United States District Court, D. South Dakota, Northern Division
NORTHERN VALLEY COMMUNICATIONS, L.L.C., A SOUTH DAKOTA LIMITED LIABILITY COMPANY, Plaintiff,
AT&T CORP., A NEW YORK CORPORATION, Defendant.
OPINION AND ORDER GRANTING IN PART AND DENYING IN
PART CROSS-MOTIONS FOR SUMMARY JUDGMENT
ROBERTO A. LANGE UNITED STATES DISTRICT JUDGE
Valley Communications, LLC (NVC) filed this collection and
declaratory judgment action against AT&T Corp. (AT&T),
alleging that AT&T was unlawfully withholding payment for
telecommunications services provided by NVC to AT&T. Doc. 1.
NVC's complaint has four claims for relief: 1) a
collection action based on NVC's tariffed charges for
interstate and intrastate switched access services provided
to AT&T, but not fully paid since March 2013; 2) in the
alternative, a state law quantum meruit claim if the charges
cannot be recovered under NVC's tariffs; 3) in the
alternative, a state law unjust enrichment claim if the
charges cannot be recovered under NVC's tariffs; and 4) a
declaratory judgment action seeking to require AT&T to pay
NVC's invoices in the future. Doc. 1 at
filed a motion for partial judgment on the pleadings, Doc.
33, and an amended answer and counterclaim against NVC that
consists of a long argument of why AT&T believes that NVC
ought not to recover, Doc. 52 at 1-51. AT&T's
counterclaim ultimately made three claims for relief: 1) that
NVC was unlawfully billing for services under the rules and
orders of the Federal Communication Commission (FCC); 2) that
NVC was billing for services that violated its own tariffs;
and 3) that AT&T is entitled to a declaratory judgment on its
first two claims thereby relieving AT&T of any obligation to
pay the disputed charges. Doc. 52 at 46-49. After a motion
hearing, this Court denied AT&T's motion for partial
judgment on the pleadings. Doc. 60.
parties simultaneously moved for partial summary judgment.
Docs. 80, 84. AT&T seeks summary judgment on all four of NVCs
claims for relief, and summary judgment on the liability
portions of its own Counts I and II in its counterclaim. Doc.
80 at 1. NVC seeks summary judgment on Counts I and
TV of its Complaint, or on Count II of its Complaint
in the alternative, and summary judgment on each of
AT&T's counterclaims. Doc. 84 at 1. This Court read
extensive filings and held a lengthy hearing on the
cross-motions for summary judgment. Doc. 119. The
parties' disagreement relates primarily to application of
the law to facts not actually in dispute. For the reasons
explained below, this Court grants NVC's motion for
summary judgment on Count I of its complaint in part, grants
AT&T's motion for summary judgment on Counts II and III
of NVC's Complaint, denies at this time NVC's motion
for summary judgment on Count IV of its Complaint, denies
AT&T's motion for summary judgment on its counterclaim,
and grants in part and denies in part NVC's motion for
summary judgment on AT&T's counterclaim.
FCC Telecommunications Regulatory Framework
case involves a dispute between two types of
telecommunications carriers. NVC is a local exchange carrier
(LEC), which provides telephone services to local residents
and businesses. AT&T is an interexchange carrier (IXC), which
is responsible for carrying telephonic traffic between LECs
in different geographic areas, enabling long-distance phone
service. As a LEC, NVC is responsible for a service known as
"exchange access, " which connects local customers
to the IXC necessary to call and receive calls from other
LECs. There are two types of LECs: incumbent LECs (ILECs) and
competitive LECs (CLECs). An ILEC is the original LEC that
held a monopoly on local exchange services in a community
prior to the Telecommunications Act of 1996, Pub. L. 104-104,
110 Stat. 56 (1990). An ILEC may also be the successor
company of the original LEC in an area. CLECs, such as NVC,
are those LECs formed after the Telecommunications Act that
compete with an established ILEC in an area. The
Telecommunications Act forms the basis for the existing FCC
regulations and orders on all telecommunications carriers.
ordinary long distance phone call involves three carriers-an
originating LEC, an IXC, and a terminating LEC. The
originating LEC has the responsibility for connecting the
caller's terminal-the telephone device-to its main local
switch through the use of copper or fiber-optic cables. At
its main local switch, the originating LEC aggregates these
local cables into common "trunks" that can carry
multiple separate calls simultaneously. The originating LEC
delivers the call to the circuit of the caller's chosen
long-distance provider, the IXC. This hand-off occurs at a
centralized, or tandem, switching location. The IXC then
transmits the call through its circuit system, from tandem
trunk to tandem trunk, to the LEC for the recipient's
location. At this terminating LEC, the LEC receives the call
at its main local switch, then delivers it through its local
network of cables to the recipient's terminal. In remote
areas, the LEC may have a main "host" switch that
branches off into additional "remote" end office
switches, which are then connected to a caller's
generally pay for this service through contracts with IXCs.
The EXCs, in turn, pay both the originating and terminating
LECs for their services through charges billed by the LECs.
Broadly defined, the main components of these charges are
either "transport" charges or "terminating
switched access" charges. Transport charges are those
incurred by a LEC for transporting the IXC's call on its
local circuit from where it picks the call up at an
interconnection point to the LECs end office switch, where it
can be connected directly to the called party. An IXC might
connect directly to a LEC using a direct trunked transport
system that only carriers the traffic of one IXC, or it might
connect indirectly to the LEC, which allows traffic from
multiple IXCs to use the same circuit. Terminating switched
access charges, also known as end office charges, are those
incurred by a LEC for routing a telephone call to its final
called party from the LECs end office switch.
of their distinct histories, ILECs and CLECs are regulated
through separate regimes under the FCC to ensure consumers
receive reasonable pricing and broad access to
telecommunications services. See AT&T Corp. v. All Am.
Tel. Co.. 28 FCC Red. 3477, 3479-80 (2013) (explaining
the regulatory framework for ILECs and CLECs). The FCC
requires ILECs to file tariffs to monitor the rates charged
by ILECs to IXCs for interstate exchange access services. See
47 U.S.C. § 203. These tariffs set out the
telecommunications services offered by an ILEC to an IXC, and
the corresponding rates to be charged. See 47 C.F.R. §
61.26. The FCC has the authority to determine the "just
and reasonable charge" for a telecommunications service.
47 U.S.C. § 205. In contrast, CLECs like NVC are subject
to "minimal rate regulation." All Am. Tel.
Co.. 28 FCC Red. at 3480. CLECs can file tariffs, like
ILECs, detailing their charges for interstate exchange access
services, but these tariffs are subject to the
"benchmark rule;" that is, a CLECs rates for a
specified service can be no higher than the local, competing
ILECs tariffed rates for that same service. Id; 47 C.F.R.
§ 61.26(b). A CLEC can only charge rates higher than the
local, competing ILEC if it negotiates and enters into a
separate agreement with an IXC to charge higher rates.
All Am. Tel. Co.. 28 FCC Red. at 3480.
LECs engage in a practice known as "access
stimulation" to increase the volume of calls they
handle, thereby increasing their revenue without violating
the FCC's benchmark rule by raising their rates. See
In re Connect Am. Fund, A Nat'l Broadband Plan for
our Future. 26 FCC Red. 17663, 17874-90 (2011)
fhereafter Connect Am. Fund Orderl. Access
stimulation occurs when a LEC enters into an agreement with a
high-volume telecommunications customer. These customers are
identified as free calling parties (FCP) because they often
provide "free" services to their users, such as
free conference calls, free chat lines, or free international
calling. The FCP is assigned a telephone number within the
LECs service area, although the high-volume customer may not
have any other connection with the LECs service area. Id., at
17877. The increase in traffic to the LEC generated from the
FCP's users is billed to the EXC, which results in
increased revenue for the LEC. Id. In return, the
LEC often returns a portion of their increased revenue to the
high-volume customer. Id. at 17878-88. The practice
of access stimulation has led to increased levels of
litigation between LECs and IXCs, and resulted in changes to
FCC rules. IcL at 17874-90. In addition to the general tariff
and benchmarking requirements for all CLECs, CLECs engaged in
access stimulation are prohibited from filing rates for
interstate exchange access services that are higher than the
"price cap" LEC with the lowest switched access rates
in the state. 47 C.F.R. § 61.26(g); Connect Am. Fund
Order. 26 FCC Red. at 17886; All Am. Tel. Co..
28 FCC Red. at 3480 n.27.
disputes in this case are controlled broadly by two main
sections of the Telecommunications Act of 1996, 47 U.S.C.
§§ 201(b) and 203(c). Section 201(b) requires that
"[a] 11 charges, practice, classifications, and
regulations for and in connection with . . . communication
service, shall be just and reasonable, and any such charge,
practice, classification or regulation that is unjust or
unreasonable is hereby declared to be unlawful." 47
U.S.C. § 201(b). Section 203(c) prohibits a carrier from
imposing any charges that are not specified in its tariffs.
47 U.S.C. § 203(c) ("[N]o carrier shall . . .
charge, demand, collect, or receive a greater or less or
different compensation . . . than the charges specified in
the schedule then in effect.").
with Civil Local Rule 56.1, both parties filed statements of
undisputed material facts with their respective motions for
summary judgment. Docs. 86, 88; see D.S.D. Civ. LR 56.1. Both
parties under Local Rule 56.1 filed responses to those
statements of undisputed material facts, Docs. 96, 100, and
statements of additional material facts, Docs. 95, 101. NVC
also filed an additional appendix of facts with its reply
brief, which AT&T moves for this Court to strike. Docs.
104-1, 114. Competing motions for summary judgment present a
challenge to any court in setting forth pertinent facts.
Under Rule 56 of the Federal Rules of Civil Procedure, this
Court must view the genuinely disputed facts in the light
most favorable to the non-movant, and NVC and AT&T are both
movants and non-movants here. This Court has taken care to
draw undisputed facts from both NVC's and AT&T's
statements of undisputed material facts, Docs. 86, 88, where
they are undisputed by both parties, as indicated by the
responsive filings, Docs. 96, 100.
a CLEC in South Dakota that has been engaging in access
stimulation since November 2005. Doc. 88 at ¶ 1; Doc.
100 at ¶ 1. AT&T is an KC carrier that provides
intrastate and interstate long distance telecommunications
services throughout the United States including in South
Dakota. Doc. 86 at ¶ 1; Doc. 96 at ¶ 1. Because of
uncertainty with the rules surrounding access stimulation and
charges resulting therefrom, AT&T and NVC have had and
settled disputes in the past regarding AT&T's payments to
NVC. Doc. 88 at ¶¶ 3, 32; Doc. 100 at ¶¶
3, 32. These disputes took place prior to the FCC's
Connect Am. Fund Order, which in addition to
establishing a plan for widespread, affordable fixed and
mobile voice and broadband telephone services, also
overhauled and provided greater clarity to the access
stimulation practice. See 26 FCC Red. at 17667, 17676.
of the Connect Am. Fund Order's requirements,
NVC filed a new tariff with the FCC that took effect in
January of 2012. Doc. 88 at ¶¶ 5-6; Doc. 100 at
¶¶ 5-6. AT&T paid NVC's invoices in full until
the March 2013 invoice. Doc. 88 at ¶ 33; Doc. 100 at
¶ 33. NVC contacted AT&T through email requesting
payment, and AT&T informed NVC that it was withholding
payment "until it can determine the nature of the nearly
200% increase in traffic to your switches since
December." Doc. 88 at ¶ 37; Doc. 100 at ¶ 37.
Since that invoice, AT&T has been paying NVC for its end
office switching charges, but not its transport charges. Doc.
86 at ¶¶ 49-50; Doc. 96 at ¶¶ 49-50; Doc.
100 at ¶ 33. Between April 2013 and November 2014, NVC
and AT&T attempted to resolve their disputes. Doc. 86 at
¶ 51; Doc. 88 at ¶¶ 40-65; Doc. 96 at ¶
51; Doc. 100 at ¶¶ 40-65. No agreement was reached,
so NVC filed this suit against AT&T.
of its access stimulation business, NVC has separate
"Telecommunications Service Agreements" with its
high-volume customers, reciting the procurement and provision
of "Telecommunications Services" as currently
defined by 47 U.S.C. § 153(46). Doc. 88 at ¶¶
28, 30; Doc. 100 at ¶¶ 28, 30. NVC does business
with a number of high-volume customers, and not all provide
free services to their customers, as suggested by
the name "free calling parties" (FCPs). Doc. 86 at
¶ 6; Doc. 96 at ¶ 6. However, in the interest of
simplicity for this Court in comparing NVC's business
practices with the case law and FCC precedent on the issue,
the term "FCP" will be used to reference all
high-volume customers of NVC that make up its access
stimulation business. These Agreements with FCPs require that
NVC provide "at a minimum, DID [direct inward dialing]
trunks, DID numbers, [and] connectivity to the Public
Switched Telephone Network." Doc. 88 at ¶ 29; Doc.
100 at ¶ 29. NVC also provides corollary services to the
FCPs, such as rack space, electrical power, and fire
protection for the building. See Doc. 100 at ¶
29. In return, the FCPs are issued and pay invoices on a
routine basis. Doc. 88 at ¶ 31; Doc. 100 at ¶ 31.
NVC routes its traffic for access stimulation, along with its
relatively small portion of "traditional" telephone
calls,  from
its centralized host switch in Groton to its remote end
switches in either Redfield or Aberdeen, depending on where
the user directed the call. See Doc. 86 at ¶¶
31-35; Doc. 88 at ¶¶ 23, 27; Doc. 96 at
¶¶ 31-35; Doc. 100 at ¶¶ 23, 27.
parties have different characterizations of how the traffic
moves between Sioux Falls, where AT&T routes the call to a
tandem switch owned by South Dakota Network, LLC (SDN),
NVC's switch in Groton 147 miles away. NVC alleges that
its "Point of Interconnection" with SDN is in Sioux
Falls, where it either picks up the traffic and transports it
along a circuit it claims to be leasing from SDN to Groton,
or drops off the traffic transported through Groton along the
SDN circuit it claims to be leasing from SDN. Doc. 88 at
¶¶ 20-24. NVC alleges that it has leased SDN's
circuit since NVC's inception as a company and that
nothing has changed in the physical transportation of the
traffic in the last fifteen years, including NVC's
monthly lease payments to SDN. Doc. 88 at ¶¶ 20-22.
After this dispute over NVC's billings to AT&T arose,
AT&T negotiated with SDN to pay SDN directly for the
transportation of calls where AT&T is the IXC and NVC is the
CLEC between Sioux Falls and Groton. See Doc. 86 at
¶¶ 56-58; Doc. 96 at ¶¶ 56-58. AT&T
asserts that, since its agreement with SDN, NVC no longer is
carrying the traffic along the circuit between Sioux Falls
and Groton and thus cannot bill for that service. Doc. 100 at
¶¶ 20-24. In short, AT&T maintains that because it
is paying SDN directly for the transportation between Sioux
Falls and Groton, it cannot be required to pay NVC for the
same 147 miles of transport. Doc. 100 at ¶¶ 19,
20-24. This dispute regarding the NVC-SDN lease and the
AT&T-SDN Agreement is currently the subject of a separate
lawsuit in the Fifth Judicial Circuit in Brown County, South
Dakota. Doc. 111-2.
Standard of Review
Rule 56(a) of the Federal Rules of Civil Procedure, summary
judgment is proper when "the movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law." On summary
judgment, the evidence is "viewed in the light most
favorable to the nonmoving party." True v.
Nebraska. 612 F.3d 676, 679 (8th Cir. 2010) (quoting
Cordrv v. Vanderbilt Mortg. & Fin.. Inc.. 445 F.3d
1106, 1109 (8th Cir. 2006)). There is a genuine issue of
material fact if a "reasonable jury [could] return a
verdict for either party" on a particular issue.
Mayer v. Countrywide Home Loans. 647 F.3d 789, 791
(8th Cir. 2011). A party opposing a properly made and
supported motion for summary judgment must cite to particular
materials in the record supporting the assertion that a fact
is generally disputed. Fed.R.Civ.P. 56(c)(1); Gacek v.
Owens & Minor Distrib.. Inc.. 666 F.3d 1142, 1145 (8th
Cir. 2012). "Mere allegations, unsupported by specific
facts or evidence beyond the nonmoving party's own
conclusions, are insufficient to withstand a motion for
summary judgment." Thomas v. Corwin. 483 F.3d
516, 527 (8th Cir. 2007). Summary judgment is not "a
disfavored procedural shortcut, but rather ... an integral
part of the Federal rules as a whole, which are designed
'to secure the just, speedy and inexpensive determination
of every action.'" Celotex Corp. v. Catrett
477 U.S. 317, 327 (1986) (quoting Fed.R.Civ.P. 1).
considering a motion for summary judgment the court does not
weigh the evidence, make credibility determinations, or
attempt to discern the truth of any factual issue."
Morris v. Citvof Chillicothe. 512 F.3d 1013, 1018
(8th Cir. 2008). The standard for summary judgment set out
under Rule 56(a) does not change because both parties have
moved concurrently for summary judgment. See Sterneck v.
Equitable Life Ins. Co. of Iowa, 237 F.2d 626, 628 (8th
Cir. 1956). "That both sides move for summary judgment
does not mean that there are no genuine issues, obliging a
court to grant judgment for one side or the other."
Hot Stuff Foods, LLC v. Houston Cas. Co.. 771 F.3d
1071, 1076 (8th Cir. 2014) (quoting St. Paul Fire &
Marine Ins. Co. v. Engelmann. 639 N.W.2d 192, 199 (S.D.
2002)). Each party's motion for summary judgment must be
evaluated independently in accordance with the standard
weight of evidence accorded to the non-moving party to
determine if there is any genuine issue of material fact.
See Wermager v. Cormorant Twp. Bd, 716 F.2d 1211,
1214 (8th Cir. 1983); see also St. Luke's
Methodist Hosp. v. Thompson. 182 F.Supp.2d 765,
769 (N.D. Iowa 2001), affd. 315 F.3d 984 (8th Cir.
issues framed by the cross-motions for summary judgment are
best considered in a specific order. First, the Court must
decide, if it can do so based on facts not subject to genuine
dispute, whether NVC's billings to AT&T are within the
scope of NVC's filed tariffs and are lawful charges. This
requires a consideration of several issues concerning the
FCC's requirements for LECs charging IXCs for business
from access stimulation under the Connect Am. Fund
Order, including whether NVC has properly benchmarked
its rates to those charged by the price cap LEC with the
lowest rates in South Dakota, whether NVC's services are
functionally equivalent to that LECs services, whether
NVC's Tariff is sufficiently clear in defining transport
charges, and whether some or all of the FCPs are end users.
Next, if NVC's Tariff applies and the charges are lawful,
this Court must consider what, if any, effect NVC's
dispute resolution clause in its Tariff has on AT&T's
claims. This Court also must consider the effect of the
pending dispute between NVC and SDN regarding billing of AT&T
for the 147-mile stretch between Sioux Falls and Groton in
dispute. Only if the charges do not fall under the Tariff
must this Court consider whether NVC is entitled to any
relief through the state law doctrines of quantum meruit and
briefing, both parties raise the issue of possible referral
to the FCC under the primary jurisdiction doctrine, "a
common-law doctrine that is utilized to coordinate judicial
and administrative decision making." Access
Telecomms. v. Sw. Bell Tel. Co., 137 F.3d 605, 608 (8th
Cir. 1998). There is no "fixed formula" for
determining whether a question should be referred to an
agency under the primary jurisdiction doctrine. Id
The primary jurisdiction doctrine is applied to obtain agency
expertise, Red Lake Bands of Chippewa Indians v.
Barlow, 846 F.2d 474, 476 (8th Cir. 1988), and to
promote uniformity and consistency, Nader v. Allegheny
Airlines. Inc., 426 U.S. 290, 303-04 (1976).
"Ordinarily, the construction of a tariff is a matter of
law for the Court, being no different than the construction
of any other written document." United States v.
Great N. Rv. Co., 337 F.2d 243, 246 (8th Cir. 1964).
However, where '"words in a tariff are used in a
peculiar or technical sense, and where extrinsic evidence is
necessary to determine their meaning or proper application,
' ... the issue should first go to the appropriate
administrative agency." Access Telecomms., 137
F.3d at 609 (quoting United States v. Western Pac. R.R.
Co., 352 U.S. 59, 66 (1956)) (holding that a complicated
question involving voice grades, circuits, and length of a
local loop connection fell within the FCC's primary
jurisdiction). The expense and delays that often result from
referrals to agencies make the Eighth Circuit
"reluctant" to invoke the doctrine. Id. at
608; United States v. McDonnell Douglas Corp., 751
F.2d 220, 224 (8th Cir. 1984). Although some of the questions
involved in this lawsuit are complex, none necessitate
referral to the FCC. In the interests of reducing costs and
avoiding delay awaiting an FCC ruling for two companies whose
dispute has lingered too long, this Court can provide a
straightforward construction of NVC's Tariff in light of
existing case law, regulations, and FCC orders.
Issues Concerning Tariff Applicability
argues that it is allowed to collect from AT&T under
NVC's Tariff filed with the FCC. In a series of orders
and rulings, the FCC has determined that charges levied by
telecommunications companies must conform to a set of
requirements. Telecommunications companies seek to meet these
requirements through written tariffs filed with the FCC.
Filed tariffs not only allow telecommunications customers to
know exactly for what services and in what amounts they will
be billed, but also ensure that similar customers will be
charged similarly for services. NVC's Tariff declares
that a "Buyer is responsible for the payment of charges
for any service it takes from [NVC], " and a
"buyer" is defined as "an Interexchange
Carrier utilizing [NVC's] Access Service to complete a
Call to or from End Users." Doc. 87 at 15. To recover
under Count I of its Complaint based on tariffed charges, NVC
argues it need only prove: "a) AT&T is an Interexchange
Carrier that is b) utilizing NVC's Access Service c) to
complete a call to or from End Users." Doc. 87 at 17-18.
NVC submits that AT&T is an IXC, AT&T is utilizing NVC's
access services, NVC's local customers and FCPs are End
Users under the definition in the Tariff, and therefore NVC
is entitled to collect on its invoices issued to AT&T at the
rates set forth in NVC's Tariff. Doc. 87 at 18-20.
counters that the invoices filed by NVC fall outside the
Tariff because NVC's Tariff does not meet the FCC's
requirements from the Connect Am. Fund Order, which
requires the benchmarking of rates for functional equivalent
service in order to collect for FCP business, the Tariffs
definition of transport charges is deficient, the FCPs are
not "end users, " and NVC cannot bill AT&T for
transport between Sioux Falls and Groton because AT&T pays
SDN separately for that transport. See Doc. 85 at 20. AT&T
also argues that it is entitled to a refund for any end
office switching charges paid, because they did not conform
to the federal or state tariffs requirements. Doc. 85 at 37.
NVC disputes AT&T's claims and asserts that it is
entitled to summary judgment regardless because AT&T did not
comply with NVC's dispute resolution clause to raise
these issues. See Doc. 87 at 38-47.
oversimplifies what it must show in order to collect from
AT&T under NVC's Tariff. The FCC has outlined specific
requirements applicable to LECs billing FXCs for business
attributable to access stimulation and FCPs. The
cross-motions for summary judgment frame a series of issues
addressed separately below.
Benchmarking and Functional Equivalency
2011, the FCC discussed its rules and orders applicable to
access stimulation companies.
Resolution of the present dispute [between an IXC and a CLEC]
requires an examination first of the Commission's rules
and orders governing incumbent local exchange carrier
("ILEC") access services. ILECs are required to
publish the rates, terms, and conditions applicable to their
access service in tariffs filed with the Commission. The
Commission's rules governing these tariffs provide that
ILECs may recover access service costs through charges
assessed on both IXCs and "end users." These rules
have, since their promulgation in 1983 in anticipation of the
AT&T divestiture, defined "end user" as "any
customer of an interstate or foreign telecommunications
service that is not a carrier." The Commission, since
1984, also has required that ILEC ...