Allied Telecom Group, LLC v. District of Columbia ( 2023 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
ALLIED TELECOM GROUP, LLC,
Plaintiff,
v. Civil Action No. 1:22-cv-00653 (CJN)
DISTRICT OF COLUMBIA,
Defendant.
MEMORANDUM OPINION
Plaintiff Allied Telecom Group, LLC, a telecommunications service provider, claims that
two District of Columbia agencies have contracted with each other for telecommunications
services in violation of federal regulations implementing the Telecommunications Act of 1996.
The District of Columbia moves to dismiss the complaint for lack of subject-matter jurisdiction
and failure to state a claim. For the reasons explained below, the Court will deny the motion.
I. Background
This case concerns competitive-bidding requirements established by regulations
implementing provisions of the Telecommunications Act that promote the provision of
telecommunications and information services to entities like schools and libraries. The Court of
Appeals has described the relevant statutory and regulatory scheme as follows:
In the Telecommunications Act of 1996, Congress charged the Federal
Communications Commission (“FCC”) with promoting universal access to
advanced telecommunications and information services at just, reasonable, and
affordable rates. Telecommunications Act of 1996, Pub. L. No. 104–104 § 254,
110 Stat. 56, 71–75. Under the 1996 Act and the FCC’s implementing regulations,
every interstate telecommunications carrier must contribute a portion of its
quarterly interstate and international telecommunications revenue to the Universal
Service Fund. See 47 C.F.R. §§ 54.706, 54.709. . . . The FCC appointed the
Universal Service Administrative Company to administer the Fund, 47 C.F.R.
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§ 54.701(a), and to use the money to support the cost of providing low-cost
telecommunications services to schools, libraries, health-care providers,
low-income consumers, and subscribers in high cost-areas. See 47 U.S.C. § 254(b);
47 C.F.R. § 54.701(c)(1).
One of the many programs administered through the Fund is the Schools
and Libraries Program, commonly known as “E–Rate.” See 47 U.S.C.
§ 254(h)(1)(B). The E–Rate program entitles qualifying schools and libraries to
receive Internet and telephone services at discounted rates. See generally United
States v. Green, 592 F.3d 1057, 1060–1061 (9th Cir. 2010). To receive those
discounts, the schools and libraries must first conduct a “competitive bidding
process” that is open to all telecommunications service providers. 47 C.F.R.
§ 54.503(a). . . .
The schools and libraries must then select the most cost-effective service
from among those bids. 47 C.F.R. § 54.511(a). Once the schools and libraries have
reached an agreement with a service provider, they can submit a request for funding
approval to the Universal Service Administrative Company. Id. § 54.504(a). Once
the agreement is approved, the Company will either reimburse the school or library
for its payments to the service provider, or will pay the service provider’s invoices
directly. Id. § 54.514(a) & (c).
United States ex rel. Heath v. AT & T, Inc., 791 F.3d 112, 116–17 (D.C. Cir. 2015). In addition,
“[s]tate telecommunications networks may secure discounts under the universal service support
mechanisms . . . on behalf of eligible schools and libraries,” provided that they “[c]omply with the
competitive bid requirements set forth in [47 C.F.R.] § 54.503.” 47 C.F.R. § 54.519(a)(6).
Allied alleges that the District of Columbia Public Schools (DCPS) has violated these rules
by contracting with another D.C. agency—the Office of the Chief Technology Officer
(OCTO)—for telecommunications services and by obtaining funding through the E–rate program.
Compl. ¶¶ 12–13, ECF No. 1. D.C. Code § 1-301.01(k) provides that
[t]he Mayor may authorize the heads of District departments, offices, and agencies
to place orders with any other department, office, or agency of the District for
materials, supplies, equipment, work, or services of any kind that the requisitioned
department, office, or agency may be in a position to supply or equipped to render.
Acting under authority from this provision, Allied claims, DCPS has issued a “non-competitive,
higher priced” award to OCTO “rather than awarding the work on a competitive basis to a lower
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commercial service provider offeror such as Allied.” Id. ¶ 16. According to the complaint, Allied
provided its “wide area network and internet services” to DCPS prior to 2015, but since that year,
DCPS has obtained the services from OCTO. Id. ¶¶ 6–7, 12. This departure allegedly stemmed
from a decision by DCPS “to not contract for the E-rate telecommunications services from a
commercial vendor such as Allied.” Id. ¶ 12. Allied alleges that “OCTO provides these services
to DCPS at a price in excess of the price which Allied has offered to perform these services,” and
that “in the most recent contracting cycle, Allied offered to perform the services at a price
significantly lower” than OCTO’s price. Id. Allied also claims that OCTO “has a relationship
with DCPS that unfairly influences the outcome of any competition and furnished OCTO with
inside information,” all of which is improper under FCC rules. Id. ¶ 19; see 47 C.F.R. § 54.503(a).
In March 2022, Allied filed suit against the District of Columbia for declaratory and
injunctive relief. Allied seeks a “declaratory judgment that federal law preempts D.C. Code Ann.
§ 1-301.01(k) as it applies to contracts awarded under the E-rate program,” such that “DCPS has
no power to continue to contract with OCTO under the E-rate program.” Compl. at 7. Allied also
requests an injunction “to prevent DCPS from continuing to violate Federal law.” Id. ¶ 31. The
District moves to dismiss, arguing that the Court lacks subject-matter jurisdiction and that Allied
has failed to state a claim.
II. Legal Standards
When assessing a motion to dismiss for lack of subject-matter jurisdiction under Federal
Rule of Civil Procedure 12(b)(1), the Court “assume[s] the truth of all material factual allegations
in the complaint and construe[s] the complaint liberally, granting plaintiff the benefit of all
inferences that can be derived from the facts alleged.” Am. Nat’l Ins. Co. v. FDIC, 642 F.3d 1137,
1139 (D.C. Cir. 2011) (quotation omitted). The Court also construes the factual allegations in a
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complaint this way when addressing a motion to dismiss for failure to state a claim under Rule
12(b)(6). See Holy Land Found. for Relief & Dev. v. Ashcroft, 333 F.3d 156, 165 (D.C. Cir. 2003).
To survive a motion to dismiss under Rule 12(b)(6), a plaintiff must plead “enough facts
to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007). That requirement is met when the pleaded facts allow “the reasonable inference that
the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements,
do not suffice.” Id.III. Analysis
The District’s primary argument for dismissal is that Allied’s claims do not fall within the
Court’s subject-matter jurisdiction because Allied lacks a cause of action. Even if the Court has
jurisdiction, the District contends, Allied’s claims should nevertheless be dismissed because Allied
has failed to state a preemption claim and because the suit is time-barred. The Court addresses
each argument in turn, starting with the argument that the District frames as jurisdictional.
District courts have subject-matter jurisdiction to decide federal questions—those that
“aris[e] under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. The
Court generally has federal-question jurisdiction if plaintiffs’ right “to recover under their
complaint will be sustained if the Constitution and laws of the United States are given one
construction and will be defeated if they are given another.” Steel Co. v. Citizens for a Better
Env’t, 523 U.S. 83, 89 (1998) (quotation omitted). That general rule applies “unless the claim
clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where
such a claim is wholly insubstantial and frivolous.” Id. (quotation omitted). As a result, “the
inadequacy of the federal claim” will only support dismissal for lack of subject-matter jurisdiction
“when the claim is so insubstantial, implausible, foreclosed by prior decisions of this Court, or
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otherwise completely devoid of merit as not to involve a federal controversy.” Id. (quotation
omitted). Otherwise, the absence of a cause of action “does not implicate subject-matter
jurisdiction.” Id.The District’s motion conflates the concepts of subject-matter jurisdiction and cause of
action; only in its reply brief does it recognize these well-established rules, arguing there, in a
footnote, that Allied lacks even an arguable cause of action (in the jurisdictional sense). Def.’s
Reply at 2 n.2, ECF No. 10. The District does little to support its position that Allied’s claims are
“devoid of merit.” Steel Co., 523 U.S. at 89 (quotation omitted). The Court disagrees that this
question about the existence of a cause of action bears on its jurisdiction here, and it will analyze
the question under the rubric of Rule 12(b)(6). See infra at 6–7; Doe v. Metro. Police Dep’t, 445
F.3d 460, 466–67 (D.C. Cir. 2006).
The Court’s federal-question jurisdiction is otherwise clear: Because Allied’s claims turn
on the preemptive effect of federal law—the Telecommunications Act and the FCC’s
implementing regulations—the case presents a federal question. See Verizon Md., Inc. v. Pub.
Serv. Comm’n, 535 U.S. 635, 642 (2002); D.C. Ass’n of Chartered Pub. Schs. v. District of
Columbia, 930 F.3d 487, 493–94 (D.C. Cir. 2019). And the District’s half-hearted challenge to
Allied’s standing, raised in a footnote in its motion, falls short. See Def.’s Mem. in Support of
Mot. to Dismiss (“Def.’s Mot.”) at 5 n.1, ECF No. 8-1 (stating that it is “unclear at best whether
plaintiff has alleged an injury redressable by this Court”). A “disappointed bidder” allegedly
deprived of its “right to a legally valid procurement process . . . asserts a cognizable injury,” and
the bidder must show “that it is ready, willing, and able to participate in a new auction should it
prevail in court.” Alvin Lou Media, Inc. v. FCC, 571 F.3d 1, 6 (D.C. Cir. 2009) (quotations
omitted). Allied has satisfied this standard at the pleading stage, alleging that it has “proposed on
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and sought to provide” its services to DCPS, and did provide those services, in the relatively recent
past. Compl. ¶ 6. Allied alleges that DCPS has “prevented Allied from providing these services”
by operating its bidding process in a non-competitive manner. Id. ¶ 7. Together, these allegations
reasonably support the conclusion that Allied is a “ready, willing, and able” bidder. Alvin Lou
Media, 571 F.3d at 6.
The Court also declines to dismiss based on the inadequacy of Allied’s claims under the
Rule 12(b)(6) standard. The District argues that no valid cause of action exists because the
Declaratory Judgment Act, the Supremacy Clause, the Telecommunications Act, and the FCC
regulations—all referenced in Allied’s complaint—do not create a private cause of action. See
Def.’s Mot. at 5–9. But Allied does not attempt to rely on any express or implied statutory cause
of action; instead, it presses a “preemption-based claim” that “would arise under federal common
law.” D.C. Ass’n of Chartered Pub. Schs., 930 F.3d at 493. Although the preemptive effect of
federal law stems from the Constitution’s Supremacy Clause, the cause of action “does not arise
under the Constitution itself,” but is “the creation of courts of equity.” Id. (quoting Armstrong v.
Exceptional Child Ctr., Inc., 575 U.S. 320, 327 (2015)) (internal quotation marks omitted).
At least two obstacles may bar this type of claim from proceeding beyond the pleading
stage, but they do not have that effect here. First, courts of equity created “[t]he ability to sue to
enjoin unconstitutional actions by state and federal officers,” while sovereign immunity can bar
similar claims brought against state entities. Armstrong, 575 U.S. at 327 (emphasis added); see
Verizon Md., 535 U.S. at 645 (recognizing that under Ex parte Young, 209 U.S. 123 (1908), a
plaintiff “may proceed against the individual commissioners in their official capacities” even
absent waiver of sovereign immunity). But the District (the only named defendant) has not
asserted sovereign immunity. Second, a suit “to enjoin unlawful executive action is subject to
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express and implied statutory limitations.” D.C. Ass’n of Chartered Pub. Schs., 930 F.3d at493–94 (quoting Armstrong, 575 U.S. at 327) (internal quotation marks omitted). While the
District argued in its motion to dismiss that no source of federal law at play here affirmatively
supplies a federal cause of action, it did not argue that the statutory scheme “implicitly precludes
private enforcement.” Armstrong, 575 U.S. at 328 (emphasis added).
The District again acknowledges the latter issue for the first time in its reply brief. And its
only contention there appears to be that Allied has not “made any argument that it may indeed avail
itself of the Court’s equitable powers to bring a private enforcement action under the applicable
legal regime”—with no recognition of the District’s own failure to make the counterargument in
its initial motion. Def.’s Reply at 3. The Court declines to consider this late (and very limited)
argument now, absent adequate briefing from the parties. See, e.g., Bronner v. Duggan, 324 F.R.D.
285, 293 (D.D.C. 2018); Benton v. Laborers’ Joint Training Fund, 121 F. Supp. 3d 41, 51 (D.D.C.
2015).
Turning to the substance of Allied’s preemption-based claim, the District argues that the
D.C. Code provision allowing agencies to contract with one another does not conflict with, and is
not otherwise preempted by, the Telecommunications Act or its implementing regulations. True
enough, these laws alone do not “clash in a way that makes compliance with both [District] and
federal law impossible,” and the contracting authority provided by D.C. law does not pose an
“obstacle” to the E–rate program. Sickle v. Torres Advanced Enter. Sols., LLC, 884 F.3d 338, 347
(D.C. Cir. 2018) (quotations omitted). But the District appears to realize, by the time of its reply,
that the core of Allied’s theory of preemption challenges DCPS’s exercise of authority under D.C.
Code § 1-301.01(k) “as applied to authorize DCPS’s contract with OCTO for E-rate services.”
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Def.’s Reply at 16; see also Verizon Md., 535 U.S. at 640–48 (permitting preemption-based claim
that an FCC order violated the Telecommunications Act and an FCC ruling).
The District attacks that theory only as a matter of factual sufficiency of the complaint,
arguing that the complaint alleges that DCPS did not choose the bid with the lowest price, while
the federal competitive-bidding requirements do not mandate that the lowest-price bid be accepted.
See 47 C.F.R. § 54.511(a) (stating that “price should be the primary factor considered” when
choosing the most “cost-effective service offering,” but that “entities may consider relevant factors
other than the pre-discount prices”). However, Allied alleges broadly that DCPS “avoids
competitive bidding,” having “determined to obtain these services” from OCTO, and more
specifically that DCPS did not select Allied’s bid even though it “offered to perform the services
at a price significantly lower that [sic] the price OCTO is providing the services.” Compl.
¶¶ 12–13. A “reasonable inference” from these factual allegations is that DCPS has violated the
FCC’s competitive-bidding rules. Iqbal, 556 U.S. at 678.
Last, the District seeks dismissal on the ground that the action is time-barred by the general
three-year statute of limitations from D.C. Code § 12-301(8). See Loumiet v. United States, 828
F.3d 935, 947 (D.C. Cir. 2016). In the District’s view, that limitations period has now passed,
having started to run in 2015 when DCPS is alleged to have first granted a contract award to OCTO
in violation of the competitive-bidding requirements. Allied does not suggest any alternate
limitations period in the place of the three-year period that the District proposes, but it does argue
that the doctrine of laches—not any statute of limitations—applies.
The Court need not decide whether the three-year statute of limitations or the doctrine of
laches applies at this point, because neither would conclusively bar Allied’s suit on the face of the
complaint. See Firestone v. Firestone, 76 F.3d 1205, 1209 (D.C. Cir. 1996). Construing the
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factual allegations in Allied’s favor, it has alleged a series of unlawful contract awards by DCPS
to OCTO beginning in 2015. See Compl. ¶ 12. For “a series of repeated violations of an identical
nature,” “each violation gives rise to a new cause of action” and “begins a new statute of limitations
period as to that particular event.” Figueroa v. D.C. Metro. Police Dep’t, 633 F.3d 1129, 1135
(D.C. Cir. 2011) (quotation omitted). It is not clear from the complaint that each of these instances
fall outside of the limitations period.
As for laches, that doctrine “involves more than the mere lapse of time and depends largely
upon questions of fact.” Menominee Indian Tribe v. United States, 614 F.3d 519, 532 (D.C. Cir.
2010) (quotation omitted). The party asserting laches must show that it has been prejudiced by an
unreasonable delay. See Nat’l R.R. Passenger Corp. v. Morgan, 536 U.S. 101, 121–22 (2002). “A
complaint seldom will disclose undisputed facts clearly establishing the defense.” Menominee,
614 F.3d at 532 (quotation and brackets omitted). Here, not only did the District omit any mention
of the doctrine of laches from its initial motion, but it also failed to make the required showing of
prejudice and unreasonableness on the face of the complaint.
IV. Conclusion
For these reasons, the District’s Motion to Dismiss is DENIED. An order will issue
contemporaneously with this opinion.
DATE: July 24, 2023
CARL J. NICHOLS
United States District Judge
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