Opinion
CAUSE NO. IP02-0170-C-H/K.
December 2, 2004
ENTRY ON MOTION FOR SUMMARY JUDGMENT
In this diversity action, plaintiffs Indiana Bell Telephone Co. and Michigan Bell Telephone Co. (collectively "Ameritech") have sued Thrifty Call, Inc. ("TCI") seeking recovery under state law for fraud and conspiracy to defraud, as well as under an Indiana statute providing civil remedies to crime victims. Ameritech has alleged that TCI, a long distance telephone carrier, participated with others in a scheme to fraudulently induce Ameritech to supply local phone lines in Indianapolis and Detroit that were then used to terminate long distance calls as local calls, thus avoiding tariff-based termination fees. The court previously denied TCI's motion to dismiss the action. Indiana Bell Telephone Co. v. Ward, 2002 WL 32067296 (S.D. Ind. Dec. 6, 2002).
TCI has moved for summary judgment. TCI argues first that all claims for damages incurred before January 28, 2000 are barred by the two-year statute of limitations in the Federal Communications Act ("FCA"), 47 U.S.C. § 415(a) (b). TCI also argues that all claims for damages incurred on or after January 28, 2000 are barred because TCI was not Ameritech's customer with respect to the phone lines at issue. For the reasons explained below, the court denies TCI's motion for summary judgment, as well as the motion for oral argument on the motion.
The court will consider separately at a later date Ameritech's pending objection to the magistrate judge's order allowing TCI to amend its answer to add the statute of limitations defense, which was first raised in the summary judgment motion.
The purpose of summary judgment is to "pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). When deciding a motion for summary judgment, the court considers those facts that are undisputed and views additional evidence, and all reasonable inferences drawn therefrom, in the light reasonably most favorable to the non-moving party. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
Section 415 of the FCA provides in relevant part:
(a) Recovery of charges by carrier: All actions at law by carriers for recovery of their lawful charges, or any part thereof, shall be begun within two years from the time the cause of action accrues, and not after.
(b) Recovery of damages: All complaints against carriers for the recovery of damages not based on overcharges shall be filed with the Commission within two years from the time the cause of action accrues, and not after, subject to subsection (d) of this section.
TCI argues that regardless of the labels that Ameritech has given its claims, Ameritech seeks to recover tariff-based fees so that its claims are governed by 47 U.S.C. § 415(a). TCI also argues that it is a carrier itself, and that this case against it falls within the scope of § 415(b). From TCI's point of view, the statute of limitations started running on Ameritech's claims no later than December 1999. Therefore, TCI contends, because Ameritech did not bring its action until January 28, 2002, more than two years later, the claims arising before January 28, 2000 are time-barred.
Deciding whether to apply the federal statute of limitations in § 415 requires the court to consider the relationship between § 415 and the FCA's preemptive power and the savings clause in 47 U.S.C. § 414. The savings clause provides: "Nothing in this Act contained shall in any way abridge or alter the remedies now existing at common law or by statute, but the provisions of this Act are in addition to such remedies." The Seventh Circuit has instructed that the savings clause must be read "narrowly to avoid swallowing the rule, but not so narrowly as to render it a dead letter." Bastien v. ATT Wireless Services, Inc., 205 F.3d 983, 987 (7th Cir. 2000). The Seventh Circuit has explained that the proper operation of the savings cause is demonstrated by In re Long Distance Telecommunications Litigation, 831 F.2d 627, 633-34 (6th Cir. 1987), which involved "a claim of simple fraud, and its adjudication did not require determining the validity of a tariff." Cahnmann v. Sprint Corp., 133 F.3d 484, 488 (7th Cir. 1998) (finding that breach of contract claim was preempted where relief would have effectively invalidated a filed tariff). Although the FCA has substantial preemptive force, the savings clause shows that Congress did not intend to displace existing state law remedies, such as those for fraud. See, e.g., Cooperative Communications, Inc. v. ATT Corp., 867 F. Supp. 1511, 1516 (D. Utah 1994) ("the savings clause clearly indicates Congress' intent that independent state law causes of action, such as interference with contract or unfair competition, not be subsumed by the Act, but remain as separate causes of action").
I. Section 415(a)
At the motion to dismiss stage, the court held that Ameritech's claims for fraud are not preempted by the FCA. Under the reasoning of that decision, these claims for fraud do not seek recovery of "lawful charges," do not arise under the FCA, and are not subject to the two-year limit in § 415(a). Cf. International Magazine Service of Atlanta, Inc. v. Allnet Communications Services, Inc., 469 S.E.2d 305, 306 (Ga.App. 1996) (holding that where state law claim for breach of contract was preempted by the FCA, § 415(a) statute of limitations applied).
Under Indiana law, actions for relief against fraud are subject to a six-year statute of limitations. Ind. Code § 34-11-2-7.
II. Section 415(b)
Notwithstanding the reference in § 415(b) to filings "with the Commission," the two-year limit in § 415(b) also applies to claims against carriers that arise under the FCA when those claims are pursued in district courts. Hofler v. ATT Co., 328 F. Supp. 893, 894 (E.D. Va. 1971); Ward v. Northern Ohio Tel. Co., 251 F. Supp. 606, 611 (N.D. Ohio 1966), aff'd, 381 F.2d 16 (6th Cir. 1967). Judge Young showed in Ward why the reference in § 415(b) to filing "with the Commission" does not prevent application of the statute of limitations to claims asserted in district courts.
In this case, however, TCI argues that § 415(b) should apply to some claims against carriers that do not arise under the FCA and that are neither governed by federal law nor preempted by federal law. In support of this extraordinary extension of federal law — after all, why would Congress try to write a statute of limitations for state law claims that it had taken special care to preserve with the savings clause of § 414? — TCI offers no direct support.
TCI relies on the Ninth Circuit's decision in Pavlak v. Church, 727 F.2d 1425, 1428-29 (9th Cir. 1984) (Kennedy, J.). The Pavlak court had no difficulty holding that § 415(b) applied to a claim that arose under the FCA itself, for violation of 47 U.S.C. § 605, which bars unauthorized interception of communications. The court also applied that federal statute of limitations to the plaintiffs' federal civil rights claims. At that time, before the Supreme Court's decision in Wilson v. Garcia, 471 U.S. 261, 276-79 (1984) (holding that all § 1983 claims would be subject to state statute of limitations for personal injury claims), federal courts hearing civil rights claims borrowed the most closely analogous statute of limitations. This portion of Pavlak was simply a straightforward application of the borrowing principles of that era. The case provides no support for TCI's attempt to apply the federal statute of limitations to a state law claim that is already subject to its own state law statute of limitations, with no need for borrowing.
TCI also relies on Swarthout v. Michigan Bell Tel. Co., 504 F.2d 748, 749 (6th Cir. 1974), but that reliance is also misplaced. Swarthout held that plaintiffs could not use a Michigan fraudulent concealment statute to toll the § 415(b) statute of limitations for a federal claim against a carrier under the FCA. The case offers no basis for extending the language of § 415(b) to apply to state law claims that are not preempted and that could not be filed before the FCC.
TCI finds its strongest support in a paragraph in MFS International, Inc. v. International Telecom Ltd., 50 F. Supp. 2d 517, 520 (E.D. Va. 1999), but even that support is weak. The court wrote in MFS International that § 415(b) should apply to state law claims against a carrier for breach of contract and conversion. In the following paragraph, however, the court made clear that those same claims were preempted and necessarily arose under the FCA, so that the federal statute of limitations would of course apply. There was no clear indication from the court, let alone a convincing reason to find, that the federal statute of limitations should apply to state law claims like Ameritech's claims here, which are not preempted and are not deemed to arise under federal law.
Adopting TCI's arguments would create an improbable and complicated system of vague categories of claims against telephone carriers. The first category would be claims that arise under the FCA, which are governed by federal law and the federal statute of limitations. That much is unexceptionable. But TCI must concede that § 415(b) does not apply to every claim against a carrier, such as ordinary business claims arising from property or equipment leases, torts, employment disputes, or other routine business matters, that are neither preempted by federal law nor subject to the federal statute of limitations. TCI's arguments would require the courts to create an amorphous third category, one that consists of state law claims against carriers that are not preempted by the FCA but which should still be subject to the federal statute of limitations in § 415(b). Though TCI would be satisfied so long as Ameritech's fraud claims against it fall within the category, the boundaries between this improbable category and the second category are not at all clear.
As this court views the problem, § 415(b) should be interpreted to apply to those claims that arise under the FCA, either directly or by reason of its preemptive force, and that could be filed either before the FCC or in federal district courts (without regard for diversity of citizenship). This result is consistent with the language of the statute (stretched to include claims in district courts, per the reasoning of Ward v. Northern Ohio Telephone). This result also has the benefit of being relatively simple to apply: if a claim arises under federal law, the federal statute of limitations applies; otherwise, it does not. This result is also consistent with the existing case law cited above. Accord, Cooperative Communications, Inc. v. ATT Corp., 867 F. Supp. 1511, 1519 (D. Utah 1994) (§ 415(b) did not apply to state law claims that did not arise under the FCA). This result also eliminates the difficult question of why Congress might have chosen to impose a federal statute of limitation on an undefined category of un-preempted state law claims.
The savings clause in § 414 preserves state law claims that are not intended to challenge, enforce, or invalidate a tariff. See, e.g., ATT v. Central Office Telephone, Inc., 524 U.S. 214 (1998); Cahnmann v. Sprint Corp., 133 F.3d 484, 490 (7th Cir. 1998). This court has already concluded that Ameritech's fraud claims are not preempted. The fact that Ameritech had no contractual relationship with TCI for the phone lines at issue further indicates that Ameritech's claims are fraud claims in substance as well as form. That fact also distinguishes this case from cases in which state law claims were artfully pled claims for breach of contract to enforce a tariff. Ameritech's fraud claims are not FCA claims in state law clothing, and the statute of limitations in § 415(a) and (b) does not apply here.
The court does not reach the issues of exactly when the statute of limitations clock began to run and whether equitable tolling might apply to excuse a delay in filing suit against TCI.
In light of this conclusion, Ameritech is also entitled to pursue its state law claims against TCI regardless of whether TCI was or was not Ameritech's customer. State law claims can be brought against non-customers. The court need not address the issue of whether claims governed by the FCA can be brought against non-customers.
For the foregoing reasons, defendant's motion for summary judgment is denied. Trial remains scheduled for January 10, 2005.
So ordered.