Sprint Communications Co. v. Elizabeth Jacobs

United States Court of Appeals
For the Eighth Circuit
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No. 16-1417
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Sprint Communications Company, L.P.
lllllllllllllllllllll Plaintiff - Appellant
v.
Richard W. Lozier, Jr.;1 Nick Wagner; Geri Huser, in their official capacities as
members of the Iowa Utilities Board
lllllllllllllllllllll Defendants - Appellees
v.
Windstream Iowa Communications, Inc.; Office of Consumer Advocate
lllllllllllllllllllllIntervenor Defendants - Appellees
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Appeal from United States District Court
for the Southern District of Iowa - Des Moines
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Submitted: January 11, 2017
Filed: June 23, 2017
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Before WOLLMAN, MURPHY, and COLLOTON, Circuit Judges.
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1
Board member Richard W. Lozier, Jr., is substituted for his predecessor,
Elizabeth S. Jacobs. See Fed. R. App. P. 43(c)(2).
WOLLMAN, Circuit Judge.
Having previously come before us on issues of abstention, Sprint Commc’ns
Co. v. Jacobs, 690 F.3d 864 (8th Cir. 2012) (Sprint I), rev’d sub nom. Sprint
Commc’ns, Inc. v. Jacobs, 134 S. Ct. 584 (2013), and issue preclusion, Sprint
Commc’ns Co. v. Jacobs, 798 F.3d 705 (8th Cir. 2015) (Sprint II), this case now
presents the question whether the Telecommunications Act of 1996
(Telecommunications Act or Act), preempts the Iowa Utilities Board’s (Board’s)
authority to compel Sprint Communications Company, L.P. (Sprint) to pay intrastate
access charges to Windstream Iowa Communications, Inc. (Windstream, formerly
Iowa Telecom). On cross-motions for summary judgment, the district court2
determined that the Act preserved the Board’s authority and that Sprint thus was not
entitled to declaratory or injunctive relief. It granted the Board’s and Windstream’s
motions for summary judgment and denied Sprint’s motion. We affirm.
Years ago, Sprint partnered with MCC Telephony of Iowa, L.L.C. (Mediacom)
to provide Voice over Internet Protocol (VoIP) voice telephony to Mediacom’s
customers. The VoIP calls at issue in this case were nonnomadic, intrastate long-
distance calls—that is, the calling and the called parties were situated in fixed
geographic locations in different exchanges in Iowa.
The VoIP calls originated on Mediacom’s cable network in Internet Protocol
(IP) format. They were then routed to Sprint, which converted them from IP format
to Time Division Multiplexing format for delivery on the Public Switched Telephone
Network (PSTN). After Sprint converted the format, it delivered the calls to
Windstream on exchange access trunks, over which Sprint routed long-distance calls.
Windstream then connected the calls to end users. For years, Sprint paid Windstream
2
The Honorable John A. Jarvey, Chief Judge, United States District Court for
the Southern District of Iowa.
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intrastate access charges based on the rates set forth in the tariff that Windstream had
submitted to the Board.
Sprint adopted the position in 2009, however, that the calls were not subject
to intrastate access charges, claiming that the Telecommunications Act preempted
state regulation of VoIP traffic. Sprint discontinued paying the intrastate access
charges to Windstream and also began withholding payment of other, undisputed
amounts. Sprint explained that withholding such additional payments allowed it to
recover the intrastate access charges that it erroneously had paid over the years. In
response, Windstream threatened to discontinue access service to Sprint, which would
block calls that Sprint routed to Windstream.
Sprint filed a complaint with the Board, alleging that Sprint had properly
disputed the intrastate access charges and that its decision to withhold payment was
appropriate under Windstream’s tariff. Sprint requested emergency relief to prevent
Windstream from blocking calls. Windstream thereafter agreed to continue to
provide access service to Sprint as long as Sprint remained current on newly billed
intrastate access charges. Sprint then moved to withdraw its complaint, arguing that
its claim was no longer ripe because Windstream’s agreement to continue to provide
access service granted Sprint the relief it had requested from the Board. The Board
granted Sprint’s motion to withdraw the complaint, but nonetheless decided to reach
the merits of the underlying dispute, “i.e., whether VoIP calls are subject to intrastate
regulation.” Sprint Commc’ns, Inc., 134 S. Ct. at 589. Sprint argued that the Board
lacked jurisdiction to decide the underlying dispute, which Sprint described as
“whether it [was] proper for [Windstream] to charge traditional access charges on the
traffic [that] originated as” VoIP traffic. The Board “disagreed, ruling that the
intrastate fees applied to VoIP calls.” Sprint Commc’ns, Inc., 134 S. Ct. at 589. The
Board later denied Sprint’s application for reconsideration.
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In April 2011, Sprint filed suit in federal district court against members of the
Board in their official capacities, seeking a declaration that the Board’s order
compelling Sprint to pay intrastate access fees was contrary to federal law, as well as
an injunction prohibiting the Board from enforcing its order. Sprint’s complaint set
forth one count, entitled “Preemption of State Regulation of Information Services.”
Sprint maintained that the disputed intrastate long-distance VoIP calls were
“information services” under the Communications Act of 1934, as modified by the
Telecommunications Act, and that the Communications Act preempted the authority
of state utilities commissions to regulate information services. The district court
permitted Windstream and the Iowa Office of Consumer Advocate to intervene and
participate in the litigation.
The same day it filed its federal complaint, Sprint also petitioned for review of
the Board’s order in Iowa state court. The federal district court initially abstained
from exercising jurisdiction and dismissed the case without prejudice. On appeal, we
affirmed the decision to abstain, but vacated the judgment of dismissal and remanded
the case to the district court with instructions to enter a stay of proceedings. Sprint
I, 690 F.3d at 869. The Supreme Court granted Sprint’s petition for certiorari,
concluded that abstention was inappropriate, and reversed our judgment. Sprint
Commc’ns, Inc., 134 S. Ct. at 593-94. We thereafter vacated our panel opinion, again
reversed the judgment of dismissal, and remanded the case to the district court for
further proceedings. Sprint Commc’ns Co. v. Jacobs, 746 F.3d 850 (8th Cir. 2014).
While the United States Supreme Court was considering the abstention
question, the state trial court ruled on Sprint’s petition for review of the Board’s
order. As relevant here, the state court rejected Sprint’s argument that the Board
lacked “jurisdiction to approve and enforce [the] tariff that permitted [Windstream]
to charge Sprint . . . intrastate access charges on non-nomadic VoIP traffic.” It
affirmed the Board’s order and later denied Sprint’s motion for reconsideration.
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The state trial court issued its ruling in September 2013, well before the federal
case was remanded to district court following our March 2014 order.3 On remand,
the district court gave preclusive effect to the state trial court’s determination that
federal law did not preempt state regulation of intrastate VoIP traffic and thus
dismissed Sprint’s federal complaint for failure to state a claim. We reversed and
remanded, “conclud[ing] that Congress did not intend that issue-preclusion principles
bar federal-court review of the issue involved here.” Sprint II, 798 F.3d at 708.
While we expressed no view on the merits of the case, we framed the issue as
“whether the nonnomadic intrastate long-distance VoIP calls at issue are information
services, payment for which should be governed by a reciprocal compensation
agreement, or telecommunications services subject to state access charges.” Id. On
remand, the district court did not decide whether the calls were information services
or telecommunications services. It determined instead that § 251(g) of the
Telecommunications Act preserved state authority to regulate the VoIP calls,
regardless of their classification, and that the Act “did not preempt the state tariffs
[under which] Sprint was charged.” D. Ct. Order of Dec. 30, 2015, at 13.
Sprint argues that the district court erred in declining to classify the
nonnomadic, intrastate long-distance VoIP calls as information services or
telecommunications services. According to Sprint, our articulation of the issue
presented was essential to the holding in Sprint II and thus constituted the law of the
case. Sprint contends that “the upshot of the binding formulation that this Court
provided . . . was that, if the calls at issue were . . . information service[s],” the Act’s
reciprocal compensation regime applied and Windstream’s intrastate access charges
did not. Appellant’s Br. 22 (citing 47 U.S.C. § 251(b)(5)).
3
Sprint filed a notice of appeal from the state-court order with the Iowa
Supreme Court in April 2014 and voluntarily dismissed that appeal in March 2015.
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The law-of-the-case doctrine provides that “when a court decides upon a rule
of law, that decision should continue to govern the same issues in subsequent stages
of the same case.” Little Earth of the United Tribes, Inc. v. U.S. Dep’t of Hous. &
Urban Dev., 807 F.2d 1433, 1441 (8th Cir. 1986) (quoting Arizona v. California, 460
U.S. 605, 618 (1983)); see also Bethea v. Levi Strauss & Co., 916 F.2d 453, 456 (8th
Cir. 1990) (“When an appellate court remands a case to the district court for further
proceedings consistent with the appellate decision, all issues the appellate court
decides become the law of the case.”). “This doctrine ‘prevents the relitigation of
settled issues in a case, thus protecting the settled expectations of the parties, ensuring
uniformity of decisions, and promoting judicial efficiency.’” Maxfield v. Cintas
Corp., No. 2, 487 F.3d 1132, 1135 (8th Cir. 2007) (quoting Little Earth of the United
Tribes, 807 F.2d at 1441). “The doctrine of law of the case comes into play only with
respect to issues previously determined[,]” however. Quern v. Jordan, 440 U.S. 332,
347 n.18 (1979). When we remand a case, the district court “may consider and decide
any matters left open by the mandate.” See id. (quoting In re Sanford Fork & Tool
Co., 160 U.S. 247, 256 (1895)).
In Sprint II, “[w]e express[ed] no view on the merits of the parties’ arguments.”
798 F.3d at 708. We held that preclusive effect must not be given to the state court’s
determination that “VoIP calls were not information services preempted from state
regulation.” Id. at 706. Although we characterized the “issue involved” in the case
as being “whether VoIP calls are information services or telecommunications
services,” id. at 708, Sprint II did not require the district court to classify the calls.
The decision instead left open the broader question whether the Telecommunications
Act preempted the Board’s authority to enforce its order. Contrary to Sprint’s
argument, the district court was free to consider the parties’ arguments and decide the
preemption issue set forth in Sprint’s federal complaint unconstrained by Sprint II.
Turning to the merits of Sprint’s preemption argument, we look to § 251 of the
Telecommunications Act. Section 251(b)(5) assigns local exchange carriers “[t]he
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duty to establish reciprocal compensation arrangements for the transport and
termination of telecommunications.” Charges incurred pursuant to reciprocal
compensation arrangements are different from intrastate access charges, like those
that Sprint had paid pursuant to Windstream’s tariff. Sprint argues that § 251(b)(5)
applies in this case and that it “does not permit parties to rely on tariffs for
compensation.” Appellant’s Br. 14. Because Windstream is a local exchange carrier
that terminated calls on Sprint’s behalf, Sprint argues that § 251(b)(5) required it to
enter into a reciprocal compensation arrangement with Sprint.
Section 251(g), however, provides for the continued enforcement of exchange
access and interconnection requirements that were in place before the passage of the
Telecommunications Act. Specifically, it requires local exchange carriers like
Windstream to continue “provid[ing] exchange access, information access, and
exchange services for such access to interexchange carriers and information service
providers in accordance with the same equal access and nondiscriminatory
interconnection restrictions and obligations (including receipt of compensation) that
apply to such carrier on the date immediately preceding February 8, 1996.” 47 U.S.C.
§ 251(g). Those pre-Act restrictions and obligations apply until they “are explicitly
superseded by regulations prescribed by the [FCC].” Id. “Section 251(g) thus
preserved the pre-1996 Act regulatory regime that applie[d] to access traffic,
including rules governing ‘receipt of compensation,’ and thereby precluded the
application of section 251(b)(5) to such traffic ‘unless and until the Commission by
regulation should determine otherwise.’” Connect America Fund, 26 FCC Rcd.
17,663, 17,916 ¶ 763 (2011) (CAF Order) (quoting Implementation of the Local
Competition Provisions in the Telecommunications Act of 1996, 16 FCC Rcd. 9151,
9169 ¶ 39 (2001)), petitions for review denied sub nom., In re FCC 11-161, 753 F.3d
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1015 (10th Cir. 2014). The FCC “explicitly superseded” the access charge regime in
November 2011, when it released its Connect America Fund Order.4
Sprint argues that § 251(g) did not preserve state authority to enforce intrastate
access charges on the type of VoIP calls at issue here. According to Sprint, § 251(g)
preserved instead the enhanced service providers (ESP) exemption, which Sprint
contends applies to the disputed intrastate long-distance VoIP calls. The FCC
established the “so-called ‘ESP exemption’” in 1983, when it adopted uniform rules
related to access charges. CAF Order, 26 FCC Rcd. at 18,016 n.1959; see
Amendments of Part 69 of the Commission’s Rules Relating to Enhanced Service
Providers, 3 FCC Rcd. 2631, 2631 ¶ 2 & n.8 (1988). ESPs had long been categorized
as customers of telecommunications companies and had “been paying the generally
much lower business service rates.” CAF Order, 26 FCC Rcd. at 18,016 n.1959
(quoting MTS & WATS Market Structure, 97 F.C.C.2d 682, 715 ¶ 83 (1983)); see
Peter W. Huber, et al., 2 Federal Telecommunications Law § 12.6.2 (2d ed. 2011).
The FCC thus decided to exempt ESPs from paying access charges, “recogniz[ing]
that certain ‘users who employ exchange service for jurisdictionally interstate
communications,’ . . . ‘would experience severe rate impacts were [the FCC]
immediately to assess carrier access charges upon them.’” CAF Order, 26 FCC Rcd.
at 18,016 n.1959 (quoting MTS & WATS Market Structure, 97 F.C.C.2d at 715 ¶ 83).
The FCC reaffirmed the ESP exemption after the passage of the Telecommunications
4
The FCC determined that § 251(b)(5) applied to all telecommunications traffic
and “adopt[ed] a prospective intercarrier compensation framework that br[ought] all
VoIP-PSTN traffic within the section 251(b)(5) framework.” CAF Order, 26 FCC
Rcd. at 18,008 ¶ 943. The FCC has defined “VoIP-PSTN traffic” as “traffic
exchanged over PSTN-facilities that originates and/or terminates in IP format.” Id.
at 18,006 ¶ 940 (citation omitted). The CAF Order thus ended the ongoing
compensation dispute between Sprint and Windstream, with the result that this case
involves only those intrastate access charges incurred from 2009, when Sprint
discontinued payment, to 2011, when Windstream modified its tariff to comply with
the CAF Order.
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Act, when it ruled that the existing price structures for information service providers
(ISPs) should remain in place and prohibited incumbent local exchange carriers from
assessing interstate access charges on ISPs.5 Access Charge Reform, 12 FCC Rcd.
15,982, 16,133 ¶ 344 (1997) (“We conclude that . . . incumbent [local exchange
carriers] will not be permitted to assess interstate per-minute access charges on
ISPs.”).
The ESP exemption previously applied only to interstate access charges, and
we decline Sprint’s invitation to extend it to the intrastate access charges that the
Board seeks to enforce in this case. Sprint asks us to infer from the CAF Order that
the ESP exemption applied to pre-1996 intrastate communications, but the FCC did
not indicate any intention to address that issue. To the contrary, the CAF Order
provides, “We do not address preexisting law, including whether or how the ESP
exemption might have applied previously, and we make clear that, whatever its
possible relevance historically, the ESP exemption is not relevant or applicable
prospectively in determining the intercarrier compensation obligations for VoIP-
PSTN traffic.” See CAF Order 26 FCC Rcd. at 18,008-09 ¶ 945; see also id. at
18,009 n.1905 (“Because we are bringing all traffic within section 251(b)(5), the ESP
Exemption from interstate access charges does not apply by its terms.”). Because the
CAF Order does not address the issue, and because Sprint has not cited persuasive or
controlling authority to support its contention that the ESP exemption precluded the
application of intrastate access charges, we reject Sprint’s argument that federal law
exempted Sprint from having to pay intrastate access charges. See California v. FCC,
905 F.2d 1217, 1240 (9th Cir. 1990) (holding that intrastate enhanced services were
“place[d] squarely within the regulatory domain of the states”).
5
“Information services” include all “enhanced services,” and the distinction
between the two definitions is not relevant here. See Huber, supra, § 12.2.1.
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Having determined that the ESP exemption does not apply, we consider
“whether there was a ‘pre-Act obligation relating to intercarrier compensation for’
particular traffic exchanged between a [local exchange carrier] and ‘interexchange
carriers and information service providers.’” CAF Order 26 FCC Rcd. at 18,015
¶ 956 (quoting 47 U.S.C. § 251(g)). The FCC has rejected claims “that VoIP-PSTN
traffic did not exist prior to the 1996 Act, and thus cannot be part of the access charge
regimes ‘grandfathered’ by section 251(g).”6 Id. Regardless of the classification of
the calls as information services or telecommunications services, state law determined
the pre-Act obligation relating to compensation for the intrastate traffic exchanged
between Windstream and Sprint. See generally 47 U.S.C. § 152(b)(1). We conclude
that § 251(g) preserved state authority to regulate that traffic and that federal law did
not preempt the Board’s authority to regulate the nonnomadic, intrastate long-
distance VoIP calls at issue in this case.
The judgment is affirmed.
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6
During oral argument, Sprint conceded that we must apply the CAF Order if
we conclude that the Sprint II decision did not require the district court to determine
whether the disputed VoIP calls were information services or telecommunications
services. Accordingly, to the extent that Sprint has argued that there existed no
compensation regime to be preserved by § 251(g) because VoIP traffic did not exist
in 1996, that argument fails in light of the CAF Order.
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