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Ivy Broadcasting Co. v. American Telephone and Telegraph Co.

decided: February 13, 1968.

IVY BROADCASTING COMPANY, INC., PLAINTIFF-APPELLANT,
v.
AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND NEW YORK TELEPHONE COMPANY, DEFENDANTS-APPELLEES-APPELLANTS



Lumbard, Chief Judge, and Waterman and Smith, Circuit Judges.

Author: Lumbard

LUMBARD, Chief Judge:

Plaintiff appeals from the dismissal of its complaint and defendants cross-appeal from the dismissal of their counterclaims by Judge Port in the Northern District of New York. The appeals present the question -- apparently one of first impression -- whether, in the absence of diversity of citizenship, a federal court has jurisdiction over a claim for negligence and breach of contract in the rendition of interstate telephone service by carriers regulated under the Communications Act of 1934, as amended, 47 U.S.C. §§ 151-609, and over counterclaims for unpaid charges with respect to such service. We conclude that plaintiff's claims arise under federal law within the meaning of 28 U.S.C. § 1331 and, since the amount in controversy exceeds $10,000, we hold that the district court had jurisdiction over the causes of action stated in the complaint. Consequently, the court also had jurisdiction over defendants' counterclaims to the extent that they are compulsory under Rule 13(a) of the Federal Rules of Civil Procedure. Furthermore, we conclude that the counterclaims, so far as they rely upon tariffs required to be filed with the Federal Communications Commission, arise under the Communications Act so as to confer jurisdiction on the district court under 28 U.S.C. § 1337. Accordingly, we reverse the district court's judgment dismissing the complaint and the counterclaims.

Plaintiff, Ivy Broadcasting Company, Inc., a New York corporation, operates six radio broadcasting stations in the State of New York and a radio network serving those and other stations. Defendants -- American Telephone and Telegraph Company and its wholly-owned subsidiary, New York Telephone Company, both New York corporations -- are communications "common carriers" who are subject to the provisions of the Communications Act and have filed tariffs with the FCC as required by the Act. Plaintiff ordered telephone communications service from defendants in connection with plaintiff's broadcasts of sixteen Syracuse University football games between 1959 and 1962 and of the 1962 New York political conventions.*fn1

The complaint alleged grossly negligent and unreasonably delayed installation and testing of special telephone lines for the transmission of these broadcasts and grossly negligent operation of the lines, resulting in noise, interruptions, and transmission of the wrong material. Count 1 of the complaint sought compensatory damages of $78,377.50 and punitive damages of $900,000. Count 2 alleged that defendants had exacted discriminatory charges by billing plaintiff for $10,000 for periods during which the telephone service was impaired. Count 3 averred that defendants contracted and warranted to maintain and operate the lines properly and sought to recover amounts already paid, totalling $10,000, for periods during which defendants allegedly failed to perform this undertaking. There being no diversity of citizenship, plaintiff asserted that there was federal jurisdiction under 28 U.S.C. § 1337, and under the Communications Act, §§ 152(b), 201-203, 206, 207, 217.

Defendants' answers denied liability and set forth counterclaims for telephone charges allegedly due and unpaid. Defendants moved for summary judgment on the complaint and the counterclaims, and plaintiff cross-moved to add further broadcasts to its complaint and to strike certain defenses.

The district court did not rule on these motions but, on its own motion, dismissed the complaint and the counterclaims for lack of federal jurisdiction. The court reasoned that the claims in count 1 and count 3 of the complaint were actions for negligence and breach of contract which did not arise out of the Communications Act but which were founded on the state law of torts and contracts; therefore neither the Communications Act nor 28 U.S.C. § 1337 gave the court jurisdiction over these claims. Although count 2 alleged discriminatory charges, which ordinarily would be a violation of the Communications Act, the basis of the alleged discrimination was that plaintiff was charged for services which were negligently rendered. Therefore, count 2 was merely a restatement of counts 1 and 3, and did not state a cause of action for discriminatory charges within the meaning of the Act. The court stated that the counterclaims were actions for services rendered, and, since no jurisdictional basis was alleged to support them, they fell with the complaint. Plaintiff appeals and defendants cross-appeal from this judgment.*fn2

We hold that the court had jurisdiction over the plaintiff's actions for damages resulting from negligence and breach of contract in the rendition of interstate telephone service. The test we have stated for determining whether a complaint presents a federal question is

whether the complaint is for a remedy expressly granted by an act of Congress or otherwise "inferred" from federal law, or whether a properly pleaded "state created" claim itself presents a "pivotal question of federal law," for example because an act of Congress must be construed or "'federal common law' [governs] some disputed aspect" of the claim.

McFaddin Express, Inc. v. Adley Corp., 346 F.2d 424, 426 (2 Cir.1965), cert. denied, 382 U.S. 1026, 86 S. Ct. 643, 15 L. Ed. 2d 539 (1966); see T. B. Harms Co. v. Eliscu, 339 F.2d 823, 826-828 (2 Cir.1964).

Clearly the remedy which plaintiff seeks is not one granted by an act of Congress. The Communications Act, §§ 206, 207, provides that a suit may be brought in federal court for damages resulting from a common carrier's violation of specific provisions of the Act, 47 U.S.C. §§ 206, 207, but we agree with the district court's conclusion that the complaint does not show any violation of the Act. In the absence of such specific violations, the Act does not expressly grant a remedy for negligence or breach of contract in the rendition of communications service. Nor do we think that such a remedy should be "inferred" from the Act; there is no reason to believe that Congress, in the Communications Act, intended to declare the existence of the fundamental right to recover for tort or breach of contract. Therefore, 47 U.S.C. § 207 does not confer jurisdiction on the district court.

The question remains whether plaintiff's claims are governed by federal common law and, if so, whether the district court has jurisdiction under 28 U.S.C. § 1331.

In the absence of any statutory provision relating to a carrier's liability for negligence or breach of contract, the courts must determine whether these questions should be left to state law or whether the federal interest in the result of such cases is so great that they should be controlled by federal common law. See Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S. Ct. 573, 87 L. Ed. 838 (1943).

The fact that a contract is subject to federal regulation does not, in itself, demonstrate that Congress meant all aspects of its performance or nonperformance to be governed by federal law rather than by the state law applicable to similar contracts in businesses not under federal regulation. In McFaddin Express, Inc. v. Adley Corp., supra, which involved contracts for the temporary management and sale of an interstate motor carrier, we held that, while federal statutes require that such contracts be approved by the ICC, the consequences of a breach of those contracts were ruled by state, not federal, law; the statutory framework indicated that the federal interest in the matter was sufficiently served by the ICC's power to ...


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