Appeal by plaintiff from an order entered 8 August 2003 by
Judge Addie Harris Rawls in Harnett County District Court. Heard
in the Court of Appeals 17 November 2004.
Morgan, Reeves & Gilchrist, by Robert B. Morgan, for
plaintiff-appellant.
Smith Moore, L.L.P., by Jon Berkelhammer and Travis W. Martin,
for defendant-appellee.
HUNTER, Judge.
Katie Owen Morgan (“plaintiff”) appeals from an order of
dismissal with prejudice dated 8 August 2003 of her action for
damages and a declaratory judgment against AT&T Corporation
(“defendant”). As we find the trial court's grant of summary
judgment improper as to plaintiff's claim under N.C. Gen. Stat. §
75-1.1 (2003) for fraud and unfair and deceptive practices after
the cancellation of the agreement, we reverse in part.
Plaintiff's evidence tends to show that on 27 February 2001,
plaintiff was contacted by an agent of defendant via telephone
regarding an offer for long-distance service. The agent
represented that plaintiff would receive a rate of five cents per
minute for long-distance calls for a small monthly fee. Plaintiff
accepted the offer and began to use the plan.
Some months later, plaintiff noticed that she had been charged
a rate of ten cents per minute for some long-distance calls on her
telephone bill. She contacted defendant on 1 June 2001 and was
advised the five cent rate applied only to interstate calls on
weekends. Plaintiff then asked defendant to cancel her service
with them and resumed service with her previous carrier.
Defendant continued to bill plaintiff for services through
April 2002. Plaintiff attempted to contact defendant using the
printed number on the statements, but was unable to reach a live
representative. Plaintiff then wrote a letter to defendant, dated
24 March 2002, advising defendant that she had previously cancelled
the service. Plaintiff continued to receive bills from defendant
and shortly thereafter was pursued by collection agencies for non-
payment of the account. Although she advised the collection agentsshe had cancelled the account, she continued to receive calls
demanding payment.
Plaintiff filed an action on 21 May 2002 for fraud and unfair
and deceptive practices against defendant. Plaintiff sought
injunctive relief to bar the harassing phone calls and
correspondence, and monetary damages. Defendant denied the
allegations in the complaint and moved for dismissal under Rule
12(b)(6) for lack of jurisdiction by the trial court. Defendant
alleged that its rates were regulated by the Federal Communications
Commission, which has exclusive jurisdiction over such tariffs, and
that any action challenging communication charges was vested
exclusively in the federal courts and the Federal Communications
Commission.
Following a period of discovery, a delayed hearing on
defendant's motion to dismiss pursuant to Rule 12(b)(6) was held on
14 July 2004. Defendant moved to convert the 12(b)(6) motion to a
motion for summary judgment, and for dismissal of the action on the
grounds the fixed tariff doctrine was an absolute bar to
plaintiff's action. The motion was opposed in writing by
plaintiff. The trial court converted defendant's original motion
to one for summary judgment and granted the motion, dismissing
plaintiff's complaint with prejudice on the grounds that
plaintiff's exclusive remedy lay in the Federal Communications Act
of 1934 (“FCA”). Plaintiff appeals from this order.
We note that plaintiff conceded during oral argument before
this Court that she no longer sought injunctive relief against
defendant. We therefore make our determination as to whetherplaintiff's complaint is preempted solely upon plaintiff's claim
for damages for fraud and unfair and deceptive practices.
I.
[1] Plaintiff first contends the trial court erred by
converting defendant's Rule 12(b)(6) motion to a motion for summary
judgment and dismissing plaintiff's action with prejudice prior to
completion of discovery. We disagree.
When matters outside the pleadings are considered in a motion
pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(6) (2003), that Rule
states that the motion “shall be treated as one for summary
judgment and disposed of as provided in Rule 56, and all parties
shall be given reasonable opportunity to present all material made
pertinent to such a motion by Rule 56.”
Id. “The standard of
review of a trial court's decision to convert a Rule 12(b)(6)
motion to a Rule 56 motion is abuse of discretion.”
Belcher v.
Fleetwood Enters.,
Inc., 162 N.C. App. 80, 84, 590 S.E.2d 15, 18
(2004).
Here, defendant raised the affirmative defense of the federal
filed tariff rate doctrine, arguing it preempted state action as a
matter of law.
See AT&T v. Central Office Telephone, 524 U.S. 214,
222, 141 L. Ed. 2d 222, 233 (1998). A claim is properly dismissed
if the moving party shows that the “opposing party's claim is
barred by an affirmative defense which cannot be overcome.”
Rahim
v. Truck Air of the Carolinas, 123 N.C. App. 609, 612, 473 S.E.2d
688, 690 (1996). However, the Federal Telecommunications Act of
1996 and subsequent rulemaking by the Federal Communications
Commission substantially ended the tariffed environment under whichmost telecommunications firms operated.
See Ting v. AT&T, 319 F.3d
1126, 1132 (9th Cir. 2003). As recent cases in other jurisdictions
arising post-detariffication have recognized, the filed tariff
doctrine applies only to contracts formed while the tariff was in
effect, not to those formed after the tariffs were ended.
See
Ting, 319 F.3d at 1139. Thus defendant's motion raised two issues
of fact outside the pleadings pertinent to the determination of
whether the filed rate doctrine barred defendant's claim: (1) the
date plaintiff and defendant entered into their agreement, and (2)
the date on which defendant's rates were detarrifed and the filed
rate doctrine no longer applied to its contracts. The trial court
requested defendant provide that additional information for the
limited purpose of supporting the motion, and affidavits were
introduced showing that the agreement between the parties was
entered into on 27 February 2001, and that defendant ended
operation under a tariffed environment on 31 July 2001. Plaintiff
did not contest the above evidence introduced at the hearing on the
motion to dismiss. Thus the evidence presented clearly established
that defendant was operating in a tariffed environment when the
agreement was entered into, and the filed rate doctrine was
therefore an affirmative defense which was properly before the
trial court. As both parties were afforded a reasonable
opportunity to present all material pertinent to the motion, we
therefore find no abuse of discretion on the part of the trial
court in converting defendant's 12(b)(6) motion to a motion for
summary judgment.
II.
[2] Plaintiff next contends the trial court erred in ruling
that the FCA preempted state consumer protection laws and barred
plaintiff's action. We agree in part on this question of first
impression for our courts, and reverse the grant of summary
judgment as to plaintiff's claim for unfair and deceptive practices
for the continued harassment after cancellation of the
telecommunications service with defendant.
We first note the standard of review on appeal of a motion for
summary judgment is whether there is any genuine issue of material
fact and whether the moving party is entitled to a judgment as a
matter of law, when the evidence presented by the parties is viewed
in the light most favorable to the non-movant.
See Bruce-Terminix
Co. v. Zurich Ins. Co., 130 N.C. App. 729, 733, 504 S.E.2d 574, 577
(1998). The dispositive question raised here, as noted
supra in
Section I, is whether plaintiff's claim is preempted as a matter of
law by the FCA.
The United States Supreme Court has held that Congress' intent
to supercede state law may be inferred in three ways, absent
explicit pre-emptive language: (1) when the scheme of federal
regulation is so pervasive that an inference is reasonable that
Congress left no room for the States to supplement it, (2) when the
legislation concerns a field in which the federal interest is so
dominant that the federal system is assumed to preclude enforcement
of state laws on the same subject, or (3) when the object sought to
be obtained by federal law and the character of obligations imposed
by it may reveal the same purpose.
See Fidelity Federal S. & L.
Assn. v. de la Cuesta, 458 U.S. 141, 153, 73 L. Ed. 2d 664, 675(1982). Further, even if express or implied preemption is not
found, state law is nullified to the extent that it actually
conflicts with federal law.
Id.
The stated purpose of the FCA is to regulate
interstate and foreign commerce in
communication . . . so as to make available,
so far as possible, to all the people of the
United States, without discrimination on the
basis of race, color, religion, national
origin, or sex, a rapid, efficient, Nation-
wide, and world-wide wire and radio
communication service with adequate facilities
at reasonable charges[.]
47 U.S.C. § 151 (2001). In order to accomplish this purpose, the
Federal Communications Commission formerly required telephone
companies which were common carriers to file what were known as
tariffs, or rate schedules of all charges for interstate services.
47 U.S.C. § 203(a) (2001). To prevent unfair or discriminatory
charges, 47 U.S.C. § 203(c) made it unlawful for a carrier to
provide services except as specified in the filed tariff.
Id.
The FCA therefore preempts state actions to enforce even
fraudulent agreements of rates which vary from the filed tariff.
See AT&T v. Central Office Telephone, 524 U.S. at 222, 141 L. Ed.
2d at 233 (holding that “even if a carrier intentionally
misrepresents its rate and a customer relies on the
misrepresentation, the carrier cannot be held to the promised rate
if it conflicts with the published tariff”). Thus, as the
agreement was made while the defendant was operating in a tariffed
environment, plaintiff's state action for fraud and unfair and
deceptive practices in misrepresentation of the rates offered bydefendant is barred and we affirm the trial court's grant of
summary judgment as to that portion of the complaint.
[3] The FCA does not, however, exclusively preempt state
action against purveyors of telecommunications. Section 414 of the
FCA states that “[n]othing in this chapter contained shall in any
way abridge or alter the remedies now existing at common law or by
statute, but the provisions of this chapter are in addition to such
remedies.” 47 U.S.C. § 414 (2001). The United States Supreme
Court has held that this savings clause “preserves only those
rights that are not inconsistent with the statutory filed-tariff
requirements.”
AT&T v. Central Office Telephone, 524 U.S. at 227,
141 L. Ed. 2d at 236. As such, “[a] claim for services that
constitute unlawful preferences or that directly conflict with the
tariff . . . cannot be 'saved' under § 414.”
Id. However the
Second Circuit has noted that:
The FCA not only does not manifest a clear
Congressional intent to preempt state law
actions prohibiting deceptive business
practices, false advertisement, or common law
fraud, it evidences Congress's intent to allow
such claims to proceed under state law. . . .
Moreover, while the FCA does provide some
causes of action for customers, it provides
none for deceptive advertisement and
billing. . . .
The states may have an equal or greater
interest in preventing such conduct as
manifested by state consumer protection laws.
Marcus v. AT&T Corp., 138 F.3d 46, 54 (2nd Cir. 1998) (footnote
omitted).
In this case, plaintiff's complaint, in addition to alleging
fraud in the misrepresentation of the rate, also raised a claim of
fraud and unfair and deceptive practices under N.C. Gen. Stat. §75-1.1 for defendant's continued charges to plaintiff after
cancellation of the service, and continuing harassing phone calls
to plaintiff. Our courts have established that an unfair and
deceptive practices claim must show “(1) an unfair or deceptive act
or practice, (2) in or affecting commerce, and (3) which
proximately caused injury.”
Unifour Constr. Servs., Inc. v.
BellSouth Telecomm., Inc., 163 N.C. App. 657, 665, 594 S.E.2d 802,
807 (2004). An unfair practice has been recognized as one which
“'offends established public policy as well as when the practice is
immoral, unethical, oppressive, unscrupulous, or substantially
injurious to consumers. [A] party is guilty of an unfair act or
practice when it engages in conduct that amounts to an inequitable
assertion of its power or position.'”
Unifour Constr. Servs., 163
N.C. App. at 665-66, 594 S.E.2d at 807-08.
The statement of “an intention to perform an act, when no such
intention exists, constitutes misrepresentation of the promisor's
state of mind, an existing fact, and as such may furnish the basis
for an action for fraud if the other elements of fraud are
present[.]”
Unifour Constr. Servs., 163 N.C. App. at 666, 594
S.E.2d at 808. “[P]roof of fraud necessarily constitutes a
violation of the statutory prohibition against unfair and deceptive
acts[.]”
Id.
Here, plaintiff contacted defendant regarding cancellation of
the service, but continued to be billed for several months after
the cancellation, even after attempting to contact defendant by
telephone and in writing regarding the continued charges.
Additionally, defendant placed plaintiff's account with acollection agency who continued to call and harass plaintiff, even
after notification by plaintiff that the account had been
cancelled. These actions, taken after plaintiff's cancellation of
the contract and independent of the agreement governed by the filed
tariff, present a claim sufficient, when taken in the light most
favorable to the plaintiff, to overcome a motion for summary
judgment.
Further, although courts have held that awards of damages
which would provide compensation for misrepresented rates would
violate the filed tariff doctrine by effectively giving claimants
a discounted rate for phone service,
see Marcus, 138 F.3d at 60,
Hill v. BellSouth Telecommunications, Inc., 364 F.3d 1308, 1316-17,
(11th Cir. 2004), damages for unfair and deceptive practices for
the continued harassment by defendant after cancellation of the
phone service, such as sought by plaintiff in this case, present no
conflict with the statutory filed-tariff requirements and are
therefore not preempted by the FCA.
See Marcus, 138 F.3d at 62.
As an award under N.C. Gen. Stat. § 75-16 (2003) provides treble
damages for unfair and deceptive practices, not purely compensatory
damages, a monetary award under the statute would not provide a
discounted rate to plaintiff, but rather would both punish
defendant for unethical practices and provide remediation for
plaintiff's harassment.
See Marshall v. Miller, 302 N.C. 539, 546,
276 S.E.2d 397, 402 (1981) (holding that Section 75-16 is both
punitive and remedial, serving as a deterrent, encouraging private
enforcement, and providing a remedy for aggrieved parties). As plaintiff's action for fraud and unfair and deceptive
practices for defendant's actions subsequent to plaintiff's
cancellation of service is not preempted by the Federal
Communications Act, we therefore reverse the trial court's grant of
summary judgment as to this issue.
In conclusion, we affirm the trial court's grant of summary
judgment as to plaintiff's claim for fraud and unfair and deceptive
practices as to defendant's misrepresentation of the filed rate,
and reverse the trial court's grant of summary judgment as to
plaintiff's claim for fraud and unfair and deceptive practices as
to defendant's actions after the cancellation of the agreement
between the parties.
Affirmed in part and reversed in part.
Judges CALABRIA and LEVINSON concur.
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