524 U.S. 214 (1998), 97-679, American Telephone & Telegraph Co. v. Central Office Telephone

Docket Nº:Case No. 97-679
Citation:524 U.S. 214, 118 S.Ct. 1956, 141 L.Ed.2d 222, 66 U.S.L.W. 4483
Party Name:AMERICAN TELEPHONE & TELEGRAPH CO. v. CENTRAL OFFICE TELEPHONE, INC.
Case Date:June 15, 1998
Court:United States Supreme Court
 
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524 U.S. 214 (1998)

118 S.Ct. 1956, 141 L.Ed.2d 222, 66 U.S.L.W. 4483

AMERICAN TELEPHONE & TELEGRAPH CO.

v.

CENTRAL OFFICE TELEPHONE, INC.

Case No. 97-679

United States Supreme Court

June 15, 1998

Argued March 23, 1998

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Syllabus

Respondent purchases "bulk" communications services from long-distance providers, such as petitioner AT&T, and resells them to its customers. Petitioner, as a common carrier under the Communications Act of 1934, must file with the Federal Communications Commission (FCC) "tariffs" containing all its "charges" for interstate services and all "classifications, practices, and regulations affecting such charges," 47 U.S.C. § 203(a). A carrier may not "extend to any person any privileges or facilities in such communication, or employ or enforce any classifications, regulations, or practices affecting such charges, except as specified in such [tariff]." § 203(c). The FCC requires carriers to sell long-distance services to resellers under the same rates, terms, and conditions as apply to other customers. In 1989, petitioner agreed to sell respondent a long-distance service, which, under the parties' written subscription agreements, would be governed by the rates, terms, and conditions in the appropriate AT&T tariffs. Respondent soon experienced problems with the service it received, and withdrew from the contract before the expiration date. Meanwhile, it had sued petitioner in Federal District Court, asserting, inter alia, state-law claims for breach of contract and for tortious interference with contractual relations (viz., respondent's contracts with its customers), the latter claim derivative of the former. Respondent alleged that petitioner had promised and failed to deliver various service, provisioning, and billing options in addition to those set forth in the tariff, and that petitioner's conduct was willful, so that consequential damages were available under the tariff. The Magistrate Judge rejected petitioner's argument that the claims were pre-empted by § 203's filed-tariff requirements; he declined, however, to instruct on punitive damages for the tortious-interference claim. The jury found for respondent and awarded damages. The Ninth Circuit affirmed the judgment, but reversed the Magistrate Judge's failure to instruct on punitive damages and remanded for a trial on that aspect of the case.

Held:

The Communications Act's filed-tariff requiremnets pre-empt respondent's state-law claims. Pp.221-228

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(a) Sections 203(a) and (c) are modeled after similar provisions of the Interstate Commerce Act (ICA), and the "filed rate doctrine" associated with the ICA tariff provisions applies to the Communications Act as well. MCI Telecommunications Corp. v. American Telephone & Telegraph Co., 512 U.S. 218, 229-231. Under that doctrine, the rate a carrier duly files is the only lawful charge. Louisville & Nashville R. Co. v. Maxwell, 237 U.S. 94, 97. Even if a carrier intentionally misrepresents its rate and a customer relies on the misrepresentation, the carrier cannot be held to the promised rate if it conflicts with the published tariff. Kansas City Southern R. Co. v. Carl, 227 U.S. 639, 653. That this case involves services and billing rather than rates or ratesetting does not make the filed rate doctrine inapplicable. Since rates have meaning only when one knows the services to which they are attached, any claim for excessive rates can be couched as a claim for inadequate services and vice versa. The Communications Act recognizes this in the §§ 203(a) and (c) requirements, and the cases decided under the ICA make it clear that discriminatory privileges are not limited to discounted rates, see, e. g., United States v. Wabash R. Co., 321 U.S. 403, 412-413. Pp. 221-224.

(b) This Court's filed-rate cases involving special services claims cannot be distinguished on the ground that the services they involved should have been included in the tariff. That is precisely the case here. Even provisioning and billing are "covered" by the applicable tariff. Nor does it make any difference that petitioner provided the same services, without charge, to other customers; that only tends to show that petitioner acted unlawfully with regard to the other customers as well. Pp. 224-226.

(c) The analysis used in evaluating respondent's contract claim applies with equal force to its wholly derivative tortious-interference claim. The Communications Act's saving clause does not dictate a different result. It copies the ICA's saving clause, which has long been held to preserve only those rights that are not inconsistent with the statutory filed-rate requirements. Keogh v. Chicago & Northwestern R. Co., 260 U.S. 156, 163. Finally, respondent's argument that petitioner's willful misconduct makes the relief awarded here consistent with the tariff is rejected. Pp. 226-228.

108 F.3d 981, reversed.

Scalia, J., delivered the opinion of the Court, in which Rehnquist, C. J., and Kennedy, Souter, Thomas, Ginsburg, and Breyer, JJ., joined. Rehnquist, C. J., filed a concurring opinion, post, p. 228. Stevens, J., filed a dissenting opinion, post, p. 231. O'Connor, J., took no part in the consideration or decision of the case.

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David W. Carpenter argued the cause for petitioner. With him on the briefs were Carter G. Phillips, Thomas W. Merrill, Peter D. Keisler, and Marc E. Manly.

Bruce M. Hall argued the cause and filed a brief for respondent.[*]

Justice Scalia delivered the opinion of the Court.

Respondent Central Office Telephone, Inc. (COT), a reseller of long-distance communications services, sued petitioner AT&T, a provider of long-distance communications services, under state law for breach of contract and tortious interference with contract. Petitioner is regulated as a common carrier under the Communications Act of 1934, 48 Stat. 1064, as amended, 47 U.S.C.§ 151 et seq. The issue before us is whether the federal filed-tariff requirements of the Communications Act pre-empt respondent's state-law claims.

I

Respondent purchases "bulk" long-distance services— volume-discounted services designed for large customers— from long-distance providers, and resells them to smaller customers. Like many other resellers in the telecommunications industry, respondent does not own or operate facilities of its own; it is known as a "switchless reseller," which is the industry nomenclature for arbitrageur. Of course respondent passes along only a portion of the bulk-purchase discount to its aggregated customers, and retains the remaining discount as profit.

Petitioner provides long-distance services and, as a common carrier under the Communications Act, § 153(h), must

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observe certain substantive requirements imposed by that law. Section 203 of the Act requires that common carriers file "schedules" (also known as "tariffs") containing all their "charges" for interstate services and all "classifications, practices, and regulations affecting such charges." § 203(a). The Federal Communications Commission (FCC), which is the agency responsible for enforcing the Act, requires carriers to sell long-distance services to resellers such as respondent under the same rates, terms, and conditions as apply to other customers.

Prior to 1989, petitioner had developed a type of long-distance service known as Software Defined Network (SDN), designed to meet the needs of large companies with offices in multiple locations. SDN established a "virtual private network" that allowed employees in different locations to communicate easily. For example, an employee in Washington could call a co-worker in Denver simply by dialing a four-digit extension. SDN customers, in exchange for a commitment to purchase large volumes of long-distance communication time, received this service at a rate much below what it would otherwise cost.

Several changes to SDN in 1989 made the service extremely attractive to resellers, such as respondent, who aggregate smaller customers. Petitioner developed the capability to allow customers to use ordinary ("switched access") telephone lines to connect locations to their SDN networks. Previously, locations had to be connected over special "dedicated access" lines, which are direct lines from a location's telephone system to petitioner's long-distance network, bypassing the switches of the local exchange carrier. Dedicated access involves large fixed costs, so it is cost effective only when a location originates a large volume of calls. Switched access, in contrast, does not entail additional high fixed costs, so it is better suited to small users and hence to resellers. Petitioner also instituted two pricing promotions for SDN in 1989: additional discounts from the basic SDN

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rates for customers making large usage and duration commitments, and waiver of installation charges for customers making multiyear commitments (subject to penalties for early termination). Petitioner also added a new billing option. In addition to network billing, whereby petitioner prepares a single bill that applies the tariffed rate to all usage at all locations, petitioner started to offer multilocation billing (MLB), which allows the SDN volume discounts to be apportioned between an SDN customer and individual locations on its network, with the proportion being chosen by the customer. Under this option, petitioner sends bills directly to the customer's individual locations (which, in the case of resellers, means to the reseller's customers) but the customer (or reseller) remains responsible for all payments. The tariff provides, however, that petitioner is not responsible for the allocation of charges. See AT&T Tariff FCC...

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