Communication Management Services, LLC v. Qwest Corp.

Citations: 67 F. Supp. 3d 1159; 2014 U.S. Dist. LEXIS 172805; 2014 WL 7147661Docket: No. 3:14-cv-00249-BR

Court: District Court, D. Oregon; December 14, 2014; Federal District Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

The Court grants Qwest Corporation's Motion to Dismiss the Plaintiffs’ First Amended Complaint and denies as moot the Plaintiffs’ Motion for Partial Summary Judgment. The case centers on a dispute regarding payphone tariff rates in Oregon and marks the fifth instance of related litigation involving Qwest. Previous cases (NPCC I, NPCC II, and NPCC III) were dismissed, and the Ninth Circuit affirmed that the Plaintiffs were aware of their claims as early as 2001. In 2014, Plaintiffs filed a state-law action that Qwest removed to federal court, asserting jurisdiction. The Court upheld this removal, confirming federal-question and supplemental jurisdiction over state-law claims. Plaintiffs, who are payphone-service providers, sought summary judgment on several claims while Qwest moved to dismiss all claims. The regulatory backdrop includes Qwest's obligations to set new payphone rates established by the Oregon Public Utilities Commission (PUC) beginning in 1995, with interim rates subject to refund if new rates were lower, and compliance with a new services test mandated by the Telecommunications Act of 1996.

In April 1996, the Public Utilities Commission (PUC) initiated a bifurcated rate case for Qwest, consisting of a revenue-requirement phase to determine necessary revenue for a reasonable return, and a rate-design phase to establish rates meeting these revenue needs. On April 4, 1997, the Federal Communications Commission (FCC) issued a 45-day waiver for Qwest and similar providers to submit information for NST-compliant rates. Qwest and other regional Bell operating companies (RBOCs) submitted a Waiver Request Letter on April 10, 1997, asking for time to review and file new intrastate payphone rates and to collect payments contingent on NST compliance. They assured that any interim rates would not discriminate against payphone-service providers (PSPs) by agreeing to refund any differences to them once the PUC set final rates. The FCC granted this waiver on April 15, 1997, and PSPs did not contest it.

The revenue-requirement phase concluded on May 19, 1997, when the PUC ordered Qwest to refund $102 million to PSPs due to higher interim rates. Qwest subsequently certified new NST-compliant rates for payphone services. Qwest maintained these rates until December 1999 when it proposed new rates in the rate-design phase, claiming its 1999 PAL rates were compliant and CustomNet rates were exempt from compliance. On September 9, 1999, Qwest and PUC staff reached a stipulation to settle appeals regarding the earlier phase, agreeing to lower the refund rate, although the staff could not bind the PUC. The PUC later modified this stipulation in a Settlement Order on April 14, 2000, which Qwest accepted, agreeing to pay refunds before appealing final rates and to pay additional refunds if rates were lowered post-appeal.

The PUC adopted Qwest’s proposed rates on September 14, 2001, despite objections from the Plaintiffs, with approved PAL rates lower than interim rates and CustomNet rates unchanged. The Plaintiffs appealed this order in March 2002 and subsequently filed a Refund Case in May 2001, seeking refunds for alleged overpayments on PAL rates. Qwest unilaterally reduced its PAL and CustomNet rates in March 2003 and August 2013, respectively, while maintaining its position regarding NST compliance. On November 10, 2004, the Oregon Court of Appeals reversed Qwest’s final rates, remanding the case to the PUC to set compliant rates, despite Qwest's insistence that its rates were compliant or exempt.

Qwest provided cost data related to its Oregon payphone services and proposed rates, which were the same as those it had charged since 2003. The Oregon Public Utilities Commission (PUC) approved these rates as compliant with the National Standards for Telecommunications (NST) on November 15, 2007, which were significantly lower than previously approved rates. Plaintiffs allege that Qwest was aware the rates it submitted in 1999 were not compliant with NST, asserting that Qwest engaged in a scheme to undermine Plaintiffs' payphone business to eliminate competition and increase the value of its own payphone services before selling them to FSH Communications, LLC. Plaintiffs claim Qwest subsidized its services through overcharges to them, denied access to essential interconnections, and withheld additional services available to its own payphones. Allegations include Qwest's actions to obstruct Plaintiffs' integration of enhanced services and the destruction of connections upon terminating services, which did not occur when Qwest sold its payphones to others. FSH, formed by former Qwest executives, became the largest payphone service provider in Oregon after acquiring Qwest's assets in 2004. Plaintiffs assert that Qwest continues to offer preferential treatment to FSH.

In their Amended Complaint, Plaintiffs present fourteen claims for relief, including:
1. Seeking refunds based on the settlement agreement with the PUC.
2. A common-law unjust enrichment claim for repayment of refunds.
3. A claim for repayment based on promissory and judicial estoppel.
4. A third-party beneficiary claim regarding the settlement agreement.
5. A common-law conversion claim due to Qwest's refusal to pay refunds.
6. An intentional fraud claim for misrepresentations about rate compliance and refunds.

Claim Seven asserts negligent fraud, paralleling the issues in Claim Six. Claim Eight alleges Qwest's violation of the Oregon Deceptive Trade Practices Act (ODTPA). Claim Nine contends that Qwest's interim rates exceed NST-compliant rates, entitling Plaintiffs to mandatory refunds under Oregon Revised Statute 759.185. Claim Ten alleges that Qwest granted undue preferences to competitors, including FSH and its payphone services, violating Oregon Revised Statute 759.275. Claim Eleven claims Qwest unfairly provided competitors access to network elements while denying the same to Plaintiffs, contravening Oregon Revised Statute 759.455. Claim Twelve involves allegations of intentional interference with Plaintiffs’ business relationships through discriminatory pricing and service provisions. Claim Thirteen is a breach-of-contract assertion based on Qwest's representations in a Waiver Request Letter and its failure to pay the expected refunds. Claim Fourteen argues that Qwest’s non-payment of refunds creates a constructive trust regarding those refunds and related overpayments. Qwest's motion to dismiss these claims cites reasons of untimeliness, claim preclusion, jurisdictional exclusivity with the PUC, and deficiencies in the merits of the claims. To withstand a motion to dismiss, a complaint must include sufficient facts to suggest a plausible claim for relief, meaning it must allow for reasonable inference of liability. The standard requires more than mere possibility and must be distinguished from vague assertions or formulaic recitations of claims. Courts are obligated to accept factual allegations as true and interpret them favorably towards the plaintiff.

In a 12(b)(6) motion, courts typically consider only the allegations in the pleadings, exhibits attached to the complaint, and matters subject to judicial notice. A court may also reference documents that are mentioned in the complaint if their authenticity is unquestioned. Judicially noticeable facts, including public records, can also be considered. If a plaintiff fails to state a claim, the court should grant leave to amend unless the claim is irreparably deficient.

Qwest seeks to dismiss the plaintiffs’ claims as untimely, barred by claim preclusion, within the exclusive jurisdiction of the Public Utilities Commission (PUC), or failing to state a claim. Regarding claim preclusion for Claim One, Qwest argues it is barred because a prior court dismissed an identical claim. The federal law of claim preclusion applies, which dictates that a final judgment from a competent court serves as a bar to subsequent identical actions against the same defendant or those in privity. The criteria for claim preclusion include: same parties involved, the same claim or cause of action, and a final judgment on the merits in the prior litigation. 

Privity is defined as a legal relationship where a party is so closely aligned with another in interest that they represent the same rights in the matter. Courts assess privity based on substantial identity and significant interest in the prior action, as well as express or implied accountability between parties. It is the identity of interest that determines privity, not merely the nominal identity of the parties. Claim preclusion prevents any subsequent claims that were or could have been raised in the earlier action, regardless of whether they were actually pursued.

Claim One is barred by claim preclusion because it was previously adjudicated and rejected on the merits in NPCC III. Plaintiffs acknowledge bringing the same claim in NPCC III but argue that the third element of claim preclusion is not satisfied since the court found they lacked standing, thus not addressing the claim on its merits. In Claim One, Plaintiffs seek enforcement of Settlement Orders (PUC Orders 00-190, 00-191, and 07-497). The court in NPCC III concluded that Oregon Revised Statute 756.180 does not provide a private right of action, leading to the dismissal of Plaintiffs' claims. This dismissal was affirmed by the Ninth Circuit, establishing it as a judgment on the merits, which applies res judicata. 

Regarding Claims Two-Eight and Ten-Thirteen, Qwest argues these are untimely. Specifically, Qwest contends that state-law Claims Four-Eight, Twelve, and Thirteen are barred by statutes of limitations, while Claims Two and Three are barred by laches. In federal court, state substantive law governs the adjudication of state-law claims, including statutes of limitations and tolling doctrines. 

The parties dispute the effective filing date of the claims. Qwest asserts the filing date is November 15, 2013, the date the original complaint was filed. In contrast, Plaintiffs argue for a date of November 13, 2009, when they filed their Complaint in NPCC I, claiming that statutes of limitations were tolled during NPCC I and until the Ninth Circuit issued its mandate in that case. Under Oregon law, if a claim is dismissed without prejudice, a plaintiff can commence a new action based on the same claims within 180 days of that judgment, with the initial action's filing date being critical for the new action's timeliness.

The 180-day savings period outlined in ORS 12.220 begins upon the trial court's entry of judgment, irrespective of any appeal, as established in Belinskey v. Clooten. Plaintiffs filed NPCC I on November 13, 2009, with the court dismissing their state-law claims without prejudice on October 25, 2010. To benefit from the savings provision, Plaintiffs needed to refile by April 25, 2011, but did not initiate this action until November 15, 2013, rendering their state-law claims filed at that later date, well past the savings period.

Plaintiffs contend that the statute of limitations should be tolled per 28 U.S.C. 1367(d) while their claims were pending, which would normally toll the statute during the pendency of supplemental-jurisdiction claims and for 30 days post-dismissal. However, since Plaintiffs did not appeal the dismissal of their state-law claims, 1367(d) does not apply according to case law like Thompson v. Paul. Consequently, the relevant statutes of limitations were only tolled from November 13, 2009, to November 29, 2010.

The court will apply the most favorable statutory provision regarding the statutes of limitations for each of the Plaintiffs’ claims, particularly in light of Qwest's argument that Claims Four to Eight and Claims Ten to Thirteen are time-barred. In Claim Four, which involves enforcement of a settlement agreement as third-party beneficiaries, the applicable six-year statute of limitations from ORS 12.080(1) does not include a discovery rule. Qwest's alleged breach occurred by May 2001, based on actions taken in response to the settlement agreement ratified by the PUC. The court noted that breaches were evident by March and August 2003 when Qwest filed lower rates with the PUC.

The statute of limitations has expired for Plaintiffs' claims, specifically Claim Four and Claim Five, due to the filing of NPCC I occurring after the six-year period. Claim Four, a third-party beneficiary claim, is barred under ORS 12.080(1) since it was filed after the limitations period expired. Claim Five involves a conversion claim where Plaintiffs allege that Qwest converted their property by withholding refunds. Under the Oregon discovery rule, the limitation period begins when a plaintiff is aware of some harm, not the full extent of the damage. Plaintiffs were aware of Qwest's control over the refunds by May 2001, when they filed the Refund Case, thus the statute of limitations for this claim also expired six years later. Consequently, Claim Five is deemed time-barred.

Claim Six pertains to allegations of fraud against Qwest based on material misrepresentations made in the Waiver Request Letter and communications with the FCC. A fraud claim must be filed within two years from when the cause of action accrues, defined as the point when the plaintiff discovers or should have discovered facts indicating actionable injury. To establish fraud under Oregon law, Plaintiffs must prove several elements, including the defendant's intent and the plaintiff's reliance on the misrepresentation. Given the timeframes outlined, Claim Six is also subject to the statute of limitations, further complicating the Plaintiffs' position.

Qwest's alleged misrepresentations occurred around the time of its Waiver Request Letter to the FCC in April 1997 and subsequent communications to long-distance carriers in May 1997, focusing on the NST-compliance of its rates and a purported commitment to refund overpayments. The Plaintiffs’ fraud claim accrued no later than May 2001 when they filed the Refund Case with the PUC, and the two-year statute of limitations under ORS 12.110(1) had expired before the filing of NPCC I. Even if the claim were deemed to accrue in January 2008, it would still be barred due to the limited remaining statutory period after the NPCC I filing in November 2009. The 180-day savings provision under ORS 12.220 does not apply since the claim was not re-filed by April 25, 2011.

Claim Seven, alleging negligent fraud based on the same representations as Claim Six, is also barred by the two-year statute of limitations as per ORS 12.110(1), due to identical facts and limitations for both claims. 

In Claim Eight, Plaintiffs allege Qwest engaged in deceptive trade practices under the Oregon Deceptive Trade Practices Act (ODTPA), which has a one-year statute of limitations. Plaintiffs failed to file this claim within the required timeframe, which would have expired by November 30, 2011, even with tolling considerations. 

Claim Ten involves allegations against Qwest for providing undue preferences to competitors, violating ORS 759.275, which prohibits telecommunications utilities from granting unreasonable advantages or disadvantages to any person or locality.

A claim under Oregon Revised Statute 759.275 must be initiated within six years of its accrual, as stated in Or.Rev.Stat. 12.080(2). All alleged violations by Qwest occurred by 2004, and the Plaintiffs do not assert any facts suggesting their undue-preferences claim arose after that year. Consequently, Claim Ten is deemed to have accrued on December 31, 2004, leaving approximately 14 months in the statutory period when the Plaintiffs filed NPCC I. Under the tolling provision of 1367(d), the limitations period expired by January 2012, which is approximately sixteen months prior to the filing of the current action, rendering Claim Ten barred by the statute of limitations.

Claim Eleven, alleging Qwest's violation of ORS 759.455 by granting competitors access to network elements denied to the Plaintiffs, is based on the same facts as Claim Ten and similarly falls under the six-year statute of limitations, thus also expiring by January 2012. Consequently, Claim Eleven is likewise barred.

Claim Twelve involves allegations of tortious interference with contractual relations due to Qwest's price and service discrimination. This type of claim must be filed within two years of accrual, as per Or.Rev.Stat. 12.110(1). Qwest argues this claim accrued no later than 2004, while the Plaintiffs argue it accrued on November 15, 2007, when the PUC finalized NST-compliant rates. Even if the claim accrued in 2007, the Plaintiffs filed NPCC I just before the expiration of the statutory period, relying on the savings provision in 12.220. However, the Court finds it unnecessary to determine the accrual date because the claim was re-filed after the savings period had lapsed.

Plaintiffs’ Claim Twelve is dismissed due to being barred by Oregon's two-year statute of limitations (Or.Rev.Stat. 12.110(1)). Claim Thirteen, concerning a breach-of-contract based on Qwest's representations, is also denied as it falls under Oregon’s six-year statute of limitations (Or.Rev.Stat. 12.080), which began with the alleged breach in May 2001 when Plaintiffs initiated the Refund Case. As the statutory period expired before filing NPCC I, neither 1367(d) nor 12.220 affect this limitation.

Qwest contends that Plaintiffs’ Claims Two and Three are barred by laches. This equitable defense applies if a claimant (1) had notice of the claim, (2) delayed unreasonably in bringing the claim, and (3) caused substantial prejudice to the defendant, with the analogous statute of limitations providing guidance on unreasonable delays. In Claim Two, Plaintiffs argue unjust enrichment due to Qwest’s failure to timely file NST-compliant rates and pay refunds; this claim is similarly subject to a six-year statute of limitations and is found to have accrued in May 2001 and again in 2003. The Court determines this claim was filed too late, placing the burden on Plaintiffs to prove the absence of laches. The Court finds that Plaintiffs had actual notice in May 2001 and that their delay in pursuing the claim was unreasonable, while Qwest has been prejudiced by prolonged litigation over the same issues, leading to an unfavorable equity assessment for Plaintiffs.

In Claim Three, Plaintiffs assert promissory and judicial estoppel based on Qwest's unfulfilled promises regarding refunds.

Claim Three is reclassified as a promissory-estoppel claim since judicial estoppel is not a valid cause of action. Judicial estoppel serves to maintain the integrity of the judicial process by preventing parties from altering their positions opportunistically. Consequently, Plaintiffs cannot pursue a claim for judicial estoppel, leading the Court to interpret Claim Three as promissory estoppel. The applicable statute of limitations for this claim is six years, per Oregon Revised Statute 12.080(1). The claim is based on unpaid refunds allegedly owed to Plaintiffs by Qwest, which means the claim accrued by May 2001 and again in March and August 2003. The Court determines that Claim Three is outside the statute of limitations and that Plaintiffs must prove the absence of laches. The elements of laches also apply to Claim Three, resulting in a conclusion that the claim is barred by laches. Therefore, Claims Two and Three are barred by laches, while Claims Four through Eight and Ten through Thirteen are barred by the relevant statute of limitations.

Regarding Claim Nine, Plaintiffs seek recovery of unpaid refunds from Qwest under Oregon Revised Statute 759.185(4), which mandates refunds if a telecommunications utility collects increased revenues due to a rate change that is later reduced by a regulatory commission. Qwest argues that ORS 759.185(4) is irrelevant as it pertains only to situations where a utility files for increased rates and the commission does not suspend them pending a hearing. Plaintiffs counter that the statute is applicable because, during the Rate Case initiated by the Public Utility Commission (PUC), previously-filed tariffs remained in effect on an interim basis and were subject to refund. However, the Court finds that Plaintiffs’ interpretation of the statute is overly broad, affirming that ORS 759.185 applies only to new or increased rates filed by a utility.

An interim rate increase was denied by the Public Utility Commission (PUC) during the ongoing Rate Case, which did not include requests from Qwest for new or increased rates. The PUC initiated the Rate Case and maintained previous rates, allowing for a right of refund. Consequently, the court determined that ORS 759.185(4) does not apply and does not provide a basis for the plaintiffs' claims, leading to the dismissal of Claim Nine. 

In Claim Fourteen, plaintiffs alleged that Qwest’s failure to pay refunds established a constructive trust. However, a constructive trust is an equitable remedy rather than a standalone claim, and since plaintiffs sought only a monetary judgment, this claim was deemed non-cognizable. The court concluded that plaintiffs failed to state a claim in Claim Fourteen as well.

Regarding potential amendments to claims, the court noted that claims can only be dismissed with prejudice if it is evident that they cannot be amended successfully. Claims One, Nine, and Fourteen were dismissed on legal grounds, while claims dismissed for timeliness could not be revived due to the established facts. As a result, the court dismissed the plaintiffs’ amended complaint in its entirety with prejudice and denied their motion for partial summary judgment as moot.

The court took judicial notice of the Refund Case filed by the plaintiffs in May 2001, as these facts are part of the public record and not subject to dispute, using them to support the dismissal of Qwest's motion.

A court can take judicial notice of public records without changing a motion to dismiss into a motion for summary judgment, provided the facts are not reasonably disputed. The Court acknowledges the procedural history from the parties' Stipulation and bases its ruling on the documents filed with the PUC in relation to Defendant’s Motion to Dismiss. Dismissals of state-law claims due to lack of supplemental jurisdiction occur without prejudice. The timing of claims is also addressed, noting that a tolling provision under 1367(d) pauses the statute of limitations until a specified event occurs, while the savings provision under 12.220 establishes the filing date of the initial action as crucial for any subsequent action. The longest potential re-filing period for claims is based on the remaining statutory time at the initial filing, with the Court indicating that the Plaintiffs’ ODTPA claim likely accrued prior to November 13, 2009.