American Telephone & Telegraph Company v. Central Office Telephone, Inc.

PETITIONER: American Telephone & Telegraph Company
RESPONDENT: Central Office Telephone, Inc.
LOCATION: United States Court of Appeals for the Ninth Circuit

DOCKET NO.: 97-679
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 524 US 214 (1998)
ARGUED: Mar 23, 1998
DECIDED: Jun 15, 1998

ADVOCATES:
Bruce M. Hall - Argued the cause for the respondent
David W. Carpenter - Argued the cause for the petitioner

Facts of the case

Under the Communications Act of 1934, AT&T must file "tariffs" containing all its charges for interstate services and all "classifications, practices and regulations affecting such charges" with the Federal Communications Commission (FCC). Under section 203(c) of the Act, a common carrier, such as AT&T, may not "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 [tariff]."In 1989, AT&T sold Central Office Telephone, Inc. its Software Defined Network, a long-distance service. Subsequently, Central Office experienced problems with the service and withdrew from the contract. Central Office sued AT&T in Federal District Court, asserting state-law claims for breach of contract and for tortious interference with contractual relations for failure to deliver various service, provisioning, and billing options in addition to those set forth in the tariff. Ultimately, the Court of Appeals affirmed a jury's damages award.

Question

Do the federally filed tariff requirements of section 203 of the Communications Act of 1934 pre-empt state-law claims?

Media for American Telephone & Telegraph Company v. Central Office Telephone, Inc.

Audio Transcription for Oral Argument - March 23, 1998 in American Telephone & Telegraph Company v. Central Office Telephone, Inc.

William H. Rehnquist:

We'll hear argument now in Number 97-679, American Telephone and Telegraph Company v. Central Office Telephone, Incorporated.

Mr. Carpenter.

David W. Carpenter:

Mr. Chief Justice, and may it please the Court:

The question in this case is whether the Ninth Circuit correctly held that the statutory filed tariff requirements, here codified in section 203 of the Communications Act, apply only to rates and not to the services provided in exchange for those rates.

The answer to this question is that the holding is simply wrong.

The statutory terms are not limited to rates, but they also prohibit, among other things, any untariffed privilege or facility in communication and any form of rebate, and this Court has held many times that it's an unlawful rebate and preference in violation of these prohibitions for a carrier to provide a service or to enforce a service guarantee that is not covered by the carrier's tariff.

And this case also lacks the element that made the recent Maislin and MCI v. ATT cases close questions in this Court, for no Federal agency responsible for the administration of these requirements has ever suggested the Ninth Circuit's interpretation, much less endorsed it as advancing some other legitimate statutory goal.

The reality is, is that in situations where tariffing requirements have applied and should continue to apply, and the Federal agencies have found that there are many, the Ninth Circuit's holding would create the very discrimination in rates that everyone, even our opponent, concedes to be the purpose of this requirement.

Under the holding, carriers could evade the prohibitions not by misquoting the rates, but by misquoting the service, making service guarantees that aren't in the tariff, and when they're breached excusing the carrier from paying tariff charges and paying an amount of money that would represent the damages for the breach.

Anthony M. Kennedy:

Do we take the case as if there had been no violation of the Federal statute 201 through 207?

David W. Carpenter:

Yes, Your Honor.

There was no claim litigated there is any violation of those provisions.

The only claims that were litigated is that it was a State law breach of contract, an intentional interference with tortious relationships, with business relationships for ATT to fail to provide COT with the quality of regulated long distance service that COT claimed it had been promised.

Anthony M. Kennedy:

Are there cases which tell us that a State law, the State law of torts, say, inform the construction of reasonableness under the Federal statute?

That is to say, if there were an interference with an advantageous business relation, that this would carry over to show that this is an unreasonable implementation of the tariffs under the Federal statute?

David W. Carpenter:

There's no limitation on the things that the FCC can consider in deciding whether a difference in treatment is unjust and unreasonable, for example, for purposes of the prohibition of section 202(a) of the Communications Act.

Similarly, I don't think there would be any limitation on the factors that it could consider in deciding whether something's unjust and unreasonable--

William H. Rehnquist:

You're saying that AT&T, then, is immune from any sort of intentional interference with business relationship action brought against it by anyone who it had a contractual relationship with.

That seems extreme.

David W. Carpenter:

--No, that's not... that is not our position.

First, there are a whole range of intentional and nonintentional torts that don't arise out of the carrier-customer relationship and the fortuity that someone happens to be our customer wouldn't immunize us from a tort action if that... if a customer were a victim of such a tort.

Second, with respect to things that arise out of the customer-carrier relationship, we are under a series of duties under the Communications Act.

William H. Rehnquist:

I realize that, but you would be immune in many respects from an ordinary suit, say in State court based on State court tort law.

David W. Carpenter:

Absolutely, if it involved the rates that we charge for our communications service or the obligations that we incur in exchange for the receipt of those payments.

Anthony M. Kennedy:

Well, I was asking because I--

David W. Carpenter:

Yes.

Anthony M. Kennedy:

--I have some of the concerns indicated by the Chief Justice's question, whether or not in interpreting what is reasonable under the Federal statute, lower courts or the agency has said, well, this is an interference with an advantageous business relationship under State tort law, and that informs our judgment as to what is unreasonable.

David W. Carpenter:

That's... that would be entirely legitimate, but, of course, the Federal statute has to be interpreted uniformly.

Let me maybe put some of these questions to rest right now.

If AT&T had deliberately provided COT, other resellers with service that was inferior in quality to that that the commercial customers had received, we would have violated 202 of the Communications Act and we would have been liable to it for the damages we caused.