VOIP and Social Objectives
Washington, D.C., July 26, 2010 - The FCC celebrated the 20th anniversary of the Americans with Disabilities Act (“ADA”) this month. The FCC held a Technology Showcase featuring exhibitors with telecommunications technology aimed at helping those with disabilities. The Telecommunications Act of 1996 required all telecommunications companies to make telecommunications service and equipment accessible to people with disabilities, if readily achievable. The FCC has repeatedly asked if these obligations should extend to VoIP services. Click to read more.
Verizon to Pay Customers $21M for Early Termination Fee Policy
Washington, D.C., July 20, 2010 - Last month a California appeals court ruled that Verizon must pay customers affected by its early termination fee (“ETF”) policies $21 million. The case related to Verizon’s ETF policy which charged subscribers a flat fee of $175 if they cancelled their contract early. The plaintiffs in the class action suit sued Verizon claiming that their ETF policy violated California consumer protection laws and were unauthorized penalties under Civil Code § 1671. Click to read more.
Select Upcoming FCC Regulatory Deadlines
Washington, D.C., July 12, 2010 - The FCC imposes a number of filing requirements on common carriers and on other related telecommunications companies. Some of these requirements have annual deadlines; others have deadlines systematically throughout the year. Penalties for non-compliance with these and other FCC deadlines can be significant, so regulatory compliance is critical. This is a reminder of certain upcoming deadlines; it is not intended to be a comprehensive list of all filing requirements or deadlines nor is it legal advice. Also, this list does not include any state regulatory filing requirements. We are pleased to provide information regarding other filing requirements at the federal level and filing requirements for any state upon request. Click to read more.
The Future of Broadband: "The Third Way"
Washington, D.C., June 24, 2010 - The FCC continues to seek the best way to regulate broadband and bring it to all Americans. Currently, there are about 100 million Americans who do not have broadband at home. The FCC is striving to increase access to broadband in order to improve businesses, education, healthcare, energy efficiency, and improve safety through faster communication and data services. Click to read more.
Federal Court Rules on Net Neutrality
Washington, D.C., April 7, 2010 - In 2007 several subscribers to Comcast’s high-speed Internet service filed a complaint with the FCC challenging Comcast’s interference with their use of peer-to-peer networking applications. Peer-to-peer programs allow users to share large files directly with one another without going through a central server, but such programs also consume significant amounts of bandwidth. Concluding that it had jurisdiction over Comcast’s network management practices and that it could resolve the dispute through adjudication rather than through rulemaking, the FCC ruled that Comcast had “significantly impeded consumers’ ability to access the content and use of the applications of their choice” and that its method of bandwith management “contravened . . .federal policy.” In re Formal Compl. Of Free Press & Public Knowledge Against Comcast Corp. for Secretly Degrading Peer-to-Peer Applications, 23 F.C.C.R. 13,028, 13052-54, ¶¶ 43, 44 (2008) (“Order”). Click to read more.
FollowUPdateSM on Early Termination Fees
Washington, D.C., July 30, 2008 - Background On June 19, we reported on the FCC's Public Hearing on Early Termination Fees ("ETFs"). At the Hearing called by the FCC, executives from major telecom companies, like Verizon and AT&T, argued that ETFs are consistent with the public interest because they lower the barrier to entry for consumers, thereby allowing consumers who would not normally be able to participate in the wireless markets, to gain entry. On this basis, they urged that the FCC should pre-empt state-laws that currently allow consumers to seek civil remedies against telecom companies based on state consumer protection laws. Click to read more or click here to Listen to a Podcast of this SnapUPdate
Developments Shape the Internet - "Opt-In" Web Tracking
Washington, D.C., July 23, 2008 - For some time, companies like Google and Yahoo have been tracking consumer searches on their own sites “to tailor advertisements to their interests.” Recently, however, the problem has grown as third-party advertising companies have teamed up with phone or cable Internet carriers to track user activities on the Internet more generally. Click to read more or click here to Listen to a Podcast of this SnapUPdate
ACLU Vows to Challenge FISA Immunity Problems
Washington, D.C., July 16, 2008 - The ACLU plans to challenge the FISA bill passed on July 9, 2008, by the Senate. The Foreign Intelligence Surveillance Act (“FISA”) grants telecommunications companies, which helped the National Security Agency spy on Americans, retroactive civil immunity from lawsuits. According to the New York Times, “the new FISA bill clarifies the scope of government intelligence activities, depending on the type and origin of the communication, and provides greater latitude to use technology to track foreign terrorism suspects overseas.” The new version of the bill still requires a warrant to track Americans in the U.S., but does not require permission to track foreign citizens who are oversees, regardless of whether the surveillance passes through domestic-based communication networks. Click to read more or click here to Listen to a Podcast of this SnapUPdate
E-mail Privacy at the Office
Washington, D.C., July 8, 2008 - The introduction of new communications technologies into the workplace has created new privacy concerns for employers and employees. Should an employer have the right to view what an employee is doing on his or her computer while at work or while on company business? Should an employee have an expectation that personal e-mails or documents will be kept private from employers? These are questions that are in the process of being answered by the courts. However, there is still no clear precedent in determining a standard answer to these questions. Click to read more or click here to Listen to a Podcast of this SnapUPdate.
FCC Rules that Verizon May Not Use Customer Proprietary Information In Efforts to Retain Customers
Washington, D.C., July 2, 2008 - The FCC ruled that Verizon Communications, Inc. may not use customer proprietary information in connection with its efforts to retain customers who are attempting to switch to a cable-provided telephone service. The FCC’s ruling came in response to complaints filed by Comcast Corp., Time Warner Cable Inc., who argued that “the practice violated the law because it used proprietary information about customers. Click to read more or click here to Listen to a Podcast of this SnapUPdate.
FCC Holds Public Hearings on Early Termination Fees
Washington, D.C., June 19, 2008 - The Federal Communications Commission held a public hearing regarding early termination fees (“ETFs”) last week. The hearing included members of the industry, experts in economics and law, state regulators, consumer protection advocate representatives from governmental and non-governmental bodies, and individual consumers. All presented their arguments and evidence in favor or against the regulation of ETFs. . Click to read more.
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Evergreen Clauses - Are the Enforeceable?
From an agent’s perspective, including evergreen clauses, which ensure continuing commission payments for the life of the customer, in its agreements with carriers and master agents seems like a good idea. But are they enforceable? As with most legal issues, that depends on many factors, including the contract language and the governing law.
Contract Language. An evergreen clause may extend agent commission payments and typically provide for continuing commission payments on agent-generated revenues following the expiration or termination of the agent agreement. In simple terms, and in our view, an evergreen clause simply means that as long as the carrier gets paid by a customer that the agent generated, the agent gets paid the commission to which he/she is entitled.
However, a typical evergreen clause in an agent agreement might state the following: “Master will pay Agent a commission of __% of gross billed monthly revenues for all services sold by Agent to XYZ Company.” This language leaves open as many questions as it answers. For example, it does not address how long the payment obligation lasts or in what, if any, circumstances the obligation would not apply. Thus, we recommend that language be added that makes it clear that the obligation to pay commissions is absolute, survives termination and continues for as long as the carrier receives payment from a customer acquired by the agent.
Of course, each evergreen clause is different and the terms vary by agreement. Generally, evergreen clauses pertaining to agent commissions should specify the terms under which the commission will be paid, including:
- the commission amount or percentage
- to whom it should be paid
- the items(s) or event(s) are tied
- whether the commission survives the termination of the agent agreement
- any exceptions
- notice requirements
In addition, non-commission-related terms such as those concerning termination are, and should be, separate from the agent’s rights to his/her commissions and should not impact them. While termination generally allows the carrier not to take new business generated by the agent, it does not — and should not — impact the agent’s right to commissions on existing business provided the agreement includes a properly-drafted evergreen clause.
Governing Law. There are many legal cases pertaining to evergreen clauses or “perpetual obligation” terms as they pertain to certain business transactions. For example, federal courts have ruled that evergreen letters of credit must be "clear and unequivocal." They also have upheld evergreen clauses in collective bargaining agreements. However, few, if any, cases have addressed evergreen clauses as applied to agent commission agreements. This either means that evergreen clauses have been well written and crystal clear; that they are incredibly one-sided and favor the carrier/master; or that agents don’t have the time, will, desire or resources to take on well-heeled multinational corporations. Given the number of recent disputes regarding agent commission payments, we suspect that the lack of evergreen clause cases is a function of agents facing pro-supplier agreements and the prospect of protracted litigation to enforce the agent agreement.
To the extent that evergreen clauses include or may be considered to be automatic renewal or perpetual clauses, state statutes may govern them. In New York, for example, a statute prohibits automatic renewal of contracts for service to, or repair of, personal or real property unless the service provider notifies the other party of the auto-renewal provision 15 to 30 days before the termination notice is due under the contract. So far this statute has not been applied to professional services, although it has been used successfully to prohibit the automatic renewal of an answering service agreement. It is therefore critical to ensure that evergreen clauses in agent agreements apply to professional services, such as generating customers, as opposed to the underlying telecommunications services.
In addition, an agent agreement including future perpetual interest could run afoul of state proscriptions against perpetual interests, or perpetuities. Agents should therefore ensure that they have an existing right to a commission, rather than a contingent right based on future undetermined or unidentified events. This means that the commission should be specific, tied to a particular metric or revenue stream, and it should specify the particular time period during which the commission will be paid, including whether it survives the termination of the agent agreement. A vague commission that is not tied to a particular metric, revenue stream or triggering event invites litigation and puts the agent’s commission at risk. Evergreen clauses that are clearly drafted, unambiguous and precise as to their terms and scope have a better chance of surviving a legal challenge than those that are not.
Given that the enforceability of evergreen clauses as applied to agent agreements depends on many factors, they should be drafted and reviewed in advance by competent legal counsel. Clearly written, precise, unequivocal and unambiguous vested-interest evergreen clauses are clearly enforceable and they should be used to the extent possible to protect the agent’s commissions. Vague and ambiguous evergreen clauses run the risk of being ignored or misunderstood and invite lengthy and costly litigation with an uncertain outcome.
Craig Dingwall is an attorney with Technology Law Group. He can be reached at +1 202 895 1707 or by e-mail at cdingwall@tlgdc.com. The opinions expressed in this article are those of the author alone, and are not and should not be construed as legal advice.
We encourage interested persons to comment on this and other matters of interest on the webs first interactive telecommunications blog: http://blog.tlgdc.com/
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