Utility Control v. FCC,
78 F.3d 842, 846 n.1 (2d Cir. 1996); Digital Communications Network,
Inc. v. AT&T Wireless Services, 63 F. Supp.2d 1194, 1199 (C.D. Cal.
1999). Therefore, the focus would instead be on whether the amount
charged being unreasonable, unjust, or otherwise inappropriate needs to
be considered in order to resolve the claim. See 47 U.S.C. § 201
(b); Sanderson, 958 F. Supp. at 954-55; In re Comcast, 949 F. Supp. at
In Sanderson, 958 F. Supp. at 955, it was held that statutory fraud and
contract*fn5 claims based on failing to disclose that the defendant,
unlike customary industry practice, charged for noncommunication time*fn6
did not raise a rate issue that would be preempted. Cases involving
similar claims against the same defendant reached the same conclusion.
See In re Comcast, 949 F. Supp. at 1199-1200; DeCastro v. AWACS, Inc.,
935 F. Supp. 541, 550, appeal dismissed, 940 F. Supp. 692 (D.N.J. 1996).
As to claims that the nondisclosure also constituted unjust enrichment
and breach of the implied duty of good faith and fair dealing,
Sanderson, 958 F. Supp. at 956, found it unclear as to whether the
charges themselves were being challenged as unreasonable, unfair, or
unjust, but resolved the doubts against finding removal jurisdiction
satisfied. In re Comcast, 949 F. Supp. at 1200-01, and DeCastro, 935 F.
Supp. at 550-51, however, found that similar claims involved direct
challenges to the billing practices and therefore would be preempted by
the FCA.*fn7 In Bryceland, the plaintiffs brought claims of breach of
contract, fraud, breach of warranty, and negligent misrepresentation
based on AT&T Wireless allegedly providing a lower quality of service
than had been represented it would provide. Because the quality of the
service was implicated, the court found that the claims were all
challenges to the rates charged. 122 F. Supp. 2d at 709. In Brown v.
Washington/Baltimore Cellular, Inc., 109 F. Supp.2d 421, 423 (D. Md.
2000), the court held that a challenge to the late fees charged by a
cellular telephone service provider was not a challenge to rates subject
to preemption because, "[w]hile rates of service reflect a charge for the
use of cellular phones, late fees are a penalty for failing to submit
timely payment."*fn8 The claims contained in plaintiff's complaint must
be considered in light of this case law and, more importantly, the
Seventh Circuit's focus on whether the appropriateness of the amount
charged is necessary to resolving the claim, as well as the recognition
that complaints about quality of service generally constitute complaints
about the rates charged for the services.
The FCC does not specifically regulate rates for cellular telephone
services. Rates are instead left to be determined by market forces, but
with 47 U.S.C. § 201 (b) prohibiting charges that are unjust or
unreasonable. See Bryceland, 122 F. Supp. 2d at 708;
In re Comcast, 949
F. Supp. at 1198. The specific contract allegations are as follows:
16. According to the terms of its contract with
Plaintiff, Defendant agreed to provide cellular
telephone service to Plaintiff at the rates set forth
in the "Service Charges" section of its monthly
bills. Nowhere in the Contract or elsewhere did
Plaintiff agree to pay higher rates for cellular
service or to pay additional fees for which no
significant additional goods or services were
rendered. Thus, by imposing and collecting such fees,
Defendant has breached its contract. 17. Defendant
provides no significant additional goods or services
in exchange for the Corporate Account Administrative
Fees it charges, and thus those Fees are also void and
unenforceable for lack of consideration. 18. The Fee
is also void and unenforceable as a violation of the
duty of good faith implicit in every contract. 19. The
Fee is also unconscionable and, as such, is void and
unenforceable on that additional basis.
Plaintiff's contract allegations explicitly raise the issue of whether
it received sufficient services in return for the Fee. That is a rate
issue. See Central Office Telephone, 524 U.S. at 223; Bastien, 205 F.3d
at 988; Bryceland, 122 F. Supp. 2d at 709.*fn9 Also, alleging that the
Fee is unconscionable and that defendant did not act in good faith are
allegations that the Fee is unjust and/or unreasonable. See In re
Comcast, 949 F. Supp. at 1200 (duty of good faith claim); DeCastro, 935
F. Supp. at 550 (same). Compare Sanderson, 958 F. Supp. at 956 (same).
But even if these express allegations were not in Count I, the claim that
plaintiff should not have been required to pay the Fee because he did not
agree to pay it is a challenge to the appropriateness of the Fee and
therefore a rate challenge that falls within the purview of §
201(b). The focus is on the agreement, not defendant's failure to disclose.
Plaintiff is claiming that the Fee defendant charged was not a fee that
had been established in the market as the FCA (as interpreted by the FCC)
provides. Plaintiff wants instead to pay the amount that had been agreed
upon through market mechanisms. As a state law claim, Count I is preempted
by the FCA and must be construed as a claim under the FCA that falls
within federal jurisdiction and may be litigated in court under
47 U.S.C. § 207.
Although not expressly denominated and distinguished by plaintiff, the
statutory and common law fraud allegations contained in Counts II and III
each contain two different types of fraud claims, one of which falls
within the purview of the FCA and one which does not. To the extent
plaintiff simply claims that defendant added the Fee while attempting to
hide the increase in charges (hereinafter the "nondisclosure fraud
claim"),*fn10 that is a claim like the one in Long Distance Litigation.
Success on the nondisclosure fraud claim would not require proof that the
Fee was unreasonably high or unjustified in light of any new services
provided in return.
Instead, plaintiff would have to show that deceit or a
misrepresentation was used in charging the Fee and that the deceit or
misrepresentation was material to plaintiff's decision to continue to
subscribe to defendant's services. The Counts II and III nondisclosure
fraud claims are not preempted by § 332(c)(3) and are not FCA
claims within this court's federal question jurisdiction. See Cahnmann,
133 F.3d at 488; Long Distance Litigation, 831 F.2d at 633-34;
Sanderson, 958 F. Supp. at 955; In re Comcast, 949 F. Supp. at
1199-1200; DeCastro, 935 F. Supp. at 550. But see Bryceland, 122 F.
Supp. 2d at 709.
Counts II and III also include the allegation that the Fee involved
deception or a misrepresentation in that no additional goods or services
were received in return for the new Fee (hereinafter the "no-services
fraud claim"). The no-services fraud claim would require proof that any
services provided in return were not worth the amount of the Fee. As
previously discussed, that is a rate challenge that falls within the
purview of the FCA. See Central Office Telephone, 524 U.S. at 223;
Bastien, 205 F.3d at 988; Bryceland, 122 F. Supp. 2d at 709. The
no-services fraud claims of Counts II and III fall within this court's
federal jurisdiction and, as state law claims, are preempted.
The specific allegations of the Count IV unjust enrichment claims
34. Defendant has no contractual or other legal
justification for imposing the Fee on Plaintiff and
the Class. Defendant provides no significant
additional administrative or other goods or services
in exchange for the Fee, and Plaintiff and the Class
thus receive no benefit in return for the payment of
Count IV necessarily raises the issue of whether plaintiff received
adequate services in return for the Fee. It also raises the question of
whether the Fee was unjust. That is a rate claim that falls within the
purview of the FCA and which, as a state law claim, is preempted. See
Central Office Telephone, 524 U.S. at 223; Bastien, 205 F.3d at 988; In
re Comcast, 949 F. Supp. at 1200-01; DeCastro, 935 F. Supp. at 550-51.
Compare Sanderson, 958 F. Supp. at 956.
Since the contract, unjust enrichment, and no-services fraud claims
fall within the purview of the FCA's complete preemption, they involved
federal questions and removal was proper. The state law nondisclosure
fraud claims are properly before the court on supplemental jurisdiction.
See 28 U.S.C. § 1441 (c), 1367; In re Comcast, 949 F. Supp. at 1206.
Although certain of the claims are preempted as state law claims, they
are still before the court as federal claims; to hold otherwise would be
inconsistent with applying complete preemption. Defendant can still raise
the issues of whether the allegations state a basis for granting relief
pursuant to § 207 of the FCA and whether the no-services fraud claims
satisfy the pleading requirements of Fed. R. Civ. P. 9(b). Before
addressing those questions, however, plaintiff should amend his complaint
to expressly state all but the nondisclosure fraud claims as FCA claims.
Also, plaintiff remains the master of his complaint. He may choose to
drop the federal claims and pursue only the nondisclosure fraud claims.
If that is plaintiff's desire, he should so inform the court by written
motion and plaintiff's individual federal cause of action would be
dismissed with prejudice and the case would be remanded to state court
for further proceedings.
Thus far, it has been determined that the court has jurisdiction over
the case. The merits of plaintiff's claims have not yet been considered,
other than to hold, consistent with the jurisdictional determination,
that certain claims are preempted as state law claims. Where possible,
before considering the merits of defendant's Rule 12(b)(6) motion, it
should first be determined whether this case is appropriate for class
certification. Chavez v. Illinois State Police, 251 F.3d 612, 629-30 (7th
Cir. 2001); Mira v. Nuclear Measurements Corp., 107 F.3d 466, 474-75 (7th
Cir. 1997); Anderson v. Cornejo, 199 F.R.D. 228, 237 (N.D. Ill. 2000).
Unless this case is remanded to state court because plaintiff drops his
federal claims, plaintiff shall promptly move for class certification as
set forth in today's order.
IT IS THEREFORE ORDERED that plaintiff's motion for remand [4-1] is
denied. Defendant's motion to dismiss [3-1] is denied without prejudice.
By August 27, 2001, plaintiff shall file his amended complaint. By
September 12, 2001, defendant shall answer or otherwise plead to the
amended complaint. By September 5, 2001, plaintiff shall move for class
certification. Status hearing set for September 19, 2001 at 11:00 a.m.