CGM, LLC v. Bellsouth Telecomms., Inc.

• Decision Date: 08 December 2011
• Docket Number: No. 10–1693.,10–1693.
• Citation: 664 F.3d 46,54 Communications Reg. (P&F) 1147
• Parties: CGM, LLC, Plaintiff–Appellant, v. BELLSOUTH TELECOMMUNICATIONS, INCORPORATED; AT & T Billing Southeast, LLC, a/k/a AT & T Billing Southeast, Inc.; AT & T Corporation, Defendants–Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

54 Communications Reg. (P&F) 1147

664 F.3d 46

CGM, LLC, Plaintiff–Appellant,

v.BELLSOUTH TELECOMMUNICATIONS, INCORPORATED; AT & T Billing Southeast, LLC, a/k/a AT & T Billing Southeast, Inc.; AT & T Corporation, Defendants–Appellees.

No. 10–1693.

United States Court of Appeals, Fourth Circuit.

Argued: Sept. 20, 2011.Decided: Dec. 8, 2011.

ARGUED: Ira Thane Kasdan, Kelley, Drye & Warren, LLP, Washington, D.C., for Appellant. Dennis Friedman, Mayer Brown, LLP, Chicago, Illinois, for Appellees. ON BRIEF: Barbara A. Miller, Kelley, Drye & Warren, LLP, Washington, D.C., for Appellant. Patrick W. Turner, AT & T South Carolina, Columbia, South Carolina; Jeffrey M. Strauss, Mayer Brown, LLP, Chicago, Illinois, for Appellees.

Before SHEDD and WYNN, Circuit Judges, and DAMON J. KEITH, Senior Circuit Judge of the United States Court of Appeals for the Sixth Circuit, sitting by designation.

Affirmed by published opinion. Judge WYNN wrote the opinion, in which Judge SHEDD and Senior Judge KEITH concurred.

OPINION

WYNN, Circuit Judge:

“The Telecommunications Act of 1996 ... represents a comprehensive effort by Congress to bring the benefits of deregulation and competition to all aspects of the telecommunications market in the United States, including especially local markets.” Goldwasser v. Ameritech Corp., 222 F.3d 390, 391 (7th Cir.2000). The 1996 Act imposes new duties on incumbent local telecommunications carriers, which had previously enjoyed monopolies in local telecommunications markets; those duties include the duty to sell telecommunications services at wholesale rates to would-be competitors for resale to consumers.

In this case, CGM, LLC, a billing agent for competitive local exchange carriers (“competitive LECs”), brought a declaratory judgment action against BellSouth Telecommunications, Inc., an incumbent local exchange carrier (“incumbent LEC”). CGM claimed that BellSouth offered long-term promotional discounts to its own customers but failed, in violation of the 1996 Act and rules implementing it, to pass the full value of those discounts on to CGM's client competitive LECs, none of which is a party to this suit. Because CGM has no statutory standing under either the 1996 Act or a seemingly broadly worded but nonetheless inapplicable statute from the Federal Telecommunications Act of 1934, we affirm the district court's dismissal of CGM's complaint.

I.

In an effort to introduce competition into local telephone markets, Congress enacted the 1996 Act, which amended and supplemented the 1934 Act. See BellSouth Telecomms., Inc. v. Sanford, 494 F.3d 439, 441, 444 (4th Cir.2007). The 1996 Act requires, among other things, that large telephone companies with existing telecommunications infrastructure share that infrastructure with their smaller competitors. Upon request, the incumbent LECs must provide network access to their competitors, the competitive LECs. Id. at 444–45; 47 U.S.C. § 251(c)(2).

In connection with the mandate to provide competitive LECs with access, the 1996 Act also requires incumbent LECs to offer competitive LECs “resale at wholesale rates any telecommunications service that the [incumbent LEC] provides at retail to subscribers who are not telecommunications carriers....” Id. § 251(c)(4). Put differently, competitive LECs may purchase services from incumbent LECs at a discounted rate and then resell those services to individual customers at market rates.

To implement the provisions of the 1996 Act, the Federal Communications Commission (“FCC”) promulgated regulations. See 47 C.F.R. § 51.1. Under those regulations, the “resale duty” extends to promotional offers incumbent LECs provide to their retail customers lasting longer than ninety days. 47 C.F.R. § 51.613(a). 47 C.F.R. § 51.613(a) prevents incumbent LECs from devising retail promotional schemes enabling them to offer discounts to their retail customers without extending the value of those discounts to competitive LECs.

The terms and conditions of the access arrangements between incumbent LECs and competitive LECs are developed through private contracts know as “interconnection agreements.” 47 U.S.C. § 252; Verizon Md., Inc. v. Global NAPs, Inc., 377 F.3d 355, 364 (4th Cir.2004). Interconnection agreements can be reached through voluntary negotiation or compulsory arbitration, but regardless of whether negotiated or arbitrated, all interconnection agreements must be submitted to and approved by the appropriate state utilities commissions. Id.; 47 U.S.C. § 252(e).¹

Interconnection agreements, not the general duties mentioned in Section 251(c), govern incumbent LECs' 1996 Act resale duties. In other words, “section 251(c)'s obligations are not generally self-executing. Rather, incumbents are required to implement them through voluntary good-faith negotiations with prospective entrants....” Peter W. Huber et al., Federal Telecommunications Law § 5.6.2 (2d ed. Supp. 2011); cf. Verizon Md., 377 F.3d at 364 (“Once the [interconnection agreement] is approved, the 1996 Act requires the parties to abide by its terms. Interconnection agreements are thus the vehicles chosen by Congress to implement the duties imposed in § 251.” (internal citation omitted)).

BellSouth provides local exchange telephone service in a nine-state region in the southeastern United States.² In each of those states, BellSouth operates as an incumbent LEC. CGM is a billing agent for certain unidentified competitive LEC resellers of BellSouth telecommunications services in the nine-state BellSouth region. CGM itself, however, provides no telecommunications services.

CGM is neither an incumbent LEC nor a competitive LEC and does not assert that it is a party to an interconnection agreement. Nevertheless, in 2009, CGM filed a “Complaint for Expedited Declaratory Judgment” in the Western District of North Carolina. J.A. 10. CGM is the only named plaintiff, and nothing in the record indicates that CGM was authorized to bring, or was in fact bringing, its suit on behalf of anyone other than itself. CGM's primary grievance: BellSouth is overcharging for its services to competitive LECs in violation of 47 U.S.C. § 251(c)(4) and 47 C.F.R. § 51.613(a). Specifically, CGM contends that BellSouth provided cash-back promotions to its retail customers but provided CGM's competitive LEC clients with only around eighty percent of the value of those promotions. CGM argues that, absent a contrary determination by the applicable state utilities commission, the competitive LECs are entitled to the full value of those promotions.

Significantly, CGM does not contend that BellSouth owes it money directly. Instead, CGM maintains that BellSouth owes CGM's competitive LEC customers over $14 million as a consequence of this overcharging dispute. ³ According to CGM, those competitive LECs in turn owe CGM over $360,000 in fees. This is because CGM is paid by its client competitive LECs based in part on the amount of money that CGM obtains for the competitive LECs from “Credits/Rebates/Cashbacks/Winbacks/Offsets” that BellSouth provides to its retail customers and is thus obligated to pass on to the competitive LECs. J.A. 12. In its complaint, CGM primarily seeks a declaratory judgment that BellSouth “must credit the CGM [competitive LECs] the full, dollar for dollar, value of the credit offered to BellSouth's retail customers in the absence, as here, of [its] having first proved to the appropriate regulatory body that [its] contrary practice to date is reasonable and nondiscriminatory as required by Sanford and 47 C.F.R. § 51.613(b)....” J.A. 17.

In response, BellSouth filed a motion to dismiss CGM's complaint under Federal Rule of Civil Procedure 12(b)(6). BellSouth argued that CGM lacks standing to assert its claims and that it fails to state a claim upon which relief can be granted. With regard to standing specifically, BellSouth contended that the pertinent inquiry is “ ‘whether the ... statutory provision on which the claim rests properly can be understood as granting persons in the plaintiff's position a right to judicial relief.’ ” J.A. 70 (quoting Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975)). BellSouth maintained that “[i]t is not sufficient to allege—as CGM does (Opp. 6 n. 5)—that the defendant is the ‘but for’ cause of some alleged injury. The plaintiff must have a basis for seeking redress under the statute on which the claim rests.... CGM has no rights under the 1996 Act; it thus also lacks ‘standing’ to sue....” J.A. 204.

A magistrate judge issued a memorandum and recommendation to grant BellSouth's motion, to which CGM objected. Nevertheless, the district court granted BellSouth's motion to dismiss on the basis that CGM lacked standing to bring its claims. In essence, the district court held that the 1996 Act granted rights and obligations to specific parties and created a particular framework within which those parties may assert violations of those rights and obligations. Because CGM is not a party with rights under the 1996 Act, it has no standing to assert its claims, which are based on alleged violations of duties arising under the 1996 Act. And the district court determined that a general redress provision in the 1934 Act provided no lifeline to CGM's failed claims. The district court further held that the Declaratory Judgments Act provided no independent basis for CGM's suit. CGM appealed.

II.

We review de novo the district court's grant of BellSouth's motion to dismiss. Sucampo Pharm., Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 550 (4th Cir.2006). When ruling on a Rule 12(b)(6) motion to dismiss, “a judge must accept as true all of the factual allegations contained in the complaint.” Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). Further, “like the district court, [we] draw all reasonable inferences in favor of the plaintiff.” Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 253 (4th...