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AT & T Corp. v. JMC Telecom, LLC

470 F.3d 525 (3rd Cir. 2006)

CONTRACTS; FILED RATE DOCTRINE — Under the Federal Communication Commission’s Filed Rate Doctrine, a customer is prohibited from enforcing a contract or tort right that contradicts the filed tariff.

A wholesaler of prepaid telephone cards entered into an agreement with a telephone service carrier to design, market, and sell prepaid telephone cards in the maritime market. The wholesaler and the carrier executed four documents to confirm their agreement: a Contract Tariff Order Form, a Professional Services Agreement, a Contract Tariff, and an Addendum. Those documents outlined the price the wholesaler had to pay and established a minimum annual revenue commitment. The Addendum provided that if there was a business downturn beyond the wholesaler’s control, and it caused the wholesaler to fail to meet the minimum revenue commitment, the parties would cooperate to develop a mutually agreeable solution. In accordance with federal law, the carrier filed the Tariff Order Form and Contract Tariff with the Federal Communications Commission (FCC). The Addendum was never filed with the FCC, though the wholesaler claimed that the carrier agreed to file it. The wholesaler developed concerns with respect to the quality of telephone service as well as concerns with respect to the quality of the telephone cards. The wholesaler made a one-time payment to the carrier, but made no further payments. In addition, the wholesaler claimed that it lost a significant amount of business due to business downtown problems beyond its control, and attempted to negotiate more competitive rates with the carrier pursuant to the Addendum. When the negotiations failed, the carrier sued the wholesaler for the balance owed from telephone cards already sold, as well as for the amount the wholesaler owed under the minimum annual revenue commitment. The wholesaler filed a counterclaim alleging violations of state law, the Sherman Act, and federal common law.

The lower count dismissed the Sherman Act claim and granted the carrier’s motions for summary judgment with respect to the state law and federal common law claims. The wholesaler appealed, but the Court of Appeals affirmed, finding that an antitrust claim requires a contract and a combination or conspiracy between the manufacturer and other distributers, which is commonly known as “horizontal restraint.” The conspiracy must be between two companies on the same level of production. In this case, the Court agreed with the lower court’s finding that the relationship between the wholesaler and carrier was one of a supplier and distributor and as therefore “vertical” and not “horizontal.” Therefore, there could be no antitrust claim. The Court also rejected the wholesaler’s federal common law claims with respect to alleged poor telephone service and customer service on the part of the carrier. The Court found that under the filed rate doctrine, a customer is prohibited from enforcing a contract or tort right that contradicts the filed tariff. Therefore, it rejected the wholesaler’s claim that the carrier failed to lower the rates as provided for in the Addendum. In doing so, it noted the Addendum, which was never filed with the FCC, could not contradict the tariffs that had been filed, and it gave no consideration to the wholesaler’s allegation that the carrier promised to file the Addendum with the FCC. The Court also agreed that the wholesaler’s state law fraud and breach of contract claims were also barred under the filed rate doctrine.

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