Peerless Network, Inc. et al v. MCI Communications Services, Inc. et al

Filing 310

MEMORANDUM Opinion and Order: For the foregoing reasons, the Court denies Verizon's motion to stay the declaratory judgment 278 . The Court grants Peerless's motion to enforce judgment 299 . Signed by the Honorable Thomas M. Durkin on 10/17/2018:Mailed notice(srn, )

Case: 1:14-cv-07417 Document #: 310 Filed: 10/17/18 Page 1 of 7 PageID #:9727

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PEERLESS NETWORK, INC., et al.,
Plaintiffs,
vs.
MCI COMMUNICATIONS SERVICES, INC.,
VERIZON SERVICES CORP., and VERIZON
SELECT SERVICES, INC.,
Defendants.

)
)
)
)
)
)
)
)
)
)
)

No. 14 C 7417
Judge Thomas M. Durkin

MEMORANDUM OPINION AND ORDER
On March 16, 2018, the Court entered a Memorandum Opinion and Order
granting in part Peerless’s motion for partial summary judgment. R. 243. On July 27,
2018, the Court entered final judgment on Counts I through V in favor of Peerless in
the amount of $48,456,131.66 and entered a declaratory judgment on Count XI. R.
270. On August 7, 2018, the Court granted Verizon’s motion for approval of
supersedeas bond and stayed judgment as to Counts I through V pending appeal. R.
277. The parties now dispute whether the declaratory judgment on Count XI can
similarly be stayed pending appeal.
Verizon has filed a motion to stay under Federal Rule of Civil Procedure 62(d).
R. 278. Peerless has filed a separate motion to enforce the judgment under Rule 70.
R. 299. For the following reasons, the Court denies Verizon’s motion and grants
Peerless’s motion.

Case: 1:14-cv-07417 Document #: 310 Filed: 10/17/18 Page 2 of 7 PageID #:9728

Analysis
A. Verizon’s Motion to Stay Declaratory Judgment Under Rule 62
“Rule 62(d) of the Federal Rules of Civil Procedure allows an appellant to
obtain an automatic stay of execution of judgment pending appeal by posting a bond.”
Dillon v. City of Chicago, 866 F.2d 902, 904 (7th Cir. 1988). In general, Rule 62(d) is
applied only to money judgments and in determining whether Rule 62(d) applies, the
Court focuses on the nature of the relief ordered, not simply on the form of the
judgment. See Hebert v. Exxon Corp., 953 F.2d 936, 938 (5th Cir. 1992) (stating that
“[t]he applicability of Rule 62(d) turns not on that distinction [between declaratory
and money judgments], but on whether the judgment involved is monetary or
nonmonetary,” and concluding that since the district court’s declaratory judgment
bound a party to pay a “specific sum” of money, Rule 62(d) applied); Donovan v. Fall
River Foundry Co., Inc., 696 F.2d 524, 526 (7th Cir. 1982) (stating that Rule 62(d)
procedure “makes little sense as applied to an order to do, rather than an order to
pay”); Frommert v. Conkright, 639 F. Supp. 2d 305, 309 (W.D.N.Y. 2009) (applying
Rule 62(d) where the relief ordered was “indisputably monetary in nature: defendants
were ordered to pay the plaintiffs money”).
Peerless’s Count XI claim for a declaratory judgment requested the Court to
declare as follows:
(a) Peerless has lawfully charged Verizon for services rendered in the
provision of interstate access services, either pursuant to the Switched
Access Agreement, Peerless’ currently effective and duly filed federal
Interstate Access Services tariff, or in accordance with the principles of
equity.

2

Case: 1:14-cv-07417 Document #: 310 Filed: 10/17/18 Page 3 of 7 PageID #:9729

(b) Verizon has violated Peerless’ currently effective and duly filed
federal Interstate Access Services tariff, by refusing and failing to pay
interstate access service charges and associated late fees, either as set
forth in these tariffs or as established as a matter of equity.
(c) Verizon is obligated to make timely payment of these charges and
late fees as said charges become due.
R. 73 ¶ 102. In granting Peerless’s declaratory judgment, the Court recognized that
Verizon had asserted several counterclaims alleging that Peerless should have been
billing for certain switched access charges at a different rate. R. 243 at 25-30, 29-31.
The Court held that Verizon could not engage in self-help by unilaterally declaring
Peerless’s Tariff unlawful and then withholding payments required to be made under
it without seeking either a court’s or the FCC’s declaration that the Tariff was
unlawful. Id. at 34. Accordingly, the Court referred Verizon’s counterclaims to the
FCC and granted Peerless’s Counts I through V for past-due charges.
Verizon now argues that the Court’s order was an “order to pay” rather than
an “order to do,” implicating Rule 62(d)’s allowance of an automatic stay. The Court’s
order was not an order to pay. The declaratory judgment order declared Peerless’s
Tariff legally effective and ordered Verizon to comply with it. Although the holding
inevitably orders Verizon to pay through its compliance with the Tariff, the Tariff
governs the charges and how Verizon may dispute those charges. This is so because
the amount charged by Peerless every month varies based on the quantity of calls
routed through Peerless’s network. As a result, the monetary value of the judgment
cannot be easily calculated, precluding the availability of a stay. See Frommert, 639
F. Supp. 2d at 310 (listing cases turning on whether the declaratory judgment “can
be calculated and secured with relative ease” for purposes of a stay under Rule 62(d)).
3

Case: 1:14-cv-07417 Document #: 310 Filed: 10/17/18 Page 4 of 7 PageID #:9730

Further, a stay of the declaratory judgment may not adequately compensate
Peerless. See Hebert, 953 F.2d at 938 (“Courts have restricted the application of Rule
62(d)’s automatic stay to judgments for money because a bond may not adequately
compensate a non-appealing party for loss incurred as a result of the stay of a nonmoney judgment”). Peerless is required by law to exchange telephone calls with
Verizon, regardless of whether Verizon pays the full amount charged under the Tariff.
Peerless represents that Verizon has refused to pay a significant portion of the
charges (almost 50%) and has refused to follow the dispute procedures outlined in the
Tariff. As a result, Peerless is not fully compensated for the services it provides,
despite the Tariff’s deemed lawful status. Stay of the declaratory judgment would
allow Verizon to continue withholding a significant amount of the charges without
providing any reason to Peerless for its doing so. Verizon’s motion to stay the
declaratory judgment is denied.
B. Peerless’s Motion to Enforce Judgment Under Rule 70
In conjunction with Verizon’s motion to stay the declaratory judgment action,
Peerless filed a motion to enforce the judgment under Rule 70. Rule 70 allows the
Court to order Verizon to comply with its previous order. Fed. R. Civ. P. 70(a). The
Rule also allows the Court to hold Verizon in contempt for its failure to comply. Fed.
R. Civ. P. 70(e).
Verizon does not substantively dispute Peerless’s motion to enforce the
judgment. Instead, it argues that Peerless’s motion is premature because if the Court
denies Verizon’s motion to stay, it will “of course” abide by the declaratory judgment

4

Case: 1:14-cv-07417 Document #: 310 Filed: 10/17/18 Page 5 of 7 PageID #:9731

and not withhold payment based upon the disputes Verizon raised in its
counterclaims. R. 301 at 5. Verizon has had numerous opportunities to comply with
the Tariff and has consistently failed to do so. In fact, the crux of Peerless’s lawsuit
and the Court’s order on summary judgment concerned this very conduct. Verizon’s
continued attempt to delay paying Peerless for services Peerless has already provided
necessitates granting Peerless’s motion to enforce.
However, that does not mean Verizon must pay whatever amounts Peerless
bills without any basis in the Tariff or the services provided. But if Verizon chooses
to dispute any portion of the invoice, it must dispute those charges in accordance with
the Tariff’s terms. That includes providing Peerless with a timely notice of what the
disputed charges are with “sufficient documentation to investigate the dispute,
including account number under which the bill was rendered, the date of the bill, and
the specific items on the bill being disputed.” R. 301-2, Peerless Tariff No. 4, Section
3.6.3(A). 1 If the parties still cannot reach an agreement, Verizon may file a complaint
with the FCC. As the Court stressed in its summary judgment order, however,
Verizon may not continue to withhold payment on a unilateral basis.
The parties also dispute whether Verizon must comply with the Tariff’s terms
for the period between February 6, 2018 (the judgment encompasses stipulated
damages through the invoice dated February 5, 2018), and August 10, 2018 (the date

According to that section, “[a]ll bills are presumed accurate, and shall be binding on
the Customer unless notice of the disputed charge(s) is received by the Company
within 90 days (commencing 5 days after such bills have been mailed or otherwise
rendered per the Company’s normal course of business).”
1

5

Case: 1:14-cv-07417 Document #: 310 Filed: 10/17/18 Page 6 of 7 PageID #:9732

the declaratory judgment went into effect). Verizon attempts to avoid paying the
disputed charges during those months at all through procedural technicalities. See
R. 301 at 7-8. Verizon argues that the final judgment amount included only charges
through February 5, 2018 and that the Court lacks jurisdiction to amend that amount
to include later dates. It also argues that the declaratory judgment did not go into
effect until August 10, 2018 and therefore, it is not obligated to follow the Court’s
order before that date. Verizon’s argument reflects another attempt to avoid paying
Peerless for services Peerless has already provided through a filed Tariff (which
Verizon chose not to contest during the appropriate period). While the Court will not
add those charges to the bond, it orders Verizon to follow the dispute procedures as
discussed in the Tariff for those charges as well. Verizon’s attempt to avoid those
charges altogether is not taken in good faith.
If Verizon continues to evade the Tariff’s terms, the Court will hold a show
cause hearing to demonstrate why Verizon should not be held in contempt for
continuously failing to comply with the Court order regarding Peerless’s Tariff.
Peerless’s motion to enforce is therefore granted.
Conclusion
For the foregoing reasons, the Court denies Verizon’s motion to stay the
declaratory judgment (R. 278). The Court grants Peerless’s motion to enforce
judgment (R. 299).

6

Case: 1:14-cv-07417 Document #: 310 Filed: 10/17/18 Page 7 of 7 PageID #:9733

ENTERED:

Honorable Thomas M. Durkin
United States District Judge

Dated: October 17, 2018

7