In Re Universal Service Fund Telephone Billing Practice Litigation. Class

• Citation: 619 F.3d 1188
• Decision Date: 20 September 2010
• Docket Number: Nos. 09-3059, 09-3077.,s. 09-3059, 09-3077.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)
• Parties: In re UNIVERSAL SERVICE FUND TELEPHONE BILLING PRACTICE LITIGATION. Class Plaintiffs, Plaintiffs, Class Plaintiffs, Thomas F. Cummings; Roger A. Gerdes; Sterling Beimfohr, doing business as Sterling Sails, Plaintiffs-Appellees/Cross-Appellants, v. AT & T Corporation, Defendant-Appellant/Cross-Appellee, Harris, Wiltshire & Grannis LLP, Respondent, and Pam Hattaway, formerly known as Pam Holloway; George Hattaway; T.J. Adamczyk, Objectors.

619 F.3d 1188

In re UNIVERSAL SERVICE FUND TELEPHONE BILLING PRACTICE LITIGATION.Class Plaintiffs, Plaintiffs,Class Plaintiffs, Thomas F. Cummings; Roger A. Gerdes; Sterling Beimfohr, doing business as Sterling Sails, Plaintiffs-Appellees/Cross-Appellants,

v. AT & T Corporation, Defendant-Appellant/Cross-Appellee,Harris, Wiltshire & Grannis LLP, Respondent,andPam Hattaway, formerly known as Pam Holloway; George Hattaway; T.J. Adamczyk, Objectors.

Nos. 09-3059, 09-3077.

United States Court of Appeals,Tenth Circuit.

Sept. 20, 2010.

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David W. Carpenter (Mark B. Blocker and Michael Doss with him on the briefs), Sidley Austin LLP, Chicago, IL, for Defendant-Appellant/Cross-Appellee.

Barry Barnett of Susman Godfrey L.L.P., Dallas, TX, and F. Paul Bland, Jr., Public Justice, Washington, DC (Warren T. Burns of Susman Godfrey L.L.P., Dallas, TX, with them on the briefs), for Plaintiffs-Appellees/Cross-Appellants.

Before MURPHY, HOLMES, Circuit Judges, and POLLAK, ^* District Judge.

MURPHY, Circuit Judge.

I. Introduction

This multidistrict litigation involves multiple class action lawsuits arising from the billing practices of defendant AT & T Corporation. Each class of plaintiffs challenged the lawfulness of a monthly line-item charge defendant imposed on its customers to recover contributions to the federal Universal Service Fund (“USF”) required by 47 U.S.C. § 254. One subclass of plaintiffs, comprising all residential long-distance customers of AT & T in California, proceeded to trial and was awarded $16,881,000 in damages. The district court remitted the verdict to $10,931,000, and awarded prejudgment interest of $5,546,958.41, for a total award of $16,477,958.41. On appeal, AT & T argues it is entitled to judgment as a matter of law or a new trial. It alternatively asserts it is entitled to a further remittitur of the jury's damages award. On cross-appeal, plaintiffs argue the district court erred in enforcing AT & T's arbitration clause against non-California residential plaintiffs and in granting partial summary judgment on AT & T's business customers' breach of contract claims. Exercising jurisdiction under 28 U.S.C. § 1291 and 9 U.S.C. § 16(a)(3), this court AFFIRMS the decisions of the district court.

II. Background

Under the Federal Communications Act of 1934 (“FCA” or “1934 Act”), telecommunications carriers were required to file with the Federal Communications Commission (“FCC”) a list of tariffs showing “all charges ... and ... the classifications, practices, and regulations affecting such charges.” 47 U.S.C. § 203(a). The 1934 Act also prohibited carriers from extending rates, terms, or conditions that differed from their filed tariffs. 47 U.S.C. § 203(c); AT & T v. Cent. Office Tel., Inc., 524 U.S. 214, 222, 118 S.Ct. 1956, 141 L.Ed.2d 222 (1998). The goal of this “filed rate doctrine” was to ensure uniformity in the rates, terms, and conditions offered to the purchasers of telecommunications services. Cent. Office Tel., 524 U.S. at 222-23, 118 S.Ct. 1956.

During the 1970s and 1980s, advances in the telecommunications industry gradually eroded the utility of the filed rate doctrine. Ting v. AT & T, 319 F.3d 1126, 1131-32 (9th Cir.2003). The FCC's attempts to exempt certain carriers from the requirements of § 203, however, were invalidated by the Supreme Court. MCI Telecomms. Corp. v. AT & T Corp., 512 U.S. 218, 225-29, 234, 114 S.Ct. 2223, 129 L.Ed.2d 182 (1994) (holding § 203(b)(2) gives the FCC authority to modify the 1934 Act's tariff filing requirement, but not to eliminate it entirely).

Congress responded by enacting the Telecommunications Act of 1996 (“1996 Act”), which required the FCC to “forbear from applying” the filed rate doctrine if it determined application of the doctrine was: (1) “not necessary to ensure that the charges, practices, classifications, or regulations ... are just and reasonable and are not unjustly or unreasonably discriminatory,” (2) “not necessary for the protection of consumers,” and (3) “consistent with the public interest.” 47 U.S.C. § 160(a). The FCC subsequently issued a Notice of Proposed Rulemaking on March 25, 1996, to forbear from applying the tariffing requirements of § 203 of the 1934 Act. In re Policy & Rules Concerning the Interstate, Interexchange Marketplace, Notice of Proposed Rulemaking, 11 FCC Rcd. 7141 (1996). Following a comment period, the FCC issued a series of detariffing orders, effective August 1, 2001, in which it forbore from enforcing § 203 against long-distance carriers. See In re Policy & Rules Concerning the Interstate, Interexchange Marketplace, Second Order on Reconsideration, 14 FCC Rcd. 6004 (1999); In re Policy & Rules Concerning the Interstate, Interexchange Marketplace, Order on Reconsideration, 12 FCC Rcd. 15,014 (1997); In re Policy & Rules Concerning the Interstate, Interexchange Marketplace, Second Report & Order, 11 FCC Rcd. 20,730 (1996).

The FCC anticipated telecommunications carriers would enter into “short, standard-form contracts” with their customers setting forth the applicable rates, terms, and conditions of service which had previously been set out in the filed tariffs. Second Report & Order, 11 FCC Rcd. 20,730, ¶ 57. The FCC emphasized carriers would continue to be subject to the substantive prohibitions against unjust, unreasonable, and discriminatory rates and terms contained in §§ 201 and 202 of the 1934 Act. Order on Reconsideration, 12 FCC Rcd. 15,014, ¶ 77. Specifically, the FCC's Order on Reconsideration stated:

In the Second Report and Order, we stated that our decision to forbear from requiring nondominant interexchange carriers to file tariffs for interstate, domestic, interexchange services will not affect our enforcement of carriers' obligations under sections 201 and 202 to charge rates, and impose practices, classifications, and regulations that are just and reasonable, and not unjustly or unreasonably discriminatory. We therefore agree with AT & T, Sprint, and WorldCom that the Communications Act continues to govern determinations as to whether rates, terms, and conditions for interstate, domestic, interexchange services are just and reasonable, and are not unjustly or unreasonably discriminatory. While the parties only sought clarification that the Communications Act governs the determination as to the lawfulness of rates, terms, and conditions, we note that the Communications Act does not govern other issues, such as contract formation and breach of contract, that arise in a detariffed environment. As stated in the Second Report and Order, consumers may have remedies under state consumer protection and contract laws as to issues regarding the legal relationship between the carrier and customer in a detariffed regime.

Id. (footnotes omitted).

To meet its obligations under the detariffing orders, AT & T mailed proposed Consumer Services Agreements (“CSAs”) to each of its residential customers in June 2001. The CSAs and the accompanying mailings clearly informed AT & T's residential customers they could agree to the terms of the CSA by continuing to use, and pay for, AT & T services. The CSAs provided “[y]ou agree to pay us for the Services at the prices and charges listed in the AT & T Service Guides” ¹ and that “[y]ou must pay all taxes, fees, surcharges and other charges that we bill you for the Services.” The CSAs then provided “[t]his agreement incorporates by reference the prices, charges, terms and conditions included in the AT & T Service Guides.”

The Consumer Service Guide described the AT & T Universal Connectivity Charge (“UCC”) as “a monthly charge to Customers to recover amounts AT & T must pay into a federal program called the Universal Service Fund.” ² The Consumer Service Guide then stated “[t]he Universal Connectivity Charge is equal to 9.9% of your total billed state-to-state and international charges (excluding taxes).” AT & T issued a new guide in advance of each change to the UCC rate and always charged its customers exactly the rate listed in that guide.

The CSAs also contained an arbitration clause with a class action ban. This provision stated “[t]his section provides for resolution of disputes through final and binding arbitration before a neutral arbitrator instead of in a court by a judge or jury or through a class action.” It added “[n]o dispute may be joined with another lawsuit, or in an arbitration with a dispute of any other person, or resolved on a class-wide basis.”

AT & T used a different approach with its business customers, with whom it entered into individually negotiated agreements. Each agreement incorporated by reference the terms of AT & T's Business Service Guide, which contained the following provision governing regulatory surcharges and miscellaneous charges:

AT & T may adjust its rates and charges or impose additional rates and charges on its Customers in order to recover amounts that it, either directly or indirectly, pays to or is required by governmental or quasi-governmental authorities to collect from others to support statutory or regulatory programs, plus associated administrative costs. Examples of such programs include, but are not limited to, the Universal Service Fund....

The Business Service Guide then listed the UCC rate applicable to the business customers' interstate and international charges.

This multidistrict litigation originally involved numerous putative class action lawsuits against, inter alia, AT & T. On March 10, 2003, plaintiffs filed a second consolidated and amended class action complaint alleging, among other things, violations of federal antitrust laws, 47 U.S.C. §§ 201(b) and 202, the New York and Kansas statutory consumer protection acts, and breach of contract. As relevant to this appeal, Plaintiff Thomas Cummings, a Pennsylvania resident, sought to represent a nationwide class of AT & T's residential customers. Plainti...