United States ex rel. Vt. Nat'l Tel. Co. v. Northstar Wireless, L.L.C., Civil Action No. 15–728 (CKK)

• Decision Date: 12 December 2017
• Docket Number: Civil Action No. 15–728 (CKK)
• Citation: 288 F.Supp.3d 28
• Parties: UNITED STATES of America, EX REL. VERMONT NATIONAL TELEPHONE CO., Plaintiff v. NORTHSTAR WIRELESS, L.L.C., et al., Defendants
• Court: U.S. District Court — District of Columbia

288 F.Supp.3d 28

UNITED STATES of America, EX REL. VERMONT NATIONAL TELEPHONE CO., Plaintiff

v.NORTHSTAR WIRELESS, L.L.C., et al., Defendants

Civil Action No. 15–728 (CKK)

United States District Court, District of Columbia.

Filed December 12, 2017

Bert W. Rein, Michael Lee Sturm, Stephen J. Obermeier, Wiley Rein LLP, Washington, DC, for Plaintiff.

Benjamin John Razi, Peter B. Hutt, II, Michael M. Maya, Covington & Burling LLP, Gejaa T. Gobena, Jonathan Lee Diesenhaus, Hogan Lovells US LLP, Howard M. Shapiro, Carl J. Nichols, Wilmer Cutler Pickering Hale & Dorr LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION AND ORDER

(December 12, 2017)

COLLEEN KOLLAR–KOTELLY, United States District Judge

Relator Vermont National Telephone Company brings this action under the False Claims Act ("FCA"), 31 U.S.C. § 3730, alleging that Defendants deprived the United States of approximately $3.3 billion through misconduct during an auction of wireless spectrum licenses conducted by the Federal Communications Commission ("FCC") between November 13, 2014, and January 29, 2015 (the "Auction"), in which Relator also participated. Relator alleges that the Defendants engaged in "a massive fraud" designed to obtain "bidding credits to which they were not entitled," Rel.'s Opp'n to Defs.' Mot. to Temporarily Stay Case Pending Related Appeal and Request for Expedited Consideration, ECF No. 48, at 1, credits which the FCC awarded them through its "designated entity" program. That program defines "designated entities" as either "small businesses" or "very small businesses" that are entitled to bidding credits based on "their average annual gross revenues during the preceding three years." Defs.' Mot. to Temporarily Stay Case Pending Related Appeal and Request for Expedited Consideration, ECF No. 41, at 3. A qualifying "very small business" is eligible for a 25% credit. Id.

Two months prior to the Auction, Defendants Northstar Wireless, L.L.C. ("Northstar") and SNR Wireless LicenseCo, L.L.C. ("SNR") filed "short-form" applications to participate in the Auction as designated entities. Id. at 2–3; Compl. ¶ 76. Relator's Complaint alleges that Northstar and SNR falsely represented to the FCC that they qualified as "very small businesses" and were thereby entitled to a 25% bid credit, even though the two entities were in fact controlled by Defendant DISH Network Corporation, "a Fortune 250 corporation with annual revenues of $14 billion and a market capitalization of over $32 billion." Rel.'s Opp'n to Defs.'Mot. to Temporarily Stay Case Pending Related Appeal and Request for Expedited Consideration, ECF No. 48, at 2. Relator also alleges that Defendants engaged in a "complex bidding scheme ... to create the appearance of intense competition in order to scare off legitimate bidders." Id.

Northstar and SNR ultimately secured 345 wireless spectrum licenses during the Auction, for a gross bid amount of $13.3 billion; but because they participated as designated entities entitled to a 25% bid discount, Northstar and SNR were only obligated to pay $10 billion. Id. at 3. Subsequently, Northstar and SNR filed "long-form" applications to obtain the wireless spectrum licenses they had won in the Auction. Defs.' Mot. to Temporarily Stay Case Pending Related Appeal, ECF No. 41, at 3–4. Relator and seven other parties filed petitions with the FCC to deny those applications shortly thereafter. Id. at 4. While its petition was pending before the FCC, Relator filed this qui tam action, in which the United States has declined to intervene. See The United States' Notice of Election to Decline Intervention, ECF No. 17.

On August 18, 2015, the FCC issued a Memorandum Opinion and Order, which concluded that "DISH is ... a controlling entity of, or affiliated with [SNR and Northstar] ... and therefore neither SNR nor Northstar is eligible for very small business bidding credits."

FCC Order ¶ 49.¹ The FCC, however, expressly declined to hold that Northstar and SNR had been disingenuous in their applications. Id. ¶ 9 ("[B]ased on the record before us, we find that [SNR's and Northstar's] disclosure of their agreements and of the existence of their bidding arrangements was sufficient to comply with the disclosure obligations of our rules, and we further find that their bidding activity did not violate the previous FCC rules that governed [the] Auction ...."), ¶ 131 ("The fact that the Commission, upon review of the Agreements, concludes that, as a legal matter, the facts disclosed show that DISH controlled the applicants does not compel a finding that the applicants lacked candor."), ¶ 132 ("Based on the record before us, we find no substantial and material question of fact as to whether SNR and Northstar have shown a lack of truthfulness or reliability in their dealings with the Commission."). As a result of the FCC's decision, "Northstar and SNR paid the full auction price to the FCC for spectrum licenses they retained; agreed to the re-auction of licenses they did not retain; and will reimburse the government if those licenses sell for lower prices than their full Auction ... prices." Defs.' Reply in Supp. of Mot. to Temporarily Stay Case Pending Related Appeal, ECF No. 50, at 4.

Northstar and SNR appealed the FCC order to the United States Court of Appeals for the District of Columbia Circuit (the "D.C. Circuit"). SNR Wireless LicenseCo, LLC, et al. v. F.C.C. , 868 F.3d 1021 (D.C. Cir. 2017). On March 2, 2017, the Court stayed the proceedings in the present action pending the issuance of the D.C. Circuit's opinion regarding the appeal of the FCC Order. Mem. Op. and Order, ECF No. 53, at 7. The Court determined that the resolution of the appeal before the D.C. Circuit was likely to have a considerable impact on the next stage of the proceedings in the present action, because it could shed light on whether the FCC properly denied Northstar's and SNR's application for bidding credits, and in what amount the Defendants benefitted from receiving those credits. Id. at 6.

On August 29, 2017, the D.C. Circuit rendered a decision which concluded that the FCC "reasonably interpreted and applied" FCC precedent "when it determined that DISH had de facto control over SNR and Northstar." SNR Wireless LicenseCo, LLC , 868 F.3d at 1030. The D.C. Circuit thus "affirm[ed] the Commission's decision that the petitioners are required to pay full price for the spectrum licenses they won in [the] Auction." Id. However, the D.C. Circuit also held that "[b]ecause the FCC did not give clear notice" that it would deny Defendants an opportunity to modify their agreements with DISH, "an opportunity for petitioner to renegotiate their agreements with DISH provides the appropriate remedy here." Id. at 1046. The D.C. Circuit thus remanded the matter to the FCC.

In light of that remand, Defendants filed the pending [54] Motion to Extend the Court–Ordered Stay Pending Further Administrative Proceedings ("Motion to Extend Stay"), which requests a stay of this case until the conclusion of administrative proceedings before the FCC. Defs.' Mot. to Extend Court–Ordered Stay Pending Further Administrative Proceedings, ECF No. 54, at 7. Relators subsequently filed the [55] Motion to Set Deadlines for Response to the Complaint and Briefing Schedule ("Motion to Set Deadlines"), opposing a continued stay. Having reviewed the pleadings,² the relevant legal authorities, and the record as a whole, the Court GRANTS–IN–PART and DENIES–IN–PART Defendants' [54] Motion to Extend Stay and DENIES Relator's [55] Motion to Set Deadlines. While Defendants did not specify a sunset for this stay aside from the resolution of the FCC proceedings, the Court understands them to seek an extension of at least ninety days from the October 13, 2017, deadline for the parties to request en banc review of the D.C. Circuit decision.³ See Defs.' Reply Mem. in Supp. of Mot. to Extend Court–Ordered Stay, and Mem. in Opp'n to VTel's Mot. to Set Deadlines, ECF No. 57, at 7. This Court finds it appropriate to key the ninety-day period instead from the issuance of the D.C. Circuit's mandate on October 24, 2017. Accordingly, this matter shall be STAYED until JANUARY 22, 2018 , or until resolution of the proceedings before the FCC, whichever is earlier. If the FCC proceedings are not resolved by January 22, 2018, the parties shall file a Joint Status Report on JANUARY 22, 2018 , as further instructed herein.

I. LEGAL STANDARD

"[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants. How this can best be done calls for the exercise of judgment, which must weigh competing interests and maintain an even balance." Air Line Pilots Ass'n v. Miller , 523 U.S. 866, 879 n.6, 118 S.Ct. 1761, 140 L.Ed.2d 1070 (1998) (quoting Landis v. North American Co. , 299 U.S. 248, 254–55, 57 S.Ct. 163, 81 L.Ed. 153 (1936) ) (internal quotation marks omitted); see also Clinton v. Jones , 520 U.S. 681, 707, 117 S.Ct. 1636, 137 L.Ed.2d 945 (1997). A party requesting a stay of proceedings "must make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay for which he prays will work damage to some one else." Landis , 299 U.S. at 255, 57 S.Ct. 163.

II. DISCUSSION

The Court's determination of whether a stay is warranted "is inextricably intertwined with the nature of the specific case." Wrenn v. District of Columbia , 179 F.Supp.3d 135, 137 (D.D.C. 2016) (Kollar–Kotelly, J.). Accordingly, Defendants must show "that a stay is proper in this case, at the present time," given the circumstances specific to this matter. Id. In the present case, the stay inquiry reduces to the following two questions: (i) What effect, if any, will the completion of the FCC proceedings have on the proceedings before this Court?; and (ii) How, if at all, will Relator be burdened if...