Qwest Commc'ns Co. v. Aventure Commc'ns Tech., LLC

86 F.Supp.3d 933

QWEST COMMUNICATIONS COMPANY, Plaintiff/Counterclaim Defendant

v.AVENTURE COMMUNICATIONS TECHNOLOGY, LLC; Dixon Telephone Company; Reasnor Telephone Company, LLC, Audiocom, LLC; Free Conferencing Corporation; Futurephone.Com, LLC; and Hometown Telecom, Inc; Defendants/Counterclaim Plaintiffs.

No. 4:07–cv–00078–JEG.

United States District Court, S.D. Iowa, Central Division.

Signed Feb. 17, 2015.

Charles W. Steese, Sandra L. Potter, Armstrong Teasdale LLP, Phillip L. Douglass, Steese & Evans, P.C., Denver, CO, David S. Sather, Richard W. Lozier, Jr., Belin McCormick, P.C., Des Moines, IA, for Plaintiff/Counterclaim Defendant.

Steven L. Nelson, Robert F Holz, Jr., Davis Brown Law Firm, Kris Holub Tilley, Thomas George Fisher, Jr., Des Moines City Attorney, Davis, Brown, Koehn, Shors & Roberts, PC, Des Moines, IA, Matthew Alexander Henry, William Scott McCollough, McCollough Henry, PC, West Lake Hills, TX, David J. Hellstern, Sullivan & Ward PC, West Des Moines, IA, Gary M. Joye, Maxwell M. Blecher, Blecher Collins Pepperman & Joye, P.C., Los Angeles, CA, Paul D. Lundberg, Lundberg Law Firm, Sioux City, IA, Larry D. Espel, Greene Espel PLLP, Minneapolis, MN, R. Bruce Beckner, Garvey Schubert Barer, Washington, DC, Scott R. Swier, Swier Law Firm, Prof. LLC, Avon, SD, for Defendants/Counterclaim Plaintiffs.

ORDER

JAMES E. GRITZNER, Chief Judge.

TABLE OF CONTENTS

I.	INTRODUCTION	939
II.	JURISDICTION	940
III.	BACKGROUND	941

A. Telecommunication Regulatory Backdrop 941

1.	Communications Act of 1934	941
2.	Anti–trust Litigation	942
3.	Telecommunications Act of 1996	943
4.	The Act: IXCs, ILECs, and CLECs	943
5.	Relevant Provisions of the Act	945

B. “Traffic Pumping” Litigation 947

1. Farmers v. Qwest 947

a.	FCC: Farmers I	948
b.	FCC: Farmers Reconsideration I	949
c.	FCC: Farmers II	950
d.	FCC: Farmers Reconsideration II	953
e.	D.C. Circuit: Farmers & Merchants v. FCC	953

2. FCC: All American Tel. Co. v. AT & T Corp. 954

a.	FCC: All American I	954
b.	FCC: All American Reconsideration I	956
c.	FCC: All American II	956
d.	FCC: All American Reconsideration II	959

3.	FCC: AT & T v. YMax	960
4.	Northern Valley Cases	963

a.	FCC: Qwest v. Northern Valley (N. Valley I)	963
b.	FCC: N. Valley Reconsideration I	965
c.	FCC: Sprint v. Northern Valley (N. Valley II)	966
d.	FCC: N. Valley Reconsideration II	967
e.	D.C. Circuit: N. Valley v. FCC	967

5. Sancom and Splitrock Cases 967

a.	FCC: Qwest v. Sancom (Sancom I)	968
b.	FCC: Sancom Reconsideration I	971
c.	Qwest v. Free Conferencing 4:07–cv–04147 (D.S.D.)	971

6.	Tekstar Cases	972
7.	Connect America	972

C.	Procedural History	976
D.	Factual Background	978

1. Factual Allegations in Qwest's Second Amended Complaint 979

a. Qwest's Claims 985

2. Factual Allegations in Dixon's Counterclaims 986

a. Dixon 986

3. Factual Allegations in Aventure's Claims and Counterclaims 987

a. Aventure's Claims/Counterclaims 987

4. Factual Allegations in Futurephone's Counterclaims 987

a. Futurephone's Counterclaims 990

5. Factual Allegations in Free Conferencing's Counterclaims 990

a. Free Conferencing's Counterclaims 992

6. LECs' Tariff Definitions: Customer, End User, Switched Access 992

a.	Dixon: NECA Tariff FCC No. 5	992
b.	Reasnor: ICORE Tariff FCC No. 2	992
c.	Aventure: Tariff FCC No. 1	993

IV. DISCUSSION 993

A. Motions to Dismiss 993

1.	Standard for Motion to Dismiss	993
2.	Hometown's Motion to Dismiss for Insufficient Service of Process	994
3.	Reasnor's Motion to Dismiss	995

a.	Primary Jurisdiction of the FCC	995
b.	Filed Rate Doctrine	997
c.	Dismissal under the Doctrine of Primary Jurisdiction	998

4. Aventure's Motion to Dismiss Claims under the Act 999

a.	12(b)(1) Dismissal for Lack of Standing	999
b.	12(b)(6) Dismissal for Failure to State a Claim	1001

i.	§ 201(b) claim(s)	1001
ii.	§ 203(c) claim	1003

5. Aventure's/FCSC Defendants' Motions to Dismiss State Law Claims 1005

a.	Unfair Competition	1005
b.	Fraudulent Concealment	1010
c.	Tortious Interference with Contract	1014
d.	Civil Conspiracy	1016
e.	Unjust Enrichment	1018

B. Qwest's Motion for Judgment on the Pleadings on Non–Tariff Counterclaims 1019

1.	Standard for Motion for Judgment on the Pleadings	1019
2.	Communications Act Claims	1019
3.	Unjust Enrichment and Quantum Meruit Counterclaims	1023

V. CONCLUSION 1026

I. INTRODUCTION

Before the Court and addressed in this Order are Motions for Judgment on the Pleadings filed by Plaintiff /Counterclaim Defendant Qwest Communications Corporation¹ (Qwest) against local exchange carrier (LECs) Defendants/Counterclaim Plaintiffs Aventure Communication Technology, LLC (Aventure); Dixon Telephone Company (Dixon); and Reasnor Telephone Company, LLC (Reasnor)² (collectively, LEC Defendants); and free conferencing service companies (FCSCs) Audiocom, LLC (Audiocom); Free Conferencing Corporation (Free Conferencing);Futurephone.com, LLC (Futurephone); and Hometown Telecom, Inc. (Hometown) (collectively, FCSC Defendants).³ Also before the Court and addressed in this Order are Motions to Dismiss filed by Reasnor, Free Conferencing, Hometown, and Aventure against Qwest.

On July 23 and July 24, 2014, the Court conducted omnibus hearings on the motions in this case and on the motions in related cases 4:07–cv–00043, 4:07–cv–00194, 4:08–cv–00005, and 5:07–cv–04095 (NDIA). Representing Qwest were attorneys Charles Steese and Sandra Potter; representing Aventure were attorneys Paul Lundberg and Gary Joye; representing Dixon were attorneys Steven Nelson and Kris Tilley; representing Reasnor were attorneys William “Scott” McCollough and Matthew Henry; representing Audiocom⁴ were attorneys Larry Espel and Paul Lundberg; representing Free Conferencing was attorney Scott Swier; and representing Futurephone was attorney Gary Joye. The motions are fully submitted and ready for disposition.⁵

II. JURISDICTION

Qwest filed this action asserting jurisdiction based on federal question pursuant to 28 U.S.C. § 1331 and diversity of citizenship pursuant to 28 U.S.C. § 1332.⁶ Qwest alleges claims against Aventure, Dixon, and Reasnor that arise under the Telecommunications Act of 1996, 47 U.S.C. § 201 et seq., as well as claims that arise under Iowa state law. This Court has original jurisdiction over the federal law claims, see 28 U.S.C. § 1331, and supplemental jurisdiction over the state law claims, see id. § 1367.

Qwest's claims against Audiocom, Free Conferencing, Futurephone, and Hometown are all state law causes of action. The Court ordered Qwest as the party asserting jurisdiction to demonstrate that at the time this action was filed, complete diversity existed between Qwest and Audiocom, Free Conferencing, Futurephone, and Hometown. See Jones v. Gale, 470 F.3d 1261, 1265 (8th Cir.2006). The Court specifically required Qwest to identify the citizenship and principal places of business of every member of any Defendant that was a limited liability entity, see OnePoint Solutions, LLC v. Borchert,

486 F.3d 342, 346–47 (8th Cir.2007).

In compliance with that order, Qwest demonstrated to the Court's satisfaction that at the time this case was filed (1) Plaintiff Qwest was a Delaware corporation with its principal place of business in Denver, Colorado; (2) Defendant Free Conferencing was a Nevada corporation with its principal place of business in Long Beach, California; (3) Defendant Hometown was a Nevada corporation with its principal place of business in Inglewood, California; and (4) Defendant Audiocom was a limited liability company organized under the laws of Nevada, with its principal place of business in Los Angeles, California, and that the three members of Audiocom's limited liability company were natural persons—two were citizens of California, and one was a citizen of Texas;⁷ and Defendant Futurephone was a limited liability company organized under the laws of Nevada, with its principal place of business in Reno, Nevada, and that the two members of Futurephone's limited liability company were both natural persons—one was a citizen of California, and the other was a citizen of Nevada.

The Court finds complete diversity of citizenship exists under 28 U.S.C. § 1332(c) and that Qwest's claims against each defendant exceed the minimum amount in controversy, id. § 1332(a). See LaPree v. Prudential Fin., 385 F.Supp.2d 839, 842 (S.D.Iowa 2005) (“Generally, a complaint that alleges the jurisdictional amount in good faith will suffice to confer jurisdiction, but the complaint will be dismissed if it ‘appear[s] to a legal certainty that the claim is really for less than the jurisdictional amount.’ ” (alteration in original) (quoting Larkin v. Brown, 41 F.3d 387, 389 (8th Cir.1994) (quoting St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289, 58 S.Ct. 586, 82 L.Ed. 845 (1938) )));⁸ see generally 14AA Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3704 (4th ed.2011).

III. BACKGROUND

A. Telecommunication Regulatory Backdrop

The Communications Act of 1934, 47 U.S.C. § 151 et seq., is the comprehensive act that codified telecommunication regulations and created the Federal Communications Commission (FCC or Commission) to oversee and regulate the telecommunications industry.⁹

1. Communications Act of 1934

The stated purpose of the Communications Act of 1934 was

regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States,¹⁰ a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges, for the purpose of the national defense, for the purpose of promoting safety of life and property through the use of wire and radio communications, and for the purpose of securing a more effective execution of this policy by centralizing authority heretofore granted by law to several agencies and by granting additional authority with respect to interstate and foreign commerce in wire and radio communication, there is created a commission to be known as the “Federal Communications Commission” [FCC], which shall be

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