Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ared-2_07-cv-00152/USCOURTS-ared-2_07-cv-00152-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1441 Petition for Removal- Fraud

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IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

WESTERN DIVISION

KELLY LEOPPARD, ET AL. PLAINTIFFS

VS. CASE NO. 2:07CV00152 JMM

ALLTEL COMMUNICATIONS, INC. DEFENDANT

ORDER

Pending before the Court is Plaintiff’s Motion to Remand and defendant’s objection to such

remand. For the reasons stated below, the motion is granted (#21).

Plaintiff Kelly Leoppard originally filed this class action lawsuit in the Circuit Court of

Phillips County, Arkansas. On May 14, 2003, defendant removed the case to federal court and The

Honorable George Howard remanded it, relying on an opinion by the Honorable G. Thomas Eisele

in Moriconi v. At & T Wireless PCS, LLC, 280 F. Supp.2d 867 (E.D. Ark. 2003) (finding § 332 of

the Communications Act "lacks the extraordinary preemptive power necessary to convert Plaintiff's

state law challenges to Defendant's marketing and advertising practices into a federal claim."). 

Plaintiff subsequently amended her complaint in state court to assert a new cause of action

contending that defendant violated the Arkansas Deceptive Trade Practices Act, and the usury

provisions of Article 19, § 13 of the Arkansas Constitution by charging excessive late fees.

Based upon this new claim and a recent United State Court of Appeals for the Eighth Circuit case

interpreting the preemptive scope of 47 U.S.C. § 332(c)(3)(A), see Cellco Partnership v. Hatch,

431 F.3d 1077 (8th Cir. 2005), defendant removed plaintiff’s complaint for a second time

contending that plaintiff now directly challenges an important element of its rate structure which is

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a preempted claim.

Based upon the law of the case, the only issue before this Court is whether the Federal

Communications Act (“FCA”) provides the exclusive remedy for plaintiff’s allegation that

defendant’s assessment of late fees violates the Arkansas Deceptive Trade Practices Act and

violates the usury provisions of the Arkansas Constitution. 

The FCA states that “[n]o State or local government shall have any authority to regulate the

entry of or the rates charged by any commercial mobile service or any private mobile service,

except that this paragraph shall not prohibit a State from regulating the other terms and conditions

of commercial mobile services.” 47 U.S.C. § 332(c)(3)(A). 

The parties agree that the FCA completely preempts state laws affecting wireless carriers if

those laws directly impact the rates charged by providers, but that the state laws would not be

preempted if these laws apply to other “terms and conditions” of the agreement between the

wireless carrier and the customer. 

Plaintiff points to the legislative history of the FCA to support her position that defendant’s

assessment of “late fees” is one of the “terms and conditions” of her agreement with defendant.

The legislative history of the 1993 amendment to the FCA states:

By “terms and conditions,” the Committee intends to include such matters as

customer billing information and practices and billing disputes and other consumer

protection matters; facilities siting issues (e.g. zoning); transfers of control; the

bundling of services and equipment; and the requirement that carriers make

capacity available on a wholesale basis or such other matters as fall within a state’s

lawful authority. This list is intended to be illustrative only and not meant to

preclude other matters generally understood to fall under “terms and conditions.”

H.R. Rep. No. 103-111, at 261 (1993), reprinted in 1993 U.S.C. C.A.N. 378, 588.

Plaintiff additionally points to the fact that the written agreement between defendant and its

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customer does not disclose late fees, or interest on past due payments, which plaintiff argues

proves that it is not part of defendant’s rate structure. Plaintiff contends that, if anything,

defendant’s late payment charges are undisclosed terms and conditions billed by defendant upon a

default under the parties’ agreement and are not rates charged for use of cellular service. 

Plaintiff, in support of her position directs the Court to Wong v. T-Mobile USA, Inc., 2006

WL 2042512 (E.D. Mich. July 20, 2006) (unpublished) (cellular telephone company’s billing

practices are not governed by the FCA); Brown v. Washington/Baltimore Cellular, 109 F.Supp.2d

421 (D. Md. 2000) (late fees are “other terms and conditions” of service, and not rates); Esquivel v.

Southwestern Bell Mobile Systems, Inc., 920 F.Supp 713 (S.D. TX 1996) (termination

fee/liquidated damages provision is a term and condition of the customer contract, rather than a

rate); Phillips v. AT&T Wireless, 2004 WL 1737385 (S.D. Iowa July 29, 2004)(early termination

fees are not rates for purposes of complete preemption) (unpublished); Cedar Rapids Cellular

Corp. v. Miller, 2000 WL 34030836 (N.D. Iowa September 15, 2000) (unpublished) aff'd in part,

rev'd in part, Cedar Rapids Cellular Telephone, L.P. v. Miller, 280 F.3d 874 (8th Cir. 2002)

(“court declines to read “rates” in section 332 so broadly as to necessarily preclude a state's judicial

challenge based on a statute designed to protect consumers against fraudulent or deceptive business

practices); and Iowa v. United States Cellular Corp., 2000 WL 33915909 (S.D. Iowa Aug. 7, 2000)

(unpublished) (claims brought pursuant to state consumer protection laws are not preempted).

Defendant contends that because it charges one set of rates to customers who pay on a

timely basis and another set of rates to customers who do not pay on a timely basis, the challenged

late fee is an element of its rate structure since late fees are used to require delinquent customers to

bear the costs associated with late payments. Defendant specifically cites to Cellco for the

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proposition that a reduction in late fees, brought about by application of state law, would affect its

“rates” by causing them to increase. Defendant relies on the Cellco case to support its argument

that all consumer protection claims are not automatically assumed to be related to “terms and

conditions” of an agreement for wireless service.

Defendant additionally directs the Court to In re Wireless Consumer Alliance, 15 F.C.C.R.

17021, 17027 (Aug. 14, 2000). The Court does not find In re Wireless Consumers Alliance, Inc.

persuasive as it holds that “Section 332 does not generally preempt the award of monetary damages

by state courts based on state consumer protection, tort, or contract claims.” Id. at 17022.

Defendant also cites Gilmore v. Sothwestern Bell Mobile Systems, Inc., 156 F. Supp.2d 916

(N.D. Ill. 2001)(holding that § 332(c)(3)(A) completely preempted a state-law challenge to a

wireless carrier’s corporate account administration fee); Redfern v. AT&T Wireless, Case No. 03-

206-GPM (S.D. Ill. June 16, 2003) (complete preemption was proper in a case involving a statelaw challenge to a wireless carrier’s early termination fee); Chandler v. AT&T Wireless Services,

Inc., Case No. 04-180-GPM (S.D. Ill. July 21, 2004) (same); Simmons v. GTE Mobilnet, Inc., Case

No. H-95-5169 (S.D. Tex. Jan. 8 1996) (same); In re Southwestern Bell Mobile System, Inc., 14

F.C.C.R. 19898, 19901-02 (1999) (federal law preempted state-law claims challenging the legality

of a wireless carrier’s practice of rounding up the length of customers’ calls to the nearest wholeminute increment); Coffelet v. Arkansas Power & Light Co., 248 Ark. 313, 451 S.W.2d 881 (1970)

(late charge is not interest, but is a device by which consumers are automatically classified to avoid

discrimination); Kiefer v. Paging Network, Inc., 50 F. Supp.2d 681 (E.D. Mich. 1999) (late fees

constitute an integral part of wireless carriers’ rate structures). 

The Court agrees with the reasoning of plaintiff as stated in Phillips and Brown. The late

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See Phillips v. AT&T Wireless, 2004 WL 1737385 n 20 (S.D. Iowa) (preemption as a

defense is insufficient to give rise to federal subject matter jurisdiction).

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fee charged by defendant is not a charge for airtime or for minutes used by the customer. Phillips

v. AT&T Wirelss, 2004 WL 1737385 (S.D. Iowa July 29, 2004)(unpublished). Moreover, the fact

that a successful claim may result in a increased obligation which could increase rates is not

sufficient to raise a late fee to the status of being part of defendant’s rate structure. See Brown v.

Washington/Baltimore Cellular, Inc,109 F. Supp.2d at 423. If a wireless company’s rates included

every action that might bring about a rate increase, the exception to complete preemption set out in

§ 332(c)(3)(A) would be “swallowed by the rule.” Phillips v. AT&T Wirelss, 2004 WL 1737385

(S.D. Iowa Jly 29, 2004) (unpublished).

The Motion to Remand is granted. The Clerk of the Court is directed to return forthwith

the case along with the pending Motion to Dismiss (#17) which raises preemption as a defense1

 and

seeks dismissal of plaintiff Martha Wright for failure to state a claim, to the Circuit Court of

Phillips County, Arkansas. 

IT IS SO ORDERED THIS 4 day of April , 2008.

 

James M. Moody

United States District Judge

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