Kaylan Stuart v. Global TelLink Corporation

United States Court of Appeals
For the Eighth Circuit
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No. 18-2640
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Kaylan Stuart, individually and on behalf of all others similarly situated; Dustin
Murilla; Walter Chruby; Rocky Hobbs,
lllllllllllllllllllllPlaintiffs - Appellants,
v.
Global Tel*Link Corporation,
lllllllllllllllllllllDefendant - Appellee.
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No. 18-2763
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Kaylan Stuart, individually and on behalf of all others similarly situated; Dustin
Murilla; Walter Chruby; Rocky Hobbs,
lllllllllllllllllllllPlaintiffs - Appellees,
v.
Global Tel*Link Corporation,
lllllllllllllllllllllDefendant - Appellant.
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Appeals from United States District Court
for the Western District of Arkansas - Fayetteville
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Submitted: October 15, 2019
Filed: April 15, 2020
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Before COLLOTON, WOLLMAN, and BENTON, Circuit Judges.
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COLLOTON, Circuit Judge.
Global Tel*Link provides telephone services to correctional facilities
throughout the country. In 2014, appellant Stuart, an inmate who had used Global’s
services, brought a putative class action against Global. He claimed that the
company’s rates and fees were unjust and unreasonable under the Federal
Communications Act (FCA), 47 U.S.C. § 201, et seq., and that Global had unjustly
enriched itself in violation of state laws. In 2015, Stuart amended his complaint to
include three other plaintiffs, including appellants Murilla and Chruby. In 2017, the
district court1 certified a nationwide class for plaintiffs’ FCA claims and four
subclasses for the unjust enrichment claims. One year later, after the regulatory
backdrop for the inmate calling service industry changed, the court decertified all
classes and granted summary judgment for Global on all claims. In so doing, the
court denied plaintiffs’ request to stay federal court proceedings and to refer certain
questions to the Federal Communications Commission.
Plaintiffs appeal the district court’s decisions. Global conditionally cross-
appeals an earlier judgment in which the court declined to compel arbitration between
Global and one of the plaintiffs. We affirm the decisions on class decertification and
summary judgment in favor of Global. We also affirm the district court’s refusal to
1
The Honorable Timothy L. Brooks, United States District Judge for the
Western District of Arkansas.
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stay proceedings because there was no need to refer questions to the FCC. Global’s
conditional cross-appeal is moot.
I.
This case arises in the context of a multiyear process of rulemaking by the
FCC. In 2013, the agency issued an order and notice of proposed rulemaking related
to calling services for inmates in correctional facilities. 28 FCC Rcd. 14107 (2013).
Citing the complaints of “[t]ens of thousands” of individuals, the FCC stated that “the
rates inmates and their friends and families pay for phone calls render it all but
impossible for inmates to maintain contact with their loved ones and their broader
support networks.”
The FCC announced two rules relevant to our case. First, the FCC placed
interim caps on the per-minute rates that carriers like Global could charge for
telephone calls. In determining these rates, the FCC explained that “site
commissions”—fees paid by service providers to facilities in exchange for an
exclusive right to provide communication services—were “not reasonably related to
the provision of [inmate calling services]” and “are not recoverable through [calling]
rates.” Second, the FCC required that ancillary charges “be based only on costs that
are reasonably and directly related to the provision of [inmate calling services].”
These ancillary charges included deposit fees, which are fees imposed by service
providers when an individual uses a credit card to add money to an inmate’s
communication account.
Providers of inmate calling services immediately challenged many of the rules
announced in the 2013 Order. 28 FCC Rcd. 15927 (2013). In January 2014, the D.C.
Circuit stayed the rule related to ancillary charges. Order, Securus Techs., Inc. v.
FCC, No. 13-1280 (D.C. Cir. Jan. 13, 2014), ECF No. 1474764. The interim rate
caps went into effect.
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In September 2014, appellant Stuart filed a putative class action complaint
against Global, alleging violations of the FCA and “unjust enrichment.” Stuart
sought to represent a class of all persons in the United States who had used Global’s
inmate calling services. In his complaint, he drew heavily from the 2013 Order for
facts about the inmate calling service industry and for the broader principle that
Global’s conduct violated the FCA.
In November 2015, the FCC issued a second order related to inmate calling
services. 30 FCC Rcd. 12763 (2015). In this order, the FCC introduced new caps on
call rates and a per-transaction limit on deposit fees. Reaffirming the FCC’s position
that site commissions were “not part of the cost of providing [inmate calling
services],” the 2015 Order made clear that the FCC had not considered site
commissions when setting call rates. Service providers challenged the new rules
promulgated under the 2015 Order.
In 2016, plaintiff Hobbs intervened in this case after another plaintiff was
dismissed, and the plaintiffs moved for class certification. The district court granted
the motion, certifying a nationwide class for two claims under the FCA (one for
calling rates and one for deposit fees) and four subclasses for the unjust enrichment
claims grouped according to the governing state law. The case proceeded on a
second amended complaint filed in December 2016.
Litigation related to the validity of the 2015 Order continued. In August 2017,
the D.C. Circuit vacated the calling service rate caps. Among other concerns, the
court concluded that the FCC’s determination that site commissions were unrelated
to the costs of providing services “defies reasoned decisionmaking.” Glob. Tel*Link
v. FCC, 866 F.3d 397, 402, 413 (D.C. Cir. 2017). The D.C. Circuit also held that the
FCC had authority to impose ancillary fee caps such as deposit fee caps on interstate
calls, but not on intrastate calls. Id. at 415. The court therefore remanded the case
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for the FCC to determine whether a methodology existed for segregating ancillary
fees between interstate and intrastate calls. Id. at 402.
Following the D.C. Circuit decision, the plaintiffs here moved to stay
proceedings in the district court and to refer two questions to the FCC. Global moved
to decertify the class and for summary judgment on the individual claims. The district
court denied plaintiffs’ motion for a referral and granted Global’s motions for class
decertification and summary judgment.
II.
We first address class decertification. Plaintiffs sought to certify classes under
Federal Rule of Civil Procedure 23(b)(3). As such, they were required to establish
not only the threshold prerequisites for all class actions under Rule
23(a)—numerosity, commonality, typicality, and adequate representation—but also
that questions of law or fact common to all class members predominate over any
questions affecting only individual members, and that a class action is superior to
other available methods for fairly and efficiently adjudicating the controversy. Fed.
R. Civ. P. 23(b)(3). We review the decertification decision for abuse of discretion.
Roby v. St. Louis Sw. Ry. Co., 775 F.2d 959, 961 (8th Cir. 1985).
The district court decertified all classes based on a lack of predominance. The
“predominance inquiry tests whether proposed classes are sufficiently cohesive to
warrant adjudication by representation.” Amchem Prods., Inc. v. Windsor, 521 U.S.
591, 623 (1997). Predominance requires that “the common, aggregation-enabling,
issues in the case are more prevalent or important than the non-common, aggregation-
defeating, individual issues.” Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036,
1045 (2016) (quoting 2 William B. Rubenstein, Newberg on Class Actions § 4:49, at
195-96 (5th ed. 2012)).
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Plaintiffs’ first claim is that Global’s call rates were unjust and unreasonable
under the FCA. When the district court certified this class, it did so with the
understanding that the plaintiffs, under the 2013 and 2015 Orders, could prevail on
a theory that site commissions were not recoverable at all through call rates. Two
common questions united the class: whether Global set call rates with the purpose
of recovering site commissions, and whether recovering site commissions through
call rates was unjust and unreasonable as defined by the FCC.
This theory of class certification became untenable after the D.C. Circuit’s
decision in Global Tel*Link. In that decision, the court determined that site
commissions were a part of doing business in the inmate calling service industry, and
that the FCC could not place a per se bar on recovering site commissions through call
rates. 866 F.3d at 414. Therefore, what had been a question whose answer was
shared among all class members in this case (whether Global’s rates accounted for
site commissions at all and were therefore unreasonable) became a question whose
answer was likely to require considerable individual inquiry (whether Global’s rates
at a specific facility accounted for too great a proportion of site commissions and
were therefore unreasonable). The district court acted within its discretion in
deciding that common questions no longer predominated, and that a class action was
not the proper vehicle for resolving this type of claim.
The second class action claim was that Global’s deposit fees were unjust and
unreasonable because they greatly exceeded the cost of processing deposits. The
class as certified contained all individuals who had paid these deposit fees. In Global
Tel*Link, the D.C. Circuit confirmed that the FCC could place limits on deposit fees.
866 F.3d at 415. But the court also determined that the FCC could place those limits
only on fees for interstate calls, not intrastate calls. Id. This determination
introduced two new questions that the district court would need to resolve for each
member of the nationwide class. Did a particular plaintiff make deposit fees for
intrastate or interstate calls? And if the plaintiff made both types of deposits, what
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proportion was dedicated to interstate calls? As the district court noted, the plaintiffs
presented no reliable mechanism for sorting deposit fees for interstate calls from fees
for intrastate calls. Given the two new questions and the fact that the plaintiffs put
forward no convincing way to address one of them, we see no abuse of discretion in
the court’s determination that common questions no longer predominated.
Plaintiffs’ third claim is that Global’s revenue from call rates and deposit fees
constitutes unjust enrichment under state law. The district court decertified the class
in light of Global’s affirmative defense that a person cannot recover money that he
or she has voluntarily paid. See Curtis Lumber Co. v. La. Pac. Corp., 618 F.3d 762,
782 (8th Cir. 2010). The court ruled that this affirmative defense, the “voluntary
payment doctrine,” would require substantial individualized inquiry and that common
questions thus would not predominate.
Plaintiffs argue that the court should not have decertified the class on the basis
of an affirmative defense. Although courts are sometimes “reluctant” to refuse class
certification because of affirmative defenses, a district court may do so when “the
affirmative defenses are, for some reason, unusually important.” Rubenstein, supra,
§ 4:55. The court here identified a convincing reason why the affirmative defense
raised by Global would present a particularly troubling obstacle to class adjudication:
it would require an individualized inquiry into the subjective thinking of each user
of inmate calling services every time he or she made a call.
Plaintiffs also contend that they could defeat the voluntary payment doctrine
without individualized inquiry by showing that Global’s monopoly position in
correctional facilities, standing alone, is sufficient to render any decision to use
Global’s services involuntary. Even if this theory might hold sway in one
jurisdiction, see Ark. Nat. Gas Co. v. Norton, Co., 263 S.W. 775, 778 (Ark. 1924),
plaintiffs have not demonstrated that it is universally accepted or that variations in
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state law would not predominate over common issues. The district court did not
abuse its discretion in decertifying the class.
III.
The plaintiffs also appeal the dismissal of their individual claims. The district
court granted summary judgment for Global on all three claims: that calling rates
allegedly violated the FCA, that deposit fees allegedly violated the FCA, and that
Global allegedly was unjustly enriched.
The district court ruled that the plaintiffs’ claim alleging unjust and
unreasonable calling rates and deposit rates could not proceed because there is no
order or regulation of the FCC declaring Global’s rates unreasonable. We agree that
the claims lack the necessary predicate action by the agency.
The FCA states that any “unjust or unreasonable” charge in connection with
a communication service “is declared to be unlawful,” and gives the FCC power to
promulgate rules and regulations defining “just” and “reasonable.” 47 U.S.C.
§ 201(b). The Act provides that if a common carrier like Global engages in conduct
deemed unlawful, the carrier “shall be liable to the person or persons injured
thereby.” Id. § 206. And the statute allows a person “claiming to be damaged” by an
unlawful practice to “bring suit . . . in any district court of the United States.” Id.
§ 207.
Therefore, a person may bring suit under § 207 if he alleges that a carrier has
violated a rule or regulation promulgated by the FCC under § 201(b). Glob. Crossing
Telecomms., Inc. v. Metrophones Telecomms., Inc., 550 U.S. 45, 54 (2007). But here,
the plaintiffs cannot point to a violation of any FCC rule or regulation. In that
situation, they may not proceed under § 207. See Havens v. Mobex Network Servs.,
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LLC, 820 F.3d 80, 89-91 (3d Cir. 2016); North Cty. Commc’ns Corp. v. Cal. Catalog
& Tech., 594 F.3d 1149, 1158-61 (9th Cir. 2010).
Congress, when it enacted these provisions of the FCA, mimicked a regulatory
regime that it had constructed nearly half a century earlier in the Interstate Commerce
Act of 1887. Global Crossing, 550 U.S. at 49. One key part of that regime was a
recalibration of authority between courts and an administrative agency: whereas
“[t]he common law originally permitted a freight shipper to ask a court to determine
whether a railroad rate was unreasonably high,” the new regime “made clear that a
commission, not a court, would determine a rate’s reasonableness.” Id. Allowing the
plaintiffs to proceed with a claim alleging unreasonable rates without action by the
FCC would place those decisions “squarely in the hands of private parties and some
700 federal district judges, instead of in the hands of the Commission.” New England
Tel. & Tel. Co. v. Pub. Utils. Comm’n, 742 F.2d 1, 6 (1st Cir. 1984). We think that
approach would be contrary to the congressional design.
Neither of plaintiffs’ federal claims is premised on a regulation or order of the
FCC. On the claims about calling rates, plaintiffs proceeded on the theory that Global
violated the FCA if it recovered site commissions through call rates. The D.C. Circuit
decision in Global Tel*Link made this bright-line theory unsupportable as a matter
of law. 866 F.3d at 412-14. On the deposit fee claims, plaintiff Hobbs asserted based
on the 2013 and 2015 Orders that the fees violated the FCA if they were grossly
disproportionate to the actual costs of processing deposits. But during the period in
which Hobbs claims to have been harmed—March through July 2015, before the
2015 Order was released and after the 2013 Order was stayed—neither rule was in
effect. Accordingly, plaintiffs can identify no violation of an FCC rule during the
time in which they claim to have been injured.
The plaintiffs also dispute the district court’s dismissal of their individual
claims for unjust enrichment. The FCA, however, preempts a state law claim if the
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claim would not exist without duties created by the Act. Firstcom, Inc. v. Qwest
Corp., 555 F.3d 669, 678 (8th Cir. 2009) (interpreting 47 U.S.C. § 414). Throughout
this litigation, the plaintiffs have argued that Global’s proceeds were unjust because
they were gathered through business practices that violated the FCA. That claim was
preempted.
Plaintiffs argue that their unjust enrichment claims do not rely solely on duties
imposed by the FCA but also “stem from a common law duty not to enrich oneself
unjustly at the expense of others.” Plaintiffs contend that Global’s rates were
“unjust” because Global used its “monopoly power” to “inflate” rates and “pass on
the costs of site commissions.” The four plaintiffs bring their claims under the laws
of Arkansas, Minnesota, Pennsylvania, and Texas, respectively. In each of these
jurisdictions, the general rule is that a common-law claim of unjust enrichment is not
available where, as here, a valid contract governs the same matter. Wilson Area Sch.
Dist. v. Skepton, 895 A.2d 1250, 1254 (Pa. 2006); Fortune Prod. Co. v. Conoco, Inc.,
52 S.W.3d 671, 684 (Tex. 2000); U.S. Fire Ins. Co. v. Minn. State Zoological Bd.,
307 N.W.2d 490, 497 (Minn. 1981); Lowell Perkins Agency, Inc. v. Jacobs, 469
S.W.2d 89, 92 (Ark. 1971). There are exceptions in some jurisdictions when a
contract is void or rescinded, Campbell v. Asbury Auto., Inc., 381 S.W.3d 21, 37
(Ark. 2011), or when there is an overpayment on a valid contract, Sw. Elec. Power
Co. v. Burlington N. R.R. Co., 966 S.W.2d 467, 469-70 (Tex. 1998), but plaintiffs
identify no authority allowing a claim for unjust enrichment on the bare theory that
a contractual price was unreasonably high due to one party’s market power.
Summary judgment was therefore proper.
IV.
After the D.C. Circuit decision in Global Tel*Link, plaintiffs asked the district
court to refer two questions to the FCC under the doctrine of primary jurisdiction.
See Reiter v. Cooper, 507 U.S. 258, 268 (1993). First, for the calling rate claim,
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“what criteria should the Court consider in determining which portions of [Global’s]
commission costs are directly related to providing inmate calling services?” Second,
for the deposit fee claim, “[w]hat is the appropriate method for segregating interstate
from instrastate ancillary fees so that the ancillary fees can be evaluated under the
FCA?” The district court declined to refer these matters, and there was no error
whether we review de novo or for abuse of discretion. See Chlorine Inst., Inc. v. Soo
Line R.R., 792 F.3d 903, 909 (8th Cir. 2015).
Whatever the FCC might have said in response to these questions would not
alter the outcome here. On the calling rate claim, the plaintiffs’ theory of the case—
that recovering site commissions through call rates was per se unreasonable—was
foreclosed by Global Tel*Link. No elaboration from the FCC about how to determine
reasonable call rates could have revived it. On the deposit fee claim, even if the FCC
were able to propose a workable method to distinguish between fees paid for
intrastate calls and interstate calls, the litigation still would require individualized
fact-finding on whether a given plaintiff paid deposit fees for intrastate calls and, if
so, in what proportion. The district court thus properly decertified the class action
without seeking a determination by the agency on a methodology for segregating
ancillary fees.
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For the foregoing reasons, the judgment of the district court is affirmed in No.
18-2640. The contingent cross-appeal in No. 18-2763 is dismissed as moot.
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