# Opposition Brief — GLOBAL CROSSING TELECOM. v. Metrophones

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0234%3A03

## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2007
- **Citation:** 550 U.S. 45

## Text

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
SF OE EIT \stycicccasecnsssusvusdeendtntssptihlenstpntsissiidiioseting l
As TUR a eiese'-cinisiitseupiquivtencin densely toniniibiniticidiettisiions 1
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

-iV-
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:
Be Rt Oe IID chchccaniutdhsdsdscitecevsieniiasikieeceammnnal passim
WHEE BUS ici coic cae 7,8
COUR BO iia i ee 8
BF ee: SR sin chcsnsseonsecachittensiinsiaahidahiahbiadacaain 9
BF iis Te PDs hesctiisdeséninritoaniniicvatiecbadcatetamaansiae 10
A OG iii icinscedesneaeaie !

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
SI aciehedieipiablihaeinsanteamibadiiaiiiiadenapinteadedaneunes senidenlaatiaiaatadies

.%

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

27a

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

29a

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

30a

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).

33a

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0234%3A03. Public record. Not legal advice.