Great Lakes Commc'n Corp. v. At&T Corp.

GREAT LAKES COMMUNICATION CORPORATION, Plaintiff, v. AT&T CORP., Defendant.

No. C13-4117-DEO

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF IOWA WESTERN DIVISION

DATED: June 24, 2014

REPORT AND

RECOMMENDATION

TABLE OF CONTENTS

I. INTRODUCTION...........................................................................3

II. PROCEDURAL HISTORY...............................................................3

III. REGULATORY BACKGROUND........................................................4

IV. GLCC'S COMPLAINT..................................................................10

V. AT&T's COUNTERCLAIM............................................................11

VI. THE MOTION TO DISMISS..........................................................11

A. Applicable Standards.............................................................12

B. Analysis.............................................................................13

1. Standing....................................................................13

2. Counterclaim Count I...................................................15

a. Overview...........................................................15

b. Summary of the Arguments....................................16

c. Discussion.........................................................18

i. Has AT&T Alleged That No Fees Are Being Paid?.......................................................18

ii. Is The Allegation Plausible?...........................19

3. Counterclaim Count II ..................................................22

a. Overview ........................................................... 22b. Summary of the Arguments.................................... 23

c. Discussion ......................................................... 24

4. Counterclaim Count III................................................. 28

a. Overview ........................................................... 28

b. Summary of the Arguments.................................... 28

c. Discussion ......................................................... 29

VII. THE MOTION FOR SUMMARY JUDGMENT....................................33

A. Applicable Standards.............................................................33

B. Undisputed Facts.................................................................35

C. Summary of the Arguments....................................................37

D. Discussion..........................................................................38

1. Is There a Genuine Issue of Material Fact as to Whether AT&T is a Buyer Under the Tariff and, Therefore, Subject to its Billing Dispute Requirements?.......................38

2. If AT&T is a Buyer, is GLCC Entitled to Summary Judgment Based on AT&T's Failure To Comply With the Tariff's Billing Dispute Requirements?..............................40

a. Notice Requirements ............................................41

b. Payment Requirement...........................................44

VIII. CONCLUSION AND RECOMMENDATION.......................................46

I. INTRODUCTION

This case is before me on plaintiff's motion (Doc. No. 17) to dismiss and for summary judgment. Defendant has filed a resistance (Doc. No. 20) and plaintiff has filed a reply (Doc. No. 24). The Honorable Donald E. O'Brien, Senior United States District Judge, has referred the motion to me pursuant to 28 U.S.C. § 636(b) to conduct any necessary hearings and to issue a report and recommendation. See Doc. No. 27. I heard oral arguments on May 29, 2014. Attorneys Jeana Goosmann, David Carter and Joseph Bowser appeared for plaintiff. Attorneys Richard Lozier and Michael Hunseder appeared for defendant. The motion is now fully submitted.

II. PROCEDURAL HISTORY

Plaintiff Great Lakes Communication Corporation (GLCC) commenced this action against defendant AT&T Corp. (AT&T) on December 18, 2013. GLCC's complaint (Doc. No. 1) asserts various causes of action through which it seeks to recover payments allegedly owed to it by AT&T. GLCC also seeks declaratory relief.

GLCC alleges that it is an Iowa corporation that operates as a local exchange carrier (LEC), meaning it "provides interstate and intrastate exchange access service, as well as local, long distance and enhanced services to residential and business telecommunications customers." Doc. No. 1 at ¶ 4. GLCC contends AT&T is a New York corporation that operates as an interexchange carrier (IXC) and is a common carrier subject to the provisions of the Communications Act, 47 U.S.C. § 151 et seq. (the Act). Id. ¶¶ 5-6. GLCC alleges subject matter jurisdiction via both federal-question and diversity jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1332. Id. at ¶ 7-8. It further alleges supplemental jurisdiction over state law claims pursuant to 28 U.S.C. § 1367. Id. at ¶ 9.

On January 31, 2014, AT&T filed an answer and counterclaim (Doc. No. 11). On March 3, 2014, GLCC filed its pending motion to dismiss and for summary judgment. GLCC seeks entry of an order (a) dismissing AT&T's counterclaims pursuant to Federal Rule of Civil Procedure 12(b)(6) and (b) holding AT&T liable to GLCC as a matter of law pursuant to Federal Rule of Civil Procedure 56.

III. REGULATORY BACKGROUND

Overview of intercarrier compensation. Telephone calls often involve multiple service providers. When more than one provider is involved, arrangements must be made for those providers to obtain compensation for their respective roles. The Federal Communications Commission (FCC) oversees and governs this process with regard to telecommunications services that cross state lines. Services that occur entirely within a state are governed by that state's applicable regulatory agency which, in Iowa, is the Iowa Utilities Board (IUB).

Switched access service charges are one form of intercarrier compensation. LECs, such as GLCC, offer switched access services that allow IXCs, such as AT&T, to originate and terminate long distance calls to end users. Thus, for example, if a caller in Iowa places a call to another state, the caller's local phone company (a LEC) accepts the call at a local switch that connects the caller to its network, carries the call over its local network and eventually hands off the call at a switch to the caller's selected long distance company (an IXC). The IXC then carries the call over its national network to a location near the called party's premises and hands it off at a switch to the called party's local telephone company (another LEC). That LEC then routes the call over its local network to a switch that is directly connected to the called party. The call is then connected to the called party.

In this example, the IXC would not be able to carry the long distance call (and, thus, bill its long distance customer) without the assistance of the originating and terminating LECs. For this reason, those LECs are permitted to assess originating and terminating access charges on the IXC. The charges are typically established by tariffs, filed by each LEC, or by express contracts between a LEC and an IXC. They may include separate elements such as "transport" (carrying calls over wires, or "trunks") and "switching" (routing calls in various directions). Each element is ordinarily priced and billed pursuant to FCC rules and the rates and requirements contained in the applicable tariff or contract.

Under this system, the IXC has no control over the selection of the LEC at either end of the call. The IXC's long distance service customers make that choice. Once an IXC's customer chooses to take local service from a particular LEC, the IXC must rely on the customer's chosen LEC to originate calls to the long distance carriers' network. The same is true with respect to persons called by an IXC's customers. Those customers choose their own LECs and the IXCs must obtain terminating access services from those LECs when their customers make long distance calls to end users served by those LECs. If an IXC cannot obtain originating and terminating access services from certain LECs, then that IXC would not be able to serve customers who subscribe to the local telephone services of those LECs.

Switched access service arrangements are often more complicated than suggested by the example discussed above. For example, a small or rural LEC may not be connected to each IXC's network and, instead, must rely on an intermediate LEC to exchange call traffic with an IXC. That is, a long distance call directed to a LEC's customer may be handed off by the IXC to a different LEC, which then transports the call to the terminating LEC's system. This means, in short, that there can be more thanthree entities involved in carrying a single long distance call. Of course, the additional, intermediary parties also expect compensation for the use of their facilities.

One alternative to basic switched access service is called Centralized Equal Access (CEA). A CEA typically involves multiple LECs working together to build a transport network that accepts long distance calls at a centralized location and then carries them to the individual LECs. In Iowa, a CEA provider known as Iowa Network Services (INS) operates a centralized switch in Des Moines and transports long distance calls between that switch and certain LECs. INS charges an IXC a flat, per-minute rate for each call that is so transported, regardless of the distance the call travels on the INS network.

Another alternative, direct trunking, occurs when an LEC and IXC establish a direct connection at a location where they share a large volume of traffic. When a LEC and an IXC create a direct trunking relationship, calls are exchanged over that connection at an agreed price. When large volumes of traffic are involved, this can be the most cost-effective method of providing intercarrier services.

Regulation of LEC Switched Access Charges. Incumbent local exchange carriers (ILECs) are the traditional local telephone companies that existed prior to the enactment of the Telecommunications Act of 1996....