IA Network Services v. Qwest Corp.

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 05-3551
___________
Iowa Network Services, Inc., *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* Southern District of Iowa.
Qwest Corporation, *
*
Appellee. *
___________
Submitted: May 15, 2006
Filed: October 31, 2006
___________
Before BYE, HANSEN, and SMITH, Circuit Judges.
___________
SMITH, Circuit Judge.
Iowa Network Services, Inc. ("INS") brought this collection action against
Qwest Corporation ("Qwest"), alleging violations of its federal and state tariffs, as
well as unjust enrichment, for services provided in connecting wireless calls to rural
Iowa telephone companies. The district court granted Qwest's motion to dismiss. INS
appealed, and we reversed the district court's judgment and remanded for further
proceedings. Iowa Network Serv., Inc. v. Qwest Corp., 363 F.3d 683 (8th Cir. 2004)
("Qwest I"). On remand, Qwest filed a motion for summary judgment. As outlined in
its thorough opinion, the district court1 granted Qwest's motion for summary judgment
on all claims and dismissed the case. INS now appeals from the district court's grant
of summary judgment to Qwest, arguing principally that the district court should have
applied the filed rate doctrine. We affirm.
I. Background
The background facts underlying this dispute are fully set forth in our prior
opinion, Qwest I, and the district court's summary judgment opinion, Iowa Network
Serv., Inc. v. Qwest Corp., 385 F. Supp. 2d 850 (S.D. Iowa 2005) ("Qwest II"). We
instructed the district court on remand "to decide for itself whether the traffic at issue
is subject to access charges pursuant to INS's tariffs." Qwest I, 363 F.3d at 695.
Upon remand, the district court, in granting Qwest's motion for summary
judgment and dismissing INS's claims, made several important findings. First, with
respect to the Iowa Utilities Board ("IUB"), the district court determined that (1) the
IUB had jurisdiction to rule in the underlying action and was acting within its
authority in rendering its rulings; (2) the IUB's rulings are consistent with, and do not
violate, federal law; and (3) the IUB's orders must be upheld as a regulatory means of
resolving the dispute.
Second, the district court found that (1) INS's amended federal tariff does not
apply to the traffic at issue, as it undermines the thrust of the Telecommunications Act
of 1996 ("the Act") and the authority of the IUB; (2) the Iowa tariff and the original
federal tariff are inapplicable under the terms of the Act and the IUB's rulings; and (3)
these determinations foreclose INS's self-help claims.
1
The Honorable James E. Gritzner, United States District Judge for the Southern
District of Iowa.
-2-
Lastly, the district court held that (1) equitable remedies are not available to
INS; (2) a regulatory scheme is available to the parties as indicated by the IUB's
decisions, and the parties must adhere to this framework before equitable remedies
may be ripe for consideration; and (3) INS's unjust enrichment and implied
contract/quantum meruit claims fail on the current record because of assorted
substantive deficiencies.
INS appeals, seeking reversal of the district court's summary judgment ruling
and enforcement of INS's tariffs pursuant to the filed rate doctrine, as codified in state
and federal statutes.
II. Discussion
A. Standard of Review
We review de novo a district court decision granting a motion for
summary judgment, using the same standard as the district court and
construing the record in the light most favorable to [ ] the nonmoving
party. Summary judgment is appropriate only if the evidence establishes
that there exists no genuine issue of material fact and that the moving
party [ ] is entitled to judgment as a matter of law.
Johnson v. AT&T Corp., 422 F.3d 756, 760 (8th Cir. 2005) (internal citation omitted).
"Federal courts have the ultimate power to interpret provisions of the 1996 Act,
including whether § 251(b)(5)'s reciprocal compensation requirement applies to the
wireless traffic at issue here . . . ." Qwest I, 363 F.3d at 692; 47 U.S.C. § 252(e)(6).
B. Enforcement of INS's Federal and State Tariffs
INS argues on appeal, inter alia, that the district court erred in failing to apply
the filed rate doctrine and allowing the IUB to displace the tariffs at issue. INS states
that telecommunications tariffs have the effect of law and conclusively establish the
terms under which a carrier must charge and the user must pay for
telecommunications services covered by the tariff. INS claims that it was error for the
-3-
district court to yield to the IUB ruling and refuse to enforce, and effectively
invalidate, INS's tariffs. Further, INS contends that the district court erred in finding
that INS's amended tariff was an effort to circumvent the negotiation/arbitration
process codified in 47 U.S.C. § 252. INS asserts that even though the
negotiation/arbitration process applies only to incumbent local exchange carriers
("ILECs"), and INS, Qwest, and the third-party wireless carriers cannot properly be
considered ILECs, the district court held that the IUB was authorized to impose the
negotiation/arbitration process on broader categories of carriers. INS states that this
holding was erroneous because (1) this court has already held that the district court
was not bound by the IUB's findings and (2) the IUB did not invoke any residual state
law authority to find that INS could be properly required to undertake the
negotiation/arbitration process. Next, INS states that the district court erred in relying
on the Federal Communications Commission's (FCC) reciprocal compensation rules
to support its refusal to enforce INS's tariffs. Lastly, INS asserts that, in the event this
court upholds the district court's decision to dismiss INS's claims regarding the
violation of its tariffs, this court should remand this case to allow INS to proceed on
its state law claims of unjust enrichment and implied contract.
INS's tariffs purportedly require Qwest to compensate INS for all traffic,
regardless of origin, that Qwest transports to INS for completion over INS's access
service trunks, including intrastate traffic. In this appeal, INS asserts that the FCC has
exclusive jurisdiction over any claims regarding INS's federal tariff. In addition, INS
states that the district court misconstrued the FCC's reciprocal compensation rules as
barring enforcement of INS's state tariff. INS contends that the reciprocal
compensation rules do not apply here because INS and Qwest are intermediary
carriers. INS submits that reciprocal compensation rules more aptly apply to those
carriers that originate and terminate the telephone calls. Because intermediary carriers,
like Qwest and INS, by definition, neither originate nor terminate calls, they do not
fit into the "reciprocal" relationship contemplated in the Act and defined in the FCC's
rules. Consequently, INS submits that the FCC's rules permit an intermediary carrier
-4-
like INS to charge another intermediary carrier like Qwest, rather than the originating
carrier.
INS urges that § 251 imposes on ILECs, but not other carriers, the duty to
negotiate an interconnection agreement in response to such a demand and to
participate in arbitration if negotiations fail. INS states that neither it nor Qwest are
ILECs for purposes of this case, meaning § 251 does not apply. Also, INS submits that
the proper procedure for seeking to invalidate its tariffs is to file a complaint with the
FCC because, under the filed rate doctrine, only the FCC can invalidate the tariff.
Absent such action, INS states that the tariff governs the charges until the day the FCC
requires changes or cancels the tariff.
Qwest responds by stating that the 1996 Act intended for state commissions,
such as the IUB, to resolve open issues in telecommunications and that is exactly what
happened in this case. Qwest urges that the IUB acted within its authority, and its
decision does not violate federal law. As a result, the district court did not err in
granting summary judgment based upon the IUB's ruling. Qwest further states that the
filed rate doctrine, established by 47 U.S.C. § 203, is limited to "interstate and
foreign" traffic. Because the communications that are the subject of INS's complaint
are "intrastate," not "foreign or interstate," § 203 does not apply and hence the filed
rate doctrine does not apply.
The district court found that the Act and the FCC's interpretive and
implementing decisions have eliminated access charges, or tariffs such as INS seeks
to impose, for local traffic. Thus, the district court held that the IUB's
determination—that Qwest need not pay access charges because access charges are
not available for "local" traffic—was consistent with federal law. Moreover, the
district court found that because the FCC's reciprocal compensation rules do not
directly address the intermediary carrier compensation to be paid, the IUB is
-5-
authorized to resolve the question, as long as its resolution does not violate federal
law. We agree.
As stated in Qwest I, "there are two types of charges which one carrier can
extract from another for the provision of telecommunication services." 363 F.3d at
686. For local telephone service, "[u]nder the 1996 Act, the amount an ILEC can
charge for allowing a competitor to use its infrastructure to deliver a local call is to be
determined by an interconnection agreement negotiated . . . between the ILEC and the
interconnecting carrier that has been approved by the state commission." Id. (citing
47 U.S.C. § 251(c)(1)). The access fee, or carrier's tariff, is charged "by common
carriers for use in carrying long-distance communications via their infrastructure, or
toll services." Id. (citing 47 U.S.C. §§ 201, 202) (emphasis added).
Because this case concerns intraMTA [major trading area] traffic, which
originates and terminates within the local calling area for cell phone users, we agree
with the district court that this case involves local traffic, or intrastate telephone calls,
and the manner of calculating the charges for connecting those calls between
interconnecting carriers or transferring carriers. The IUB and the district court, guided
by the orders and regulations of the FCC, determined that because the traffic at issue
here is local, or intrastate, access fees or tariffs do not apply. When dealing with this
type of traffic, the district court and IUB determined that reciprocal compensation
agreements control and that the parties should negotiate or arbitrate—not unilaterally
file tariffs.
The FCC differentiates between transport and termination of local traffic and
access service for long-distance telecommunications.
Transport and termination of local traffic for purposes of reciprocal
compensation are governed by sections 251(b)(5) and 252(d)(2), while
access charges for interstate long-distance traffic are governed by
sections 201 and 202 of the Act. . . . We conclude that section 251(b)(5)
-6-
reciprocal compensation obligations should apply only to traffic that
originates and terminates within a local area.
In the Matter of Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996, 11 FCC Rcd. 15499, ¶¶ 1033–34, 1996 WL 452885
(1996). Moreover, the FCC has ruled that
traffic to or from a CMRS [commercial mobile radio service] network
that originates and terminates within the same MTA is subject to
transport and termination rates under section 251(b)(5), rather than
interstate and intrastate access charges. We conclude that section
251(b)(5) obligations apply to all LECs [local exchange carriers] in the
same state-defined local exchange service areas . . .
Id. at ¶¶ 1036–37. Lastly, the FCC has stated that
[a]lthough section 252(b)(5) does not explicitly state to whom the LEC's
obligation runs, we find that LECs have a duty to establish reciprocal
compensation arrangements with respect to local traffic originated by or
terminating to any telecommunications carriers . . . LECs' reciprocal
compensation obligations under section 251(b)(5) apply to all local
traffic transmitted between LECs and CMRS providers.
Id. at ¶ 1041.
In this case, the calls originate and terminate within the same local MTA;
therefore, they are considered to be "local" calls. According to the FCC's ruling,
because these calls are "local," they are to be governed by reciprocal compensation
arrangements. The rulings of the district court and the IUB are consistent with this
ruling; thus, they do not violate federal law. As a result, the district court did not err
in granting Qwest's motion for summary judgment.
-7-
The IUB found that the tariffs at issue in this case did not apply to the type of
traffic involved in this dispute, namely local traffic. Consequently, neither the district
court nor the IUB followed the filed rate doctrine. "Under [the filed rate] doctrine,
once a carrier's tariff is approved by the FCC, the terms of the federal tariff are
considered to be 'the law' and to therefore 'conclusively and exclusively enumerate the
rights and liabilities' as between the carrier and the customer." Evanns v. AT&T Corp.,
229 F.3d 837, 840 (9th Cir. 2000). INS repeatedly argues that the actions of the
district court and the IUB nullify its federal tariffs. We disagree with INS's
characterization. The IUB did not invalidate INS's tariffs; it simply stated that the
charges as set out in INS's tariffs do not apply to the type of traffic at issue in this
case. This determination does not mean that the tariff does not apply to interstate or
foreign traffic. The tariff is still enforceable for traffic as specified in 47 U.S.C. §§
202, 203. Because the traffic in this case is "local," and therefore covered by 47
U.S.C. §§ 251, 252, INS's tariff is not applicable.
In the absence of a clear mandate from the FCC or Congress stating how
charges for this type of traffic should be determined, or what type of arrangement
between carriers should exist, the Act has left it to the state commissions to make the
decision, as long as it does not violate federal law and until the FCC rules otherwise.
The goal of preserving a role for the state regulatory commissions is
reflected in a number of provisions in the [1996 Act]. Congress expressly
left with the states the power to enforce 'any regulation, order, or policy
of a State commission that . . . establishes access and interconnection
obligations of local exchange carriers; . . . is consistent with the
requirements of this section; and . . . does not substantially prevent
implementation of the requirements of this section and the purposes of
this part.'
-8-
Global Naps, Inc. v. Mass. Dep't of Telecomm. & Energy, 427 F.3d 34, 46–47 (1st Cir.
2005) (quoting 47 U.S.C. § 251(d)(3)). As the IUB acted within its power under
statute, we find no error.
Next, we examine the district court's finding that reciprocal compensation
applies to arrangements between INS and Qwest. In Illinois Bell Telephone Co. v.
WorldCom Tech, Inc., 179 F.3d 566 (7th Cir. 1999), the court held that just because
"the Act does not require reciprocal compensation for calls to ISPs [Internet service
providers] is not to say that it prohibits it. The Act simply sets out the obligations of
all local exchange carriers to provide for reciprocal compensation . . . ." Id. at 573
(emphasis in original). The court found that "[t]he ICC's conclusion—that reciprocal
compensation should apply to traffic Ameritech bills as local traffic—does not violate
the Act or the FCC's interpretation of the Act." Id. We reach the same conclusion in
this case. The fact that reciprocal compensation is only explicitly provided for with
respect to ILECs does not mean that the Act prohibits reciprocal compensation
arrangements for LECs. In fact, the FCC stated that "LECs have a duty to establish
reciprocal compensation arrangement with respect to local traffic originated by or
terminating to any telecommunications carriers." Local Competition Provisions, 11
FCC Rcd. 15499 at ¶ 1041. Therefore, because there is no prohibition from Congress
or the FCC, we hold that the IUB was within its jurisdiction to rule as it did.
Lastly, we note the FCC's stated desire to move away from tariffs and toward
negotiation and arbitration in order to facilitate market competition. See In the Matter
of Developing a Unified Intercarrier Compensation Regime T-Mobile et al., 20 FCC
Rcd. 4855, 2005 WL 433200 (2005) (holding that the FCC is amending its rules to
make clear its preference for contractual arrangements by prohibiting LECs from
imposing compensation obligations for non-access CMRS traffic pursuant to tariff.);
MCI WorldCom, Inc. v. Fed. Comm. Comm'n, 209 F.3d 760 (D.C. Cir. 2000) (stating
that the Commissioner tentatively concluded that tariffing was no longer necessary).
"The Commission has long been concerned that the necessity of filing tariffs hinders
-9-
competitive responsiveness . . . [and] the filed-rate doctrine has been used by the
carriers as a shield to avoid individual contract negotiations with large and small
users, thereby reducing competition among carriers." MCI WorldCom, 209 F.3d at
764. Moreover, as pointed out by the FCC, "no provision of the Communications Act
except §203(a) requires tariffing, and no provision gives a carrier a positive right to
file a tariff, so if it forbears from applying § 203(a) the Commission's staff is not
obliged to accept filings."
C. Implied Contract and Unjust Enrichment
INS appeals the district court's dismissal of its state law claims of unjust
enrichment and implied contract (quantum meruit). However, INS concedes that it
cannot prevail on these claims if they are covered by an express contract, either in the
form of a tariff or a reciprocal compensation agreement. Because we have already
concluded that the IUB acted within its authority in directing INS and Qwest to
negotiate within the reciprocal compensation regime, the regulatory process
contemplates that an express contract will ultimately result, and for this reason the
district court did not err in dismissing INS's state law claims of unjust enrichment and
implied contract.
III. Conclusion
For these reasons, we affirm the district court's grant of summary judgment,
based upon the IUB's determinations, because its rulings are not contrary to federal
law.
______________________________
-10-