H.J. Inc. v. Northwestern Bell Telephone Co.

• Decision Date: 15 January 1992
• Docket Number: No. 90-5245,90-5245
• Citation: 954 F.2d 485
• Parties: , RICO Bus.Disp.Guide 7917 H.J. INC., a Minnesota corporation, Kirk Dahl, Larry Krugen and Mary Krugen, individually and d/b/a Photo Images, Susan Davis, Robert Neal, Isaac H. Ward, Richard L. Anderson, Thomas J. Mott, and all others similarly situated, Appellants, v. NORTHWESTERN BELL TELEPHONE COMPANY, a subsidiary of U.S. West, A.B.C. individually and D.E.F. as corporations, and other unnamed Co-conspirators, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 485

954 F.2d 485

60 USLW 2475, RICO Bus.Disp.Guide 7917

H.J. INC., a Minnesota corporation, Kirk Dahl, Larry Krugen

and Mary Krugen, individually and d/b/a Photo Images, Susan

Davis, Robert Neal, Isaac H. Ward, Richard L. Anderson, Thomas J. Mott, and all others similarly situated, Appellants, v. NORTHWESTERN BELL TELEPHONE COMPANY, a subsidiary of U.S.

West, A.B.C. individually and D.E.F. as

corporations, and other unnamed

Co-conspirators, Appellees.

No. 90-5245.

United States Court of Appeals,

Eighth Circuit.

Submitted March 14, 1991.

Decided Jan. 15, 1992.

Mark Reinhardt, St. Paul, Minn., argued (Susan Bedor and John Cochrane, on brief), for appellants.

John D. French, Minneapolis, Minn., argued (John F. Beukema, James L. Volling and Stephen T. Refsell, on brief), for appellees.

Before JOHN R. GIBSON and BOWMAN, Circuit Judges, and DUMBAULD, ^* Senior District Judge.

JOHN R. GIBSON, Circuit Judge.

This is the second appeal in this class action arising under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.A. §§ 1961-1968 (West 1984 & Supp.1991). The H.J. class consists of all purchasers of "telecommunications goods and services" from Northwestern Bell Telephone Company between 1980 and 1986. The H.J. class alleged that Northwestern Bell bribed members of the Minnesota Public Utilities Commission for the purpose of influencing the officials in setting telephone rates in Minnesota. The H.J. class alleged violations of Minnesota's bribery statute, Minn.Stat.Ann. § 609.42 (West 1987), and Minnesota common law (Count I), and several provisions of RICO. ¹ (Counts II-V). The district court ² dismissed the H.J. class's complaint, holding that its RICO claims were barred by the filed rate doctrine and that its state law claims were barred by res judicata. H.J., Inc. v. Northwestern Bell Tel. Co., 734 F.Supp. 879, 888 (D.Minn.1990). We affirm.

The procedural history of this case is lengthy. The district court first dismissed the H.J. class's complaint in 1986. H.J. Inc. v. Northwestern Bell Tel. Co., 648 F.Supp. 419 (D.Minn.1986). The district court held that: (1) the H.J. class did not allege facts constituting a "pattern of racketeering activity" under RICO; (2) the H.J. class failed to state a claim under section 1962(a) of RICO because it failed to allege a RICO "enterprise" separate and distinct from a RICO "person"; and (3) the filed rate doctrine barred the H.J. class's claims. Id. at 434-29. The court granted Northwestern Bell's motion to dismiss the RICO counts, dismissed the pendent state law claim without prejudice, id. at 429-30, and later denied the H.J. class's motion for reconsideration. H.J. Inc. v. Northwestern Bell Tel. Co., 653 F.Supp. 908, 916 (D.Minn.1987).

This court affirmed the dismissal, holding that the H.J. class failed to allege a pattern of racketeering activity under RICO. H.J. Inc. v. Northwestern Bell Tel. Co., 829 F.2d 648, 649-50 (8th Cir.1987). We did not consider the other bases for the district court's dismissal. Id. at 650.

The Supreme Court reversed, holding that the H.J. class's complaint should not have been dismissed for failing to plead a sufficient pattern of racketeering activity. H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 249-50, 109 S.Ct. 2893, 2905-06, 106 L.Ed.2d 195 (1989). The Court did not consider the other two grounds on which the district court had relied in dismissing the action. Id. at 234 n. 1, 109 S.Ct. at 2898 n. 1.

Following the Supreme Court's reversal, we remanded the case to the district court, H.J. Inc. v. Northwestern Bell Tel. Co., No. 87-5121, slip op. at 2 (8th Cir. Oct. 30, 1989), and Northwestern Bell renewed its motion for dismissal. The district court ordered dismissal of the H.J. class's complaint, ruling again that its RICO claims were barred by the filed rate doctrine. H.J., Inc., 734 F.Supp. at 882-84. The court found further support for its dismissal of the H.J. class's RICO claims in the doctrines of abstention and clear statement, id. at 886-88, concluding that "Congress did not intend that the additional sanction of treble damages ... be available against defendants under RICO for the actions alleged in plaintiffs' complaint." ³ Id. at 888.

In addition to the lengthy procedural history of this case, there have been other proceedings relating to this case. Shortly after the district court's 1986 decision, the H.J. class brought a parallel action in Minnesota state court. In addition to its bribery and RICO claims, the H.J. class asserted a claim for unjust enrichment. The Minnesota Court of Appeals affirmed the state trial court's dismissal of the action, holding that: (1) there is no private right of action under Minnesota statutory or common law for damages caused by the alleged bribery of public officials; (2) the H.J. class's RICO claims were barred by res judicata; and (3) the H.J. class's unjust enrichment claim was barred by Minn.Stat.Ann. § 237.26 (West 1972) because it was a collateral attack on a ratemaking decision of the Commission. H.J. Inc. v. Northwestern Bell Corp., 420 N.W.2d 673, 675-77 (Minn.Ct.App.1988). The Minnesota Supreme Court denied the H.J. class's petition for review. H.J. Inc. v. Northwestern Bell Tel. Corp., 420 N.W.2d 673 (Minn. May 16, 1988). The district court dismissed with prejudice the H.J. class's state law bribery claims (Count I), ruling that the claims were barred by res judicata. 734 F.Supp. at 888.

While this case was pending, the Minnesota Attorney General petitioned the Commission to reopen and reconsider NWB 83-600, a proceeding on a rate increase requested by Northwestern Bell in 1983 and granted in 1984. The Minnesota Court of Appeals held that the Commission could properly reopen and vacate this rate. In re Minnesota Pub. Utilities Comm'n, 417 N.W.2d 274, 279-83 (Minn.Ct.App.1987), cert. denied, 488 U.S. 849, 109 S.Ct. 130, 102 L.Ed.2d 103 (1988). As a result of the reconsideration, the Commission lowered the rate increase from $57,148,000.00 to $45,603,000.00. In May 1987, Northwestern Bell implemented new rates that are approximately $9 million per year lower than the rates that were in effect when the H.J. class brought this case. Because the Commission lacked authority to order refunds, the Attorney General for the State of Minnesota brought an action in Minnesota state court to compel Northwestern Bell to refund the difference between the original 1984 and reconsidered 1987 rates. The parties settled that action in September 1989, and Northwestern Bell has refunded approximately $32 million to telephone customers.

I.

The H.J. class first argues that the district court erred in holding that its RICO claims are barred by the filed rate doctrine. The H.J. class argues that the filed rate doctrine does not apply because: (1) Northwestern Bell cannot use the filed rate doctrine to shield it from its own fraudulent conduct; (2) the H.J. class did not ask the district court to set new rates; and (3) the filed rate doctrine is a federal doctrine that applies only to federal agencies.

The filed rate doctrine "forbids a regulated entity [from charging] rates for its services other than those properly filed with the appropriate federal regulatory authority." Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 577, 101 S.Ct. 2925, 2930, 69 L.Ed.2d 856 (1981). The filed rate doctrine prohibits a party from recovering damages measured by comparing the filed rate and the rate that might have been approved absent the conduct in issue. Id. at 578-79, 101 S.Ct. at 2930-31.

The purpose of the filed rate doctrine is to: (1) preserve the regulating agency's authority to determine the reasonableness of rates; and (2) insure that the regulated entities charge only those rates that the agency has approved or been made aware of as the law may require. See id. at 577-78, 101 S.Ct. at 2930-31. The Supreme Court recently explained: "The duty to file rates with the Commission ... and the obligation to charge only those rates ... have always been considered essential to preventing price discrimination and stabilizing rates." Maislin Ind., U.S. Inc. v. Primary Steel, Inc., --- U.S. ----, 110 S.Ct. 2759, 2766, 111 L.Ed.2d 94 (1990).

The district court, applying the same reasoning as it did in its 1986 dismissal, concluded that the filed rate doctrine barred the H.J. class's RICO claims because the class sought to recover damages amounting to the difference between the approved rates and the rates that would have been approved but for Northwestern Bell's wrongdoing. ⁴ H.J., Inc., 734 F.Supp. at 882-84; H.J., Inc., 648 F.Supp. at 428-29. In so ruling, the court relied on a line of federal cases, Montana-Dakota Utilities Co. v. Northwestern Public Service Co., 341 U.S. 246, 71 S.Ct. 692, 95 L.Ed. 912 (1951); Arkansas-Louisiana Gas Co., 453 U.S. 571, 101 S.Ct. 2925, 69 L.Ed.2d 856; Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409, 106 S.Ct. 1922, 90 L.Ed.2d 413 (1986); and Keogh v. Chicago & Northwestern Railway Co., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183 (1922). These cases held that the filed rate doctrine barred the various claims when the measure of damages is determined by comparing the approved rate and the rate that allegedly would have been approved absent the wrongful conduct. 734 F.Supp. at 882-84. The court also relied on two district court decisions, Carr v. Southern Co., 731 F.Supp. 1067 (S.D.Ga.1990) and County of Suffolk v. Long Island Lighting Co., 710 F.Supp. 1387 (E.D.N.Y.1989) (LILCO ), to support its dismissal of the H.J. class's RICO claims. After the district court's dismissal, however, the Eleventh Circuit reversed the district court's decision in Carr, and the Second Circuit, although affirming on other grounds, rejected the lower court's analysis in LILCO. See Taffet v. Southern Co., 930 F.2d 847 (11th Cir.1991); County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295 (2d Cir.1990).

A

The H.J. class first argues that...