Verizon Va., LLC v. XO Commc'ns, LLC
| Decision Date | 04 November 2015 |
| Docket Number | Civil Action No. 3:15–cv–171. |
| Citation | 144 F.Supp.3d 850 |
| Parties | VERIZON VIRGINIA, LLC, et al., Plaintiffs, v. XO COMMUNICATIONS, LLC et al., Defendants. |
| Court | U.S. District Court — Eastern District of Virginia |
Jeremy Stephen Byrum, McGuireWoods LLP, Richmond, VA, Scott Harris Angstreich, Whitney Corinne Cloud, Kellogg Huber Hansen Todd Evans & Figel PLLC, Washington, DC, for Plaintiffs.
Christopher William Savage, Robert G. Scott, Davis Wright Tremaine LLP, Washington, DC, L. Lee Byrd, Sarah Warren Smith, Sands Anderson PC, Richmond, VA, for Defendants.
ROBERT E. PAYNE
, Senior District Judge.
This matter is before the Court on PLAINTIFFS' MOTION FOR PARTIAL JUDGMENT ON THE PLEADINGS (Docket No. 40), which the Court subsequently converted into a MOTION FOR PARTIAL SUMMARY JUDGMENT at the joint request of the parties (Order, Docket No. 67). For the reasons stated below, the Court finds for the Plaintiffs with regard to the “Calculation Dispute” and finds for the Defendants with regard to the “3–Month Dispute.” Relying on the parties' stipulation on damages (Stipulation, Docket No. 69), the Court awards Verizon $2,711,989.
Plaintiffs are fourteen state or regional Verizon corporate entities (collectively, “Verizon”). Defendants are XO Communications, LLC and XO Virginia, LLC (collectively, “XO”). Plaintiffs filed in this Court on March 19, 2015, alleging several counts stemming from XO's failure to pay fees to Verizon owed under federal tariff schedules, intrastate tariff schedules, and federally-governed private contracts. . The Complaint additionally alleges that XO failed to pay late fees on those non-payments. (Compl. ¶ 3; Am. Compl. ¶ 3).
The pending motion involves the largest dollar-value claim in the Complaint, the so-called Commitment Discount Plan (“CDP”) claim. CDPs offer discounts to customers in exchange for a pre-commitment to buy high volumes of Verizon's pre-identified services. However, the CDPs also contain a “shortfall provision” that penalizes the customer's failure to meet those commitments. (Compl. ¶¶ 51–69; Am. Compl. ¶¶ 51–69). Verizon alleged that XO failed to meet its pre-commitments, and then failed to pay the shortfall fees and late payment fees associated with these shortfall fees. (Compl. ¶¶ 54–69; Am. Compl. ¶¶ 54–69).
On May 13, 2015, XO filed three motions, including a Motion to Refer Claims for Agency Resolution. (Docket No. 22) (“Motion to Refer”). On the same date, XO also filed its Answer, Affirmative Defenses, and Counterclaims. (Docket No. 25). In its Answer and Affirmative Defenses, XO claimed that Verizon had incorrectly interpreted the CDP shortfall fee, that Verizon had incorrectly calculated the CDP shortfall fee under Verizon's own interpretation, and that the CDP shortfall fee as interpreted by Verizon was unjust and unreasonable in contravention of the Telecommunications Act. (Answer ¶¶ 60–65; Affirmative Defenses ¶ 3). Verizon opposed all of XO's motions. (Docket No. 33).
On August 7, 2015, Verizon filed this Motion for Partial Judgment on the Pleadings requesting partial judgment on the CDP issue, along with a memorandum in support. (Pl.'s Mem. in Supp. for Partial J. on the Pleadings, Docket No. 41) (“Pl.'s Partial J. Mem.”). XO filed its Memorandum in Opposition (Docket No. 44) (“Def.'s Partial J. Reply”) on August 21, 2015, raising three main issues of law ((1) whether Verizon had correctly interpreted the tariff; (2) whether the tariff was just and reasonable under the Telecommunications Act; and (3) whether Verizon could bring a claim for a certain three-month period in addition to the usual six-month periods) and one issue of fact (whether Verizon had correctly applied its own formula).
On August 25, 2015, the Court denied the Motion to Refer. (Order, Docket No. 46). On August 31, 2015, XO informed the Court that it intended to present several CDP-related issues, including the “just and reasonable” nature of the CDP shortfall provision, to the Federal Communications Commission (“FCC”). (Letter, Docket No. 50). On August 31, Verizon filed a Motion for Temporary Restraining Order and Preliminary Injunction Pursuant to the All Writs Act (Docket No. 51) and a Memorandum in Support of that motion (Docket No. 52), requesting that XO be enjoined from bringing any CDP-related matter to the FCC. The Court ordered accelerated briefing (Order, Docket No. 53), and held a hearing on the matter on September 8, 2015.
At the September 8, 2015 hearing, before any ruling on the motion for an injunction, the parties agreed that, rather than continuing a battle over the appropriate forum, they would agree to an expedited ruling from the Court on the CDP claim by way of summary judgment. (Tr. Sept. 8, 2015 Hr'g, Docket No. 68, 52:9–55:2). To enable this expedited ruling, the parties advised that they would withdraw some of the live issues that had been raised in the briefing on Verizon's partial summary judgment motion: whether the CDP shortfall provision was just and reasonable, and whether Verizon correctly calculated the shortfall under its own interpretation of the tariff. (Tr. Sep. 8, 2015 Hr'g 52:9–55:2). Subsequently, the parties requested, and the Court granted, a motion converting Verizon's Rule 12(c) motion to a
. (Joint Proposed Order, Docket No. 66; Order, Docket No. 67).
On September 16, 2015, the parties filed their stipulation on CDP issues, narrowing the dispute to two issues:
The parties also stipulated as to the damages that should be entered depending on the resolution of each dispute. (Stipulation ¶ 4). In essence, the parties voluntarily submitted the merits of the CDP monetary claim to the Court for final resolution.
Under the Telecommunications Act, Verizon must make its infrastructure available to other telecommunications companies pursuant to tariffed rates. 47 U.S.C. § 251
. Two of Verizon's tariffs provide for CDPs. . Under the CDP terms, a customer commits to purchase a certain minimum number of “channel terminations” on a specified service, in exchange for which Verizon gives that customer a discount on all aspects of service (transport, termination, multiplexers) that are required to provide the specified service. (Compl. ¶¶ 51–57; Am. Compl. ¶¶ 51–57; Pl.'s Partial J. Mem. 1–5; FCC 1 § 25.1; FCC 11 § 25.1). A customer that does not purchase enough channel terminations to meet the minimum commitment is subject to a shortfall penalty. (FCC 1 § 25.1.7(B); FCC 11 § 25.1.7(B); Pl.'s Partial J. Mem. 3–5).
Verizon alleges, and XO agrees, that XO began subscribing to Verizon's CDPs in 2004. (Compl. ¶¶ 54, 57; Am. Compl. ¶¶ 54, 57; Answer ¶¶ 57–65). Verizon alleges, and XO agrees, that XO missed several of its pre-commitments between 2012 and the present, and that XO received but did not pay Verizon's bills for the shortfall amounts. (Compl. ¶¶ 59–65; Am. Compl. ¶¶ 59–65; Answer ¶¶ 57–65). In its Answer, XO denied that the CDP was enforceable (on grounds that it was unjust and unreasonable in contravention of the Telecommunications Act) and denied that Verizon had correctly calculated the shortfall. (Answer ¶¶ 57–65). The parties' subsequent Joint Submission reiterated that the parties “dispute ... how that shortfall adjustment should be calculated.” (Joint Submission, Docket No. 32, 1). After entry of the Stipulation, the parties' CDP disagreement has two components.1
The first dispute is interpretation of the shortfall provision, the “Calculation Dispute.” (Stipulation ¶ 2). Verizon argues that its tariff is unambiguous, and that the shortfall must be calculated according to the five-step formula set forth in the tariff. (Pl.'s Reply to Resp. to Mtn. for J. on the Pleadings, Docket No. 45, 3–5) (“Pl.'s Partial J. Reply”) (relying on FCC 1
§ 25.1.7(B); FCC 11 § 25.1.7(B)). XO asserts that Verizon's tariff is ambiguous because, although the five-step formula calls for calculation based on what a customer actually spent, the preamble to that formula describes the penalty as the difference between what a customer spent over the last six months and what a customer “would have” spent over the last six months “had the minimum commitment been satisfied.” (Def.'s Partial J. Reply 9). According to XO's theory, a rational business actor “would have” bought channel terminations (and only channel terminations) necessary to meet the minimum commitment, such that calculating the penalty using the preamble to the five-step formula creates a lower penalty than using the five-step formula itself. (Def.'s Partial J. Reply 10).
Thereupon, XO asserts that, because the preamble and the five-step formula are both plausible ways to calculate the shortfall, there is a patent ambiguity, and the Court must enforce the tariff according to the interpretation most favorable to the customer. (Def.'s Partial J. Reply 11–12). In the alternative, XO argues that, even if the Court does not believe that a rational actor “would have” purchased only sufficient channel terminations necessary to stave off the shortfall penalty, the term “would have” creates a latent ambiguity that entitles XO to present evidence on what its purchasing history and business needs show it “would have” spent, and that this factual issue precludes granting summary judgment. (Def.'s Partial J. Reply 14–16).
The second dispute concerns the application of the...
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