Verizon Virginia LLC et al v. XO Communications, LLC, et al

Filing 85

MEMORANDUM OPINION. Signed by District Judge Robert E. Payne on 11/5/2015. (jsmi, )

NOV - 6 20l5
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Richmond Division

CLERK, U.S. DISTRICT COURT
RICHMOND, VA

VERIZON VIRGINIA, LLC,
et al. ,
Plaintiffs,

v.

Civil Action No. 3:15-cv-171

XO COMMUNICATIONS, LLC
et al.,
Defendants.

MEMORANDUM OPINION

This
MOTION

matter

TO

Arbitration

is

COMPEL
Mtn. ") .

will be granted as

before

the

ARBITRATION
For

the

Court
(Docket

reasons

on
No.

stated

Defendants'
57)
below,

RENEWED

( "Def . ' s
the

2d

motion

it relates to the Texas and Florida claims

and denied as it relates to California claims that were also the
subject

matter

of

the

2007

Settlement

Agreement

between

the

parties.

BACKGROUND
A.

Procedural Posture
Plaintiffs are fourteen state or regional Verizon corporate

entities

(collectively,

"Verizon").

Defendants

are

XO

Communications,
Verizon is
of

the

LLC

and XO Virginia,

an "incumbent

phone

companies

LLC

(collectively,

local-exchange carrier"
that

enjoyed

a

local

Co.

of Virginia

501,

506

v.

(4th Cir.

Verizon Md.,

Inc.

Cir.

2013)

Under

2004).

Verizon

must

extensive
tariffs,

46,
is a

the

called
251;

Inc.,

competitors

134

tariffs,

and/or

LLC v.

S.

Ct.

Act,

rates

F. 3d

423

agreements"

Inc.,

"competitive local exchange carrier"

to

(2013);
359

(4th

such

the

as

ILECs

interstate

governed private

BellSouth Telecomm.,

2011); Verizon Md.,

715

through

federally

before
Tel.

ILECs

access

one

Cent.

377 F.3d 355,

with

set

at

monopoly

of Virginia,

Telecommunications

"interconnection

CGM,

(4th Cir.

Co.

denied,

Global NAPS,

provide

intrastate

§

50

v.

Commc' ns
cert.

infrastructure

contracts
U.S. C.

Sprint

( "ILEC"),

~,

enactment of the 1996 Telecommunications Act.

"XO").

47

{" I CAs " ) .
Inc.,

664

F. 3d

377 F.3d at 358.
("CLEC"),

XO

one of the

competitors allowed to access an ILEC's infrastructure under the
Telecommunications Act.

~'

Verizon's Complaint,
fees

that

it

owed

to

in sum,

Verizon

intrastate tariff schedules,
1)

(Compl.

<Jic:II

Cent. Tel. Co., 715 F.3d at 506.
alleges that XO failed to pay

under

federal

and the parties'

tariff
ICAs.

schedules,
(Docket No.

1, 50). The Complaint additionally alleges that XO

failed to pay late fees on those non-payments.

2

(Compl.

<JI

4).

On

May

13,

2015,

XO

filed

three

Dismiss Pursuant to FRCP 12 (b} (6)

motions:

(Docket No.

a

20},

Motion

to

a Motion to

Refer Claims for Agency Resolution (Docket No. 22}, and a Motion
to Compel Arbitration on all claims arising out of transactions
in California, Texas, and Florida.
to

Compel") .

Consolidated

In

support

Memorandum

of

in

(Docket No. 21)

these

Support

motions,
(Docket

("Def.' s Mtn.
XO

No.

filed

its

("Def. ' s

23}

Consolidated Mero."}. On June 9, 2015, Verizon filed a Memorandum
of

Law

in

Opposition

to

XO's

Motions

to

Dismiss,

Arbitration, and for a Primary Jurisdiction Referral
33}

("Pl.'s

Mem.

in

Opp'n"}.

denied the Motion to Dismiss
Refer (Docket No. 22}.

On

August

(Docket No.

25,
20}

to

Compel

(Docket No.

2015,

the

Court

and the Motion to

(See Order, Docket No. 46). On August 26,

2015 following oral argument, the Court continued the Motion to
Compel Arbitration pending further briefing.

(Order,

Docket No.

4 9} •

XO filed its Renewed Motion to Compel Arbitration and its
corresponding Memorandum in Support

(Docket No.

Arbitration Mern. ")

2015.

on

September

4,

58}

(''Def.' s 2d

The motion

has

been

fully briefed and argued and is ripe for decision.
B.

Claims at Issue

The ICAs for California, Texas, and Florida each contain an
arbitration

clause.

In

its

original
3

motion,

XO

accordingly

requested

that

the

California,

Texas,

arbitration,

or,

action

pending

Court

order

that

all

claims

arising

in

and Florida be submitted to private binding
in

the

alternative

arbitration.

(Def.' s

that

the

Mtn.

to

then, XO has identified the claims in
the Complaint as

~~

Court
Compel

2) .

~~

96-98 and

being subject to the

stay this
Since

102-104 of

arbitration provisions,

though it also alleges generally that any other disputes arising
out of those states should be referred to arbitration.

(Def.' s

Consolidated Mem. 17).
The parties do not dispute that the arbitration clauses in
the

California,

Texas,

Federal Arbitration Act
parties

also

disputes

to

agree

and

Florida

(FAA)

that,

arbitrate exists; and (2)

exist,

or

that

the

favors arbitration agreements. The

under

the

where:

arbitration

ICAs

FAA,

( 1)

a

courts
valid

must

refer

agreement

to

the dispute falls within the scope of

the agreement to arbitrate. Both sides point to the decision in
GE Capital Corp.
150,

152

(4th

v.

Union Corp.

Cir.

appropriate standard.

Fin.

Grp.

Inc.,

2005)

(unpublished),

as

(Def.' s

Consolidated Mem.

142

F.

App' x

supplying
15;

Pl.' s

the
Mem.

in Opp'n 10).
The

parties

dispute

the

second

element

of

GE

Capital:

whether Verizon's claims fall within the scope of the agreement
to

arbitrate.

The

parties

also
4

dispute

what

test

applies

to

determine

whether

a

dispute

falls

within

the

scope

of

an

agreement to arbitrate.
As to the applicable test for the scope of the agreement,
XO

argues

does

not

that,
arise

arbitration
when

under

the

Fourth

directly

claim must

claim

is

Circuit

from

a

precedent,

contract

nonetheless

"significantly

be

a

claim that

containing

referred

relatedn

to

to

a

broad

arbitration

the

contract.

Verizon argues that orders from a tariff are subject to an ICA's
arbitration clause only when the ICA incorporates the tariff by
reference. 1
The

parties

also

round of briefing:

the

Agreement

No.

(Docket

raised

a

Pl.'s Mem.

11-13,

1

"Pl.'s

issue

effect of the parties'
76)

on

California orders placed by XO.
16;

secondary

the

in

the

2007

California

latest

Settlement
and

on

(Def.' s 2d Arbitration Mero.

13-

in Opp'n to Compel Arbitration,
2d Arbitration Mero.

in

Opp'n";

ICA

Docket No.
Def.'s

Reply

71,
in

Both parties have changed their positions since the original
round of briefing. In the first round, Verizon asserted that all
of its claims arose solely out of tariffs, and that, even though
the ICAs exist, XO was always ordering services from the tariff
list. (Pl.' s Mero. in Opp' n 10) ("XO does not explain how any
provision ... of those interconnection agreements transforms XO' s
orders from Verizon's state tariffs into orders from the
interconnection agreements."). XO asserted that, once parties
entered into an ICA, the ICA superseded the tariff and all
interaction between the parties is "through" the ICA. (Def.' s
Consolidated Mem. 5-6, 17). Those positions have been abandoned
in the subsequent round of briefing and will not be further
considered.
5

Resp.

to 2d Mtn.

"Def.' s

2d

Arbitration

Settlement
resolve

to Compel Arbitration,

Agreement
any

Reply") .

provides

disputes

In

73,

if

the

parties

2007
cannot
or

interpretation

the

enforcement" of the Agreement by good

14-16,

the

particular,

that,

"regarding

Docket No.

faith

negotiation,

then

"either Party may pursue any remedies available to it under this
Agreement,

at law,

limited to,

in equity,

or otherwise,

including,

but not

instituting an appropriate proceeding before

...

a

court of competent jurisdiction." (2007 Settlement Agreement 9).
The

2007

clause

Settlement

providing

supersedes

all

Agreement

that,

as

other

trunk

then,

disputes

is
at

specific claims in

to

contains

matters

agreements

Settlement Agreement 11) .
Agreement,

also

within

between

the

an

integration

its

scope,

parties.

it

(2007

Interpretation of the 2007 Settlement

key to the arbi trabili ty of the transport
102-104

c:!I<JI
c:!Ic:!I

of

the

Complaint,

and

the

less

96-98 of the Complaint.

DO THE INTERCONNECTION AGREEMENTS COMPEL ARBITRATION?
A.

Procedural Approach

The

FAA

arbitration.

states
Under

arbitration where:
and

(2)

a

the
( 1)

strong
FAA,

a

preference

courts

must

valid agreement

for

refer
to

enforcing

disputes

arbitrate

to

exists;

the dispute falls within the scope of the agreement to
6

arbitrate.
Inc.,

Chorley
F.3d

Enters. ,
2015

--,

Inc.

4637967,

WL

2015) . On those points,
Mem.

15;

Pl.'s Mem.

v.

Dickey's
at

*6

the parties agree.

in Opp'n 10)

Barbecue

(4th

Cir.

Rests.,
Aug.

5,

(Def.' s Consolidated

(relying on GE Capital Corp,

142 F. App'x at 152).
However,

the parties dispute the

for determining whether the claims in

governing legal

~~

~~

96-98 and

standard

102-104 of

the Complaint fall within the scope of their ICA agreements to
arbitrate.

The parties'

ships passing in
general,

Fourth

briefs and their oral advocacy were two

the night:
Circuit

XO

relies

precedent,

but

on binding,
Ryan

J. J.

S . A. ,

and Verizon

ICA/tariff-specific precedent,

Networks,
(2004) .

on

Inc. v. Verizon Tel.

Co.,

3 21

Sons,

Rhone Pou 1 enc Text i 1 e ,
relies

8 6 3 F . 2 d 315 ,

&

19 F.C.C.

For the reasons stated below,

quite

Inc.

v.

( 4th Cir . 19 8 8 ) ,

Red.

Broadview

22216,

22221

the Court concludes that

the Broadview approach is to be used as a measure to determine
whether there a "significant relationshipu between a claim and a
contract with an arbitration clause under the J.J. Ryan test.

1.

Framework for Assessing Arbitrability of Claims which
are Not Directly Covered by an Arbitration Clause
(a)

XO

XO's Proposed Standard: J.J. Ryan and "Any
Significant Relationship"

correctly

states

the

governing

law

for

cases

where

a

claim does not directly arise out of a contract that contains an
7

J. J.

arbitration clause:

Ryan requires first that a court look

to see if the arbitration clause is broad;
clause

is

broad,

"significantly

that

a

related"

court
to

look

the

to

and second,

see

contract

if

with

the

the

if the

claim

is

arbitration

clause. J.J. Ryan, 863 F.2d at 321.
First,
contain

XO

argues

"broad"

Mero.

5-6) .

The

to,"

that

the

arbitration
California

(Docket No.

23,

Ex.

three

language.

ICA uses
11

in

(Def.'s

question
2d

"arising under

14),

§

ICAs

and the

all

Arbitration
or

related

Florida and Texas

ICAs use "arising out of or relating to." (Docket No. 23, Ex. 14
§

14; Docket No.

under or
~'

23,

Ex.

21

[relating/related]

People's Sec.

867 F.2d 809,

815

14). XO is correct that "arising

§

to" is broad arbitration language,

Life Ins.

Co.

v.

Monumental Life Ins.

Co.,

(4th Cir. 1989), and Verizon does not dispute

this proposition.
Second,

XO

also

correctly

states

the

standard

for

determining the arbitrability of disputes that do not directly
arise out of the contract with the arbitration clause when the
arbitration

clause

has

broad

arbitration

language:

"every

dispute between the parties having a significant relationship to
the contract regardless of the label attached to the dispute" is
subject to arbitration.

(Def.' s 2d Arbitration Mem.

6)

(quoting

J.J. Ryan, 863 F.2d at 321). In applying this standard, however,
8

XO's briefs proceed as though the inquiry is over once a court
finds a clause of broad application.

That is evident because XO

repeatedly misstates the test as merely "related," when the J.J.
Ryan inquiry is "significantly related."
Mem.

10-13;

that

misapprehension,

(Def.' s

Def.'s 2d Arbitration Reply 7-9,
XO' s

briefing

determine whether its tariff orders

does

2d Arbitration

12-13).

not

Because of

confront

how

to

(and the resulting disputes)

are "significantly related" to the ICAs. 2
cases in the J.J. Ryan line do provide guidance on

However,
how

to

assess

example,
the

the

"significant

relationship 11

question.

the Fourth Circuit has held that "a court must review

factual

evaluate

allegations

the

underlying

connection

between

the
those

particular
allegations

contract containing the arbitration clause." Great Am.
v.

Hinkle

2012)
the

Ins.

Contracting Corp.,

"evaluate
that

Co.,

for
the

4 97

497

significant

arbitration
F.

F.

App'x

348,

354

claim

and

and

the

Ins.

Co.

(4th Cir.

(emphasis added) . 3 Courts that have reached

(unpublished)

conclude

For

App ' x

relationships"

clause

at

3 5 4;

applies.

stage

E.g.,

often

Great Am.

_Am_.__R_e_c_o_v_e_r_..y
__C_o_r..._p_.__v_.

2

At oral argument,
XO's counsel stated that he had not
identified any cases explaining how to measure "significantly
related." (Tr. Sept. 29 2015 Hr'g 4:12-17).
3

In our circuit, unpublished opinions are not binding. However,
they nonetheless are useful analytical tools.
9

Computerized Thermal Imaging,
J.J.

Ryan

always

the

without

Sons,

&

an

case

Inc.,

that

Inc. ,

863

a

9 6 F. 3d 8 8

F.2d at

dispute

arbitration clause

321.

However,

arising out

is

(4th Cir. 19 9 6) ;
it

of one

is

instrument

"significantly related"
~'

second contract with an arbitration clause.

not

to a

Wachovia Bank,

Nat'l Ass'n v. Schmidt, 445 F.3d 726, 764 (4th Cir. 2006).
In

Wachovia,

plaintiff

relationships":

defendant

financial

that

deal

and

defendant

advised

ultimately

had

plaintiffs

went

sour,

"two

to
and

distinct

invest

in

defendant

a

had

loaned money to plaintiffs so that plaintiffs

could invest

that

filed

state

law

766.

While

the

financial

claims

based

deal.
on

Id.

the

at

768.

financial

Plaintiffs

deal.

Id.

at

lending contract had a broad arbitration clause,
deal document had no arbitration clause.
Circuit

then

connection
contract

considered

between

the

several

facts

allegations

containing the

Id.

of

arbitration clause:

the investment

at 767. The Fourth
in

the

in

evaluating

complaint
( 1)

the

and
fact

the
the
that

the claims derived from defendants' adviser-advisee relationship
while the arbitration clause dealt with the defendants'
lendee relationship;
claims

would

relationships]' s

(2)

the fact that court resolution of the

"require
terms,

lender-

nor

no

inquiry

even

into

knowledge

of

the
the

[lending
[promissory

note's] existence"; and (3) the fact that the financial deal and
10

the lending transaction were not part of a "single,

integrated

course of dealing" because plaintiffs could have participated in
the financial deal without taking out a loan from Wachovia.

Id.

at 768. The Wachovia court also pointed out that the investmentadvising relationship started before the
whereas
was

in J. J.

lending relationship,

Ryan the contract with the arbitration clause

the same contract that

created the

relationship,

and that

contained provisions necessary to carry forth the relationship.
Although in both Long and J.J. Ryan, we
interpreted arbitration clauses materially
identical
to
the
one
in
the
Note
to
encompass claims that did not arise directly
from the agreement containing the clauses,
each of those decisions involved claims that
derived
from
the
specific
relationship
created by the relevant agreement. See [Long
v. Silver, 348 F.3d 309, 317-19 (4th Cir.
2001)]
(concluding that arbitration clause
in
shareholder
and
employment
agreement
encompassed tort and contract claims that
arose
from
shareholder
and
employment
relationships created by agreement); J.J.
Ryan,
8 63
F. 2d at
318-19
(ruling that
arbitration clause in exclusive distribution
contract
encompassed
claims
involving
enforcement of ancillary agreements that
were necessary to implement distribution
contract)
Wachovia Bank,

Nat'l Ass'n,

445

F.3d at

769.

The analysis

Wachovia was not presented as an official checklist,
exclusive

list

of

factors

for

relationship" facet of the test.

applying

the

test,

in
or

"significant

However, Wachovia signals that

those facts are important in determining whether a "significant
11

relationship"

exists

between

XO's

tariff

orders

and

the

XO-

Verizon ICA.
(b)

Verizon's Standard: Broadview

In Broadview Networks,
parties to arbitration.

a New York trial court ordered the

That court faced a similar question to

the one that this Court faces now:
the telecommunications industry,

"whether,

in the context of

a party may compel arbitration

of a dispute concerning obligations governed by the terms of a
filed tariff,
not

on the basis of an arbitration agreement which is

contained in that tariff." Verizon N. Y.

Inc.

v.

Broadview

Networks, Inc., 5 Misc. 3d 346, 348, 781 N.Y.S.2d 211, 213 (N.Y.
Sup.

Ct.

2004) .

Broadview contended that the parties'

arose out of the tariffs rather than the ICA.
opinion,

the

New

York

interconnection agreement

court

found

dispute

In a thoughtful

that,

"[w]hen

an

contains a provision providing for a

CLEC' s purchase of services at the rates and on the terms set
forth in a tariff filed by the ILEC,
purchase,

the

CLEC

'is

agreement.'" Verizon N.Y.

and the CLEC makes such a

acting

through

[the]

Inc.,

5 Misc.

3d at

interconnection
350-51

(quoting

U.S. W Commc'n, Inc. v. Sprint Commc'n Co., L.P., 275 F.3d 1241,
1251 (10th Cir. 2002)
ordered through the

(emphasis in original)). Because Broadview
ICA,

which had an arbitration clause,

claims were arbitrable.
12

its

The decision of a New York court is, by itself, not binding
here.

However,

in

disposing

of

Broadview's

related

complaint

before the FCC, the FCC subsequently concluded that:
the New York Order's conclusion that the
Interconnection
Agreement
(including
its
mandatory
arbitration
provision),
rather
than
Verizon's
tariffs
standing
alone,
governs this dispute is reasonable, given
that
(i)
the
Interconnection
Agreement
clearly
incorporates
the
tariffs
with
respect to the collocation orders at issue
here, and (ii) at least one federal court of
appeals
has
held
that,
when
an
interconnection
agreement
incorporates
a
tariff, the parties thereafter act through
the agreement, not the tariff. Moreover, the
New
York
Order's
conclusion
that
the
Interconnection
Agreement's
mandatory
arbitration
provision
encompasses
this
dispute is reasonable, in light of (i) the
breadth of the provision's language, and
(ii)
the
federal
policies
favoring
arbitration and resolving any doubt in favor
of arbitrability.
Broadview

Networks,

Inc.,

19

F.C.C.

Red.

at

22221

(emphasis

added) . 4 That decision gave the FCC's imprimatur to the New York
decision.

4

The FCC relied on the same Tenth Circuit case as had the New
York court:
under
the
terms
of
the
interconnection
agreement, Sprint can purchase services at
specific rates and terms listed in its
interconnection
agreement,
or,
alternatively, can purchase services at the
rates
and
terms
set
forth
in
Qwest' s
13

The
the

FCC' s

FCC' s

finding that telecommunications

tariffs under certain circumstances,
relevant

to

deference.

arbitrability

Chevron,

Additionally,

However,

decision is not binding here either.

this

of

U.S.A.,

Court has

and that incorporation is

tariff

Inc.

v.

ICAs may incorporate

orders,

NRDC,

is

entitled

467 U.S.

837

approvingly cited the

to

(1984).

same Tenth

Circuit passage undergirding the decisions of the New York court
and the FCC in Broadview. Cent.

Tel.

Co.

of Virginia v.

Sprint

Commc'ns Co. of Virginia, 759 F. Supp. 2d 789, 799 n.6 (E.D. Va.
aff 'd,

2011)'

accordingly

715

F.3d

recognizes

501

that

(4th

The

2013).

Cir.

incorporation

is

relevant

Court
to

an

arbitrability inquiry when dealing with tariffed services.
Verizon framed its latest brief around the Broadview rule
that

an

ICA

(and

the

ICA's

arbitration

place of a valid tariff when

( 1)

language)

governs

in

the ICA clearly incorporates

the tariffs with respect to the orders/charges at issue and

(2)

(Pl.'s

2d

Broadview

by

the

arbitration

language

in

the

ICA

is

broad.

Arbitration Mem. in Opp'n 6-10).
In

its

highlighting

Reply,

XO

that

the

attempted

to

arbitration

distinguish
clause

in

Broadview

tariffs.
Either
way,
Sprint
is
acting
through its interconnection agreement.
U.S. W. Commc'ns, Inc., 275 F.3d at 1250-51.
14

was

narrower than the ICAs before the Court in this case. Therefore,
XO asserts,

Broadview cannot establish a

general

rule

limiting

arbitrability to cases where the tariff is incorporated into the
ICA.

(Def.'s 2d Arbitration Reply 9 n.6). However, the fact that

the contract language in Broadview was different does not negate
the utility of Broadview as a

tool for analyzing the existence

of a significant relationship.

Indeed,

the Broadview approach or

test even takes the breadth of the arbitration clause's language
into account.

Broadview Networks,

19 F.C.C.

Red.

at 22221

("the

New York Order's conclusion that the Interconnection Agreement's
mandatory

arbitration

reasonable,
language,
resolving

in

and

light

(ii)

any

provision
of

(i)

encompasses

the

breadth

of

this

dispute

the

is

provision's

the federal policies favoring arbitration and

doubt

in

favor

of

arbitrability.")

(emphasis

added) . The factual differences between Broadview and this case
do not make Broadview inapplicable here,

especially because the

FCC's Broadview inquiry already takes into account the scope of
the arbitration clause language.

(c)

Integrating J.J. Ryan and Broadview

J.J.

Ryan

and

Broadview

must

be

its
given

progeny

are

deference.

binding

on

Fortunately,

J.J. Ryan test is not incompatible with Broadview.

15

this
the

Court;
two-part

S. New England Tel.
2075
to

(JCH},

2006 WL 1169805

integrate

Broadview

a

test

approach.

the

mandatory

Global NAPS,

(D.

similar
The

those in this case:
on

Co. v.

Conn. Apr.

to

facts

of

that

Inc., No.
28,

in

2006}

J.J.

Global

NAPS

shows how

Ryan
are

3:04-CV-

with

the

similar

to

defendant moved to compel arbitration based
arbitration

provision

of

the

parties'

ICA;

plaintiff argued that defendant ordered circuits pursuant to the
tariff and independently of the parties'
!CA,

such

that

the

dispute

arbitration provision.

Id.

was

not

obligations under the

within

the

scope

of

the

at *1-2. To resolve the dispute,

the

court applied the Second Circuit's equivalent of the J. J.
test.

Id.

at

*4. 5

arbitration clause
the

court

found

First,

the court examined the scope of the

(finding that it was not broad}.
that

the

defendant's tariff purchases}

5

Ryan

plaintiff's

Id.

claims

Second,

(based

on

were not "on their face" disputes

The Second Circuit test requires a court to:
[f] irst ... classify the particular clause as
either broad or narrow. Next, if reviewing a
narrow clause,
the court must determine
whether the dispute is over an issue that
"is on its face within the purview of the
clause," or over a collateral issue that is
somehow connected to the main agreement that
contains the arbitration clause
Where
the arbitration clause is broad,
"there
arises a presumption of arbitrability."

Id. at *4 (quoting Louis Dreyfus Negoce S.A. v. Blystad Shipping
& Trading, Inc., 252 F.3d 218, 225 (2d Cir. 2001}.
16

"arising out
Global

of

NAPS's

agreements

related to

version

that

arbitration

or

[were]

clause."

distinguished

of

the

the

Broadview,

at

but,

the

*8.

saying

purview

In
that

rather,

so

even

on

collateral

involve[d]

facts,

outside

Id.

ICA,

of

the

narrow

the

doing,

court

[Broadview],

"[u]nlike

Global NAPS has not demonstrated that the ICA here contains a
provision

that

references

SNET' s

federal

tariffs

and provides

that Global NAPS will purchase services at the rates established
in the tariff

The federal

tariff is not incorporated into

the ICA as it is in [Broadview]." Id. at *8 n.3.
The

best

reading

of

Broadview,

then,

is

that

tariff

"incorporation" is a relevant factor in determining, as required
by

the

second

part

of

_J_._J_.__Ry_a_n,
__

whether

"the

factual

allegations underlying the particular claim" have a "significant
relationship" to the contract containing the arbitration clause.
Great

Am.

Ins.

Co.,

497

F.

App'x

at

354.

Global

NAPS

sensible approach that can be employed in applying the
Circuit's

J.J.

Ryan,

and

the

Court

adopts

its

is

a

Fourth

procedural

framework to best give effect to both J.J. Ryan and Broadview. 6

6

XO claims that Global NAPS is "not even relevant to" this case
because the arbitration language was narrow and because it was
governed by Second Circuit, not Fourth Circuit,
standards.
(Def.' s 2d Arbitration Reply 12). However, as with Broadview,
the factual differences between Global NAPS and this case do not
foreclose the use of Global NAPS as a persuasive guide about how
17

(d)

Dispositive Inquiry

The legal standards for arbitrability are somewhat akin to
Russian matryoshka dolls, with every test revealing another subtest.

The

first

doll,

or the threshold inquiry,

requires that

courts determine whether a valid agreement to arbitrate exists.
Chorley Enters.,
agreement

to

-- F.3d --, 2015 WL 4537969, at *6. If a valid

arbitrate

exists,

then

the

second

inquiry

asks

whether the dispute falls within the scope of the agreement to
arbitrate.
from

the

Id.

If

the

agreement

claims

containing

at

issue did not

the

arbitration

arise

directly

clauses

(e.g.,

where the claims arise from a tariff rather than an !CA with an
arbitration

clause) ,

then

the

third

inquiry

as ks

whether

the

arbitration provision is broad or narrow. J.J. Ryan, 863 F.2d at

to approach the problem of tariff-based claims in a relationship
where the parties have an ICA which contains an arbitration
clause.
XO also implies that, even if Global NAPS is well-reasoned
under Second Circuit precedent, it is not persuasive because it
is not an application of Fourth Circuit precedent. (Def.' s 2d
Arbitration Reply 12) . This ignores that Global NAPS was
applying a Second Circuit test that is analytically similar to
J.J. Ryan (a two-step "broad or narrow? Collateral or related?"
inquiry), such that Global NAPS sets a persuasive example of how
to procedurally integrate Broadview into any two-step "broad or
narrow? Collateral or related?" inquiry.
XO's implication also ignores the Fourth Circuit's deep
appreciation for the Second Circuit's arbitration jurisprudence.
Indeed,
the
Fourth
Circuit
recently
reiterated
that
it
recognizes "that the Second Circuit's decisions are 'preeminent
in arbitration law.'"~, Chorley Enters., -- F.3d --, 2015 WL
4537969, at *6 n.12
(internal citations omitted).
18

321; Wachovia Bank, Nat'l Ass'n, 445 F.3d at 769; see also Louis
Dreyfus

Negoce

1169805,

at

*8;

S.A.,

252

F.3d

Broadview

at

225;

Networks,

Global

Inc.,

19

NAPS,

2006

WL

F.C.C.

Red.

at

22221. 7
Finally,
must

review

if the arbitration clause is broad, then "a court
the

factual

allegations

underlying

the

particular

claim and evaluate the connection between those allegations and
the contract containing the arbitration clause" to see if there
is

a

"significant

relationship"

arbitration clause. Great Am.

between

Ins. Co.,

the

claim

and

the

497 F. App'x at 354. In

a case where an ICA contains an arbitration provision but the
plaintiff pleads claims arising out of tariffs,

one way to see

whether the dispute is "significantly related" is to see whether
the contract containing the arbitration clause incorporated the
tariff. Global NAPS,
5 Misc.

2006 WL 1169805, at *8; Verizon N.Y.

3d at 346; Broadview Networks,

7

Inc.,

19 F.C.C. Red. at 22221.

Although XO spends a fair amount of its Reply pointing out that
Verizon has not contested the applicability of any of these
preliminary three points of law (Def.'s 2d Arbitration Mem. 1-4,
7-8), there is no reason for Verizon to contest the existence or
applicability of these first three tests when Verizon is only
disputing the final matryoshka: how to calculate "significantly
related." XO states that failure to address points of law and
fact mean Verizon has failed to provide meaningful opposition to
XO's motion (Def.'s 2d Arbitration Mem. 3), but Verizon's
argument can better be characterized as strategic use of its
page space to focus on the issue that actually is in dispute.
19

Other
the

factors

relevant

relationship

to

that

the

connection include:

gave

rise

to

the

( 1)

claim

whether
and

the

relationship created by the contract with the arbitration clause
were distinct;

(2) whether resolution of the claims requires any

factual

inquiry

into

the

contract

containing

clause;

(3) whether the claims could have arisen if the contract

with the arbitration clause never existed;

the

and

(4)

arbitration

whether the

contract with the arbitration clause "created" the relationship
which gave rise to the claim.
F.3d

at

768-69.

Broadview is

to

The
treat

best

Wachovia Bank,

way

to

Nat' 1 Ass' n,

J.J.

reconcile

incorporation of a

tariff as

Ryan
a

445
and

tool

to

evaluate the existence of a "significant relationship."
Lining up all the relevant tests in narrowing order shows
that

only

the

final

issue

actually in dispute here.

of

a

''significant

relationship"

is

The ICA contains a valid arbitration

clause; the dispute does not on its face arise from the ICA; the
ICA arbitration clause is broad.
whether

the

demonstrate a

factual

Thus,

allegations

of

the dispositive issue is
Verizon's

"significant relationship"

to the

tariff

claim

ICA containing

the arbitration clause. Great Am. Ins. Co., 497 F. App'x at 354.
·Incorporation of a tariff into the ICA is one significant tool
for evaluating the "significant relationship." See, e.g., Global
NAPS,

2006 WL 1169805, at *8; Broadview Networks,
20

19 F.C.C. Red.

at 22221. The other factors will also inform resolution of that
issue.

2.

In

Parties' Other Propositions of Law

addition

arbitrability,

to

disputing

the

propositions.

XO

framework

for

evaluating
narrower

also

dispute

three

correctly,

that

ambiguities

parties

proposes,

the

in

an

arbitration clause must be resolved in favor of arbitration. XO
proposes,

incorrectly,

relationships

between

incorrectly,

that

enforcement

of

the

that
CLECs

and

filed

arbitration

govern

necessarily

ICAs

ILECs.

rate

clauses

Verizon

doctrine
in

proposes,

prohibits

ICAs.

Each

all

will

the
be

assessed in turn.
(a)

XO

XO's Undisputed Propositions on Resolving
Ambiguity

makes

essentially,

note

of

doctrines

several

for,

calling

tipping the scale in favor of arbitration when the

language in an arbitration clause is unclear.
dispute these doctrines,

Verizon does not

and they are black letter law,

so the

Court recites them only briefly.
There
(Def.'s

2d

Corp.-Ala.

is

a

strong

Arbitration
v.

Randolph,

"ambiguities as to the

federal
Mero.

4)

531

U.S.

policy

favoring

(relying
79,

on

91-92

arbitration.

Green-Tree
(2000)),

so

Fin.
that

scope of the arbitration clause itself
21

[must

be]

resolved

Arbitration Mem. 4)
Trustees

of

(1989)).

The

in

favor

of

arbitration."

(Def.' s

2d

(relying on Volt Info. Scis., Inc. v. Bd. of

Leland Stanford Junior Univ. ,
party

resisting

arbitration

4 8 9 U.S.
bears

4 68,

the

4 7 6,

burden

of

showing that the dispute does not fall within the scope of the
arbi tr a ti on agreement.

(Def.' s

2d Arbitration Mem.

4)

(relying

on Green-Tree, 531 U.S. at 91-92). Arbitration must be compelled
"unless

it

may

be

said

with

positive

assurance

that

the

arbitration clause is not susceptible of an interpretation that
covers the asserted dispute."
(relying

on

United

(Def.' s

Steelworkers

2d Arbitration Mem.

of America

v.

Warrior

&

4-5)
Gulf

Navigation Co., 363 U.S. 574, 582-83 (1960)).
(b)

Do ICAs Govern All Interaction between a CLEC and
ILEC?

As part of its effort to show that tariff orders "relate"
to the ICAs,

XO argues that the Telecommunications Act intended

that ICAs serve as the tool for CLECs to compete with ILECs, and
that,

therefore,

"necessary

for

interconnect.

XO

the

scope

of

an

ICA

to

compete

in

local

(Def.' s 2d Arbitration Mero.

purchases are made to interconnect and
reference

to possibly fulfilling

the contract rate,

XO

includes

everything

telephone markets"
9-10).

and

Because tariff

because the ICAs make

ICA obligations by buying at

concludes that "it does

not matter that

the ICAs do not formally and explicitly state that Verizon's ...
22

tariffs are

'incorporated by reference'

into the ICAs" because

the contract language says "related to," and tariffed purchases
are

purchased

in

furtherance

of

the

ICAs

such

that

they

are

therefore "related to" the ICAs such that they are subject to
arbitration.
XO' s
that

(Def.'s 2d Arbitration Mem. 11-13).

argument misses

the

standard

"related."

the

is

Second,

mark.

First,

"significantly

it

again

related,

not

merely

11

Telecommunications

the

ignores

Act

creates

alternatives: CLECs may either order from a tariff or through an
!CA,

and

the

act

does

not

another. U.S. W. Commc'ns,
and Qwest agree that,

express

Inc.,

a

preference

275 F.3d at 1250

under Colorado law,

for
("MCI,

one

or

Sprint

a CLEC has the right

to purchase services from an ILEC pursuant to the ILEC's tariffs
without

negotiating

an

interconnection

agreement.");

In

the

Matter of Implementation of the Local Competition Provisions in
the Telecomms. Act of 1996,
(stating

that

CLECs

that

11 F.C.C.

"have

the

Red.
choice

15499,
of

15805

(1996)

negotiating

an

interconnection agreement pursuant to sections 251 and 252 or of
taking tariffed interstate

service.") . 8 The purchase orders

8

in

Nor does the plain text of the Telecommunications Act support
XO's contention. 47 U.S.C. § 25l(b)-(c) impose several duties on
ILECs, including requirements that they: (1) negotiate in good
faith with CLECs about the resale of telecommunications services
and about reciprocal compensation for transport and termination
of telecommunications; (2) provide interconnection, transmission
23

dispute might still significantly relate to the
if they do,

ICAs;

however,

it is not because the Telecommunications Act makes

ICAs the be-all and end-all of a CLEC-ILEC relationship,

as XO

contends.
(c)

Verizon

Enforcement of the Filed Rate Doctrine does not
Prohibit Arbitration Provisions in ICAs

argues

that

the

"filed

tariff

doctrine"

prevents

enforcement of any agreement which has the effect of altering a
tariff,

including

carrier's

promise

unenforceable."
offers

agreements
to

depart

to
from

the

(Pl.'s 2d Arbitration Mem.

no decisions

because

arbitrate,

"any

terms

[is]

tariff

in Opp'n 9). Verizon

directly resolving whether

the

filed

rate

doctrine prohibits arbitration of claims arising out of tariffs
that would otherwise be subject to the arbitration clauses in an
!CA under the J.J. Ryan line of decisions.

and routing at reasonable rates; and (3) offer services at
wholesale rates to CLECs. Section 252 lays out three ways in
which
an
ILEC may
fulfill
its
§
251
duties:
voluntary
negotiation,
compulsory arbitration,
and filing
a
tariff.
However, filing a § 252(f) tariff does not affect the "duty to
negotiate": "[t] he submission or approval of a statement under
this subsection shall not relieve a Bell operating company of
its duty to negotiate the terms and conditions of an agreement
under section 251 of this title." § 252 (f) (5). By its text,
then, the Telecommunications Act characterizes tariffs and ICAs
as alternatives, rather than establishing a hierarchy between
them. The Act does not establish that, once parties enter a
§ 252 (a)/§ 252 (b) ICA, the parties' dealings always relate to
the ICA.
24

"The
carrier

filed-rate
duly

BellSouth

filed

Commc'ns,

(quoting AT&T

v.

doctrine
is

the

Inc.,

Cent.

mandates
only

377

Office

that

lawful

F.3d

424,

Tel.,

'the

rate

charge.'"
429

Inc.,

(4th

524

of

Bryan
Cir.

U.S.

the
v.

2004)

214,

222

"is

not

(1998)).
The
doctrine's
purpose
is
twofold:
to
prevent discrimination among consumers and
to preserve the rate-making authority of
federal agencies
[A] regulated carrier
must charge the tariff rate established with
the appropriate regulatory agency. . . . To do
otherwise would be giving a preference to
and discriminating in favor of the customer
in question.
Id.

Verizon

argues

that

the

filed

tariff

doctrine

limited to the rates in the tariff, but encompasses all of the
associated terms and conditions."
Opp' n

9)

(relying

on

AT&T,

(Pl.'s 2d Arbitration Mem.

524

U.S.

at

223-24).

in

Verizon

accordingly argues that dispute resolution is a tariff term that
must

be

could

applied

not

have

uniformly

to

enf orceably

all

customers,

agreed

to

so

change

resolution provisions of the tariff for XO,

that

Verizon

the

dispute

a single customer,

any more than it could have enforceably agreed to change prices
for XO.

(Pl.' s

2d Arbitration Mem.

2015 Hr' g 28: 19-23).

in Opp' n

9;

The Court identifies five

to reject Verizon's conclusion.

25

Tr.

Sept.

2 9,

related reasons

Broadview

First,
Verizon's

represents

If

argument.

ICAs

could

hurdle

significant

a

not

contain

to

enforceable

arbitration provisions,

then the FCC could not have blessed the

trial

to

court's

decision

send the

dispute

to

arbitration

in

Broadview. Verizon attempts to distinguish Broadview by arguing
that,

because

sending the

ICA

parties

rate doctrine:
through the

the

to

incorporated

the

tariff

arbitration did not

by

reference,

violate

the

filed

because Broadview could only ever order services

ICA rather than the tariff,

contract claims to arbitration,

the court was

not tariff matters.

sending

(Tr.

Sept.

29 2015 Hr'g 26:11-16, 28:19-24, 29:21-30:1). In Verizon's view,
referring to mandatory arbitration unincorporated tariff claims
that are merely "significantly relatedn to a contract alters the
rates set in the tariff, because such unincorporated claims are
still

purely

contract

tariff

cannot

claims

enforceably

contrary to Verizon' s

under
alter

Broadview
tariff

characterization,

and

an

terms.

external
However,

the New York court

in

Broadview sensibly dismissed the exact argument that Verizon is
making here.
Broadview contends that the reference to the
"filed tariff doctrinen dictates that the
parties' dispute arose out of the filed
tariff (s) and not out of the Interconnection
Agreement. Under the filed tariff doctrine,
Broadview argues,
the terms of a filed
tariff exclusively define the relationship
Broadview asserts that, by deeming the
26

parties' dispute to be within the scope of
the arbitration provision, the court would
be
impermissibly
interjecting
the
arbitration provision into the tariff(s) ....
The
applicability
of
the
arbitration
provision to the ... dispute does not depend
upon
the
addition
of
an
arbitration
provision to, or the interjection of the
provision into, the applicable tariff (s).
Rather,
effect
must
be
given
to
the
arbitration provision because it is included
in
the
Interconnection
Agreement,
an
agreement separate and distinct from the
tariff (s).
Nor has Broadview articulated any basis for
a conclusion that the application of the
arbitration provision to the dispute would
constitute
an
improper
alteration
or
amendment of the tariff ( s) . Broadview does
not
allege
that
dispute
resolution
is
specifically addressed by the tariffs(s)
(cf. [AT & T, 524 U.S. at 225]}, or that the
arbitration
provision
conflicts
with
or
challenges any of the terms or conditions
which are specifically set forth in the
tariff. Rather, the terms and conditions set
forth in the tariff ( s) remain precisely as
they
are,
and,
insofar
as
they
are
applicable,
will
conclusively
and
exclusively govern the parties' dispute.
Verizon N.Y.
the

Inc.,

Broadview

5 Misc.

court

3d at *4-6

makes

the

(emphasis added).

compelling

arbitration clause in an ICA modifies the ICA,

point

In sum,
that

an

not the tariff,

and the court makes this point without indicating that it would
reach

any different

conclusion

if

it

had not

already decided

that the ICA incorporated the tariff by reference. The Broadview
court considered the same argument that Verizon is making here,
27

and nevertheless packed the parties off to arbitration.
noted

the

New

York

without additional
F.C.C.

Red.

court's

of

comment or analysis.

at 22220

Broadview's

rejection

Broadview' s

that

argument

Broadview Networks,

(stating simply that

contention

The FCC

"the Court

enforcement

of

the

19

rejected

arbitration

provision would violate the filed tariff doctrine").
Second,

the

FCC

takes

the

view,

as

a

general

that arbitration clauses in ICAs should be enforced.
Networks, 19 F.C.C. Red. at 22223

principle,
Broadview

("the Commission has expressed

a strong interest in encouraging compliance with interconnection
agreements,

including

provisions
certainly

contained
tells

that

deference
in

to

valid

interconnection

the

FCC

believes

forum-selection

agreements.").
such

provisions

That
are

enforceable. 9
Third, it is also a misreading of AT&T for Verizon to state
that the filed tariff doctrine "is not limited to the rates in
the

tariff,

conditions."

but

encompasses

(Pl.'s

all

of

the

2d Arbitration Mem.

associated
in Opp'n

9).

terms

and

In AT&T,

company literature and an AT&T corporate representative promised

9

The filed rate doctrine is a "century-old," but was included in
the Telecommunications Act at 47 U.S.C. § 203(a}. AT&T at 222.
The FCC is tasked with administering the Telecommunications Act,
and this Court gives Chevron deference to its interpretations of
the Act.
28

Central Office certain "additional services and guarantees" not
included

in

the

tariff,

faster

"viz. ,

the

provisioning,

allocation of charges through multilocation billing, and various
matters

relating

support." AT&T,

to
524

deposits,
U.S.

at

calling

224-25.

Central

breach of those non-tariff promises.
Ninth

Circuit

"thought

the

filed

and

cards,

Id.

at

Office

service

sued over

Although the

doctrine

rate

220.

inapplicable

'[b]ecause this case does not involve rates or ratesetting, but
rather involves the provisioning of services and billing,'" the
Supreme Court instead held that "non-price features" are covered
by

the

Circuit

filed

rate

omitted).

"discriminatory

doctrine.
In

so

Id.

doing,

'privileges'

at

the

come

223

{citation

Supreme
in

many

Court

to

Ninth

noted

guises

that
[A]

preference or rebate is the necessary result of every violation
where the carrier renders or pays for a service not covered
by

the

omitted).

prescribed
To

tariffs."

support

its

Id.

at

reasoning,

224
the

{internal
Court

citations

cited

to

two

earlier railroad cases in which a customer had contracted for an
especially fast train not specified in the tariffs or contracted
for use of train cars on a particular day not specified in the
tariff.

Id.

(noting

Davis

v.

Cornwell,

264

U.S.

Kansas City S. R. Co. v. Carl, 227 U.S. 639 (1913)).

29

560

(1924);

Verizon

quotes

AT&T

for

the

proposition

that

"the

filed

tariff doctrine is not limited to the rates in the tariff,
encompasses all of the associated terms and conditions."
2d Arbitration

Mem.

in

Opp'n

9).

However,

AT&T

but

(Pl.' s

clearly

only

contemplates privileges that alter the tariffed service - when,
where,

and

condition.

what

is

provided

In other words,

not

associated with

and

conditions

and

Although

the

provide

non-tariffed

contracting
rate,

filed

to

dispute

rate

a

resolution

discriminatory

"privileges

providing the

associated

with

doctrine

rates

provide

associated

term

or

there is a distinction between terms

and conditions
terms

every

or

service

not

equate

facilities"

service

resolution.

contracting

to

service,

tariffed

a

non-tariffed
do

dispute

prohibits

for

terms

tariffed

for
to

a

or

tariffed

the

type

contemplated

of

by

the

will

not

filed rate doctrine.
Fourth,

sending

this

dispute

to

an

arbitrator

impermissibly alter the tariffed rate. Rather, it merely results
in

an

been

arbitrator
applying

telling

rates

WorldNet Telecomm.,
("This

'validity'
tariff

insofar

as

See

had

whether
P.R.

52 F. Supp.

ruling

of any tariff,

only

carrier

correctly.

Inc.,

[arbitration]

the

the

Tel.

3d 370,

nothing

Co.,

383
to

carrier
Inc.

(D.P.R.
do

with

has
v.

2014)
the

and it invalidated charges under the
it

held
30

that

PRTC

had

long

been

overcharging").
under a

An

tariff.

arbitration

clause

does

not

alter

orders

It merely changes where the parties go when

they require interpretation of the tariff.
Fifth and finally,
in

other

tariffed

F.E.R.C.,

864

industries.

F.2d

823,

included

companies

an

interconnection
complaint

against

other

than

interconnection
Power

had

Duke

example,

(D.C.

One

of

Power

the

before

in

Duke

1989),

Cir.

arbitration

clause

Power
two

their

brought

Federal

the

power

in

companies

v.

a

Energy

alleging that Duke Power was charging an

the

filed

agreement.

indeed

For

825

agreement.

Regulatory Commission,
amount

courts have enforced arbitration clauses

rate

Id.

violated

The

the

in

contravention

Commission
filed

found

tariff

of

the

that

Duke

doctrine,

and

retained jurisdiction over the dispute rather than sending it to
arbitration, because the Commission believed that submitting the
dispute to arbitration would be a waste of time and resources.
Id.

at

825-26.

The

United

States

Court

of

Appeals

for

the

District of Columbia Circuit held that the Commission was not
required

to

assistance

submit
of

an

the

dispute

arbitrator

to
was

arbitration
neither

because

"[t] he

required

necessary to interpret the rate schedules." However,

nor

the court

noted that the Commission might enforce the arbitration clauses
in its discretion. Id. at 831. The court also stated that
31

[ i] n
so
holding,
we
do
not
give
the
Commission
a
license
to
disregard
the
mandatory arbitration clauses in routine
contract disputes ... The facts of this case
constitute an exception ... because although
"the Natural Gas Act permits the relations
between
the
parties
to
be
established
initially by contract, the protection of the
public interest [is] afforded by supervision
of the individual contracts, which to that
end must be filed with the Commission and
made public [.]"
In short, because the
Commission has an independent interest as a
regulatory body in prohibiting utilities
from charging other than their filed rates,
Duke's
violation
of
the
interconnection
agreements effectively converted the
dispute
from
one
between
Duke
and
complainants to one between Duke and the
Commission. Our decision today
not to
order arbitration therefore derives entirely
from the Commission's duty to enforce filed
rate schedules.
Id.

(emphasis

added) .

interconnection

sum:

In

agreements

are

arbitration

enforceable,

clauses

although

when

in
the

underlying dispute alleges violations of a filed tariff in front
of an agency,
agency

to

the unique interests of the agency may allow the

retain

jurisdiction

over

a

dispute

arises from a mandatory arbitration clause.

which

otherwise

In this case, there

are no allegations that XO has violated the filed rate doctrine.
Additionally,

the

Court

does

interests

as

an

agency,

retaining

jurisdiction

not

and

over

have

lacks

an

32

an

otherwise

the

same

duties

and

agency's

basis

for

arbitrable

dispute.

Instead,

this

case

is

one

of

the

"routine

contract

disputes"

that cannot escape an ICA's arbitration clause.
For the foregoing reasons,
the

filed

rate

doctrine

the Court declines to find that

precludes

from

parties

placing

enforceable arbitration provisions in ICAs.
B.

Application of Governing Law

The

Court

Broadview

applies

to

Verizon's

"review

claims

allegations

and

the

and
the"

Am.

Great

factual

"evaluate
ICAs

Ins.

the

Co.,

Wachovia,

allegations
connection

containing

the

and

underlying"

between

arbitration

those

clause.

Great Am. Ins. Co., 497 F. App'x at 354.
1.

Wachovia Points of Interest

Wachovia

did

not

create

evaluating

"significantly

helpful

look

to

important

in

at

the

set

related,"
facts

evaluating

a

the

that

list

but
the

it

of
is

Wachovia

relationship

factors

for

nonetheless
court

between

the

found
claims

asserted in the complaint and the contract with an arbitration
clause.
First, Wachovia examined whether the relationship that gave
rise

to

the

arbitration
the

claim

clause

relationship

and

were
that

the

relationship

"separate." Here,
gave

rise

to

governed

unlike
the

the

in Wachovia,

claim

relationship created by the !CA is one and the same:
33

by

and

the

the CLEC-

ILEC

relationship.

This

factor

very

strongly

points

to

a

significant relationship.
Second,

Wachovia examined whether resolution of the claims

would require reference to the contract or relationship governed
by the arbitration clause.

In this case,

that factor depends on
~~

the claim. XO has identified Verizon's claims at
102-104 as subject to arbitration.

96-98

and~~

(Def.' s 2d Arbitration Reply

19). According to the Complaint, Verizon's claims based on XO's
failure to pay transportation costs arise out of the California
ICA (Compl.
would

~

102-104), so that resolving the California dispute

require

reliance

on

the

ICA.

claims under the state tariffs

However,
~~

(Compl.

~~

96-98)

96-98

states

and should not

require reference to the ICAs.
Wachovia also inquired whether the claims would have arisen
if

the

contract

including

the

arbitration

existed. As to the transport claims at
were

created by the

arbitration.
Agreement,

ICA,

then this

~~

clause

had

never

102-104, if the claims

factor weighs

in favor of

If the claims were created by the 2007 Settlement
then

this

factor

weighs

against

arbitration.

Examining the 2007 Settlement Agreement,

the effect of which is

discussed more

section,

obligations

fully

in

the

following

clearly pre-date the 2007

originate in the California ICA.
34

the

transport

Settlement Agreement and

(2007 Settlement Agreement 4)

("the Effective !CA in the state of California ... provides that
each

Party,

at

facilities

its

to

own

the

shall

expense,

technically

of

102-104 would not

That weighs in favor of

have arisen if the !CA did not exist.
arbitration for these transport claims.
~~

~~

transport

Point(s)

feasible

Interconnection"). The transport claims in

claims in

provide

As to the state tariff

XO stated in oral argument that the "only

96-98,

reason" it purchases anything from Verizon is to effectuate the
purposes of the ICA,

and that there was "no possible way" that

XO would have purchased the services at issue if the ICA never
existed.
Docket

(Tr.
No.

Sept. 29,

73,

Ex.

2,

2015 Hr'g 10:1-4, 20:11-20)

(relying on

Deel.

The

of

Richard

Jackson).

would not have arisen if the ICA did not exist.

That weighs in
~~

favor of arbitration for the state tariff claims in
Finally,
"created"

Wachovia

the

asked

relationship

whether

that

gave

the

96-98.

arbitration

rise

to

claims

the

clause

claim.

As

discussed previously, the Court rejects XO's contention that the
Telecommunications
transactions
the

Act

"significantly relate"

breadth

of

Telecommunications

an
Act

significant relation.
importance

necessarily

in

the

ILEC-CLEC
was

not

However,
CLEC-ILEC

to

all

an

and finds

that

under

the

ICA,

relationship

dispositive

to

the

the breadth of the
relationship
35

ILEC-CLEC

makes

is

issue

of

ICA and its
still

highly

relevant to finding a
2015 10: 1-4,

significant relationship.

20: 11-20)

(relying on Docket No.

(Tr.

73,

Sept.

Ex.

2,

29,

Deel.

of Richard Jackson) .
In

sum,

the

Wachovia

factors

clearly

disputes asserted in the Complaint that
(~,

<Jrn 102-104)

Compl.

should

be

indicate

that

arise out of the

arbitrated.

The

the
ICAs

Wachovia

factors are less clear on the claims arising out of intrastate
tariffs

(Compl.

96-98) .

<JI<JI

relationship

as

the

relationship

that

ICA

These claims arise out of the

and

led to

the

the

ICA

claims,

is

a

but

cornerstone
the

claims

same

of

the

could be

resolved without reference to the ICA and XO could feasibly have
placed orders under the intrastate tariffs even if the ICA had
never existed. As a practical matter, however, the Court accepts
the

uncontested

Jackson

that,

representations

but

for

the

placed the current orders.
Court

finds

that

the

in

ICAs,

the
XO

Declaration

would

not

of

Richard

actually

have

Given this but-for relationship,

Wachovia

referring the California, Texas,

factors

point

in

favor

the
of

and Florida claims to mandatory

binding arbitration.
2.Broadview

XO

argued

that

round of briefing.
current round,

ICAs
However,

"incorporate"
it

tariffs

abandoned that

in

its

argument

first
in the

instead taking the tack that "[i]ncorporation of
36

tariffs

by

reference

is

irrelevant

to

XO's

Renewed

Motion."

(Def.'s 2d Arbitration Mem.; Def.'s 2d Arbitration Reply 3). The
Court,

then,

accepts Verizon's contention that the ICAs do not

incorporate the tariffs by reference
in Opp' n 8),

(Pl.'s 2d Arbitration Mem.

a view that is adequately supported by Verizon' s

exhibits.

(Pl.'s 2d Arbitration Mem.

Broadview

by

indicating

way

of

that

J.J.

the

Ryan,

tariff

in Opp'n,

Ex.

non-integration

claims

are

not

1-8). Under
is

a

factor

"significantly

related" to the !CA.
C.

Conclusion

Unfortunately,
pointing
While

in

the

one

this

direction

Court

should

leaves
and

the

Court

Wachovia

resolve

with

pointing

all

Broadview

in

ambiguities

another.
in

arbitration clause language itself in favor of arbitration,

the
the

Court is already reading the !CA arbitration language broadly.
The remaining ambiguity is a question of applicable law, not of
arbitration clause interpretation: which facts carry more weight
for determining "significant relat[ion]" - the facts the Fourth
Circuit

held

relationships

important

for

in Wachovia,

arbitration
or the

fact

of
the

typical

commercial

FCC held important

for arbitration of tariff disputes in Broadview?
Specific

terms

prevail

over

interpretation and in contracts,
37

broad

~,

terms

in

statutory

Radzanower v. Touche Ross

Co.,

&

426

U.S.

interpretation);
Inflight,

Lufthansa

Inc.,

Sys.

GmbH

Infratec

894 F. Supp. 2d 677

statutory

(discussing

(1976)

148

(E.D. Va.

v.

Wi-Sky

2012)

(discussing

contract interpretation), but this jurisprudential rule does not
necessarily extend to the proposition that "rules for specific
and technical areas of law prevail over rules for broad areas of
law"

such

that

Broadview

Additionally,

the

"all

language

be

resolved

Warrior

must
&

in

ambiguities
in

favor

Gulf Navigation Co.,

of

363 U.S.

resolving ambiguities in a contract,

Wachovia.

trumps

necessarily

arbitration
arbitration"

at 582-83,

clause
rule

of

applies to

not to ambiguities between

which law should prevail.
However,

the

strong

federal

policy

favoring

arbitration

over court litigation, CompuCredit Corp. v. Greenwood, -- U.S. 132 S. Ct. 665, 669 (2012), suggests that ambiguous questions
of

law

should

also

be

resolved

in

favor

of

arbitration.

The

strong federal policy favoring arbitration allows XO to prevail
on its motion to compel arbitration,

subject to the legal force

of the 2007 Settlement Agreement.

EFFECT OF THE 2007 SETTLEMENT AGREEMENT

The 2007 Settlement Agreement settled a variety of disputes
between

Verizon

and

XO,

including
38

disputes

over

certain

enumerated California services.
The

2007

Settlement

(2007 Settlement Agreement 1-2}.

Agreement's

dispute

resolution

clause

explicitly allows the parties to "pursue any remedies available
at law,
to,

in equity,

or otherwise,

including, but not limited

instituting an appropriate proceeding before ... a court of

competent
parties

jurisdiction"
regarding

the

to

resolve

interpretation

"any
or

dispute

between

enforcement

of

the
this

Agreement or any of its terms." (2007 Settlement Agreement 9} . 10
XO makes two arguments: that the 2007 Settlement Agreement
does not displace the !CA and the !CA' s arbitration agreement,
and that the 2007 Settlement Agreement does not cover the claims
XO wants to send to arbitration. Neither is correct.

10

The contract is governed by Virginia law to the extent that
Virginia law is not preempted by federal law. (2007 Settlement
Agreement 10} . The Settlement Agreement actually requires that
any dispute governed by the 2007 Settlement Agreement be brought
in the "federal or state court of competent jurisdiction in or
nearest to Fairfax County," (2007 Settlement Agreement 10),
which is the Alexandria Division of the Eastern District of
Virginia rather than the Richmond Division. If the claims at ~~
102-104 arose out of the 2007 Settlement Agreement, as Verizon
claims, then XO might have challenged venue in its original
round of pleadings. However, a party must make all its Rule 12
motions at once. Fed. R. Civ. P. 12 (g) ("a party that makes a
motion under this rule must not make another motion under this
rule raising a defense or objection that was available to the
party but omitted from its earlier motion."). Having presented a
motion under Fed. R. Civ. P. 12(b) (6), XO has waived its ability
to make a motion under Fed. R. Civ. P. 12(b) (3) at this stage in
the proceedings.
39

First, XO argues that the 2007 Settlement Agreement permits
the

parties

to

go

to

court

rather

than affirmatively denying

them the ability to go to arbitration, such that the arbitration
requirement

in

the
16)

Arbitration Mem.

U.S.

363

at

earlier

(relying on Warrior

582-83

grievance

should

positive

("An

assurance

susceptible

of

not

an

!CA

still

order

be

denied

that

the

to

governs.
&

it

that

the

may

particular

be

said

with

is

not

clause

arbitration

interpretation

2d

Gulf Navigation Co.,

arbitrate

unless

(Def.' s

covers

the

asserted

dispute.")). Warrior & Gulf is not actually on point.

Instead,

that case dealt with interpreting ambiguities in the scope of an
arbitration
whether

clause

in a

expressly

single

permitting

contract,
resort

not

to

the

the

question

courts

in

of
a

subsequent contract trumps an arbitration clause in an earlier
contract.
recently

Id.

In

a

rejected

presents.

The

expressly

reserves

more
an

Fourth

group of claims,

the

applicable

argument

similar

Circuit

found

right

the

to the courts open prevails.
4637967,

that

the

at

2007

to

go

the

to

the

that,
to

Fourth

court

one

when
over

one
a

Circuit
that

XO

clause
specific

but a different and more general clause makes

arbitration mandatory,

WL

case,

*9-11.

This

specific provision

leaving

recourse

Chorley Enters., -- F.3d --,
case

is

Settlement Agreement's
40

different

2015

than Chorley in

dispute provision is

not

necessarily more specific than the general arbitration clause in
the

ICA.

However,

of Warrior

&

defeated by a

Chorley still demonstrates that XO' s

Gulf

is

incorrect:

an

arbitration

clause permitting but

reading

clause may be

not mandating

recourse to

the courts in another clause.
In

deciding

Agreement

whether

controls,

the

Verizon

ICA

also

or

the

points

2007

out

agreement controls over an earlier agreement,

Settlement

that

a

later

particularly when

the later agreement explicitly states that it supersedes earlier
agreements.

(Pl.'s

National R.R.
523,

529-31

the

sublease

applying

Arbitration

Passenger Corp.

(D.C.

the

2d

Cir.

2003)

v.

Br.

(relying

12-13)

ExpressTrak,

L.L.C.,

on

330 F.3d

("Because the Sublease came later"

controlled,

and

the

arbitration

clause

"district
of

the

court

erred

[earlier]

by

Operating

Agreement, rather than the litigation clauses of the leases")).
The

2007

Settlement Agreement's

dispute

is last in time relative to the California
Settlement
Chorley

Agreement

and

contains

ExpressTrak,

an

the

resolution clause
ICA.

integration

2007

And,

the 2007

clause.

Settlement

Under

Agreement's

"supersedes" language accordingly is to be read to allow Verizon
to bring the California disputes to court, but only if Verizon's
claims actually arise from duties created in the 2007 Settlement
Agreement.
41

This

leads

to

XO's

second

contention:

that

the

2007

Settlement Agreement's dispute resolution language only applies
to

the

one-time

Settlement

payment

Agreement,

obligation

and

that

the

created

parties

by

put

the
the

2007

dispute

resolution language in the Settlement Agreement because it was
unclear whether the broad dispute resolution clauses in the ICAs
would

cover

the

Arbitration Mem.
the

Complaint

one-time
14-15) .

and

the

payment

obligation.

The Court must,
2007

Settlement

(Def.' s

accordingly,
Agreement

to

2d

examine
decide

whether any claims in the Complaint are also subject to the 2007
Settlement Agreement and that Agreement's litigation
XO alleges specifically that the claims in
Complaint

are

subject

to

the

· California

~~

claus~.

102-04 of the
ICA.

Consolidated Mem. 17). The Complaint states that
102. Under the California interconnection
agreement between Verizon and XO, XO is
responsible for the costs of the transport
facilities used to route traffic from its
facilities
to
its
chosen
point
of
interconnection on Verizon's network. See
California Agreement, § 4.2.
103.
In
the
2007
Settlement Agreement,
Verizon and XO clarified their understanding
of
XO's
responsibilities
under
the
California
Agreement.
2007
Agreement,
§
2 (d) (iv) ("The Parties acknowledge and agree
that the Effective ICA in the state of
California (as amended, including pursuant
to the settlement agreement between the
Parties as of October 21, 2004) provides
that each Party, at its own expense, shall
42

(Def. 's

provide
transport
facilities
to
technically
feasible
Point(s)
Interconnection. ") ....

the
of

104. XO owes Verizon for the proportion of
the facilities used to deliver traffic from
XO to Verizon's point of interconnection.
(Compl.

~~

102-04).

However,

as XO points out,

the heading for

this section in the Complaint is "XO's Repeated Breaches of the
Interconnection Agreements."

(Def.' s 2d Arbitration Reply 15) . 11

The 2007 Settlement Agreement states that
Whereas, the parties have (or may hereafter
have) disputes regarding the amounts that
are owed by Verizon to XO for the transport
and termination of Verizon-originated local
traffic
(including
non-optional
EAS
traffic),
reciprocal
compensation traffic
and intraLATA switched access traffic, in
California
from the beginning of
time through (and including) July 31 2007
(such dispute, the "Usage Dispute") ...
Whereas, the Parties have (or may hereafter
have) disputes regarding the amounts that
are
owed
by
Verizon
to
XO
for
local/intraLATA
interconnection
transport
facilities
in
California
from
the
beginning of time through (and including)
July 31, 2007 (such dispute, the "Facilities
Dispute") ...
Whereas the parties have (or may hereafter
have) disputes regarding the amounts that
are
owed
by
XO
to
Verizon
for
local/intraLATA
interconnection
transport

11

The Amended Complaint, just like the Complaint, states that
the claim is based in breach of the interconnection agreement,
and cites to the California Agreement. (Am. Compl., Docket No.
70, ~~ 102-04).
43

facilities
in
California
from
the
beginning of time through (and including)
July 31, 2007 (such dispute, the "California
Facilities Dispute").
Whereas, the Parties have (or may hereafter
have)
disputes
regarding
liability
for
certain taxes, surcharges, and late payment
charges arising out of amounts allegedly
owed in connection with the
California
Facilities Dispute
(such disputes, the
"Additional Charges Dispute") ...
Whereas, the Parties wish to resolve and
settle ... the Usage Dispute, the Facilities
Dispute
the
California
Facilities
Dispute and the Additional Charges Dispute

(2007

Settlement Agreement

then recites

1-2).

The

2007

several payments and credits between the parties,

and several agreements about the parties'
existing

Settlement Agreement

ICAs.

(2007

Settlement

responsibilities under
Agreement

2-5) .

"Acknowledgements and Reconciliations" section states that
(iv) The Parties acknowledge and agree that
the Effective ICA in the state of California
provides that each Party, at its own
expense, shall provide transport facilities
to the technically feasible
Point(s)
of
Interconnection.
(v) The Parties agree to continue in good
faith
the
process
of
reconciling
each
Party's
respective
records
of
XO
local/intraLATA
interconnection
trunk
facilities in order to determine and agree
upon the identity of the circuits that exist
and the
charges that should be billed.
Verizon acknowledges that certain of such
facilities
have
been
validated
and
reconciled, and that it is required to pay
44

The

such amounts as may be undisputed and due in
accordance with the terms of the applicable
Effective !CA.
(vi) The Parties agree to engage in good
faith
the
process
of
reconciling
XO' s
billings to Verizon for local and intraLATA
toll usage, in order to prevent, so far as
possible,
disputes similar to the Usage
Dispute from arising in the future.
(2007

Settlement

clearly

goes

Agreement

beyond merely

4).

The

requiring

2007
a

Settlement
one-time

Agreement

payment,

instead creates substantive legal rights and duties.

Thus,

and
XO's

second argument also fails.
The Court finds that all claims whose terms or payment were
subject to the 2007 Settlement Agreement are not subject to the
arbitration provision of the California ICA,

because they have

been removed from the scope of the California ICA's arbitration
clause by the specific and subsequent dispute resolution clause
of the 2007 Settlement Agreement, per Chorley and ExpressTrak.
In that regard,

the Court notes that Verizon's claim in

~~

102-104 of the Complaint, over money owed "for the proportion of
the

facilities

used

to

deliver

traffic

from

XO

to

Verizon's

point of interconnection," is quite clearly subject to paragraph
(iv)

of

the

2007

Reconciliations,
arbitration.

Settlement
and

Agreement's

accordingly

is

not

Acknowledgements
subject

to

and

binding

Claims stemming from "transport and termination of

Verizon-originated

local

traffic
45

(including

non-optional

EAS

traffic),

reciprocal

compensation

and

traffic,

intraLATA

switched access traffic," "local/intraLATA interconnection trunk
facilities,"
clearly

and

subject

"local
to

and

intraLATA
2007

the

toll

usage"

also

Agreement,

Settlement

are

and

accordingly are not subject to binding arbitration.
in

<JI<JI

The claims

96-98 of the Complaint also appear to be covered by the

2007 Settlement Agreement.

12

The Court recognizes that referring Texas

claims,

Florida

claims, and any identified California claims to arbitration will
result

in

an

awkward

di vision

of

claims.

The

FAA

both

acknowledges and accepts this inefficiency, and the Court is not
free

to

rewrite

the

parties'

litigation. Chorley Enters.,
at *8-9
26

(quoting KPMG LLP v.

(2011}

(per

curiam)

contracts

Inc.,

to

-- F.3d

Cecchi, -- U.S.

("[W]hen

arbitrable and nonarbitrable claims,

a

ensure

efficient

2 015 WL 4 6 3 7 9 6 7 ,

--,

complaint

132 S.Ct.
contains

23,
both

the Act requires courts to

compel arbitration of pendent arbitrable claims when one of the
parties files a motion to compel, even where the result would be

12

XO contends that the claims in <JI<JI 96-98 of the Complaint are
not covered by the 2007 Settlement Agreement. On this record,
that contention does not bear out. If, however, discovery should
disclose some basis for believing that a claim within <JI<JI 96-98
is
not
covered
by
the
2007
Settlement
Agreement,
the
arbitrability of that claim can be addressed later.
46

the possibly inefficient maintenance of separate proceedings in
different forums.") ) . 13
CONCLUSION

For

the

foregoing

reasons,

the

RENEWED

MOTION

TO

COMPEL

ARBITRATION (Docket No. 57) will be granted as it relates to the
Texas and Florida claims,

but will be denied as it relates to

any California claims which were also the subject matter of the
2007 Settlement Agreement.

It is so ORDERED.

Isl
Robert E. Payne
Senior United States District Judge
Richmond, Virginia
Date: November ~, 2015

13

Of course, the parties can eschew rights to arbitrate the
Florida and Texas claims and have them promptly settled in the
trial of this case.
47

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Richmond Division

VERIZON VIRGINIA, LLC,
et al.,
Plaintiffs,

v.

Civil Action No. 3:15-cv-171

XO COMMUNICATIONS, LLC
et al.,
Defendants.
ORDER

For

the

reasons

stated

in

the

accompanying

Memorandum

Opinion, it is hereby ORDERED that:
(1)
57)

The

RENEWED MOTION TO COMPEL ARBITRATION

is granted as

{Docket No.

it relates to the Texas and Florida claims;

and
(2)
57)

The RENEWED MOTION TO COMPEL ARBITRATION

(Docket No.

is denied as it relates to any California claims that were

also the subject matter of the 2007 Settlement Agreement.
It is so ORDERED.

Isl

f?,F.,,/

Robert E. Payne
Senior United States District Judge

Richmond, Virginia
Date: November ~, 2015