Porr v. NYNEX Corp.
Decision Date | 07 July 1997 |
Parties | , 179 P.U.R.4th 235 Robert PORR, etc., Respondent-Appellant, v. NYNEX CORPORATION, et al., Appellants-Respondents. |
Court | New York Supreme Court — Appellate Division |
Davis Polk & Wardwell, New York City (Guy Miller Struve and David B. Anders, of counsel), and John E. Reilly and Richard H. Wagner, New York City, for appellants-respondents (one brief filed).
Sheldon V. Burman, P.C., New York City (James B. Fishman and G. Oliver Koppell, of counsel), for respondent-appellant.
Before ROSENBLATT, J.P., and SULLIVAN, PIZZUTO and FRIEDMANN, JJ.
The plaintiff is a NYNEX customer and ratepayer in Westchester County who purports to represent both himself and others similarly situated. The plaintiff charges that the defendants "secretly" and "fraudulently" followed "a policy of charging for phone calls in whole-minute increments only". For example, if a phone call lasts for two minutes and one second, the defendants charge for a full three minutes. It is the plaintiff's position that the defendants failed to state this policy plainly in their rate schedules filed with the Public Service Commission as required by Public Service Law § 92(1), and that they had further not revealed the practice to the public in their billing statements.
Based upon these allegations, the plaintiff sued the defendants, NYNEX Corporation and New York Telephone Company, alleging eight causes of action sounding in: (1) unfair and deceptive practices under General Business Law § 349, (2) false advertising under General Business Law § 350, (3) violation of Public Service Law § 92(1) and § 93, (4) fraudulent omission of material facts, (5) common-law fraud, (6) breach of a duty of good faith and fair dealing, (7) unjust enrichment, and (8) negligent misrepresentation. The plaintiff sought, inter alia, class certification, compensatory and punitive damages, and an injunction "[e]njoining defendant NYNEX from continuing to use the challenged deceptive, fraudulent and illegal practices" in the future.
The defendants moved pursuant to CPLR 3211(a)(1) and (7) to dismiss the action, arguing that the plaintiff's claims were barred by the Public Service Law, by the "filed rate doctrine", and/or by the doctrine of primary jurisdiction. The defendants also argued that the plaintiff failed to state causes of action under General Business Law § 349 and § 350, and failed to assert essential elements of their fraud claims.
The Supreme Court dismissed the plaintiff's Public Service Law and negligent misrepresentation claims with prejudice, and it dismissed the plaintiff's fraud and breach of duty of good-faith causes of action with leave to replead--although such leave had not been requested by the plaintiff. It declined, however, to dismiss the causes of action under General Business Law § 349 and § 350, as well as the plaintiff's cause of action to recover damages for unjust enrichment, finding dispositive its perception that . (Porr v. NYNEX Corp., 170 Misc.2d 203, 204-205, 650 N.Y.S.2d 509.)
In this the court erred. For the reasons stated below, we hold that the filed rate doctrine, coupled with the related doctrine of "primary administrative jurisdiction", mandates the dismissal with prejudice of all of the plaintiff's causes of action.
It has repeatedly been held that a consumer's claim, however disguised, seeking relief for an injury allegedly caused by the payment of a rate on file with a regulatory commission, is viewed as an attack upon the rate approved by the regulatory commission. All such claims are barred by the "filed rate doctrine".
In 1922 Justice Brandeis formulated the filed rate doctrine in Keogh v. Chicago & Northwestern Ry., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183. In that case, the plaintiff, a Minnesota manufacturer and shipper of excelsior and flax tow, established that the defendant railroads had collusively maintained artificially high freight rates in violation of the Sherman Act. The plaintiff argued that he was entitled to the difference between these collusive rates and the rates as subsequently adjusted by the Interstate Commerce Commission in response to his complaint. Justice Brandeis did not agree. According to him, the earlier, collusive rates, like the later, lowered ones, were nondiscriminatory and had been deemed "reasonable" by the Commission at the time that they were filed (Keogh v. Chicago & Northwestern Ry., supra, at 161, 43 S.Ct. at 49). Even assuming that the government could prosecute the defendants for antitrust violations Justice Brandeis reasoned, it did not follow that a private shipper could recover damages because, in the shipper's estimation, he had for many years "lost the benefit of rates still lower, which, but for the conspiracy, he would have enjoyed" (Keogh v. Chicago & Northwestern Ry., supra, at 162, 43 S.Ct. at 49).
Justice Brandeis adduced many grounds for holding that a consumer plaintiff has no cause of action, and no genuine claim for damages against a member of a regulated industry, when he has paid the rates filed with the regulatory commission.
For example, he explained, a lawsuit for damages may not be maintained in the absence of injury, and (Keogh v. Chicago & Northwestern Ry., supra, at 163, 43 S.Ct. at 49). Therefore, even if the carrier arrived at its rates illegally--by means of fraud or collusion or a conspiracy in restraint of trade--once the rates have been accepted as reasonable and applied uniformly by the regulatory commission, a shipper may not claim that he has been damaged if he has paid the filed rates. Indeed, any claim of "damage" would be "purely speculative" (Keogh v Chicago & Northwestern Ry., supra, at 164-165, 43 S.Ct. at 50).
Were this not so, Justice Brandeis amplified, a discriminatory system would result, with those having recourse to the courts paying less for the same services than other ratepayers who have either not sued, or who, having sued, are granted less substantial relief by different courts and juries (Keogh v. Chicago & Northwestern Ry., supra, at 163, 43 S.Ct. at 49). Moreover, neither a court nor the Commission was equipped to answer the hypothetical question raised by the plaintiff in such a case, namely, whether a lower rate could legally (i.e., without causing discrimination) have been maintained during the period complained of "without reconstituting the whole rate structure", in order to determine "whether a hypothetical lower rate would under conceivable conditions have been discriminatory" (Keogh v. Chicago & Northwestern Ry., supra, at 164, 43 S.Ct. at 50). Arguably, in order to find for the plaintiff in such an action, the Commission would have to second-guess itself--that is, it would have to conclude that the rates it had set in the past as nondiscriminatory were in fact discriminatory.
Although Keogh addressed Federal regulation, the cases considering the matter have held that the same rationales are implicated where, as here, a State regulatory agency sets an industry's "reasonable rates" (see, e.g., H.J. Inc. v. Northwestern Bell Telephone Co., 954 F.2d 485, 494, cert. denied 504 U.S. 957, 112 S.Ct. 2306, 119 L.Ed.2d 228 [] ; Taffet v. Southern Co., 967 F.2d 1483, 1494, cert. denied 506 U.S. 1021, 113 S.Ct. 657, 121 L.Ed.2d 583 [ ] ; see also, Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 101 S.Ct. 2925, 69 L.Ed.2d 856).
Intrastate telephone communications in New York are regulated by the Public Service Commission (hereinafter PSC) pursuant to the Public Service Law, which embodies "a comprehensive regulatory scheme for public utilities" operating within the State (see, e.g., Abraham v. New York Tel. Co., 85 Misc.2d 677, 680, 380 N.Y.S.2d 969; see also, Diamond Intern. Corp. v. F.C.C., 627 F.2d 489, 492). Characterized as "the alter ego of the Legislature" (Matter of Rochester Gas & Electric Corp. v. Public Serv. Commn. of State of N.Y., 135 A.D.2d 4, 7, 523 N.Y.S.2d 201), the Commission has "exclusive original jurisdiction over public utility rates" (Van Dussen-Storto Motor Inn v. Rochester Tel. Corp., 42 A.D.2d 400, 403, 348 N.Y.S.2d 404, adopting opn. below 34 N.Y.2d 904, 905-906, 359 N.Y.S.2d 286, 316 N.E.2d 719).
The "primary jurisdiction" of the PSC was definitively explored in the 1935 case of Purcell v. New York Central R.R. Co., ...
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