Opinion
00 Civ. 3594 (JGK)
January 21, 2001
Joel R. Dichter, Klein, Zelman, Rothermel Dichter, L.L.P., New York, N Y 10022, for the Plaintiffs
Stephen R. Reynolds, Gibson, Del Deo, Dolan, Griffinger Vecchione, P.C., New York, N Y 10019, for the Defendant
OPINION AND ORDER
This is an action brought by plaintiffs LO/AD Communications B.V.I., Ltd. ("LO/AD"), International Dialing Service, Inc. ("IDS"), Ashera, Inc. ("Ashera"), Telemedia Entertainment, Inc. ("Telemedia"), Jeffery Hardman ("Hardman"), Gregory Orozco ("Orozco"), and Paul Kleever ("Kleever") against WorldCom, Inc. ("WorldCom") in connection with WorldCom's blocking of certain telephone numbers beginning in May 2000. The plaintiffs, invoking the Court's jurisdiction under 18 U.S.C. § 1331 and 47 U.S.C. § 201, 202 and 406, allege causes of action for: (1) unreasonable practices pursuant to 47 U.S.C. § 201; (2) unjust or unreasonable discrimination in practices and/or services under 47 U.S.C. § 202; (3) breach of contract; and (4) violations of the First Amendment. The defendant now moves to dismiss or stay this action pursuant to the doctrine of primary jurisdiction and to dismiss certain claims pursuant to Fed.R.Civ.P. 12(b)(6).
Although the plaintiffs have identified the defendant as "MCI Worldcom" in the Complaint and in the caption, the defendant asserts that its proper name is "WorldCom, Inc."
The plaintiffs filed a motion for a preliminary injunction preventing the defendant from blocking domestic and international long distance telephone traffic to the plaintiffs' range of telephone numbers. That motion was withdrawn without prejudice by an Order dated May 23, 2000.
I.
The plaintiffs LO/AD, IDS, Ashera, Telemedia, and Hardman are providers of domestic and international audiotext, chat and other communication services (collectively referred to as the "Corporate Plaintiffs"). (Compl. ¶¶ 6, 12.) The plaintiffs Orozco and Keever are customers of the Corporate Plaintiffs and are telephone subscribers of WorldCom. (Compl. ¶¶ 7, 8.) The defendant WorldCom is a Georgia Corporation with its principal place of business in Clinton, Mississippi and provides telecommunication services through its subsidiaries. (Def.'s Mem. of Law in Supp. of Mot. to Dismiss at 4.)
The plaintiff Keever also claims to be the president of American International Communications, a California Telecommunications Corporation that provides audiotext, chat and other communication services. (First Affidavit of Paul Kleever, submitted in support of Pls.' Motion for Prelim. Inj., dated May 8, 2000, ("First Kleever Aff."), ¶¶ 1-2.)
On or about May 1, 2000, the Corporate Plaintiffs noticed that all call traffic carried over the defendant's lines destined for the range of numbers to which the Corporate Plaintiffs provide audiotext services had been blocked. (Compl. ¶ 15.) Many of the services are located in foreign countries, such as Dominica, Granada and Guyana. (See Compl. Rider A.) The plaintiffs claim that WorldCom's actions were taken without notice or justification. (Compl. ¶ 17.)
The range of telephone numbers to which the Corporate Plaintiffs provided their services is set forth in Rider A of the Complaint.
In addition, the plaintiffs assert that the messages customers received when they called the blocked numbers were knowingly false and that they gave the impression to customers that the Corporate Plaintiffs were no longer offering their services to the public when, in fact, the phone numbers were being unlawfully blocked by WorldCom. (Compl. ¶¶ 19-20.) The plaintiffs claim that the audiotext industry is highly competitive and that when the Corporate Plaintiffs' callers are not connected to their services, the callers take their business elsewhere. (Compl. ¶ 22.) As a result of the blocking of the selected range of numbers, the Corporate Plaintiffs assert that they lost hundreds of thousands of minutes of audiotext traffic per day while the lines were blocked, as well as goodwill. (Compl. ¶¶ 18, 23.)
The plaintiffs claim that WorldCom's actions in blocking the selected range of numbers violated its common carrier obligations under the Federal Communications Act of 1934, 47 U.S.C. § 151 et seq. ("Communications Act"), and was motivated, in whole or in part, by personal objections to the Corporate Plaintiffs' call content. (Compl. ¶¶ 26-27.) The plaintiffs also allege that pursuant to Commission Rule 63.19, WorldCom must give affected parties and the Federal Communications Commission ("FCC") sixty days written notice prior to blocking or shutting off service and that WorldCom did not do so. (Compl. ¶ 27.)
WorldCom contends that it discontinued services for the selected range of numbers after it discovered through investigation that the business in which the Corporate Plaintiffs are engaged used deceptive practices designed to fraudulently deceive WorldCom customers by routing customers who believe they are calling a local phone number or accessing a web page with a modem to an international number charging international long-distance rates, constituting unlawful use of WorldCom's services. (Affidavit of Jay Stenger, dated May 19, 2000, ("Stenger Aff."), ¶¶ 7, 9, 11-12.) WorldCom alleges that customers informed the company that they were unaware that this was occurring and refused to pay charges for these calls, causing WorldCom to lose significant revenues. (Stenger Aff. ¶¶ 10, 13.)
WorldCom alleges that upon discovering this fraudulent scheme to deceive WorldCom customers, it gave written notice to Cable and Wireless ("C W") and Guyana Telephone Telegraph Co., Ltd. ("GTT"), WorldCom's customers with whom the Corporate Plaintiffs have contracted, that their service would be terminated May 1, 2000, due to their unlawful use of WorldCom's services. (Def.'s Mem. of Law in Supp. of Mot. to Dismiss at 6; Stenger Aff. ¶ 12-14.) WorldCom asserts its actions were specifically authorized by WorldCom's Tariff FCC No. 1 ("Tariff"), filed with the FCC pursuant to the Communications Act, which provides in pertinent part:
2.03 Without notice to the customer, MCI WORLDCOM may block traffic to or from certain countries, country codes, cities, city codes, NXX exchanges, individual telephone stations, groups or ranges of individual telephone stations, or calls using certain customer authorization codes, when MCI WORLDCOM deems it necessary to take such action to prevent unlawful use of, or nonpayment for, it's services or to prevent the use of its services in a manner that MCI WORLDCOM determines to be in violation of this tariff or when the customer's call volume or calling pattern results, or may result, in the blockage of MCI WORLDCOM's network or in the degradation of MCI WORLDCOM's service.
(Declaration of James E. Kerr, dated May 19, 2000, ("Kerr. Dec."), Ex. A.) WorldCom asserts that this provision of the Tariff governs this action.
II. A.
The defendant first contends that the doctrine of primary jurisdiction requires that this case be dismissed or stayed and referred to the FCC. Specifically, the defendant argues that the FCC has primary jurisdiction over the plaintiffs' claims under Sections 201 and 202 of the Communications Act.
The term "referral" is technically a misnomer. The Communications Act does not contain a mechanism whereby the Court can require or request a determination from the FCC. MCI Telecommunications Corp. v. Dominican Communication Corp., 984 F. Supp. 185, 189 n. 3 (S.D.N.Y. 1997) (citingReiter v. Cooper, 507 U.S. 258 (1993)). Referral is triggered by the filing of an administrative complaint by one of the parties. Id.
In general, courts have concurrent jurisdiction with the FCC with respect to actions seeking damages pursuant to the provisions of the Communications Act. 47 U.S.C. § 207. The doctrine of primary jurisdiction, however, "allows a federal court to refer a matter extending beyond the `conventional experiences of judges' or `falling within the realm of administrative discretion' to an administrative agency with more specialized experience, expertise, and insight."National Communications Ass'n, Inc. v. Am., Tel. Tel. Co., 46 F.3d 220, 222-23 (2d Cir. 1995) (quoting Far East Conference v. United States, 342 U.S. 570, 574 (1952); see also United States v. Western Pac. R.R. Co., 352 U.S. 59, 63-64 (1956). The "doctrine of primary jurisdiction . . . is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties,"Western Pac., at 63. Courts apply the doctrine to cases involving technical and intricate questions of fact and policy that Congress has assigned to a specific agency. Goya Foods, Inc. v. Tropicana Products, Inc., 846 F.2d 848, 851 (2d Cir. 1988).
There is no fixed formula to determine whether an administrative agency has primary jurisdiction. Western Pac., 352 U.S. at 64; National Communications, 46 F.3d at 222-23. Courts generally consider four factors in determining whether to refer a matter to an administrative agency under the doctrine: (1) whether the question at issue is within the conventional experience of judges or whether it involves technical or policy considerations within the agency's particular field of expertise; (2) whether the question at issue is particularly within the agency's discretion; (3) whether there exists a substantial danger of inconsistent rulings; and (4) whether a prior application to the agency has been made. National Communications, 46 F.3d at 222-23 (noting the four factors that have generally been the focus of the primary jurisdiction analysis); National Communications Ass'n. Inc. v. Am. Tel. Tel. Co., 813 F. Supp. 259, 262-263 (S.D.N.Y. 1993). A court is also required to "balance the advantages of applying the doctrine against the potential costs resulting from complications and delay in the administrative proceedings." National Communications, 46 F.3d at 223.
When a court determines that the doctrine of primary jurisdiction is applicable, the court "defers to the agency for advisory findings and either stays the pending action or dismisses it without prejudice."Johnson v. Nyack Hosp., 86 F.3d 8, 11 (2nd Cir. 1996) (citing Reiter v. Cooper, 507 U.S. 258, 268-69 (1993)).
B.
Section 201 of the Communications Act requires common carriers engaged "in interstate or foreign communication by wire or radio to furnish such communication service upon reasonable request therefor. . . ." 47 U.S.C. § 201(a). Section 201(b) provides in pertinent part:
All charges, practices, classifications, and regulations for and in connection with . . . communication service shall be just and reasonable, and any such charge, practice, classification, or regulation that is unjust or unreasonable is declared to be unlawful. . . .47 U.S.C. § 201(b). Section 202(a) provides in pertinent part: "It shall be unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, . . . or services for or in connection with like communication service, directly or indirectly, by any means or device. . . ." 47 U.S.C. § 202(a). The plaintiffs allege that the defendant's blocking of the selected range of numbers constituted an unreasonable practice in connection with the provision of communications services in violation of Section 201(b). The plaintiffs also allege that the defendant's blocking of the selected range of numbers amounted to unjust and/or unreasonable discrimination in violation of Section 202(a). The defendants argue that the plaintiffs services were fraudulently deceiving the defendant's customers and that the blocking of the range of numbers was appropriate pursuant to the Tariff filed with the FCC.
The plaintiffs' Section 201 and 202 claims are within the FCC's discretion and implicate policy and technical issues that require the FCC's expertise. As an initial matter, the regulation of audiotext services, such as those at issue in this case, also known as "pay-per-call services," is within the authority of the FCC. See In re Tel. Publishing Corp. and Telemedia Network, Inc., DA 97-809, 1997 WL 186501, 12 F.C.C.R. 21, 384 (April 18, 1997). The Telephone Disclosure and Dispute Resolution Act of 1992, 47 U.S.C. § 228, specifically requires that the FCC promulgate regulations that "protect against abusive practices by providers of pay-per-call services." 47 U.S.C. § 228(b)(3). In addition, the FCC has previously addressed the issue of abuses involving audiotext services. See Tel. Publishing Corp., 1997 WL 186501, 12 F.C.C.R. 21, 384.
Here, WorldCom alleges that it blocked the selected range of numbers because the business in which the Corporate Plaintiffs are engaged used deceptive practices. Whether WorldCom's action was reasonable, and whether it constituted unreasonable discrimination against the plaintiffs involves technical and policy matters requiring a detailed knowledge of audiotext services and the standard practices of the telephone industry. Such matters are not within the conventional experience of the Court, but are within the FCC's particular field of expertise. Cf. Mical Communications, Inc. v. Sprint Telemedia, Inc., 1 F.3d 1031, 1040 (10th Cir. 1993) (remanding the case to the district court with instructions to stay the matter pending FCC resolution after finding that "the appropriate characterization of billing and collection in the area code 900 [pay-per-call] context requires expertise and familiarity with the industry").
The FCC has the jurisdiction to hear actions "complaining of anything done or omitted to be done by any common carrier" subject to the Communications Act. 47 U.S.C. § 208. In addition, the FCC has the authority to determine the reasonableness of rates and practices, along with the authority to grant relief to those affected by unreasonable rates or practices. 47 U.S.C. § 205, 207; see also Southwestern Bell Tel. Co. v. Allnet Communications Serv., Inc., 789 F. Supp. 302, 304 (E.D. Mo. 1992). Thus, courts have consistently held that claims alleging unreasonable practices in violation of Section 201(b) are within the primary jurisdiction of the FCC and that the FCC is in the best position to identify such practices. E.g., In re Long Distance Telecommunications Litig., 831 F.2d 627, 631 (6th Cir. 1987); MCI Telecommunications Corp. v. Dominican Communication Corp., 984 F. Supp. 185, 189-90 (S.D.N Y 1997); Vortex Communications, Inc. v. Am. Tel. Tel. Co., 828 F. Supp. 19, 20-21 (S.D.N.Y. 1993); Am. Tel. Tel. Co. v. People's Network, Inc., Civ. A. No. 92-3100, 1993 WL 248165, at *8-9 (D. N.J. Mar. 31, 1993). As the Court of Appeals for the Sixth Circuit stated: "Section 201(b) speaks in terms of reasonableness, and the very charge [in this case] is that the defendants engaged in unreasonable practices. This is a determination that `Congress has placed squarely in the hands of the [FCC].'" Long Distance, 831 F.2d at 631 (quoting Consolidated Rail Corp. v. National Ass'n of Recycling Indus., Inc., 449 U.S. 609, 612 (1981)).
Likewise, courts have also held that claims alleging unjust or unreasonable discrimination in violation of Sections 202(a) are within the primary jurisdiction of the FCC. E.g., Digital Communications Network, Inc. v. AT T Wireless Servs., 63 F. Supp.2d 1194, 1201-02 (C.D. Cal. 1999); Vortex Communications, 828 F. Supp. at 20-21; Am. Tel. Tel. Co. v. IMR Capital Corp., 888 F. Supp. 221, 244-245 (D. Mass. 1995); People's Network, 1993 WL 248165, at *9-10.
In this particular case, the plaintiffs' claims under Sections 201 and 202 require determining whether the practices used by the Corporate Plaintiffs in routing customers through international numbers constituted unlawful practices in the provision of audiotext service, determining whether WorldCom's determination that the Corporate Plaintiffs' were engaged in unlawful use of WorldCom's services and that such practices resulted in nonpayment for WorldCom's services was proper such that denying service was reasonable, and determining the reasonableness of WorldCom's actions in blocking the selected range of numbers. These issues involve technical and policy matters not within the conventional experience of the Court. See Vortex, 828 F. Supp. at 20-21 (plaintiff's claims that the defendant's termination of three area code 900 numbers assigned to the plaintiff violated §§ 201 and 202 involved technical and policy considerations warranting referral to FCC); see also FBN America, Inc. v. Athena Int'l. L.L.C., No. Civ. 97-6427, 1997 WL 698492, at *5 (E.D. Pa. Nov. 4, 1997) (finding that the resolution of the questions regarding the reasonableness of the defendant's termination of the plaintiff's services required "the experience, technical expertise and policy judgments of the FCC"). Rather, they are within the special expertise of the FCC and the FCC has the primary responsibility for determining such issues. See Vortex, 828 F. Supp. At 20; IMR Capital Corp., 888 F. Supp. at 244-245 ("The Communications Act's prohibition of `unreasonable,' `unjust' and `discriminatory' practices . . . essentially invites the FCC to promulgate specific policies governing the telecommunications industry.")
In addition, a claim under Section 202(a) entails a three-step inquiry: (1) whether the services are "like"; (2) if so, whether the carrier is offering the service to other customers at a "different" price or under "different" conditions than those offered to the petitioner; and (3) if such difference exists, whether that difference is unreasonable.Am. Message Ctrs. v. F.C.C., 50 F.3d 35, 40 (D.C. Cir. 1995); Telecom Int'l. Am. Ltd. v. AT T Corp., 67 F. Supp.2d 189, 210 (S.D.N Y 1999). Issues regarding whether services are alike and whether distinctions in practices between customers are justified "are best left to the FCC's technical experience and policy-making abilities." People's Network, 1993 WL 248165, at *9; Digital Communications, 63 F. Supp.2d at 1201. Thus, given the issues to be decided under these claims, the first two factors in the primary jurisdiction analysis weigh in favor of staying the action pending resolution of these issues by the FCC.
The third factor also weighs in favor of deferring initially to the FCC. Concerns over inconsistent rulings and the need for uniform regulation of the telecommunications industry favor resolution of the issues involved by the FCC. See Vortex, 828 F. Supp. at 21; People's Network, 1993 WL 248165. at *6; Erdman Technologies Corp. v. U.S. Sprint Communications Co., L.P., No. 91 Civ. 7602, 1992 WL 77540, at *3 (S.D.N.Y. Apr. 9, 1992). Regulation of audiotext services and communication carriers in providing long distance services to businesses engaged in the provision of audiotext services has nationwide ramifications. The services at issue have been the subject of orders and rulings by the FCC, see Tel. Publishing Corp., 1997 WL 186501, 12 F.C.C.R. 21, 384, and the FCC is in the best position to provide a uniform solution. See Mical Communications, 1 F.3d at 1039-40. The regulation of audiotext services is relatively new and decisions with respect to routing through international numbers will have general ramifications. If this Court were to decide the issues involved in the plaintiffs' Sections 201 and 202 claims, it is possible that the Court's ruling would conflict with the policy choices of the FCC, disrupting any such efforts Supp. at 264; Erdman Technologies, 1992 WL 77540, at *3. Furthermore, having the FCC decide these issues will mitigate the danger that other courts, when faced with these issues, may render inconsistent rulings.
With regard to the final factor of the primary jurisdiction analysis, there is no evidence that a prior application to the FCC has been made with respect to these issues and thus this factor would weigh against staying this action.
The advantages of applying the doctrine of primary jurisdiction outweigh any potential costs resulting from complications and delay in the administrative proceedings. This case has been pending for considerably less than a year. The Court has not stayed discovery and that record could be used by the parties before the FCC as well as in any continuation of this lawsuit. The parties were able to resolve the issues raised by the preliminary injunction and many of the numbers that had originally been blocked are no longer blocked. Although the agency decisionmaking process can be burdensome and cause delay, National Communications, 46 F.3d at 225, the technical nature of the issues involved in this case and the policy implications that must necessarily be considered strongly favor referral to the FCC. Thus, the advantages of referral to the FCC outweigh the disadvantages.
Accordingly, application of the doctrine of primary jurisdiction is appropriate with respect to the plaintiffs' claims under Sections 201 and 202 of the Communications Act. The plaintiffs are directed to submit their Section 201 and 202 claims to the FCC and this action is stayed pending resolution of the issues raised by these claims by the FCC.
III.
The defendant has also moved to dismiss the plaintiffs' breach of contract claim and First Amendment claim pursuant to Fed.R.Civ.P. 12(b)(6). Because the issues involved in resolving the plaintiffs' Sections 201 and 202 claims may impact the resolution of these two remaining claims, the Court will not resolve the defendant's motion to dismiss at this time. Accordingly, the defendant's motion to dismiss pursuant to 12(b)(6) is denied without prejudice to renewal. Further proceedings on all of the plaintiffs' claims are stayed pending referral of the issues raised in the plaintiffs' claims under Sections 201 and 202 to the FCC. Once this Court has received the benefit of the FCC's expertise with respect to those issues, it can effectively resolve the remaining claims in this case.
CONCLUSION
For the foregoing reasons, the defendant's motion to stay this action under the doctrine of primary jurisdiction with respect to the plaintiff's claims under Section 201 and 202 of the Communications Act is granted. The plaintiffs are directed to submit their Section 201 and 202 claims to the FCC and this action is stayed pending the FCC's determination. The defendant's motion to dismiss the remaining breach of contract and First Amendment claims is denied without prejudice to renewal after the FCC's determination. The Clerk of the Court is directed to place this case on the Court's Suspense Docket. The parties are directed to advise the Court no later than June 29, 2001, as to the status of any proceedings before the FCC.
SO ORDERED.