Kemp v. American Tel. & Tel. Co., 03-15189.

Citation393 F.3d 1354
Decision Date27 December 2004
Docket NumberNo. 03-15189.,03-15189.
PartiesFelix KEMP, Plaintiff-Appellee, v. AMERICAN TELEPHONE & TELEGRAPH COMPANY, Defendant-Cross-Claimant-Appellant,
CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)

C. LeeAnn McCurry, Norman L. Underwood, William N. Withrow, Jr., Troutman Sanders, Atlanta, GA, Wyck A. Knox, Jr., Joseph H. Huff, Kilpatrick Stockton, LLP, Augusta, GA, Ted Hamby Clarkson, Kilpatrick Stockton, LLP, Sewanee, TN, for AT&T.

Leroy W. Brigham, John C. Bell, Jr., Bell & James, Augusta, GA, for Kemp.

Appeal from the United States District Court for the Southern District of Georgia.

Before BIRCH, BARKETT and COX, Circuit Judges.

BARKETT, Circuit Judge:

AT&T appeals the district court's denials of its motion for judgment as a matter of law seeking to set aside a jury verdict in favor of Felix Kemp and its motion to reduce the jury's punitive damages award. The jury determined that AT&T was guilty of fraudulent billing practices and the collection of illegal gambling debts in violation of the federal and Georgia RICO statutes. These gambling debts were incurred after Kemp's grandson called a 900-number named "Let's Make a Deal," which offered callers a chance to win various prizes in exchange for a fee. AT&T attempted to collect these debts by including them in Kemp's phone bill as though they were long distance charges. The jury awarded Kemp $115.05 in actual damages, the costs of playing the game, which were then trebled under the RICO statutes, and also awarded Kemp punitive damages of one million dollars. For the reasons given below, we affirm the denial of AT&T's motion for judgment as a matter of law. However, we conclude that the trial court erred by letting the jury's punitive damages award stand and therefore reduce the award.

I. BACKGROUND

The "Let's Make a Deal" game ("LMAD") was created by Teleline, Inc., based on the famous television show of the same name. The game ran from early 1990 until December 1992.1 When participants called the 900 line, they were asked to pick a number using their touchtone phones that corresponded to a figurative "door" that concealed a prize. If callers guessed correctly, they could either keep the prize or instead proceed to the next "level." Upon successfully completing all six levels of the game, callers were entitled to a cash prize of $2000. The odds of winning this prize were approximately 1 in 2700. The cost of playing the game was $3.88 per minute, and there was no set time for how long any particular call would last.

AT&T carried calls to LMAD's 900 numbers over its long distance network and played the prerecorded messages that callers heard when they called the line. Individuals who called LMAD were not charged for the price of a phone call, but instead paid only for the "content" provided by Teleline, namely, the ability to gamble using their phones. It was Teleline who paid AT&T for the cost of each phone call to LMAD.2 Notwithstanding that the charges incurred in playing the game were owed exclusively to Teleline and were not debts for long distance calls, AT&T listed these charges in its long distance phone bill, interspersed with charges for long distance calls. AT&T billed individuals who called LMAD from Georgia $360,252.40 and collected $287,360.59. This disparity is due in part to AT&T's policy of erasing LMAD fees for customers who complained sufficiently about the charges. In exchange for its billing services, AT&T received a commission of six percent of the fees it collected on behalf of Teleline.

Kemp was a long distance customer of AT&T who received a bill containing multiple charges for playing the LMAD game intermingled among charges for long distance phone calls. The LMAD charges appeared on pages marked with AT&T's name and logo. The remainder of the bill contained charges for local phone service owed to BellSouth, in which only BellSouth's name and logo appeared. Despite the separate sections for local and long distance charges, the entire portion of the bill was to be paid to BellSouth, which purchased AT&T's accounts receivable.

Upon noticing the LMAD charges, Kemp called the number for BellSouth listed in his phone bill, seeking information about these debts. After a BellSouth representative told Kemp that he owed the entire amount of the bill and would lose phone service if he refused to pay, Kemp paid for the charges and later brought suit.3 At trial, the jury agreed with Kemp that AT&T's billing practices were fraudulent and constituted a pattern of racketeering activity within the meaning of the federal and Georgia RICO statutes. In addition, the jury determined that AT&T's actions amounted to illegal gambling under state law and that the collection of these unlawful debts also violated RICO. The jury awarded Kemp both compensatory damages and the aforementioned one million dollars in punitive damages. AT&T moved for judgment as a matter of law and for a reduction of the punitive damages award. The district court denied both motions and this appeal followed.

II. DISCUSSION
A. AT&T's Motion for Judgment as a Matter of Law

A motion for judgment as a matter of law should be granted only if a court finds that "there can be but one reasonable conclusion as to the proper judgment." See Bryan v. James E. Holmes Reg'l Med. Ctr., 33 F.3d 1318, 1333 (11th Cir.1994) (internal quotation marks omitted). AT&T argues that it was entitled to judgment as a matter of law because the jury's findings were unreasonable given the evidence presented at trial. Specifically, AT&T claims that Kemp failed to offer sufficient evidence for the jury to reasonably conclude that (1) AT&T's actions violated the mail or wire fraud statutes and Georgia's theft by deception statute; (2) AT&T's billing practices amounted to the collection of unlawful debts in violation of state and federal RICO; and (3) Kemp's payments were made involuntarily within the meaning of state law. We address each contention in turn.

1. RICO Violations For Racketeering Activity Involving Mail and Wire Fraud and Theft by Deception

In reviewing AT&T's motion for judgment as a matter of law on this issue, we consider whether there was a reasonable evidentiary basis for the jury to conclude that AT&T's actions constituted federal mail or wire fraud, under 18 U.S.C. §§ 1341 and 1343, respectively, and theft by deception under state law, Ga.Code Ann. § 16-8-3, which were the predicate crimes triggering RICO liability. See Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and the Georgia RICO Act, Ga.Code Ann. § 16-14-1 et seq. Given the materially equivalent elements for establishing a claim of mail or wire fraud and theft by deception, the district court only required that Kemp prove that AT&T committed mail and wire fraud. Since neither party challenges the correctness of this decision on appeal, we consider only whether Kemp established sufficient facts in order to prove mail or wire fraud. And because the elements of the mail and wire fraud statutes are the same, we consider these claims together. See Pelletier v. Zweifel, 921 F.2d 1465, 1498 (11th Cir.1991).

In order to bring a RICO claim where mail or wire fraud serves as the predicate activity, it is necessary to show that (1) the defendant intentionally participated in a scheme to defraud another of money or property, (2) the defendant used the mails or wires in furtherance of that scheme, and (3) the plaintiff relied to his detriment on the defendant's misrepresentations. Id. at 1498-99. Only intent and reliance are at issue in this appeal, since AT&T obviously used the mails when it sent Kemp his phone bill.

AT&T argues that Kemp failed to provide sufficient evidence that it intended to deceive him because none of the statements in its long distance phone bill were false. As this court has explained, however, it is not necessary for a plaintiff to point to affirmative misstatements in order to establish the requisite fraudulent intent of a defendant under the mail and wire fraud statutes. Langford v. Rite Aid of Ala., Inc., 231 F.3d 1308, 1312 (11th Cir.2000) ("Intent to defraud need not be shown through active misrepresentation — material omissions can be fraudulent if they are intended to create a false impression."). The nondisclosure of material information, even in the absence of any patently false statements, can also constitute a violation of the mail and wire fraud statutes where a defendant has a duty to disclose. See Ayres v. Gen. Motors Corp., 234 F.3d 514, 521 (11th Cir.2000). Such a duty can be judicially created where there is a special relationship of trust between the parties, or may be based on other circumstances. See Langford, 231 F.3d at 1312-13 ("Determinations as to whether a duty to disclose information exists must be made on a case by case basis, with appropriate attention given to the nature of the transaction and the relationship between the parties.").

In this case, once AT&T included the LMAD charges in the section of its bill for long distance calls, it had the duty to correct the mistaken impression it had fostered that the LMAD debts were for long distance charges. See United States v. Autuori, 212 F.3d 105, 119 (2nd Cir.2000) ("A duty to disclose can also arise in a situation where a defendant makes partial or ambiguous statements that require further disclosure in order to avoid being misleading."); United States v. Townley, 665 F.2d 579, 585 (5th Cir.1982) (noting that "under the mail fraud statute, it is just as unlawful to speak `half truths' or to omit to state facts necessary to make the statements made, in light of the circumstances under which they were made, not misleading"). The LMAD gambling charges appeared under the heading "direct dialed calls" in Kemp's phone bill and were interspersed among charges for regular long distance calls. AT&T's name and logo were displayed...

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