In re Universal Service Fund Telephone Billing Practices Litigation, Case No. 02-MD-1468-JWL (D. Kan. 2/13/2004)
| Decision Date | 13 February 2004 |
| Docket Number | Case No. 02-MD-1468-JWL. |
| Parties | IN RE: UNIVERSAL SERVICE FUND TELEPHONE BILLING PRACTICES LITIGATION This Order Relates to All Cases |
| Court | U.S. District Court — District of Kansas |
JOHN WATSON LUNGSTRUM, Chief Judge, District.
This multidistrict litigation consists of numerous putative class action lawsuits arising from the practices of defendants AT&T Corporation ("AT&T") and Sprint Communications Company, L.P. ("Sprint") and non-parties MCI WORLDCOM Network Services, Inc. and MCI WorldCom Communications, Inc. (collectively "MCI")1 of charging their customers to recoup their contributions to the federal Universal Service Fund ("USF") program. Plaintiffs are customers or former customers of defendants and MCI who allege defendants engaged in an illegal scheme of conspiring to overcharge them for USF-fund surcharges, thereby creating a secret profit center. This matter is presently before the court on plaintiffs' motion for class certification (Doc. 102). For the reasons explained below, the court will grant this motion as modified by plaintiffs' revised proposed class definition (Doc. 223) and clarified by plaintiffs' supplemental memorandum (Doc. 236).
The Federal Communications Commission (the "FCC") administers the USF, a federal fund that subsidizes telecommunications service for low-income consumers, consumers in rural and high-cost areas, schools, libraries, and health care providers. 47 U.S.C. § 254. Long distance carriers such as defendants are required to contribute a percentage of their revenues to maintaining the USF. Id. All major long distance carriers attempt to recover the costs of their contributions to the USF fund from their customers by way of line-item surcharges.
Plaintiffs are customers or former customers of defendants and MCI who allege defendants engaged in an illegal scheme of conspiring to overcharge them for these USF surcharges, thereby creating a secret profit center. For example, plaintiffs allege that the FCC USF contribution factor during the relevant time period in 2001 and 2002 ranged from 6.8% to 7.28%, and that during this same time period defendants and MCI imposed USF surcharges on their residential customers ranging from 9.9% to 11.5% and USF surcharges on their business customers ranging from 7.5% to 10.6%. Defendants explain that this disparity is attributable to several factors such as their declining long distance revenues, uncollectible accounts, and their attempts to recoup their costs to administer the program.
Plaintiffs' second consolidated and amended class action complaint (hereinafter referred to as simply the "complaint") asserted a number of claims against defendants. On December 1, 2003, the court entered a memorandum and order that compelled arbitration of certain aspects of some of the plaintiffs' claims, dismissed certain aspects of some of the plaintiffs' claims, and referred plaintiffs' claims under §§ 201(b) and 202(a) of the Federal Communications Act ("FCA"), 47 U.S.C. § 151 et seq., to the Federal Communications Commission to exercise primary jurisdiction. See generally In re Universal Serv. Fund Tel. Bitting Practices Lit., No. 02-1468, 2003 WL 23219878, at *1-*40 (D. Kan. Dec. 1, 2003). Given the court's rulings in that memorandum and order, the claims remaining in this court that are not currently stayed include: (1) the post-detariffing aspect of the business customers' and the AT&T California residential customer's antitrust claim under the Sherman Act, 15 U.S.C. § 1, and sections 4 and 16 of the Clayton Act, 15 U.S.C. § 15; (2) the post-detariffing aspect of the Sprint business customers' claim under the Kansas Consumer Protection Act, K.S.A. §§ 50-623 et seq. ("KCPA"); and (3) the business customers' and the AT&T California residential customer's breach of contract claim. Plaintiffs now seek class certification with respect to certain aspects of their antitrust claim as well as their breach of contract claim. Plaintiffs' supplemental brief clarifies that they do not seek class certification with respect to their claim under the KCPA or the aspect of their antitrust claim involving an alleged conspiracy to implement arbitration clauses.
Plaintiffs' antitrust claim is asserted by all plaintiffs against both AT&T and Sprint. Plaintiffs ask the court to certify the following class with respect to this antitrust claim (the "conspiracy class"):
All business long distance customers of AT&T, Sprint, or MCI in the United States and all residential long distance customers of AT&T in California who paid a USF charge on or after August 1, 2001.2
This proposed conspiracy class would include the following named plaintiffs: Roger Gerdes, an AT&T long distance residential customer3 in California; Goldman & Hellman, P.A. ("Goldman & Hellman"), an AT&T long distance business customer; Lady Di's, Inc. ("Lady Di's"), an AT&T long distance business customer; Sterling Beimfohr d/b/a Sterling Sails ("Sterling Sails"), an AT&T long distance business customer; Pressman Toy Co. ("Pressman Toy"), a Sprint long distance business customer; B&C Values, Inc. ("B&C Values"), a Sprint long distance business customer; and NYLB, Inc. d/b/a Skny ("NYLB"), an MCI long distance business customer.
Plaintiffs' breach of contract claim is asserted by the AT&T customers against AT&T and by the Sprint customers against Sprint. Plaintiffs ask the court to certify the following two subclasses with respect to this claim (the "AT&T subclass" and the "Sprint subclass"):
All business long distance customers of AT&T in the United States and all residential long distance customers of AT&T in California who paid a USF charge between August 1, 2001, and March 31, 2003.
All business long distance customers of Sprint in the United States who paid a USF charge between August 1, 2001, and March 31, 2003.
Mr. Gerdes, Goldman & Hellman, Lady Di's, and Sterling Sails are the proposed named plaintiffs of the AT&T subclass. Pressman Toy and B&C Values are the proposed named plaintiffs of the Sprint subclass.
The decision whether to certify a class is committed to the broad discretion of the trial court. Rector v. City & County of Denver, 348 F.3d 935, 949 (10th Cir. 2003); Davoll v. Webb, 194 F.3d 1116, 1146 (10th Cir. 1999); J.B. ex rel. Hart v. Valdez, 186 F.3d 1280, 1287 (10th Cir. 1999). The court must perform a rigorous analysis of whether the proposed class satisfies the requirements of Rule 23. Gen. Tel. Co. v. Falcon, 457 U.S. 147, 155 (1982); Reed v. Bowen, 849 F.2d 1307, 1309 (10th Cir. 1988) (). The court should accept the allegations in the complaint as true, but it "need not blindly rely on conclusory allegations which parrot Rule 23 requirements [and] may . . . consider the legal and factual issues presented by plaintiffs complaints." Hart, 186 F.3d at 1290 a7 (quotation omitted; brackets in original). The court may not inquire into the merits of the case. Adamson v. Bowen, 855 F.2d 668, 676 (10th Cir. 1988); Anderson v. City of Albuquerque, 690 F.2d 796, 799 (10th Cir. 1982).
The standards for certifying a class action are set forth in Fed.R.Civ.P. 23. This rule requires all four prerequisites of Rule 23(a) and at least one of the three requirements of Rule 23(b) to be satisfied. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614 (1997); In re Integra Realty Res., 354 F.3d 1246, 1262 (10th Cir. 2004).
As explained below, the court finds that the four prerequisites of Rule 23(a) — that is, numerosity, commonality, typicality, and adequacy of representation — are satisfied with respect to the proposed class and both proposed subclasses. The requirements of Rule 23(b)(3) are also satisfied because common questions of law and fact will predominate this case and a class action is the most superior method for adjudicating this controversy. The court will also certify the conspiracy class pursuant to Rule 23(b)(2) because defendants have allegedly acted on grounds generally applicable to the class with respect to their USF-fund recovery practices, and therefore final injunctive relief may be warranted with respect to the conspiracy class as a whole. Accordingly, the court will certify the conspiracy class, the AT&T subclass, and the Sprint subclass under the class definitions set forth above. Further, the court will appoint co-lead counsel in this multidistrict litigation as class counsel.
Rule 23(a) provides four prerequisites for class certification. Specifically, it provides:
One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
Fed.R.Civ.P. 23(a); Integra Realty, 354 F.3d at 1262 n.3. Thus, the court must examine whether these four requirements of numerosity, commonality, typicality, and adequacy of representation are satisfied in this case.
Rule 23(a)(1) allows certification of a class only if the proposed class is so large that joinder of all class members would be impracticable. In order to satisfy this numerosity requirement, plaintiffs "must present some evidence or otherwise establish by reasonable estimate the number of class members who may be involved." Rex v. Owens, 585 F.2d 432, 436 (10th Cir. 1978). Plaintiffs have submitted exhibits which state that publicly available records reflect that the proposed conspiracy class, the AT&T subclass, and the Sprint subclass will consist of millions of long distance customers...
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