neither the savings clause nor Metropolitan Life requires remand.
For the above reasons, removal of plaintiffs claims for damages was proper. Supplemental jurisdiction exists for any claims that do not arise under federal law because all claims asserted arise from the same set of operative facts. 28 U.S.C. § 1367(a) (1994).
Defendant contends that the filed rate doctrine bars all claims raised by the Marcus and Moss complaints. That doctrine, known also as the filed tariff doctrine, derives from the tariff-filing requirements of the Communications Act, supra pp. 5-6, and the analogous requirements of the Interstate Commerce Act of 1910 ("ICA"), 49 U.S.C. § 10101 et seq., which served as a model for the Communications Act. MCI, 114 S. Ct. at 2231.
Put simply, the filed rate doctrine forbids a regulated entity from charging rates "for its services other than those properly filed with the appropriate federal regulatory authority." Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 577, 69 L. Ed. 2d 856, 101 S. Ct. 2925 (1981) ("Arkla "). The doctrine creates "strict filed rates requirements and . . . forbid[s] equitable defenses to collection of the filed tariff." Maislin Indus., Inc. v. Primary Steel, Inc., 497 U.S. 116, 127, 111 L. Ed. 2d 94, 110 S. Ct. 2759 (1990) (invalidating an ICC policy that relieved a shipper of the obligation to pay the filed rate when the shipper and carrier had privately negotiated a lower rate). That means that the filed rate governs the legal relationship between carrier and subscriber, and "the rights as defined by the tariff cannot be varied or enlarged by either contract or tort of the carrier." Keogh v. Chicago & N.W. Ry., 260 U.S. 156, 163, 67 L. Ed. 183, 43 S. Ct. 47 (1922) (dismissing claims of conspiracy to fix rates); see also Square D Co. v. Niagara Frontier Tariff Bureau, 476 U.S. 409, 417, 90 L. Ed. 2d 413, 106 S. Ct. 1922 (1986) (declining to overrule Keogh and holding that the filed rate doctrine barred antitrust action alleging rates fixed pursuant to an illegal agreement). Moreover, the regulatory agency has no power to alter retroactively a properly filed rate. Arkla, 453 at 578.
Because the agency rate-making procedures and the resulting tariffs are public documents, the consumer's "knowledge of the lawful rate is conclusively presumed," Kansas City S.R. Co. v. Carl, 227 U.S. 639, 653, 57 L. Ed. 683, 33 S. Ct. 391 (1913), and "ignorance or misquotation of rates is not an excuse for paying or charging either less or more than the rate filed." Louisville & Nashville R.R. v. Maxwell, 237 U.S. 94, 97, 59 L. Ed. 853, 35 S. Ct. 494 (1915) (holding that a passenger who bought a train ticket at a misquoted rate had no defense to payment of the filed tariff). The filed rate doctrine trumps contract defenses: even a customer who has negotiated with the carrier for a lower rate must pay the filed rate. Armour Packing Co. v. United States, 209 U.S. 56, 81, 52 L. Ed. 681, 28 S. Ct. 428 (1908). Permitting parties to contract for a reasonable rate would subvert the FCC's ability to judge in every case the reasonableness of the rate. Arkla, 453 U.S. 571 at 582.
The filed rate doctrine prevails also over claims of fraud. In Wegoland, Ltd. v. NYNEX Corp., 27 F.3d 17, 19 (2d Cir. 1994), plaintiffs alleged that defendants had provided the "'regulatory agencies and consumers misleading financial information to support the inflated rates they requested.'" Id. at 18 (quoting Wegoland, Ltd. v. NYNEX Corp., 806 F. Supp. 1112, 1113 (S.D.N.Y. 1992)). Explaining that the twin goals of the filed rate doctrine are non-discrimination among ratepayers and exclusion of the courts from the ratemaking process, the Second Circuit reasoned that the task of "ferreting out fraud in the rate-making process" would enmesh the court impermissibly in that process, would subvert the regulatory agency's authority and "undermine the stability of the system." 27 F.3d at 21. Accordingly, the Court refused to create a fraud exception to the filed rate doctrine. Id. at 22; see also Taffet v. Southern Co., 967 F.2d 1483, 1488-90 (11th Cir.) (en banc) (filed rate barred RICO action because customers had suffered no legally cognizable injury), cert. denied, 506 U.S. 1021, 113 S. Ct. 657, 121 L. Ed. 2d 583 (1992); H.J. Inc. v. Northwestern Bell. Tel. Co., 954 F.2d 485, 494 (8th Cir.), (filed rate doctrine barred RICO claims for fraud on agency), cert. denied, 504 U.S. 957, 112 S. Ct. 2306, 119 L. Ed. 2d 228 (1992); Marco Supply Co. v. AT&T Communications, Inc., 875 F.2d 434, 436 (4th Cir. 1989) (filed rate doctrine barred claim of price misrepresentation); Transportation Data Interchange, Inc. v. AT&T, 920 F. Supp. 86, 89 (D.Md. 1996) (relying on Marco, supra, in holding that filed rate doctrine bars claims for breach of contract and fraud); MCI Telecommunications Corp. v. Graphnet, Inc., 881 F. Supp. 126, 132 (D.N.J. 1995) (holding that filed rate doctrine precludes claims for fraudulent inducement and breach of contract).
That a common carrier may charge no more and no less than its filed rate necessarily means that a subscriber may pay no more and no less than the filed rate, regardless of equitable circumstances suggesting otherwise. It follows that any subscriber who pays the filed rate has suffered no legally cognizable injury. Here, AT&T filed its rates based on rounding up with the FCC, and plaintiffs paid the rates so filed. That plaintiffs may have been misled by AT&T's bills, or its advertisements of "True Savings," does not mitigate the effect of the filed rate doctrine. Accordingly, plaintiffs' claims for damages are barred by the filed rate doctrine.
Plaintiffs assert that their claims do not engage the filed rate doctrine because they attack AT&T's non-disclosure of its residential long-distance rates rather than the reasonableness of those rates. In essence, plaintiffs challenge the application of AT&T's rates to them in light of AT&T's billing and advertising practices, as opposed to the reasonableness of the rates absent any allegedly misleading conduct. But Supreme Court case law illustrates that the filed rate doctrine applies as stringently to claims challenging the individual application of the filed rate, as it does to claims challenging the general integrity of that rate. See, e.g., Maxwell, 237 U.S. at 97 (filed rate applies even to passenger who had been quoted a lower rate); Armour Packing, 209 U.S. at 81 (filed rate applies even to customer who contracted for a lower rate). Conversely, the filed rate doctrine applies as stringently to claims challenging the universal application of the filed rate as it does to claims challenging the individual application of the rate. Claims challenging universal application seek retroactive alteration of the filed rate, a remedy that neither the FCC nor the courts may provide. The statute requires the carrier to charge all customers the same rate and yields to no equitable defenses. "Stripped of its semantic cover," plaintiffs' claims "thus stand revealed as flatly inconsistent with the statutory scheme as a whole." Maislin, 497 U.S. at 131.
Plaintiffs attempt to avoid Wegoland also by arguing that they allege a fraud on the public, rather than a fraud on the regulatory agency. But again, that distinction is immaterial, because the two types of allegations implicate equally the filed rate doctrine. As long as the carrier has charged and the plaintiff has paid the filed rate, what bars a claim is not the harm alleged, but the impact of the remedy sought. Any remedy that requires a refund of a portion of the filed rate -- whether an award of damages for fraud on an agency or an award of damages for fraud on consumers -- is barred.
Plaintiffs rely also on Gelb, 813 F. Supp. 1022. There, holders of AT&T's calling cards alleged that AT&T fraudulently had concealed the cost of using those cards. Those plaintiffs asserted claims of fraud, violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO") and deceptive acts and practices and false advertising in violation of N.Y. Gen. Bus. L. §§ 349-50 and New York common law. Id. at 1023. In considering whether plaintiffs' claims of fraud were barred by the filed rate doctrine, the Court held that:
Because the fraudulent conduct alleged involves universal fraud and concealment of rates as to all cardholders by defendant AT&T (rather than fraud directed at a particular customer) and because the claim does not implicate in any manner the reasonableness of the filed rate, this Court rules that the filed rate doctrine does not apply.
Id. at 1032. The Gelb Court held that the filed rate doctrine did not bar plaintiff's claim for declaratory or injunctive relief, but reserved judgment as to whether an award of damages impermissibly would involve the court in the ratemaking process. Id. at 1032-33.
Gelb does not support plaintiffs' claim for damages, because it left open the question of whether damages would be barred by the filed rate doctrine. The case ultimately settled and that question never was resolved. To the extent Gelb does bear on the facts presented here, I respectfully decline to follow it, because I conclude that plaintiffs' claims for damages, even absent a challenge to the reasonableness of AT&T's rates, offend the filed rate doctrine and therefore are barred.
Just as plaintiffs' claims violate the letter of the filed rate doctrine, so too they violate the doctrine's policy. To require AT&T to pay damages here would mean that these plaintiffs, because of their reliance on AT&T's non-disclosure, are entitled to a reduced rate for AT&T services. Non-party subscribers to AT&T's residential long distance service necessarily would pay a higher rate. That disparity cannot be squared with the filed rate doctrine's mandate of equal rates for equal service.
In response, plaintiffs argue that there will be no discrimination here because they seek to represent a class. But even a class action litigation -- were plaintiffs' class to be certified -- would lead to rate discrimination. Certification of a class pursuant to Fed. R. Civ. P. 23(b)(3) permits class members to opt out of the litigation. A class member's exercise of that right likely would result in the application of different rates to the class and the opting out members. To hold that the opting out members' actions were barred by the filed rate doctrine would force all members of the class to litigate together, in contravention of the opt-out provision of Fed. R. Civ. P. 23(b)(3).
To be sure, the opt-out provision does not apply to class actions certified under Fed. R. Civ. P 23(b)(1) or (b)(2), which bind all members of the class. But in this case the very elements of the claim could compel discrimination. These plaintiffs allege common-law fraud and negligent misrepresentation. Both claims require proof of reliance, see infra pp. 21-22, and in a class action, the reliance of each class member must be proved. See, e.g., In re Crazy Eddie Secs. Litig., 802 F. Supp. 804, 811-12 (E.D.N.Y. 1992). Class members able to prove reliance on AT&T's alleged concealment or its advertisement of "True Savings" would recover damages, while class members unable to do so, either because they were aware of the filed tariff or because they did not take the phrase "True Savings" literally, could not so recover. That result would thwart the Communication Act's goal of uniform nationwide rates.
Further, "the class action nature of the proceeding in no way affects the important concerns of agency authority, justiciability and institutional competence" implicated by the filed rate doctrine and "tends to frustrate these legitimate interests and might end up costing consumers even more in litigation expenses." Wegoland, 27 F.3d at 22; see In re Empire Blue Cross & Blue Shield Customer Litig., 164 Misc. 2d 350, 622 N.Y.S.2d 843, 848 (Sup. Ct. New York County 1994), aff'd, 640 N.Y.S.2d 102 (1st Dep't 1996). For that reason, both the Supreme Court and the Second Circuit have declined to craft a class-action exception to the filed rate doctrine. Square D, 476 U.S. at 423 ("The emergence of subsequent procedural and judicial developments [including the class action] does not minimize Keogh's role as an essential element of the settled legal context in which Congress has repeatedly acted in this area."); Wegoland, 27 F.3d at 22.
Here too, calculation of the damages plaintiffs seek necessarily would require this court to determine a reasonable rate for AT&T's residential long-distance service to cure the allegedly fraudulent non-disclosure. Because the filed rate doctrine confers on the FCC exclusive authority to make that determination, plaintiffs' claims for damages must be dismissed.
Plaintiffs' request for an injunction requiring AT&T to disclose its billing practices in materials other than the tariffs is not barred by the filed rate doctrine, because that type of relief would have no impact on the tariff charged. It would not require AT&T to charge more or less than the filed rate, nor would it permit a customer to pay more or less than the filed rate. Nor would plaintiffs' claims for injunctive relief to remedy AT&T's non-disclosure be preempted by the Communications Act, which requires common carriers to disclose their rates in the filed tariffs only. The Act does not prohibit a state from requiring common carriers to disclose their rates elsewhere, and any such state obligation would not frustrate Act's purposes of uniformity and agency ratemaking. See supra pp. 12-13.
A party seeking an injunction from a federal court must show that it will suffer irreparable harm and that legal remedies are inadequate to redress that harm. Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 506-507, 3 L. Ed. 2d 988, 79 S. Ct. 948 (1959). Plaintiffs have pointed to no requirement obliging a common carrier to disclose its billing practices anywhere other than in the tariffs, and no law that requires a common carrier to disclose in its bills the actual length of the service provided.
To state a claim for fraud under either federal law or New York common law, a plaintiff must allege: (1) a material false representation or omission of existing fact, (2) intent to defraud, (3) reasonable reliance, and (5) damages. Pence v. United States, 316 U.S. 332, 338, 86 L. Ed. 1510, 62 S. Ct. 1080 (1941) (federal common law); Turtur v. Rothschild Registry Int'l, Inc., 26 F.3d 304, 310 (2d Cir. 1994) (New York common law).
Relatedly, the elements of a claim for negligent misrepresentation are: (1) carelessness in imparting words, (2) to one whom the speaker is bound by some relation of duty or care, (3) who is expected to rely, (4) upon which plaintiff acted or failed to act, (5) to plaintiff's damage. Mallis v. Bankers Trust Co., 615 F.2d 68, 82 (2d Cir. 1980), cert. denied, 449 U.S. 1123, 67 L. Ed. 2d 109, 101 S. Ct. 938 (1981) (New York and federal common law); In re JWP Inc. Secs. Litig., 928 F. Supp. 1239, 1253 (S.D.N.Y. 1996) (New York common law).
Plaintiffs' claims for both fraud and negligent misrepresentation require proof of damages. But plaintiffs here have suffered no legally cognizable damages because they paid the tariff rate. Equitable redress is not warranted, because there is nothing to redress.
The Marcus plaintiffs assert also a claim for breach of warranty. Liability on that theory arises only when "persons or property are damaged because of a product's failure to live up to an express or implied representation by the manufacturer or other supplier." Tinnerholm v. Parke Davis & Co., 285 F. Supp. 432, 440 (S.D.N.Y. 1968), aff'd, 411 F.2d 48 (2d Cir. 1969). An express warranty arises when the seller affirmatively represents a fact concerning the goods or services it sells. Id. An implied warranty arises in the absence of an express representation, and is imposed by operation of law. Id. Plaintiffs' claim for breach of warranty suffers from the same defect as their claims for fraud and negligent representation; even assuming that AT&T's bills and advertisements create an actionable express warranty, plaintiffs' claim is insufficient because plaintiffs have suffered no damages as a result of any alleged breach. Plaintiffs paid only the rates they were legally obliged to pay.
A claim for unjust enrichment or imposition of a constructive trust is based on:
an obligation which the law creates, in the absence of any agreement, when and because the acts of the parties or others have placed in the possession of one person money, or its equivalent, under such circumstances that in equity and good conscience he ought not to retain it, and which ex ae quo et bono belongs to another.
In re Chateaugay Corp., 10 F.3d 944, 957-58 (2d Cir. 1993) (quoting Miller v. Schloss, 218 N.Y. 400, 407, 113 N.E. 337 (1916)). Here, plaintiffs, by paying the filed rate, have conferred no benefit on AT&T to which AT&T is not entitled. Likewise, it violates no principle of equity or good conscience to allow AT&T to keep the money plaintiffs are legally obligated to pay.
Plaintiffs allege also that AT&T has violated two sections of New York's Consumer Protection Act. Section 349 of that Act makes unlawful "deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service." N.Y. Gen. Bus. L. § 349(a) (McKinney 1988). That section also establishes that,
it shall be a complete defense that the act or practice is, or if in interstate commerce would be, subject to and complies with the rules and regulations of and the statutes administered by, the federal trade commission or any official department, division, commission or agency of the United States . . . .
Id. § 349(d).
Section 350 of New York's General Business Law makes unlawful "false advertising in the conduct of any business, trade or commerce or in the furnishing of any service in this state." Id. § 350. False advertising is advertising that is:
misleading in a material respect, . . . [including] the extent to which the advertising fails to reveal facts material in the light of such representations with respect to the commodity . . . to which the advertising relates under the conditions prescribed in said advertisement, or under such conditions as are customary or usual.