Case Title: Martin Weinberg v. Sprint Corporation

Citation: 

Docket Number: a-36-01

State: new-jersey

Court: New Jersey Supreme Court

Date: 2002-07-22T00:00:00Z

Document:
Sprint Corporation is a national long-distance provider that advertises and provides services to New Jersey residents. Martin Weinberg is a residential telephone consumer of Sprint. In 1995, Weinberg filed a national class action lawsuit against Sprint on behalf of residential users of Sprint s long-distance telephone services, claiming that Sprint s national television commercials induced residential customers to use its long-distance services by employing deceptive, fraudulent, misleading, and /or false advertising and promotional practices. According to Weinberg, Sprint s advertisements were designed to misrepresent and conceal its practice of charging a full minute of telephone usage even if the caller was only connected for a few seconds. Weinberg alleges that the practice of rounding-up to the next highest minute is unconscionable, resulting in millions of dollars in excess billing. It is undisputed that Sprint s advertisements do not explain its practice of rounding-up when stating the per-minute charge. Sprint s federally filed tariffs for its long-distance service during the relevant period stated that it charged per-minute rates. The record does not demonstrate that Sprint s practice was inconsistent with its filed tariff. Weinberg s complaint alleges three causes of action: 1) common-law fraud by knowingly engaging in deceptive practices, misrepresentations, and material omissions in order to induce residents to unknowingly pay for call time they did not use; 2) consumer fraud in violation of the Act; and 3) negligent misrepresentation by negligently failing to inform consumers of its billing practices. Weinberg sought, among other things, injunctive relief, statutory damages under the Act, and compensatory and punitive damages. In January 1996, Sprint removed the matter to the United States District Court for the District of New Jersey on preemption grounds. Weinberg then successfully removed the matter to State court. Following the remand, Weinberg moved for class certification and Sprint moved to dismiss the matter. The trial court dismissed the case in part, finding that the filed-rate doctrine precluded Weinberg s claim for monetary relief. The court did allow Weinberg s claim for injunctive relief to proceed. The court also granted class certification limited to residential long-distance customers in New Jersey. At the conclusion of discovery, the parties filed cross-motions for summary judgment. The trial court granted Sprint s motion and dismissed the complaint. The court reasoned that Weinberg s claim for injunctive relief under the Act must fail because: 1) Sprint complied with FCC disclosure requirements, and 2) Weinberg could not demonstrate any genuine issue of material fact to support his claim of ascertainable loss as a result of Sprint s conduct. The trial court also dismissed Weinberg s claims for common-law fraud and negligent misrepresentation. On appeal, the Appellate Division affirmed substantially for the reasons expressed by the trial court, noting that Weinberg failed to demonstrate any ascertainable loss. The Supreme Court granted certification. HELD: To have standing under the Consumer Fraud Act, a private party must plead a claim of ascertainable loss that is capable of surviving a summary judgment motion. In such a case, even if the factfinder ultimately determines that the loss has not been proven, a private party may obtain injunctive relief under the Act, along with attorneys fees, when unconscionable conduct is found to exist. 1. The filed-rate doctrine forbids a regulated entity to charge rates for its service other than those properly filed with the appropriate federal regulatory authority. Customers are conclusively presumed to have constructive knowledge of the filed tariff. Thus, even if the carrier intentionally misrepresents its rate and a customer relies on the misrepresentation, the carrier cannot be held to the promised rate if it conflicts with the published tariff. As such, the filed-rate doctrine bars money damages from telecommunications carriers where the damage claims are premised on state contract principles, consumer fraud, or other bases on which plaintiffs seek to enforce a rate other than a filed rate. (Pp. 7-13) 2. Before 1996, Sprint s FCC tariff revealed that it billed in per-minute increments. Therefore, Weinberg is precluded under the filed-rate doctrine from recovering money damages since he paid a rate that was consistent with the approved filed tariff. Weinberg s fraud claim also is barred because the filed-rate doctrine requires the conclusive presumption that Weinberg knew the filed rate. In addition, a reasonable consumer would not have been deceived into believing that he or she was being billed by the second, especially in view of the monthly billing statements. (Pp. 13-17) 3. Although the filed-rate doctrine may bar monetary relief, it does not by its terms bar injunctive relief. As originally enacted, the Act vested the Attorney General (AG) with exclusive authority to fight the increasingly widespread practice of consumer fraud. The Act was later amended to enable individual consumers to bring private actions to recover refunds and treble damages for violations of the Act. The addition of a private cause of action promoted several purposes, including victim compensation, punishment of the wrongdoer, and the attraction of competent counsel to fight consumer fraud. (Pp. 17-21) 4. The plain language of the Act unmistakably makes a claim of ascertainable loss a prerequisite for a private cause of action for victims of consumer fraud. However, that does not mean that only a plaintiff who successfully proves ascertainable loss may have access to the Act s remedies of equitable relief and attorney s fees. A plaintiff who reaches the factfinder on a claim of ascertainable loss and succeeds in proving an unlawful practice but does not succeed in proving damages should be eligible to recover attorneys fees for bringing the action. Here, the courts below correctly dismissed Weinberg s monetary claims under the preclusion of the filed-rate doctrine. Weinberg failed to present a claim of ascertainable loss because operation of the filed-rate doctrine precluded him from any monetary damages. He had no lawful claim to have been charged any other rate and could present no genuine issue of fact on his assertion of loss. His claims for compensatory damages were also properly dismissed. Weinberg may not proceed solely on his claims for injunctive relief and attorneys fees; accordingly, those remaining claims were properly dismissed. (Pp. 21-28) Judgment of the Appellate Division is AFFIRMED. JUSTICE VERNIERO, dissenting, in which JUSTICES STEIN and ZAZZALI join, would not rely on the filed-rate doctrine to dismiss Weinberg s consumer protection claims. In his view, the public policy behind the Consumer Fraud Act argues in favor of allowing those claims to proceed to trial. According to Justice Verniero, Sprint should not be permitted to benefit from the protections of the filed-rate doctrine given the content of its filed tariffs, which did not explicitly disclose its round-up practice. In addition, Justice Verniero would not apply a legal fiction whose future is dim, at best. Absent the doctrine, Weinberg likely has an ascertainable loss or at least is entitled to prove such a loss at trial. Furthermore, allowing the claim to proceed would be consistent with the Act s history of expanding consumer protection in these circumstances. CHIEF JUSTICE PORITZ and JUSTICES COLEMAN and LONG join in JUSTICE LaVECCHIA S majority opinion. JUSTICE VERNIERO filed a separate dissenting opinion in which JUSTICES STEIN and ZAZZALI join. Plaintiff-Appellant, v. SPRINT CORPORATION, Defendant-Respondent. Argued February 11, 2002 Decided July 22, 2002 On certification to the Superior Court, Appellate Division. Peter S. Linden, a member of the New York bar, argued the cause for appellant (Bernstein Liebhard & Lifshitz, attorneys; Mr. Linden and Robert J. Berg, on the briefs). Russell S. Jones, Jr., a member of the Missouri bar, argued the cause for respondent (Bloom Rubenstein Karinja & Dillon, attorneys; Mr. Jones and Paul J. Dillon, on the briefs). The opinion of the Court was delivered by LaVECCHIA, J. In Meshinsky v. Nichols Yacht Sales, Inc., 110 N.J. 464 (1988), the Court addressed the requirement that a private plaintiff sustain an ascertainable loss in order to bring a cause of action under the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20 (Act). Meshinsky noted that the positions of a private plaintiff and the Attorney General are sharply different in that respect. "While the Attorney General does not have to prove that the victim was damaged by the unlawful conduct, N.J.S.A. 56:8-2, a private plaintiff must show that he or she suffered an 'ascertainable loss . . . as a result of' the unlawful conduct." Meshinsky, supra, 110 N.J. at 473 (citation omitted). In this appeal plaintiff invites us to eliminate the statutory distinction between the standing of the Attorney General and a private plaintiff, and to allow a private injunctive action for consumer fraud irrespective of the plaintiff's ability to claim ascertainable loss. We reject the invitation to vitiate the distinction between the powers of the Attorney General and private plaintiffs under the Act. The distinction was drawn by the Legislature in unmistakable terms and we are not free to ignore the requirement of ascertainable loss as a predicate to a private cause of action for consumer fraud. Instead, we must construe that requirement reasonably and sensibly. We conclude that to have standing under the Act a private party must plead a claim of ascertainable loss that is capable of surviving a motion for summary judgment. In such a case, even if the factfinder ultimately determines that the loss has not been proven, a private plaintiff may obtain injunctive relief under the Act, along with attorneys' fees when unconscionable conduct is found to exist. Plaintiff-Appellant, v. SPRINT CORPORATION, Defendant-Respondent. VERNIERO, J., dissenting. My difference with the majority is a narrow one. I would not rely on a legal fiction known as the filed rate doctrine to dismiss plaintiff s consumer protection claims. I also believe that the public policy behind the Consumer Fraud Act (Act) argues in favor of allowing those claims to proceed to trial. My rationale for not applying the filed rate doctrine is twofold. First, Sprint should not be permitted to benefit from the protections of that doctrine given the content of its filed tariffs that existed at the time of the litigation. In that respect, as the Court properly acknowledges, Sprint rounded up to the next minute, ante at ____ (slip op. at 4), notwithstanding that the rate that it filed with the Federal Communications Commission (FCC) did not explicitly disclose [that] practice[.] Ibid. The Court also observes that Sprint s description of its rates could have been clearer[.] Id. at ____ (slip op. at 14). Thus, the cases cited by the majority, in which the defendants actually did disclose rounding up in their filed tariffs, are inapposite. See, e.g., Marcus v. AT&T Corp., 138 F.3d 46, 57 (2d Cir. 1998) (involving filed rate that stated, Additional Minute rates apply to each additional minute, or any fraction thereof ) (emphasis in original); Mobley v. AT&T Corp, 717 So. 2d 367, 368 (Ala. 1998) (same); Hardy v. Claircom Communications Group, Inc., 937 P.2d 1128, 1132 (Wash. Ct. App. 1997) (involving tariff [that] expressly state[d] that charges are measured in whole minutes with fractions rounded to the next highest minute ). But see Porr v. NYNEX Corp., 660 N.Y.S.2d 440, 442 (N.Y. App. Div. 1997) (holding that filed rate doctrine precluded consumer s claims in case in which plaintiff alleged that defendant failed to disclose rounding up in its filed rates). Second, I would not apply a legal fiction whose days, according to some courts, are numbered. I recognize that for close to one hundred years, the filed rate doctrine has served to protect communications companies from suit, even in the face of fraud. See Charles H. Helein, Jonathan S. Marashlian, Loubna W. Haddad, Detariffing and the Death of the Filed Tariff Doctrine: Deregulating in the Self Interest, 54 Fed. Comm. L.J. 281, 289-93 (2002) (reviewing early history and principles of filed rate doctrine). The doctrine s future, however, is dim at best. See MCI Worldcom, Inc. v. Fed. Communications Comm n, 209 F.3d 760, 765 (D.C. Cir. 2000) (observing that FCC no longer accepts filed rates by long-distance carriers because, in part, FCC is wary that the filed-rate doctrine might be interpreted by state and federal courts to interfere with free-market behavior ); Fax Telecommunicaciones Inc. v. AT&T, 138 F.3d 479, 491 (2d Cir. 1998) (explaining that, although filed rate doctrine once served valid public policy purposes, doctrine is plainly a creature of a different time ); Emperor Clock Co. v. AT&T Corp., 727 So. 2d 41, 42 (Ala. 1998) (noting argument that recent changes in communications laws may have effectively repealed the filed-rate doctrine ); Helein, Marashlian, Haddad, supra, 54 Fed. Comm. L.J. at 283-84 (indicating that FCC announced that carriers may no longer rely on the Filed Tariff Doctrine[,] and chief effect of [that] announcement, expressly encouraged by the FCC, is to open the carrier-customer relationship to the scrutiny of state authorities, like the State Attorneys General and state consumer-protection laws ) (footnote omitted) (emphasis added). Absent the filed rate doctrine, plaintiff likely has incurred an ascertainable loss, or at least is entitled to prove such a loss at trial. Plaintiff alleges that rounded-up rates are more expensive than sub-minute billing and that New Jersey consumers have paid excess charges as a result. He further asserts that contrary to Sprint s practices, other phone companies were offering sub-minute billing at the time of this litigation. Had New Jersey consumers known of those other options, they may have purchased their long-distance services elsewhere. Thus, in addition to the excess charges incurred by using Sprint in the first instance, consumers may have suffered a continuing opportunity cost by remaining with Sprint rather than using another phone company. The Court dismisses plaintiff s presentation of advertisements from other phone companies, saying in essence that plaintiff has not shown that he actually could have taken advantage of those rates. Ante at ___ (Slip op. at 4-5). That, however, is a jury question in my view. Given the procedural posture of this case the Court should not dismiss plaintiff s contentions on that basis. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). Lastly, the Act has been hailed as one of the strongest consumer protection laws in the nation[.] Governor s Press Release for Assembly Bill No. 2402, at 1 (June 29, 1971). The history of the Act is one of constant expansion of consumer protection. Gennari v. Weichert Co. Realtors, 148 N.J. 582, 604 (1997). The Act is remedial in nature and, for that reason, [c]ourts have emphasized that like most remedial legislation, the Act should be construed liberally in favor of consumers. Cox v. Sears Roebuck & Co., 138 N.J. 2, 15 (1994). When assessing individual claims, courts must remain mindful that the Act s provision authorizing consumers to bring their own private action is integral to fulfilling the [statute s] legislative purposes[.] Id. at 16. In sum, allowing plaintiff s claim to proceed would be consistent with the Act s uninterrupted history of expanding consumer protection in these circumstances. I respectfully dissent. Justices Stein and Zazzali join in this opinion. NO. A-36 SEPTEMBER TERM 2001 ON CERTIFICATION TO Appellate Division, Superior Court MARTIN WEINBERG, on behalf of Himself and all others Similarly situated, Plaintiff-Appellant, v. SPRINT CORPORATION, Defendant-Respondent. DECIDED July 22, 2002 Chief Justice Poritz PRESIDING OPINION BY Justice LaVecchia CONCURRING OPINION BY DISSENTING OPINION BY Justice Verniero