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Ramette v. AT & T Corp.

June 22, 2004

[5] WILLIAM R. RAMETTE, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT,
v.
AT&T CORPORATION, DEFENDANT-APPELLEE.



[6] Appeal from the Circuit Court of Cook County. No. 01 CH 17702. The Honorable Stephen A. Schiller, Judge Presiding.

[7] The opinion of the court was delivered by: Justice Garcia

[8]  William Ramette filed a class action lawsuit against AT&T based on AT&T's decision to charge its customers $1.50 per month to continue receiving their long-distance telephone bills with their local service telephone bills. Ramette alleged that the fee was imposed without any disclosure from AT&T that it would send a separate long-distance bill at no charge. The imposition of this fee closely coincided with the first-ever contract between AT&T and its customers, the "Consumer Services Agreement" (CSA). Previously, the relationship between AT&T and its customers was governed by tariffs filed with the Federal Communications Commission (FCC).

[9]  AT&T moved to compel arbitration of the claims pursuant to the CSA's arbitration provision. Ramette argued that the legal remedies provisions of the CSA, including the arbitration provision, were unconscionable under Illinois law. The circuit court granted AT&T's motion to compel arbitration, finding that the Federal Communications Act (47 U.S.C. §203 (2000)) preempts all state-law challenges to the enforcement of the arbitration clause. The circuit court also found the CSA was not unconscionable as a matter of law. Ramette filed an interlocutory appeal on December 23, 2002, pursuant to Supreme Court Rule 307 (188 Ill. 2d R. 307).

[10]   BACKGROUND

[11]   Prior to 1996, pursuant to the Federal Communications Act (FCA), the FCC required long-distance providers to file tariffs detailing the terms and cost of telephone service (47 U.S.C. §203 (2000)). The tariffs then governed the relationship between the telephone service provider and its customers. Under the "filed tariff doctrine," customers were bound by the terms of the tariff even if they had never seen the tariff, and even if the customer had been promised services with different rates, terms, or conditions. Boomer v. AT&T Corp., 309 F.3d 404, 408 (7th Cir. 2002). Customers were bound by the rates, terms and conditions contained in the tariff unless the FCC determined the tariff violated the FCA. Boomer, 309 F.3d at 408.

[12]   The Telecommunications Act of 1996 amended the FCA. The amendment expressly granted the FCC the authority to forbear from applying the tariff-filing requirement. The Telecommunications Act of 1996 allowed the FCC to exempt carriers from the tariffing requirements (47 U.S.C. §160(a) (2000)). Accordingly, the FCC ordered mandatory detariffing. Detariffing meant that the rates, terms, and conditions of long-distance service would be governed by individual contracts between the service provider and the customer, rather than through tariffs filed with the FCC. The carriers were required to provide customers with notice of the rates, terms, and conditions of service, and to offer customers service under such terms and conditions. Boomer, 309 F.3d at 409. The customers in turn could accept or reject the carrier's offer. Boomer, 309 F.3d at 409. As a result, AT&T entered directly into contracts with each of its customers.

[13]   In May 2001, AT&T began mailing the CSA to its customers. AT&T mailed each customer three documents: the CSA, a letter explaining the reasons the CSA was being sent, and a list of anticipated frequently asked questions with explanatory responses (collectively CSA Mailing). The CSA Mailing was sent to Ramette in June 2001, in an envelope that was separate from his monthly bill. On the outside of the envelope was typed: "ATTENTION: Important information concerning your AT&T service enclosed."

[14]   The cover letter and sheet of frequently asked questions specifically highlighted that the CSA contained a mandatory arbitration provision. The cover letter explained to customers that the CSA contained "[a] new binding arbitration process which uses an objective third party rather than a jury for resolving any disputes that may arise." The cover letter also informed customers that their AT&T service or billing would not change. The CSA Mailing provided a method for customers to reject the terms offered by AT&T. The customer was provided a toll-free number to call to cancel his AT&T services. The CSA Mailing informed customers that they would accept the terms of the CSA agreement by continuing to use AT&T services.

[15]   The CSA included a section entitled "Legal Remedies Provisions." Section 7 of the CSA mandated binding arbitration and bans all class-wide dispute resolution. This section began in bold and capitalized text: "IT IS IMPORTANT THAT YOU READ THIS ENTIRE SECTION CAREFULLY. THIS SECTION PROVIDES FOR RESOLUTION OF DISPUTES THROUGH FINAL AND BINDING ARBITRATION BEFORE A NEUTRAL ARBITRATOR INSTEAD OF IN A COURT BY A JUDGE OR JURY OR THROUGH CLASS ACTION. YOU CONTINUE TO HAVE CERTAIN RIGHTS TO OBTAIN RELIEF FROM A FEDERAL OR STATE REGULATORY AGENCY." Following this bold language, the agreement explained that all disputes must be resolved by arbitration, unless the consumer chooses to bring an eligible dispute in small claims court or before a regulatory body, like the FCC.

[16]   In 2001, AT&T also sent Ramette and other customers a letter informing them of billing options. The letter explained that customers could continue to receive their long-distance bill with their local service bill at a cost of $1.50 per month, or the customer could elect to receive his or her bill on the Internet at no charge. This letter did not inform customers that AT&T would mail a separate bill at no charge. The additional-charge alternative was the default option, and AT&T began charging Ramette $1.50 each month as a "Bill Statement Fee."

[17]   Ramette did not contact AT&T to cancel his services. Instead, Ramette filed a class action complaint for restitution and damages under common law and the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2000)). AT&T moved to stay the action and compel arbitration on a nonclass basis. Ramette argued that enforcement of the CSA's legal remedies provision would leave him without a forum for his claims and that this rendered the arbitration clause unconscionable and unenforceable.

[18]   Shortly before oral argument on the motion to compel arbitration, the Seventh Circuit decided Boomer, 309 F.3d 404. Accordingly, the circuit court limited oral argument: "The real focus is the applicability of the Boomer case and even if it does apply, whether I am compelled to follow it." The circuit court decided to follow Boomer, finding that the FCA preempts all state-law challenges to the enforcement of the arbitration clause. Ramette filed an interlocutory appeal on December 23, 2002, pursuant to Supreme Court Rule 307 (188 Ill. 2d R. 307).

[19]   On appeal, Ramette argues that the circuit court erred in granting AT&T's motion to compel arbitration.

[20]   ANALYSIS

[21]   I. The Federal Communications Act and Preemption

[22]   Pursuant to the supremacy clause of the United States Constitution, federal law can preempt state laws that interfere with or are contrary to federal law. U.S. Const., art. VI, cl. 2. Congress' purpose "'is the ultimate touchstone' of preemption analysis." Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516, 120 L.Ed. 2d 407, 422, 112 S.Ct. 2608, 2617 (1992), quoting Malone v. White Motor Corp., 435 U.S. 497, 504, 55 L.Ed. 2d 443, 450, 98 S.Ct. 1185, 1189 (1978). "Congress' intent to preempt State law may be manifested 'by express provision, by implication, or by a conflict between federal and state law.'" Busch v. Graphic Color Corp., 169 Ill. 2d 325, 335, 662 N.E.2d ...


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