Gcb Communications Inc. v. U.S. South Communications Inc.

• Decision Date: 29 April 2011
• Docket Number: 10–16086.,Nos. 09–17646,s. 09–17646
• Parties: GCB COMMUNICATIONS, INC., an Arizona corporation, DBA Pacific Communications; Lake Country Communications, Inc., a Minnesota corporation, Plaintiffs–Appellees,v.U.S. SOUTH COMMUNICATIONS, INC., a Georgia corporation, Defendant–Appellant,andUnidentified Companies I through X, Defendant.GCB Communications, Inc., an Arizona corporation, DBA Pacific Communications; Lake Country Communications, Inc., a Minnesota corporation, Plaintiffs–Appellees,v.U.S. South Communications, Inc., a Georgia corporation, Defendant–Appellant,andUnidentified Companies I through X, Defendant.
• Court: U.S. Court of Appeals — Ninth Circuit

650 F.3d 1257

11 Cal. Daily Op. Serv. 5021

2011 Daily Journal D.A.R. 6090

53 Communications Reg. (P&F) 176

GCB COMMUNICATIONS, INC., an Arizona corporation, DBA Pacific Communications; Lake Country Communications, Inc., a Minnesota corporation, Plaintiffs–Appellees,

v.U.S. SOUTH COMMUNICATIONS, INC., a Georgia corporation, Defendant–Appellant,andUnidentified Companies I through X, Defendant.GCB Communications, Inc., an Arizona corporation, DBA Pacific Communications; Lake Country Communications, Inc., a Minnesota corporation, Plaintiffs–Appellees,

v.U.S. South Communications, Inc., a Georgia corporation, Defendant–Appellant,andUnidentified Companies I through X, Defendant.

Nos. 09–17646

10–16086.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 15, 2011.Filed April 29, 2011.

Glenn B. Manishin, Duane Morris LLP, Washington, D.C., for the appellant.Glenn B. Hotchkiss, Cheifetz Iannitelli Marcolini, P.C., Phoenix, AZ, for the appellees.Albert H. Kramer, Dickstein Shapiro LLP, Washington, D.C., for the amicus, American Public Communications Council, Inc.Appeal from the United States District Court for the District of Arizona, Susan R. Bolton, District Judge, Presiding. D.C. No. 2:07–cv–02054–SRB.Before: J. CLIFFORD WALLACE, FERDINAND F. FERNANDEZ, and RICHARD R. CLIFTON, Circuit Judges.

OPINION

FERNANDEZ, Circuit Judge:

U.S. South Communications, Inc. (U.S. South) appeals from the judgment entered against it and in favor of GCB Communications, Inc. and Lake Country Communications, Inc. (collectively GCB) after a bench trial. At issue is whether U.S. South was required to pay GCB for completed coinless payphone calls—dial-around calls—if U.S. South did not receive coding digits that would identify the calls as GCB payphone calls. We reverse and remand for further proceedings.

BACKGROUND

GCB is a payphone service provider (PSP), which owns public payphones. U.S. South is an issuer of prepaid calling cards. The disputed calls in this case were placed on GCB's payphones using U.S. South's calling cards.

When a coinless call is made on a payphone, it is initially received by the local exchange carrier (LEC) serving that geographic region. The LEC then passes the call to an interexchange carrier (IXC), and the IXC then routes the call to the carrier that completes the call (the “completing carrier,” which in this case is U.S. South, a switch-based reseller (SBR)). For the calls at issue in this case that were completed by U.S. South, Level Three Communications (L3) was U.S. South's IXC. Federal Communications Commission (FCC) regulations require an SBR to compensate PSPs for completed calls that were placed on their payphones.¹ Dial-around calls are coinless calls placed at a payphone where the caller does not utilize the PSP's chosen long distance provider, and for which the PSPs receive no compensation from the caller. U.S. South is the completing carrier when individuals place calls using its prepaid calling cards. A call is deemed completed when the called party answers the telephone. As calls are routed through the telephone communications network, the various carriers in the call path exchange information so that each carrier knows what to bill for its contribution to the completed call.

U.S. South identifies which payphones were used to place calls with its calling cards by utilizing technology called “Flex–ANI.” Every payphone is assigned an Automatic Number Identification (ANI), which is essentially its phone number. Flex–ANI is software that enables the LEC to determine whether a particular call was originated from a payphone by matching the ANI of the phone from which the call is made against a database of payphone ANIs. If the ANI is identified as a payphone ANI, the LEC, using Flex–ANI, will generate a two digit code of either 27, 29, or 70 and attach that code to the payphone's ANI at the LEC's switch. The codes are not actually attached to the ANI at the payphone itself. Flex–ANI has become the standard method for determining whether a call originated from a payphone.

In order for the system to function properly, the originating LEC and each subsequent carrier must have Flex–ANI capability. IXCs, like L3, have an obligation to provide all of the call data they receive at their switches, without manipulation, to SBRs, like U.S. South, including the Flex–ANI coding digits if received. If L3 does not receive Flex–ANI digits when the call is passed to it, neither will U.S. South.

When U.S. South completes a call, the data from that call is captured at its switch. If U.S. South receives a call with Flex–ANI coding digits identifying the call as having been placed on a payphone, it will add that call to a database used to determine dial-around compensation owed to individual PSPs, like GCB. If a call does not include the identifying digits, it will be discarded as not compensable. On a quarterly basis, U.S. South forwards its compensable call data to Atlantax Systems, Inc., which it hires to process and pay the dial-around compensation it owes to each individual PSP.

At root, GCB's argument is that when U.S. South completed calls made from GCB's payphones, U.S. South owed it dial-around compensation for the calls, ² even if the proper coding was absent or incorrect at the time U.S. South received them. Both parties make factual arguments disclaiming fault for the failure of Flex–ANI digits to appear with the disputed calls at the time U.S. South received them. Beyond that, GCB contends that the FCC regulations require completed calls to be compensated, without regard to whether the completing carrier received Flex–ANI coding, or to why it was not received. U.S. South argues that if it did not receive Flex–ANI digits, the regulations require compensation only if it can be found that the completing carrier or IXC is at fault.

The district court did not resolve that factual issue after the bench trial. Instead, the district court determined the result based on a legal conclusion: it interpreted the FCC regulations on dial-around compensation to require that once PSPs “set up (or provision) their payphone lines with Flex–ANI capability” they are owed compensation for completed calls, even if the Flex–ANI coding is not sent to or received by the completing carrier. Moreover, the district court held that because “the relevant regulations placed the burden for accurately tracking calls on the completing carrier (U.S. South) and not the PSP (plaintiffs),” U.S. South owes GCB dial-around compensation for the disputed calls “regardless of whether the proper Flex–ANI digits were transmitted.” On that view of the law, the only factual finding necessary to resolve the case was whether GCB had properly “set up” its payphones with Flex–ANI capability. The court found that it had. U.S. South appealed.

JURISDICTION AND STANDARDS OF REVIEW

The district court had jurisdiction pursuant to 28 U.S.C. § 1331. We have jurisdiction pursuant to 28 U.S.C. § 1291. In this statutory and regulatory area of the law, we review a district court's legal interpretations, which are constrained by Chevron,³ de novo. See Levine v. Vilsack, 587 F.3d 986, 991 (9th Cir.2009). A district court's conclusions of law following a bench trial are also reviewed de novo. See JustMed, Inc. v. Byce, 600 F.3d 1118, 1125 (9th Cir.2010). We review a district court's denial of a request to refer a case to an agency under the primary jurisdiction doctrine for abuse of discretion. See Syntek Semiconductor Co., Ltd. v. Microchip Tech. Inc., 307 F.3d 775, 781 (9th Cir.2002). But if the district court has committed an error of law, that would constitute an abuse of discretion. See Bateman v. Am. Multi–Cinema, Inc., 623 F.3d 708, 712 (9th Cir.2010). We review the factual findings underlying a district court's decisions for clear error. See JustMed, 600 F.3d at 1125; United States v. Bassignani, 575 F.3d 879, 883 (9th Cir.2009).

We review evidentiary rulings for abuse of discretion, but will not reverse those unless it is more probable than not that an error, if any, tainted the outcome. See Valdivia v. Schwarzenegger, 599 F.3d 984, 993–94 (9th Cir.2010). Moreover, we review a district court's case management decisions for abuse of discretion. See O'Neill v. United States, 50 F.3d 677, 687–88 (9th Cir.1995).

DISCUSSION

U.S. South raises a number of issues besides the central issue of who bears the expense when the completing carrier does not receive the Flex–ANI coding numbers. Three of those are at the threshold: does GCB have a cognizable claim; is even considering the question here a violation of principles of deference to administrative agencies; and should the district court have applied the principle of primary jurisdiction? Others can be considered after we dispose of the central issue: did the district court err when it made evidentiary rulings; did it err when it made case management decisions; did it use the wrong prejudgment interest rate; and did it improperly determine the fee award?

I. Threshold Issues

This group of issues revolves around U.S. South's wish that the district court had not heard the case at all. Its laments take three forms.

U.S. South first states that the district court had no power to grant relief, by which it appears to mean that GCB did not state a claim because no right of action is provided for by law. That is a most problematic position in any event,⁴ but we need not address it at this time because the argument was not presented to the district court.⁵ In short, the alleged defect is not one of jurisdiction ⁶ and U.S. South has waived it.⁷ We will not consider the issue.

Next, U.S. South argues that the district court, somehow, violated the doctrine that requires deference to an interpretation of statutes or regulations by an administrative agency, here the FCC. See Nat'l Assoc. of Home Builders v. Defenders of Wildlife, 551 U.S. 644, 672, 127 S.Ct. 2518, 2537–38, 168 L.Ed.2d 467 (2007); Che...