In re Empire One Telecommunications Inc.

• Decision Date: 24 October 2011
• Docket Number: Bankruptcy No. 10–10987 (ALG).,Adversary No. 10–04234 (ALG).
• Citation: 458 B.R. 692,55 Bankr.Ct.Dec. 168
• Parties: In re EMPIRE ONE TELECOMMUNICATIONS, INC., a/k/a EOT, Debtor.Empire One Telecommunications, Inc., a/k/a EOT, Plaintiff,v.T–Mobile USA, Inc., Defendant.
• Court: U.S. Bankruptcy Court — Southern District of New York

458 B.R. 692

55 Bankr.Ct.Dec. 168

In re EMPIRE ONE TELECOMMUNICATIONS, INC., a/k/a EOT, Debtor.Empire One Telecommunications, Inc., a/k/a EOT, Plaintiff,

v.T–Mobile USA, Inc., Defendant.

Bankruptcy No. 10–10987 (ALG).

Adversary No. 10–04234 (ALG).

United States Bankruptcy Court, S.D. New York.

Oct. 24, 2011.

Goldberg & Rimberg, PLLC, By: Robert L. Rimberg, Esq., Joel S. Schneck, Esq., Steven A. Weg, Esq., New York, NY, for Plaintiff.Alston & Bird LLP, By: John W. Weiss, Esq., New York, NY, Kristine M. Brown, Esq., Sage M. Sigler, Esq., Atlanta, GA, Marianne Roach Casserly, Washington, DC, for Defendant.

MEMORANDUM OF OPINION

ALLAN L. GROPPER, Bankruptcy Judge.

Introduction

Before the Court is a motion filed by defendant T–Mobile USA, Inc. (“T–Mobile”) to dismiss the amended complaint of plaintiff Empire One Telecommunications, Inc. (“EOT”), the debtor in the above-captioned chapter 11 case. EOT is a competitive local exchange carrier (“LEC”), T–Mobile is a commercial mobile radio service (“CMRS”) carrier, and EOT seeks compensation for having terminated calls that T–Mobile customers made to EOT customers. In its first amended complaint, dated May 27, 2011 (the “Complaint”), EOT asserts claims for compensation based on four theories: (1) account stated, (2) unjust enrichment, (3) failure to pay for goods and services delivered, and (4) prima facie tort. T–Mobile moves to dismiss for lack of subject-matter jurisdiction, pursuant to Rule 12(b)(1), asserting that EOT's earlier submission of an informal claim to the Federal Communications Commission (“FCC” or “Commission”) precludes a lawsuit based on the same issues due to an election of remedies provision in the governing statute. T–Mobile also asserts that the complaint fails to state a claim upon which relief can be granted and should be dismissed pursuant to Rule 12(b)(6). For the reasons set forth below, the motion to dismiss for lack of subject-matter jurisdiction is granted and, accordingly, the Court does not reach the 12(b)(6) issues.

Background

The facts alleged in the Complaint are assumed to be true for purposes of this decision. Additional facts from outside the pleadings are also relied on, as is appropriate on a Rule 12(b)(1) motion, but in any event none of the essential facts is contested.Makarova v. United States, 201 F.3d 110, 113 (2d Cir.2000), citing Kamen v. Amer. Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d Cir.1986).

EOT voluntarily filed a prior petition under chapter 11 of the Bankruptcy Code on July 24, 2001, ultimately confirming a plan of reorganization. That first case was closed on July 11, 2005. On February 25, 2010, EOT filed a second voluntary petition for relief under chapter 11, continuing to operate its business as a debtor in possession. It filed a plan of reorganization that was confirmed on February 28, 2011, but the plan has not yet been consummated.

On May 26, 2009, after emerging from its first bankruptcy but before filing the instant case, EOT filed an informal complaint (the “Informal FCC Complaint”) with the FCC asserting claims against T–Mobile. The Informal FCC Complaint included allegations (i) that “T–Mobile is refusing to pay EOT for both intra and interMTA traffic that T–Mobile has terminated to EOT numbers” and (ii) that T–Mobile was evading its payment obligations by making it appear that interMTA traffic was intraMTA—“Local” or “non-access”—traffic.¹ Memorandum of Law in Support of Defendant's Motion to Dismiss the Complaint, Ex. 1 at 5–6, 10 [ Dkt. No. 32] (attaching the Informal FCC Complaint). The Informal FCC Complaint further asserted (i) that “T–Mobile refuses to negotiate for an interconnection agreement with EOT in good faith” ² and (ii) that EOT was “entitled to invoice T–Mobile USA for Local [(non–access)] traffic based on 47 C.F.R. § 20.11(b)(2)....” Ex. 1 at 6, 11. The relief requested was as follows:

EOT is requesting that the FCC direct T–Mobile to (a) route all Access Traffic destined to EOT to the appropriate Verizon Access Tandem, (b) continue the negotiations that T–Mobile initiated in July 2007 and supply EOT with a draft non bill-and-keep interconnection agreement ..., and (d) pay the invoices submitted by EOT to T–Mobile.Ex. 1 at 15.

There were some developments over the next several months relating to the Informal FCC Complaint, including a response by T–Mobile required under FCC rules. Then, by letter dated November 18, 2009, the FCC advised EOT that it had reviewed the Informal FCC Complaint, T–Mobile's response, and other correspondence between the parties and was closing the file without further action. Declaration of Steven A. Weg, Ex. 1 [Dkt. No. 37] (attaching the FCC's letter). The FCC also advised that EOT could convert the Informal FCC Complaint into a formal one if it was not satisfied with this disposition, but that such action would have to be taken by January 4, 2010. After that date, the Informal FCC Complaint would be deemed abandoned. EOT chose not to pursue the formal complaint process. Memorandum of Law in Opposition to Defendant's Motion to Dismiss the Complaint 4 [Dkt. No. 36].

EOT initiated this adversary proceeding by filing a four-page complaint on November 16, 2010 (the “Initial Complaint”), alleging two counts against T–Mobile. [Dkt. No 1]. The first count was for an account stated, and the second was for unjust enrichment. T–Mobile filed a motion to dismiss the Initial Complaint on January 18, 2011. [Dkt. No. 6]. After a hearing on April 12, 2011, the Court granted T–Mobile's motion, without prejudice to repleading. Order Granting Defendant's Motion to Dismiss the Complaint (April 21, 2011) [Dkt. No. 28]. At the April 12 hearing, the Court found in substance that the abbreviated complaint, which did not even attach the invoices on which the account stated claim was based, was insufficient. EOT then filed the instant Complaint on May 27, 2011. [Dkt. No. 29].

The essence of EOT's allegations is that T–Mobile is indebted to EOT because calls from the T–Mobile network were terminated to numbers serviced by EOT, that is, EOT put calls from T–Mobile customers through to its own customers without being paid for doing so. EOT alleges that “T–Mobile was attempting to avoid paying for non-local or ‘Access' traffic termination as the traffic was essentially masked to appear as intraMTA traffic.” Amended Complaint ¶ 14. EOT also describes the same interconnection agreement negotiation as addressed in the Informal FCC Complaint, id. ¶¶ 66–87, and it again asserts that the source of T–Mobile's obligation to pay is 47 C.F.R. § 20.11, id. ¶¶ 43–50.

The damages sought are for calls during the period starting January 1, 2007 and ending June 30, 2010 based on various state common law theories. EOT invoiced T–Mobile for all traffic in that period, sending out the first bill on February 17, 2009. See Amended Complaint, Ex. A (including invoices for “local,” “intrastate,” and “interstate” calls). EOT uses the outstanding balance due on or before July 16, 2010 as the measure of damages requested for each of the four counts. Id. ¶ ¶ 95, 107, 113, 120. All of the invoices include charges for “local” and “interstate” traffic, which presumably refers respectively to intrastate, intraMTA calls, and to interstate, interMTA calls. EOT suspended “intrastate” (intrastate, interMTA) service to T–Mobile on August 31, 2009 and ceased associated billing. Id. ¶ 80. Although the Complaint asserts that T–Mobile acted in bad faith, it does not contain a damage claim based thereon. See id. ¶¶ 66–87; Memo in Opposition 14 (“T–Mobile's argument is contrary to clear orders and directives of the FCC and is a bad faith attempt to avoid paying over $1,400,000 owed to EOT.”); id. at 25 (“At all times, T–Mobile has conducted itself in bad faith....”).

T–Mobile responded to the Complaint with the instant motion to dismiss on July 1, 2011. [Dkt. No. 31]. It argues that EOT impermissibly used tariffs to calculate the invoiced amounts, that a complex structure of rights and obligations exists between the parties, and that it is disputed whether the fees for access or non-access calls should apply to the T–Mobile traffic. See supra note 1. Prior to reaching the merits, T–Mobile further asserts, the Court should dismiss for lack of jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) based on EOT's prior informal complaint to the FCC. Since the motion to dismiss for lack of jurisdiction is well-founded, it is the only issue that need be addressed.

Discussion

A. Legal Standard

A motion to dismiss for lack of subject-matter jurisdiction under Fed.R.Civ.P. 12(b)(1), made applicable by Bankruptcy Rule 7012(b), may be raised by any party or by a court sua sponte. Arbaugh v. Y & H Corp., 546 U.S. 500, 506, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006). Subject-matter jurisdiction refers to “prescriptions delineating the classes of cases ... falling within a court's adjudicatory authority.” Kontrick v. Ryan, 540 U.S. 443, 455, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004). “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).

The plaintiff bears the burden of establishing by a preponderance of the evidence that the court has subject-matter jurisdiction. Luckett v. Bure, 290 F.3d 493, 497 (2d Cir.2002). “A court must accept the material factual allegations in the complaint as true, but need not draw inferences favorable to the plaintiff.” Penthouse Media Group v. Guccione (In re Gen. Media, Inc.), 335 B.R. 66, 71–72 (Bankr.S.D.N.Y.2005), citing J.S. v. Attica Cent. Schools, 386 F.3d 107, 110 (2d Cir.2004). In addition, materials outside the pleadings may be considered on a Rule 12(b)(1) challenge without converting the motion into one for summary judgment. Makarova, 201 F.3d at 113, citing Kamen, 791 F.2d at 1011.

B. Election of Remedies Pursuant to 47 U.S.C. § 207

Section 207 of the Communications Act of 1934 (as amended, the “Act”), 47 U.S.C....