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NORDLICHT v. NEW YORK TEL. CO.

May 8, 1985

HAROLD NORDLICHT, on behalf of himself and all other similarly situated, Plaintiff, against NEW YORK TELEPHONE COMPANY, Defendant


The opinion of the court was delivered by: HAIGHT

MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

This case concerns unspecified phone calls plaintiff made within Canada and from Canada to the United States. Plaintiff, a New York resident, directed the Canadian telephone company to bill the cost of these calls to his American telephone account with defendant New York Telephone. It is alleged that the Canadian company billed defendant for these calls in Canadian dollars and that defendant then billed plaintiff for the calls in the same amount of American dollars. At the time the exchange rate of the two dollars was not one-for-one, with the American dollar the stronger currency. As a result, New York Telephone would have billed plaintiff for, in effect, a higher price than it was charged. It allegedly pocketed the difference.

 Plaintiff filed this as yet uncertified class action in New York Supreme Court to recover the difference in value between the Canadian and American prices, alleging fraud and money had and received. Defendant removed the action to this Court pursuant to 28 U.S.C. § 1441, alleging subject matter jurisdiction under two federal question statutes, 28 U.S.C. §§ 1331 and 1337. Following some discovery, defendant has moved to dismiss under Rules 9(b) and 12(c), Fed.R.Civ.P. Plaintiff cross-moves for remand pursuant to 28 U.S.C. § 1447(c) or alternatively for summary judgment.

 I.

 Because the motion for remand goes directly to the Court's power to adjudicate this dispute, I address it first. Removal was proper only if subject matter jurisdiction exists in federal court. 28 U.S.C. § 1441. Defendant contends that jurisdiction can be found under the federal question statute, 28 U.S.C. § 1331. Section 1331 grants a federal forum to lawsuits "arising under" federal law. Plaintiff contends that his common law causes of action do not so arise.

 The leading case is Ivy Broadcasting Co. v. American Telegraph and Telephone Co., 391 F.2d 486 (2d Cir. 1968). Plaintiff in Ivy operated radio stations. It contracted with the telephone company to provide communications service in connection with the broadcast of Syracuse University football games and New York political conventions. The telephone company allegedly provided inadequate service, ruining plaintiff's broadcasts. Plaintiff sued, stating causes of action for negligence and breach of contract. The district court sua sponte dismissed the complaint for want of subject matter jurisdiction, reasoning that the claims arose not under federal law but under the common law of New York State.

 The Court of Appeals reversed. The court acknowledged that the remedy which the plaintiff sought was not one granted by federal statutory law, since the acts alleged were not violations of specific provisions of the Communications Act of 1934 ("the Act"), 47 U.S.C. §§ 151-609, a statute which provides a comprehensive scheme of regulation for carriers such as the telephone company. However, the very comprehensiveness of the regulatory scheme established by the Act led the court to consider whether Congress intended to displace state law with federal common law in the governance of contracts involving communications carriers. After considering a number of United States Supreme Court cases in which a uniform federal rule was held to displace state law in actions involving the provision of telegraphic services, the court held that:

 
...questions concerning the duties, charges and liabilities of telegraph or telephone companies with respect to interstate communications service are to be governed solely by federal law...[T]he states are precluded from acting in this area. Where neither the Communications Act itself nor the tariffs filed pursuant to the Act deals with a particular question, the courts are to apply a uniform rule of federal common law.

 391 F.2d at 491. The application of federal common law was held to create federal subject matter jurisdiction. Id. at 493. The Supreme Court has since concurred in the latter conclusion. Illinois v. City of Milwaukee, 406 U.S. 91, 100, 31 L. Ed. 2d 712, 92 S. Ct. 1385 (1972) (pollution of interstate or navigable waters).

 Ivy is controlling here and creates federal subject matter jurisdiction. The holding of Ivy is both broad and absolute -- "questions concerning the duties, charges and liabilities of ... telephone companies with respect to interstate communications service are to be governed solely by federal law." 391 F.2d at 491. This case involves the charges for the provision of communications service. That it is framed in terms of a tort is irrelevant -- the Ivy plaintiff, too, was pleading a tort. The only potentially significant difference between this action and Ivy is that this action concerns international and wholly foreign service. However, the regulatory scheme of the Act which persuaded the Ivy court to apply federal common law extends not only to the provision of interstate but also of foreign communication. Section 201 of the Act, 47 U.S.C. § 201, for example, which governs "service and charges," applies to "every common carrier engaged in interstate and foreign communication.' Thus the reasoning which led the Court of Appeals to apply federal common law to disputes over interstate service extends equally to disputes over foreign communication. Both are within the Act's regulatory scheme. As a result, federal jurisdiction exists, and whatever claims plaintiff is raising are governed by federal, not state, common law.

 Plaintiff argues that because rates for intra-Canada calls are not subject to regulation by the Act, Ivy is inapplicable. The specific rates for intra-Canada calls, however, are not at issue here. Plaintiff's concern is with New York Telephone's method of billing for these calls, not the actual price of the calls. Section 201(b) of the Act requires "all charges" in connection with the provision of interstate and foreign communications services to be "just and reasonable." This would appear to include the provision of billing services for foreign calls. In addition, the type of contract under which defendant provides this billing service for the Canadian telephone company must be filed with the Federal Communications Commission ("FCC") pursuant to 47 U.S.C. § 211, see also 47 C.F.R. § 43.51(a)(1), which may veto such contracts if they are "contrary to the public interest." 47 U.S.C. § 201(b). Plainly, billing for intra-Canada calls is subject to regulation under the Act. Plaintiff's objection is meritless. Removal was proper.

 II.

 The parties have cross-moved for judgment. Defendant styles its motion as one pursuant to Rule 12(c), Fed.R.Civ.P., but because it relies upon factual matters outside the pleadings which contradict the allegations of the complaint, it is more appropriately treated as a motion for summary judgment pursuant to Rule 56. Because plaintiff has himself filed a motion under Rule 56, I find no prejudice in treating both of the cross-motions as motions for summary judgment.

 Based on the evidence submitted by defendant, it appears that the true nature of the transactions between Canadian and American telephone companies is quite different from that stated in the complaint. The complaint asserts that whenever plaintiff made an intra-Canadian or international call from within Canada, the Canadian company would bill New York Telephone in Canadian dollars while New York Telephone would in turn bill plaintiff in stronger American dollars. New York Telephone allegedly kept the difference in value between the two currencies, which plaintiff alleges at the time of his calls amount to 15 percent of their price.

 That is not the way it works. Not surprisingly, the true relationship between the two companies and their ...


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