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NO. 5-99-0514

IN THE

APPELLATE COURT OF ILLINOIS

FIFTH DISTRICT

JUSTICE MAAG delivered the opinion of the court:

Lucent Technologies, Inc., and AT&T Corporation (AT&T) (defendants) appeal from an order of the Madison Countycircuit court denying their motions to dismiss or stay the pending class action suit. On appeal, defendants claim that thecircuit court erred in denying their motion to dismiss and alternative motion to stay the proceedings because (1) theplaintiff's action is preempted by federal law, (2) each claim is barred by the voluntary-payment doctrine, and (3) the claimsshould be referred to the Federal Communications Commission (FCC) pursuant to the doctrine of primary jurisdiction. Defendants also contend that the circuit court abused its discretion in denying their motion to dismiss brought pursuant tosection 2-619(a)(3) of the Code of Civil Procedure (735 ILCS 5/2-619(a)(3) (West 1994)) because there was another actionpending between the same parties for the same cause.

A brief summary of the historical background and the facts pertinent to the appeal are set forth as follows. The case comeson the tail end of numerous changes in the telecommunications industry. Advances in computer technology, a conclusionby the FCC that some aspects of the telecommunications industry would thrive on deregulation and free marketcompetition, and the divestiture of the Bell Telephone system contributed significantly to the deregulation in the industryduring the 1980s. Prior to the deregulation, telephone companies leased customer-premises equipment to customers whoused its telephone services. Customer-premises equipment (CPE) includes telephones, modems, and terminal equipmentlocated inside the customers' homes. Lease charges for CPE were "bundled with" charges for telephone service into oneflat fee. According to FCC regulations, the flat fee, referenced in the industry as a "tariff", had to be approved by the stateutility commission, the FCC, or both. Once approved, that rate was billed to all customers of that service. Telephonecompanies could not alter the rate without submitting a proposed new rate to and receiving approval from the authorizingcommission.

In the past few decades, a number of vendors, other than telephone companies, began to produce and market telephoneequipment with different options and features for sale to the public. Recognizing the increase in competition in the CPEmarket, the FCC concluded that telephone companies should also lease or sell CPE in a deregulated market. The FCCdetermined that CPE charges would be separated from the other charges for telephone service and removed from the tariffregulations. In order to accomplish a uniform deregulation of CPE, the FCC directed each state to unbundle and detariffCPE. The goal was to remove the leasing and sales of CPE from the control of the federal and state utility commissionsand to allow the competitive market to regulate this product.

In furtherance of this goal, the FCC issued an implementation order that imposed some restrictions and established somerequirements on the telephone companies for a period of two years. The FCC determined that a transitional period wasnecessary in order to ensure that AT&T would not take advantage of its dominant position in the CPE market to arrest thedevelopment of competition in that market. AT&T had acquired all of the residential CPE from the Bell Telephone systemas part of the divestiture. The FCC required AT&T to notify customers of their option to continue leasing CPE equipmentand required AT&T to offer CPE for sale or lease at set prices in order to ensure price stability during the transition period. The FCC retained jurisdiction over the CPE deregulation and monitored the telephone companies to ensure compliancewith its program during this period. The FCC's implementation plan provided that telephone companies would be freefrom its requirements and restrictions upon the expiration of the two-year transition period. This transition period beganwith the divestiture of the Bell Telephone system in 1984 and ended in 1986.

In September 1996, Donna Crain (plaintiff) filed a class action suit against defendants, alleging that defendants breachedcontracts with its customers, violated the Illinois Consumer Fraud and Deceptive Practices Act (815 ILCS 505/2 (West1994)) and the Uniform Deceptive Business Practices Act (815 ILCS 510/2 (West 1994)), and owed restitution for moneypaid on voidable contracts. The gravamen of plaintiff's complaint is that defendants engaged in deceptive, misleading, andcontract-breaching practices with respect to the leasing and servicing of CPE.

Defendants filed a motion for judgment on the pleadings in which they argued that the action should be dismissed becauseit was preempted by federal law and was barred by the voluntary-payment doctrine. Alternatively, defendants argued thatthe allegations should be referred to the FCC pursuant to the primary-jurisdiction doctrine and the pending case dismissedor stayed. In a separate motion to dismiss brought pursuant to section 2-619(a)(3) of the Code of Civil Procedure,defendants argued that the circuit court should dismiss this case because there were other actions pending that involved thesame parties and claims in a federal district court.

On March 10, 1999, the circuit court granted the motion for judgment on the pleadings, finding that the claims werepreempted by federal law. Based upon its decision, the court found the remaining issues raised in the motions to be mootand denied them on that basis. Plaintiff filed a motion for reconsideration. Prior to the hearing, the FCC filed an amicusmemorandum in which it stated that the court erred in inferring that the FCC intended to preempt state consumer-protectionand contract laws.

Following a hearing on the motion for reconsideration, the circuit court vacated its prior order and denied defendants'motion for judgment on the pleadings. In its July 2, 1999, order, the court found that plaintiff's claims could be pursuedwithout posing an obstacle to the FCC's goal of a competitive CPE market and held that the claims were not barred bypreemption. Addressing those issues previously denied as moot, the court held that plaintiff's action was not barred by thevoluntary-payment doctrine and that the action should not be stayed under the doctrine of primary jurisdiction. The courtalso denied defendants' section 2-619(a)(3) motion to dismiss.

Before addressing the issues raised by defendants, we will take up plaintiff's motion challenging our jurisdiction to considerthose issues in this interlocutory appeal. Plaintiff alleges that this court lacks jurisdiction over the issues raised in point IIand point III of defendants' brief because defendants failed to preserve those issues for review and because those issues arenot proper subjects for review under Supreme Court Rule 307 (166 Ill. 2d R. 307). In point II, defendants contend that thecircuit court erred in vacating its original order granting the motion for judgment on the pleadings on the ground ofpreemption. In point III, defendants argue that the court erred in vacating its original order granting the motion forjudgment on the pleadings on the ground that plaintiff's claims were barred by the voluntary-payment doctrine.

The scope of a Rule 307(a) (166 Ill. 2d R. 307(a)) appeal is limited. The only question properly before the court is whetherthere was a sufficient showing made to the trial court to sustain its order granting or denying the relief sought. Postma v.Jack Brown Buick, Inc., 157 Ill. 2d 391, 399, 626 N.E.2d 199, 203 (1993). Rule 307 may not be used as a vehicle todetermine the merits of either party's case. Postma, 157 Ill. 2d at 399, 626 N.E.2d at 203.

In our view, plaintiff's motion as to point III is well taken for two reasons. First, the voluntary-payment doctrine issue isnot a proper subject for review under the limited scope of Rule 307(a). The order denying the motion to dismiss on thevoluntary-payment issue is not a final order. In this case, a resolution of the voluntary-payment-doctrine issue cannot beobtained at the pleading stage. Defendants have alleged the applicability of the doctrine, but plaintiff has alleged that thepayments were not made voluntarily. The resolution of this issue will require the presentation of evidence so that the courtor fact finder can determine whether a payment was voluntarily made without protest and without fraud or mistake. Second, the circuit court's decision denying defendants' motion to dismiss on the ground of the voluntary-payment doctrinewas not a step in the procedural progression leading to the order granting plaintiff's motion to reconsider and denyingdefendants' motion for judgment on the pleadings. See Burtell v. First Charter Service Corp., 76 Ill. 2d 427, 435, 394N.E.2d 380, 383 (1979); Jiffy Lube International, Inc. v. Agarwal, 277 Ill. App. 3d 722, 726-27, 661 N.E.2d 463, 467(1996). For those reasons, we are without jurisdiction to review point III of defendants' brief, and we order it stricken.

The preemption issue was the focal point of the July 1999 order from which defendants appeal. In Kellerman v. MCITelecommunications Corp., the Illinois Supreme Court concluded that the defendant's federal-preemption argument raisedthe issue of the authority of the trial court to enter the order appealed from and that it was therefore a proper subject oninterlocutory appeal. Kellerman v. MCI Telecommunications Corp., 112 Ill. 2d 428, 437-38, 493 N.E.2d 1045, 1049(1986). Similarly, defendants' preemption argument challenges the circuit court's authority to enter any orders in this case. Further, the circuit court's discussion of the preemption issued was a primary and substantial step in the procedural progressof granting the motion to reconsider and denying the motion for judgment on the pleadings. See Burtell, 76 Ill. 2d at 435,394 N.E.2d at 383. For those reasons, we conclude that defendants' preemption argument is within the purview of Rule307(a) review. We begin with that issue.

The preemption doctrine provides that in some instances a federal law will override state laws on the same subject. Kellerman, 112 Ill. 2d at 438, 493 N.E.2d at 1049. The doctrine requires courts to examine the federal statute in questionto determine whether Congress intended it to supplant state laws on the same subject. Kellerman, 112 Ill. 2d at 438, 493N.E.2d at 1049. Absent explicit preemptive language, courts may infer Congress's intent to preempt where a federalregulation is so pervasive as to make reasonable the inference that Congress left no room for the states to supplement it orwhere a federal statute touches a subject or an object in which the federal interest is so dominant that the federal systemwill be assumed to preclude the enforcement of state laws on the same subject. Kellerman, 112 Ill. 2d at 438, 493 N.E.2dat 1049 (citing Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 698, 81 L. Ed. 2d 580, 588, 104 S. Ct. 2694, 2700 (1984)).

Even when Congress has not completely displaced state regulation of a specific subject or object, state law is nullified tothe extent that it actually conflicts with federal law. Kellerman, 112 Ill. 2d at 438, 493 N.E.2d at 1049; Fidelity FederalSavings & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 153, 73 L. Ed. 2d 664, 675, 102 S. Ct. 3014, 3022 (1982). Actualconflicts arise when it is physically impossible to comply with both federal and state regulations or when state lawinterferes with the accomplishment and execution of the purposes and objectives of Congress. Kellerman, 112 Ill. 2d at438, 493 N.E.2d at 1049; de la Cuesta, 458 U.S. at 153, 73 L. Ed. 2d at 675, 102 S. Ct. at 3022.

In this case, defendants assert that plaintiff's claims are expressly preempted by the FCC deregulation and implementationorders. Defendants also argue that plaintiff's claims are impliedly preempted because the FCC has addressed each ofplaintiff's claims in those orders and any relief entered would interfere with the FCC's regulatory goal of free-marketcompetition in the sale and leasing of CPE.

The Illinois Supreme Court has previously examined the Federal Communications Act (47 U.S.C.