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BTC, Inc. v. At&T Corp.

United States District Court, N.D. Iowa, Central Division

September 3, 2019

BTC, INC., an Iowa Corporation d/b/a WESTERN IOWA NETWORKS, Plaintiff,
v.
AT&T CORP., a New York Corporation, Defendant.

          MEMORANDUM OPINION AND ORDER ON MOTION TO DISMISS CERTAIN CLAIMS

          LEONARD T. STRAND, CHIEF JUDGE.

         I. INTRODUCTION

         This matter is before me on a motion (Doc. No. 14) by defendant AT&T Corp. (AT&T) to dismiss Counts II and III of plaintiff's complaint. Plaintiff BTC Inc. d/b/a Western Iowa Networks (BTC), has filed a resistance (Doc. No. 15) and AT&T has filed a reply (Doc. No. 16). I find that oral argument is not necessary. See Local Rule 7(c).

         II. BACKGROUND

         BTC filed its complaint (Doc. No. 1) on December 28, 2018, alleging that AT&T has refused to pay BTC's interstate tariffed switched access charges to transmit interstate long-distance calls to BTC customers. Doc. No. 1 at 1. It explains that switched access charges are federally-mandated charges assessed by local telephone companies like BTC on long-distance carriers like AT&T who utilize and rely on the local carrier's telecommunications network for the origination or termination of interstate long-distance telecommunications traffic. Id. BTC alleges the switched access services it provided were in accordance with Federal Communication Commission (FCC) rules and regulations, including federally-filed tariffs. Id. It alleges that the tariffs were filed in full compliance with rules adopted by the FCC on November 18, 2011, that concluded competitive local exchange carriers (CLECs) such as BTC may tariff and assess switched access charges on long-distance carriers that terminate traffic to free conference calling providers served by the CLEC. These rules also established the reasonable switched access rates to be charged for this telecommunications traffic. Id. at 1-2. BTC refers to these as “access stimulation” rules and alleges they were adopted by the FCC to clarify whether tariffed access charges applied to calls made to high-volume free conference calling and similar services. BTC alleges AT&T's refusal to pay BTC the tariffed access charges violates FCC policy. Id. at 2. BTC relies on both federal question and diversity jurisdiction[1] and alleges that venue is proper based on AT&T's business transactions in this district and because a substantial part of the events or omissions giving rise to the claims occurred in this district. Id. at 3-4.

         BTC provides the following background in its complaint concerning telecommunications regulation. In 1984, AT&T was split up into “local” and “long distance” companies. Id. at 4. Local telephone companies (LECs) maintained exclusive franchises to provide telephone service within defined geographic service territories, while the long-distance portion of AT&T faced competition from other interexchange carriers (IXCs), such as MCI, Sprint and others. Id. IXCs generally use their own lines to carry calls across a state or across the country. Id. They do not, however, own lines within the local exchanges. Id. These lines are owned by the LECs. To enable longdistance competition, the FCC required LECs to allow IXCs to use their local lines for purposes of “originating” and “terminating” calls. Id. To compensate LECs for the use of their networks, the FCC required IXCs to pay “access charges” to LECs for originating and terminating long-distance telephone calls. The charges were set forth in regulated price lists, known as tariffs, filed with the FCC (interstate long-distance calls) and state public service commissions (intrastate long-distance calls). Id.

         In 1996, Congress passed the Telecommunications Act (1996 Act), which eliminated the exclusive franchises possessed by the incumbent LECs (ILECs) and preempted state statutes, regulations and other legal requirements that “prohibit or have the effect of prohibiting the ability of any entity to provide interstate or intrastate telecommunications services.” Id. at 4-5 (quoting 47 U.S.C. § 253(a)). Congress also required all telecommunications carriers to interconnect their networks to ensure that all consumers can place and receive calls from consumers that are served by different carriers. Id. at 5.

         BTC notes that prior to 2001, the FCC did not regulate CLEC access charges. Id. In 2001, it modified its rules to regulate CLEC access rates by more closely aligning them with those of the ILECs. Id. The FCC established a “benchmark” or “safe harbor” under which CLEC access rates are presumed just and reasonable as a matter of law. Id. (citing In re Reform of Access Charges Imposed by Competitive Local Exchange Carriers, 16 FCC Rcd. 9923, 9924, 9938-49, ¶¶ 3, 40-63 (2001) (CLEC Access Charge Order I); 47 C.F.R. § 61.26). The CLEC Access Charge Order I stated:

[A]n IXC that refused payment of tariffed rates within the safe harbor would be subject to suit on the tariff in the appropriate federal district court, without the impediment of a primary jurisdiction referral to the Commission to determine the reasonableness of the rate. Similarly, because of the presumptive conclusion of reasonableness that we will accord to tariffed rates at or below the benchmark, a CLEC with qualifying rates will not be subject to a section 208 complaint challenging its rates.

CLEC Access Charge Order I, 16 FCC Rcd. at 9948 ¶ 60. BTC alleges that many years ago, LECs recognized that an increase in traffic volumes on their networks would allow them to collect more access revenue and, in turn, provide better services to residents of rural areas. Thus, they began to compete for customers that received high volumes of calls, such as free conference calling services. Doc. No. 1 at 6.

         In approximately 2008, AT&T and other IXCs filed disputes with state utility commissions, the FCC, and in various federal courts alleging it was unjust and unreasonable for LECs to be paid full access charges for traffic going to these high-volume services. They failed to convince regulators to prohibit free conference calling services or to prevent LECs from assessing tariffed access charges on these calls. See Connect America Fund Order, ¶¶ 672, 674. On November 18, 2011, the FCC struck a compromise, adopting the Connect America Fund Order, specifically permitting LECs to engage in “access stimulation, ” but requiring LECs that provided service to high-volume customers to reduce their rates to match the rates of the largest “price cap” ILEC in the state. Doc. No. 1 at 6.

         BTC participates as an issuing carrier in a tariff identified as Kiesling Associates LLP Tariff FCC No. 2 (the Kiesling Tariff). Id. at 7. It contends its tariffed interstate access rates are fully consistent with the requirements of the Connect America Fund Order. The Kiesling Tariff benchmarks BTC's tariffed rates to the “price cap” ILEC in Iowa (CenturyLink) as required by the Connect America Fund Order. BTC contends that despite being billed for and receiving services in accordance with that order and the rules established by the FCC, AT&T has refused to pay BTC for the switched access services it has provided. According to BTC, AT&T's unpaid balance exceeds $2.2 million, not including accrued late fees that are allegedly due pursuant to the Kiesling Tariff. Id. BTC alleges that additional damages accrue daily as AT&T continues to withhold amounts due. Id. Finally, BTC argues that while AT&T refuses to pay the lawful tariffed switched access charges, it nevertheless continues to bill and collect payment from retail and wholesale clients for the delivery of calls to BTC's networks. Id. BTC alleges AT&T has generated significant profit by terminating long-distance calls to the high-volume conference call providers served by BTC while refusing to compensate BTC for the work it does completing the calls on behalf of AT&T.

         BTC alleges the following claims against AT&T:

• Count I - Collection Action Pursuant to Federal Tariffs
• Count II - Quantum Meruit
• Count III - Unjust Enrichment
• Count IV - Declaratory Judgment

Id. at 8-10. It seeks damages for an amount to be determined at trial, but no less than the access charges that AT&T owes, together with late fees and prejudgment interest, a preliminary and permanent injunction barring AT&T from continuing to engage in such conduct and directing it to pay access charges in the future pursuant to BTC's federal tariff in addition to attorneys' fees and costs. Id. at 11.

         III. APPLICABLE STANDARDS

         The Federal Rules of Civil Procedure authorize a pre-answer motion to dismiss for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). The Supreme Court has provided the following guidance in considering whether a pleading properly states a claim:

Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” As the Court held in [Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)], the pleading standard Rule 8 announces does not require “detailed factual allegations, ” but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. Id., at 555, 127 S.Ct. 1955 (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)). A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” 550 U.S. at 555, 127 S.Ct. 1955. Nor does a complaint suffice if it tenders “naked assertion[s]” devoid of “further factual enhancement.” Id., at 557, 127 S.Ct. 1955.
To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Id., at 570, 127 S.Ct. 1955. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id., at 556, 127 S.Ct. 1955. The plausibility standard is not akin to a “probability requirement, ” but it asks for more than a sheer possibility that a defendant has acted unlawfully. Ibid. Where a complaint pleads facts that are “merely consistent with” a defendant's ...

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