Opinion
No. 05-2122-PHX-ROS.
September 29, 2006
ORDER
This action arises out of charges that were allegedly improperly assessed with respect to local and long distance services provided by Defendant. Pending is Defendant's Motion To Dismiss. (Doc. #11). For the reasons set forth below, the Motion is denied.
I. BACKGROUND
Plaintiff Shary Everett contends that in or around February 2003 MCI assessed her account ("Everett Account") a monthly service charge and related charges in the amount of $9.88 in connection with an MCI long distance plan that were neither incurred nor authorized. (Doc. #1, ¶ 25). Plaintiff further alleges that despite several requests to have the charges reversed or removed, she received a collections notice in July 2003 for failure to pay the unauthorized charges and subsequently paid them. (Id., ¶¶ 27-29).
The account against which these charges were assessed is in Plaintiff's husband's name but is for the telephone number at the residence they share. Plaintiff contends she is jointly responsible for paying the bill.
Defendant's records indicate that in December 2002, MCI received an order from the Local Exchange Carrier ("LEC") for MCI to provide long distance services for the Everett's phone number. (Id., ¶ 7). This particular order was one where MCI designated itself as the carrier through the LEC during a move. (Id.). Once the account was active with long distance service, it became subject to minimum usage fees as set forth in MCI's Federal Communications Commission ("FCC") Tariff and the MCI General Service Agreement, which is mailed to all customers and is available on its website. (Id.). Such fees were billed on the December 2002 and January 2003 invoices in the total amount of $9.88. (Id.). Defendant's records further indicate that in February 2003, Plaintiff called to dispute authorization of the account, but did not request a credit. (Id., ¶ 8). MCI's procedure was to advise Plaintiff to contact the LEC to switch services away from MCI in order to cancel her account. (Id., ¶ 9). Three days after Everett's call, MCI received a disconnect order from the LEC and cancelled the Everett Account. (Id.). MCI records do not indicate that the Everetts initiated any other contact. (Id., ¶ 10).
Notably, only a LEC, and not a long distance carrier such as MCI, can switch a customer's long distance provider from one carrier to another. (Doc. #11, p. 4). All changes made to service, including switching the designated long distance carrier, are transmitted by the LEC to the appropriate long distance carrier.
On behalf of herself and others similarly situated, Plaintiff filed a putative class action on July 19, 2005 for violations of the Communications Act of 1934, 47 U.S.C. §§ 151, et seq., ("Communications Act") and for unjust enrichment. (Doc. #1). Plaintiff seeks monetary damages, equitable relief and declaratory relief. Upon filing her lawsuit, Defendant credited the LEC with $12.00 for the Everett's Account (Doc. #11, Exh. A at ¶ 11), although the credit did not post to Plaintiff's account until after the Motion For Class Certification was filed. (Doc. #46).
Plaintiff is a resident of Goodyear, Arizona. Defendant MCI, Inc. is a Delaware corporation providing local and long distance telephone service to customers in Arizona and throughout the United States, and maintains offices within the State of Arizona. Because this case involves a federal question under the Communications Act, the Court has jurisdiction pursuant to 28 U.S.C. § 1331 over the federal claim, and supplemental jurisdiction pursuant to 28 U.S.C. § 1367 over the state law claim. (Doc. #1).
On September 29, 2005 Defendant MCI filed a Motion To Dismiss. (Doc. #11). Plaintiff responded on October 31, 2005 (Doc. #12), and Defendant replied on November 15, 2005. (Doc. #16). On April 26, 2006 the Court held oral argument and ordered supplemental briefing. On May 26, 2006 the parties filed simultaneous supplemental briefs (Doc. #38, Defendant's Supplemental Brief; Doc. #39, Plaintiff's Supplemental Brief), and on June 9, 2006 simultaneous opposition briefs were filed (Doc. #46, Defendant's Opposition Brief; Doc. #48, Plaintiff's Opposition Brief) followed by simultaneous replies filed on June 23, 2006. (Doc. #51, Defendant's Reply In Support of Its Supplemental Brief; Doc. #52, Plaintiff's Reply In Support of Its Supplement Brief).
The Court ordered supplemental briefing on the following issues: (1) whether Manson v. MCI, Inc. and Telecom USA, Inc., Case No. 04-73374 (E.D. Mich. Feb. 24, 2005), is controlling in this case; (2) whether it is disputed that Plaintiff has received all damages; (3) whether it is determinative that Plaintiff alleges fraud; (4) whether or not the court's application of the "picking-off" doctrine in Manson is distinguishable; (5) whether the potential class members may be transitory such that there is a likelihood of repetition.
II. DISCUSSION
A. Legal Standard
Defendant argues that the Court should dismiss Plaintiff's claim pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure for lack of subject matter jurisdiction because (1) it is moot, and (2) Plaintiff's claims fall within the primary jurisdiction of the Federal Communications Commission ("FCC"). Plaintiff, as the party seeking to invoke the jurisdiction of the court, bears the burden of establishing subject matter jurisdiction. See McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 182-83 (1936);Fenton v. Freedman, 748 F.2d 1358, 1359 (9th Cir. 1994). A Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction may be either a facial or a factual challenge. When the moving party challenges jurisdiction based on the allegations in the complaint, the court must consider all the allegations in the complaint as true, and will not look beyond the face of the complaint to determine jurisdiction. See Mortensen v. First Fed. Sav. Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977).
Defendant also argues that Plaintiff lacks standing, because the Everett account was in her husband's name. (Doc. #38, p. 2 fn 1). The cases on which Defendant relies do not support its contention that Plaintiff lacks standing to sue over charges assessed to an account for which she is jointly responsible. Ms. Everett paid the debts from a joint checking account she shared with her husband (Doc. #39, p. 5; Everett Decl., ¶ 4), and has suffered an economic injury for which she has standing to sue.See San Diego County Gun Rights Comm. v. Reno, 98 F.3d 1121, 1130 (9th Cir. 1996) ("Economic injury is clearly a sufficient basis for standing"). Moreover, it appears that Ms. Everett was authorized to make changes to the account on behalf of her husband. (Doc. #38, Exh. A).
On the other hand, when a court reviews a complaint under a factual challenge, the allegations have no presumptive truthfulness, Ritza v. International Longshoremen's and Warehousemen's Union, 837 F.2d 369 (9th Cir. 1988) (quotingMortensen, 549 F.2d at 891), and the court is not limited to the allegations in the pleadings if the "jurisdictional issue is separable from the merits of [the] case." Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987). Rather, the court weighing the evidence has discretion to allow affidavits, documents, and even a limited evidentiary hearing to resolve disputed jurisdictional facts. See Valdez v. United States, 837 F. Supp. 1065, 1067 (E.D. Cal. 1993), aff'd, 56F.3d 1177 (9th Cir. 1995),Mortensen, 549 F.2d at 891.
B. Analysis
1. Mootness
Defendant contends that Plaintiff's claim is moot, because it credited Plaintiff for all of her alleged damages plus interest, and as a result, there is no actual, ongoing controversy. (Doc. #11, Exh. A, ¶ 11). Plaintiff argues that Defendant's attempt to satisfy her claim shortly after it was filed, and before she could file a Motion for Class Certification, is an attempt to "pick-off" her claim and should not be subject to the mootness limitation.
Plaintiff's request for costs and interest does not create a case or controversy. See Bank of Marin v. England, 385 U.S. 99, 111 n. 1 (1966) (Fortas, J., dissenting) (citations omitted). Nor does Plaintiff's claim for attorneys' fees save an otherwise moot case. See Lewis v. Continental Bank Corp., 494 U.S. 472, 480 (1990).
Article III of the United States Constitution requires a plaintiff to present an actual case or controversy, which is a prerequisite to the Court's exercise of subject matter jurisdiction. See American-Arab Antidiscrimination Comm. v. Thornburgh, 940 F.2d 445, 448 (9th Cir. 1991). The doctrine of mootness is derived from the case-or-controversy limitation. See Gator.com Corp. v. L.L. Bean, Inc., 398 F.3d 1125, 1128-29 (9th Cir. 2005). A live controversy must persist throughout all stages of the litigation. See id. When this condition is not met, the case has become moot and is no longer within the Court's constitutional purview. Id.
In most cases, a case becomes moot when a defendant offers to satisfy the plaintiff's requested relief. Holstein v. City of Chicago, 29 F.3d 1145, 1147 (7th Cir. 1994). But, when the plaintiff attempts to represent a class, the mootness doctrine is somewhat different. See Bd. of School Comm'rs v. Jacobs, 420 U.S. 128, 129 (1975); Kuahulu v. Employers Ins. of Wausau, 557 F.2d 1334, 1336 (9th Cir. 1977). The application of the mootness doctrine depends on the idiosyncrasies of each case and "does not require an automatic dismissal in every case where the district court has failed to certify the class before the representative's claim has become moot." Kuahulu, 557 F.2d at 1336. A plaintiff whose claims have been satisfied and are no longer active may avoid dismissal by showing that the claims are nonetheless "capable of repetition, yet evading review." Sosna v. Iowa, 419 U.S. 393, 401-02 (1975). Application of this exception to the mootness doctrine is limited to situations where "(1) the challenged action is in its duration too short to be fully litigated prior to its cessation or expiration, and (2) there is a reasonable expectation that the same complaining party will be subject to the same action again." Weinstein v. Bradford, 423 U.S. 147 (1975). In addition, the Supreme Court has held, "Requiring multiple plaintiffs to bring separate actions, which effectively could be `picked off' by a defendant's tender of judgment before an affirmative ruling on class certification could be obtained, obviously would frustrate the objectives of class actions; moreover it would invite waste of judicial resources by stimulating successive suits brought by others claiming aggrievement." Deposit Guaranty Nat'l Bank v. Roper, 445 U.S. 326, 339 (1980). Where a named plaintiff's claims become moot before the court certifies a class, the class certification motion is deemed to relate back to the named plaintiff's standing when she filed the class complaint. See, Wade v. Kirland, 118 F.3d 667, 670 (9th Cir. 1997). The "relation-back" exception applies where the claims are transitory or acutely susceptible to mootness as a result of the defendant's effort to pick them off.See, e.g., id; Weiss v. Regal Collections, 385 F.3d 337, 347-48 (3d Cir. 2004).
Defendant cites two cases involving similar facts in which courts have dismissed the action on grounds of mootness where the claims were satisfied before the court certified the class action. In Manson v. MCI, Inc. and Telecom USA, Inc., Case No. 04-73374 (E.D. Mich. Feb. 24, 2005), aff'd by the Sixth Circuit without opinion on April 25, 2006 (Doc. #36, Exh. A), the court held that there was no case or controversy over plaintiff's moot claims where MCI issued a credit to plaintiff in an amount equal to or greater than the potential damages. The court rejected plaintiff's argument that defendants were attempting to "pick off" the claims with settlement offers in an attempt to avoid a class action, because the motion for class certification had not yet been filed. Defendant argues that like Manson, at the time MCI credited Plaintiff's account, no Motion For Class Certification had been filed.
Although Sixth Circuit Rule 28(g) disfavors the "[c]itation of unpublished decisions in briefs and oral arguments in this Court and in the district courts within this Circuit, except for the purposes of establishing res judicata, estoppel, or the law of the case," Defendant is not prohibited from citing the case in this Circuit. Contrary to Defendant's assertion that the Sixth Circuit's oral disposition "compels dismissal of this case" (Doc. #38, p. 2), the Sixth Circuit decision is not binding on this Court.
Plaintiff filed a Motion For Class Certification on May 30, 2006 (Doc. #43).
Like Manson, Plaintiff's claim was satisfied before the motion for class certification had been filed. Manson is distinguishable on other grounds, because the defendants in that case agreed to institute a recovery program to determine what other class members were entitled to the same credit afforded plaintiff such that all claims would be moot, therefore alleviating any concerns that there would be repetitious claims. Here, MCI has not offered to credit other putative plaintiffs who were also improperly charged. At oral argument, MCI contended that based on the factual circumstances in Manson, it was easier to rectify the wrong, whereas here, the alleged wrong is based on incorrect information MCI receives from the LEC. MCI further contends that through its liberal credit policy, all putative plaintiffs who requested a credit received one. Under this reasoning, however, MCI has placed the burden on the putative plaintiff to contact MCI and not only identify herself as an account holder whose account was improperly charged, but also request a credit. If a putative plaintiff fails to do so, perhaps because she is unable to reach a live person through the automated customer service line, then the putative plaintiff is deemed to have accepted the services. MCI's policy does not sufficiently rectify the problem or alleviate this Court's concern over future claims.
Although Defendant issued a credit to the LEC before Plaintiff filed its Motion For Class Certification, the credit did not post to Plaintiff's account until after the Motion was filed. (Doc. #46). Whether the claim was mooted on the date the credit was issued or the date the credit appeared is immaterial, as this Court rejects the brightline rule that focuses solely on the date on which the motion for class certification was filed.
Defendant also cites to Labora v. MCI Telecommunications Corp., No. 98-1073 (S.D. Fl. July 20, 1998), in which the plaintiff filed a class action alleging improper and duplicative billing practices. Plaintiff, a customer, did not contact MCI's customer service center to inquire about the calls and instead filed a class action complaint. Upon receipt of the complaint, however, MCI refunded the plaintiff the total alleged duplicate charges of $1.52 and moved to dismiss the complaint as moot. The court held that this credit mooted plaintiff's cause of action and rendered him ineligible to represent the class, and also held that his request for costs and interest did not salvage the otherwise moot case. It was upheld with no written opinion by the Eleventh Circuit.
Like the Sixth Circuit's disposition in Manson, the Eleventh Circuit's summary affirmance in Labora has no precedential value.See 11th Cir. R. 36-1.
This case is also distinguishable, because in Labora, the court found relevant that prior to the filing of the lawsuit, MCI had no notice that it had improperly charged the plaintiff. The fact that MCI credited the plaintiff shortly after the complaint was filed was more indicative of an intent to rectify an error upon receiving notice than of any intent to "pick-off" the plaintiff's claim. In this case, Plaintiff notified Defendant that she did not authorize initiation of services well before filing suit. Defendant argues that its policy prevented it from issuing a credit until Plaintiff specifically requested one, which its records indicate Plaintiff did not do at the time she called to inquire about the charges. Defendant further contends that the fact it credited Plaintiff pursuant to its internal policy is evidence that it is not intending to "pick off" her claim. The basis for the refund is immaterial, however, where unlike Labora, Defendant was on notice beforehand but did not act until after the lawsuit was filed. Moreover, it is these very policies and practices that are issue in this lawsuit.
Plaintiff cites the Third Circuit decision, Weiss v. Regal Collections, 385 F.3d 337, 344 (3d Cir. 2004), as support for its argument that mootness should not apply. Weiss involved a plaintiff who, within six weeks of filing his amended complaint and before filing a motion for class certification, was made an offer of judgment by defendant under Fed.R.Civ.P. 68 for the amount of statutory damages plus attorneys' fees and costs. The plaintiff declined the offer of judgment, and the district court granted the defendant's motion to dismiss on grounds of mootness.Id. at 340. In reversing the district court's opinion, the Third Circuit held that the defendant's offer of judgment, which provided complete relief to Weiss but not to the class, would not be given effect, because to allow the defendant to make an offer of judgment to a named plaintiff prior to class certification would undermine the purposes of Rule 23. Id. at 345. The Third Circuit cited precedent for its holding that a class action would not be moot if a trial court lacked the opportunity to rule on a pending motion for class certification when a defendant made an offer of judgment. Id. at 346 (citing Susman v. Lincoln Am. Corp., 587 F.2d 866, 869-71 (7th Cir. 1978); Zeidman v. J. Ray McDermott Co., 651 F.2d 1030, 1051 (5th Cir. 1981); Lusardi V. Xerox Corp., 975 F.2d 964, 975 (3d Cir. 1992)). In rejecting a brightline rule followed by other courts, the Third Circuit instead focused on whether the plaintiff had unduly delayed in moving for certification; it held that plaintiff had not delayed, and as a result, found the case was not moot. See id. at 348.
This is an issue of first impression in the Ninth Circuit, whether a claim is rendered moot where plaintiff's damages are satisfied not only before a court has ruled on a motion for class certification, but before plaintiff has even filed such a motion. Defendant seeks adoption of a brightline rule focusing solely on whether a motion for certification was filed at the time plaintiff's damages were satisfied.
Defendant attempts to distinguish this case from Weiss by claiming that its credit was not an offer of judgment made pursuant to Fed.R.Civ.P. 68. Regardless of whether it was issued as part of a formal settlement offer or not, Defendant's credit satisfied Plaintiff's claim; thus, for purposes of mooting Plaintiff's claim, it is the same as an offer of judgment. To hold otherwise would permit a defendant to circumvent the practical considerations underlying the court's reasoning inWeiss, as well as subsequent cases, which speak most closely to the issues at hand while recognizing the modifications to Fed.R.Civ.P. 23 in 2003 allowing for more time to file for certification. Creating a brightline based on whether the claim was satisfied before the filing of the class certification motion would necessitate that putative plaintiffs seek class certification on the date a complaint is filed or immediately thereafter in order to preserve their claim; similarly, it would encourage defendants to "race to pay off" named plaintiffs very early in the litigation before a motion for class certification is filed, which is inconsistent with the purposes of Rule 23.Liles v. American Corrective Counseling Servs., Inc., 201 F.R.D. 452, 455 (S.D. Iowa 2001); Schaake v. Risk Management Alternatives, Inc., 203 F.R.D. 108 (S.D.N.Y. 2001) ("Taken to its absurd logical conclusion, the policy urged by defendant. . . . would also allow defendants to essentially opt-out of Rule 23, by allowing a defendant to avoid liability for class wide relief, which could be prevented by the mere service of a Rule 68 offer at the outset of the case."); Nasca v. GC Servs. Ltd. P'ship, 01 Civ. 10127 (DLC), 2002 U.S. Dist. LEXIS 16992, at *9 (S.D.N.Y. Sept. 13, 2002) ("To allow a Rule 68 offer to moot a named plaintiff's claim in these circumstances [where an offer of judgment was made less than two months after defendant filed its answer] would encourage defendants to pick off named plaintiffs in the earliest stage of the case."); Bond v. Fleet Bank (RI), N.A., C.A. No. 01-177 L, 2002 U.S. Dist. LEXIS 4131, at *21-22 (D.R.I. Feb. 21, 2002) ("To permit Fleet to intentionally moot Bond's claims, before Bond had an opportunity to move for class certification, in an effort to avoid a class action, would do violence to the interests of justice."); David Hill Koysza,Preventing Defendants From Mooting Class Actions By Picking Off Named Plaintiffs, 53 Duke L.J. 781, 781-82 (Nov. 2003) (an offer of judgment to named plaintiffs before class certification "both thwarts the function of the class action device and vitiates the policies behind it"). Though Weiss involved an offer of judgment, the Court finds the Third Circuit's reasoning to be persuasive and rejects the brightline rule in favor of an approach that permits sufficient time to allow Rule 23 to play out.
Another inquiry is whether Plaintiff engaged in "undue delay" in not filing the Motion For Class Certification before the claim was satisfied. MCI credited the Plaintiff's account via the LEC only seven weeks after she filed her Complaint. Defendant had not answered or even moved against the Complaint; thus, Plaintiff had not had a reasonable opportunity to move for class certification at that time. In addition, unlike Manson where the court believed that the entire class action would be moot, because MCI indicated that it was in the process of "identify[ing] all customers incorrectly billed. . . . [and crediting] those accounts in full for any over-billing," Manson, slip op. at 8, MCI here has made no such effort. The Court has strong concerns that to render Plaintiff's claims moot would only result in repetitious claims.
2. Primary Jurisdiction
Alternatively, Defendant argues that Plaintiff's claims should be dismissed, because the FCC has primary jurisdiction over the claims. "Primary jurisdiction is not implicated simply because a case presents a question, over which the FCC could have jurisdiction. . . . Rather, primary jurisdiction is properly invoked when a case presents a far-reaching question that `requires expertise or uniformity in administration.'" Brown v. MCI WorldCom Network Serv's, Inc., 277 F.3d 1166, 1172 (9th Cir. 2002) (citations omitted). In considering whether to dismiss a federal action based on primary jurisdiction, courts have considered four factors: (1) whether the question at issue is within the conventional expertise of judges; (2) whether the question at issue lies particularly within the agency's discretion or whether it requires the exercise of agency expertise; (3) whether there exists a substantial danger of inconsistent rulings; and (4) whether a prior application to the agency has been made. See Total Telecomm. Servs., Inc. v. Am. Tel. Telegraph Co., 919 F. Supp. 472, 478 (D.D.C. 1996). "A court `should be reluctant to invoke the doctrine of primary jurisdiction, which often, but not always, results in added expense and delay to litigants. . . .'" McDonnell Douglas Corp., 751 F.2d 220, 224 (8th Cir. 1984) (citations omitted).
This Court need not decide whether the alleged unlawful charges were reasonable, but rather whether MCI's decision to assess the fee to non-customers was part of a deceptive scheme. Plaintiff's allegations of consumer fraud are well within the competence of this Court. See Nadar v. Allegheny Airlines, Inc., 426 U.S. 290, 305-06 (1976) ("The standards to be applied in an action for fraudulent misrepresentation are within the conventional competence of the courts, and the judgment of a technically expert body is not likely to be helpful."). Moreover, other courts have rejected such attempts to refer jurisdiction over cases involving similar issues. See Brennan v. AT T Corp., No. 04-CV-433, 2006 U.S. Dist. LEXIS 8237, at *4 (S.D. Ill. Feb. 8, 2006) (rejecting defendant's argument to refer jurisdiction over underlying claim that defendant deliberately charged improper non-usage fees) (Doc. #20, Exh. A). Contrary to Defendant's assertion that the FCC has an interest in adjudicating this matter, its recent Report and Order and Further Notice of Proposed Rulemaking, which addresses the problem of LECs providing incorrect information to long distance carriers such as MCI contains no such indication. (Doc. #11, Exh. B C). Moreover, the Rulemaking did not address the issue raised in this action, which is whether Defendant violated the Communications Act after obtaining data from the LECs by establishing accounts and enrolling consumers in billing plans with MUFs without customer authorization. For these reasons, a referral would be improper.
Accordingly,
IT IS ORDERED that Defendant's Motion To Dismiss (Doc. #11) is denied.