Harper v. American Tel. and Tel. Co.

• Decision Date: 07 July 1999
• Docket Number: No. CV 192-134.,CV 192-134.
• Parties: Jerry HARPER, Josephine Meadows, J.D. Powell, Lamar Andrews, and Addie Williams, Plaintiffs, v. AMERICAN TELEPHONE AND TELEGRAPH COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Georgia

54 F.Supp.2d 1371

Jerry HARPER, Josephine Meadows, J.D. Powell, Lamar Andrews, and Addie Williams, Plaintiffs, v. AMERICAN TELEPHONE AND TELEGRAPH COMPANY, Defendant.

No. CV 192-134.

United States District Court, S.D. Georgia, Augusta Division.

July 7, 1999.

John C. Bell, Jr., Pamela S. James, Bell & James, Augusta, GA, John B. Long, Thomas William Tucker, Dye, Tucker, Everitt, Long & Brewton, PC, Augsuta, GA, Arthur R. Miller, Professor, Cambridge, MA, Melvyn I. Weiss, Michael Champlin Spencer, Ralph M. Stone, Milberg Weiss Bershad Hynes & Lerach, New York City, Richard Henry Weiss, Milberg Weiss Bershad Hynes & Lerach LLP, New York City, James J. Binns, Philadelphia, PA, William A. Pannell, P.C., Alpharetta, GA, for Plaintiffs.

Ted H. Clarkson, Wyckliffe A. Knox, Jr., Kilpatrick Stockton, LLP, Augusta, GA, William N. Withrow, Jr., Susan S. Lanigan, C. LeeAnn McCurry, Troutman Sanders LLP, Atlanta, GA, Harry J. Winograd, Bodker, Ramsey & Andrews, Atlanta, GA, James R. Wyrsch, Keith E. Drill, Cheryl A. Pilate, Ronald D. Lee, Wyrsch, Atwell, Mirakian, Lee & Hobbs, P.C., Kansas City, MO, Julie E. Grimaldi, Kansas City, MO, Percy J. Blount, Glover & Blount, PC, Augusta, GA, for Defendant.

ORDER

BOWEN, Chief Judge.

In the above-captioned case, Defendant American Telephone and Telegraph Company (AT & T) has filed a Motion for Summary Judgment. For the reasons stated below, Defendant's Motion for Summary Judgment is GRANTED.

I. Background

Plaintiffs¹ filed this case on June 24, 1992, individually and on behalf of a class of all other persons similarly situated, alleging that AT & T knowingly participated in an enterprise operated in interstate commerce by which people would dial 900 numbers to obtain credit cards. With these 900-number programs, the caller was charged a fee for the 900-number call and would later receive an application for a secured credit card² in return for the charge.

Plaintiffs' Complaint alleges that this activity constitutes racketeering activity in violation of the federal RICO statute, 18 U.S.C. §§ 1961 to 1968 (1994), and that this activity violates the Communications Act of 1934, 47 U.S.C. §§ 201 to 229 (1994), and the federal common law of communications law.³ The Complaint further alleges that Defendant committed mail and wire fraud, in violation of 18 U.S.C. §§ 1341 & 1343 (1994), in furtherance of its RICO enterprise.⁴

Plaintiffs originally presented this case as a class action, and I certified a master class and a Georgia subclass. Defendant appealed the class certification to the Eleventh Circuit Court of Appeals. The Court of Appeals decertified the class and remanded the case to this Court for further proceedings. Andrews v. American Tel. & Tel. Co., 95 F.3d 1014, 1022 (11th Cir. 1996). Defendant has filed a Motion for Summary Judgment on all of Plaintiffs' claims.

Plaintiffs' claims concern 900-number credit card programs which utilized direct mail and television advertisements to encourage participants to pay for 900-number calls. Plaintiffs contend that the solicitations for the 900 numbers promised callers a credit card in return for their phone calls.

Pay-per-call, or "900-number," telephone service was developed in the early 1980s. It was first used for telephone polling and other interactive programs designed to disseminate a wide variety of information to customers, who were usually charged for the calls in their monthly phone bills. After its inception, the 900-number industry rapidly expanded to encompass varied news, sports, sex, weather, and entertainment information programs, as well as promotional and giveaway contests. While the specifics of different 900-number programs vary greatly, their basic operation is the same: callers are enticed by television commercials, direct mail solicitation, or other advertising materials to call a 900 number, for which the callers are charged either a flat fee per call or a per-minute rate.

The entity which actually develops or sponsors the 900-number program, produces the solicitation materials, and develops the audio message consumers hear is an Information Provider (IP). Plaintiffs' claims involve programs developed by two IPs, BBC Interests (BBC) and American Marketing (American).

These IPs developed programs utilizing 900 numbers which were answered with recorded messages. The entity responsible for delivery of these recorded messages is a service bureau. BBC employed Info-Line Technology as its service bureau, and American employed CMI as its service bureau.

The 900-number programs also utilize call transport services. Call transport services involve the transmission of the recorded message by an interexchange carrier to the person making the telephone call, such as a long distance or a local exchange carrier. Defendant AT & T is a major long distance carrier that provided phone service to various sponsors of 900-number promotions and, after deregulation of the industry in 1986, offered billing and collection services to 900-number sponsors. The sponsors, some of which hired independent service bureaus to operate the 900-number enterprises, received a share of the fees collected by the long distance carriers from customers who called the 900 numbers.

AT & T provided call transport services for the 900 numbers at issue in this lawsuit. AT & T contends that it only provided call transport services for the IPs and service bureaus and that it had no involvement in the other areas of 900-number operations. Plaintiffs contend, however, that AT & T approved solicitation materials and scripts for telephone messages.

The price AT & T charged for interexchange transport services was set by a tariff filed with the Federal Communications Commission. AT & T contends that it provided service to the 900-number programs as it would any other customer and that it did not have the discretion to decline the transport service. Plaintiffs contend, however, that AT & T was allowed to decline the 900-number businesses at issue in this case because these programs were illegal.

Those involved in these 900-number programs earned substantial revenues through the billing and collection of charges incurred for the calls to the 900 numbers. Pursuant to a contractual arrangement, AT & T provided billing and collection services for the 900 numbers at issue in this case. This contract required the service bureau and/or IPs to adhere to AT & T's 900-number program guidelines. Specifically, Plaintiffs allege that all materials associated with the 900-number program (revisions or changes to the program, solicitation materials, or scripts) were submitted to AT & T for its review prior to use. AT & T contends that this review only ensured that the programs complied with all federal and state laws and AT & T's own internal guidelines. AT & T contends that this review was not conducted in an attempt to operate or manage programs or increase the profitability of the parties involved. AT & T attorneys were involved in this review process, and AT & T eventually began requiring IPs to provide their own attorney opinion letters concerning the legality of the 900-number programs.

Plaintiffs contend that AT & T was aware that the 900 numbers violated the law and still chose to provide services. They argue that it was the risk of getting caught that motivated AT & T's decision as to whether they would run a program in a particular area.

Although AT & T charged a fee for its services, it contends that the actual billing and collection services were tied only to the use of its services as determined in the contract. AT & T contends that the profitability of the programs and the revenues it collected did not impact its fee; the service bureau and/or IP had to pay for AT & T's billing and collection services regardless of whether the charges were collected from the callers. The service bureaus and the IPs did not directly pay AT & T. Instead, AT & T deducted its charges and passed on what, if any, was left to the service bureaus and IPs.

Plaintiffs also contend that AT & T was actively involved with the other functions of the 900-number credit card programs. In response, AT & T contends that it did not create, formulate, or implement the programs at issue. AT & T also contends that it did not create the content of advertising or designate the means of advertising for the 900 numbers. Plaintiffs contend, however, that AT & T required its own approval of the content and means of advertising as a condition of AT & T collecting and billing for the programs.

This case focuses on 900-number programs involving credit card offers. These programs earned millions of dollars for the program operators. In these programs, the IP developed direct mail and/or television advertisements urging recipients to call a 900 number to receive a credit card. The caller was charged a flat fee for the call and later received an application for a secured credit card in return for the charge.

Each Plaintiff's particular claim and the circumstances surrounding his participation in the 900-number program is summarized below.

A. Andrews

Plaintiff Lamar Andrews contends that he made a phone call to the Creditinfo 900 number on April 24, 1991. American serviced this program for CMI. Plaintiff Andrews made this call in response to a solicitation he received in the mail. The Creditinfo program enticed participants to dial a 900 number and incur a $50.00 charge to receive an application for a secured credit card. The solicitation also notified participants that they may have won a $5,000.00 line of credit that they could claim by either mailing the solicitation card or calling the 900 number.

Defendant contends that Plaintiff Andrews cannot identify any false statement in the solicitation on which he relied. Defendant also alleges that Plaintiff Andrews admitted that he did not read the full text of the credit card solicitation corresponding to the 900 number he called. Defendant...