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LLC v. Illinois Bell Telephone Co.

United States District Court, E.D. Missouri, Eastern Division

April 10, 2017

LEVEL 3 COMMUNICATIONS, LLC, et al., Plaintiffs,
v.
ILLINOIS BELL TELEPHONE COMPANY, et al., Defendants.

          MEMORANDUM AND ORDER

          CAROL E. JACKSON UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on the parties' cross motions for summary judgment on the Phase I issues related to liability.

         I. Background

         Defendants Illinois Bell Telephone Company, Indiana Bell Telephone Company, Inc., Michigan Bell Telephone Company, Nevada Bell Telephone Company, Ohio Bell Telephone Company, Pacific Bell Telephone Company, Southwestern Bell Telephone Company and Wisconsin Bell, Inc. are incumbent local telephone companies, or incumbent local exchange carriers (“ILECs”), located in twelve states. Plaintiffs Level 3 Communications, LLC and Broadwing Communications, LLC are competitive local exchange carriers (“CLECs”) offering competing telecommunications services in the twelve states where defendants are ILECs. Because ILECs were once state-regulated monopolies, the Telecommunications Act of 1966, 47 U.S.C. §§ 151, et seq. (hereinafter referred to as the “Act”), was enacted in order to require ILECs to provide interconnection to CLECs at cost-based rates. See 47 U.S.C. §§ 251(c)(2), 252(d). Interconnection is the physical act of linking the network lines of two carriers so that CLEC customers can send communications to ILEC customers. In order to ensure compliance with the Act, the defendants entered into individual interconnection agreements (ICAs) with both of the plaintiffs. Each ICA was reviewed and approved by a state public utility commission. See Id. § 252(e) (“Any [ICA] adopted by negotiation or arbitration shall be submitted for approval to the State commission. A State commission to which an agreement is submitted shall approve or reject the agreement, with written findings as to any deficiencies.”).

         In late 2002, plaintiff Level 3 began negotiations with defendants for new ICAs in 13 states. [Doc. #98, ¶ 23]. The parties were unable to agree upon all of the terms of the new ICAs. [Doc. #98, ¶ 24]. Under the Act, when ILECs and CLECs are unable to agree on the terms of an ICA, the matter is resolved through arbitration proceedings governed by state commissions. [Doc. #98, ¶ 25]. On August 21, 2003, the FCC issued a ruling known as the Triennial Review Order (“TRO”) discussing parties' obligations under the Act. [Doc. #98, ¶ 19]. In mid-2004, Level 3 filed petitions with 13 state commissions to arbitrate the disputed terms of the ICAs. [Doc. #98, ¶ 26]. Among the many issues in dispute during the arbitration proceedings between Level 3 and defendants was the extent of defendants' obligation to lease Level 3 entrance facilities used for interconnection. [Doc. #98, ¶ 27]. On February 4, 2005, the FCC released the Triennial Review Remand Order (“TRRO”) following D.C. Circuit review of the TRO. [Doc. #98, ¶ 28-30].

         On February 10, 2005, the parties executed a Memorandum of Understanding (“MOU”) agreeing to withdraw the arbitration proceedings and agreeing in concept to the terms of the new ICAs. [Doc. #98, ¶ 33]. Pursuant to the MOU, Level 3 and defendants entered into the current ICAs on February 22, 2005, for the states of Arkansas, California, Illinois, Indiana, Kansas, Michigan, Missouri, Nevada, Ohio, Oklahoma, Texas, and Wisconsin. [Doc. #98, ¶ 34]. The Level 3 ICAs contain 73 pages of general terms and conditions and a series of appendices which are common to all states at issue in this lawsuit. [Doc. #98, ¶ 35]. The ICAs provide the terms on which defendants and Level 3 interconnect with each other's network so that customers on one network can call customers on the other. [Doc. #98, ¶ 37]. Prior to executing the MOU in February of 2005, Level 3 and defendants entered into a “First Amendment Superseding Certain Intercarrier Compensation, Interconnection and Trunking Provisions” (the “Superseding Amendment”). [Doc. #98, ¶ 54]. On January 3, 2007, Level 3 acquired plaintiff Broadwing and its subsidiaries. [Doc. #98, ¶ 178]. Unlike the Level 3 ICAs, the general terms and conditions of which are substantially uniform among the relevant states, the Broadwing ICAs are different from one state to another. [Doc. #98, ¶ 180]. The Broadwing ICAs are also subject to a multi-state “Further Amendment Superseding Certain Intervening Law, Compensation, Interconnection and Trunking Provisions” (the “Further Amendment”) which expressly governs and supersedes the Broadwing ICAs. [Doc. #98, ¶ 208].

         Following the issuance of the TRRO, defendants developed and implemented a large-scale project to convert prices it was charging for entrance facilities used for local interconnection from lower cost-based rates to higher tariff rates. [Doc. #98, ¶ 66]. Defendants named its price conversion project the “EF2AC Project.” [Doc.#98, ¶ 67]. EF2AC was an acronym used by defendants which meant Entrance Facility to Access Charge. [Doc. #98, ¶ 68]. As a part of its EF2AC Project, defendants monitored proceedings in each state regarding the TRRO's interpretation. [Doc. #98, ¶ 74]. As a part of its EF2AC Project, defendants converted both DS1 and DS3 circuits to higher tariff rates. [Doc. #98, ¶ 78]. DS1s and DS3s are different sizes of entrance facilities. [Doc. #98, ¶ 79]. From December 2007 through February 2009 without amending the ICAs, defendants converted the Level 3 and Broadwing circuits in Texas, Kansas, Oklahoma, Michigan, Ohio, and Arkansas to higher tariff rates. [Doc. #98, ¶ 86].

         As a part of the price conversion project in Texas, defendants changed the circuit IDs for the converted circuits and removed the “JK” identifiers from the circuit identification numbers. The JK identifiers identified the circuits as local interconnection circuits eligible for cost-based pricing. [Doc. #98, ¶ 97]. In May, 2008, when plaintiffs first received bills from defendants in which the JK identifiers were removed and which reflected higher rates, plaintiffs contacted defendants about the changes. [Doc. #98, ¶ 98]. Defendants responded to plaintiffs by email dated May 16, 2008, with the following explanation:

As a result of the FCC's Triennial Review Order and Triennial Review Remand Order (2005), AT&T is no longer required to provide entrance facilities at TELRIC rates. The EF2AC project will convert the embedded base of Local Interconnection Entrance Facilities to Switched Access tariffed services. Currently we have approval to begin conversion in Texas, Oklahoma, Kansas, Arkansas, Ohio and Connecticut. Conversion will begin immediately in Texas with the other approved states to begin later in 1Q08.

[Doc. #98, ¶ 99].

         Plaintiffs also filed three disputes with defendants challenging the removal of the JK identifier and defendants' price increase. [Doc. #98, ¶ 100]. Defendants denied plaintiffs' disputes and advised that the price increase was justified by the TRRO, stating in its dispute denial remarks:

Denied - as a result of the FCC's Triennial Review Order and Triennial Review Remand Order (2005), ATT is no longer required to provide entrance facilities at TELRIC rates. The EF2AC project converted the embedded base of Local Interconnection Entrance Facilities to Switched Access tariffed services. Credit for the local interconnection entrance facilities was given on ban 710-550-5062-320.

[Doc. #98, ¶ 101].

         Level 3 also disputed AT&T's charge of $246, 328.31 in Michigan for AT&T's retroactive true-up. [Doc. #98, ¶ 102]. Litigation over the interpretation of the TRRO was ongoing in multiple jurisdictions, ultimately culminating in the Supreme Court's decision in Talk America, Inc. v. Michigan Bell Tel. Co., 564 U.S. 50, 63, 131 S.Ct. 2254, 2263, 180 L.Ed.2d 96 (2011).

         Plaintiffs bring this action seeking damages and declaratory relief for defendants' failure to provide essential telecommunications wires (called “entrance facilities”) at cost-based rates (“TELRIC” rates). [Doc. #46]. In the amended complaint, plaintiffs claim that defendants breached the Level 3 ICAs (Count I), the Broadwing ICAs (Count II), and violated the Telecom Act (Count III) by improperly charging higher rates. Plaintiffs also seek a declaration that the Telecom Act, FCC rulings, and the terms of the ICAs require the defendants to provide interconnection at cost-based rates (Count IV). [Doc. #46]. Plaintiffs also assert a claim of unjust enrichment based on the contention that defendants wrongfully billed them at rates higher than cost-based rates (Count V). [Doc. #46].

         The defendants assert various affirmative defenses in their answer. In a counterclaim, defendants Southwestern Bell and Michigan Bell (collectively the “AT&T ILECs”) claim that plaintiffs violated their federal access tariffs by failing to pay the correct amounts for the transport facilities the defendants provided. The AT&T ILECs seek an award of damages and a declaration that the plaintiffs are in violation of the tariffs and are liable for the unpaid amounts.

         II. Legal Standard

         Rule 56(a) of the Federal Rules of Civil Procedure provides that summary judgment shall be entered if the moving party shows “that there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law.” In ruling on a motion for summary judgment the court is required to view the facts in the light most favorable to the non-moving party and must give that party the benefit of all reasonable inferences to be drawn from the underlying facts. AgriStor Leasing v. Farrow, 826 F.2d 732, 734 (8th Cir. 1987). The moving party bears the burden of showing both the absence of a genuine issue of material fact and its entitlement to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). Once the moving party has met its burden, the non-moving party may not rest on the allegations of his pleadings but must set forth specific facts, by affidavit or other evidence, showing that a genuine issue of material fact exists. United of Omaha Life Ins. Co. v. Honea, 458 F.3d 788, 791 (8th Cir. 2006) (quoting Fed.R.Civ.P. 56(e)). Rule 56 “mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corporation v. Catrett, 477 U.S. 317, 322 (1986).

         “Where parties file cross-motions for summary judgment, each summary judgment motion must be evaluated independently to determine whether a genuine issue of material fact exists and whether the movant is entitled to judgment as a matter of law.” Progressive Cas. Ins. Co. v. Morton, 140 F.Supp.3d 856, 860 (E.D. Mo. 2015) (citations omitted). Because “the interpretation and construction of insurance policies is a matter of law, . . . such cases are particularly amenable to summary judgment.” Id. (quoting John Deere Ins. Co. v. Shamrock Indus., Inc., 929 F.2d 413, 417 (8th Cir. 1991)).

         III. Discussion

         The ICA is a private contract that implements duties imposed by the Telecommunications Act of 1996. The Court will therefore begin with a brief discussion of the relevant provisions of the Act, the key agency decisions and judicial interpretations, as well as the key provisions of the parties' ICA before turning to the motions for summary judgment. The Act imposed a number of duties on incumbent providers of local telephone service in order to facilitate market entry by competitors. AT & T Corp. v. Iowa Utilities Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). The Act requires incumbent carriers to share their physical networks with new market entrants, known as “competing carriers, ” to mitigate the prohibitive cost of building a new network. CoreTel Virginia, LLC v. Verizon Virginia, LLC, 752 F.3d 364, 367-68 (4th Cir. 2014). §251(c)(2) of the Act promotes interconnection, the physical link between two telecommunications networks that allows each carrier's customers to call the other's. The FCC has interpreted §251(c)(2) to require, among other things, that an incumbent carrier lease a competing carrier “entrance facilities” required for interconnection at TELRIC rates. See Unbundled Access to Network Elements [“Remand Order ”], 20 F.C.C. 2533, ¶ 140 (2005); Review of the Section 251 Unbundling Obligations of Incumbent Local Exch. Carriers [“Triennial Review Order ”], 18 F.C.C. 16978, ¶ 366 (2003); see also Talk America, 131 S.Ct. at 2261. Therefore, while an incumbent carrier no longer has a general obligation to provide entrance facilities at TELRIC rates under § 251(c)(3), it remains obligated to provide entrance facilities at TELRIC rates when they are used for interconnection under §251(c)(2). CoreTel Virginia, LLC v. Verizon Virginia, LLC, 752 F.3d 364, 368 (4th Cir. 2014) (citing Talk America, 131 S.Ct. at 2264-65; Remand Order, 20 F.C.C. 1533, ¶ 140; Triennial Review Order, 18 F.C.C. 16978, ¶¶ 365, 366).

         The ICAs[1] contain several provisions pertaining to the rights and obligations of the parties. Section 43.1 addresses the scope of the ICA:

This Agreement is intended to describe and enable specific Interconnection and compensation arrangements between the Parties. This Agreement is the arrangement under which the Parties may purchase from each other the products and services described in Section 251 of the Act and obtain approval of such arrangement under Section 252 of the Act. Except as agreed upon in writing, neither Party shall be required to provide the other Party a function, facility, product, service or arrangement described in the Act that is not expressly provided herein. Nothing herein is intended to affect or abridge either Party's rights or obligations under Section 252(i) of the Act, nor is anything herein intended to modify SBC-13STATE's obligation to provide services and facilities under the Act.

[Doc. #84-2, p. 75, §43.1].

         Section 22.1 addresses the law governing the ICA:

Unless otherwise provided by Applicable Law, this Agreement shall be governed by and construed in accordance with the Act, the FCC Rules and Regulations interpreting the Act and other applicable federal law. To the extent that federal law would apply state law in interpreting this Agreement, the domestic laws of the state in which the Interconnection, Resale Services, Network Elements, functions, facilities, products and services at ...

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