281 F.3d 1350 (11th Cir. 2002), 99-8007, Sikes v Teleline Inc.

Docket Nº:99-8007
Citation:281 F.3d 1350
Party Name:JAMES W. SIKES, FELIX KEMP, Individually and On Behalf of All Other Persons Similarly Situated, Plaintiffs-Appellees, v. TELELINE, INC, USA NETWORKS, Defendants, AMERICAN TELEPHONE & TELEGRAPH COMPANY, Defendant-Appellant.
Case Date:February 13, 2002
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 1350

281 F.3d 1350 (11th Cir. 2002)

JAMES W. SIKES, FELIX KEMP, Individually and On Behalf of All Other Persons Similarly Situated, Plaintiffs-Appellees,

v.

TELELINE, INC, USA NETWORKS, Defendants,

AMERICAN TELEPHONE & TELEGRAPH COMPANY, Defendant-Appellant.

No. 99-8007

United States Court of Appeals, Eleventh Circuit

February 13, 2002

Page 1351

[Copyrighted Material Omitted]

Page 1352

Appeal from the United States District Court for the Southern District of Georgia, D. C. Docket No. 92-00147-CV-6

Before TJOFLAT, WILSON and FLETCHER[x], Circuit Judges.

TJOFLAT, Circuit Judge:

American Telephone & Telegraph Corporation ("AT&T") appeals the district court's certification, pursuant to Fed. R. Civ. P. 23(b)(3), of a class of plaintiffs who present claims arising from a "900-number" telemarketing program. We conclude that the district court abused its discretion in holding that the questions of law or fact common to the members of the proposed class predominate over any questions affecting only individual members and that,

therefore, the class would be manageable.1 We therefore reverse the certification of the class and remand for further proceedings.

I.

A.

In Andrews v. American Telephone & Telegraph Co., 95 F.3d 1014 (11th Cir. 1996), we held that the district court erred in certifying two classes under Rule 23(b)(3)2 of the Federal Rules of Civil Page 1353

Procedure because the plaintiffs had failed to demonstrate that common issues predominated.3 The first class of plaintiffs, the "Andrews class," brought suit against various telecommunications carriers and services providers, alleging that several 900-number telephone programs,4 which the defendants were providing to the public, were

gambling activity [that] is illegal under the laws of all of the fifty states, and constitutes racketeering activity in violation of the federal RICO statute, 18 U.S.C. § § 1961 to 1968 (1994), the Communications Act of 1934, 47 U.S.C. § § 201 to 229 (1994), and the federal common law of communications law.

[The] complaint further allege[d] that the defendants committed mail and wire fraud, in violation of 18 U.S.C. § § 1341 & 1343 (1994), in furtherance of a RICO enterprise . . . . In addition to the allegations concerning a national gambling enterprise, [the plaintiffs] allege[d] that the defendants . . . violated Georgia statutes that prohibit the operation of a gambling business within that state.

Id. at 1019 (internal citations and quotations omitted).

The district court certified a master class and a Georgia subclass, the master class consisting of

[a]ll persons who paid for one or more 900-number telephone calls billed and collected by [two of the defendants], which calls were made in connection with programs offering sweepstakes, games of chance, awards, cash or other prizes, gifts, or information on unclaimed funds.

Id. at 1020-21. Finding that the court had abused its discretion in certifying the master class,5 we held that while

[i]t may be true that, at a general level, the predominant issue presented in Andrews is whether the [defendants] were involved in the operation of illegal gambling schemes that used 900 numbers to facilitate caller participation . . ., as a practical matter, the resolution of this overarching common issue breaks down into an unmanageable variety of individual legal and factual issues.

Id. at 1023. Drawing on Pelletier v. Zweifel, 921 F.2d 1465, 1499-1500 (11th Cir. Page 1354

1991), for the proposition that "each plaintiff must demonstrate reliance on deceptive conduct in furtherance of [an] alleged RICO scheme," we stated that "[t]he class's mail and wire fraud allegations . . . are not wholly subject to class-wide resolution." Id. at 1023-24. As to the claims based upon state gambling laws, we held that "the need to interpret and apply the gaming laws of all fifty states to assess the legality of each 900-number program [is] foremost among the difficulties in trying the gambling claims on a class basis." Id. at 1024.

The second class of plaintiffs, the "Harper class," brought suit against various telecommunications carriers and services providers that offered several 900-number programs to the public. The plaintiffs alleged that the defendants had committed mail and wire fraud, thereby violating federal RICO and Georgia RICO, "by approving and mailing misleading promotional and solicitation materials [for 900 numbers regarding credit cards] and by collecting the revenues produced by caller participation." Id. at 1021. The court certified a master class and a Georgia subclass, to include

persons who paid for one or more 900-number telephone calls billed and collected by [two of the defendants], which calls were made in connection with programs offering credit cards, financial information services, catalog cards, or information on obtaining credit cards or catalog cards.

Id.

We were "even more certain that the Harper class is unsustainable under Rule 23(b)(3)" than we were about the Andrews class, because "individual issues abound and are magnified by the necessity of applying diverse state laws to programs that in many cases have little in common beyond their use of 900 numbers." Id. at 1024. After noting the significant problem that "the [multiple] 900-number programs at issue . . . differ widely" in many respects, we held that the class was unsustainable because of the individualized nature of the plaintiffs' claims:

Even if it could be shown that the appellants were engaged in a scheme to defraud and made misrepresentations to further that scheme, the plaintiffs would still have to show, on an individual basis, that they relied on the misrepresentations, suffered injury as a result, and incurred a demonstrable amount of damages. As [with the Andrews class], the problems with trying the individualized elements of the plaintiffs' claims, as well as handling the unique aspects of the 900-number programs, are compounded by the necessity of referencing fifty sets of credit card and consumer protection laws.

Id. at 1025 (emphasis added) (internal citations omitted).

B.

The case at bar presents facts that are almost identical to those involved in the Andrews case, with one variation. Instead of multiple 900-number programs being challenged, in this case there is only one: the "Let's Make a Deal" program ("LMAD"). The district court described LMAD as follows:

This automated interactive telephone game was modeled on the television game show of the same name. The game had up to six levels, and at each level the caller could win a prize by selecting the correct "door" behind which the prize was concealed. Upon winning a prize, the caller could either accept that prize or advance to the next level. If the caller chose to advance, any previously awarded prize was forfeited in exchange for a chance at a Page 1355

larger prize. Plaintiffs claim that the odds of ultimately winning the maximum $2,000.00 cash prize were 1 in 2,700.

Sikes v. Am. Tel. & Tel. Co., No. CV-692-147 (S.D. Ga. Mar. 26, 1998) at 2-3.6

Plaintiffs, individuals who had called LMAD and incurred charges (in excess of any winnings they may have received), brought suit, individually and on behalf of all others similarly situated, in the United States District Court for the Southern District of Georgia.7 The plaintiffs sued: (1) Page 1356

Teleline, Inc. ("Teleline"), the creator and operator of LMAD; (2) the U.S.A. Network, which broadcast a portion of the television advertising for LMAD; and (3) AT&T, which acted as Teleline's telecommunications carrier and billing contractor.

Count One of the plaintiffs' complaint8 asserted that the defendants had violated the federal Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § § 1961-1968 ("federal RICO").9 Section 1962(c) criminalizes participation "in the conduct of an enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt."10 Section 1962(d) criminalizes conspiracy to do the same.11 Section 1964(c) permits a civil plaintiff to sue for recovery of costs, attorneys' fees, and treble damages sustained as a result of a defendant's violation of section 1962.12

Count One alleged that the defendants had violated sections 1962(b),13 (c), and (d) by engaging in a pattern of racketeering activity that included "numerous acts of connected, related and continuing mail and wire fraud with the advertisement and solicitation of calls to [LMAD's 900 numbers], the answering of each individual 900 number call to these number[s], and the billing and collection of charges for each such 900 number call." Such activity was allegedly in violation of the wire and mail fraud statutes, 18 U.S.C. § § 1341 and 1343,14 which satisfy the definition of "racketeering activity" as set forth in section 1961(1)(B).15 Further, Count One asserted that the defendants engaged in an Page 1357

illegal gambling business, in violation of 18 U.S.C. § 1955,16 by operating LMAD. The plaintiffs alleged that this illegal gambling business constituted racketeering activity under section 1961(1)(B) and the continued operation of LMAD established a pattern of racketeering activity. Finally, Count One asserted that each charge incurred by a caller to LMAD's 900 numbers constituted a gambling debt, which is an unlawful debt within the meaning of section 1961(6). The defendants' billing and collection of this unlawful debt thus constituted unlawful debt collection. Since Count One asserted that the defendants had violated sections 1962(c) and (d) by engaging in and conspiring to engage in a pattern of racketeering activity (wire and mail fraud and illegal gambling) and collection of...

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