Commc'n Mgmt. Servs., LLC v. Harlow

COMMUNICATION MANAGEMENT SERVICES, LLC, et al., Plaintiff, v. BROOKS L. HARLOW, Attorney at Law, Defendants.

3:12-cv-01923-BR

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON

September 23, 2014

OPINION AND ORDER

FRANKLIN G. PATRICK

P.O. Box 231119

Portland, OR 97281

(503) 245-2828

Attorney for Plaintiffs

JEFFREY M. PETERSON

STEVEN K. BLACKHURST

Ater Wynne, LLP

1331 N.W. Lovejoy Street

Suite 900

Portland, OR 97209-2785

(503) 226-8635

Attorneys for Defendant

BROWN, Judge.

This matter comes before the Court on Defendant Brooks L. Harlow's Request (#48) for Judicial Notice and Motion (#45) for Summary Judgment.

For the reasons that follow, the Court GRANTS Defendant's Request (#48) for Judicial Notice and DENIES Defendant's Motion (#45) for Summary Judgment.

BACKGROUND

The following facts are undisputed and taken from the parties' submissions on summary judgment.

I. Underlying Litigation Background

In 1996 Congress passed the Telecommunications Act of 1996 (TCA), which amended the Federal Communications Act of 1934 and substantially modified the regulatory scheme governing the payphone industry and directed the Federal Communications Commission (FCC) to issue regulations implementing the provisions of this new law. Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (codified as amended in scattered sections of 47 United States Code). The FCC adopted regulations that required carriers such as Qwest to set payphone service rates that were based on the actual cost of providing the service together with a reasonable amount for overhead.

Northwest Public Communications Council (NPCC) is a regionaltrade association representing companies providing public payphone services in Idaho, Montana, Oregon, and Washington. Plaintiffs are Payphone Service Providers (PSPs) and are current or former members of NPCC who purchased network payphone services from Qwest Communications Corporation. Those services included Public Access Line services (PAL) and fraud-protection services (CustomNet).

Defendant is an attorney and former partner of the Miller Nash law firm who represented NPCC when he was at Miller Nash. Defendant also represented individual members of NPCC in various matters, including litigation against Qwest in the Western District of Washington. See Davel Commc'ns, Inc. v. Qwest Corp., 460 F.3d 1075 (9th Cir. 2006).

In December 1995 the Oregon Public Utilities Commission (PUC) opened a general rate case (the Rate Case) to establish new rates for all of Qwest's Oregon telecommunications services, including its payphone services.

Three months after the commencement of the Rate Case, Congress enacted the TCA pursuant to which payphone owners were to be compensated for all calls made from their payphones, including calls using 800 numbers, credit cards, and other mechanisms that permitted calls without depositing coins into the payphones. Under the TCA intrastate payphone rates were subject to federal regulations for the first time, and the TCA requiredsuch rates to be compliant with the "new services test" (NST). Thus, the enactment of the TCA fundamentally changed the regulation of payphones during the pendency of the Rate Case.

In May 2001 NPCC (represented by Defendant) filed a complaint with the PUC seeking refunds of PAL rates that allegedly were in excess of those permitted by the TCA and certain FCC orders (the Refund Case). Although the Refund Case was filed separately from the Rate Case, it would be affected by the outcome of the Rate Case. Thus, the PUC immediately stayed the Refund Case in accordance with an agreement between the parties.

In September 2001 the PUC concluded the Rate Case and set rates that it believed were compliant with the 1996 amendments to the FCA.

In March 2002 Defendant represented NPCC in an appeal of the PUC's final determination in the Rate Case.

In 2003 Qwest implemented lower rates for the PAL and CustomNet services that it provided to PSPs.

In 2004 the Oregon Court of Appeals ruled in favor of NPCC and rejected the PUC's rate order as to payphone services, remanded the administrative proceeding to the PUC, and directed the PUC to reconsider the proposed rates in light of recent FCC orders.

In 2005 while the Rate Case was pending on remand, theadministrative law judge assigned to the Refund Case abated that action in light of pending additional guidance from the FCC about the application of one of the FCC's orders.

In 2007 the PUC adopted a stipulation between Qwest and NPCC that the lower rates adopted by Qwest in 2003 complied with the FCC's orders and regulations, which effectively ended the Rate Case.

In February 2009 the PUC reactivated the Refund Case at NPCC's request when it became evident that further guidance from the FCC was not forthcoming. In part because NPCC in the original Refund Case complaint only pled claims for refunds of PAL rates, NPCC moved to amend its complaint to add claims related to CustomNet refunds.

In May 2009 the PUC denied NPCC's motion to amend to include claims for CustomNet refunds on the ground that the CustomNet claims did not relate back to the initial claim for PAL refunds and, therefore, those claims were barred by the statute of limitations.

On approximately July 22, 2009, NPCC and the individual PSPs hired Plaintiffs' current counsel, Frank Patrick, to replace Defendant. Prior to assuming representation, Patrick told Plaintiffs that they needed to file a case in the FCC or the United States District Court to protect claims that were not before the PUC (i.e., to obtain refunds) and that they had muchlarger claims for damages against Qwest that Defendant had not asserted on their behalf. Patrick also specifically informed Plaintiffs that he was concerned the PUC did not have jurisdiction over the Refund Case claims because he believed the FCC or United States District Court had exclusive jurisdiction over claims arising under the TCA.

After being retained by Plaintiffs, Patrick conducted a full review of the complex history of the litigation before the PUC. On completion of this review, Patrick informed Plaintiffs in October 2009 that:

1) In addition to the refund claims, there were other claims for damages and a potential federal antitrust claim;

2) A number of state-law claims existed that provided independent bases for recovery, including recovery of the unpled CustomNet overcharges;

3) State-law damage claims exceeded the potential federal damage claims; and

4) If the PUC did not have jurisdiction over the claims in the Refund Case, such claims must be filed before the FCC or the United States District Court no later than November 15, 2009, to avoid a two-year statute of limitations. Patrick also told Plaintiffs that any applicable statute of limitations would be tolled under

equitable principles even if the statutory period had run.

Accordingly, on November 13, 2009, NPCC and Plaintiffs filed an action in this Court asserting federal and state-law claims against Qwest (the Federal Action). See N.W. Pub. Commc'ns Council v. Qwest Corp., No. 3:09-cv-01351-BR.

Also in November 2009 Plaintiffs, represented by Patrick, again moved to amend their complaint before the PUC to add claims for CustomNet refunds, but the PUC denied their motion in February 2010. Plaintiffs appealed that ruling to the Oregon Court of Appeals, but the appellate court dismissed the interlocutory appeal on September 9, 2010, on the ground that the PUC ruling was not an appealable final order.

On October 25, 2010, this Court dismissed Plaintiffs' federal-law claims on statute of limitations grounds; declined to exercise supplemental jurisdiction over Plaintiffs' state-law claims; and, accordingly, dismissed the Federal Action in its entirety. See N.W. Pub. Commc'ns Council v. Qwest Corp., No. 3:09-cv-01351-BR (#66), 2010 WL 4260341 (D. Or. Oct. 25, 2010). Plaintiffs moved the Court to reconsider its dismissal of the Federal Action on November 22, 2010. On March 16, 2011, the Court issued an Order in which it adhered to its October 25, 2010 decision. The Ninth Circuit Court of Appeals affirmed the Court's decision.

Shortly after the Court issued its October 25, 2010, decision in the Federal Action, Patrick advised Plaintiffs to obtain malpractice counsel. At this time Patrick advised Plaintiffs that Patrick was uncertain whether the malpractice claims had accrued yet because the damages under the state-law claims exceeded the potential damages in the dismissed federal-law claims. Plaintiffs believed they could not afford malpractice counsel, however, so Patrick agreed to undertake a limited effort to attempt to reach a tolling agreement with Defendants.

The PUC issued a final order in the Refund Case in 2011, which Plaintiffs appealed to the Oregon Court of Appeals. That appeal remains pending.

On January 13, 2014, Plaintiffs instituted an action against Qwest in Oregon state court (the State Action) in pursuit of the state-law claims over which this Court declined to exercise supplemental jurisdiction in the Federal Action. Qwest removed the State Action to this Court on February 13, 2014, and the State Action is now pending before this Court. See Commc'ns Mgmt. Servs., LLC v. Qwest Corp., No. 3:14-cv-00249-BR.

II. Malpractice Action Background

On October 25, 2012, two years after the Court's Order dismissing the Federal Action, Plaintiffs filed this legal malpractice action against Defendant. In their Third AmendedComplaint (TAC), Plaintiffs allege Defendant was negligent in connection with his representation of Plaintiffs "in many different matters concerning claims under Oregon law and the Federal Telecommunications Acts before the [PUC] and the [FCC] and the Courts of Washington and Oregon." TAC at ¶ 12. See also TAC ¶¶ 21-27.

Specifically, Plaintiffs allege:

(1) Defendant failed to timely file all the Plaintiffs' claims under the TCA against the PUC and Qwest in appropriate fora and as a result all Plaintiffs' claims under the TCA were deemed time barred;

(2) Defenda...