Duggal v. G.E. Capital Communications

96 Cal.Rptr.2d 383

81 Cal.App.4th 81

Oliver DUGGAL et al., Plaintiffs and Appellants, v. G.E. CAPITAL COMMUNICATIONS SERVICES, INC., Defendant and Respondent.

Oliver Duggal et al., Plaintiffs and Appellants, v. AT&T Corp., Defendant and Respondent.

No. B125295.

No. B129637.

Court of Appeal, Second District, Division 5.

May 31, 2000.

A. Raymond Hamrick, III, Universal City, and Raymond C. Dion, for Plaintiffs and Appellants.

DeWitt & Roberts LLP, and David M. Roberts and Kelly C. Fitzgerald, Los Angeles, for Defendant and Respondent G.E. Capital Communications Services, Inc.

Jeffer, Mangels, Butler & Marmaro, LLP, and Jeffrey K. Riffer, Los Angeles, for Defendant and Respondent AT & T Corp.

GODOY PEREZ, J.

Plaintiffs Oliver Duggal, Starfire Financial Services, Inc.; Michael Hauser, both individually and dba Global-Tel; and U.S. Refill-It, dba Supply Distribution Network, appeal from the judgments entered for defendants AT & T Corp. and G.E. Capital Communications Services, Inc., after their demurrers to the third amended complaint were sustained without leave to amend.¹ For the reasons set forth below, we affirm.

FACTS AND PROCEDURAL HISTORY

These consolidated appeals arise from the practice of reselling long-distance telephone services provided by defendant and respondent AT & T Corp. (ATT). ATT sells phone time in bulk at a discounted rate to various resellers, including defendants Future Telcom, Inc. (Telcom), and Globalwise Communications, Inc. (Globalwise).² Those entities then resell the long-distance services to smaller customers, passing along only a portion of the volume discount received from ATT in order to make a profit.

Between August 1994 and January 1995, plaintiffs and appellants Starfire Financial Services, Inc. (Starfire), Global-Tel, and U.S. Refill-It, dba Supply Distribution Network (Supply Network) entered contracts with Telcom and Globalwise to act as their sales representatives or as independent contractors in reselling to retail customers the bulk phone services which Telcom and Globalwise bought from ATT.³

The Telcom agreements provided that appellants would buy phone services "wholesale" for further resale by appellants for their own account. In jurisdictions where appellants were not properly licensed to do so, they would act as Telcom's sales representatives. In the former event, appellants' relationship with Telcom was no more than a purchaser of services. In the latter, appellants were deemed Telcom's independent contractors. The Globalwise agreement provided that appellants were independent contractors engaged to sell phone services to Globalwise customers. In exchange, both agreements provided that appellants would receive commissions based on the sales made on behalf of Telcom and Globalwise.

The operative third amended complaint alleged that ATT sold its services to defendant and respondent G.E. Capital Communications Services, Inc. (GE).⁴ GE resold those services to other entities, including Telcom and Globalwise, for further resale. When appellants made sales, their accounts would be submitted to Telcom for initial processing and verification. Telcom would then pass the accounts on to GE for further processing, which would in turn pass them along to ATT for final processing, followed by the provisioning of services to and eventual billing of the ultimate users of the phone services.

Appellants sued Telcom and Globalwise, along with some of their officers or representatives, in June 1997. The third amended complaint alleged that Telcom and Globalwise defrauded appellants and breached their agreements in a variety of ways, including: lying about having a direct contractual relationship with ATT; failing to order services for customers obtained by appellants; failing to properly verify or account for bills paid by those customers; and failing to pay commissions owed.

The sixth cause of action for negligence named ATT and GE as defendants, contending they breached their respective duties of care by failing to timely provide or bill for services to customers obtained by appellants under appellants' agreements with Telcom and Globalwise. Appellants alleged that ATT and GE knew about their contracts with Telcom, had a history of billing and service delays, and knew the harm those delays would cause. As a result of ATT's and GE's negligent provision of or billing for services, appellants were damaged, they alleged.

Appellants' 12th cause of action sought an accounting from ATT and GE, alleging they held in trust money paid by appellants' customers. ATT and GE demurred to the sixth cause of action on the ground that they did not owe appellants any duty of care and were therefore not negligent. If that demurrer were sustained, then the accounting cause of action would necessarily fail, they contended. On May 29, 1998, the trial court sustained GE's demurrers without leave to amend but overruled ATT's demurrers. Judgment for GE was entered on June 29,1998.

On June 29, 1998, ATT brought a motion to renew its demurrers based on a new decision by the United States Supreme Court—American Telephone & Telegraph Co. v. Central Office Telephone, Inc. (1998) 524 U.S. 214, 118 S.Ct 1956, 141 L.Ed.2d 222 (hereafter Central Office). The Central Office decision—which we will discuss in detail post—arose on similar facts. ATT was sued by resellers of its long-distance phone services for failing to properly provide services and bill the reseller's customers. The Supreme Court reversed a federal court jury verdict which awarded the plaintiff damages under state law for breach of contract and tortious interference with contract. The basis for this decision was the "filed rate doctrine," which holds that customers of telecommunications providers may not obtain services or remedies that conflict with the tariff or rate schedules the provider has filed with the Federal Communications Commission (FCC). Based on this decision, ATT argued that appellants' state law negligence claim was in conflict with its filed tariff and was thus preempted by the filed rate doctrine pursuant to the Federal Communications Act. ATT's renewed demurrers were sustained without leave to amend on November 3, 1998. The court ordered the third amended complaint dismissed as to ATT and entered judgment accordingly. These appeals followed.

STANDARD OF REVIEW

In reviewing a judgment of dismissal after a demurrer is sustained without leave to amend, we must assume the truth of all facts properly pleaded by the plaintiff-appellant. Regardless of the label attached to the cause of action, we must examine the complaint's factual allegations to determine whether they state a cause of action on any available legal theory. Reversible error is committed if the facts alleged show entitlement to relief under any possible legal theory. (Cochran v. Cochran (1997) 56 Cal.App.4th 1115, 1119-1120, 66 Cal.Rptr.2d 337.) The plaintiff-appellant bears the burden of showing how the complaint might be amended to state a viable cause of action. (Hendy v. Losse (1991) 54 Cal.3d 723, 742, 1 Cal.Rptr.2d 543, 819 P.2d 1.) We will affirm an order sustaining a demurrer which is correct on any applicable theory. (Kennedy v. Baxter Healthcare Corp. (1996) 43 Cal.App.4th 799, 808, 50 Cal.Rptr.2d 736.)

We will not, however, assume the truth of contentions, deductions or conclusions of fact or law and may disregard allegations that are contrary to the law or to a fact of which judicial notice may be taken. When a ground for objection to a complaint, such as the statute of limitations, appears on its face or from matters of which the court may or must take judicial notice, a demurrer on that ground is proper. (Code Civ. Proc, § 430.30, subd. (a); Cochran v. Cochran, supra, 56 Cal. App.4th at p. 1120, 66 Cal.Rptr.2d 337.) We may take judicial notice of the records of a California court. (Evid.Code, § 452, subd. (d).) We must take judicial notice of the decisional and statutory law of California and the United States. (Evid.Code, § 451, subd. (a).)

DISCUSSION

1. The Filed Rate Doctrine

The Federal Communications Act (the FCA) requires telecommunication common carriers to file schedules, known as tariffs, with the FCC. These tariffs must show all charges and the classifications, practices and regulations affecting those charges. (47 U.S.C. § 203(a).) The contents of the tariff are subject to FCC approval. (47 U.S.C. § 203(b)(2).) These filed tariffs are the equivalent of federal regulations which have the force of law. (Marcus v. AT&T Corp. (2d Cir.1998) 138 F.3d 46, 56; Cahnmann v. Sprint Corp. (7th Cir.1998) 133 F.3d 484, 488.)

It is unlawful for any carrier to "extend to any person any privileges or facilities in such communication, or employ or enforce any classifications, regulations, or practices affecting such charges, except as specified in such schedule." (47 U.S.C. § 203(e).) These provisions are modeled after similar sections of the Interstate Commerce Act (ICA) and are intended to prevent unreasonable or discriminatory charges. (Central Office, supra, 524 U.S. at p. 221,118 S.Ct. 1956.)

As a result, the filed rate doctrine associated with the ICA applies to the FCA. Under this doctrine, the filed rate is the only lawful rate. Deviation is not permitted under any pretext. "`... Shippers and travelers are charged with notice of it, and they as well as the carrier must abide by it, unless it is found by the Commission to be unreasonable. Ignorance or misquotation of rates is not an excuse for paying or charging either less or more than the rate filed. This rule is undeniably strict and it obviously may work hardship in some cases, but it embodies the policy which has been adopted by Congress in the regulation of interstate commerce in order to prevent unjust discrimination.' [¶] Thus, even if a carrier intentionally misrepresents its rate and a customer relies on the misrepresentation, the carrier cannot be held to the promised rate...