The AOL List: Law and Disorder

David Cassel (
Wed, 15 Jan 1997 04:30:09 -0800 (PST)

		   L a w   a n d   D i s o r d e r 


"Back in Las Vegas three of my friends were actually arrested for using
AOHELL and so on," one hacker commented.  "Of course, nothing ever stood
up in court because of the fact that they were very good at the 'Whats a
hacker?' shit..." 

AOL acknowledged that hundreds of users avoided paying for their service
using Happy Hardcore's program, AOL4Free.  But there was a positive side. 
One hacker with the password to another user's account ran up monthly
bills over $200--then "decided to be nice," and switched the stolen
account to AOL4Free. 

"It's sad to see AOL prosecute Happy," they commented to the AOL List. 
"They could turn around and use him as a valuable person.  They could use
him to help cover up holes, and anything else." 

There's a precedent.  To fill some of their remote staff positions, AOL
used the subpopulation supplying fake information with free-trial disks. 
One staffer commented that AOL had hired "more than few," who started out
harassing other members with AOHell--and ended up as Guides.  "A few
have been busted before they were hired," the staffer complained.  "And
deaf ears were turned to it."  The former AOL4Free user suggested the same
lenience for Happy Hardcore.  "I sure know that if I was facing 5 years in
prison, and I was still going to college, I would do it." 

Rule-bending appears in transcripts of AOL's Guide-training sessions, too. 
( In one the instructor
reminds trainees of AOL's "Vulgarity Guidelines" -- the words considered
inappropriate for AOL's chat rooms.  "Have you all read and memorized that
list?" the instructor asks his group of trainees.  "Fuck yes!" a trainee

But AOL's law and order stance backfired earlier this year, when they
faced charges that they had improperly skimmed $13 million from users.  In
September a San Francisco judge reviewed a class action alleging their
practice of rounding up minutes -- and rounding forty-five seconds up to
two minutes -- misrepresented the service's cost to customers.  (The $13
million total is especially significant, since the company showed a profit
of just $2 million in 1994, $1.4 million in 1993, and $3.7 million in

AOL's figures show that even though they reported a $35 million loss for
1995, they spent over $8 million defending against the suit.  Yet they
offered only $500,000 in restitution, disposing the remaining claims with
one free hour of service distributed to all subscribers in July. 
According to court documents, 75% of AOL's members weren't even using
their five-hour allotment each month. 

"Court tells AOL to hand out chump change" read the headline on C|Net
radio.  Even court officials seemed skeptical of the settlement.  "Didja
get your free hour yet?" the bailiff smirked shortly before a hearing

He was a Prodigy subscriber. 

The settlement even contained an obscure caveat.  In lieu of cash claims,
the settlement stipulated that current users were paid with free time on
AOL--which expired four months after it was awarded.  "This sucks," one
recipient complained, "as I will never use the time since I never go over
$9.95/month any more having learned about what an ISP is!" They had 16
weeks to use 45 hours of time--and were told by AOL that the time-limit
couldn't be extended "due to the stipulations of the class action

Even worse, AOL announced flat-rate access plans just three months later. 
"Before the ink was dry, they have the right to unlimited hours," attorney
Lawrence Schonbrun argued. 

Yet Monday the attorneys who negotiated this settlement asked the judge
for $2.75 million in fees.  Schonbrun was there to oppose them.  "Contrary
to what they say in their papers, they have not negotiated this settlement
structurally in the best interests of the class.  They have negotiated
AGAINST the best interests of the class.  They should get no sympathy from
the court." 

Schonbrun argued that the settlement negotiated didn't address concerns
raised in their suit.  And he pointed out that the compensation was next
to worthless.  In September he argued, "A penny is worth more than a free
hour that they're never going to use."  While the judge approved the
settlement, he agreed to determine the lawyers' fees later.  "They did
very well," Schonbrun argued Monday.  "For themselves.  That's who they
did very well for."  He told the court, "I am here to give normally silent
class members a voice."  Over 1,000 class members signed the petition at opposing the settlement's terms.  And for over seven years
Schonbrun has taken objections to class action settlements on a pro bono

Schonbrun argued that the lawyers' fees were too high, saying they should
choose their rate from a national average rather than the fees they
customarily charge their own customers.  "In the real world, there's no
rule that a lawyer coming out of law school can't charge whatever he can
get away with.  And if he can get it, people slap him on the back and say
'Great job'."  In previous class actions, attorneys received over $450 an
hour for their time.  And the AOL case's attorneys argued that their rates
should increase.  ("There is a small amount of inflation, our rates have
gone up...")

But the judge held them to a lower hourly fee of $375.  During one recess,
a watching attorney pulled Schonbrun aside and whispered, "You're doing a
hell of a job up there." 

In another windfall, judges multiply the lawyers' fees in a case--often
tripling their award to offset the risks they traditionally take in filing
the case.  "That was when they lost cases," one spectator told me.  Big
companies now routinely pay off suits as a business expense.  (Schonbrun
uses the description offered by one law professor at Yale.  "It's a
shakedown, not unlike what Al Capone did on the South Side of Chicago in
the 1930s.")

But Monday the attorneys found the judge set their "multiplier" at just
2--and refused to allow any multiplier for the period after it became
clear AOL would settle.  This resulted in a 12% reduction in the
attorney's fees.  The money was added to the pool for cash claims, which
AOL had original capped at $500,000.  It now stands at close to $1
million.  If the pool isn't claimed, the judge indicated he wants a say in
how it's distributed. 

The judge may be nostalgic.  Since the case was filed in August of 1995,
he's moved to the criminal circuit.  This meant class action arguments
were heard in San Francisco's Hall of Justice -- near the poor district by
the highway, in the building housing the women's prison.  As arguments
proceeded in September, women passed in the hallway wearing prison
workclothes.  And Monday before AOL's attorneys arrived, the judge heard
cases about marijuana possession and domestic violence.  In the class
action hearing, as Schonbrun pointed out that attorneys object to his
presence at a hearing as much as his actual arguments, the judge smiled,
leaned back in his chair, and nodded. 

But even as his case was wrapping up, five AOL users in California filed a
new class action in Los Angeles, claiming AOL showed "malice" and "fraud" 
for their failure to deliver on their promise of unlimited access.  The
Associated Press reported they were seeking a minimum of $20 million--plus
a court order to stop AOL from selling any more flat-fee service until
they can handle the users they have.  And C|Net noted that new class
actions were also filed in New York and Illinois.  "AOL has been saying in
effect: 'Let them eat busy signals!'," one poster noted on Usenet. 

Ironically, the day after the suits were filed, AOL lost access to content
areas for two hours, according to the Atlanta Journal-Constitution's
"NetWatch".  Even the President of Arlen Communications couldn't get on
Monday night.  "It was painful," he told Reuters, predicting that AOL will
revoke flat-rate access within a few months. 

Last Thursday the Milwaukee Journal Sentinel reported Wisconsin's attorney
general felt AOL's users were entitled to refunds for the level of service
they were receiving.  And several press outlets have noticed homegrown 
software which allows users to stay online without being logged off.

AOL must long for the good old days--when the only people who had
unlimited access to the system were the one's using software by Happy 


In his January letter, Steve Case wrote that "A wide range of new offerings 
our planned for the year ahead."

Case needs to learn how to spell "are".

        David Cassel
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