Smith v. SBC Communications Inc.

• Decision Date: 21 January 2004
• Citation: 178 N.J. 265,839 A.2d 850
• Parties: Mildred SMITH, Plaintiff-Respondent, v. SBC COMMUNICATIONS INC., Defendant, and Southern New England Telephone Co., d/b/a SNET, Defendant-Respondent, and BJ's Wholesale Club, Inc., Defendant-Appellant.
• Court: New Jersey Supreme Court

839 A.2d 850

178 N.J. 265

Mildred SMITH, Plaintiff-Respondent, v. SBC COMMUNICATIONS INC., Defendant, and Southern New England Telephone Co., d/b/a SNET, Defendant-Respondent, and BJ's Wholesale Club, Inc., Defendant-Appellant.

Supreme Court of New Jersey.

Argued October 7, 2003.

Decided January 21, 2004.

Jonathan J. Bart, a member of the Pennsylvania bar, Philadelphia, PA, argued the cause for appellant (Silverman Bernheim & Vogel, attorneys, Westmont).

Donald P. Alexander, a member of the Pennsylvania bar, argued the cause for respondent Mildred Smith (Shepherd, Finkelman, Miller & Shah and Sherman, Silverstein, Kohl, Rose & Podolsky, attorneys, Philadelphia, PA; James C. Shah, on letter brief).

Gavin J. Rooney, Roseland, submitted a letter in lieu of brief on behalf of respondent Southern New England Telephone Co., d/b/a SNET (Lowenstein Sandler, attorneys). Justice ZAZZALI delivered the opinion of the Court.

In Weinberg v. Sprint Corp., 173 N.J. 233, 801 A.2d 281 (2002), we concluded that the filed rate doctrine effectively barred plaintiffs from seeking monetary and injunctive relief against telecommunications carriers under the Consumer Fraud Act, N.J.S.A. 56:8-1 to 20, because the doctrine precluded plaintiffs from pleading a claim of ascertainable loss capable of surviving a motion for summary judgment. In this appeal, we are asked to consider whether that same doctrine insulates a retailer of telecommunications services, which is not itself a telecommunications carrier, from an action alleging breach of contract and consumer fraud arising out of the sale of prepaid calling cards. Because we conclude that the doctrine does not apply to retailers in every circumstance involving the sale of telecommunications services, we affirm the judgment of the Appellate Division and remand for further proceedings.

I.

Plaintiff Mildred Smith filed this Consumer Fraud Act and breach-of-contract suit on behalf of a putative class seeking compensatory damages and injunctive relief on the grounds that Southern New England Telephone Company (SNET) and BJ's Wholesale Club, Inc. (BJ's) falsely advertised that prepaid calling cards purchased at BJ's would yield substantially more calling time than plaintiff actually received.¹ Because this appeal comes to us on a Rule 4:6-2(e) motion to dismiss, we accept as true all factual assertions in the complaint. Craig v. Suburban Cablevision, Inc., 140 N.J. 623, 625, 660 A.2d 505, 506 (1995). Our recitation of the facts, therefore, derives from the complaint. In addition, we consider the content of SNET's tariff filed with the Federal Communications Commission (FCC) that was submitted to the Law Division with SNET's motion to dismiss.

SNET is a telecommunications corporation that provides, among other services, calling cards and prepaid phone-card services to the eastern and northeastern United States. Its rates are governed by the FCC and the Federal Communications Act of 1934, 47 U.S.C.A. §§ 151-615b (FCA). At the time the complaint was filed, BJ's operated approximately ninety-six wholesale clubs throughout the United States, offering discounted merchandise to its club members. It does not appear to be a telecommunications carrier subject to FCC regulation. During the relevant timeframe, vending machines in BJ's clubs dispensed SNET prepaid phone cards under the brand name "BJ's Wholesale Club Pre-Paid Phone Card."

The complaint alleges that SNET and BJ's "jointly controlled" point-of-sale advertising and marketing materials relied on by plaintiff. Those marketing materials informed consumers that the prepaid phone cards sold in the vending machines provided a 9.9-cents-per-minute rate for calls placed with the card. As advertised, consumers could purchase a $10 card purporting to yield 101 minutes of calling time or a $20 card ostensibly yielding 202 minutes of calling time. However, the cards provided "significantly fewer" minutes than advertised. The discrepancy between the advertised rates and the actual charges results from certain surcharges, none of which, according to the complaint, are mentioned in the point-of-sale information. Those surcharges include a 30 cents surcharge for each call originating from a payphone, a 30 cents surcharge for each call originating from a phone as to which long-distance calling has been "blocked," a 30 cents surcharge for each call originating from a hotel or motel room, and a charge for every call that does not connect to the intended recipient. Additionally, all calls are "rounded-up" to the next minute.

Plaintiff purchased a $20 card from a vending machine inside of a BJ's store. She expected to receive 202 minutes of calling time. After using her prepaid card, however, plaintiff discovered that she received only fifty minutes or less of calling time, amounting to an effective rate of nearly 40 cents per minute.

As noted, plaintiff filed a class-action suit premised on consumer fraud and breach of contract. Specifically, the claim of fraud alleges that SNET and BJ's falsely advertised the rate applicable to the prepaid calling cards in violation of various provisions of the Consumer Fraud Act. Her contract theory asserts that the point-of-sale description of the phone card's terms and conditions constituted a legally-binding offer that plaintiff accepted at the time of purchase.

SNET moved to dismiss the complaint pursuant to Rule 4:6-2(e), arguing that plaintiff's claim was barred by the filed rate doctrine (also referred to as the filed tariff doctrine), which provides that no carrier can charge a rate that differs from those on file with the FCC. Weinberg, supra, 173 N.J. at 242,801 A.2d at 286. Annexed to SNET's motion were the applicable prepaid phone-card service rates that SNET had filed with the FCC. In those filings, although there were differences over time in the rates applicable to bulk purchases, SNET consistently indicated a usage charge of 40 cents per minute. BJ's joined in SNET's motion.

The Law Division dismissed both the consumer-fraud claim and the breach-of-contract claim against SNET on the basis of the filed rate doctrine. Explaining that the filed tariff was the only enforceable contract between plaintiff and SNET, the court concluded that the doctrine precluded plaintiff from demonstrating an ascertainable loss, which is a prerequisite for any private cause of action under the Consumer Fraud Act. For essentially the same reason, the court dismissed plaintiff's fraud claim against BJ's. The court dismissed the contract claim against BJ's on the ground that the complaint did not allege a contract between plaintiff and BJ's.

On appeal, the Appellate Division affirmed the Law Division on the claims for monetary damages against SNET, but remanded for a determination of whether injunctive relief was warranted as to both SNET and BJ's. The panel also reversed the dismissal of the damages claim against BJ's as premature, noting that plaintiff's complaint, read liberally, alleged a separate contractual relationship between the consumer and BJ's.

SNET and BJ's petitioned for certification. Before deciding that petition, we decided Weinberg v. Sprint Corp., supra,

which held that, to have standing under the Consumer Fraud Act, a party must raise a genuine issue of fact as to the existence of ascertainable loss. 173 N.J. at 237,

801 A.2d at 283. Because the filed rate doctrine prevented the plaintiff from demonstrating ascertainable loss in the form of damages against the defendant, a telecommunications carrier, we determined that equitable relief and attorneys' fees were also unavailable under the act. Id. at 254, 801 A.2d at 293. In view of that holding, we granted both petitions for certification, 174 N.J. 187-88, 803 A.2d 1160 (2002), and summarily remanded to the Appellate Division for reconsideration.

On reconsideration, the Appellate Division found that plaintiff's claims for injunctive relief and attorneys' fees against SNET could not proceed. Accordingly, plaintiff's claims against SNET were dismissed. Similarly, the panel concluded that Weinberg effectively vitiated its prior holding that plaintiff could obtain injunctive relief against BJ's if it were only an agent of SNET. Subject to those modifications, however, the Appellate Division reaffirmed its reinstatement of plaintiff's complaint against BJ's, explaining "plaintiff's contractual claims against BJ's stand on different footing, at least on the present record."

BJ's again petitioned for certification. We granted certification, 175 N.J. 432, 815 A.2d 478 (2003), and now affirm.

II.

A.

We recently had occasion to explore in some detail the development of the filed rate doctrine. Weinberg, supra, 173 N.J. at 240-44, 801 A.2d at 285-88. Although we need not repeat that entire discussion here, the following observations merit particular emphasis in the context of this appeal.

Interstate telecommunications carriers are subject to regulation by the FCC pursuant to the Federal Communications Act of 1934, supra. During the period of time relevant to the complaint, the FCA and FCC required telecommunications carriers to file a tariff with the FCC showing all charges for each telephone service they provided, as well as all "classifications, practices, and regulations affecting such charges."² 47 U.S.C.A. § 203(a). Under the FCA, "[c]arriers are prohibited from providing communications services except pursuant to a filed tariff, and may not charge, demand, collect, or receive a rate other than the rate listed in the applicable tariff." Fax Telecommunicaciones Inc. v. AT & T, 138 F.3d 479, 482 (2d Cir.1998) (citing 47 U.S.C.A. § 203(c)). In addition, "carriers are prohibited from unreasonably discriminating between customers in charges, practices, classifications, regulations, facilities, or services." Ibid. (citing 47 U.S.C.A. § 202(a)). To effectuate those mandates, the United States Supreme Court has held that "the century-old `filed...