Union Telephone Company et al v. Level 3 Communications LLC et al

Filing 27

MEMORANDUM OPINION AND ORDER: Level 3's motions to dismiss #20 are denied. (Ordered by Judge Sidney A Fitzwater on 3/22/2017) (ran) Modified on 3/22/2017 (gr).

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE: INTRAMTA SWITCHED
ACCESS CHARGES LITIGATION

§
§
§
§
§
THIS DOCUMENT RELATES TO
§
CIVIL ACTION NOS.
§
§
3:16-CV-0974-D, 3:16-CV-0975-D,
§
3:16-CV-0977-D, 3:16-CV-0979-D,
§
3:16-CV-0988-D, 3:16-CV-0989-D,
§
3:16-CV-0990-D, 3:16-CV-1010-D,
§
3:16-CV-1105-D, 3:16-CV-1119-D,
§
3:16-CV-1122-D, 3:16-CV-1123-D,
§
3:16-CV-1126-D, 3:16-CV-1443-D,
§
3:16-CV-1605-D, 3:16-CV-1626-D,
§
3:16-CV-1893-D, 3:16-CV-1980-D,
§
3:16-CV-1985-D, 3:16-CV-2210-D,
§
3:16-CV-2722-D, and 4:16-CV-0302-D. §

Civil Action No. 3:14-MD-2587-D
(MDL No. 2587)

MEMORANDUM OPINION
AND ORDER
In a prior opinion in these MDL proceedings—In re IntraMTA Switched Access
Charges Litigation, 2015 WL 7252948 (N.D. Tex. Nov. 17, 2015) (Fitzwater, J.) (“IntraMTA
I”)—the court addressed the question whether local exchange carriers (“LECs”) can charge
interexchange carriers (“IXCs”) access fees for access services that the LECs provide the
IXCs to enable them to exchange interstate wireless intraMTA calls—that is, interstate
wireless calls that originate and terminate within the same Major Trading Area (“MTA”).
In IntraMTA I the IXCs were the plaintiffs and the LECs were the defendants. The Fed. R.
Civ. P. 12(b)(6) motions to dismiss in the instant tag-along actions present the same principal

question as in IntraMTA I, although the LECs are aligned as plaintiffs and the IXCs are
aligned as defendants, and the IXCs rely on arguments not raised in IntraMTA I. Because
the court concludes that the LECs have pleaded plausible claims on which relief can be
granted, it denies the motions to dismiss.
I
The court assumes that the parties are familiar with its opinion in IntraMTA I and will
add to its recitation of the background facts and procedural history what is necessary to
understand the present decision. Plaintiffs in these cases1 are LECs that are suing defendants
Level 3 Communications, LLC and its affiliates (collectively, “Level 3”)2 in their capacities
as IXCs.3 The LECs allege that Level 3 ordered and used their interstate and intrastate
tariffed access services to exchange calls between Level 3’s long distance network and the
LECs’s local networks; that the LECs have timely rendered bills setting forth the charges

1

The Level 3 cases consist of the following 22 lawsuits (shown by the docket numbers
in this court): 3:16-CV-0974-D, 3:16-CV-0975-D, 3:16-CV-0977-D, 3:16-CV-0979-D, 3:16CV-0988-D, 3:16-CV-0989-D, 3:16-CV-0990-D, 3:16-CV-1010-D, 3:16-CV-1105-D, 3:16CV-1119-D, 3:16-CV-1122-D, 3:16-CV-1123-D, 3:16-CV-1126-D, 3:16-CV-1443-D, 3:16CV-1605-D, 3:16-CV-1626-D, 3:16-CV-1893-D, 3:16-CV-1980-D, 3:16-CV-1985-D, 3:16CV-2210-D, 3:16-CV-2722-D, and 4:16-CV-0302-D.
2

In most of the Level 3 cases, plaintiffs have sued Level 3 Communications, LLC and
its affiliates, WilTel Communications, LLC and Global Crossing Telecommunications, Inc.
In four cases (3:16-CV-975-D, 3:16-CV-1105-D, 3:16-CV-1119-D, and 3:16-CV-1123-D),
plaintiffs have also sued Level 3 Communications, LLC’s affiliate, Broadwing
Communications, LLC. In one case (3:16-CV-2722-D), plaintiffs have only sued WilTel
Communications, LLC and Global Crossing Telecommunications, Inc.
3

Level 3 moves to dismiss on the ground that the LECs have not pleaded that it is an

IXC.
-2-

required by the LECs’s state and federal tariffs for the access services; and that, since early
2014, Level 3 has withheld payment of interstate and intrastate access charges for wireless
(also known as “Commercial Mobile Radio Service” or “CMRS”) intraMTA calls, which
Level 3 contends by law are not subject to access charges. The LECs assert claims for
breach of federal and state tariffs, and they seek a declaratory judgment that Level 3 is
obligated to pay access charges for exchanging intraMTA calls between Level 3’s longdistance network and the LECs’s local telephone networks.4
In IntraMTA I the court held, in pertinent part:
Under 47 U.S.C. § 251(g), the proper methodology for
determining whether LECs can charge IXCs for the access
services at issue [(i.e., access services for interstate wireless
intraMTA calls)] is to identify the baseline practice on the date
immediately preceding February 8, 1996 and then determine
whether the [Federal Communications Commission (“FCC”)] by
regulation has explicitly superseded that practice. Defendants
have established that the FCC has not yet explicitly superseded
the baseline compensation practices that applied on the date
immediately preceding February 8, 1996 to the access services
that LECs provide IXCs to enable them to exchange interstate
wireless intraMTA calls. And plaintiffs have failed to show
otherwise.
IntraMTA I, 2015 WL 7252948, at *11.
Level 3 now moves under Rule 12(b)(6) to dismiss the LECs’s actions for failure to
state a claim on which relief can be granted. In support of its motions, it relies on the

4

Level 3 relies on the complaint filed in Centurylink Communications, LLC v. Level
3 Communications, LLC, No. 3:16-CV-0988-D, as representative of the complaints filed in
all of the Level 3 cases. The court will do so as well.
-3-

following grounds: first, it adopts the arguments that Sprint Communications Company L.P.
(“Sprint”) and MCI Communications Services, Inc. / Verizon Select Services Inc.
(“Verizon”)—the IXCs in IntraMTA I—presented in IntraMTA I to argue that IXCs are not
obligated to pay access fees to LECs for access services that the LECs provide the IXCs to
enable them to exchange interstate wireless intraMTA calls; second, Level 3 contends that
the LECs have failed to plead that Level 3 is an IXC; third, Level 3 maintains that, under 47
U.S.C. § 251(g)—a provision of the Telecommunications Act of 1996 (the
“Telecommunications Act” or the “Act”)—access charges apply only to long distance
communications, and therefore do not apply to intraMTA wireless calls, which are defined
by an order of the FCC as local calls; and, fourth, Level 3 posits that, under the regulatory
scheme established by Congress and the FCC, the same call cannot simultaneously be subject
to access charges and reciprocal compensation. The LECs oppose Level 3’s motions. The
court has heard oral argument.
II
Under Rule 12(b)(6), the court evaluates the pleadings by “accept[ing] ‘all
well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.’” In re
Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (quoting Martin K. Eby
Constr. Co. v. Dall. Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004)). To survive
Level 3’s motions, the LECs’s complaints must allege enough facts “to state a claim to relief
that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A
claim has facial plausibility when the plaintiff[s] plead[ ] factual content that allows the court
-4-

to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The plausibility standard is not akin to a
‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has
acted unlawfully.” Id.; see also Twombly, 550 U.S. at 555 (“Factual allegations must be
enough to raise a right to relief above the speculative level[.]”). “[W]here the well-pleaded
facts do not permit the court to infer more than the mere possibility of misconduct, the
complaint has alleged—but it has not ‘shown’—‘that the pleader is entitled to relief.’” Iqbal,
556 U.S. at 679 (brackets omitted) (quoting Rule 8(a)(2)). Furthermore, under Rule 8(a)(2),
a pleading must contain “a short and plain statement of the claim showing that the pleader
is entitled to relief.” Although “the pleading standard Rule 8 announces does not require
‘detailed factual allegations,’” it demands more than “‘labels and conclusions.’” Iqbal, 556
U.S. at 678 (quoting Twombly, 550 U.S. at 555). And “‘a formulaic recitation of the
elements of a cause of action will not do.’” Id. (quoting Twombly, 550 U.S. at 555).
III
Level 3 relies first on the arguments that Sprint and Verizon made in their opposition
to the LECs’s motions to dismiss addressed in IntraMTA I. The court denies this ground of
Level 3’s motion for the reasons explained in IntraMTA I.
IV
At the conclusion of Level 3’s adoption of Sprint’s and Verizon’s arguments, it
advances an argument that the court will treat as the second ground of its motions to dismiss:
that even if there is an “IXC exception” to the reciprocal compensation requirement of 47
-5-

U.S.C. § 251(b)(5),5 the LECs have not established the contours of the exception, have not
pleaded facts showing what category Level 3 falls into, or even what distinguishes IXCs from
other intermediate carriers, and have not alleged that Level 3 delivers intraMTA traffic in its
capacity as an IXC as opposed to some other type of intermediate carrier. The court
concludes that Level 3 is not entitled to dismissal on this basis.
The LECs have plausibly pleaded that Level 3 is an IXC. See, e.g., Compl. ¶ 98
(“Level 3 is an IXC. Level 3 ordered and used the [LECs’s] interstate and intrastate tariffed
access services to exchange calls between Level 3’s long-distance network and the [LECs’s]
local networks.”). To the extent Level 3 contends, “as a legal matter,” that it cannot be an
IXC, it has failed to cite controlling authority for this position. Accordingly, the court denies
Level 3’s motion to dismiss on the basis that the LECs have failed to allege that Level 3 is
an IXC.
V
Level 3’s third ground for dismissal relies on a new argument that the IXCs did not
raise in IntraMTA I: that the carve-out found in 47 U.S.C. § 251(g)—a provision of the
Telecommunications Act—applies only to long distance communications, and therefore does
not apply to intraMTA wireless calls, which are defined by FCC order as local calls.6

5

Under 47 U.S.C. § 251(b)(5), LECs have “[t]he duty to establish reciprocal
compensation arrangements for the transport and termination of telecommunications.”
6

The failure of the IXCs to raise this argument in IntraMTA I prompts this question:
If this theory so obviously represents a correct interpretation and application of 47 U.S.C. §
251(g) and the pertinent FCC order, why did the IXCs fail to argue it in IntraMTA I?
-6-

A
47 U.S.C. § 251(g) provides:
On and after February 8, 1996, each [LEC], to the extent that it
provides wireline services, shall provide exchange access,
information access, and exchange services for such access to
[IXCs] and information service providers in accordance with the
same equal access and nondiscriminatory interconnection
restrictions and obligations (including receipt of compensation)
that apply to such carrier on the date immediately preceding
February 8, 1996 under any court order, consent decree, or
regulation, order, or policy of the [FCC], until such restrictions
and obligations are explicitly superseded by regulations
prescribed by the [FCC] after February 8, 1996. During the
period beginning on February 8, 1996 and until such restrictions
and obligations are so superseded, such restrictions and
obligations shall be enforceable in the same manner as
regulations of the [FCC].
In IntraMTA I the court held that § 251(g) left in place the access charge regime between
LECs and IXCs that existed prior to passage of the Telecommunications Act. IntraMTA I,
2015 WL 7252948, at *5 (“The Telecommunications Act thus preserves the restrictions and
obligations concerning LECs—‘including receipt of compensation’—until later explicitly
superseded by FCC regulations.”). The question whether LECs were permitted under federal
law to charge IXCs access charges for intraMTA wireless calls “thus turn[ed] on whether the
FCC ha[d] by regulation explicitly superseded the pertinent compensation scheme that was
the existing practice at the time the Telecommunications Act was enacted.” Id. In IntraMTA
I the court concluded that the FCC had not yet “explicitly superseded” the preexisting
compensation scheme.
Level 3 maintains that the carve-out found in § 251(g) to the reciprocal compensation
-7-

regime otherwise imposed by § 251(b)(5) is limited to long distance communications, and
that the FCC has defined intraMTA wireless calls as local calls. Level 3 posits that § 251(g)
applies to the extent that a LEC provides “exchange access” to an IXC; that “exchange
access” is defined in the Act as “the offering of access to telephone exchange services or
facilities for the purpose of the origination or termination of telephone toll services,” 47
U.S.C. § 153(20); and that “telephone toll service” is defined as “telephone service between
stations in different exchange areas,” id. § 153(55). Level 3 maintains that “telephone toll
service” is, in colloquial terms, long distance calling service. It contends that a wireless call
that originates and terminates within the same MTA—i.e., an intraMTA wireless call—is a
local call under the FCC’s order in In re Implementation of the Local Competition Provisions
in the Telecommunications Act of 1996, Interconnection Between Local Exchange Carriers
and Commercial Mobile Radio Service Providers, First Report and Order, 11 FCC Rcd.
15499 (Aug. 8, 1996) (“Local Competition Order”), so that all intraMTA wireless calls are
subject to the payment of reciprocal compensation, not access charges. In sum, Level 3
contends that the court should dismiss the LECs’s actions for failure to state a claim because
[i]t would violate Section 251 to assess access charges on local
wireless traffic because even where Section 251 allows access
charges—in the Section 251(g) carve-out—it only allows them
for “exchange access”—i.e., long distance traffic which by
definition cannot include intraMTA calls. Thus, Section
251(b)(5) explicitly requires local wireless calls to be subject to
reciprocal compensation because they are “telecommunications”
but they are not “access services” (indeed, they are “NonAccess” services).
Ds. Br. 14.
-8-

B
For purposes of today’s decision, the court will assume arguendo that Level 3’s
interpretation of the Act is correct, and that § 251(g) preserves the pre-February 8, 1996
access compensation scheme for LECs providing access services to IXCs only for long
distance communications. Even on that assumption, Level 3’s motions to dismiss fail at least
for the reason that Level 3 has not established that all the intraMTA wireless calls at issue
are by definition local calls.
To establish that all intraMTA wireless calls are by definition local calls, Level 3
relies on ¶ 1036 of the Local Competition Order, which provides:
On the other hand, in light of this Commission’s exclusive
authority to define the authorized license areas of wireless
carriers, we will define the local service area for calls to or from
a CMRS network for the purposes of applying reciprocal
compensation obligations under section 251(b)(5). Different
types of wireless carriers have different FCC-authorized
licensed territories, the largest of which is the “Major Trading
Area” (MTA). Because wireless licensed territories are
federally authorized, and vary in size, we conclude that the
largest FCC-authorized wireless license territory (i.e., MTA)
serves as the most appropriate definition for local service area
for CMRS traffic for purposes of reciprocal compensation under
section 251(b)(5) as it avoids creating artificial distinctions
between CMRS providers. Accordingly, traffic to or from a
CMRS network that originates and terminates within the same
MTA is subject to transport and termination rates under section
251(b)(5), rather than interstate and intrastate access charges.
Local Competition Order, 11 FCC Rcd. at 16014, ¶ 1036 (emphasis added) (footnotes
omitted). Level 3’s reliance on ¶ 1036 is misplaced because this provision defines the local
service area “for calls to or from a CMRS network.” Moreover, in ¶ 1034 of the Local
-9-

Competition Order, the FCC stated: “[w]e find that the reciprocal compensation provisions
of section 251(b)(5) for transport and termination of traffic do not apply to the transport or
termination of interstate or intrastate interexchange traffic.” Id. at 16013, ¶ 1034 (emphasis
added). And in ¶ 30 of the same order, the FCC said: “[n]othing in this Report and Order
alters the collection of access charges paid by an [IXC] under Part 69 of the Commission’s
rules, when the incumbent LEC provides exchange access service to an [IXC], either directly
or through service resale.” Id. at 15515-16, ¶ 30. As the court explained in IntraMTA I:
[paragraph] 1036 simply sets out the intraMTA rule; it does not
mention IXCs, much less explicitly supersede the existing
access charge regime between LECs and IXCs. Nor is
Plaintiffs’ reading of ¶ 1036 reasonable given the FCC’s
statement that it is defining “the local service area for calls to or
from a CMRS network for the purposes of applying reciprocal
compensation obligations under section 251(b)(5),” Local
Competition Order, 11 [FCC Rcd.] at 16014, ¶ 1036 (emphasis
added), and its clarification in ¶ 1034 that “the reciprocal
compensation provisions of section 251(b)(5) for transport and
termination of traffic do not apply to the transport or
termination of interstate or intrastate interexchange traffic,” id.
at 16013, ¶ 1034 (emphasis added). Moreover, Plaintiffs’
reading of ¶ 1036 cannot be reconciled with the FCC’s
statement in ¶ 30 that the Local Competition Order does not
alter the collection of access charges paid by an IXC under Part
69 of the FCC’s rules, which includes 47 C.F.R. § 69.5(b).
IntraMTA I, 2015 WL 7252948, at *7.
Paragraph 1043 of the Local Competition Order is consistent with the understanding
that ¶ 1036 does not purport to define local service for all purposes, including for access
services provided by LECs to IXCs. Paragraph 1043 provides:

- 10 -

As noted above, CMRS providers’ license areas are established
under federal rules, and in many cases are larger than the local
exchange service areas that state commissions have established
for incumbent LECs’ local service areas. We reiterate that
traffic between an incumbent LEC and a CMRS network that
originates and terminates within the same MTA (defined based
on the parties’ locations at the beginning of the call) is subject
to transport and termination rates under section 251(b)(5), rather
than interstate or intrastate access charges. Under our existing
practice, most traffic between LECs and CMRS providers is not
subject to interstate access charges unless it is carried by an
IXC, with the exception of certain interstate interexchange
service provided by CMRS carriers, such as some “roaming”
traffic that transits incumbent LECs’ switching facilities, which
is subject to interstate access charges. Based on our authority
under section 251(g) to preserve the current interstate access
charge regime, we conclude that the new transport and
termination rules should be applied to LECs and CMRS
providers so that CMRS providers continue not to pay interstate
access charges for traffic that currently is not subject to such
charges, and are assessed such charges for traffic that is
currently subject to interstate access charges.
Local Competition Order, 11 FCC Rcd. at 16016-17, ¶ 1043 (emphasis added) (footnotes
omitted).
Further support for this understanding is found in In re TSR Wireless, LLC (TSR

Wireless, LLC v. U S West Commc’ns, Inc.), 15 FCC Rcd. 11166 (June 21, 2000), pet. for
recon. dism’d, 16 FCC Rcd. 11462, aff’d sub. nom, Qwest Corp. v. FCC, 252 F.3d 462 (D.C.
Cir. 2001) (“TSR Wireless”), which was decided almost four years after the Local
Competition Order was adopted:

- 11 -

Section 51.703(b) concerns how carriers must compensate each
other for the transport and termination of calls. It does not
address the charges that carriers may impose upon their end
users. Section 51.703(b), when read in conjunction with Section
51.701(b)(2), requires LECs to deliver, without charge, traffic
to CMRS providers anywhere within the MTA in which the call
originated, with the exception of RBOCs, which are generally
prohibited from delivering traffic across LATA boundaries.
MTAs typically are large areas that may encompass multiple
LATAs, and often cross state boundaries. Pursuant to Section
51.703(b), a LEC may not charge CMRS providers for facilities
used to deliver LEC-originated traffic that originates and
terminates within the same MTA, as this constitutes local traffic
under our rules. Such traffic falls under our reciprocal
compensation rules if carried by the incumbent LEC, and under
our access charge rules if carried by an interexchange carrier.
This may result in the same call being viewed as a local call by
the carriers and a toll call by the end-user.
TSR Wireless, 15 FCC Rcd. at 11184, ¶ 31 (emphasis added) (footnotes omitted).
Because Level 3 has not established that all the intraMTA wireless calls at issue are
locals calls that fall within the carve-out of § 251(g), the court declines to accept the third
ground of Level 3’s motion.
VI
Level 3 argues fourth that, under the regulatory scheme established by Congress and
the FCC, the same call cannot simultaneously be subject to access charges from one carrier
and reciprocal compensation from another.7 In support of this argument, Level 3 cites the
Local Competition Order and In re Connect America Fund, A National Broadband Plan for

7

This ground is not delineated by a separate header in Level 3’s motion. To the extent
Level 3 intends to advance this argument in support of another ground of its motion, the court
declines to accept the argument in that context as well.
- 12 -

Our Future, Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd.
17663 (Nov. 18, 2011) (“Connect America Order”), both of which refer to compensation for
intraMTA “traffic.” See Local Competition Order at 16014, ¶ 1036 (“traffic . . . that
originates and terminates within the same MTA is subject to transport and termination rates”
(emphasis added)); Connect America Order at 18043, ¶ 1007 (“intraMTA traffic is subject
to reciprocal compensation” (emphasis added)). According to Level 3, the FCC in the
Connect America Order expressly superseded the access charge regime for long distance
access traffic, subjecting this traffic instead to reciprocal compensation under § 251(b)(5).
In IntraMTA I, however, this court rejected the argument that the FCC’s use of the
word “traffic,” as opposed to framing the issue as whether LECs or CMRS providers may
impose access charges on one another for intraMTA calls, evidenced a “square rejection” of
the LECs’s position regarding access charges on IXCs. IntraMTA I, 2015 WL 7252948, at
*10 (brackets omitted). The court held that ¶ 1007 of the Connect America Order does not
address compensation between LECs and IXCs. Id. In its brief, Level 3 essentially reiterates
the argument already raised by the IXCs in IntraMTA I and rejected by this court.
Accordingly, for the reasons explained in IntraMTA I, the court declines to accept Level 3’s
argument that a single call cannot be subject to reciprocal compensation (e.g., between a LEC
and a CMRS carrier) and access charges (between the LEC and an IXC in the middle of the
call path).

- 13 -

*

*

*

For the reasons explained, Level 3’s motions to dismiss are denied.
SO ORDERED.
March 22, 2017.

_________________________________
SIDNEY A. FITZWATER
UNITED STATES DISTRICT JUDGE

- 14 -