Kellerman v. MCI Telecommunications Corp.

• Decision Date: 21 May 1986
• Docket Number: No. 62132,62132
• Citation: 98 Ill.Dec. 24,493 N.E.2d 1045,112 Ill.2d 428
• Parties: , 98 Ill.Dec. 24 S. KELLERMAN, et al., Appellees, v. MCI TELECOMMUNICATIONS CORPORATION, Appellant. Phyllis HESSE, Appellee, v. MCI TELECOMMUNICATIONS CORPORATION, Appellant.
• Court: Illinois Supreme Court

Page 1045

493 N.E.2d 1045

112 Ill.2d 428, 98 Ill.Dec. 24

S. KELLERMAN, et al., Appellees, v. MCI TELECOMMUNICATIONS CORPORATION, Appellant.

Phyllis HESSE, Appellee, v. MCI TELECOMMUNICATIONS CORPORATION, Appellant.

No. 62132.

Supreme Court of Illinois.

May 21, 1986.

Kevin M. Forde, Ltd., Chicago, Howard Z. Gopman & Associates, Skokie (Kevin M. Forde, Chicago, Howard Z. Gopman, Katrina Veerhusen, Skokie, of counsel), for Hesse.

Chester T. Kamin, Richard J. Gray, Darryl M. Bradford, Patricia Lee Refo, Robert S. Markin (Jenner & Block, of counsel), Chicago, for MCI Telecommunications Corp.

Russell C. Green, Alvin W. Block (Block, Levy & Associates, of counsel), Chicago, for Kellerman, Davis, Turovitz.

Justice Thomas J. MORAN delivered the opinion of the court:

Plaintiffs, subscribers of defendant MCI's long-distance telephone service, brought these class action suits in the circuit court of Cook County alleging that certain advertisements, which described defendant's service charges, violate the Consumer Fraud and Deceptive Business Practices Act (Ill.Rev.Stat.1983, ch. 121 1/2, par. 261 et seq.) and the Uniform Deceptive Trade Practices Act (Ill.Rev.Stat.1983, ch. 121 1/2, par. 311 et seq.). Plaintiffs also allege that defendant's advertising practices constitute a breach of contract and common law fraud. They seek damages and an accounting for themselves and other persons similarly situated.

After the cases were consolidated by the trial court, defendant moved to dismiss the actions, contending that the State-law claims are preempted by the Federal Communications Act of 1934 (Communications Act) (47 U.S.C. sec. 151 et seq. (1982)). Alternatively it requested that the court stay the actions and refer plaintiffs' claims to the Federal Communications Commission (FCC) based on the doctrine of primary jurisdiction, or stay the actions pursuant to section 2--619(a)(3) of the Code of Civil Procedure (Ill.Rev.Stat.1983, ch. 110, par. 2--619(a)(3)). The trial court denied defendant's motion to dismiss or stay the actions. It also refused defendant's request to certify the preemption issue for interlocutory appeal. (See 87 Ill.2d R. 308.) Thereafter, defendant appealed the denial of the stay. (87 Ill.2d R. 307.) The appellate court, in addition to affirming the denial of the stay, determined that it had jurisdiction to consider the preemption issue even though the trial court had not certified the issue for interlocutory review. The appellate court held that plaintiffs' State-law claims are not preempted by the Communications Act. (134 Ill.App.3d 71, 89 Ill.Dec. 51, 479 N.E.2d 1057.) We allowed defendant's petition for leave to appeal (94 Ill.2d R. 315).

Defendant's principal contention is that plaintiffs' claims are preempted by the Communications Act (47 U.S.C. sec. 151 et seq. (1982)). Defendant asserts that the "comprehensive nature" of the Communications Act demonstrates that Congress "intended to occupy the entire field of interstate long distance telephone service." It argues that the conduct challenged by plaintiffs is "at the center of the occupied field" and that, therefore, plaintiffs' State-law claims are preempted. Plaintiffs contend, however, that their actions are not preempted, asserting that the only conduct being challenged is defendant's advertising practices and not the manner in which it provides interstate telephone service. Defendant raises two alternative arguments as to why this court should either dismiss or stay these actions. First, it contends that under the doctrine of primary jurisdiction the actions should be stayed and plaintiffs' claims referred to the FCC. Additionally, defendant requests that the suits be stayed pursuant to section 2-619(a)(3) of the Code of Civil Procedure (Ill.Rev.Stat.1983, ch. 110, par. 2-619(a)(3)), asserting that there is a Federal action pending which involves the same parties and same cause.

The record shows that plaintiffs originally brought four separate actions against defendant in the circuit court. Three of the actions, filed by plaintiffs S. Kellerman, Bernard Turovitz and Louis T. Davis & Associates, Inc. (Davis), were consolidated by the trial court for all purposes. The action brought by Phyllis Hesse was consolidated with the other actions for pretrial purposes only. The allegations contained in all four complaints are substantially similar in that they attack certain of defendant's advertisements and promotional material as fraudulent and deceptive.

The advertisements and promotional material in question compare the cost of defendant's long-distance telephone service with the cost of a service provided by a competitor, American Telephone & Telegraph Company (AT & T). Plaintiffs allege that in order to induce them to purchase its service, defendant disseminated certain advertisements and promotional materials through various media which claimed that "although its rates are substantially lower" than AT & T's, "its billing practices and procedures were identical to those of" AT & T. They allege that AT & T charges its customers only for completed calls and no charge is made to customers for calls which are initiated but not completed, i.e., where the recipient does not answer or the caller terminates the call before it is answered. In contrast, plaintiffs allege that defendant has billed its customers for uncompleted calls.

Plaintiffs further allege that it was defendant's practice to impose a surcharge in situations where the telephone rang six or more times before it was answered--a charge not customarily imposed in the industry. It also is alleged that every time customers used defendant's service they paid a local telephone charge which AT & T customers did not have to pay. Plaintiffs do not challenge the reasonableness of the additional charges imposed by defendant, but only the fact that its advertising did not disclose that the additional charges would be made. It is alleged that through these advertisements and promotions, defendant "engaged in a course of conduct to falsely represent to the plaintiff[s] and the general public that its practice and policy [were] * * * to bill its customers only for the actual time of communication during completed long distance calls" when in fact its practice was to bill its customers for uncompleted calls and to impose a surcharge when a telephone rang six or more times before it was answered. Plaintiffs allege that defendant's conduct constitutes common law fraud, a breach of contract, and that it violates the Uniform Deceptive Trade Practices Act (Ill.Rev.Stat.1983, ch. 121 1/2, par. 311 et seq.) and the Consumer Fraud and Deceptive Business Practices Act (Ill.Rev.Stat.1983, ch. 121 1/2, par. 261 et seq.).

Before proceeding with the issues raised by defendant, we find it necessary to determine whether the preemption issue is properly before this court. Plaintiffs Kellerman, Turovitz and Davis contend that since the trial court refused to certify the preemption question for interlocutory appeal in accordance with Supreme Court Rule 308 (87 Ill.2d R. 308), the appellate court did not have jurisdiction to consider it. As such, they assert that the issue is not properly before this court.

The appellate court, relying on this court's decision in May Department Stores Co. v. Teamsters Union Local No. 743 (1976), 64 Ill.2d 153, 355 N.E.2d 7, held that it had jurisdiction to consider whether plaintiffs' actions are preempted by the Communications Act. In May, store owners sought to enjoin a union from soliciting store employees and distributing union literature in the store's parking lot, claiming that the union's activities violated State criminal trespass laws. The union contended that Federal law preempted the authority of the State courts to issue an injunction barring its organizational activities on store property. The trial court granted the preliminary injunction, and the union perfected an interlocutory appeal pursuant to Rule 307. On appeal from the appellate court, this court viewed the union's preemption argument as a challenge to the State courts' authority to issue the preliminary injunction and, therefore, a proper subject on interlocutory appeal.

After reviewing the record in the present case in light of May, we believe that the appellate court was correct in finding that it had jurisdiction to address the preemption issue. Defendant's Federal preemption argument brings into issue the authority of the trial court to enter the order appealed from and, thus, the argument is properly considered on interlocutory appeal. Therefore, we will consider defendant's argument that plaintiffs' State-law actions are preempted by the Communications Act.

The preemption doctrine, which has its origin in the supremacy clause of the Federal Constitution (U.S. Const., art. VI, cl. 2), provides that Federal law will in some instances override or preempt State laws on the same subject. (Rice v. Santa Fe Elevator Corp. (1947), 331 U.S. 218, 229-31, 67 S.Ct. 1146, 1151-53, 91 L.Ed. 1447, 1459.) The key inquiry in all preemption cases is the objective or purpose of Congress in enacting the particular statute. The doctrine requires courts to examine the Federal statute in question to determine whether Congress intended it to supplant State laws on the same subject. (Allis-Chalmers Corp. v. Lueck (1985), 471 U.S. ----, ----, 105 S.Ct. 1904, 1910, 85 L.Ed.2d 206, 213.) Generally this is no easy task because rarely does Congress, in enacting legislation, expressly provide that concurrent State laws will be preempted. Rather, a court must usually divine for itself whether the statute evidences an intent by Congress to preempt State law.

Although there is no "rigid formula or rule which can be used" to determine if Congress intended Federal law to preempt plaintiffs' actions for fraud, deceptive advertising and breach of contract (Hines v. Davidowitz (1941), 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85...