Northern Valley Communications, L.L.C. v. Qwest Communications Company, LLC
Filing
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ORDER staying case and denying 37 Motion for Partial Summary Judgment; denying 50 Motion to Strike ; denying 80 Motion to Dismiss; granting 96 Motion to Seal Document; denying 23 Motion for Summary Judgment. Signed by Chief Judge Karen E. Schreier on 3/23/2012. (KC)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
NORTHERN VALLEY
COMMUNICATIONS, LLC,
Plaintiff,
vs.
QWEST COMMUNICATIONS CO.,
L.P.,
Defendant.
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CIV. 11-4052-KES
MEMORANDUM OPINION
AND ORDER
Plaintiff, Northern Valley Communications, LLC, filed suit against
defendant, Qwest Communications Co., L.P., to collect charges billed pursuant
to its interstate access tariff number three. There are numerous pending
motions before the court, including Northern Valley’s motion for summary
judgment (Docket 23), Qwest’s cross motion for partial summary judgment
(Docket 37), Northern Valley’s motion to strike Qwest’s statement of material
facts (Docket 50), Northern Valley’s motion to dismiss Qwest’s counterclaims
(Docket 80), and Qwest’s motion to seal certain documents (Docket 96).
This case is one of numerous similar cases pending in the District of
South Dakota, and it involves the same interstate access tariff as the one at
issue in Northern Valley Communications Co. v. Sprint Communications Co., No.
11-4052-KES (D.S.D.) (Sprint II).1 This court has stayed the majority of these
1
There is a separate action pending in this court involving Northern
Valley and Sprint relating to Northern Valley’s prior tariffs. Northern Valley
cases and referred specific issues to the Federal Communications Commission
(FCC), including Sprint II, pursuant to the primary jurisdiction doctrine.
Although neither party has moved the court to stay the action and refer specific
issues to the FCC, the court ordered the parties to address whether this case
should be stayed and referred. Docket 89.
Northern Valley and Qwest both oppose a stay and referral and argue
that the court can determine the merits of the pending motions. The court
finds that referral of certain issues to the FCC is called for under the primary
jurisdiction doctrine.
BACKGROUND
I.
History of the Present Case
Qwest provides nationwide long-distance telephone services and is
known under the telecommunications regulatory framework as an
interexchange carrier (IXC). Qwest delivers long-distance calls to a local
exchange carrier (LEC) or a competitive local exchange carrier (CLEC) for
termination to end users. Under the FCC’s current regulatory framework,
Qwest pays the LEC a terminating access charge based on the LEC’s interstate
access tariff, which is filed with the FCC.
Northern Valley is a CLEC. Northern Valley filed its tariff number two
with the FCC on November 15, 2004, which became effective on November 16,
Commc’ns, LLC v. Sprint Commc’ns Co., 08-cv-1003-KES (Sprint I).
2
2004. Pursuant to tariff number two, Northern Valley billed Qwest for access
charges when Qwest’s long-distance customers originated calls to several
companies that provide free telephone services such as conference calling,
chat-line, and similar services,2 which used Northern Valley’s network.
Northern Valley charged Sprint its typical rural access charge for the free
conference calls. Qwest has refused to pay these charges since May 1, 2007.
Qwest's refusal to pay is the subject of a separate case pending before
U.S. District Judge Charles B. Kornmann. Northern Valley Commc’ns, LLC v.
Qwest Commc’ns Co., 09-cv-1004-CBK (Qwest I).
On July 8, 2010, Northern Valley filed tariff number three with the FCC,
which became effective and received deemed lawful protection on July 23,
2010. On June 7, 2011, the FCC found in favor of Qwest on its formal
complaint that was filed against Northern Valley’s tariff number three. Qwest
Commc’ns Co., LLC v. Northern Valley Commc’ns, LLC, 26 FCC Rcd. 8332
(June 7, 2011), 2011 WL 2258081 (Qwest v. Northern Valley I). In Qwest v.
Northern Valley I, the FCC found Northern Valley’s definition of “end user” and
“customer of a foreign or interstate telecommunications service” to be unlawful
and directed Northern Valley to revise the tariff. 26 FCC Rcd. at 8332-33. The
FCC reasoned that Northern Valley’s definition of “end user” was unlawful
because an end user must receive services from Northern Valley “for a fee.” Id.
2
The court will refer to these companies collectively as “free calling
providers” or “conference calling companies.”
3
at 9337 (“[U]nder the Commission’s ILEC access charge regime, an ‘end user’ is
a customer of a service that is offered for a fee.”).
Sprint also filed a formal complaint regarding Northern Valley’s tariff
number three, which the FCC granted in part and denied in part on July 18,
2011. Sprint Commc’ns Co. v. Northern Valley Commc’ns, LLC, 26 FCC Rcd.
10780 (July 18, 2011), 2011 WL 2838100 (Sprint v. Northern Valley I). In Sprint
v. Northern Valley I, the FCC found certain provisions of Northern Valley’s tariff
to be unlawful and directed Northern Valley to revise the tariff. 26 FCC Rcd. at
10780-81.
On July 26, 2011, Northern Valley filed changes to effectuate the
modifications mandated by the FCC in Sprint v. Northern Valley I. Qwest and
Sprint filed their petitions to suspend or reject the tariff on August 2, 2011.
The FCC rejected Qwest’s and Sprint’s petitions, and Northern Valley’s tariff
number three as revised was deemed lawful and effective on August 10, 2011.
Protested Tariff Transmittal Action Taken, 26 FCC Rcd. 11282, 11282 (Aug. 12,
2011), 2011 WL 3561907 (“[W]e conclude that the parties filing petitions
against the tariff transmittals listed in this Report have not presented
compelling arguments that these transmittals are so patently unlawful as to
require rejection.”).3
3
The court will refer to Northern Valley’s tariff number three and revised
tariff number three as “tariff number three” unless there is a need to
distinguish between the tariffs.
4
Northern Valley’s tariff number three has a definition for Voice over
Internet Protocol (VoIP) technology. See Docket 81-1 at 3 (“The term VoIP-PSTN
Traffic shall have the meaning denoted in the Federal Communications
Commission Report and Order in WC Docket Nos. 10-90, etc., F.C.C. Release
No. 11-161 (November 18, 2011). It is traffic exchanged over PSTN (Public
Switched Telephone Network) facilities that originates and/or
terminates in IP (Internet Protocol) format.”). The tariff also has a compensation
system for services utilizing VoIP technology. Docket 81-1 at 5.
In Qwest I, which is pending before Judge Kornmann, Northern Valley
moved to stay the action and refer certain issues to the FCC. The court granted
the motion. Qwest I, Docket 159. In Sprint I, this court referred the issues
regarding the interstate access tariff to the FCC and also referred certain issues
regarding Northern Valley’s intrastate tariff to the South Dakota Public Utilities
Commission (SDPUC). Sprint I, Docket 112. The parties have almost completed
discovery before the SDPUC. Sprint I, Docket 58 at 8.
II.
Related Cases
This case is one of a number of cases pending in this and other courts
involving a dispute between a CLEC or an LEC and an IXC regarding access
charges associated with traffic delivered to free calling providers. In each of
these cases, a CLEC claims that an IXC has wrongfully refused to pay
terminating access charges for services performed pursuant to the CLEC’s
5
interstate tariff(s) and requests compensation under breach of contract, breach
of implied contract, and/or unjust enrichment theories. In each case, the IXC
claims that the services provided were not covered by the applicable tariff
because the CLEC did not terminate the calls and the free calling providers
were not end users within the meaning of the tariffs. Many of the IXCs also
claim that the applicable CLEC engaged in unlawful traffic pumping.
The following cases are pending in the District of South Dakota, some of
which have been stayed pending referral of specific issues to the FCC:
Sprint v. Native American Telecommunications, Civ. 104110-KES
Stayed
Northern Valley v. Qwest, Civ. 11-4052-KES
Northern Valley v. Sprint, Civ. 11-4053-KES
Stayed
Northern Valley Communications L.L.C. v. Qwest
Communications Co., Civ. 09-1004-CBK
Stayed
Splitrock Properties, Inc. v. Sprint Communications Co.,
Civ. 09-4075-KES
Stayed
Northern Valley Communications, LLC v. Sprint
Communications Co., Civ. 08-1003-KES
Stayed
Splitrock Properties, Inc. v. Qwest Communications
Corp., No. 08-4172-KES
Stayed
Sancom, Inc. v. AT & T Corp., Civ. 08-4211-KES
Stayed
6
Northern Valley Communications, LLC v. MCI
Communications Services, Inc. d/b/a Verizon Business
Services, Civ. 07-1016-KES4
Stayed
Sancom, Inc. v. Sprint Communications Co., Civ.
07-4107-KES
Stayed
Sancom, Inc. v. Qwest Communications Co., Civ.
07-4147-KES.
Stayed
Moreover, this court is aware of similar cases pending in other
jurisdictions, many of which have been stayed pending referral of specific
issues to the FCC. See, e.g., Qwest Commc'ns Co. v. Tekstar Commc'ns, Inc., No.
10-490, 2010 WL 2772442 (D. Minn. July 12, 2010); All. Am. Tel. Co. v. AT&T,
Inc., No. 07-861, 2010 WL 7526933 (S.D.N.Y. Jan. 19, 2010); Tekstar
Commc'ns, Inc. v. Sprint Commc'ns Co., No. 08-1130, 2009 WL 2155930 (D.
Minn. July 14, 2009). See also Bluegrass Tel. Co. v. Qwest Commc'ns Co., No.
4:09-CV-70-M, 2010 WL 1257727 (W.D. Ky. Mar. 26, 2010) (staying the case
pending resolution of referrals in District of South Dakota, District of
Minnesota, and Southern District of New York cases). But see N. Cnty.
Commc'ns Corp. v. Verizon Global Networks, Inc., 685 F. Supp. 2d 1112, 1117
(S.D. Cal. 2010) (denying motion to refer Verizon's counterclaims pursuant to
primary jurisdiction doctrine).
4
Northern Valley v. MCI, Civ. 07-1016 is consolidated with Sancom, Inc. v.
MCI Communications Services, Inc., d/b/a Verizon Business Services, Civ.
07-4106.
7
III.
Relevant FCC History
The FCC not only has multiple similar actions pending before it (in
addition to the FCC history related to Northern Valley listed above), but also
has taken various administrative actions concerning the services and
technology at issue in this case. The Farmers line of cases is particularly
pertinent to this action. See also Sancom, Inc. v. AT&T Corp., 696 F. Supp. 2d
1030, 1034-35 (D.S.D. 2010) (discussing the Farmers line of cases in detail).
In Farmers, Farmers & Mutual Telephone Co., an LEC, and Qwest
Communications Corp., an IXC, disputed whether Qwest had to pay Farmers’
billed access charges for types of services similar to those at issue here. Qwest
Commc’ns Corp. v. Farmers & Merchants Mut. Tel. Co., 22 FCC Rcd. 17973
(2007), 2007 WL 2872754 (Farmers I). Initially, the FCC, in addressing whether
a free conference calling company is an end user for purposes of Farmers’ tariff
and, if not, whether Farmers can recover access charges from Qwest, ruled in
favor of Farmers. Id. at 17986-88. The FCC later granted partial
reconsideration based on Qwest’s assertions that Farmers engaged in fraud
and misrepresentations. Qwest Commc’ns Corp. v. Farmers & Merchants Mut.
Tel. Co., 23 FCC Rcd. 1615 (2008), 2008 WL 246393.
In Qwest Communications Corp. v. Farmers & Merchants Mutual Telephone
Co., 24 FCC Rcd. 14801, 14812-13 (2009), 2009 WL 4073944 (Farmers II), the
FCC found that the conference calling companies did not subscribe to the
services offered under Farmers’ tariff. Because the conference calling
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companies were neither “customers” nor “end users” within the meaning of
Farmers’ tariff, Farmers was not entitled to charge Qwest switched access
charges. Id. Thus, the FCC found that Farmers’ practice of charging Qwest
access charges for the traffic from the conference calling companies was unjust
and unreasonable in violation of 47 U.S.C. § 201(b). Id. at 14812-13. The FCC,
however, declined to rule that Farmers was “precluded from receiving any
compensation at all for the services it has provided to Qwest.” Id. at 14812 n.96
(citation omitted). The FCC declined Farmers’ petition for reconsideration and
rejected challenges to its authority to issue Farmers II. Qwest Commc’ns Corp. v.
Farmers & Merchants Mut. Tel. Co., 25 FCC Rcd. 3422 (2010), 2010 WL 972315
(Farmers III).
The Court of Appeals for the District of Columbia upheld the FCC’s
reasoning in Farmers II and Farmers III. Farmers & Merchants Mut. Tel. Co. v.
Fed. Commc’n Comm’n, 668 F.3d 714 (D.C. Cir. 2011). In summarizing the
FCC’s decision in Farmers II, the court reasoned that “[t]he Commission found
that in numerous respects, the conference calling contracts did not establish a
subscriber relationship under Farmers’ tariff.” Id. at 720 (internal quotation
omitted). For example, Farmers did not bill the conference calling companies,
the companies never paid access charges to Farmers, Farmers did not expect to
be paid, and the parties’ relationship was not structured in a manner
consistent with Farmers’ tariff. Id. The court also rejected Farmers’ argument
9
that the FCC ignored the plain terms of its tariff that required Qwest to pay the
tariffed rate regardless of whether the conference calling companies were end
users. Id. (reasoning that “the tariff itself includes a diagram of switched access
service that illustrates an end user as one of the sub-elements of that
service.”).
The court upheld the FCC’s determination that Farmers did not provide
Qwest with “switched access” pursuant to its tariff, and, therefore, Farmers
was unjustly and unreasonably charging Qwest pursuant to § 201(b) and
§ 203(c). Id. at 721 (citation omitted). Thus, the court upheld the FCC’s
determination that the filed rate doctrine did not apply:
Although it did not decide how traffic to the conference calling
companies should be classified, the Commission based its
conclusion, that in the absence of an end user such traffic did not
constitute switched access service under the tariff, on the
controlling plain text of Farmers’ tariff. The service was outside of
the tariff and, as such, the filed rate doctrine could not protect
Farmers from liability to Qwest.
Id. at 722-23 (internal citation omitted). The court continued to leave open the
question of whether and to what extent Farmers could recover compensation
from Qwest.
On February 9, 2011, the FCC released a “Notice of Proposed
Rulemaking and Further Notice of Proposed Rulemaking.” Connect America
Fund; A National Broadband Plan for Our Future; Establishing Just and
Reasonable Rates for Local Exchange Carriers, 26 FCC Rcd. 4554, 2011 WL
10
466775. On November 28, 2011, the FCC issued its final rule concerning the
services and technology at issue in this case. Connect America Fund; A National
Broadband Plan for Our Future; Establishing Just and Reasonable Rates for
Local Exchange Carriers, 76 Fed. Reg. 73830 (Nov. 29, 2011), 2011 WL
5909863 (to be codified at 47 C.F.R. pts. 0, 1, 20, 36, 51, 54, 61, 64, and 69)
(final rule). In light of the issuance of the FCC’s final rule, the court ordered
further briefing on what impact, if any, the final rule has on this case. Qwest
argued that the final rule required Northern Valley to revise its tariff and
reduce its rates and Northern Valley should “amend its complaint to assert
claims related to several unpled tariff revisions,” but otherwise the final rule
does not change this case. Docket 83 at 3. Northern Valley argued that the
final rule validated its position, and the court could utilize the final rule in
ruling on Northern Valley’s summary judgment motion. Docket 75.
The final rule sets out a two-part test for determining whether an LEC is
engaged in access stimulation and, if so, provides a compensation scheme. 76
Fed. Reg. at 73837. The FCC also created a transitional framework for VoIP
intercarrier compensation. Id. at 73833. But the final rule does not state that it
is retroactive, and the court will not assume that it is retroactive. See, e.g.,
Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988) (“Retroactivity is
not favored in the law. . . . By the same principle, a statutory grant of
legislative rulemaking authority will not, as a general matter, be understood to
11
encompass the power to promulgate retroactive rules unless that power is
conveyed by Congress in express terms.” (citations omitted)). Thus, the final
rule is inapplicable to the time period before it became effective.
DISCUSSION
“Primary jurisdiction ‘is a doctrine specifically applicable to claims
properly cognizable in court that contain some issue within the special
competence of an administrative agency. It requires the court to enable a
referral to the agency, staying further proceedings so as to give the parties
reasonable opportunity to seek an administrative ruling.’ ” United States v. Rice,
605 F.3d 473, 475 (8th Cir. 2010) (quoting Reiter v. Cooper, 507 U.S. 258, 268
(1993)). “The doctrine ‘is concerned with promoting proper relationships
between the courts and administrative agencies charged with particular
regulatory duties.’ ” Id. (quoting United States v. W. Pac. R.R. Co., 352 U.S. 59,
63 (1956)). “Primary jurisdiction ‘promotes uniformity, consistency, and the
optimal use of the agency's expertise and experience.’ ” Id. (quoting United
States v. Henderson, 416 F.3d 686, 691 (8th Cir. 2005)).
There is no fixed formula for deciding whether to apply the doctrine of
primary jurisdiction. Access Telecomms. v. Sw. Bell Tel. Co., 137 F.3d 605, 608
(8th Cir. 1998) (citing W. Pac., 352 U.S. at 64). Instead, the court considers
“whether the reasons for the doctrine are present and whether applying the
doctrine will aid the purposes for which the doctrine was created.” Id. (citing
12
United States v. McDonnell Douglas Corp., 751 F.2d 220, 224 (8th Cir. 1984)).
The Eighth Circuit has identified two main reasons and purposes for the
doctrine. Alpharma, Inc. v. Pennfield Oil Co., 411 F.3d 934, 938 (8th Cir. 2005)
(internal quotation omitted). First, and most common, “the use of agency
expertise in cases raising issues of fact not within the conventional experience
of judges or cases requiring the exercise of administrative discretion[.]” Id.
(internal quotation omitted). Second, the “promotion of consistency and
uniformity within the areas of regulation[.]” Id. (citation omitted); see also Rice,
605 F.3d at 475 (“Primary jurisdiction ‘promotes uniformity, consistency, and
the optimal use of the agency's expertise and experience.’ ” (quoting Henderson,
416 F.3d at 691)). “The doctrine of primary jurisdiction . . . should seldom be
invoked unless a factual question requires both expert considerations and
uniformity of resolution.” McDonnell Douglas, 751 F.2d at 224 (quotations
omitted). When the primary jurisdiction doctrine applies, the “district court has
discretion either to [stay the case and] retain jurisdiction or, if the parties
would not be unfairly disadvantaged, to dismiss the case without prejudice.”
Access Telecomms., 137 F.3d at 609 (internal quotation and citation omitted,
alteration in original).
The primary jurisdiction doctrine should be applied when the reasons for
the doctrine are present even if the parties have not raised the issue. This is
because “the doctrine exists for the proper distribution of power between
13
judicial and administrative bodies and not for the convenience of the parties.”
Red Lake Band of Chippewa Indians v. Barlow, 846 F.2d 474, 476 (8th Cir.
1988).
In prior orders, this court has generally referred three issues to the FCC:
(1) whether the CLEC or LEC is entitled to collect interstate switched access
charges it has billed to the IXC for calls to numbers assigned to free calling
providers; (2) in the event the services provided by the CLEC or LEC to the IXC
do not qualify as switched access service under the CLEC’s or LEC's applicable
interstate access tariff, determination of the proper classification of these
services, whether such services are subject to federal tariffing requirements,
and whether the CLEC or LEC is entitled to obtain compensation for these
services; and (3) in the event that the services provided by the CLEC or LEC to
the IXC do not qualify as switched access service under the CLEC’s or LEC's
applicable interstate access tariff, but the CLEC or LEC is otherwise entitled to
compensation for these services, determination of a reasonable rate for these
services. See, e.g., Sancom, 696 F. Supp. 2d at 1036.5 In Sprint II, at Sprint’s
5
The court has issued a number of almost-identical orders staying
similar cases pending referral to the FCC. See, e.g., Splitrock Props., Inc. v.
Sprint Commc’ns Co., No. Civ. 09-4075-KES, 2010 WL 1329634 (D.S.D.
Mar. 30, 2010); Splitrock Props., Inc. v. Qwest Commc’ns Corp., No. Civ. 084172-KES, 2010 WL 2867126 (D.S.D. July 20, 2010); Sancom, Inc. v. AT&T
Corp., 696 F. Supp. 2d 1030 (D.S.D. 2010); Sancom Inc. v. Sprint Commc’ns Co.,
No. Civ. 07-4107-KES, 2010 WL 936718 (D.S.D. Mar. 15, 2010); Sancom, Inc.
v. Qwest Commc’ns Corp., No. Civ. 07-4147, 2010 WL 960005 (D.S.D. Mar. 12,
2010). For simplicity, the court will refer to its previous orders with a single
14
request, the court referred two additional issues: (1) Whether the pre-June 7,
2011, payments by the conference calling companies constitute payments
under Northern Valley’s revised tariff number three; and (2) Whether Northern
Valley can collect access service charges from Sprint under all versions of its
tariff number three as the tariff defines “customer,” “buyer,” and “service.”
Qwest and Northern Valley argue that this court should not stay and
refer this case to the FCC and, alternatively, that this court should delay
referral until the parties have completed fact discovery. The court finds that the
reasons for applying the primary jurisdiction doctrine are present and that
applying the doctrine will aid the purposes for which the doctrine was created.
Because the tariff at issue in this case (tariff number three) is the same tariff at
issue in Sprint II, the court will refer the same five issues in this case as it
referred in Sprint II.
I.
Motion to Seal
As a preliminary matter, Qwest moves to seal Northern Valley’s response
to Qwest’s interrogatory number four and the accompanying affidavit of
attorney Christopher W. Madsen. Docket 96. It is unlikely that Northern Valley
will oppose this motion because it originally designated its response to Qwest’s
interrogatory number four as confidential. Docket 96 at 2. The motion to seal is
granted.
citation to Sancom, Inc. v. AT&T Corp., 696 F. Supp. 2d 1030 (D.S.D. 2010).
15
II.
Application of Tariffs
The first issue the court considers referring to the FCC is the question of
whether the services that Northern Valley provides with respect to the free
calling provider traffic qualify as “switched access service” within the meaning
of Northern Valley’s tariff number three. This is essentially a tariff
interpretation and enforcement question.
An action to enforce a tariff is properly brought before a district court.
Access Telecomms., 137 F.3d at 609; see also United States v. Great N. Ry. Co.,
337 F.2d 243, 246 (8th Cir. 1964) (“Ordinarily, the construction of a tariff is a
matter of law for the Court, being no different than the construction of any
other written document.” (citation omitted)). But “ ‘where words in a tariff are
used in a peculiar or technical sense, and where extrinsic evidence is necessary
to determine their meaning or proper application,’ . . . the issue should first go
to the appropriate administrative agency.” Access Telecomms., 137 F.3d at 609
(quoting W. Pac., 352 U.S. at 66). “The reason is plainly set forth: such a
‘determination is reached ordinarily upon voluminous and conflicting evidence,
for the adequate appreciation of which acquaintance with many intricate facts
of [the regulated area] is indispensable, and such acquaintance is commonly to
be found only in a body of experts.’ ” W. Pac., 352 U.S. at 66 (quoting Great N.
Ry. Co. v. Merchants' Elevator Co., 259 U.S. 285, 291 (1922)).
16
If the interpretation of the tariff is straightforward, then courts do not
apply the primary jurisdiction doctrine. See, e.g., GCB Commc’ns, Inc. v. U.S.
S. Commc’ns, Inc., 650 F.3d 1257, 1264 (9th Cir. 2011) (reasoning that referral
was not appropriate because “the basic compensation concept, with all of its
complexity, is not before us. What is before us is the relatively easier task of
construing the language of the FCC orders.”); Nat’l Commc’ns Ass’n v. AT&T
Co., 46 F.3d 220, 223 (2d Cir. 1995) (reasoning that application of the primary
jurisdiction doctrine was unnecessary because the case did “not present any
issues involving intricate interpretations or applications of tariffs that might
need the FCC's technical or policy expertise.”).
Contrastingly, if the case requires interpretation of technical terms or
specialized knowledge, then referral is appropriate under the primary
jurisdiction doctrine. See, e.g., Access Telecomms., 137 F.3d at 609 (reasoning
that referral was appropriate because the issue required the FCC to determine
the reasonableness of a telecommunications practice); Clark v. Time Warner
Cable, 523 F.3d 1110, 1115 (9th Cir. 2008) (reasoning that referral was proper
because Congress specifically delegated responsibility to the FCC to define the
type of services that were at issue in that case); Davel Commc’ns, Inc. v. Qwest
Corp., 460 F.3d 1075, 1089 (9th Cir. 2006) (reasoning that “the interpretation
of an agency order issued pursuant to the agency’s congressionally granted
regulatory authority falls within the agency's primary jurisdiction where the
17
order reflects policy concerns or issues requiring uniform resolution.” (citing
Serv. Storage & Transfer Co. v. Virginia, 359 U.S. 171, 177 (1959); Rilling v.
Burlington N. R.R. Co., 909 F.2d 399, 401 (9th Cir. 1990)). See also In re
StarNet, Inc., 355 F.3d 634, 639 (7th Cir. 2004) (“Instead of trying to divine how
the FCC would resolve the ambiguity . . . we think it best to send this matter to
the Commission under the doctrine of primary jurisdiction.”).
Northern Valley argues that because its revised tariff number three has
deemed lawful status, the court can rule on its pending summary judgment
motion by interpreting the plain meaning of the tariff. But Northern Valley cites
to no FCC precedent, and the court has found no precedent, enforcing all the
terms of a CLEC’s interstate access tariff for calls made to free conference
calling services. Instead, throughout various orders and the final rule, the FCC
has announced piecemeal rules and definitions for these types of tariffs.
Creating a uniform system of rules regarding the type of cases is within the
FCC’s expertise, not the court’s expertise.
Qwest argues that referral to the FCC is unnecessary because the
conference calling companies do not purchase interstate access services
pursuant to a tariff from Northern Valley. The FCC has ruled that an “end
user” must purchase interstate access services from the CLEC: “The
Commission’s rules governing these tariffs provide that ILECs may recover
access service costs through charges assessed on both IXCs and ‘end users.’
18
These rules have . . . defined ‘end user’ as any customer of an interstate or
foreign telecommunications service that is not a carrier.” Qwest v. Northern
Valley I, 26 FCC Rcd. at 8334 (internal quotation and footnotes omitted).
Northern Valley’s definition of end user appears to comply with Qwest v.
Northern Valley I:
The term “end user” means any Customer of an Interstate or
Foreign Telecommunications Service that is not a carrier, except
that a carrier other than a telephone company shall be deemed to
be an ‘End User’ when such carrier uses a Telecommunications
service for administrative purposes and a person or entity that
offers Telecommunications services exclusively as a reseller shall
be deemed to be an ‘End User’ if all resale transmissions offered by
such reseller originate on the premises of such reseller. An End
User must pay a fee to the Company for telecommunications
service. Other carriers, including IXCs, are not considered to be
End Users under the terms of this Tariff, unless the Company
consents to such classification in writing.
Docket 30-6 at 10. Northern Valley, however, has acknowledged that the
conference calling companies do not purchase interstate access services;
instead, the conference calling companies utilize Northern Valley’s local
services pursuant to agreements made under South Dakota law. See Docket 81
at 14 (“While Qwest is a customer of the interstate access tariff, the
relationship between Northern Valley and the conference calling services are
not governed by that tariff or by Section 203(c). Instead, the provision of local
exchange services to end user customers is governed by state law.”). This
appears to be consistent with Northern Valley’s definition of “volume end user”
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in its revised tariff number three, which broadly states “services” instead of
“interstate access services:”
An End User that obtains Service from the Company in
order to provide high-traffic services, including, but not limited to,
chat line services, conference calling services, help desk
assistance, or call center support, designates the Company’s
central office as its EDP, and accordingly, installs equipment in the
Company’s central office. Because of the high-volume of traffic
generated to and from VEUs, origination and termination of
switched access services to this class of End User will be assessed
at a lower composite rate, as outlined in Section 7.2.2 of this Tariff.
Docket 30-6 at 12.
Qwest contends that the court would only reach the “volume end user”
portion of Northern Valley’s tariff if the court found that the conference calling
companies were “end users” because the “volume end user” definition is only
applied to determine the rate if an end user subscribes to Northern Valley’s
services. Docket 95 at 14. Qwest contends that because the conference calling
companies do not purchase interstate access services from Northern Valley,
they cannot be a “volume end user.” Docket 95 at 13.
One of the most glaring areas in need of the FCC’s expertise is Northern
Valley’s definition of “end user” and “volume end user” in its tariffs. The FCC
will need to carefully parse the terms used in Northern Valley’s tariff number
three to determine whether the tariff applies to calls to conference calling
companies that utilize Northern Valley’s local, but not interstate, services. The
interpretation of “volume end user” and “end user” in tariff number three, as it
20
has progressed over a series of revisions, is a task within the FCC’s unique
expertise. See, e.g., AT&T Corp. v. Y’Max Commc’ns Corp., 226 FCC Rcd. 5742,
5747-48 (2011), 2011 WL 1361436 (interpreting “end user” when the LEC
billed the IXC access charges for calls made through a MagicJack device that
allows a person to make a phone call over the internet); Sancom, 696 F. Supp.
2d at 1038 (“The FCC is uniquely qualified to compare the terms of an
agreement between an LEC and a conference calling company with the terms of
a traditional agreement for the provision of tariffed access services because of
the FCC’s experience in the field.”).
Assuming, without deciding, that Qwest’s interpretation is correct and
the conference calling companies do not subscribe to services in Northern
Valley’s interstate access tariff number three because they purchase local, not
interstate services, the FCC has repeatedly reasoned that a CLEC or an LEC
may be entitled to recover some payment for these services. See, e.g.,
Farmers II, 24 FCC Rcd. at 14812 n.96 (declining to rule that the LEC was
precluded from receiving any compensation for the services it provided to the
IXC even if the services were not interstate access services); Qwest Commc’ns v.
Farmers & Merchants, 668 F.3d at 724 (discussing Farmers II and reasoning
that while the filed rate doctrine did not apply, the FCC left open the question
of how services for conference calling companies should be classified). Even
after the FCC issued its final rule, the FCC’s prior orders on the types of
21
services at issue here remained valid. See, e.g., In the Matter of Connect America
Fund, 2012 WL 363934, at *7 n.69 (Feb. 3, 2012) (reasoning that the FCC’s
previous decisions on access stimulation remained valid, and the final rule
should not be interpreted as overturning or superseding those decisions).
As noted by various courts, “[t]his area of telecommunication regulation
is in dynamic flux . . . [so] these issues . . . are ripe for determination and
clarification by the regulatory agency.” All. Am. Tel., 2010 WL 7526933, at *1;
see also Sancom, 696 F. Supp. 2d at 1043 (same); Bluegrass Tel., 2010 WL
1257727, at *2 (same). See also Allnet Commc’n Serv., Inc. v. Nat’l Exchange
Carrier Ass’n, 965 F.2d 1118, 1121 (D.C. Cir. 1992) (reasoning that the FCC is
in the better position to resolve conflicting policies in the telecommunications
arena). The area is even more in flux after the FCC announced its final rule,
which, through a later clarification, upheld the FCC’s prior orders, but did not
provide analysis on how, if at all, a CLEC should be compensated for the
services at issue here for the time period before the final rule became effective.
Because the FCC’s input on the tariff application, classification of services, and
reasonable rate issues may inform the court’s analysis of this case going
forward, the court will refer the following issue to the FCC:6 If the services
6
The court has referred an almost identical issue in other cases. See,
e.g., Sancom, 696 F. Supp. 2d at 1043 (“In the event that the services provided
by Sancom to AT & T, by which calls placed by AT & T's customers are
delivered to free calling providers served by Sancom, do not qualify as switched
access service under Sancom's applicable interstate access tariff, determination
22
provided by Northern Valley do not qualify as switched access services to
companies that provide free conferencing calling services, then determination
of how the traffic should be classified, whether that traffic can be tariffed, and
whether Northern Valley is entitled to any compensation for the services
Northern Valley provided, and if so, what a reasonable rate would be for
Northern Valley’s services.
Moreover, because the FCC, not the court, determines the rate for
telecommunication services, the FCC should determine what rate applies to
services provided by Northern Valley if the services are not switched access
services. Northern Valley agrees that the court could need guidance from the
FCC in the event the court grants Northern Valley’s summary judgment motion
either in part or in whole, but it contends that the court should wait until that
time. See Docket 97 at 15 (“Northern Valley acknowledges that the Court may
continue to need additional guidance with regard to . . . alternative recovery
issues. However, the potential need for this guidance in the future does not
necessitate a referral at this time.”).
Before the court could even reach the possibility of awarding a remedy in
this case, including any alternative recovery theory, the court would need to
interpret the terms of Northern Valley’s tariff number three. But, as stated
of the proper classification of these services, whether such services are subject
to federal tariffing requirements, and whether Sancom is entitled to obtain
compensation for these services.”).
23
above, interpretation of the tariff’s terms requires the FCC’s technical expertise.
Thus, as in the other cases,7 the court will refer an issue about rate making to
the FCC: In the event that the services provided by Northern Valley to Qwest do
not qualify as switched access services under Northern Valley’s interstate tariff
number three or interstate revised tariff number three, but Northern Valley is
otherwise entitled to compensation for these services, then what is a
reasonable rate for these services.
III.
Additional Issues from Sprint II
In addition to the three issues outlined above that the court has
repeatedly referred to the FCC, in Sprint II, Sprint requested that two other
issues be referred to the FCC. See Sprint II, No. 11-4053, Docket 59 at 10.
Because the tariff at issue here is the identical tariff at issue in Sprint II,8 the
court will refer the two additional issues from Sprint II to the FCC: (1) Do the
pre-November 29, 2011, payments by the conference calling companies
constitute payments under Northern Valley’s revised tariff number three; and
7
Sancom, 696 F. Supp. 2d at 1043 (“In the event that the services
provided by Sancom to AT & T, by which calls placed by AT & T's customers
are delivered to free calling providers served by Sancom, do not qualify as
switched access service under Sancom's applicable interstate access tariff,
determination of the proper classification of these services, whether such
services are subject to federal tariffing requirements, and whether Sancom is
entitled to obtain compensation for these services.”)
8
The court finds that, during discovery, the same issues articulated by
Sprint may become issues in this case. The court finds that the reasons
articulated in Sprint II, Docket 59 at 8-11, support referring these two
additional issues to the FCC.
24
(2) Whether Northern Valley can collect access service charges from Qwest
under all versions of its tariff number three because of the tariff’s definitions
for “customer,” “buyer,” and “service.”
IV.
Request to Delay Referral
In the event that the court stays and refers this case, Northern Valley
requests that the court allow discovery to be completed in Sprint II before it
enters the primary jurisdiction referral to the FCC. Northern Valley contends
that the FCC prefers to focus on a lead case and that waiting until discovery is
completed will allow Sprint II to be the lead case and resolve the referred issues
more quickly. Qwest requests that the court delay any referral to the FCC until
the parties have completed fact discovery.
The court does not consider the regulatory agency's discovery rules and
pleading requirements in applying the primary jurisdiction doctrine. See Access
Telecomms., 137 F.3d at 608 (explaining that the primary jurisdiction doctrine
should be applied when the issue calls for expert consideration and uniformity
within the field of regulation). “[I]f . . . the primary jurisdiction doctrine applies
on any set of facts that could be developed by the parties, there is no reason to
await discovery, summary judgment, or trial, and the application of the
doctrine properly may be determined on the pleadings.” Davel Commc'ns, Inc. v.
Qwest Corp., 460 F.3d 1075, 1089 (9th Cir. 2006).
25
The parties cite no FCC precedent stating that the FCC requires parties
to have completed discovery before addressing issues in a referred case.
Instead, the parties rely on the fact that the FCC chose a certain case, Sancom
v. Qwest, as the lead referral in an earlier set of referred cases, which included
Sprint I, because discovery was complete in that case. The fact that the FCC
“designated the case in which discovery was complete as the lead case does not
suggest that completed discovery was necessary for the FCC to proceed.”
Splitrock, 2010 WL 2867126, at *12. “Indeed, the FCC did not require that the
case in which discovery was complete be designated as the lead case, but
rather ordered the IXCs to ‘decide amongst themselves which IXC [would] be
the complainant in the proceeding.’ ” Id. (citing Letter by Deputy Chief, Market
Disputes Resolution Division, Enforcement Bureau, Docket 80-1 at 3 (released
May 5, 2010); Letter by Deputy Chief, Market Disputes Resolution Division,
Enforcement Bureau, Docket 80-1 at 6 (June 2, 2010) (noting that IXCs
indicated that they had agreed that Qwest would file the formal complaint)).
Moreover, Northern Valley moved for summary judgment before
completing the discovery that it now wishes to conduct. Docket 23. About a
month later, Qwest moved for partial summary judgment on three of its
counterclaims without conducting the discovery that it now seeks permission
to complete before referral to the FCC. Docket 37. Neither party has articulated
a reason why discovery is necessary before referral to the FCC but not
26
necessary for the court to rule on the pending summary judgment motions.
The parties’ positions are contrary to the law, which dictates precisely the
opposite outcome: discovery may be necessary prior to the court considering
the summary judgment motions, as there can be no genuine disputes of
material fact for summary judgment to be proper, but as discussed above,
discovery need not be completed prior to referral to the FCC. In any event, the
court will not delay referral to the FCC to allow the parties to complete
discovery because discovery can be completed under the FCC’s discovery
rules,9 and because the primary jurisdiction doctrine does not require
discovery to be complete before a case is referred.
CONCLUSION
Pending before the court are Northern Valley’s motion for summary
judgment, Qwest’s cross motion for partial summary judgment, Northern
Valley’s motion to strike Qwest’s statement of material facts, Northern Valley’s
motion to dismiss Qwest’s counterclaims, and Qwest’s motion to seal certain
documents. Before the court addressed these motions, it ordered the parties to
brief whether this case should be stayed and certain issues referred to the FCC
for resolution. Qwest and Northern Valley argue that the court should not stay
9
Moreover, discovery is almost complete in Sprint II, some of which will
be applicable here, and discovery was partially completed in Northern Valley v.
Qwest I, which should expedite the discovery process before the FCC.
27
and refer this case and, alternatively, to delay referral until the parties have
completed at least some discovery.
The motion to seal is granted and the remaining motions are denied
without prejudice. Because the primary jurisdiction doctrine supports a stay
and referral in this case, the court will stay and refer this case and will not
delay referral until the parties complete discovery. If the other pending motions
are still relevant after the FCC has made its final determination on referral, the
parties may resubmit their motions. Accordingly, it is
ORDERED that plaintiff’s motion for summary judgment (Docket 23) is
denied without prejudice.
IT IS FURTHER ORDERED that defendant’s cross motion for partial
summary judgment (Docket 37) is denied without prejudice.
IT IS FURTHER ORDERED that plaintiff’s motion to strike defendant’s
statement of material facts (Docket 50) is denied without prejudice.
IT IS FURTHER ORDERED that plaintiff’s motion to dismiss defendant’s
counterclaims (Docket 80) is denied without prejudice.
IT IS FURTHER ORDERED that defendant’s motion to seal (Docket 96) is
granted.
IT IS FURTHER ORDERED that this action is STAYED pending
(1) resolution of the dispute by agreement of the parties; (2) a decision on the
28
disputed issues by the FCC pursuant to the referral described below; or
(3) further order of the court.
IT IS FURTHER ORDERED that this matter is referred to the FCC for
resolution, to the extent the FCC’s jurisdiction permits, of the following issues:
(1)
Whether, under the facts of the present dispute between
Northern Valley and Qwest, Northern Valley is entitled to
collect interstate switched access charges that it has billed to
Qwest pursuant to Northern Valley’s interstate access tariff
number three or revised interstate access tariff number three
for calls to numbers assigned to free calling providers.
(2)
If the services provided by Northern Valley do not qualify as
switched access services to companies that provide free
conference calling services, then determination of how the
traffic should be classified, whether that traffic can be
tariffed, and whether Northern Valley is entitled to any
compensation for the services Northern Valley provided, and
if so, what a reasonable rate would be for Northern Valley’s
services.
(3)
In the event that the services provided by Northern Valley to
Qwest do not qualify as switched access services under
Northern Valley’s interstate tariff number three or interstate
revised tariff number three, but Northern Valley is otherwise
entitled to compensation for these services, then what is a
reasonable rate for these services.
(4)
Do the pre-November 21, 2011, payments by the conference calling
companies constitute payments under Northern Valley’s revised
tariff number three?
(5)
Whether Northern Valley can collect access service charges from
Qwest under all versions of its tariff number three because of the
tariff’s definitions for “customer,” “buyer,” and “service.”
IT IS FURTHER ORDERED that Qwest will contact the Market Disputes
Resolution Division of the FCC to obtain guidance regarding the appropriate
29
method for bringing this matter before the FCC. Qwest will initiate proceedings
as recommended by the Market Disputes Resolution Division within 30 days of
the date of this order. Qwest is directed to furnish the FCC with a copy of this
order as part of its submission.
IT IS FURTHER ORDERED that the parties will submit a joint report to
the court every three months describing the status of the proceeding before the
FCC, the first of which will be filed no later than three months from the date of
this order.
Dated March 23, 2012.
BY THE COURT:
/s/ Karen E. Schreier
KAREN E. SCHREIER
CHIEF JUDGE
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