MCI Communication Services Inc v. Ertel Construction Inc

Filing 70

ORDER AND OPINION denying 58 Motion for Partial Summary Judgment as to Plaintiff's loss of use damages. Signed by Honorable J Michelle Childs on 10/30/2019.(asni, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
AIKEN DIVISION
MCI Communication Services, Inc.,

)
)
Plaintiff,
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v.
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)
Ertel Construction, Inc.,
)
)
Defendant.
)
___________________________________ )

Civil Action No.: 1:17-cv-01460-JMC

ORDER AND OPINION

Plaintiff MCI Communication Services, Inc. filed this action against Defendant Ertel
Construction, Inc. seeking to recover damages resulting from Defendant’s alleged negligent
conduct that resulted in the severance of Plaintiff’s underground fiber-optic cable in or near
Fairfax, South Carolina. (ECF No. 1 at 2 ¶¶ 6–10.)
This matter is before the court on Defendant’s Motion for Partial Summary Judgment
pursuant to Rule 56 of the Federal Rules of Civil Procedure. (ECF No. 58.) Specifically,
Defendant asserts it is entitled to summary judgment as to Plaintiff’s claim for loss of use damages.
(Id. at 1.) Plaintiff opposes Defendant’s Motion in its entirety. (ECF No. 60 at 27.) For the
reasons set forth below, the court DENIES Defendant’s Motion for Partial Summary Judgment as
to Plaintiff’s loss of use damages.
I.

RELEVANT BACKGROUND TO PENDING MOTION

Plaintiff “is a telecommunications company which provides interstate telecommunications
services to individual and commercial users.” (ECF No. 1 at 2 ¶ 5.) Plaintiff alleges that it provides
telecommunications services through “a nationwide network of fiber-optic cable which is buried
underground.”1 (Id.) Plaintiff further alleges that it “installed, maintains, and operates a fiber1

“A fiber-optic cable is essentially a ‘pipeline’ that carries telecommunications traffic between
various points in a telecommunications carrier’s network known as terminals.” (ECF No. 60-1 at
1

optic cable in or near Fairfax, Allendale County, South Carolina (the “Cable”).” (Id. ¶ 6.) More
specifically, Plaintiff asserts that the Cable serviced its customers between Columbia, South
Carolina and Savannah, Georgia and actively carries data amounting to 4,416 DS-3s.2 (ECF No.
60-1 at 6 ¶¶ 24, 28.)
Defendant is a utility construction company that specializes in “installation of electric,
natural gas and broadband fiber-optic services.” About Ertel, http://www.ertelconst.com/about
(last visited Oct. 24, 2019). In June of 2014, Defendant was performing utility work in Fairfax,
South Carolina on behalf of South Carolina Electric and Gas. (ECF No. 58-1 at 1.)
On June 5, 2014, Plaintiff alleges that while performing excavation work with a mechanical
auger for the purpose of installing utility poles, “Defendant severed an MCI underground fiberoptic telecommunications cable” at a location “approximately 2,600 feet north of the intersection
of CSX railroad tracks and Walker Road in or near Fairfax . . . .” (ECF No. 60 at 1.) When the
Cable was severed, Plaintiff was able to reroute some, but not all of the relevant
telecommunications traffic to spare restoration capacity—which Plaintiff maintains for
emergencies. (ECF No. 60-1 at 7 ¶¶ 33–34, 8 ¶ 41.) As a result of the aforementioned Cable
severance, Plaintiff asserts that it suffered damages to include the costs of repairing the Cable and
the loss of its use for 8.15 hours. (ECF No. 60 at 2–3.) For its loss of use damages, Plaintiff seeks
to recover $887,013.40. (See ECF No. 60-1 at 14 ¶ 65.)
Thereafter, Plaintiff filed an action in this court on June 5, 2017, alleging a claim against
Defendant for negligence. (ECF No. 1 at 2 ¶ 10–5 ¶ 14.) In the Complaint, Plaintiff specifically

5 ¶ 14.) “A fiber-optic cable consists of individual strands of glass or ‘fibers’ which are connected
to electronic equipment in the terminals.” (Id. ¶ 15.) “The electronic equipment transmits the
telecommunications traffic in the form of optical signals, or light, between terminals.” (Id.)
2
A DS-3 is the unit of measurement for the capacity of a fiber-optic cable. (ECF No. 60-1 at 5 ¶
19.) “One DS-3 is the equivalent of 672 individual phone calls.” (Id. ¶ 20.)
2

pleaded that “[a]s a result of [Defendant] Ertel’s actions and/or omissions, [Plaintiff] MCI has
sustained damage to and loss of use of its Cable, . . . .” (Id. at 4 ¶ 11.) Defendant answered the
Complaint on July 18, 2017, denying its allegations. (ECF No. 10.) On September 15, 2019,
Defendant filed the instant Motion for Partial Summary Judgment. (ECF No. 58.) Plaintiff filed
opposition to the Motion for Partial Summary Judgment on September 30, 2019, to which
Defendant filed a Reply in Support of Defendant’s Motion for Partial Summary Judgment on
October 14, 2019. (ECF Nos. 60, 65.)
On October 28, 2019, the court heard arguments from the parties in support of their
respective positions. (ECF No. 68.) The court considers the merits of Defendant’s Motion and
Plaintiff’s opposition to said Motion below.
II.

JURISDICTION

The court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332,
because the parties are citizens of different states and the amount in controversy exceeds
$75,000.00, exclusive of interest and costs. For jurisdictional purposes, Plaintiff alleges that it is
a Delaware corporation with its principal place of business in Basking Ridge, New Jersey. (ECF
No. 1 at 1 ¶ 1.) Defendant is admittedly a corporation organized under the laws of the State of
North Carolina. (ECF No. 10 at 1 ¶ 3.) The court is satisfied that the amount in controversy
exceeds $75,000.00, exclusive of interest and costs. (ECF No. 1 at 5.)
III. LEGAL STANDARD
Summary judgment should be granted “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). A fact is “material” if proof of its existence or non-existence would affect the disposition
of the case under the applicable law. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248–49 (1986).

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A genuine question of material fact exists where, after reviewing the record as a whole, the court
finds that a reasonable jury could return a verdict for the nonmoving party. Newport News Holdings
Corp. v. Virtual City Vision, 650 F.3d 423, 434 (4th Cir. 2011). In ruling on a motion for summary
judgment, a court must view the evidence in the light most favorable to the non-moving party.
Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 123-24 (4th Cir. 1990). The non-moving party
may not oppose a motion for summary judgment with mere allegations or denial of the movant’s
pleading, but instead must “set forth specific facts” demonstrating a genuine issue for trial. Fed.
R. Civ. P. 56(e); see Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 252 (1986); Shealy v. Winston, 929 F.2d 1009, 1012 (4th Cir. 1991).
All that is required is that “sufficient evidence supporting the claimed factual dispute be shown to
require a jury or judge to resolve the parties’ differing versions of the truth at trial.” Anderson,
477 U.S. at 249.
IV. ANALYSIS
A.

The Parties’ Arguments
In its Motion, Defendant argues that (1) “under prevailing South Carolina law, Plaintiff

cannot recover for any alleged loss of use of its damaged cable”3 and (2) even [i]f loss of use
damages are appropriate at all, . . . they should be calculated based on [] Plaintiff’s lost profits due
to the absence of the redundant capacity, or the diminution in value of its property.” (ECF No. 581 at 6, 7.) In support of this argument, Defendant asserts that South Carolina courts “in analyzing
loss of use damages and rental value, have only applied the assessment to automobiles or other
modes of vehicular transportation.” (Id. at 5.) Defendant further asserts that “[r]ental value [] is
3

The court observes that at the October 28, 2019 motion hearing, counsel for Defendant appeared
to withdraw this position by stating in response to a question by the court that Defendant only
opposes the amount of loss of use damages sought by Plaintiff and its calculation to reach that
amount.
4

not a proper measure of damages where the property is not capable of [being] rented and/or does
not have rental value.” (Id. at 6 (citing Hyler v. Wheeler, 126 S.E.2d 173, 175 (S.C. 1962)). As a
result of the foregoing, Defendant argues that it is entitled to summary judgment as to Plaintiff’s
claim for loss of use damages because: (1) it did not lease “additional capacity from another
telecommunications carrier for the 8.15 hours that it took to repair the cable at issue in this case”;
(2) “Plaintiff did not need to do so as most of the Plaintiff’s services had built-in redundant
capacity”; (3) the rental market for leasing “substitute capacity does not actually exist, at least for
the 8.15 hours of time needed to repair the cable at issue in this case”; and (4) Plaintiff did not
“actually incur any of the alleged $887,013.40 it is claiming in loss of use damages.” (Id. at 6, 7.)
However, as a fallback position, Defendant contends that “[i]f loss of use damages are appropriate
at all,” the court should not use Plaintiff’s proposed calculation for damages, but should calculate
loss of use damages “based on the Plaintiff’s lost profits due to the absence of the redundant
capacity, or the diminution in value of its property.” (Id. at 7 (citing Peoples Fed. Sav. & Loan
Ass’n of S.C. v. Res. Planning Corp., 596 S.E.2d 51 (S.C. 2004)).)
Plaintiff opposes summary judgment on its claim for loss of use damages. Plaintiff argues
that under South Carolina law an owner of property “may recover damages for the loss of use of
that property” in instances “[w]here personal property is injured but not destroyed by the negligent
act of another.” (ECF No. 60 at 13 (citing generally Laney Tank Lines, Inc. v. United States, 237
F. Supp. 205 (E.D.S.C. 1965); Newman v. Brown, 90 S.E.2d 649 (S.C. 1955); Scott v. Southern
Ry. Co., 97 S.E.2d 73 (S.C. 1957); Hutson v. Cummins Carolinas, Inc., 314 S.E.2d 19 (S.C. Ct.
App. 1984)).) Therefore, because it owned the Cable that Defendant severed on June 5, 2014,
Plaintiff argues that it “may recover the reasonable costs of restoring the Cable to its condition
immediately prior to the incident, together with loss of use during the period of the repairs.” (Id.

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at 15 (citing Newman, 90 S.E.2d at 653; Coleman v. Levkoff, 122 S.E. 875, 875 (S.C. 1924)).)
Plaintiff further argues that it “is entitled to recover for loss of use of the Cable regardless of
whether it actually procures a replacement or proffers evidence that it also incurred lost profits,
lost revenues, lost business, or any other pecuniary out-of-pocket loss occasioned by the loss of
the use of the Cable.” (Id. (citing Newman, 90 S.E.2d at 653; Coleman, 122 S.E. at 875; Laney
Tank Lines, 237 F. Supp. at 207).) Moreover, as to the proper measure of damages, Plaintiff asserts
that the South Carolina Supreme Court has expressly allowed a party to recover “the reasonable
rental value of comparable property or the expense of hiring a substitute for the time during which
the use of the property was deprived.” (Id. at 13 (citing Coleman, 122 S.E. at 875; Scott, 97 S.E.2d
at 76; Barnett v. Charleston & W. Carolina Ry. Co., 96 S.E.2d 555 (S.C. 1957)).) In this regard,
Plaintiff “elected to quantify its damages for the loss of the use of the Cable by the cost of procuring
substitute capacity on another carrier’s cables to replace the capacity of the transport systems that
were active, carrying traffic, and impacted by Defendant’s severance of the Cable.” (Id. at 23.)
B.

The Court’s Review
To resolve the parties’ dispute in this matter, the court must determine whether under South

Carolina law “a telecommunications service provider whose cable is severed [can] recover lossof-use damages measured by the rental value of substitute cable when it has not rented such cable
or otherwise incurred any monetary loss apart from the cost of repair?” See MCI Commc’ns Servs.
v. CMES, Inc., 728 S.E.2d 649, 651 (Ga. 2012) (quoting MCI Communc’ns Servs. v. CMES, 669
F.3d 1313, 1314 (11th Cir. 2012)). At the outset, the court observes that neither Plaintiff nor
Defendant has cited, and the court has not located, a South Carolina appellate court case addressing
this precise issue regarding loss of use of a telecommunications cable.4 “Thus, as a federal court
4

Additionally, neither Plaintiff nor Defendant has requested certification of this issue to the South
Carolina Supreme Court.
6

sitting in diversity, the [c]ourt must predict how the South Carolina Supreme Court would decide
the issue.” Allstate Ins. Co. v. Electrolux Home Prods., Inc., C/A No.: 4:16-cv-03666-RBH, 2017
WL 2216298, at *5 (D.S.C. May 19, 2017) (citing Private Mortg. Inv. Servs., Inc. v. Hotel & Club
Assocs., Inc., 296 F.3d 308, 312 (4th Cir. 2002) (“As a federal court sitting in diversity, we have
an obligation to apply the jurisprudence of South Carolina’s highest court, the South Carolina
Supreme Court. But in a situation where the South Carolina Supreme Court has spoken neither
directly nor indirectly on the particular issue before us, we are called upon to predict how that
court would rule if presented with the issue.” (internal footnote and citations omitted))). “In
predicting a ruling by the South Carolina Supreme Court, [the Court] may also consider, inter alia:
restatements of the law, treatises, and well considered dicta,” id., “as well as the practices of other
states.” Id. (quoting St. Paul Fire & Marine Ins. Co. v. Am. Int'l Specialty Lines Ins. Co., 365 F.3d
263, 272 (4th Cir. 2004) (internal quotation marks omitted)).
Under South Carolina law, “[g]enerally, the measure of damages in a tort case is ‘the
amount needed to compensate the plaintiff for the losses proximately caused by the defendant’s
wrong so that the plaintiff will be in the same position he would have been in if there had been no
wrongful injury.” Turpin v. Lowther, 745 S.E.2d 397, 403 (S.C. Ct. App. 2013) (quoting Austin
v. Specialty Transp. Servs., Inc., 594 S.E.2d 867, 874 (S.C. Ct. App. 2004); see also Clark v.
Cantrell, 529 S.E.2d 528, 533 (S.C. 2000) ( “The goal [of compensatory damages] is to restore the
injured party . . . to the same position he or she was in before the wrongful injury occurred.”).
“Recovery for loss of use is grounded on the principle that when one has been deprived of
possession of the property, he has lost a valuable right in the property, i.e., the right to use it.”
Isaac v. Gene’s Used Cars, 372 S.E.2d 102, 104 (S.C. Ct. App. 1988) (citing generally J.A. Tobin
Constr. Co. v. Holtzman, 485 P.2d 1276 (Kan. 1971)). After considering the aforementioned

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caselaw, the court is confident that the South Carolina Supreme Court would conclude that
Plaintiff, even as a telecommunications service provider, is eligible to recover loss of use damages
for the downtime it experienced when Defendant severed Plaintiff’s fiber-optic cable, which
conclusion Defendant appeared to concede at the October 28, 2019 motion hearing.5
However, the question of whether rental value is the appropriate measure of damages is
less clear.6 South Carolina law does generally allow a plaintiff to calculate loss of use damages
based on the rental value of replacement property. See Hyler, 126 S.E.2d at 175 (“An accepted
measure of the value of the use of specific property capable of being rented is its rental value.”);
Standard Supply Co. v. Carter & Harris, 62 S.E. 150, 151 (S.C. 1908) (“The general rule, well
supported by authority and the fairest that could be adopted, is that damages for the wrongful
5

In reaching this conclusion, the court found relevant to its analysis in this case the following
observation by the United States District Court for the Western District of Oklahoma:
Telecommunications-specific cases from other jurisdictions agree with the
availability of loss-of-use damages as well. Summarizing prior cases, the U.S.
District Court for the Western District of Kentucky recently explained that loss-ofuse damages for a severed cable generally are available when “the plaintiff used its
redundant capacity for emergencies only, but not in its general business,” and such
loss-of-use damages are not available “where the plaintiff used its redundant
capacity in the ordinary course of business and did not reserve it expressly for
emergencies.” Level 3 Commc'ns, LLC v. TNT Constr., Inc., 220 F. Supp. 3d 812,
818-19 (W.D. Ky. 2016) (collecting cases). In this case, Plaintiff submitted
evidence that the excess cable to which traffic was rerouted was “reserve[d] for use
in emergencies.” Resp. 9, Doc. No. 29; see also id. at 11. Defendant has not
submitted any evidence otherwise. Contra MCI WorldCom Network Servs., Inc. v.
OSP Consultants, Inc., 585 S.E.2d 540, 544 (Va. 2003) (disallowing loss-of-use
damages when, different from the evidence in the instant case, evidence showed
that the telecommunications company “maintain[ed] excess network capacity
primarily for the general use of its business so that it c[ould] accommodate varying
levels of telecommunications traffic” and “d[id] not reserve particular cables for
use exclusively in emergencies”).
MCI Communc’ns Servs. v. Sadler Boring, LLC, Case No. CIV-18-231-SLP, 2019 WL 2897490,
at *4 (W.D. Okla. Apr. 25, 2019).
6
The court observes that South Carolina appellate courts have not spoken on the issue regarding
the measure of damages in the context of a severed telecommunications cable.
8

deprivation of the use of specific property are to be measured by its rental value.”) (citations
omitted). Further, in South Carolina, a plaintiff is arguably allowed to offer evidence of rental
value even if neither it nor its agent did not actually procure the rental replacement. See Scott, 97
S.E.2d at 76 (“[T]here is no merit in the contention that the rental value of the car used was not a
proper element of damages because it was furnished gratis by a party other than appellants.”).
However, “damages for the temporary deprivation of specific property of another, . . . cannot be
restricted to its rental value, where from any cause it has no rental value.” Id. In such cases the
damages must necessarily be ascertained by an inquiry into the value of the use of the property to
the injured party for the time he was deprived of it.” Id.
Upon its review of the foregoing in the context of the parties’ arguments, the court is
constrained to conclude that “Plaintiff’s proposed measure of damages—calculated based on rental
of an alternative cable—is acceptable” under South Carolina law. See MCI Communc’ns Servs. v.
Sadler Boring, LLC, Case No. CIV-18-231-SLP, 2019 WL 2897490, at *4 (W.D. Okla. Apr. 25,
2019). But see Level 3 Commc’ns, LLC v. TNT Constr., Inc., 220 F. Supp. 3d 812, (W.D. Ky.
2016) (“[T]he majority of courts from other jurisdictions addressing this issue in nearly identical
lawsuits brought by telecommunications companies against contractors have held that measuring
loss-of-use damages by a theoretical rental value is inappropriate. In light of these circumstances,
Level 3’s proposed measure of damages offends general principles of damages law.” (internal
citation omitted)); CMES, Inc., 728 S.E.2d at 652 (“An injury to a person or damage to property
is required for a tort to be actionable, and MCI did not expend any money to keep its system
running, nor did it suffer any lost profits, and thus it has failed to show damage qualifying as loss
of use that would require compensation.”). In other words, the court predicts that the South
Carolina Supreme Court would not preclude a plaintiff from arguing to the trier of fact that the

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amount of its loss of use damages should be the cost of renting capacity from another
telecommunications carrier.7 To this end, the court observes that Defendant’s arguments attacking
the $887,013.40 amount requested by Plaintiff “relate to the weight of the evidence and disputed
factual issues, not to legal issues appropriate for summary judgment.” Sadler Boring, 2019 WL
2897490, at *4 (citations omitted). Therefore, the court finds that Plaintiff’s loss of use damages
and its rental value method for calculating its loss of use damages are proper issues for jury
consideration in this matter.8
V.

CONCLUSION

Upon careful consideration of the entire record, the court hereby DENIES the Motion for
Summary Judgment of Defendant Ertel Construction, Inc. as to Plaintiff’s loss of use damages.
(ECF No. 58.)
IT IS SO ORDERED.

United States District Judge
October 30, 2019
Columbia, South Carolina

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However, at the same time, Defendant will be able to argue to the jury that rental costs do not
result in the proper amount of calculated damages for loss of use.
8
The court observes that this decision does not contemplate the argument accepted by some courts
in states that require mitigation of damages that “a party cannot recover the reasonable rental value
of substitute property if the party does not rent such property because it is able to use its own
property to mitigate damages.” MCI Commc’ns, Inc. v. Maverick Cutting & Breaking LLC, 374
F. Supp. 3d 789, 803–04 (D. Minn. 2019).
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