Fedor v. Cingular Wireless Corp.

• Citation: 355 F.3d 1069
• Decision Date: 22 January 2004
• Docket Number: No. 02-3332.,02-3332.
• Parties: James J. FEDOR, Jr., Plaintiff-Appellant, v. CINGULAR WIRELESS CORPORATION, a Delaware Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

355 F.3d 1069

James J. FEDOR, Jr., Plaintiff-Appellant, v. CINGULAR WIRELESS CORPORATION, a Delaware Corporation, Defendant-Appellee.

No. 02-3332.

United States Court of Appeals, Seventh Circuit.

Argued May 22, 2003.

Decided January 22, 2004.

Ben Barnow (argued), Barnow & Associates, Chicago, IL, for Plaintiff-Appellant.

Hugh C. Griffin (argued), Lord, Bissell & Brook, Chicago, IL, for Defendant-Appellee.

Before BAUER, KANNE, and ROVNER, Circuit Judges.

ROVNER, Circuit Judge.

James J. Fedor, Jr., contracted with Cingular Wireless ("Cingular") for a cellular telephone service plan. For a fixed rate, that plan entitled him to a certain amount of airtime minute usage each month, and minutes in excess of that amount resulted in additional charges to his account. In July 2001, Fedor filed a complaint in state court against Cingular, alleging that Cingular improperly billed minutes incurred in one month to the billing periods in other months. For instance, Fedor alleged that calls made in January were billed under the allotment for February, resulting in extra charges for February (i.e. because it caused him to exceed the fixed-rate minutes in February) even though no charges would have accrued had the minutes been properly attributed to January (because the January allotment of minutes was not fully used). Fedor alleged such billing discrepancies in months from January through April. The result of that billing practice, according to the complaint, is that Cingular customers incurred charges in excess of the charges that those customers should have paid under the service plan purchased. The state court complaint pleaded both individual and class action claims for breach of contract, breach of the covenant of good faith and fair dealing, consumer fraud, and unjust enrichment.

Pursuant to 28 U.S.C. § 1441(b), Cingular removed the state court claim to federal court. Fedor subsequently moved to remand the case back to state court, arguing that the case presented only state law claims. The district court, however, held that the complaint was a challenge to the reasonableness of Cingular's rates, and that such a challenge was completely preempted by the Federal Communications Act (FCA), 47 U.S.C. § 332(c)(3)(A), which provides that

no State or local government shall have any authority to regulate the entry of or the rates charged by any commercial mobile service or any private mobile service, except that this paragraph shall not prohibit a State from regulating the other terms and conditions of commercial mobile services.

Cingular then filed motions to dismiss the complaint on a number of grounds, including that the complaint lacked subject matter jurisdiction, that the claims were within the primary jurisdiction of the Federal Communications Commission ("FCC"), and that it failed to state a claim. The district court granted some of the requested relief, dismissing two counts without prejudice as within the primary jurisdiction of the FCC, and dismissing two other counts with prejudice for failure to state a claim.

The initial issue before this court on appeal is whether the district court erred in denying Fedor's motion to remand the case back to state court. We review the district court's denial of that motion de novo.

I.

A state court civil action may be removed to federal court if the claim arises under federal law. Beneficial Nat. Bank v. Anderson, 539 U.S. 1, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003). Courts have long recognized, however, that a plaintiff who has both state and federal claims available may avoid federal court by limiting his or her complaint to only state law claims. Under the well-pleaded complaint rule, absent diversity jurisdiction, a case will not be removable if the complaint does not affirmatively allege a federal claim. Id. at 2062. Moreover, the availability of a federal defense to those state claims does not provide a basis for removal. Id.

In this case, there is no dispute that the complaint on its face alleges only state law claims. That would be the end of the inquiry but for the fact that the well-pleaded complaint rule is not without exceptions. Where a federal statute completely preempts the state-law cause of action, the claim, although pleaded in terms of state law, is in reality based on federal law, and therefore the claim is removable under 28 U.S.C. § 1441(b). Beneficial, 123 S.Ct. at 2063.

We considered that exception in the context of a state court complaint against a wireless carrier in Bastien v. AT&T Wireless Services, Inc., 205 F.3d 983, 987 (7th Cir.2000), holding that § 332(c)(3) of the FCA "completely preempted the regulation of rates and market entry, allowing removal to federal court, although the savings clause continues to allow claims that do not touch on the areas of rates or market entry." The issue, then, here as in Bastien, is whether the complaint actually challenges rates or market entry.

Cingular argues that the complaint indeed challenges both rates and market entry. According to Cingular, the complaint involves the timing of the billing and the amount billed, and therefore constitutes a challenge to rates. Essentially, Cingular would interpret the preemption provision as covering any claim that touches on the rates charged in any manner. Because the complaint alleges that Fedor's calls were improperly billed, Cingular asserts that it challenges the rates. That overstates the scope of the preemption, and in fact is a position that has been repeatedly rejected by courts and the FCC. Bastien is illustrative.

In Bastien, a wireless customer sued AT & T Wireless Services, Inc. ("AT & T Wireless") alleging that AT & T Wireless breached its contract to him and committed consumer fraud in signing up customers without first building the cellular towers and other infrastructure to provide reliable cellular connections, resulting in a large number of "dropped" calls, and that it continued to market its phones and service even though it had knowledge of the inadequacy of its infrastructure. Id. at 985. We held that his claims "tread directly on the very areas reserved to the FCC: the modes and conditions under which AT & T Wireless may begin offering services in the Chicago market." Id. at 989. Specifically, we noted that the FCC is responsible for determining the number, placement and operation of cellular towers and other infrastructure, as well as the rates and conditions that could be offered for the new service. Id. Bastien's claims, however, would have required AT & T Wireless to exceed those FCC requirements, providing more towers, clearer signals, or lower rates. Id. We noted that a number of Bastien's claims sounded like state law claims, such as allegations of breach of contract and misrepresentations, but those claims were founded on AT & T Wireless' failure to build more towers and fully develop its network when the service was offered to Bastien, and thus directly addressed the areas reserved to federal law. Id.

Bastien contrasted that situation with the claims presented to the Sixth Circuit in Long Distance Telecommunications Litig., 831 F.2d 627 (6th Cir.1987) ("Long Distance Litigation"). In Long Distance Litigation, the plaintiffs brought state law claims of fraud and deceit against long-distance telephone companies for failing to inform customers of their practice of charging for uncompleted calls. The court in Long Distance Litigation held that Congress did not intend to preempt those claims, because the claims related to fraudulent and deceitful statements, and therefore did not impact federal regulation of the carriers. Bastien, 205 F.3d at 988-89. In contrast, we noted that Bastien's claims "would directly alter the federal regulation of tower construction, location and coverage, and quality of service and hence rates for service." Id. at 989.

Thus, Bastien, in contrasting its case with Long Distance Litigation, recognized that the nature of the claim would govern the inquiry, and that the focus is whether the claim necessarily treads upon the federally-reserved areas. The FCC reached the same conclusion in In the Matter of Southwestern Bell Mobile Systems, Inc., 14 F.C.C.R. 19898 (1999) ("Southwestern Bell") and In the Matter of Wireless Consumers Alliance, Inc., 15 F.C.C.R. 17021 (2000) ("Wireless Consumers"). In Southwestern Bell, the FCC held that state law claims stemming from state contract or consumer fraud laws governing disclosure of rates or rate practices are not generally preempted under § 332. Southwestern Bell, 14 F.C.C.R. at 19908 ¶ 23. The FCC held that billing information, practices and disputes which may be regulated by state contract or consumer fraud laws fall within the "other terms and conditions" which states are allowed to regulate. Id. at 19901 ¶ 7. Therefore, Southwestern Bell rejected the notion that all claims related to rates or billing are necessarily preempted by § 332.

The FCC further explored that issue in Wireless Consumers, wherein it addressed whether damage awards against commercial mobile service providers based on state court tort or contract claims are preempted by § 332 as equivalent to rate regulation. 15 F.C.C.R. 17021. The FCC answered in the negative, holding that such claims are generally preempted only where they involve the court in ratemaking. Id. at 17034 ¶¶ 23, 24. The FCC in Wireless Consumers expressly rejected the argument that any determination of...