Metrophones v. Global Crossing

• Decision Date: 08 September 2005
• Docket Number: No. 04-35287.,04-35287.
• Citation: 423 F.3d 1056
• Parties: METROPHONES TELECOMMUNICATIONS, INC., a Washington corporation, Plaintiff-counter-defendant-Appellee, v. GLOBAL CROSSING TELECOMMUNICATIONS, INC., a Michigan corporation, Defendant-counter-claimant-Appellant, and Unidentified Companies I through X, Defendants.
• Court: U.S. Court of Appeals — Ninth Circuit

423 F.3d 1056

METROPHONES TELECOMMUNICATIONS, INC., a Washington corporation, Plaintiff-counter-defendant-Appellee, v. GLOBAL CROSSING TELECOMMUNICATIONS, INC., a Michigan corporation, Defendant-counter-claimant-Appellant, and Unidentified Companies I through X, Defendants.

No. 04-35287.

United States Court of Appeals, Ninth Circuit.

Argued January 12, 2005.

Resubmitted August 31, 2005.

Filed September 8, 2005.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Michael J. Shortley, III, Global Crossing North America, Inc., Pittsford, NY, and Daniel M. Waggoner, Davis Wright Tremaine LLP, Seattle, WA, for the defendant-counter-claimant-appellant.

David J. Russell, Keller Rohrback L.L.P., Seattle, WA, for the plaintiff-counter-defendant-appellee.

Joel Marcus, Federal Communications Commission, Washington, D.C., for the amicus curiae.

Appeal from the United States District Court for the Western District of Washington; Marsha J. Pechman, District Judge, Presiding. D.C. No. CV-03-00694.

Before: SCHROEDER, Chief Judge, and GOODWIN and GRABER, Circuit Judges.

GRABER, Circuit Judge:

We again are asked to decide whether a provider of payphone services may sue a long distance carrier to recover compensation that federal regulations, 47 C.F.R. §§ 64.1300-.1340, obligate the carrier to pay. We faced that question once before, in Greene v. Sprint Communications Co., 340 F.3d 1047, 1050-51 (9th Cir.2003), cert. denied, 541 U.S. 988, 124 S.Ct. 2026, 158 L.Ed.2d 492 (2004), and answered "no." This time, the circumstances have changed materially: since our decision in Greene, which was made without the participation of the Federal Communications Commission ("Commission" or "FCC"), the Commission has interpreted a provision of the Communications Act that we did not address explicitly in Greene, 47 U.S.C. § 201(b), to allow such actions. As we explain below, we defer to the Commission's reasonable, authoritative interpretation of that statute. See, e.g., Nat'l Cable & Telecomms. Ass'n v. Brand X Internet Servs., ___ U.S. ___, ___ - ___, 125 S.Ct. 2688, 2702-12, 162 L.Ed.2d 820 (2005) ("Brand X") (deferring to the FCC's interpretation of a statute).

Consequently, we affirm the district court's decision to allow Plaintiff Metrophones Telecommunications, Inc., a payphone service provider, to go forward with its claim under § 201(b) against Defendant Global Crossing Telecommunications, Inc., a long distance carrier. We also hold that Plaintiff may pursue two of its three state law claims, because they are not preempted by 47 U.S.C. § 276(c). We reverse, however, the district court's decision to allow Plaintiff to pursue claims under 47 U.S.C. § 416(c) and under a third state-law theory.

I. BACKGROUND

A. Statutory and Regulatory Background

Before 1996, payphone service providers ("PSPs") were largely uncompensated for "dial-around" coinless calls—calls in which the caller uses an access code or a "1-800" number to place calls through a long distance carrier other than the carrier with which the PSP has a contract. Am. Pub. Commc'ns Council v. FCC, 215 F.3d 51, 53 (D.C.Cir.2000). As of 1990, PSPs were prohibited by statute from blocking such dial-around calls, Ill. Pub. Telecomms. Ass'n v. FCC, 117 F.3d 555, 559 (D.C.Cir.1997) (per curiam), but were unable to secure payment for them. Therefore, in the Telecommunications Act of 1996, Pub.L. No. 104-104, 100 Stat. 5,¹ Congress directed the Commission to enact regulations establishing "a per call compensation plan to ensure that all payphone service providers are fairly compensated for each and every completed intrastate and interstate call using their payphone." 47 U.S.C. § 276(b)(1)(A).

The Commission then adopted rules making particular carriers responsible for compensating PSPs for dial-around calls. 47 C.F.R. §§ 64.1300-.1340; see also Sprint Corp. v. FCC, 315 F.3d 369, 371-73 (D.C.Cir.2003) (describing the development of the rules); Pay Tel. Reclassification & Comp. Provisions of Telecommc'ns Act of 1996, 18 F.C.C.R. 19,975, 2003 WL 22283556 (2003) ("2003 Payphone Order") (adopting final rules for fair compensation of PSPs). The rules require carriers to pay PSPs on a per-call basis at a rate agreed upon by the parties, 47 C.F.R. § 64.1300(b), and set default per-call rates that are mandatory in the absence of such an agreement, id. § 64.1300(c), (d). The rules also set forth detailed compensation procedures and reporting requirements, which the parties may modify by agreement. Id. § 64.1310.

B. Procedural History

Plaintiff filed this action in district court alleging that Defendant had failed to pay the full amount owed for calls placed from Plaintiff's payphones. Originally, Plaintiff brought its action under 47 U.S.C. § 276—the statute by which Congress had directed the Commission to enact regulations to fairly compensate PSPs. However, soon after Plaintiff filed its action, this court held that § 276 provides no private right of action—express or implied—to recover compensation for payphone calls. Greene, 340 F.3d at 1053.

In the wake of Greene, Defendant moved for judgment on the pleadings as to Plaintiff's federal claim. The district court agreed that Greene foreclosed Plaintiff's original claim under § 276, but permitted Plaintiff to amend its complaint to assert federal claims under 47 U.S.C. §§ 201(b) and 416(c), provisions dealing with "unjust and unreasonable" practices of carriers and the duty to comply with FCC orders, respectively. The court rejected Defendant's argument that those amendments would be futile because they would not survive a motion to dismiss.

Defendant also moved for judgment on the pleadings on Plaintiff's state law claim for "quantum meruit," arguing that the claim was preempted by 47 U.S.C. § 276(c), which expressly preempts state laws that are inconsistent with the federal regulations. The district court denied Defendant's motion, concluding that the quantum meruit claim was consistent with the federal regulations. For the same reason, the court allowed Plaintiff to add two additional state law claims for breach of implied contract and negligence.

The district court granted Defendant's motion requesting an interlocutory appeal, 28 U.S.C. § 1292(b), and we agreed to allow the appeal.

II. STANDARDS OF REVIEW

In an interlocutory appeal, we review de novo the district court's denial of a motion for judgment on the pleadings. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir.1986) (reviewing de novo the denial of a motion to dismiss for failure to state a claim); Turner v. Cook, 362 F.3d 1219, 1225 (9th Cir.) (reviewing de novo a dismissal on the pleadings), cert. denied, ___ U.S. ___, 125 S.Ct. 498, 160 L.Ed.2d 371 (2004). The district court's interpretation of a statute is reviewed de novo, SEC v. McCarthy, 322 F.3d 650, 654 (9th Cir.2003), as are its decisions regarding preemption, Transmission Agency of N. Cal. v. Sierra Pac. Power Co., 295 F.3d 918, 927 (9th Cir.2002).

We review for abuse of discretion the district court's decision to permit amendment of a complaint. Nat'l Audubon Soc'y, Inc. v. Davis, 307 F.3d 835, 853 (9th Cir.), amended by 312 F.3d 416 (9th Cir.2002). An error of law is one form of an abuse of discretion. Koon v. United States, 518 U.S. 81, 100, 116 S.Ct. 2035, 135 L.Ed.2d 392 (1996).

III. DISCUSSION

A. Plaintiff may pursue compensation in a private action under the FCC's reasonable, authoritative interpretation of 47 U.S.C. § 201(b).

1. Greene did not address 47 U.S.C. § 201(b).

We recognized in Greene that any person who suffers damages as a result of a common carrier's violation of a "provision[] of this chapter"—that is, of the Communications Act, 47 United States Code, Chapter 5—may seek recovery of those damages in federal court under 47 U.S.C. §§ 206 and 207.² Greene, 340 F.3d at 1050 & n. 2. Nonetheless, we held that a common carrier's failure to pay compensation for payphone calls does not violate 47 U.S.C. § 276 and therefore does not give rise to a claim under §§ 206 and 207. Id. at 1050-51. We reasoned that, although the regulations enacted pursuant to § 276 require carriers to pay PSPs, the statute itself merely requires the Commission to adopt regulations to ensure fair compensation for PSPs. See id. Because a claim under §§ 206 and 207 requires violation of a statute, and because a carrier does not violate § 276 directly when it fails to pay PSPs, "there is no violation of the Act to be remedied through the private right of action afforded by §§ 206 and 207." Id. at 1052.³ The payphone regulations alone, we held, could not create an enforceable obligation where none existed in the statute. Id. at 1051 (citing Alexander v. Sandoval, 532 U.S. 275, 284-89, 121 S.Ct. 1511, 149 L.Ed.2d 517 (2001)).

In Greene, we were not asked to decide whether a carrier's failure to compensate a PSP would violate provisions of the Communications Act other than § 276, nor did we give explicit consideration to any other provision of that Act. Nonetheless, several of our statements suggest that our decision foreclosed any recovery of payphone compensation under federal law. For example, we said:

There is no private right of action for the relief that PSPs seek, to recover damages for [a carrier's] alleged failure to pay compensation for dial-around calls as required by FCC regulations promulgated pursuant to § 276 of the Telecommunications Act.

Id. at 1053; see also id. at 1052(stating that failure to pay a PSP causes "no violation of the Act"). Thus, the central question briefed by the parties in the present appeal is whether the broad statements in Greene preclude an action to enforce two different sections of the Act—47 U.S.C. §§ 201(b) and 416(c)—that we did not address in Greene. We turn first to § 201(b) and conclude that, in view of the FCC's reasonable, authoritative interpretation of § 201(b), Greene does not prevent Plaintiff from...