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Time Warner Class Action Defense Cases–Clark v. Time Warner: Ninth Circuit Affirms “Primary Jurisdiction” Dismissal of Class Action And Referral To FCC Of Issue Central To Class Action Complaint

District Court Dismissal of Class Action Complaint and Referral to Federal Communications Commission (FCC) of “Novel and Technical Question” of Issue Central to Class Action Claims was Proper Ninth Circuit Holds

Plaintiff filed a putative class action against Time Warner Cable alleging that it engaged in the practice of “slamming” in violation of 47 U.S.C. § 258(a); the class action complaint alleged further the Time Warner violated the parallel state statute. Clark v. Time Warner Cable, 523 F.3d 1110, 1112 (9th Cir. 2008). The class action advanced also state law claims, as well as RICO (Racketeer Influenced and Corrupt Organizations Act), id. According to the class action’s allegations, defendant telephoned plaintiff marketing a digital phone package; the package utilized Voice over Internet Protocol (VoIP) technology, rather than “the traditional public switched telephone network (PSTN). Id. Plaintiff alleges she rejected the invitation, but defendant disconnected her existing telephone service and sent a technician to install her new service. Id. Defense attorneys moved to dismiss the class action on the grounds that the FCC had not yet decided whether § 258(a) applies to VoIP providers as well as a “telecommunications carriers.” Id., at 1112-13. In addition to referring the § 258(a) class action claim to the FCC, the district court dismissed, without prejudice, plaintiff’s remaining claims. Id., at 1113. The Ninth Circuit affirmed.

The Circuit Court explained that this appeal presents the issue of “whether the doctrine of primary jurisdiction permits a district court to refer a claim raising a novel and technical question of federal telecommunications policy to the Federal Communications Commission for its consideration in the first instance.” Clark, at 1112. “The primary jurisdiction doctrine allows courts to stay proceedings or to dismiss a complaint without prejudice pending the resolution of an issue within the special competence of an administrative agency.” Id., at 1114. Put simply, the Telecommunications Act of 1996 “imposes a variety of obligations on telecommunications carriers,” id., at 1113, and expressly prohibits “slamming” – “the practice in which a telecommunications carrier switches a consumer’s telephone service without the consumer’s consent,” id., at 1112. Specifically, § 258(a) states that “[n]o telecommunications carrier shall submit or execute a change in a subscriber’s selection of a provider of telephone exchange service or telephone toll service except in accordance with such verification procedures as the [FCC] shall prescribe” (italics added). The Ninth Circuit explained at pages 1113 and 1114:

The emergence of VoIP technology created new challenges for the FCC, however, as existing regulations did not contemplate the revolutionary changes IP-enabled services entailed. Accordingly, the FCC issued a Notice of Proposed Rulemaking seeking comment on how to define and to regulate all IP-enabled services, including VoIP, while maintaining its “established policy of minimal regulation of the Internet and the services provided over it.” In re IP-Enabled Services, 19 F.C.C.R. 4863, 4865 ¶ 2 (2004) (footnote omitted). The Notice posed two specific questions relevant to Clark’s § 258(a) claim against TWC. First, it solicited comment on whether VoIP services should be classified as “telecommunications services” or “information services” under the Act. In re IP, 19 F.C.C.R. at 4880-81 26-27, id. at 4886 ¶ 35. Second, the FCC solicited comment on whether § 258(a)’s anti-slamming provision should apply to VoIP providers regardless of their statutory classification. Id. at 4910-11 72. (Footnotes omitted.)

The district court concluded that the viability of the class action’s § 258(a) claim was dependent upon whether the statute applied to VoIP providers, and that this determination should be made by the regulatory body charged with overseeing the telecommunications industry rather than by the courts. Clark, at 1114. The Ninth Circuit agreed, explaining that it has “previously approved the use of the primary jurisdiction doctrine where it is unclear whether the federal statute apples to new technology.” Id., at 1115 (citation omitted). “Faced with the same question here, we conclude that the primary jurisdiction doctrine provided the district court with the authority to refer [plaintiff’s] claim to the FCC.” Id., at 1116. Accordingly, it affirmed the judgment dismissing the class action complaint. Id.

NOTE: The Ninth Circuit noted that “no court of appeals has considered the question of whether § 258 vests subscribers with a private right of action,” but left that issue unresolved based on its conclusion that the primary jurisdiction doctrine supported the district court’s ruling. Clark, at 1114 n.7.

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