Class action claims Redbox charges illegal late fees

Kelly Holleran Oct. 28, 2009, 10:00am



A St. Clair County woman has filed a putative class action lawsuit against Redbox, alleging the company illegally charges excessive late fees despite its promises against such a practice.

In a complaint filed Oct. 21 in St. Clair County Circuit Court, lead class plaintiff Laurie Piechur claims Redbox Automated Retail charges customers who return DVDs after 9 p.m. late fees. However, the company wrongly boasts that it will never charge late fees, Piechur claims.

"The illegal penalties are charged in connection with rented DVDs returned even one minute late," the suit states. "From January 1, 2002 up to present, the class period at issue in this case, Redbox has, on information and belief, collected more than $100 million dollars in illegal and punitive late fees from its customers."

Thomas G. Maag and Peter J. Maag of Wendler Law in Edwardsville and James F. Kelly and Jeffrey A.J. Millar of Brent Coon and Associates in St. Louis represent the plaintiff.

Peichur claims she has rented multiple DVDs from Redbox and was charged excessive late fees when she did not return them before 9 p.m.

"Two of those DVDs were 'Fool's Gold' and '27 Dresses' which were not returned on time such that Plaintiff was charged excessive and illegal late fees along with a 'Maximum Charge,'" the complaint says.

Maximum charges apply only to those DVDs that are not returned within 24 days of the time they are rented, according to the complaint. Customers are billed $25 for the maximum charge and are allowed to keep the DVD, the suit states.

Redbox, a kind of DVD vending machine, began as a trial in Washington, D.C., in 2002, then expanded its test run to Las Vegas in 2003, according to the complaint. Now, the company has expanded its services across the United States and offers 17,000 self-service kiosks, the complaint says.

Many of the Redbox kiosks can be found in grocery stores and consist of a touch screen and sign with a web-linked electronic communications system that allows consumers to rent DVDs directly from the kiosk. Kiosks can store up to 700 DVDs at a time, Peichur claims.

Redbox charges customers $1 for each DVD they rent. For each additional day patrons keep the DVD, they are billed another $1, Peichur claims.

As part of its advertising campaign, Redbox claims its customers are never exposed to late fees. However, Peichur says the company's allegation is a sham.

"Specifically, it imposes the fiction that, if the customer does not return the movie by the 9:00 p.m. deadline, then the customer must have wished to enter into a second rental whereby he would re-rent the movie for an additional rental period for another $1 a night," the suit states. "The customer never actually entered into a contract for a re-rental, nor signed an agreement that contains this re-rental fiction. Instead, the fiction was unilaterally imposed by Redbox upon its customers to covertly impose this $1 late fee."

In fact, Redbox prefers that its customers return their DVDs after the 9 p.m. deadline so that the company can profit from the $1 late fee while simultaneously gaining another $1 if another customer rents the DVD minutes after its late return, according to the complaint.

"So while Redbox boasts that it is the low-cost alternative to renting DVDs elsewhere, and in particular, is a low-cost alternative to stores like Blockbuster that charge upwards of $3-4 per DVD rental, in this scenario, Redbox can effectively double, if not triple its revenue on a single DVD, with virtually no increase in its costs, thus in fact closely matching the point of sales price of its competitors, meaning Redbox is not a lower-cost alternative at all," the complaint says.

The maximum charge of $25, too, is illegal, Peichur claims.

"While Redbox boasts 'the disc is yours to keep' it is only so at prices much higher than compared to retail prices for the same disc, which would not be previously viewed or used," the suit states. "Indeed, Redbox itself only charges $7 for used DVDs at its kiosks – less than one-third the amount it charges its customers for a used DVD. In this scenario, the customer pays an inflated price for an inferior quality disc, compared to what could be purchased brand new at a retail store, or even used from Redbox itself."

Peichur wants the putative nationwide class to be divided in two – a late fees class that returned a Redbox DVD after the 9 p.m. deadline and a maximum charge class that was billed the $25.

Allegations in the seven-count suit include statutory fraud, unfair practice, unlawful penalties, unjust enrichment, violation of the Illinois Rental-Purchase Agreement, violation of the Automatic Contract Renewal Act and violation of the Deceptive Business Practices Act.

Peichur is asking the court to certify the case as a class action and to award a judgment of more than $350,000, plus attorneys' fees and other relief the court deems just.

St. Clair County Circuit Court case number: 09-L-562.

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