Cent. Tel. Co. of Va. v. Sprint Communications Co. of Va. Inc.

• Decision Date: 04 January 2011
• Docket Number: Civil No. 3:09cv720.
• Citation: 759 F.Supp.2d 772
• Court: U.S. District Court — Eastern District of Virginia
• Parties: CENTRAL TELEPHONE CO. OF VIRGINIA, et al., Plaintiffs,v.SPRINT COMMUNICATIONS CO. OF VIRGINIA, INC., et al., Defendants.

759 F.Supp.2d 772

CENTRAL TELEPHONE CO. OF VIRGINIA, et al., Plaintiffs,

v.SPRINT COMMUNICATIONS CO. OF VIRGINIA, INC., et al., Defendants.

Civil No. 3:09cv720.

United States District Court, E.D. Virginia,Richmond Division.

Jan. 4, 2011.

Michael J. Lockerby, Benjamin Rodes Dryden, Jennifer Matilda Keas, Foley & Lardner LLP, Washington, DC, for Plaintiffs.Edward P. Noonan, Michael Randolph Shebelskie, William Jeffery Edwards, Hunton & Williams LLP, Richmond, VA, Mark Ayotte, Matthew Slaven, Max Heerman, Philip Schenkenberg, Briggs and Morgan P.A., Minneapolis, MN, for Defendants.

MEMORANDUM OPINION

ROBERT E. PAYNE, Senior District Judge.

This matter is before the Court on DEFENDANTS' MOTION TO DISMISS FOR LACK OF JURISDICTION AND FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES, OR, ALTERNATIVELY, TO STAY THIS CASE UNDER THE DOCTRINE OF PRIMARY JURISDICTION (Docket No. 9); the MOTION FOR LEAVE TO SUPPLEMENT THE APPENDIX TO CENTURYLINK'S OPPOSITION TO SPRINT'S MOTION TO DISMISS OR STAY (Docket No. 20); and CENTURYLINK'S OBJECTIONS

TO THE MAGISTRATE'S REPORT AND RECOMMENDATION (Docket No. 43). For the reasons set forth below, DEFENDANTS' MOTION TO DISMISS FOR LACK OF JURISDICTION AND FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES, OR, ALTERNATIVELY, TO STAY THIS CASE UNDER THE DOCTRINE OF PRIMARY JURISDICTION (Docket No. 9) is denied; the MOTION FOR LEAVE TO SUPPLEMENT THE APPENDIX TO CENTURYLINK'S OPPOSITION TO SPRINT'S MOTION TO DISMISS OR STAY (Docket No. 20) is denied; and CENTURYLINK'S OBJECTIONS TO THE MAGISTRATE'S REPORT AND RECOMMENDATION (Docket No. 43) are sustained.

BACKGROUND

This action involves a contract dispute over fees that the Defendant telecommunications carriers (“Sprint”) have agreed to pay the Plaintiff carriers (“CenturyLink”) for use of CenturyLink's local telephone network facilities pursuant to eighteen interconnection agreements (“ICAs”). The ICAs at issue were entered into pursuant to the provisions of the Telecommunications Act of 1996, Pub.L. No. 104–404, 110 Stat. 56 (codified in sections of 47 U.S.C.).

I. The Telecommunications Act of 1996

The Telecommunications Act of 1996 (the “Act”) was enacted to open previously monopolistic local telephone markets to competition. The Act requires all incumbent local exchange carriers (“ILECs”), such as CenturyLink, to interconnect their networks with those of competing local exchange carriers (“CLECs”), such as Sprint. See 47 U.S.C. § 251(c)(2). Interconnection allows a customer of one carrier to call a customer from another carrier. When this occurs, the carrier whose customer initiated the call must compensate the receiving carrier for transporting and terminating the call through its network.

The Act also requires ILECs and CLECs to negotiate ICAs to establish the terms by which they will compensate one another for use of each other's networks. Id. § 251(b), (c)(1). All ICAs must be approved by a state regulatory commission before they become effective. Id. § 252(e).

II. The Breach of Contract Claim

Between 2004 and 2006, CenturyLink and Sprint entered into eighteen ICAs pursuant to the requirements of the Act. The ICAs covered access charges for Sprint's use of CenturyLink's local telephone network facilities. (Compl. ¶ 3.) In each of the ICAs, the specified per minute charges for use of CenturyLink's local telephone network facilities depend on the origin of the call, as either in-state or out-of-state, and the nature of the call, as either local or long distance. ( Id. ¶¶ 3–4.) For long distance interstate calls, the charges are based on tariffs that have been filed and approved by the Federal Communications Commission (the “FCC”). ( Id. ¶ 4.) Charges for long distance intrastate calls, on the other hand, are based on tariffs that have been filed with the applicable state commission. ( Id.) Under the terms of the ICAs, the specified charges apply whether the call uses a transmission format known as Voice-over Internet Protocol (“VoIP”) or a format known as Time Division Multiplexing. ( Id. ¶ 5.)

At the time the ICAs were negotiated, drafted, and signed, Sprint and CenturyLink were sister companies and wholly owned subsidiaries of Sprint Nextel Corporation. ( Id. ¶ 6.) Subsequently, in 2006, the CenturyLink companies were spun off and bought by Embarq Corporation which later became CenturyLink.

The appropriate state commissions approved all the ICAs. ( Id. ¶ 31.) Following the effective date of each ICA, CenturyLink billed Sprint for use of CenturyLink's local telephone network facilities; and, until June 2009, Sprint paid as agreed under the terms of the ICAs. ( Id. ¶ 6.)

In June 2009, Sprint altered course and, for the first time since the effective date of any of the ICAs, lodged with CenturyLink a series of disputes over VoIP-originated traffic contending that the ICAs did not make Sprint liable to pay the charges for such traffic.¹ ( Id. ¶ 8.) Additionally, Sprint disputed amounts previously paid, spanning the prior two years. ( Id.) Specifically, Sprint sought to reduce its payment obligations for VoIP-originated traffic by ninety-six percent retroactive to May 2007. ( Id. ¶ 10.)

In this action, Sprint filed a motion to dismiss for lack of jurisdiction and failure to exhaust administrative remedies, or, in the alternative, to stay the case under the doctrine of primary jurisdiction. CenturyLink filed a motion for leave to file a supplemental appendix to CenturyLink's opposition to Sprint's motion. The Magistrate Judge submitted a Report and Recommendation counseling that Sprint's motion should be granted and CenturyLink's motion denied. CenturyLink filed objections to the Magistrate's Report and Recommendation. The motions and objections have been briefed and argued fully and are ripe for decision.

DISCUSSION

I. Standard of Review of Magistrate's Report and Recommendation

Under 28 U.S.C. § 636(b)(1)(C) and Fed.R.Civ.P. 72(b)(3), the Court must undertake de novo review of any portions of the Magistrate's Report to which there is an objection. “[A]s part of its obligation to determine de novo any issue to which proper objection is made, a district court is required to consider all arguments directed to that issue, regardless of whether they were raised before the magistrate.” United States v. George, 971 F.2d 1113, 1118 (4th Cir.1992).

II. Dismissal Under Rule 12(b)(1)A. Subject Matter Jurisdiction Under 28 U.S.C. § 1331

The first issue is whether the Court has subject matter jurisdiction over a claim for breach of an ICA. CenturyLink asserts jurisdiction under 28 U.S.C. § 1331 or, alternatively, under 47 U.S.C. § 207.

The analysis must proceed mindful of the principle that federal courts are “courts of limited jurisdiction” and thus “are empowered to act only in those specific situations authorized by Congress.” Bowman v. White, 388 F.2d 756, 760 (4th Cir.1968). Thus, a “court is to presume ... that a case lies outside its limited jurisdiction unless and until jurisdiction has been shown to be proper.” United States v. Poole, 531 F.3d 263, 274 (4th Cir.2008). “If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.” Fed.R.Civ.P. 12(h)(3). However, it also is the rule that, when jurisdiction is proper, courts have a “virtually unflagging obligation” to exercise that jurisdiction. Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976).

Under § 1331, district courts have jurisdiction in all “civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. The Supreme Court has recognized federal jurisdiction under § 1331 when “federal law creates the cause of action.” Verizon Md., Inc. v. Global NAPS, Inc., 377 F.3d 355, 362 (4th Cir.2004) [hereinafter “ Verizon Md. II ”] (citing Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986)). Thus, the dispositive question is whether this breach of contract action is a civil action arising under the laws of the United States, which, in turn, is determined by whether federal law created the cause of action here asserted.

In Verizon Md. Inc. v. Pub. Serv. Comm'n of Md., 535 U.S. 635, 642, 122 S.Ct. 1753, 152 L.Ed.2d 871 (2002), the Supreme Court of the United States held that there was “no doubt that federal courts have jurisdiction under § 1331 to entertain” a claim that a state commission's order regarding compensation due under an ICA violated the Act and FCC regulations. On remand, in Verizon Md. II, the Fourth Circuit outlined the appropriate jurisdictional analysis when considering whether a district court has jurisdiction under § 1331 respecting disputes over an ICA provision. 377 F.3d at 357. In all cases, said the Fourth Circuit, “the question of whether a claim arises under federal law begins with a look at the face of the plaintiff's properly pleaded complaint.” Id. at 363 (internal quotation marks omitted). In Verizon Md. II, the complaint cited the Act as well as FCC regulations, as did the ICAs which were attached to the complaint. Id. at 363–64.

The Fourth Circuit then considered the nature and purpose of the ICA and whether it was a creature of federal law. Id. at 364. The Court of Appeals concluded that an ICA is a “creation of federal law” because it is the tool through which the Act is implemented and enforced. Id. (citing BellSouth Telecomms., Inc. v. MCImetro Access Transmission Servs., Inc., 317 F.3d 1270, 1278 (11th Cir.2003)). The Court of Appeals elaborated that “[t]he Act requires an [ILEC] and its aspiring competitor to enter into an [ICA] that sets forth the ‘terms and conditions ... to fulfill the duties' mandated by § 251(b) and § 251(c) of the Act.” Verizon Md. II, 377 F.3d at 364 (citing § 251(c)(1)). Our circuit court went on to explain that ICAs “are thus the vehicles chosen by Congress to implement the duties imposed in § 251. They are, in short, federally...