******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) Michael J. Valenti and Real ) Estate Market Place of New Jersey ) t/a Real Estate Alternative, ) Complainants ) ) v. ) ) American Telephone and ) File No. E-93-09 Telegraph Company ) ) and ) ) MCI Telecommunications ) File No. E-93-10 Corporation, ) Defendants. ) ) MEMORANDUM OPINION AND ORDER Adopted: January 30, 1997; Released: February 26, 1997 By the Commission: I. INTRODUCTION 1. Michael J. Valenti and Real Estate Market Place of New Jersey t/a Real Estate Alternative (together "REA") have filed applications for review of a Common Carrier Bureau ("Bureau") order in the above-captioned proceedings, which dismissed REA's formal complaints against the American Telephone and Telegraph Company ("AT&T") and MCI Telecommunications Corporation ("MCI"). The complaints concerned numerous unauthorized, computerized calls placed by AT&T in October and November of 1989 to REA's 800 number toll-free service line, which effectively blocked many of REA's legitimate incoming business calls. The Bureau dismissed the complaints on the ground that they are barred by the two-year statute of limitations contained in Section 415 of the Communications Act of 1934, as amended (the "Act"). Both AT&T and MCI filed oppositions to REA's application on August 26, 1994, and REA replied to each. For the reasons stated below, we affirm the Bureau's decision regarding the statute of limitations and clarify our subject matter jurisdiction relative to a related proceeding before the Superior Court of New Jersey. II. BACKGROUND 2. In September 1989, REA began a toll-free, telephone-based service for matching sellers and buyers of real estate without brokers, using 800 service obtained from MCI. In October 1989, REA began to receive a large number of calls to its 800 number, which, when answered, would immediately terminate. REA states that it first alerted MCI about the calls shortly after they started and that MCI failed to identify the source of the calls or to take corrective action even after repeated requests. REA eventually discovered that the calls were originating from various AT&T locations across the country. AT&T has since acknowledged that it did "unknowingly" place the calls to test MCI's 800 service for, among other things, call set-up time, but that it intended to use only unassigned 800 numbers. The calls, which seriously disrupted REA's business, continued through the end of November 1989. 3. REA filed claims for damages and injunctive relief against both MCI and AT&T in the Ocean County Superior Court of New Jersey on November 14, 1989. On April 21, 1992, the New Jersey court, on MCI's motion and without ruling on the merits of the case, dismissed with prejudice REA's claim against MCI for lack of subject matter jurisdiction and stayed the claim against AT&T pending acceptance of jurisdiction by this Commission. The court stated that, should the Commission reject jurisdiction over AT&T, REA could request that the stay of its claims be lifted. 4. On November 4, 1992, almost three years after the last AT&T computer-generated phone call, REA filed formal complaints with the Commission, pursuant to Section 208 of the Act, against MCI and AT&T, alleging that they had violated Sections 201(a), 201(b), 202(a), and 203(c) of the Act. Without reaching the merits of REA's claims, the Bureau dismissed both formal complaints as untimely under the statute of limitations contained in Section 415 of the Act, 47 U.S.C.  415. The Bureau rejected REA's interpretation of the dates upon which its causes of action accrued under Section 415 of the Act and rejected REA's argument that the equitable tolling doctrine should be applied to this case. REA filed applications for review pursuant to Section 1.115 of this Commission's rules. III. DISCUSSION A. Procedural Errors. 1. Contentions of the Parties. 5. REA. In the Bureau Order, the Bureau stated that REA did not address anywhere in its main and reply briefs in September and October 1993, the statute of limitations defense that AT&T had raised in its answer of January 4, 1993. REA now argues that the Bureau erred in its reliance on this conclusion because REA did in fact respond in detail to the statute of limitations contentions in its "Reply, Opposition and Answer" filed on February 3, 1993, in response to AT&T's answer and MCI's answer and counterclaim. REA claims that the Bureau did not consider REA's arguments on this critical decisional point and that the Bureau's findings are therefore based on an erroneous set of facts. 6. REA also contends that the Bureau Order failed to address the issue of subject matter jurisdiction raised by the New Jersey Superior Court. According to REA, the Bureau should have explicitly decided that issue before any of the statute of limitations questions. Moreover, REA asserts that it cannot ask the New Jersey Superior Court to lift its stay regarding AT&T unless the Commission decides the jurisdiction issue. 7. AT&T. Concerning REA's first claim that the Bureau believed that REA did not respond to AT&T's statute of limitations defense, AT&T does not dispute that REA did address the limitations question as to both defendants in its Reply, Opposition and Answer of February 3, 1993. AT&T argues, however, that the Bureau only intended to say that the issue was not discussed in REA's briefs and that the Bureau did consider these very arguments in its decision. 8. Regarding REA's second argument that the Bureau Order should have affirmatively considered subject matter jurisdiction, AT&T responds that, while the Bureau did not explicitly assert jurisdiction in this case, it implicitly accepted jurisdiction by deciding the statute of limitations issues. 2. Decision 9. REA is correct in stating that the Bureau's belief that REA had not responded to AT&T's statute of limitations defense "anywhere in its pleadings" is unfounded because REA's consolidated Reply, Opposition and Answer of February 3, 1993, did so. We believe, however, that even if the Bureau's belief was incorrect and should not have been one of the bases for its ultimate conclusion, this does not constitute reversible error. REA had the opportunity to advance all its arguments on the limitations issue in both its pleadings and briefs, and it discussed all specific arguments against it, virtually all of which were raised by MCI, in detail. The Bureau Order addressed all of these contentions quite thoroughly. As will be discussed below, we find ample support in the record for the Bureau's conclusions. 10. On the question of subject matter jurisdiction, we conclude that the context clearly shows that the Bureau believed it had subject matter jurisdiction and was silent on the matter only because: (1) jurisdiction was not contested by the parties by the end of the briefing cycle; (2) jurisdiction was, and is, very clear; and (3) the fact that the Bureau proceeded directly to the logically secondary statute of limitations issues was a tacit acknowledgment of jurisdiction. On the first point, REA's Section 208 complaint against AT&T specifically asserted AT&T's liability as a common carrier under Title II of the Communications Act, and included no request for a specific ruling on jurisdiction. In response to a one-sentence assertion in AT&T's answer that REA had failed to state a claim under the Act, REA's main brief several months later included a two-page argument that the Commission does have jurisdiction over AT&T's alleged actions and that AT&T's conduct in the state action constituted a voluntary submission to such jurisdiction before the Commission. AT&T's responsive brief did not contest this, arguing only the question of damages. In short, the issue of subject matter jurisdiction was not posed to the Bureau in a way that demanded an explicit ruling. 11. Second, we believe that this Commission's subject matter jurisdiction over this proceeding under Title II of the Act is quite clear because both defendants were "common carriers" as defined in Section 3(h) of the Act, and the alleged actions and omissions of the defendants were charges and practices for and in connection with tariffed interstate communication services within the meaning of Sections 201, 202, and 203 of the Act. Finally, the fact that the Bureau proceeded to the statute of limitations issues, which are logically posterior to subject matter jurisdiction and are based on application of Section 415 of the Act, indicates the Bureau's tacit assumption that it indeed had subject matter jurisdiction. 12. The finding that this Commission has subject matter jurisdiction, however, raises another issue concerning the effect this decision has on REA in the New Jersey state court proceeding. REA argues in its application that it needs an explicit ruling from us in order to request the state court to lift the stay with respect to AT&T. The orders of the New Jersey court referring the matter to us appear to assume that our jurisdiction is not only primary, but exclusive, and that the state suit against AT&T will be dismissed with prejudice upon our affirmative assertion of jurisdiction. Our present order on REA's application for review confirms both the Bureau's implicit finding that it had subject matter jurisdiction under Title II of the Act and the Bureau's explicit finding that REA's Section 208 claims were barred by the statute of limitations under Section 415 of the Act. We are not ruling, however, that our affirmative Title II jurisdiction over the events alleged by REA must be to the exclusion of any tort or other claim that REA might have in a state court; that is a matter for the state court to decide. B. Dates of Accrual. 1. Contentions of the Parties. 13. REA. REA reiterates its argument below that the Commission's general statute of limitations, Section 415(b) of the Act, began to run on the date of the last bill in May 1991. Under Section 415(b), "all complaints against carriers for recovery of damages not based on overcharges shall be filed with the Commission within two years from the time the cause of action accrues . . . ." Pursuant to this provision, REA argued that, given the rule that a cause of action accrues for purposes of Section 415 when the carrier does the unlawful act or fails to do what the law requires, REA's causes of action against both defendants accrued when MCI last attempted to bill it in May 1991 for calls that included those generated by AT&T in October and November 1989. The Bureau agreed with MCI, however, that REA's claims accrued no later than November 1989, when the calls ceased, thereby making REA's two formal complaints, which were filed with the Commission on November 4, 1992, untimely for purposes of Section 415(b). 14. Similarly, REA argues that the Commission's specific statute of limitations on overcharge actions, Section 415(c), also began to run on the date of the last bill in May 1991. Under Section 415(c), an action at law for overcharges shall be initiated within two years from the time the cause of action accrues, with a possible two-year extension from the time the carrier disallows a timely written claim for overcharges. REA argues that its overcharge cause of action under Section 415(c) accrued when MCI last attempted to bill it in May 1991. REA bases this contention on our decision in Tele-Valuation v. AT&T that, "as a general proposition, the point of accrual should be fixed as the time the customer receives a bill for services." This is a different position than REA espoused before the Bureau. REA argued there that its claim in the state court complaint for $5,594.50 in unpaid MCI charges for the AT&T-generated calls functioned as a timely written claim for overcharges for purposes of extension of the two-year period in Section 415(c). The Bureau concluded, however, that this was not a claim for overcharges as defined in Section 415(g) because REA did not allege that the charges were in excess of the tariffed rate. 15. AT&T and MCI. In response to REA's assertion that its causes of action accrued as late as the date of MCI's last bill that included AT&T-generated calls, i.e. May 1991, AT&T observes that the calls themselves, which are the critical element under applicable law as reviewed in the Bureau Order, ceased in November 1989. AT&T also notes that, in any event, the statute of limitations with respect to AT&T cannot be extended by MCI's billing. 16. MCI contends that the Bureau Order correctly applied the general rule that a cause of action accrues for purposes of Section 415 when the carrier does the unlawful act or fails to do what the law requires, and the complainant has discovered or could have discovered the defendant's wrong. According to MCI, the Bureau properly found that, under Section 415(b), governing non- overcharge cases, this date was no later than November 1989, when REA knew of AT&T's actions and the last AT&T-generated calls were made, rather than the date of MCI's last bill that included those calls in May 1991, as REA now claims. 17. Similarly, MCI asserts that, under Section 415(c), the Bureau was correct in finding that this was not an overcharge case. MCI further argues that REA's reliance on Tele-Valuation to claim that its cause of action accrued in May 1991, the date of the last bill, is misplaced. MCI contends that the general proposition stated in Tele-Valuation, that an action for overcharges should accrue on the date of the customer's bill, is intended for a typical overcharge dispute in which the customer normally would first be aware of a potential claim at that time. But in the instant case, MCI says, REA was aware of the source of the allegedly wrongful calls by November 1989, and filed a state court suit at that time with a factual basis virtually identical to the present one before the Commission. 2. Decision. 18. REA's attempt to place the dates of accrual for both the non-overcharge and overcharge causes of action at the date of the last MCI bill in May 1991 is unconvincing. REA correctly states the general rule that a cause of action accrues for purposes of Section 415 when the carrier does the unlawful act or fails to do what the law requires, but overlooks part of the rationale for that rule in the correlative requirement that the cause of action accrues when the complainant has discovered or could have discovered the defendant's wrong. As stated in Bunker Ramo, "a statute of limitations does not begin to run until discovery of the right or wrong of the facts on which such knowledge is chargeable in law." There is no question that the principal wrongful acts or omissions that REA alleges against both defendants as non-overcharge causes of action were the AT&T computer- generated telephone calls, which indisputably ended in November 1989. REA learned of the source of the calls by the time it filed its state court complaint on November 14, 1989, and the primary facts REA alleged in its subsequent Section 208 complaints are virtually identical to those of the state proceeding. The fact that MCI bills continued to list these unpaid calls among other charges until service was discontinued in May 1991 is immaterial to the non-overcharge wrongs or omissions about which REA complained to the Commission. Accordingly, the Bureau did not err in finding that the two-year statute of limitations on the non-overcharge causes of action expired no later than November 1991. 19. REA's claim that the overcharge cause of action for purposes of Section 415(c) also accrued on the date of the last MCI bill is not only unpersuasive for the same reason as is its general Section 415(b) claim, but is, moreover, founded on the unjustified assumption that the case could be construed as an overcharge case. REA did not plead specifically in either its state suit or the instant complaint proceeding that the $5,594.50 in unpaid MCI charges to REA that included the AT&T-generated calls constituted overcharges. We conclude, as did the Bureau, that the charges in question are not overcharges because they did not exceed the tariffed rate. In addition, REA's reliance on Tele-Valuation to support its claim that the accrual of the overcharge claim was somehow renewed with every additional bill is misplaced. The general proposition stated in Tele-Valuation, that an action for overcharges should accrue on the date of the customer's bill, rests on the notion of "discovery" by the customer. In REA's case the discovery occurred in November 1989. C. Equitable Tolling. 1. Contentions of the Parties. 20. REA. In its Reply, Opposition and Answer of February 3, 1993, before the Bureau, REA charged that AT&T and MCI deliberately prolonged the New Jersey proceeding until the two-year statute of limitations of Section 415 had run, and then MCI, with AT&T's support, moved for dismissal of the state action for lack of subject matter jurisdiction. REA stated that MCI waited 25 months, until December 1991, to file its motion to dismiss on subject matter jurisdiction, rather than pleading it in the answer of December 1989. On this basis, REA argued that, even if its cause of action did accrue in November 1989, the doctrine of equitable tolling of the statute of limitations should be applied. MCI replied that it complied with all state court rules, that it originally moved to dismiss on subject matter jurisdiction in its first answer to the complaint on December 5, 1989, and that REA bore the responsibility of timely filing its claim in the proper jurisdiction. The Bureau rejected REA's argument, holding that the equitable tolling doctrine applies only when the delay is caused by the defendant and that, in this case, REA itself was primarily responsible. 21. REA raises the same claim in its present application. REA unequivocally states that the first time either of the defendants raised the state court's subject matter jurisdiction was in the motion to dismiss on this ground in December 1991, just beyond two years after the last AT&T- generated calls in November 1989. In addition, REA urges the Commission to apply the three-part test for equitable tolling in Ervin v. Los Angeles County. In the context of a federal civil rights complaint, that case held that a statute of limitations can be tolled if a plaintiff has given timely notice to a defendant of its claim, the delay in the filing of the claim does not prejudice the defendant, and the plaintiff has acted reasonably and in good faith. REA argues that it notified defendants of the AT&T-generated calls in a timely manner, that the defendants would not be procedurally prejudiced by an adjudication on the merits, that REA acted in good faith, and that the claims are not stale and vexatious. 22. AT&T and MCI. AT&T states that the Bureau correctly found that REA was responsible for its tardiness in filing its complaint. Moreover, AT&T argues, the defendants could not be expected to raise the statute of limitations defense before the time period had expired, and there is no requirement on the moving party to give such advance notice. 23. MCI states that application of the equitable tolling doctrine is usually very much restricted even if doing so produces hardships and that it generally requires fraud or deceit by the defendants to prevent the complainant from becoming aware of the basis for the claim. On this basis, MCI concludes that the Bureau correctly found that the primary responsibility for the complainant's tardiness lay with REA, and that MCI did nothing to prevent REA from learning the source of the AT&T-generated calls, much less engaging in active fraudulent concealment. MCI further asserts that Ervin and Carter did not involve Section 415 and both held that a prior claim in a different forum did not toll the statute of limitations for a later proceeding elsewhere. 2. Decision. 24. REA has presented nothing that persuades us that the Bureau erred in rejecting its equitable tolling argument. We have stated that: [under Section 415] the lapse of time beyond the limitation period not only bars the remedy but also destroys the liability . . . . The construction of Section 415, both by the Commission and the federal courts, has been "strict". . . [Where] there is no allegation of fraud or deceit, having been practiced by the defendants upon complainant to prevent him from becoming aware of the facts which are the basis of its claim, there is no way of . . . tolling the statute of limitations. In addition, the Bureau has summarized applicable law as follows: the concept of tolling of a statutory period on equitable grounds is usually very much restricted, especially when, as here, the statutory period is jurisdictional. Section 415 is to be construed in light of Congressional intent and the Commission and the courts have consistently held that Section 415 is jurisdictional and must be applied even if to do so produces hardships. 25. REA's claim that defendants' conduct is sufficient under the foregoing standards to invoke the doctrine of equitable tolling rests on the assertion that defendants deliberately waited two years after the AT&T-generated calls had ceased before raising subject matter jurisdiction for the first time in state court. This assertion is incorrect: MCI's December 5, 1989, answer in state court included explicit separate defenses in the alternative asserting that the Commission had either primary or exclusive jurisdiction over the matter; thus, REA was on notice of possible jurisdictional problems from the beginning. REA has not shown either active concealment by defendants or any other equitable factors that would be sufficient, under the applicable standards, to overcome the reasonable conclusion that REA was principally responsible for not filing a timely complaint before this Commission. 26. Moreover, the authorities cited by REA cannot change this result. Ervin concerned a different statute and in fact found the plaintiff's tardiness to be unreasonable. Further, with respect to the three-prong test in Ervin (i.e., that the plaintiff timely notify the defendant of the claim, the defendant not be prejudiced by the delay, and the plaintiff act reasonably and in good faith), REA's tardiness here fails the third prong requiring that the complainant's conduct be reasonable because it was or should have been aware of the possibility that the Commission had primary or exclusive subject matter jurisdiction and that there might be associated statute of limitations problems. Accordingly, the Bureau did not err in rejecting the equitable tolling argument. 27. Although we have concluded that REA's conduct relative to AT&T and MCI in the state court has not met the requirements for equitable tolling, we are not implying a conclusion that REA's underlying claim on the merits is deficient, and we recognize that REA may experience hardship by losing the opportunity for a ruling on the merits in any forum. We emphasize that our jurisdiction over REA's claims under the Communications Act does not exclude a tort or other legal action in state court, and that the New Jersey court is free to resume proceedings on REA's still-pending claim there against AT&T if it so chooses. IV. CONCLUSION AND ORDERING CLAUSE 28. For the reasons discussed above, we conclude that the Bureau did not err in holding that REA's claims against MCI and AT&T were barred by the statute of limitations contained in Section 415 of the Act. 29. Accordingly, IT IS ORDERED pursuant to Sections 1, 4(i), 4(j), 208, and 415 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154(i), 154(j), 208, and 415, and Section 1.115 of the Commission's Rules, 47 C.F.R.  1.115, that the applications for review that were filed on August 11, 1994, by Michael J. Valenti and Real Estate Market Place of New Jersey t/a Real Estate Alternative ARE DENIED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary