In re Long Distance Telecommunication Litigation

• Decision Date: 27 June 1985
• Docket Number: MDL No. 598.
• Citation: 612 F. Supp. 892
• Parties: In re LONG DISTANCE TELECOMMUNICATION LITIGATION. CERTIFIED COLLATERAL CORPORATION, et al., on behalf of themselves and all of those similarly situated, Plaintiffs, v. ALLNET COMMUNICATIONS SERVICES, INC., et al., Defendants. Charles KAPLAN, Plaintiff, v. ITT-UNITED STATES TRANSMISSION SYSTEMS, INC., Defendant.
• Court: U.S. District Court — Western District of Michigan

612 F. Supp. 892

In re LONG DISTANCE TELECOMMUNICATION LITIGATION.

CERTIFIED COLLATERAL CORPORATION, et al., on behalf of themselves and all of those similarly situated, Plaintiffs, v. ALLNET COMMUNICATIONS SERVICES, INC., et al., Defendants.

Charles KAPLAN, Plaintiff, v. ITT-UNITED STATES TRANSMISSION SYSTEMS, INC., Defendant.

MDL No. 598.

United States District Court, E.D. Michigan, S.D.

June 27, 1985.

James A. Mangione, Law Offices of James A. Mangione, William Lerach, Margaret Dobies, Milberg Weiss Bershad Specthrie & Lerach, San Diego, Cal., for Seymour Lazar.

Fay Clayton, Sachnoff, Weaver & Rubenstein, Ltd., Chicago, Ill., for Certified Collateral Corp. Earl E. Olive, David H. Locks.

Michael J. Freed, Chicago, Ill., for Euromarket Designs, Inc. d/b/a Crate & Barrel.

Karl L. Cambronne, Chestnut & Brooks, P.A., Minneapolis, Minn., for McIntosh Embossing, Inc.

Grant S. Lewis, LeBouef, Lamb, Leiby & MacRae, New York City, for U.S. Transmission Systems, Inc. Mitchell S. Goldgehn, Greenberg Keele Lunn & Aronberg, Chicago, Ill., for Allnet Communication Services, Inc.

Richard J. Gray, Jenner & Block, Chicago, Ill., for MCI Telecommunications Corp.

Howard G. Kristol, Reboul, MacMurray, Hewitt, Maynard & Kristol, New York City, for GTE Corp., GTE Spring Communications Corp., GTE Automatic Elec. Corp., Southern Pacific Co., Southern Pacific Communication Co., Southern Pacific Satellite Co.

Gerald D. Miller, Miller, Hochman & Myerson, Jersey City, N.J., for Mark Hochman, et al.

John Havas, Foulkrod, Reynolds & Havas, Harrisburg, Pa., for Lilly M. Feitler, etc.

Nicholas Chimicles, Greenfield, Chimicles & Lewis, Haverford, Pa., for A. Linda Leventhal, etc.

Jonathan Plasse, Lawrence Sucharow, New York City, for Charles Kaplan.

Robert P. Hurlbert, Dickenson, Wright, Moon, Van Dusen & Freeman, Bloomfield Hills, Mich., for Western Union Telegraph Co.

Michael W. Ward, O'Keefe, Ashenden, Lyons & Ward, Chicago, Ill., for U.S. Telephone of the Midwest, Inc.

John Kinzey, New York City, for ITT-USTS, Inc.

MEMORANDUM OPINION AND ORDER

ANNA DIGGS TAYLOR, District Judge.

These matters come before the court on two independent motions to dismiss by the parties defendant which, because of their close relationship in questions presented, must be determined together. The first matter discussed herein is the consolidated motion of the defendants in Certified Collateral Corporation to dismiss the consolidated complaint of the plaintiffs. That complaint has replaced the complaints filed in ten separate class actions which had been filed in ten other U.S. District Courts and which the Judicial Panel on Multidistrict Litigation had transferred to this court in 1984.¹ The consolidated complaint essentially charges defendants, all common carriers in competition with American Telephone and Telegraph Company (AT&T) for the provision of long distance phone services to consumers thereof, with improperly charging the consumer plaintiffs for long distance calls which were never completed, and with failing to advise the plaintiffs of such a practice. Defendants are alleged to have violated both federal statutes and federal common law, and this court's jurisdiction is invoked under 28 U.S.C. § 1332 (1966) and 47 U.S.C. § 207 (1962), the jurisdictional provision of the Federal Communications Act of 1934, 47 U.S.C. § 151 et seq (1962), the statute which is central to this entire set of disputes. For the reasons which follow, defendants' consolidated motion to dismiss must be granted, and this case referred to the Federal Communications Commission (FCC) for disposition.

Although the Kaplan action was also transferred to this court by the Multidistrict Panel as a "tag-along" action, presenting claims similar to those of the plaintiffs above, Kaplan has not joined in the consolidated complaint, and defendant therein seeks reconsideration by this court of a previous partial denial of its motion to dismiss plaintiff Kaplan's complaint prior to its transfer to this district. Although that motion was originally denied by the United States District Court for the Eastern District of New York, Charles Kaplan v. ITT-U.S. Transmissions Systems, 589 F.Supp. 729 (EDNY 1984) this court will, for the reasons set down below, both entertain and grant defendant's motion, and the Kaplan action is also dismissed and referred to the FCC.

I. CERTIFIED COLLATERAL CORPORATION, et al. v. ALLNET COMMUNICATIONS SERVICES, INC., et al.

THE CONSOLIDATED COMPLAINT

Plaintiffs' joint complaint alleges that defendants, as providers of long distance telephone services (also referred to as common carriers), regularly charge consumers for long-distance telephone calls which are not actually completed and further, that each and every defendant's billing practices and procedures are such as to render unlikely the discovery of such charges by the consumer. Plaintiffs claim that it is the practice of defendants to routinely fail to inform their customers of these alleged charging procedures.

Count I of the complaint is brought under § 201(b) of the Communications Act, 47 U.S.C. § 201(b) (1962), and contends that defendants' above-described charges and practices are unjust and unreasonable. Count II claims that this alleged misconduct is also violative of federal common law principles of fraud. Count III cites the same conduct under § 207 of the Communications Act. Count IV claims breach of contract by defendants, and Count V asserts a conversion claim. These two counts (IV and V) are also brought under federal common law, plaintiffs contend. Finally, plaintiffs assert that defendants' conduct herein constitutes a violation of the Racketeer Influences and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq. (Supp.1984) (Count VI).

COUNT I — § 201(b) COMMUNICATIONS ACT CLAIM

Initially, this court must note that it has previously decided the first of these cases, Control Electronics, Inc. v. Southern Pacific Communications Co., No. 83-1010 (E.D.Mich.1984), appeal dismissed, No. 84-1439 (6th Cir. October 30, 1984), which presented facts and allegations quite similar to those contained in this consolidated complaint. After a study of the doctrine of primary jurisdiction, this court held that, under that doctrine, it must defer to the Federal Communications Commission, and dismiss the case. A review of the primary jurisdiction doctrine is in order here, but first, we should examine the statutory provision upon which plaintiffs rely. 47 U.S.C. § 201(b) (1962) provides in pertinent part:

(b) All charges, practices, classifications, and regulations for and in connection with such communication service, shall be just and reasonable, and any such charge, practice, classification, or regulation that is unjust or unreasonable is declared to be unlawful.

PRIMARY JURISDICTION

The Supreme Court described the purpose and character of the primary jurisdiction doctrine in U.S. v. Western Pacific RR Co., 352 U.S. 59, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956):

The doctrine of primary jurisdiction, like the rule requiring exhaustion of administrative remedies, is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties. Exhaustion applies where a claim is cognizable in the first instance by an administrative agency alone; judicial interference is withheld until the administrative process has run its course. Primary jurisdiction, on the other hand, applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views. 352 U.S. at 63-64, 77 S.Ct. at 165.

The concept of administrative primary jurisdiction had its genesis at least as early as Texas and Pacific Railway Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553 (1906), in which the plaintiff brought suit against the railroad in a state court to recover allegedly unreasonable charges made by the railroad. The Interstate Commerce Act expressly provided that an aggrieved party could sue for damages either before the Interstate Commerce Commission (ICC) or in United States District Court, and expressly provided that common law remedies (such as suit in state court) were preserved. Nevertheless, the court ruled that a plaintiff must first attack the reasonableness of charges made by the railroad before the ICC. The primary reasons advanced by the court for this construction was the necessity of uniformity in determining what rates were reasonable or unreasonable under the Act.

This doctrine was further explicated and expanded in Far East Conference v. United States, 342 U.S. 570, 72 S.Ct. 492, 96 L.Ed. 576 (1952). There the United States brought its antitrust action against an association of steamship companies which had promulgated a dual system of rates favoring shippers who agreed to utilize conference members exclusively. The court held that the Federal Maritime Board had primary jurisdiction over rates charges by those companies. Although antitrust claims made by the government did not invoke the provisions under which the Maritime Board operated, the court held that the applicability of antitrust laws to the rate system being challenged must necessarily be judged, in the first instance, by the federal agency charged by Congress with the responsibility of regulating the particular industry in question. Quoting United States Navigation Co. v. Cunard Steamship Co., 284 U.S. 474, 485, 52 S.Ct. 247, 250, 76 L.Ed. 408 the court said:

Whether a given agreement among such carriers should be held to contravene the act may depend upon a consideration of economic relations, of facts peculiar to the business or its history, of

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