Mcleodusa Telecommunications Services v. Qwest

469 F.Supp.2d 677

McLEODUSA TELECOMMUNICATIONS SERVICES, INC., Plaintiff, v. QWEST CORPORATION and Qwest Communications Corporation, Defendants.

No. C 06-0035-MWB.

United States District Court, N.D. Iowa, Cedar Rapids Division.

January 16, 2007.

Diane Kutzko, Richard S. Fry, Shuttleworth & Ingersoll, Cedar Rapids, IA, Jason

R. Scherr, Jonathan S. Frankel, Richard M. Rindler, Robin F. Cohn, Warren Anthony Fitch, Bingham McCutchen LLP, Washington, DC, Jeana L. Goosmann, John C. Gray, Sioux City, IA, for Plaintiff.

David A. Vogel, Douglas P. Lobel, Cooley Godward Kronish LLP, Reston, VA, Stephen J. Holtman, Simmons Perrine Albright Ellwood, Cedar Rapids, IA, for Defendants.

MEMORANDUM OPINION AND ORDER REGARDING PLAINTIFF'S MOTION TO DISMISS CERTAIN COUNTERCLAIMS

BENNETT, District Judge.

TABLE OF CONTENTS
I.  INTRODUCTION ........................................................ 680
      A.  Factual Background .............................................. 680
      B.  Procedural Background ........................................... 681
          1.  The Complaint and Counterclaims ............................. 681
          2.  The Counterclaims at issue .................................. 681
              a.  Negligent misrepresentation ............................. 681
              b.  Conversion .............................................. 682
              c.  Trespass  ............................................... 683
              d.  Fraud ................................................... 683
              e.  Fraudulent concealment .................................. 684
              f.  Negligence .............................................. 685
          3.  The motions to dismiss ...................................... 686
 II.  LEGAL ANALYSIS ...................................................... 687
      A.  Standards For A Rule 12(b)(6) Motion To Dismiss ................. 687
      B.  The Sufficiency Of Qwest's "Tort" Allegations ................... 689
          1.  The negligent misrepresentation counterclaims ............... 689
              a.  Arguments of the parties ................................ 689
              b.  Applicable law .......................................... 691
              c.  Analysis ................................................ 696
          2.  The conversion counterclaims ................................ 698
              a.  Arguments of the parties ................................ 699
              b.  Applicable law .......................................... 699
              c.  Analysis ................................................ 700
          3.  The trespass counterclaims .................................. 702
              a.  Arguments of the parties ................................ 702
              b.  Applicable law .......................................... 703
              c.  Analysis ................................................ 703
          4.  The fraud counterclaim ...................................... 705
              a.  Arguments of the parties ................................ 705
              b.  Applicable law .......................................... 705
              c.  Analysis ................................................ 706
          5.  The fraudulent concealment counterclaims .................... 706
              a.  Arguments of the parties ................................ 707
              b.  Applicable law .......................................... 707
              c.  Analysis ................................................ 708
          6.  The negligence counterclaims ................................ 709
              a.  Arguments of the parties ................................ 709
              b.  Applicable law .......................................... 709
              c.  Analysis ................................................ 710
III.  CONCLUSION .......................................................... 710

Disputes between telecommunications companies, which provide each other with various services for initiation or completion of intrastate, interstate, wireless, wire-line, long-distance, and "toll free" (8XX) calls to and from each other's customers, have ripened into litigation. The plaintiff asserts six claims of breach of contract, one claim of quantum meruit, one claim of unjust enrichment, and one claim for declaratory judgment that the plaintiff does not owe the defendants the amounts that the defendants have claimed for terminating access charges. In response, the defendants assert thirty-nine counterclaims, among them fourteen "tort" counterclaims that the plaintiff now challenges in a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state claims upon which relief can be granted. The challenged counterclaims are for negligent misrepresentation, conversion, trespass, fraud, fraudulent concealment, and negligence. The court must decide whether the defendants' challenged counterclaims are merely restated contract claims, as the plaintiff contends, or claims with an independent basis that can properly be asserted along side of the defendants' contract claims, as the defendants contend.

I. INTRODUCTION

A. Factual Background

As explained more fully below, in considering a motion to dismiss under Rule 12(b)(6), the court must assume that all facts alleged by the complaining party, here the counterclaimants, are true, and must liberally construe those allegations. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Therefore, for purposes of the plaintiff's Rule 12(b)(6) motion to dismiss some of the defendants' counterclaims, the factual background that is relevant is set forth in the defendants' counterclaim.

Defendants Qwest Corporation and Qwest Communications Corporation (collectively, "Qwest"), allege, generally, that plaintiff McLeodUSA has deliberately and systematically attempted to lower its operating costs and to generate revenue by violating obligations under law or contract, including obligations to Qwest. Qwest is a telecommunications carrier providing both local telephone services in fourteen states, including Iowa, and long-distance telephone services throughout most of the country. At a more technical level, as a local telephone service provider, Qwest is a "local exchange carrier" or "LEC," and as a long-distance services provider, Qwest is an "interexchange carrier" or "IXC." McLeodUSA is also a "LEC," but more specifically, is a "competitive local exchange carrier" or "CLEC," and is also an IXC. Other entities are "ILECs," or "incumbent local exchange carriers." Nonparty Iowa Network Services ("INS") is a consortium of Iowa ILECs established years ago as an entity to provide the ILECs' customers with an alternative for long-distance service to the then-prevailing long-distance carrier (AT & T). Today, Qwest alleges that INS continues to provide to many Iowa ILECs (but not Qwest or McLeod) long-distance services as well as other services, such as data processing and billing functions.

The various entities, including Qwest, McLeodUSA, and various LECs, must regularly exchange telephone calls between each other's customers in order to create seamless and ubiquitous telephone service throughout Iowa. Thus, Qwest and McLeodUSA are parties to various Interconnection Agreements ("ICAs"), which govern, among other things, the terms and conditions under which the parties agree to exchange local telephone calls between their respective networks. Qwest alleges that these ICAs govern, in part, the use of Local Interconnection Service facilities between Qwest and McLeod, but Qwest alleges that the ICAs do not authorize McLeod to use Qwest's Local Interconnection Service facilities to route most kinds of toll calls, such as interLATA calls,¹ 8XX calls,² or other toll calls carried by IXCs. The parties' disputes and, more specifically, the counterclaims at issue here, arise from allegations of unauthorized, use of the parties' facilities and non-payment of the charges, or "tariffs," for routing of local and long-distance calls through and between the parties' systems.

B. Procedural Background

1. The Complaint and Counterclaims

In a Complaint (docket no. 1), filed March 14, 2006, McLeodUSA asserts six claims of breach of contract, one claim of quantum meruit, one count of unjust enrichment, and one count for declaratory judgment that it does not owe Qwest the amounts that Qwest has claimed for terminating access charges. Qwest filed an Answer and Counterclaims (docket no. 21) on May 19, 2006, and its First Amended Counterclaims (docket no. 41) on August 24, 2006, the latter of which asserts thirty-nine counterclaims.

2. The Counterclaims at issue

For present purposes, the counterclaims at issue are the "tort" counterclaims asserted by Qwest in Counts VI, VII, VIII, XVII, XVIII, XIX, XXII, XXV, XXVI, XXVIII, XXIX, XXX, XXXIII, and XXXIV of its Counterclaims. These Counts assert claims of negligent misrepresentation, conversion, trespass, fraud, fraudulent concealment, and negligence. The court will identify briefly, in turn, the allegations supporting each kind of counterclaim.

a. Negligent misrepresentation

Qwest asserts three counterclaims for "negligent misrepresentation": Count VI (regarding Qwest's 8XX access charge), Count XIX (regarding interLATA access charges), and Count XXIX (regarding INS terminating access charges). More specifically, in Count VI, Qwest alleges, in part, the following:

166. As part of its business, McLeod is engaged in providing 8XX services. In the course of, and as a necessary and critical part, McLeod's business requires McLeod to provide information to a third-party. SMS 800 Database. Qwest and other carriers, including McLeod, rely on the information submitted to the SMS 800 Database. This information is necessary for Qwest and other carriers to...