Ruwe v. Cellco Partnership

• Decision Date: 18 March 2009
• Docket Number: No. C 07-03679 JSW.,C 07-03679 JSW.
• Citation: 613 F.Supp.2d 1191
• Parties: Joseph RUWE and Elizabeth Orlando, individually and on behalf of all others similarly situated, Plaintiffs, v. CELLCO PARTNERSHIP, d/b/a Verizon Communications, Inc. et al., Defendant.
• Court: U.S. District Court — Northern District of California

613 F.Supp.2d 1191

Joseph RUWE and Elizabeth Orlando, individually and on behalf of all others similarly situated, Plaintiffs, v. CELLCO PARTNERSHIP, d/b/a Verizon Communications, Inc. et al., Defendant.

No. C 07-03679 JSW.

United States District Court, N.D. California.

March 18, 2009.

Jeff D. Friedman, Hagens, Berman, Sobol, Shapiro, LLP, Berkeley, CA, Steve W. Berman, Hagens, Berman, Sobol, Shapiro, LLP, Seattle, WA, for Plaintiffs.

Hojoon Hwang, Munger, Tolles & Olson, LLP, San Francisco, CA, Henry Weissmann, Jason Rantanen, Munger, Tolles & Olson, LLP, Los Angeles, CA, for Defendants.

ORDER DENYING DEFENDANT'S MOTION TO DISMISS

JEFFREY S. WHITE, District Judge.

Now before this Court is the motion to dismiss filed by defendant Cellco Partnership, d/b/a Verizon Wireless ("Verizon Wireless"). Having carefully reviewed the parties papers and considered their arguments and relevant legal authority, the Court hereby DENIES Verizon Wireless's motion to dismiss. The Court finds this matter suitable for disposition without oral argument. N.D. Civil L.R. 7-1(b). Accordingly, the hearing set for March 20, 2009 at 9:00 a.m. is HEREBY VACATED.

BACKGROUND

Plaintiffs Joseph Ruwe ("Ruwe") and Elizabeth Orlando ("Orlando") bring this purported class action to challenge the late fees and reconnect fees charged by Verizon Wireless. In approximately August 2006, Ruwe entered into a two-year agreement with Verizon Wireless for mobile phone and data services. (Third Amended Complaint ("TAC") at ¶ 8.) In approximately 2003, and again in 2005, Orlando entered into two-year agreements with Verizon Wireless for mobile phone and data services. (Id. at ¶ 9.) As a result of these agreements, Ruwe and Orlando were subject to the terms and conditions set forth in the Verizon Wireless Customer Agreement, which provides in pertinent part:

Charges and Fees We Set

You agree to pay all access, usage, and other charges and fees we bill you or that the user of your wireless phone accepted ... You may have to pay fees to begin service or reconnect suspended service.

(Id. at ¶ 10.)

Your Bill

Your bill is our notice to you of your fees, charges, and other important information ... We bill usage charges after calls are made or received. We bill access fees and some other charges in advance.

(Id.)

Our Rights To Limit Or End Service Or This Agreement

WE CAN, WITHOUT NOTICE, LIMIT, SUSPEND, OR END YOUR SERVICE OR ANY AGREEMENT WITH YOU FOR ... GOOD CAUSE, including

but not limited to: (a) paying late more than once in any 12 months ...

(Id.)

When a customer fails to make timely payment, Verizon Wireless may "hotline" or "suspend" that customer's service. (Id. at ¶ 21.) Hotlining impairs a customer's service by redirecting outgoing calls to Verizon Wireless financial customer service rather than the customer's intended recipient, whereas suspension blocks customers from receiving in-bound calls. (Id.) These impairment methods are distinct from disconnection. (Id. at ¶ 23.) After a customer's service has been suspended, he must pay a reconnect fee for normal service to resume. (Id. at ¶ 22.) On at least one occasion, Verizon Wireless impaired Ruwe's and Orlando's service due to late payment, and charged each a $15 reconnect fee per line. (Id. at ¶¶ 14, 16.)

Plaintiffs allege that the $15 reconnect fee violates California law, and on that basis bring the following claims against Verizon Wireless: (1) violation of California Civil Code § 1671; (2) violation of the California Consumers Legal Remedies Act, California Civil Code §§ 1750, et seq.; (3) unjust enrichment; and (5) declaratory relief. Verizon Wireless now moves to dismiss these claims as they pertain to the $15 reconnect fee on the grounds that Plaintiffs have failed to state a claim that the reconnect fee is a liquidated damages provision in violation of California Civil Code § 1761, and that such state law claims are preempted by section 332 of the Federal Communications Act, 47 U.S.C. § 332(c)(3)(A) ("Section 332").

ANALYSIS

A. Legal Standards Applicable to Motions to Dismiss.

Federal Rule of Civil Procedure 12(b)(6) ("Rule 12(b)(6)") permits dismissal upon the plaintiff's "failure to state a claim upon which relief can be granted." Fed. R.Civ.P. 12(b)(6). The complaint is construed in the light most favorable to the non-moving party and all material allegations in the complaint are taken to be true. Sanders v. Kennedy, 794 F.2d 478, 481 (9th Cir.1986). A district court should grant a motion to dismiss if the plaintiff has not plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of entitlement relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (internal quotation marks and citations omitted). "Conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim." In re Syntex Corp. Sec. Litig., 95 F.3d 922, 926 (9th Cir.1996). "Factual allegations must be enough to raise a right to relief above the speculative level ..." Twombly, 550 U.S. at 556, 127 S.Ct. 1955 (citations omitted). In addition, the pleading must not merely allege conduct that is conceivable, but it must also be plausible. Id. at 570, 127 S.Ct. 1955.

B. Plaintiffs' Reconnect Fee Claims are Not Preempted by the FCA.

Section 332 provides in pertinent part: "[N]o State or local government shall have any authority to regulate the entry of or the rates charged by commercial mobile service or any private mobile service except that this paragraph shall not prohibit a State from regulating the other terms and conditions of commercial mobile services." 47 U.S.C. § 332(c)(3)(A). Thus, the FCA grants the Federal Communications Commission (the "FCC") exclusive authority to regulate rates charged by wireless service providers, but reserves the power of the states to regulate all other terms and conditions. Id. Verizon Wireless argues that its reconnect fee is a rate charged for a service, and is thereby preempted by Section 332. Plaintiffs argue that the reconnect fee is an "other term and condition," and is therefore not preempted by Section 332.

Whether or not the reconnect fee is a rate determines whether Plaintiffs' claims are preempted. The term "rate" is not defined in the FCA. In its prior order this Court defined rate as "[a]n amount paid or charged for a good or service." (Order Denying Defendant's Motion to Dismiss ("Order") at 3). The Supreme Court has explained that in analyzing whether any charge is considered a rate, it is important to determine whether the purported rate is in exchange for a service, and what that service is. Am. Tel. & Tel. Co. v. Central Office Tel., 524 U.S. 214, 223, 118 S.Ct. 1956, 141 L.Ed.2d 222 (1998) (finding that rates "have meaning only when one knows the services to which they are attached"). Moreover, the term "rate" should be construed narrowly. Phillips v. AT & T Wireless, 2004 WL 1737385, *10 (S.D.Iowa July 29, 2004). Thus, this Court previously held that the term "rate," as it is used in Section 332, does not include late fees charged by Verizon Wireless. (Order at 6.)

Given this definition of "rate" under Section 332, the Court must determine whether the reconnect fee is an amount paid for the service of reactivation, as Verizon Wireless contends. Here, the purported service is "an automated process whereby Verizon Wireless stops impairing service." (TAC at ¶ 22.) The Court finds no case law elaborating on the meaning of "service" in this context. Service is commonly understood as "doing something useful for a person or company for a fee." Black's Law Dictionary 1399 (8th ed. 2004). Here, Verizon Wireless contends it provides a service by allowing normal service to resume. This is allegedly achieved by the "flip[ping] of an automated switch." (Opp. Br. at 1; Reply Br. at 7.) The customer, in order to resume normal, unimpaired service pays both the unpaid balance and reconnect fee. (TAC at ¶ 22.) This payment of the outstanding monthly fees is what would be charged in exchange for normal mobile services. The reconnect fee paid by the customer, as characterized by Verizon Wireless, is essentially charged for the same service, suggesting that it is actually a late fee, rather than a separate charge for service.

Beside this Court's definition, Plaintiffs also point to other indicia used by courts when determining whether a charge is considered a "rate." For example, charges based on units of time may indicate the charge is considered a rate. See Ball v. GTE Mobilnet, 81 Cal.App.4th 529, 538, 96 Cal.Rptr.2d 801 (2000) (noting that the "element of time can no more be divorced from rate than a clock from its hands"). In contrast, where a challenged billing practice has only a tangential relationship to the actual rates for service paid by customers, some courts have held that the charge is not a rate. See In re Comcast Cellular Telecommunications Litigation, 949 F.Supp. 1193, 1201 (E.D.Pa.1996) (noting that several courts have found state claims challenging the fairness of a billing practice not completely preempted where the billing practices at issue "had only a tangential relationship to the actual rates for service paid by customers"). Under similar reasoning, several courts have determined in published opinions that early termination fees do not constitute rates. See, e.g., Esquivel v. Southwestern Bell Mobile Sys., Inc., 920 F.Supp. 713, 715 (S.D.Tex.1996); Phillips, 2004 WL 1737385 at *10, 2004 U.S. Dist. LEXIS 14544, at *36; Iowa v. United States Cellular Corp., No. 4-00-CV-90197, 2000 WL 33915909, 2000 U.S. Dist....