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AT&T Corp. v. Level 3 Communications, LLC

United States District Court, D. Colorado

August 1, 2018

AT&T CORP., Plaintiff,
v.
LEVEL 3 COMMUNICATIONS, LLC, Defendant.

          RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

          MICHAEL E. HEGARTY, UNITED STATES MAGISTRATE JUDGE.

         This lawsuit stems from a billing dispute between two providers of telecommunications services: Plaintiff AT&T Corporation (a long distance, inter-exchange carrier) and Defendant Level 3 Communications, LLC (a local exchange carrier or “LEC”). The parties disagree on the appropriate rate for Level 3's provision of certain services to AT&T. AT&T contends it is entitled to a refund based on AT&T Corporation v. FCC, 841 F.3d 1047 (D.C. Cir. 2016). But Level 3 does not consider that decision to be “final” for purposes of the governing contract because the D.C. Circuit remanded to the Federal Communications Commission (“FCC”) and that remand remains pending. Level 3 therefore moves to dismiss AT&T's complaint under Federal Rule of Civil Procedure 12(b)(1) on the ground that AT&T's claims are not yet ripe for adjudication. Because I agree the claims are not yet ripe, I respectfully recommend that the Court grant the motion to dismiss based on lack of subject matter jurisdiction and dismiss this action without prejudice.

         BACKGROUND

         I. Facts

         Level 3 is a local exchange carrier and AT&T provides long distance telephone services. Compl. ¶¶ 12, 13, ECF No. 1. Level 3 provides telecommunications services to AT&T under a contract. Id. ¶ 8. The parties are currently embroiled in a dispute over the rates billed for a type of local access service. Although those rates are regulated by the FCC, they also can be negotiated in contracts between LECs and long distance carriers. Id. ¶ 14. The calls at issue are referred to as “over-the top (OTT) VoIP calls, ” because they are routed using a type of Voice over Internet Protocol (“VoIP”) through high-speed internet obtained by the callers themselves. Id. ¶ 2. AT&T takes the position that these calls should be classified as “tandem” switching services and billed at a lower rate; by contrast, Level 3 believes they should be classified as “end office” switching services and billed at a higher rate. Id. ¶ 23.

         Both the FCC and the D.C. Circuit Court of Appeals have spoken on this issue. In 2015, the FCC issued a Declaratory Ruling in In re Connect America Fund, 30 FCC Rcd. 1587 (2015)- a proceeding to which AT&T was a party. That ruling (which expanded upon a 2011 decision by the FCC) found that OTT VoIP calls qualify as end office switching services, not tandem switching services. Id. at 1588-89, ¶ 3. AT&T appealed the Declaratory Ruling. See AT&T Corp. v. FCC, 841 F.3d 1047 (D.C. Cir. 2016). The D.C. Circuit vacated the ruling and remanded to the FCC for “further explanation.” Id. at 1049.

         In May 2015, amidst the uncertain outcome of the pending appeal, AT&T and Level 3 executed a Release and Settlement Agreement (the “Agreement”) to try to resolve their billing dispute. See Mot. to Dismiss, Exh. 1, ECF No. 15-1. Among other topics, the Agreement addressed the parties' difference of opinion about the appropriate charges for OTT VoIP calls. Id.

         at 2-4. For instance, it provided that Level 3 would refund AT&T if the D.C. Circuit overturned the Declaratory Ruling, with payment due after the appellate decision “becomes final and is no longer subject to further appeal or other judicial review.” Id. at 3, ¶ 1(a)(iv). AT&T has made some payments under the Agreement but has withheld others. Compl. ¶¶ 26, 28-29. AT&T concedes that Level 3 has complied with portions of the Agreement, but asserts that Level 3 has not provided a required refund and continues to bill AT&T improperly, using higher rates. Id. ¶¶ 47-57. AT&T also questions the percentage of calls that Level 3 has designated to be OTT VoIP calls for billing purposes. See Id. ¶¶ 39-46.

         II. Procedural History

         AT&T filed its complaint on January 16, 2018, asserting claims for (1) breach of contract; (2) violations of the FCC's rules on VoIP calls and the Communications Act of 1934, 47 U.S.C. §§ 201(b), 203, and 251(b)(5); and (3) declaratory judgment. Level 3 filed its motion to dismiss on February 14, 2018 (ECF No. 14). AT&T filed its opposition to that motion on March 23, 2018 (ECF No. 48). Level 3 filed a reply brief in support of its motion on April 4, 2018 (ECF No. 52).

         LEGAL STANDARD

         Level 3 seeks a dismissal under Rule 12(b)(1), which empowers a court to dismiss a complaint for “lack of subject-matter jurisdiction.” Fed.R.Civ.P. 12(b)(1). Dismissal under Rule 12(b)(1) is not a judgment on the merits of a plaintiff's case, but only a determination that the court lacks authority to adjudicate the matter. See Pueblo of Jemez v. United States, 790 F.3d 1143, 1151 (10th Cir. 2015) (recognizing that federal courts are courts of limited jurisdiction and may only exercise jurisdiction when specifically authorized to do so). A court lacking jurisdiction “must dismiss the cause at any stage of the proceeding in which it becomes apparent that jurisdiction is lacking.” Id. (quoting Full Life Hospice, LLC v. Sebelius, 709 F.3d 1012, 1016 (10th Cir. 2013)). Any such dismissal is without prejudice. See Brereton v. Bountiful City Corp., 434 F.3d 1213, 1216 (10th Cir. 2006).

         Level 3 challenges jurisdiction on ripeness grounds. “[F]or a claim to be justiciable under Article III, it must be shown to be a ripe controversy.” New Mexicans for Bill Richardson v. Gonzales, 64 F.3d 1495, 1499 (10th Cir. 1995); see also Alto Eldorado P'ship v. County of Santa Fe, 634 F.3d 1170, 1173 (10th Cir. 2011) (explaining that the “[r]ipeness doctrine is rooted both in the jurisdictional requirement that Article III courts hear only ‘cases and controversies' and in prudential considerations limiting our jurisdiction”). “Ripeness is peculiarly a question of timing, intended to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract agreements. In short, the doctrine of ripeness is intended to forestall judicial determinations of disputes until the controversy is presented in ‘clean-cut and concrete form.'” New Mexicans for Bill Richardson, 64 F.3d at 1499 (brackets and internal citations omitted) (quoting Renne v. Geary, 501 U.S. 312, 313 (1991)); see also Abbott Labs. v. Gardner, 387 U.S. 136, 149 (1967) (discussing the need “to protect the agencies from judicial interference until an administrative decision has been formalized”). For example, “[a] claim is not ripe for adjudication if it rests upon ‘contingent future events that may not occur as anticipated, or indeed may not occur at all.'” Texas v. United States, 523 U.S. 296, 300 (1998) (quoting Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 580-81 (1985)).

         The question of ripeness properly falls within a Rule 12(b)(1) motion to dismiss. New Mexicans for Bill Richardson, 64 F.3d at 1499. A Rule 12(b)(1) motion “must be determined from the allegations of fact in the complaint, without regard to mere [conclusory] allegations of jurisdiction.” Groundhog v. Keeler, 442 F.2d 674, 677 (10th Cir. 1971). Even so, a Rule 12(b)(1) movant may go beyond those allegations “by presenting evidence to challenge the factual basis upon which subject matter jurisdiction rests” without converting the motion into one for summary judgment. Maldonado v. Prudential Ins. Co. of Am., No. 10-cv-00074-PAB-MEH, 2011 WL 819751, at *1 (D. Colo. Mar. 2, 2011). The burden of establishing subject matter jurisdiction is on the party asserting jurisdiction. Pueblo of Jemez, 790 F.3d at 1151. Accordingly, AT&T bears the burden of establishing that this Court has jurisdiction to hear its claims.

         The Supreme Court has articulated three factors to consider in evaluating ripeness: “(1) whether delayed review would cause hardship to the plaintiff; (2) whether judicial intervention would inappropriately interfere with further administrative action; and (3) whether the courts would benefit from further factual development of the issues presented.” Utah v. U.S. Dep't of the Interior, 210 F.3d 1193, 1196 (10th Cir. 2000) (citing Ohio Forestry Ass'n v. Sierra Club, 523 U.S. 726, 733 (1998)). Stated otherwise, courts must assess “both the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.” Id. (quoting Abbott Labs., 387 U.S. at 149).

         ANALYSIS

         The parties dispute whether OTT VoIP calls should be classified as lower-priced “tandem switching services” (AT&T's preference) or higher-priced “end office switching services” (Level 3's preference) for billing purposes. Level 3 contends this issue is not ripe for the Court's consideration because (1) AT&T's claims are not triggered until entry of a final order resolving this question and (2) the question is still pending before the FCC on remand from the D.C. Circuit. Mot. to Dismiss at 11-20. AT&T counters that it is entitled to a refund under the Agreement because Level 3 is ...


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