American Inmate Phone Systems v. US SPRINT

• Decision Date: 31 March 1992
• Docket Number: No. 91 C 5948.,91 C 5948.
• Citation: 787 F. Supp. 852
• Parties: AMERICAN INMATE PHONE SYSTEMS, INC., Plaintiff, v. US SPRINT COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, Defendant.
• Court: U.S. District Court — Northern District of Illinois

787 F. Supp. 852

AMERICAN INMATE PHONE SYSTEMS, INC., Plaintiff, v. US SPRINT COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, Defendant.

No. 91 C 5948.

United States District Court, N.D. Illinois, E.D.

March 31, 1992.

Gary P. Hollander, Bixby, Lechner & Potratz, P.C., Chicago, Ill., for plaintiff.

Michael H. Kenny, Kenny & Kenny, Wheaton, Ill., for defendant.

MEMORANDUM OPINION AND ORDER

ALESIA, District Judge.

Now before the court is plaintiff's motion to remand this action to state court, pursuant to 28 U.S.C. § 1447(c). Plaintiff filed its two-count complaint in state court seeking relief based on Illinois law. Defendant removed the action to this court claiming that federal law preempts plaintiff's state-law claims. For the reasons set forth below, we hold that defendant's removal was improper because this court lacks subject matter jurisdiction. Plaintiff's motion to remand is granted.

I. FACTS

Plaintiff American Inmate Phone Systems, Inc. ("AIPS") filed a two count complaint in the Circuit Court of Cook County against defendant US Sprint Communications Company Limited Partnership ("Sprint"). AIPS provides pay phone services to prisons and Sprint provides long distance phone service throughout the U.S.

In Count I of its complaint, AIPS alleges that Sprint entered into a verbal agreement to provide long distance service to AIPS and breached that agreement. The terms of the alleged agreement included: Sprint would waive all phone card surcharges to AIPS; Sprint would provide AIPS with forward discounting; Sprint would introduce procedures to reduce the number of fraudulent phone calls; and Sprint would provide a written agreement including these terms. (Complaint, at 1-3) In Count II, AIPS alleges Sprint violated the Illinois Consumer Fraud and Deceptive Business Practices Act, ILL.REV.STAT. ch. 121½, paras. 261 et seq. (Complaint, at 3-5)

Sprint answered the complaint and filed a counter-claim alleging that AIPS entered into a written contract for tariffed phone service and subsequently breached that contract by failing to pay for the service provided. Sprint filed a petition to remove the action to the United States District Court for the Northern District of Illinois pursuant to 28 U.S.C. § 1446(b). Sprint asserted that the federal court had original jurisdiction over the case under the Communications Act, 47 U.S.C. §§ 151 et seq., pursuant to 28 U.S.C. § 1331.

AIPS has now moved to remand this action to the Circuit Court of Cook County and requested attorney's fees and costs as a result of wrongful removal pursuant to 28 U.S.C. § 1447(c).

II. DISCUSSION

A. Standard of Review

On a motion to remand, the question before the court is its authority to hear a case pursuant to the removal statute.¹ Commonwealth Edison Co. v. Westinghouse Elec. Co., 759 F.Supp. 449, 451 (N.D.Ill.1991). Whether removal was proper is determined from the record as a whole. Kennedy v. Commercial Carriers, Inc., 739 F.Supp. 406, 409 (N.D.Ill.1990). The party seeking removal, and not the party moving to remand, has the burden of establishing that the court has jurisdiction. Commonwealth Edison, 759 F.Supp. at 452. If the district court finds that it has no jurisdiction, the district court must remand the case to state court. Commonwealth Edison, 759 F.Supp. at 452.

B. Subject Matter Jurisdiction

Federal district courts are courts of limited subject matter jurisdiction. In general, a civil action brought in state court may be removed to federal court only if it could have been originally brought in federal court. 28 U.S.C. § 1441. The federal courts have jurisdiction either when the parties to the lawsuit are of diverse citizenship or when the case involves a federal question. 28 U.S.C. §§ 1331, 1332. Sprint has not based its removal on diversity jurisdiction.² Therefore, the jurisdiction necessary for removal of this case must be based on a question of federal law. The appropriate inquiry is whether the AIPS' state-law claim arises under federal law.³ Boyle v. MTV Networks, Inc., 766 F.Supp. 809, 812-13 (N.D.Cal.1991).

When deciding whether a case warrants removal because a federal question is involved, a federal court must principally determine if the federal question appears on the face of plaintiff's complaint. Illinois v. Kerr-McGee Chemical Corp., 677 F.2d 571, 575 (7th Cir.), cert. denied, 459 U.S. 1049, 103 S.Ct. 469, 74 L.Ed.2d 618 (1982). A defendant cannot create a federal question by asserting an issue of federal law in a pleading or in a petition for removal. Kerr-McGee, 677 F.2d at 575. On the other hand, removal is proper if the plaintiff has attempted to avoid a federal forum by drafting an essentially federal claim in terms of state law. Kerr-McGee, 677 F.2d at 575. To provide grounds for removal the federal question must be a key element of the plaintiff's complaint. Kerr-McGee, 677 F.2d at 575.

A federal question does not appear on the face of the plaintiff's complaint when a defense of federal preemption is raised. Lister v. Stark, 890 F.2d 941, 943 (7th Cir.1989), cert. denied, ___ U.S. ___, 111 S.Ct. 579, 112 L.Ed.2d 584 (1990). Therefore, a preemption defense does not authorize removal of a case to federal court. Lister, 890 F.2d at 943. The Supreme Court, however, has created an exception to this rule. Lister, 890 F.2d at 943 (citing Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 66, 107 S.Ct. 1542, 1547, 95 L.Ed.2d 55 (1987)). Under this exception, removal is proper when Congress has completely preempted an area of state law. When the complete preemption exception applies, the plaintiff's state-law claim is recharacterized as a federal claim. Lister, 890 F.2d at 943. Whether a cause of action has been completely preempted depends on the intent of Congress. Lister, 890 F.2d at 943.

Two inquiries are necessary to resolve the jurisdictional question of this case. Lister, 890 F.2d at 944. The first inquiry is whether a federal question appears on the face of plaintiff's complaint. If so, then the removal was proper. If no federal question appears on the complaint, the second inquiry is whether removal is proper under the complete preemption exception. Lister, 890 F.2d at 944.

In this case, AIPS' complaint does not allege a federal claim and federal law has not completely preempted state law in this area. As a result, this court does not have subject matter jurisdiction and must remand the matter to state court.

1. AIPS' Complaint

In the present case, Count I of AIPS' complaint alleges breach of a verbal contract entered into on or about March 12, 1990. Count II alleges violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. Sprint argues, however, that AIPS' complaint alleges a breach of a written contract for long distance service entered into by the parties on May 15, 1990. Sprint contends that a tariff is incorporated into this contract and, as a result, AIPS is alleging a breach of a tariff.

In fact, AIPS' complaint alleges breach of a verbal contract. Neither count alleges a violation of the Communications Act or any other federal law or of Sprint's tariff. A defendant cannot create a federal question by asserting an issue of federal law in a pleading or in a petition for removal. Kerr-McGee, 677 F.2d at 575. Therefore, no federal cause of action appears on the face of AIPS' complaint. As a result, the second inquiry is whether removal is proper under the complete preemption exception.

2. Preemption

To determine whether the complete preemption exception applies requires an inquiry into Congress' intent in enacting a statute. Lister, 890 F.2d at 943. A few courts have addressed preemption in the context of the Communications Act. In Ivy Broadcasting Co. v. American Telephone & Telegraph Co., 391 F.2d 486 (2d Cir. 1968), the Second Circuit Court of Appeals found that the Communications Act completely preempted state common law actions against a telephone carrier for negligence or breach of contract. Ivy involved claims against AT & T for negligence and breach of contract. The court held that issues of duties, charges, and liabilities of telephone companies with respect to interstate communications service were to be governed solely by federal law. Ivy, 391 F.2d at 491. The court found that the states were precluded from acting in this area. The Ivy court considered various provisions of the Communications Act and found a congressional purpose of uniformity and equality of rates and service. Ivy, 391 F.2d at 491. According to the Ivy court, this purpose could be achieved only by the application of uniform federal law.

The court declines to follow Ivy for a number of reasons. First, the Ivy court did not address the "savings clause" of the Communications Act. The savings clause provides:

Nothing in this chapter contained shall in any way abridge or alter the remedies now existing at common law or by statute, but the provisions of this chapter are in addition to such remedies.

47 U.S.C. § 414. Since Ivy, other courts have addressed the remedies Congress had in mind when enacting § 414. See Comtronics, Inc. v. Puerto Rico Tel. Co., 553 F.2d 701 (1st Cir.1977). The Comtronics court interpreted § 414 as preserving state court claims for breaches of duties which are distinguishable from duties created by the Communications Act, such as breach of contract claims. Comtronics, 553 F.2d at 708 n. 6. Other courts have approved state-law claims for fraud and deceit as well. See In Re Long Distance Telecommunications Litigation, 831 F.2d 627, 633 (6th Cir.1987).⁴

A single court in this district has considered this question. In Bruss Co. v. Allnet Communication Services, Inc., 606 F.Supp. 401, 411 (N.D.Ill.1985), Judge Nordberg determined that a complaint which alleged violations of the Illinois Consumer Fraud and Deceptive Business Practices Act and the Illinois Deceptive Trade Practices Act, was saved from preemption by § 414. In Bruss, the plaintiffs, former...