Opposition Brief — GLOBAL CROSSING TELECOM. v. Metrophones

Ms Riprene Soa Te

FILED

No. 05-705 JAN 3 2005

IN THE

Supreme Court of the Anited States

GLOBAL CROSSING TELECOMMUNICATIONS, INC.,

Petitioner,

Vv.

METROPHONES TELECOMMUNICATIONS, INC.

Respondent.

On Petition for Writ of Certiorari

to the United States Court of Appeals for the Ninth

Circuit

OPPOSITION TO PETITION FOR A

WRIT OF CERTIORARI

DAVID J. RUSSELL

KELLER ROHRBACK L.L.P.

1201 Third Avenue

Suite 3200

Seattle, WA 98101

(206) 623-1900

AMERICAN FINANCIAL PRINTERS * (202) 464-5500

QUESTIONS PRESENTED

1. Whether 47 U.S.C. § 201(b) of the

Communications Act of 1934 creates a private right of action

for a provider of payphone services to sue a long distance

carrier for alleged violations of the FCC’s regulations

concerning compensation for coinless payphone calls.

2. Whether 47 U.S.C. § 276 of the

Communications Act of 1934 preempts state law claims for

quantum meruit and breach of implied contract based on a

long distance carrier’s alleged failures to compensate a

payphone service provider for coinless payphone calls.

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 29.6, respondent Metrophones

Telecommunications, Inc. (“Metrophones”) makes the

following disclosure: Metrophones is privately held. As a

result, no publicly held company owns 10% or more of the

company’s stock.

TABLE OF CONTENTS

CORPORATE DISCLOSURE STATEMENT ...............065 i

OPPOSITION TO PETITION FOR A WRIT ..............00 l

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RELEVANT STATUTORY PROVISIONS ................0004. l

STATEMENT OF THE GCASE..........:.ceceeeceetiveeeeeeeesens l

REASONS FOR DENYING THE PETITION.................... 4

A. The Only Conflict Between Circuit Courts

Is Over The Deference Required Under

Chevron—An Issue That This Court

Addressed Earlier This Year. ..................000064 4

1. The Ninth Circuit’s Decision

Regarding the Deference Due To

The FCC’s 2003 Order Was Correct..... 7

B. The Preemption Issues Decided By The

C. Metrophones Only Sought The Payment of

Approximately $30,000..............:ccccecseeereees 10

RCS CPR DEC oar lio ee RES NER Ro 1]

APPENDIX A, District Court Complaint .................... la

APPENDIX B, District Court's Order on Defendants’

Motions to Dismiss and Plaintiff's Motions to Amend ...19a

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TABLE OF AUTHORITIES

CASES:

APCC Services, Inc. v. Sprint Comm. Co., 418 F.3d

I isicie siiastsdviiibutecthecer Snir iciaabencnaibcasicdeaiae 4, 5,9

Chevron U.S.A. Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837 (1984) 0.00.0... ee cerns 5

Cincinnati Bell Tel. Co. v. Allnet Communications

Servs., Inc., 17 F.3d 921 (6th Cir. 1994) ooo. 8

Digitel, Inc. v. MCI WorldCom, Inc., 239 F.3d 187 (2nd

SF TU cis.ssssepcudinipleinthinctnipcoescbentichebsaandniininaiaicensalivion 8

Metrophones v. Giobal Crossing, 423 F.3d 1056...1, 3, 6, 10

Nat'l Cable & Telecomms. Ass'n v. Brand X Internet Servs.,

EB RSE EE Ree 4,5,6

Stiles v. GTE Southwest, Inc., 128 F.3d 904, 907 (Sth Cir.

ISR ETRE CDT R IN ae Pose 8

STATUTES:

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ADMINISTRATIVE MATERIALS:

The Pay Telephone Reclassification & Compensation

Provisions of the Telecommunications Act of 1996, 18

Fk PR CR ivesacsessessnisiakeniglastasageseldeniinniens 3,7

The Pay Telephone Reclassification & Compensation

Provisions of the Telecommunications Act of 1996,

Second Order on Reconsideration, 16 F.C.C.R. 8,098

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OPPOSITION TO PETITION FOR A WRIT

OF CERTIORARI

Respondent Metrophones Telecommunications, Inc.

(““Metrophones”) respectfully submits that this Court should

deny the petition for certiorari filed by Global Crossing

Telecommunications, Inc. (“Global Crossing”) for the

reasons outlined below.

OPINIONS BELOW

Petitioner Global Crossing attached the opinions

below to its petition. The Ninth Circuit’s opinion below was

recently published at 423 F.3d 1056. The relevant opinion of

the district court is unpublished and is reproduced at App.

14a-33a.

JURISDICTION

Petitioner Global Crossing properly stated the bases

for this Court’s jurisdiction.

RELEVANT STATUTORY PROVISIONS

Petitioner Global Crossing listed the relevant

statutory provisions with the exception of 47 U.S.C. § 414,

the savings clause in the Communications Act of 1934.

47 U.S.C. § 414 provides in relevant part: “Nothing

in this chapter contained shall in any way abridge or alter the

remedies now existing at common law or by statute, but the

provisions of this chapter are in addition to such remedies.”

STATEMENT OF THE CASE

Metrophones brought this small collections action in

March of 2003. In its Complaint, Metrophones sought to

2.

collect only $31,330.42 for uncompensated telephone calls. !

App. 13a. Global Crossing paid Metrophones for some of

the coinless calls placed from Metrophones’ payphones, but

has refused to pay Metrophones for all coinless calls that

were placed from Metrophones’ payphones and routed over

Global Crossing’s network.

In December of 2003, The Honorable Marsha J.

Pechman of the United States District Court for the Western

District of Washington issued an order permitting

Metrophones to amend its complaint to add a cause of action

under 47 U.S.C. § 201(b), as well as state law causes of

action for quantum meruit, implied breach of contract, and

negligence. App. |4a-3ea.

l At page 4 of its petition, Global Crossing misstates the

facts of the current controversy in two respects. First,

Metrophones filed its complaint in March of 2003 and not

“{ijn late 2001,” as Global Crossing claims. App. 1 la.

Second, Global Crossing incorrectly claims _ that

Metrophones sought a judgment requiring it to conduct an

accounting of amounts owed “since the second quarter of

1999.” Petition at p. 4. The truth is that (1) Metrophones

did not assert an accounting cause of action in this case;

and (2) because of Global Crossing’s bankruptcy filing,

the unpaid calls at issue in this case begin on January 28,

2002. App. 13a. Indeed, all of the calls at issue in this

case were placed during the so-called “toll gate era,” when

the first facilities-based interexchange carrier (here, Global

Crossing) was responsible for all completed calls routed to

it by the local exchange carrier. The Pay Telephone

Reclassification & Compensation Provisions of the

Telecommunications Act of 1996, Second Order on

Reconsideration, 16 F.C.C.R. 8,098 (2001) at ¥¥ 1-2.

xe

On the issue of Metrophones’ cause of action under

47 U.S.C. § 201(b), Judge Pechman merely held that “[s]ince

§§206 and 207 allow a private nght of action for acts

declared unlawful under the provisions of this chapter,

plaintiff may state a cause of action for unreasonable

practices under § 201." App. 27a. In reaching her decision,

Judge Pechman relied, in large part, on the FCC’s 2003

Payphone Order.2 In that Order, the FCC specified that a

carrier’s “failure to pay [dial-around compensation] in

accordance with the Commission’s pay phone

rules...constitutes...an unjust and unreasonable practice in

violation of section 201(b) of the Act.” 18 F.C.C.R. at

19,990, 432.

The Ninth Circuit, in affirming Judge Pechman’s

ruling on the existence of a private right of action under

section 201(b), confirmed that this Court’s Chevron

framework applied to the FCC’s 2003 Payphone Order. The

Ninth Circuit acknowledged that “the statement in the 2003

Payphone Order arose in the context of a complex decision

about the operation of the whole system of payphone

regulation.” 423 F.3d at 1066. The Court also noted that it

was in the context of “adopting the final rules in the 2003

Payphone Order, {that} the Commission relied on the

availability of actions for damages under §§ 206 and 207.”

Id. In the spirit of this Court’s holding in Brand X, the Ninth

Circuit “defer{red} to the Commission’s reasonable,

authoritative interpretation of § 201(b) and [held] that a

private nght of action is available to remedy the unjust and

unreasonable practice of failing to pay PSPs according to the

Commission’s regulations.” /d. at 1070.

2 Pay Telephone Reclassification & Compensation

Provisions of the Telecommunications Act of 1996, 18

F.C.C.R. 19,975 (2003) (“2003 Payphone Order’).

REASONS FOR DENYING THE PETITION

Metrophones believes that this Court should deny

Global Crossing’s petition for three reasons. First, if there is

a conflict between circuit courts, it is a_ relatively

insignificant conflict over the applicability of Chevron

deference to a statutory analysis performed by the FCC.

This Court took up—and resolved—that same issue six

months ago in Nat'l Cable & Telecomms. Ass'n v. Brand X

Internet Servs., 125 S.Ct. 2688 (2005) (“Brand X"’). Second,

there is no qualifying conflict over the preemption issues that

the Ninth Circuit decided in the case below. Third, the

lawsuit that Metrophones filed against Global Crossing was

for the payment of only $31,330.42. Given the relatively

small amount in controversy, this Court should not further

delay Metrophones’ effort to get to the merits of its claim

against Global Crossing.

A. The Only Conflict Between Circuit Courts Is Over

The Deference Required Under Chevron—An

Issue That This Court Addressed Earlier This

Year.

While it is true that the Circuit Court for the D.C.

Circuit recently held—in the case of APCC Servs., Inc. v.

Sprint Communications Co., 418 F.3d 1238 (D.C. Cir. 2005)

(“APCC”’)—that 47 U.S.C. § 201(b) did not create a private

right of action in favor of a payphone service provider, the

Ninth Circuit’s decision to the contrary does not create a

conflict that warrants this Court’s intervention. Indeed, if

there is a conflict between the APCC decision and the

decision of the Ninth Circuit below, that conflict came about

because the D.C. Circuit issued its opinion in APCC only

one day after this Court decided the Brand X case. Because

of that timing (the D.C. Circuit presumably had already

-5-

completed its opinion in APCC when this Court issued

Brand X), the D.C. Circuit did not mention Brand X—or, for

that matter, the FCC’s 2003 Payphone Order3—in reaching

its decision on the Section 201(b) issue.4

In Brand X, the FCC had concluded that cable

companies selling broadband Intemet service were not

providing a “telecommunications § service[e]” as_ the

Communications Act defines that phrase. This Court—

applying the analytical framework outlined in Chevron

U.S.A. Inc. v. Natural Resovrces Defense Council, Inc., 467

U.S. 837 (1984)—held that “[i]f a statute is ambiguous, and

if the implementing agency’s construction is reasonable,

Chevron requires a federal court to accept the agency’s

construction of the statute ....” 125 S.Ct. at 2699.

In Brand X, this Court determined that Chevron

deference is appropriate if (1) the relevant statutory language

is ambiguous; and (2) the administering agency’s statutory

3 The majority in the APCC case did not even acknowledge

the existence of the FCC’s 2003 Payphone Order. Indeed,

the D.C. Circuit’s determination that the FCC had not

spoken on the existence of a private right of action under

§ 201(b) of the Act is inexplicable, given the 2003

Payphone Order. As the dissent in APCC pointed out, the

majority was able to say that “‘[t]here was no authoritative

interpretation of § 201(b) in this case’ only because it

makes no mention of the 2003 Report and Order and fails

to note that the Commission filed an amicus brief in this

case advancing the same position.” 418 F.3d at 1254.

4 APCC did file a petition for rehearing based, in part, on

this Court’s decision in the Brand X case. That D.C.

Circuit, however, denied that petition in November of

2005. See 2005 U.S.App. LEXIS 24402.

-6-

interpretation is a reasonable one. Given this legal standard,

the issue before the Ninth Circuit in the case below became

whether 47 U.S.C. § 201(b) unambiguously provides that a

failure to pay dial-around compensation does not qualify as a

“practice{]”’ that is “unjust or unreasonable.” It does not.

Section 201(b) broadly declares unlawful “{a]ll charges,

practices, classifications, and regulations for and in

connection with ... communication service” that are “unjust

or unreasonable.” 47 U.S.C. § 201(b) (emphasis added).

The statute does not define the terms “practices” and “unjust

or unreasonable.” When, as here, the statutory terms at issue

are undefined, Brand X confirms that the FCC had the

discretion to interpret the undefined terms in order to “fill the

consequent statutory gap.” Brand X, 125 S.Ct. at 2708

(“{T]he relevant definitions do not distinguish facilities-

based and non-facilities-based carriers. That silence

suggests, instead, that the Commission has the discretion to

fill the consequent statutory gap.”). In short, the FCC

interpreted ambiguous statutory terms when it issued its

2003 Payphone Order and_ specified, after careful

consideration,» that “{a] failure to pay in accordance with the

5 In footnote one of its petition, Global Crossing repeats its

mantra that the FCC determination—in the 2003 Payphone

Order—is dicta and, therefore, is not entitled to deference.

That argument is unfounded. As the Ninth Circuit correctly

explained, the FCC’s “statement in the 2003 Payphone

Order arose in the context of the whole system of payphone

regulation.”” 423 F.3d at 1066. In other words, the FCC’s

“unjust and unreasonable practice” decision was directly

related to its broader determination that it should require

switch-based resellers—trather than the carner—to pay PSPs

directly for reseller calls placed after July 1, 2004. As the

Ninth Circuit explained, “{t}he Commission rejected the

PSPs’ position in part because the PSPs could recover

damages from delinquent carriers in private actions.” /d.

Re

Commission’s payphone rules, such as the rules expressly

requiring such payment that we adopt today, constitutes ...

an unjust and unreasonable practice in violation of section

201(b) of the Act.” 18 F.C.C.R. at 19,990, 4 32.

The Ninth Circuit issued its opinion below

approximately two months after this Court decided the

Brand X case. Because of this timing, the Ninth Circuit—

unlike the D.C. Circuit in APCC—incorporated and applied

this Court’s teachings from Brand X. Thus, the purported

conflict upon which Global Crossing’s petition is based is

not a conflict at all. One circuit appropriately implemented

this Court’s recent gloss on the Chevron framework. The

other—because of the timing of its decision—did not.

At its core, Global Crossing’s petition is a plea for

this Court to revisit the same Chevron deference issue that

this Court addressed—in Brand X—only six months ago.

Metrophones respectfully submits that this Court need not

revisit the Chevron/Brand X issue at this time.

1. The Ninth Circuit’s Decision Regarding the

Deference Due To The FCC’s 2003 Order

Was Correct.

Global Crossing’s challenge to the merits of the

Ninth Circuit’s opinion below is based almost entirely upon

a suggestion that 47 U.S.C. §§ 206 and 207 permit a PSP to

bring a claim for unpaid payphone compensation before the

FCC, but not in a federal District Court. Indeed, at page 11

of its petition, Global Crossing argues that this Court should

intervene because “the FCC is fully equipped to handle any

complaints or disputes administratively.” Global Crossing’s

argument—that PSP’s may seek compensation before the

FCC but not in federal District Court—is flawed for at least

three reasons.

-8-

First, Section 207, which provides the statutory basis

for complaints for damages for violations of the Act, could

not be clearer. It states that complaints can either be brought

“to the [FCC]” or “in any district court.” 47 U.S.C. § 207.

Thus, the statute itself confirms that injured parties are free

to choose either forum to remedy a violation of the Act. See

Digitel, Inc. v. MCI WorldCom, Inc., 239 F.3d 187, 190 (2nd

Cir. 2001) (“there can be no doubt that § 207 permits an

~ injured party to seek relief either in federal court or before

the FCC, but not in both”); Stiles v. GTE Southwest, Inc.,

128 F.3d 904, 907 (Sth Cir. 1997); Cincinnati Bell Tel. Co. v.

Allnet Communications Servs., Inc., 17 F.3d 921, 923 (6th

Cir. 1994). Given the choice provided by Section 207, there

is no principled basis for any distinction that would require

injured parties to proceed before the FCC, as Global

Crossing maintains Metrophones must, while precluding

them from proceeding before a district court.

Second, Global Crossing’s logic, if accepted, would

deny Metrophones and other payphone owners any forum.

The statutory basis for relief before the FCC and a Federal

District Court is the same—it flows from Congress’

pronouncement (in Section 206) that prohibited acts are

actionable. Thus, if Metrophones has no available cause of

action in federal court under Section 206, then Metrophones

would have no cause of action before the FCC under Section

206. The economic impact of stripping payphone owners of

their right to pursue carriers that underpay would force many

payphone owners out of business. Such a result, ironically,

would defeat the Congressional intent—expressed in Section

276—1to promote the widespread deployment of payphones

and competition among payphone service providers by

ensuring that they receive fair compensation for every

completed call from their payphones.

-9.

Finally, Global Crossing’s policy arguments are

legally irrelevant. The issue before the Ninth Circuit was

whether Congress intended to create a private nght of action

when it enacted Sections 201(b), 206, and 207—not whether

that Court, as a matter of public policy, would have made the

same decision. There is simply no reason to believe that

Congress shared Global Crossing’s view that judicial

enforcement of payphone compensation requirements would

intrude on matters best left to the Commission. In fact,

Congress has created private rights of action in federal courts

to address other issues that are far more complex than any

case concerning payphone compensation. See, e.g., 47

U.S.C. § 252(e)(6) (creating pnvate nght of action to seek

district court review of state commission decision that

interconnection agreements meet the requirements of

Sections 251 and 252).

B. The Preemption Issues Decided By The Ninth

Circuit Also Do Not Warrant Review.

A writ is certainly not appropriate to review the Ninth

Circuit’s affirmance of Judge Pechman’s ruling permitting

Metrophones to assert two state law claims consistent with

the FCC’s regulations. Review of the Ninth Circuit’s

decision on Metrophones’ state law claims is not necessary

Or appropriate because the Ninth Circuit’s decision on those

causes of action does not meet any of the Rule 10

considerations governing review. There is no other federal

appellate court that has addressed the viability of state law

claims against a long distance carrier for its failure to pay

dial-around compensation. State law claims were not at

issue at all in the APCC case. See 418 F.3d at 1242.

The other Rule 10(a) considerations also do not apply

to the Ninth Circuit’s preemption analysis. The Ninth

Circuit merely confirmed that Metrophones’ causes of action

-10-

for guantim meruit and breach of contract were not

preempted because only “inconsistent” state requirements

are barred by 47 U.S.C. § 276(c). In the words of the Ninth

Circuit below, “Plaintiff's quasi-contract claim sought

recovery for unjust ennchment in the exact amount that it

was entitled to be paid under the federal regulations and,

consequently, would not require the district court to

determine a reasonable price, let alone to set an

‘inconsistent’ price.” 423 F.3d at 1077.

Finally, it is not true that the Ninth Circuit’s

preemption analysis is a decision on an important federal

question that conflicts with relevant decisions of this Court.

The Ninth Circuit’s preemption analysis is unique to the case

below. The Ninth Circuit correctly focused on the fact that

“Plaintiff's quasi-contract claim sought recovery for unjust

enrichment in the exact amount that it was entitled to be paid

under the federal regulations....” 423 F.3d at 1077. Since

only “inconsistent” state requirements are barred by Section

276(c), the Ninth Circuit correctly determined that

Metrophones’ state law claims were not preempted.

C. Metrophones Only Sought The Payment of

Approximately $30,000.

Finally, Metrophones—a small payphone owner—

sought the payment of only approximately $30,000. Global

Crossing, a self-described “iarge company”® has adopted a

strategy of spending tens of thousands of legal dollars to try

to avoid a short trial on the simple issue of whether Global

Crossing fully compensated Metrophones for calls placed

from payphones owned by Metrophones.

6 Global Crossing’s Petition at p. 17.

-]]-

Since filing this small collections action in March of

2003, Metrophones has been subjected to (1) Global

Crossing’s motion to dismiss in the District Court; (2) Global

Crossing’s protracted interlocutory appeal to the Ninth

Circuit; and (3) now, Global Crossing’s petition to this Court

for a writ of certiorari. Global Crossing’s petition should be

denied, among other reasons, so that the parties can proceed

to a trial on the merits as soon as possible.

CONCLUSION

For the foregoing reasons, this Court should deny

Global Crossing’s Petition for a Wnt of Certiorari.

Respectfully submitted,

DAVID J. RUSSELL

KELLER ROHRBACK L.L.P.

1201 Third Avenue,

Suite 3200

Seattle, WA 98103

(206) 623-1900

December 29, 2005 Attomeys for Respondent

la

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

METROPHONES

TELECOMMUNICATIONS,

INC., a Washington corporation,) No. C03-0694P

COMPLAINT

JURY TRIAL

DEMANDED

V.

GLOBAL CROSSING

TELECOMMUNICATIONS,

INC., a Michigan corporation

and UNIDENTIFIED

COMPANIES I THROUGH xX,

i ee de ee ee ee ee oe oe

The Plaintiff above named complains of Defendants

as follows:

1. INTRODUCTION AND SUMMARY OF

COMPLAINT

1. Under 47 U.S.C. § 276(b)(1)(A), 47 C.F.R §§

64.1300 et seq., and various orders of the Federal

Communications Commission (“FCC”) in Common Carrier

Docket No. 96-128, Defendant Global Crossing

Telecommunications, Inc. (“Global Crossing”), as an

interexchange carrier of various types of long distance

communications, is required to compensate Plaintiff, as a

payphone service provider (“PSP”’), at the rate prescribed by

the FCC, for each and every compensable call including, but

not limited to, completed access code calls and toll free calls,

that has been made at any time since January 29, 2002 from

a payphone owned by Plaintiff and carmed over Global

Crossing’s telephone network facilities. Such compensation

is referred to herein as “payphone compensation.”

2. Many compensable calls placed from

2a

payphones owned by Plaintiff have been carried over Global

Crossing’s telephone network, but Global Crossing has

failed and refused to provide Plaintiff a full accounting of

such calls, and has failed and refused to pay Plaintiff the full

amounts of payphone compensation required to be paid

under federal law, despite Plaintiff's demands. Plaintiff

seeks an accounting of the amounts of payphone

compensation owed by Global Crossing for all compensable

calls, and judgment for such amounts, plus interest, costs,

and attorneys’ fees as provided by law.

Il. PARTIES

3. Plaintiff Metrophones Telecommunications,

Inc. (“Metrophones’’) is a payphone service provider with its

headquarters and principal place of business located in

Bellevue, Washington.

4. Plaintiff owns and operates one or more coin-

operated and/or coinless payphones for use by the public. As

defined by the FCC, Plaintiff is an independent PSP.

5. On information and belief, Defendant Global

Crossing is a Michigan corporation with its principal place of

business in New York. Unidentified Companies I through X

are other subsidiaries and/or affiliates of Global Crossing.

Inasmuch as the vast and complex structure of the Global

Crossing family of companies makes it difficult to ascertain

which particular affiliates are responsible to pay payphone

compensation to Plainuff, as alleged herein, Plaintiff

reserves the right to amend its complaint to specifically name

such responsible parties, upon ascertainment of the identity

thereof. Upon information and belief, all Defendants have

acted in concert with respect to the matters alleged herein.

As used hereinafter, the term “Global Crossing” refers to the

affiliate or affiliates that are responsible for the payment of

3a

payphone compensation to Plaintiff, as alleged herein.

Global Crossing regularly conducts business in the state of

Washington.

6. Global Crossing is a common carner as

defined in 47 U.S.C. § 153(10). As such, Global Crossing is

subject to regulation by the FCC under Title 47 of the United

States Code.

7. Global Crossing provides various

telecommunications services to the public through its

telecommunications network that is accessible from

Bellevue, Washington and elsewhere in Washington and the

United States. Such services include the carnage over

Global Crossing’s telecommunications network of various

types of calls placed from payphones, such as access code

calls (calls made by first accessing Global Crossing’s

network through dialing a code number) and toll-free calls

(calls for which the recipient has previously agreed to pay

the toll charges)

Il. JURISDICTION AND VENUE

8. This Court has subject matter jurisdiction

pursuant to 28 U.S.C. § 1331 because this action arises under

the laws of the United States. Further, 47 U.S.C. § 207

grants subject matter jurisdiction over this action to this

Court.

9. Venue is proper in the United States District

Court for the Western District of Washington, under 28

U.S.C. §§ 1391(b) and 1391(c), because Defendant Global

Crossing is subject to personal jurisdiction in this district and

hence, is deemed to reside in this district.

4a

IV. PAYPHONE COMPENSATION UNDER

FEDERAL LAW

10. As a PSP, Plaintiff makes its payphones

available to the public to enable persons to make telephone

calls. Plaintiff receives compensation for some types of

payphone calls through direct payment by the caller (e.g.

through the deposit of coins into the pay»i.one) or through

commission payments from Plaintiff's presubscribed carrier

(the carrier to which operator-assisted calls are automatically

routed by agreement between Plaintiff and such carrier).

However, a substantial portion of calls placed from

Plaintiff's payphones can be and are made without any

compensation to Plaintiff from the caller or from Plaintiff's

presubscribed carner. Such calls include access code calls

and toll-free calls (all of which shall be referred to

hereinafter as “coinless” calls) that are initiated from

Plainuff's payphones and are routed over various carriers’

telecommunications networks and facilities, including those

of Global Crossing. For coinless calls, the interexchange

carrier receives payment through various means, including

the use of calling cards, credit cards, debit cards, prepaid

cards, and calls billed to another party (e.g., collect, third-

party, and toll-free calls).

11. In February, 1996, Congress enacted the

Telecommunications Act of 1996 (the “Act’’). In relevant

part, the Act directed the FCC to prescribe regulations that

“establish a per call compensation plan to ensure that all

independent payphone service providers are fairly

compensated for each and every completed intrastate and

interstate call using their payphone, except that emergency

calls and telecommunications relay service calls for hearing

disabled individuals shall not be subject to such

compensation.” 47 U.S.C. § 276(b)(1)(A).

12. Pursuant to the Act, the FCC has promulgated

Sa

regulations and has issued orders that require carriers,

including Global Crossing, to pay payphone compensation to

PSPs, such as Plaintiff, for all completed coinless calls made

from a payphone where the caller utilizes a carrier other than

the payphone’s presubscribed carrier. Such coinless calls

include, without limitation, (1) calls that are terminated on

Global Crossing’s own network; (2) calls that are initially

routed by the local exchange carrier to Global Crossing’s

network; and (3) calls from Global Crossing’s network that

are routed to other carriers and/or resellers for completion.

In particular, the FCC has promulgated the following

regulation:

a. Except as provided herein, the first

facilities-based interexchange carrier

to which a completed coinless access

code or subscriber toll-free payphone

call is delivered by the local exchange

carrier shall compensate the payphone

service provider for the call at a rate

agreed upon by the parties by contract.

47 CFR § 64.1300(a)

13. Pursuant to the Act, the FCC has issued

orders establishing the default per call compensation rate (i.e.

the rate that applies in the absence of a contract between the

PSP and the carrier) at $.24 per call for all compensable calls

made from and after April 21, 1999 rate aff'd sub. Nom.

American Pub. Communications Counsel v. FCC, 215 F.3d

51 (D.C. Cir. 2000).

14. _ Pursuant to the Act, the FCC has promulgated

regulations and has issued orders requiring -each—earrier,

including Global Crossing, to track or arrange for the

tracking of each compensable coinless call carried over its

6a

network including, but not limited to, coinless calls

completed by Global Crossing and coinless calls routed to

Global Crossing’s resellers and other interexchange carriers.

In particular, the FCC has promulgated the following

regulation:

(a) It is the responsibility of the first

facilities-based interexchange carrier

to which a compensable coinless

access code or subscriber toll-free

payphone call is delivered by the local

exchange carrer to track, or arrange

for the tracking of, each such call so

that it may accurately compute the

compensation required by

§ 64.1300(a). The first facilities-based

interexchange carrier to which a

compensabie coinless payphone call is

delivered by the local exchange carrier

must also send back to each payphone

service provider at the time dial

around compensation is due to be paid

a statement in computer readable

format indicating the toll-free and

access code numbers that the LEC has

delivered to the carrer, and the

volume of calls for each toll-free and

access number each carner has

received from each of that payphone

service provider’s payphones, unless

the payphone service provider agrees

to other arrangements.

47 C.F.R. § 1310(a)

15. Under FCC-approved procedures adopted by

7a

the telecommunications industry, PSPs, such as Plaintiff,

provide to carriers, such as Global Crossing, or to their

designated agent(s), on a calendar quarter basis, a list of the

telephone numbers of the payphones owned and operated by

the PSP as of the end of the applicable calendar quarter.

Each such unique telephone number is referred to as an

“ANI,” which is the acronym for “Automatic Number

Identification.” The ANI, which may also include payphone

specific coding digits identifying as a payphone the

telephone from which a call is made, is transmitted with each

call made from a payphone, and is recorded and stored by

the carrier to whose network the call is routed. The carrier

can determine which calls carned over its network were

made from which payphones by comparing the ANI lists

submitted by a PSP to the carrier’s call detail records or

other records maintained by the carrier identifying the ANI

for each recorded call. By such means, the carrer can also

determine to whom payment of payphone compensation

should be made, and the amount of such payment.

16. Plaintiff is able to determine, with a high

degree of accuracy, the number of compensable coinless

calls made from each of its payphones and routed to Global

Crossing as the first facilities-based interexchange carrier.

Such data are collected by a third party, Bulletins, to whose

services Plaintiff subscribes.

17. Pursuant to FCC regulations, carners are

required to remit payment of payphone compensation to

PSPs on a quarterly basis.

18. From January 29, 2002 to the date of this

Complaint, many compensable coinless calls have been

made from the payphones of Plaintiff, which have been

routed by the applicable local exchange carrier to Global

Crossing as the first facilities-based interexchange carrier.

8a

19. Plaintiff has submitted its ANI lists to Global

Crossing or its designated agent for the periods of the first

quarter, 2002, to the third quarter, 2002, and will continue to

submit their ANI lists to Global Crossing each calendar

quarter thereafter.

20. Plaintiff has also submitted demands to

Global Crossing for payment of the payphone compensation

owed to it, in the form of invoices and other demands for

payment.

21. Althougn Global Crossing has made some

partial payments of payphone compensation to Plaintiff,

Global Crossing has failed and refused to pay the full

amount of payphone compensation owed to Plaintiff for the

periods for which Plaintiff has submitted its ANI lists and

invoices, in amounts to be proven at trial. Attached hereto as

Exhibit A is a chart showing the amount payable by Global

Crossing to Plainuff for the period of the first quarter, 2002,

through the third quarter, 2002, together with the amount

paid and the balance owing, including interest.

22. Inasmuch as Global Crossing continues to

accrue liability to pay payphone compensation to Plaintiff,

Plaintiff reserves the right to amend its complaint prior to

and/or after trial to allege the amounts owing as of the date

of trial.

23. Despite sufficient demand from Plaintiff,

Global Crossing’s willful refusal to pay the full amount of

payphone compensation to Plaintiff or to provide a proper

accounting to Plaintiff has continued over many months and

years. In the meantime, Global Crossing has reaped

substantial profits from the calls placed from Plaintiff's

payphones. Furthermore, Global Crossing has collected

9a

millions of dollars in payphone surcharges from its

customers, which were imposed for the specific purpose of

providing funds from which Global Crossing could make

payment to the PSP of the payphone compensation Global

Crossing owes to the PSP, including Plaintiff, yet Global

Crossing has failed and refused to pay over to Plaintiff the

surcharges so collected.

FIRST CAUSE OF ACTION

VIOLATION OF TITLE 47, UNITED STATES CODE,

AND REGULATIONS AND ORDERS OF THE FCC

24. _—~ Plaintiff realleges 44 1 through 23.

25. Global Crossing’s failure and refusal to pay

the full amount of payphone compensation owed to Plaintiff

violates Section 276 of the Act and the regulations and/or

orders issued by the FCC pursuant thereto.

26. Global Crossing’s violations of Section 276

of the Act and the FCC regulations and orders requiring

payment to Plaintiff of payphone compensation have caused

substantial monetary damage to Plaintiff, in the amounts set

forth on Exhibit A attached hereto and incorporated herein,

such amounts to be proven at tnal, together with such

additional amounts as may accrue to the date of trial.

27. Under 47 U.S.C. § 206, Global Crossing is

liable to Plaintiff for the full amount of damages sustained

by Plaintiff in consequence of Global Crossing’s violations

of Section 276 of the Act and the FCC regulations and/or

orders issued pursuant thereto.

28. | The FCC has required that a carner that fails

to pay the full amount of payphone compensation by the

required due date must pay interest on the unpaid balance at

10a

the rate of 11.25% per annum. Accordingly, Global

Crossing owes Plaintiff pre-judgment interest on the unpaid

payphone compensation at the rate of 11.25%, beginning as

of the first day of the quarter following the submission by

Plaintiff to Global Crossing of an ANI list. Alternatively,

Global Crossing owes Plaintiff pre-judgment interest at the

maximum rate permitted under applicable state law.

29. Global Crossing is liable for Plaintiff's

reasonable attorneys’ fees pursuant to 47 U.S.C. § 206

SECOND CAUSE OF ACTION

QUANTUM MERUIT

30. _—~ Plaintiff realleges 4] 1 through 29.

31. Plaintiff has rendered valuable business

services to Global Crossing’s benefit.

32. The value of Plaintiff's services rendered to

Global Crossing has been set at .24 cents per call originated

through Plaintiff's payphones via the “Dial Around” services

described above. Accordingly, as of the filing of this

Complaint, Plaintiff is entitled to the amounts outlined on

Exhibit A attached hereto.

33. Because Global Crossing has _ not

compensated Plaintiff .24 cents per call for all calls routed

over its network from plaintiff's payphones, Global Crossing

has not only been unjustly enriched in the amounts outlined

on Exhibit A, but should be required to pay interest at

11.25% per annum for late payment, pursuant to

orders/regulations of the FCC.

34. Global Crossing is liable for Plaintiff's

reasonable attomeys’ fees pursuant to 47 U.S.C. § 206.

lla

WHEREFORE, Plaintiff prays for judgment against

Global Crossing as follows:

1. On the First Cause of Action, for all

payphone compensation owed by Global Crossing to

Plaintiff under regulations and orders of the FCC, in the

amounts set forth on Exhibit A attached hereto, together with

such additional amounts as may accrue to the date of the

trial, together with prejudgment interesi at the maximum rate

and for the maximum period allowed by law, reasonable

attorneys’ fees, costs of court, and such further relief as the

Colurt deems just.

2. On the Second Cause of Action, for the

amounts set forth on Exhibit A attached hereto, together with

prejudgment interest at the maximum rate and for the

maximum period allowed by law, reasonable attorneys’ fees,

costs of court, and such further relief as the Court deems just.

V. DEMAND FOR JURY TRIAL

Plaintiff hereby demands trial by jury of all issues

that may be tried to a jury.

DATED: March 19, 2003.

KELLER ROHRBACK L.L.P.

/s/

David J. Russell, WSBA #17289

Attorneys for Plaintiff

Metrophones Telecommunications,

Inc.

12a

EXHIBIT A

13a

METROPHONES TELECOMMUNICATIONS, INC.

2020 124th Avenue NE, Suite C-103

Bellevue, WA 98005

(425) 869-7551

STATEMENT OF ACCOUNT

As Of 3-31-03

DESCRIPTION (PREVIOUSLY BILLED AND UNPAID DIAL

AROUND) BY BULLETINS

Global Crossing Telecommunications, Inc.

180 S. Clinton Avenue

Rochester, NY 14646

(716) 777-8456

Period

1Q2002 (Jan. 28-Mar 31)

292002

3Q2002

Period

1Q2002 (Jan. 28-Mar 31)

2Q2002

3Q2002

all

Count

35684

56894

127664

Percent

52.02%

53.03%

22.71%

Rate Due

$0.24 $ 8,564.16

$0.24 $13,654.56

$0.24 $30,639.36

Disputed Interest

$1,026.48 $260.06

$1,596.00 $271.02

$1,409.28 $626.42

Total Due

Payments

$4,455.48

$7,240.44

$6,957.48

Owed

$ 3,342.26

$ 5,089.14

$22,899.02

$31,330.42

l4a

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

METROPHONES >

TELECOMMUNICATIONS, INC.,

Plaintiff(s),

V.

GLOBAL CROSSING

TELECOMMUNICATIONS, INC.,

et al.,

Defer.dant(s).

METROPHONES

TELECOMMUNICATIONS, INC.,

Plaintiff(s),

V.

SOUTHWESTERN BELL

COMMUNICATION SERVICES,

INC., and WILTEL

COMMUNICATIONS, INC.,

Defendant(s).

METROPHONES

TELECOMMUNICATIONS, INC.,

Plaintiff(s),

v.

VARTEC TELECOM, INC.,

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

Defendant(s). )

No. C03-0694P

ORDER ON

DEFENDANTS’

MOTIONS TO

DISMISS AND

PLAINTIFF’S

MOTIONS TO

AMEND

No. C03-0809P

No. C03-0811P

This matter comes before the Court on several nearly

identical motions in three related cases. Plaintiff

Metrophones Telecommunications Services, Inc.

(““Metrophones”), a “payphone service provider,” has

1Sa

brought three lawsuits against four long distance phone

service carners, Global Crossing Telecommunications, Inc.,

Southwestern Bell Communication Services, Inc., Wiltel

Communications, Inc., and Vartec Telecom, Inc. The cases

were originally assigned to three different district judges, but

the later two were reassigned to Judge Marsha Pechman on

the Court’s own motion as related to C03-0694P, as all three

cases present substantially similar legal issues. In each of

the cases, Metrophones originally asserted a private right of

action under Section 276 of the Telecommunications Act of

1996 and the common law cause of action of quantum

meruit. The Ninth Circuit then declared that no such private

right of action exists, and each of the defendants in these

cases moved to dismiss the § 276 claims on this ground, and

to dismiss the quantum meruit cause of action as preempted.

Greene v. Sprint Communications Co., 340 F.3d 1047, 1052

(9th Cir. 2003). Also in each case, plaintiff Metrophones has

moved to amend the complaints to include federal causes of

action under three other sections of the Telecommunications

Act, as well as two other common law causes of action.

Defendants oppose the amendments, contending that such

amendment would be futile. Having reviewed the papers

and pleadings submitted by the parties, the Court hereby

GRANTS the defendants’ motions to dismiss as to the § 276

claims, but denies those motions as to quantum meruit, as the

Court does not view those claims as preempted. In addition,

the Court GRANTS the motions to amend, as a private right

of action will be allowed under two of the three sections of

the Act, and the common law causes of action are not

preempted. As these cases involve two controlling questions

of law that present novel issues in the Ninth Circuit, the

l6a

Court will entertain a proper motion for certification

of interlocutory appeal under 28 U.S.C. § 1292(b).

BACKGROUND

Plaintiff Metrophones is a “payphone service

provider” that owns and operates public payphones.

Metrophones brings these lawsuits against Global Crossing

Telecommunications, Inc. (“Global Crossing”),

Southwestern Bell Communication Services, Inc.

(“Southwestern Bell”), Wiltel Communications, Inc.

(“Wiltel”), and Vartec Telecom, Inc. (“Vartec’’), which are

interexchange (long distance) carriers, for an alleged failure

to pay compensation for coinless payphone calls made using

Metrophones’ payphones.

Payphone service providers (“PSPs”) such as plaintiff

are compensated for the use of their payphones in two

primary ways, either through direct payment by the caller by

insertion of coins into the payphone, or “commission

payments” from the PSP’s “presubscribed carrier,” the

carrier to which operated-assisted calls are automatically

routed. Compl. at 3. Yet calls are also made without

utilizing either of these compensation methods, namely

credit card (access code) calls and toll-free calls (collectively

“coinless” calls). /d. For these calls, the caller pays the

interexchange (long distance) carrier, but there is no direct

means by which the PSP is compensated. /d.

In enacting the Telecommunications Act of 1996,

Congress restructured and deregulated much of the local

telephone industry. Relevant to the present lawsuit, Section

276 of the Act was aimed at promoting competition in the

17a

payphone service industry.' That section prohibits “any Bell

operating company that provides payphone service” from

discriminating in favor of its own payphone service. 47

U.S.C. § 276(a). It also directs the Federal Communications

Commission to promulgate regulations that:

(A) establish a per call

compensation plan to ensure that

all payphone service providers are

fairly compensated for each and

every completed intrastate and

interstate call using their

payphone, except that emergency

calls and telecommunications relay

service calls for hearing disabled

individuals shall not be subject to

such compensation.

Id. at § 276(b)(I)(A).

To that end, the FCC has promulgated regulations

and has issued orders requiring long distance carriers and

local carriers to compensate PSPs on a per call basis for calls

made using their payphones. 47 C.F.R. § 64.1300 (2003).?

' An in depth background of the Act and its history is set forth in New

England Public Communications Council, Inc. v. FCC, 334 F.3d 69

(D.C. Cir. 2003).

2 The regulations were substantially revised by the Commission’s order

of October 3, 2003, which switches the obligation to pay from the “first

interexchange carrier” to the “completing carrier,” and included local

exchange carriers in the definition. /n the Matter of The Pay Telephone

Reclassification and Compensation Provision of the

Telecommunications Act of 1996, Dkt. No. 96-128, 2003 WL

22283556, 30 Communications Reg. (P&F) 609, F.C.C. (Oct. 3, 2003).

18a

Specifically, the FCC now requires that the “completing

carrier” (the interexchange or local carrier that completes a

coinless call) must compensate the PSP at a rate agreed upon

by the parties. /d. at § 64.1300(b). In the absence of such an

agreement, the rate is twenty-four cents per call. /d. at §

64.1300( d). Further, it is the duty of the completing carrier

to track the calls in order to ensure adequate compensation.

Id. at § 64.1310(a).

After implementation of these regulations, several

PSPs (including plaintiff Metrophones) brought an action

against Sprint Communications Company for alleged

underpayment of per call compensation owed under the

regulations. Prior to the defendant even being served, the

district court sua sponte dismissed the action on the ground

that while § 276 authorized the FCC to promulgate

regulations, it did not create an express or implied private

right of action based on those regulations. The Ninth Circuit

affirmed that decision in the absence of a defendant, holding

that § 276 directs the FCC to establish a plan for

compensation, but does not create a right to compensation.

Greene v. Sprint Communications Co., 340 F.3d 1047, 1052

(9th Cir. 2003). Although §§ 206 and 207 of the Act create

liability for “violations” of the “provisions of this chapter”

and a right to sue by persons damaged by such violations, the

court reasoned that § 267 did not itself create a duty that one

could “violate.” /d. The court concluded that, unlike some

other sections of the Act (i.e. 227(b)(3)(A)), § 267 did not

establish a right to sue for violations of its corresponding

regulations. /d. It appears that plaintiffs in that case did

allege a common law quantum meruit cause of action as

well, but this was not addressed by the court, and easily

The Court does not perceive the changes in the regulations to affect the

resolution of the issues presented in the motions before it.

19a

could have been dismissed on the basis of lack of subject

matter jurisdiction.

Defendants now bring motions to dismiss,’ arguing

that plaintiff's § 267 cause of action has been rendered moot

by the Greene decision, and that plaintiff's claim for

quantum meruit is preempted by the Telecommunications

Act, § 276(c). Plaintiff responds by arguing that the Court

should hold in abeyance the motions to dismiss as they relate

to the § 276 private right of action in order to allow the

plaintiffs in Greene to file for a writ of certioran. Plaintiff

further argues that the quantum meruit claim is not

preempted. Finally, plaintiff moves to amend the complaints

to include both new theories of private nght of action under

the Act, and two other state common law causes of action.

Defendants oppose the motions to amend on futility grounds,

saying that an end run around Greene should not be allowed,

and that each of the other state law claims is likewise

preempted.

ANALYSIS

A. Private Right of Action Under & 276

Plaintiff argues that despite the clear mandate from

the Ninth Circuit that there is no private right of action under

§ 276 or its regulations, this Court could refuse to

“immediately implement the narrow holding of the three-

judge panel in Greene,” and hold the matter in abeyance

until after it ts determined whether the Supreme Court will

3 Defendant Global Crossing has styled its motion as a motion for

judgment on the pleadings, but its arguments are identical to those

presented in the other two cases.

20a

grant a writ of certiorari on the issue, which plaintiff's

counsel in the Greene case plans to file soon.

The parties agree that Greene is the governing law in

the present case, and also recognize that the filing of a

petition for certiorari does not change the binding effect of

the Ninth Circuit’s decision on this Court. While plaintiff

argues that the Ninth Circuit made the wrong decision in

Greene, there is no authority for this Court to simply ignore

it. See Yong v. INS, 208 F.3d 1116, 1119 n. 2 (9th 18 Cir.

2000); Wedbush, Noble. Cooke. Inc. v. SEC, 714 F.2d, 923,

924 (9th Cir. 1983). Yet plaintiff asks the Court to do just

that, based on its assertion that “the law in this area is not

settled and because the Greene decision is still being

appealed.” Yet the Ninth Circuit has already denied a

petition for rehearing en banc. Further, this Court does not

presume to know, nor will it hazard a guess, as to what the

U.S. Supreme Court will or will not do if presented with a

petition for certiorari. What is certain, is that Greene is the

current controlling law of the Ninth Circuit, and that is the

law this Court must follow. The Ninth Circuit has

definitively decided the issue, the motion is ripe for decision,

and plaintiff's claim for a private nght of action under § 276

is dismissed.

B. Preemption of State Law Claims Under § 276(c)

Federal preemption of state law onginates from the

Supremacy Clause of the Constitution, which invalidates

laws that “interfere with or are contrary to federal law.”

Total TV v. Palmer Communications, Inc., 69 F.3d 298,302

(9th Cir. 1995) (internal quotations omitted). The rule

regarding preemption is easy to state, yet tricky to apply —

“(t]he purpose of Congress is the ultimate touchstone’ of the

2la

preemption analysis.” Cipollone v. Liggett Group, Inc., 505

U.S. 504,516 (1992), quoting Malone v. White Motor Com.,

435 U.S. 497, 504 (1978). There are three basic situations in

which preemption of state law occurs: (1) express

preemption, where a federal statute specifically defines its

preemptive force; (2) implied, or “field” preemption, where

federal regulation of an area of the law is so complete that

there is no room for state regulation to occur; and (3) conflict

preemption, where compliance with both federal and state

requirements would be impossible. See Hillsborough

County, Fla. v. Automated Medical Labs., 471 U.S. 707,

712-13 (1985). In addition, a cause of action may be said to

“arise under” federal law “if the right to relief under” state

law “requires resolution of a substantial question of federal

law in dispute between the parties.” Franchise Tax Board of

State of Cal. v. Construction Laborers Vacation Trust for

Southern Cal., 463 U.S. 1, 13 (1983).

The present cases involve a question of express

preemption. In such a case, “the task of statutory

construction [of an express preemption clause] must in the

first instance focus on the plain wording of the clause, which

necessarily entails the best evidence of Congress’ preemptive

intent.” Sprietsma v. Mercury Marine, 537 U.S. 51, 62-63

(2002) quoting CSX Transportation, Inc. v. Easterwood, 507

U.S. 658,664 (1993). Section 276(c) of the

Telecommunications Act of 1996, 47 U.S.C. § 276(c)

provides:

(c) State Preemption

To the extent that any State

requirements are inconsistent with

the Commission’s regulations, the

22a

Commission’s regulations on such

matter shall preempt such State

requirements.

The preemptive scope of this provision is relatively

narrow. Compare Morales v. Trans World Airlines, 504 U.S.

374, 383-84 (1992) (recognizing broad preemptive effect of

Airline Deregulation Act that preempts state laws “relating

to” air carrier rates, etc.) with CSX Transportation, Inc. v.

Easterwood, 507 U.S. 658, 664 (1993) (preemptive force of

federal regulations “covering the same subject matter”

viewed as narrow). When Congress intends broad

preemptive force, it certainly knows how to provide for it.

While the express preemption clause of § 276 has yet

to be interpreted by the Ninth Circuit, it is very similar in

scope to the one interpreted in Total TV v. Palmer

Communications, Inc., 69 F.3d 298, 302 (9th Cir. 1995).

There, the court was interpreting federal statutes regulating

cable television, which included a provision stating that “no .

. . State may regulate the rates for the provision of cable

services except to the extent provided under this section and

section 532 of this title.” Jd. at 301 and n. 4. The defendant

argued that plaintiff's causes of action brought under the

state’s general unfair business practices act were preempted

by the federal cable acts. The Ninth Circuit disagreed,

finding that there was nothing inconsistent between the cable

acts and the general state statute. /d. at 302. The court held

that by using the language “regulate the rates,”’ Congress had

signaled its intent to limit preemption under the Cable Acts.

Id.

The language at issue in § 276 is even narrower. In

passing the Telecommunications Act of 1996, and in

23a

particular in enacting § 276, Congress provided a very

narrow preemptive scope — one that is only invoked when

“state requirements are inconsistent with the Commission’s

regulations.” There is nothing inconsistent between the

regulations promulgated pursuant to § 276 and the common

law doctrine of quantum meruit. In fact, the purpose of each

are entirely consistent. The regulations were promulgated in

order to “promote competition among payphone service

providers and [to] promote the widespread deployment of

payphone services.” 47 U.S.C. § 276(b)(1). The doctrine of

quantum meruit is an equitable one, serving to prevent the

unjust enrichment of the defendant in the absence of an

enforceable contract by forcing compensation to the plaintiff

in an amount equal to the value of the benefit conferred on

the defendant. Eaton v. Engelcke Mfg. Inc., 25 37 Wn. App.

677, 680, 681 P.2d 1312 (1984). Competition is fostered by a

level playing field, one on which there is equity. The

purposes of the regulations and the doctrine of quantum

meruit are aligned.

This result is also consistent with the statute’s

“savings Clause,” which states generally that “Nothing in this

chapter contained shall in any way abridge or alter the

remedies now existing at common law or by statute, but the

provisions of this chapter are in addition to such remedies.”

47 U.S.C. § 414. Though it is true that clauses such as these

are ineffective if a state law is nevertheless in conflict with a

federal statute or regulation, Geier v. American Honda

Motor Co., 529 U.S. 861, 869 (2000) (doctrine of conflict

preemption applies even in face of savings clause), such is

not the case here. Nothing in § 276 indicates that Congress

intended the regulations to provide the sole remedy

regarding collection of monies owed to payphone service

24a

providers. Congress only intended to eliminate inconsistent

state requirements.

Finally, plaintiff's quantum meruit cause of action

should not be considered to “arise under” federal law as

involving a “substantial question of federallaw.” “The fact

that a case may tum in part upon the resolution of some issue

of federal law or that federal law constitutes an ingredient of

the state law claim for relief does not automatically convert a

state claim” into a federal one. Precision Pay Phones v.

Qwest Communications Corp., 210 F. Supp. 2d 1106, 1117

(N.D. Cal. 2002). In the present case, resolution of the state

law cause of action for quantum meruit will not involve a

substantial federal question. The FCC regulations in this

case establish an obligation to pay on a per call basis and

define a rate in the absence of a contract between the parties.

Quantum meruit, under Washington law, is a remedy to

compensate a plaintiff for the reasonable value of services

rendered where retention of that value would be unjust.

Douglas Northwest. Inc. v. Bill O'Brien & Sons 22 Constr.

Inc., 64 Wn. App. 664, 683, 828 P.2d 565 (1992). Thus the

only point at which the state law claim and the federal

regulations connect is in establishing the reasonable value of

the payphone services provided to the carriers. This does not

involve resolution of a substantial federal question.

For each of the above reasons, the Court holds that

the plainuff's state law cause of action for quantum meruit is

not preempted

ad Motion to Amend Complaint

Plaintiff also moves to amend the complaints to

include additional federal causes of action under three other

25a

provisions of the FTA and state law causes of action for

implied contract and negligence.

Leave to amend pleadings “shall be freely given

when justice so requires.” Fed. R. Civ. P. 15(a). Motions to

amend are typically granted provided that the amendment

will not unduly prejudice the opposing party, is not sought in

bad faith, will not cause undue delay, and does not constitute

an exercise in futility. DCD Programs. Ltd.v. Leighton, 833

F.2d 183, 186 (9th Cir. 1987). Defendants oppose

amendment of the complaints in these cases on the ground

that the new alleged causes of action would not survive a

motion to dismiss under Rule 12(b)(6) and would therefore

be futile.

Plaintiff's amended complaints state three new

theories of liability and private nght of action. Specifically,

plaintiff would like to amend in order to state a cause of

action under § 201(b) of the Act, which ostensibly requires

that all charges, practices, classifications, and regulations be

“just and reasonable.” Next, plaintiff argues that the

regulations and “orders” issued pursuant to the FCC’s

rulemaking authority should be considered “orders for

payment of money” as the term is used in § 407, which

allows private parties who were the intended beneficiaries of

the order to file suit against a party that has failed to comply

with that order. Plaintiff also argues that § 416(c) establishes

a duty to comply generally with orders of the Commission.

None of these statutory provisions were at issue or addressed

by the Ninth Circuit in Greene. Finally, plaintiff asks for

leave to amend to include two more state common law

causes of action for implied contract and negligence.

a Section 201 (b)

26a

Section 201(b) of the Act provides that

All charges, practices,

classifications, and regulations for

and in connection with such

communication service, shall be

just and reasonable, and any such

charge, practice, classification, or

regulation that is unjust or

unreasonable is declared to be

unlawful.

47 US.C. § 201(b)(emphasis added). Meanwhile, § 206

states that:

In case any common carrier shall

do, or cause or permit to be done,

any act, matter, or thing in this

chapter prohibited or declared to

be unlawful, or shall omit to do

any act, matter, or thing in this

chapter required to be done, such

common carrier shall be liable to

the person or persons injured

thereby. . .

47 U.S.C. § 206 (emphasis added). Finally, § 207

establishes the private nght of action:

Any person claiming to be

damaged by any common carrier

subject to the provisions of this

chapter may either make

complaint to the Commission as

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hereinafter provided for, or may

bring suit for the recover of the

damages for which such common

carrier may be liable under the

provisions of this chapter, in any

district court of the United States

of competent jurisdiction; but such

person shall not have the right to

pursue both such remedies.

47 US.C. § 207 (emphasis added).

In interpreting the above statutory provisions, the

D.C. Circuit has held that a common Carmier’s failure to

comply with a Commission “rate of retum prescription”

constituted a “per se violation of the requirement of the

Communications Act that a common carrier maintain ‘just

and reasonable’ rates” under § 201. MCI

Telecommunications Co. v. F.C.C., 59 F.3d 1407, 1413-14

(D.C. Cir. 1995). This rationale was used to allow a §

201(b) cause of action for violations of the regulations

promulgated under § 276 in APCC Services. Inc. v. Cable &

Wireless. Inc., 281 F.Supp.16 2d 52, 58 (D.D.C. 2003).

The Court finds this authority persuasive. Although

§ 276 may not in and of itself provide for a private right of

action, § 201 declares unreasonable practices to be unlawful.

The Court finds that failure to comply with Commission

regulations would per se be an unreasonable practice, and

therefore violative of § 201. Since § § 206 and 207 allow a

private nght of action for acts declared unlawful under the

provisions of this chapter, plaintiff may state a cause of

action for unreasonable practices under § 201.

28a

The Court is further persuaded by the FCC’s recent

determination that “{a] failure to pay in accordance with the

Commission’s payphone rules, such as the rules expressly

requiring such payment that we adopt today, constitutes both

a violation of section 276 and an unjust and unreasonable

practice in violation of section 201 (b) of the Act.” Jn the

Maiter of The Pay Telephone 2 Reclassification and

Compensation Provisions of the Telecommunications Act of

1996, Dkt. No. 96-128, 2003 WL 22283556, 30

Communications Reg. (P&F) 609, F.C.C. (Oct 03, 2003).

This agency interpretation of the statute is entitled to

substantial deference, as the precise issue of whether a

violation of the Commission’s regulations on PSP

compensation would be a violation of § 201 is not

specifically addressed by the language of the statute.

Chevron U.S.A.. Inc. v. Natural Resources Defense Council.

Inc., 467 U.S. 837 (1984). Accordingly, this Court will allow

amendment of the 8 complaints to include a cause of action

under § 201(b).

2. Section 407

Section 407 of the Telecommunications Act provides

that:

If a carrier does not comply with

an order for the payment of money

within the time limit in such order,

the complainant, or any person for

whose benefit such order was

made, may file in the district court

of the United States . . . a petition

setting forth briefly the causes for

which he claims damages, and the

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order of the Commission in the

premises. Such suit in the district

court of the United States shall

proceed in all respects like other

civil suits for damages, except that

on the trial of such suits the

findings and order of the

Commission shall be prima facie

evidence of the facts therein

stated, except that the petitioner

shall not be liable for costs in the

district court nor for costs at any

subsequent stage of the

proceedings unless they accrue

upon his appeal.

47 U.S.C. § 407 (emphasis added). This provision, of

course, must be read in the context of the entire statute. As

explained above, § 207 allows a person to attempt to recover

damages by either filing a complaint with the Commission or

filing a suit for damages in district court. The sections that

follow establish various procedures, including procedures for

filing a complaint before the Commission (Section 208) and

for issuance of “orders for payment of money” (Section

209). Section 407 then gives a person the right to bring an

action in district court where a carrier does not comply with

an “order for the payment of money.”

The Court reads the term “order for the payment of

money” as a term of art. Section 407 gives an means of

enforcement against carriers who do not abide by the

Commission’s orders for the payment of money. It is clear

from §§ 208 and 209 that such orders are made after a

petition is filed by a complainant and an investigation is

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carried out. The order then directs a specific carrier to pay

money “to the complainant” (emphasis added) and must give

a time period for compliance. Whether or not this is an

“order” in the sense of an “adjudication” under the

Administrative Procedures Act is unclear. But what is clear

is that the Telecommunications Act itself provides a distinct

procedure for the issuance of an “order for the payment of

money” and its enforcement.

In the present case, plaintiff is not asking this Court

to enforce an “order for the payment of money” that was

issued by the Commission. Instead, it is asking for a remedy

pursuant to rulemaking orders. Those rulemaking orders

may address issues of compensation, but they are not “orders

for the payment of money” as is contemplated under §§ 209

and 407. Plaintiff's motions to amend are therefore

DENIED with regard to the cause of action under § 407.

3. Section 416(c)

Section 416 is entitled “Orders of Commission.”

Relevant to the present case is § 416(c), which decrees that

“(i]t shall be the duty of every person, its agents and

employees, and any receiver or trustee thereof, to observe

and comply with such orders so long as the same shall

remain in effect.”

Unlike the “orders for payment of money” described

in the above section, this section refers generally to “orders.”

There is no indication that this term is to be construed as

“adjudications” as set forth in the Administrative Procedures

Act. In fact, it appears that where Congress wanted to adopt

the APA definition of “orders,” it specifically did so. See 47

U.S.C. § 409. The Ninth Circuit has expressly held that the

APA definition should not be imported into the statute unless

3la

specifically stated. Hawaiian Tel. Co. v. Pub. Utils. Comm'n,

827 F.2d 1264, 1271 (9th Cir. 1987) (interpreting Section

401 of the Telecommunications Act). Neither does the

statute itself provide any guidance as to what an “order”

would entail. The Court does not, therefore, read the term to

be so narrow. APCC Services. Inc. v. Cable & Wireless.

Inc., 281 F.Supp. 2d 52, 58 (D.D.C. 2003). Amendment of

the complaints is therefore granted with regard to plaintiffs

proposed § 416(c) cause of action.

4. Pro tate Law Claims

Plaintiff also moves to amend the complaints to

include other state common law causes of action. For all of

the same reasons stated above, the Court finds that plaintiff's

state law claims of implied contract and negligence are not

preempted by § 276(c) and the Commission’s regulations.

The amendment as to these claims will be allowed.

D. Interlocutory Appeal

Title 28, Section 1292(b) allows for interlocutory

appeals as an exception to the general rule that only “final”

orders are appealable. That provision provides:

When a district judge, in making

in a civil action an order not

otherwise appealable under this

section, shall be of the opinion that

such order involves a controlling

question of law as to which there is

substantial ground for difference

opinion and that an immediate

appeal from the order may

32a

materially advance the ultimate

termination of the litigation, [she]

shall so state in writing in such

order.

28 U.S.C. § 1292(b) (emphasis added). Either the district

court or the court of appeals may stay the case pending

resolution of the appeal.

It appears that the present cases involve two issues of

novel and controlling law as to which there is a substantial

ground for difference of opinion, the first regarding

alternative private rights of action under the

Telecommunications Act for violations of regulations

promulgated under § 276, the other regarding the preemptive

scope of § 276(c). Thus, the Court will entertain a properly

brought motion pursuant to 28 U.S.C. § 1292(b).

CONCLUSION

The Court holds that plaintiff's claims brought under

§ 276 of the Telecommunications Act against the various

defendants in these cases must be dismissed under the Ninth

Circuit’s decision in Greene v. Sprint Communications Co.,

340 F.3d 1047, 1052 (9th Cir. 2003). However, plaintiff's

claims for quantum meruit shall stand, as those claims are

not preempted by the relatively narrow express preemption

provision set forth in § 276(c) of the Act. Next, the Court

finds that amendments to the complaints in these cases that

assert causes of action under §§ 201(b) and 416(c) shall be

allowed, as such amendments would not be futile. A cause of

action under § 407, however, shall not be allowed. Finally,

plaintiff's supplemental claims for two additional common

law causes of action shall be allowed as well as they are not

preempted by § 276(c).

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The Clerk is directed to send copies of this order to

all counsel of record. Dated: December 16, 2003.

/s/

Marsha J. Pechman

United States District Judge