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Midcontinent Communications v. MCI Communications Services, Inc.

United States District Court, D. South Dakota, Southern Division

November 18, 2016

MIDCONTINENT COMMUNICATIONS, Plaintiff,
v.
MCI COMMUNICATIONS SERVICES, INC., d/b/a VERIZON BUSINESS Defendant.

          ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

          KAREN E. SCHREIER, UNITED STATES DISTRICT JUDGE

         Defendant, MCI Communications Services d/b/a Verizon (Verizon), moves to dismiss Count II of plaintiff's complaint pursuant to 12(b)(6) of the Federal Rules of Civil Procedure and to dismiss plaintiff's request for declaratory relief to the extent that it relies on Count II. Docket 8. Plaintiff, Midcontinent Communications (Midco), opposes the motion. Docket 10.

         FACTUAL BACKGROUND

         Viewed in the light most favorable to Midco, the nonmoving party, the facts are as follows:

         Midco is a competitive local exchange carrier (CLEC) that operates in several states, including South Dakota, North Dakota, and Minnesota. Among a variety of services, Midco provides telecommunications services to its customers and originating and terminating access services, also described as switched access service, to long-distance companies. Verizon is a long-distance company that utilizes Midco's switched access service. Because Midco's access charges pertain to interstate and intrastate communications, Midco filed tariffs with the Federal Communications Commission (FCC) and the South Dakota, North Dakota, and Minnesota Public Utilities Commissions.

         In March 2007, Midco and Verizon executed a contract for switched access services. The agreement, titled Switched Access Service Agreement, included a three-year term and called for payment at the tariffed rates. In March of 2010, Midco and Verizon extended the term of the Switched Access Service Agreement for four years with additional one-year renewals absent termination by either party. In January of 2016, Verizon notified Midco that Midco had overbilled Verizon in excess of $640, 000. Verizon then informed Midco that it would withhold payment for the alleged overbilled amounts until it regained the overbilled amount. Verizon also stated that it would withhold payments it had previously promised to pay in connection with other litigation.[1] At the time the complaint was filed, Verizon had withheld $180, 000. Midco filed suit against Verizon, alleging breach of contract and unjust enrichment. Midco also seeks a declaratory judgment under SDCL § 21-24-2.

         DISCUSSION

         I. Motion to Dismiss

         Under Rule 12(b)(6), the defendant may move to dismiss for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). In considering a motion to dismiss, the court assumes all facts alleged in the complaint are true and construes the complaint in the light most favorable to the plaintiff. The court should dismiss only if “it appears beyond a doubt that the plaintiff can prove no set of facts which would entitle the plaintiff to relief.” Coleman v. Watt, 40 F.3d 255, 258 (8th Cir. 1994). “The issue is not whether a claimant will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.” Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183, 191 (1984). “A well-pleaded complaint may proceed even if it appears ‘that recovery is very remote and unlikely.' ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007) (quoting Scheuer, 416 U.S. 232, 236 (1974)).

         II. Filed Rate Doctrine

         Section 203(c) of the Communications Act provides that “[n]o carrier, unless otherwise provided by or under authority of this chapter, shall engage or participate in [wire or radio communication] unless schedules have been filed and published in accordance with the provisions of this chapter.” 47 U.S.C. § 203(c). It requires CLECs such as Midco to assess interstate access charges against carriers such as Verizon “either by filing tariffs with the [FCC] or by negotiating contracts.” In re Sprint Commc'ns Co. v. N. Valley Commc'ns, LLC, 26 FCC Rcd. 10780, 10782 (2011). So “until a CLEC files valid interstate tariffs under Section 203 of the Act or enters into contracts . . . for the access services it intends to provide, it lacks authority to bill for those services.” In re AT&T Corp. v. All Am. Tel. Co., 28 FCC Rcd. 3477, 3494 (2013)(All American II). The filed-rate doctrine provides that “once a carrier's tariff is approved by the FCC, the terms of the federal tariff are considered to be ‘the law' and to therefore ‘conclusively and exclusively enumerate the rights and liabilities' as between the carrier and the customer.” Iowa Network Servs., Inc. v. Quest Corp., 466 F.3d 1091, 1097 (8th Cir. 2006) (quoting Evanns v. AT&T Corp., 229 F.3d 837, 840 (9th Cir. 2000)). Verizon claims that the filed rate doctrine bars Midco's unjust enrichment claim. The filed rate doctrine provides that the Communications Act “preempts claims concerning the price at which service is to be offered, and . . . claims concerning the services that are offered.” Access Telecom, Inc. v. MCI Telecomms. Corp., 197 F.3d 694, 711 (5th Cir. 1999).

         A. Filed Rate Doctrine Applies to Midco's Claims.

         First, the court must determine if the filed-rate doctrine applies to this case. Midco states in its complaint that it has “filed with the FCC a tariff which establishes its rates for interstate switched access services.” Docket 1 at 2. And Midco acknowledges that it entered into the parties' Switched Access Service Agreement with the understanding that it will “bill to Verizon the rates set forth in its state and federal tariffs as filed.” Id. at 3. Also, the disputed payments in this action arise from the switched access services provided under the tariff. See Id. at 4 (stating that ‚ÄúVerizon has failed and refused . . . to acknowledge that the amounts in issue were validly billed and paid pursuant to the parties' Switched Access Service ...


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