992, and it reached the present five dollar level in January 1993. Each time United increased its late fees, it notified customers of the changes by billing inserts.

In billing its customers, United operates on billing cycles which run somewhat in advance of the period of cable service that is being billed. Any given customer's billing cycle begins three days in advance of the approximately thirty day service period for which the bill is sent. Bills become due and payable six days after the commencement of the then current service period. The bills indicate that the late fee is assessed on the fifteenth day of the then current service period. There was testimony that, as a matter of general practice, United did not impose its late fee until a few days after the fifteenth day of the service period. The next succeeding billing cycle begins on the twenty-seventh day of the then current service period. In addition to the subscription price for the immediately forthcoming service period, a bill from United will include any balance carried forward from the prior billing cycle, any payments and credits, any late charge, and the new balance.

The contract between United and a subscriber is illustrated by a document entitled, "IMPORTANT NOTICES TO OUR CUSTOMERS," which reads:

"Charges for service start within 24 hours after service is installed. The charges for one month's service, any deposits, and any installation or equipment-lease fees, are payable when service is installed. After that, we will bill you each month in advance for service....

"The bills you receive will show the total amount due and the payment due date. You agree to pay us monthly by the payment due date for that service and for any other charges due us, including any administrative fees due to late payments or any returned check fees.

"If you do not pay your bill by the due date, you agree to pay us an administrative fee for late payment. The administrative fee is intended to be a reasonable advance estimate of our costs which result from customers' late payments and non-payments. Other fees or charges may also be assessed by your local cable system.

"We do not anticipate that you will pay your bill late and the administrative fee is set in advance because it would be difficult to determine the costs associated with any one particular late payment. We do not extend credit to our customers and the administrative fee is not interest, a credit service charge or a finance charge."

The document further provides that customers are permitted to cancel their cable service at any time without penalty by giving notice.

Both the brochure and a rate card were provided to customers when they subscribed to United's cable services. Rate cards also were printed each month in United's program guide, which is sent to existing customers who order that service. Further, a statement of United's late fee policy was included in an annual customer mailing, and disclosures made on United's standard billing form apprised customers that late charges would be imposed for late payment.

If a customer does not pay a bill when due, United begins its collection process by including a statement in the late-payer's next bill that the account is delinquent and that service will be disconnected if payment is not received. Upon receiving this notification, customers frequently call United in an attempt to clear up their delinquent accounts. United is required to maintain a customer service department, in part, to field the calls that result from the late fee notices. If a customer's account remains delinquent, United programs an automatic dialing system, called the "automatic response unit," to place telephone calls to the customer's residence. At about the same time, United mails a written reminder notice to the late-paying customer. These efforts result in more calls to United's headquarters.

If an account remains delinquent after the phone calls and mailings, the company's employees perform a "soft" disconnection which prevents the late-paying customer from taking advantage of United's cable services and provides a message on the customer's screen to call United. This step generally leads to a third round of calls from customers who wish to reactivate their cable services. Subsequent to soft disconnection, the customer receives two final telephone calls from collection representatives employed by United. During the first call, the representative attempts to make payment arrangements with the customer. The second call warns the customer that hard disconnection is imminent and that the call is the customer's last opportunity to avoid that result.

If the customer's bill remains unpaid, a technician employed by United drives to the customer's residence to seek payment of the bill. If the customer refuses to pay the overdue bill, the technician permanently interrupts the customer's cable service. United employees continue to make telephone calls to the customers after hard disconnect in an attempt to obtain payment of the bills. If these are unsuccessful United at some...