Fax Telecommunicaciones Inc. v. AT & T, Docket No. 97-7374

• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
• Writing for the Court: JOHN M. WALKER, JR.
• Citation: 138 F.3d 479
• Parties: 11 Communications Reg. (P&F) 1205 FAX TELECOMMUNICACIONES INC., Plaintiff-Appellant, v. AT&T, Defendant-Appellee, Michael Gilmartin and Richard Stotts, Defendants.
• Docket Number: Docket No. 97-7374
• Decision Date: 10 March 1998

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138 F.3d 479 11 Communications Reg. (P&F) 1205 FAX TELECOMMUNICACIONES INC., Plaintiff-Appellant,
v.
AT&T, Defendant-Appellee,
Michael Gilmartin and Richard Stotts, Defendants. Docket No. 97-7374 United States Court of Appeals,
Second Circuit. Argued Oct. 28, 1997.
Final brief submitted Nov. 20, 1997.
Decided March 10, 1998.

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Stacey Van Malden, Charles Wallshein, Freeport, NY, for Plaintiff-Appellant.

Elizabeth M. Sacksteder, Alan M. Unger, Sidley & Austin, New York City (Sharon O. Gans, AT&T Law Division, AT&T Corp., Liberty Corner, NJ, on the brief), for Defendant-Appellant.

Before: FEINBERG, WALKER, Circuit Judges, and GOLDBERG, Judge. ^*

JOHN M. WALKER, JR., Circuit Judge:

Plaintiff-appellant Fax Telecommunicaciones Inc. ("Fax"), a former purchaser of AT&T long-distance telephone services, brought this action alleging breach of contract, fraudulent misrepresentation, and fraudulent inducement to contract against defendant-appellee AT&T ("AT&T"), for which Fax sought a declaratory judgment, specific performance, and compensatory and punitive damages. In essence, Fax claims that AT&T promised to file a new contract tariff with the Federal Communications Commission ("FCC") for the telephone services it proposed to provide to Fax. Based on this promise, Fax purchased long-distance telephone services from AT&T. However, AT&T never filed the new contract tariff with the FCC, and instead billed Fax pursuant to the applicable filed tariff, which was significantly more expensive. Because Fax only paid AT&T what Fax calculated it owed under the promised rates, AT&T counterclaimed for an additional $2,321,390.71 in unpaid telephone charges which Fax owed under the filed tariff, plus pre-judgment interest. The United States District Court for the Eastern District of New York (Joanna Seybert, District Judge ) granted AT&T's motion for summary judgment in part and dismissed it in part, granting judgment for AT&T on its counterclaim and dismissing all but one of Fax's claims based on the district court's application of the filed rate doctrine. Fax appeals, contending that the filed rate doctrine does not bar its dismissed claims.

We affirm.

BACKGROUND

I. Regulatory Scheme

Before presenting the facts of this case, it will be helpful to briefly describe the regulatory structure governing interstate telecommunications. Interstate telecommunications carriers are regulated pursuant to the Federal Communications Act of 1934, 47 U.S.C. § 151 et seq. ("FCA"). As a provider of long distance telephone services, AT&T is

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classified as a common carrier under the FCA. See 47 U.S.C. § 153(h). As a common carrier, AT&T must file with the Federal Communications Commission ("FCC") a tariff showing all charges for each telephone service it provides, as well as all classifications, practices, and regulations affecting such charges. See 47 U.S.C. § 203(a). Carriers are prohibited from providing communications services except pursuant to a filed tariff, and may not charge, demand, collect, or receive a rate other than the rate listed in the applicable tariff. See 47 U.S.C. § 203(c). In addition, carriers are prohibited from unreasonably discriminating between customers in charges, practices, classifications, regulations, facilities or services. See 47 U.S.C. § 202(a). The FCC is empowered to review filed rates, and to reject any rates deemed unjust, unfair, or unreasonable. See 47 U.S.C. § 205(a).

Beginning in 1991, the FCC adopted rules and regulations allowing carriers to establish "contract tariffs." See In the Matter of Competition in the Interstate Interexchange Marketplace, CC Docket No. 90-132, 6 F.C.C.R. Rec 5880, 1991 WL 638354 (F.C.C.) ("Matter of Competition "). These rules were designed to increase flexibility for customers and to promote competition among carriers. A carrier may negotiate a contract tariff individually with a customer. At least one customer must enter into a contract with the carrier pursuant to the new tariff in order for the carrier to file the contract tariff. 47 C.F.R. § 61.3(m). The contract tariff must be filed at least fourteen days prior to the effective date of the contract. Matter of Competition pp 91, 121. The tariff must include the terms of the contract, a description of the services to be provided, the price for these services, the minimum volume commitments for each service, any volume discounts, as well as any other classifications, practices, and regulations affecting the contract rate, thereby complying with the filing requirements of 47 U.S.C. § 203(a). Id. at pp 121, 122. After fourteen days, the contract tariff is effective, assuming neither the FCC nor any member of the public objects. Id. at pp 91, 121, 122; 47 C.F.R. §§ 61.58(c)(6), 61.42(c)(8). The FCC will presume that rates filed in a contract tariff are reasonable. Matter of Competition p 74. The carrier must make the contract tariff generally available to other similarly situated customers. Id. at pp 91, 129. In this way, the FCA's prohibition against discrimination among customers is not violated. See pp 126-32.

II. Factual and Procedural History

Fax, a New York corporation, operates telephone arcades in Brooklyn and Queens, New York. A telephone arcade is a store, open to the public, containing several private telephone booths. A customer wishing to place a telephone call from one of the booths must first pay a deposit. Customers are billed based on the destination and duration of their call. When their call is complete, the amount of their bill is deducted from their deposit, and the difference is refunded. The overwhelming majority of Fax's customers placed calls to Latin America, with 80% to 85% of Fax's total call volume placed to Colombia alone.

Beginning August 1993, David Ospino, Fax's president, met with representatives of AT&T to discuss the purchase of long-distance services. At the time, Fax was using a different carrier, but hoped to negotiate a more competitive deal with AT&T. For its purposes, AT&T hoped to make greater inroads in the local Latin American community by establishing Fax as its central lead account for various arcades serving the Latin American market, all of which could then be serviced under one billing umbrella. ¹ AT&T representatives believed that Fax, with its Latin American ownership, would be better able to market AT&T service to other Latin American calling arcades in Brooklyn and Queens than would AT&T's own representatives.

On December 21, 1993, AT&T sales representative Richard Stotts presented Ospino

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with a "Network Services Commitment Form" offering Fax a three-year plan for service under AT&T's "Uniplan Conquest" tariff for dedicated service. Dedicated service provides a customer with direct access to AT&T long-distance services by bypassing "switched" local service. Dedicated service is less expensive than switched service. In order to receive dedicated service directly from AT&T, and therefore receive Conquest service, Fax needed to install a "T1 Pipe." Fax ordered a T1 pipe system from AT&T, and made a $3,500 deposit on its installation. However, AT&T never installed the system. Therefore, Conquest service was never available to Fax.

At the same December meeting, Stotts also presented a draft version of an amended Conquest tariff, which would include greater discounts based on Fax's calling volume. Eventually, this amended Conquest tariff was to have been filed as a contract tariff with the FCC. Ospino signed the offering with the understanding that Fax would receive service under the "CustomNet" tariff until AT&T could file the contract tariff. The CustomNet tariff bills at a higher rate than the Conquest tariff then on file with the FCC, and at a considerably higher rate than the proposed amended Conquest tariff. However, Ospino understood and AT&T represented orally that Fax would be retroactively re-rated upon the filing of the contract tariff, so that Fax would never actually pay the CustomNet rates. Technically, AT&T could not actually re-rate charges retroactively. However, Stotts attests that AT&T regularly did so effectively by applying discounts and bonuses to customer bills. Fax never signed a contract for CustomNet service.

Fax commenced service with AT&T in early January 1994. On or about January 14, 1994, Ospino and Stotts had another meeting. At that time, Stotts presented an unsigned letter describing the services that AT&T would provide to Fax under the amended Conquest tariff, and the rates that AT&T would charge for those services. Allegedly, this letter contained numerous typographical errors, mistakes, and omissions which should have been apparent to Ospino. ² Stotts informed Ospino that these new rates soon would be filed with the FCC.

It was then that Fax's problems with AT&T began. Fax received its first bill from AT&T in February 1994. To Ospino's surprise, Fax had been billed using the higher rates in the CustomNet tariff, rather than the rates quoted in the unsigned letter of January 14, 1994. When Ospino contacted AT&T representatives Stotts and Fabio Herrera, they informed him that the contract tariff was being processed, and that his next bill would include a credit to Fax to reflect the new tariff rate. Ospino computed his payment to AT&T based on the rates promised in the unsigned letter of January 14, 1994, and remitted approximately $75,000 to AT&T.

In March 1994, Fax received a second bill from AT&T. Again, Fax had been charged the higher CustomNet rate, and this bill included a past amount due under the first bill of $120,000. Herrera told Ospino that he need not worry, and assured him that the next bill would reflect the appropriate credits. As he had done the month before, Ospino calculated the amount he thought due under the promised rate, and remitted approximately $85,000 to AT&T.

In March 1994, Ospino met with AT&T representative Michael Gilmartin to discuss Fax's billing...