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Richman Brothers Records Inc. v. U.S. Sprint Communications Co.

argued: April 3, 1991.


Appeal from the United States District Court for the District of New Jersey. (D.C. Civil Action No. 88-04908) (D.C. Civil Action No. 89-00732)

Present: Mansmann and Hutchinson, Circuit Judges, and O'neill, District Judge*fn*

Author: Hutchinson


HUTCHINSON, Circuit Judge.


Richman Brothers Records, Incorporated (Richman) appeals an order of the United States District Court for the District of New Jersey which it claims directs the clerk of that court "to immediately transfer" both Richman's action against US Sprint Communications Company (Sprint), as well as Sprint's consolidated action against Richman, to the Secretary of the Federal Communications Commission (Commission). Sprint, a non-dominant carrier of telephone communications, has on file with the Commission a tariff that purports to limit Sprint's liability for damages from faulty service to restitution. Richman says this transfer order is a final order because its text shows the district court wholly relinquished jurisdiction over both Sprint's action for payment of its charges to Richman and Richman's claim for negligent service to the Commission or, in any event, on analogy to abstention orders, effectively put Richman out of court. Accordingly, Richman says we have appellate jurisdiction over its appeal. On the merits, Richman asks us to hold that Sprint cannot effectively limit its liability by the terms of a tariff Sprint elected to file with the Commission.

Sprint contends that we lack jurisdiction because the transfer order merely refers to the Commission a discrete issue: whether the limitation on liability in a tariff of rates that the Commission says the law permits, but does not require, a non-dominant telecommunication carrier*fn1 to file, under the Communications Act of 1934 (Act), see 47 U.S.C.A. §§ 151-163 (West 1990), is valid, and, if so, what its effect is. Sprint says the transfer order is an interlocutory judicial deferral to an administrative agency with primary jurisdiction over an issue requiring the specialized knowledge of that agency. In a protective cross-appeal, Sprint asks us to hold that the district court erred in vacating its prior partial summary judgment order in favor of Sprint and in thereafter allowing Richman to amend its complaint to add a fraud count.

We hold that the district court intended to do no more than transfer to the Commission the question of the validity and effect of the liability limitation in Sprint's tariff and accordingly stayed the case pending a final order of the Commission that decides that question. Because transfer orders of this kind are not final, appealable orders, we hold that we lack appellate jurisdiction over Richman's appeal. Accordingly, we will dismiss Richman's appeal and Sprint's protective cross-appeal without passing on the merits of the issues they raise concerning the effect of liability limiting provisions in tariffs non-dominant telecommunication carriers elect to file under section 203(a) of the Act. As we shall see, the need to resolve these complex issues was triggered by Sprint's seemingly simple action to collect an unpaid bill and Richman's claim that it was seriously damaged by Sprint's negligence in performing Sprint's contract with Richman for the provision of telecommunication services.


The parties' dispute over Sprint's performance of its contract with Richman first reached the courts on August 1, 1988, when Sprint brought an action against Richman in the United States District Court for the District of Kansas. By this action, Sprint sought to collect $57,806.77 in telephone charges it had billed Richman together with interest on that amount. On August 26, 1988, Richman took legal action by filing a claim against Sprint in the Superior Court of New Jersey, Law Division. In the New Jersey action, Richman alleged that Sprint had not only been grossly negligent when it installed Richman's long-distance phone lines but had also engaged in fraudulent and willful misconduct in connection with its contract to provide telecommunication service to Richman. Accordingly, Richman sought consequential and treble damages under the New Jersey Consumer Fraud Act, N.J. Stat. Ann. §§ 56:8-1 to 56:8-48 (West 1989), as well as punitive damages.

Sprint removed Richman's suit to the United States District Court for the District of New Jersey. Sprint's Kansas action was also transferred from the Kansas district court to the New Jersey district court on March 6, 1989. In the New Jersey district court, the two cases were consolidated for all purposes by order entered on March 28, 1989.

Sprint moved for partial summary judgment claiming that its liability was limited by a tariff that it filed with the Commission and sought dismissal of Richman's claim under the New Jersey Consumer Fraud Act. The district court granted Sprint's motion, limiting its liability for negligence to the amounts set forth in the tariff and dismissing Richman's New Jersey Consumer Fraud Act claim.

Richman filed a motion for reconsideration pursuant to Federal Rule of Civil Procedure 59(e) and alternately sought certification of the tariff issue for interlocutory appeal pursuant to 28 U.S.C.A. § 1292(b) (West Supp. 1991). Richman contended, inter alia, that the district court had erroneously decided the provision in Sprint's elective tariff limiting its common law liability for negligence was valid and effective. Richman also sought leave to amend its complaint to add a claim of fraudulent inducement against Sprint.

The district court granted reconsideration with an opinion and order issued June 22, 1990. In them, the district court vacated its April 6 opinion and order, granted Richman leave to amend its complaint to include the fraudulent inducement action and directed the clerk thereafter "to immediately transfer the cases to the . . . Commission."*fn2 Appendix (App.) at 370. The district court did not grant Richman's motion to certify the tariff issue for interlocutory appeal. Richman promptly filed an amended complaint adding its claim for fraud in the inducement and, on July 11, 1990, filed this timely appeal from the order "transferring" the action to the Commission.

On July 25, 1990, the Clerk of this Court advised the parties that Sprint's appeal would "be submitted to a panel of this Court for possible dismissal due to a jurisdictional defect." Letter from Bradford A. Baldus to Counsel, July 25, 1990, at 1. Referring to our decision in Brotherhood of Maintenance of Way Employees v. Consolidated Rail Corp., 864 F.2d 283 (3d Cir. 1988), the Clerk asked the parties to file an appropriate response concerning the finality of the district court's "transfer" order. Both parties have filed responses. In the meantime, on July 26, Sprint had filed a timely cross-appeal for the purpose of preserving its merits contention that the district court erred in vacating the initial order granting Sprint partial summary judgment on the limitation of liability issue.

Sprint itself challenges this Court's appellate jurisdiction and has filed a motion to have both appeals dismissed for lack of appellate jurisdiction. In support of its motion to dismiss, Sprint's main contention is that the district court's transfer order is not a final appealable order because it did not dispose of Sprint's consolidated action for payment of Sprint's telecommunication charges to Richman. In support Sprint cites Bergman v. City of Atlantic City, 860 F.2d 560 (3d Cir. 1988).

Richman seeks dismissal of Sprint's cross-appeal while itself opposing Sprint's motion to dismiss Richman's appeal from the transfer order. Sprint replies that the Court must hear the appeals of both parties or neither. All these motions, along with the parties' responses to the Clerk's request that they comment on the issue of appealability as affected by Brotherhood, are now before us for disposition.


To understand the procedural posture of this case, a description of the statutory and regulatory background to the dispute over Sprint's contract to provide Richman with telecommunication services is needed. That background is provided by the Act as amended and the regulations and general orders the Commission has made in exercising its regulatory authority under the Act. See generally 47 U.S.C.A. §§ 151-613. Specifically, Title II of the Act governs the activities of common carriers. See id. §§ 201-26. A common carrier is defined by the Act as:

Any person engaged as a common carrier for hire, in interstate or foreign communication by wire or radio or in interstate or foreign radio transmission of energy, except where reference is made to common carriers not subject to this chapter . . . .

Id. § 153(h). It is undisputed that Sprint is a common carrier.

Under the Act, every common carrier must file with the Commission for public display a schedule of charges. Id. § 203(a). This schedule is commonly known as a tariff. See MCI Telecommunications Corp. v. FCC, 247 App. D.C. 32, 765 F.2d 1186, 1189 (D.C. Cir. 1985). Changes "in the charges, classifications, regulations, or practices" in a filed tariff may only be made after the Commission and the public have been given 120-days notice of the change, see 47 U.S.C.A. § 203(b)(1), unless the Commission has shortened the notice period, see id. § 203(b)(2). A carrier can charge only the rates listed in the tariff. See id. § 203(c)(1). the classifications, regulations, or practices affecting such charges" must also be specified in the tariff. Id. § 203(c)(3).

The Act provides that a common carrier's

charges, practices, classifications and regulations for and in connection with . . . communication service, shall be just and reasonable, and any such charge, practice, classification or regulation that is unjust or unreasonable is . . . unlawful.

Id. § 201. Unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities or services by a common carrier is unlawful. Id. § 202.

The Commission may assess civil damages against a common carrier for violations of the Act. Id. §§ 206, 209. While a complainant may pursue a remedy for violations of the Act before the Commission or in a federal district court, the complainant must elect one forum or the other. Id. § 207. The filing of a suit in federal court, however, does not deprive the Commission of its primary jurisdiction.*fn3 See generally L. Jaffe, Judicial Control of Administrative Action 121-23 (1965) (describing the doctrine of primary jurisdiction and its operation once an action is brought in court).

Section 208 allows the Commission to conduct investigations concerning complaints that common carriers has acted in contravention of the Act. See id. § 208. Thus, once the tariffs are in effect, specific complaints about compliance with them, as well as their validity, are subject to challenge before the Commission even though the complaint involves a part of a tariff that the Commission has already approved. International Business Mach. v. FCC, 570 F.2d 452, 456 (2d Cir. 1978). The usual time table for investigation under section 208 is twelve to fifteen months depending on the complexity of the case. See 47 U.S.C.A. § 208(b).

In 1979 the Commission began rulemaking proceedings under the Act to consider whether it needed to revise its regulations concerning common carriers because of the far-reaching changes that took place in the industry during the 1970's. See In re Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Therefor, First Report and Order, 85 F.C.C.2d 1, 5 (1980) (hereinafter First Report). The First Report divided common carriers into two groups: dominant and non-dominant. Id. at 10. Those carriers who have enough market power to control price are dominant carriers. All others are non-dominant carriers. See id. at 10-11. Although it has relaxed regulatory oversight for non-dominant carriers in some areas, i.e., financial reporting and facilities authorizations, see id. at 11, the Commission was careful to note in the First Report that "its action . . . does not relieve non-dominant carriers from complying with the provisions of Sections 201-205 of the Act . . . . It merely modifies the method by which the Commission assures compliance with these requirements." Id. at 18. Under the modification, it is assumed that the rates and conditions a non-dominant carrier sets out in a filed tariff are lawful for purposes of sections 201(b) and 202(a) of the Act. This assumption is premised on the Commission's finding that:

Firms lacking market power simply cannot rationally price their services in ways which, or impose terms or conditions which, would contravene Sections 201(b) and 202(a) of the Act. . . . [A] non-dominant competitive firm, for example, will be incapable of violating the just and reasonable standard of [section] 201(b).

Id. at 31. The statutory authorities the Commission cited in support of its rule are sections 151 and 154 of the Act. Id. at 13. They charge the Commission generally with the duty to make available rapid, efficient communication service, 47 U.S.C.A. § 151, and give it the authority to promulgate rules to that end, id. § 154(i).

Two years after the First Report, the Commission issued In re Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Therefor, Second Report and Order, 91 F.C.C.2d 59 (1982) (hereinafter Second Report). The Second Report embodies a Commission policy now known as "permissive forbearance." In the Second Report, the Commission concluded that the regulatory scheme was inefficient. Id. at 73. Therefore, the Commission decided that "resale carriers . . . no longer need adhere . . . to the tariff filing requirements of Section 203." Id. (footnote omitted).

The permissive forbearance policy was expanded to include specialized non-dominant carriers in In re Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Therefor, Fourth Report and Order, 95 F.C.C.2d 554, 557 (1983) (hereinafter Fourth Report). The category of specialized non-dominant carriers includes entities like MCI and Sprint. See MCI Telecommunications Corp., 765 F.2d at 1189. The Commission made the permissive forbearance policy mandatory in In re Policy and Rules Concerning Rates For Competitive Common Carrier Services and Facilities Authorizations Therefor, Sixth Report and Order, 99 F.C.C.2d 1020 (1985), but the United States Court of Appeals for the District of Columbia has vacated that order, holding that the Commission violated the plain language of section 203(a) of the Act. MCI Telecommunications Corp., 765 F.2d at 1195-96. The court's ruling was limited to the mandatory policy precluding non-dominant carriers from filing tariffs and eschewed consideration of the Commission's permissive forbearance policy. Id. at 1196. It is the Commission's permissive forbearance policy that Richman claims undermines the tariff's effect as a complete defense to unintentional torts.


Richman is a wholesale dealer and distributor of records, cassettes, compact discs and related merchandise. It communicates with most of its customers out of its office in Pennsauken, New Jersey, by telephone. Until October 1, 1987, Richman's long-distance telephone service was provided by Telesphere, Incorporated (Telesphere). In May of 1987, Harry Bogaev (Bogaev), a Sprint representative, ...

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