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Class Action Lawsuit Insanity
Posted June 29, 2004 – 11:44 am by Yakov Shafranovich in Personal, PoliticsGoing through some paperwork recently, I ran across a settlement notice from the insurance company insuring my wireless phone (if you had a Treo 600, you would do it too). Well guess what - I get a phone card with upto 50,000 minutes (yeah right) that expires in 180 days valued at at least $5.00. The lawyers get $1,250,000 in cold hard cash (yep, that’s a million). Of course, an objection can always be filed - but then again, will anyone read it?
After doing some more calculations, I am coming up with an interesting result. There is a total of 50,000,000 minutes alloted for these phone cards at the retail value of $0.10/minute. This comes out to a total of $5 million dollars. The minimum value of each card is $5 which comes out to about 1 million potential people that will receive them. HOWEVER, if we take into account the wholesale value of phone cards which can be as low as $0.01 or $0.02, then the value of the settlement drops to somewhere between $500,000 to $1 million. Take into account that they also expire in 180 days and it looks like a very good deal for the defendands. At the same time, the lawyers are seeking $1.25 million in cash which can possible dwarf the settlement itself.
What would have made a bit more sense is alloting straight $5 million in cash among the possible 1 million people. But then again, this is our legal system.
UPDATE: I decided to submit an objection to the court. A copy in PDF format can be found here.
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One Response to “Class Action Lawsuit Insanity”
By my calculations shown below, the proposed settlement will actually part the defendants with less than $8,230.45. This is, of course, in addition to the $1,250,000 in attorneys’ fees.
50,000,000 x 60 = 3,000,000,000
50,000,000 long distance minutes equals 3,000,000,000 seconds.
A compression method that gives good quality sound results in a higher data rate. This type of a digital voice communication can take up to 4 kilobytes per second. Note that most of the time they use more compression which results in a lower quality of communication and lower required data rate, usually around 1 to 2.5 kilobytes per second. I use the high data rate of 4 kilobytes per second in these calculations.
3,000,000,000 * 4 = 12,000,000,000
12,000,000,000 / 1,000,000,000 = 12
3,000,000,000 seconds of voice communication at 4 kilobytes per second would make 12,000,000,000 kilobytes of data, which can be represented as 12 terabytes of data.
I just got an average price quote for a 45 megabits per second T3 connection at $9,000 to $10,000 per month. This is the price offered to large businesses and corporations, so it still is not the bottom line that the phone companies themselves are paying. I will use the high estimate of $10,000 in my calculations.
45 / 8 = 5.625
45 megabits per second is 5.625 megabytes per second because there are 8 bits in a byte.
30 * 24 * 60 * 60 = 2,592,000
There are 2,592,000 seconds in 30 days.
5.625 * 2,592,000 = 14,580,000
14,580,000 / 1,000,000 = 14.58
5.625 megabytes per second for 2,592,000 seconds comes out to 14,580,000 megabytes.
So this T3 connection could transmit 14,580,000 megabytes, or 14.58 terabytes, of data per month.
So far I have shown that there is 12 terabytes of voice data to be communicated and that a T3 connection could transmit 14.58 terabytes in a month.
12 / 14.58 = 0.823045267
12 terabytes is 82.3 percent of 14.58 terabytes.
0.823045267 * 10,000 = 8230.452674897
So $8,230.45 is the fraction of the $10,000 monthly bill for the T3 that the voice data requires.
The T3 connection used in this calculation is used to determine the approximate value of the bandwidth required to transmit the voice data. In reality, long distance voice data is traveling over much larger pipes where per peta/terra/giga/mega/kilo-byte charges are considerably lower.
So by these calculations, the defendants pay out phone cards at a monetary value of $8,230.45 (which is a considerably high estimate) and will write it off on their taxes as a loss of $5,000,000.
The proposed settlement does not hold the defendants accountable for the proposed charges and furthermore does not demand a sufficient recovery for the class and therefore is not fair, not reasonable, not adequate, and not in the best interests of the class.
By Andrew LeBaron on Aug 4, 2004