Clark v. Time Warner Cable

• Decision Date: 30 April 2008
• Docket Number: No. 07-55794.,07-55794.
• Citation: 523 F.3d 1110
• Parties: K. CLARK, both individually and as representative of the proposed class, Plaintiff-Appellant, v. TIME WARNER CABLE, a corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

523 F.3d 1110

K. CLARK, both individually and as representative of the proposed class, Plaintiff-Appellant, v. TIME WARNER CABLE, a corporation, Defendant-Appellee.

No. 07-55794.

United States Court of Appeals, Ninth Circuit.

Submitted February 6, 2008.^*

Filed April 30, 2008.

Stephen Yagman, Yagman & Yagman & Reichmann, Venice Beach, CA, filed briefs for the plaintiff-appellant; Marion R. Yagman and Joseph Reichmann, Yagman & Yagman & Reichmann, Venice Beach, CA, were on the briefs.

Bryan A. Merryman, White & Case LLP, Los Angeles, CA, filed a brief for the defendant-appellee; Travers D. Wood and Patrick O. Hunnius, White & Case LLP, Los Angeles, CA, and Matthew A. Brill, Latham & Watkins LLP, Washington, DC, were on the brief.

Appeal from the United States District Court for the Central District of California; Valerie Baker Fairbank, District Judge, Presiding. D.C. No. CV-07-01797-VBF.

Before: ALEX KOZINSKI, Chief Judge, DIARMUID F. O'SCANNLAIN, and WILLIAM A. FLETCHER, Circuit Judges.

O'SCANNLAIN, Circuit Judge:

We must decide whether the doctrine of primary jurisdiction permits a district court to refer a claim raising a novel and technical question of federal telecommunications policy to the Federal Communications Commission for its consideration in the first instance.

I

Time Warner Cable ("TWC") is one of the largest cable operators in the United States. Among other products and services, TWC markets "Digital Phone," a bundle of local and long distance calling services that utilize Voice over Internet Protocol ("VoIP") technology. VoIP uses the Internet to transmit telephone signals rather than using the traditional public switched telephone network ("PSTN"). As such, VoIP has the capacity to transmit voice and data streams simultaneously, whereas PSTN-based connections only have the capacity to transmit one signal at a time.

Appellant K. Clark maintained two separate PSTN phone lines in her home, one serviced by Vonage, the other serviced by Verizon. On February 24, 2007, Clark received a telephone call from a TWC sales representative soliciting her to switch over to TWC's Digital Phone package. Clark, initially intrigued, conversed with the salesperson, who at one point indicated that Digital Phone offered a six-hour backup that would allow Clark to continue making calls and to dial 9-1-1 in the event her cable was disconnected. Clark was later transferred to a second sales representative who corrected the false assertion made by the first, explaining to Clark that Digital Phone did not offer any backup system at all. In response to this news, Clark informed the sales representative that she was not interested in TWC's service and hung up the phone.

TWC apparently misunderstood Clark's statement. On Thursday, March 8, 2007, the company disconnected Clark's Vonage and Verizon telephone service and dispatched a technician to her home to install a TWC cable line. When the technician arrived at her door, Clark immediately informed him that she was not interested in TWC's service, and that she had not authorized the switch. The technician told Clark to contact TWC to resolve the problem and, according to Clark, confusion ensued.

Clark alleges that she made multiple calls to TWC, was continuously placed on hold, and was promised technicians to restore her Vonage and Verizon service who never arrived. She further contends that she was without any telephone service from March 8 until March 16, 2007, when only one of her telephone lines was reconnected.

On March 19, 2007, Clark filed a complaint against TWC in the District Court for the Central District of California on behalf of herself and those similarly situated. Her complaint alleged that TWC violated 47 U.S.C. § 258(a), the federal prohibition on "slamming"—the practice in which a telecommunications carrier switches a consumer's telephone service without the consumer's consent. In addition, her complaint alleged that TWC violated California state law's prohibition of the same conduct, Cal. Pub. Util.Code section 2889.5, and the federal Racketeer Influenced and Corrupt Organizations ("RICO") statute, 18 U.S.C. § 1962. Finally, Clark pled causes of action for fraud, fraudulent concealment, and negligence.

Upon TWC's motion, the district court dismissed Clark's complaint without prejudice. Noting that § 258(a) applies only to "telecommunications carriers," and that the question of whether a VoIP provider meets this definition has never been resolved the district court referred Clark's § 258(a) claim to the Federal Communications Commission ("FCC") to consider the matter in the first instance.

The district court further concluded that its referral of Clark's § 258(a) claim to the FCC warranted a dismissal without prejudice of her remaining claims. In the alternative, it dismissed all such claims for failure to state a claim upon which relief could be granted. See Fed.R.Civ.P. 12(b)(6). This appeal followed.¹

II

A

The Telecommunications Act of 1996 (the "Act") imposes a variety of obligations on telecommunications carriers. The FCC is charged with the Act's administration, along with the administration of its predecessor, the Federal Communications Act of 1934. 47 U.S.C. §§ 151, 154. Among other things, the Act includes a prohibition on "slamming." Section 258(a) provides that "[n]o telecommunications carrier shall submit or execute a change in a subscriber's selection of a provider of telephone exchange service or telephone toll service except in accordance with such verification procedures as the [FCC] shall prescribe." Id. § 258(a) (emphasis added). In addition, § 258(b) authorizes the FCC to prescribe procedures for the award of damages when the verification procedures in § 258(a) are violated. Under this delegation of authority, the FCC established detailed and comprehensive procedures which telecommunications carriers must follow to verify a subscriber's consent to a carrier change,² and established the penalties for violations.³

The emergence of VoIP technology created new challenges for the FCC, however, as existing regulations did not contemplate the revolutionary changes IP-enabled services entailed. Accordingly, the FCC issued a Notice of Proposed Rulemaking seeking comment on how to define and to regulate all IP-enabled services, including VoIP, while maintaining its "established policy of minimal regulation of the Internet and the services provided over it." In re IP-Enabled Services, 19 F.C.C.R. 4863, 4865 ¶ 2 (2004) (footnote omitted). The Notice posed two specific questions relevant to Clark's § 258(a) claim against TWC. First, it solicited comment on whether VoIP services should be classified as "telecommunications services"⁴ or "information services"⁵ under the Act. In re IP, 19 F.C.C.R. at 4880-81 26-27, id. at 4886 ¶ 35. Second, the FCC solicited comment on whether § 258(a)'s anti-slamming provision should apply to VoIP providers regardless of their statutory classification. Id. at 4910-11 72.⁶

The district court determined that Clark's § 258(a) claim against TWC could not be resolved without first deciding whether that statute applies to VoIP providers. Recognizing that such question fell within the FCC's rulemaking authority and recognizing that its own decision could jeopardize the uniform administration of the FCC's regulatory scheme, the district court invoked the primary jurisdiction doctrine to refer Clark's claim to the FCC.⁷

B

The primary jurisdiction doctrine allows courts to stay proceedings or to dismiss a complaint without prejudice pending the resolution of an issue within the special competence of an administrative agency. A court's invocation of the doctrine does not indicate that it lacks jurisdiction. Reiter v. Cooper, 507 U.S. 258, 268-69, 113 S.Ct. 1213, 122 L.Ed.2d 604 (1993). Rather, the doctrine is a "prudential" one, under which a court determines that an otherwise cognizable claim implicates technical and policy questions that should be addressed in the first instance by the agency with regulatory authority over the relevant industry rather than by the judicial branch. See Syntek, 307 F.3d at 780.

Primary jurisdiction applies in a limited set of circumstances. As we explained in Brown v. MCI WorldCom Network Servs., 277 F.3d 1166 (9th Cir.2002), the doctrine is not designed to "secure expert advice" from agencies "every time a court is presented with an issue conceivably within the agency's ambit." Id. at 1172 (internal quotation marks and citation omitted). Instead, it is to be used only if a claim "requires resolution of an issue of first impression, or of a particularly complicated issue that Congress has committed to a regulatory agency," id. (citing Tex. & Pac. Ry. Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 442, 27 S.Ct. 350, 51 L.Ed. 553 (1907)), and if "`protection of the integrity of a regulatory scheme dictates preliminary resort to the agency which administers the scheme,'" id. (quoting United States v. Gen. Dynamics Corp., 828 F.2d 1356, 1362 (9th Cir.1987)).⁸

When a district court determines that primary jurisdiction applies, it enables a "referral" of the issue to the relevant agency.⁹ Reiter, 507 U.S. at 268, 113 S.Ct. 1213. In practice, this means that the court either stays proceedings or dismisses the case without prejudice, so that the parties may seek an administrative ruling. Syntek, 307 F.3d at 782 n. 3 (citation omitted). "[T]here is no formal transfer mechanism between the courts and the agency"; rather, the parties are responsible for initiating administrative proceedings themselves. Id.

C

Although "[n]o fixed formula exists for applying the doctrine of primary jurisdiction," Davel Commc'ns, Inc. v. Qwest Corp., 460 F.3d 1075, 1086 (9th Cir.2006) (internal quotation marks and citation omitted), we have traditionally examined the factors set forth in General Dynamics, and held that the doctrine applies in cases where there is: "(1)[a] need to resolve an issue...