Media & Communications Law

AT&T Drops Federal Suit Over $1M Hack-Attack Phone Bill, But Says It Had a Legal Right to Collect

A hard-fought legal battle over a Massachusetts company’s $1 million phone bill quickly racked up, at a rate of $22 per minute, by hackers calling Somalia, came to an abrupt end after news of the dispute captured public attention.

Although still maintaining that it has a legal right to collect, AT&T said in a written statement Monday that it has dropped its federal lawsuit against Michael Smith, reports the Associated Press.

The Ipswich, Mass., businessman had said he could be put into bankruptcy and forced to lay off more than a dozen employees at Todd Tool and Abrasive Systems if AT&T prevailed. Although there seems to be no dispute that hackers are responsible for making $891,470 of phone calls during a four-day period in September 2009, the suit had sought $1.15 million from Smith’s company, including penalties and interest, on two theories, according to the Salem News.

First, AT&T said the phone owner is responsible for the cost of phone calls, under Federal Communications Commission rules, regardless of who makes them—and, according to the newspaper, regardless of the fact that Smith’s company contracted with Verizon, not AT&T, for long-distance phone service.

Second, AT&T contended that Smith’s company had not adequately secured its phone system against hack attacks.

In response, Smith said he had unsuccessfully sought to settle, while racking up some $30,000 in legal bills, and filed counterclaims contending that AT&T had abused the legal process and pointing to consumer protection laws.

An AT&T spokeswoman declined to comment when contacted by the Salem News.

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