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Federal appeals court examines disputed telephone charges

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Writing for a unanimous 7th Circuit Court of Appeals panel, U.S. Judge David Hamilton authored an opinion Tuesday full of what he calls “telephonese.” The opinion delves into a small business’s disputed phone bill charges and how those matters are governed by state and common law.

The ruling comes in Lady Di’s Inc. v. Enhanced Services Billing Inc. and ILD Telecommunications Inc., No. 10-3903, a case from U.S. Judge Sarah Evans Barker in the Southern District of Indiana involving an Indianapolis beauty and hair salon.

Using AT&T as its telephone company, Lady Di’s disputes charges that were on its telephone bill in 2008 from ESBI in Delaware and ILD in Delaware – both described as “billing aggregators” that are not directly involved with the sale of telecommunications and services to customers but act as intermediaries between telephone companies such as AT&T and service providers offering e-fax services or Internet resources.

After customers pay their telephone bills, ESBI and ILD collect payments for service provider charges recovered by local telephone companies, deduct part of the payment as a fee, and forward the rest to service providers.

In this case, Lady Di’s owners dispute several months of charges in 2008 that they claim were unauthorized for an e-fax service and an Internet search engine and directory option. Lady Di’s made its October payment that year that included the $49.95 and $42.75 charges before discovering the charges, and then contacted AT&T for a refund. AT&T told the business to contact both ESBI and ILD, and the billing aggregators named as defendants here either refused a refund or didn’t respond.

After this suit was filed in state court and later removed to federal court, Lady Di’s account was credited in full for the disputed charges – but the case proceeded on claims that the allegedly unauthorized charges violated Indiana’s anti-cramming statute as well as the Deceptive Consumers Practices Act, and that the amounts were unjust enrichment under common law.

Judge Barker denied a class-certification request and later in separate rulings granted the defendants’ motion for summary judgment on the claims of unjust enrichment and statutory deception. Lady Di’s appealed both rulings, and the 7th Circuit panel affirmed the judgment, but the court followed a different path to reach that same conclusion.

“Turning first to the merits, we conclude that the Indiana anti-cramming regulation does not apply to these defendants because they are not telephone companies and did not act in this case as billing agents for telephone companies,” Judge Hamilton wrote.

Although the anti-cramming regulation detailed in both Indiana Code 8-1-29-5(2) and 170 IAC 7-1.1-19 doesn’t provide a private cause of action, Judge Hamilton wrote that it does provide a way to defend against collection actions. The judges also determined that a recorded phone conversation shows that Lady Di’s actually did order the disputed services and that defeats the unjust enrichment and deceptive commercial solicitation claims.

Precedent from state courts during the past century proves that Indiana courts likely wouldn’t agree with the plaintiffs on the unjust enrichment claims, Judge Hamilton wrote.

“We do not believe Indiana courts would use the equitable doctrine of unjust enrichment to convert a technical violation of a regulation into a right of action that would provide a (tiny) windfall for an individual customer who actually ordered, received the benefit of, and paid for the services in question,” he wrote.

“If Indiana wants to create a private right of action for a violation of the anti-cramming law, it can do so by statute or perhaps by regulation. It has not done so yet. If a customer is a victim of genuine cramming – charged for unwanted services that were not ordered – the equitable doctrine of unjust enrichment might well be applicable. But the doctrine … cannot be used in this way by a customer like plaintiff, who actually ordered and received the services.”
 

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  1. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

  2. Justice has finally been served. So glad that Dr. Ley can finally sleep peacefully at night knowing the truth has finally come to the surface.

  3. While this right is guaranteed by our Constitution, it has in recent years been hampered by insurance companies, i.e.; the practice of the plaintiff's own insurance company intervening in an action and filing a lien against any proceeds paid to their insured. In essence, causing an additional financial hurdle for a plaintiff to overcome at trial in terms of overall award. In a very real sense an injured party in exercise of their right to trial by jury may be the only party in a cause that would end up with zero compensation.

  4. Why in the world would someone need a person to correct a transcript when a realtime court reporter could provide them with a transcript (rough draft) immediately?

  5. This article proved very enlightening. Right ahead of sitting the LSAT for the first time, I felt a sense of relief that a score of 141 was admitted to an Indiana Law School and did well under unique circumstances. While my GPA is currently 3.91 I fear standardized testing and hope that I too will get a good enough grade for acceptance here at home. Thanks so much for this informative post.

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