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Wernikoff v. RCN Telecom Services of Illinois

June 05, 2003

SHELDON WERNIKOFF, INDIV. AND ON BEHALF OF THOSE SIMILARLY SITUATED, PLAINTIFF-APPELLEE,
v.
RCN TELECOM SERVICES OF ILLINOIS, INC., AND RCN CORPORATION, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Cook County. No. 02 CH 2333 Honorable Patrick E. McGann, Judge Presiding.

The opinion of the court was delivered by: Justice Greiman

UNPUBLISHED

Plaintiff, Sheldon Wernikoff, filed a three-count class-action complaint against the defendants RCN Telecom Services and RCN Corporation (collectively, defendants or RCN). Defendants filed a motion to dismiss under section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619(a)(1) (West 2000)), on the grounds that exclusive subject matter jurisdiction lay with the Illinois Commerce Commission (the Commission) because plaintiff's claim was actually one for reparations under sections 9-250 and 9-252.1 of the Public Utilities Act (Act) (220 ILCS 5/9-250, 252.1 (West 2000)). Plaintiff filed a response, asserting that the Commission did not have jurisdiction to decide the complaint's allegations. Ultimately, the court denied the defendants' motion but decided, sua sponte, that the issue was appropriate for an immediate appeal under Supreme Court Rule 308 (155 Ill. 2d R. 308). Thereafter, the trial court entered an order certifying the following question for appeal: "Whether the Illinois Commerce Commission maintains exclusive jurisdiction over claims for reparations by customers of telecommunications carriers that provide competitive telecommunications services[.]" On September 30, 2002, we granted defendants' application for leave to appeal under Supreme Court Rule 308. For the reasons that follow, we answer that certified question in the negative.

Defendants offer competitive telephone, cable television, and high speed Internet services across the country, including markets in Washington, D.C., Boston, New York, Philadelphia, San Francisco, and Chicago. In Illinois, the RCN is considered a "telecommunications carrier," as defined in the Act, and has been granted a certificate of service authority by the Commission according to the Act. Accordingly, the rates, terms and conditions governing RCN's provision of telecommunications services to its customers in Illinois are contained in tariffs filed by RCN with the Commission.

This appeal arises from a complaint filed January 31, 2002, regarding overcharges with RCN's local telephone service. Specifically, the plaintiff alleges that the defendants charged higher rates than those listed with the Commission in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (the Consumer Fraud Act) (815 ILCS 505/1 et seq. (West 2000)) (count I); breach of contract (count II); and unjust enrichment (count III). On a somewhat different note, the plaintiff also alleges overcharging for state and local taxes. In the end, the complaint, which was brought individually and on behalf of a class of similarly situated RCN customers, sought damages, an injunction against further unlawful conduct, and an award of attorneys fees and expenses.

On May 2, 2002, RCN filed a section 2-619 motion to dismiss. It argued that exclusive subject matter jurisdiction lay with the Commission because, despite its appearance, plaintiff's claim was actually one for reparations under sections 9-250 and 9-252.1 of the Act. And because this court has determined that the Commission has exclusive jurisdiction over reparations claims brought under the Act, plaintiff's complaint was improperly filed with the circuit court of Cook County.

On June 10, 2002, the plaintiff filed a response to defendants' motion, asserting that the Commission did not have any jurisdiction to decide the allegations in the complaint because telecommunications consumers simply cannot bring a claim of excess rates before the Commission. After the trial court heard arguments on the motion on July 14, 2002, it denied the motion. Nevertheless, the court admitted that it was an extremely close question as to whether the legislature, in passing the Universal Telephone Service Protection Law of 1985 (Telecommunications Article) (220 ILCS 5/13-101 et seq. (West 2000)), intended to retain the Commission's exclusive jurisdiction over consumer complaints regarding the rates, terms, and condition of services as provided by telecommunications companies such as RCN. As such, it entered an order certifying the question for appeal.

In reaching its decision, the court found:

"In this court's opinion, there is one issue *** that decides the case. And that is the answer to the inquiry of whether by creating this new statutory scheme the legislature was retaining the established principle that review of billing practices was peculiarly within the province of the Illinois Commerce Commission, as the courts of Illinois have uniformly decided."

The court also found that "this case is solely about reparations for overcharges, overcharges in rates for certain billing items, improper calculation of taxes, [and] charges for items not disclosed but found in the tariff." In addition, the court found that "the focus for the court in these cases is not on the name attached to the remedy or the type of the remedy but the essence of the claim."

Since its inception in 1921 through 1985, the Act defined "public utilities" as companies that provided heat, cold, power, electricity, water, light, sewage disposal, gas, or "the transmission of telegraph or telephone messages." Ill. Rev. Stat. 1983, ch. 111 2/3, par. 10.3. During the time the statute was enacted, all of those were services traditionally provided by monopolistic entities, and the Act empowered the Commission to regulate almost every aspect of the companies providing those services. Therefore, as RCN admits, prior to 1985, the Act empowered the Commission with complete control over the prices these entities could charge for their services. Moreover, it provided a specific provision that addressed the situation when a utility was alleged to be charging more than its stated rates, and the courts uniformly held that the statutory claim under the Act provided the exclusive remedy for such claims.

In the early 1980s, however, a competitive market developed for certain telephone services, signaling to the General Assembly that it needed to change the regulatory function of the Commission. Accordingly, the General Assembly passed the Telecommunications Article of 1985, which substituted competition for regulation where there was a competitive market for telecommunications services. In fact, the 1985 Telecommunications Article stated the public policy of Illinois as:

"[C]onsistent with the protection of consumers of telecommunications services and the furtherance of other public interest goals, competition should be permitted to function as a substitute for certain aspects of regulation in determining the variety, quality and price of telecommunications services and that the economic burdens of regulation should be reduced to the extent possible consistent with protection of the public interest[.]" Ill. Rev. Stat. 1985, ch. 111 2/3, par. 13-103(b).

The Telecommunications Article effectuated its changes by first removing telecommunications companies from the Act's definition of "public utility." Compare Ill. Rev. Stat. 1983, ch. 111 2/3, par. 10.3, with Ill. Rev. Stat. 1985, ch. 111 2/3, par. 3-105 (now 220 ILCS 5/3-105 (West 2000)). This meant that the Act was no longer generally applicable to telephone companies. However, the General Assembly did not get rid of all regulation of telephone companies, and it selectively chose which provisions of the Act would still be applicable, as noted in section 13-101 (220 ILCS 5/13-101 (West 2000)).

The legislature also split telephone companies into two categories: competitive and noncompetitive. Accordingly, section 13-101 has two lists: one list of provisions applicable to noncompetitive telephone companies and one list for competitive telephone companies. For noncompetitive companies, section 13-101 makes almost all of the Act applicable, basically leaving the regulatory scheme unchanged for such companies. However, for competitive companies, section 13-101 rendered significant portions of the Act inapplicable. Put another way, the deregulation of competitive telephone companies essentially was accomplished by not making many sections of the Act applicable to such companies.

The largest omission was that nearly all of Article IX of the Act, which deals with rates, was not made applicable. For example, section 9-101 (220 ILCS 5/9-101 (West 2000)), which empowers the Commission to determine whether a utility's rates are "just and reasonable," does not apply to competitive telephone companies. Likewise, section 9-201 (220 ILCS 5/9-201 (West 2000)), which requires Commission approval for all rate changes, is also inapplicable to competitive phone companies. By not applying provisions such as these to competitive telephone companies, the legislature took away the Commission's power to regulate the rates of those entities. Thus, a competitive phone company may charge whatever rate it chooses, subject only to the requirement that it files that rate with the Commission. 220 ILCS 5/13-501 (West 2000).

In addition, subsequent amendments to the sections of the Act that apply to telephone companies seem to have expanded the General Assembly's policy of deregulating competitive telephone companies. For example, the policy statement in the 1985 Telecommunications Article stated that "competition should be permitted to function as a substitute for certain aspects of regulation." (Emphasis added.) Ill. Rev. Stat. 1985, ch. 111 2/3, par. 13-103 (b). However, the policy statement adopted in 1997 appears to be much more expansive:

"[C]onsistent with the protection of consumers of telecommunications services and the furtherance of other public interest goals, competition in all telecommunications service markets should be pursued as a substitute for regulation in determining the variety, quality and price of telecommunications services and that the economic burdens of regulation should be reduced to the extent possible consistent with the furtherance of ...


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