Mci, LLC v. Patriot Engineering and Environmental

• Decision Date: 17 May 2007
• Docket Number: No. 1:06-cv-00945-DFH-JMS.,1:06-cv-00945-DFH-JMS.
• Citation: 487 F.Supp.2d 1029
• Parties: MCI, LLC d/b/a Verizon Business, Plaintiff, v. PATRIOT ENGINEERING AND ENVIRONMENTAL, INC., Defendant.
• Court: U.S. District Court — Southern District of Indiana

487 F.Supp.2d 1029

MCI, LLC d/b/a Verizon Business, Plaintiff, v. PATRIOT ENGINEERING AND ENVIRONMENTAL, INC., Defendant.

No. 1:06-cv-00945-DFH-JMS.

United States District Court, S.D. Indiana, Indianapolis Division.

May 17, 2007.

Anthony J. Jorgenson, James John Proszek, Hall Estill Hardwick Gable Golden & Nelson PC, Tulsa, OK, Cathy Elliott, Bose McKinney & Evans, Indianapolis, IN, for Plaintiff.

James D. Witchger, Jeffrey Alan Musser, Scott Lee Timberman, Rocap Witchger LLP, Indianapolis, IN, for Defendant.

ENTRY ON LOSS OF USE DAMAGES

HAMILTON, District Judge.

Plaintiff MCI, LLC does business as Verizon Business ("Verizon") and operates a telecommunications network of fiber-optic cables. Defendant Patriot Engineering and Environmental, Inc. ("Patriot") damaged, one of Verizon's high-capacity underground cables while performing drilling operations for Indiana's highway department. Verizon quickly rerouted much of the telecommunications traffic through other cables and repaired the damaged cable in a little more than eight hours. The repairs cost approximately $22,000. In this diversity action, plaintiff Verizon seeks both those repair costs and an additional award of $633,596 for the loss of use of its cable during the hours needed to repair it. Defendant Patriot seeks partial summary judgment on the issue of loss of use damages. Patriot has agreed that Verizon is entitled to recover some reasonable amount for loss of use damages for the hours that it took to repair the cable. The disputed issue is how to measure the value of that loss of use.

Verizon seeks to measure its loss of use by what it claims it would have cost to rent replacement fiber-optic capacity for a few hours on the open market, though Verizon did not actually rent any replacement cable capacity. As explained below, Verizon is not entitled to measure the value of its loss of use as it proposes. Verizon has failed to come forward with evidence that there is a functioning rental market for comparable facilities for such a short term. More than 98 percent of the claimed rental cost, $624,000 of a total of $633,596, consists of one-time installation fees that a third-party provider charges for the setup of one-year rental contracts for high-capacity telecommunications cables. Awarding loss of use damages based primarily on those one-time charges for such different hypothetical rental transactions would be unreasonable as a matter of law. Such an award would amount to an improper windfall under Indiana law and would be unfair in the absence of a market for short-term rental of comparable facilities.

Summary Judgment Standard

The purpose of summary judgment is to "pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Summary judgment should be granted only where the pleadings, depositions, answers to interrogatories, affidavits, and other materials demonstrate that there exists "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Only genuine disputes over material facts can prevent a grant of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is material if it might affect the outcome of the suit under the governing law. Id.

Patriot's motion for summary judgment asserted initially that Verizon has no evidence that would support any award of loss of use damages at all. Patriot has since conceded that some loss of use damages may be appropriate. Patriot still contends that loss of use damages could not reasonably be based on the onetime charges that are part of cable rental transactions for one year or more. Under Indiana law, it is the plaintiffs burden to prove damages. Shepard v. State Automobile Mutual Ins. Co., 463 F.3d 742, 745 (7th Cir.2006), citing Lincoln National Life Insurance Co. v. NCR Corp., 772 F.2d 315, 320 (7th Cir.1985). As a matter of summary judgment practice, Patriot's motion takes advantage of the holding in Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party may prevail by pointing out the lack of evidence on an issue, like damages here, as to which the non-moving party bears the burden of proof.

In deciding a motion for summary judgment, the court may not make credibility determinations, weigh the evidence, or choose from among different reasonable inferences that might be drawn from the evidence. Paz v. Wauconda Healthcare and Rehabilitation Centre, LLC, 464 F.3d 659, 664 (7th Cir.2006) (reversing summary judgment); Payne v. Paisley, 337 F.3d 767, 770 (7th Cir.2003) (reversing summary judgment). "[B]ecause summary judgment is not a paper trial, the district court's role in deciding the motion is not to sift through the evidence, pondering the nuances and inconsistencies, and decide whom to believe." Waldridge v. American Hoechst Corp., 24 F.3d 918, 920 (7th Cir. 1994). The court must view the evidence in the light reasonably most favorable to the non-moving party, giving it the benefit of conflicts in the evidence and the most favorable reasonable inferences. Paz, 464 F.3d at 664; Pourghoraishi v. Flying J, Inc., 449 F.3d 751, 754 (7th Cir.2006). Accordingly, the factual statements in this decision are not necessarily accurate but reflect the evidence in light of the summary judgment standard.

Facts For Summary Judgment

Patriot is an engineering firm that provides geotechnical, environmental, and construction materials testing services. Patriot had a contract with the Indiana Department of Transportation to perform geotechnical engineering services throughout Indiana. On September 13, 2005, as a part of the agreement, Patriot conducted foundation exploration soil borings near County Road 700 West and U.S. 52 (Brookville Road) in Hancock County. The soil borings were taken in connection with roadway improvements scheduled for U.S. 52. While conducting these soil borings, Patriot damaged a fiber-optic telecommunications cable owned and operated by Verizon.

Verizon operates a telecommunications network that relies on many underground fiber-optic cables like the one that Patriot damaged. These cables carry telecommunications traffic between various terminals on Verizon's network. The high-capacity cable that Patriot damaged contained 48 separate optical fibers and ran between Verizon's terminals in Pleasant View, Indiana and Waynesville, Ohio. One pair of fiber-optic cables could carry up to 32 OC-192 transport systems. An OC (optical carrier) transport system converts electrical signals into optical signals that can then be carried over fiber-optic cables in the form of light. The capacity of a fiberoptic cable is measured in "DS-3" units. One DS-3 is the equivalent of 672 individual telephone calls. An OC-192 transport system can carry 192 DS-3s, an OC-48 transport system can carry 48 DS-3s, etc. Since a pair of fiber-optic cables is capable of carrying up to 32 OC-192 transport systems, the cable that Patriot damaged, which had 24 pairs of cables, could potentially carry 768 OC-192 transport systems. This is a capacity of 147,456 DS-3s, or the equivalent of 99,090,432 individual telephone calls.

At the time the cable was damaged, Verizon was using less than one half of one percent of the cable's theoretical maximum capacity. Only thirteen OC-48 transport systems were "lit, active, and impacted." This is a capacity of 624 DS-3s, equivalent to 419,328 individual telephone calls. Verizon has based its claim for loss of use damages on only this capacity that was actually in use at the time of the accident.

Within approximately one minute after Patriot damaged the cable, Verizon was able to restore 296 DS-3s by rerouting them automatically to spare capacity on other cables in Verizon's network. Verizon was able to restore another six DS-3s by rerouting them manually to spare capacity on other cables in Verizon's network within approximately two hours and 36 minutes. Verizon was able to repair the cable and restored the remaining 322 DS-3s approximately eight hours and 27 minutes, after Patriot had damaged the cable. Approximately 3,900 switched calls were blocked or interrupted as a result of the damage to the cable. Verizon received complaints from at least 57 separate customers that their dedicated service was interrupted.

Verizon now seeks more than $655,000 in damages from Patriot. This sum includes $6,250 in labor costs paid to an outside contractor and $15,624 in costs of Verizon's own employees for work to physically repair the cable. Patriot's summary judgment motion does not challenge those charges.

Verizon also seeks loss of use damages based on what it claims it would have cost it to rent 624 DS-3 lines for 8.23 hours (the time calculated by Verizon). To determine the cost of renting cable capacity sufficient to replace the transport systems affected by the damaged cable, Verizon consulted the published tariff schedules of Level 3 Communications, Inc. ("Level 3") and Qwest Communications Corporation. See. Supplemental Decl. of Tooley, Exhibits C & D (Docket No. 43). Level 3 also operates a nationwide fiber-optic network. Its rate for comparable capacity consists of a monthly recurring charge of $1,345.34 per DS-3 and a onetime installation charge of $1,000 per DS-3. During oral argument on Patriot's motion, Verizon verified that the minimum rental period that Level 3 offers is one year. In calculating the hypothetical rental rate, Verizon pro-rated the $1,345.34 per month charge to an hourly rate of approximately $1.87 per DS-3. Verizon did not pro-rate the installation fee. The pro-rated hourly rate was then multiplied by the 8.23 hours that it took to repair the cable and then again by the 624 DS-3 lines that were affected. This yielded a...