Court Opinion

ID: 2996786
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:31:26.011136+00
Date Added: 2024-06-11T12:11:21.488475
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 02-3332
JAMES J. FEDOR, JR.,
                                               Plaintiff-Appellant,
                                 v.

CINGULAR WIRELESS CORPORATION,
a Delaware Corporation,
                                              Defendant-Appellee.
                          ____________
            Appeal from the United States District Court
       for the Northern District of Illinois, Eastern Division.
            No. 01 C 6849—William J. Hibbler, Judge.
                          ____________
    ARGUED MAY 22, 2003—DECIDED JANUARY 22, 2004
                    ____________

  Before BAUER, KANNE, and ROVNER, Circuit Judges.
  ROVNER, Circuit Judge. James J. Fedor, Jr., contracted
with Cingular Wireless (“Cingular”) for a cellular tele-
phone service plan. For a fixed rate, that plan entitled him
to a certain amount of airtime minute usage each month,
and minutes in excess of that amount resulted in additional
charges to his account. In July 2001, Fedor filed a com-
plaint in state court against Cingular, alleging that
Cingular improperly billed minutes incurred in one month
to the billing periods in other months. For instance, Fedor
alleged that calls made in January were billed under the
allotment for February, resulting in extra charges for
2                                               No. 02-3332

February (i.e. because it caused him to exceed the fixed-rate
minutes in February) even though no charges would have
accrued had the minutes been properly attributed to
January (because the January allotment of minutes was not
fully used). Fedor alleged such billing discrepancies
in months from January through April. The result of
that billing practice, according to the complaint, is that
Cingular customers incurred charges in excess of the
charges that those customers should have paid under the
service plan purchased. The state court complaint pleaded
both individual and class action claims for breach of con-
tract, breach of the covenant of good faith and fair dealing,
consumer fraud, and unjust enrichment.
  Pursuant to 28 U.S.C. § 1441(b), Cingular removed
the state court claim to federal court. Fedor subsequently
moved to remand the case back to state court, arguing that
the case presented only state law claims. The district court,
however, held that the complaint was a challenge to the
reasonableness of Cingular’s rates, and that such
a challenge was completely preempted by the Federal
Communications Act (FCA), 47 U.S.C. § 332(c)(3)(A), which
provides that
    no 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 ser-
    vice, except that this paragraph shall not prohibit a
    State from regulating the other terms and conditions of
    commercial mobile services.
Cingular then filed motions to dismiss the complaint on
a number of grounds, including that the complaint lacked
subject matter jurisdiction, that the claims were within the
primary jurisdiction of the Federal Communications
Commission (“FCC”), and that it failed to state a claim. The
district court granted some of the requested relief, dismiss-
ing two counts without prejudice as within the primary
No. 02-3332                                                 3

jurisdiction of the FCC, and dismissing two other counts
with prejudice for failure to state a claim.
  The initial issue before this court on appeal is whether
the district court erred in denying Fedor’s motion to remand
the case back to state court. We review the district court’s
denial of that motion de novo.

                              I.
   A state court civil action may be removed to federal court
if the claim arises under federal law. Beneficial Nat. Bank
v. Anderson, 539 U.S. ___, 123 S. Ct. 2058 (2003). Courts
have long recognized, however, that a plaintiff who has both
state and federal claims available may avoid federal court
by limiting his or her complaint to only state law claims.
Under the well-pleaded complaint rule, absent diversity
jurisdiction, a case will not be removable if the complaint
does not affirmatively allege a federal claim. Id. at 2062.
Moreover, the availability of a federal defense to those state
claims does not provide a basis for removal. Id.
   In this case, there is no dispute that the complaint on its
face alleges only state law claims. That would be the end of
the inquiry but for the fact that the well-pleaded complaint
rule is not without exceptions. Where a federal statute
completely preempts the state-law cause of action, the
claim, although pleaded in terms of state law, is in reality
based on federal law, and therefore the claim is removable
under 28 U.S.C. § 1441(b). Beneficial, 539 U.S. at 2063.
  We considered that exception in the context of a state
court complaint against a wireless carrier in Bastien v.
AT&T Wireless Services, Inc., 205 F.3d 983, 987 (7th Cir.
2000), holding that § 332(c)(3) of the FCA “completely pre-
empted the regulation of rates and market entry, allowing
removal to federal court, although the savings clause
continues to allow claims that do not touch on the areas of
4                                               No. 02-3332

rates or market entry.” The issue, then, here as in Bastien,
is whether the complaint actually challenges rates or mar-
ket entry.
  Cingular argues that the complaint indeed challenges
both rates and market entry. According to Cingular, the
complaint involves the timing of the billing and the amount
billed, and therefore constitutes a challenge to rates.
Essentially, Cingular would interpret the preemption
provision as covering any claim that touches on the rates
charged in any manner. Because the complaint alleges that
Fedor’s calls were improperly billed, Cingular asserts that
it challenges the rates. That overstates the scope of the
preemption, and in fact is a position that has been repeat-
edly rejected by courts and the FCC. Bastien is illustrative.
  In Bastien, a wireless customer sued AT&T Wireless
Services, Inc. (“AT&T Wireless”) alleging that AT&T
Wireless breached its contract to him and committed con-
sumer fraud in signing up customers without first building
the cellular towers and other infrastructure to provide
reliable cellular connections, resulting in a large number of
“dropped” calls, and that it continued to market its phones
and service even though it had knowledge of the inadequacy
of its infrastructure. Id. at 985. We held that his claims
“tread directly on the very areas reserved to the FCC: the
modes and conditions under which AT&T Wireless may
begin offering services in the Chicago market.” Id. at 989.
Specifically, we noted that the FCC is responsible for
determining the number, placement and operation of
cellular towers and other infrastructure, as well as the
rates and conditions that could be offered for the new
service. Id. Bastien’s claims, however, would have required
AT&T Wireless to exceed those FCC requirements, provid-
ing more towers, clearer signals, or lower rates. Id. We
noted that a number of Bastien’s claims sounded like state
law claims, such as allegations of breach of contract and
misrepresentations, but those claims were founded on
No. 02-3332                                                5

AT&T Wireless’ failure to build more towers and fully
develop its network when the service was offered to
Bastien, and thus directly addressed the areas reserved to
federal law. Id.
  Bastien contrasted that situation with the claims pre-
sented to the Sixth Circuit in Long Distance
Telecommunications Litig., 831 F.2d 627 (6th Cir. 1987)
(“Long Distance Litigation”). In Long Distance Litigation,
the plaintiffs brought state law claims of fraud and deceit
against long-distance telephone companies for failing to
inform customers of their practice of charging for uncom-
pleted calls. The court in Long Distance Litigation held that
Congress did not intend to preempt those claims, because
the claims related to fraudulent and deceitful statements,
and therefore did not impact federal regulation of the
carriers. Bastien, 205 F.3d at 988-89. In contrast, we noted
that Bastien’s claims “would directly alter the federal
regulation of tower construction, location and coverage, and
quality of service and hence rates for service.” Id. at 989.
  Thus, Bastien, in contrasting its case with Long Distance
Litigation, recognized that the nature of the claim would
govern the inquiry, and that the focus is whether the claim
necessarily treads upon the federally-reserved areas. The
FCC reached the same conclusion in In the Matter of
Southwestern Bell Mobile Systems, Inc., 14 F.C.C.R. 19898
(1999) (“Southwestern Bell”) and In the Matter of Wireless
Consumers Alliance, Inc., 15 F.C.C.R. 17021 (2000) (“Wire-
less Consumers”). In Southwestern Bell, the FCC held that
state law claims stemming from state contract or consumer
fraud laws governing disclosure of rates or rate practices
are not generally preempted under § 332. Southwestern
Bell, 14 F.C.C.R. at 19908 ¶ 23. The FCC held that billing
information, practices and disputes which may be regulated
by state contract or consumer fraud laws fall within the
“other terms and conditions” which states are allowed to
regulate. Id. at 19901 ¶ 7. Therefore, Southwestern Bell
6                                                No. 02-3332

rejected the notion that all claims related to rates or billing
are necessarily preempted by § 332.
  The FCC further explored that issue in Wireless
Consumers, wherein it addressed whether damage awards
against commercial mobile service providers based on state
court tort or contract claims are preempted by § 332 as
equivalent to rate regulation. 15 F.C.C.R. 17021. The FCC
answered in the negative, holding that such claims are
generally preempted only where they involve the court in
ratemaking. Id. at 17034 ¶¶ 23, 24. The FCC in Wireless
Consumers expressly rejected the argument that any de-
termination of monetary liability is equivalent to a finding
that the service was inadequate for the charge, and there-
fore necessarily a finding that the rates charged were
unreasonable. Id. at 17035 ¶ 25. The FCC recognized that
state law claims are preempted where the court must
determine whether the price charged for a service is unrea-
sonable, or where the court must set a prospective price for
a service. Id. The FCC proceeded, however, to delineate a
number of circumstances in which inquiries related to rates
or billing practices would not be preempted:
    On the other hand, a case may present a question of
    whether a CMRS [commercial mobile radio service]
    service had indeed been provided in accordance with
    the terms and conditions of a contract or in accordance
    with the promises included in the CMRS carrier’s
    advertising. Such a case could present breach of con-
    tract or false advertising claims appropriately review-
    able by a state court. In such a situation, a court need
    not rule on the reasonableness of the CMRS carrier’s
    charge in order to calculate compensation for the injury
    that was caused, even though it could be appropriate for
    it to take the price charged into consideration in calcu-
    lating damages. In our view, the court would not be
    making a finding on the reasonableness of the price
    charged but would be examining whether under state
No. 02-3332                                                 7

    law, there was a difference between promise and
    performance.
Id. at ¶ 26 [footnotes omitted]. Therefore, the FCC distin-
guished between claims that would enmesh the courts in a
determination of the reasonableness of a rate charged and
those that would require examination of rates in the context
of assessing damages, but would not involve the court in
such a reasonableness inquiry. Those opinions by the FCC
are entitled to deference. City of Chicago v. F.C.C., 199 F.3d
424 (7th Cir. 1999); Christensen v. Harris County, 529 U.S.
576 (2000); Chevron U.S.A., Inc. v. National Resource
Defense Council, Inc., 467 U.S. 837 (1984). In addition, that
approach is consistent with our opinion in Bastien—as
Wireless Consumer explicitly noted—because the claims in
Bastien required the state court to determine the infrastruc-
ture appropriate to market entry, which is an area reserved
under § 332. Other courts have reached similar conclusions.
See, e.g., AT&T Corp. v. FCC, 349 F.3d 692, 701 (D.C. Cir.
2003) (recognizing that state courts may not determine the
reasonableness of rates but may inquire into the existence
of a contract and compliance with it); Union Ink Co., Inc. v.
AT&T Corp., 801 A.2d 361, 376 (N.J. Super. Ct. App. Div.
2002) (claims regarding whether a service was provided
in accordance with the terms of the contract may be ap-
propriately reviewable in state court because the court need
not inquire into reasonableness of the charges, even though
it could be appropriate for it to take the price charged into
consideration in calculating damages); Tenore v. AT&T
Wireless Services, 962 P.2d 104 (Wash. 1998) (challenge to
practice of rounding up call charges not preempted by FCA
because challenge was only to the non-disclosure of the
practice not its reasonableness).
  Those decisions thus reject the argument that any claims
related to the billing amount are automatically preempted
under § 332. Instead, we must examine whether the claims
require the state court to assess the reasonableness of the
8                                              No. 02-3332

rates charged, or impact market entry. The claims in this
case do not involve such an examination. Fedor asserts that
Cingular agreed to provide him with a certain number of
minutes of call-time each month, and that calls within that
month that exceeded the allotted time would be subject to
an additional fee. Fedor does not challenge the reasonable-
ness of those charges, nor does he ask the court to deter-
mine whether the services provided were sufficient to
justify the charges. Fedor merely argues that Cingular
inappropriately attributed calls made in one month to
the call-time for a different month, thus assessing charges
that were different from the contract terms. A state court
analyzing this claim would need to refer to the rates in as-
sessing damages, but would never examine the reasonable-
ness of those rates. In fact, even if the rates charged were
patently unreasonable, no damages would be awarded
unless the charges were inconsistent with the terms of the
contract or the representations made by Cingular. In other
words, these claims address not the rates themselves, but
the conduct of Cingular in failing to adhere to those rates.
That is precisely the type of state law contract and tort
claims that are preserved for the states under § 332 as the
“terms and conditions” of commercial mobile services.

                            II.
  Cingular’s remaining argument is that the claims by
Fedor are a challenge to market entry. According to
Cingular, the claims would necessarily require alterations
to its infrastructure because the calls for which billing is
delayed are those that involve roaming (calls outside the
service territory). Cingular cannot bill for those calls
immediately because it must wait for the operators of the
cellular towers in those areas to provide the billing in-
formation. Accordingly, Cingular argues that success on
this complaint would require it to build its own cellular
No. 02-3332                                                9

towers in all of those areas, thus mandating changes in
its infrastructure and thereby impacting market entry.
That argument stretches the allegations of the complaint
beyond recognition. The complaint alleges that the delayed
billing damaged the plaintiffs because the minutes were not
attributed to the proper month. It does not demand that the
charges be billed immediately, but instead complains that
the delayed charges are billed to the wrong month, there-
fore often resulting in an incorrect charge. Nothing in the
complaint even remotely demands the construction of new
towers, nor is that the logical consequence of the claims.
The claims merely require Cingular to bill its customers in
accordance with the terms of its agreements. That is an
accounting problem, not an infrastructure problem, and at
most would require Cingular to either (1) adjust its billing
system so that the amount owed is calculated based on the
minutes remaining and fees applicable to the months in
which the call was made or, (2) alter its contract to provide
that roaming charges are separately billed under the
contract and may be attributed to another month. In other
words, Cingular would have to conform its billing practices
to the representation made in its contract. That does not
relate to the construction or placement of towers at all.
  Because the claims were properly before the state court
and are not preempted by § 332, Fedor’s motion to remand
the case to state court should have been granted, and the
claims considered on their merits by the state court rather
than the district court. Accordingly, the decisions of the
district court denying the motion to remand and granting
the motions to dismiss are vacated, and the case is re-
manded to the district court for it to remand the case to
state court. Appellee shall bear costs.
10                                        No. 02-3332

A true Copy:
      Teste:

                    ________________________________
                    Clerk of the United States Court of
                      Appeals for the Seventh Circuit

               USCA-02-C-0072—1-22-04