Lovejoy v. At&T Corp.

• Decision Date: 05 September 2001
• Docket Number: No. C034423.,C034423.
• Court: California Court of Appeals Court of Appeals
• Parties: Robert LOVEJOY, Plaintiff and Appellant, v. AT&T CORPORATION, Defendant and Appellant.

111 Cal.Rptr.2d 711

92 Cal.App.4th 85

Robert LOVEJOY, Plaintiff and Appellant, v. AT&T CORPORATION, Defendant and Appellant.

No. C034423.

Court of Appeal, Third District.

September 5, 2001.

As Modified on Denial of Rehearing October 5, 2001.

Law Offices of Mark C. Barulich and Mark C. Barulich, for Plaintiff and Appellant.

Watson, Khachadourian Re & lams, Sacramento, and Kevin R. Iams for Defendant and Appellant.

CALLAHAN, J.

One of the fastest growing subjects of consumer complaints is the practice of "slamming," wherein one telephone carrier company surreptitiously gains control over the service provided by another without notice to the customer.¹ Slamming is prohibited by the law of this state. (Pub.Util. Code, § 2889.5.)² In this case, plaintiff Robert Lovejoy, individually and doing business as Lovejoy Drilling, filed a lawsuit claiming that defendant AT & T Corporation (ATT) "slammed" his toll-free 800 number and that he lost his business as a result.

Plaintiff appeals from a judgment in favor of ATT after the trial court granted ATT's motion for judgment on the pleadings, dismissing his complaint which alleged a single count of fraud. ATT has filed a protective cross-appeal, urging that, even if the judgment on the pleadings was erroneously granted, it should have gotten out of the case earlier on a motion for summary judgment.

We will conclude that the trial court erred in granting the motion for judgment on the pleadings, and that the order denying ATT's motion for summary judgment was correct. We will reverse and remand with directions.

PROCEDURAL BACKGROUND

Plaintiff originally filed a complaint alleging that Pacific Bell (Pac Bell) and several Doe defendants tortiously allowed his toll-free 800 business telephone service to be terminated without his knowledge. The complaint was later amended to name ATT as a Doe defendant. Plaintiff was granted leave of court to file a two-count amended complaint for negligence and fraud against ATT only, alleging that ATT caused the switching and then cancellation of his 800 telephone service without his consent.

ATT brought a motion for summary judgment, primarily on the ground that plaintiffs action was barred by the "filed rate doctrine," which will be explained in detail, infra. The court ruled that the negligence count was barred by the filed rate doctrine, but denied ATT's motion as to the fraud cause of action.

Plaintiff proceeded to trial under a first amended complaint, alleging a single cause of action for fraud. In chambers, ATT brought a number of jmotions, including one for judgment on the pleadings, which the court granted. Since this action was effectively terminated by the granting of the motion, we summarize the allegations of the pleading in some detail:

The First Amended Complaint

At all times pertinent, plaintiff operated a business known as Lovejoy Drilling, while ATT and Pac Bell were both in the business of providing 800 telephone numbers. In September 1994, plaintiff contracted with Pac Bell to provide his business with an 800 number, which was good for the entire state.

On February 20, 1996 (all further calendar references are to that year) ATT informed Pac Bell, who was acting as plaintiffs agent, that ATT had written authorization from plaintiff to be the provider of his 800 number. Pac Bell, however, refused to release the number without proof of written authorization.

On March 1, ATT represented to a third entity, Lockheed IMS, that it had written authorization to take over plaintiffs 800 number. This representation was false— at no time did plaintiff ever authorize such a switch, either orally or in writing. ATT knew the representation was false, and made it for the sole purpose of obtaining plaintiff as a customer "for their own personal monetary gain." As a direct and proximate result of the false representation to Lockheed, Pac Bell released plaintiffs 800 number to ATT. Plaintiff had no knowledge of the switch—at all times, he continued to believe that Pac Bell was his 800 carrier. This practice is known as "slamming" in the telecommunications industry.

Prior to February 1996 plaintiff had long distance telephone service with ATT. Once ATT obtained plaintiffs 800 number it hid the charges for 800 service in its long distance billing; the billing statement remained the same and did not indicate plaintiff was being charged for 800 service.

In August, plaintiff became embroiled in a payment dispute with ATT over his long distance bill. As a result of the dispute, ATT disconnected plaintiffs long distance service. The termination of service disconnected plaintiffs 800 service as well. However, plaintiff had no idea his 800 service had been terminated as a result of the payment dispute.

In March 1997, plaintiff discovered that his 800 number had been assigned to someone in Michigan, who had been getting six to 20 calls per day requesting plaintiffs services. As a proximate cause of the fraudulent conduct by ATT, plaintiff lost his business, was required to file bankruptcy, and suffered emotional distress.

THE APPEAL

I Applicable Principles—Judgment on the Pleadings

"A motion for judgment on the pleadings is analogous to a general demurrer. [Citation.] The task of this court is to determine whether the complaint states a cause of action. All facts alleged in the complaint are deemed admitted, and we give the complaint a reasonable interpretation by reading it as a whole and all of its parts in their context. [Citations.] We are not concerned with a plaintiffs possible inability to prove the claims made in the complaint, the allegations of which are accepted as true and liberally construed with a view toward attaining substantial justice. [Citations.]" (Lance Camper Manufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal.App.4th 194, 198, 51 Cal. Rptr.2d 622.)

"Review of a judgment on the pleadings requires the appellate court to determine, de novo and as a matter of law, whether the complaint states a cause of action. [Citation.] For purposes of this review, we accept as true all material facts alleged in the complaint. [Citation.] Denial of leave to amend after granting a motion for judgment on the pleadings is reviewed for abuse of discretion. [Citation.]" (Ott v. Alfa-Laval Agri, Inc. (1995) 31 Cal. App.4th 1439, 1448, 37 Cal.Rptr.2d 790.)

II The Fraud Cause of Action

In a nutshell, plaintiff alleges that his business had 800 service with Pac Bell and long distance service with ATT; that ATT knowingly and falsely represented to Pac Bell that plaintiff wished to switch his 800 service to ATT; that when Pac Bell refused to release the number due to the lack of a signed authorization, ATT went to another agency and made the same false representation; that as a result of this second representation, Pac Bell was induced into releasing the 800 number to ATT; that ATT thereafter billed plaintiff for 800 service but hid the 800 billing charges so that plaintiff had no idea his service had been switched; that when plaintiff got into a billing dispute with ATT over his long distance bill, ATT pulled the plug on not only his long distance service but (unknown to him) his 800 service as well; and that, by the time plaintiff found out his 800 number had been disconnected, he lost his business and ended up in bankruptcy.

The trial judge believed these allegations failed to state a cause of action for fraud. In its written ruling, the court gave three reasons for granting ATT's motion: (1) plaintiff failed to plead that ATT intended to drive him out of business; since a fraud defendant is not liable for unintended consequences, proximate cause was lacking; (2) plaintiff did not, nor could he, plead that he relied on ATT's false representation, but instead pleaded that he was totally unaware of it; and (3) the complaint fails to state a cause of action for indirect misrepresentation because plaintiff was unable to plead that ATT either intended or had reason to believe that its misrepresentation regarding the 800 switch would be repeated to him and that he would act on it.

We will first analyze the complaint for the defects cited by the trial court and then separately determine whether the complaint states a cause of action, mindful that, as an appellate court, "we are not bound by the determination of the trial court, but are required to render our independent judgment on whether a cause of action has been stated." (Hoffman v. State Farm Fire & Casualty Co. (1993) 16 Cal.App.4th 184, 189, 19 Cal.Rptr.2d 809.)

Failure to Plead That Defendant Intended the Type of Damage Caused to Plaintiff

The trial court found the complaint insufficiently demonstrated a proximate connection between ATT's alleged fraud and the damage, explaining its reasoning as follows: "`A complete "causal relationship" between the fraud or deceit and the plaintiffs damages is required.' [Citation.] `The defendant must intend to induce a particular act of the plaintiff and is not liable in fraud for unintended consequences. [Citation.] And it must be shown that the plaintiff actually and justifiably relied upon the defendant's misrepresentation in acting to his detriment.' (Conrad v. Bank of America (1996) 45 Cal.App.4th 133, 157, 53 Cal.Rptr.2d 336 [Conrad].) . . . Plaintiff has pled that defendant's purpose was to obtain plaintiff as a customer for monetary gain. Plaintiff has not pled that defendant intended plaintiff to act to his detriment. Instead, inferentially, defendant wanted to keep plaintiff as a 800 service customer for monetary gain—not to drive him out of business." (Italics added.)

The court's ruling implies that, in order to state a cause of action for fraud it is necessary that the defendant intend to cause the plaintiff to suffer a particular type of damage. That is not the law.

Section 525 of the Restatement Second of Torts (Restatement) states: "One who fraudulently makes a misrepresentation of fact . . . for the purpose of...