Duke Energy Progress, Inc. v. Frontier Commc'ns of the Carolinas, Inc.

DUKE ENERGY PROGRESS, INC., Plaintiff, v. FRONTIER COMMUNICATIONS OF THE CAROLINAS, INC., Defendant.

NO. 5:13-CV-617-FL

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA WESTERN DIVISION

September 23, 2014

ORDER

This matter comes before the court upon defendant's motion to stay (DE 19), plaintiff's motion for partial judgment on the pleadings (DE 17), and plaintiff's motion for hearing (DE 34). These motions have been fully briefed and are ripe for adjudication. For the reasons that follow, the court grants defendant's motion to stay, denies without prejudice plaintiff's motion for partial judgment on the pleadings, and denies plaintiff's motion for hearing.

BACKGROUND

On August 7, 2013, plaintiff filed a complaint against defendant in state court, which defendant removed to this court on August 26, 2013. Plaintiff is an electric utility that owns utility poles for purposes of distributing electricity to its customers. Defendant is an incumbent local exchange carrier ("ILEC") that owns utility poles for purposes of distributing telephone and other services to its customers.

Plaintiff seeks to recover over $2.97 million that defendant allegedly owes pursuant to two agreements, executed in 1978 and 1981, by the parties' predecessors ("Joint Use Agreements"),which authorize each party to attach its cables that are used in the transmission of the party's retail services, to poles owned by the other party.¹ Under the terms of the Joint Use Agreements, the parties agreed to pay annual rent to each other, calculated pursuant to a rate methodology contained in the Joint Use Agreements, as consideration for the right to use the other party's poles.

According to the complaint, in 1995 and 1996, the parties unsuccessfully attempted to negotiate a new joint use agreement with a new rate methodology. From 1996 through 2009, plaintiff invoiced defendant by using the Handy-Whitman Index, a widely-used cost index in the utility industry, not the rate methodology in the Joint Use Agreements. From 2010 through 2012, however, plaintiff returned to invoicing defendant using the rate methodology in the Joint Use Agreements.

Plaintiff seeks to recover from defendant for underpayments made on annual rental invoices for the years 2010, 2011, and 2012. In particular, plaintiff seeks to recover on (1) 2010 annual rentals, based upon invoices sent in December 2010 and February 2011; (2) 2011 annual rentals, based upon invoices sent in December 2011; (3) 2011 inventory, based upon invoices sent December 2012 and January 2013; and (4) 2012 annual rentals, based upon invoices sent in December 2012. According to the complaint, on July 8, 2011, defendant provided plaintiff one year's written notice of defendant's intent to terminate the Joint Use Agreements, effective July 8, 2012.

Plaintiff asserts four claims premised upon breach of the Joint Use Agreements. In particular, plaintiff seeks a (1) declaration that the Joint Use Agreements continue to control the methodology by which the annual pole rental payments due to each party is calculated; (2) breachof contract recovery of over $2.97 million, excluding interest, for failure to pay full amount due for rental for 2010-2012 rental invoices and the 2011 inventory invoices; (3) in the alternative, breach of contract recovery of $816,255.48, excluding interest, using the Handy-Whitman index to measure damages should the court determine the parties mutually agreed to adopt the Handy-Whitman index for 2011-2012 annual rental invoices and 2011 inventory invoices; and (4) in the alternative, recovery in an unspecified amount based upon unjust enrichment should the court determine that no express rental rate existed for 2010 through 2012.

Defendant filed its answer to the complaint on October 9, 2013. Following submission of a joint report and plan pursuant to Federal Rule of Civil Procedure 26(f), the court entered an order on November 25, 2013, noting that plaintiff sought to move forward in discovery while defendant sought a stay of discovery, pending resolution of an anticipated motion to stay on the basis that the Federal Communications Commission ("FCC") has primary jurisdiction over certain aspects of the dispute. The court directed defendant to file a motion to stay on or before December 9, 2013, and stayed discovery pending resolution of the motion.

On December 9, 2013, defendant filed its motion to stay, in which it argues that plaintiff's claims for rentals dated after July 12, 2011, fall within the FCC's primary jurisdiction, based upon an FCC order regarding pole attachments, effective July 12, 2011. See Implementation of Section 224 of the Act; A National Broadband Plan for Our Future, 26 FCC Rcd. 5240, 5328-33, 2011 WL 1341351 (2011) ("Pole Attachment Order"); id., 76 Fed. Reg. 40817 (2011) (establishing effective date). Defendant attaches to the motion a complaint it filed that same date with the FCC's enforcement bureau (the "FCC complaint"), seeking to have FCC set rates that plaintiff may chargefor all periods in dispute after July 12, 2011. Defendant seeks a stay pending FCC's resolution of its FCC complaint.

Also on December 9, 2013, plaintiff filed a motion for partial judgment on the pleadings, pursuant to Federal Rules of Civil Procedure 12(c) and (h)(2)(B), seeking to strike the following three defenses contained in defendant's answer:

[FIRST FURTHER DEFENSE:] Under 47 U.S.C. § 224, [defendant] is entitled to just and reasonable rates, terms, and conditions for its attachments on [plaintiff's] poles.²

[SECOND FURTHER DEFENSE:] The FCC has primary jurisdiction over this matter. The subject matter of this case involves the rates, terms and conditions of agreements for [defendant's] use of [plaintiff's] utility poles, over which the FCC has primary jurisdiction. This Court, accordingly, should defer to the FCC's primary jurisdiction.

[THIRD FURTHER DEFENSE:] Given that the subject matter of this case involves the rates, terms and conditions of joint use agreements, a matter which is related to the primary jurisdiction of the FCC, [plaintiff] has failed to state a claim upon which relief can be granted.

DISCUSSION

A. Motion to Stay

The primary jurisdiction doctrine is "specifically applicable to claims properly cognizable in court that contain some issue within the special competence of an administrative agency." Reiter v. Cooper, 507 U.S. 258, 268 (1993) "It requires the court to enable a referral to the agency, staying further proceedings so as to give the parties reasonable opportunity to seek an administrative ruling."Id. (internal quotations omitted). "No fixed formula exists for applying the doctrine of primary jurisdiction. In every case the question is whether the reasons for the existence of the doctrine are present and whether the purposes it serves will be aided by its application in the particular litigation." United States v. Western Pac. R.R. Co., 352 U.S. 59, 64 (1956). "Generally speaking, the doctrine is designed to coordinate administrative and judicial decision-making by taking advantage of agency expertise and referring issues of fact not within the conventional experience of judges or cases which require the exercise of administrative discretion." Envtl. Tech. Council v. Sierra Club, 98 F.3d 774, 789 (4th Cir. 1996). "Despite what the term primary jurisdiction may imply, it does not speak to the jurisdictional power of the federal courts. It simply structures the proceedings as a matter of judicial discretion, so as to engender an orderly and sensible coordination of the work of agencies and courts." Id. at 789 n.24 (quotation omitted).

"The grant or denial of a request to stay proceedings calls for an exercise of the district court's judgment 'to balance the various factors relevant to the expeditious and comprehensive disposition of the causes of action on the court's docket.'" Maryland v. Universal Elections, Inc., 729 F.3d 370, 375 (4th Cir. 2013) (quoting United States v. Ga. Pac. Corp., 562 F.2d 294, 296 (4th Cir.1977)). Although the Fourth Circuit has not articulated specific factors, courts within this circuit have identified four factors that may be considered, albeit not exclusively, in deciding whether to grant a stay due to the doctrine of primary jurisdiction:

(1) whether the question at issue is within the conventional experience of judges or is within the agency's particular filed of expertise; (2) whether the question at issue is particularly within the agency's discretion; (3) whether there exists a substantial danger of inconsistent rulings; and (4) whether a prior application to the agency has been made.

Longo v. Trojan Horse Ltd., 992 F. Supp. 2d 612, 617 (E.D.N.C. 2014) (citing Nat'l Comm. Ass'n,Inc. v. American Tel. & Tel. Co., 46 F.3d 220, 222 (2d Cir.1995)); see Sprint Commc'ns Co., L.P. v. Ntelos Tel. Inc., 5:11CV00082, 2012 WL 3255592 * 11 (W.D. Va. Aug. 7, 2012) (same); Cent. Tel. Co. of Virginia v. Sprint Commc'ns Co. of Virginia, 759 F. Supp. 2d 772, 786 (E.D. Va. 2011) (same).

Consideration of these factors, as well as other circumstances presented, weigh in favor of granting the motion to stay in this case. As to the first two factors, the parties do not agree on the "question at issue" in this case. Plaintiff contends the question at issue is the extent of contractual rights of the parties, which is undeniably a question suited for judicial determination. Defendant contends that the question at issue is whether the FCC Pole Attachment Order must dictate the rents plaintiff may recover for post-July 12, 2011 rentals. There is some truth to the positions on both sides. As to the parties' contractual rights regarding pre-July 12, 2011, rentals, the FCC Pole Attachment Order is not applicable, and the court must determine the rights of the parties based upon the Joint Use Agreements and other applicable agreements between the parties, to the extent an express rental rate existed for this time period.

As to...