Northern Valley Communications v. At & T Corp.

659 F.Supp.2d 1056

2009 D.S.D. 10

NORTHERN VALLEY COMMUNICATIONS, LLC, Plaintiff, v. AT & T CORP., Defendant.

No. CIV 09-1003.

United States District Court, D. South Dakota, Northern Division.

September 24, 2009.

James M. Cremer, Bantz, Gosch & Cremer, LLC, Aberdeen, SD, Joseph P. Bowser, Michael B. Hazzard, Ross A. Buntrock, Arent Fox LLP, Washington, DC, for Plaintiff.

James F. Bendernagel, Jr., Michael J. Hunseder, Sidley Austin, LLP, Washington, DC, William M. Van Camp, Olinger, Lovald, McCahren & Reimers, P.C., Pierre, SD, for Defendant.

OPINION AND ORDER

KORNMANN, District Judge.

INTRODUCTION

[¶ 1.] Northern Valley filed this diversity action to collect for amounts allegedly due from AT & T for providing originating and terminating telephone access services. Plaintiff alleged claims for breach of contract and breach of implied contract arising out of federal and state tariffs, violation of the Telecommunications Act of 1996 ("the Act" or "the 1996 Act"), 47 U.S.C. §§ 201 and 203, collection action pursuant to state tariff, and unjust enrichment. Plaintiff seeks damages in the amount of $6,191,303 for amounts claimed to be due from January 1, 2008, to July 1, 2008, interest, attorneys fees, punitive damages, and injunctive relief. AT & T filed an answer contending that Northern Valley did not provide access services for which it billed AT & T. AT & T also filed a counterclaim alleging violation of Northern Valley's tariffs and the Act, 47 U.S.C. § 203(c), by charging for services not provided for in Northern Valley's tariffs, violation of the Act, 47 U.S.C. § 201(b), by billing for services not provided to AT & T, fraudulent and negligent misrepresentation, unjust enrichment, and civil conspiracy. AT & T seeks damages, declaratory and injunctive relief, and attorneys fees. Plaintiff filed a motion (Doc. 24) for judgment on the pleadings as to its claims set forth in the complaint and the counterclaims asserted by defendant.

BACKGROUND

[¶ 2.] The 1996 Act amended the Communications Act of 1934 to promote "competition and the reduction of regulation in the telecommunications industry, in order to secure lower prices and higher quality services for American telecommunications consumers and to encourage the rapid deployment of new telecommunications technology." Verizon Wireless (VAW) LLC v. Sahr, 2006 D.S.D. 15, ¶ 10, 457 F.Supp.2d 940, 944-945 (D.S.D.2006) (citing Telecommunications Act of 1996, Pub.L. No. 104-104, purpose statement; 110 Stat. 56 (1996)). "Before the Act was passed, incumbent local exchange carriers ["ILECs"] served as the exclusive providers of local telephone service, which was considered a natural monopoly." Iowa Telecommunications Services, Inc. v. Iowa Utilities Bd., 563 F.3d 743, 745-746 (8th Cir.2009). The 1996 Act imposed a duty upon ILECs to provide interconnection with their networks to any requesting telecommunications carrier, including a competing local carrier in the same calling area. Id. at 746. Northern Valley is a competitive local exchange carrier ("CLEC") that offers local telephone service. CLECs are companies that were not the original monopoly telephone company in a specific area at the time of the 1996 Act. Verizon Wireless (VAW) LLC v. Kolbeck, 2007 D.S.D. 30, ¶ 10, 529 F.Supp.2d 1081, 1086 (D.S.D.2007). Northern Valley owns the wires which allow telephone calls to be delivered to homes and businesses of its customers.

[¶ 3.] AT & T is an interexchange carrier ("IXC") that provides long distance service to its customers. A long distance carrier cannot complete, i.e., deliver, its customer's call by itself. Its customer's local exchange carrier ("LEC") has to originate the call and the LEC for the intended call recipient must terminate the call. The long distance carrier pays both LECs "access compensation" for the use of their equipment and services in connecting the call and terminating the call. See Alma Communications Co. v. Missouri Public Service Com'n, 490 F.3d 619, 621 (8th Cir. 2007).¹

[¶ 4.] Northern Valley provides "terminating switched access service" to AT & T to enable AT & T to deliver its customers' long distance calls to Northern Valley's customers. "Termination" is the "switching of the telecommunications traffic at the terminating carrier's end office switch, or equivalent facility, and delivery of such traffic to the called party's premises." 47 C.F.R. § 51.701(d).

[¶ 5.] Tariffs are schedules setting forth the terms and conditions of services and rates for common carriers. See 47 C.F.R. 61.3(rr). Northern Valley filed tariffs with the Federal Communications Commission ("FCC") (for interstate calls) and the South Dakota Public Utilities Commission ("the PUC") (for intrastate calls) and its access services are therefore governed by the rates set forth in Northern Valley's tariffs. Like a contract,² a tariff controls the relationship between the carrier and its customers. Marcus v. AT & T Corp., 138 F.3d 46, 56 (2d Cir.1998).

[¶ 6.] Though not applicable to the pending motion for judgment on the pleadings, I would note that this is just one of a number of other cases pending in the District of South Dakota and elsewhere which were filed by CLECs against IXCs alleging failure to pay switched access charges.³ In each of these cases, the defendant IXCs have alleged that the plaintiff LECs have engaged in "traffic pumping" schemes with various companies offering conference calling services whereby the LECs provide telephone numbers to the conference calling company, the conference calling company advertises free conference calls in an attempt to generate long distance calls through the IXCs to the LEC's number, the LECs bill the IXCs for call termination, and split the profits with the conference calling company as "marketing fees." One of the defenses asserted by the IXCs is that these calls do not "terminate" with an end user in the LEC's network and therefore the switched access services provided by Northern Valley to terminate such calls are not covered by Northern Valley's tariffs and therefore, Northern Valley may not collect from IXCs.

DECISION

[¶ 7.] Judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c) "`is appropriate only when there is no dispute as to any material facts and the moving party is entitled to judgment as a matter of law,' the same standard used to address a motion to dismiss for failure to state a claim under Rule 12(b)(6)." Ashley County, Ark., v. Pfizer, Inc., 552 F.3d 659, 665 (8th Cir.2009) (quoting Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990)). The district court must "view all facts pleaded by the nonmoving party as true and grant all reasonable inferences in favor of that party." Poehl v. Countrywide Home Loans, Inc., 528 F.3d 1093, 1096 (8th Cir.2008).

[¶ 8.] Northern Valley claims it is entitled to judgment on its pleadings based upon the filed rate doctrine, also called the filed tariff doctrine. The Communications Act requires every common carrier⁴ to file with the FCC schedules, that is, tariffs "showing all charges . . . classifications, practices, and regulations affecting such charges." 47 U.S.C. § 203(a). The United States Supreme Court has recognized that

These provisions are modeled after similar provisions of the Interstate Commerce Act (ICA) and share its goal of preventing unreasonable and discriminatory charges. Accordingly, the century-old "filed rate doctrine" associated with the ICA tariff provisions applies to the Communications Act as well.

American Tel. and Tel. Co. v. Central Office Telephone, Inc., 524 U.S. 214, 221, 118 S.Ct. 1956, 1962, 141 L.Ed.2d 222 (1998) (internal citations omitted). The Supreme Court has described the basic contours of the filed rate doctrine under the ICA:

Section 203(c) makes it unlawful for a carrier to extend to any person any privileges or facilities in such communication, or employ or enforce any classifications, regulations, or practices affecting such charges, except as specified in such schedule.

Under the Interstate Commerce Act, the rate of the carrier duly filed is the only lawful charge. Deviation from it is not permitted upon any pretext. Shippers and travelers are charged with notice of it, and they as well as the carrier must abide by it, unless it is found by the Commission to be unreasonable. Ignorance or misquotation of rates is not an excuse for paying or charging either less or more than the rate filed. This rule is undeniably strict and it obviously may work hardship in some cases, but it embodies the policy which has been adopted by Congress in the regulation of interstate commerce in order to prevent unjust discrimination.

AT & T v. Central Office Telephone, 524 U.S. at 221-22, 118 S.Ct. at 1962-63 (quoting Louisville & Nashville R. Co. v. Maxwell, 237 U.S. 94, 97, 35 S.Ct. 494, 495, 59 L.Ed. 853 (1915)). The filed rate doctrine is strictly applied. AT & T v. Central Office Telephone, 524 U.S. at 223, 118 S.Ct. at 1963.

[¶ 9.] The Second Circuit has explained The filed rate doctrine is motivated by two "companion principles" (1) preventing carriers from engaging in price discrimination as between ratepayers (the "nondiscrimination strand") and (2) preserving the exclusive role of federal agencies in approving rates for telecommunications services that are "reasonable" by keeping courts out of the rate-making process (the "nonjusticiability strand"), a function that the federal regulatory agencies are more competent to perform.

Marcus v. AT & T Corp., 138 F.3d 46, 58 (2nd Cir.1998) (citing, inter alia H.J. Inc. v. Northwestern Bell Tel. Co., 954 F.2d 485, 488 (8th Cir.1992)). Accord, Verizon Delaware, Inc. v. Covad Communications Co., 377 F.3d 1081, 1086 (9th Cir.2004). The doctrine is applied to prevent a cause of action that implicates either the nondiscrimination strand or the nonjusticiability strand. Marcus v. AT & T Corp., 138 F.3d at 59. "[T]he focus for determining whether the filed rate doctrine...