Opinion
Civil No. 1:02CV00228
February 6, 2003
MEMORANDUM OPINION
On February 22, 2002, Tomi White Bryan ("Plaintiff") filed suit in the General Court of Justice, Superior Court Division, Guilford County, North Carolina, against BellSouth Telecommunications, Inc. ("Defendant") alleging three state law causes of action. Defendant removed the case to federal court based on federal question and diversity jurisdiction.
This matter is before the court on a motion to remand the case to state court by Plaintiff and a motion to dismiss by Defendant pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the court will grant Plaintiff's motion to remand in part, deny Plaintiff's motion to remand in part, grant Defendant's motion to dismiss in part, and deny Defendant's motion to dismiss in part. The ultimate result, arrived at in a way which might be perceived as cumbersome, but in the court's opinion necessary, is that Plaintiff's surviving claims are returned to state court.
FACTS
Defendant is a provider of telecommunications services and is subject to federal regulation as a common carrier under the Federal Communications Act of 1934, as amended ("FCA"), 47 U.S.C. § 151 et seq. Pursuant to federal regulation, Defendant is required to contribute a percentage of its revenue to the federal Universal Service Fund ("USF"). The USF provides funding for telecommunications services to rural areas, schools, libraries, and health care providers. Federal regulations permit Defendant to recover the costs related to its contributions to the USF through an itemized charge. The charge is classified on the customer's bill as the Federal Universal Services Charge ("FUSC"). Defendant's FUSC is set forth in the federal tariff that it tiles with the Federal Communications Commission ("FCC"). The tariff specifies the amount that Defendant charges as well as how the charge is calculated.
Plaintiff filed the present class action challenging Defendant's collection of an excessive FUSC from North Carolina consumers. In addition to challenging the collection of an excessive FUSC, Plaintiff challenges the imposition of any charge without full disclosure to consumers of all the material facts surrounding the charge. Plaintiff's first amended complaint includes three causes of action: (1) a claim for violation of the North Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. § 75-1.1; (2) a claim for unjust enrichment and restitution; and (3) a claim for breach of contract, including the covenant of good faith and fair dealing.
DISCUSSION
I. Motion to Remand
A cause of action filed in state court, which originally could have been filed in federal court, may be removed to federal court pursuant to 28 U.S.C. § 1441. The removing party has the burden of establishing the existence of federal subject matter jurisdiction. Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994). "If federal jurisdiction is doubtful, a remand is necessary." Id. Where there is no diversity jurisdiction, federal question jurisdiction is required for removal. Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987).
In Defendant's notice of removal, it indicated that this court had both diversity and federal question subject matter jurisdiction. Plaintiff acknowledges that there is complete diversity of citizenship, but contends that the amount in controversy is below the $75,000.00 threshold. Plaintiff's first amended complaint limits the damages she seeks to less than this amount. Accordingly, there is no diversity jurisdiction because Plaintiff does not seek damages that meet the amount in controversy threshold.
In determining the existence of subject matter jurisdiction based on federal question jurisdiction, the "well-pleaded complaint" rule applies. Under the well-pleaded complaint rule, "federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Id. (citing Gully v. First Nat'l Bank, 299 U.S. 109, 112-13 (1936)). As a result, the plaintiff, as the master of the claims, "may avoid federal jurisdiction by exclusive reliance on state law." Id.
Plaintiff argues that her complaint presents no federal questions. Plaintiff's amended complaint alleges three claims, all of which facially are state law claims. Thus, applying the well-pleaded complaint rule, Plaintiff's complaint on its face presents no federal question. Defendant, however, contends that Plaintiff's claims raise a federal question and jurisdiction in this court is proper.
Defendant argues that because Plaintiff's claims implicate the terms and rights under a federal tariff, her state law claims are preempted under the filed-rate doctrine; and because the filed-rate doctrine preempts her claims, her claims present a federal question. While the filed-rate doctrine does preempt claims seeking to alter the terms and conditions of a federal tariff, ATT v. Central Office Tel., Inc., 524 U.S. 214, 229 (1998), the doctrine itself does not provide an independent basis for federal jurisdiction. It is certainly possible that some or all of Plaintiff's claims will be preempted by the filed-rate doctrine, and therefore ultimately be governed by federal law. The filed-rate doctrine, however, is an affirmative federal defense. Id.; see also Braco v. MCI WorldCom Communications, WorldCom, Inc., 138 F. Supp.2d 1260, 1269 (C.D. Cal. 2001); Minnesota v. WorldCom, Inc., 125 F. Supp.2d 365, 371 n. 6 (D. Minn. 2000). And it is "settled law that a case may not be removed to federal court on the basis of a federal defense, including the defense of pre-emption." Caterpillar, 482 U.S. at 393. Accordingly, while Defendant may ultimately be correct in its assertion that Plaintiff's claims are barred by the filed-rate doctrine, for the purpose of evaluating whether removal was proper, the filed-rate doctrine as a federal defense to Plaintiff's claims does not confer federal jurisdiction.
A corollary to the well-pleaded complaint rule is the "artful pleading" doctrine. As previously stated, the plaintiff is the master of her claims. Thus, if a plaintiff elects not to assert a federal claim, the defendant cannot remove the action to federal court. However, "removal will be held proper when the plaintiff has concealed a legitimate ground of removal by . . . artful pleading." 14B Charles Alan Wright et al., Federal Practice and Procedure § 3721, at 332-33 (3d ed. 1998). Under this doctrine, "a court is permitted to look behind a complaint to determine whether a plaintiff is attempting to conceal the federal nature of [her] claim." In re Wireless Tel. Radio Frequency Emissions Prod. Liab. Litig., 216 F. Supp.2d 474, 492 (D. Md. 2002). Therefore, "the plaintiff may be said to have engaged in `artful pleading' . . . when [she] pleads . . . a . . . state cause of action the merits of which turn on an important federal question." Wright et al., supra § 3721, at 333. Because Plaintiff's amended complaint on its face presents no federal question, the court must look behind the complaint to determine whether Plaintiff is attempting to conceal the federal nature of her claims.
Defendant argues that because Plaintiff is challenging its FUSC, which is set forth in a tariff filed with the FCC, her claims arise under federal law. In Plaintiff's brief in support of her motion to remand, Plaintiff adopted the position that Defendant is no longer required to file a tariff, and therefore she can maintain her state law causes of action. Effective July 31, 2001, the FCC amended the federal regulation that required long distance carriers to set forth their rates and charges in tariffs. Prior to this de-tariffing, most state causes of action were preempted. Following the FCC's de-tariffing efforts, however, the full range of state consumer protection laws are now available to consumers. Operating under the belief that Defendant was no longer required to file a tariff, Plaintiff further stated that her "claims are limited to the recovery of excessive Federal Universal Service Fees paid to BellSouth after the effective date of detariffing." (Pl.'s Br. Supp. Mot. Remand at 7.)
Plaintiff's position regarding de-tariffing as it relates to Defendant, however, is incorrect. The FCC's decision to no longer require the filing of tariffs applies only to interexchange long distance providers. Defendant, however, is a local exchange carrier and is still subject to the regulation requiring the filing of tariffs. Plaintiff attempted to retreat from her earlier position by arguing that she is not contesting the rate charged, but instead is challenging the "imposition of any charge without full disclosure to customers of all of the material facts surrounding the charge." (Pl.'s Reply Br. Supp. Mot. Remand at 2.) Notwithstanding her assertions to the contrary, Plaintiff's amended complaint clearly indicates that she is challenging the FUSC collected by Defendant as excessive, in addition to her claims regarding Defendant's failure to disclose material information.
Because Plaintiff is challenging the FUSC as excessive, her claims are a direct challenge to the terms of the tariff filed with the FCC. Plaintiff alleges that Defendant breached its contract with its customers by, inter alia, "charging . . . an excessive Federal Universal Service Charge." (First Am. Compl. ¶ 29(a).) Plaintiff also makes the same allegation in her unjust enrichment/restitution claim, which states that "BellSouth has imposed an excessive and unlawful Federal Universal Service Charge on North Carolina consumers." (Id. ¶ 26.)
"`The legal relationship between [Defendant] and its customers is defined by the tariffs, which consist of the terms and conditions of the common carrier's service and rates, that [Defendant] is required to file and maintain with the' FCC under the FCA." Marcus v. ATT Co., 138 F.3d 46, 56 (2d Cir. 1998) (quoting ATT Co. v. City of New York, 83 F.3d 549, 552 (2d Cir. 1996)). "Moreover, `federal tariffs are the law, not mere contracts.'" Id. (quoting MCI Telecomms. Corp. v. Garden State Inv. Corp., 981 F.2d 385, 387 (8th Cir. 1992)); see also ATT Co. v. City of New York, 83 F.3d 549, 552 (2d Cir. 1996) (stating that filed tariffs "have the force of law and are not simply contractual"); Carter v. ATT Co., 365 F.2d 486, 496 (5th Cir. 1966) ("[A] tariff, required by law to be filed, is not a mere contract. It is the law."). Thus, "[a] tariff filed with a federal agency is the equivalent of a federal regulation, and so a suit to enforce it, and even more clearly a suit to invalidate it as unreasonable under federal law, . . . arise under federal law."Cahnmann v. Sprint Corp., 133 F.3d 484, 488 (7th Cir. 1998) (citations omitted) (citing Thurston Motor Lines, Inc. v. Jordan K. Rand. Ltd., 460 U.S. 533 (1983) (per curiam) (holding federal question jurisdiction exists over suits involving filed tariff)); see also In re Universal Serv. Fund Tel. Billing Practices Litig., No. 02-MD-1468, 2002 WL 31929179, at *11 (D. Kan. Dec. 19, 2002) (holding that claims challenging a carrier's USE contributions as "excessive, unfair, or otherwise unlawful" "raise substantial questions of federal law `on which the outcome of [the] lawsuit turn'").
Plaintiff challenges the rate of the FUSC as explicitly set forth in the tariff filed with the FCC, contending that the rate is excessive and unlawful. Such a challenge calls into question the validity and reasonableness of the tariff. Therefore, because a duly filed tariff has the force and effect of federal law and some of Plaintiff's claims challenge the rate explicitly specified in that tariff, these claims necessarily raise a substantial federal question over which federal courts may properly exercise jurisdiction.
In addition to Plaintiff's claims contesting Defendant's FUSC as excessive, she alleges claims that do not directly challenge the FUSC. Among the allegations unrelated to Plaintiff's direct challenge are claims that Defendant failed to disclose sufficient information about how the charges are calculated and that the charges include administrative expenses, costs, and/or profits. Furthermore, Plaintiff alleges that Defendant represented to its customers that the collected FUSC is paid to the USF, which she contends is a false statement. While claims that directly challenge the validity of a rate contained in a tariff raise a federal question, claims that challenge conduct as deceptive or misleading do not raise a federal question because their "adjudication [does] not require determining the validity of a tariff." Cahnmann, 133 F.3d at 488; see, e.g., In re Long Distance Telecomms, Litig., 831 F.2d 627 (2d Cir. 1987) (stating that claims for fraud and deceit based on the defendants' failure to notify customers of billing practices did not raise a federal question); Braco v. MCI WorldCom Communications, Inc., 138 F. Supp.2d 1260 (C.D. Cal. 2001) (remanding claims for deceptive and misleading practices because claims did not raise a federal question);Crump v. WorldCom, Inc., 128 F. Supp.2d 549, 555 (W.D. Tenn. 2001) (remanding state law claims for deceptive practices because "conduct complained of . . . relates to misrepresentations . . . and is not a direct attack on rates"); Minnesota v. WorldCom, Inc., 125 F. Supp.2d 365, 371-72 (D. Minn. 2000) (remanding state law claims for deceptive trade practices because nothing in the complaint "require[d] a determination of whether the rates . . . filed with the FCC [were] valid or enforceable"); Sanderson, Thompson, Ratledge Zimny v. AWACS, 958 F. Supp. 947, 955 (D. Del. 1997) (remanding claims challenging the defendant's failure to disclose its billing method because claims did not challenge the "reasonableness of [the defendant's] billing rates or its method of calculating those rates").
To the extent that Plaintiff's claims challenge Defendant's failure to disclose certain information and misrepresentations, these claims do not raise a federal question and are appropriately styled state law claims. Unlike Plaintiff's claims contesting the FUSC, these claims do not attack the validity of the tariff. Rather, Plaintiff is challenging the fact that Defendant did not disclose the true nature of the charge. Nevertheless, because Plaintiff's claims challenging the FUSC as excessive raise a federal question, jurisdiction over Plaintiff's remaining state law claims is proper under the court's supplemental jurisdiction. 28 U.S.C. § 1367.
II. Motion to Dismiss
Defendant argues that Plaintiff's claims should be dismissed as barred by the filed-rate doctrine. The "filed-rate" doctrine, also known as the "filed-tariff" doctrine, "forbids a regulated entity to charge rates for its services other than those properly filed with the appropriate federal regulatory authority." Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 577 (1981). "Tariffs filed with the F.C.C. conclusively and exclusively control the rights and liabilities between a carrier and its customers" with respect to tariffed services unless and until the FCC finds the tariff unlawful. MCI Telecomms. Corp. v. Graham, 7 F.3d 477, 479 (6th Cir. 1993). One of the principles underlying the filed-rate doctrine is to preserve the "exclusive role of federal agencies in approving rates for telecommunications services that are `reasonable' by keeping courts out of the rate-making process, . . . a function that the federal regulatory agencies are more competent to perform." Marcus, 138 F.3d at 58. Indeed, a direct attack upon a rate duly set forth in a tariff "would unnecessarily enmesh the courts in the rate-making process" and "unduly subvert the regulating agencies' authority." Wegoland v. NYNEX Corp., 27 F.3d 17, 19, 21 (2d Cir. 1994) (citing Montana-Dakota Utils. Co. v. Northwestern Pub. Serv. Co., 341 U.S. 246 (1951)).
Plaintiff challenges as excessive the FUSC set forth in Defendant's tariff. Such a challenge can be characterized only as a direct attack on the validity and reasonableness of the rate. As a remedy to her claim that the FUSC is excessive, Plaintiff seeks compensatory damages. Apparently, these damages would be the difference between the actual rate paid and some other rate determined by the court. Such judicial action, however, would undermine the regulatory agency's rate-making authority.
Defendant is required by law to file its tariff with the FCC. The tariff sets forth the rate of the FUSC. Once the tariff is approved by the FCC, it is by "definition reasonable unless and until the FCC, as the `legislatively appointed regulatory bod[y] [with] institutional competence,' says otherwise." Marcus, 138 F.3d at 61 (quoting Sun City Taxpayers' Ass'n v. Citizens Utils. Co., 45 F.3d 58, 62 (2d Cir. 1995)). The imposition of monetary damages, which Plaintiff seeks as her only remedy, however, would require the court to determine that the filed FUSC rate is unreasonable. The court would then be required to determine what the reasonable rate should be. Such a scenario would clearly subvert the authority of the FCC and undermine the regulatory regime, thus implicating the filed-rate doctrine. Accordingly, the court will dismiss, as barred by the filed-rate doctrine, Plaintiff's claims to the extent that they challenge the FUSC as excessive.
III. State Law Claims
Plaintiff's suit was properly removed because her claims challenging Defendant's FUSC as excessive raise a federal question over which this court had original jurisdiction. Plaintiff's remaining claims, which do not directly challenge Defendant's FUSC but rather challenge Defendant's failure to disclose material information, do not raise a federal question. Jurisdiction over these claims, therefore, is predicated upon the court's supplemental jurisdiction.
Section 1367(c)(3) provides a district court with discretion to dismiss a claim supported only by supplemental jurisdiction if it has dismissed all claims over which it had original jurisdiction. 28 U.S.C. § 1367 (c)(3). Because this court will grant Defendant's motion to dismiss as to Plaintiff's claims challenging Defendant's FUSC under the filed-rate doctrine, the court, within its discretion granted pursuant to Section 1367(c)(3), will remand Plaintiff's remaining state law claims to the General Court of Justice, Superior Court Division, Guilford County, North Carolina.
CONCLUSION
For the reasons set forth in this opinion, the court will grant Plaintiff's motion to remand to the extent that her claims challenge Defendant's failure to disclose material information and deny Plaintiff's motion to remand to the extent that her claims challenge as excessive Defendant's FUSC which was duly filed in a tariff with the FCC. As to Defendant's motion to dismiss, the court will grant Defendant's motion to dismiss Plaintiff's claims contesting the FUSC under the filed-rate doctrine and deny Defendant's motion to dismiss Plaintiff's remaining state law claims.
An order in accordance with this memorandum opinion shall be entered contemporaneously herewith.
ORDER
For the reasons set forth in the memorandum opinion filed contemporaneously herewith,
IT IS ORDERED that Plaintiff's motion to remand [Doc. #9] is GRANTED IN PART AND DENIED IN PART. Plaintiff's motion to remand is GRANTED as to Plaintiff's claims which challenge Defendant's failure to disclose material information, and Plaintiff's claims which challenge Defendant's failure to disclose material information are REMANDED to the General Court of Justice, Superior Court Division, Guilford County, North Carolina. Plaintiff's motion to remand is DENIED as to her claims which challenge as excessive Defendant's Federal Universal Services Charge which was duly filed in a tariff with the FCC.
IT IS FURTHER ORDERED that Defendant's motion to dismiss [Doc. #14] is GRANTED IN PART AND DENIED IN PART. Defendant's motion to dismiss is GRANTED as to Plaintiff's claims contesting the Federal Universal Services Charge under the filed-rate doctrine, and Plaintiff's claims contesting the Federal Universal Services Charge under the filed-rate doctrine are DISMISSED. Defendant's motion to dismiss is DENIED as to Plaintiff's remaining state law claims.