, Salem, MA

November 3, 2012

After hangups, suit over $1 million phone bill settled

The Salem News

---- — IPSWICH — Remember that Ipswich small business owner who was hauled into federal court by telecommunications giant AT&T over a $1 million phone bill for calls to Somalia no one at the company made?

And remember how AT&T immediately announced it was dropping the suit the same morning that a Salem News story about Michael Smith’s plight went viral back in July?

Well, it turns out things weren’t quite over. After Smith, the owner of Todd Tool and Abrasives, announced that he was still going to pursue a claim for legal expenses against AT&T, the litigation dragged on for another four months.

But last week, both sides finally signed off on a settlement — a confidential settlement — that ended the case, according to documents filed in U.S. District Court.

Neither side is talking but court papers show that the battle went on for nearly two months longer before the two sides entered mediation at the end of August.

In the meantime, there continued to be legal wrangling over requests from Todd Tool’s lawyer for additional information from AT&T, after the telecom disclosed information that suggested that it knew about the unauthorized calls on the first day they were being made, Sept. 19, 2009, but allowed them to continue for another five days before shutting them down.

“That AT&T was aware of the calls to Somalia and permitted them to continue for five days so that it could then bill Todd Tool at the rate of $22 per minute indicates that AT&T came to this litigation with unclean hands and supports the conclusion that AT&T acted in bad faith in pursuing this action against Todd Tool,” lawyer Donna Mandriota wrote in August.

Smith, the owner of the small, 14-employee company on Route 1, had spent more than $40,000 in legal bills fighting the phone charges for three years before it hit the press. And in an interview last summer, he said he wanted to be compensated for that expense.

So the battle continued. Mandriota filed a response to AT&T’s motion to dismiss in which she noted that while AT&T was relying on a provision in federal regulations that allowed it to bill for calls even when they’re unauthorized, the company failed to follow a requirement that the bill be sent to the customer’s own service provider, in this case, Verizon.

Instead, AT&T began billing Smith directly for most of the calls. Nor could AT&T prove that it ever notified Todd Tool immediately after it discovered the calls being made, as the telecom claimed in its suit, Mandriota charged in the court filing. Meanwhile, AT&T was seeking to delay a deposition until a judge issued a “protective order” barring the disclosure of what it considered proprietary information about how it handles allegedly fraudulent calls, according to court papers.

But in late August, the two sides sat down with a court-appointed mediator and began working out an agreement to end the case.

After several delays, that agreement was filed on Oct. 25. Kate MacKinnon, a spokeswoman for AT&T, said the company has no comment.

Efforts to reach Smith or his attorney by phone and email on Friday were unsuccessful.


Courts reporter Julie Manganis can be reached at 978-338-2521, via email at or on Twitter @SNJulieManganis.