RIM Preparing for a rash of Blackberry Failure Lawsuits

Troubled Canadian mobile phone outfit RIM is about to be sued for taking three days to sort out a fault which shut down its email services worldwide. Last week's problems began with a failure in a European data centre which spread across the world before it began to recover.

Law firms in the United States and Canada are exploring possible consumer lawsuits against Research In Motion and are trying to make up their mind if they have enough common claims against RIM to team up in a single lawsuit.

As might be expected, the lawyers are looking at breach-of-contract or consumer-fraud claims, Reuters reports.

The breach-of-contract argument is based on the fact that RIM failed in its obligations to provide a service and could include carriers for BlackBerry as additional defendants. If the lawyers go for a consumer-fraud claim it would be based on the fact that customers were misled about the reliability of RIM's networks.

While the outage did not rise to the level of seriousness comparable to a dangerous medication or tainted food, it inconvenienced and angered customers. Frustrated BlackBerry users, turning to blogs, message boards, Twitter and Facebook, complained about losing important emails and missing meetings withing the period. 

What might save RIM from the wrath of the courts is that it will be hard to prove damages beyond loss of service. US state laws make the chances of bringing a nationwide consumer-fraud class action remote.

A recent US Supreme Court consumer class-action ruling in April made it more difficult for consumers to sue if a contract they signed with a company demands that disputes be settled through arbitration. RIM has this clause in its contracts. 

"Here, you just have the loss of (BlackBerry) use, so tons of class-action firms are not running to the courthouse steps," said Jay Edelson, a partner with the law firm Edelson McGuire in Chicago, who represents plaintiffs. "But there are definitely consumers motivated to lend their names to the case to make sure these problems don't happen again in the future." 

Because consumers can hire lawyers on a contingency basis, they would not have to fund the litigation, an added incentive, he said. Winning a class action case for BlackBerry users, in turn, would raise the profile of a small or medium-sized law firm. 

RIM has not offered to compensate customers and is offering subscribers access to premium apps "as an expression of appreciation for their patience during the recent service disruptions." The apps will be available for four weeks and are worth more than $100 per customer, RIM claims, but it's not a thrilling list.

If it did pay back customers and service carriers for the days of service lost, the cost to the company has been estimated at $26 million. Given RIM's problems it needs this like a hole in the head. It would be even worse if consumers go to court, because there would be expensive legal costs on top of this. 

BlackBerry devices have experienced similar, but more short-lived outages each year since 2007. The system failures came as RIM struggles to hold on to market share for BlackBerry smart phones, as more customers opt for Apple Inc's iPhone and Google Inc's Android. RIM did not respond to messages seeking comment on potential lawsuits.