Tenore v. AT & T Wireless Services, 65609-6

• Court: United States State Supreme Court of Washington
• Citation: 962 P.2d 104,136 Wn.2d 322
• Decision Date: 10 September 1998
• Docket Number: No. 65609-6,65609-6
• Parties: , 13 Communications Reg. (P&F) 972 Coryelle TENORE, Charles F. Peterson and Karen M. Cole, on behalf of Themselves and All Others Similarly Situated, Appellants, v. AT & T WIRELESS SERVICES and McCaw Cellular Communications, Inc. d/b/a Cellular One, Respondents.

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136 Wn.2d 322 962 P.2d 104, 13 Communications Reg. (P&F) 972 Coryelle TENORE, Charles F. Peterson and Karen M. Cole, on
behalf of Themselves and All Others Similarly
Situated, Appellants,
v.
AT & T WIRELESS SERVICES and McCaw Cellular Communications,
Inc. d/b/a Cellular One, Respondents. No. 65609-6. Supreme Court of Washington,
En Banc. Argued May 19, 1998.
Decided Sept. 10, 1998.

[962 P.2d 105]

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Hagens & Berman, Steve Berman, Erin K. Flory, Seattle, for Appellants.

Stokes, Eitelbach & Lawrence, Michael Kipling, Laura J. Buckland, Kelly Noonan, Seattle, for Respondents.

SMITH, Justice.

Appellants Coryelle Tenore, Charles F. Peterson and Karen M. Cole, on behalf of themselves and all

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others similarly situated, seek direct review of a judgment of the King County Superior Court which dismissed their class action lawsuit on a Civil Rule (CR) 12(b)(6) motion based upon federal preemption of state law claims under 47 U.S.C. § 332(c)(3)(A) and the doctrine of primary jurisdiction. We granted review. We reverse the trial court. QUESTION PRESENTED

The question presented is whether the trial court was correct in dismissing Appellants' state law claims on a CR 12(b)(6) motion based upon federal preemption under 47 U.S.C. § 332(c)(3)(A) and the doctrine of primary jurisdiction.

STATEMENT OF FACTS

On October 24, 1995, Appellants Coryelle Tenore, Charles F. Peterson and Karen M. Cole, individually and on behalf of others similarly situated, filed in the King County Superior Court a class action complaint against Respondents AT & T Wireless Services and McCaw Cellular Communications, Inc. d/b/a Cellular One. ¹ Respondent AT & T Wireless Services (AT & T) is a wholly [962 P.2d 106] owned subsidiary of AT & T Corporation and provides cellular service in the Northwest region. ² McCaw Cellular Communications, Inc. d/b/a Cellular One (McCaw Cellular), also named as a defendant, was the largest provider of cellular telephone service in the country until it merged with AT & T. ³ McCaw Cellular

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no longer exists as a separate entity. ⁴

In their Second Amended Class Action Complaint, Appellants claimed that Respondent AT & T engaged in "deceptive, fraudulent, misleading and/or unfair conduct" by not disclosing its practice of "rounding" airtime in order to "induce cellular customers to use its cellular service, and/or in order to unfairly profit." ⁵ "Rounding," "rounding up" or "full minute billing" is a common billing practice in the cellular and long distance telephone industry where fractions of a minute are rounded up to the next highest minute. ⁶ For example, a call that lasts one minute and one second is charged as a two-minute call, but the subscriber is not informed of the actual duration of the call. ⁷ Appellants claim this billing practice "results in millions of dollars of excess billing ... all at the expense of the unwary customer." ⁸ Appellants additionally claim this practice is "contrary to the 'Service Agreement' ... which states that the customer is billed only for 'the time you press send until the time you press end.' " ⁹

Also, Appellants claim cellular customers do not receive the full minutes they have contracted for at a fixed rate under their service plan because of rounding. ¹⁰ For example, all subscribers are required to choose between plans that offer varying specified minutes of airtime, such as 30, 60, or 100 minutes, for a fixed monthly rate, beyond which

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calls are billed at a specified per-minute rate. ¹¹ But a 30-minute plan may not in fact provide 30 full minutes because of rounding. This is what Appellants claim AT & T should have disclosed. ¹²

Appellants filed state law claims in the King County Superior Court for breach of contract, ¹³ negligent misrepresentation, fraud, and violation of the Washington Consumer Protection Act (CPA) under RCW Chapter 19.86. ¹⁴ They requested, among other things, injunctive relief and compensatory damages in the form of a refund of the difference between the amount charged by AT & T and the amount class members would have incurred if AT & T had not engaged in the practice of rounding up without disclosing it. ¹⁵ On April 29, 1997, AT & T moved for dismissal of the complaint by a CR 12(b)(6) motion based upon federal preemption of state law claims under 47 U.S.C. § 332(c)(3)(A) and the doctrine of primary [962 P.2d 107] jurisdiction. ¹⁶ 47 U.S.C. § 332(c)(3)(A) provides in relevant part:

Notwithstanding sections 152(b) and 221(b) of this title, no State or local government shall have any authority to regulate the entry of or the rates charged by any commercial mobile service or any private mobile service, except that this paragraph shall not prohibit a State from regulating the other terms and condition of commercial mobile services.

AT & T contends this statute preempts Appellants' state law claims because the monetary relief sought by Appellants would necessarily require a court to engage in rate regulation in determining the refund award for partial

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minutes of cellular service. ¹⁷ AT & T further claims, under the doctrine of primary jurisdiction, that any challenge to the reasonableness of cellular rates must be deferred to the agency with expertise in rate regulation--in this case, the Federal Communications Commissions (FCC). ¹⁸

While AT & T's motion to dismiss was pending, the Court of Appeals, Division I, filed its decision in Hardy v. Claircom Comm's. Group, Inc., ¹⁹ a case with a similar fact pattern to this one. The King County Superior Court, the Honorable J. Kathleen Learned, agreed with AT & T that Hardy is controlling and granted its motion to dismiss on June 13, 1997, stating:

The Court concludes as a matter of law that this case is controlled by Hardy v. Claircom and therefore the plaintiffs' state law claims are preempted by 47 U.S.C. § 332(c)(3)(A), and/or that the doctrine of primary jurisdiction requires that plaintiffs' claims be referred to the FCC.[ ²⁰

Appellants, however, contend they are only challenging the allegedly misleading advertising practices of AT & T and not the underlying rates or charges. ²¹ They argue it is within the authority of state courts to resolve their state law claims without FCC intervention. ²² After the order of dismissal, Appellants sought direct review by this Court, which we granted on January 6, 1998.

DISCUSSION STANDARD OF REVIEW

Under CR 12(b)(6), a complaint can be dismissed for "failure to state a claim upon which relief can be granted." A dismissal under this rule involves a question of

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law which is reviewed de novo by an appellate court and is appropriate only if it appears beyond doubt that the plaintiff cannot prove any set of facts which would justify recovery. ²³ In such a case, a plaintiff's allegations are presumed to be true and a court may consider hypothetical facts not included in the record. ²⁴ CR 12(b)(6) motions should be granted "sparingly and with care" and "only in the unusual case in which plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief." ²⁵

HARDY V. CLAIRCOM COMMUNICATIONS GROUP, INC.

In dismissing Appellants' complaint, the trial court concluded as a matter of law that it was bound by the decision of the Court of Appeals, Division I, in Hardy v. Claircom Comm's. Group, Inc., ²⁶ the only Washington [962 P.2d 108] case addressing the specific issues now before this Court. ²⁷ Appellants argue that Hardy should not control the decision in this case and that the two cases are distinguishable. ²⁸ AT & T claims Hardy is on point and urges this Court to follow it. ²⁹

The facts in Hardy are somewhat similar to the facts in this case. In Hardy Appellants Michael J. Hardy and Michael Lair brought class action lawsuits in the King County Superior Court against Claircom Communications Group,

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Inc., d/b/a AT & T Wireless Services (Claircom) and GTE Airphone, Inc. (GTE) claiming breach of contract, negligent misrepresentation, fraud and violation of the Washington Consumer Protection Act. ³⁰ Claircom and GTE provide air-to-ground radiotelephone services for passengers on commercial aircraft. ³¹ Appellants claimed the companies were liable because the promotional materials provided to passengers aboard aircraft did not disclose the companies' practice of rounding up airtime. ³² The trial courts dismissed both appellants' actions ruling their claims were preempted by 47 U.S.C. § 332(c)(3)(A) and barred by the filed tariff doctrine. ³³ The Court of Appeals affirmed on the same grounds. ³⁴

FILED RATE OR FILED TARIFF DOCTRINE ³⁵

The "filed rate" doctrine, also known as the "filed tariff" ³⁶ doctrine, is a court-created rule to bar suits against regulated utilities involving allegations concerning the reasonableness of the filed rates. ³⁷ This doctrine provides, in essence, that any "filed rate"--a rate filed with and approved by the governing regulatory agency--is per se reasonable and cannot be the subject of legal action against the private entity that filed it. ³⁸ The purposes of the "filed rate" doctrine are twofold: (1) to preserve the agency's primary jurisdiction to determine the reasonableness of rates,

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and (2) to insure that regulated entities charge only those rates approved by the agency. ³⁹ These principles serve to provide safeguards against price discrimination and are essential in stabilizing prices. ⁴⁰ But this doctrine, which operates under the assumption that the public is conclusively presumed to have knowledge of the filed rates, has often been invoked rigidly, even to bar claims arising from fraud or misrepresentation. ⁴¹

Courts have construed the "filed rate" doctrine broadly in dismissing lawsuits against telecommunications carriers involving direct [962 P.2d 109] or indirect challenges to the reasonableness of rates. In Marcus v. AT & T Corp., subscribers to AT & T Corporation's long distance...