On this date in 2004, the Supreme Court decided Smith v. SBC Communications, Inc., 178 N.J. 265 (2004). The case was a putative Consumer Fraud Act (“CFA”) and breach of contract class action against Southern New England Telephone Company (“SNET”) and BJ’s Wholesale Club, Inc. Plaintiff alleged that defendants falsely advertised that prepaid calling cards purchased at BJ’s would yield substantially more calling time than plaintiff actually received.

The Law Division granted a motion to dismiss the CFA and breach of contract claims against both defendants. On plaintiff’s appeal, the Appellate Division affirmed the dismissal of the damage claim against SNET but reversed as to BJ’s, finding that plaintiff’s complaint might be able to be read as alleging a separate contract with BJ’s. The panel also remanded for a decision as to whether injunctive relief might be available against either defendant.

Both defendants sought Supreme Court review. Before that case got heard, the Supreme Court decided Weinberg v. Sprint Corp., 173 N.J. 233 (2002). There, the Court held that the filed rate doctrine, which forbids a regulated entity to charge rates for its services other than those properly filed with the appropriate federal regulatory authority, barred any CFA claim against a telecommunications carrier because such carriers file rate tariffs with the FCC.

The Court remanded the Smith case to the Appellate Division for further consideration in light of Weinberg. The Appellate Division dismissed all claims against SNET and the injunctive claim against BJ’s. But the contract claim against BJ’s survived. BJ’s successfully petitioned for Supreme Court review again.

The filed rate doctrine potentially posed a big obstacle to plaintiff. But in an opinion by Justice Zazzali, the Court distinguished between a retailer that acts as an agent for a carrier and a retailer that “acting with complete independence from the telecommunications carrier, buys from a reseller or issuer telecommunications services that were purchased previously from a carrier in accordance with the terms and conditions of a filed tariff.” The former would be protected by the filed rate doctrine, but the latter would not, as the purposes and underpinnings of the filed rate doctrine would not apply to an independent retailer.

Applying the liberal standard of review that generally disfavors motions to dismiss, Justice Zazzali found that, on the limited record then existing, “plaintiff’s contractual claims against BJ’s stand on different footing than those she asserted against the carrier, SNET. When read liberally, the complaint alleges that BJ’s had a measure of control over the advertising of the prepaid calling cards and entered into a separate contractual relationship with plaintiff in accordance with the terms and conditions offered in its promotional literature.”

Discovery might, or might not show that BJ’s acted as SNET’s agent or played no independent role at all, Justice Zazzali said. But the Court permitted the case to go forward. Justice Zazzali said that “[a] contrary conclusion would leave certain segments of the community without any means of redressing the wrongful conduct of retailers. Because the retail of previously-purchased telecommunications services has no bearing on either the filed tariff or the reasonableness of its terms, the FCC would have no jurisdiction over a complaint arising out of an alleged breach of that sales contract or false advertising with respect to the services that the retailer purported to offer. Yet, by wrapping themselves in the mantle of the filed rate doctrine, retailers of telecommunications services that purposefully deceive the public through their advertising would enjoy effective immunity. That result is unacceptable.” The Court vindicated its concern for consumers in this decision.