Whistleblower Case Against Nations Largest Wireless Carriers Moves Forward

Suit Claims Verizon, AT&T, Sprint, and T-Mobile Overcharged California Government Customers in Excess of $100 million

SAN FRANCISCO -The nation’s largest wireless providers can’t escape any part of a lawsuit claiming they overcharged California pp government customers more than $100 million, a California court ruled on September 13.

The Honorable Judy Holzer Hersher in the Superior Court of California in Sacramento County denied several demurrers, a California procedural hurdle similar to a motion to dismiss, filed by the defendants Verizon, AT&T, Sprint, and T-Mobile. The case will now move to the discovery, or evidence-gathering, phase.

The fraud case alleges that the wireless companies overcharged government customers more than $100 million by failing to meet “rate plan optimization” requirements. The case was originally filed under the California False Claims Act in 2012 and unsealed in December 2015. In all, 43 California government entities, including the University of California, the California State University system, and some of the largest counties in the state, have intervened in the qui tam lawsuit.

The Court soundly rejected the defendants’ three demurrers. The wireless carriers argued that the government customers failed to state facts sufficient to constitute a cause of action.  The defendants also urged that the government customers’ allegations were publicly disclosed, and that the contract language precluded the lawsuit. The Court dismissed all three arguments, concluding that the detailed complaint presented sufficient allegations to support the claims that the defendants knowingly defrauded the government customers. The Court also held that no prior public disclosure of the government customers’ fraud allegations occurred, and that the government customers reasonably interpreted the contract to require the defendants to provide valuable cost-saving measures.

Constantine Cannon LLP represents the state and local government interveners and the whistleblower, OntheGo Wireless, LLC.

The wireless companies are alleged to have purposefully ignored two cost-saving requirements included in master contracts under which theCalifornia state and local government customers bought wireless services. Under the contracts, the carriers were required to determine and report to the government customers which rate-plan selections would result in the lowest cost, referred to as “rate plan optimization,” and to provide wireless services at “the lowest available cost.” Selecting the rate plan that best matches usage patterns reduces costs by 20-30% over the term of a contract. The carriers’ failure to live up to their contractual promises, the lawsuit alleges, resulted in overcharges to the government of more than $100 million.

“We are pleased that the Court rejected the wireless carriers’ efforts to escape their obligations to government customers,” said Anne Hayes Hartman, a partner at Constantine Cannon who is co-lead counsel on the case. “It is unconscionable that these companies defrauded hundreds of government entities in California.”

“The judge was correct in dismissing the wireless carriers’ objections,” said Wayne T. Lamprey, a partner at Constantine Cannon, who, with Hartman, heads the government customers’ legal team. “We look forward to moving on to the next phase of the case and recovering the damages taxpayers were cheated out of.”

The suit was brought by OntheGo Wireless, a pioneer in the field of rate-plan optimization.

The case is State of California et al. ex rel. OntheGo Wireless, LLC v. Cellco Partnership et al., Case No. 34-2012-00127517 (Super. Ct. Cal., Sacramento County).

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