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Smith v. Southern New England Telephone Co.

A-2051-00T1 (N.J. Super. App. Div. 2001) (Unpublished)

TELECOMMUNICATIONS—A telephone carrier is not liable for money damages for falsely advertising its rates because a consumer is deemed to be aware of the carrier’s rate filings with the Federal Communications Commission.

A consumer purchased a discount phone card from a warehouse club and sued the club and the telephone company after she discovered that she did not receive as many minutes as were advertised when she purchased the phone card. She filed a class action lawsuit against the warehouse club and the telephone company, alleging that they falsely advertised the net amount of calling minutes at the point of sale and that they violated New Jersey’s Consumer Fraud Act. The complaint sought monetary damages and an injunction. The lower court dismissed the complaint. The Appellate Division affirmed the dismissal of the claim for money damages as against the telephone company. It agreed with the lower court that, under federal law, a consumer is assumed to know the rate charged by a telephone carrier (which is the rate on file with the Federal Communications Commission. The telephone company disclosed its calling rates, including all surcharges and taxes, to the FCC. Those rates and charges were the same as those charged to the consumer. Therefore, even though the advertisement quoted a different rate, the consumer was prevented by federal law from suing the telephone company for money damages. However, the Court reversed the lower court’s decision to dismiss the money damage claim against the warehouse club and to dismiss the injunction against the club and telephone company. It found that the warehouse company could be held liable for breach of contract claims and was not protected by federal law for any false advertising claims. As for the injunction, the Court found that while federal law prohibited money damages against the telephone carrier, it did not prohibit the consumer from seeking an injunction to prevent the carrier from continuing to display misleading advertising.


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