United States District Court, D. South Dakota, Northern Division
JAMES VALLEY COOPERATIVE TELEPHONE COMPANY, A SOUTH DAKOTA COOPERATIVE; JAMES, VALLEY COMMUNICATIONS, INC., A SOUTH DAKOTA CORPORATION; AND NORTHERN VALLEY COMMUNICATIONS L.L.C., A SOUTH DAKOTA LIMITED LIABILITY COMPANY, Plaintiffs,
SOUTH DAKOTA NETWORK, LLC, A SOUTH DAKOTA LIMITED LIABILITY COMPANY, Defendant.
OPINION AND ORDER ON PENDING MOTIONS
ROBERTO A. LANGE UNITED STATES DISTRICT JUDGE
case began with a state court complaint filed in Brown
County, Fifth Judicial Circuit, South Dakota, back in 2015.
Doc. 3-2 (Complaint dated March 25, 2015); Doc. 1 (Notice of
Removal indicating service occurred on June 6, 2015). On
August 30, 2017, Defendant South Dakota Network, LLC (SDN)
filed a Notice of Removal in this Court, asserting federal
question jurisdiction under 28 U.S.C. § 1331. Doc. 1.
SDN filed with its Notice of Removal two motions: 1) a Motion
to Consolidate Related Actions, Doc. 5, seeking to
consolidate this case with the factually related case of
Northern Valley Communications, LLC v. AT&T
Corp., 14-CV-1018-RAL, long pending in this Court;, and
2) a Motion for Modified Confidentiality Agreement and Access
to Certain Filings in 14-CV-1018-RAL, Doc. 7. Plaintiffs
James Valley Cooperative Telephone Company, James Valley
Communications, Inc., and Northern Valley Communications, LLC
(collectively "Plaintiffs") filed a Motion to
Remand on September 14, 2017. Doc. 17. This Court held a
motion hearing on October 25, 2017, on the pending motions.
For the reasons explained below, Plaintiffs' Motion to
Remand, Doc. 17, is granted; the Motion to Consolidate
Related Actions, Doc. 5, is denied as moot; and the Motion to
Modify Confidentiality Agreement, Doc. 7, is denied without
prejudice to seeking relief otherwise.
Summary of Facts Relevant to Pending Motions .
a South Dakota limited liability company existing under
Federal Communications Commission (FCC) and State Public
Utility Commission orders. SDN provides for centralized equal
access (CEA) service in South Dakota using an access tandem
switch in Sioux Falls. SDN is owned by a group of 17
incumbent local exchange carriers (ILECs) and provides a
centralized point for the aggregation and exchange of long
distance telecommunication traffic. SDN is governed by a
board of managers.
James Valley Cooperative Telephone Company (JVT) is a member
of SDN. JVT is an ILEC that provides telephone services in
Brown County, South Dakota. JVT owns Plaintiff James Valley
Communications, Inc., which is the sole member of Plaintiff
Northern Valley Communications, LLC (NVC). NVC is a
competitive local exchange carrier (CLEC) that provides
telecommunications and information services in certain areas
of Brown County and Spink County in northeastern South
Dakota. Over 90% of NVC's telecommunications business
comes from a practice known as "access stimulation,
" by affiliation with out-of-state entities that
generate high volumes of calls, such as free conference
calling services. Access stimulation is a controversial
business practice that has led to litigation before the FCC
access stimulation business and its dispute with AT&T
over billing for those calls gave rise to both this lawsuit
and the related lawsuit pending as 14-CV-1018-RAL. AT&T
is an interexchange carrier (IXC), which is responsible for
carrying telephone traffic between local exchange carriers
(LECs) and 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 in order to call and receive calls from
other LECs. NVC has used SDN's access tandem switch
services to do so.
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. 1-1 at 42 of 86. The FCC addressed the
access stimulation practice in In re Connect America
Fund, A National Broadband Plan For Our Future, 26 FCC
Red. 17663, 17874-90 (2011) [hereafter Connect Am. Fund
Order!, in which the FCC sought to provide greater
clarity to the access stimulation practice. Id. at
17667, 17676. After the Connect Am. Fund Order, NVC
filed a new tariff with the FCC that took effect in January
of 2012. AT&T paid NVC's invoices until the March
2013 invoice, after which AT&T paid NVC for its end
office switching charges, but not for transport charges. Doc.
1-1 at 42 of 86. FCC decisions have provided some guidance on
how CLECs like NVC can collect from an IXC like AT&T when
the CLEC is engaged in access stimulation. In short, NVC may
collect from AT&T based on either a negotiated rate with
AT&T or a properly "benchmarked" rate. See
Quest Commc'ns Co., LLC v. N. Valley Commc'ns,
LLC, 26 FCC Red. 8332, 8334-35 (2011); Connect Am.
Fund Order. 26 FCC Red. at 17886: see also N. Valley
Commc'ns v. AT&T Corp.. 245 F.Supp.3d 1120, 1130
(D.S.D. 2017). However, an IXC like AT&T may be able to
install a direct trunk from the IXC's point of presence
to the end office of the CLEC, thereby avoiding tandem
switching functions and the transport charges that make
access stimulation potentially so profitable to an entity
like NVC. In re Access Charge Reform. 26 FCC Red.
2556, 2565 (2008) (decision known as
"PrairieWave"); N. Valley Commc'ns.
245 F.Supp.3d at 11.31.
of its CEA services, SDN provides tandem switch services for
the exchange of telecommunications traffic between LECs like
JVT and NVC with IXCs like AT&T. Doc. 3-53at 3. NVC has
utilized the CEA services of SDN since 1999 pursuant to lease
agreements and other contracts. Doc. 3-53 at 3. SDN bills
AT&T separately for its services related to the CLEC
NVC's calls connected to the IXC AT&T. A month after
AT&T began withholding payment from NVC, AT&T in
April of 2013 began withholding payment from SDN as well.
Doc. 3-53 at 4.
communications had occurred between NVC and AT&T for some
alternative arrangement for handling the access stimulation
generated volume of calls, but no agreement resulted. Doc.
3-53 at 4. SDN's board of managers met in November of
2013 without the Plaintiffs' participation to address the
billing dispute with AT&T. Doc. 3-53 at 4. After that
meeting, SDN notified NVC that it intended to negotiate
separately with AT&T, NVC objected and sent a cease and
desist letter to SDN, and SDN then attempted to work with NVC
to resolve the dispute with AT&T. Doc. 3-53 at 4. In
early December of 2013, SDN and NVC representatives met in
Groton, South Dakota, to discuss matters relating to
nonpayment of bills by AT&T and related issues. SDN and
NVC dispute whether an agreement was reached during the
meeting. Doc. 3-53 at 4.
of 2014, NVC sued AT&T in the United States District
Court for the District of South Dakota. 14-CV-1018-RAL, Doc.
1. Thereafter, on September 18, 2014, SDN entered into a
separate agreement with AT&T which provided for a
contract rate to provide transport for access stimulation
traffic between Sioux Falls and Groton. Doc. 3-53 at 4-5. NVC
had been billing and was seeking to collect from AT&T a
tariff rate for transport charges including for the mileage
between Sioux Falls and Groton. The effect of the
SDN-AT&T agreement was to undercut NVC's damage
claim against AT&T for those transport
charges and to provide AT&T an argument of a defense to
that portion of NVC's damage claim. As this Court
previously put it:
AT&T argues that it is not responsible for any transport
charges after September 2014 between Sioux Falls and Groton
because SDN, rather than NVC, was providing that transport
pursuant to a negotiated agreement with AT&T. Despite
AT&T's arguments to the contrary, -it is a material
issue whether SDN had the ability to enter into an agreement
with AT&T or had a binding agreement with NVC such that
it could not. After all, the FCC has deemed it a violation of
47 U.S.C. § 201(b) for a LEC to bill an IXC for
transport services that offered no advantage to the IXC.
Thus, if AT&T and SDN have a valid agreement under which
SDN is providing to AT&T the transport services between
Groton and Sioux Falls, NVC cannot collect for that service.
Valley Commc'ns. 245 F.Supp.3d at 1143-14.
in this case sued SDN in state court in 2015 through a
complaint alleging various state law claims. Doc. 3-2. When
SDN filed its answer, defenses, counterclaim, and third-party
complaint on July 20, 2015, SDN alleged a federal law
preemption defense, Doc. 3-4 at 11, and made certain state
law counterclaims against Plaintiffs under theories of breach
of contract, state law civil conspiracy, and expulsion of JVT
from the SDN operating agreement, Doc. 3-4. Plaintiffs
subsequently have twice been allowed to amend their state
court complaint, with the Second Amended Complaint having
been filed in or around April of 2016.
state court in this case, SDN filed a Motion to Dismiss and
Alternative Motion to Stay Proceedings and Refer Issues to
the FCC and a Motion to Strike or Exclude certain expert
opinions. Through that motion, SDN argued that all of
Plaintiffs' claims arise under federal law and are
preempted. Doc. 3-60 at 2. The Honorable Scott P. Myren
granted the motion in part and denied the motion in part.
Judge Myren carefully navigated through the remaining claims,
defenses, and expert opinions to confine the case to state
law claims. Judge Myren recognized:
This Court [state trial court for Brown County] lacks subject
matter jurisdiction oyer claims for violation of the [Federal
Communications Act] because the federal courts have exclusive
jurisdiction to adjudicate those claims. However, lack of
subject matter jurisdiction over these ...