Sprint Communications Company, LP v. Butler-Bremer Mutual Telephone Company et al
Filing
28
MEMORANDUM OPINION AND ORDER granting in part, denying in part, and reserving in part 8 MOTION to Dismiss or Stay and Refer to FCC - Oral Argument Requested. See Order for details. This action is stayed pending completion of administrative proceedings before the FCC. The parties shall file a status report concerning the need for additional proceedings in this court, if any, upon conclusion of the administrative proceedings. Signed by Judge Mark W Bennett on 10/6/14. (djs)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
CENTRAL DIVISION
SPRINT COMMUNICATIONS
COMPANY, L.P.,
No. C 14-3028-MWB
Plaintiff,
vs.
BUTLER-BREMER MUTUAL
TELEPHONE COMPANY, CLEAR
LAKE INDEPENDENT TELEPHONE
COMPANY, COON CREEK
TELEPHONE COMPANY, FARMERS
COOPERATIVE TELEPHONE
COMPANY, GOLDFIELD
TELEPHONE COMPANY, HEART OF
IOWA COMMUNICATIONS
COOPERATIVE, MABEL
COOPERATIVE TELEPHONE
COMPANY, NORTH ENGLISH
COOPERATIVE TELEPHONE
COMPANY, FARMERS MUTUAL
TELEPHONE COOPERATIVE OF
SHELLSBURG, IOWA, d/b/a USA
Communications, WEBSTERCALHOUN COOPERATIVE
TELEPHONE ASSOCIATION, and
WINNEBAGO COOPERATIVE
TELECOM ASSOCIATION,
MEMORANDUM OPINION AND
ORDER REGARDING
DEFENDANTS’ MOTION TO
DISMISS OR STAY
Defendants.
___________________________
TABLE OF CONTENTS
I.
INTRODUCTION........................................................................... 2
II.
LEGAL ANALYSIS ........................................................................ 3
A.
Grounds For Dismissal Or Stay .................................................. 3
B.
Primary Jurisdiction ............................................................... 4
1.
Arguments of the parties .................................................. 4
2.
Discussion ................................................................... 6
a.
The primary jurisdiction doctrine ............................... 6
b.
Is referral to the agency appropriate?.......................... 8
c.
Is dismissal or a stay appropriate? ............................ 10
C.
Other Grounds For Dismissal .................................................. 11
III.
CONCLUSION ............................................................................ 12
I.
INTRODUCTION
In this action, plaintiff Sprint Communications Company, L.P., an interexchange
carrier or IXC, seeks a refund of, and declaratory bar to, allegedly improper switched
access charges by defendant local exchange carriers (LECs), from their intrastate and
interstate switched access tariffs, for exchange of wireless communications between
Commercial Mobile Radio Service (CMRS) carriers and the LECs that originate and
terminate in the same “Major Trading Area” (intraMTA calls) where Sprint acts as an
intermediary carrier. Sprint alleges that it should not have been billed access charges,
applicable to “long distance calls,” for these calls, because these calls are “local calls”
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subject to reciprocal compensation, pursuant to longstanding Federal Communications
Commission (FCC) rules and federal appellate court decisions.1
This case is now before me on the defendant LECs’ July 14, 2014, Motion To
Dismiss Or Stay And Refer Issues To The Federal Communications Commission (docket
no. 8). After an extension of time to do so, Sprint filed its Resistance (docket no. 17) on
August 21, 2014, and the LECs filed a Reply (docket no. 25) in further support of their
motion on September 15, 2014.
The LECs requested oral arguments on their Motion To Dismiss, because they
contend that this case involves complex technical and policy issues in telecommunications
regulation and the interpretation and application of orders, rules, and regulations
promulgated by the FCC over the past 18 years, and, as such, that oral arguments will
allow the court an opportunity to question counsel, which should assist the court. I do
not find oral arguments to be necessary in this case, nor has my crowded schedule
permitted the timely hearing of such oral arguments. Therefore, I will consider the
LECs’ Motion To Dismiss fully submitted on the parties’ written submissions.
II.
A.
LEGAL ANALYSIS
Grounds For Dismissal Or Stay
The LECs first assert that Sprint’s Complaint should be dismissed for failure to
state a claim upon which relief can be granted, pursuant to Rule 12(b)(6) of the Federal
Rules of Civil Procedure, because Sprint’s claims are barred by application of the “filed
rate doctrine” and “the voluntary payment doctrine.” In the alternative, the LECs argue
that Sprint’s Complaint should be dismissed without prejudice, or that this action should
1
Sprint’s claims in its May 7, 2014, Complaint (docket no. 1) are framed as
“breach of contract” (Counts I (Iowa defendants) and II (Minnesota defendants)) and
“declaratory relief” (Count III (all defendants)).
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be stayed, and the claims referred to the FCC, because the FCC has “primary
jurisdiction” over Sprint’s claims.
Sprint disputes each of the LECs’ grounds for
dismissal or stay.
I conclude that I must consider, first, the LECs’ alternative arguments for
dismissal or stay in light of the FCC’s “primary jurisdiction.” If, indeed, the FCC has
“primary jurisdiction,” and the issues presented are properly referred to the FCC, it
would be improper for me to circumvent the FCC’s “primary jurisdiction” by considering
whether Sprint’s Complaint states claims upon which relief can be granted, and the FCC’s
determination on issues within its “primary jurisdiction” may be dispositive of the other
grounds for dismissal asserted by the LECs. If, on the other hand, I need not defer to
the FCC’s “primary jurisdiction,” then I would be free to consider whether dismissal of
Sprint’s Complaint pursuant to Rule 12(b)(6) is appropriate.
B.
1.
Primary Jurisdiction
Arguments of the parties
The LECs argue that application of the “primary jurisdiction doctrine” warrants
dismissal of Sprint’s Complaint, because referral to the FCC would have the following
beneficial effects: (1) it would ensure national uniformity and consistency in deciding
the legal issues that are at the heart of the more than 30 (and counting) complaints that
Sprint has filed in various federal and state courts; and (2) it would allow the FCC to
address the applicability of the LECs’ switched access tariffs, to determine the effects of
the FCC’s own orders on those tariffs (including its 1996 Local Competition Order and
its 2011 Connect America Fund Order), to determine the impact of Sprint’s unjustifiable
delay in asserting its claims, and to address the prospective relief that Sprint is seeking,
which are all legal issues that require an exercise of the FCC’s expertise and experience.
The LECs argue that Sprint will not be unfairly disadvantaged by dismissal of its
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Complaint, because any subsequent legal action will likely involve an appeal from the
FCC’s decision, not the present claims, even if the present claims become time-barred
during the pending of administrative proceedings. Nevertheless, the LECs concede that,
if I conclude that there would be some unfair disadvantage to Sprint, I could and should
stay Sprint’s action pending disposition of claims referred to the FCC.
In response, Sprint argues, in essence, that the FCC and the federal courts have
already addressed the issues that the LECs want referred to the agency so that all that
remains is for this court to apply those prior determinations. Indeed, Sprint argues that
the impropriety of billing switched access charges for intraMTA calls has been apparent
since the FCC’s 1996 Local Competition Order and that the FCC clarified the impact of
that order in its 2011 Connect America Fund Order by stating, categorically, that
intraMTA calls are local traffic subject to reciprocal compensation, not long distance
traffic subject to switched access charges. Sprint asserts that the federal appellate courts
to consider the question are all in agreement, citing Alma Communications Co. v.
Missouri Public Service Comm’n, 490 F.3d 619 (8th Cir. 2007); Iowa Network Services,
Inc. v. Qwest Corp., 466 F.3d 1091 (8th Cir. 2006); and Atlas TelephoneCo. v.
Oklahoma Corp. Commission, 400 F.3d 1256 (10th Cir. 2005).
In reply, the LECs argue that Sprint ignores the federal law that controls the
compensation arrangements between LECs, like themselves, and IXCs, such as Sprint.
They point out that Sprint cites to cases and quotes parts of FCC orders related to
compensation arrangements between LECs and cellular service (CMRS) providers, but
does not address the law that governs compensation between LECs and IXCs. They point
out that the FCC’s 1996 Local Competition Order, on which Sprint relies, expressly states
that (i) the FCC’s existing rules for compensation arrangements between LECs and IXCs
would continue to apply to IXCs that routed intraMTA traffic over switched access
service arrangements that the IXCs purchased from the LECs’ tariffs, and (ii) those IXCs
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would continue to be required to pay the LECs’ tariffed access charges applicable to those
services. They argue that the FCC’s 2011 Connect America Fund Order also does not
apply to compensation arrangements between a LEC and an IXC, but between a CMRS
provider and a LEC. Likewise, they argue, the decisions of the Circuit Courts of Appeals
on which Sprint relies do not relate to the issues of compensation arrangements between
a LEC and an IXC for intraMTA traffic. Finally, they point out that Sprint has never
requested local compensation arrangements in all the years since the 1996 Local
Competition Order on which it now relies, so that its claims are barred.
2.
Discussion
a.
The primary jurisdiction doctrine
As the Eighth Circuit Court of Appeals has succinctly explained,
Primary jurisdiction “is a doctrine specifically applicable to
claims properly cognizable in court that contain some issue
within the special competence of an administrative agency. It
requires the court to enable a ‘referral’ to the agency, staying
further proceedings so as to give the parties reasonable
opportunity to seek an administrative ruling.” Reiter v.
Cooper, 507 U.S. 258, 268, 113 S.Ct. 1213, 122 L.Ed.2d
604 (1993). The doctrine “is concerned with promoting
proper relationships between the courts and administrative
agencies charged with particular regulatory duties.” United
States v. W. Pac. R.R. Co., 352 U.S. 59, 63, 77 S.Ct. 161,
1 L.Ed.2d 126 (1956). Primary jurisdiction “promotes
uniformity, consistency, and the optimal use of the agency's
expertise and experience.” [United States v.] Henderson, 416
F.3d [686,] 691 [(8th Cir. 2005)].
United States v. Rice, 605 F.3d 473, 475 (8th Cir. 2010). The Eighth Circuit Court of
Appeals has recognized, however, that “[t]he doctrine is to be ‘invoked sparingly, as it
often results in added expense and delay.’” Alpharma, Inc. v. Pennfield Oil Co., 411
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F.3d 934, 938 (8th Cir. 2005) (quoting Red Lake Band of Chippewa Indians v. Barlow,
846 F.2d 474, 477 (8th Cir. 1988)).
The Eighth Circuit Court of Appeals has made clear that “[t]he doctrine targets
issues.” Rice, 605 F.3d at 476 (emphasis in the original). Thus, there must be an issue
that the district court could “refer” to the administrative agency under the “primary
jurisdiction doctrine.” Id. (citing Reiter, 507 U.S. at 268 and n.3). The question is
whether the case would require the court to “decide any issues on which an administrative
ruling would be appropriate,” and, more specifically still, an issue “suited to the ‘expert
and specialized knowledge of the [agency].’” Id. at 476 (quoting W. Pac. R.R., 352
U.S. at 64). Disputed factual issues are not properly ones within agency expertise, such
that they should be referred to an agency pursuant to the “primary jurisdiction doctrine,”
because such issues properly fall within the function of a jury. Henderson, 416 F.3d at
691. Moreover, “expert consideration and uniformity of resolution” by an agency are
not required where the issue presented merely turns on the meaning of published agency
regulations, because interpretation of such materials “is well within the ‘conventional
experience of judges.’” Alpharma, Inc., 411 F.3d at 939 (quoting Access Telecomm. v.
Southwestern Bell Tel. Co., 137 F.3d 605, 608 (8th Cir. 1998)).
On the other hand, where determination of the scope and application of agency
regulations requires agency expertise, referral pursuant to primary jurisdiction is
appropriate. Id. (contrasting a determination of whether a competitor’s product had
received FDA approval for certain uses, which turned on the meaning of agency
publications, and, thus, was not appropriate for referral to the FDA, with the question of
whether the competitor’s product should have been approved as safe and effective, which
was a question that required the FDA’s scientific expertise, although that question had
not been raised in the case). Similarly, “application of the [primary jurisdiction] doctrine
is appropriate when policy considerations are at issue,” Atlantis Express, Inc. v. Standard
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Transp. Servs., Inc., 955 F.2d 529, 532-33 (8th Cir. 1992), such as when resolution of
the issue could have an impact on future viability of regulated businesses or how they
conduct their business. Id. at 535 (remanding with directions to refer to the Interstate
Commerce Commission (ICC) the question of whether a licensed freight broker, which
arranged transportation services on behalf of shippers and carriers, should be liable for
certain freight charges and, if so, what the amount of this liability would be).
b.
Is referral to the agency appropriate?
If this case merely involved the interpretation and application of prior FCC rulings
and case law, as Sprint contends, then dismissal or a stay and referral to the FCC under
the “primary jurisdiction doctrine” would be inappropriate. See Alpharma, Inc., 411
F.3d at 939. This is not such a case, however.
First, contrary to Sprint’s repeated representations, neither the FCC’s 1996 Local
Competition Order nor its 2011 Connect America Fund Order expressly applies to
compensation between a LEC and an IXC for intraMTA calls. As the LECs point out,
the 1996 Local Competition Order distinguishes between service arrangements between
LECs and CMRS providers and service arrangements between LECs and IXCs, and did
not apply its conclusion that service arrangements involving intraMTA traffic between
CMRS providers and LECs are subject to reciprocal compensation, not access charges,
to service arrangements involving such traffic between LECs and IXCs. See 1996 Local
Competition Order, 11 FCC Rcd 15499, ¶ 1043 (establishing new rules for compensation
between LECs and CMRS providers). Likewise, the 2011 Connect America Fund Order
only “clarified” payment arrangements between LECs and CMRS providers, but did not
address payment arrangements between LECs and IXCs. See 26 FCC Rcd 17663, ¶ 1007
n.2132.
Second, the federal appellate decisions on which Sprint relies also do not involve
interpretation or policy analysis of FCC regulations regarding payment arrangements
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between LECs and IXCs. The Eighth Circuit Court of Appeals explained that, in Iowa
Network Services, Inc. v. Qwest Corp., 466 F.3d 1091 (8th Cir. 2006) (INS), it had “held
that an intermediary carrier was not required to pay access charges for cell-phone to landline calls originating and terminating within a major trading area.” Alma Commc’ns Co.
v. Missouri Public Serv. Comm’n, 490 F.3d 619, 625 (8th Cir. 2007) (summarizing the
decision in INS). Nevertheless, the decision in INS turned on the following lacuna in
FCC regulation, which a state agency had filled:
In the absence of a clear mandate from the FCC or
Congress stating how charges for this type of traffic should
be determined, or what type of arrangement between carriers
should exist, the Act has left it to the state commissions to
make the decision, as long as it does not violate federal law
and until the FCC rules otherwise. . . . As the IUB acted
within its power under statute, we find no error.
INS, 466 F.3d at 1097. Thus, INS cannot be read as a judicial conclusion that the FCC’s
regulations require reciprocal compensation between LECs and IXCs for the traffic in
question. Also, INS involved litigation over compensation between two intermediary
carriers, INS and Qwest, not between a LEC and an IXC or intermediary carrier. Id. at
1095 (noting that both Qwest and INS are intermediary carriers). Alma Communications
Company, on which Sprint also relies, likewise did not involve litigation over
compensation between a LEC and an IXC, but compensation between a LEC and a CMRS
provider. See 490 F.3d at 620. The same is true of the out-of-circuit decision in Atlas
Telephone Company v. Oklahoma Corporation Commission, 400 F.3d 1256, 1260 (10th
Cir. 2005).
Moreover, the question of whether the same “reciprocal compensation”
requirement that applies between a LEC and a CMRS should apply between a LEC and
an IXC is not just a matter of “interpretation” of FCC rulings, but a determination of the
scope and applicability of FCC rulings, which requires agency expertise. Consequently,
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it is an appropriate issue for referral to the FCC under the “primary jurisdiction
doctrine.” Alpharma, Inc., 411 F.3d at 939 (contrasting a determination of whether a
competitor’s product had received FDA approval for certain uses, which turned on the
meaning of agency publications and was not appropriate for referral to the FDA, with
the question of whether the competitor’s product should have been approved as safe and
effective, which was a question that required the FDA’s scientific expertise, but which
had not been raised in that case). That determination is fraught with policy considerations
involving the impact of certain regulatory decisions upon the telecommunications industry
that are also best considered by the appropriate agency. See Atlantis Express, Inc., 955
F.2d at 535, 532-33 (remanding with directions to refer to the ICC the question of
whether a licensed freight broker, which arranged transportation services on behalf of
shippers and carriers, should be liable for certain freight charges and, if so, what the
amount of this liability would be, because those issues involved the viability of a part of
the industry and the impact of the regulations). This may be all the more true where, as
here, the FCC ruling on which Sprint relies was handed down in 1996. Thus, Sprint did
not seek application of the FCC ruling, as it now interprets it, to the current parties, for
more than 18 years, which suggests that the interpretation of the FCC’s ruling that Sprint
presses is not as obvious as Sprint contends.
Under the circumstances presented here, the question of whether compensation
between LECs and IXCs for the traffic in question is subject to reciprocal compensation
or filed tariffs is one properly referred to the FCC under the “primary jurisdiction
doctrine.”
c.
Is dismissal or a stay appropriate?
The LECs seek dismissal of Sprint’s Complaint upon referral of issues to the FCC
under the “primary jurisdiction doctrine,” at least in the first instance, but they concede
that a stay would be acceptable, as well. Sprint argues that dismissal is not appropriate,
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because the FCC does not have jurisdiction over the entire case.
This contention
apparently stems from Sprint’s damages claim, because Sprint suggests that dismissal
might preclude its damages claim, if the statute of limitations expires on its
Communications Act claims before a ruling from the FCC. It is clear that either a
dismissal or a stay is appropriate, once a district court has determined that it should refer
issues to an agency under the “primary jurisdiction doctrine.” See Rice, 605 F.3d at 475
(stating that a stay of further proceedings is appropriate to give the parties a reasonable
opportunity to seek an administrative ruling (citing Reiter, 507 U.S. at 268)); Henderson,
416 F.3d at 691 (explaining that the district court has the power to dismiss or stay the
action in deference to administrative agency proceedings). What is less clear from
decisions of the Eighth Circuit Court of Appeals is when and how the district court should
decide whether to dismiss or stay the action before it.
Whatever factors may be
appropriate in that calculus, the one I find determinative here is that there is some
possibility that the statute of limitations could run on Sprint’s damages claim, while the
FCC considers the regulatory issues, if its Complaint is dismissed. Consequently, I will
stay this action, rather than dismiss it, pending completion of FCC proceedings.
C.
Other Grounds For Dismissal
The LECs also sought dismissal of Sprint’s claims pursuant to Rule 12(b)(6), on
the grounds that Sprint’s claims are barred by application of the “filed rate doctrine” and
“the voluntary payment doctrine.” The FCC’s determination of whether reciprocal
compensation or tariffed access charges are applicable to the traffic in question between
a LEC and an IXC will necessarily determine whether the “filed rate doctrine” applies
and will necessarily determine whether there are any “voluntary payments” for Sprint to
attempt to recoup. Therefore, I will not reach these separate grounds for dismissal of
Sprint’s Complaint.
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III.
CONCLUSION
Upon the foregoing,
1.
The defendant LECs’ July 14, 2014, Motion To Dismiss Or Stay And Refer
Issues To The Federal Communications Commission (docket no. 8) is granted in part,
denied in part, and reserved in part, as follows:
The part of the Motion seeking a referral to the FCC of the issue of
whether reciprocal compensation or tariffed access charges determine the
compensation between the LECs and Sprint, an IXC, for the traffic in question is
granted;
The part of the Motion seeking dismissal of Sprint’s Complaint upon
referral to the FCC is denied;
The part of the Motion seeking a stay of this action upon referral to
the FCC is granted; and
Ruling is reserved on those parts of the Motion seeking dismissal of
Sprint’s claims pursuant to Rule 12(b)(6), on the grounds that Sprint’s claims are
barred by application of the “filed rate doctrine” and “the voluntary payment
doctrine.”
2.
The question of whether reciprocal compensation or tariffed access charges
determine the compensation between the LECs and Sprint, an IXC, for the traffic in
question is referred to the FCC as a matter within that agency’s primary jurisdiction;
and
3.
This action is stayed pending completion of administrative proceedings
before the FCC on the question of whether reciprocal compensation or tariffed access
charges determine the compensation between the LECs and Sprint, an IXC, for the traffic
in question.
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4.
The parties shall file a status report concerning the need for additional
proceedings in this court, if any, upon conclusion of the administrative proceedings.
IT IS SO ORDERED.
DATED this 6th day of October, 2014.
______________________________________
MARK W. BENNETT
U.S. DISTRICT COURT JUDGE
NORTHERN DISTRICT OF IOWA
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