All American Telephone Company, Inc. et al v. AT&T, Inc.

Filing 186

OPINION & ORDER re: 163 MOTION for Summary Judgment on Defendant's Counterclaims filed by AT&T Corp., 159 MOTION for Summary Judgment on Plaintiffs' State Law Claims filed by AT&T Corp: For the foregoing rea sons, AT&T's motions for summary judgment are granted. The parties are directed to submit a proposed judgment consistent with this Opinion & Order by September 25, 2018. The Clerk of Court is directed to terminate the motions pending at ECF Nos. 159 and 163 and mark this case as closed. (Signed by Judge William H. Pauley, III on 9/10/2018) (jwh)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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ALL AMERICAN TELEPHONE
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COMPANY, INC., et al.,
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Plaintiffs,
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-against:
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AT&T CORP.,
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Defendant.
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07cv861
OPINION & ORDER

WILLIAM H. PAULEY III, Senior United States District Judge:
This action involves a long-running dispute between telecommunications carriers
over access charges. Plaintiffs All American Telephone Company, Inc., Chase Com, and ePinnacle Communications, Inc. are competitive local exchange carriers—in lay terms, local
telephone companies—operating in Utah and Nevada. Over a decade ago, Plaintiffs initiated an
action against AT&T to collect tariffed access charges. Plaintiffs also asserted claims under the
Federal Communications Act of 1934 (the “Communications Act”) for AT&T’s refusal to pay
the tariffed rates and for quantum meruit. In essence, Plaintiffs sought to recover unpaid access
charges that AT&T allegedly owed them for connecting long distance telephone calls carried by
AT&T in its capacity as an interexchange carrier. Unsurprisingly, AT&T has a different
perspective, counterclaiming that Plaintiffs violated the Communications Act by acting as
“sham” carriers created as part of a scheme to artificially generate long distance call volume—
and by extension, access charges that AT&T posits it should not be required to pay.
Similar disputes have found their way into federal courts nationwide. And like
other judges, this Court saw fit to refer the key issues in this action to the Federal

Communications Commission (FCC) under the primary jurisdiction doctrine in recognition of
the FCC’s specialized expertise and the virtues of uniformity in telecommunications regulation.
This action returned to this Court in 2017 following the FCC’s issuance of two separate orders
on liability and damages and the D.C. Circuit’s resolution of an appeal of the FCC’s order on
damages. AT&T now moves for summary judgment dismissing Plaintiffs’ Second Amended
Complaint and granting relief on its counterclaims. For the reasons that follow, both of AT&T’s
motions are granted.
BACKGROUND
To assist in better understanding Plaintiffs’ claims and AT&T’s counterclaims, a
brief primer on access charges and telecommunications carriers precedes a description of the
relevant facts and extensive procedural history of this case.
I.

Regulatory Framework
The regulatory scheme that governs the fees that a carrier may recover from

another carrier has been exhaustively detailed in myriad judicial opinions. This Opinion &
Order draws primarily from the Ninth Circuit’s 2018 decision in CallerID4u v. MCI
Communications Services Inc. and the D.C. Circuit’s 2017 decision resolving Plaintiffs’ appeal
of the FCC’s damages order issued pursuant to this Court’s primary jurisdiction referral.
When a long-distance call is placed, a local exchange carrier that operates in the
caller’s local service area (or “telephone exchange area”) routes the call to an “interexchange
carrier” (or “IXC” or “interstate exchange carrier”). All Am. Tel. Co., Inc. v. Fed. Commc’ns
Comm’n (“All American III”), 867 F.3d 81, 84 (D.C. Cir. 2017). The interexchange carrier then
delivers the call to the local exchange carrier that services the recipient’s geographic area. All
American III, 867 F.3d at 84. When the recipient’s local exchange carrier completes the call, the

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interexchange carrier must pay an access charge to the local exchange carriers for the connection
service—i.e., the “originating” switched access service provided by the caller’s local carrier and
the “terminating” switched access service provided by the recipient’s local carrier. All American
III, 867 F.3d at 84.
The rate that a local exchange carrier may charge for switched access service
depends on how the carrier is classified. Incumbent local exchange carriers (or “ILECs”) are
local exchange carriers that, “on or prior to February 8, 1996, provided service to a particular
area or were part of an exchange carrier association.” All American III, 867 F.3d at 84 (citing 47
U.S.C. § 251(h)). ILECs may only impose access charges by filing a tariff with the FCC that
governs their rate structure. All American III, 867 F.3d at 84; All Am. Tel. Co. v. AT&T, Inc.
(“All American I”), 2009 WL 691325, at *1 (S.D.N.Y. Mar. 16, 2009) (citing 47 U.S.C. § 203);
see CallerID4u, Inc. v. MCI Commc’ns Servs. Inc., 880 F.3d 1048, 1058 (9th Cir. 2018)
(explaining that ILECs are “both required to file tariffs and [are] also subject to FCC rate
regulations”).
On the other hand, all other local exchange carriers are competitive local
exchange carriers (or “CLECs”). All American III, 867 F.3d at 84 (citing 47 C.F.R.
§ 51.903(a)). Following revisions to the FCC’s permissive de-tariffing policy for CLECs in
2001, there are only “two means by which a CLEC can provide an IXC with, and charge for
interstate access services.” CallerID4u, Inc., 880 F.3d at 1059 (quotation mark omitted) (citing
AT&T Servs. Inc. v. Great Lakes Comnet, Inc., 30 FCC Rcd. 2586, 2588 ¶ 10 (2015)). A CLEC
may (1) under the benchmark rule, “tariff interstate access charges if its rates are no higher than
the rates charged for such services by the competing ILEC” in the service area; or (2) privately
“negotiate and enter into an agreement with an IXC to charge rates higher than those permitted

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under the benchmark rule.” CallerID4U, Inc., 880 F.3d at 1059 (citation and quotation marks
omitted); accord All American III, 867 F.3d at 84 (citations omitted); AT&T Corp. v. All Am.
Tel. Co. (“Liability Order”), 28 FCC Rcd. 3477, 3480 ¶ 9 (2013).
Where a tariff has been filed, a carrier may not deviate from the rates that apply to
the services set forth in the tariff. The “filed rate doctrine, also known as the filed tariff doctrine,
is derived from the tariff-filing requirements of . . . [§ 203 of the Communications Act] and
‘forbids a regulated entity to charge rates for its services other than those properly filed with the
appropriate federal regulatory authority.’” Marcus v. AT&T Corp., 138 F.3d 46, 58 (2d Cir.
1998) (citations omitted); see also CallerID4u, Inc., 880 F.3d at 1052-53 (explaining that
§ 203(c) “prohibits common carriers from providing any interstate wire communications without
filing tariffs with the FCC, and prohibits common carriers from charging, demanding, collecting,
or receiving any compensation for such services except as specified in the carriers’ filed tariffs”).
This litigation plays out in the arena of “access stimulation,” sometimes referred
to as “traffic pumping.” As explained by the D.C. Circuit, an access stimulation scheme works
like this:
[A] local exchange carrier would enter into a contractual relationship with a
company that generates a high volume of telephone calls, such as a conference
calling provider or a provider of sexually explicit chat lines. The local carrier would
house the phone-call-generating partner’s equipment on its premises for free and
would sometimes even provide the equipment itself at no cost. Not only would the
local carrier forgo charging its partner for the phone calls that came in, but in fact
the carrier would pay the partner a share of the per-minute long-distance access
rates it charged the interexchange carriers.
All American III, 867 F.3d at 85.1

1
Senior United States District Judge James E. Gritzner of the Southern District of Iowa has provided a
detailed historical account of access stimulation litigation—including this action—in several comprehensive
opinions. See, e.g., AT&T Corp. v. Aventure Commc’ns Tech., LLC, 207 F. Supp. 3d 962, 973-1004 (S.D. Iowa
2016); Aventure Commc’ns Tech., LLC v. Sprint Commc’ns Co. L.P., 224 F. Supp. 3d 706, 718-48 (S.D. Iowa
2015); Qwest Commc’ns Co. v. Aventure Commc’ns Tech., LLC, 86 F. Supp. 3d 933, 947-76 (S.D. Iowa 2015).

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Such an arrangement benefits the local exchange carrier by boosting its phone
traffic and access charge revenue as well as the conference call/chat line provider by providing
free service and part of the access charge revenue—all at the expense of the interexchange
carriers, who had to pay artificially inflated access charges. All American III, 867 F.3d at 85.
Starting in 2010, however, the FCC issued orders ruling that local exchange carriers could not
bill interexchange carriers under their tariffs to connect long-distance calls to a non-paying end
user—i.e., an access stimulation scheme is unlawful under §§ 201(b) and 203(c) if the
conference call/chat line provider does not pay for the local exchange carrier’s services. See All
American III, 867 F.3d at 85 (citing FCC orders affirmed by the D.C. Circuit).
II.

Factual Background
The following facts are drawn from the FCC’s orders pursuant to this Court’s

referral, on which the parties’ Local Rule 56.1 statements primarily rely. Plaintiffs are CLECs
who provide services exclusively to chat line/conference call providers in Utah and Nevada.
Liability Order, 28 FCC Rcd. at 3478 ¶ 3. For purposes of this action, AT&T is an
interexchange carrier that provides long-distance calling services. Liability Order, 28 FCC Rcd.
at 3478 ¶ 2.
While not parties to this action, the cast is rounded out by Beehive Telephone
Company, Inc. Nevada and Beehive Telephone Company, Inc. Utah (“Beehive”), ILECs that
operate in rural Nevada and Utah, and Joy Enterprises (“Joy”), a Nevada chat line/conference
call provider that All American served. Liability Order, 28 FCC Rcd. at 3478 ¶¶ 3-5. In 1994,
Beehive was able to charge relatively high access rates under its tariff because its historic traffic
volumes had been low. Liability Order, 28 FCC Rcd. at 3480 ¶ 10. Sometime between 1994
and the early 2000s, Beehive and Joy entered into an access revenue–sharing arrangement “in

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which Beehive paid Joy a portion of Beehive’s tariffed access charges for every minute of long
distance traffic routed to Joy’s assigned telephone numbers.” Liability Order, 28 FCC Rcd. at
3480 ¶ 11. While the scheme inflated Beehive’s traffic precipitously, that escalation in traffic
also caused Beehive’s tariff-determined local access charge rates to nosedive. Liability Order,
28 FCC Rcd. at 3480-81 ¶¶ 11-12.
To keep the access stimulation scheme running, the Beehive entities (which were
ILECs) created Plaintiffs (which were CLECs) to serve as the terminating access carrier in
Beehive’s stead. Liability Order, 28 FCC Rcd. at 3481 ¶ 13. At the time of the scheme, CLECs
could tariff switched access services at rates benchmarked against the competing ILEC’s rates
without incurring any rate reduction based on increases in traffic volume.2 Liability Order, FCC
Rcd. at 3481 ¶ 13, 3489 ¶ 27.
Beehive also assisted in choosing locations for Plaintiffs’ equipment, installing
and maintaining their equipment for free (which was collocated in Beehive’s facilities),
managing Plaintiffs’ billing and collection, and providing other services—including filing
revised tariffs for Plaintiffs after Beehive increased its own rates. Liability Order, 28 FCC Rcd.
at 3483 ¶ 16. Despite being CLECs, All American provided services only to a single conference
call/chat line provider, and Chase Com and e-Pinnacle exclusively serviced only a handful of
providers. Liability Order, 28 FCC Rcd. at 3478 ¶ 3, 3483 ¶ 17. Prior to 2008, Plaintiffs did not
own or lease any operating switches typically used to provide CLEC services to the public.
Liability Order, 28 FCC Rcd. at 3483 ¶ 17.

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Plaintiffs dispute this. (See, e.g., Plaintiffs’ Response to Defendant’s Rule 56.1 Statement of Material Facts
Relating to Summary Judgment on Second Amended Complaint, ECF No. 175 (“Plaintiffs’ First Rule 56.1
Response”) ¶ 28.) Nonetheless, this fact is immaterial to the disposition of the summary judgment motions. See
Dist. Attorney of N.Y. Cty. v. Republic of the Phil., 307 F. Supp. 3d 171, 188 (S.D.N.Y. 2018).

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III.

Procedural History
Plaintiffs’3 First Amended Complaint sought to recover millions of dollars in

unpaid access fees for access services that Plaintiffs allegedly provided to AT&T between 2005
and 2006 and which AT&T was required to pay under tariffs Plaintiffs filed with the FCC.
Plaintiffs claimed that AT&T’s unilateral refusal to pay contravened the filed rate doctrine and
FCC orders prohibiting such self-help and constituted an unreasonable practice under the
Communications Act. In relevant part, the First Amended Complaint asserted claims under
federal tariffs, §§ 201(b) and 203(c) of the Communications Act, and quantum meruit. See All
American I, 2009 WL 691325, at *1.
In response, AT&T counterclaimed for (1) violations of Plaintiffs’ federal tariffs
and 47 U.S.C. § 203; (2) unreasonable practices in violation of 47 U.S.C. § 201(b) by billing for
services not provided; (3) unreasonable practices in violation of 47 U.S.C. § 201(b) by operating
as sham entities created to inflate access charges; (4) fraudulent and negligent misrepresentation;
(5) unjust enrichment; and (6) civil conspiracy. All American I, 2009 WL 691325, at *1.
A. S.D.N.Y. Decisions
On July 24, 2008, this Court granted Plaintiffs’ motion for judgment on the
pleadings and dismissed AT&T’s counterclaims based on the filed rate doctrine. Upon
reconsideration, this Court vacated its prior order on March 16, 2009 and denied Plaintiffs’
motion for judgment on the pleadings and to strike AT&T’s counterclaims. See All American I,
2009 WL 691325, at *4. However, it stayed AT&T’s sham entity counterclaim under the
primary jurisdiction doctrine and directed AT&T to advise as to whether it intended to

3

References to “Plaintiffs” in this Opinion & Order are to the CLECs that filed this action, regardless of
their party status in the FCC proceedings.

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commence a proceeding on that counterclaim before the FCC.
In January 2010, this Court granted Plaintiffs’ motion to refer certain issues to the
FCC under the primary jurisdiction doctrine. See All Am. Tel. Co. v. AT&T, Inc. (“All
American II”), 2010 WL 7526933 (S.D.N.Y. Jan. 19, 2010). Under that doctrine, a federal court
may refer “issues which, under a regulatory scheme, have been placed within the special
competence of an administrative body” for that body’s views before the court decides a claim
requiring resolution of those issues. Mathirampuzha v. Potter, 548 F.3d 70, 83 (2d Cir. 2008).
The issues, which were agreed upon by the parties and referred to the FCC on February 5, 2010,
include (1) whether Plaintiffs provided switched access services pursuant to valid tariffs; (2)
whether Plaintiffs provided some other regulated service, and if so, what rate ought to be
applied; (3) whether Plaintiffs are entitled to compensation under a quantum meruit or similar
theory; and (4) whether AT&T violated the Communications Act by refusing to pay the billed
access charges. (ECF No. 89, Ex. A.)
B. FCC Decisions
Although the FCC opened two separate actions to effectuate this Court’s referral,
the relevant FCC proceeding is No. EC-09-MD-010, which the FCC bifurcated into liability and
damages phases and for which it issued separate decisions.
1. Liability Order
The FCC issued the Liability Order on March 25, 2013, which held that Plaintiffs
violated §§ 203 and 201(b) by “participating in an access stimulation scheme designed to collect
in excess of eleven million dollars of improper terminating access charges from AT&T.”
Liability Order, 28 FCC Rcd. at 3477 ¶ 1.
First, the FCC found that Plaintiffs “were ‘sham’ CLECs created to ‘capture

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access revenues that could not otherwise be obtained by lawful tariffs,’” and billing AT&T for
those access charges constituted an unjust and unreasonable practice under § 201(b). Liability
Order, 28 FCC Rcd. at 3487-88 ¶ 24. The Liability Order also found that Plaintiffs “had no
intention at any point in time to operate as bona fide CLECs or provide local exchange service to
the public at large.” Liability Order, 28 FCC Rcd. at 3488 ¶ 25. Specifically, they “neither
owned nor leased facilities, nor did they purchase unbundled network elements typically used by
CLECs to provide any telecommunications services to the public,” but instead, they relied on the
operational support of Beehive. Liability Order, 28 FCC Rcd. at 3488 ¶¶ 25-26. Callers were
none the wiser—their calls were placed to the same conference/chat telephone numbers and were
routed over the same Beehive facilities and equipment. Liability Order, 28 FCC Rcd. at 3489
¶ 27. In short, the formation of Plaintiffs “allowed the access stimulation arrangements to
continue at rates that [otherwise] would have been unsustainable.” Liability Order, 28 FCC Rcd.
at 3489 ¶ 27.
Second, the Liability Order determined that Plaintiffs violated §§ 203 and 201(b)
“by billing AT&T for access services that they did not provide pursuant to valid and applicable
interstate tariffs.” Liability Order, 28 FCC Rcd. at 3492 ¶ 34. Specifically, the FCC found that
Plaintiffs’ tariffs did not apply to the interstate traffic for which Plaintiffs billed AT&T. Liability
Order, 28 FCC Rcd. at 3492 ¶ 35, 3493 ¶ 36. The Liability Order also concluded that Plaintiffs
did not provide switched access service within the meaning of their tariffs because the
conference call/chat line providers were not “end users” as defined in the tariffs, such that
Plaintiff could not be said to “terminate” calls to end users. Liability Order, 28 FCC Rcd. at
3494 ¶ 38.

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2. Damages Order
On August 21, 2015, the FCC released the Damages Order, which awarded
AT&T $252,496.37 in damages—i.e., the amount that AT&T had paid to Plaintiffs for services
they billed but did not provide. See AT&T Corp. v. All Am. Tel. Co. (“Damages Order”), 30
FCC Rcd. 8958, 8958 ¶ 1, 8960 ¶ 5 (2015). In the Damages Order, the FCC reiterated that
Plaintiffs did not provide any access services, but that “Beehive furnished the access services
over its facilities and equipment [and] . . . issued bills for the service to AT&T” under Plaintiffs’
names. Damages Order, 30 FCC Rcd. at 8959 ¶ 3; see also Damages Order, 30 FCC Rcd. at
8962 ¶ 11 (recounting Plaintiffs’ “admi[ssion] that they did not provide AT&T with access
services and that Beehive did”); Damages Order, 30 FCC Rcd. at 8964 ¶ 16 (noting that the
Liability Order reached the conclusion “that [Plaintiffs] did not provide any services to AT&T
because they did not own or lease any switches” typically used to provide access services to the
public).
In relevant part, the FCC also made the following observations regarding the state
law claims:
[¶] 13. [Plaintiffs] contend that AT&T’s supplemental complaint should be
dismissed because AT&T would be unjustly enriched if the Commission were to
award damages. But [Plaintiffs] have demonstrated neither that they may plead
equitable defenses in a Section 208 complaint proceeding, nor that they may seek
equitable relief relating to matters subject to regulation. Even assuming they could
make these arguments, [Plaintiffs] have failed to establish the necessary elements
for unjust enrichment, because they did not provide a service to, or confer a benefit
on, AT&T. [Plaintiffs] contend in this damages proceeding that, as “billing/sales
agents” of Beehive, they “have the right to be compensated [by AT&T] for the role
they played in causing the Beehive service to be provided to AT&T.” Their
assertion is unsupported by the record, however.
...
[¶] 21. The remaining issues that the Court referred are predicated on the
assumption that [Plaintiffs] provided a service to AT&T. Because we found in the
Liability Order that [Plaintiffs] did not provide any service to AT&T, those issues

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have no bearing on [Plaintiffs’] entitlement to compensation, and we therefore
dismiss them as moot.
Damages Order, 30 FCC Rcd. at 8962 ¶ 13, 8966 ¶ 21 (emphasis added).
While Plaintiffs did not appeal the Liability Order or the FCC’s denial of their
petition for reconsideration of the Liability Order, see AT&T Corp. v. All Am. Tel. Co., 29 FCC
Rcd. 6393 (2014), they appealed the Damages Order.
C. D.C. Circuit Opinion and Subsequent Proceedings
On August 11, 2017, the D.C. Circuit upheld the FCC’s damages award, but
vacated those portions of the Damages Order “touching on the merits of [Plaintiffs’] state-law
claims.” All American III, 867 F.3d at 89. Specifically, the D.C. Circuit took issue with
portions of the Damages Order that discussed Plaintiffs’ “ability to satisfy the ‘necessary
elements for unjust enrichment’ and [the FCC’s] determination that the quantum meruit claims
referred to the [FCC] were ‘moot[ed]’” by its finding that Plaintiffs did not provide any service
to AT&T. All American III, 867 F.3d at 95 (internal citations omitted) (third alteration in
original). These conclusions, the D.C. Circuit held, were “improper and ultra vires to the extent
that they addressed [Plaintiffs’] state-law-claims.” All American III, 867 F.3d at 95.
Thereafter, Plaintiffs filed a Second Amended Complaint abandoning their claims
under federal and state tariffs and the Communications Act. The revised pleading left only two
state law claims in play—unjust enrichment and quantum meruit. (See Second Amended
Complaint, ECF No. 158 (“Compl.”).) The gravamen of the state law claims is that AT&T
received $13 million in terminating switched access service, which Plaintiffs claim to have
played some role in providing, either by working with Beehive to provide those services and/or
causing those services to be provided. (See Compl. ¶¶ 107-123.)

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LEGAL STANDARD
I.

Summary Judgment
As an initial matter, Plaintiffs oppose AT&T’s summary judgment motions in part

because they fail to satisfy New York’s summary judgment standard under CPLR § 3212.
However, CPLR § 3212 and the New York case authority interpreting and applying that standard
do not apply. A federal court sitting in diversity must apply state substantive law and federal
procedural law. Hanna v. Plumer, 380 U.S. 460, 465 (1965) (citation omitted). As courts in this
Circuit have held, the summary judgment standard is procedural, and there is a federal
procedural rule on point—i.e., Rule 56. See Allianz Ins. Co. v. Lerner, 416 F.3d 109, 118 (2d
Cir. 2005) (observing that “New York state procedural rules do not apply here to a federal court
sitting in diversity”).
Under Rule 56, summary judgment is appropriate “if the pleadings, depositions,
answers to interrogatories on file, together with the affidavits, if any, show there is no genuine
dispute as to any material fact and that the moving party is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(c); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986);
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). In deciding a motion for summary
judgment, a court construes the evidence in the light most favorable to the non-moving party and
draws all reasonable inferences in its favor. See Niagara Mohawk Power Corp. v. Jones Chem.,
Inc., 315 F.3d 171, 175 (2d Cir. 2003).
The moving party “bears the initial burden of showing why it is entitled to
summary judgment.” Salahuddin v. Goord, 467 F.3d 263, 272 (2d Cir. 2006) (citing Celotex,
477 U.S. at 323). Where the non-movant bears the burden of proof at trial, the movant may
show prima facie entitlement to summary judgment by pointing to evidence that negates the non-

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movant’s claims or by pointing to a lack of evidence for the trier of fact on an essential element
of the non-movant’s claim. Salahuddin, 467 F.3d 172-73; CILP Assocs., L.P. v.
PriceWaterhouse Coopers LLP, 735 F.3d 114, 123 (2d Cir. 2013). If the movant makes this
showing, the burden shifts to the non-movant to “point to record evidence creating a genuine
issue of material fact.” Salahuddin, 467 F.3d at 173. Finally, it is insufficient for the movant to
simply deny the allegations in the opponent’s pleadings, just as the non-movant cannot rest on
the allegations in its pleadings. Salahuddin, 467 F.3d at 173.
II.

Primary Jurisdiction
Following a referral to the FCC under the primary jurisdiction doctrine, the

parties also dispute the extent to which this Court must defer to the FCC’s legal and factual
findings. On one hand, AT&T contends that this Court is expected—if not required—to follow
the FCC’s factual and/or legal determinations, subject to the caveat that this Court must decide
the merits of the state law claims. Plaintiffs adopt a less deferential tack, arguing that the FCC’s
orders do not prevent this Court from recognizing Plaintiffs’ statements of fact because the FCC
lacked authority to make factual determinations dispositive of the state law claims.
It is clear that some degree of deference must be afforded a determination “made
by an agency to which a court initially deferred under the doctrine of primary jurisdiction[;]
otherwise, the doctrine would be meaningless.” Golden Hill Paugussett Tribe of Indians v. Rell,
463 F. Supp. 2d 192, 197 (D. Conn. 2006). The primary jurisdiction doctrine contemplates a
division of labor between courts and administrative agencies to promote uniformity in the
regulation of a sphere entrusted to an agency and in recognition of the special competence of
agencies in resolving particular issues. See Johnson v. Nyack Hosp., 86 F.3d 8, 11 (2d Cir.
1996) (explaining that “a court defers to the agency for advisory findings” under the doctrine,

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which applies “where a claim, though ‘originally cognizable in the courts,’ is better suited for a
specialized administrative body’”). Thus, at minimum, courts in this Circuit have found it
appropriate to defer to the factual findings of an administrative body to which a matter has been
referred under the primary jurisdiction doctrine while retaining the ultimate authority to
adjudicate the claim. United States v. 43.47 Acres of Land, 896 F. Supp. 2d 151, 157-58 (D.
Conn. 2012), aff’d sub nom. Schaghticoke Tribal Nation v. Kent Sch. Corp., 595 F. App’x 32,
34-35 (2d Cir. 2014) (endorsing such an approach); accord Golden Hill, 463 F. Supp. 2d at 198.
To be sure, this case raises an additional wrinkle because exclusive authority to
review final FCC orders is generally vested in the courts of appeals. See 47 U.S.C. § 402(a); 28
U.S.C. § 2342(1). Precedent from sister Circuits recognizes that when a district court properly
refers an issue to an agency under the primary jurisdiction doctrine and exclusive authority to
review the agency’s determination is vested in a court other than the referring court, the district
court is bound by the determinations of the agency and cannot review the merits of those
determinations. See United States v. Gen. Dynamics Corp., 828 F.2d 1356, 1360 (9th Cir. 1987)
(citing Port of Bos. Marine Terminal Ass’n v. Rederiaktiebolaget Transatlantic, 400 U.S. 62, 64
(1970)); MCI Telecomms. Corp. v. Teleconcepts, Inc., 71 F.3d 1086, 1103 (3d Cir. 1995);
accord Locust Cartage Co. v. Transamerican Freight Lines, Inc., 430 F.2d 334, 341 (1st Cir.
1970) (finding that district court erred in substituting its own findings and conclusions, and that
“[w]hen the [agency] resolves a question within its primary jurisdiction, its resolution should not
be set aside unless it exceeds the [agency’s] statutory authority or is unsupported by substantial
evidence”).
Accordingly, this Court finds it appropriate to defer to the FCC’s determinations
except to the extent that they impermissibly usurp the ultimate authority to adjudicate the merits

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of Plaintiffs’ state law claims. Accord 33 Fed. Prac. & Proc. Judicial Review § 8400 (1st ed.)
(explaining that while “[t]he court’s decision may be dictated by the agency’s decision on certain
issues in the controversy[,] . . . the complete decision is nonetheless still the court’s”). Stated
differently, while this Court should defer to the FCC’s factual determinations (and its legal
determinations insofar as they relate to whether certain practices violate the Communications
Act), it must determine the legal import of those findings on Plaintiffs’ state law claims in the
first instance. Cf. VoiceStream Wireless Corp. v. All U.S. Commc’ns, 149 F. Supp. 2d 29, 34
(S.D.N.Y. 2001) (citing Far E. Conference v. United States, 342 U.S. 570, 574 (1952)) (“Referral
is appropriate ‘even though the facts after they have been appraised by such specialized
competence [will] serve as a premise for legal consequences to be judicially defined.”).
Substituting this Court’s own determination of issues properly referred to the FCC would
otherwise amount to an impermissible appellate review of the FCC’s decisions.
DISCUSSION
I.

AT&T’s Motion for Summary Judgment on Plaintiffs’ State Law Claims
AT&T contends that it is entitled to dismissal of Plaintiffs’ complaint as a matter

of law for three reasons. First, it argues that the FCC’s regulatory regime preempts Plaintiffs’
state law unjust enrichment and quantum meruit claims. Second, AT&T asserts in the alternative
that the equitable doctrine of unclean hands bars Plaintiffs from proceeding with the unjust
enrichment and quantum meruit claims. Finally, it maintains that Plaintiffs’ state law claims fail
on the merits because Plaintiffs conferred no benefit on AT&T.
A. Prematurity of Summary Judgment
Before turning to Plaintiffs’ state law claims, this Court first addresses Plaintiffs’
assertion that AT&T’s motions for summary judgment are premature because no discovery has

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been taken on their state law claims and the motions were filed before an answer was interposed.
As a threshold matter, Plaintiffs’ claim that summary judgment may not be granted before an
answer is filed or discovery is conducted is incorrect. See Fed. R. Civ. P. 56(b) (permitting any
party to “file a motion for summary judgment until 30 days after the close of all discovery”); cf.
Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292, 303-04 (2d Cir. 2003) (reiterating that
“[o]nly in the rarest of cases may summary judgment be granted against a plaintiff who has not
been afforded the opportunity to conduct discovery” (quotation marks and citation omitted)).
Rather, Rule 56(d) provides that “[i]f a nonmovant shows by affidavit or
declaration that, for specified reasons, it cannot present facts essential to justify its opposition,”
the court may defer decision on the motion, deny the motion, allow additional time to take
discovery, or issue any other appropriate order. Fed. R. Civ. P. 56(d). In this Circuit, a sufficient
Rule 56(d) affidavit “must include the nature of the uncompleted discovery; how the facts sought
are reasonably expected to create a genuine issue of material fact; what efforts the affiant has
made to obtain those facts; and why those efforts were unsuccessful.” Paddington Partners v.
Bouchard, 34 F. 3d 1132, 1138 (2d Cir. 1994); see also Alphonse Hotel Corp. v. Tran, 828 F.3d
146, 151 (2d Cir. 2016) (citation omitted) (explaining that “[a] party seeking to delay resolution
of a summary judgment motion on grounds that he has been deprived of certain discovery
materials ‘must show that the material sought is germane to the [issues before the court], and that
it is neither cumulative nor speculative . . . .”).
Here, Plaintiffs’ showing falls short of the Rule 56(d) standard. Specifically,
Plaintiffs submitted an affidavit seeking the following discovery:
[T]he business and technical procedures used by AT&T to route traffic to the chatline and conference operators associated with Plaintiffs; . . . the revenues generated
to AT&T when its long distance and cellular customers made calls to the chat-line
and conference operators associated with Plaintiffs; . . . the extent to which such

16

revenues were enhanced by bulk transmission purchase agreements that AT&T
held with traffic aggregators; . . . amounts paid by AT&T to incumbent and
competitive local exchange carriers engaged in access stimulation[;] . . . [and]
documents discussing the economic impact on AT&T of refusing to pay for access
services associated with access stimulation . . . .
(See Affidavit of Jonathan E. Canis Regarding Discovery, ECF No. 173 (“Canis Aff.”), ¶ 4.)
According to the affidavit, Plaintiffs require this discovery “to support their claims,” stating that
“[a]ll of these materials and related information are probative of the elements of quantum meruit
and unjust enrichment claims, as well as Plaintiffs’ affirmative defenses and counterclaims
against claims made by AT&T.” (Canis Aff. ¶¶ 3-5.) Finally, Plaintiffs attest that the requested
discovery is “solely in the possession of and under the control of AT&T.” (Canis Aff. ¶ 7.)
But this requested discovery does not appear to bear on the issues central to
preemption or the merits of Plaintiffs’ state law claims,4 such as whether and to what extent they
provided switched access service (or any service) to AT&T—nor do Plaintiffs explain how this
discovery is germane to whether Plaintiffs’ state law claims are barred by the unclean hands
defense. Similarly, the discovery that Plaintiffs seek is not facially relevant to AT&T’s
counterclaims under the Communications Act, which focus on Plaintiffs’ conduct. Further,
Plaintiffs “fail[] to explain with any specificity ‘how the facts sought are reasonably expected to
create a genuine issue of material fact’” such that a reasonable jury could find in Plaintiffs’ favor
either on their state law claims or on AT&T’s counterclaims. See Alphonse Hotel Corp., 828
F.3d at 152 (citing Paddington Partners, 34 F.3d at 1138). Ultimately, Plaintiffs’ affidavit fails
because it simply identifies categories of discovery in the hands of AT&T that Plaintiffs claim

4

A “determination regarding preemption is a conclusion of law.” Island Park, LLC v. CSX Transp., 559
F.3d 96, 101 (2d Cir. 2009) (citation omitted); see also N.Y. State Rest. Ass’n v. N.Y.C. Bd. of Health, 509 F. Supp.
2d 351, 354-55 (S.D.N.Y. 2007) (observing that “preemption is a legal question for the Court to decide” and is thus
ripe for summary judgment); Retail Indus. Leaders Ass’n v. Suffolk Cty., 497 F. Supp. 2d 403, 410 (E.D.N.Y. 2007)
(same).

17

support their claims and affirmative defenses. See Alphonse Hotel Corp., 828 F.3d at 151 (“[A]
bare assertion that the evidence supporting a plaintiff’s allegation is in the hands of the defendant
is insufficient.” (citation and quotation marks omitted)).
Finally, there is no serious contention that Plaintiffs provided any other service or
benefit to AT&T aside from access services. At oral argument, Plaintiffs’ counsel surmised that
Plaintiffs may have acted as sales or billing agents for Beehive, ostensibly by brokering
connections with conference call/chat service providers that AT&T’s customers wanted to call.
(Oral Arg. Tr., ECF No. 181, at 31:6-17.) Counsel also represented that while such a theory was
not based on any discovery, the FCC conceded on appeal to the D.C. Circuit that additional
discovery could support such a theory. But Rule 56(d) is meant to shield a party against the
entry of summary judgment where it has not had an adequate opportunity to defend—a party
cannot weaponize Rule 56(d) to fish for evidence in hopes of finding out whether it has a claim.
See Robinson v. Allstate, 706 F. Supp. 2d 320, 329 (W.D.N.Y. 2010); see also Paddington
Partners, 34 F.3d at 1138 (characterizing party’s argument “that it should be allowed to find out
if it has a claim, rather than that it has a claim for which it needs additional discovery” as a
“divagation [that] is decidedly not the object of the discovery procedures outlined in the Federal
Rules of Civil Procedure”). In any event, discovery relating to what services Plaintiffs provided
would most naturally be within their possession or control.
For these reasons, Plaintiffs’ attempt to delay the resolution of AT&T’s summary
judgment motions on the basis of inadequate discovery is rejected. Cf. Gurary v. Winehouse,
190 F.3d 37, 43-44 (2d Cir. 1999) (noting that the failure to file an affidavit in accord with the
Federal Rules is fatal to a claim regarding the inadequacy of discovery on summary judgment).

18

B. State Law Claims
Plaintiffs’ sole remaining claims are those for quantum meruit and unjust
enrichment under state law. The parties’ briefs apply New York law, and such implied consent
sufficiently establishes the applicable choice of law. Trikona Advisers Ltd. v. Chugh, 846 F.3d
22, 31-32 (2d Cir. 2017). To prevail on a quantum meruit claim in New York, a plaintiff must
establish “(1) performance of services in good faith, (2) acceptance of services by the person to
whom they are rendered, (3) expectation of compensation therefor, and (4) reasonable value of
the services rendered.” Evans-Freke v. Showcase Contracting Corp., 926 N.Y.S.2d 140, 141
(N.Y. App. Div. 2011). An unjust enrichment claim requires a plaintiff to demonstrate “‘that (1)
the other party was enriched, (2) at that party’s expense, and (3) that it is against equity and good
conscience to permit the other party to retain what is sought to be recovered.’” Georgia Malone
& Co. v. Rieder, 973 N.E.2d 743, 746 (N.Y. 2012) (citation omitted). Though these quasicontract causes of action have “nominally different elements,” In re Coudert Bros., 487 B.R. 375,
396 (S.D.N.Y. 2013), the Second Circuit has “analyze[d] quantum meruit and unjust enrichment
together as a single quasi contract claim,” Mid-Hudson Catskill Rural Migrant Ministry, Inc. v.
Fine Host Corp., 418 F.3d 168, 175 (2d Cir. 2005) (citing Newman & Schwartz v. Asplundh
Tree Expert Co., 102 F.3d 660, 663 (2d Cir. 1996)). For purposes of this motion, this Court
analyzes Plaintiffs’ claims in tandem because “both are claims under ‘a contract implied . . . in
law to pay reasonable compensation.’” Snyder v. Bronfman, 921 N.E.2d 567, 569 (N.Y. 2009)
(citation omitted).
AT&T principally contends that Plaintiffs fail to establish an essential element of
their claims based on FCC determinations that they played no role in providing services or
benefits of any kind to AT&T. (State Law Claims Motion, at 20.) In particular, AT&T points to

19

the FCC’s findings that (1) Plaintiffs did not own or lease any switches or facilities typically
used to provide local telecommunications services to the public; (2) Plaintiffs had no intention of
providing local telecommunications services to the public; (3) and Beehive provided the access
services over its facilities and equipment while billing for the services under Plaintiffs’ names.
In essence, AT&T contends that Plaintiffs were created solely as conduits enabling them to
charge higher rates than Beehive could otherwise charge for the same call volume. In relevant
part, Plaintiffs attempt to rebut AT&T’s prima facie showing based on the FCC’s recognition—
as interpreted by Plaintiffs—that they played at least some role in providing access services in
tandem with Beehive or causing access services to be provided to AT&T.
Admittedly, the Liability Order and Damages Order are not paragons of clarity as
to whether the FCC determined that Plaintiffs provided no access services at all or that Plaintiffs
did provide (or had some role in providing) access services that fell outside the terms of their
tariffs. A fair reading of the Liability Order suggests that Plaintiffs did—as they insist—provide
access services or have some role in doing so. See, e.g., Liability Order, 28 FCC Rcd. at 3484
n.70 (noting that “although [Plaintiffs] provided some CLEC services, they did not do so to the
public at large” or in accord with the terms of their tariffs); Liability Order, 28 FCC Rcd. at 3478
¶ 3, 3483 ¶ 17, 3488 ¶ 25 (describing how Plaintiffs “provided services” in Nevada and Utah
exclusively to a handful of conference call/chat line providers, but did not own or lease the
facilities and equipment typically used to provide services to the public).
But these statements are arguably in tension with the Damages Order’s
recapitulation that “Beehive furnished the access services over its facilities and equipment” and
“issued bills for the services to AT&T under [Plaintiffs’] names.” Damages Order, 30 FCC Rcd.
at 8959 ¶ 3; see also Damages Order, 30 FCC Rcd. at 8962 ¶ 11 (noting that “[Plaintiffs] admit

20

that they did not provide AT&T with access services and that Beehive did”); Damages Order, 30
FCC Rcd. at 8965 ¶ 16 & n.68 (characterizing the Liability Order as finding “that [Plaintiffs]
served only chat line/conferencing providers and did not provide access services” because “they
did not own or lease any switches”). Nevertheless, resolving any ambiguities in Plaintiffs’ favor,
this Court concludes that there is no genuine dispute of material fact to be decided by a jury
because Plaintiffs’ state law claims are preempted. Cf. Chertkova v. Conn. Gen. Life Ins. Co.,
92 F.3d 81, 87 (2d Cir. 1996) (“No genuine issue exists if . . . after drawing all inferences and
resolving all ambiguities in favor of the non-movant, it appears that the evidence supporting the
non-movant’s case is so scant that a rational jury could not find in its favor.”).
1. Plaintiffs’ Procedural Arguments
Before wading into the merits of preemption, this Court first considers two
threshold arguments advanced by Plaintiffs. The first is easily disposed of. Plaintiffs
proclaim—without citing to any legal authority—that AT&T waived the preemption argument
by failing to plead it in the proceedings before the FCC. Separate from lacking legal support for
their assertion, however, Plaintiffs are simply incorrect on the facts. As the FCC noted, “[t]he
Commission directed the parties to effectuate [this] Court’s referral by filing two formal
complaints.” Liability Order, 28 FCC Rcd. at 3477 n.1. Both AT&T’s liability-phase complaint
and its supplemental damages-phase complaint plainly assert that the Communications Act
preempts Plaintiffs’ claims for quantum meruit and unjust enrichment. (Declaration of Jonathan
E. Canis, ECF No. 174 (“Canis Decl.”), Ex. 11 (“AT&T’s FCC Compl.”) ¶¶ 119-120, 140-141;
Canis Decl., Ex. 12 ¶¶ 7, 77, 79-83, 89, 110, 124.) At this stage, these facts are sufficient to
foreclose Plaintiffs’ waiver argument.
Equally unpersuasive is Plaintiffs’ contention that AT&T is judicially estopped

21

from asserting that the FCC’s regulatory scheme preempts state law claims. Plaintiffs argue that
AT&T took contrary positions in other proceedings in its capacity as a CLEC and purportedly
conceded to the D.C. Circuit in this action “that no preemption took place.” (See Memorandum
of Plaintiffs in Opposition to Defendant’s Motions for Summary Judgment on Plaintiffs’ Second
Amended Complaint & Defendant’s Counterclaims, ECF No. 172 (“Plaintiffs’ Opp.”), at 21-24.)
Judicial estoppel is a discretionary doctrine “designed to ‘protect the integrity of
the judicial process by prohibiting parties from deliberately changing positions according to the
exigencies of the moment.’” United States v. Apple, Inc., 791 F.3d 290, 337 (2d Cir. 2015)
(citing New Hampshire v. Maine, 532 U.S. 742, 749-50 (2001)). Although the propriety of the
doctrine depends “heavily on the ‘specific factual context[]’” of the case, courts generally
consider (1) whether the party’s argument or position is “clearly inconsistent with its earlier
position”; (2) whether the party “succeeded in persuading a court to accept that earlier position”;
and (3) whether the “party seeking to assert an inconsistent position would derive an unfair
advantage or impose an unfair detriment on the opposing party if not estopped.” Apple, Inc., 791
F.3d at 337. The mere existence of a prior inconsistent position and adoption of that position by
a tribunal, while necessary, are not sufficient, and a court must “inquire into whether the
particular factual circumstances of a case ‘tip the balance of equities in favor of doing so.” Clark
v. All Acquisition, LLC, 886 F.3d 261, 266-67 (2d Cir. 2018) (citation omitted).
Judicial estoppel is unwarranted because AT&T’s prior positions are far from
inconsistent with its position on preemption. For positions to be inconsistent, there must be “a
true inconsistency between the statements in the two proceedings,” and “if the statements can be
reconciled, there is no occasion to apply an estoppel.” Simon v. Safelite GlassCorp., 128 F.3d
68, 72-73 (2d Cir. 1997); see Apple, Inc., 791 F.3d at 337 (emphasizing the need to “carefully

22

consider the contexts in which apparently contradictory statements are made to determine if there
is, in fact, direct and irreconcilable contradiction” (quotation marks and citation omitted)).
Plaintiffs contend that AT&T “admitted no preemption took place” based on assertions it made
in the FCC proceedings. Obviously, such a characterization—if accurate—would directly
contradict the position AT&T takes here. But Plaintiffs mischaracterize AT&T’s comments, in
which it merely agreed with the unremarkable proposition that the FCC lacked the jurisdiction to
entertain the merits of state law quasi-contract claims. Plaintiffs do not explain—and this Court
cannot readily ascertain—how statements on the scope of the FCC’s adjudicatory authority bear
any connection to issues of preemption. Likewise, Plaintiffs’ reliance on instances where AT&T
pleaded quasi-contract claims in the alternative to contract claims in its own collection actions is
misplaced. These positions on whether contract and quasi-contract claims may be asserted in the
alternative at the pleading stage simply have nothing to do with preemption.
2. Law of Preemption
The doctrine of preemption reflects the Supremacy Clause’s core mandate that
federal law prevails in case of a conflict with state law. U.S. Const. art. VI, cl. 2; see Murphy v.
Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 1479-80 (2018) (“Congress enacts a law that
imposes restrictions or confers rights on private actors; a state law confers rights or imposes
restrictions that conflict with the federal law; and therefore the federal law takes precedence and
the state law is preempted.”) In general, three types of preemption exist: “(1) express
preemption, where Congress has expressly preempted local law; (2) field preemption, where
Congress has legislated so comprehensively that federal law occupies an entire field of
regulation and leaves no room for state law; and (3) conflict preemption, where local law
conflicts with federal law such that it is impossible for a party to comply with both or the local

23

law is an obstacle to the achievement of federal objectives.” Figueroa v. Foster, 864 F.3d 222,
227-28 (2d Cir. 2017) (citation and quotation mark omitted). Preemption is “ultimately a
question of statutory construction,” and courts “look to the intent of Congress to determine the
preemptive force of a statute” and the agency’s intent “in evaluating preemption by a
regulation.” N.Y. Pet Welfare Ass’n, Inc. v. City of New York, 850 F.3d 79, 87 (2d Cir. 2017)
(internal citations and quotations omitted). Finally, the “same ‘ordinary pre-emption principles’
[apply] whether the relevant federal law is a statute or a regulation.” N.Y. Pet Welfare Ass’n,
Inc., 850 F.3d at 87.
The party “asserting that federal law preempts state law bears the burden of
establishing preemption.” In re Methyl Tertiary Butyl Ether (MTBE) Prod. Liability Litig., 725
F.3d 65, 96 (2d Cir. 2013). Here, AT&T predicates its preemption arguments on conflict
preemption. (See State Law Claims Motion at 10 n.12; Reply Memorandum of AT&T in
Support of Motions for Summary Judgment, ECF No. 179 (“AT&T’s Reply”), at 3 n.4.) The
burden to establish impossibility is demanding and requires a showing that compliance with
federal and state law is a “physical impossibility,” when state law “penalizes what federal law
requires,” or when state law claims “directly conflict with federal law.” In re MTBE, 725 F.3d at
97 (quotation marks omitted) (collecting Supreme Court authority). Demonstrating that state law
poses an “obstacle to the accomplishment and execution of the full purposes and objectives of
Congress” is also heavy and requires an “‘actual conflict’ with the overriding federal purpose
and objective” and requires the “repugnance or conflict [to be] so direct and positive that the two
acts cannot be reconciled or consistently stand together.” In re MTBE, 725 F.3d at 101-02
(citations and quotation marks omitted). For all preemption analysis, “the purpose of Congress is
the ultimate touchstone.” Wyeth v. Levine, 555 U.S. 555, 565 (2009).

24

Finally, while this Circuit typically applies a presumption against preemption in
areas traditionally entrusted to the states, the presumption generally does not apply to a sphere
“where there has been a history of significant federal presence,” N.Y. SMSA Ltd. P’ship v.
Town of Clarkstown, 612 F.3d 97, 104 (2d Cir. 2010), such as the regulation of long-distance
telecommunications, Ting v. AT&T, 319 F.3d 1126, 1136 (9th Cir. 2003).
3. Preemption of Plaintiffs’ State Law Claims
Fundamentally, AT&T contends that Plaintiffs’ quantum meruit and unjust
enrichment claims are barred because the FCC’s extensive regulatory regime exclusively
governs the rates that a local exchange carrier may charge an interexchange carrier for
completing a long-distance call. Specifically, AT&T argues that CLECs may impose access
charges only by tariff or by contracting with the interexchange carrier, and that any attempt to
recover compensation for access services under an unjust enrichment or quantum meruit theory
impermissibly conflicts with the FCC’s regulatory regime. Plaintiffs counter that federal
telecommunications law does not foreclose the equitable recovery of reasonable fees in the
absence of a tariff or contract, even in access stimulation cases.
In support of their positions, the parties cite a dizzying array of district court
decisions and FCC orders landing on both sides of the preemption issue. They also dispute the
extent to which the weight of authority favors their positions. On one hand, AT&T boasts that
“virtually all courts” have dismissed similar state law claims as a matter of law and that it is
unaware of any court that has awarded compensation for access services based on similar state
law claims. (Memorandum of AT&T in Support of Motion for Summary Judgment on
Plaintiffs’ Second Amended Complaint, ECF No. 160 (“State Law Claims Motion”), at 14 &
nn.17, 18 (collecting cases).) AT&T’s position has not gone unnoticed by judges in other

25

districts. See Great Lakes Commc’n Corp. v. AT&T Corp., 2015 WL 12551192, at *23 (N.D.
Iowa June 8, 2015) (remarking that the CLEC “points to no case where these types of state law
claims were actually entertained by a court,” and that “[t]here is substantial authority supporting
AT&T’s argument that [the CLEC’s] state law claims must be denied”); Qwest Commc’ns Co. v.
Aventure Commc’ns Techs., LLC , 86 F. Supp. 3d 933, 1026 (S.D. Iowa 2015) (“It defies
credulity that the LECs continue to maintain, despite consideration of these very traffic pumping
cases by various tribunals, that the resounding theme at the very core of the matter—if the tariff
access charges do not apply, are the LECs nonetheless entitled to some compensation—has
somehow been missed by all these tribunals. It has not; the answer is no.”). In response,
Plaintiffs do not substantively address AT&T’s cases. Instead, they simply assert that a “similar”
number of cases have arrived at the opposite conclusion. (Plaintiffs’ Opp. at 19.) Based on a
review of the relevant case authority, Plaintiffs overstate the extent to which courts are in
equipoise. But while the weight of authority favors AT&T, a superficial tallying of cases
obscures the greater persuasiveness of AT&T’s position.
The divergent conclusions reached by the cases cited by the parties may be
reconciled in large part by accounting for when those decisions were issued, especially relative
to the then-existing FCC guidance. Viewed through this lens, Plaintiffs’ invocation of three
2010 district court decisions that note the disagreement among courts as to whether a CLEC may
recover for services outside of its tariff under quasi-contractual theories is unpersuasive because
those decisions merely offer a snapshot as to the uncertainty engendered by the unclear agency
guidance at that time. See Qwest Commc’ns Co. LLC v. Tekstar Commc’ns Inc., 2010 WL
2772442, at *7 (D. Minn. July 12, 2010); Splitrock Props., Inc. v. Sprint Commc’ns Co. Ltd.
P’ship, 2010 WL 1329634, at *9 (D.S.D. Mar. 30, 2010); Sancom, Inc. v. Qwest Commc’ns

26

Corp., 2010 WL 960005, at *10 (D.S.D. Mar. 12, 2010).
Additional context is warranted to better understand the underpinnings of this
uncertainty. In the decade and a half leading up to the passage of the Telecommunications Act
of 1996, the FCC experimented with the de-tariffing of non-dominant carriers to promote
competition in the telecommunications market, trusting that “‘market forces and the
administration of the complaint process’ could guarantee reasonable rates without the lure of
collusive pricing incentives inherent in the filed rate mechanism.” See Ting, 319 F.3d at 1132
(citations omitted) (remarking that “some began to argue that the continuation of extensive tariff
filing only imposed unnecessary costs on new entrants and facilitated collusive pricing”).
Following judicial rejection of the FCC’s deregulatory efforts as unauthorized by the statutory
scheme, Congress passed the Telecommunications Act of 1996, vesting the FCC with “authority
to forbear from enforcing § 203’s tariff-filing requirements.” CallerID4u, Inc., 880 F.3d at 1057.
The FCC—while not imposing mandatory de-tariffing for CLECs, under which they would be
prohibited from filing tariffs—adopted a mandatory de-tariffing policy, under which CLECs
were “subject to the tariff-filing requirement in § 203 unless they entered into negotiated
agreements with IXCs.” CallerID4u, Inc., 880 F.3d at 1058. In 2001, the FCC revised its
CLEC-tariffing policy to address concerns that CLECs could file tariffs that set “unreasonably
high switched access rates that were ‘subject neither to negotiation nor to regulation designed to
ensure their reasonableness.’” CallerID4u, 880 F.3d at 1058 (citing In re Access Charge Reform,
16 FCC Rcd. 9923, 9924-25 (2001)).
Thus, following the FCC’s 2001 In re Access Charge Reform decision, CLECs
could only impose access charges benchmarked to the rate that the competing ILEC could charge
by filing a tariff, or alternatively, impose higher rates by negotiating an agreement with the

27

interexchange carrier. But courts subsequently grappled with the implications of the FCC’s
permissive de-tariffing regime for the filed rate doctrine, and specifically, whether the doctrine
barred local exchange carriers from obtaining compensation under equitable theories from
interexchange carriers who received services not covered by a tariff. In part, this uncertainty
appears traceable to a comment made in a 2009 FCC order on reconsideration, which this Court
refers to as Farmers II in accord with the nomenclature adopted by other courts. See Qwest
Commc’ns Corp. v. Farmers & Merchs. Mut. Tel. Co., 24 FCC Rcd. 14801 (2009).
Prior to Farmers II, courts had routinely applied the filed rate doctrine to bar local
exchange carriers from collecting charges for services not covered by filed tariffs, though some
began to question the continued vitality of the filed rate doctrine in the wake of the FCC’s
permissive de-tariffing policy for CLECs. Compare, e.g., Sancom, Inc. v. Qwest Commc’ns
Corp., 643 F. Supp. 2d 1117, 1126 (D.S.D. 2009), reconsideration granted in part, 2010 WL
960005 (D.S.D. Mar. 12, 2010); Splitrock Props., Inc. v. Qwest Commc’ns Corp., 2009 WL
2827901, at *2 (D.S.D. Aug. 28, 2009); MCI WorldCom Network Servs., Inc. v. Paetec
Commc’ns, Inc., 2005 WL 2145499, at *5 (E.D. Va. Aug. 31, 2005); Freedom Ring Commc’ns,
LLC v. AT&T Corp., 229 F. Supp. 2d 67, 69-70 (D.N.H. 2002), with N. Valley Commc’ns v.
Qwest Commc’ns Corp., 659 F. Supp. 2d 1062, 1070 (D.S.D. 2009) (finding it premature to
apply the filed rate doctrine to a CLEC’s unjust enrichment claim based on the uncertainty as to
whether CLEC provided services to “end users” as to be covered by the tariffs).
In Farmers II, the FCC held that the local exchange carrier could not charge the
interexchange carrier switched access rates under its tariff where the traffic did not constitute
“switched access” within the meaning of the tariff. Farmers II, 24 FCC Rcd. at 14813 ¶ 26. In a
cryptic footnote, however, the FCC suggested that the local exchange carrier was not necessarily

28

“precluded from receiving any compensation at all for the services it has provided to [the
interexchange carrier].” Farmers II, 24 FCC Rcd. at 14812 n.96. In these murky regulatory
waters, it is unremarkable that courts—including those cited by Plaintiffs—opted to stay their
hand not because they determined that compensation in equity was allowed as a matter of law,
but pending additional guidance from the FCC as to whether and on what basis a local exchange
carrier could obtain compensation from interexchange carriers for services not covered by their
tariffs. See, e.g., Qwest Commc’ns Co., LLC, 2010 WL 2772442, at *6-7; Splitrock Props., Inc.,
2010 WL 1329634, at *9; Sancom, Inc., 2010 WL 960005, at *10.
Although the Farmers II parties resolved their dispute before the FCC had a
further chance to opine on the import of footnote 96 in a damages proceeding, see Qwest
Commc’ns Corp. v. Farmers & Merchs. Mut. Tel. Co., 27 FCC Rcd. 9377 (2012), subsequent
decisions by the FCC in other access stimulation cases brought additional clarity. In its January
2011 order denying Plaintiffs’ formal complaint in this action, the FCC explained as follows:
[Farmers II] does not hold that a carrier is always entitled to some compensation
for a service rendered, even if the service is not specified in its tariff. [Farmers II]
merely holds that a carrier may be entitled to some compensation for providing a
non-tariffed service, depending on the totality of the circumstances.
All Am. Tel. Co. v. AT&T Corp. (“Denial Order”), 26 FCC Rcd. 723, 731 ¶ 19 (2011) (emphasis
in original). To be fair, the Denial Order’s gloss did not specify what circumstances might
entitle a local exchange carrier to compensation for non-tariffed services, and some courts
continued to adhere to the notion that local exchange carriers “should receive some form of
compensation for access stimulation-related services” in the absence of a tariff or negotiated
agreement. See, e.g., N. Valley Commc’ns, L.L.C. v. Qwest Commc’ns Corp., 2012 WL
2366236, at *7 (D.S.D. June 20, 2012) (citing Farmers II, 24 FCC Rcd. at 14812 n.96) (musing
that it “seems unlikely that the FCC foreclosed any compensation for services plaintiff provided

29

outside of the tariff or a negotiated contract”).
But to the extent that courts (and CLECs) have read a gap into the regulatory
regime that would permit a CLEC to be compensated for access services not covered by a tariff
or a negotiated contract, the 2013 Liability Order and 2015 Damages Order have plugged it. As
the FCC reiterated, “until a CLEC files valid interstate tariffs under Section 203 of the
[Communications] Act or enters into contracts with IXCs for the access services it intends to
provide, it lacks authority to bill for those services.” Liability Order, 28 FCC Rcd. at 3494 ¶ 37.
The Damages Order put an even finer point on it, noting that CLECs are “entitled to
compensation for access services only ‘through a valid tariff or a contract negotiated with
AT&T’” and that the Liability Order “did not create a ‘regulatory gap’ entitling [Plaintiffs] to
pursue alternate damage theories.” Damages Order, 30 FCC Rcd. at 8963 n.50.5
In sum, a CLEC may charge for interstate access services only by filing and
complying with a valid interstate tariff with rates benchmarked to the competing ILEC, or by
negotiating an agreement with the interexchange carrier. If no agreement is negotiated, then the
CLEC “remains subject to § 203 and the filed rate doctrine” “unless and until a CLEC has
avoided the tariff filing requirement by entering into such an agreement.” CallerID4u, Inc., 880
F.3d at 1062-63. As relevant here, a CLEC may “tariff access charges only if those charges are
for transporting calls to or from an individual or entity to whom the CLEC offers service for a

5

This discussion occurred in the context of the FCC’s statement that even if Plaintiffs could seek such
compensation in equity, they “failed to establish the necessary elements for unjust enrichment, because they did not
provide a service to, or confer a benefit on, AT&T.” Damages Order, 30 FCC Rcd. at 8963 ¶ 13. Although the D.C.
Circuit nullified the FCC’s discussion insofar as it touched upon Plaintiffs’ “ability to satisfy the ‘necessary
elements for unjust enrichment,’” All American III, 867 F.3d at 95, the statements cited above pertain to whether the
Communications Act bars Plaintiffs’ claims—a question separate from the merits of the state law claims. Cf.
Wyeth, 555 U.S. at 576-77 (noting that while courts are not required to defer to an agency’s conclusion on
preemption, an agency’s “explanation of how state law affects the regulatory scheme” may be afforded persuasive
weight). Indeed, the D.C. Circuit implicitly recognized this distinction in noting that the preemption question and
the merits of Plaintiffs’ state law claims were to be decided by this Court in the first instance. All American III, 867
F.3d at 95 & n.5.

30

fee.” Qwest Commc’ns Co., LLC v. N. Valley Commc’ns, LLC, 26 FCC Rcd. 8332, 8336 ¶ 7
(2011); accord All American III, 867 F.3d at 85 (“[I]t is now ‘well-settled that a [local exchange
carrier] cannot bill an [interstate exchange carrier] under its tariff for calls ‘terminated’ at a
conference call bridge when the conference calling company does not pay a fee for th[ose]
services.’” (citation omitted) (second, third, and fourth alterations in original)). Put differently, if
a CLEC “wishes to charge [an IXC] for terminating calls to entities that pay no fees, it must do
so through a negotiated contract.” Qwest Commc’ns Co., LLC, 26 FCC Rcd. at 8338 ¶ 11. But
while CLECs “have the option of negotiating contracts, once a CLEC files a tariff, a CLEC may
not then negotiate separate contracts for interstate access.” AT&T Corp., 207 F. Supp. 3d at
1029; see also Denial Order, 26 FCC Rcd. at 730 n.47 (“[P]arties are precluded from negotiating
separate agreements that affect the rate for services once a tariff has been filed.” (citation and
quotation marks omitted)).
Applying these principles here, this Court concludes that Plaintiffs’ state law
claims are preempted. As the FCC found, Plaintiffs negotiated no agreement with AT&T—
though they certainly could have. Liability Order, 30 FCC Rcd. at 8963 n.50. Therefore, they
were subject to § 203 and the filed rate doctrine. And once Plaintiffs filed their tariffs, those
tariffs provided the only means of compensation for any access services. But Plaintiffs cannot
recover via tariff because the FCC “has determined that a CLEC may not impose switched
access charges pursuant to tariff unless it is providing interstate switched exchange access
services to its own end users, and that an entity to whom the CLEC offers free service is not an
end user.” Qwest Commc’ns Co., LLC, 26 FCC Rcd. at 8338 ¶ 11.
Allowing Plaintiffs to recover under quasi-contractual theories in the absence of a
negotiated agreement would circumvent the filed rate doctrine and FCC rulings in two ways.

31

First, it is tantamount to the imposition of access charges by judicial fiat for services that do not
comply with filed tariffs. Second, it effectively requires this Court to determine a reasonable rate
for the access services Plaintiffs billed AT&T under their tariffs. Accord, e.g., AT&T Corp., 207
F. Supp. 3d at 1036; Great Lakes Commc’n Corp., 2015 WL 12551192, at *23; see also Peerless
Network, Inc. v. MCI Commc’n Servs., Inc., 2015 WL 2455128, at *8-10 (N.D. Ill. May 21,
2015) (collecting cases). In a similar vein, permitting CLECs to obtain compensation outside of
a tariff or a negotiated agreement undermines congressional goals of uniformity because “CLECs
could receive different rates either because different state equitable principles applied or because
different courts weighed the equities differently.” CallerID4u, Inc., 880 F.3d at 1063. Valid
tariffs and negotiated agreements ensure reasonable rates via the benchmarking rule or
competitive market forces—state law equitable claims implicate neither. Because there is no
other means of compensation other than by negotiated agreement or the FCC’s regulatory
regime, Plaintiffs’ Second Amended Complaint must be dismissed.6
In opposition, Plaintiffs cling to outdated precedent that is now unpersuasive.
Plaintiffs rely on a case from this District that analyzed whether the filed rate doctrine precluded
a carrier’s recovery under unjust enrichment for connecting Voice over Internet Protocol (or
VoIP) calls. See Manhattan Telecomms. Corp. v. Global NAPS, Inc., 2010 WL 1326095
(S.D.N.Y. Mar. 31, 2010). Citing the lack of agency guidance and conflicting judicial rulings as
to whether VoIP services are “information services,” which—unlike telecommunications

6

For the first time at oral argument and in a supplemental letter, Plaintiffs posited that the Ninth Circuit’s
2003 decision in Ting—purportedly “cited with approval and discussed extensively” in CallerID4u—confirmed that
state law claims would proceed in the absence of a valid tariff. The CallerID4u panel rejected a similar argument
made by a CLEC. Ting considered “whether federal law preempted state common remedies in the context of a
completely detariffed and competitive marketplace” and concluded that in an environment where the federal ratefiling requirement was completely inapplicable, state law could not interfere with a federal tariffing regime.
CallerID4u, 880 F.3d at 1057 (emphasis added). This is not the case with permissively de-tariffed CLECs, who
remain subject to the federal rate-filing system in the absence of a negotiated agreement.

32

services—are not subject to the Communications Act’s access charge scheme, the court declined
to apply the filed rate doctrine. Glob. NAPS, Inc., 2010 WL 1326095, at *2. The court
concluded, however, that the “inability to apply the tariff regime as it stands does not preclude
[plaintiffs’] entitlement to recover in equity.” Glob. NAPS, Inc., 2010 WL 1326095, at *3. But
Global NAPS is readily distinguishable. The court reasoned that the filed rate doctrine ought not
to have any preemptive effect because VoIP services may not be subject to the FCC’s tariffing
regime at all. But this rationale offers minimal persuasive force because the services at issue in
this case are subject to access charges. Thus, there is no similar tension in arguing that services
are not subject to the statutory rate system while simultaneously contending that the statutory
rate system bars equitable claims to receive compensation for those services. See Global NAPS,
2010 WL 1326095, at *3. Likewise, the court’s determination that it was “merely filling the gap
left by the FCC’s pronouncements” without usurping the FCC’s rate-making authority offers no
refuge where the FCC has spoken. Global NAPS, 2010 WL 1326095, at *3.
Certainly, some decisions have held that the filed rate doctrine does not preempt
state law equitable claims for services that are not covered by a tariff or negotiated contract, even
after the FCC’s decisions in this action. See N. Valley Comm’cns, L.L.C. v. AT&T Corp., 2015
WL 11675666 (D.S.D. Aug. 20, 2015). There, the court first noted the uncertainty in how the
filed rate doctrine applied to CLECs after permissive de-tariffing, explaining that the “filed-rate
doctrine was developed in an era of greater regulation during which all carriers were required to
file tariffs.” N. Valley Commc’ns, 2015 WL 11675666, at *4 (citing, inter alia, In re Hyperion
Telecomms., Inc. Petition Requesting Forbearance, 12 FCC Rcd. 8596, 8611 ¶ 30 (1997)). It
then reasoned that the filed rate doctrine does not bar state equity claims for services that fall
outside the filed tariff, pointing to “subsequent cases [that] have found that the filed-rate doctrine

33

does not apply when a telecommunications carrier supplied services falling outside the filed
tariff.” N. Valley Commc’ns, 2015 WL 11675666, at *4 (citing, inter alia, Farmers & Merchs.
Mut. Tel. Co., of Wayland, Iowa v. FCC, 668 F.3d 714, 722-23 (D.C. Cir. 2011)). Based on
these premises, it concluded that the filed rate doctrine did not preempt the CLEC’s state law
claims. N. Valley Commc’ns, 2015 WL 11675666, at *5.
In this Court’s view, the reasoning and cases cited in North Valley
Communications are unpersuasive. As an initial matter, though the applicability of the filed rate
doctrine may have been uncertain in the nascent stages of permissive de-tariffing when the FCC
decided Hyperion, subsequent decisions by the FCC and federal courts have established that
absent a negotiated contract, CLECs remain subject to § 203 and the filed rate doctrine. E.g.,
CallerID4u, Inc., 880 F.3d at 1062-63. The D.C. Circuit’s opinion in the Farmers proceedings is
not to the contrary. In that case, the D.C. Circuit explained that the filed rate doctrine did not
apply because the traffic did not involve end users under the tariff, and thus did not implicate
tariffed services. Farmers, 668 F.3d at 722. But the court included this discussion in response to
a CLEC’s invocation of the filed rate doctrine to support its contention that an interexchange
carrier that accepts service under a tariff must pay the tariffed rate. See Farmers, 668 F.3d at
721-22. The D.C. Circuit rejected this argument, clarifying that because the “service was outside
of the tariff . . ., the filed rate doctrine could not protect [the CLEC] from liability to [the
interexchange carrier].” Farmers, 668 F.3d at 723; see Farmers, 668 F.3d at 722 (“The [FCC]
has long instructed that a service that does not ‘fall within the plain meaning’ of the tariff is not
governed by the tariff whether or not it is ‘functionally similar’ to a tariffed service.” (citations
omitted)).
With that context, Northern Valley Communications says little about whether the

34

FCC’s tariff regime bars all alternative means of compensation for services not covered by a
tariff (or contract). And while the Northern Valley Communications court inferred that the
“FCC does not interpret its rules as preempting all avenues of recovery when a service falls
outside a filed tariff and no negotiated contract applies,” such an inference is weakened by the
FCC’s subsequent clarifications in the Liability Order and Damages Order. See N. Valley
Commc’ns, 2015 WL 11675666, at *6 (citing Farmers II, 244 FCC Rcd. at 14812 n.96; Denial
Order, 26 FCC Rcd. at 731 ¶ 19)). In short, the fact that a CLEC’s access services fall outside a
filed tariff does not necessarily bring it outside the FCC’s regulatory purview. Rather, CLECs
may charge an interexchange carrier for access services only through a negotiated contract or a
valid filed tariff. If a CLEC wishes to charge a higher rate than the benchmark or for services to
non-paying end users, the FCC requires that it do so through a negotiated contract. The Second
Circuit explained as follows:
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, 138 F.3d at 58 (citation omitted). Allowing a CLEC to recover damages through state
law equitable claims—which the FCC may not pass on—would “unnecessarily enmesh the
courts in the rate-making process.” Wegoland Ltd. v. NYNEX Corp., 27 F.3d 17, 19 (2d Cir.
1994). This, a judge cannot do. Marcus, 138 F.3d at 61 (“The filed rate doctrine prevents more
than judicial rate-setting; it precludes any judicial action which undermines agency rate-making
authority.”)
The filed rate doctrine must be “applied strictly to prevent a plaintiff from
bringing a cause of action even in the face of apparent inequities whenever either the

35

nondiscrimination strand or the nonjusticiability strand underlying the doctrine is implicated by
the cause of action the plaintiff seeks to pursue.” Marcus, 138 F.3d at 59. This Court is
cognizant that the filed rate doctrine, where it applies, is “rigid and unforgiving.” Simon v.
KeySpan Corp., 694 F.3d 196, 205 (2d Cir. 2012). The Second Circuit has also expressed
sympathy “to the argument that, at least in the telecommunications industry, strict adherence to
the filed rate doctrine is no longer required.” Marcus, 138 F.3d at 62. Irrespective of whether
the filed rate doctrine should apply, “[u]nless Congress or the Supreme Court re-examines the
doctrine, we are bound to enforce it.” Fax Telecommunicaciones, Inc. v. AT&T, 138 F.3d 479,
491 (2d Cir. 1998). And while Plaintiffs’ objections that the FCC had enforced filed tariffs in
access stimulation disputes before abruptly reversing its position in 2009 is noted, the wisdom of
the FCC’s stance on access stimulation is well outside the expertise and constitutional role of the
courts. Because this Court finds that AT&T is entitled to judgment as a matter of law based on
the preemption of Plaintiffs’ state law claims, it need not reach AT&T’s other arguments for
dismissal of the Second Amended Complaint.
II.

AT&T’s Motion for Summary Judgment on AT&T’s Counterclaims
A. Merits
AT&T moves for summary judgment on its counterclaims under 47 U.S.C.

§§ 201(b) and 203.7 In support of its motion, AT&T points to the FCC’s Liability Order, which
determined that Plaintiffs violated §§ 203 and 201 by billing for services not provided pursuant
to valid and applicable tariffs, and that Plaintiffs violated § 201 by operating as sham carriers

7

AT&T asserted the at-issue counterclaims in its answer to Plaintiffs’ first amended complaint. (See
Answer and Amended Counterclaims of Defendant AT&T Corp. to Plaintiffs’ First Amended Complaint, ECF No.
48.) In view of AT&T’s motions for dismissal of the Second Amended Complaint and for summary judgment on its
counterclaims, the parties consented to adjourning AT&T’s deadline to answer the Second Amended Complaint and
re-assert any existing counterclaims until after this Court resolved AT&T’s motions.

36

created to capture access fees that they would not otherwise have been able to obtain pursuant to
lawful tariffs. See generally Liability Order, 28 FCC Rcd. at 3487 ¶ 24 – 3495 ¶ 38. AT&T
initially sought—among other things—damages to be determined at trial, interest, and attorney’s
fees. (See Answer & Amended Counterclaims of Defendant AT&T Corp. to Plaintiffs’ First
Amended Complaint, ECF No. 48 (“Amended Answer & Counterclaims”) ¶¶ 48, 55, 60.)
However, it now seeks only the $252,496.37 awarded by the FCC’s Damages Order, along with
prejudgment interest.
Here, AT&T satisfies its burden to demonstrate entitlement to judgment as a
matter of law. AT&T’s counterclaims assert violations of §§ 201(b) and 203(c) of the
Communications Act. In relevant part, § 201(b) provides that “[a]ll charges, practices,
classifications, and regulations for and in connection with [interstate] communication service,
shall be just and reasonable, and any such charge, practice, classification, or regulation that is
unjust or unreasonable is declared to be unlawful . . . .” 47 U.S.C. § 201(b). Section 203(c)
prohibits carriers from “engag[ing] or participat[ing] in [interstate wire or radio] communication
unless schedules have been filed and published in accordance with the provisions of this chapter
and with the regulations made thereunder,” and also that “no carrier shall . . . charge, demand,
collect, or receive a greater or less or different compensation for such communication, or for any
service in connection therewith, . . . than the charges specified in the schedule then in effect
. . . .” 47 U.S.C. § 203(c).
This Court concludes that the FCC conclusively resolved the liability issues
relating to AT&T’s Communications Act counterclaims—in particular, it found that Plaintiffs
violated §§ 203(c) and 201(b) by charging for terminating switched access services that were
provided dehors the filed tariffs, and that Plaintiffs violated § 201(b) by operating as sham

37

entities for the purpose of extracting inflated access charges. Accord MCI Telecomms., Inc. v.
T.A. Commc’ns, Inc., 40 F. Supp. 2d 728, 734 (D. Md. 1999) (finding the FCC’s determination
as to Communications Act claims following a primary jurisdiction referral to be conclusive,
where FCC reviewed those claims and issued a final order).
In response, Plaintiffs offer several arguments, none of which raise a genuine
dispute of material fact to be resolved by the fact-finder, and all of which are unpersuasive.8
First, Plaintiffs assert that summary judgment on the counterclaims must be denied because
violations of individual provisions of the Communications Act do not per se furnish private
causes of action. They point to the FCC’s purported treatment of Plaintiffs’ various statutory
violations as a single claim.9
While somewhat abstruse, Plaintiffs appear to make two discrete arguments: (1)
conduct alleged to violate a provision of the Communications Act cannot furnish a private cause
of action unless the FCC has determined that such conduct violates the statute; and (2) the
conduct for which the FCC found liability cannot be disaggregated into more than one
independent cause of action. The first contention holds no water—as the second contention
implicitly recognizes, the FCC has determined precisely that the conduct on which the FCC’s
liability determination rests violates §§ 201(b) and 203. See, e.g., Liability Order, 28 FCC Rcd.
at 3490 ¶ 30 (discussing Total Telecomm. Servs., Inc. v. AT&T Corp., 16 FCC Rcd. 5726
(2001), aff’d in part and remanded in part, 317 F.3d 227 (D.C. Cir. 2003)); All American III, 867

8

Plaintiffs also urge denial of summary judgment as to the third counterclaim because this Court did not
reinstate it on reconsideration of its prior order granting Plaintiffs’ motion for judgment on the pleadings. This
claim is without merit. The initial iteration of the third counterclaim related to erstwhile-Plaintiff Great Lakes
Communication Corp., who was dropped from this case upon filing of the Second Amended Complaint. Moreover,
this Court’s order granting AT&T’s motion for reconsideration makes clear that the sham entity counterclaim—i.e.,
the third counterclaim in AT&T’s amended pleading—was to be stayed pending referral to the FCC.
9

The administrative complaint filed by AT&T alleges violations of §§ 203 and 201(b) in two separate
counts. See Liability Order, 28 FCC Rcd. at 3477 ¶ 1.

38

F.3d at 85 (observing that starting in 2010, the FCC issued a series of orders “that local exchange
carriers could not charge interexchange carriers to connect long-distance calls to a non-paying
end user”). Moreover, AT&T was certainly entitled to plead violations of different statutory
proscriptions based on different conduct as separate counts. See Fed. R. Civ. P. 8; cf. United
States v. Cohn, 682 F. Supp. 209, 220 (S.D.N.Y. 1988). The point is that regardless of whether
its counterclaims were most properly pled as one, two, or three counts, the FCC found that
Plaintiffs violated §§ 201(b) and 203 by billing for access services not provided pursuant to a
valid or applicable tariff and operating as a sham entity to collect inflated access charges.
Second, Plaintiffs reiterate that a pre-answer and pre-discovery summary
judgment motion is premature. As previously discussed, however, this line of reasoning lacks
merit because the New York summary judgment standard is wholly inapplicable, the Federal
Rules do not categorically bar such a motion, and the discovery requested in Plaintiffs’ Rule
56(d) affidavit bears no apparent relation to the merits of AT&T’s counterclaims. Plaintiffs’
invocation of New York’s “well-established” rule that summary judgment should not be granted
if there is a meritorious counterclaim for an amount equal to or greater than the claim is also
unavailing. (See Plaintiffs’ Opp. at 39 (citing Ill. McGraw Elec. Co. v. John J. Walters, Inc., 164
N.E.2d 872 (N.Y. 1959)).) Independent of the fact that Plaintiffs’ claims lack merit, that
principle applies when a court grants partial summary judgment dismissing a claim that is
inextricably interwoven with a counterclaim that is allowed to remain. See Seneca Trucking Co.
v. D.H. Overmeyer Co., 320 N.Y.S.2d 314, 315 (N.Y. App. Div. 1971).
Third, Plaintiffs’ contention that the FCC’s damages award was not based on any
showing of actual injury to AT&T presupposes that the measure of damages should have been
determined based on a showing of AT&T’s actual pecuniary loss and not the amount that AT&T

39

paid on invoices that it honored. But Plaintiffs raised this precise argument on appeal to the D.C.
Circuit, which in affirming the FCC’s damages award, held that AT&T “met [its] burden . . . [to]
prove a financial loss that was caused by the alleged violation.” All American III, 867 F.3d at
91-92. In effect, adopting Plaintiffs’ argument would impermissibly require this Court to sit in
review of the Damages Order.
Finally, Plaintiffs erroneously claim that AT&T’s suggestion of different ways to
calculate prejudgment interest raises an issue of fact precluding summary judgment. It is wellsettled that the decision to award prejudgment interest rests within the trial court’s broad
discretion. SEC v. Contorinis, 743 F.3d 296, 307-08 (2d Cir. 2014); see also Nat’l Commc’ns
Ass’n, Inc. v. Am. Tel. & Tel. Co., 1999 WL 258263, at *1 (S.D.N.Y. Apr. 29, 1999) (collecting
cases). That courts have applied different methods of calculating prejudgment interest merely
reflects an exercise of this judicial discretion—it hardly suggests that the discretionary rate of
prejudgment interest to be applied is a question of fact to be decided by the fact-finder, much less
one material to the merits of AT&T’s counterclaims.
B. Prejudgment Interest
In determining whether prejudgment interest is appropriate, courts consider “(i)
the need to fully compensate the wronged party for actual damages suffered, (ii) considerations
of fairness and the relative equities of the award, (iii) the remedial purpose of the statute
involved and/or (iv) such other principles as are deemed relevant by the court.” Wickham
Contracting Co. v. Local Union No. 3, 955 F.2d 831, 833-34 (2d Cir. 1992). Even where the
relevant federal statute is silent on prejudgment interest, the Supreme Court and the Second
Circuit have upheld such awards based on one or more of the above-enumerated considerations,
unless congressional intent points to the contrary or if statutory damages are fully compensatory

40

or punitive in nature. See Wickham Contracting Co., 955 F.2d at 834-36 (citations omitted).
Here, while the Communications Act does not speak to prejudgment interest, courts and the FCC
have recognized the necessity of prejudgment interest to fully compensate parties aggrieved by
violations of the statute. E.g., Nat’l Commc’ns Ass’n, 1999 WL 258263, at *1; ITT World
Commc’ns, Inc. v. W. Union Tel. Co., 598 F. Supp. 1435, 1437 (S.D.N.Y. 1984).
The considerations outlined in Wickham also support an award of prejudgment
interest. AT&T has—as the FCC found and the D.C. Circuit affirmed—suffered actual harm
from Plaintiffs’ violations of the Communications Act for which the FCC concluded that
damages in the amount of AT&T’s loss were appropriate. Moreover, as courts in this Circuit
have recognized, the Communications Act establishes a remedial scheme to compensate those
injured by carriers who violate the statute. See Nat’l Commc’ns Ass’n, 1999 WL 258263, at *5
(citing 47 U.S.C. § 206). Finally, the equities weigh in favor of awarding prejudgment interest.
The FCC determined that Plaintiffs were “sham” CLECs created to capture access revenues that
could not otherwise be obtained by lawful tariffs, and that Plaintiffs never intended to operate as
bona fide CLECs. Liability Order, 28 FCC Rcd. at 3487 ¶ 24, 3488 ¶¶ 25-26; cf. Wickham
Contracting Co., 955 F.2d at 834-35 (observing that prejudgment interest may be inappropriate
“when the defendant acted innocently and had no reason to know of the wrongfulness of his
actions”). Although Plaintiffs protest that AT&T and the FCC conspired to delay the FCC
proceedings to Plaintiffs’ detriment, they do not point to any evidence in support of their
contention. Thus, in this Court’s discretion, prejudgment interest is warranted. See Nat’l
Commc’ns Ass’n, 1999 WL 258263, at *5 (applying the precept that “[w]here no circumstances
exist to justify denial of prejudgment interest, . . . ‘it is ordinarily an abuse of discretion not to
include prejudgment interest’” (citing Gierlinger v. Gleason, 160 F.3d 858, 873 (2d Cir. 1998)).

41

But the inquiry does not end there. District courts also exercise discretion in
determining the rate of prejudgment interest as well as the date on which interest accrues.
Endico Potatoes, Inc. v. CIT Grp./Factoring, Inc., 67 F.3d 1063, 1071-72 (2d Cir. 1995); see
Jones v. UNUM Life Ins. Co. of Am., 223 F.3d 130, 139 (2d Cir. 2000) (explaining that “the
same considerations that inform the court’s decision whether or not to award interest at all
should inform the court’s choice of interest rate”). With respect to a suitable rate of prejudgment
interest, this Court is guided by the Second Circuit’s admonition that awards of prejudgment
interest should not overcompensate or result in a windfall to the aggrieved party. See Wickham
Contracting Co., 955 F.2d at 834. AT&T proposes the New York statutory interest rate of nine
percent per annum or the interest rates specified in Plaintiffs’ FCC tariffs for late payments, both
of which have been applied to claims for unpaid tariff charges. See, e.g., AT&T Corp. v. Cmty.
Network Servs., Inc., 1999 WL 1267457, at *6 (S.D.N.Y. Dec. 29, 1999) (applying New York
statutory rate); WorldCom, Inc. v. Voice Plus Int’l, Inc., 2000 WL 12146, at *2-3 (S.D.N.Y. Jan.
6, 2000) (applying interest rate specified in tariff filed with the FCC). Other measures include
the interest rates set forth in 26 U.S.C. § 6621 for underpayment and overpayment of taxes and
the interest rate prescribed by 28 U.S.C. § 1961 for post-judgment interest. See Nat’l Commc’ns
Ass’n, 1999 WL 25823, at *5.
Here, the interest rates for overpayment of taxes is appropriate. In particular, 26
U.S.C. § 6621 sets forth “five rates of interest, all functions of the Treasury’s rate for short-term
borrowing.” ACS of Anchorage, Inc. v. FCC, 290 F.3d 403, 414 (D.C. Cir. 2002). These rates
differ based on “whether taxes are overpaid or underpaid, whether the party is an individual or
corporation,” and the magnitude of overpayment or underpayment. ACS of Anchorage, 290
F.3d at 414. The interest rate for non-large corporate overpayments adequately compensates

42

AT&T for the loss of use of its money that it paid to Plaintiffs. Accord In re Total Telecomms.
Servs., Inc., 16 FCC Rcd. 5726, 5746 ¶ 49 (2001) (awarding prejudgment interest at the IRS rate
for corporate overpayments for violation of 47 U.S.C. § 201(b) based on an unreasonable scheme
to inflate access charges). Indeed, the FCC has on several occasions used the applicable IRS
refund rate in Communications Act cases that involve “overcharging or improperly withheld
payments.” Nat’l Commc’ns Ass’n, 1999 WL 258263, at *6; see also ACS of Anchorage, Inc.,
290 F.3d at 414 (noting that the FCC “apparently co-opts these rates for the calculation of
prejudgment interest”).
This Court observes that the New York statutory rate is inapt because AT&T’s
counterclaims involve substantive violations of a federal statute without any meaningful
connection to New York law. See In re Palermo, 739 F.3d 99, 107 (2d Cir. 2014) (endorsing the
framework employed by courts in this Circuit of determining the rate of prejudgment interest by
“look[ing] to the source of law underlying [the] claims”). Moreover, applying the interest rates
set forth in Plaintiffs’ tariffs for late payments seems particularly inappropriate because AT&T
sought their invalidation—not to mention that those rates may well overcompensate AT&T.
(See Declaration of David I. Toof, Ph.D, ECF No. 166 (“Toof Decl.”) ¶¶ 7-10 (calculating
$1,563,378.97 in prejudgment interest for $252,496.37 in damages).)
Accordingly, AT&T shall be entitled to prejudgment interest on the $252,496.37
awarded by the FCC to accrue from the dates the payments were made. See Nat’l Commc’ns
Ass’n, 1999 WL 258263, at *6 (noting that under federal law, interest accrues from the time of
injury). The amount of such interest shall be calculated based on the applicable IRS refund rate
throughout the period of accrual. Plaintiffs’ insinuation that the FCC proceedings were
intentionally (and with animus) protracted by the FCC and AT&T to drain Plaintiffs’ resources

43

and allow AT&T to win by default deserves one final remark. While Plaintiffs offer nothing
more than innuendo, even if they were correct, awarding interest from the dates the payments
were made to judgment is within the bounds of this Court’s discretion given that Plaintiffs
retained the use of AT&T’s payments throughout the entire period. Cf. SEC v. First Jersey
Secs., 101 F.3d 1450, 1477 (2d Cir. 1996) (noting in the SEC enforcement context that “[e]ven if
defendants were correct that the present litigation was protracted through some fault of the SEC,
defendants plainly had the use of their unlawful profits for the entire period”).
CONCLUSION
For the foregoing reasons, AT&T’s motions for summary judgment are granted.
The parties are directed to submit a proposed judgment consistent with this Opinion & Order by
September 25, 2018. The Clerk of Court is directed to terminate the motions pending at ECF
Nos. 159 and 163 and mark this case as closed.
Dated: September 10, 2018
New York, New York
SO ORDERED:

_______________________________
WILLIAM H. PAULEY III
U.S.D.J.

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