Verizon New Jersey v. Ntegrity Telecontent Servs., Civ. No. 99-5366(GEB).

• Decision Date: 12 August 2002
• Docket Number: Civ. No. 99-5366(GEB).
• Citation: 219 F.Supp.2d 616
• Parties: VERIZON NEW JERSEY, INC. and Verizon Pennsylvania, Inc., Plaintiffs, v. NTEGRITY TELECONTENT SERVICES, INC., Defendant, v. Verizon Maryland, Inc., Third Party Defendant.
• Court: U.S. District Court — District of New Jersey

219 F.Supp.2d 616

VERIZON NEW JERSEY, INC. and Verizon Pennsylvania, Inc., Plaintiffs, v. NTEGRITY TELECONTENT SERVICES, INC., Defendant, v. Verizon Maryland, Inc., Third Party Defendant.

Civ. No. 99-5366(GEB).

United States District Court, D. New Jersey.

August 12, 2002.

Karol Corbin Walker, St. John and Wayne, L.L.C., Newark, NJ, John Thorne, Ajit Pai, Verizon, Arlington, VA, Dan K. Webb, Charles B. Molster, III, Winston & Strawn, Aaron M. Panner, Kellog, Huber, Hansen, Todd & Evans, P.L.L.C., Washington, DC, for Plaintiffs and Counterclaim Defendants and Third Party Defendants.

Steven G. Sanders, Arseneault & Fassett, Chatham, NJ, Diana D. Parker, Law Offices of Diana D. Parker, Edward Rubin, Law Offices of Edward Rubin, New York City, Attorneys for Defendant and Counterclaim Plaintiff and Third Party Plaintiff.

OPINION

GARRETT E. BROWN, Jr., District Judge.

This matter comes before the Court upon the motion of Verizon for dismissal of Ntegrity's antitrust Counterclaim and Third Party Complaint, and upon Ntegrity's cross-motion to dismiss plaintiffs' collection action. The Court exercises jurisdiction over this matter pursuant to 28 U.S.C. § 1332 and having considered the submissions and the arguments of the parties, grants in part and denies in part Verizon's motion, and denies Ntegrity's motion.

I. BACKGROUND

A. Legislative and Factual Background

As it serves as the basis for the instant litigation and motion practice, the Court must first review the history and purpose of the Telecommunications Act of 1996 ("1996 Act" or "the Act"), which amended the Communications Act of 1934, 47 U.S.C. § 151 et. seq. At one point in history, local telephone service was a sanctioned monopoly. See Trinko v. Bell Atlantic Corp., 294 F.3d 307 (2d Cir.2002). However, in 1996, Congress enacted the Telecommunications Act in an effort to create competition in the once monopolized market. See id. at 312. Under the Act, states are no longer permitted to enforce laws prohibiting entry into the local telephone market. See id. In order to generate competition in the local telephone service market, the Act imposes affirmative duties upon existing incumbent local exchange carriers ("ILECs") such as Verizon. See id. These duties include providing "access to the poles, ducts, conduits, and rights-of-way of such carrier to competing providers." Id. (quoting 47 U.S.C. § 251(b)(4)). Additionally, the Act requires that ILECs provide interconnection with their networks to the competing local exchange carriers ("CLECs") "that is at least equal in its quality to that provide by the local exchange carrier to itself." Id. (quoting 47 U.S.C. § 251(c)(2)(C)).

The 1996 Act therefore imposed a duty upon Verizon, an ILEC, to provide services to CLECs such as Ntegrity. See Amended Answer Counterclaims and Third Party Complaint of Ntegrity ("Am.Answer") ¶¶ 16-17. Ntegrity was founded as a minority owned CLEC in 1998, with the goal of providing local telephone services to the general public. See id. ¶ 17. Pursuant to the 1996 Act, Ntegrity entered into contracts with Bell Atlantic New Jersey, Bell Atlantic Pennsylvania and Bell Atlantic Maryland.¹ See id. Each of the interconnection agreements were filed with and approved by the respective state commissions. See Verizon's Brief in Support of Dismissal ("Verizon Br.") at 5. The negotiated contracts each provided for a one year term, after which either party could terminate the agreement by providing written notice 90 days in advance of the desired termination date. See id.

Ntegrity describes the local exchange services they sought to provide as the "originating or terminal point for interstate telephone and data transmission services." Am. Answer ¶ 17. Ntegrity acquired its first customer in July 1998, and added more than 1,000 customers by September of that year and nearly 8,000 customers in both November and December of 1998. See id. ¶ 18. The contracts created by Ntegrity and the Verizon entities serve as the basis for the instant disputes.

B. Procedural History

The parties in the instant matter have been engaged in this litigation for nearly three years. In November 1999, Verizon formerly known as Bell Atlantic, filed two separate Complaints against the defendant, Ntegrity Telecontent Services. See Ntegrity's Brief in Opposition ("Ntegrity's Br.") at 6. Verizon Pennsylvania, claimed that defendant failed to pay overdue bills in violation of the resale agreement between the parties. See id. Similarly, Verizon New Jersey filed a complaint alleging that Ntegrity failed to pay its bills according to their contract. See id. In response, Ntegrity filed a Counterclaim alleging violations of Section 2 of the Sherman Act, 15 U.S.C. § 2, and Section 2(a) of the Clayton Act, 15 U.S.C. § 13(a), as well as New Jersey and Pennsylvania state law antitrust statutes. See Am. Answer ¶¶ 84-181. Additionally, Ntegrity included a Third Party Complaint against Verizon Maryland alleging similar violations. See id. Ntegrity also included a number of state law breach of contract and tortious interference claims against all three Verizon parties. See id.

The parties consented to the consolidation of the Verizon Pennsylvania and Verizon New Jersey claims and this Court entered an Order to that effect on April 11, 2000. Shortly thereafter, Verizon filed a motion to dismiss Ntegrity's Counter-claim and Third Party Complaint in its entirety. The Court considered whether Ntegrity had properly asserted the necessary elements of an antitrust claim.

1. Decision of the Court in the Previous Motion to Dismiss

In the prior Memorandum and Order of the Honorable Anne E. Thompson, U.S.D.J., the Court concluded that Ntegrity had sufficiently pled the elements of a section 2 Sherman Act claim for abuse of monopoly power.² See October 31, 2000 Memorandum and Order ("10/31/00 Order") at 3. Specifically, the Court found that Ntegrity alleged that Verizon "willfully acquired and maintained monopoly power" through various anti-competitive techniques. Id. at 3-4.

The Court also sustained Ntegrity's claims for Sherman Act liability for attempted monopolization. See id. at 5. The Court found that Ntegrity relied upon the same allegations as set forth in their alternate Sherman Act claim, and thus sustained Ntegrity's allegations. See id. Similarly, the Court allowed Ntegrity's claim of price discrimination under section 2 of the Clayton Act. See id. To do so, the Court inferred that Ntegrity defined telephone service as a commodity. See id.

However, Ntegrity's allegations of illegal tie-ins under Section 1 of the Sherman Act were dismissed. See id. at 6. The Court determined that Ntegrity had failed to state a claim because it did not allege that it was denied telephone service because it refused to buy other services from Verizon. See id. Ntegrity's claim under Section 206 of the Telecommunications Act was also dismissed. See id. at 7. The Court found that Section 206 did not create a separate cause of action, and dismissed that portion of the Counterclaim. See id.

Moving on to Ntegrity's state law claims, the Court determined that it had adequately pled claims for breach of contract and malicious interference with business relations. See id. at 7-8. Similarly, the Court sustained Ntegrity's claims for breach of good faith and fair dealing. See id. at 8-9. In conclusion, the Court allowed Ntegrity the opportunity to amend its Counterclaim and Third Party Complaint. See id. at 9. Ntegrity subsequently filed its amended pleading.

2. Ntegrity's Amended Answer, Counterclaim and Third Party Complaint

Ntegrity alleges that at the time of its Counterclaim, Verizon controlled approximately 97% of the local telephone service in New Jersey, Pennsylvania and Maryland. See Am. Answer ¶ 19. Ntegrity states that Verizon engaged in a number of anti-competitive tactics in an effort to maintain its monopoly market share. See id. Those alleged practices included illegal tie-ins; unjust discriminatory switching fees; discriminatory denial of access to pricing information; intentionally error-prone and discriminatory computer interface systems; error prone billing; and preventing Ntegrity customers from placing long-distance phone calls. See id.

Specifically, Ntegrity alleges that Verizon intentionally utilized a discriminatory and error prone billing method for CLECs like Ntegrity. See id. ¶ 21. Ntegrity claims the billing errors created the need for it to extensively audit the bills submitted by Verizon, and this process utilized more than 100 hours per week. See id. ¶¶ 21, 25. Additionally, Ntegrity asserts that the error rate on the bills generated by Verizon for the CLECs was substantially higher than the error rate for Verizon's own large retail customers. See id. ¶ 21. Ntegrity maintains that the billing errors made it impossible to conduct an actual accounting of the money it owes to Verizon. See id. ¶ 24. Ntegrity contends that electronic billing would have alleviated some of the problems with the billing errors, but Verizon would only offer that service at "a prohibitive cost." Id.

Ntegrity also claims that the bills it received from Verizon were inaccurate because the tariffs assessed against Ntegrity were set by regulation based on the value of Verizon's equipment. See id. ¶ 28. Ntegrity points to an audit conducted in 1999 by the FCC, which determined that the value of Verizon's equipment was overstated in New Jersey, Pennsylvania and Maryland. See id. ¶ 29. Ntegrity maintains that this resulted in excess charges of more than $65,000,000.00 to Verizon customers. See id. Based on those figures, Ntegrity assumes that it has been overcharged by approximately $300,000.00. See id. ¶ 31.

Further, Ntegrity alleges that Verizon charged new Ntegrity customers a switching penalty when they transferred their service from Verizon. See id. ¶ 34. Ntegrity alleges that this was called a Record Order Charge, but that it was actually ...