Long Distance Telecommunications Litigation, In re

• Decision Date: 01 December 1987
• Docket Number: Nos. 85-1684,ITT-U,86-1599,s. 85-1684
• Citation: 831 F.2d 627
• Parties: RICO Bus.Disp.Guide 6756 In re LONG DISTANCE TELECOMMUNICATIONS LITIGATION. Charles KAPLAN, et al., Plaintiffs-Appellants, v.S. TRANSMISSION SYSTEMS, INC., et al., Defendants-Appellees. Roger LEE, et al., Plaintiffs-Appellants, v. WESTERN UNION TELEGRAPH COMPANY, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 627

831 F.2d 627

RICO Bus.Disp.Guide 6756

In re LONG DISTANCE TELECOMMUNICATIONS LITIGATION.

Charles KAPLAN, et al., Plaintiffs-Appellants, v. ITT-U.S. TRANSMISSION SYSTEMS, INC., et al., Defendants-Appellees.

Roger LEE, et al., Plaintiffs-Appellants, v. WESTERN UNION TELEGRAPH COMPANY, et al., Defendants-Appellees.

Nos. 85-1684, 86-1599.

United States Court of Appeals,

Sixth Circuit.

Argued April 27, 1987.

Decided Oct. 9, 1987.

As Amended on Denial of Rehearing Dec. 1, 1987.

Fay Clayton, Carolyn Hope Rosenberg Safer (argued), Sachnoff, Weaver & Rubenstein, Ltd., Chicago, Ill., Charles R. Watkins, Lawrence W. Abel, Greenfield & Chimicles, Haverford, Pa., Mark F. Anderson, San Francisco, Cal., James A. Mangione and Margaret G. Dobies, San Diego, Cal., for plaintiffs-appellants in No. 85-1684.

Richard J. Gray (argued), Chicago, Ill., for MCI Telecommunications Corp.

Howard G. Kristol, Wm. I. Sussman, Reboul, MacMurray, HeWitt, Maynard & Kristol, New York City, for GTE Sprint Communications Corp.

Michael W. Ward, John F. Ward, Jr., Chicago, Ill., for U.S. Telephone of the Midwest, Inc.

Mitchell S. Goldgehn, Chicago, Ill., for Allnet Communications Services.

Mark Anderson, San Francisco, Cal., for plaintiffs-appellants in No. 86-1599.

Robert P. Hurlbert, Bloomfield Hills, Mich., Maureen H. Burke, Detroit, Mich., Robert M. Chilvers, San Francisco, Cal., Robert L. Sills, Reboul, MacMurray, Hewitt, Maynard & Kristol, New York City, for defendants-appellees in No. 86-1599.

Before LIVELY, Chief Judge, and GUY and BOGGS, Circuit Judges.

LIVELY, Chief Judge.

These consolidated appeals deal with the application of the doctrines of primary jurisdiction and preemption. The plaintiffs are customers of the defendants, which are companies engaged in providing long distance telephone services. The complaints charged violations of federal statutes and of state and federal common law based on the defendants' practice of charging for uncompleted calls, ring time and holding time, and failing to inform customers of this practice. The defendants are competitors of American Telephone & Telegraph Co. (AT & T) who advertise that their long distance rates are lower than those of AT & T, but do not reveal their practice of charging for uncompleted calls. AT & T does not charge for such calls. In order to frame the issues clearly, it is necessary to set forth the procedural history of the litigation in some detail.

I.

Ten separate class actions were filed in various district courts setting forth the same general claims. The Judicial Panel on Multidistrict Litigation transferred these cases to the United States District Court for the Eastern District of Michigan pursuant to 28 U.S.C. Sec. 1407(a). Thereafter, as more complaints were filed, the Judicial Panel continued to transfer them to the district court. Seymour Lazar, a plaintiff in one of the transferred cases, moved to remand his case to state court, asserting that he had raised only state law claims. The district court denied the motion, finding that plaintiff's state law claims were preempted by the Federal Communications Act of 1934, 47 U.S.C. Secs. 151, et seq., and that this federal statute provided the exclusive remedy for the defendants' allegedly unlawful actions. The district court held that the defendants' alleged conduct was within the scope of activities governed by 47 U.S.C. Sec. 201(b) which provides in part: "All charges, practices, classifications, and regulations for and in connection with such communication service, shall be just and reasonable, and any such charge, practice, classification, or regulation that is unjust or unreasonable is declared to be unlawful...." Lazar v. MCI Communications, Inc., 598 F.Supp. 951 (E.D.Mich.1984). The district court has subsequently denied similar remand motions brought by other plaintiffs in the consolidated proceedings. See Solomon v. MCI Communications, 640 F.Supp. 997 (E.D.Mich.1986); Sandler v. GTE Sprint, 622 F.Supp. 282 (E.D.Mich.1985).

After the Lazar decision, all of the plaintiffs filed a single amended consolidated complaint. ¹ Count I of the consolidated complaint alleged that defendants' failure to disclose their billing policy was an "unreasonable" practice in violation of 47 U.S.C. Sec. 201(b). Count III alleged that the same conduct was also violative of 47 U.S.C. Sec. 207, which provides:

Recovery of damages. Any person claiming to be damaged by any common carrier subject to the provisions of this chapter may either make complaint to the Commission as hereinafter provided for, or may bring suit for the recovery of the damages for which such common carrier may be liable under the provisions of this chapter, in any district court of the United States of competent jurisdiction; but such person shall not have the right to pursue both such remedies.

The district court ruled that this section merely outlines the concurrent jurisdiction of the federal district courts and the Federal Communications Commission (FCC) to hear claims alleging violations of other provisions of the Act and that section 207 does not, in and of itself, create a separate, independent cause of action. The plaintiffs have not appealed from this ruling. Counts II, IV, and V presented federal common law claims of fraud, breach of contract, and conversion. Finally, in Count VI of the consolidated complaint, plaintiffs alleged that defendants' conduct also violated the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. Secs. 1961, et seq.

In granting the defendants' motion to dismiss, the district court found that it would be more appropriate for the FCC to make the initial determination regarding the reasonableness of the defendants' practices under 47 U.S.C. Sec. 201(b). Therefore, relying on the doctrine of primary jurisdiction, the district court dismissed this statutory claim and referred the issue to the FCC. In re Long Distance Telecommunications Litigation, 612 F.Supp. 892 (E.D.Mich.1985) (Long Distance Litigation ). The plaintiffs' federal common law claims were dismissed because the court found that it was unnecessary to imply such claims where there was already a statute which was broad enough to address the issues and provide plaintiffs with the requested relief. Finally, with respect to plaintiffs' RICO claims, the court found that a determination of "unreasonableness" under Sec. 201(b) was a necessary prerequisite to establishing the existence of "crime," "injury," or "liability" as required to state a RICO claim.

II.

We consider the appeal in No. 85-1684 first. In dismissing the consolidated complaint the district court invoked the doctrine of primary jurisdiction. This doctrine is based upon a principle described by Justice Frankfurter in Far East Conference v. United States, 342 U.S. 570, 574-75, 72 S.Ct. 492, 494-95, 96 L.Ed. 576 (1952), as follows:

The Court thus applied a principle, now firmly established, that in cases raising issues of fact not within the conventional experience of judges or cases requiring the exercise of administrative discretion, agencies created by Congress for regulating the subject matter should not be passed over. This is so even though the facts after they have been appraised by specialized competence serve as a premise for legal consequences to be judicially defined. Uniformity and consistency in the regulation of business entrusted to a particular agency are secured, and the limited functions of review by the judiciary are more rationally exercised, by preliminary resort for ascertaining and interpreting the circumstances underlying legal issues to agencies that are better equipped than courts by specialization, by insight gained through experience, and by more flexible procedure.

The Supreme Court explained the difference between exhaustion and primary jurisdiction in United States v. Western Pacific Railroad Co., 352 U.S. 59, 63-65, 77 S.Ct. 161, 165-66, 1 L.Ed.2d 126 (1956):

The doctrine of primary jurisdiction, like the rule requiring exhaustion of administrative remedies, is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties. "Exhaustion" applies where a claim is cognizable in the first instance by an administrative agency alone; judicial interference is withheld until the administrative process has run its course. "Primary jurisdiction," on the other hand, applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views. General American Tank Car Corp. v. El Dorado Terminal Co., 308 U.S. 422, 433 [60 S.Ct. 325, 331, 84 L.Ed. 361 (1940) ].

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The doctrine of primary jurisdiction thus does "more than prescribe the mere procedural time table of the lawsuit. It is a doctrine allocating the lawmaking power over certain aspects" of commercial relations. "It transfers from court to agency the power to determine" some of the incidents of such relations.

(Footnote omitted).

Justice Harlan, writing for the Court in Western Pacific, emphasized the necessity for applying the doctrine of primary jurisdiction on a case-by-case basis, and identified the two principal considerations to be taken into account:

No fixed formula exists for applying the doctrine of primary jurisdiction. In every case the question is whether the reasons for the existence of the doctrine are present and whether the purposes it serves will be aided by its application in the particular litigation. These reasons and purposes have often been given expression by this Court. In the earlier cases emphasis was laid on the desirable uniformity which would obtain if initially a specialized...