Duke Energy Progress, Inc. v. Frontier Communications of the Carolinas Inc.

Filing 37

ORDER denying 34 Motion for Hearing; denying 17 Motion for Partial Judgment on the Pleadings; and granting 19 Motion to Stay - This matter is STAYED pending further order of the court. Either party may move to lift the stay either upon a fi nal determination by the FCC on defendant's FCC complaint, or upon other developments that result in dismissal or termination of the proceedings resulting from initiation of the FCC complaint. In any event, the parties shall file a status report with the court, no later than ninety (90) days from the date of this order, and periodically every ninety (90) days thereafter until resolution of the FCC complaint, specifying whether the FCC complaint remains pending for decision before the FCC. Signed by District Judge Louise Wood Flanagan on 09/23/2014. (Baker, C.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
NO. 5:13-CV-617-FL

DUKE ENERGY PROGRESS, INC.,
Plaintiff,
v.
FRONTIER COMMUNICATIONS OF
THE CAROLINAS, INC.,
Defendant.

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ORDER

This matter comes before the court upon defendant’s motion to stay (DE 19), plaintiff’s
motion for partial judgment on the pleadings (DE 17), and plaintiff’s motion for hearing (DE 34).
These motions have been fully briefed and are ripe for adjudication. For the reasons that follow, the
court grants defendant’s motion to stay, denies without prejudice plaintiff’s motion for partial
judgment on the pleadings, and denies plaintiff’s motion for hearing.
BACKGROUND
On August 7, 2013, plaintiff filed a complaint against defendant in state court, which
defendant removed to this court on August 26, 2013. Plaintiff is an electric utility that owns utility
poles for purposes of distributing electricity to its customers. Defendant is an incumbent local
exchange carrier (“ILEC”) that owns utility poles for purposes of distributing telephone and other
services to its customers.
Plaintiff seeks to recover over $2.97 million that defendant allegedly owes pursuant to two
agreements, executed in 1978 and 1981, by the parties’ predecessors (“Joint Use Agreements”),

which authorize each party to attach its cables that are used in the transmission of the party’s retail
services, to poles owned by the other party.1 Under the terms of the Joint Use Agreements, the
parties agreed to pay annual rent to each other, calculated pursuant to a rate methodology contained
in the Joint Use Agreements, as consideration for the right to use the other party’s poles.
According to the complaint, in 1995 and 1996, the parties unsuccessfully attempted to
negotiate a new joint use agreement with a new rate methodology. From 1996 through 2009,
plaintiff invoiced defendant by using the Handy-Whitman Index, a widely-used cost index in the
utility industry, not the rate methodology in the Joint Use Agreements. From 2010 through 2012,
however, plaintiff returned to invoicing defendant using the rate methodology in the Joint Use
Agreements.
Plaintiff seeks to recover from defendant for underpayments made on annual rental invoices
for the years 2010, 2011, and 2012. In particular, plaintiff seeks to recover on (1) 2010 annual
rentals, based upon invoices sent in December 2010 and February 2011; (2) 2011 annual rentals,
based upon invoices sent in December 2011; (3) 2011 inventory, based upon invoices sent December
2012 and January 2013; and (4) 2012 annual rentals, based upon invoices sent in December 2012.
According to the complaint, on July 8, 2011, defendant provided plaintiff one year’s written notice
of defendant’s intent to terminate the Joint Use Agreements, effective July 8, 2012.
Plaintiff asserts four claims premised upon breach of the Joint Use Agreements. In
particular, plaintiff seeks a (1) declaration that the Joint Use Agreements continue to control the
methodology by which the annual pole rental payments due to each party is calculated; (2) breach

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A copy of the Joint Use Agreement between Western Carolina Telephone Company and Carolina Power & Light
Company, dated April 28, 1978, is attached to the complaint as “Exhibit 1”; and a copy of the Joint Use Agreement
between General Telephone Company of the Southeast and Carolina Power & Light Company, dated January 1, 1981,
is attached thereto as “Exhibit 2.”

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of contract recovery of over $2.97 million, excluding interest, for failure to pay full amount due for
rental for 2010-2012 rental invoices and the 2011 inventory invoices; (3) in the alternative, breach
of contract recovery of $816,255.48, excluding interest, using the Handy-Whitman index to measure
damages should the court determine the parties mutually agreed to adopt the Handy-Whitman index
for 2011-2012 annual rental invoices and 2011 inventory invoices; and (4) in the alternative,
recovery in an unspecified amount based upon unjust enrichment should the court determine that
no express rental rate existed for 2010 through 2012.
Defendant filed its answer to the complaint on October 9, 2013. Following submission of
a joint report and plan pursuant to Federal Rule of Civil Procedure 26(f), the court entered an order
on November 25, 2013, noting that plaintiff sought to move forward in discovery while defendant
sought a stay of discovery, pending resolution of an anticipated motion to stay on the basis that the
Federal Communications Commission (“FCC”) has primary jurisdiction over certain aspects of the
dispute. The court directed defendant to file a motion to stay on or before December 9, 2013, and
stayed discovery pending resolution of the motion.
On December 9, 2013, defendant filed its motion to stay, in which it argues that plaintiff’s
claims for rentals dated after July 12, 2011, fall within the FCC’s primary jurisdiction, based upon
an FCC order regarding pole attachments, effective July 12, 2011. See Implementation of Section
224 of the Act; A National Broadband Plan for Our Future, 26 FCC Rcd. 5240, 5328–33, 2011 WL
1341351 (2011) (“Pole Attachment Order”); id., 76 Fed. Reg. 40817 (2011) (establishing effective
date). Defendant attaches to the motion a complaint it filed that same date with the FCC’s
enforcement bureau (the “FCC complaint”), seeking to have FCC set rates that plaintiff may charge

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for all periods in dispute after July 12, 2011. Defendant seeks a stay pending FCC’s resolution of
its FCC complaint.
Also on December 9, 2013, plaintiff filed a motion for partial judgment on the pleadings,
pursuant to Federal Rules of Civil Procedure 12(c) and (h)(2)(B), seeking to strike the following
three defenses contained in defendant’s answer:

[FIRST FURTHER DEFENSE:] Under 47 U.S.C. § 224, [defendant] is entitled to
just and reasonable rates, terms, and conditions for its attachments on [plaintiff’s]
poles.2
[SECOND FURTHER DEFENSE:] The FCC has primary jurisdiction over this
matter. The subject matter of this case involves the rates, terms and conditions of
agreements for [defendant’s] use of [plaintiff’s] utility poles, over which the FCC has
primary jurisdiction. This Court, accordingly, should defer to the FCC’s primary
jurisdiction.
[THIRD FURTHER DEFENSE:] Given that the subject matter of this case involves
the rates, terms and conditions of joint use agreements, a matter which is related to
the primary jurisdiction of the FCC, [plaintiff] has failed to state a claim upon which
relief can be granted.
DISCUSSION
A. Motion to Stay
The primary jurisdiction doctrine is “specifically applicable to claims properly cognizable
in court that contain some issue within the special competence of an administrative agency.” Reiter
v. Cooper, 507 U.S. 258, 268 (1993) “It requires the court to enable a referral to the agency, staying
further proceedings so as to give the parties reasonable opportunity to seek an administrative ruling.”

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47 U.S.C. § 224, commonly referred to as the Pole Attachments Act (“PAA”), requires the Federal Communications
Commission (“FCC”) to “regulate the rates, terms, and conditions for pole attachments to provide that such rates, terms,
and conditions are just and reasonable,” subject to certain provisions regarding state regulatory authority not applicable
here. See 42 U.S.C. § 224(b)(1).

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Id. (internal quotations omitted). “No fixed formula exists for applying the doctrine of primary
jurisdiction. In every case the question is whether the reasons for the existence of the doctrine are
present and whether the purposes it serves will be aided by its application in the particular
litigation.” United States v. Western Pac. R.R. Co., 352 U.S. 59, 64 (1956). “Generally speaking,
the doctrine is designed to coordinate administrative and judicial decision-making by taking
advantage of agency expertise and referring issues of fact not within the conventional experience
of judges or cases which require the exercise of administrative discretion.” Envtl. Tech. Council v.
Sierra Club, 98 F.3d 774, 789 (4th Cir. 1996). “Despite what the term primary jurisdiction may
imply, it does not speak to the jurisdictional power of the federal courts. It simply structures the
proceedings as a matter of judicial discretion, so as to engender an orderly and sensible coordination
of the work of agencies and courts.” Id. at 789 n.24 (quotation omitted).
“The grant or denial of a request to stay proceedings calls for an exercise of the district
court’s judgment ‘to balance the various factors relevant to the expeditious and comprehensive
disposition of the causes of action on the court’s docket.’” Maryland v. Universal Elections, Inc.,
729 F.3d 370, 375 (4th Cir. 2013) (quoting United States v. Ga. Pac. Corp., 562 F.2d 294, 296 (4th
Cir.1977)). Although the Fourth Circuit has not articulated specific factors, courts within this circuit
have identified four factors that may be considered, albeit not exclusively, in deciding whether to
grant a stay due to the doctrine of primary jurisdiction:
(1) whether the question at issue is within the conventional experience of judges or
is within the agency’s particular filed of expertise; (2) whether the question at issue
is particularly within the agency’s discretion; (3) whether there exists a substantial
danger of inconsistent rulings; and (4) whether a prior application to the agency has
been made.
Longo v. Trojan Horse Ltd., 992 F. Supp. 2d 612, 617 (E.D.N.C. 2014) (citing Nat’l Comm. Ass'n,

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Inc. v. American Tel. & Tel. Co., 46 F.3d 220, 222 (2d Cir.1995)); see Sprint Commc’ns Co., L.P.
v. Ntelos Tel. Inc., 5:11CV00082, 2012 WL 3255592 * 11 (W.D. Va. Aug. 7, 2012) (same); Cent.
Tel. Co. of Virginia v. Sprint Commc’ns Co. of Virginia, 759 F. Supp. 2d 772, 786 (E.D. Va. 2011)
(same).
Consideration of these factors, as well as other circumstances presented, weigh in favor of
granting the motion to stay in this case. As to the first two factors, the parties do not agree on the
“question at issue” in this case. Plaintiff contends the question at issue is the extent of contractual
rights of the parties, which is undeniably a question suited for judicial determination. Defendant
contends that the question at issue is whether the FCC Pole Attachment Order must dictate the rents
plaintiff may recover for post-July 12, 2011 rentals. There is some truth to the positions on both
sides. As to the parties’ contractual rights regarding pre-July 12, 2011, rentals, the FCC Pole
Attachment Order is not applicable, and the court must determine the rights of the parties based upon
the Joint Use Agreements and other applicable agreements between the parties, to the extent an
express rental rate existed for this time period.
As to post-July 12, 2011, rentals, by contrast, the FCC has established a framework for
addressing rental rates as between ILECs, such as defendant, and utilities, such as plaintiff. See Pole
Attachment Order, 26 FCC Rcd at 5242 (“[T]he Commission’s experience during the past 15 years
has revealed the need to establish a more detailed framework to govern the rates, terms and
conditions for pole attachments.”); id. at 5245 (“[W]e allow [ILECs] to file pole attachment
complaints if they believe a particular rate, term or condition is unjust or unreasonable, and provide
guidance regarding the Commission’s approach to evaluating those complaints and what the
appropriate rate may be.”).

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Application of this framework is authorized by the broad mandate of the Pole Attachments
Act, 47 U.S.C. § 224(b)(1), which directs the FCC to “adopt procedures necessary and appropriate
to hear and resolve complaints concerning” pole attachment rates, terms and conditions. See
American Elec. Power Svc. Corp. v. FCC, 708 F.3d 183, 188-190 (D.C. Cir. 2013) (holding that the
Pole Attachment Order is a reasonable interpretation of the statute). Through its complaint filed
with the FCC, defendant has asked the FCC in the first instance to determine under its regulatory
framework the rates, terms, and conditions for pole attachments for the post-July 12, 2011 time
period. The FCC is uniquely situated to consider the applicability of its own Pole Attachment Order
to the post-July 12, 2011 rentals in this case.
While defendant argues that the FCC Pole Attachment Order does not apply to existing
contractual arrangements, such as the Joint Use Agreements here, this argument is not determinative
of primary jurisdiction. Because the applicability of the FCC Pole Attachment Order is itself a
question in dispute, the FCC is in the best position to interpret its own order and regulations to
answer this question, in light of its statutorily-mandated duty to “regulate the rates, terms, and
conditions for pole attachments to provide that such rates, terms, and conditions are just and
reasonable.” 47 U.S.C. § 224(b)(1).3 Furthermore, where defendant terminated the Joint Use
Agreements effective July 8, 2012, the contractual basis for plaintiff’s claims for rents after that date
is even more attenuated.

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The Pole Attachment Order does not draw a bright-line rule against consideration of rates, terms, and conditions in
existing joint use agreements. Rather the FCC “declined . . . to adopt comprehensive rules governing” the pole
attachments of ILECs, opting instead “to proceed on a case-by-case basis” in complaint proceedings brought before the
FCC. Pole Attachment Order, 26 FCC Rcd. at 5334. The FCC recognized the existence of agreements between ILECs
and utility companies, such as defendant, for joint use of utility poles. Id. In addition, the FCC acknowledged the
concern some ILECs expressed about these existing joint use agreements. Id. at 5334-35. Without resolving the issue
for purposes of all cases, the FCC stated instead that it “is unlikely to find the rates, terms, and conditions in existing joint
use agreements unjust or unreasonable.” Id. at 5335 (emphasis added).

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The third factor, whether there is a substantial danger of inconsistent rulings, also depends
on the time period under consideration. As to rents for 2010, there does not appear to be a
substantial danger of inconsistent rulings. As to rents for 2011 and 2012, however, there is a risk
that a judgment in favor of plaintiff based upon contractual provisions alone could conflict with an
order of the FCC regarding post-July 12, 2011, rents. This risk is augmented if the court awards
relief to plaintiff pursuant to its fourth claim for relief, unjust enrichment, based on calculation of
rates in accordance with what “a reasonable person would expect to pay for the benefit of” pole
attachments, (Compl. ¶ 90), and such calculation conflicts with a specialized assessment of the same
issue by the FCC. Furthermore, there is a substantial danger of inconsistent rulings concerning
plaintiff’s claim for declaratory judgment, where plaintiff seeks a declaration regarding applicability
of the of rental rates in the Joint Use Agreements “in calendar year 2010 and thereafter,” without
date limitation. (Compl. p. 23).
The fourth factor, whether a prior application to the agency has been made, also weighs in
favor of a stay under circumstances of this case. “The advisability of invoking primary jurisdiction
is greatest when the issue is already before the agency.” CF Indus., Inc. v. Transcon. Gas Pipe Line
Corp., 614 F.2d 33, 35 (4th Cir. 1980) (quotations omitted). Where plaintiff initiated its FCC
complaint seeking a limitation of rental rates for periods following the July 12, 2011, effective date
of the FCC Pole Attachment Order, (DE 19-1 at ¶¶ 74-75), that issue is already before the agency,
and no separate referral to the FCC is required.
Furthermore, as an additional consideration in favor of a stay, a similar contractual dispute
regarding applicability of a joint use agreement between defendant and a Duke Energy affiliate for
2012 and 2013 rents on pole attachments in counties in western North Carolina, also has been stayed

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pending resolution of an administrative complaint by defendant. The United States District Court
for the Western District of North Carolina held that “[i]t would be a waste of judicial resources for
this Court to proceed with this case while Defendant’s complaint is pending with the FCC,” and that
a stay “will ultimately allow this Court to resolve this dispute without the cloud of the FCC
complaint hanging over this case.” Duke Energy Carolinas, LLC v. Frontier Comm’s of the
Carolinas, LLC, No. 2:13-CV-40, 2014 WL 3854146 *5 (W.D.N.C. August 6, 2014).
Plaintiff argues that the court should not stay this matter because defendant lacks a private
right of action under the Pole Attachments Act. This argument, which also is asserted as a basis for
judgment on the pleadings as to the First, Second, and Third Further Defenses, is misplaced for
several reasons. As an initial matter, case law does not support uniformly barring assertion of a
defense based upon a statute where the statute does not provide a private right of action. Rather,
barring a defense on this basis depends on the nature of the defense asserted and the context of the
claims asserted. Compare, e.g., Wachovia Bank, N.A. v. Lone Pine, Inc., No. 1:09-CV-02983-JOF,
2010 WL 2553880, at *2 (N.D. Ga. June 15, 2010) (granting motion for judgment on the pleadings
as to borrower’s affirmative defense asserted on the basis that plaintiff bank accepted funds under
the Troubled Assets Relief Capital Purchase Program (“TARP”) established under the Emergency
Stabilization Act of 2008, 12 U.S.C. §§ 5201, et seq.); with Kaiser Steel Corp. v. Mullins, 455 U.S.
72, 82 (1982) (stating that “any one sued upon a contract may set up as a defence that it is a violation
of the act of Congress, and if found to be so, that fact will constitute a good defence to the action,”
in context of anti-trust law) (quotations omitted); Costello v. Grundon, 651 F.3d 614, 624 (7th Cir.
2011) (“No private right of action under a statute is necessary to assert a violation of that statute as
an affirmative defense.”).

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In this case, although the Pole Attachments Act does not provide a private right of action,
it does, as noted above, mandate the FCC to “adopt procedures necessary and appropriate to hear
and resolve complaints concerning . . . rates, terms and conditions.” 47 U.S.C. § 224(b)(1). Thus,
although defendant may not be able to bring suit or a counterclaim on the basis of the Pole
Attachments Act in this court, it may file an administrative complaint with the FCC, as it has done
here. The lack of a private right of action, therefore, does not in itself serve to undermine
defendant’s asserted defense on the basis of primary jurisdiction. Nor does it serve to restrict the
court’s discretion to stay this matter pending outcome of the proceedings on the FCC complaint.
Plaintiff also argues that a stay is not warranted because antecedent legal issues may be
decided by the court that could aid the FCC in its review of the justness and reasonableness of the
post-July 2011 rates. For example, in order to assess the reasonable ness of the rates, plaintiff
argues, the FCC must know what rate it is evaluating and the circumstances under which that rate
was negotiated, which determinations raise contract interpretation issues exclusively under the
jurisdiction of the court. The Pole Attachments Act, however, does not prohibit the FCC from
making its own findings regarding the nature of the parties’ prior rate arrangements, to the extent
those findings may be relevant to its determination of the justness and reasonableness of post-July
2011 rates. Indeed, the Pole Attachment Order suggests that the FCC may find it necessary to
inquire into the nature of the prior “negotiating position” of the parties in order to evaluate terms of
existing joint use agreements, leaving open the possibility that the FCC may find rates in existing
joint use agreements unjust or unreasonable. 26 FCC Rec. 5335. In any event, to the extent the FCC
determines it cannot proceed under its own framework without a prior judicial determination of the
contractual rights of the parties, the FCC may resolve defendant’s FCC complaint accordingly.

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Finally, plaintiff suggests that there is no reason to stay claims based upon pre-July 2011
rents, where the FCC has no jurisdiction over rates prior to that date. The court could, for example,
allow plaintiff to continue adjudication its claims against defendant based upon underpayment of
rents for the 2010 calendar year. It is possible, however, that plaintiff’s claims for 2010 rents could
turn on plaintiff’s alternative theory of unjust enrichment, in the event that no express rental rate
existed for 2010. In such instance, plaintiff asks the court to determine what “a reasonable person
would expect to pay for the benefit of [pole attachment] services,” including an inquiry into the “full
value thereof.” (Compl. ¶ 90). At this juncture, it is not clear whether any FCC determination
regarding reasonable rental rates for the post-July 2011 time period could inform upon the court’s
analysis of what “a reasonable person” would expect to pay for the pre-July 2011 time period, in the
absence of an express rental rate in the Joint Use Agreements.
Conversely, if the FCC declines to make any determination as to whether the rents charged
for the post-July 2011 time period are reasonable, this could also impact the court’s analysis of
rental rates for the pre-July 2011 time period, under an unjust enrichment theory. Accordingly, the
court finds it to be a more efficient use of the court’s and the parties’ resources to address claims
related to the pre-July 2011 time period after the FCC has addressed defendant’s FCC complaint
pertaining to the post-July 2011 time period.
B. Motion for Judgment on the Pleadings
In light of the court’s determination that a stay is warranted on the basis of FCC primary
jurisdiction regarding rental rates for the post-July 2011 time period, on the basis of 47 U.S.C. § 224
and the Pole Attachment Order, which primary jurisdiction forms the basis of defendant’s First,
Second, and Third Further Defenses, the court will deny without prejudice plaintiff’s motion for

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judgment on the pleadings as to these defenses. In doing so, however, the court notes two
considerations that may impact future consideration of these defenses. First, as set forth above, the
stay based upon FCC primary jurisdiction is based primarily upon the potential impact that an FCC
determination as to post-July 2011 rates could have on plaintiff’s claims related to such time period.
In this manner, the First, Second, and Third Further Defenses may be more properly viewed as
partial defenses only to plaintiff’s claims. Second, the stay based upon FCC primary jurisdiction
does not resolve these defenses in favor of defendant, but rather defers final consideration of the
defenses until the FCC has made a determination on the basis of defendant’s FCC complaint. It is
for this reason that the court will deny the motion for judgment on the pleadings without prejudice.
C.

Motion for Hearing
The court denies plaintiff’s motion for hearing because the facts and legal contentions are

adequately presented in the materials before the court and oral argument would not aid the decisional
process.
CONCLUSION
Based on the foregoing, defendant’s motion to stay (DE 19) is GRANTED, plaintiff’s motion
for partial judgment on the pleadings (DE 17) is DENIED WITHOUT PREJUDICE, and plaintiff’s
motion for hearing (DE 34) is DENIED. This matter is STAYED pending further order of the court.
Either party may move to lift the stay either upon a final determination by the FCC on defendant’s
FCC complaint, or upon other developments that result in dismissal or termination of the
proceedings resulting from initiation of the FCC complaint. In any event, the parties shall file a
status report with the court, no later than ninety (90) days from the date of this order, and

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periodically every ninety (90) days thereafter until resolution of the FCC complaint, specifying
whether the FCC complaint remains pending for decision before the FCC.
SO ORDERED, this the 23rd day of September, 2014.

LOUISE W. FLANAGAN
United States District Court Judge

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