Opposition Brief — Sikes v. American Telephone & Telegraph Co.

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No. 02-124

IN THE

Supreme Court of the United States

JAMES W. SIKES and FELIX KEMP,

Petitioners,

v,

AT&T CORP.,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT FOR THE ELEVENTH CIRCUIT

“BRIEF IN OPPOSITION

Wyck A. Knox, JR. WILLIAM N. WItHRow, JR.

TeD H. CLARKSON Counsel of Record

KILPATRICK STOCKTON LLP C. LEEANN McCurry

Post Office Box 2043 TROUTMAN SANDERS LLP

Augusta, GA 30903 5200 NationsBank Plaza

(706) 724-2622 600 Peachtree Street

Laura A. KASTER Atlanta, GA 30308-2216

AT&T Corp. (404) 885-3000

295 North Maple Avenue

Room 1138L2

Basking Ridge, NJ 07920

(908) 221-4838

Attorneys for AT&T Corp.

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COUNSEL PRESS -—_

(800) 274-3321 + (800) 359-6859 _

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1

STATEMENT PURSUANT TO RULE 29.6

Respondent, AT&T Corp. (formerly known as American

Telephone & Telegraph Company), has no parent corporation

and no publicly held company owns 10% or more of its stock.

il

TABLE OF CONTENTS

Statement Pursuant to Rule 29.6 ...............

Te OE Co o.v ic Soka haw os ob askance

Table of Cited Authorities .....................

DOI Bk. bok Khe ee

Counterstatment of the Case ...................

Reasons for Denying the Writ..................

‘

II.

Il.

There Is No Conflict Among The Circuits

Regarding The Appropriate Standard Of

Review For District Court Certification

2 errr er ere rr yy re errr

The Eleventh Circuit’s Refusal To Allow

Elements Of A Claim To Be Presumed In

Order To Facilitate Class Certification

Recognized A Well-Settled Rule Of Law And

Presents No Issue For Review By This

CE, is viv sanaeeeeiees eee

There Is No Conflict Among The Circuits

Regarding The Standard For Certifying A

Nationwide Class That Will Require The

Application Of The Laws Of All Fifty

WD. . vkddcains (0045s b els eee

re en Sree

Page

12

17

22

26

lil

TABLE OF CITED AUTHORITIES

Page

Cases:

Alabama vy. Blue Bird Body Co.; Inc., 573 F.3d 309

MN ose sda Who ee bk Kee ek oa Ow Oe 20

Amaco Enters., Inc. v. Smolen, 1995 U.S. App.

LEXIS 20486 (9th Cir. 1995) ..............4. 19

Amchem Prods. Inc. v. Windsor, 521 U.S. 591

EE EEEEM, oar peat nae er Pane naen eae ere 13,19

Andrews v. AT&T, 95 F.3d 1014, reh’g denied

en banc, 104 F.3d 373 (11th Cir. 1996) ....... passim

Appletree Square I Ltd. Pshp. v. W.R. Grace & Co.,

29 F.3d 1283 (8th Cir. 1994) ................ 18

AT&T v. Central Office Tel. Inc., 524 U.S. 214

ts Lette s eyesore eRe ea eA 4

Barney v. Holzer Clinic, 110 F.3d 1207 (6th Cir.

REE CEST ga RR cre, ny ar ere 14

Basic Inc. v. Levinson, 485 U.S. 224 (1988) ...... 22

Berger v. Compaq Computer Corp., 257 F.3d 475

as or eh ek ky bake oe Raw Os 15

Bill Heard Chevrolet Co. v. Dixon, 2001 Ala. LEXIS

re yr rr a 24

Boughton v. Cotter Corp., 65 F.3d 823 (10th Cir.

ee ee hash eh kw kin cK SS 14

iv

Cited Authorities

Page

Brandenburg v. Seidel, 859 F.2d 1179 (4th Cir.

PE SKS eek brea aeeraatans 18

Broussard v. Meineke Discount Muffler Shops, Inc.,

155 F.3d 331 (4th Cir. 1998) ................ 15, 22

Carroll v. Cellco Pshp., 713 A.2d 509 (N.J. Super.

SOU 46 bx Ub ean w Cegbaken eee a ean meee 20

Castano v. American Tobacco Co., 84 F.3d 734

a ere ee ee a eee passim

Chin v. Chrysler Corp., 182 F.R.D. 448 (D.N.J.

i Ee Py ey ne me re mre 19, 23, 24

~ Cichonski v. American Inventors Corp., 1995 U.S.

Dist. LEXIS 16563 (E.D. Pa. 1995) ........... 22

Coleman v. GMAC, 2002 U.S. App. LEXIS 14644

Gee eee ee 65u 1 Swe har backe lee eres 12

County of Suffolk v. Long Island Lighting Co.,

907 F.2d 1295 (2d Cir. 1990) .............00. 18

Delta Air Lines, Inc. v. Air Line Pilots Ass’n Int'l,

238 F.3d 1300 (11th Cir. 2001) .............. 13

Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974) .. 10

Ex parte Green Tree Fin. Corp., 723 So.2d 6 (Ala.

FON So n0ks SS aS pac Ce ee

Freedman vy. Arista Records, Inc., 137 F.R.D. 225

Ce as RE Ads bs aNaeS Roe e eee ee 22

Cited Authorities

Page

General Tel. Co. of Southwest v. Falcon, 457 U.S.

SOT CUTER obi cde ven is cans news ceweneweres 3, 43

Georgine v. Amchem Prods., 83 F.3d 610 (3d Cir.

1996), aff’d, 521 U.S. 591 (1997) ............ 23

Glick v. MTV Networks, 796 F. Supp. 743 (S.D.N.Y.

ORD nb 5 GR RAGAS reee ee ree 24

Grantham & Mann v. American Safety Prods.,

831 F.2d 596 (6th Cir. 1987) ..............-. 18

Gulf Oil Co. v. Bernard, 452 U.S. 89 (1981) ...... 12

Harper v. AT&T, 54 F. Supp.2d 1371 (S.D. Ga.

i eT ee eo re Peer on ee ee 21

Hawkins v. Comparet-Cassani, 251 F.3d 1230

Le we | errrrrerrrrer eT eer ror 14

Holmes v. Securities Investor Protection Corp.,

SOS US. 250 CIGGE) 6s ewes ecvievensaveens 17

Horton v. Merrill Lynch, Pierce, Fenner & Smith,

855 F. Supp. 825 (E.D.N.C. 1994) ............ 15

Hudson v. Delta Airlines, 90 F.3d 451, 457 (11th Cir.

1996), cert. denied, 117 S. Ct. 1082 (1997) ....19, 20

Ideal Dairy Farms v. John Labatt, Ltd., 90 F.3d 737

CRECAE: TOTP oie GAs ores ese oe 18

In re Ford Motor Co. Vehicle Paint Litig., 182 F.R.D.

APOGEE. LA. TAGE) vines dk cde kind va ieee 19, 22

vi

Cited Authorities

Page

In re: LifeUSA Holding, 242 F.3d 136 (3d Cir.

DORE ssvdicuskihcenceessnteeese 13, 14

In re Stucco Litig., 175 F.R.D. 210 (E.D.N.C.

SOUR vchvanaded bake ee ee ceeeehee oa 25

In the Matter of Detariffing of Billing and Collection

Services, 102 F.C.C.2d 1150 (1986), recon.

Gontad, | FALA, GaSe CUPOe 00 bid cincceuss >.

James v. City of Dallas, 254 F.3d 551 (Sth Cir. 2001),

cert. denied, 122 S. Ct. 919 (2002) ........... 14

Johnson v. Penrod Drilling Co., 469 F.2d 897

Coie Gh WP os oh veh cunws eden waneeereees 25

Lienhart v. Dryvit Sys., Inc., 255 F.3d 138 (4th Cir.

DUE. v vé.gukdise0hsedesbuee eee 12, 14

Mack v. GMAC, 169 F.R.D. 671 (M.D. Ala. 1996)... = 22

Martin v. Dahlberg, Inc., 156 F.R.D. 207 (N.D. Cal.

ey ere pr re Mm 19, 22

Martinez v. Weyerhaeuser Mortg. Co., 1997 U.S.

Dist. LEXIS 22172 (S.D. Fla. 1997) .......... 24

MGIC Indem. Corp. v. Weisman, 803 F.2d 500

ek | rr eres err ry ya et 18

Mulligan v. Choice Mortg. Corp. USA, 1998 U.S.

Dist. LEXIS 13248 (D.N.H. 1998) ........... 22

vil

Cited Authorities

Page

Murphy v. Sofamor Danek Group, 123 F.3d 394

(6th Cir. 1997), cert. denied, 523 U.S. 1106

ee ere er re es ee 18, 20

Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340

ON ved e wb es che hieenekasecnssesenees 10

Pelletier v. Zweifel, 921 F.2d 1465 (11th Cir.), cert.

GOntaE, FSS UB. SSP CUFSA) vcccvccssveseces 18

Perrone v. GMAC, 232 F.3d 433 (Sth Cir. 2000),

cert. denied, 532 U.S. 971 (2001) ............ 18, 20

Reynolds v. East Dyer Dev. Co., 882 F.2d 1249

eS Br re erry err 18

Robinson v. Metro-North Commuter R.R., 267 F.3d

147 (2d Cir. 2001), cert. denied, 122 S. Ct. 1349

ET wis Fecha cake ae ba tanta weak eneak okie 14

Rosentstein v. CPC Int'l, Inc., 1991 U.S. Dist. LEXIS

SP ee EEO bb uSbdendnbhe bh cKarene 19, 22

Securities Investor Protection Corp. v. BDO

Seidman, LLP, 222 F.3d 63 (2d Cir. 2000) ...... 18

Sikes v. Teleline, 281 F.3d 1350, reh’g denied

en banc, 2002 U.S. App. LEXIS 10585 (11th Cir.

WEEE Actacedsisviakiactsetaweneeeesaans passim

Simon v. GD. Searle & Co., 816 F.2d 397 (8th Cir.

Re i.e eee Ce 16

vill

Cited Authorities

Page

Southwestern Refining Co. v. Bernal, 22 S.W.3d 425

Ce Sk avabecwkeseekGerenesdanenens 24

Spence v. Glock, GES. m.b.H, 227 F.3d 308 (Sth Cir.

BOOED vavenscesevewbercesceeeensavesenyes 12, 24

State v. Schubert Theatre Players Co., 281 N.W. 369

Ge: SHOE Sess cneeeesstverbeateveuseees 24

Stirman v. Exxon Corp., 280 F.3d 554 (Sth Cir.

BOUND Sa cs saecueceeeadessweskeanaveriess 24

Strain v. Nutri/System, Inc., 1990 U.S. Dist. LEXIS

17031 (E.D. Pa. 1990) ........ GeVesbeter 19, 21, 22

Summit Props., Inc. v. Hoechst Celanese Corp.,

214 F.3d 556, reh’g denied en banc, 228 F.3d 411

(Sth Cir. 2000), cert. denied, 531 U.S. 1132

GEE as.d50yaeees$in¥dsesessesioen ee 3, 18, 20

Turner v. Beneficial Corp., 242 F.3d 1023 (11th Cir.),

cert. denied, 122 S. Ct. 51 (2001) ............ 13

Walsh v. Ford Motor Co., 807 F.2d 1000 (D.C. Cir.

1986), cert. denied, 482 U.S. 915 (1987) ...15, 23, 25

Washburn v. Kansas City Life Ins. Co., 831 F.2d

ed rr Peer Te TET Tere Ty 21

Washington Mutual Bank v. Superior Court, 15 P.3d

SEU S GO OED Baebes essswetescentereres 24

Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d

Be LUNs NEE 6b 6 cevsakekevesieresesies 13

ix

Cited Authorities

Page

Wilkes v. Ford Motor Co. (In re Ford Motor Co.

Ignition Switch Prods. Liab. Litig.), 174 F.R.D.

CUED Okc bee Rs bac ee weneeen ieee) 24, 25

Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180

oe Be ere ree rr re 24

Statutes:

og et fe ee eee 6

Be a a SEE IL bes ere bedeviceweeeves 2

og fa | ye rey err e Perr ee ey ere 17

BO UA NBME sc iccvcctenccescevecsenceses 16

PE Eo > ee ab ee ahi ag 19

ee ery eee 2

de ee fee er ee 6

se of ee rere 2

x

Cited Authorities

Page

Rules:

oe YS er rrr 25

Pe i Eo ha Oks Se eeceebeeRREN baa ne passim

EE kein 6040-4 0a ks nena ane aees 25

Other Authority:

ee Re er ere 6

]

RESPONDENT’S BRIEF IN OPPOSITION

The Petition for a Writ of Certiorari should be denied

because the decision below represents a routine application of

settled law and does not present any issue of general importance.

The Eleventh Circuit decertified the class in this case because

the district court’s certification ruling disregarded binding

Eleventh Circuit law rendered in a related case that the district

court could not eliminate elements of each plaintiff’s claim by

entertaining class-wide presumptions of reliance and injury in

order to justify class treatment. The district court also ignored

any impediment to class certification presented by its own

determination that the case required the application of all fifty

states’. gambling laws. Instead, the district court improperly

entertained the legal fiction that all states’ gambling laws

were similar. The Petition should be denied because the Eleventh

Circuit’s decision neither conflicts with the decisions of any

other Circuit nor raises any issue that implicate the supervisory

power of this Court as Petitioners erroneously assert.

INTRODUCTION

This is the third of three related putative class actions

that have met the identical fate — decertification by the Eleventh

Circuit Court of Appeals. Each case asserted a nationwide

class to challenge the legality of certain 900-number

telephone programs. Andrews v. AT&T challenged all 900-

number programs that offered a chance to win a prize, while

Harper v. AT&T attacked all 900-number programs involving

credit cards or credit services.' In this case, Petitioners James

W. Sikes and Felix Kemp (“Petitioners”) challenged a particular

900-number program encompassed within the Andrews class

definition, the “Let’s Make A Deal” (““LMAD”) program.

1. The Andrews and Harper actions were effectively consolidated

for class certification purposes and are hereafter collectively referred to

as “Andrews.”

2

Each of these actions claimed that AT&T Corp.’s (“AT&T”)

provision of billing and collection services for the described

900-number programs constituted, among other things, mail and

wire fraud and/or illegal gambling.” In each case, the district ~

court certified nationwide classes and, because otherwise the

litigation would have been unmanageable, adopted various

“presumptions” to eliminate the need for the individual proofs

required to establish each class member’s claim. Thus, the

district court adopted a presumption that each and every class

member had justifiably relied on a misrepresentation in deciding

to call the 900-number programs. Similarly, despite the fact

that there were extensive refunds and credits made to those billed

for calls to the 900-number programs at issue, to permit class

certification, the district court was willing to presume that each

and every class member had suffered a compensable injury.

Further, although the district court recognized the necessity of

applying the gambling laws of all fifty states, it assumed that

these various states’ laws would be sufficiently similar to allow

the cases to be effectively managed. (R13-291-Ex.2-28-30;

R5-142-8, 10-11).

The Eleventh Circuit reversed the district court’s

certifications, first in Andrews v. AT&T, 95 F.3d 1014, reh'g

denied en banc, 104 F.3d 373 (11th Cir. 1996), which the

representative plaintiffs did not pursue before this Court. Then,

five years later, the Eleventh Circuit followed the Andrews ruling

and reversed the district court’s certification in this case. Sikes

v. Teleline, 281 F.3d 1350, reh’g denied en banc, 2002 U.S.

App. LEXIS 10585 (11th Cir. 2002).

2. The complaints in each case asserted claims under the Federal

Racketeering Influenced and Corrupt Organizations Act (“RICO”),

18 U.S.C. § 1961, et seg.; the Federal Communications Act (“FCA”),

47 U.S.C. § 201, et seq.; and the Georgia RICO Act, O.C.GA. § 16-14-

1, et seq. Also named as defendants in this action were Teleline,

Inc. (“Teleline”), the sponsor of the LMAD program, and U.S.A.

Networks (“U.S.A.”), which broadcast certain LMAD advertising.

(R1-1-4 6-9; R5-142-1, 4, 7).

3

Despite the articulation of the questions presented, the

Petition is simply a challenge to the ordinary application of the

proper standard of review for class certification decisions.

Indeed, Petitioners concede that the Eleventh Circuit properly

articulated that standard but complain that in practice it applies

an “essentially plenary de novo review” to class certification

orders. (Petition at 10). However, the review standard and its

application were patently correct because, as even the district

court itself recognized, the fundamental issues underlying its

certification orders were questions of law — whether it could

adopt the substantive law presumptions it found were needed

to justify class treatment and to facilitate certification under

Rule 23. (R13-287-3). The Eleventh Circuit’s recognition that

“*(a] district court abuses its discretion if. . . it applies the wrong

legal standard ...,’” is consistent with the review standards

applied by all of the Circuit Courts of Appeals. Sikes, 281 F.3d

at 1359 (citation omitted); see p. 12, infra. Further, Petitioners’

suggestion that there should be a presumption in favor of

certification (Petition at 11, 15-16) is contrary to this Court’s

instruction that “actual, not presumed” compliance with the

requirements of Rule 23 is “indispensable.” General Tel. Co. of

Southwest v. Falcon, 457 U.S. 147, 160 (1982).

Second, Petitioners are flatly wrong when they contend

that the Eleventh Circuit’s refusal to allow reliance to be

presumed on a class-wide basis conflicts with established law.

(Petition at 16). The overwhelming weight of authority has

unequivocally rejected the notion that it is appropriate to

presume reliance outside the context of securities fraud.

See, e.g., Summit Props., Inc. v. Hoechst Celanese Corp.,

214 F.3d 556, 561, reh’g denied en banc, 228 F.3d 411 (Sth Cir.

2000), cert. denied, 531 U.S. 1132 (2001) (“No court has

accepted the use of [the fraud on the market] theory outside of

the context of securities fraud .. .” and rejecting the use of a

presumption of reliance in a RICO claim predicated on fraud);

see p. 17, infra. Petitioners’ contention that the consequence

of the Eleventh Circuit’s decision is to deny the use of

4

circumstantial evidence to establish fraud claims is directly

refuted by the decision itself, which states that its ruling does

not mean that only direct evidence, and not circumstantial

evidence, may be used to establish reliance. Sikes, 281 F.3d at

1363 n.32.

Petitioners’ final question articulates an issue that is simply

not presented by the Eleventh Circuit’s decision, and is based

on the erroneous assumption that the Eleventh Circuit adopted

a per se rule that any case requiring the district court to

apply the laws of all fifty states precludes class certification.

(Petition at 24). However, the Eleventh Circuit did not adopt

any such per se rule. Nor did Petitioners contend before the

Eleventh Circuit that if all fifty states’ gambling laws applied,

the case nevertheless would be manageable. Instead, Petitioners

argued that the district court had erred by finding that all

fifty states’ gambling laws applied, when it should have

applied, at most, the gambling laws of four states. As the

Eleventh Circuit recognized, however, because Petitioners failed

to file a cross-appeal on this choice of law issue, it had not been

preserved for review. Sikes, 281 F.3d at 1367 n.44.

Because the Eleventh Circuit properly applied well-

’ established legal principles in reversing the district court’s class

certification order, the Petition presents no issue warranting this

Court’s review or consideration.

COUNTERSTATMENT OF THE CASE?’

AT&T provided early 900-number services as a common

carrier. * (R19-143-48-49). Pay-per-call, or “900-number,”

3. Because the Statement of Facts set forth in the Petition seriously

misrepresents portions of the record, AT&T provides this

Counterstatement, setting forth the facts pertinent to the district court’s

class certification decision.

4. The tariffs filed with the FCC that govern AT&T’s provision of

such services carry the force of law. See, e.g., AT&T v. Central Office

Tel. Inc., 524 U.S. 214 (1998).

5

telephone services were introduced in the early 1980s to measure

caller reaction to particular events or issues (such as presidential

debates) and to “broadcast” recorded, non-interactive messages

to callers. These services rapidly expanded to include a wide

range of “interactive” programs offering information on sports,

weather, medicine, news, entertainment, and finance. (R19-

143-39-40). Eventually, some message providers or sponsors

unfortunately offered programs that were of questionable value

or offensive to some people (e.g., “Dial-A-Porn” programs)

(R19-143-94); however, as a common carrier, AT&T was

prohibited from denying transport service on the basis of

message content.

Concerned that dissatisfaction with objectionable 900-

number programs would undermine consumer confidence in

regular long distance service, and in reliance on FCC decisions

holding that billing and collection services need not be offered

pursuant to tariff,» AT&T amended its 900-number tariff to

separate the common carrier transport function from the billing

and collection function. (R19-143-38-39, 93-94). Under these

new arrangements, AT&T charged the program sponsor for the

calls on a tariffed basis, and the sponsor in turn charged

the callers for the information service. That sponsor-set,

untariffed charge was then included by AT&T on the callers’

telephone bills. (R19-143-43, 45). AT&T provided this billing

service to the sponsor under a separate contract, generally for a

minimal fee of between five and ten percent of the sponsor’s

charge. (R19-143-41-44, 49). AT&T only provided untarriffed

billing and collection services to sponsors who agreed to comply

with AT&T’s 900-number program guidelines. (R19-143-51-

52, 95; R5-140-tab 27).

5. See, e.g., In the Matter of Detariffing of Billing and Collection

Services, 102 F.C.C.2d 1150 (1986), recon. denied, 1 F.C.C.R. 445

(1986).

6. The 900-number guidelines AT&T created have served as a

model for later efforts by federal and state lawmakers to control 900-

(Cont’d)

6

The Let’s Make A Deal (“LMAD”) program operated from

early 1990 until December 1992. AT&T terminated billing and

collection services for LMAD in December 1992 when it

discovered that Teleline had failed to submit the majority of its

LMAD advertising and message scripts for review as required

by AT&T’s guidelines. (R19-143-53, 61). Teleline then

sued AT&T for terminating its billing and collection services.

(R19-143-61, 112, 116-17).

LMAD was generally modeled on the television show of

the same name and involved players answering questions and

choosing “doors” in an effort to win a prize. After a win, players

could stop playing or could continue the game and try for the

top prize. Anew game began every calendar month, and updated

rules regarding the program were issued when necessary.

(R19-143-148-49).’ Teleline created the advertising and audio

message heard by callers to the programs, identified possible

markets and placed the advertising, developed the computer

programming necessary for running the programs, and managed

and operated the programs. (R19-143-137-46, 155).

Teleline submitted for AT&T review its initial advertising,

the text of the initial message script to be used, and written

legal opinions that that the LMAD game complied with all

applicable federal and state laws. (R19-143-56, 148; R5-140-

tab 27). However, the LMAD advertising was changed over

(Cont'd)

number program content and advertising. See, e.g.,47 C.F. R. § 64.1501,

et seq. (regulations governing 900-number programs promulgated by

the FTC and FCC pursuant to the Telephone Disclosure and Dispute

Resolution Act of 1992, 47 U.S.C. § 228; 15 U.S.C. § 5701).

7. Petitioners notably fail to inform the Court that individuals were

not required to call a 900-number in order to play the LMAD game and

that Teleline provided a toll-free number for individuals to call with

questions about the game. Indeed, in the last six months of operation,

some 20,200 individuals used the free mail-in alternative to play, and

some 102,900 persons called the LMAD 800-number. (R19-143-152).

7

time, and the LMAD game was advertised through multiple

media outlets* using multiple messages. Further, the game’s

structure varied significantly over time. (R19-143-138-39, 143,

151; R5-140-tabs 3, 7).

AT&T provided three services in connection with LMAD.

(See R19-143-91, 137-40, 143-45, 164-65). AT&T carried calls

to LMAD’s 900-numbers for a tariffed charge and supplied

Teleline with call termination services, which in effect

constituted the “answering machine” for LMAD. (R19-143-

55, 57-58, 91).? The recorded messages, however, were devised

by Teleline. (R19-143-155-56). AT&T also provided billing

and collection services pursuant to contract for a fee of six

percent of Teleline’s charges to callers. (R19-143-49). As part

of this service, AT&T provided “billing inquiry” that enabled

individual callers with billing questions or complaints about

the program or its charges to contact an AT&T service

representative at an 800-number and, if dissatisfied, to obtain a

refund or credit. (R19-143-98).

AT&T was not, however, as Petitioners assert, the only

entity to handle consumer complaints or requests for refunds.

(Petition at 5). Consumers could, and did, procure refunds and

adjustments for 900-number calls to LMAD from local exchange

carriers and Teleline. (R19-143-101-02, 150-51). Because local

exchange carriers tracked 900-number refunds only on a

collective basis, and not by the individual caller receiving a

credit or refund of charges, the district court acknowledged that

8. Although Petitioners imply that the LMAD game was advertised

exclusively through television commercials on U.S.A. network, the

evidence is undisputed that, in addition to 30 second commercials, two

minute commercials, and 30 minute infomercials on U.S.A., the LMAD

game was also advertised through print media (such as the National

Enquirer and newspapers), and direct mail solicitations. (R19-143-131,

138-46, 151, 160-61, 165-68; RS-140-tab 30).

9. Teleline also obtained call termination service from other

vendors. (R5-149-143).

8

there is no way to determine which class members actually paid

for calls to LMAD or received refunds from the local exchange

carriers. (See R19-143-67-68, 98-100, 103, 106-07).'°

Although Mr. Sikes and Mr. Kemp seek to represent a

class of all individuals who have been billed for calls made to

LMAD (R3-89-14), neither actually called LMAD or played

the LMAD game. (R19-143-9, 22). Instead, their charges were

generated by children — Mr. Sikes’ son and Mr. Kemp’s

grandson. (R19-143-9-10, 19). Prior to receiving their telephone

bills, Mr. Sikes and Mr. Kemp had never seen any advertisements

for LMAD. (R19-143-14, 22). Neither can identify what

advertisement, if any, the children saw, whether the children

called LMAD in response to an advertisement or even what

might have been false, deceptive or misleading in any such

advertisement. (R19-143-15, 23). Additionally, Mr. Sikes has

never paid for any calls his son made to LMAD. (R19-143-14,

22-23).

The district court certified a nationwide class in this case

consisting of all persons who had been billed for calls made in

connection with LMAD and who had not received cash prizes

exceeding the charges incurred for such calls. (R5-142-12).

‘In certifying the classes, the district court rejected AT&T’s claim

that individual issues of reliance, injury and damages, and the

need to apply the gambling laws of all fifty states, precluded

certification. Rather, the district court:

(1) expressly recognized that detrimental reliance

was an essential element of Petitioners’ RICO

claims predicated on mail and wire fraud, but

concluded that the necessity of proving

individual reliance did not preclude class

treatment because such reliance could be

_ “virtually presumed;”

10. In this case, over $2 million in refunds and uncollectible

debt for LMAD was booked by AT&T but never repaid by Teleline.

(R19-143-105-06).

9

(2) dispensed with any requirement that class

members prove that they had suffered a RICO

injury by paying for a call to LMAD and,

although it recognized that presuming injury

and damage would permit individuals who had

never paid for calls to LMAD to recover

damages, concluded that such a “double

recovery” was permissible because it would

“not significantly harm” AT&T; and"

(3) held that applying the varying gambling laws

of all fifty states would not predominate over

- common issues because the application of such

varying states’ laws “would share many

common questions.”

(R5-142-8, 10-11; R13-287-3). The district court denied

AT&T’s request for permission to pursue an interlocutory appeal

of the certification decision.'? (R5-142-14).

11. In their most egregious misrepresentation of the record,

Petitioners suggest that AT&T affirmatively conceded that “individual

caller data was not needed ‘to assess or calculate damages in this case,’”

in order to avoid having to convert to computer format certain of

its LMAD call detail records stored on microfiche. (Petition at 8).

The record, however, is patently clear that AT&T consistently asserted

that the LMAD call detail report could not be used to establish damages

because it did “nothing other than identify an amount billed to a particular

telephone number. It does not establish that any class member in fact

paid for a call, how much a class member paid for a call, or whether the

class member received a refund.” (Petition App. 118). Because the call

detail data, at most, could be used to establish the gross revenues for the

LMAD program, a number to which AT&T was willing to stipulate, it

argued that there was no need to incur the tremendous expense of

converting this data to a computer format. (/d.).

12. Because the order also improperly required AT&T to pay one-

half of the costs ($225,000.00) associated with providing the class with

notice by publication, AT&T directly appealed the paneeene ores)

ont’

10

Thereafter, the district court entered a virtually identical

order certifying nationwide classes in Andrews. (R13-291-Ex.2-

28-30). However, recognizing that its certification order was

of “nationwide significance” and that there could be “a

substantial ground for difference of opinion,” the district court

authorized the defendants in Andrews to seek interlocutory

review of its decision. (R13-291-Ex. 2-34-35).

The Eleventh Circuit granted the interlocutory petition in

Andrews and reversed the district court’s certification of the

plaintiff classes. Andrews v. AT&T, 95 F.3d 1014, reh’g denied

en banc, 104 F.3d 373 (11th Cir. 1996). In particular, recognizing

that class treatment could not be used to alter the substantive

proof required to succeed on a claim for relief, the Eleventh

Circuit rejected the district court’s attempt to satisfy the

predominance requirement of Rule 23(b)(3) and render the

litigation manageable by presuming that each class member

justifiably relied on a misrepresentation, and suffered a

compensable injury as a result. /d. at 1025. Similarly, the

Eleventh Circuit rejected the district court’s unfounded

assumption that the gambling laws of all fifty states were

sufficiently similar to justify class treatment. Jd. at 1024.

' The representative parties in Andrews did not seek this Court’s

review of the Eleventh Circuit’s decision.

Following the Eleventh Circuit’s decision in Andrews,

AT&T moved to decertify the instant action. The district court

denied AT&T’s motion, concluding that Andrews did not

preclude continued class treatment in this case or the use of

presumptions to establish the essential elemenis of reliance,

injury and damage. Sikes v. AT&T, 179 F.R.D. 342, 346-47

(Cont'd)

under the collateral order doctrine. (R5-144-1). See Eisen v. Carlisle &

Jacquelin, 417 U.S. 156 (1974); Oppenheimer Fund, Inc. v. Sanders,

437 U.S. 340 (1978). This appeal was subsequently dismissed as moot

after the district court vacated that portion of its order imposing notice

costs on AT&T. (R5-165-1; R6-172-1).

11

(S.D. Ga. 1998). Instead, it distinguished Andrews on the basis

that it involved a number of different 900-number programs,

while this case involved only one 900-number program. Jd.

Moreover, although the district court explicitly recognized that

the majority in Andrews “‘ex:pressed reservations concerning the

manageability of undertaking inquiries into the laws of all

fifty states absent a thorough analysis of the various state

laws by the class proponents,” it again concluded that such a

pre-certification analysis of all fifty states’ gambling laws was

unnecessary in this case. Jd. at 348.

The district court subsequently certified its decision for

interlocutory appeal, and the Eleventh Circuit again reversed,

rejecting the district court’s attempts to distinguish Andrews

and holding that because Andrews “rejected the propriety of

allowing a presumption that would relieve plaintiffs of their

burden of having to prove every element of a claim . . . we must

do the same in this case.” 281 F.3d at 1362. The Court also

concluded that the district court’s bases for employing the

various presumptions were erroneous. /d. at 1362-64.

Specifically, the Eleventh Circuit held that because class

members, and not AT&T, controlled any evidence as to whether

they relied on a misrepresentation or suffered an injury as a

result of such reliance, there was no basis for presuming the

elements of reliance, injury or damage, and further, because not

all of the LMAD advertising was available and Petitioners’

expert testified that the available advertisements varied

“in terms of their potential to deceive,’” no presumption that

all LMAD advertising was misleading could be employed.

Id. at 1362-65.

Petitioners seek review by this Court claiming that the

Eleventh Circuit (1) fails to accord sufficient deference to district

court certification decisions and, in particular, district court

findings regarding the superiority and/or manageability of class

actions (Petition at 10-11); (2) broke with common law

principles when it refused to permit the essential element of

12

reliance to be presumed in a civil RICO action predicated on

fraud (Petition at 16); and (3) improperly adopted a per se rule

that the necessity of applying the laws of all fifty states

necessarily precludes a finding of superiority under Rule 23.

(Petition at 24). Points 1 and 2 reflect incorrect statements of

accepted law, and point 3 misstates the Eleventh Circuit’s ruling.

Because the Eleventh Circuit’s decision in this action

presents no novel issue, but applied settled law to unique facts;

does not implicate any issue on which there is a conflict in the

Circuits; and reflects no issue of national importance, Petitioners

have presented no issue that warrants review by this Court.

REASONS FOR DENYING THE WRIT

I. There Is No Conflict Among The Circuits Regarding

The Appropriate Standard Of Review For District Court

Certification Orders.

As this Court has recognized:

[b]ecause of the potential for abuse, a district court

has both the duty and the broad authority to exercise

control over a class action and to enter appropriate

orders governing the conduct of counsel and parties.

But this discretion is not unlimited, and indeed is

bounded by the relevant provisions of the Federal

Rules.

Gulf Oil Co. v. Bernard, 452 U.S. 89, 100 (1981). Thus, in

reviewing district court certification orders, the Circuit Courts

agree that while the decision to certify a class rests in the

sound discretion of the district court, that discretion must be

exercised within the confines of Rule 23. Sikes, 281 F.3d

at 1359; Castano v. American Tobacco Co., 84 F.3d 734, 740

(Sth Cir. 1996); Lienhart v. Dryvit Sys., Inc., 255 F.3d 138,

146 (4th Cir. 2001); Coleman v. GMAC, 2002 U.S. App. LEXIS

14644, *4-5 (6th Cir. 2002); Spence v. Glock, GES. m.b.H, 227

F.3d 308, 310 (Sth Cir. 2000). Because “actual, not presumed”

13

compliance with the requirements of Rule 23 is “indispensable,”

Falcon, 457 U.S. at 160, there cannot be, as Petitioners claim, a

presumption in favor of class certification. (Petition at 5).

Rather, district courts are required to undertake a “rigorous

analysis” of the factual and legal issues comprising a plaintiff’s

causes of action in order to ensure that the requirements of Rule

23 are actually met. Falcon, 457 U.S. at 160-61; see also

Amchem Prods. Inc. v. Windsor, 521 U.S. 591, 623-24 (1997)

(Rule 23’s predominance inquiry focuses on “the legal or factual

questions that qualify each class member’s case as a genuine

controversy”). Appellate review of a certification decision

therefore appropriately focuses — as the Eleventh Circuit did

here — on whether the class as certified meets all of the

applicable Rule 23 requirements. Jn re: LifeUSA Holding, 242

F.3d 136, 144 (3d Cir. 2001).

The Eleventh Circuit properly recognized that it must defer

to a district court’s certification decision when it has “properly

exercised its discretion within the parameters of Rule 23”

in certifying aclass. Sikes, 281 F.3d at 1359; see also Andrews,

95 F.3d at 1022. However, the Eleventh Circuit also has

recognized its obligation to review de novo district court

determinations regarding purely legal issues that underlie a

discretionary certification decision. Turner v. Beneficial Corp.,

242 F.3d 1023, 1025 (11th Cir.), cert. denied, 122 S. Ct.

51 (2001) (“conclusions of law that informed” district court’s

certification decision reviewed de novo). And where a district

court “applies the wrong legal standard” in certifying a class,

the Eleventh Circuit recognizes that it has necessarily abused

its discretion. Delta Air Lines, Inc. v. Air Line Pilots Ass'n

Int'l, 238 F.3d 1300, 1308 (11th Cir. 2001).

The review standard, as articulated and applied by the

Eleventh Circuit, is entirely consistent with the standard of

review utilized by all other Circuit Courts of Appeals to address

the issue. See Waste Mgmt. Holdings, Inc. v. Mowbray, 208

F.3d 288, 295 (1st Cir. 2000) (district court abuses discretion in

14

certifying class if it “adopts an incorrect legal rule”); Robinson

v. Metro-North Commuter R.R., 267 F.3d 147, 162 (2d Cir. 2001),

cert. denied, 122 S. Ct. 1349 (2002) (“‘the failure to follow the

proper legal standards in certifying a class . . . is an abuse of

discretion’) (citation omitted); Jn re: LifeUSA Holding,

242 F.3d 136, 143-44 (3d Cir. 2001) (district court’s certification

decision premised on “an errant conclusion of law or an improper

application of law to fact” is an abuse of discretion); Lienhart v.

Dryvit Sys., Inc., 255 F.3d 138, 146 (4th Cir. 2001) (district

court’s discretion to certify class “must be exercised within the

framework of Rule 23”’); James v. City of Dallas, 254 F.3d 551,

562 (Sth Cir. 2001), cert. denied, 122 S. Ct. 919 (2002)

- (certification will be reversed if district court abuses its discretion

or applied an incorrect legal standard in reaching its decision);

Barney v. Holzer Clinic, 110 F.3d 1207, 1213 n.9 (6th Cir. 1997)

(“A district court that either uses the wrong legal standard or

misapplies the correct legal standard abuses its discretion’);

Hawkins v. Comparet-Cassani, 251 F.3d 1230, 1237 (9th Cir.

2001) (“A court abuses its discretion if its certification order is

premised on legal error”); Boughton v. Cotter Corp., 65 F.3d

823, 826 (10th Cir..1995) (“If the lower court did not apply an

improper standard, the court’s decision is reviewed for an abuse

' of discretion”).

This case represents a routine application of this accepted

standard to the facts of this case. The Eleventh Circuit

recognized that the district court’s certification turned on certain

conclusions of law — that the court could (1) employ certain

evidentiary presumptions in evaluating Rule 23’s requirements

of predominance and superiority; and (2) assume that the

gambling laws of all fifty states could be manageably applied,

even though neither Petitioners nor the district court had ever

analyzed the differences among the states’ laws. Sikes, 281 F.3d

at 1359-60 (“While we do not dispute that manageability is

generally an issue of fact and practicality and not one of law,

we cannot overlook the fact that the district court reached its

conclusions on manageability based upon a faulty legal

15

premise”). The Eleventh Circuit appropriately reviewed these

legal issues de novo. See Horton v. Merrill Lynch, Pierce, Fenner

& Smith, 855 F. Supp. 825, 833 (E.D.N.C. 1994) (whether

presumption of reliance would have applied had securities fraud

claim been litigated was a contested question of law); Berger v.

Compaq Computer Corp., 257 F.3d 475, 481 (Sth Cir. 2001)

(district court “unquestionably adopted an incorrect legal

standard” when it presumed compliance with adequacy

requirement in the absence of proof to the contrary); Castano,

84 F.3d at 741 (district court cannot accept “on faith” plaintiff’s

assertion that state laws do not vary); Walsh v. Ford Motor Co.,

807 F.2d 1000, 1017 (D.C. Cir. 1986), cert. denied, 482 U.S.

915 (1987) (proponent of class certification is required to provide

an “extensive analysis” of state law variations regarding all

pertinent state law issues, and establish that the application of

each state’s law would not pose “insuperable obstacles” to class

certification); Broussard v. Meineke Discount Muffler Shops,

Inc., 155 F.3d 331, 343 (4th Cir. 1998) (reversing certification

following trial on the merits in part because district court

impermissibly determined damages on a classwide basis in order

to facilitate class treatment, when applicable state law required

individualized proof of damages)."*

13. Although Petitioners contend that stating “reliance can be

virtually presumed” was a mere “factual observation” and not a ruling

of law by the district court and that it did not presume damages (Petition

at 13-14), the plain language of the district court’s order belies these

assertions:

I disagree with AT&T’s contentions regarding the necessity

of conducting individual inquiries on [the] element [of

reliance]... . if a caller played the game and was charged

more than he or she won in prizes, then the person was

injured by reason of the game. The 900-numbers are not

listed in any public telephone directory and are not

otherwise in general circulation, so it may be reasonably

assumed that the caller learned of the game and decided to

play, at least in part, from the game’s promotional materials

(Contd)

16

Indeed, the district court itself expressly recognized in

authorizing an appeal under 28 U.S.C. § 1292 that there were

controlling questions as to whether it had applied the appropriate

legal standard in certifying the class, particularly regarding its

use of a presumption of reliance. (R13-287-3). See, e.g., Simon

v. GD. Searle & Co., 816 F.2d 397, 400 (8th Cir. 1987) (court

reviews de novo questions of law certified by the district court

pursuant to 28 U.S.C. § 1292).

Finally, the Eleventh Circuit’s decision does not, as

Petitioners claim, resolve disputed issues of fact or

overturn factual findings made by the district court. (See Petition

at 13-14). In particular, Petitioners claim that the Eleventh

Circuit overruled the district court’s factual determination that

all of the LMAD advertising was “substantially similar enough

for class certification.” (Petition at 14). But the Eleventh Circuit

made no such finding. Rather, the Eleventh Circuit properly

concluded that the district court erred in assuming “that LMAD

and its promotions were ‘without material variation” when it

was undisputed that most of the advertising is no longer available

for review'* and Petitioners’ own expert conceded that the

advertisements that were available “‘vary in terms of their

(Cont’d)

or from another person who learned of the game through

those promotional materials.

(R-142-8-9); see also (R5-142-11-12) (district court certified class to

include anyone who had “been billed” for calls to LMAD, without regard

to whether they had paid for such calls, finding AT&T would not be

“significantly” harmed to the extent some class members received “a

double recovery”).

14. Most of the advertising used for the LMAD game no

longer exists. For instance, of the 119 different commercials broadcast

on U.S.A., Teleline was only able to locate twelve. (R19-143-131;

R5-140-tab 30). Even fewer of the print ads have been located.

However, the advertising that is available definitively refutes the district

court’s presumption that all of the LMAD advertising was the same.

(Compare R5-140-tabs 13, 14, 15, 29).

17

potential to deceive.’” Sikes, 281 F.3d at 1364. Thus, the

Eleventh Circuit concluded: ee

[t]he upshot of this is that each individual

plaintiff is the only person with information about

the content of the advertisement upon which he

relied. Of course, a factfinder cannot determine

whether an advertisement was misleading or

fraudulent without knowing its content, and so each

plaintiff will have to provide evidence of the

particular advertisement(s) that he heard or saw.

The court may not employ a presumption that all of

the LMAD advertisements were misleading . . .

Id.

The review conducted by the Eleventh Circuit of district

court certification decisions in general, and of the certification

decision in this case in particular, is entirely consistent with the

review standard applied by other Circuit Courts. The Eleventh

Circuit’s routine application of this well-established review

standard presents no issue that warrants this Court’s attention.

II. The Eleventh Circuit’s Refusal To Allow Elements Of A

Claim To Be Presumed In Order To Facilitate Class

Certification Recognized A Well-Settled Rule Of Law

And Presents No Issue For Review By This Court.

In Holmes v. Securities Investor Protection Corp., 503 U.S.

258, 265-68 (1992), this Court confirmed that the “by reason

of” language in 18 U.S.C. § 1964 requires that civil RICO

plaintiffs prove a causal connection that includes both “but for”

and “proximate” causation between a predicate act of mail or

wire fraud and the claimed injury in order to recover. Consistent

with this Court’s decision in Holmes, the Circuit Courts

uniformly have concluded that a civil RICO plaintiff alleging

mail or wire fraud must prove that he was the target of a

scheme to defraud and that he “relied to his detriment on

18

misrepresentations made in furtherance of that scheme.”

Pelletier v. Zweifel, 921 F.2d 1465, 1499-1500 (11th Cir.), cert.

denied, 502 U.S. 855 (1991); County of Suffolk v. Long Island

Lighting Co., 907 F.2d 1295, 1311 (2d Cir. 1990); Ideal Dairy

Farms v. John Labatt, Ltd., 90 F.3d 737, 746-57 (3d Cir. 1996);

Reynolds v. East Dyer Dev. Co., 882 F.2d 1249, 1253 (7th Cir.

1989); Brandenburg v. Seidel, 859 F.2d 1179, 1188 n.10

(4th Cir. 1988); Grantham & Mann v. American Safety Prods.,

831 F.2d 596, 606 (6th Cir. 1987); Appletree Square I Ltd. Pshp.

v. WR. Grace & Co., 29 F.3d 1283, 1286 (8th Cir. 1994); MGIC

Indem. Corp. v. Weisman, 803 F.2d 500, 504-05 (9th Cir. 1986);

Summit Props., Inc. v. Hoechst Celanese Corp., 214 F.3d 556,

562 (Sth Cir. 2000).

Petitioners’ contention that the Eleventh Circuit’s refusal

to presume reliance is outside the norm or precludes the use of

circumstantial evidence in establishing class claims cannot be

supported. Indeed, the Eleventh Circuit’s position is consistent

with the great weight of authority that has rejected the device of

presuming the element of reliance outside of the context of

securities fraud claims. See Securities Investor Protection Corp.

_v. BDO Seidman, LLP, 222 F.3d 63, 73 (2d Cir. 2000)

(recognizing that “federal courts repeatedly have refused to apply

the fraud on the market theory to state common law cases despite

its wide acceptance in the federal securities fraud context”);

Summit Props., Inc., 214 F.3d at 561 (“No court has accepted

the use of the [fraud on the market] theory outside of the context

of securities fraud ...” and rejecting its use in RICO claim

predicated on fraud); Perrone v. GMAC, 232 F.3d 433, 439-50

(Sth Cir. 2000), cert. denied, 532 U.S. 971 (2001) (refusing to

apply Affiliated Ute’s presumption of reliance in TILA action);

Murphy v. Sofamor Danek Group, 123 F.3d 394, 403 (6th Cir.

1997), cert. denied, 523 U.S. 1106 (1998) (“Neither the courts

of Tennessee nor federal courts applying Tennessee law have

held that the fraud-on-the-market theory is enough to satisfy

the reliance requirement for common law purposes”); Appletree

Square I, 29 F.3d at 1287 (refusing to presume reliance via fraud-

19

on-the-market theory in RICO action involving real estate;

unlike the stock market, real estate market was not a

“well-developed” market in which the price reflected all publicly

available information); Amaco Enters., Inc. v. Smolen, 1995 U.S.

App. LEXIS 20486, *4 (9th Cir. 1995) (finding that California

Supreme Court has specifically declined to incorporate the

Affiliated Ute presumption of reliance into California tort law,

Ninth Circuit held that element of reliance could not be presumed

in common law fraud claim); Hudson v. Delta Airlines, 90 F.3d

451, 457 (11th Cir. 1996), cert. denied, 117 S. Ct. 1082 (1997)

(class certification properly denied for breach of fiduciary duty

claim under ERISA; even ifa uniformly false message had been

used, class members still would have to prove that they “would

have deferred their retirement in the hope that they would be

eligible for the Special Retirement Plan to be offered in the

future. [footnote omitted] This sort of decision would

necessarily have been highly individualized for each potential

retiree.”); Rosentstein v. CPC Int’l, Inc., 1991 U.S. Dist. LEXIS

200 (E.D. Pa. 1991) (presumption of reliance cannot be made

in “non-perfect” markets, such as consumer market); Martin v.

Dahlberg,. Inc., 156 F.R.D. 207 (N.D. Cal. 1994) (even if

representations regarding effectiveness of product were

misleading, plaintiff's RICO claims predicated on fraud could

not be certified as reliance could not be established simply by

showing defendant’s course of conduct; reliance was an

individual, fact-specific inquiry based on a myriad of factors);

In re Ford Motor Co. Vehicle Paint Litig., 182 F.R.D. 214 (E.D.

La. 1998); Strain v. Nutri/System, Inc., 1990 U.S. Dist. LEXIS

17031 (E.D. Pa. 1990); Chin v. Chrysler Corp., 182 F.R.D. 448

(D.N.J. 1998).'° And this Court has previously declined to review

15. Indeed, by employing presumptions of reliance, injury and

damage in order to justify certification of the class, the district court

effectively used the Federal Rules of Civil Procedure to alter substantive

rights, a result forbidden by the Rules Enabling Act, 28 U.S.C. § 2072.

See Amchem Prods., 521 U.S. at 612 (courts must be “mindful that

Rule 23’s requirements must be interpreted in keeping with Article III

(Cont’d)

20

Circuit Court decisions refusing to presume the element of

reliance in non-securities fraud cases. See Hudson, supra,

Summit Props., Inc., supra, Perrone, supra, and Murphy, supra.

Each class member in this case would have had radically

different experiences, knowledge and reactions regarding

the 900-number advertising and the LMAD game. It is

undisputed that neither named Petitioner ever actually called a

LMAD 900-number or played the LMAD game; rather, both

Mr. Sikes and Mr. Kemp seek to recover damages for calls made

by children in their households. Neither Mr. Sikes nor Mr. Kemp

ever saw any LMAD advertisements prior to receiving

their phone bills, and they are unable to identify which

advertisement, if any, their children saw, whether the children

called LMAD in response to that ad, or even what might have

been false, deceptive or misleading in any such advertisement.

(R19-143-9-10, 14-15, 19, 22-23).

Additionally, a significant percentage of LMAD callers were

repeat callers, and Petitioners’ expert conceded that an individual

who continued to call LMAD time after time, after receiving

bills for his calls, could not show that he continued to be deceived

. or relied on the advertising in calling. (R19-143-81, 150, 171,

189; R14-285-Ex. A-75-77, 79-81, 129). See, e.g., Carroll v.

Cellco Pshp., 713 A.2d 509, 518 (N.J. Super. 1998) (fraud claims

premised on similar contracts required individual proof of

reliance; “a plaintiff who claimed to be defrauded but who

renewed the contract for the next year would have a serious

credibility problem”). Petitioners’ expert also admitted that

because the reasons motivating someone to call LMAD

would vary from person to person, and individual consumers

received different information regarding LMAD, it was

impossible to determine which customers actually were

(Cont'd)

constraints and with the Rules Enabling Act ...”); Alabama v. Blue

Bird Body Co., Inc., 573 F.3d 309, 318 (Sth Cir. 1978) (proof required

to establish a claim can in no way hinge on whether the action is brought

on behalf of a class under Rule 23).

21

deceived. (R14-285-Ex. A-54, 56-58, 69-72, 75-77, 79-81, 90,

94-95, 118-19, 124).'° Thus, Petitioners’ own evidence

demonstrated that there was no factual basis upon which any

presumption of reliance could possibly be predicated. Strain,

1990 U.S. Dist. LEXIS 17031, *22 (presumption of reliance

inappropriate where alleged misrepresentations in

advertisements for weight loss center did not occur “in a single

place, at the same time, or under identical conditions’”’).'’

Petitioners also are incorrect in asserting that the Eleventh

Circuit’s decision effectively precludes the use of circumstantial

evidence in establishing the element of reliance. Presuming

the element of reliance is simply not the same as proving that

element using circumstantial evidence. See Washburn v. Kansas

City Life Ins. Co., 831 F.2d 1404, 1411 (8th Cir. 1987) (while

fraud may be established by circumstantial evidence, “it may

not be presumed”). And the Eleventh Circuit explicitly stated

that its decision did not mean that only direct evidence, and not

circumstantial evidence, could be used to establish the element

of reliance in a class action, only that this element could not be

presumed. 281 F.3d at 1363 n.32.

In the absence of a presumption, whether class members

reasonably relied will be dependent upon what each of them

read, heard and understood, and what actions, if any, each of

them took based upon such representations. Such proof would

require “each class member to narrate a story which includes

individualized proof of which advertisements he saw and

whether they indeed [called] in reliance of those advertisements.

16. The district court similarly acknowledged that different reasons

or motivations, entirely unrelated to the advertising used, could have

influenced consumers’ decisions to play LMAD. (R19-143-223).

17. The impropriety of presuming reliance is further evidenced by

the fact that in Andrews, the district court ultimately granted summary

judgment to AT&T on all of the individual plaintiffs’ RICO claims

predicated on fraud, finding that none of them could establish the

essential element of reliance. See Harper v. AT&T, 54 F. Supp.2d 1371,

1382-85 (S.D. Ga. 1999).

22

[footnote omitted] There are no short-cuts.” Strain, 1990 US.

Dist. LEXIS 17031, *22.

The Eleventh Circuit’s conclusion that reliance could not

be presumed, and that conducting individual reliance inquiries

would overwhelm any common issues, raises no new or novel

issue of any importance; it is a straightforward application of

settled law. See Basic Inc. v. Levinson, 485 U.S. 224, 242 (1988)

(“Requiring proof of individualized reliance from each member

of the proposed plaintiff class effectively would have prevented

respondents from proceeding with a class action, since individual

issues then would have overwhelmed the common ones.”);

Castano, 84 F.3d at 745 (“fraud class action cannot be certified

when individual reliance will be an issue”); Broussard, 155 F.3d

at 342 (because reliance is an individual issue which ““must be

applied with factual precision,” fraud claims do not provide a

“suitable basis for classwide relief’”) (citation omitted);

Mulligan v. Choice Mortg. Corp. USA, 1998 U.S. Dist. LEXIS

13248 (D.N.H. 1998) (majority view is that certification is

inappropriate when individual reliance is an issue, denying

certification of RICO claims predicated on fraud); Rosentstein,

1991 U.S. Dist. LEXIS 200; Martin, 156 F.R.D. 207;

' Strain, 1990 U.S. Dist. LEXIS 17031; Jn re Ford Motor Co.

Vehicle Paint Litig., 182 F.R.D. 214 (E.D. La. 1998); Cichonski

v. American Inventors Corp., 1995 U.S. Dist. LEXIS 16563

(E.D. Pa. 1995); Mack v. GMAC, 169 F.R.D. 671 (M.D. Ala.

1996); Freedman v. Arista Records, Inc., 137 F.R.D. 225, 229

(E.D. Pa. 1991).

Ill. There Is No Conflict Among The Circuits Regarding

The Standard For Certifying A Nationwide Class That

Will Require The Application Of The Laws Of All Fifty

States.

In addition to fraud, Petitioners’ RICO claims also are

predicated on allegations of illegal gambling. In certifying the

class, the district court recognized that it would be required to

apply the gambling laws of all fifty states, but nonetheless

23

concluded that because the required inquiries into the various

state laws “would share many common questions,” these

individual inquiries would not predominate. (R13-287-3; R5-

142-10). Petitioners, however, never provided an analysis of

the various states’ gambling laws; instead, the district

court simply assumed that those laws would raise common

questions and could be manageably applied in a class action.

Sikes, 179 F.R.D. at 348.

The Eleventh Circuit properly rejected this unfounded

ass!imption as a matter of law. Courts uniformly recognize the

potentially overwhelming manageability problems associated

with applying the laws of all fifty states. See Castano, 84 F.3d

at 741-43 and n.15 (“We find it difficult to fathom how common

issues could predominate in this case when variations in

state law are thoroughly considered.”); Georgine v. Amchem

Prods., 83 F.3d 610, 627 (3d Cir. 1996) (necessity of

applying individualized choice of law analysis “compounded

exponentially” individual issues in class action because

states had “different rules governing the whole range of issues

raised by the plaintiff’s claims”), aff'd, 521 U.S. 591 (1997);

Ex parte Green Tree Fin. Corp., 723 So.2d 6 (Ala. 1998)

(“we have grave concerns as to whether any national class of

plaintiffs in an action involving the application of the differing

laws of numerous states can satisfy” the requirements of

predominance and superiority); Chin, 182 F.R.D. at 461

(declining to certify class which would require the application

of the laws of all fifty states; “it remains true that no federal

court has attempted to try a case under the laws of every state”’).

The Eleventh Circuit applied mainstream law when it

refused to sustain a certification order that was premised on an

unfounded assumption that the gambling laws of all fifty states

were similar. See Walsh, 807 F.2d at 1017 (class proponent

must provide an “extensive analysis” of state law variations

regarding all pertinent state law issues, and establish that the

application of each state’s law would not pose “insuperable

24

obstacles” to class certification); Castano, 84 F.3d at 741-43

(finding district court did not properly consider how variations

in state laws might affect predominance inquiry); Stirman v.

Exxon Corp., 280 F.3d 554, 564 (Sth Cir. 2002) (“A cursory

review of state law variations is not sufficient” to establish

predominance); Zinser v. Accufix Research Inst., Inc., 253 F.3d

1180, 1188 (9th Cir. 2001); Spence, 227 F.3d at 313; Chin, 182

F.R.D. at 461; Martinez v. Weyerhaeuser Mortg. Co., 1997 U.S.

Dist. LEXIS 22172, *11-12 (S.D. Fla. 1997); Wilkes v. Ford

Motor Co. (In re Ford Motor Co. Ignition Switch Prods. Liab.

Litig.), 174 F.R.D. 332, 350 (D.N.J. 1997) (plaintiff has the

burden of “designing a workable plan for trial embracing all

claims and defenses prior to class certification”). See also Bill

Heard Chevrolet Co. v. Dixon, 2001 Ala. LEXIS 383, *18 (Ala.

2001); Washington Mutual Bank v. Superior Court, 15 P.3d

1071, 1085 (Cal. 2001); Southwestern Refining Co. v. Bernal,

22 S.W.3d 425, 435 (Tex. 2000).

The Eleventh Circuit’s decision represents a straight-

forward application of this well-established legal standard.

Because Petitioners made no attempt in the district court to

- demonstrate affirmatively that the gambling laws of all fifty

states could be manageably applied, it was legal error for the

district court to assume that this Rule 23 requirement was met.'®

See Andrews, 95 F.3d at 1024 (“‘class action proponents must

18. Petitioner’s failure is understandable since even a cursory

review of gambling statutes and related laws reveals that states vary

considerably as to whether, and under what circumstances, recovery for

a gambling debt may be had, the level of scienter which must be proven,

and how the elements of prize, chance and consideration are interpreted.

Compare Glick v. MTV Networks, 796 F. Supp. 743, 748 (S.D.N.Y. 1992)

(alternative free method of entry removed 900-number promotion from

ambit of New Jersey’s gambling or lottery laws) with State v. Schubert

Theatre Players Co., 281 N.W. 369 (Minn. 1938) (drawing was illegal

despite free method of entry). Indeed, in rendering judgment on the

individual claims in Andrews, the district court concluded that the 900-

number programs at issue violated Georgia’s and Nebraska’s gambling

laws, but not the gambling laws of California.

25

do more than merely assert that variations in state law are

insignificant or ‘academic’; court cannot take class proponents’

interpretations of law ‘on faith.”””’) (citation omitted); Walsh,

807 F.2d at 1016 (to justify class treatment, class action

proponent must show that no variations in applicable states’

laws exist); Wilkes, 174 F.R.D. at 342 (denying certification

where Petitioners failed to demonstrate realistic plan for

trying class claims that arose under differing states’ laws);

In re Stucco Litig., 175 F.R.D. 210, 216 (E.D.N.C. 1997)

(although plaintiff suggested that state law differences were

minor, “(t]he devil . . . is in the details”)."

Indeed, Petitioners made no attempt before the Eleventh

Circuit to support the district court’s conclusion that it could

manageably apply the gambling laws of all fifty states. Instead,

Petitioners argued that the district court’s choice of law analysis

was erroneous and that, at most, the gambling laws of four states

would be applicable, a task Petitioners claimed would be

manageable.”° As the Eleventh Circuit recognized, however,

Petitioners failed to preserve this choice of law issue on

appeal due to their failure to file a cross-appeal as required by

Fed. R. App. P. 5(b)(2). Sikes, 281 F.3d at 1367 n.44. Having

19. In an effort to bolster their claim that this case can be effectively

managed, Petitioners erroneously suggest that the parties jointly agreed

to have this case tried by the district court. (Petition at 8). In fact,

having demanded a jury trial in their initial pleadings, Petitioners sought

to withdraw that demand after the Eleventh Circuit rendered its decision

in Andrews by filing amended responses to the Southern District’s

mandatory interrogatories stating that they desired a non-jury trial.

(See Petition App. at 103, 108 (Plaintiffs’ 3/10/97 Supplemental

Responses to Rule 8.6 Interrogatories)). This unilateral attempt to avoid

a trial by jury, more than four years after having demanded a jury trial

and after the district court certified the class based on that demand,

contravenes Fed. R. Civ. P. 39(a) and is ineffectual. See, e.g., Johnson

v. Penrod Drilling Co., 469 F.2d 897, 903-04 (Sth Cir. 1972).

20. Before this Court, Petitioners contend that the gambling laws

of only two states, Missouri and Illinois, need to be applied to the claims

of class members nationwide. (Petition at 27).

26

failed to argue before the Eleventh Circuit that the district court

correctly concluded that the gambling laws of all fifty states

could be manageably applied, this issue presents no basis for

review by this Court.

CONCLUSION

This case presents no issue that merits this Court’s

attention or review. The Eleventh Circuit’s decision involves

the application of well-established legal principles and is

consistent with other Circuit Court decisions.

Respectfully submitted,

Wyck A. Knox, JR.

Tep H. CLARKSON

WILLIAM N. Wirurow, Jr.

Counsel of Record

KILPATRICK STOCKTON LLP

C. LEEANN McCurry

Post Office Box 2043 TROUTMAN SANDERS LLP

Augusta, GA 30903 5200 NationsBank Plaza

(706) 724-2622 600 Peachtree Street

Atlanta, GA 30308-2216

LaurRA A. KASTER

.AT&T Corp. ta dant

295 North Maple Avenue

Room 1138L2

Basking Ridge, NJ 07920

(908) 221-4838

Attorneys for AT&T Corp.