Utopian Wireless Corp. v. Assumption High Sch.

• Decision Date: 25 May 2021
• Docket Number: CIVIL ACTION NO. 21-444 SECTION "F"
• Citation: Utopian Wireless Corp. v. Assumption High Sch., CIVIL ACTION NO. 21-444 SECTION "F" (E.D. La. May 25, 2021)
• Parties: UTOPIAN WIRELESS CORPORATION v. ASSUMPTION HIGH SCHOOL, ET AL.
• Court: U.S. District Court — Eastern District of Louisiana

UTOPIAN WIRELESS CORPORATION v. ASSUMPTION HIGH SCHOOL, ET AL.

CIVIL ACTION NO. 21-444 SECTION "F"

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA

May 25, 2021

ORDER AND REASONS

Before the Court is the defendants' motion to dismiss under Rule 12(b)(1)and12(b)(6).For the reasons that follow, the motion is DENIED.

Background

This litigation arises from a dispute over the lease of an educational broadband service spectrum license.A telecommunications company seeks specific performance of a long-term Educational Broadband Service Lease Agreement and damages for its breach.

Radio frequencies are regulated by the Federal Communications Commission, which allocates them through the issuance of a spectrum license, which authorizes a licensee to use a specific portion of the electromagnetic spectrum, or to use a given frequency band within a given geographic area.Spectrum licensees may enter into individual use or lease agreements with third parties to authorize the third party's use of all or part of the license holder's radio spectrum for commercial purposes.

Taking as true the complaint's allegations, educational broadband service spectrum licenses are valuable rights regulated by the Federal Communications Commission.As alleged in the complaint, to regulate the use of radio frequencies, the FCC issues licenses that authorize a licensee to transmit on specific frequencies or ranges of frequencies in particular geographic areas.The licenses are called "spectrum licenses" because they authorize the licensee to utilize a portion of the electromagnetic spectrum.Through different licenses, the FCC imposes different restrictions on the manner in which a licensee can use licensed spectrum; for example, the FCC permits licensees to use certain frequencies for FM radio transmission, cellular telephone transmission, television transmission, or air traffic control transmission.

Educational Broadband Service (EBS) is a kind of spectrum license.¹It is a prime wireless spectrum band that is currently being used by wireless carriers in the national provision ofadvanced wireless services, including mobile broadband services.Since January 10, 2005, the FCC's rules allow holders of EBS spectrum to lease their licenses to third-party wireless carriers for 30-year terms.As of April 27, 2020, the FCC began allowing EBS license holders like Assumption High School and its school board to sell their licenses to commercial for-profit entities; such sales were previously restricted to non-commercial nonprofit entities.

An EBS license authorizes a licensee to utilize a 22.5 megahertz wide allocation of spectrum at frequencies within the range of 2496-2690 MHz.Depending on the terms of their licenses and applicable FCC rules, EBS licensees may enter into spectrum leases with third parties, authorizing a third-party lessee to use a portion or all of the EBS license holder's spectrum for commercial purposes.EBS licensees may now sell their licenses to commercial entities.

The FCC issued EBS channels C1 through C4 to Assumption Parish High School to transmit in the Assumption Parish, Louisiana area.Since December 21, 2007, Utopian Wireless Corporation leases the Channels from Assumption High pursuant to the parties' Educational Broadband Service Lease Agreement.

According to the complaint's allegations, and pursuant to Section 2 of the Lease Agreement, Assumption High and Utopian arein their first of three 10-year terms of the lease.Section 3 obliged Utopian to pay $75,000 in an initial fee payment and $4,000 each year for use of the Channels during the initial 10-year term and then $5,000 each year during the second 10-year term.Section 10.1 of the Lease obliges the parties to cooperate in executing and filing the necessary FCC forms required to effectuate the Lease terms, including filing a long-term lease application with the FCC on Form 608, which the FCC requires to authorize the long-term lease.This cooperation has not been forthcoming.

Prior to terminating the lease for any material breach, Section 12.2 of the Lease requires that the non-defaulting party give to the defaulting party 30 days' prior notice of a material breach and an opportunity to cure the alleged breach.The written notice must be sent by a "reliable national express overnight delivery service" to comply with Section 19 of the Lease.

By Section 16, Assumption High agreed to "use it best efforts to obtain and maintain all licenses, permits and authorizations required or desired by [Utopian] for the use of the Channels, and will remain eligible under the FCC Rules to provide the Lessee Capacity."Assumption High also agreed to "take all necessary steps to renew the License, as required" and agreed that it "will not commit any act, engage in any activity, or fail to take anyaction that could reasonably be expected to cause the FCC to impair, revoke, cancel, suspend or refuse to renew the License."

If Assumption High fails to perform its duties under the Lease, Section 20.2 permits Utopian to seek, among other things, injunctive relief and specific performance.In any action "on account of any breach of or to enforce or interpret any of the terms, covenants or conditions of" the Lease, Section 20.3 entitles the prevailing party to reasonable attorneys' fees and costs.

In March 2008, Assumption High consented to the filing of FCC Form 608 for the long-term lease application.Utopian advised Assumption High that, upon the FCC's grant of that application by final order, it would commence the lease payments.But the long-term lease application was never filed.

Over three years later in October 2011, Assumption High's EBS license began operating on equipment provided by Utopian in the licensed service area.On October 28, 2011, Assumption High and Utopian cooperated in filing FCC Form 605 for Substantial Service, which notified the FCC that Assumption High's EBS license was operating in compliance with the FCC's substantial service requirements.The FCC required a licensee to file Form 605 in order to certify its license was operating.

In April 2013, Assumption High fulfilled the FCC regulatory requirement in filing a renewal for its license, WLX844.As faras Utopian knows, Assumption High's EBS license has been in continuous operation through the current date on equipment provided by Utopian and located in the licensed service area.

In October 2020, Utopian sent Assumption High an annual fee payment of $4,000, notwithstanding that the FCC Form 608 long-term lease application was never filed.Utopian attempted to contact Assumption High representatives to seek consent to the filing of the long-term lease application.To no avail.In December 2020, Utopian contacted Assumption High asking for its consent to file the long-term lease application, FCC Form 608, in accordance with Section 10.1 of the Lease.Assumption High ignored Utopian.To date, Assumption High has refused to file the long-term lease application with the FCC.

On January 22, 2021, Utopian mailed Assumption High a formal notice and demand letter pursuant to Lease Sections 10.1and20.2.Utopian demanded that Assumption High file the required Form 608 long-term lease application or that it consent to Utopian filing the long-term lease application on behalf of Assumption High.Though the letter requested that Assumption High respond within five days, no response was received.Despite multiple requests by Utopian, Assumption High has not filed the FCC form 608 for application of a long-term lease application.

On March 3, 2021, Utopian Wireless Corporation sued Assumption High School and Assumption Parish School Board, invoking the Court's diversity jurisdiction and seeking a declaratory judgment (that the Lease is in full force and effect and any termination of the Lease by Assumption High is invalid) and -- due to Assumption High's alleged breach of the Lease -- damages, attorney's fees and costs, as well as specific performance of the parties' EBS Lease Agreement.Utopian Wireless, a Delaware corporation with its principal place of business in Washington D.C., alleges that the defendants are Louisiana citizens and that "the value of the leasehold interest that Utopian seeks to protect exceeds $75,000.00."²"A prime spectrum license is a valuable commodity," it is alleged.Challenging the plaintiff's allegation that the amount in controversy exceeds $75,000, the defendants now move to dismiss Utopian's complaint for lack of subject matter jurisdiction.In the alternative, advancing affirmative defenses to Utopian's claims, the defendants move to dismiss for failure to state a claim.

I.

A.

The subject matter jurisdiction of federal courts is limited.Kokkonen v. Guardina Life Ins. Co. of Am., 511 U.S. 375, 377(1994).Indeed, "[i]t is to be presumed that a cause lies outside this limited jurisdiction,"the Supreme Court has observed, "and the burden of establishing the contrary rests upon the party asserting jurisdiction."Id.(citations omitted);St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288(1938)("[t]he intent of Congress drastically to restrict federal jurisdiction in controversies between citizens of different states has always been rigorously enforced by the courts.");King v. U.S. Dep't of Veterans Affairs, 728 F.3d 410, 416(5th Cir.2013);Ramming v. United States, 281 F.3d 158, 161(5th Cir.2001).

Rule 12(b)(1) requires dismissal of an action if the Court lacks jurisdiction over the subject matter of the plaintiff's claim.There are two types of Rule 12(b)(1) motions: "facial attack" and a "factual attack" on a complaint under Rule 12(b)(1).SeePaterson v. Weinberger, 644 F.2d 521, 523(5th Cir.1981).If the defendants present a "facial attack" under Rule 12(b)(1), the Court need only look to the sufficiency of the allegations in the complaint, presumed to be true.If, on the other hand, the defendants advance a "factual attack" on the Court's subject matter...