United States District Court, Northern District of Illinois, E.D
April 4, 1985
THE BRUSS COMPANY, AN ILLINOIS CORPORATION, AND HINCKLEY & SCHMITT, INC., AN ILLINOIS CORPORATION, INDIVIDUALLY AND ON BEHALF OF ALL OTHER PERSONS SIMILARLY SITUATED, PLAINTIFFS,
ALLNET COMMUNICATION SERVICES, INC., AN ILLINOIS CORPORATION, MICHAEL P. RICHER, MELVYN J. GOODMAN, ROBERT F. DOWNING, AND JULIA A. VINSON, DEFENDANTS.
The opinion of the court was delivered by: Nordberg, District Judge.
MEMORANDUM OPINION AND ORDER
This action is before the court on joint motion of all
defendants to dismiss plaintiffs' Second Amended Complaint.
For the reasons set forth below, defendants' motion is granted
in part and denied in part.
Defendant Allnet Communication Services, Inc. ("Allnet") is
a provider of long distance telephone service. It is subject
to the Federal Communications Act of 1934, 47 U.S.C. § 201 et
seq., and to the rules, regulations, directions and orders of
the Federal Communications Commission ("FCC"). The individual
defendants, Michael P. Richer, Melvyn J. Goodman, Robert
F. Downing, and Julia A. Vinson, are executives, officers
and/or directors of Allnet. Plaintiffs, The Bruss Company and
Hinckley & Schmitt, Inc., are both former subscribers to
Allnet's long distance telephone service.
Plaintiffs have sued under various legal theories, on behalf
of themselves and others similarly situated, for alleged
overcharges by Allnet for long distance service. In Counts I
and II, plaintiffs allege alternate violations of the
Racketeer Influenced and Corrupt Organizations Act ("RICO"),
18 U.S.C. § 1961-1968. Count III alleges a cause of action
under the Federal Communications Act of 1934 ("Communications
Act"), 47 U.S.C. § 201 et seq. The remaining counts allege
state law claims for common law fraud (Count IV), violations of
the Uniform Deceptive Trade Practices Act, Ill.Rev.Stat. ch.
121 1/2, § 311 et seq. (Count V), and violations of the
Illinois Consumer Fraud & Deceptive Business Practices Act,
Ill.Rev.Stat. ch. 121 1/2, § 261 et seq. (Count VI).
All six counts are based on the same principal allegations
of overcharge and fraud. Plaintiffs essentially allege that
defendants charged plaintiffs and other long distance
subscribers rates in excess of the tariffs filed with the FCC.
These overcharges were allegedly accomplished in three ways:
(1) by inflating the distance in miles for "800 service"
calls, for which charges are based on the distance between the
network switching center and the place called; (2) by
inflating the mileage component for normal calls placed
through new switching centers, and (3) by billing calls to
cities in the Allnet systems, for which lower rates were to be
charged, at the higher rates for cities not within the Allnet
system. Plaintiffs allege that all the defendants conspired
together to conceive, and then implemented, the overcharge
system as a scheme to defraud class members.
Motion to Dismiss
The defendants have moved to dismiss all six counts of the
complaint on various grounds. In considering a Rule 12(b)(6)
motion to dismiss, a complaint should not be dismissed unless
it appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim that would entitle him to the
relief requested. Cruz v. Beto, 405 U.S. 319, 323, 92 S.Ct.
1079, 1081, 31 L.Ed.2d 263 (1972); Conley v. Gibson,
355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). The court
must accept as true all material facts well pleaded in the
complaint, and must make all reasonable inferences in the light
most favorable to the plaintiff. City of Milwaukee v. Saxbe,
546 F.2d 693, 704 (7th Cir. 1976). The court need not strain,
however, to find inferences available to the plaintiff which
are not apparent on the face of the complaint. Coates v.
Illinois State Board of Education, 559 F.2d 445, 447 (7th Cir.
Counts I and II — RICO
In their original motion to dismiss, filed before the 7th
Circuit Court of Appeals issued its decision in Haroco, Inc. v.
American National Bank & Trust Company, 747 F.2d 384 (7th Cir.
1984), defendants argued that plaintiffs' RICO counts were
deficient for failure to allege a "RICO injury." The Haroco
decision squarely rejected any requirement of alleging a "RICO
injury," and defendants have since abandoned this argument.
Defendants also advance a number of other arguments for
dismissal of the RICO counts. They assert that plaintiffs have
failed to plead the fraud alleged against the individual
defendants with sufficient particularity to satisfy Rule 9(b)
of the Federal Rules of Civil Procedure. Rule 9(b) provides
In all averments of fraud or mistake the
circumstances constituting fraud or mistake shall
be stated with particularity. Malice, intent,
knowledge, and other conditions of mind of a
person may be averred generally.
This requirement of greater specificity is intended to protect
defendants from the harm that results from charges of serious
wrongdoing, and to give the defendants
notice of the conduct complained of. D & G Enterprises v.
Continental Illinois National Bank, 574 F. Supp. 263, 266-67
(N.D.Ill. 1983); Todd v. Oppenheimer & Co., Inc., 78 F.R.D.
415, 419 (S.D.N.Y. 1978), citing Segan v. Dreyfus Corp.,
513 F.2d 695, 696 (2nd Cir. 1975). As the court in D & G
Enterprises noted, complaints alleging fraud should seek
redress for a wrong, rather than attempt to discover unknown
wrongs. 574 F. Supp. at 266, citing Gross v. Diversified
Mortgage Investors, 431 F. Supp. 1080, 1087 (S.D.N.Y. 1977),
affirmed, 636 F.2d 1201 (2nd Cir. 1980).
However, Rule 9(b) must be read together with Rule 8, which
requires a plain and concise statement of the claim.
Tomera v. Galt, 511 F.2d 504, 508 (7th Cir. 1975). Therefore,
although a plaintiff must allege with particularity the
specific acts comprising the fraud, he need not plead detailed
evidentiary matters. The allegations should describe the
circumstances constituting the fraud, including the time, place
and contents of the false representations, as well as the
identity of the party making the misrepresentation. D & G
Enterprises, 574 F. Supp. at 267.
Moreover, when there are allegations of a fraudulent scheme
with multiple defendants, the complaint must inform each
defendant of the specific fraudulent acts which constitute the
basis of the action against each particular defendant.
Id.; Adair v. Hunt International Resources, 526 F. Supp. 736,
744 (N.D.Ill. 1981); Lincoln National Bank v. Lampe,
414 F. Supp. 1270, 1278-79 (N.D.Ill. 1976).
In this case, plaintiffs have made specific allegations of
the manner in which the alleged fraud or overcharges were
carried out by Allnet as a corporation. As noted above, the
complaint specifies the three ways in which Allnet allegedly
overcharged its customers. Viewing these allegations in light
of the standards under Rules 9(b) and 8 discussed above, the
court finds that these allegations plead fraud with sufficient
particularity with respect to Allnet. However, with respect to
the individual defendants, the complaint fails to include any
allegation as to how any individual defendant participated in
the fraud. The complaint merely alleges that Allnet and the
individual defendants schemed to defraud customers by
overcharging them, and then describes the types of
overcharges. Nowhere does the complaint specify any act by any
particular defendant through which the fraud was carried out.
The individual defendants are merely "lumped" together with
Allnet and accused of performing the same fraudulent acts.
Under Rule 9(b) and the cases discussed above, these
allegations are clearly insufficient to support claims of
fraud against the individual defendants.
Plaintiffs' response to their failure to plead any
individual acts by individual defendants is that defendants
have destroyed documents which would support their claim of
fraud, and otherwise hindered detection of their wrongdoing.
These unsupported allegations are insufficient to withstand
scrutiny under Rule 9(b). As the court in D & G Enterprises
noted, plaintiff should not make serious accusations of fraud
until they have ascertained what wrongs have been committed;
fraud should not be alleged in the hope of later discovering
some. 574 F. Supp. at 266.
The Seventh Circuit has relaxed the requirement of pleading
fraud with particularity in cases where matters are
particularly within the knowledge of the opposing party. In
these circumstances, allegations based "on information and
belief" may be sufficient, but the allegations must be
accompanied by a statement of facts upon which the belief is
founded. Duane v. Altenburg, 297 F.2d 515, 518 (7th Cir. 1962);
D & G Enterprises, 574 F. Supp. at 267. Thus, even when
particular facts are solely within the knowledge of the
defendant, the plaintiff must still make sufficient particular
allegations based "on information and belief," and submit a
statement of the facts upon which the belief is based.
In this case, plaintiffs have failed to make any particular
allegations of any individual defendant's conduct, even "on
and belief," and plaintiff has not, and apparently is unable
to, proffer any statement of facts on which such allegations
could be based. Plaintiffs have therefore failed to meet the
standard of Rule 9(b) for pleading fraud against the
individual defendants. Accordingly, plaintiffs' claims against
the individual defendants in Counts I and II must be
In Count I, plaintiffs allege that Allnet and all the
individual defendants together defrauded plaintiffs in
violation of §§ 1962(a), (b), (c) and (d). In Count II,
plaintiffs alternatively allege that only the individual
defendants, and not Allnet, defrauded plaintiffs in violation
of § 1962(a), (b), (c) and (d). Since the allegations against
all the individual defendants are fatally defective, Count II
must be dismissed in its entirety. However, the analysis with
respect to Count I is more complex.
Although the claims against the individual defendants in
Count I must be dismissed, Allnet remains as a "person"
alleged to have violated § 1962(a), (b), (c) and (d). The court
must therefore address another argument raised by defendants:
whether Allnet can be both the person who violates RICO and the
enterprise through which the violation of RICO has been carried
The Seventh Circuit Court of Appeals has recently addressed
this issue in Haroco, Inc. v. American National Bank,
747 F.2d 384 (7th Cir. 1984). In Haroco, the court considered both the
statutory language and the legislative intent of section
1962(a) and (c). Section 1962(c) provides:
(c) It shall be unlawful for any person employed
by or associated with any enterprise engaged in,
or the activities of which affect, interstate or
foreign commerce, to conduct or participate,
directly or indirectly, in the conduct of such
enterprise's affairs through a pattern of
racketeering activity or collection of unlawful
The court first noted that a corporation satisfies the
definitions of both a "person" and an "enterprise" under
section 1961. 747 F.2d at 400. The court then considered
whether the act nevertheless requires that the person and the
enterprise be separate entities. Focusing on the language of
§ 1962(c), the court observed that the provision requires that
the liable person be "employed by or associated with any
enterprise" which affects commerce. The court reasoned that the
use of the terms "employed by" and "associated with" appears to
contemplate that the person be distinct from the enterprise.
The court therefore concluded that, for an action under §
1962(c), the "person" alleged to have violated the provision
must be an entity separate and distinct from the "enterprise"
through which commerce was affected. Id.
Employing the same analysis to § 1962(a), however, the court
reached the opposite result. Section 1962(a) provides:
(a) It shall be unlawful for any person who has
received any income derived, directly or
indirectly, from a pattern of racketeering
activity or through collection of an unlawful
debt in which such person has participated as a
principal within the meaning of section 2, title
18, United States Code, to use or invest,
directly or indirectly, any part of such income,
or the proceeds of such income, in acquisition of
any interest in, or the establishment or
operation of, any enterprise which is engaged in,
or the activities of which affect, interstate or
foreign commerce. . . .
Once again, the court focused on the language of subsection
(a), and determined that, in contrast to subsection (c),
subsection (a) does not contain any language requiring that
the "person" and the "enterprise" be distinct. It does not
require that the person be employed by or associated with, the
enterprise, or contain any other language implying that the
two entities must be distinct. The court also emphasized that
subsection (a) prohibits the use of income from racketeering
in the "operation" of the enterprise, implying that the
legislature must have envisioned a corporation using the
proceeds of racketeering activity in its own operations. The
court therefore concluded that, in actions under
subsection (a), the person liable and the enterprise may be
the same entity, i.e., "the person liable may be a corporation
using the proceeds of a pattern of racketeering activity in its
operations." Id. at 402.
The court found this interpretation of subsections (a) and
(c) consistent with the idea that corporations should not be
liable if they are merely victims of a fraud perpetrated by
lower-level employees, but that a corporation should be held
liable if it has itself been a perpetrator of the fraud. Thus,
under subsection (a), a corporation can be held liable if it
is a perpetrator, or the direct or indirect beneficiary of the
pattern of racketeering, but under subsection (c), where the
corporation is merely the "victim, prize, or passive
instrument" of racketeering, the corporation cannot be liable.
747 F.2d at 402.
In this case, as noted above, plaintiffs have alleged in
Count I violations of § 1962(a), (b), (c) and (d). Since Allnet
is the only remaining entity in Count I, it must serve as both
the person liable and the enterprise. Under Haroco, the claim
under § 1962(c) must be dismissed for failure to allege an
enterprise separate and distinct from the "person" liable.
However, the claim under § 1962(a) cannot be dismissed on this
basis, since, under Haroco, Allnet may serve as both the
"person" and the "enterprise."
The Haroco court did not address whether the "person" and the
"enterprise" must be distinct under § 1962(b). However,
applying the same analysis, it appears that, as with subsection
(c), the same entity may not serve as both "person" and
"enterprise." Section 1962(b) provides:
(b) It shall be unlawful for any person through a
pattern of racketeering activity or through
collection of an unlawful debt to acquire or
maintain, directly or indirectly, any interest in
or control of any enterprise which is engaged in,
or the activities of which affect, interstate or
Although this provision does not contain the language in
subsection (c) requiring that the person be employed by or
associated with the enterprise, it does require that the
person "acquire or maintain" an "interest in or control of"
any enterprise. Like the language in subsection (c), this
language implies that the person acquiring an interest in or
control of the enterprise must be separate from the enterprise
itself. As with subsection (c), the language contemplates that
the enterprise is the victim, not the perpetrator, of the
crime. Separate entities must therefore fill the roles of the
"person" and the "enterprise." And, unlike subsection (a),
subsection (b) does not refer to the use of funds in the
"operation" of the enterprise, making unlikely the inference
that the legislature intended subsection (b) to cover a
corporation using the proceeds of racketeering activities for
its own operations. The court therefore concludes that, for a
cause of action under § 1962(b), the person liable and the
enterprise must be two distinct entities. In this case, since
Allnet cannot serve as both "person" and "enterprise,"
plaintiffs' claim in Count I under § 1962(b) must also be
The only remaining claim in Count I is under § 1962(d), which
makes unlawful conspiracies to violate § 1962(a), (b) and (c).
Since a conspiracy necessarily requires more than one person,
and the allegations with respect to the individual defendants
have been dismissed, plaintiffs' cause of action under §
1962(d) must also be dismissed.
Accordingly, the court dismisses all causes of action
alleged in Count I, except for plaintiffs' cause of action
under 18 U.S.C. § 1962(a) against Allnet only. Plaintiffs are
granted leave to file an amended complaint within 21 days from
the date of this order. If an amendment is filed, defendants
are granted 21 days to answer or otherwise plead.
Count III — Federal Communications Act
In Count III, plaintiffs allege that defendants have
violated section 203(c) of Title II of the Communications Act
of 1934, as amended, 47 U.S.C. § 203(c), by charging plaintiffs
rates in excess of its rate schedules filed with the FCC.
Section 203(c) provides:
(c) No carrier, unless otherwise provided by or
under authority of this chapter, shall engage or
participate in such communication unless
schedules have been filed and published in
accordance with the provision of this chapter and
with the regulations made thereunder; and no
carrier shall (1) charge, demand, collect, or
receive a greater or less or different
compensation for such communication, or for any
service in connection therewith, between the
points named in any such schedule than the
charges specified in the schedule then in effect,
or (2) refund or remit by any means or device any
portion of the charges so specified, or (3)
extend to any person any privileges or facilities
in such communication, or employ or enforce any
classifications, regulations, or practices
affecting such charges, except as specified in
Defendants assert that plaintiffs' claims under the
Communications Act must be dismissed and referred to the FCC
under the doctrine of primary jurisdiction. This doctrine
requires courts to defer to administrative agencies issues
intended by Congress to be within an agency's expert
discretion. The Supreme Court described this doctrine in
United States v. Western Pacific Railroad Co., 352 U.S. 59,
63-64, 77 S.Ct. 161, 165, 1 L.Ed.2d 126 (1956), in which it
The doctrine of primary jurisdiction, like the
rule requiring exhaustion of administrative
remedies, is concerned with promoting proper
relationships between the courts and
administrative agencies charged with particular
regulatory duties . . . "Primary
jurisdiction" . . . applies where a claim is
originally cognizable in the courts, and comes into
play whenever enforcement of the claim requires the
resolution of issues which, under a regulatory
scheme, have been placed within the special
competence of an administrative body; in such a
case the judicial process is suspended pending
referral of such issues to the administrative
body for its views. General American Tank Car Corp.
v. El Dorado Terminal Co., 308 U.S. 422, 433, 60
S.Ct. 325, 331, 84 L.Ed. 361.
Courts have applied this doctrine to require deferral to
administrative agencies of matters that call for the exercise
of an agency's discretion and expertise. For example, a
dispute as to whether a carrier's rates or practices are
reasonable has uniformly been deemed to be within the primary
jurisdiction of the appropriate regulating agency. As the
court held in Danna v. Air France, 463 F.2d 407
, 409 (2nd Cir.
It is beyond dispute that claims that filed
tariffs are either unreasonable in amount or
unduly discriminatory in effect are questions
that in the first instance must be determined by
the agency with the tariffs are filed. Any
attempt to sue in federal court or in state court
on such claims without first obtaining an agency
determination of unreasonableness or undue
discrimination fails to state a cause of action.
See also Montana-Dakota Utility Co. v. Northwestern Public
Service Co., 341 U.S. 246
, 251, 71 S.Ct. 692, 695, 95 L.Ed. 912
(1951); Detroit, Toledo and Irontown Railroad Co. v.
Consolidated Rail Corp., 727 F.2d 1391
, 1394-95 (6th Cir.
1984); Booth v. American Telephone and Telegraph Co.,
253 F.2d 57
(7th Cir. 1958).
However, when a party before a court challenges not the
reasonableness of a tariff but only whether the carrier has
failed to abide by the tariff, no issues requiring agency
discretion or expertise are raised. As the court in Danna v.
supra, noted, quoting from Pennsylvania Railroad Co. v. Puritan
Coal Mining Co., 237 U.S. 121, 131-32, 35 S.Ct. 484, 488, 59
L.Ed. 867 (1915):
But if the carrier's rule, fair on its face, has
been unequally applied and the suit is for
damages, occasioned by its violation or
discriminatory enforcement, there is no
administrative question involved, the courts
being called on to decide a mere question of fact
as to whether the carrier has violated the rule
to plaintiff's damage. Such suits though against
an interstate carrier for damages arising in
interstate commerce, may be prosecuted either in
the state or federal courts.
463 F.2d at 410.
The court in Detroit, Toledo, supra, recently succintly
summarized the law on this matter, stating:
The rule which emerges from an examination of
representative decisions is that federal courts
should decide issues relating to purely
commercial transactions between regulated
carriers and should perform their judicial
function of interpreting and enforcing contracts
between such parties except when such judicial
action results in interference with the functions
congress has placed in the hands of the
727 F.2d at 1396.
In this case, plaintiffs allege only that Allnet filed
tariffs with the FCC, and then charged plaintiffs rates in
excess of those stated in the tariffs. Thus, plaintiffs
challenge only whether the tariff has been violated by Allnet,
not whether the rates set were reasonable. The court is not
called upon to set or in any way alter a tariff filed with the
FCC. A decision in the merits in this case therefore requires
no exercise of an administrative discretion, nor would it
affect the overall regulatory scheme. The court need only
decide whether the tariffs were in fact violated, a matter
clearly within the province of the federal courts. The
doctrine of primary jurisdiction is therefore inapplicable to
this case. Accordingly, defendants' motion to dismiss Count
III is denied.
Counts IV, V and VI — State Law Claims
The remaining counts, Count IV, V and VI, allege common law
fraud (Count IV), violations of the Uniform Deceptive Trade
Practices Act, Ill.Rev.Stat. ch. 121 1/2, § 311 et seq. (Count
V), and violations of the Illinois Consumer Fraud & Deceptive
Business Practices Act, Ill.Rev.Stat. ch. 1211/2 § 261 et seq.
(Count VI). Defendants have moved to dismiss all three state
law claims on the basis that they are preempted by the FCC Act.
Defendants rely primarily on Ivy Broadcasting Co. v. American
Telephone & Telegraph Co., 391 F.2d 486 (2nd Cir. 1968). In
Ivy, the court addressed whether, in the absence of diversity
jurisdiction, a federal court has jurisdiction over a claim for
negligence and breach of contract in connection with telephone
services provided by carrier regulated by the Communications
Act. Although the court found that the remedy sought by
plaintiffs was not available under the Act, it held that
federal jurisdiction could be based on federal common law
emanating from the act. The court observed that the broad
statutory scheme embodied in the Act indicates a Congressional
intent to occupy the field to the exclusion of state law. 391
F.2d at 490. The Court then concluded that:
[Q]uestions concerning the duties, charges and
liabilities of telegraph or telephone companies
with respect to interstate communication service
are to be governed solely by federal law
and . . . states are precluded from acting in this
area. Where neither the Communications Act nor the
tariffs filed pursuant to the Act deals with a
particular question, the courts are to apply a
uniform rule of federal common law.
391 F.2d at 491.
Relying on this language, defendants assert that all state
law claims relating to
matters governed by the Communications Act are preempted by
the Act. Defendants ignore, and the Ivy court did not address,
however, the "savings clause" embodied in section 414 of the
Act, 47 U.S.C. § 414, which provides:
Nothing in this chapter contained shall in any
way abridge or alter the remedies now existing at
common law or by statute, but the provisions of
this chapter are in addition to such remedies.
The Supreme Court interpreted an identical "savings clause"
in Nader v. Allegheny Airlines, Inc., 426 U.S. 290, 96 S.Ct.
1978, 48 L.Ed.2d 643 (1975), in which the Court upheld the
plaintiff's common law claim for fraudulent misrepresentation
against an air carrier subject to regulation by the Civil
Aeronautics Board under the Federal Aviation Act of 1958,
49 U.S.C. § 1381. Quoting from Texas & Pacific R. Co. v. Abilene
Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553
(1907), the court noted that a common law right is not
abrogated, even without a savings clause, "unless it be found
that the pre-existing right is so repugnant to the statute that
the survival of such right would in effect deprive the
subsequent statute of its efficacy; in other words, render its
provisions nugatory." 426 U.S. at 299, 96 S.Ct. at 1984. The
Court in Nader concluded that the common law remedy was not
preempted because "the common law action and the statute are
not `absolutely inconsistent' and may coexist." 426 U.S. at
300, 96 S.Ct. at 1985.
More recently, however, in City of Milwaukee v. Illinois,
451 U.S. 304, 101 S.Ct. 1784, 68 L.Ed.2d 114 (1981), the Supreme
Court took a more restrictive view of the preemption question,
holding that the previously created federal common law action
for nuisance was preempted by amendments to the Federal Water
Pollution Control Act, 33 U.S.C. § 1251, et seq. The savings
clause in the Water Pollution Act provided that "[n]othing in
this section" (emphasis added) precluded other common law and
statutory remedies. Siezing upon this limiting language, the
Court held that, although nothing in that particular section of
the act, the citizen-suit provisions, 33 U.S.C. § 1365,
precluded common law remedies, the pervasive regulatory scheme
of the act as a whole did preclude other remedies. 451 U.S. at
327-29, 101 S.Ct. at 1797-98. The Court may therefore be
retrenching somewhat from its expansive view in Nader of
savings clauses and common law remedies in highly regulated
Few courts have specifically addressed the question of
preemption with respect to the Communications Act. One court,
in Comtronics, Inc. v. Puerto Rico Telephone Co., 553 F.2d 701
(1st Cir. 1977), interpreted § 414 in a manner consistent with
the Supreme Court decisions discussed above. In Comtronics, the
court held that the plaintiff had no cause of action under the
Communication Act because "connecting carriers" such as the
defendant in that case were explicitly exempted from its
coverage. The court also dismissed the plaintiff's
constitutional claims, stating that the "precisely drawn,
detailed statute preempts more general remedies." 553 F.2d at
707, quoting Brown v. G.S.A., 425 U.S. 820, 834, 96 S.Ct. 1961,
1968, 48 L.Ed.2d 402 (1976). In reaching this result, the court
interpreted § 414 as follows:
Because we hold that Congress withheld a damages
remedy under the Act against connecting
carriers . . ., we think it would make little sense
to hold that a damages remedy exists against them
§ 1983 for violations of the very same Act. The
"existing" remedies Congress had in mind under §
414 would scarcely be remedies so closely dependent
upon the Act itself; rather we read § 414 as
preserving causes of action for breaches of duty
distinguishable from those created under the Act,
as in the case of a contract claim . . .
553 F.2d at 707-08, n. 6 (citations omitted). This ruling is
consistent with Nader, because the court recognized causes of
action outside the act only when they do not conflict with
express provisions of the act. The decision in City of
Milwaukee does not impact on this interpretation of § 414,
because § 414 applies specifically to the entire Communications
Act, not only to a particular provision of the Act.
The same conclusion was recently reached by the court in
Kaplan v. ITT-U.S. Transmissions Systems, Inc., 589 F. Supp. 729
(E.D.N.Y. 1984). In Kaplan, the plaintiff alleged that the
defendant charged customers for unanswered long distance calls
without disclosing this fact to the customers. Plaintiffs sued
under § 201(b) of the Communications Act, 47 U.S.C. § 201(b),
as well as under the New York Deceptive Acts and Practices,
General Business Law § 349 (McKinney's), and for fraud,
misrepresentation, and breach of agreements embodied in
In a well-reasoned decision, the court applied the test set
forth in Comtronics, supra, and concluded that the common law
claims asserted by plaintiffs are not preempted by the
Communications Act. The court reasoned that the breaches of
duty alleged under the common law claims are markedly different
from the statutory claims. 589 F. Supp. at 735. For example, to
prove fraud and misrepresentation, the plaintiff must establish
a breach of a duty to disclose information, as well as
scienter, reliance, and damages. Id. at 736. The court
concluded that, since the common law causes of action challenge
conduct that is not contemplated by the Communications Act,
under Comtronics, § 414 serves to preserve the common law
actions alleged by plaintiff in this case.*fn2
This court finds the reasoning in Comtronics and Kaplan
persuasive, and reflective of current legal analysis of the
preemption issue. Under these decisions, § 414 must be applied
to preserve the common law actions alleged by plaintiffs in
this case. As in Kaplan, the plaintiffs here allege common law
fraud, and violation of the Illinois Consumer Fraud and
Deceptive Business Practices Act and the Illinois Deceptive
Trade Practices Act. The duty owed by defendants under each of
these causes of action is distinct from the duties created by
the Communications Act; each is intended to prohibit different
types of wrongs distinct from those prohibited by the
Communications Act. None of these causes of action conflicts
with provisions of the Communications Act or interferes in any
way with the regulatory scheme implemented by Congress. The
Court therefore concludes that § 414 applies to preserve these
causes of action.
Accordingly, defendants' motion to dismiss Count IV, V and
VI is denied.