Day v. AT & T Corp.

• Decision Date: 20 April 1998
• Docket Number: No. A076845,A076845
• Citation: 63 Cal.App.4th 325,74 Cal.Rptr.2d 55
• Court: California Court of Appeals Court of Appeals
• Parties: , 98 Cal. Daily Op. Serv. 2966, 98 Daily Journal D.A.R. 4003 Robert L. DAY, et al., Plaintiffs and Appellants, v. AT & T CORPORATION et al., Defendants and Respondents.

Page 55

74 Cal.Rptr.2d 55

63 Cal.App.4th 325, 98 Cal. Daily Op. Serv. 2966,

98 Daily Journal D.A.R. 4003

Robert L. DAY, et al., Plaintiffs and Appellants, v. AT & T CORPORATION et al., Defendants and Respondents.

No. A076845.

Court of Appeal, First District, Division 3, California.

April 20, 1998.

Milberg Weiss Bershad Hynes & Lerach, William S. Lerach, Alan M. Mansfield, Timothy Blood, Sherri Pym, San Diego, Bushnell, Caplan & Fielding, Alan M. Caplan, Philip Neumark, April M. Strauss, San Francisco, Schiffrin & Craig, Richard S. Schiffrin, Andrew L. Barroway, Marc A. Topaz, Bala Cynwyd, PA, The Cuneo Law Group, Jonathan W. Cuneo, David W. Stanley, Washington, DC, for Plaintiffs and Appellants.

McCutchen, Doyle, Brown & Enersen, David M. Heilbron, Friedman, Ross & Hersh, Jeffrey S. Ross, San Francisco, Sidley & Austin, Steven M. Bierman, Elizabeth M. Sacksteder, New York City, Sheldon Michaels, Jonathan H. Krotinger, San Francisco WALKER, Associate Justice.

Stoel Rives, Joel A. Mullin, Portland, OR, Morgenstein & Jubelirer, Eliot S. Jubelirer, San Francisco, Shughart, Thomson & Kilroy, Russell S. Jones, Jr., Christopher D. Schneider, Kansas City, MO, Darren S. Weingard, San Mateo, for Defendants and Respondents.

In this opinion we consider the viability of appellants' claim for injunctive relief filed to prevent common carriers and retailers who sell prepaid phone cards to the public in several minute blocks from allegedly engaging in misleading and deceptive advertising. Appellants contend that respondents have improperly failed to disclose in their advertising and packaging materials that calls made with the cards will be charged by rounding up to the next full minute, so that, for example, a call lasting one minute and one second will be debited from the card as a two-minute call. Appellants, who brought this action as private attorneys general on behalf of The People of the State of California, claim that respondents' advertising practices are unfair and misleading within the meaning of Business and Professions Code sections 17200 and 17500. ¹ In the trial court, they sought to enjoin respondents from continuing these practices and asked for a disgorgement of all "ill-gotten profits" resulting therefrom. Respondents, who include two providers of telephone services ² and four nonprovider phone card retailers, ³ successfully demurred to appellants' first amended complaint on the ground that the action was barred by the filed rate doctrine. This doctrine, ⁴ which will be discussed in greater detail presently, derives from the requirement contained in the Federal Communications Act that common carriers, such as AT & T, file with the Federal Communications Commission (FCC) and keep open for public inspection "all charges [and the] classifications, practices, and regulations affecting such charges." (47 U.S.C. § 203(a).) As a corollary, the filed rate doctrine prohibits an entity subject to these requirements from "charging rates 'for its services other than those properly filed with the appropriate federal regulatory authority.' [Citation.]" (Marcus v. AT & T Corp. (S.D.N.Y.1996) 938 F.Supp. 1158, 1169 (Marcus ), affd. (2d Cir.1998) 138 F.3d 46.) Notwithstanding this mandate, the doctrine presumes the consumer's knowledge of all lawful rates and bars consumer suits for damages arising out of claims involving those rates, on the premise that a consumer who pays the filed rate has suffered no injury and incurred no damage. (See, generally, Marcus, supra, at pp. 1169-1170.)

Based upon the filed rate doctrine, the trial court sustained without leave to amend the demurrer of each defendant, denied a motion for reconsideration brought by the retailer defendants and dismissed the action. We decide here that an action which seeks only to enjoin misleading or deceptive practices in the advertising of phone card rates, and seeks no monetary recovery, does not implicate the federal filed rate doctrine and can proceed under sections 17200 and 17500.

We also consider and reject respondents' several other grounds for demurrer, which were not specifically addressed by the trial court's ruling. We hold that the complaint is not preempted by the Federal Communications Act, that the California Public Utilities Commission does not have exclusive jurisdiction, that the doctrine of primary jurisdiction does not compel dismissal or stay of the action and that the appellants were not required to exhaust their administrative remedies. Accordingly, we reverse and remand for further proceedings on appellants' claim for injunctive relief.

FACTUAL AND PROCEDURAL BACKGROUND

On June 14, 1996, appellants filed, on behalf of The People of the State of California Appellants' first amended complaint alleges that respondents' practices, characterized as misrepresentations and nondisclosures of material facts, constitute unfair and fraudulent business acts or practices, within the meaning of section 17200 and unfair, deceptive, untrue or misleading advertising likely to have deceived the consuming public, within the meaning of section 17500. The complaint seeks "appropriate equitable relief including but not limited to an order: [p] (1) Restraining defendants from continuing and/or pursuing the acts described and complained of in this action. [p] (2) Restraining defendants from failing and/or refusing to undertake an immediate public information campaign to inform members of the general public in California of their policy of rounding up to the nearest minute when billing calls to their respective pre-paid phone cards. [p] (3) Restraining defendants from failing and/or refusing to disgorge all ill-gotten monies which they obtained in California as a result of the acts set forth in this Complaint."

                a first amended complaint for injunctive relief, alleging that respondents were engaging in unfair business practices and false and misleading advertising, in violation of sections 17200 and 17500.  Specifically, they alleged that respondents, who sell prepaid phone cards to the public, act deceptively in that the packaging for the cards does not "reveal to the consumer, prior to purchase, that calls made with these cards are, in fact, rounded up to the next higher minutes."   For example, on the outer packaging of its "PrePaid Card" respondent AT & T states the card is "worth 10 minutes of phone calls in the U.S." and that "1 minute of calling time requires 1 unit when calling within the U.S." Appellants contend that these statements are false, deceptive and misleading because of the failure to state that calls are rounded up to the next minute, so that a twenty-second call will be billed at one minute, and a one-minute and ten-second call will be billed at two minutes.  Statements made on packaging for phone cards sold by [63 Cal.App.4th 330] the remaining respondents are similarly detailed, with copies of the packages attached to the complaint as exhibits. 5  In each case, it is alleged that the packages purport to sell more than is actually provided, because the rounding up is not revealed
                

Respondents demurred to the first amended complaint, contending that it failed to state a cause of action under the filed rate doctrine because their billing practices, including that of rounding up phone card calls, had been fully disclosed in publicly filed rates, the contents of which the California public was conclusively presumed to know. They also demurred on the ground that the San Francisco Superior Court lacked subject matter jurisdiction over the raised claims, which were within the exclusive jurisdiction of the California Public Utilities Commission, the FCC and the federal courts. The demurrers were sustained without leave to amend and the action dismissed on the ground that the action was barred by the filed rate doctrine. This timely appeal followed.

STANDARD OF REVIEW

On appeal from a judgment of dismissal after a demurrer is sustained without leave to amend, we assume the truth of all properly pleaded facts in the complaint. (First Nationwide Savings v. Perry (1992) 11 Cal.App.4th 1657, 1662, 15 Cal.Rptr.2d 173.) We examine these facts to determine whether the complaint successfully states a cause of action on any available legal theory. If it does, sustaining the demurrer constitutes an

abuse of discretion and we must reverse. (Platt v. Coldwell Banker Residential Real Estate Services (1990) 217 Cal.App.3d 1439, 1444, 266 Cal.Rptr. 601.)

DISCUSSION

We decide here whether the trial court properly concluded that the filed rate doctrine is implicated in the narrow circumstances presented. There is no question that the doctrine has been used repeatedly to bar myriad claims seeking monetary recovery. No case, however, has used the doctrine to bar an action for injunctive relief brought under sections 17200 and 17500, which require no proof of damages in order to be sustained. As we shall discuss, we hold that the filed rate doctrine does not apply to bar the case before us, to the extent of the claim for injunctive relief. We hold that the policies which are furthered by the California statutes would be undermined by the filed rate doctrine's presumption of a consumer's omniscience of filed rates, and the resulting immunity to common carriers, regardless of any advertising deception used to lure the consumer.

We will first consider sections 17200 and 17500 and address whether, assuming the truth of the complaint's well-pleaded allegations, a cause of action has been stated. Next we consider whether the claims fall within and are barred by the filed rate doctrine. Finally, we address the remainder of the grounds raised on demurrer.

Does the Complaint State a Cause of Action Under Sections 17200 and 17500? ⁶

Sections 17200 and 17500 are consumer protection statutes designed, in part, to protect the public by prohibiting false, unfair, misleading or deceptive advertising. (Committee on Children's Television, Inc. v....