Who pays hacker's long-distance tab?

A computer hacker figured out how to make long-distance phonecalls that were billed to Frederick Fleming's California law office.The hacker called Fleming's 800 number at night when calls wereautomatically switched to an answering service through a second line.Hijacking the dial tone on the outgoing line, the hacker made $35,000in long-distance phone calls.

AT&T demanded that Fleming pay for the fraudulent calls. WhenFleming refused, the phone company filed a lawsuit in federal court.

A federal law would have protected Fleming if a thief had stolenhis credit cards and made $35,000 in unauthorized purchases, he said.With unauthorized phone calls, though, a federal law made Flemingliable for the hacker's fraud.Applying a rule called the "filed-tariff doctrine," a federaljudge in central California ruled for the phone company. Refusing togive up, Fleming took his fight with AT&T to the U.S. 9th CircuitCourt of Appeals.AT&T insisted that Fleming was liable for all long-distancecalls that "originated" at his office phone numbers. The phonecompany relied on the "tariff" it filed with the FederalCommunications Commission.The terms of the agreement between phone companies and theircustomers are listed in documents (called tariffs) that are filedwith the FCC. Tariffs aren't just ordinary contracts. Thefiled-tariff doctrine says tariffs have the same force and effect asa statute enacted by Congress. This means customers can't claimignorance of the contents of a tariff (since everyone is presumed toknow all the law). And state laws that might have provided a defensefor customers are displaced (or pre-empted) by the tariff.AT&T's tariff said customers would be liable for alllong-distance phone calls that "originated at the Customer'snumber(s)." Fleming argued that the hacker placed calls fromsomewhere miles away from his office. So, according to Fleming, thelong-distance phone calls didn't "originate" from his office line.But in a 1991 case, the FCC ruled that when a hacker calls intoa customer's phone system and hijacks another line for long-distancephone calls, the long-distance calls are considered as having"originated" at the customer's phone number. Since that decision,judges throughout the country have ruled against phone customers insimilar cases. New York City, for example, was stuck with a bill for$529,000 in unauthorized phone calls in a 1993 case.This isn't just AT&T. Other long-distance phone companies havealso been suing to make customers pay for fraudulent phone calls.Ironically, the filed-tariff doctrine was originally designed toprotect customers from big corporations. In the 1800s, railroadsearned the hatred of farmers and merchants by engaging in flagrantprice discrimination. To outlaw this kind of favoritism, railroads(and later utilities such as gas, electric and telephone companies)were required to list their prices - and the terms and conditions ofservice - in publicly filed tariffs.By giving these filed tariffs the force and effect of a statute,it became illegal for railroads and utilities to engage in pricediscrimination.Fleming argued that the filed-tariff doctrine shouldn't applybecause innocent customers could be forced into bankruptcy if theyare ordered to pay for phone fraud by computer hackers. And heargued AT&T is better equipped to bear the burden of phone fraud,because it can spread the losses among its millions of customers.Sympathizing with Fleming, the appellate judges said their handswere tied. Only Congress can change the law to give phone customersthe same kind of protection people have against unauthorizedpurchases on stolen credit cards. So the judgment ordering Flemingto pay $35,000 for fraudulent phone calls was affirmed.Steven P. Garmisa, a partner in the Chicago law firm of Torshen,Spreyer, Garmisa & Slobig Ltd., specializes in civil litigation.