Last week, a federal judge in Illinois approved a proposed settlement of a class-action lawsuit brought against AT&T Mobility LLC (“AT&T”).  The lawsuit stems from taxes and fees AT&T assessed on its data plans.  These taxes and fees impacted customers who used their AT&T mobile phones to access the Internet.

Plaintiffs initiated lawsuits in every state, alleging that the taxes and fees imposed by AT&T violated the Internet Tax Freedom Act, which imposed a moratorium on taxes on Internet access services until November 1, 2014.  Eventually, the lawsuits were consolidated before a federal court in Illinois.

As part of the court-approved settlement, AT&T is required to cease imposing taxes and fees on its data services.  In addition, it must seek a refund from state and local governments, on behalf of its customers, of almost $1 billion in erroneously paid taxes.  Disbursing the refunds to customers will be a complicated process due to the fact that AT&T did not retain the taxes and fees collected from its customers.  Rather, it remitted these collected taxes to state and local governments in each state.

While the actual settlement amount exceeded $1 billion, the settlement agreement provides that plaintiffs are entitled to a maximum recovery of $956.16 million, as a result of various state and local statutes of limitations.  AT&T agreed to the settlement without admitting any wrong doing.

Clients with questions regarding this Advisory should contact the attorney assigned to their account.