236 F.3d 1292 (11th Cir. 2001), 99-12833, Smith v GTE Corporation

Docket Nº:99-12833.
Citation:236 F.3d 1292
Party Name:Chester SMITH, individually and on behalf of all others similarly situated, Merle Fisher, individually and on behalf of all others similarly situated, et al., Plaintiffs-Counter-Defendants-Appellants, Cross-Appellees, v. GTE CORPORATION, GTE South, Inc., Defendants-counterclaimants-Appellees, Cross- Appellants.
Case Date:January 04, 2001
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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236 F.3d 1292 (11th Cir. 2001)

Chester SMITH, individually and on behalf of all others similarly situated, Merle Fisher, individually and on behalf of all others similarly situated, et al., Plaintiffs-Counter-Defendants-Appellants, Cross-Appellees,

v.

GTE CORPORATION, GTE South, Inc., Defendants-counterclaimants-Appellees, Cross- Appellants.

No. 99-12833.

United States Court of Appeals, Eleventh Circuit

January 4, 2001

January 16, 2001

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Appeals from the United States District Court for the Middle District of Alabama. (No. 97-00102-CV-D-S), Ira De Ment, Judge.

Before CARNES and BARKETT, Circuit Judges, and POLLAK[*], District Judge.

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CARNES, Circuit Judge:

In this putative class action suit, the plaintiffs assert various state law claims based on an alleged scheme by the defendants, GTE Corporation and GTE South, Inc. (collectively "GTE"), to defraud their customers into leasing telephones and paying exorbitant lease charges. GTE filed a motion to dismiss, contending that the Alabama Public Service Commission ("APSC"), which regulates public utilities operating in that state, has exclusive jurisdiction over the plaintiffs' claims. Alternatively, GTE argued APSC has primary jurisdiction over the claims and that the district court should abstain until the plaintiffs' claims were presented to and reviewed by the APSC. Relying on the primary jurisdiction doctrine, the district court concluded that the plaintiffs should first present their claims to the APSC and for that reason dismissed the suit without prejudice. The plaintiffs appealed.

We vacate the district court's order and remand with directions that the case be dismissed on the grounds that federal courts lack subject matter jurisdiction over this state law case because there is an insufficient amount in controversy for diversity jurisdiction to exist, and no federal law question in the complaint for federal question jurisdiction to exist.

I. BACKGROUND

The origin of this lawsuit lies in the deregulation of "customer premises equipment" ("CPE"). GTE,1 in addition to providing telecommunications services, leases telephones and related equipment, collectively referred to as CPE, to some of its telecommunications services customers. Before 1988, the leasing activity of GTE and other telecommunications providers, including the amount of the lease rates, was subject to federal and state regulation. In the early 1980s, the Federal Communications Commission ("FCC") decided to deregulate the CPE activity of these providers, thereby allowing them to compete freely with other non-telecommunications providers in the market for CPE while the regulation of their telecommunications services continued.

As part of the deregulation plan, the FCC found it necessary to preempt state regulation of CPE activity, but it allowed states to develop their own deregulation plans provided that those plans were implemented by December 31, 1987. In the Matter of Procedures for Implementing the Detariffing of Customer Premises Equipment and Enhanced Services, 99 F.C.C.2d 354 (1984). Working with the telecommunications providers in Alabama, the APSC followed the directive of the FCC and achieved the deregulation of the providers' CPE activity before 1988.

In January of 1997, Chester Smith and three other Alabama residents filed this putative class action lawsuit against GTE. According to the plaintiffs, after its CPE activity had been deregulated, GTE offered to sell at "artificially high prices" phones that were then being leased by its customers. GTE allegedly treated a customer's lack of response to the offer as "an agreement to continue leasing," which the plaintiffs refer to as "an unlawful negative option." The plaintiffs further allege that during the "Deregulation Period"-which they define as January 2, 1988 until the present-GTE has carried out a "fraudulent scheme," which includes charging its customers exorbitant fees for leased telephones, concealing the existence and amount of those charges, failing to inform customers they would be better off purchasing phones from third parties, and in some instances, charging customers for phones that no longer worked or had been returned to GTE.2

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In their amended complaint, the plaintiffs assert state law claims for fraud, unjust enrichment, breach of contract, and breach of warranty. In addition, the plaintiffs seek equitable relief in Count VI of their complaint, including an injunction preventing GTE from misrepresenting its lease charges on monthly bills and a declaration that the lease agreements for telephones are "null and void from their inception."

The plaintiffs contend that diversity jurisdiction exists over their state law claims, and they seek to certify the following two classes: (1) the "Damages Class," which consists of "all persons who presently reside in Alabama who have leased telephone equipment for residential use from [GTE] at any point in time between January 2, 1988 and the date of this suit," and (2) the "Injunctive Class," the composition of which is identical to the "Damages Class" except that it also includes residents of Kentucky, North Carolina, and Virginia. Although the complaint does not allege the number of members in each of the proposed classes, it does allege that "[i]n mid-1993 [GTE] leased telephone equipment to 36,065 residents of the state of Alabama." Consequently, the "Damages Class" alone consists of more than 36,000 members.

On August 14, 1997, GTE moved for judgment on the pleadings. In its motion, GTE argued that the APSC, which supervises and regulates public utilities in Alabama, had either exclusive or primary jurisdiction over the plaintiffs' claims. GTE requested that the district court dismiss the plaintiffs' suit and effectively require them to present their claims to the APSC. The motion was referred to the magistrate court who ultimately recommended that the district court, under the primary jurisdiction doctrine, stay the proceedings in the lawsuit until the plaintiffs' claims could be heard and decided by the APSC.3

Agreeing that the APSC should exercise primary jurisdiction over the plaintiffs' claims, the district court adopted the recommendation of the magistrate court except that it did not order a stay. Instead, the court dismissed the case without prejudice to allow the plaintiffs to "assert their claims before the APSC, with leave to any Party to move the court to reinstate the action on the active docket of the court, if and when appropriate and necessary." The plaintiffs appealed.

On appeal, we raised the question of whether this case involved a sufficient amount in controversy to establish federal diversity jurisdiction under 28 U.S.C. § 1332. The parties submitted supplemental briefing on that issue and addressed it at oral argument. Both the plaintiffs and GTE contend that there is a sufficient amount in controversy. However, we conclude that there is not, and that federal question jurisdiction also is not present, with the result that the district court lacked subject matter jurisdiction over the case.

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II. DISCUSSION

"Federal courts have limited subject matter jurisdiction, or in other words, they have the power to decide only certain types of cases." Morrison v. Allstate Indem. Co., 228 F.3d 1255, 1260-61 (11th Cir.2000) (citing University of South Alabama v. American Tobacco Co., 168 F.3d 405, 409-10 (11th Cir.1999)). Lower federal courts can exercise this power only over cases for which there has been a congressional grant of jurisdiction, see id., "[a]nd because the Constitution unambiguously confers this jurisdictional power to the sound discretion of Congress, federal courts should proceed with caution in construing constitutional and statutory provisions dealing with [their] jurisdiction." University of South Alabama, 168 F.3d at 409 (citations and internal marks omitted).

In this case, neither party has challenged federal court jurisdiction. However, because a federal court is powerless to act beyond its statutory grant of subject matter jurisdiction, a court must zealously insure that jurisdiction exists over a case, and should itself raise the question of subject matter jurisdiction at any point in the litigation where a doubt about jurisdiction arises. See Fitzgerald v. Seaboard Sys. R.R., Inc., 760 F.2d 1249, 1251 (11th Cir.1985) ("A federal court not only has the power but also the obligation at any time to inquire into jurisdiction whenever the possibility that jurisdiction does not exist arises."); see also Morrison, 228 F.3d at 1261-62 (raising sua sponte on appeal the issue of whether the case involved a sufficient amount in controversy for diversity jurisdiction); Laughlin v. Kmart Corp., 50 F.3d 871, 873-74 (10th Cir.1995) (same).

In their complaint, the plaintiffs allege that diversity jurisdiction exists over this case, and neither the defendant nor the district court questioned that allegation.4 Moreover, even after we raised the potential jurisdictional problem on appeal, both parties maintained in their supplemental briefs that federal jurisdiction exists over the case. But subject matter jurisdiction exists only where granted by statute, and thus, a federal court is not bound by the jurisdictional contentions of the parties. See Morrison, 228 F.3d at 1261; Jackson v. Seaboard Coast Line R.R. Co., 678 F.2d 992, 1000-01 (11th Cir.1982) ("The jurisdiction of a court over the subject matter of a claim involves the court's competency to consider a given type of case and cannot be waived or otherwise conferred upon the court by the parties.").

While both...

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