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AMERICAN TEL. AND TEL. v. INTREND ROPES

October 3, 1996

AMERICAN TELEPHONE AND TELEGRAPH COMPANY, A NEW YORK CORPORATION, PLAINTIFF,
v.
INTREND ROPES & TWINES, INC., AN ILLINOIS CORPORATION F/D/B/A INTREND TECHNOLOGIES, INC., AND AAMSTRAND ROPES & TWINE, INC., AN ILLINOIS CORPORATION, DEFENDANTS AND THIRD-PARTY PLAINTIFFS, V. ILLINOIS BELL TELEPHONE COMPANY, AN ILLINOIS CORPORATION, THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: McDADE, District Judge.

    ORDER

Before the Court is Plaintiff's Motion to Reconsider or Alternatively to Certify Judge Harold A. Baker's Order [Doc. # 64] for Interlocutory Appeal. [Doc. # 75-76]. For the reasons set forth below, this Court GRANTS Plaintiff's Motion.

PROCEDURAL HISTORY

On November 29, 1993, Plaintiff, the American Telephone and Telegraph Company ("AT & T"), filed suit against Defendants, Intrend Ropes & Twines Inc., f/d/b/a Intrend Technologies, Inc. ("Intrend"), and Aamstrand Ropes & Twines, Inc. ("Aamstrand"), for the collection of Long Distance Telecommunications Service ("LDMTS") and Wide Area Telecommunication Service ("WATS") charges that they allegedly incurred.

On September 13, 1995, AT & T filed a motion for summary judgment against Defendants Intrend and Aamstrand jointly, or Defendant Intrend individually on the basis that no material question of fact existed as to whether Defendants were liable for the WATS and LDMTS charges. [Doc. # 32]. On November 8, 1995, Intrend and Aamstrand filed their response to AT & T's motion. [Doc. # 42]. On March 20, 1996, Magistrate Judge Bernthal issued a Report and Recommendation ("R & R") in which he granted AT & T's motion for summary judgment in its entirety as to Defendant Intrend and denied the motion as to Defendant Aamstrand. [Doc. # 59]. On April 2, 1996, Intrend and Aamstrand filed their objections to Magistrate Judge Bernthal's report and recommendation. [Doc. # 60]. On June 25, 1996, District Judge Harold A. Baker rejected the report and recommendation and denied AT & T's motion for summary judgment. [Doc. # 64].

Consequently, on July 8, 1996, Plaintiff AT & T filed a motion to disqualify Judge Baker because of a potential conflict of interest and to vacate his Order denying summary judgment. (See Doc. # 65 citing ABA Judicial Canons of Ethics and Judiciary & Judicial Procedure 28 U.S.C. § 455 et seq.). Judge Baker subsequently recused himself on July 12, 1996, and the case was reassigned to this Court by Chief Judge Michael M. Mihm on July 16, 1996. Accordingly, Plaintiff AT & T renewed its motion to vacate Judge Baker's Order denying Plaintiff's Summary Judgment Motion. [Doc. # 69, 7/30/96]. However, on August 8, 1996, this Court denied AT & T's renewed motion because "Plaintiff AT & T failed to allege actual prejudice or impropriety by [Judge] Baker." [Doc. # 72 at p. 3]. Finally, on September 12, 1996, AT & T filed a Motion for Reconsideration of Judge Baker's Order denying Plaintiff's Motion for Summary Judgment or Alternatively for an Order to Certify the Issue for Interlocutory Appeal. [Doc. # 75-76]. Finally, on September 30, 1996, Defendants Intrend and Aamstrand filed Defendant and Third Party Plaintiffs' Response and Objection to Motion of Plaintiff AT & T for Reconsideration. [Doc. # 79].

FACTUAL BACKGROUND

The following facts, as set out in Magistrate Judge Bernthal's Report and Recommendation, are undisputed.*fn1 Defendant Intrend, formerly doing business as Intrend Technologies, Inc., and Defendant Aamstrand are Illinois corporations with their principal place of business located in Manteno, Illinois. Plaintiff AT & T is a common carrier engaged in the provision of interstate and foreign telecommunications services, and during the time at issue in its Complaint, provided Long Distance Telecommunications Service ("LDMTS") and Wide Area Telecommunications Service ("WATS") to Defendant Intrend pursuant to the terms and conditions of tariffs on file with the FCC.

In May of 1989, Intrend moved to its present location in Manteno, Illinois, and contracted with a telecommunications consulting company called "Nitec" to advise, design, purchase, and install a telecommunications system in the Intrend's new facility. Nitec subsequently purchased and installed for Intrend four AT & T Spirit 6-Button telephones, three COBOT Receptionist Auto Attendant units, and additionally moved and reinstalled the AT & T Spirit 1224 Key Telephone System, which included a Spirit control unit and expansion module that Intrend had used at its old location to its new Manteno facility.

This equipment, which essentially constituted the internal telecommunications system of Intrend, was subsequently connected to Intrend's incoming "800" WATS and outgoing LDMTS AT & T lines in late May of 1989 through Centrex lines or trunks provided by the Third-Party Defendant in this case, Illinois Bell (hereafter "Ameritech"), when Intrend contracted for or subscribed to Ameritech's Centrex Switching Service. Although the lines or trunks themselves were physically located on Defendant Intrend's premises, the switching or connection of calls from AT & T's outside lines to Intrend's internal phone system, and vice-versa, was performed through a combination of those lines or trunks located in Intrend's building and Centrex switching equipment located at Ameritech's Central Office.

Intrend's telecommunications system performed without incident until November of 1991, when Intrend found itself the victim of toll fraud. During the months of November and December of 1991, unknown third-parties discovered that they could phone into Intrend's facility per its "800" WATS lines, and then somehow manipulate Intrend's telecommunications system to obtain access to its outside AT & T long distance or LDMTS lines. These unknown "hackers" subsequently placed over $72,248.82 in long distance calls over Intrend's LDMTS lines and incurred over $16,273.73 worth of "800" WATS charges in accessing Intrend's long-distance lines, for a grand total of $88,522.25.

An employee of AT & T subsequently contacted Intrend in December of [1991], to alert Intrend to the unusual activity occurring on its "800" WATS and LDMTS lines. Although initially assured by AT & T employees that it would not be held liable for the unauthorized "800" WATS and LDMTS calls, Intrend was informed by AT & T in January of 1992 that it was Intrend's responsibility to secure its telecommunications system in order to prevent any unauthorized use of its AT & T lines. Intrend consequently immediately retained Telecommunications Specialist-Consultant Nina Wingard to investigate and stop the toll fraud problem, and additionally hired Telecommunications consultant Verlin Brown to confirm Ms. Wingard's findings.

After examining the telecommunications equipment housed at Intrend's Manteno facility, as well as the interaction of that equipment with the Centrex connecting service furnished by Ameritech, Ms. Wingard concluded and Mr. Brown confirmed that neither the AT & T Spirit Telephone System or the COBOT Receptionist Auto Attendants housed at Intrend's facilities were permitting the unauthorized "800" WATS caller to gain access to Intrend's AT & T LDMTS service. Rather, a multi-way calling feature of Ameritech's Centrex Switching Service, an option of which Intrend was not a subscriber, was allowing the trunk-to-trunk transfer of the unauthorized caller's "800" call to Intrend's LDMTS service, with this "switch" apparently occurring through Centrex equipment located at Ameritech's Central Office. Ameritech subsequently restricted this multi-way calling feature of Intrend's Centrex Switching Service on January 28, 1992.

AT & T continued to bill Intrend for the prior unauthorized "800" WATS and LDMTS calls, but Intrend refused to pay these charges. AT & T subsequently brought suit against Intrend and Aamstrand on November 29, 1993, alleging that either Intrend individually or both Defendants jointly were liable for the unauthorized LDMTS and "800" WATS charges pursuant respectively to AT & T's Tariff Nos. 1 and 2 on file with the FCC.

On September 13, 1995, AT & T filed their motion for summary Judgment against Intrend and Aamstrand. [Doc. # 32]. On March 20, 1996, Magistrate Judge Bernthal issued his Report and Recommendation in which he granted AT & T's motion as to Intrend and denied the motion as to Aamstrand. [Doc. # 59]. Magistrate Judge Bernthal denied AT & T's motion as to Aamstrand because he found that a question of fact existed as to whether Aamstrand ever contracted with AT & T for "800" WATS and LDMTS services. (R & R at p. 8). However, Magistrate Judge Bernthal granted AT & T's motion as to Intrend because he found that Intrend was liable as a matter of law to AT & T pursuant to AT & T's Tariff No. 2 for unauthorized "800" WATS charges and that Intrend was also liable as a matter of law for the unauthorized LDMTS charges since no material question of fact existed as to whether the unauthorized LDMTS charges "originated" at Intrend's number pursuant to AT & T's Tariff No. 1. Id.

On June 25, 1996, District Judge Baker rejected the Report and Recommendation and denied AT & T's motion for summary judgment. [Doc. # 64]. Judge Baker denied AT & T's motion for summary judgment as to Aamstrand because he too found that there was a question of material fact as to whether Aamstrand contracted with AT & T for the WATS and LDMTS services. [Doc. # 64 at p. 2 ¶ 4]. Judge Baker also denied AT & T's motion as to Intrend because he found that a material question of fact existed as to whether the fraudulent calls "originated" at Intrend's number. Specifically, Judge Baker stated:

    Does Ameritech's failure to restrict the
  trunk-to-trunk access feature and the fact that
  Intrend did not contract with Ameritech for the
  feature that allowed the fraud remove Intrend's
  responsibility under the tariff if the calls did
  not "originate" with Intrend? Unlike the facts of
  AT & T v. Jiffy Lube Int'l Inc. [813 F. Supp. 1164
  (D.Md. 1993)], and AT & T v. New York City Human
  Resources Admin. [833 F. Supp. 962, (S.D.N Y
  1993)], [citations omitted], Ameritech provided
  Intrend with the Centrex system that permitted
  parties to call from outside the switching
  equipment on one trunk and be transferred to
  another trunk. This allowed outside parties to dial
  long distance numbers and have the calls charged to
  Intrend's number, all without Intrend's knowledge
  or permission. Taking into consideration the
  submissions by the parties at this point in the
  proceedings, these calls cannot be considered
  "Intrend's calls."

[Doc. # 64 at p. 2]. As a result of Judge Baker's ruling, AT & T filed the motion presently before the Court in which Plaintiff AT & T asks this Court to reconsider Judge Baker's Order denying AT & T's motion for summary judgment. [Docs. # 75-76].

STANDARD OF REVIEW

"Motions for reconsideration serve a limited function: to correct manifest errors of law or fact or to present newly discovered evidence." Caisse Nationale De Credit Agricole v. CBI Industries, Inc., 90 F.3d 1264, 1269 (7th Cir. 1996) (quoting Keene Corp. v. Int'l Fidelity Ins. Co., 561 F. Supp. 656, 665 (N.D.Ill. 1982) aff'd, 736 F.2d 388 (7th Cir. 1984)). "Such motions cannot in any case be employed as a vehicle to introduce new evidence that could have been adduced during the pendency of the summary judgment motion." Id. (quoting Keene Corp., 561 F. Supp. at 665). Disposition of a motion for reconsideration is left to the discretion of the district court, and its ruling will not be reversed absent an abuse of that discretion. Id. at 1270 (citing Billups v. Methodist Hosp., 922 F.2d 1300, 1305 (7th Cir. 1991)).

The Law of the Case

The summary judgment decision presently under reconsideration by this Court, became the-law-of-the-case when Judge Baker issued his Order on June 25, 1996, and generally such an order should be followed in all subsequent rulings. However, in a case where a federal judge is substituted or recuses himself during litigation, the second judge may alter the previous rulings of the first judge where the presiding judge finds that the law-of-the-case is erroneous. Diaz v. Indian Head, Inc., 686 F.2d 558, 562-63 (7th Cir. 1982) (citing 1B Moore's Federal Practice P 0.404(1) at 407 (1982)).*fn2 "[W]hile a district judge should carefully consider the propriety of re-examining a prior ruling of another district judge in the same case, when good reasons for doing so appear (such as controlling law or clear error), the `law of the case' doctrine must yield to rational decisionmaking." Peterson v. Lindner, 765 F.2d 698, 704 (7th Cir. 1985).

In Bowles v. Wilke, the Seventh Circuit held that "the only restraint upon a second judge in passing upon [an] interlocutory issue decided by another judge in the same case is one of comity only, which in no way infringes upon the power of the second judge to act." Bowles v. Wilke, 175 F.2d 35, 37 (7th Cir.) cert. denied, 338 U.S. 861, 70 S.Ct. 104, 94 L.Ed. 528 (1949). The Seventh Circuit has gone on to state that ". . . we cannot be expected to reverse a correct decision by one district judge simply because we find it is contrary to a prior ruling by another judge in the same case, i.e., contrary to the law of the case." Champaign-Urbana News Agency, Inc. v. J.L. Cummins News Co. Inc., 632 F.2d 680, 683 (7th Cir. 1980) (quoting Parmelee Transportation Co. v. Keeshin, 292 F.2d 794, 797 (7th Cir. 1961)).

Accordingly, when the law-of-the-case is wrong, the district court judge should take steps to correct those errors rather than await reversal by the Court of Appeals. Id. To modify the law-of-the-case is primarily a matter of "good sense" particularly when the modification is done early in the proceedings and when such a modification will serve to correct legal errors and accelerate the resolution of a dispute. Id. (citing Uniformed Sanitation Men Association Inc. v. Commissioner of Sanitation of City of New York, 426 F.2d 619, 628 (2d Cir. 1970)), motion denied, 403 U.S. 917, 91 S.Ct. 2223, 29 L.Ed.2d 693 (1971), cert. denied, 406 U.S. 961, 92 S.Ct. 2055, 32 L.Ed.2d 349 (1972).*fn3

For the reasons set out below, this Court finds that Judge Baker's Order denying AT & T's motion for summary judgment as to Intrend was clearly erroneous. As a result, this Court will modify the law-of-the-case to appropriately reflect the governing law as to a customer's liability to a telecommunications carrier in the event of toll fraud. However, since Magistrate Judge Bernthal [Doc. # 59 at p. 9-10], District Judge Baker [Doc. # 64 at p. 1-2], and this Court agree in the finding that a material question of fact remains as to whether Defendant Aamstrand contracted with AT & T for WATS and LDMTS services, AT & T's motion for summary ...


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