Marcus v. AT & T CORP., 95 Civ. 9765 (MBM)

• Decision Date: 21 August 1996
• Docket Number: 96 Civ. 0088 (MBM).,No. 95 Civ. 9765 (MBM),95 Civ. 9765 (MBM)
• Citation: 938 F. Supp. 1158
• Parties: Lawrence MARCUS and Marc Kasky, on behalf of themselves and all others similarly situated, Plaintiffs, v. AT & T CORP., Defendant. Jeffrey A. MOSS, on behalf of himself and all others similarly situated, Plaintiff, v. AT & T CORP., Defendant.
• Court: U.S. District Court — Southern District of New York

938 F. Supp. 1158

Lawrence MARCUS and Marc Kasky, on behalf of themselves and all others similarly situated, Plaintiffs, v. AT & T CORP., Defendant.

Jeffrey A. MOSS, on behalf of himself and all others similarly situated, Plaintiff, v. AT & T CORP., Defendant.

Nos. 95 Civ. 9765 (MBM), 96 Civ. 0088 (MBM).

United States District Court, S.D. New York.

August 21, 1996.

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Michael C. Spencer, Lori G. Feldman, Elaine Simek Kusel, Milberg Weiss Bershad Hynes & Lerach, New York City, for Marcus Plaintiffs.

William S. Lerach, Alan M. Mansfield, Timothy J. Blood, Sheri Pym, Milberg Weiss Bershad Hynes & Lerach, San Diego, CA, for Marcus Plaintiffs.

Richard S. Schiffrin, Andrew L. Barroway, Marc A. Topaz, Schiffrin & Craig, Bala Cynwyd, PA, Alan M. Caplan, Philip Neumark, Bushnell, Caplan & Fielding, San Francisco, CA, for Marcus Plaintiffs.

Donald M. Lefari, Salis & Lefari, New York City, Robert W. Mills, Steven R. Rhoads, Linda Zubowski Bell, The Mills Firm, Greenbrae, CA, for Moss Plaintiffs.

Steven M. Bierman, Elizabeth M. Sacksteder, Sidley & Austin, New York City, Howard Spierer, AT & T Corp., Liberty Corner, NY, for defendant.

OPINION AND ORDER

MUKASEY, District Judge.

Plaintiffs in the above-captioned actions are subscribers to AT & T's residential long-distance telephone services who allege that AT & T fraudulently conceals its billing practices. Plaintiffs in Marcus v. AT & T, 95 Civ. 9765, initially sued in New York State Supreme Court and AT & T removed that action here. 28 U.S.C. § 1441(a). Plaintiffs move to remand the action to state court. 28 U.S.C. § 1447(c). Plaintiffs in Moss v. AT & T, 96 Civ. 0088, initiated their action here. Defendant moves to dismiss both complaints for failure to state a claim upon which relief may be granted. Fed.R.Civ.P. 12(b)(6). For the reasons that follow, the Marcus plaintiffs' motion to remand is denied, and defendant's motions to dismiss are granted.

I.

A. The Complaints

The gravamen of both complaints is that AT & T deceives its customers by "failing to disclose that residential service customers are billed per minute rounded up to the next higher full minute for long distance service." (Marcus Compl. ¶ 2) (emphasis in original) That billing practice does not appear on AT & T bills or on any other material sent to its customers. (Id.) So, for example, a telephone conversation that lasts one minute and one second will be billed as a two-minute call, but the customer will not be informed of the actual duration of the call. "The bill will state only that the customer's call was for two minutes and the customer will be billed accordingly." (Id. ¶ 3) Plaintiffs acknowledge that AT & T has disclosed its practice of rounding up in tariffs filed with the Federal Communications Commission ("FCC") but, plaintiffs contend, "AT & T makes no effort, in its advertising, marketing, or customer bills, or in any other manner, to inform customers that its billing practice of rounding up may be discovered by reviewing tariffs it may have filed with the FCC." (Moss Compl. ¶ 20) That failure to disclose, combined with AT & T's advertising pledge of "True Savings," plaintiffs allege, damaged them.

The Marcus plaintiffs contend that AT & T's conduct constitutes: (1) deceptive acts and practices, in violation of N.Y.Gen.Bus.L. § 349(a), (2) false advertising, in violation of N.Y.Gen.Bus.L. § 350, (3) fraud and deceit, (4) negligent misrepresentation, (5) breach of warranty, and (6) unjust enrichment. Plaintiffs seek class certification, compensatory damages, punitive damages, an injunction against the allegedly deceptive practices, disgorgement of ill-gotten gains and/or a constructive trust over them, fees, costs and interest.

The Moss plaintiffs assert claims of: (1) fraud and deceit under New York law and federal common law, (2) negligent misrepresentation, (3) violation of N.Y.Gen.Bus.L. §§ 349-50, (4) false advertising, and (5) unjust enrichment. Those claims differ from those of the Marcus plaintiffs, in that the Moss plaintiffs assert claims arising under federal common law, but no breach of warranty. The Moss plaintiffs seek damages, disgorgement, and a permanent injunction ordering AT & T to: (1) state the actual length of every call on all bills, and (2) admit in all advertising for 12 months that it has billed customers for service never provided.

B. The Tariffs

AT & T acknowledges that it rounds up the length of residential telephone calls, that it bills customers for the rounded up figure, and that its bills do not disclose the actual length of the call. However, AT & T explains that its billing practices are disclosed in its tariffs filed with the FCC. Those tariffs state in pertinent part:

A. Initial Period — Initial Period is the initial rate increment of a long-distance call. The specific length of the initial period is indicated on the applicable rate schedule.

B. Additional Minute — Additional Minute is the rate element used to bill for the chargeable time when a long-distance call continues beyond the initial period. Additional Minute begins when the initial period ends (e.g., with the second minute of a call for which the initial period is one minute). Additional Minute rates apply to each additional minute, or any fraction thereof, that chargeable time continues beyond the initial period.

(Peterson Aff. Exs. A-D) (emphasis in original) Because those tariffs are public documents that AT & T is required to file with the FCC, the court may take judicial notice of them pursuant to Fed.R.Evid. 201, and as a result may consider them on a Rule 12(b)(6) motion even though not included in, or attached to the complaint. Kramer v. Time Warner, Inc., 937 F.2d 767, 773-74 (2d Cir.1991) (permitting court to rely on public documents filed with the SEC).

II.

Removal is appropriate only when a complaint filed in state court properly could have been filed in federal court. 28 U.S.C. § 1441(a). A complaint properly may be filed in federal court only if there is subject matter jurisdiction. Here, defendant contends that federal subject matter jurisdiction exists pursuant to 28 U.S.C. § 1331, the federal question statute. That section provides that "the district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331 (1994). The laws of the United States include federal common law. Illinois v. City of Milwaukee, 406 U.S. 91, 99, 92 S.Ct. 1385, 1390, 31 L.Ed.2d 712 (1972) (holding that a claim arising under federal common law may be removed to federal court).

It is well-settled that the plaintiff is the "master of the complaint," The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25, 33 S.Ct. 410, 411-12, 57 L.Ed. 716 (1913), and that a claim for relief arises under federal law only when a substantial federal question is presented on the face of the plaintiff's "well-pleaded complaint." Gully v. First Nat'l Bank, 299 U.S. 109, 112-13, 57 S.Ct. 96, 97-98, 81 L.Ed. 70 (1936). Accordingly, a plaintiff may preclude removal by electing not to plead an optional federal cause of action. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429-30, 96 L.Ed.2d 318 (1987). Likewise, a defendant may not usurp control of a plaintiff's case simply by asserting a federal defense. Id. at 393, 107 S.Ct. at 2430.

But the well-pleaded complaint rule does not permit a plaintiff to evade removal by artfully pleading as a state claim what actually is a claim arising under federal law. Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 22, 103 S.Ct. 2841, 2852-53, 77 L.Ed.2d 420 (1983); Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 397 n. 2, 101 S.Ct. 2424, 2427 n. 2, 69 L.Ed.2d 103 (1981); Derrico v. Sheehan Emergency Hosp., 844 F.2d 22, 27 (2d Cir. 1988). The Second Circuit has explained:

If the only remedy available to plaintiff is federal, because of preemption or otherwise, and the state court necessarily must look to federal law in passing on this claim, the case is removable regardless of what is in the pleading.... The classic application of the artful pleading doctrine occurs in the context of federal preemption of state law.

Travelers Indemnity Co. v. Sarkisian, 794 F.2d 754, 758 (2d Cir.) (quoting 14A Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure: Jurisdiction § 3722, at 273-75 (2d ed. 1985)), cert. denied, 479 U.S. 885, 107 S.Ct. 277, 93 L.Ed.2d 253 (1986).

Defendant contends that plaintiffs' claims necessarily arise under the Communications Act of 1934 and the federal common law developed thereunder. That Act aims to regulate:

interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges.

47 U.S.C. § 151 (1994). The Act applies to "all interstate and foreign communications by wire or radio." Id. § 152.

The Act requires common carriers such as AT & T to "file with the FCC and print and keep open for public inspection schedules showing all charges ... and showing the classifications, practices, and regulations affecting such charges." 47 U.S.C. § 203(a) (1994); see MCI Telecommunications Corp. v. American Tel. & Tel. Co., 512 U.S. 218, ___, 114 S.Ct. 2223, 2231, 129 L.Ed.2d 182 (1994) (describing § 203 as "the heart of the common-carrier section of the Communications Act."). Those schedules "shall contain such other information, and be printed in such form, and be posted and kept open for public inspection in such places, as the FCC may by regulation require," and are subject to FCC regulation and approval. Id. § 203(b). No carrier shall:

(1) charge, demand, collect or receive

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