Mcleodusa Telecommunications Services v. Qwest
| Decision Date | 23 March 2005 |
| Docket Number | No. C 05-0039-MWB.,C 05-0039-MWB. |
| Citation | 361 F.Supp.2d 912 |
| Parties | MCLEODUSA TELECOMMUNICATIONS SERVICES, INC., Plaintiff, v. QWEST CORPORATION and Qwest Communications Corporation, Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
Alan E. Fredregill, Heidman Redmond Fredregill Patterson Plaza Dykstra & Prahl, Sioux City, IA, Diane Kutzko, Mark L. Zaiger, Richard S. Fry, Shuttleworth & Ingersoll, Cedar Rapids, IA, Ky Elaine Kirby, Richard M. Rindler, Swidler Berlin Shereff Friedman, LLP, Washington, DC, for Plaintiff.
Amy L. Benson, Timothy R. Beyer, Brownstein, Hyatt & Farber, PC, Denver, CO, Amy M. Omvig, Dennis Wayne Johnson, Sheila K. Tipton, Dorsey & Whitney, Des Moines, IA, for Defendants.
TABLE OF CONTENTS
I. INTRODUCTION ..............................................................914
A. Factual Background ....................................................914
B. Procedural Background .................................................917
II. LEGAL ANALYSIS ............................................................918
A. Standards For A Temporary Restraining Order ...........................918
B. Consideration Of The Dataphase Factors ................................919
1. Likelihood of success on the merits ...............................919
a. The nature of the requirement .................................919
b. Application ...................................................919
2. Irreparable harm ..................................................920
3. Balance of harms ..................................................921
4. The public interest ...............................................922
C. Rule 65's Bond Requirement ............................................923
D. Extension Of The Temporary Restraining Order ..........................924
III. CONCLUSION ................................................................925
This is one of two lawsuits arising from a payment dispute between telecommunications companies, plaintiff McLeodUSA Telecommunications Services, Inc., and defendants Qwest Corporation and Qwest Communications Corporation. These parties provide each other with various services for initiation or completion of intrastate, interstate, wireless, wire-line, long-distance, and "toll free" (8YY) calls to and from each other's customers. Although the parties held litigation at bay pursuant to a standstill agreement, that agreement expired on February 23, 2005, and both McLeodUSA and Qwest Communications Corporation have filed lawsuits, McLeodUSA's in this court, and Qwest's in Colorado. In this action, McLeodUSA has now moved for a temporary restraining order or preliminary injunction to maintain the status quo pending judicial or other resolution of the parties' dispute.
To understand the dispute leading to McLeodUSA's request for a temporary restraining order, a brief discussion of trade terminology and the relationship between the parties is necessary. This background is drawn primarily from McLeodUSA's Complaint, to which no answer has yet been filed, and the documents in support of McLeodUSA's motion for a temporary restraining order or preliminary injunction.
The Telecommunications Act of 1996, 47 U.S.C. § 151, et seq., subdivided local telephone companies (or "local exchange carriers") into two different groups: the former monopoly local telephone companies, which are termed incumbent local exchange carriers ("ILECs"), and new entrants to the local market, which are called competitive local exchange carriers ("CLECs"). See Richard E. Wiley, et al., Communications Law 2004: Contentious Times in a Shifting Landscape, 813 PLI/Pat 287, 300 (December 2004) (discussing telecommunications technology following passage of the 1996 Act). McLeodUSA is a CLEC. Among other things, McLeodUSA provides access service to various customers, including long distance carriers (technically known as interexchange carriers ("IXCs")) and wireless carriers (technically known as commercial mobile radio service carriers ("CMRS")). Defendant Qwest Corporation is an ILEC and Qwest Communications Corporation is an IXC providing long distance telephone services, including toll free services, to customers throughout the United States.
When a customer of a CMRS (wireless carrier) calls an IXC's (long distance carrier) customer, the CMRS must connect to the Public Switched Telephone Network ("PSTN"). The CMRS can choose to connect to the PSTN through either an ILEC or a CLEC. Therefore, as a CLEC, McLeodUSA would provide a means by which a CMRS can access the PSTN. When a CMRS customer that has chosen McLeodUSA to connect to the PSTN places a call, the call is routed through McLeodUSA's facilities to the IXC (long distance carrier).
A "toll free" call is a call in which the IXC's customer ("toll free customer") is the person called. This "toll free customer" is assigned an 8YY area code number — and calls to "toll free customers" are termed "8YY traffic." In the case of 8YY traffic, the "toll free customer" has agreed with the IXC to pay the IXC for the incoming call, typically at a set rate per minute. In such instances, the IXC is obligated to pay McLeodUSA for the access that enabled the toll free call to reach the IXC, and hence, ultimately reach the "toll free customer." Where the call originates from a wireless telephone, the call is routed from the CMRS's Mobile Telecommunications Switching Office ("MTSO") to a McLeodUSA facility (or "trunk") which connects the CMRS's MTSO to the McLeodUSA PSTN switch. If the call is a toll free call, the call is routed through McLeodUSA, and then, at the IXC's option, either directly to the IXC whose customer is being called or indirectly through the ILEC.
In this competitive market, McLeodUSA provides financial incentives to CMRSs and institutions (i.e. hotels, colleges, airports) in order to encourage them to do business with McLeodUSA rather than the incumbent ILEC. In return for an agreement of CMRSs or institutions to connect via McLeodUSA's facilities, McLeodUSA provides them a commission based on revenues McLeodUSA receives from providing access services to IXCs in connection with 8YY traffic direct to the IXC's customers. Therefore, in order to meet its contractual obligations with CMRSs committed to using McLeodUSA to connect, McLeodUSA bills and collects access charges for providing access services to IXCs in connection with the completion of long distance calls from the customers of other carriers to an IXC's toll free customers, including 8YY wireless calls.
McLeodUSA alleges that it has been providing both interstate and intrastate access service to Qwest for years under federal and state tariffs or implied contracts. Complaint, Doc. No. 2, at ¶ 14. During that time, McLeodUSA has billed Qwest for inter- and intrastate access charges on a regular basis. Qwest paid these bills without objection until payment was due for access services billed in April 2004. Qwest refused to pay McLeodUSA for any access services, both provided under tariff and implied contract, billed by McLeodUSA during April and May of 2004. Qwest contends that McLeodUSA has improperly inserted itself as the "originator" of certain wireless calls and has improperly, or fraudulently, claimed origination access fees for wireless customers by billing Qwest as if McLeodUSA were actually the originator of the calls. For access services billed by McLeodUSA from June 2004 through November 2004, Qwest refused to pay approximately 50% of each bill. McLeodUSA contends the total amount billed, but unpaid, is approximately $5.5 million.
Since June 19, 2001, Qwest Communications Corporation has provided McLeodUSA with certain services pursuant to a Wholesale Services Agreement. Additionally, Qwest Communications Corporation provides certain services to McLeodUSA pursuant to tariff. Qwest bills McLeodUSA for the services that it provides both under the Wholesale Services Agreement and pursuant to tariff. When the parties failed to come to some agreement regarding Qwest's withholding of payment to McLeodUSA, on about September 30, 2004, McLeodUSA began to withhold amounts billed to it pursuant to the Wholesale Services Agreement. From September 30, 2004, through November 2004, McLeodUSA withheld approximately $3.8 million in payment due to Qwest in order to set-off the $5.5 million McLeodUSA alleges it was owed by Qwest.
In December 2004, McLeodUSA and Qwest entered into a standstill agreement by which they agreed to stop the withholding of payments from one another at least until the agreement expired on February 23, 2005. McLeodUSA alleges that, should Qwest resume withholding payments for McLeodUSA's services, it would impair McLeodUSA's cash flow to the point that it will threaten McLeodUSA's ability to continue providing services to its other customers, including residential consumers and small businesses. Upon the expiration of the standstill agreement, Qwest filed suit in Colorado state court, and McLeodUSA filed the present lawsuit in this federal court. McLeodUSA has since removed the Colorado action to Colorado federal court.
On March 18, 2005, in a letter to McLeodUSA on Qwest Communications letterhead, authored by Steven Hansen — identified as "Vice President-Carrier Relations, Worldwide Wholesale Markets" — Qwest asserted that McLeodUSA was in default of its payment obligations to Qwest, that McLeodUSA had failed to provide a previously requested security amount of $900,000.00 dollars, and that unless payment of both the past due amount of $836,083.72 and the $900,000.00 security deposit was made by 5:00 p.m. Mountain Standard Time on March 23,...
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