United States District Court, D. South Dakota, Southern Division
QWEST COMMUNICATIONS CORPORATION, a Delaware corporation, Third-Party Plaintiff,
FREE CONFERENCING CORPORATION, a Nevada corporation, Third-Party Defendant.
MEMORANDUM OPINION AND ORDER
E. SCHREIER UNITED STATES DISTRICT JUDGE.
plaintiff, Qwest Communications Corporation (Qwest), brought
claims against third-party defendant, Free Conferencing
Corporation (FC), alleging that FC engaged in conduct
amounting to unfair competition, civil conspiracy, and
alternatively that FC was unjustly enriched. This court found
that Qwest failed to prove its claims. On appeal, the Eighth
Circuit Court of Appeals affirmed this court's decision
on the unfair competition and intentional interference with a
business relationship claim, but reversed and remanded on the
claim for unjust enrichment. Qwest Commc'ns Corp. v.
Free Conferencing Corp., 837 F.3d 889, 893 (8th Cir.
2016) (hereinafter Free Conferencing).
is a long-distance telephone service provider, referred to as
an interexchange carrier (IXC). As an IXC, Qwest delivers
long-distance calls from one local area to another. Docket
407 at 2. FC provides conference calling services to its
customers, operates a website, and provides 24-hour customer
support. Id. FC does not charge customers for its
services and is not a common carrier under the Communications
Act of 1934, as amended. Id.
Inc. is a local telephone service provider, referred to as a
local exchange carrier (LEC), for the Mitchell, South Dakota
area. Id. As an LEC, Sancom owns the facilities that
allow calls carried by IXCs, such as Qwest, to be originated
and terminated with Sancom's customers. Id. at
3. Sancom, a common carrier, is regulated by and filed
tariffs with both the Federal Communications Commission (FCC)
and the South Dakota Public Utilities Commission.
Communications Act of 1934 governs the contractual
relationship between an IXC and an LEC. 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 LECs such as Sancom to assess interstate
access charges against carriers such as Qwest “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). An LEC may not charge an IXC a fee for terminating
calls to local customers that is not specified in the tariff.
In re AT&T Corp. v. All Am. Tel. Co., 28 FCC
Rcd. 3477, 3494 (2013). But LECs may receive some
compensation from IXCs for calls they deliver to
noncustomers. Qwest Commc'ns Corp. v. Farmers &
Merchs. Mut. Tel. Co., 24 F.C.C. Rcd. 14801, 14812 n.96
(2009) (hereinafter Farmers II).
tariff permitted it to charge IXCs, including Qwest, more
than three cents per minute for calls it delivered to an
“end user.” Free Conferencing, 837 F.3d
at 893. An “end user” is defined in the tariff as
an individual or entity “which subscribe[d] to the
services” Sancom offered. Id. Thus, Sancom
could not charge IXCs under the terms of the tariff unless it
delivered a call to an individual or entity that subscribed
to its services.
2004, FC and Sancom entered into an agreement that provided
that Sancom would host FC's conference call bridges on
its premises in Mitchell, South Dakota. Docket 407 at 6. FC
guaranteed its conference call bridges would increase call
traffic to Sancom's service area, and in return, Sancom
paid FC a “marketing fee” of 2 cents for each
minute of call traffic that terminated at FC's conference
call bridges. Id. Thus, FC increased the volume of
call traffic IXCs delivered to Sancom and Sancom subsequently
billed IXCs under its tariff for the increased traffic.
Id. Sancom would then pay FC its marketing fee.
Id. In effect, this contract resulted in Sancom and
FC splitting the access charges paid by the IXCs on calls
destined for FC's conference bridges. Id.
it is well-settled that an LEC cannot bill an IXC under its
tariff for calls ‘terminated' at a conference call
bridge when the conference calling company does not pay a fee
for the LEC's services.” Free
Conferencing, 837 F.3d at 894. At the time that FC and
Sancom first entered into their contract, however, that issue
had not been litigated. Id. Then in 2009, the FCC
“held that an LEC could not charge an IXC under its
tariff for calls delivered to a conference call bridge when
the conference call company did not pay a fee to subscribe to
the LEC's services.” Id. at 894 (citing to
Farmers II, 24 F.C.C. Rcd. at 14801).
2014, this court held a bench trial on Qwest's claims
against FC and ruled in favor of FC on all claims.
Id. at 892. On appeal, the Eighth Circuit Court of
Appeals upheld this court's judgment finding against
Qwest on Qwest's claims of intentional interference with
a business relationship and unfair competition. Id.
at 893. But the Eighth Circuit reversed and remanded this
court's judgment on Qwest's claim for unjust
prove a claim for unjust enrichment under South Dakota law,
“the plaintiff must prove (1) it conferred a benefit
upon another; (2) the other accepted or acquiesced in that
benefit; and (3) it would be inequitable to allow the other
to retain that benefit without paying.” Id. at
899 (citing to Dowling Family P'ship v. Midland
Farms, 865 N.W.2d 854, 862 (S.D. 2015). “[T]he
relevant inquiry is whether the circumstances are such that
equitably the beneficiary should restore to the benefactor
the benefit or its value.” Hofeldt v. Mehling,
658 N.W.2d 783, 788 (S.D. 2003).
Qwest has shown that it conferred a benefit upon FC and that
FC accepted that benefit. The only issue is whether it would
be inequitable to allow FC to retain that benefit without
paying Qwest. In South Dakota, “[u]njust enrichment . .
. allows an award of restitution for the value of the benefit
unjustly received, rather than the value of the services
provided.” Johnson v. Larson, 779 N.W.2d 412,
418 (S.D. 2010). “South Dakota measures damages for
unjust enrichment based on the amount the beneficiary
received unjustly, not the amount the benefactor lost.”
Free Conferencing, 837 F.3d at 900.
Parker v. Western Dakota Insurors, Inc., 605 N.W.2d
181, 187 (S.D. 2000), the South Dakota Supreme Court found
that plaintiff could not maintain a claim for unjust
enrichment against defendant because the defendant paid for
the benefit. Defendant purchased substantially all of a
competing insurance agency's income-generating assets and
the purchase agreement specifically excluded any of the
insurance agency's debts or accounts payable.
Id. at 183-84. Plaintiff, a former insurance agent,
was entitled to a portion of her commissions from the
insurance agency, but defendant never made payments to
plaintiff after it purchased the agency's assets.
Id. at 184. The South Dakota Supreme Court found
that defendant had received a benefit from plaintiff and was
aware of the benefit, but that it was not inequitable for
defendant to keep the benefit because it paid for it.
Id. at 187. The Court found that the insurance