Worldnet Telecommunications, Inc. v. Telecommunications Regulatory Board of Puerto Rico et al

Filing 24

OPINION & ORDER denying 16 Motion to Dismiss. PRTC's Answer due by 7/27/2016. Signed by Judge Jay A. Garcia-Gregory on 7/13/2016. (AP)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

WORLDNET

TELECOMMUNICATIONS,

INC.,
Plaintiff,
CIVIL NO. 12-1916 (JAG)

v.
TELECOMMUNICATIONS
REGULATORY
BOARD OF PUERTO RICO, et al.,
Defendants.

OPINION AND ORDER
GARCIA-GREGORY, D.J.
This matter is before the Court on Co-Defendant Puerto Rico Telephone Company, Inc.’s
(“PRTC”) Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). Docket No. 16.
Plaintiff

WorldNet

Telecommunications,

Inc.

(“WorldNet”)

and

Co-Defendant

Telecommunications Regulatory Board of Puerto Rico (the “Board”) timely opposed. Docket
Nos. 17, 18. For the reasons stated below, the Court DENIES PRTC’s Motion to Dismiss.
BACKGROUND1
WorldNet and PRTC are parties to an Interconnection Agreement (“ICA”) as mandated
by the federal Telecommunications Act of 1996 (the Telecommunications Act”), 47 U.S.C. §§ 251,
252. Docket No. 1. The ICA allows WorldNet to collect liquidated damages from PRTC for

1

For purposes of Defendant’s Motion to Dismiss, all facts are taken from Plaintiff’s Complaint, Docket No. 1, and are
presumed to be true.

Civil No. 12-1916 (JAG)

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certain PRTC violations. Id. Section 24 of the ICA’s General Terms and Conditions dictates a
specific process for the assertion and resolution of liquidated damages disputes. Id. This process
includes mediation before a Board-appointed mediator before litigation can commence over a
liquidated damages claim. Id.
On December 23, 2011, WorldNet asked the Board to appoint a mediator to mediate a
liquidated damage dispute with PRTC. Id. In response to a Board order to show cause, PRTC
argued that WorldNet’s claim was in fact a normal course billing dispute and not a liquidated
damages claim, and thus Section 24 did not apply. On June 28, 2012, the Board agreed with
PRTC’s position and denied WorldNet’s request to appoint a mediator (the “Order”). Id.
WorldNet moved the Board to reconsider. Id. In its reconsideration Order on August 30, 2012
(the “Reconsideration Order”), the Board reasoned that Section 29 of the ICA’s General Terms
and Conditions, if invoked by PRTC, was the process to be used to dispute a billing error, before
a claim for liquidated damages could be mediated under Section 24. Id.
WorldNet sued in this Court alleging that the Board’s Order and its Reconsideration
Order violate Puerto Rico and federal law. Id. Specifically, WorldNet alleges that the Orders are
1) contrary to the plain language of Section 24 of the General Terms and Conditions of the ICA,
2) based on arbitrary and capricious findings, and 3) based on the imposition of an unreasonable
and anti-competitive ICA term in violation of the Telecommunications Act and Puerto Rico law.
Id. PRTC moved to dismiss, arguing 1) that the Court lacked subject matter jurisdiction over
WorldNet’s claims, 2) that WorldNet’s complaint does not state a claim under federal law, and

Civil No. 12-1916 (JAG)

3

3) that WorldNet has failed to exhaust the remedies required by the ICA before initiating
litigation.
STANDARD OF REVIEW
A defendant may move to dismiss an action for lack of subject matter jurisdiction
pursuant to Fed. R. Civ. P. 12(b)(1). As courts of limited jurisdiction, federal courts have the
duty of narrowly construing jurisdictional grants. See, e.g., Alicea-Rivera v. SIMED, 12 F. Supp. 2d
243, 245 (D.P.R. 1998). Further, the party asserting jurisdiction has the burden of demonstrating
the existence of federal jurisdiction. Murphy v. United States, 45 F.3d 520, 522 (1st Cir.1995); Droz
Serrano v. Caribbean Records Inc., 270 F.Supp.2d 217 (D.P.R.2003). Motions brought under Rule
12(b)(1) are subject to the same standard of review as Rule 12(b)(6) motions. Negron-Gaztambide
v. Hernandez-Torres, 35 F.3d 25, 27 (1st Cir. 1994).
To survive dismissal under Fed. R. Civ. P. 12(b)(6), a complaint must allege “a plausible
entitlement to relief.” Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1967 (2007). According to Twombly,
the complaint must state enough facts to “nudge [the plaintiff’s] claims across the line from
conceivable to plausible.” Id. at 1974. Therefore, to preclude dismissal pursuant to Fed. R. Civ. P.
12(b)(6), the complaint must rest on factual allegations sufficient “to raise a right to relief above
the speculative level.” Id. at 1965. At the motion to dismiss stage, courts accept all well-pleaded
factual allegations as true, and draw all reasonable inferences in the plaintiff’s favor. See CorreaMartinez v. Arrillaga-Belendez, 903 F.2d 49, 51 (1st Cir. 1988).

Civil No. 12-1916 (JAG)

4

ANALYSIS
There are three issues before the Court. First, the Court must determine if it has subject
matter jurisdiction over WorldNet’s complaints. Second, the Court must examine whether
WorldNet has stated a valid federal claim under Fed. R. Civ. P. 12(b)(6). Third, the Court must
determine whether WorldNet has exhausted all the remedies required by the ICA prior to
bringing suit in federal court.
The Court holds that this Court does have subject matter jurisdiction over WorldNet’s
claims pursuant to 47 U.S.C. § 252(e)(6) because WorldNet’s claims satisfy the two-part test
outlined by the First Circuit for federal jurisdiction under § 252(e)(6). Then the Court holds
that, at this stage, WorldNet’s complaint should not be dismissed for failure to state a claim
under Fed. R. Civ. P. 12(b)(6). Lastly, the Court holds that WorldNet has exhausted all
necessary remedies under the ICA to bring suit in federal court.

I.

Subject Matter Jurisdiction
PRTC argues that this Court does not have subject matter jurisdiction over WorldNet’s

complaint. Docket No. 16. WorldNet asserts that this Court has subject matter jurisdiction over
its complaint under 47 U.S.C. § 252(e)(6), and 28 U.S.C. §§ 1331, 1337(a), 1367(a). Docket Nos. 1,
18. The Court holds that it has jurisdiction under 47 U.S.C. § 252(e)(6). Thus, the Court need
not consider whether it has jurisdiction under the other statutes.
The Telecommunications Act provides that federal courts shall have jurisdiction to
decide whether certain State commission “determinations” concerning an ICA comply with the
provisions of the Telecommunications Act. 47 U.S.C. § 252(e)(6). Specifically, § 252(e)(6)

Civil No. 12-1916 (JAG)

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provides that “[i]n any case in which a State commission makes a determination under this
section, any party aggrieved by such determination may bring an action in an appropriate
Federal district court to determine whether the agreement or statement meets the requirements
of § 251 of this title and [§ 252].” 47 U.S.C. § 252(e)(6). It is clear that § 252(e)(6) provides for
federal jurisdiction over State commission approvals or rejections of ICAs. See Puerto Rico Tel. Co. v.
Telecommunications Regulatory Bd. of Puerto Rico, 189 F.3d 1, 9 (1st Cir. 1999) (hereinafter “Puerto Rico
Telephone Company 1999”). What is less clear is whether this section provides for jurisdiction over
interpretations or enforcements of ICAs, such as the Board Orders here. See id.
The First Circuit explored this issue in Puerto Rico Telephone Company 1999, and seemingly
delineated a two-part test. Id. at 9-16. Although the court first stated that it would not decide
whether § 252(e)(6) confers jurisdiction over State commission determinations enforcing or
interpreting an ICA, the court assumed arguendo that review under § 252 (e)(6) was not limited
to initial acceptances and rejections of ICAs. Id. at 10.2 The Court then stated that § 252(e)(6)
jurisdiction 1) “clearly requires at least a substantial nexus between the commission’s
determination and an [ICA],” id., and 2) “does not confer authority on federal courts to review
the actions of state commissions for compliance with state law,” id. at 13.

2

There is support among other circuits for the proposition that § 252(e)(6) does provide for federal review of
interpretations or enforcements of ICAs. See, e.g., Illinois Bell Tel. Co. v. Worldcom Techs., Inc., 179 F.3d 566, 570-71 (7th Cir.
1999), as amended (Aug. 19, 1999); Iowa Utilities Bd. v. F.C.C., 120 F.3d 753, 804 n. 24 (8th Cir. 1997) (stating in dicta that
“[w]e believe that the enforcement decisions of state commissions would also be subject to federal district court
review under subsection 252(e)(6)”), as amended on reh'g (Oct. 14, 1997), aff'd in part, rev'd in part sub nom. AT & T Corp. v.
Iowa Utilities Bd., 525 U.S. 366, (1999).

Civil No. 12-1916 (JAG)

6

WorldNet positions that this two-part test is dicta and should not be applied. Docket
No. 18. Instead it positions that § 252(e)(6) confers broad jurisdiction on this Court to review
Board interpretations or enforcements of an ICA. Id. PRTC, on the other hand, argues that we
should treat this test as binding precedent and that WorldNet’s complaint does not meet the
second prong of this test. The Court will assume arguendo that PRTC’s more restrictive test
applies.
Even applying the two-part test outlined in Puerto Rico Telephone Company 1999, this Court
has jurisdiction over WorldNet’s complaint under § 252(e)(6). PRTC argues that WorldNet’s
complaint fails to meet the test’s second prong because the complaint does not raise an issue of
federal law, and instead only alleges that the Board’s Orders’ interpreting the ICA did not
comply with Puerto Rico law. Docket No. 16.3 The Court disagrees. First, WorldNet’s complaint
explicitly alleges that the Board’s Orders violated federal law. Docket No. 1. WorldNet states
that the Board’s interpretation of the ICA imposed an unreasonable and anti-competitive ICA
term in violation of 47 U.S.C. § 251(c), Docket Nos. 1, 18, which states that an incumbent local
exchange carrier, like PRTC, must provide services and network facilities to competitors, like
WorldNet, on “rates, terms, and conditions that are just, reasonable, and nondiscriminatory,” §
251(c). Second, the ICA is inevitably infused with federal law and it must be interpreted and
enforced in accordance with federal law. An ICA is not an ordinary contract, it is a creature

3

PRTC does not contest whether WorldNet’s complaint meets the first prong of the test—that there is a
“substantial nexus” between the Board’s Orders and the ICA. Thus, PRTC has waived this argument. See United
States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990). Accordingly, the first prong for § 252(e)(6) jurisdiction is met.

Civil No. 12-1916 (JAG)

7

created by, and heavily dictated by the Telecommunications Act. See WorldNet Telecommunications,
Inc. v. Puerto Rico Tel. Co., 497 F.3d 1, 7 (1st Cir. 2007). Thus, any Board interpretation or
enforcement of an ICA, such as the Board’s Orders here, must comply with the requirements of
the Telecommunications Act, and this inevitably presents numerous issues of federal law. See
Puerto Rico Tel. Co. v. Telecommunications Regulatory Bd. of Puerto Rico, No. CIV. 12-1683 GAG, 2012
WL 4794381, at *3 (D.P.R. Oct. 9, 2012), motion for reconsideration granted on other grounds, Civil Case
No. 12-1683 Docket No. 38 (D.P.R. July 23, 2013). Therefore, this Court has jurisdiction over
WorldNet’s complaint under § 252(e)(6).
The First Circuit’s decision in Puerto Rico Telephone Company 1999 is not to the contrary. 189
F.3d 1. In Puerto Rico Telephone Company 1999, the Court stated in dicta that §252(e)(6) could not
provide jurisdiction over the plaintiff’s claims because they only asserted that the Board violated
state law provisions. Id. at 13-17. However, Puerto Rico Telephone Company 1999 is inapposite to the
current case for two reasons. First, the Board Order being contested in Puerto Rico Telephone
Company 1999 did not involve an ICA. Instead, the Board objected, under Puerto Rico law, to the
manner in which the plaintiff imposed certain charges on its customers, “a matter that was not
covered by the [ICA] and that affected people who were not parties to the [ICA].” Puerto Rico
Telephone Company 1999, 189 F.3d at 10. In contrast, WorldNet’s complaint contests Board Orders
that interpreted specific provisions of an ICA and which only affected the two parties to the
ICA. Docket No. 1. Second, although the complaint in Puerto Rico Telephone Company 1999 vaguely
asserted that the Board’s decision violated federal law, the complaint did not identify any
specific Telecommunications Act provisions that the Board’s decision violated. 189 F.3d at 15. In

Civil No. 12-1916 (JAG)

contrast,

WorldNet’s

8

complaint

alleges

violations

of

specific

provisions

of

the

Telecommunications Act, specifically 47 U.S.C. §§ 251, 252. Thus, WorldNet’s complaint has a
greater connection to the Telecomunications Act than the complaint in Puerto Rico Telephone
Company 1999. Therefore, unlike in Puerto Rico Telephone Company 1999, WorldNet’s complaint does
not present only issues of state law.
Accordingly, the Court has jurisdiction over WorldNet’s complaint under § 252(e)(6).

II.

Failure to State a Claim under Fed. R. Civ. P. 12(b)(6)
Next, PRTC argues that WorldNet’s complaint should be dismissed because it fails to

state a federal claim. In particular, PRTC argues that WorldNet only asserts a violation of 47
U.S.C. § 252, which PRTC contends only applies to the initial approval of an ICA, and not to a
Board interpretation of an already existing ICA, as WorldNet is contesting. Docket No. 16. Thus,
PRTC contends that WorldNet’s complaint cannot allege a § 252 violation, and accordingly it
does not state a federal claim. Id. This Court disagrees. First, PRTC provides no support for its
contention that § 252 cannot be used to challenge a Board interpretation of an existing ICA.
Second, PRTC ignores that in addition to § 252, WorldNet alleges that the Board’s ICA
interpretation also violated § 251, which states that an incumbent local exchange carrier, like
PRTC, must provide services on “rates, terms, and conditions that are just, reasonable, and
nondiscriminatory.” Docket Nos. 1, 18. Federal Courts have adjudicated whether Board
interpretations of ICAs comply with the provisions of § 251. See, e.g. McLeodUSA Telecommunications

Civil No. 12-1916 (JAG)

9

Servs., Inc. v. Iowa Utilities Bd., 550 F. Supp. 2d 1006, 1017 (S.D. Iowa 2008). Thus, at this stage, the
Court finds that WorldNet has stated a plausible federal claim upon which relief can be granted.

III.

Failure to Exhaust Administrative Remedies under the ICA
PRTC also argues that WorldNet’s complaint should be dismissed because WorldNet

has failed to exhaust the remedies required by the ICA prior to litigation. Docket No. 16.
Specifically, PRTC alleges that WorldNet’s claims involve a good faith billing dispute, which
required PRTC and WorldNet to engage in good faith negotiations prior to litigation. Id. This
Court disagrees with PRTC’s version of WorldNet’s complaint. WorldNet is not asking this
Court to adjudicate its billing dispute with PRTC. Instead, WorldNet is asking the Court to
review Board Orders interpreting the mechanisms and procedures to follow when handling
liquidated damages disputes under the ICA. See Docket No. 1. Since WorldNet already obtained
review and reconsideration from the Board on this issue, WorldNet has exhausted its required
remedies before filing suit in this Court. Accordingly, WorldNet’s complaint is properly before
this Court.
CONCLUSION
In view of the foregoing, PRTC’s Motion to Dismiss is DENIED.
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 13th day of July, 2016.
s/ Jay A. Garcia-Gregory
JAY A. GARCIA-GREGORY
United States District Judge