Cent. Tel. Co. of Va., Corp. v. Sprint Commc'ns Co. of Va., Inc.

• Citation: 715 F.3d 501
• Decision Date: 29 April 2013
• Docket Number: No. 12–1322.,12–1322.
• Parties: CENTRAL TELEPHONE COMPANY OF VIRGINIA, a Virginia Corporation; United Telephone Southeast, LLC, a Virginia Limited Liability Company; Embarq Florida, Inc., a Florida Corporation; United Telephone Company of Indiana, Inc., an Indiana Corporation; United Telephone Company of Kansas, a Kansas Corporation; United Telephone Company of Eastern Kansas, a Delaware Corporation; United Telephone Company of Southcentral Kansas, an Arkansas Corporation; Embarq Missouri, Inc., a Missouri Corporation; Embarq Minnesota, Inc., a Minnesota Corporation; United Telephone Company of the West, a Delaware Corporation; Central Telephone Company, a Delaware Corporation; United Telephone Company of New Jersey, Inc., a New Jersey Corporation; Carolina Telephone and Telegraph Company, LLC, a North Carolina Limited Liability Corporation; United Telephone of Ohio, an Ohio Corporation; United Telephone Company of the Northwest, an Oregon Corporation; the United Telephone Company of Pennsylvania, LLC, a Pennsylvania Limited Liability Corporation; United Telephone Company of the Carolinas LLC, a South Carolina Limited Liability Corporation; United Telephone Company of Texas, Inc., a Texas Corporation; Central Telephone Company of Texas, a Texas Corporation, Plaintiffs–Appellees, v. SPRINT COMMUNICATIONS COMPANY OF VIRGINIA, INC., a Virginia Corporation; Sprint Communications Company L.P., a Delaware Limited Partnership, Defendants–Appellants. Verizon; Federal Communications Commission, Amici Curiae.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

715 F.3d 501

CENTRAL TELEPHONE COMPANY OF VIRGINIA, a Virginia Corporation; United Telephone Southeast, LLC, a Virginia Limited Liability Company; Embarq Florida, Inc., a Florida Corporation; United Telephone Company of Indiana, Inc., an Indiana Corporation; United Telephone Company of Kansas, a Kansas Corporation; United Telephone Company of Eastern Kansas, a Delaware Corporation; United Telephone Company of Southcentral Kansas, an Arkansas Corporation; Embarq Missouri, Inc., a Missouri Corporation; Embarq Minnesota, Inc., a Minnesota Corporation; United Telephone Company of the West, a Delaware Corporation; Central Telephone Company, a Delaware Corporation; United Telephone Company of New Jersey, Inc., a New Jersey Corporation; Carolina Telephone and Telegraph Company, LLC, a North Carolina Limited Liability Corporation; United Telephone of Ohio, an Ohio Corporation; United Telephone Company of the Northwest, an Oregon Corporation; the United Telephone Company of Pennsylvania, LLC, a Pennsylvania Limited Liability Corporation; United Telephone Company of the Carolinas LLC, a South Carolina Limited Liability Corporation; United Telephone Company of Texas, Inc., a Texas Corporation; Central Telephone Company of Texas, a Texas Corporation, Plaintiffs–Appellees,

v. SPRINT COMMUNICATIONS COMPANY OF VIRGINIA, INC., a Virginia Corporation; Sprint Communications Company L.P., a Delaware Limited Partnership, Defendants–Appellants.Verizon; Federal Communications Commission, Amici Curiae.

No. 12–1322.

United States Court of Appeals, Fourth Circuit.

Argued: Jan. 29, 2013.

Decided: April 29, 2013.

ARGUED:Timothy J. Simeone, Wiltshire & Grannis, LLP, Washington, D.C., for Appellants. Michael J. Lockerby, Foley & Lardner, LLP, Washington, D.C., for Appellees. Scott H. Angstreich, Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, D.C., for Amicus Curiae Verizon. ON BRIEF:Christopher J. Wright, Rachel W. Petty, Wiltshire & Grannis, LLP, Washington, D.C., for Appellants. Jennifer M. Keas, Benjamin R. Dryden, Foley & Lardner, LLP, Washington, D.C.; Bradley D. Jackson, Foley & Lardner, LLP, Madison, Wisconsin, for Appellees. Michael E. Glover, Edward Shakin, Curtis L. Groves, Verizon, Arlington, Virginia; Joshua D. Branson, Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, D.C., for Amicus Curiae Verizon. Peter Karanjia, Deputy General Counsel, Jacob M. Lewis, Associate General Counsel, Laurel R. Bergold, Counsel, Federal Communications Commission, Washington, D.C., for Amicus Curiae Federal Communications Commission.

Before NIEMEYER, DUNCAN, and FLOYD, Circuit Judges.

Affirmed by published opinion. Judge DUNCAN wrote the opinion, in which Judge NIEMEYER and Judge FLOYD joined.

OPINION

DUNCAN, Circuit Judge:

Pursuant to the provisions of the Telecommunications Act of 1996, 47 U.S.C. § 151 et seq., Sprint Communications Company of Virginia, Inc., and Sprint Communications Company L.P. (collectively “Sprint” or the “Sprint Defendants”) entered into interconnection agreements with nineteen incumbent local exchange carriers (collectively “CenturyLink” or the “CenturyLink Plaintiffs”) providing for the mutual exchange of telecommunications traffic. When Sprint began to withhold payments under the agreement, CenturyLink brought a breach of contract claim in federal district court. After rejecting Sprint's threshold argument that its jurisdiction was limited to reviewing determinations by State utilities commissions, the district court entered judgment in favor of CenturyLink on the merits. The district court judge subsequently also concluded that a belatedly discovered financial interest in CenturyLink held in a managed Individual Retirement Account did not require his recusal. Sprint appeals all of the district court's rulings; for the reasons that follow, we affirm.

I.

A.

Prior to the Telecommunications Act of 1996 (the “1996 Act”), telephone service within a local calling area was provided by an incumbent local exchange carrier (“ILEC”) operating as a state-licensed monopoly. The purpose of the 1996 Act was to create competition within these local telephone markets.

At the core of the 1996 Act is a requirement that ILECs “interconnect” their facilities and equipment with competitive local exchange carriers (“CLECs”), such as Sprint, for the mutual exchange of traffic. Defined as “the linking of two networks for the mutual exchange of traffic,” 47 C.F.R. § 51.5, interconnection allows CLEC customers to call ILEC customers and vice versa. While the carriers may reach agreement through arbitration or negotiation, the product of the process is an interconnection agreement (an “ICA”), which must include “a detailed schedule of itemized charges for interconnection and each service or network element included in the agreement.” 47 U.S.C. § 252(a)(1).

B.

A brief description of the corporate relationship between Sprint and CenturyLink, and the latter's organizational parentage, provides necessary background for our consideration of the recusal issue. We then set out the underlying facts and procedural history of the appeal before us.

When Sprint sought negotiation of the ICAs at issue in April 2004, it and the nineteen companies that comprise the CenturyLink Plaintiffs were wholly owned subsidiaries of Sprint Corporation.¹ The CenturyLink Plaintiffs were a part of Sprint Corporation's local telephone division. In May 2006, Sprint Corporation spun off the CenturyLink Plaintiffs, which then formed a separate company known as Embarq Corporation (“Embarq”). In July 2009, CenturyTel, Inc. (“CenturyTel”) acquired Embarq and its subsidiaries. The resulting entity began doing business as “CenturyLink.” Between 2004 and 2005 Sprint and CenturyLink executed the nineteen ICAs that are the subject of this dispute, and which were approved by the appropriate State commissions.²

Some general information about telecommunications traffic provides context for our discussion of the issues in this case. There are three ways to place a call: landline, wireless, and Voice-over Internet Protocol (“VoIP”), which, as its name suggests, relies on the internet to originate voice communications. See Vonage Holdings Corp. v. Nebraska Pub. Serv. Comm'n, 564 F.3d 900, 902 (8th Cir.2009) (“VoIP is an internet application used to transmit voice communication over a broadband internet connection.”). Likewise, a call placed through any of these three formats can be classified into three categories of traffic, depending on the locational relationship of those speaking: local,³ long distance intrastate,⁴ and long distance interstate. The facts giving rise to the underlying dispute revolve around the ICA's compensation structure for these three categories of traffic.

In assessing the appropriate compensation for a local, long distance intrastate, and long distance interstate call, the relevant metrics are where a call originated and where it terminated.⁵ This determination is often referred to in the telecommunications industry as the “jurisdictionalizing” of a call. All the calls at issue in this case originated on Sprint's network and were terminated by one of the CenturyLink Plaintiffs on its local network.

The ICA first addresses local traffic. In salient part, the ICA defines local traffic as traffic “that is originated and terminated within Sprint's local calling area.” J.A. 718. The ICA applies to local traffic a practice known as “Bill & Keep” or “reciprocal compensation.” As § 38.1 of the ICA explains, “[u]nder Bill and Keep, each Party retains the revenues it receives from end user customers, and neither Party pays the other Party for terminating Local Traffic which is subject to the Bill and Keep compensation mechanism.” J.A. 744. In brief, no payments exchange hands for the termination of local traffic.

By contrast, the ICA provides for “access charges” ⁶ for the two categories of long distance traffic discussed above: intrastate and interstate. Under the ICA, the applicable access charge depends on the category of long distance traffic.

All three categories of traffic—local, long distance intrastate, and long distance interstate—travel across “trunks.” See47 C.F.R. § 69.2(x) (defining “trunk” as including “transmission media such as radio, satellite, wire, cable and fiber optic cable means of transmission”). The parties stipulated below that Sprint delivers some traffic to CenturyLink via local interconnection trunks, and other traffic by way of Feature Group D (“FGD”) trunks. J.A. 315. FGD trunks carry long distance traffic only. Id. at 316. FGD trunks attach to local interconnection trunks, and thus enable long distance traffic to be terminated on one of CenturyLink's local networks.

The dispute in this case only involves VoIP traffic, which travels over FGD trunks (for a long distance call) and over local interconnection trunks. ⁷ Section 38.4 of the ICA addresses the compensation system for the termination of VoIP traffic: “Voice calls that are transmitted, in whole or in part, via the public Internet or a private IP network (VoIP) shall be compensated in the same manner as voice traffic (e.g. reciprocal compensation, interstate access and intrastate access).” J.A. 746.

Sprint paid CenturyLink access charges for VoIP traffic as set out in § 38.4 from the time of the execution of the ICAs between the parties in 2004 and 2005 until June 2009. At that point, Sprint began filing written disputes with CenturyLink. Although the nature of Sprint's objections changed, its core contention appeared to be twofold: (1) that the ICA did not apply to long distance VoIP traffic that traveled over FGD trunks; and (2) that CenturyLink had billed Sprint at an improperly high rate for VoIP traffic since May 1, 2007.

Instead of following the Dispute Resolution Procedure established in the ICA, Sprint unilaterally reduced the rate for termination of VoIP-originated traffic. It demanded that CenturyLink apply Sprint's recalculated rate...