Worldcom, Inc. v. Graphnet, Inc.

• Decision Date: 12 September 2003
• Docket Number: No. 02-4256.,02-4256.
• Citation: 343 F.3d 651
• Parties: WORLDCOM, INC., Appellant v. GRAPHNET, INC.
• Court: U.S. Court of Appeals — Third Circuit

343 F.3d 651

WORLDCOM, INC., Appellant v. GRAPHNET, INC.

No. 02-4256.

United States Court of Appeals, Third Circuit.

Argued and Submitted June 16, 2003.

Filed September 12, 2003.

Patrick C. Dunican, Jr. (Argued), Gibbons, Del Deo, Dolan, Griffinger & Vecchione, P.C., Newark, NJ, for Appellant.

Francis L. Young (Argued), Law Offices of Francis L. Young, Washington, DC, Marc J. Gross, Gina M. Pontorieo, Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, LLP, Roseland, NJ, for Appellee.

Before: ALITO, ROTH, and HALL,^* Circuit Judges.

OPINION OF THE COURT

CYNTHIA HOLCOMB HALL, Circuit Judge.

Worldcom, Inc. appeals an order of the district court dismissing its complaint against Graphnet, Inc. Worldcom claims Graphnet owes it approximately 3.4 million dollars for telecommunications services and equipment. The district court held that since the contracts at issue in this controversy were not filed with the Federal Communications Commission (FCC), Worldcom is precluded from recovering anything for services or equipment provided to Graphnet. It therefore dismissed Worldcom's complaint for failing to state a claim upon which relief can be granted. See Fed.R.Civ.P. 12(b)(6).

We have jurisdiction pursuant to 28 U.S.C. § 1291. Because the district court erred by concluding that Worldcom cannot recover as a matter of law, we REVERSE and REMAND for further proceedings.

FACTS AND PROCEDURAL HISTORY

Worldcom is a global telecommunications company providing a variety of diverse communications services in local, national and international markets.¹ Graphnet provides communications services and network products for customers in national and international markets.

On June 2, 2000, Worldcom commenced an action under the Federal Communications Act, 47 U.S.C. § 151 et seq., against Graphnet for breach of contract and unjust enrichment in federal district court in the Eastern District of Virginia. The complaint was thereafter amended on August 28, 2000. Graphnet moved to transfer venue to the District of New Jersey. In its complaint, Worldcom claims that, in November 1991, it entered into a contract with Graphnet to provide two-way telex transmissions between their respective networks for telex traffic originating on each other's networks. Graphnet has not paid for over three million dollars in telex services provided to it by Worldcom. It has also failed to pay for over three hundred thousand dollars for additional telecommunications equipment and services provided pursuant to another contract. Neither contract was filed with the FCC. The extent to which Graphnet disputes these allegations is unclear since Graphnet never filed a responsive pleading admitting or denying these allegations.

In October 2000, the district court in Virginia transferred the action to the District of New Jersey. Upon transfer, Graphnet moved to dismiss the complaint under Fed.R.Civ.P. 12(b). Graphnet argued that the district court lacked subject matter jurisdiction and that Worldcom failed to state a claim upon which relief could be granted. Graphnet also raised two affirmative defenses in its motion to dismiss, claiming that Worldcom's actions were barred both by the applicable statute of limitations and by an earlier settlement agreement. In its reply brief in support of its motion to dismiss, Graphnet argued for the first time that Worldcom's claims were precluded by the so-called "filed rate doctrine." Worldcom objected to the issue being raised for the first time in Graphnet's reply brief and the district court properly allowed Worldcom to file a sur-reply brief to respond to Graphnet's arguments.

The district court filed an opinion and order granting Graphnet's motion to dismiss. The district court held that it had subject matter jurisdiction but concluded that Worldcom could not recover under any of the contracts at issue because they were never filed with the FCC. The district court did not reach any of the other issues raised by Graphnet in its motion to dismiss. Worldcom appealed.

STANDARD OF REVIEW

A motion to dismiss for failure to state a claim is reviewed de novo. We accept all well pleaded factual allegations as true and draw all reasonable inferences from such allegations in favor of the complainant. Weston v. Pennsylvania, 251 F.3d 420, 425 (3d Cir.2001). Dismissal for failure to state a claim is appropriate only if it "appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

DISCUSSION

A. Jurisdiction

After Graphnet moved to dismiss the action for lack of subject matter jurisdiction, the district court held that it had jurisdiction over the controversy. While Graphnet does not dispute this finding, we are nevertheless obligated to raise and decide the issue sua sponte. See MCI Telecomm. Corp. v. Teleconcepts, Inc. 71 F.3d 1086, 1093 (3d Cir.1995).

After examining the record, we have no doubt that the district court correctly found that it had diversity jurisdiction under 28 U.S.C. § 1332. The parties are completely diverse and the matter in controversy exceeds $75,000. We also note that there is federal question jurisdiction under 28 U.S.C. § 1331. Because this issue is related to the merits of this controversy, we will discuss it briefly. In MCI Telecomm., we held that a contract action for unpaid services under the terms and conditions set forth in a filed tariff "arises under" the laws of the United States. MCI Telecomm., 71 F.3d at 1094. In MCI Telecomm., we relied heavily on the Second Circuit's decision in Ivy Broadcasting Co., Inc. v. AT & T, 391 F.2d 486 (2d Cir.1968). In Ivy Broadcasting, the court noted that "the establishment of [a] broad scheme for the regulation of interstate service by communications carriers indicates an intent on the part of Congress to occupy the field to the exclusion of state law." Id. at 490. Since Congress intended to occupy the field, "questions concerning the duties, charges and liabilities of telegraph or telephone companies with respect to interstate communications service are to be governed solely by federal law[.]" Id. at 491. Since this controversy involves questions concerning the duties, charges and liabilities with respect to interstate and international communications services, it "arises under" federal law. 28 U.S.C. § 1331. Since no specific portion of the Act creates an action for breach of a communications contract, the district court must apply federal common law.

B. Whether Worldcom Was Required to File the Contracts at Issue

The district court erred by concluding that Worldcom was required to file the contracts at issue. This complex issue could not be resolved at this stage in the litigation. The fact that there was no filed tariff does not itself violate the FCA. Under the FCA, a carrier may conduct its business either by tariff or by contract. Bell Tel. Co. of Pa. v. FCC, 503 F.2d 1250, 1277 (3d Cir.1974). When a carrier chooses to conduct business by contract, section 211(a) of the FCA states that every common carrier "shall" file with the FCC "copies of all contracts, agreements or arrangements with other common carriers." 47 U.S.C. § 211(a) (emphasis added). The district court held that since the contracts at issue were not filed with the FCC, Worldcom had violated the FCA. The district court, however, ignored section 211(b) which states, in relevant part, that the FCC "shall have the authority to require the filing of any other contracts of any carrier, and shall also have authority to exempt any carrier from submitting copies of such minor contracts as the Commission may determine." 47 U.S.C. § 211(b) (emphasis added). The plain language of the statute gives the FCC the power to exempt certain contracts from the filing requirement of section 211(a).

Pursuant to this authority, the FCC promulgated 47 C.F.R. § 43.51 which stated in relevant part, at the time of contracting:

(a) Any communications common carrier engaged in domestic or foreign communication, or both, which has not been classified as non-dominant pursuant to Section 61.12(e) of the Commission's Rules, 47 C.F.R. § 61.12(e), is not treated under the regulatory forbearance policies established by the Commission, and which enters into a contract with another carrier must file with the Commission, within thirty (30) days of execution, a copy of each contract, agreement, concession, license, authorization or other arrangement to which it is a party ...

47 C.F.R. § 43.51(a) (1986) (available in 1 FCC Rcd 933). Worldcom argues that this language exempts non-dominant carriers from the filing requirement. Graphnet argues that this regulation merely lists a few examples of contracts that must be filed with the FCC. The FCC's report and order regarding the amendment to 47 C.F.R. § 43.51 clearly supports Worldcom's position. In that order, the FCC specifically stated that because it no longer found such documents "useful," it desired to eliminate "the requirement that non-dominant carriers treated with forbearance file certain reports and contracts." 1 FCC Rcd 933, ¶ 3 (1986). Furthermore, the language in the regulation would be superfluous were it not read to exempt non-dominant carriers from the filing requirement. We therefore agree with Worldcom that this regulation exempts "non-dominant" carriers from the filing requirement.

Worldcom specifically claims that it was classified as non-dominant and subject to regulatory forbearance with respect to its domestic long-distance operations at the time the contract was signed. It therefore cannot be resolved at this point in the litigation whether the contracts at issue were required to be filed with the FCC. The court must first determine whether Worldcom was, in fact, non-dominant in the national long distance field at the time and that the contracts at issue involved national long distance services.

Graphnet's claim...