Appendix — U. S. Telecom, Inc. v. Speakers of Sport, Inc.

(y Supreme Court Us.

87-2 86 ) F ILED

=o 17 1987

In The JOSEPH F. SPANIOL, JR,

CLERK

Supreme Court of the United States "i

@ctober Cerm, 1987

U.S. TELECOM, INC. f/k/a U.S. TELEPHONE,

INC. AND U.S. TELEPHONE OF THE

MIDWEST, INC.,

Petitioner,

Vv.

SPEAKERS OF SPORT, INC., on its own behalf

and on behalf of all others similarly situated,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO

THE APPELLATE COURT OF THE

FIRST DISTRICT OF THE

STATE OF ILLINOIS

APPENDIX TO PETITION FOR CERTIORARI

APPENDIX A THROUGH J

MICHAEL W. WarRD

( Counsel of Record )

JOHN F. Warp, JR.

O’KEEFE, ASHENDEN, LYONS

& Warp

One First National Plaza

Suite 5100

Chicago, Illinois 60603

(312) 621-0400

Attorneys for Petitioner.

Pandick Technologies, Inc., Chicago @ (312) 236-0200

A-1

APPENDIX A

149 Ill. App. 3d 898,

501 N.E. 2d 318

(1st Dist. 1986)

appeal denied,

114 Ill. 2d 558,

508 N.E. 2d 736 (1987)

SPEAKERS OF SPORT, INC., _)

Plaintiff-Appellant,

Appeal from the Circuit

v8. Court of Cook County

ee? | a

MIDWEST, INC., oo

Defendants-Appellees.

No. 85-0292

Appellate Court of Illinois,

First District, Fifth Division.

Nov. 21, 1986.

JUSTICE LORENZ delivered the opinion of the court:

This is an appeal from an order of the circuit court

of Cook County dismissing plaintiff’s suit against US.

Telephone (U.S.T.) and U.S. Telephone of the Midwest

(U.S.T.M.). The dismissal was based on a finding of Fed-

eral preemption, primary jurisdiction in the FCC, and the

pendency of a Federal action involving the same cause and

the same parties.

We reverse and remand based upon the controlling

authority of Kellerman v. MCI Telecommunications Corp.

(1986), 112 Il].2d 428, 493 N.E.2d 1045.

Plaintiff Speakers of Sport sought to bring this action

on its own behalf and on behalf of the class of present and

A-2

former customers of U.S.T. and U.S.T.M. who had allegedly

been improperly charged for certain uncompleted long dis-

tance telephone calls. Plaintiff alleged that defendants

had a practice of billing for uncompleted telephone calls

where the telephone rang six times or more. The fact

of such charges was allegedly not disclosed in defendants’

FCC filings, rate schedules, and advertising. One count of

the first amended complaint charged defendants with fraud

based on these omissions. A second count alleged breach

of contract based on these omissions and based on plain-

tiff having contracted for service in reliance on the custom

and practice that customers were only charged from the

time a telephone connection was established. A third count

charged that defendants’ failure to disclose these charges

violated the Illinois Consumer Fraud and Deceptive Busi-

ness Practices Act (Ill. Rev. Stat. 1983, ch. 121 1/2, par

261, et seq.). |

Defendants moved to dismiss the complaint on three

grounds. They contended that exclusive jurisdiction over

these claims was in the Federal Communications Commis-

sion and the Federal courts under the preemption doctrine.

Alternatively they contended that under the doctrine of

primary jurisdiction the complaint should be dismissed

pending determination of the issues by the FCC. Finally

they contended that the court should exercise its discretion

to dismiss the action because of a pending Federal action

involving the same parties and the same issues. The cir-

cuit court subsequently dismissed the complaint based on

all three grounds.

We find that ail the issues in this cause are con-

trolled by our supreme court’s decision in Kellerman v.

MCI Telecommunications Corp. (1986), 112 Tll.2d 428, 493

N.E.2d 1045. In Kellerman the plaintiffs were subscribers

of MCI’s long distance telephone service who alleged, inter

alia, that in its advertisements and promotional mate-

rials MCI failed to disclose that it billed customers for

A-3

uncompleted calls and imposed a surcharge when the tele-

phone rang six or more times before it was answered.

It was alleged that defendant’s conduct violated the Con-

sumer Fraud and Deceptive Business Practices Act (Ill.

Rev. Stat. 1983, ch. 121 1/2, par. 261, et seg.) and the Uni-

form Deceptive Trade Practices Act (Ill. Rev. Stat. 1983,

ch. 121 1/2, par. 311, et seq.). Plaintiffs also alleged that

this conduct constituted common law fraud and a breach of

contract.

Defendant MCI moved to dismiss their actions, raising

the same preemption argument raised by plaintiff Speaker

of Sports in this cause. MCI also sought a stay of the

actions based on the same contentions of primary jurisdic-

tion and the pendency of a Federal action raised by plain-

tiff here. The circuit court’s refusal to dismiss or stay these

actions was then affirmed by this court and by the Illinois

Supreme Court.

As the supreme court noted in Kellerman, the preemp-

tion doctrine provides that in some instances Federal law

will override or preempt state laws concerning the same

subject. (112 I1l.2d 428, 438, 493 N.E.2d 1045, 1049; Rice

v. Santa Fe Elevator Corp. (1947), 331 U.S. 218, 91 L.Ed.

1447, 67 S.Ct. 1146.) In determining whether Congress

intended Federal law to preempt state law the courts must

determine whether the Federal regulation is so persuasive

that it may reasonably be inferred that the state could not

supplement the regulation or whether state law actually

conflicts with the Federal law. Fidelity Federal Savings &

Loan Association v. De La Cuesta (1982), 458 U.S. 141, 153,

73 L.Ed.2d 664, 675, 102 S.Ct. 3014, 3022; cited in Keller-

man v. MCI Telecommunications Corp. (1986), 112 I[ll.2d

428, 439, 493 N.E.2d 1045, 1049.) The Kellerman court

examined the Communications Act (47 U.S.C. sec. 151,

et seq. (1982)), and determined that the plaintiffs’ actions

were not preempted by the Act, stating:

“The subject matter of plaintiffs’ complaints

A-4

involves neither the quality of defendant’s ser-

vice nor the reasonableness and lawfulness of

its rates. Plaintiffs only allege that defendant

disseminated fraudulent and deceptive advertise-

ments concerning the cost of its long-distance tele-

phone service. As such, plaintiffs seek to hold

defendant to the same standards as they would

any other business which advertises on a nation-

wide basis and which, in the course of its busi-

ness, is subject to regulation from a number of

Federal and State agencies. Moreover, these

actions do not present ‘an obstacle to the accom-

plishment’ of the Federal policy of promoting a

‘rapid, efficient * * * communication service with

adequate facilities at reasonable charges.’ (47

U.S.C.sec. 151 (1982).) The prosecution of these

claims will in no way interfere with the delivery

of long-distance telephone service to defendant’s

customers, and any possible effect the litigation

could have on defendant’s telephone rates is spec-

ulative at best. Finally, no Federal statute or reg-

ulation has been brought to our attention which

would express!y prohibit these actions. Therefore,

we find that Congress did not intend to occupy the

field of interstate telephone service to the extent

of barring these State-law claims for fraud, breach

of contract and deceptive practices, and hold that

plaintiffs’ actions are not preempted.” 112 IIl.2d

428, 443-44, 493 N.E.2d 1045, 1051-52.

In this cause defendants note that plaintiff ’s amended

complaint contains many references to alleged “improper

charges” by defendants. But when read in its entirety

it becomes clear that the gravamen of the complaint con-

cerns defendants’ allegedly misleading advertising and

rate schedules. Like the plaintiffs in Kellerman, the plain-

tiff here is not actually challenging the reasonableness

or lawfulness of defendants’ rates. Therefore under the

authority of Kellerman we find no Federal preemption of

plaintiff ’s state action.

The circuit court also dismissed plaintiff’s complaint

in this cause because it found that primary jurisdiction

A-5

over the dispute rested with the Federal Communications

Commission. Yet this same contention was rejected by

the Kellerman court. Under the doctrine of primary juris-

diction when an administrative agency has specialized

expertise that would help resolve a controversy before the

court, that court should stay the judicial proceedings pend-

ing referral of the controversy to that agency. Nader v.

Allegheny Airlines, Inc. (1976), 426 U.S. 290, 48 L.Ed.2d

643, 96 S.Ct. 1978; United States v. Western Pacific R.R.

Co. (1956), 352 U.S. 59, 1 L.Ed. 2d 126, 77 S.Ct. 161; Keller-

man v. MCI Telecommunications Corp. (1986), 112 111.2d

428, 493 N.E.2d 1045.

In rejecting the applicability of this doctrine in Keller-

man the Supreme Court stated:

“* * * the plaintiffs here do not contest the reason-

ableness or lawfulness of defendant’s charges or

billing practices, but only seek recovery for defen-

dant’s failure to disclose certain facts. In resolving

the dispute it will not be necessary to evaluate ‘the

economics or technology of the regulated industry’

(Nader v. Allegheny Airlines, Inc. (1976), 426 U.S.

290, 305, 96 S.Ct. 1978, 1987, 48 L.Ed.2d 643);

and, thus, we see little benefit, if any, in referring

plaintiffs’ claims to the FCC. Plaintiffs allege com-

mon law claims and violations of State statutes.

The legal and factual issues that are involved in

these cases are standard fare for judges, and, con-

sequently, must be deemed to be ‘within the con-

ventional competence of the courts.” (Nader v.

Allegheny Airlines, Inc. (1986), 426 U.S. 290, 305-

06, 96 S.Ct. 1978, 1987, 48 L.Ed. 2d 643, 656.)

Therefore, we reject defendant’s argument that the

primary-jurisdiction doctrine requires that these

actions be stayed pending referral to the FCC.”

(112 Ill.2d 428, 446, 493 N.E.2d 1045, 1053.)

This holding is fully applicable to this cause where the

plaintiff ’s similar claims raise no issue requiring the spe-

cialized or technical expertise of the FCC. Therefore we

find that the circuit court erred in dismissing plaintiff ’s

A-6

suit on this ground.

The final basis for the circuit court’s dismissal of this

action was the pendency of a class action suit involving the

same parties in the United States District Court for the

Eastern District of Michigan. Under section 2-619(a) (3)

of the Code of Civil Procedure (Ill.Rev. Stat. 1983, ch. 110,

par. 2-619(a) (3)) a court may in the exercise of its discre-

tion dismiss or stay an action when another action is pend-

ing between the same parties for the same cause.

Again, this same class action was cited by the defen-

dant in Kellerman as a basis for staying the Kellerman

suit. In affirming the circuit court’s denial of the stay the

Kellerman court specifically stated:

“None of the counts remaining in the Federal

action allege common law claims for fraud or

breach of contract, or claims based on Illinois’

deceptive trade and consumer fraud statutes, but

relate only to whether defendant’s failure to dis-

close its charges constitutes a violation of section

201(b) (47 U.S.C. sec. 201(b)) of the Communica-

tions Act. The issue of whether defendant’s fail-

ure to disclose certain charges is ‘unjust or unrea-

sonable’ under section 201(b) of the Communica-

tions Act has no relevance as to whether defen-

dant’s failure to dieclose those charges constituted

fraud, a breach of contract, or a violation of Dli-

nois’ statutes. While some of the same documen-

tary evidence may be used in both cases, the law-

suits involve entirely different theories and liti-

gation strategies. Thus, considerations of comity,

multiplicity, and res judicata do not persuade us

that these actions should be stayed. Moreover, as

the trial judge observed, these actions were among

the first to be filed in the country, and, conse-

quently, it cannot be argued that the actions were

filed with a vexatious purpose or with the intent to

harass defendant. Thus, we find that the refusal

to grant a stay pursuant to section 2-619(a) (3) was

not an abuse of discretion.” 112 Ill.2d 428, 448-49,

493 N.E.2d 1045, 1054.

A-7

This same reasoning is applicable to the cause before

us. Defendants correctly note that the decision to grant

or deny section 2-619(a) (3) relief is discretionary. (People

ex rel. Department of Public Aid v. Santos (1982), 92 II.

2d 120, 440 N.E.2d 876.) But the purpose of this section

is to avoid duplicative litigation. (People ex rel. Phillips

Petroleum Co. v. Gitchoff (1976), 65 Tll.2d 249, 357 N.E.2d

534.) Our Supreme Court in Kellerman determined that

the issues in the pending Federal action have no relevance

to the issues of fraud, breach of contract, and violation of

Illinois statutes raised in Kellerman. Those same issues

are raised in this action. Therefore because no duplicative

litigation would be avoided by the dismissal or stay of this

action, we find that the circuit court abused its discretion

in dismissing this action on that ground.

The judgment of the circuit court is reversed and this

cause is remanded for further proceedings.

REVERSED AND REMANDED.

PINCHAM AND MURRAY, JJ., concur.

B-1

APPENDIX B

STATE OF ILLINOIS

SUPREME COURT CLERK

SUPREME COURT BUILDING

"SPRINGFIELD 62706

May 19, 1987

Mr. Michael W. Ward

O’Keefe, Ashenden, Lyons, & Ward

One First National Plaza, S#5100

Chicago, IL 60603

THE COURT HAS TODAY ENTERED THE FOLLOW-

ING ORDER IN THE CASE OF:

No. 64625 — Speakers of Sport, Inc., respondent, v.

U.S. Telephone, Inc., et al., petitioners.

Motion by petitioners for leave to file a motion for recon-

sideration of the order denying petition for leave to appeal.

Motion denied.

Motion by petitioners to stay mandate pending disposition

of motion for reconsideration of the order denying petition

for leave to appeal or should said motion be denied to fur-

ther stay mandate pending the timely filing and disposi-

tion of a petition for writ of certiorari in the United States

Supreme Court. Alternative relief allowed.

JH:as

Enclosure

cc: Hannafan & Handler

Davis, Miner, Barnhill & Galiand

B-2

No. 64625

IN THE

SUPREME COURT OF ILLINOIS

Speakers of Sport, Inc., ”

Respondent ee rome

Spo Appellate Court

2. First District

U.S. Telephone, Inc., et al., AC1-85-0292

Petitioners V

ORDER

This matter has come for consideration upon the

motion of petitioner to stay the mandate of this Court pend-

ing appeal or application for certiorari in the United States

Supreme Court.

IT IS ORDERED that the mandate of this Court in

the above cause is stayed pending the filing of a notice of

appeal or an application for certiorari or the expiration of

the period within which said application or notice may be

filed. If certiorari is applied for or notice of appeal filed,

the mandate of this Court shall, upon proof of such filing

being made by affidavit filed with the clerk of this Court,

be further stayed pending resolution by the United States

Supreme Court of such application or appeal. If no such

affidavit is filed, the mandate shall, without further order,

issue upon the expiration of the time within which appeal

or certiorari may be sought.

FILED

May 19, 1987

SUPREME COURT CLERK

C-1

APPENDIX C

64625 ILLINOIS SUPREME COURT

JULEANN HORNYAK, CLERK

SUPREME COURT BUILDING

SPRINGFIELD, ILL. 62706

(217) 782-2035

April 15, 1987

O’Keefe, Ashenden, Lyons & Ward

Attorneys at Law

One First National Plaza, S#5100

Chicago, IL 60603

No. 64625 — Speakers of Sport, Inc., respondent, v. U.S.

Telephone, Inc., et al., petitioners. Leave to

appeal, Appellate Court, First District.

The Supreme Court today DENIED the petition for

leave to appeal in the above entitled cause.

The mandate of this Court will issue to the Appellate

Court on May 7, 1987.

D-1

APPENDIX D

ENTERED

CLERK OF THE CIRCUIT COURT

ORDER MORGAN M. FINLEY

DEC 28 1984

JUDGE DAVID J. SHIELDS

Deputy Clerk

IN THE CIRCUIT COURT OF COOK COUNTY,

ILLINOIS

SPEAKERS OF SPORT, INC, et al. >)

Plaintiffs,

Vv

U.S. TELEPHONE, INC. and U.S. 7 No. 84 L 3247

TELEPHONE OF THE MIDWEST,

INC.

Defendants. J

ORDER

This cause coming before the Court on Defendants’

Motion to Dismiss pursuant to I]. Code Civ. Proced. §2-619,

all parties being represent by counsel, memoranda and oral

arguments having been submitted and the court being fully

advised in the premises

IT IS HEREBY ORDERED

1) Defendants’ motion to dismiss is granted due to

Federal preemption;

2) Defendants’ motion to dismiss is granted due

to primary jurisdiction resting in the FCC;

Plaintiff ’s request to stay the action is denied;

3) Defendants’ motion to dismiss under §2-619 (a)

(3) is granted.

Atty No.: 25832

Name: Michael W. Ward

Attorney for: U.S. Telephone, Inc. et al.

Address: 1 First National Plaza 84L142 742 ,19 __

City: Chicago

Telephone: 621-0400 ENTER: /s/

Judge Judge’s No.

D-2

IN THE

CIRCUIT COURT OF COOK COUNTY,

ILLINOIS COUNTY DEPARTMENT-LAW DIVISION

—_

SPEAKERS OF SPORT,

Plaintiff,

_ > No. 84 L 3247

U.S. TELEPHONE,

Defendant.

7

REPORT OF PROCEEDINGS had at the hearing of

the above-entitled cause, before the Honorable DAVID J.

SHIELDS, Judge of said court, on Friday, the 28th day of

December, 1984, at the hour of 10:00 o’clock A.M.

PRESENT:

MR. MICHAEL HANNAFAN and MR. SEAN

O’SHEA, appeared on behalf of the Plaintiff.

MR. MICHAEL WARD,

appeared on behalf of the Defendant.

Christina F. Basis

Official Court Reporter

Law Division

Circuit Court of Cook County

D-3

THE COURT: Thank you for your respective remarks.

I do not want to hear anymore about it.

I appreciate the cases that you have submitted, the

arguments that you have made. I have also reviewed care-

fully an article in the Federal Communications Law Jour-

nal, 32 Fed Com LJ 205, entitled Storming the AT&T

Fortress and the FCC Deregulated Common Carrier Ser-

vices.

I read the cases of Benanti v. United States, 355 U.S.

96; the case of General Telephone of California and Federal

Communications v. Federal Communications Division, 113

Federal 2d 390; New York Telephone Company v. FCC,

631 Federai 2d 1059; and certain other cases which were

not cited in either brief.

I am satisfied that there is federal preemption. The

motions to dismiss must be sustained. The FCC has gen-

eral categorical control over the scheme and system with

respect to telephone communication regulation; and that

to proceed as you suggested in the state court would be

inappropriate.

Pursuant to my discretion, the motion to dismiss pur-

suant to Section 619 will be sustained.

MR. WARD: Thank you, your Honor.

MR. HANNAFAN: We have raised in our brief that

alternatively to a dismissal that it would be more appro-

priate to stay the proceedings.

THE COURT: I know you did.

MR. HANNAFAN: Until the FCC may or may not

rule, if it ever gets around to it, and we think that in this

case rather than a dismissal a stay is more appropriate so

we can maintain the cause of action, should the FCC ever

get around to deciding anything in the case.

THE COURT: I respectfully disagree with that. It will

be dismissed. I am aware that you did suggest that, and it

is in your brief.

D-4

MR. WARD: Do you want us to draft an order?

THE COURT: For your benefit you should. I think it

is adequately said, but “or your own protection...

MR. HANNAFAN: We would like an order, judge.

(Which was all the evidence heard and

received in the above-entitled matter.)

E-1

APPENDIX E

2 F.C.C. Red. 2171 (1987)

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of CERTIFIED COLLATERAL CORP.;

Euromarket Designs, Inc. d/b/a CRATE AND BARREL;

LILY M. FEITLER; MARK HOCHMAN; McINTOSH

EMBOSSING, INC.; SEYMOUR LAZER; A. LINDA

LEVENTHAL; ROGER LEE and LANI LEE; DAVID

H. LOCKS; EARL E. OLIVE; CHARLES KAPLAN; and

BELTING INDUSTRIES, CoO., INC., on behalf of them-

selves and all others similarly situated,

Complainants,

v

ALLNET COMMUNICATIONS SERVICES, INC., File No.

E-86-063; GTE SPRINT COMMUNICATIONS CORP.,

File No. E-86-064; MCI TELECOMMUNICATIONS

CORP., File No. E-86-065; U.S. TELEPHONE OF THE

MIDWEST, INC., File No. E-86-066; THE WESTERN

UNION TELEGRAPH COMPANY, File No. E-86-067;

ITT-U.S. TRANSMISSION SYSTEMS, INC., File No. E-

86-068,

Defendanis.

MEMORANDUM OPINION AND ORDER

Adopted April 6, 1987; Released: April 14, 1987

By the Chief, Common Carrier Bureau:

1. Before us is a complaint filed by the above-named

complainants on behalf of themselves and all others sim-

ilarly situated.’ Complainants allege that each of them

purchased telecommunications services from one or more

?Also before us are answers from each of the defen-

dants and complainants’ reply to the answers. In addi-

tion, The Western Union Telegraph Company (“Western

Union”) and ITT-United States Transmission Systems, Inc.

(“USTS”), each filed a Motion for More Definite Statement.

Complainants responded to those two motions. We dismiss

the Motions for More Definite Statements as moot because

we are dismissing the complaints.

|

E-2

of the defendant carriers? and each has been overcharged

for some of those services. They seek refund of the over-

charges and relief from the practices leading to the over-

charges. For the reasons stated below, we will dismiss the

complaint.

I. BACKGROUND

2. Most complainants were plaintiffs in class action

suits® in the United States District Court for the Eastern

District of Michigan. Therein it was alleged that defen-

dants regularly charge consumers for long-distance tele-

phone calls which are not actually completed and that their

billing practices are such that the consumer is unlikely

to discover such charges. The Court dismissed the com-

plaints and referred them to this Commission under the

doctrine of primary jurisdiction. Therefore, complainants

filed the instant complaint at the Commission on January

8, 1986, along with a motion for waiver of the Commis-

sion’s procedural rules governing formal complaints. 47

C.F.R. § 1.735(b). The complainants believe these rules are

not compatible with class action litigation. The Bureau

granted the motion in part, finding that the named com-

2GTE Corporation was also listed as a defendant in the

original complaint. However, it filed a Motion to Dismiss

Formal Complaint as to it, and the complainants have

consented. Accordingly, we will grant GTE Corporation’s

motion.

3Belting Industries Co. Inc. asserts it is the repre-

sentative of a subclass not pleaded in the District Court

action.

*Long Distance Telecommunication Litigation, MDL No.

598, Case No. 84CU5639DT (E.D. Mich.,' June 27, 1985).

Lee v. Western Union was still pending in the District

Court when the instant complaint was filed at the Commis-

sion, but has since been dismissed. Long Distance Telecom-

munication Litigation, MDL No. 598, CA No. 85 73365

(E.D. Mich., June 2, 1985).

E-3

plainants appeared to have standing and that the com-

plaints appeared to substantially comply with the formal

complaint filing requirements. Therefore, it accepted the

complaints. Certified Collateral Corp. v. Allnet Communi-

cation Services Inc., Mimeo No. 3217 (released March 19,

1986) (Order). However, it deferred ruling on the issue

of whether these complaints can be maintained as a class

action suit.

3. With the exception of Belting Industries Co., Inc.,

the named complainants represent one or more of the sub-

classes of all persons who purchased long distance tele-

phone service from each of the defendants.> Complainants

allege that the defendants, long distance telecommunica-

tions providers, have charged class members for, inter alia,

unanswered calls, ring time, holding time, busy signals,

and central office recordings and have failed to disclose

in their respective tariffs or elsewhere that they charge

for this time. These actions, complainants maintain, vio-

late Section 201(b) of the Communications Act, 47 U.S.C.

§ 201(b), as unjust and unreasonable practices, and enti-

tle the class to damages, including punitive damages of

three times the actual damages, and the costs of prosecut-

ing the suit. Moreover, they ask that defendants be per-

manently enjoined from imposing any charges like those

of which they have complained here. They argue that in

Bill Correctors, Ltd. v. United States Transmission Sys-

tems, Inc., Mimeo No. 703 (released November 8, 1984)

(Bill Correctors), the Commission recognized that billing

errors for unanswered calls, holding time, and busy sig-

nals were properly refundable charges. They ask that each

defendant be required to account to the complainants and

°Belting Industries Co., Inc. purports to represent the

subclass of all persons who unsuccessfully made a request

for refund of, or contested the imposition of, overcharges

collected or levied by the carriers.

E-4

the class members for all charges imposed by defendants

for unanswered calls, busy signals, and ring time. Fur-

thermore, they allege that Belting’s repeated requests for

refunds were rebuffed at least partly because of carriers’

requirements for “unduly onerous evidence” that the calls

billed were not completed and that the policies of the carri-

ers regarding refunds for improperly billed calls are unrea-

sonable. First Amended Complaint at 13.

4. The defendants deny they are engaging in unlaw-

ful or unreasonable billing practices or imposing onerous

requirements in their refund procedures. They acknowl-

edge that a charge may appear on a customer’s bill for an

unanswered call or for the lapse time between placement

of the call and an answer. This occurs because some of the

carriers’ current interconnection arrangements with local

exchange carriers lack the capability known as “answer

supervision,” which enables a carrier to ascertain the pre-

cise time between call placement and connection as well as

to distinguish between completed and uncompleted calls.

With the advent of equal access required by the Modified

Final Judgment,’ which will make “answer supervision”

available equally to all long distance carriers, billing inac-

curacies will diminish in the future. In the meantime, each

of the carriers has developed alternate means to detect the

initiation and length of calls and has made assumptions as

to the length of time within which calls will generally be

answered. Each has a procedure to provide refunds when

notified by a customer of the overcharge. The defendants

deny that these procedures are onerous. Moreover, they

®Each of the six defendants filed a separate answer.

While not all defendants advanced each argument, the fol-

lowing summary represents the common assertions in their

answers.

7United States v. AT&T, D552 F. Supp. 131 (D.D.D.

1982), aff’d sub nom. Maryland v. United States, 460 U.S.

1001 (1983).

E-5

point out that none of the named complainants® asserted

that it attempted to obtain a refund for the overcharges

complained of here and was refused or was required to fol-

low onerous procedures. Finally, according to the defen-

dants, the Commission has already determined in Bill Cor-

rectors that the carriers’ practices complained of here are

reasonable and do not violate Section 201(b) of the Act.®

5. In their reply, complainants maintain that none of

the defendants seriously dispute that its billing practices

may result in overcharges — they merely contend that they

have instituted internal systems for providing refunds to

make the customers whole in the event such overcharges

occur. Complainants do not concede that the surrogates

® Belting is an exception. An informal complaint filed by

Belting did not identify the carrier alleged to have denied a

credit. When the Commission ascertained that the carrier

was MCI Telecommunications Corp. (“MCI”), it forwarded

a copy of the complaint to that carrier for its response. MCI

states that as soon as it received the informal complaint,

it notified Belting that it would investigate, that it filed a

satisfactory response with the Commission within 30 days,

that it issued Belting a credit, and that the Commission

has disposed of the complaint. See Letter from Common

Carrier Bureau to Selling Industries Co., IC No. 85-990

(Mar. 11, 1986). Howewe, it points out that the Belting

complaint involved an\«!cged “redundant” long distance

service and “hicasii iocal message unit charges, but did

not relate to alleged overcharges for unanswered calls, ring

time, busy signals, holding time, or central office record-

ings at issue in this proceeding.

®MCI notes that this is one of a series of cases involving

the same issues filed in state and federal courts as well as

with the Commission. Therefore, MCI requests that the

Commission resolve the issues raised by this complaint in

a broad, industry-wide context. Furthermore, it asks for

us to hold that challenges to MCI’s charges and practices,

including disclosure, are within the exclusive jurisdiction

of the Commission.

SS... ;3mu a

E-6

for answer supervision adopted by the defendants are the

most reasonable alternatives available. They maintain

that they have insufficient information regarding the tech-

nical aspects of telephone networking on which to base an

intelligent assessment of the billing conventions applied

by the carriers. They demand discovery so they can test

whether the overcharges could be minimized by reason-

ably available alternatives. Furthermore, according to the

complainants, even if the carriers have selected the best

possible method to avoid overcharges, the carriers’ refund

procedures should not be a substitute for refunds and dam-

ages at the Commission or in the courts unless those refund

procedures are the best reasonably available.

II. DISCUSSION

6. We find that complainants have not met their bur-

den of establishing a prima facie case. They have not

alleged with specificity a single call for which a named

complainant was both overbilled and refused a refund or

was required to foliow onerous procedures to obtain the

refund. Belting Industries is the only named member of

the class who alleged it unsuccessfully requested a refund

for overcharges. Yet the informal complaint filed with the

Commission by Belting Industries, which supposedly evi-

dences the defendants’ unreasonable and onerous refund

practices for overcharges, is totally unrelated to charges

for unanswered calls, ring time, holding time, busy sig-

nals, or central office recordings. In short, it is unrelated to

the practices alleged in hese complaints before the Com-

mission and therefore provides no evidence on the issue of

refund practices for billing errors.’®

7. In Bill Correctors we considered the complaints on

their merits, despite the lack of specificity as to the com-

munications complained of and other procedural deficien-

cies, because they raised a generic question concerning

° See Complaint, Exhibit B, and note 8, supra.

E-7

the carriers’ billing practices which went beyond the pre-

cise issue of refunds. However, there is no reason to do

so in the instant case because the carriers’ billing prac-

tices no longer remain an open question. In Bill Correc-

tors we determined that the billing practices complained

of are not unreasonable as long as the carriers notify their

customers of the possibility of erroneous charges and of

their refund practices.’ As discussed in more detail in

paragraph 12, infra, the carriers advised the Commission

that they do notify their customers of their billing and

refund practices. We expect them to fulfill their contrac-

tual obligations and to refund overcharges. Complainants

have not met their threshold burden of placing at issue any

alleged failure by defendants to do so. As previously stat-

ed, the factual dispute over refunds, supposedly pleaded in

the complaint, concerns completely different refund issues.

The bare allegation that defendants’ “intimation ... that

all refunds requested will be granted is ... unbelievable”

(Reply to Answers, at 4) is certainly insufficient. Nor have

complainants submitted any evidence to suggest that the

Bureau erred in its decision in Bill Correctors, that the

situation has changed since then, that the magnitude of

overcharges is more extensive than that recognized by the

Bureau and should therefore be reassessed, or any other

facts that would mandate that the Bureau reexamine the

entire issue regardless of any specific evidence of wrong-

doing.

8. Complainants apparently expected to gather the

facts necessary to make their case through the discovery

"The billing practices of the defendants in the instant

proceedings are the same as, or similar to, the billing prac-

tices of the defendants in Bill Correctors. See para. 13,

infra.

OOo

E-8

process.’ As stated above, in our procedural Order we

deferred ruling on the issue of whether the complaints

could be maintained as a class action suit until we assessed

the validity of the allegations. We noted that the Com-

mission has no provisions regarding the certification of

classes or procedures for maintaining class action suits.

An examination of the allegations, however, reveals that

complainants have not sufficiently pleaded their case to

warrant ordering discovery.

9. Discovery, for example, would not uncover specific

overcharges of the named complainants, let alone of the

rest of the class members. All defendants have proce-

dures to eliminate charges for calls which they suspect

may be improperly billed because of the lack of answer

supervision. Therefore, the only way they can identify any

additional charges which should be removed is to rely on

customer identification of the overcharges. Complainants’

argument that the Commission should not impose “the

requirement that all [uncompleted] calls of any complain-

ing customer be identified with specificity at the outset” as

a precondition to the prosecution of a complaint (Reply to

Motions for More Definite Statement, at 5-6) is inapposite

since they have not identified any such calls even apply-

ing to them. While the named complainants might not

be able to identify all instances of overcharges, that does

not relieve them of their obligation to specify at the outset

at least the ones that are within their unique knowledge.

Without some evidence of unlawful behavior on the part of

the carriers, there is no reason to permit complainants to

go on a fishing expedition on the issue of billing practices

in general.

12 See, for example, their Reply to Motions for More

Definite Statement, in which they argue that the motions

should be denied because the information necessary for

more specific pleading of fact can come only from defen-

dants.

E-9

10. Nor is discovery necessary to uncover alleged oner-

ous refund practices. If indeed any named complainants

have been overcharged and have been required to fulfill

onerous conditions to obtain a refund, they can detail the

exact steps that were required. If they have not attempted

to obtain a refund, then their conclusion that the required

steps are onerous is mere speculation. On the other hand,

the reasonableness of the internal decisionmaking process

of the carriers is not susceptible to being adjudicated in the

abstract. Whether to make a specific refund must be deter-

mined on a case by case basis. The Commission’s rules

provide procedures whereby we can, and do, resolve dis-

putes when a party alleges that a refund was unreasonably

denied. 47 C.F.R. § 1.711, et seq.

11. Since the complainants have not alleged any

specific instances of wrongdoing, their case rests on the

allegation that defendants’ failure to disclose their billing

practices regarding unanswered calls, ring time, holding

time, busy signals, and central office recordings violate

Section 201(b) of the Communications Act. They cite part

of that Section to buttress their argument:

All charges, practices, classifications, and regula-

tions for and in connection with such communica-

tion service, shall be just and reasonable, and any

such charge, practice, classification, or regulation

that is unjust or unreasonable is . . . declared to be

unlawful.

12. Accordingly, if defendants’ charges or practices

are unjust or unreasonable, they are unlawful. However,

in Bill Correctors the Bureau examined the very billing

and charging practices which the complainants allege are

unlawful and determined that they are not unreasonable.

Moreover, it specifically found that these billing practices

E-10

need not be disclosed in the carrier’s tariffs.’*> The Bureau

required the carriers to advise the Commission of their

notification method within 30 days of the release of the

order. The Bureau specified that “[uJnless our review of

these submissions reveals that the notification procedures

are unsatisfactory, we do not anticipate the need for fur-

ther responsive pleadings.” Bill Correctors, at para. 9. The

defendants in Bill Correctors filed submissions, as direct-

ed, and the Bureau took no futher (sic) action. The com-

plainants have raised nothing new which would cause us

to take action against defendants at this point in time.

13. Four of the six defendants in the instant action

were defendants in Bill Correctors.* The other two,

U.S. Telecom’ and Western Union, included with their

answers evidence of notification procedures similar to those

submitted by the other carriers in Bill Correctors. Com-

plainants have proferred no evidence that would require

us to reexamine the general problem of billing errors due

to lack of answer supervision nor to examine the specific

practices of a particular carrier. Complainants must pro-

vide more than the mere assertion that neither the record

in Bill Correctors nor the answers in the instant complaints

contain adequate detail to make an intelligent assessment

of the billing conventions applied by the carriers.

13The complaints in Bill Correctors alleged a violation of

Section 203 of the Communications Act, 47 U.S.C. § 203,

which provides for the filing of schedules of charges. We

note that since the defendants are nondominant carriers,

they are no longer required to file tariffs at the Commis-

sion. To the extent that they choose to file tariffs, of course,

they must conform to the terms of those tariffs.

* Allnet Communications Services, Inc., GTE Sprint

Communications Corp., MCI, and ITT-USTS (USTS was

the defendant in Bill Correctors).

US Telecom-Communications Services Company, f/k/a

U.S. Telephone of the Midwest, Inc.

E-11

14. For the reasons discussed above, we find that the

complainants have not set forth a case with sufficient

specificity to grant the relief sought, and the complaints

will be dismissed. For these same reasons we conclude

that the complaint filed as a class action suit herein lacks

the required specificity as to the nature of the purported

violations. Our Rules do not contemplate class action com-

plaints, and we do not propose to accept such complaints

for filing. Once a complainant identifies a wrongful act,

the Rules provide both adequate procedures to remedy

a specific violation of the Rules or the Communications

Act and sufficient flexibility to enable the Commission to

address generic questions, as indeed the Bureau did in Bill

Correctors.

15. Although we are dismissing the instant com-

plaints, we deny MCI’s request for a holding that its

charges and billing practices are exclusively governed by

the Communications Act and are within the exclusive

jurisdiction of the Commission. We decline to grant MCI’s

request since it is unnecessary to the disposition of the

instant complaints.

III. ORDERING CLAUSES

16. Therefore, IT IS ORDERED that the above-

captioned complaints ARE DISMISSED.

17. IT IS FURTHER ORDERED that the Motion to

Dismiss Formal Complaint against GTE Corporation IS

GRANTED.

18. IT IS FURTHER ORDERED that the Motions for

More Definite Statement filed by Western Union and USTS

ARE DISMISSED as moot.

19. IT IS FURTHER ORDERED that MCTs request

for a ruling on jurisdictional exclusivity IS DENIED.

FEDERAL COMMUNICATIONS COMMISSION

Albert Halprin

Chief, Common Carrier Bureau

F-1

APPENDIX F

612 F. Supp. 892 (E.D. Mich. 1985),

appeal pending No. 85-1684

(6th. Cir. 1986)

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

In Re: LONG DISTANCE TELECOMMUNI-

CATION LITIGATION

MDL No. 598

CERTIFIED COLLATERAL CORPORA- )

TION, et aL, on behalf of themseives and

all of those similarly situated,

Plaintiffs,

v.

ALLNET COMMUNICATIONS SERVICES,

INC., et al,

Case No. 84CV5639DT

Defendante. > HONORABLE

ANNA DIGGS TAYLOR

CHARLES KAPLAN,

Plaintiff,

v.

ITT-UNITED STATES TRANSMISSION

SYSTEMS, INC.,

Defendant. F

MEMORANDUM OPINION AND ORDER

These matters come before the court on two indepen-

dent motions to dismiss by the parties defendant which,

because of their close relationship in questions presented,

must be determined together. The first matter discussed

herein is the consolidated motion of the defendants in Cer-

tified Collateral Corporation to dismiss the consolidated

F-2

complaint of the plaintiffs. That complaint has replaced

the complaints filed in ten separate class actions which had

been filed in ten other U.S. District Courts and which the

Judicial Panel on Multidistrict Litigation had transferred

to this court in 1984.’ The consolidated complaint essen-

tially charges defendants, all common carriers in compe-

tition with American Telephone and Telegraph Company

(AT&T) for the provision of long distance phone services

to consumers thereof, with improperly charging the con-

sumer plaintiffs for long distance calls which were never

completed, and with failing to advise the plaintiffs of such

a practice. Defendants are aileged to have violated both

federal statutes and federal common law, and this court’s

jurisdication is invoked under 28 U.S.C. §1332 (1966) and

47 U.S.C. §207 (1962), the jurisdictional provision of the

Federal Communications Act of 1934, 47 U.S.C. §151 et

seq (1962), the statute which is central to this entire set

of disputes. For the reasons which follow, defendants’

consolidated motion to dismiss must be granted, and this

case referred to the Federal Communications Commission

(FCC) for disposition.

Although the Kaplan action was also transferred to

1Lee v. MCI Telecommunications Corp., No. C-84-1471

JPV (N.D. Cal.): Euromarket Design, Inc. v. MCI Teleco-

mmunications Corp., No. 84-880 (D. Mass.); Euromar-

ket Design, Inc. v. Allnet Communications Services, Inc.,

No. 84-881 (D. Mass.); McIntosh Embossing, Inc. v. MCI

Telecommunications Corp., No. 4-84-Civ-271 (D. Minn.);

Hochman v. GTE Corp., et al., No. 83-4555 (D.N.J.); Cer-

tified Collateral Corp. v. MCI Telecommunications Corp.,

No. 84-C-0388 (N.D. IIl.); Olive v. Allnet Communication

Services, Inc., No. 84-C-1112 (N.D. Il.): Locks v. US.

Telephone of the Midwest, Inc., No. 84-C-1465 (N.D. I11.);

Feitler v. GTE Sprint Communications Corp., No. CV-84-

0759 (M.D. Penn.); Lazar v. MCI Communications, et al.,

No. 1435-B(M) (S.D. Cal.); Leventhal v. GTE, No. 84-CV-

602.

F-3

this court by the Multidistrict Panel as a “tag-along”

action, presenting claims similar to those of the plaintiffs

above, Kaplan has not joined in the consolidated complaint,

and defendant therein seeks reconsideration by this court

of a previous partial denial of its motion to dismiss plain-

tiff Kaplan’s complaint prior to its transfer to this district.

Although that motion was originally denied by the United

States District Court for the Eastern District of New York,

Charles Kaplan v. ITT-U.S. Transmissions Systems, 589 F.

Supp. 729 (EDNY 1984) this court will, for the reasons set

down below, both entertain and grant defendant’s motion,

and the Kaplan action is also dismissed and referred to the

FCC.

I. CERTIFIED COLLATERAL CORPORATION, et

al. v. ALLNET COMMUNICATIONS SERVI-

CES, INC., et al.

THE CONSOLIDATED COMPLAINT

Plaintiffs’ joint complaint alleges that defendants, as

providers of long distance telephone services (also referred

to as common carriers), reqularly charge consumers for

long-distance telephone calls which are not actually com-

pleted and further, that each and every defendant’s billing

practices and procedures are such as to render unlikely

the discovery of such charges by the consumer. Plaintiffs

claim that it is the practice of defendants to routinely fail

to inform their customers of these alleged charging proce-

dures.

Count I of the complaint is brought under §201(b)

of the Communications Act, 47 U.S.C. §201(b) (1962),

and contends that defendants’ above-described charges and

practices are unjust and unreasonable. Count II claims

that this alleged misconduct is also violative of federal

common law principles of fraud. Count III cites the same

conduct under §207 of the Communications Act. Count

IV claims breach of contract by defendants, and Count V

asserts a conversion claim. These two counts (IV and V)

F-4

are also brought under federal common law, plaintiffs con-

tend. Finally, plaintiffs assert that defendants’ conduct

herein constitutes a violation of the Racketeer Influences

and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961

et seq. (Supp. 1984) (Count VI).

COUNT I - § 201(b) COMMUNICATIONS ACT CLAIM

4084 Initially, this Court must note that it has pre-

viously decided the first of these cases, Control Electronics,

Inc. v. Southern Pacific Communications Co., No. 83-1010

(E.D. Mich 1984), appeal dismissed, No. 84-1439 (6th Cir.

October 30, 1984), which presented facts and allegations

quite similar to those contained in this consolidated com-

plaint. After a study of the doctrine of primary jurisdiction,

this court held that, under that doctrine, it must defer to

the Federal Communications Commission, and dismiss the

case. A review of the primary jurisdiction doctrine is in

order here, but first, we should examine the statutory pro-

vision upon which plaintiffs rely. 47 U.S.C. § 201(b) (1962)

provides in pertinent part:

(b) All charges, practices, classifications, and reg-

ulations for and in connection with such commu-

nication service, shall be just and reasonable, and

any such charge, practice, classification, or regu-

lation that is unjust or unreasonable is declared to

be unlawful.

PRIMARY JURISDICTION

The Supreme Court described the purpose and charac-

ter of the primary jurisdiction doctrine in U.S. v. Western

Pacific RR Co., 352 U.S. 59 (1956):

The doctrine of primary jurisdiction, like the

rule requiring exhaustion of administrative reme-

dies, is concerned with promoting proper relation-

ships between the courts and administrative agen-

cies charged with particular regulatory duties.

Exhaustion applies where a claim is cognizable

in the first instance by an administrative agency

alone; judicial interference is withheld until the

F-5

administrative process has run its course. Pri-

mary jurisdiction, on the other hand, applies

where a claim is originally cognizable in the

courts, and comes into play whenever enforce-

ment of the claim requires the resolution of issues

which, under a regulatory scheme, have been

placed within the special competence of an admin-

istrative body; in such a case the judicial process

is suspended pending referral of such issues to the

administrative body for its views. 352 U.S. at 63-

64.

The concept of administrative primary jurisdiction had

its genesis at least as early as Texas and Pacific Railway

Co. v. Abilene Cotton Oil Co., 204 U.S. 426 (1906), in which

the plaintiff brought suit against the railroad in a state

court to recover allegedly unreasonable charges made by

the railroad. The Interstate Commerce Act expressly pro-

vided that an aggrieved party could sue for damages either

before the Interstate Commerce Commission (ICC) or in

United States District Court, and expressly provided that

common law remedies (such as suit in state court) were pre-

served. Nevertheless, the court ruled that a plaintiff must

first attack the reasonableness of charges made by the rail-

road before the ICC. The primary reasons advanced by the

court for this construction was the necessity of uniformity

in determining what rates were reasonable or unreason-

able under the Act.

This doctrine was further explicated and expanded

in Far East Conference v. United States, 342 U.S. 570

(1952). There the United States brought its antitrust

action against an association of steamship companies

which had promulgated a dual system of rates favoring

shippers who agreed to utilize conference members exclu-

sively. The court held that the Federal Maritime Board had

primary jurisdiction over rates charges by those companies.

Although antitrust claims made by the government did

not invoke the provisions under which the Maritime Board

operated, the court held that the applicability of antitrust

F-6

laws to the rate system being challenged must necessar-

ily be judged, in the first instance, by the federal agency

charged by Congress with the responsiblility of regulating

the particular industry in question. Quoting United States

Navigation Co. v. Cunard Steamship Co., 284 U.S. 474, 485,

the court said:

Whether a given agreement among such carriers

should be held to contravene the act may depend

upon a consideration of economic relations, of facts

peculiar to the business or its history, of competi-

tive conditions in respect to the shipping of foreign

countries, and of other relevant circumstances,

generally unfamiliar to a judicial tribunal, but

well understood by an administrative body espe-

cially trained and experienced in the intricate and

technical facts and usages of the shipping trade;

and with which that body, consequently, is better

able to deal. 343 U.S. at 573-74.

The doctrine of primary jurisdiction is therefore

applied to promote a number of goals which collectively

recognize the primacy of regulatory statutes and agencies

enacted and created by Congress. Among these goals are

(1) uniformity in regulation of the business or activity

involved; (2) utilization of the specialized knowledge and

experience of the designated administrative body; and (3)

exercise of administrative discretion in effecting regulatory

policy entrusted to an agency.

As the Sixth Circuit states in Detroit, Toledo and Iron-

ton RR Co. and Grand Trunk Western RR Co. v. Consoli-

dated Rail Corp., 727 F.2d 1391 (1984):

The rule which emerges from an examination

of representative decisions is that federal courts

should decide issues related to purely commer-

cial transactions between regulated carriers and

should perform their judicial function of interpret-

ing and enforcing contracts between such parties

except when such judicial action results in inter-

ference with the functions which Congress has

placed in the hands of the Commission (here the

F-7

court was referring to the Interstate Commerce

Commission). Jd at 1396.

The courts have customarily considered four factors ir.

determining whether to defer initially to administrati: «

review of a matter under the doctrine of primary juris<i*-

tion. These are:

1. Whether the question at issue is within the conven-

tional experience of judges;

2. Whether the question at issue lies peculiarly within

the agency’s discretion or requires the exercise of agency

expertise;

3. Whether there exists a danger of inconsistent rul-

ings disruptive of a statutory scheme; and

4. Whether a prior application to the agency has been

made. Oasis Petroleum Corp. v. U.S. Dept. of Energy, 718

F. 2d 1558, 1564 (Temp. Emer. Ct. App. 1983).

The FCC has been responsible for the regulation of the

communications industry for a considerable period of time.

Defendants herein have been involved in a long struggle

with AT&T over their right to access to AT&T facilities

in order to provide the long-distance services which are

challenged here. The FCC has been deeply involved in

hearing and resolving these disputes. The very existence

of defendants as competitors of AT&T in the long distance

telephone market derives from the FCC decision that such

competition would be beneficial to the public interest. The

very reasonableness of the practices here alleged is a facet

of questions of access and the FCC’s prior determination of

what constitutes the public interest.

In disputes between defendants, other common carri-

ers and AT&T over the rates and access charges of AT&T,

other circuits have held that these matters fell within the

primary jurisdiction of the FCC. Booth v. AT&T, 253 F. 2d

57 (7th Cir. 1958); MCI Communications Corp. v. AT&T,

496 F. 2d 214 (3rd Cir. 1974).

F-8

It would be impossible for the FCC to fulfill its function

of regulating the long distance telephone market if numer-

ous federal district courts also undertake to decide the sub-

stantial questions which directly or indirectly affect the

position of the carriers within the market. See Burlington

Northern, Inc. v. United States, 459 U.S. 131 (1983) There

a D.C. Court of Appeals which rejected ICC rate orders was

held without power to freeze those rates prior to a decision

by the Commission as to what reasonable rates should be).

The Federal Communications Act charges the FCC

with the duty of prescribing just and reasonable charges,

practices, classifications and regulations regarding such

services, in the event those adopted by a carrier are found

to be unreasonable or otherwise in violation of the Act. 47

U.S.C. § 205(a), provides:

(a) Whenever, after a full opportunity for hearing,

upon a complaint or under an order for investiga-

tion and hearing made by the Commission on its

own initiative, the Commission shall be of opin-

ion that any charge, classification, regulation, or

practice of any carrier or carriers is or will be

in violation of any of the provisions of this chap-

ter, the Commission is authorized and empowered

to determine and prescribe what will be the just

and reasonable charge or the maximum or mini-

mum, or maximum or minimum, (sic) charge or

charges to be thereafter observed, and what clas-

sification, regulation, or practice is or will be just,

fair and reasonable, to be thereafter followed, and

to make an order that the carrier or carriers shall

cease and desist from such violation to the extent

that the Commission finds that the same does or

will exist, and shall thereafter publish, demand,

or collect any charge other than the charge so pre-

scribed, or in excess of the maximum or less than

the minimum so prescribed, as the case may be,

and shall adopt the classification and shall con-

form to and observe the regulation or practice so

prescribed.

Thus, the FCC has authority under the Communica-

F-9

tions Act to grant to plaintiffs all of the relief requested in

this action, that is damages, 47 U.S.C. § 207, and injunc-

tive relief, 47 U.S.C. § 207. Because the FCC may also

determine the reasonableness of rates under the Act, its

authority regarding this matter is both superior to that of

this court and broader in scope.

Regarding the second factor mentioned in Oasis,

supra, the question of the “reasonableness” of defendant

carriers’ rates and practices does appear to lie well within

the FCC’s area of expertise and jurisdiction. Given the

numerous actions which were pending before other United

States District Courts prior to their transfer here, and

the fact that additional suits continue to be transferred

to this forum presenting the identical circumstances and

contentions; and the fact that the complaint essentially

alleges overcharging of customers and a practice of fail-

ure to inform; and that the FCC has itself found that

defendants’ charging practices are “within this Commis-

sion’s expertise,” Bill Correctors, Ltd. v. MCI, F.C.C.

2d ____ (11/8/84), this court is compelled to refer these

cases to the FCC for determination of whether there has

been a breach of the statutory duty to impose charges and

implement practices which are just and reasonable. More-

over, the FCC, unlike this court, may order such other

practices as it may then determine reasonable in the indus-

trial context, in its wisdom.

The court notes further that the FCC is conduct-

ing ongoing studies and adjudications of the relationship

between the common carriers (including defendants here-

in) and AT&T, and the impact of that relationship upon

the ability of these carriers to obtain “answer supervision,”

such that they would be fully aware of call completions.

MTS and WATS Market Structures, 48 Fed. Reg. 42, 984,

43, 001 (1983), aff’d sub. nom., National Association of

Regulatory Utility Commissioners v. FCC, 737 F.2d 1095

(D.C. Cir. 1984). Those proceedings further support the

F-10

decision of this court to defer decisionmaking in these cases

to the FCC, which has been responsible for resolution of

the numerous controversies involving the common carrier

defendants and AT&T for thirteen years. Specialized Com-

mon Carrier Services, 29 F.C.C. 2d 870 (1971), aff’d sub.

nom., Washington Utilities and Transportation Commission

v. FCC, 513 F. 2d 1142 (9th Cir.), cert. denied, 423 U.S. 836

(1975).

Consideration of the third and fourth factors set forth

in the Oasis case emphasize the necessity for referral of

these problems to the FCC. There is a genuine danger of

inconsistent adjudications where, as here, numerous law-

suits have been brought by individuals and class action

plaintiffs in different state and federal courts across the

country. Only the FCC has been involved with the mate-

rial issues in these cases since their very inception, and

only it should attempt to review the purported practices

of defendants regarding their reasonableness, nationally.

Courts have not hesitated to defer to an expert agency

when such deference will promote uniformity and consis-

tency, and this court must do so in this instance. Even the

conduct of these lawsuits on a multidistrict basis cannot

fulfill the intention of Congress that the Commission make

the determinations here required.

Because the FCC is already reviewing the practices

and procedures here complained of in Bill Correctors,

supra, these matters are being simultaneously adjudicated

by this forum and that agency, and these parallel efforts

must be discontinued.

The court further notes that, since its decision in Con-

trol Electronics, four other federal courts have been pre-

sented with § 201(b) challenges materially indistinguish-

able from the challenges raised here. Consistent with this

court’s decision in Control Electronics, each of these federal

courts has dismissed the Communications Act claim under

F-11

the doctrine of primary jurisdiction.” In addition, two state

courts have dismissed purported state law challenges to

telecommunications carriers’ charges and practices under

the doctrine of primary jurisdiction.*

The “reasonableness” determination required under §

201(b) must be made in the first instance by the FCC, and

not by this court or any other. As the expert agency regu-

lating telecommunications carriers, the FCC is most famil-

iar with the technical and policy issues governing defen-

dants’ provision of long distance telephone services, and it

can, as we have seen, afford relief at the least equivalent

to that sought by plaintiffs here. It is presently conduct-

ing related proceedings, and with full determinations on

the merits of these case (sic), it may avoid the possibility

of judicial dispositions inconsistent with overall industrial

concerns and federal policy.

COUNT III - § 207 COMMUNICATIONS ACT CLAIM

47 U.S.C. § 207 provides, in pertinent part, as follows:

*Lee v. Western Union Telegraph Co., No. C 84-1472

TEH (N.D. Cal. 1984), appeal dismissed, No. 84-2383

(9th Cir. January 4, 1985) (Def. Exs. 11, 12); Schuster v.

GTS Sprint Communications Corp., No. 83-5374 (N.D. Cal.

1984), appeal dismissed, No. 84-2385 (9th Cir. January 9,

1985) (Def. Exs. 13, 14); Retail Recruiters of New York,

Inc. v. MCI Telecommuncations Corp., No. 83 Civ 8048

(S.D. N.Y. 1984), appeal dismissed, No. 84-7647 (2d Cir.

October 31, 1984) (Def. Ex. 15, 16); Kaplan v. ITT-U.S.

Transmission Systems, Inc., 589 F. Supp. 729 (E.D. N.Y.

1984) (Def. Ex. 17).

3 Speakers of Sport v. U.S. Telephone, Inc. et al., No. 84 L

3247 (Cir.Ct. Cook Cty., Ill. 1984), appeal pending, No. 85-

292 (Ill. App. Ct. 1985) (Def. Ex. 18, 19, 20); Discount Den

v. Allnet Communications Services, Inc., No. 84 CH 1059

(Cir. Ct. Cook Cty., Ill. 1984) (Def. Ex. 21, 22, 23). But, see,

Kellerman, et al. v. MCI Telecommunications Corp., No. 82

CH 11065 (Cir. Ct. Cook Cty., Ill. 1984), appeal pending,

No. 84-2877 (Ill. App. Ct. 1984) (Def. Ex. 24).

F-12

Any person claiming to be damaged by any com-

mon carrier subject to the provisions of this chap-

ter may either make complaint to the Commission

as hereinafter provided for, or may bring suit for

the recovery of the damages for which such com-

mon carrier may be liable under the provisions of

this chapter, in any district court of the United

States of competent jurisdiction; but such person

shall not have the right to pursue both such reme-

dies.

This provision, rather than providing substantive rights,

as plaintiffs claim, merely outlines the concurrent jurisdic-

tion of the FCC and federal district courts to hear claims of

plaintiffs that defendants have violated other provisions of

the act. It does not set out elements which comprise a sep-

arate and independent cause of action. As plaintiffs have

not otherwise pleaded a violation of some other actionable

statutory provision in this court, it must be dismissed.

COUNT II, IV AND V - FEDERAL COMMON

LAW CLAIMS

Under these counts plaintiffs urge the court to create

federal common law claims of fraud, breach of contract and

conversion, apparently because this court has previously

held that identical state law challenges are preempted by

the Federal Communications Act. Lazar v. MCI Commu-

nications Corp. et al., MDL No. 598, 84 CV4801DT (E.D.

Mich. 1984).

Under Ivy Broadcasting Co. v. American Telephone and

Telegraph Co., 391 F. 2d 486 (2d Cir. 1968), plaintiffs may

state a claim under federal common law only “where nei-

ther the Communications Act itself nor the tariffs filed

pursuant to the Act deals with a particular question.” Jvy,

391 F.2d at 491. In Jvy, the court created federal com-

mon law because it found that the Communications Act

did not regulate the conduct challenged. There, the plain-

tiff radio broadcasting company was found not to have a

state law cause of action to redress AT&T’s allegedly negli-

gent operation of its lines and discriminatory billing prac-

F-13

tices. The absence of applicable state common law estab-

lished the necessity of a federal common law. The Second

Circuit Court of Appeals had previously determined that

“questions concerning the duties, charges and liabilities of

telegraph or telephone companies with respect to interstate

communications services are to be governed solely by fed-

eral law and that the states are precluded from acting in

this area.” 391 F.2d at 491.

In the instant case, unlike Jvy, both this court and

the FCC have recognized and expressly observed that the

Communications Act regulates the challenged conduct.

The plaintiffs, by their very allegations under the Act,

acknowledge its applicability. In Lazar, supra, this court

held that the conduct complained of herein is not regu-

lated by principles of common law, but falls exclusively

under the Federal Communications Act. Lazar moved to

remand his case to California state court on the grounds

that he had not claimed under a federal statute. This

court held, however, that plaintiff could not defeat proper

removal by artful pleading, and upon examination of the

substance of the allegations in plaintiff ’s complaint, found

that they were indeed grounded in federal communications

law, in that they challenged the “reasonableness” of defen-

dant telephone carriers’ billing and disclosure procedures.

Plaintiff’s motion was thus denied.

Similarly, plaintiffs here may not override the preemp-

tive scheme of federal law outlined in the Federal Commu-

nications Act of 1934 by a claim of federal common law.

The act, which sets forth a comprehensive body of legisla-

tion overseeing charges, practices, duties and liabilities of

interstate telecommunications carriers in connection with

such carriers’ provision of interstate long distance service

to its customers, would surely be nullified by such a propo-

sition.

F-14

COUNT VI-RICO CLAIM

Although this court recognizes the current differences

of opinion among the circuits regarding private causes of

action brought under 18 U.S.C. §§1961 et seq (Supp. 1984),

and the controversial treble damages provision contained

therein, it has chosen to take Congress at its word, and has

not superimposed "standing” or other unwritten require-

ments upon the private plaintiff. Gerald Przybylski v.

Freiborne Industries, Inc., No. 84CV2193DT (E.D. Mich.

April, 1985).

In the instant matter, although defendants vigorously

assert the very arguments which this court has rejected in

Przybylski, the RICO claim of the plaintiffs must fail under

present circumstances for other reasons. Because the cen-

tral issue here is whether the defendants’ conduct com-

plained of is “reasonable” under federal communications

law, and because the FCC must first make this determina-

tion before any “injury,” “crime” or “liability” on the part

of defendants can be established, it would be inappropri-

ate for this court to attempt to adjudicate plaintiffs’ RICO

claim before such a determination has been made. There

simply is no basis for such a claim.

CONCLUSION

For the foregoing reasons, the defendants’ consoli-

dated motion to dismiss plaintiffs’ consolidated complaint

is hereby granted, and the case referred to the Federal

Communications Commission.

II. CHARLES KAPLAN V.ITT-UNITED STATES

TRANSMISSION SYSTEMS, INC.

Defendant herein seeks reconsideration by this court of

the partial denial of its motion to dismiss plaintiff’s com-

plaint, decided by Hon. I. Leo Glasser of the Southern Dis-

trict of New York. Kaplan v. ITT-U.S. Transmission Sys-

tems, Inc. 589 F. Supp. 729 (E.D.N.Y. 1984). As the trans-

feree forum in this multidistrict case, this court clearly

F-15

has the authority and obligation to entertain motions for

reconsideration, as it would in any other case. In re Upjohn

Company Antibiotic Clerocin Products Liability Litigation,

664 F.2d 114 (6th Cir. 1981). For the reasons below, defen-

dant’s motion must be granted, and plaintiff’s complaint

dismissed on the same grounds discussed in Certified Col-

lateral, above.

Plaintiff Charles Kaplan filed this action in the

United States District Court for the Eastern District of

New York on November 3, 1983. The first claim of

the complaint alleged that defendant USTS’s “practice of

billing . .. for unanswered calls without providing (1) prior

notice of those charges [and] (ii) notice of availability for

those charges ...” constituted an unjust and unreasonable

charge and practice prohibited by Section 2011(b) of the

Communications Act, 47 U.S.C. § 201(b). Complaint, 4 20.

The complaint went on to allege that the same conduct

challenged under the Communications Act also constituted

state common law fraud and breach of an alleged contract

between USTS and its customers.‘

The claims asserted in the complaint in the Kaplan

case are typical of the claims alleged in the other actions

against USTS’s competitors that were ultimately the sub-

ject of the transfer motion before the Judicial Panel on

Multidistrict Litigation (JPML). In particular, Goodkind,

Wechsler & Labaton, the law firm that represented plain-

tiff Kaplan against USTS, also brought two suits on behalf

of other plaintiffs against MCI Telecommunications Cor-

poration and GTE Sprint Communications Corporation.

Retail Recruiters of New York v. MCI Telecommunica-

tions Corp., 83 Civ. 4084 (S.D. N.Y.); Schuster v. GTE

Sprint Communications Corp., C83-5374 (N.D. Cal.). Aside

‘The complaint also alleged violations of the New York

General Business Law that were dismissed by Judge

Glasser on preemption grounds.

F-16

from differences in the identities of the parties and the

state statutory claims asserted, the complaints in Retail

Recruiters and Schuster were identical to the complaint in

Kaplan.

Motions to dismiss, based principally on the doctrines

of primary jurisdiction and preemption, were made in a

number of the cases that had been filed in federal district

courts across the country. In April 1984, an application

was made to the JPML to transfer these pending actions

to a single district for coordinated or consolidated pretrial

proceedings pursuant to 28 U.S.C. § 1407.

While the transfer motion was pending before the

JPML, the district courts ruled on the various defendants’

motions to dismiss. This court was the first to do so, holding

on May 7, 1984, that an action against six of USTS’s com-

petitors and unidentified “Roe Corporations” should be dis-

missed. Control Electronics, Inc. v. Southern Pacific Com-

munications Company, 83CV1010DT (E.D. Mich. 1984).

On June 29, 1984, Chief Judge Motley of the Southern Dis-

trict of New York reached the same result and dismissed

the Retail Recruiters case, which, as indicated above, was

one of the three identical actions filed by plaintiff Kaplan’s

counsel.

When Judge Glasser entered his decision on July 23,

1984, he reached a result that conflicted, in part, with the

decisions of the other courts that had already ruled. Judge

Glasser agreed that plaintiff Kaplan’s principal claim,

brought under Section 201 of the Communications Act,

should be dismissed and referred to the FCC on primary

jurisdiction grounds. However, he denied USTS’s motion to

dismiss the complaint’s purposed common law claims even

though those claims were based on the same conduct that

plaintiff challenged under the Communications Act. Judge

Glasser held that, although plaintiff had originally pleaded

state law, his common law claims in fact arose under fed-

eral, rather than state, common law; that these “federal”

F-17

common law claims created a federal cause of action sep-

arate and distinct from plaintiffs claim under the Com-

munications Act; and that the federal common law claims

which his decision created should not be sent to the FCC

under the primary jurisdiction doctrine.

In August 3, 1984, Judge Henderson of the North-

ern District of California decided the motion to dismiss

the Schuster case, the third of the three identical actions

that had been commenced by plaintiff Kaplan’s attorneys.

Although Judge Henderson took note of Judge Glasser’s

decision, he chose to follow this court’s decision in Control

Electronics rather than Judge Glasser, and dismissed the

complaint in its entirety on the grounds that the federal

claims were within the FCC’s primary jurisdiction and the

state claims were preempted by federal law.

On August 16, 1984, Judge Glasser granted USTS’s

motion to certify his decision for immediate appeal to the

Second Circuit, where plaintiffs appeal from Chief Judge

Motley’s dismissal of the Retail Recruiters case was already

pending. In granting this motion, Judge Glasser found,

inter alia, that his decision involved “questions of law as

to which there are substantial grounds for differences of

opinion. .. .” 28 U.S.C. § 1292(b).

On August 15, 1984, the JPML entered its order trans-

ferring the remaining pending cases to this court. In that

order, the Panel deferred consideration of whether the

Kaplan case should also be transferred until the Second

Circuit had acted on USTS’s application for leave toe pursue

its interlocutory appeal certified by Judge Glasser.

Plaintiff Kaplan originally did not oppose USTS’s

motion for permission to appeal in the Second Circuit.

However, in mid-October 1984, plaintiff's counsel volun-

tarily dismissed the appeal that had been brought in the

Retail Recruiters case, and submitted an affidavit urg-

ing the Second Circuit to deny USTS’s motion in light of

this development. The appellate court then denied USTS’s

F-18

motion in an order entered October 31, 1984. On Novem-

ber 19, 1984, the JPML, without any further application by

any party, entered an order transferring the Kaplan case

to this court.

While the judicial proceedings described above were in

progress, the FCC had been considering formal complaints

filed by Bill Correctors, Ltd. which asserted claims under

the Communications Act substantially identical to those

that had been asserted in the courts. Bill Correctors, Ltd.

v. United States Transmission Systems, Inc., FCC File NO.

E-84-6. On November 8, 1984, the FCC’s Common Carrier

Bureau released a decision and order denying these com-

plaints. This decision clearly indicated that the FCC is

prepared to exercise its regulatory authority not only over

the carriers’ billing practices as such, but also over the way

in which those practices are disclosed to customers. More

specifically, the FCC decision states that “Bill Correctors

has thus properly raised an area of concern, the method by

which the carriers should notify customers of the possibil-

ity of erroneous charges for short calls and of their refund

policies therefore.” The order directed each defendant car-

rier to file a description of the notification method used or

to be used to advise customers of potential billing errors

and refund policies within thirty days of its entry.

Thus, there have been significant changes in circum-

stances since the transferor court acted in this matter,

indicating the necessity to reconsider the decision made by

Judge Glasser. As another Court of Appeals has stated:

The transferee judge’s authority to coordinate

consolidated pretrial proceedings in multidistrict

cases is the essential contribution of the multi-

district transfer procedure. That judge has the

power to set aside pretrial rulings of transferor

courts, and courts performing auxiliary roles must

be guided by the transferee judge’s rulings.

In re Multi-Piece Rim Products Liability Litigation, 653

F.2d 671 (D.C. Cir. 1981).

saenienaanimaaeaaanataiiiaaaiaeele

F-19

Although ordinarily the transferee court will not lightly

disturb the ruling of a transferor court, in observance of the

doctrine of the “law of the case,” the Sixth Circuit expressly

rejected in the Upjohn case, supra, the position that this

doctrine precluded the transferee court from reconsidering

a tranferor court’s order, holding that the “law of the case,”

if a proper concept in this context, would not in all events

control. 664 F.2d at 120.

The court in Upjohn pointed out that the Sixth Cir-

cuit had “recognized that this doctrine [of law of the case]

is not an inexorable command.” Jd. The court cited its

earlier decision in Petition of United States Steel Corp.,

479 F.2d 489, 494 (6th Cir.), cert. denied, 414 U.S. 859

(1973), in which the court had held that the doctrine is

“directed to a court’s good sense so as to relieve a court

of rigid adherence to its former decision... .” Among the

well recognized exceptions to the law of the case docrine

are (a) a court may reexamine an earlier ruling in light of

changes of fact or circumstances that have occurred since

that decision was rendered, see, e.g., In re Exterior Sid-

ing and Aluminum Coil Antitrust Litigation, 696 F.2d 613,

617 (8th Cir. 1982), vacated en banc on other grounds by an

equally divided court, 705 F.2d 980 (8th Cir.), cert. denied,

104 S.Ct. 204 (1983), and (b) a court may, notwithstanding

the law of the case docrine, reverse an earlier decision if

it is convinced that the decision was “clearly erroneous.”

Petition of United States Steel, supra, 479 F.2d at 494. See,

generally, 1B Moore’s Federal Practice, 10.404 (particularly

40.404[8)).

This matter can be resolved by reviewing the

changes in circumstances which have occurred since Judge

Glasser’s decision.

Since Judge Glasser entered his decision on July 13,

1984, two very significant changes in circumstances have

occurred: (1) the FCC’s Bill Correctors decision, and (2) the

F —20

JPML’s transfer of the Kaplan case to this court.

First, when Judge Glasser entered his decision, he

could not have known that the FCC would hold in Bill

Correctors that it would regulate not only the carriers’

billing practices, but the way in which those practices

were disclosed to customers. The FCC’s decision to take

jurisdiction over all aspects of this litigation significantly

undercuts the argument made by plaintiff Kaplan that his

federal common law claims are not subsumed within the

basic Communications Act claim that is within the pri-

mary jurisdiction of the FCC,

Further, if this court were to rule on the legality of

the carriers’ disclosure practices under the federal common

law, despite the FCC's decision in Bill Correctors to regu-

late those practices under the Communications Act, it is

now clear that there is a significant risk that the court

and the FCC might reach irreconcilable results. This is

precisely the type of conflict between judicial and adminis-

trative action that the preemption and primary jurisdiction

doctrines were intended to avoid. See, e.g., United States v.

Western Pacific Railroad Co., 352 U.S. 59 (1956); Far East

Conference v. United States, 342 U.S. 570 (1952).

Finally, the Bill Correctors decision reinforces the

argument made by the USTS that the FCC is capable

of giving plaintiff Kaplan and other customers any and

all relief to which they may be entitled, and that there

is no supplementary role for a court to play. In all

of these ways, the intervening Bill Correctors decision

makes USTS’s arguments for dismissal more compelling,

and justifies reconsideration of Judge Glasser’s decision.

Second, the posture of the Kaplan case has now been

fundamentally changed by the JPML’s decision to transfer

the case to this court. One of the basic purposes of the

multidistrict process, and of the JPML’s transfer orders in

this case, is to achieve consistent rulings on the common

issues among the transferred cases. The issues of primary

F-21

jurisdiction and preemption which defendant herein raised

on its motion before Judge Glasser are at the very heart of

these controversies, and this court must be free to reexam-

ine and reconcile any prior inconsistent rulings by trans-

feror courts. Jn re First National Bank, Heavener, Okla-

homa, First Mortgage Revenue Bonds Securities Litigation,

451 F.Supp. 995 (JPML 1978); Jn re Exterior Siding and

Aluminum Coil Antitrust Litigation, supra, 696 F. 2d at

616.

Judge Glasser himself recognized, in certifying his

partial denial of defendant's motion to dismiss for immedi-

ate appeal, that there were substantial grounds for differ-

ence of opinion on the issues of law he decided. Because

this court has ruled on the issues USTS raised in decid-

ing the other defendants’ motion to dismiss the consoli-

dated complaint, the usual rationale for applying the “law

of the case” doctrine is absent in this case. The purpose of

that doctrine is to protect the courts from the burdens that

would be placed on them if they were continually asked

to readdress issues that had already been decided. See 1B

Moore’s Federal Practice, 90.404 [4.-1]. However, where,

as here, the court has ruled on those very same issues in

the other multidistrict cases that are before it, the invoca-

tion of the doctrine will not conserve any judicial resources,

but will instead simply frustrate the goals of uniformity

and fairness that the multidistrict transfers were meant to

achieve.

Therefore, for the foregoing reasons, defendants’ mot-

ion herein is granted, and plaintiff's federal common law

claims are hereby dismissed, and the case referred to the

FCC for determination.

IT IS SO ORDERED.

/s/ ANNA Diaas TAYLOR

ANNA DIGGS TAYLOR

Dated: June 27, 1985 US. District Judge

G-1

APPENDIX G

Judicial Panel on

Multidistrict Litigation

Filed

Aug. 15, 1984

Patrick D. Howarp

Clerk of The Panel

DOCKET NO. 598

BEFORE THE JUDICIAL PANEL

ON MULTIDISTRICT LITIGATION

IN RE LONG DISTANCE TELECOMMUNICATIONS

LITIGATION

TRANSFER ORDER*

This litigation presently consists of ten actions pend-

ing in seven federal districts: three actions in the North-

ern District of Illinois, two actions in the District of Mas-

sachusetts and one action exch in the Northern District of

California, the Eastern District of New York, the District

of Minnesota, the District of New Jersey and the Middle

District of Pennsylvania.’ Before the Panel is a motion,

pursuant to 28 U.S.C. $1407, by plaintiffs in seven of the

ten actions to centralize the actions in this litigation in |

* Judge Milton Pollack recused himself and took no part in the

decision of this matter.

‘The Panel staff has been advised of the pendency in federal

district courts of at least four additional related actions. These

actions, and any other related actions that come to the Panel’s

attention, will be treated as potential tag-along actions. See

Rules 9 and 10, R.P.J.P.M.L., 89 F.R.D. 273, 278-80 (1981).

G-2

the Northern District of Ilinois* for coordinated or consol-

idated pretrial proceedings.’ Plaintiffs in two actions and

one telephone company defendant oppose centralization of

all actions; some of these parties favor formation by the

Panel of separate multidistrict proceedings in different dis-

tricts for actions against different defendants. Four tele-

phone company defendants support transfer to the Eastern

District of Michigan. Other potential transferee forums

suggested by the parties include the Eastern District of

New York, the District of New Jersey and the Middle Dis-

trict of Pennsylvania.

On the basis of the papers filed and the hearing held,

the Panel finds that these ten actions involve common

? The Section 1407 movants originally sought transfer to either

the Northern District of Illinois or the Eastern District of Michi-

gan, but they subsequently deleted their request for transfer to

the Eastern District of Michigan.

3’The Section 1407 motion included four additional actions -

Conirol Electronics, Inc., et al. v. Southern Pacific Com-

munications Co., et al. E.D. Michigan, C.A. No. 83-1010;

Retail Recruiters of New York, Inc., v. MCI Telecommun-

ications Corp., S.D. New York, C.A. No. 83-8048; Harvey M.

Schuster, et al. vu. GTE Sprint Communications Corp., N.D.

California, C.A. No. C-83-5374 TEH; and Roger Lee, et al. v.

Western Union Telegraph Co., N.D. California, C.A. No. C-

84-1472 TEH —- that are no longer pending in federal district

courts. Judge Anna Diggs Taylor dismissed Control Electronics

on May 22, 1984, and Judge Constance Baker Motley dismissed

Retail Recruiters on June 29, 1984. Appeals of the dismissals

in these two actions are pending in the United States Courts of

Appeals for the Sixth Circuit and the Second Circuit, respective-

ly. Judge Thelton E. Henderson dismissed Schuster and Lee on

August 3, 1984.

Also, one of the ten actions now before the Panel, Lily M.

Feitler v. GTE Sprint Communications Corporation, M.D.

Pennsylvania, C.A. No. CV-84-0759, was not included in the Sec-

tion 1407 motion, but this action is included in the matter before

us because all parties to this action have stated in writing their

respective positions on the motion before us and have presented

oral argument.

G-3

questions of fact and that centralization of nine of these

ten actions under Section 1407 in the Eastern District of

Michigan will best serve the convenience of the parties

and witnesses and promote the just and efficient conduct

of the litigation.‘ Each of the actions before the Panel

challenges the billing and advertising practices of one of

five long distance telephone company defendants and is

brought as a purported class action on behalf of customers

of that telephone company. Those parties that oppose cen-

tralization of all actions argue that actions against differ-

ent defendants share few questions of fact because each

defendant telephone company has its own unique billing

practices, advertising, rate structure and disclosure policy.

While we recognize that much discovery directed at dif-

ferent defendants will be cumulative rather than duplica-

tive, we are persuaded that all the actions in this docket

present sufficient common questions of fact, pertaining in

particular to common practices in the long distance tele-

phone industry, to meet the threshold requirement for Sec-

tion 1407 transfer. Moreover, we note that 1) Section 1407

empowers the Panel to order transfer “for coordinated or

consolidated pretrial proceedings”; 2) the Panel has cus-

tomarily left to the discretion of the transferee judge the

manner and extent of coordination or consolidation of pre-

trial proceedings; and 3) the transferee judge has the dis-

cretion to schedule discovery unique to any defendant to

proceed concurrently with the discovery common to all

defendants. We conclude that centralization under Sec-

tion 1407 of the nine actions listed on the attached Sched-

ule A is necessary in order to eliminate duplicative discov-

ery, avoid inconsistent pretrial rulings, and conserve the

resources of the parties, their counsel, and the judiciary.

‘In light of the pendency of an appeal pursuant to 28 U.S.C.

§1292(b) in the tenth action, Charles Risdon v. ITT-US.

Transmission Systems, Inc., E.D. New York, C.A. No. 83-Civ-

4843, our decision regarding transfer of that action under Section

1407 is deferred until the appeal is resolved.

i

G-4

None of the forums suggested by the parties as poten-

tial transferee districts could be characterized as the nexus

of this litigation, involving the practices of several long

distance telephone companies that do business nationwide.

On balance, however, we are persuaded that the Eastern

District of Michigan is the appropriate transferee forum.

Even though no constituent action is presently pending

in the Eastern District of Michigan, Control Electronics

was commenced in that district in March, 1983, more

than seven months before the commencement of any other

action in this litigation. In addition, Control Electronics

is broader in scope than other actions in this litigation in

that, unlike those other actions, the complaint in Control

Electronics names multiple telephone company defendants.

We observe that Judge Taylor, the judge to whom we are

assigning this litigation, presided over pretrial proceedings

in Control Electronics for nearly a year, considered and

decided defendants’ dismissal motion, and has thus become

familiar with a broad range of issues and parties in this

litigation. Opponents of transfer to the Eastern District of

Michigan point out that Judge Taylor dismissed the com-

plaint in Control Electronics principally on the basis of the

primary jurisdiction of the Federal Communications Com-

mission (FCC). These parties further point out that pri-

mary jurisdiction is a legal issue that is germane to other

actions before the Panel. Thus, these parties argue, cen-

tralization before Judge Taylor will in effect constitute a

consignment of the entire litigation to the FCC. In response

to this argument, we observe that the primary jurisdiction

issue in Control Electronics has not yet been definitively

resolved, in view of the pendency before the United States

Court of Appeals for the Sixth Circuit of plaintiffs’ appeal

from Judge Taylor’s order dismissing the complaint.

———<

G-5

IT IS THEREFORE ORDERED that, pursuant to 28

U.S.C. $1407, the actions listed on the attached Schedule

A be, and the same hereby are, transferred to the Eastern

District of Michigan and, with the consent of that court,

assigned to the Honorable Anna Diggs Taylor for coordi-

nated or consolidated pretrial proceedings.

FOR THE PANEL:

/s/ ANDREW A. CAFFREY

Andrew A. Caffrey

Chairman

G-6

SCHEDULE A

MDL-598 -- In re Long Distance Teiecommunications Liti-

gation

Northern District of California

Roger Lee, et al. v. MCI Telecommunications Corp.,

C.A. No. C-84-1471JPV

District of Massachusetts

Euromarket Designs, Inc., d/b/a Crate and Barrell v. MCI

Telecommunications Corp., C.A. No. 84-880

Euromarket Designs, Inc., d/b/a Crate and Barrell v. Allnet

Communications Services, Inc., C.A. No. 84-881

District of Minnesota

McIntosh Embossing, Inc. v. MCI Telecommunications

Corp., C.A. No. 4-84-Civ-271

District of New Jersey

Mark Hochman, et al. v. GTE Corp., et al., C.A. No. 83-

4555

Northern District of Illinois

Certified Collateral Corp. v. MCI Telecommunications

Corp., C.A. No. 84-C-0388

Earl E. Olive v. Allnet Communication Services, Inc., C.A.

No. 84-C-1112

David H. Locks v. U.S. Telephone of Midwest, Inc., C.A.

No. 84-C-1465

Middle District of Pennsylvania

Lily M. Feitler v. GTE Sprint Communcations Corporation,

C.A. No. CV-84-0759

H-1

APPENDIX H

IN THE CIRCUIT COURT OF

COOK COUNTY, ILLINOIS COUNTY

DEPARTMENT, CHANCERY DIVISION

SPEAKERS OF SPORT, INC.,

on its own behalf and on behalf

of all others similarly situated,

Plaintiff, No. 84L3247

v8. > —

JURY TRIAL

U.S. TELEPHONE, INC. and DEMANDED

U.S. TELEPHONE OF THE

MIDWEST, INC.,

Defendants.

alt

CLASS ACTION COMPLAINT

Plaintiff, Speakers of Sport, Inc., by its attorneys,

states as follows:

1. This is an action for damages and injunctive relief

from improper overcharges in telephone service under prin-

ciples of common law fraud, breach of contract and for vio-

lation of Jll.Rev.Stat. Ch. 121-1/2 §262 et. seg. for deceptive

practices and /ll.Rev.Stat. Ch. 121 1/2 §312 for deceptive

trade practices.

2. The plaintiff is an Illinois corporation with its prin-

cipal place of business in Northbrook, Illinois.

3. Defendant U.S. Telephone, Inc. is a foreign corpo-

ration with its principal place of business in Dallas, Texas.

Defendant U.S. Telephone of the Midwest, Inc. is an IIli-

nois corporation with its principal place of business located

in Chicago, Illinois. Both defendants transact business

_ within the state of Illinois and both sell long distance tele-

phone discount services.

H-2

CLASS ACTION ALLEGATIONS

4. This action is brought by plaintiffs under Section 2-

801 of the Code of Civil Procedure of Illinois on behalf of a

class of all persons:

(a) who are now or have been at sometime in the past

customers of U.S. Telephone and U.S. Telephone of the

Midwest; and

(b) who were improperly charged by either defendant for

services during the past.

5. The members of the plaintiff class are so numer-

ous that joinder of all members is impractical. Plaintiff

is informed and believes that the class members number

several thousand.

6. There are questions of law and fact common to the

class and to the subclass which predominate over any ques-

tions involving only individual members, including but not

limited to:

(a) whether the defendants have improperly charged class

members for telephone calls which were not completed;

(b) whether the defendants’ improper charges for uncom-

pleted calis begin after only six rings;

(c) whether it takes approximately 48 seconds for a phone

to ring six times;

(d) whether a class member can be charged one minute or

more for uncompleted calls as a result of letting the

telephone ring six or more times;

(e) whether defendants improperly charged for rings prior

to completed calls;

(f) whether the defendants’ charges were unjust and

unreasonable;

(g) whether the actions complained of herein constitute a

fraud at common law perpetrated against the members

of the class;

(h) whether the actions of defendants complained of herein

constitute a breach of a written contract between

H-3

defendants and the members of the class;

(i) whether the conduct of the defendants complained of

herein constitutes a violation of the Dlinois Consumer

Fraud and Deceptive Practices Act;

(j) whether the conduct of defendants complained of

herein constitutes a violation of the Uniform Deceptive

Trade Practices Act;

(k) whether defendants’ conduct was willful and wanton

so as to give rise to punitive damages.

7. The claims of the plaintiff are typical of the claims

of the class and of the subclass.

8. Plaintiff will fairly and adequately protect the

interests of the class and of the subclass it seeks to rep-

resent.

9. A class action is an appropriate method for the fair

and efficient adjudication of this controversy.

BACKGROUND FACTS

10. Defendants own and operate a large long dis-

tance telephone communications network covering several

states.

11. Defendants provide discounted long distance rates

to its commercial and residential customers through

microwave transmissions.

12. Defendants furnish their customers with rate

schedules which defendants routinely send to their cus-

tomers.

13. Defendants regularly advertise that their rates are

less expensive than those of the Bell network.

14. Defendants send their commercial and residen-

tial customers itemized bills listing the calls made on a

monthly basis.

15. Plaintiff has purchased defendants’ services for a

substantial period of time.

H-4

CHALLENGED PRACTICES OF DEFENDANTS

16. Defendants have engaged in a scheme and course

of conduct whereby defendants charge their customers for

calls which are not completed.

17. The fact that these charges would be made was

never at any time disclosed in:

(a) the defendants’ F.C.C. filings;

(b) the defendants’ rate schedules sent to their residential

customers;

(c) the defendants’ rate schedules sent to their commercial

customers; and

(d) any of the defendants’ advertising.

18. According to the defendants’ practice, these

improper charges were reversed by defendants only if dis-

covered by the customer and reported to the defendants.

19. Defendants’ billing procedures make it unlikely

that a customer would discover these improper charges and

difficult to have such charges reversed.

20. The improper charges imposed by defendants pur-

suant to the scheme and plan against their subscribers are

and were accomplished by means which include, but are

not limited to, the following:

(a) If defendants’ customer makes a call which is not com-

pleted and permits the telephone to ring six times or

more, the customer will be charged a minute or more

for this uncompleted call.

(b) If defendants’ customer makes a call which is complet-

ed, yet rings six times or more before it is answered,

the customer may be charged a minute or more in addi-

tion to any actual communication.

21. The scheme and fraudulent course of conduct

described above was and is carried out with the full knowl-

edge of defendants and was and is perpetuated with the

intent that members of the plaintiff class would rely on

the misrepresentations and omissions.

H-5

22. The improper additional charges described in para-

graph 20, supra, were imposed deliberately, knowingly

and with the intention to deceitfully and fraudulently

obtain moneys from class members to which the defen-

dants were not and knew they were not entitled. Defen-

dants have repeatedly been advised of the existence of their

improper overcharging practices through their subscribers’

complaints and otherwise, but continue such practices.

23. The misrepresentations described above were

material. Plaintiff and the plaintiff class were misled and

deceived by them, relied to their detriment upon them, and

were, by their reliance on defendants’ omissions and mis-

statements, directly and proximately damaged.

COUNT I

FRAUD

24. Plaintiff repeats and repleads Paragraphs 1-23 as

if fully set forth herein.

25. Defendants’ conduct as described above involved

material fraudulent representations to plaintiff concerning

their rates which were false and known by defendants to be

false at the time they were made, including but not limited

to:

(a) the representations that customers would only be

charged for completed calls;

(b) the representation that billing would begin only after

the call was answered;

(c) the representation that defendants’ rates were signifi-

cantly lower than those of the Bell System.

26. Defendants’ conduct as described above involved

fraudulent omissions. These omissions did and were

intended to mislead and deceive the plaintiff class, and

include but are not limited to:

(a) defendants omitted disclosure that charges would be

made for incomplete calls;

H-6

(b) defendants omitted disclosure that to avoid these

charges one would have to hang up before six rings;

(c) defendants omitted disclosure that six or more rings

prior to a completed call might involve additional

charges;

(d) defendants omitted disclosure in its advertisements

that defendants’ rates might not be significantly lower

than the Bell System’s rates;

(e) defendants omitted to inform the class that if the

improper charges were reported, as stated in para-

graph 18 above, the charges would be reversed.

27. Members of the plaintiff class believed and reason-

ably relied to their detriment on defendants’ misrepresen-

tations and omissions in becoming and remaining subscrib-

ers to defendants and were thereby damaged in the amount

of all improper charges imposed on them, plus interest and

inconvenience caused thereby.

28. Defendants’ conduct in committing the fraud

described above was done willfully and/or recklessly and

in wanton disregard of the rights of the class members and

defendants’ obligations under the common and statutory

laws, entitling plaintiff and the members of the class to

punitive damages.

WHEREFORE, plaintiff respectfully requests this

Court to enter judgment in the class’ favor and against

defendants, including an order that:

(a) defendants be required to account to the plaintiff class

for all improper overcharges;

(b) defendants be required to pay the class an amount

equal to all such overcharges, plus interest from the

date imposed, and a compensatory amount for incon-

venience;

(c) the plaintiff class be awarded their costs incurred in

connection with this action, including the award of

attorneys’ fees;

(d) the plaintiff class be awarded punitive damages in an

a |

H-7

amount of three times the actual damages incurred;

(e) defendants be permanently enjoined from imposing

improper overcharges; and

(f) the plaintifff class be awarded such further relief as

this Court deems appropriate.

COUNT II

BREACH OF CONTRACT

29. Plaintiff repeats and repleads Paragraphs 1-23 as

if fully set forth herein.

30. Defendants’ conduct as described above has

breached the written and implied contract existing

between plaintiffs and defendants in, but not limited to,

the following ways:

(a) that customers would only be charged for completed

calls;

(b) that billing would begin only after the call was

answered;

(c) that defendants’ rates were significantly lower than

the Bell System’s rates.

31. As a direct and proximate result of defendants’

breach of contract, the plaintiff class have been damaged

in the amount of all improper charges imposed on them as

subscribers of defendants and have suffered inconvenience

caused thereby.

32. Defendants’ conduct in breaching the contract as

described above was done willfully and in wanton disre-

gard of the rights of the plaintiff class and its obligations

under the common and statutory laws of Illiois, entitling

the plaintiff class to punitive damages.

WHEREFORE, plaintiff respectfully requests this

Court to enter judgment in the class’ favor and against the

defendants, including an order that:

(a) defendants be required to account to the plaintiff class

for all improper overcharges;

H-8

(b) defendants be required to pay to the plaintiff class an

amount equal to all such overcharges, plus interest

from the date imposed;

(c) the plaintiff class be awarded their costs incurred in

connection with this action, including the award of

attorneys’ fees;

(d) the plaintiff class be awarded punitive damages in an

amount of three times the actual damages incurred;

(e) defendants be permanently enjoined from imposing

any improper overcharges;

(f) the plaintiff class be awarded such further relief as

this Court deems appropriate.

COUNT III

UNIFORM DECEPTIVE

TRADE PRACTICES ACT

33. Plaintiff repeats and repleads Paragraphs 1-23 as

if fully set forth herein.

34. Defendants’ conduct violated Jll.Rev.Stat., Ch.

121-1/2 §312, which provides in pertinent part that:

A person engages in a deceptive trade practice when,

in the course of business .. . (it)

(5) represents that ... services have... characteristics...

benefits or qualities that they do not have....

(9) advertises goods or services with intent not to sell

them as advertised;

(12) engages in any other conduct which similarly creates

a likelihood of confusion or of misunderstanding.

35. Defendants’ violation of §312 includes, but is not

limited to, the following:

(a) defendants’ representations that customers would be

charged only for completed calls;

(b) defendants’ representations that billing would begin

only after the call was answered;

(c) defendants’ representations that defendants’ rates

were lower than Bell’s;

H-9

(d) defendants’ billing procedures, which made it difficult

and unlikely for a customer to discover these improper

charges.

36. As a direct and proximate result of defendants’

violation of §312, the plaintiff class has been damaged in

the amount of all improper charges imposed on it, and has

suffered inconvenience caused thereby.

WHEREFORE, plaintiff respectfully requests this

Court to enter judgment in favor of the class and against

the defendants including an order that:

(a) defendants be required to account to all plaintiffs for

all improper overcharges;

(b) defendants be required to pay to the plaintiffs an

amount equal to all such overcharges, plus interest

from the date imposed and compensatory amount for

inconvenience;

(c) the plaintiffs be awarded their costs incurred in con-

nection with this action, including the award of attor-

neys’ fees pursuant to /ll.Rev.Stat., ch. 121-1/2, §313;

(d) the plaintiffs be awarded punitive damages in an

amount of three times the actual damages incurred;

(e) defendants be permanently enjoined from imposing

any improper overcharges; and

(f) the plaintiffs be awarded such further relief as this

Court deems appropriate.

COUNT IV

ILLINOIS CONSUMER FRAUD

AND DECEPTIVE PRACTICES ACT

37. Plaintiff repeats and repleads Paragraphs 1-23 as

if fully set forth herein.

38. Defendants’ conduct violates Jll.Rev.Stat., ch. 121-

1/2 §262, which declares unlawful:

.. . unfair or deceptive acts or practices, includ-

ing but not limited to the use or employment of

any deception fraud (sic), false promise, misrepre-

H-10

sentation or the concealment, suppression or omis-

sion of any material facts, with the intent that

others rely upon the concealment, supression (sic)

or omission of such material fact .. . in the conduct

of any trade or commerce... whether any person

has in fact been misled or damaged thereby. ...

39. Defendants’ violation of §262 includes, but is not

limited to, the following:

(a) defendants’ failure to disclose that charges would be

made for uncompleted calls is an intentional fraud,

deceptive practice, suppression, concealment and omis-

sion to state a material fact in violation of §262;

(b) defendants’ failure to disclose that in order to avoid

these charges one would have to hang up before six

rings is an intentional fraud, deceptive practice, sup-

pression, concealment and an omission to state a mate-

rial fact under §262;

(c) defendants’ failure to disclose that six or more rings

prior to a completed call might involve additional

charges is an intentional fraud, deceptive practice,

suppression, concealment and omission to state a

material fact under §262; and

(d) defendants’ failure to disclose in its advertisements

that their rates might not be significantly lower than

the Bell System’s rate is an intentional fraud, decep-

tive practice, suppression, concealment and omission

to state a material fact under §262.

40. As a direct and proximate result of defendants’ vio-

lation of §262, the members of the plaintiff class have been

damaged in the amount of all improper charges imposed on

them, plus interest and inconvenience caused thereby.

41. The defendants’ conduct in violation of §262 was

done willfully and in wanton disregard of the Consumer

Fraud and Deceptive Practices Act and of numerous other

provisions of Illinois statutory and common law, entitling

plaintiffs to punitive damages.

WHEREFORE, plaintiff respectfully requests this

Court to enter judgment in favor of the plaintiffs and

H-11

against defendants, including an order that:

(a)

(b)

(c)

(d)

(e)

(f)

defendants be required to account to the plaintiffs for

all improper overcharges;

defendants be required to pay to the plaintiffs an

amount equal to all such overcharges, plus interest

from the date imposed and a compensatory amount for

inconvenience;

the plaintiffs be awarded their costs incurred in

connection with this action, including the award of

attorneys’ fees pursuant to /ll.Rev.Stat., ch. 121-1/2

§270a(c);

the plaintiffs be awarded punitive damages in an

amount of three times the actual damages incurred;

defendants be permanently enjoined from imposing

any improper overcharges; and

the plaintiffs be awarded such further relief as this

Court deems appropriate.

/s/ CHARLES BARNHILL

CHARLES BARNHILL

Attorney for the Plaintiff Class

Davis, MINER, BARNHILL

& GALLAND, P.C.

14 West Erie Street

Chicago, IL 60610

(312) 751-1170

DATED: February 13, 1984

I-1

APPENDIX I

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

DAVID H. LOCKS, on his own)

behalf and on behalf of all oth-

ers similarly situated,

Plaintiff,

v. 4 _

JURY DEMANDED

U.S. TELEPHONE OF THE |

MIDWEST, INC.,

Defendant.

No. 84C1485

CLASS ACTION COMPLAINT

FOR INJUNCTIVE AND OTHER RELIEF

Plaintiff, David H. Locks, through his attorneys, for

his complaint against the defendant, U.S. Telephone of the

Midwest, Inc. (“U.S. Telephone”), states as follows:

1. This is an action under 47 U.S.C. § 201 et seg. for

damages and injunctive relief from improper overcharges

in telephone service; under principles of common law fraud

and breach of contract; and for violation of Il. Rev. Stat.

ch. 121-1/2, § 262 et seg. for deceptive practices and III.

Rev. Stat. ch. 121-1/2, § 312 for deceptive trade practices.

JURISDICTION AND VENUE

2. Jurisdiction is predicated upon 28 U.S.C. § 1331,

28 U.S.C. § 1337, 47 U.S.C. § 207, and upon principles of

pendent jurisdiction.

3. The plaintiff is a U.S. Telephone subscriber who

resides in Chicago, Illinois.

4. Defendant, U.S. Telephone is a corporation organ-

ized under the laws of the State of Texas. It is qualified to

I-2

do business and is doing business in Illinois.

5. Jurisdiction is proper under 47 U.S.C. § 207, which

provides:

Any person claiming to be damaged by any com-

mon carrier subject to the provisions of this chap-

ter may either make a complaint to the Commis-

sion as hereinafter provided for, or may bring suit

for the recovery of the damages for which such

common carrier may be liable under the provisions

of this chapter, in any district court of the United

States of competent jurisdiction ....

6. Venue lies in this district under 28 U.S.C. § 1391

as the defendant is qualified to do business in this district

and is doing business in this district.

CLASS ACTION ALLEGATIONS

7. This action is brought by palintiff under Rule

23b(1), b(2) and b(3) of the Federal Rules of Civil Procedure

on behalf of a class of all persons:

(a) who are now or have been at some time in the

past ten years customers of U.S. Telephone; and

(b) who were improperly charged by defendant U.S.

Telephone for services during the past ten years.

8. Counts IV and V are brought on behalf of a subclass

of the class which is described in paragraph 7. The subclass

includes all members of the class who are residents of the

State of Illinois.

9. The members of the plaintiff class and of the sub-

class are so numerous that joinder of all members is

impractical.

10. There are questions of law and fact common to the

class and to the subclass which predominate over any ques-

tions involving only individual members, including but not

limited to:

(a) whether the defendant has improperly charged

I-3

class members for telephone calls which were not com-

pleted;

(b) when the defendant’s improper charges for

uncompleted calls begin;

(c) whether a class member can be charged for

uncompleted calls;

(d) whether the defendant improperly charges for

rings prior to completed calls;

(e) whether the defendant’s charges were unjust and

unreasonable;

(f) whether the conduct of defendant complained of

herein violates Title 47 of the United States Code;

(g) whether the actions complained of herein con-

stitute a fraud at common law perpetrated against the

members of the class;

(h) whether the actions of defendant complained

of herein constitute a breach of the written contract

between defendant and the members of the class;

(i) whether defendant’s conduct was willful and wan-

ton so as to give rise to punitive damages.

11. The claims of the plaintiff are typical of the claims

of the class and of the subclass.

12. Plaintiff will fairly and adequately protect the

interests of the class and of the subclass he seeks to repre-

sent.

13. Aclass action is an appropriate method for the fair

and efficient adjudication of this controversy.

BACKGROUND FACTS

14. U.S. Telephone owns and operates a long distance

lephone communications network covering all of the con-

thgental United States.

\15. Pursuant to Title 47 of the United States Code,

U.S. Telephone files a schedule of its tariffs with the

I-4

Federal Communications Commission (the “F.C.C” or the

“Commission”).

16. U.S. Telephone advertises that its rates are sig-

nificantly lower than those of AT&T.

17. U.S. Telephone bills its customers for calls on a

monthly basis.

CHALLENGED PRACTICES OF DEFENDANT

18. Defendant has engaged in a scheme and course of

conduct whereby defendant charges its customers for calls

which are not completed.

19. The fact that these charges would be made was

never at any time disclosed in either the defendant’s F.C.C.

filings or any of the defendant’s advertising.

20. According to the defendant’s practice, these

improper charges are reversed by the defendant only if ais-

covered by the customer and reported to the defendant.

21. Defendant’s billing procedure makes it unlikely

that a customer would discover these improper charges,

and difficult to have such charges reversed.

22. The improper charges imposed by defendant pur-

suant to the scheme and plan against its subscribers are

and were accomplished by means which include, but are

not limited to, the following:

(a) If a U.S. Telephone customer makes a call which

is not completed, the customer will be charged for this

uncompleted call.

(b) If a U.S. Telephone customer makes a call

which is completed, yet rings several times before it is

answered, the customer may be charged for ringing time

in addition to any actual communication.

23. The scheme and fraudulent course of conduct

described above was and is carried out with the full knowl-

edge of defendant and was and is perpetuated with the

I-5

intent that members of the plaintiff class would rely on

the misrepresentations and omissions.

24. The improper additional charges described in para-

graph 22, swpra, were imposed deliberately, knowingly and

with the intention to deceitfully and fraudulently obtain

moneys from class members to which the defendant was

not and knew it was not entitled. Defendant has repeat-

edly been advised of the existence of its improper over-

charging practices through its subscribers’ complaints and

otherwise, but continues such practices.

25. The misrepresentations described above were

material. The plaintiff class were misled and deceived by

them, relied to their detriment upon them, and were, by

their reliance on defendant’s omissions and misstatements,

directly and proximately damaged.

COUNT I

VIOLATION OF TITLE 47

26. Plaintiff repeats and repleads paragraphs 1-25 as

if fully set forth herein.

27. Defendant’s conduct violated 47 U.S.C. § 201(b),

which provides in pertinent part:

All charges, practices, classifications, and regula-

tions for and in connection with such communica-

tion service, shall be just and reasonable, and any

such charge, practice, classification or regulation

that is unjust or unreasonable is declared to be

unlawful.

28. Defendant’s conduct violated 47 U.S.C. § 203(c),

which provides in pertinent part:

No carrier, uni 3 otherwise provided by or under

authority of this chapter, shall engage or partici-

pate in such communication unless schedules have

been filed and published in accordance with the

provisions of this chapter and with the regulations

made thereunder; and no carrier shall (1) charge,

demand, collect, or receive a greater or less or dif-

ferent compensation for such communications, or

I-6

for any service in connection therewith, between

the points named in any such schedule than the

charges specified in the schedule then in effect.

29. Defendant’s violation of § 201(b) and § 203(c)

include, but are not limited to, the charging, demanding,

and receiving greater compensation for their services than

their F.C.C. schedule of charges indicated, and the imposi-

tion of unjust and unreasonable charges.

30. Defendant’s violations of § 201(b) and § 203(c)

include, but are not limited to, the following:

(a) charging customers for uncompleted calls;

(b) beginning to bill customers before many com-

pleted calls were answered.

31. As a direct and proximate result of defendant’s vio-

lations of § 201(b) and § 203(c), plaintiff and the members

of the plaintiff class have been damaged in the amount of

all improper charges imposed on them, plus inconvenience

caused thereby.

WHEREFORE, plaintiff respectfully requests this

Court to enter judgment in favor of the plaintiff class and

against the defendant including an order that:

(a) defendant be required to account to the plaintiff

class for all improper overcharges;

(b) defendant be required to pay to the plaintiff class

an amount equal to all such overcharges, plus interest

from the date imposed, and a compensatory amount for

inconvenience;

(c) the plaintiff class be awarded their costs

incurred in connection with this action, including the

award of reasonable attorneys’ fees, pursuant to 47

U.S.C. § 206.

(d) the plaintiff class be awarded punitive dam-

ages in an amount of three times the actual damages

incurred;

I-7

(e) defendant be permanently enjoined from impos-

ing any improper overcharges;

(f) the plaintiff class be awarded such further relief

as this Court decrees appropriate.

COUNT II

FRAUD

32. Plaintiff repeats and repleads paragraphs 1-25 as

if fully set forth herein.

33. Defendant’s conduct as described above involved

material fraudulent representations to plaintiff concerning

its rates which were false and known by defendant to be

false at the time they were made, including but not limited

to:

(a) the representation that customers would only be

charged for completed calls;

(b) the representation that billing would begin only

after the call was answered and that the customers

would pay for only what they used;

(c) the representation that U.S. Telephone’s rates

were significantly lower than those of AT&T.

34. Defendant’s conduct as described above involved

fraudulent omissions. These omissions did and were

intended to mislead and deceive the plaintiff class, and

include but are not limited to:

(a) defendant omitted disclosure that charges would

be made for incomplete calls;

(b) defendant omitted disclosure that rings prior to

a completed call might involve additional charges;

(c) defendant omitted disclosure that U.S. Tel-

ephone’s rates might not be signicantly lower than

AT&T’s rates;

(d) defendant omitted to inform the class that if the

improper charges were reported, as stated in Paragraph

20 above, the charges would be reversed.

I-8

35. Members of the plaintiff class believed and rea-

sonably relied to their detriment on defendant’s misrepre-

sentations and omissions in becoming and remaining sub-

scribers to U.S. Telephone and were thereby damaged in

the amount of all improper charges imposed on them, plus

interest and inconvenience caused thereby.

36. Defendant’s conduct in committing the fraud

described above was done willfully and/or recklessly and

in wanton disregard of the rights of the class members and

defendant’s obligations under the laws, entitling plaintiff

and the members of the class to punitive damages.

WHEREFORE, plaintiff respectfully requests this

Court to enter judgment in the class’ favor and against

defendant, including an order that:

(a) defendant be required to account to the plaintiff

class for all improper overcharges;

(b) defendant be required to pay the class an

amount equal to all such overcharges, plus interest from

the date imposed, and a compensatory amount for incon-

venience;

(c) the plaintiff class be awarded their costs

incurred in connection with this action, including the

award of attorneys’ fees;

(d) the plaintiff class be awarded punitive dam-

ages in an amount of three times the actual damages

incurred;

(e) defendant be permanently enjoined from impos-

ing improper overcharges;

(f ) the plaintiff class be awarded such further relief

as this Court deems appropriate.

COUNT III

BREACH OF CONTRACT

37. Plaintiff repeats and repleads paragraphs 1-25

as if fully set forth herein.

|

I-9

38. Defendant’s conduct as described above has

breached the written and implied contract existing

between plaintiffs and defendant in, but not limited to,

the following ways:

(a) customers were charged for uncompleted calls;

(b) billing did not begin only after the call was

answered;

(c) in many instances U.S. Telephone’s rates were

not significantly lower than AT&T's rates.

39. As a direct and proximate result of defendant’s

breach of contract, the members of the plaintiff class have

been damaged in the amount of all improper charges

imposed on them as subscribers of U.S. Telephone, and

have suffered inconvenience caused thereby.

40. Defendant’s conduct in breaching the contract as

described above was done willfully and in wanton disregard

of the rights of the plaintiff class and its obligations under

the laws entitling the plaintiff class to punitive damages.

WHEREFORE, plaintiff respectfully requests this

Court to enter judgment in the class’ favor and against the

defendant, including an order that:

(a) defendant be required to account to the plaintiff

class for all improper overcharges;

(b) defendant be required to pay to the plaintiff class

an amount equal to all such overcharges, plus interest

from the date imposed;

{c) the plaintiff class be awarded their costs

incurred in connection with this action, including the

award of attorneys’ fees;

(d) the plaintiff class be awarded punitive dam-

ages in an amount of three times the actual damages

incurred;

(e) defendant be permanently enjoined from impos-

ing any improper overcharges;

I-10

(f ) the plaintiff class be awarded such further relief

as this Court deems appropriate.

COUNT IV

UNIFORM DECEPTIVE

TRADE PRACTICES ACT

41. Count IV is stated on behalf of the subclass of

members of the plaintiff class who reside in Illinois (“Ili-

nois plaintiffs”).

42. Plaintiff repeats and repleads Paragraphs 1-25 as

if fully set forth herein.

43. Defendant’s conduct violates Ill. Rev. Stat., ch.

121-1/2, § 312, which provides in pertinent part that:

A person engages in a deceptive trade practice when,

in the course of his business .. . (it)

(5) represents that ... services have ... char-

acteristics ... benefits or qualities that they do not

have....

(9) advertises goods or services with intent not to

sell them as advertised;

(12) engages in any other conduct which similarly

creates a likelihood of confusion or of misunderstand-

ing.

44. Defendant’s violation of § 312 includes, but is not

limited to, the following:

(a) defendant’s representations that customers

would be charged only for completed calls;

(b) defendant’s representations that billing would

begin only after the call was answered;

(c) defendant’s representations that U.S. Telephone’s

rates were lower than AT&T’s;

(d) defendant’s billing procedure, which made it

difficult and unlikely for a customer to discover these

improper charges.

I-11

45. As a direct and proximate result of defendant’s

violation of § 312, the plaintiff class has been damaged in

the amount of all improper charges imposed on it, and has

suffered inconvenience caused thereby.

WHEREFORE, plaintiff respectfully requests this

Court to enter judgment in favor of the subclass of IIli-

nois plaintiffs and against the defendant including an order

that:

(a) defendant be required to account to all Illinois

plaintiffs for all improper overcharges;

(b) defendant be required to pay to the Illinois plain-

tiffs an amount equal to all such overcharges, plus inter-

est from the date imposed and a compensatory amount

for inconvenience;

(c) the Iliinois (sic) plaintiffs be awarded their costs

incurred in connection with this action, including the

award of attorneys’ fees pursuant of Jll. Rev. Stat., ch.

121-1/2, § 313;

(d) the [llinois plaintiffs be awarded punitive dam-

ages in an amount of three times the actual damages

incurred;

(e) defendant be permanently enjoined from impos-

ing any improper overcharges;

(f) the Dlinois plaintiffs be awarded such further

relief as this Court deems appropriate.

COUNT V

ILLINOIS CONSUMER FRAUD

AND aprrtapaadls hides PRACTICES ACT

46. Count V is stated on behalf of the subclass of

members of the plaintiff class who reside in I]linois.

47. Plaintiff repeats and repleads paragraphs 1-25 as

if fully set forth herein.

48. Defendant’s conduct violates Jill. Rev. Stat., ch.

121-1/2, § 262, which declares unlawful:

I-12

... unfair or deceptive acts or practices, including

but not limited to the use or employment of any

deception fraud (sic), false promise, misrepresen-

tation or the concealment, suppression or omission

of any material facts, with the intent that others

rely upon the concealment, suppression or omis-

sion of such material fact ...in the conduct of any

trade or commerce... whether any person has in

fact been misled or damaged thereby...

49. Defendant’s violation of § 262 includes, but is not

limited to, the following:

(a) defendant’s failure to disclose that charges would

be made for uncompleted calls is an intentional fraud,

deceptive practice, suppression, conceaiment and omis-

sion to state a material fact in violation of § 262.

(b) defendant’s failure to disclose more rings prior to

a completed call might involve additional charges is an

intentional fraud, deceptive practice, suppression, con-

cealment and omission to state a material fact under

§ 262;

(c) defendant’s failure to disclose in its advertise-

ments that U.S. Telephone’s rates might not be signifi-

cantly lower than AT&T’s rate is an intentional fraud,

deceptive practice, suppression, concealment and omis-

sion to state a material fact under § 262.

50. As a direct and proximate result of defendant’s

violation of § 262, the members of the plaintiff class have

been damaged in the amount of all improper charges

imposed on them, plus interest and inconvenience caused

thereby.

51. The defendant’s conduct in violation of § 262 was

done willfully and in wanton disregard of the Consumer

Fraud and Deceptive Practices Act and of numerous other

provisions of Illinois statutory and common law, entitling

plaintiffs to punitive damages.

WHEREFORE, plaintiff respectfully requests this

I-13

Court to enter judgment in favor of the Illinois plaintiffs

and against defendant, including an order that:

(a) defendant be required to account to the Illinois

plaintiffs for all improper overcharges;

(b) defendant be required to pay to the Illinois plain-

tiffs an amount equal to all such overcharges, plus inter-

est from the date imposed and a compensatory amount

for inconvenience;

(c) the [Illinois plaintiffs be awarded their costs

incurred in connection with this action, including the

award of attorneys’ fees pursuant to J/l. Rev. Stat., ch.

121-1/2, § 270a(c);

(d) the Illinois plaintiffs be awarded punitive dam-

ages in an amount of three times the actual damages

incurred;

(e) defendant be permanently enjoined from impos-

ing any improper overcharges;

(f) the Illinois plaintiffs be awarded such further

relief as this Court deems appropriate.

Dated: February 16, 1984

SACHNOFF WEAVER & RUBENSTEIN, LTD.

/s/ JacK L. BLock

One of the Attorneys for Plaintiffs

JAcK L. BLOcK

Fay CLAYTON

SACHNOFF WEAVER & RUBENSTEIN, LTD.

One IBM Plaza, Suite 4700

Chicago, IL 60611

(312) 644-2400

Atty #5388

J-1

APPENDIX J

STATUTES AND CONSTITUTIONAL

PROVISIONS INVOLVED

United States Constitution, Article VI, Clause 2:

This Constitution, and the Laws of the United States

which shall be made in Pursuance thereof; and all

Treaties made, or which shall be made, under the

Authority of the United States, shall be the supreme

Law of the Land; and the Judges in every State shall be

bound thereby, any Thing in the Constitution or Laws

of any State to the Contrary notwithstanding.

Federal Communications Act of 1934, 47 U.S.C. Sec. 151:

For the purpose of regulating interstate and foreign com-

merce in communication by wire and radio so as to make

available, so far as possible, to all the people of the

United States a rapid, efficient, Nation-wide, and world-

wide wire and radio communication service with ade-

quate facilities at reasonable charges, for the purpose of

the national defense, for the purpose of promoting safety

of life and property through the use of wire and radio

communication, and for the purpose of securing a more

effective execution of this policy by centralizing author-

ity heretofore granted by law to several agencies and by

granting additional authority with respect to interstate

and foreign commerce in wire and radio communication,

there is created a commission to be known as the “Fed-

eral Communications Commission”, which shall be con-

stituted as hereinafter provided, and which shall execute

and enforce the provisions of this chapter.

Federal Communications Act of 1934, 47 U.S.C. Sec.

201 (b):

(b) All Charges, practices, classifications, and regula-

tions for and in connection with such communication ser-

vice, shall be just and reasonable, and any such charge,

J-—2

practice, classification, or regulation that is unjust or

unreasonable is declared to be unlawful:...The Com-

mission may prescribe such rules and regulations as may

be necessary in the public interest to carry out the pro-

visions of this chapter.

Federal Communications Act of 1934, 47 U.S.C. Sec.

202 (a):

(a) Itshall be unlawful for any common carrier to make

any unjust or unreasonable discrimination in charges,

practices, classifications, regulations, facilities, or ser-

vices for or in connection with like communication ser-

vice, directly or indirectly, by any means or device, or to

make or give any undue or unreasonable preference or

advantage to any particular person, class of persons, or

locality, or to subject any particular person, class of per-

sons, or locality to any undue or unreasonable prejudice

or disadvantage.

Federal Communications Act of 1934, 47 U.S.C. Sec.

203 (a) - (c):

(a) Every common carrier, exept connecting carriers,

shall, within such reasonable time as the Commission

shall designate, file with the Commission and print and

keep open for public inspection schedules showing all

charges for itself and its connecting carriers for inter-

state and foreign wire or radio communication between

the different points on its own system, and between

points on its own system and points on the system of its

connecting carriers or points on the system of any other

carrier subject to this chapter when a through route has

been established, whether such charges are joint or sepa-

rate, and showing the classifications, practices, and reg-

ulations affecting such charges. Such schedules shall

contain such other information, and be printed in such

form, and be posted and kept open for public inspection

in such places, as the Commission may be regulation

require, and each such schedule shall give notice of its

J-3

effective date; and such common carrier shal! furnish

such schedules to each of its connecting carriers, and

such connecting carriers shall keep such schedules open

for inspection in such public places as the ne

may require.

(b) (1) No change shall be made in the charges, clas-

sifications, regulations, or practices which have been so

filed and published except after ninety days notice to the

Commission and to the public, which shall be published

in such form and contain such information as the Com-

mission may by regulations prescribe.

(2) The Commission may, in its discretion end for

good cause shown, modify any requirement made by or

under the authority of this section either in particular

instances or by general order applicable to special cir-

cumstances or conditions except that the Commission

may not require the notice period specified in paragraph

(1) to be more than ninety days.

(c) No carrier, unless otherwise provided by or under

authority of this chapter, shall engage or participate in

such communication unless schedules have been filed,

and published, in accordance with the provisions of this

chapter, and with the regulations made thereunder; and

no carrier shall (1) charge, demand, collect, or receive a

greater or less or different compensation for such com-

munication, or for any service in connection therewith,

between the points named in any such schedule than the

charges specified in the schedule then in effect, or (2)

refund or remit by any means or device any portion of

the charges so specified, or (3) extend to any person any

privileges or facilities in such communication, or employ

or enforce any classifications, regulations, or practices

affecting such charges, except as specified in such sched-

ule.

J-4

Federal Communications Act of 1934, 47 U.S.C. Sec.

205 (a): .

(a) Whenever, after full opportunity for hearing, upon a

complaint or under an order for investigation and hear-

ing made by the Commission on its own initiative, the

Commission shall be of opinion that any charge, classifi-

cation, regulation, or practice of any carrier or carriers

is or will be in violation of any of the provisions of this

chapter, the Commission is authorized and empowered

to determine and prescribe what will be the just and rea-

sonable charge or the maximum or minimum, or maxi-

mum and minimum, charge or charges to be thereafter

observed, and what classificiation, regulation, or prac-

tice is or will be just, fair, and reasonable, to be there-

after followed, and to make an order that the carrier or

carriers shall cease and desist from such violation to the

extent that the Commission finds that the same does or

will exist, and shall not thereafter publish, demand, or

collect any charge other than the charge so prescribed,

or in excess of the maximum or less than the minimum

so prescribed, as the case may be, and shall adopt the

classification and shall conform to and observe the reg-

ulation or practice so prescribed.

Federal Communications Act of 1934, 47 U.S.C. Sec. 206:

In case any common carrier shall do, or cause or permit

to be done, any act, matter, or thing in this chapter pro-

hibited or declared to be unlawful, or shall omit to do

any act, matter, or thing in this chapter required to be

done, such common carrier shall be liable to the person

or persons injured thereby for the full amount of dam-

ages sustained in consequence of any such violation of

the provisions of this chapter, together with a reason-

able counsel or attorney’s fee, to be fixed by the court

in every case of recovery, which attorney’s fee shall be

taxed and collected as part of the costs in the case.

J-5

Federal Communications Act of 1934, 47 U.S.C. Sec. 207:

Any person claiming to be damaged by any common car-

rier subject to the provisions of this chapter may either

make complaint to the Commission as hereinafter pro-

vided for, or may bring suit for the recovery of the dam-

ages for which such common carrier may be liable under

the provisions of this chapter, in any district court of the

United States of competent jurisdiction; but such person

shall not have the right to pursue both such remedies.

Federal Communications Act of 1934, 47 U.S.C. Sec. 208:

Any person, any body politic or municipal organization,

or State commission, complaining of anything done or

omitted to be done by any common carrier subject to

this chapter, in contravention of the provisions thereof,

may apply to said Commission by petition which shall

briefly state the facts, whereupon a statement of the

complaint thus made shall be forwarded by the Commis-

sion to such common carrier, who shall be called upon to

satisfy the complaint or to answer the same in writing

within a reasonable time to be specified by the Commis-

sion. If such common carrier within the time specified

shall make preparation for the injury alleged to have

been caused, the common carrier shall be relieved of lia-

bility to the complainant only for the particular violation

of law thus complained of. If such carrier or carriers

shall not satisfy the complaint within the time specified

or there shall appear to be any reasonable ground for

investigating said complaint, it shall be the duty of the

Commission to investigate the matters complained of in

such manner and by such means as it shall deem proper.

No complaint shall at any time be dismissed because of

the absence of direct damage to the complainant.

Federal Communications Act of 1934, 47 U.S.C. Sec. 209:

If, after hearing on a complaint, the Commission shall

determine that any party complainant is entitled to an

award of damages under the provisions of this chapter,

J-—6

the Commission shall make an order directing the car-

rier to pay to the complainant the sum to which he is

entitled on or before a day named.

Federal Communications Act of 1934, 47 U.S.C. Sec.

401 (b):

(b) If any person fails or neglects to obey any order of

the Commission other than for the payment of money,

while the same is in effect, the Commission or any party

injured thereby, or the United States, by its Attorney

General, may apply to the appropriate district court of

the United States for the enforcement of such order. If,

after hearing, that court determines that the order was

regularly made and duly served, and that the person

is in disobedience of the same, the court shall enforce

obedience to such order by a writ of injunction or other

proper process, mandatory or otherwise, to restrain such

person or the officers, agents, or representatives of such

person, from further disobedience of such order, or to

enjoin upon it or them obedience to the same.

Federal Communications Act of 1934, 47 U.S.C. Sec.

402 (a):

Any proceeding to enjoin, set aside, annual, or suspend

any order of the Commission under this chapter (except

those appealable under subsection (b) of this section)

shall be brought as provided by and in the manner pre-

scribed in chapter 158 of Title 28.

Federal Communications Act of 1934, 47 U.S.C. Sec. 407:

If a carrier does not comply with an order for the pay-

ment of money within the time limit in such order, the

complainant, or any person for whose benefit such order

was m::de, may file in the district court of the United

States for the district in which he resides or in which

is located the principal operating ctffice of the carrier,

or through which the line of the carrier runs, or in any

State court of general jurisdiction having jurisdiction of

J-—7

the parties, a petition setting forth briefly the causes for

which he claims damages, and the order of the Commis-

sion in the premises. Such suit in the district court of

the United States shall proceed in all respects like other

civil suits for damages, except that on the trial of such

suits the findings and order of the Commission shall be

prima facie evidence of the facts therein stated, except

that the petitioner shall not be liable for costs in the

district court nor for costs at any subsequent stage of

the proceedings unless they accrue upon his appeal. If

the petitioner shall finally prevail, he shall be allowed a

reasonable attorney’s fee, to be taxed and collected as a

part of the costs of the suit.

United States Code, Title 28, Chapter 158, Section 2342:

The court of appeals has exclusive jurisdiction to enjoin,

set aside, suspend (in whole or in part), or to deter-

mine the validity of — (1) all final orders of the Federal

Communications Commission made reviewable by sec-

tion 402 (a) of title 47; Jurisdiction is invoked by filing

a petition as provided by section 2344 of this title.

Illinois Consumer Fraud and Deceptive Practices Act, IIli-

nois Revised Statutes, Chapter 121 1/2, Sec. 262:

Unfair methods of competition and unfair or deceptive

acts or practices, including but not limited to the use

or employment of any deception, fraud, false pretense,

false promise, misrepresentation or the concealment,

suppression or omission of any material fact, with intent

that others rely upon the concealment, suppression or

omission of such material fact, or the use or employ-

ment of any practice described in Section 2 of the “Uni-

form Deceptive Trade Practices Act”, approved August

5, 1965, in the conduct of any trade or commerce are

hereby declared unlawful whether any person has in fact

been misled, deceived or damaged thereby. In constru-

ing this section consideration shall be given to the inter-

pretations of the Federal Trade Commission and the fed-

J-8

eral courts relating to Section 59 (a) of the Federal Trade

Commission Act.