Pay Phone Concepts v. MCI Telecommunications

• Citation: 904 F. Supp. 1202
• Decision Date: 06 September 1995
• Docket Number: No. 95-4113-SAC.,95-4113-SAC.
• Parties: PAY PHONE CONCEPTS, INC., Plaintiff, v. MCI TELECOMMUNICATIONS CORP., Defendant.
• Court: U.S. District Court — District of Kansas

904 F. Supp. 1202

PAY PHONE CONCEPTS, INC., Plaintiff, v. MCI TELECOMMUNICATIONS CORP., Defendant.

No. 95-4113-SAC.

United States District Court, D. Kansas.

September 6, 1995.

COPYRIGHT MATERIAL OMITTED

David P. Troup, Weary, Davis, Henry, Struebing & Troup, Junction City, KS, for plaintiff Pay Phone Concepts, Inc.

John H. Stauffer, Jr., Goodell, Stratton, Edmonds & Palmer, Topeka, KS, John C. Meinrath, MCI Telecommunications Corporation, Richardson, TX, for defendant MCI Telecommunications Corporation.

MEMORANDUM AND ORDER

CROW, District Judge.

The case comes before the court on the defendant's motion to dismiss or, in the alternative, motion for summary judgment (Dk. 11) and the plaintiff's memorandum in support of declaratory judgment (Dk. 13). The plaintiff seeks a declaratory judgment pursuant to 28 U.S.C. § 2201 that the existing billing dispute between the parties is not subject to mandatory arbitration. The parties agree the court should decide the case on the facts as stipulated and on the legal issues as presented by their memoranda and motion. The court will consider all memoranda that have been filed, including the defendant's response (Dk. 16) and the plaintiff's response¹ (Dk. 17).

FACTS

The parties stipulate that the following facts are true for purposes of determining whether the billing dispute between the parties is subject to mandatory arbitration.

1. Plaintiff, Pay Phone Concepts, Inc. ("Pay Phone"), is a Kansas corporation and defendant, MCI Telecommunications Corporation "MCI") is a Delaware corporation and thus the parties are citizens of different states for purposes of 28 U.S.C. § 1332.

2. The amount in controversy exceeds $50,000.

3. MCI is a provider of long distance telecommunications services to individual and corporate users.

4. Pay Phone owns and operates pay telephones in the state of Kansas and was a purchaser of long distance services from MCI beginning in 1991.

5. During this period, MCI provided telecommunications services to Pay Phone pursuant to MCI Tariff F.C.C. No. 1 ("Tariff"), which is filed with the Federal Communications Commission ("FCC") in Washington, D.C.

6. In May or June 1993, Pay Phone executed a MCI Vision Promotion Enrollment Form and Agreement and a MCI Off-Peak Vision Enrollment Form and Agreement under which it agreed to use MCI services for a term of two years at an annual revenue of $60,000.00. The start date was June 15, 1993. A true and correct copy of the executed Agreements, totalling four preprinted pages, is attached to this Stipulation as Exhibit A and is incorporated by reference herein. Pay Phone executed no other document concerning service by MCI.

7. A true and correct copy of Tariff Section B-7.13, as in effect on May 1, 1993, is attached as Exhibit "B" and incorporated by reference herein.

8. The Tariff was amended in February 1994 to provide for binding arbitration of all disputes concerning or affecting payment of invoices totaling $10,000 and above on services rendered after February 28, 1994. The Tariff was amended in December 1994 to provide for binding arbitration of all disputes concerning or affecting payment of invoices issued after February 28, 1994, for charges totalling $10,000 and above. A true and correct copy of Tariff Section B-7.13 as in effect from February 4, 1994 to the present is attached marked Exhibit "C" and incorporated by reference herein. These tariff amendments were filed with the FCC in Washington, D.C. according to standard procedures.

9. No MCI representative personally informed Pay Phone of the amendments to the Tariff providing for binding arbitration, and Pay Phone was unaware of the amendments.

10. On May 12, 1995, MCI filed a Notice of Claim, Arbitration Case No. 1994ARB00099 with J.A.M.S./Endispute seeking an award of $97,957.44. That sum represents invoices issued after February 28, 1994. Of that sum, $1,340.76 represents charges for telephone service and $96,616.68 represents under-utilization charges arising from Pay Phone's failure to meet its call volume commitment. A statement of account setting forth the charges, payments, and credits is attached as Exhibit D and incorporated by reference herein.

11. Pay Phone filed a response to the arbitration claim of MCI, denying the claim on the merits but also objecting to the jurisdiction of the arbitration firm on the grounds that Plaintiff had never consented to arbitrate any disputes between the parties. Pay Phone plans to file an amendment to its arbitration response to further object to jurisdiction based upon its position that the invoices do not include charges for services rendered in excess of $10,000.00.

(Dk. 9). These stipulations and the referenced documents constitute the entire evidentiary record in this case.

The two agreements referenced above require MCI to provide special rates and discounts on long distance service based on the call volume and service term to which Pay Phone committed itself. Pay Phone committed to retain MCI service for two years, beginning June 15, 1993, and to use an annual minimum of $60,000 in services. In the event that Pay Phone's use did not meet the annual minimum commitment, the agreement provided that Pay Phone would still be charged for the difference between actual usage charges and its annual minimum commitment. For ease of reference, these charges will be called "under-utilization charges."

Both agreements have sections entitled "Tariff Considerations" which are substantially identical. As it appears in the second agreement, this section on tariff concerns reads:

This Enrollment Form and Agreement incorporates by reference the terms and conditions of MCI Tariff F.C.C. No. 1 ("MCI Tariff"). In the event of any inconsistency between this Enrollment Form and Agreement and the terms and conditions set forth in the MCI Tariff, and it may be amended from time to time, the MCI Tariff shall be deemed controlling.

Both agreements also have integration clauses which provide: "Together with the Tariff this is the complete agreement of the parties and supersedes any prior or contemporaneous proposals, discussions or agreements, written or oral, concerning...."

At the time that Pay Phone entered into these agreements, MCI's Tariff at § B-7.13 required arbitration of all disputes concerning or affecting invoices totaling more than $500 between MCI and its California customers. MCI's Tariff, however, did not require arbitration for disputes between it and its other customers.

In February of 1994, MCI amended Tariff § B-7.13, so as to read:

All disputes concerning or affecting payment of invoices totaling $10,000 and above, for services rendered after February 28, 1994, may be resolved through binding arbitration. A dispute concerns or affects payment of invoices when the customer fails to pay an invoice or contests it for any reason associated with the ordering, installation, provisioning, maintenance, repair, interruption, restoration or termination of any service or facility offered under this Tariff. Once MCI or the customer has commenced arbitration of a dispute, arbitration shall be mandatory, and counterclaims may be asserted.

Effective December 23, 1994, MCI revised the first sentence to provide: "All disputes concerning or affecting payment of invoices issued after February 28, 1994 for charges totaling $10,000.00 and above may be resolved through binding arbitration." The symbol "T" next to this amended sentence is intended "to signify a change in text but no change in rate or regulation." 47 C.F.R. § 61.54(i)(1) (1994).

Pay Phone did not meet its annual usage commitment for either year of the two-year contract. MCI billed Pay Phone for these under-utilization charges through invoices beginning in June of 1994 through February of 1995. From June of 1994 through November of 1994, MCI billed Pay Phone for $38,388.51,² and from December 25, 1994 through February of 1995, it billed Pay Phone for $59,705.98.

ISSUES

(1) Does Pay Phone challenge the lawfulness of MCI's Tariff provision requiring arbitration, and, if so, does the court have jurisdiction to hear this challenge?

(2) Must Pay Phone arbitrate as required by MCI's Tariff regardless of its agreement with MCI?

(3) Have Pay Phone and MCI agreed to arbitrate their disputes as provided in MCI's Tariff provisions?

LAWFULNESS OF TARIFF

Citing and summarizing the involved statutory scheme under which the Federal Communications Commission ("FCC") regulates it, MCI argues the district court is without jurisdiction to review the reasonableness or lawfulness of a tariff regulation. Pay Phone concedes this court is without jurisdiction to decide the reasonableness or fairness of MCI's Tariff. Pay Phone, however, denies that its declaratory judgment action exceeds the court's jurisdiction, for it does not contest the Tariff. Rather, Pay Phone says its suit simply asks the court to construe the agreements in determining if the parties have agreed to submit their disputes to binding arbitration. MCI accepts the court deciding whether the Tariff requires arbitration here and whether the written agreements also require arbitration. Because the court intends to decide only those issues, the court considers MCI's jurisdictional challenge to be moot.

FEDERAL COMMUNICATIONS ACT

The Federal Communications Act ("FCA"), 47 U.S.C. §§ 151-613, establishes a regulatory scheme that is as comprehensive as that imposed by the Interstate Commerce Act. MCI Telecommunications Corp. v. Graham, 7 F.3d 477, 479 (6th Cir.1993).³ The express purpose of the FCA is to "regulate interstate and foreign commerce in communication by wire and radio so as to make available ... to all the people of the United States a rapid, efficient ... communication service with adequate facilities at reasonable charges." 47 U.S.C. § 151. Towards that end, the FCA provides that "all charges, practices, classifications, and regulations for and in connection with such communication service,...