SW Legal studies in Business

Telephone Slamming May Result in Damages to Business as Result of Loss of Customers
Description Appeals court held that a business that suffered a loss of customers due to slamming of its long distance service without knowledge by the customer could be the basis for a suit for fraudulent concealment that could make the long-distance carrier liable for business losses suffered by the user of the long-distance service.
Topic Consumer Protection
Key Words Slamming; Fraud
C A S E   S U M M A R Y
Facts Lovejoy, individually and doing business as Lovejoy Drilling, sued AT&T for slamming his toll-free 800 number, which, he asserts, caused him to lose business. Pac Bell provided Lovejoy's 800 telephone service for in-state service. AT&T falsely informed Pac Bell that it was authorized by Lovejoy to switch his 800 service from Pac Bell to AT&T. Lovejoy was unaware of the switch. The 800 number charges were hidden in Lovejoy's long distance charges, which were with AT&T, at Lovejoy's permission. Months later, Lovejoy, still unaware of the 800 number switch, discontinued his AT&T service and changed to another long distance provider. That resulted in the 800 number service being disconnected too, which Lovejoy did not discover for some time. Lovejoy contended that as a result of the telephone fraud, he lost enough business to cause bankruptcy. The trial court dismissed Lovejoy's suit; he appealed.

Reversed. Lovejoy sufficiently pleaded a proximate cause connection between AT&T's alleged deceptive conduct and his loss of business. He has stated a cause of action for fraudulent concealment. "Not every fraud arises from an affirmative misstatement of material fact." The principle is fundamental that deceit may be negative as well as affirmative. It may consist of suppression of that which it is one's duty to declare as well as of the declaration of that which is false. Compensating Lovejoy for AT&T's alleged fraud would not conflict with Federal Communications Commission regulations regarding telephone service and rates.

Citation Lovejoy v. AT&T Corp., 111 Cal.Rptr.2d 711 (Ct. App., Calif., 2001)

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