Polar Communications Corp. v. Oncor Communications, Inc.

Citations: 927 F. Supp. 894; 1996 U.S. Dist. LEXIS 8492; 1996 WL 333417Docket: PJM 95-3544

Court: District Court, D. Maryland; June 12, 1996; Federal District Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Polar Communications Corporation filed a lawsuit against Oncor Communications, Inc. seeking damages, declaratory, and injunctive relief under several statutes, including 47 U.S.C. §§ 201, 206, 207, and 401(b) and 28 U.S.C. §§ 2201 and 2202. Oncor moved to dismiss the case for lack of subject matter jurisdiction, while Polar sought partial summary judgment. The court denied both motions without prejudice and allowed Oncor to file for a stay pending arbitration.

The background involves a contract from June 1991 between Polar and Telesphere Communications, Inc. (Oncor's predecessor), where Polar was to market long-distance services, receiving commissions based on secured lines. Oncor assumed Telesphere's obligations before a May 1994 contract amendment. Oncor faced an FCC investigation for "slamming," changing customers' Primary Interexchange Carriers without authorization, leading to a March 1995 Notice of Apparent Liability for $1,410,000. Subsequently, Oncor entered a Consent Decree with the FCC, agreeing to pay $500,000 and terminating the investigation.

Since the Decree, Oncor stopped paying Polar approximately $40,000 monthly in commissions, claiming the Decree mandated terminating payments to contractors involved in unauthorized PIC changes, which included Polar. Polar contends this interpretation would unjustly allow Oncor to retain funds that rightfully belong to Polar or stem from illegal practices. Polar accuses Oncor of trying to evade penalties from the FCC by withholding payments due under their contract. Oncor argues that the case is essentially a breach of contract dispute disguised as a tort claim to bypass the arbitration clause in their contract, and it seeks an advisory opinion on the FCC Decree's meaning.

Parties can assert multiple theories of liability under Fed. R.Civ. P. 8(e)(2), but cannot disguise a contract case as a tort claim to bypass a compulsory arbitration clause. The key determination is whether the contract claim is predominant; if it is, the court has discretion to stay all claims. Broad stays are justified when arbitrable claims dominate and non-arbitrable claims lack merit. Courts maintain discretion to stay litigation among non-arbitrating parties pending arbitration outcomes, preventing parties from evading arbitration through strategic pleading. The case at hand is fundamentally a contract dispute, with one party alleging non-payment for services rendered per a written contract. Although both parties seek the court's interpretation of an FCC Decree, the relevance of the Decree is not addressed at this stage. Oncor is encouraged to clearly express its desire to enforce the arbitration clause within fifteen days, with Polar given an additional fifteen days to respond. Meanwhile, Polar's Motion for Partial Summary Judgment is denied but may be refiled later. An order will be issued consistent with this opinion.

Oncor's motion to file a surreply regarding the summary judgment motion has been granted. The critical language in Paragraph 19(c) of the Consent Decree mandates Oncor to cease payments to any individual or entity involved in unauthorized PIC changes or not compliant with specified paragraphs of the Consent Decree. The Court refrains from deciding whether Oncor has waived its right to arbitrate due to its litigation involvement. Since September 20, 1995, Oncor has used the Decree to justify withholding approximately $40,000 monthly in commissions from Polar, claiming that Polar is a "slammer" and thus covered by the Decree, which precludes honoring their contractual obligations. Polar argues that this interpretation allows Oncor to retain funds that rightfully belong to them or stem from illegal slamming. Polar's claims suggest that Oncor's actions to avoid FCC penalties represent disobedience under 47 U.S.C. 401b. However, Oncor contends that the matter should not be in court, asserting that Polar is mischaracterizing a breach of contract dispute as a tort claim to evade arbitration. The Court acknowledges that parties may assert multiple theories of liability but cannot disguise a contract case as a tort to bypass arbitration clauses. The main issue is whether the contract claim prevails, which would allow the trial court to stay all claims.

Stays of nonarbitrable claims are at the court's discretion, particularly if the arbitrable claims are the primary focus and the nonarbitrable claims lack merit. The decision to stay litigation among non-arbitrating parties pending arbitration is essential to prevent parties from undermining arbitration clauses through strategic pleading. The case at hand involves a clear contract dispute, characterized by one party's performance of services and the other party's failure to pay as per the contract terms. Although both parties seek court interpretation of the FCC Decree, the court finds this inquiry premature and does not comment on its relevance to the contract dispute. Oncor has expressed a desire to enforce the arbitration clause, and the court will allow it fifteen days to formally request arbitration or waive that right, followed by a fifteen-day response period for Polar. The court denies Polar's Motion for Partial Summary Judgment but permits re-filing once litigation progresses. Additionally, Oncor's unopposed motion for leave to file a surreply to the summary judgment motion is granted. The court notes the potential waiver of the right to arbitrate by Oncor's litigation participation, referencing relevant legal precedents.