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Brown v. SBC Communications

March 1, 2007

CHARLES E. BROWN, ON BEHALF OF HIMSELF, AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
SBC COMMUNICATIONS, INC., ENHANCED SERVICES BILLING, INC., BILLING SERVICES GROUP, LLC, ABRY PARTNERS, LLC, ILD TELECOMMUNICATIONS, INC., AND ILD TELESERVICES, INC., DEFENDANTS.



The opinion of the court was delivered by: J. Phil Gilbert District Judge

MEMORANDUM AND ORDER

A. Introduction

Plaintiff Charles Brown, a local telephone subscriber of defendant SBC Communications, Inc., ("SBC") alleges that on at least eleven occasions in 2004 and 2005, he was billed for telecommunications services he did not request, a practice Brown calls "cramming." Brown originally filed this action in the Circuit Court of the Twentieth Judicial Circuit, St. Clair County, Illinois, on behalf of himself and a proposed class of SBC subscribers who allegedly were subjected to the "cramming" of unauthorized charges onto their monthly billing statements from SBC, asserting claims for violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 -- 505/12, ("ICFA") and unjust enrichment. Thereafter, the action was removed to this Court pursuant to 28 U.S.C. § 1332, as amended by the Class Action Fairness Act of 2005, Pub. L. No. 109-2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.) ("CAFA"). By order entered September 29, 2006, the Court held that removal of this case was proper pursuant to CAFA and denied remand of the case to state court.

According to the allegations of Brown's complaint, on at least five occasions (February 2004, March 2004, May 2004, June 2004, and July 2004) Brown's monthly billing statement from SBC contained a $14.95 charge for "Traveller Info Svcs #," which Brown alleges is a monthly fee for "technical support services" that he never authorized. Complaint ("Compl.") ¶ 19(a). Likewise, Brown alleges that on at least six occasions (August 2004, September 2004, October 2004, November 2004, December 2004, and January 2005) he was billed a monthly fee of $14.95, together with taxes and local, state, and federal charges of $1.36, for "Nationwide Voice Msg," a "nationwide voice messaging" service Brown never requested. Id.¶ 19(b). It appears from the complaint that there is some dispute as to whether Brown in fact ordered the services at issue. See id.¶ 21. SBC is, as discussed, Brown's local telephone service or "local exchange carrier" ("LEC"). Id.¶ 19. Defendant Enhanced Services Billing, Inc., ("ESBI") is, according to Brown's complaint, a company that bills consumers directly or through LECs for services provided by third-party companies in the telecommunications industry, as is defendant ILD Telecommunications, Inc. ("ILD"). See id.¶ 5, ¶ 8.*fn1 ILD is alleged to be responsible for placing the unauthorized charges for "Nationwide Voice Msg" on Brown's SBC billing statement. Id.¶ 8, ¶ 19(b). Although it is not entirely clear from the allegations of Brown's complaint, presumably Brown believes that ESBI is responsible for placing the unauthorized charges for "Traveller Info Svcs #" on Brown's SBC billing statement. Defendant Billing Services Group, LLC, ("BSG") which is also a billing company, is alleged to own ESBI; defendant Abry Partners, LLC, ("Abry") is alleged to own BSG. See id.¶ 6, ¶ 7.

Brown alleges that all of the defendants acted jointly to "cram" unauthorized charges onto the SBC billing statements of Brown and the members of the proposed class. Brown seeks to represent a class of Illinois residents who were billed for unauthorized charges through their billing statements from SBC from June 16, 2002, to the present. See Compl.¶ 9. This matter currently is before the Court on motions to dismiss for failure to state a claim upon which relief can be granted brought by SBC (Doc. 17), ESBI and BSG (Doc. 12), and Abry (Doc. 15), and on a motion to dismiss for lack of personal jurisdiction brought by ILD (Doc. 13). Having reviewed carefully the submissions of the parties, the Court now is prepared to rule.

B. Failure to State a Claim Upon Which Relief Can Be Granted 1 Legal Standard

The purpose of a motion to dismiss for failure to state a claim upon which relief can be granted brought pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is to test the sufficiency of a complaint, not to resolve a case on its merits. See Marshall-Mosby v. Corporate Receivables, Inc., 205 F.3d 323, 326-27 (7th Cir. 2000). When evaluating a Rule 12(b)(6) motion, a court must accept as true all factual allegations in a complaint and draw all reasonable inferences in a plaintiff's favor. See Hentosh v. Herman M. Finch Univ. of Health Scis./The Chicago Med. Sch., 167 F.3d 1170, 1173 (7th Cir. 1999). Because the Federal Rules of Civil Procedure establish a liberal pleading system that requires only notice pleading, a "complaint's mere vagueness or lack of detail is not sufficient to justify a dismissal." National Serv. Ass'n, Inc. v. Capitol Bankers Life Ins. Co., 832 F. Supp. 227, 230 (N.D. Ill. 1993). A motion to dismiss should not be granted unless it "appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). See also Johnson v. Martin, 943 F.2d 15, 16 (7th Cir. 1991).

2. ICFA

ESBI, which, as discussed, is a billing clearinghouse, argues that the misconduct alleged against it in Brown's complaint amounts at most to aiding and abetting a violation of the ICFA. Section 2 of the ICFA provides,

Unfair methods of competition and unfair or deceptive acts or practices, including but not limited to the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact, or the use or employment of any practice described in Section 2 of the "Uniform Deceptive Trade Practices Act", approved August 5, 1965, in the conduct of any trade or commerce are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby. In construing this section consideration shall be given to the interpretations of the Federal Trade Commission and the federal courts relating to Section 5(a) of the Federal Trade Commission Act. 815 ILCS 505/2 (footnote omitted). The Supreme Court of Illinois has held that merely aiding and abetting an ICFA violation, that is, "knowingly receiv[ing] the benefits of another's fraud," is not actionable as a violation of section 2 of the statute. Zekman v. Direct Am. Marketers, Inc., 695 N.E.2d 853, 859 (Ill. 1998). In Zekman a consumer who allegedly had been induced by fraudulent mailings from a direct mail marketer, Direct American Marketers, Inc., ("Direct American") to make telephone calls to a 900 number, thus incurring toll charges, brought suit under the ICFA against both Direct American and AT & T, which had billed the consumer for the toll charges, retaining a percentage of the charges and remitting the rest to Direct American. See id.at 856. The court concluded that the conduct alleged against the telephone company was not actionable under the ICFA:

We agree with AT & T that the plain language of section 2 of the Act does not include anything that makes it unlawful to knowingly receive the benefits of another's fraud. As this court stated in Laughlin v. Evanston Hospital, 133 Ill.2d 374, 390, 140 Ill. Dec. 861, 550 N.E.2d 986 (1990), "[t]he language of the Act shows that its reach was to be limited to conduct that defrauds or deceives consumers or others." To allow plaintiff to recover for AT & T's knowingly receiving the benefits of Direct American's fraud would require us to read into the statute violations that are not a part of the statutory text. * * * * Canons of statutory interpretation additionally guide our decision that knowingly receiving the benefits of another's fraud is not actionable under section 2 of the Act. When a statute provides a list that is not exhaustive, as section 2 does ("including but not limited to . . ."), the class of unarticulated things will be interpreted as those that are similar to the named things . . . . The common feature of the forms of conduct listed in section 2 of the Act is that they involve actions directly done by the perpetrator of the fraud. Knowingly receiving the benefits of another's fraud, however, more closely resembles a form of secondary liability. We believe that a claim for knowingly receiving the benefits of another's fraud is not so similar to the enumerated violations of section 2 of the Act that the legislature intended for it to be a cause of action under that statute. With no clear indication from the legislature that such conduct violates section 2 of the Act, we cannot extend liability to those who knowingly receive the benefits of another's fraud.

Id. at 859.

In the case at bar the Court agrees with Brown that the allegations of his complaint establish more than ESBI's passive involvement in the alleged fraud. Brown's complaint alleges, Service providers or LECs sometimes use several billing clearinghouses to obtain the different services needed to get the billing information ready for the LECs. For example, one billing clearinghouse might provide a "rating" service, i.e., applying the proper charges for each call made. A second billing clearinghouse may then actually prepare and submit the resulting data to the LEC. In this instance, the actual carrier or service provider is three steps removed from the customer. The chain is: carrier or service provider, first billing agent, second billing agent, LEC, and end-use customer. When the customer pays the bill, the money flows in reverse sequence from the LEC to the carrier or service provider. Because customers may subsequently seek refunds, LECs and billing agents typically hold a percentage of the payments as reserves. * * * * The use of billing agents creates a situation that facilitates cramming by carriers and service providers. On the basis of invalid authorizations, such carriers and service providers are able to generate accounts receivable before the end-use customers are even billed. Once these customers are billed, many of them unwittingly pay the unauthorized charges, each of which is in a small enough amount to "fly under the radar" of many subscriber's suspicions.

Compl. ¶¶ 17-18. Concerning ESBI, Brown's complaint alleges that "ESBI is no stranger to cramming . . . . [O]n August 6, 2001, the Federal Trade Commission announced that ESBI, among others, had agreed to settle FTC allegations that ESBI . . . failed to adequately police the practice of vendors who engaged in cramming." Id. ¶ 22(b). In Saltzman v. Enhanced Services Billing, Inc., 811 N.E.2d 191 (Ill. App. Ct. 2003), the court reversed a trial court's dismissal of cramming claims against ESBI substantially identical to those asserted in this case. The court said, "the complaint in this case alleged that it was ESBI's practice to receive billing information from [a third-party service provider], and without any evidence of authorization, place the 'bogus' charge on the victim's telephone bill, in effect, representing that the customer owed the charge." Id. at 197. The court found these allegations distinguishable from the allegations at issue in Zekman. "In our view, these allegations are different from the one made in . . . the . . . complaint in Zekman, which only alleged that AT & T knowingly received the benefits of Direct American's deceptive practices in violation of section 2 of the Fraud Act." Id.

The Saltzman court concluded, "we find that a question of fact exists as to whether the practice of billing phone customers, for charges that are not authorized and cannot be verified while representing that charges are owed, amounts to a direct participation in the fraud under section 2 of the Consumer Fraud Act." 811 N.E.2d at 199. In so holding, the court gave weight to the consent order entered into by the FTC and ESBI, noting that section 2 of the ICFA mandates that, in construing the statute, courts must give consideration to the FTC's interpretation of what constitutes deceptive trade practices for purposes of the Federal Trade Commission Act. See id.at 199-200. This Court agrees with Saltzman that the conduct at issue here is distinguishable from the conduct at issue in Zekman. In contrast to Zekman, where the defendant telephone company merely billed the plaintiff for calls the plaintiff freely admitted he had made, here ESBI is alleged to have billed consumers, including Brown, for services they never ...


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