Opinion
NO. CIV. S-10-1164 FCD/EFB.
August 11, 2010
MEMORANDUM AND ORDER
This matter is before the court on the motion of defendant Pac-West Telecomm, Inc. ("Pac-West" or "defendant") to dismiss plaintiff PNG Telecommunications, Inc.'s ("PNG" or "plaintiff") complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). In connection with its motion, defendant also requests that the court take judicial notice of several documents. Plaintiff opposes defendant's motion to dismiss. The court heard oral argument on the motion on August 6, 2010. For the reasons set forth below, defendant's motion is DENIED insofar as the court finds that it has subject matter jurisdiction over the case. However, prudential considerations lead the court to stay the case while the parties present the issues raised herein to the California Public Utilities Commission ("CPUC").
BACKGROUND
PNG, an Ohio corporation, entered into a Master Services Agreement (the "MSA") with Pac-West, a California corporation and authorized carrier of local exchange and interexchange telecommunications services within California and other states. (Compl., filed May 11, 2010, ¶¶ 4-6.) Pursuant to the MSA, Pac-West agreed to provide PNG various inbound and outbound interstate and intrastate telecommunications services, including Internet access and services. (Id. ¶ 6.) The rates Pac-West would charge PNG for these services were set forth in rate declarations that were periodically amended under the terms and conditions of the MSA. (Id. ¶¶ 6-7.)
PNG alleges from September 1, 2008 through March 1, 2009, Pac-West charged PNG an amount in excess of the rates dictated by the applicable rate declarations. (Id. ¶ 8.) PNG was unaware of these excess charges until March 2009 and paid the amounts invoiced by Pac-West. (Id. ¶ 9.) As a result, PNG alleges that it overpaid Pac-West by $489,668.74. (Id.) In April 2009, PNG notified Pac-West of the overpayments and requested a reimbursement or credit. (Id. ¶ 11.) Pac-West issued a credit in favor of PNG in the amount of $208,044.81, but refused to reimburse PNG or credit its account for the remainder of the alleged overpayment. (Id. ¶¶ 11-12.)
PNG filed its complaint on May 11, 2010, asserting seven claims for relief: (1) violation of the Federal Telecommunications Act of 1996, 47 U.S.C. § 151 et seq.; (2) breach of contract; (3) promissory estoppel; (4) unjust enrichment; (5) conversion; (6) common counts — money paid by mistake; and (7) declaratory relief.
STANDARDS
I. Judicial Notice
In ruling upon a motion to dismiss, the court may consider matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. See Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of U.S., Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998). Rule 201 permits a court to take judicial notice of an adjudicative fact "not subject to reasonable dispute" because the fact is either "(1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b). The court can take judicial notice of matters of public record, such as pleadings in another action and records and reports of administrative bodies. See Emrich v. Touche Ross Co., 846 F.2d 1190, 1198 (9th Cir. 1988).
"Even if a document is not attached to a complaint, it may be incorporated by reference into a complaint if the plaintiff refers extensively to the document or the document forms the basis of the plaintiff's claim." United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). "The defendant may offer such a document, and the district court may treat such a document as part of the complaint, and thus may assume that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6)."Id. The policy concern underlying the rule is to prevent plaintiffs "from surviving a Rule 12(b)(6) motion by deliberately omitting references to documents upon which their claims are based." Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998), superceded by statute on other grounds as recognized in Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 681 (9th Cir. 2006).
II. Rule 12(b)(1)
Under Rule 12(b)(1) of the Federal Rules of Civil Procedure, a party may by motion raise the defense that the court lacks jurisdiction over the subject matter of a claim. Fed.R.Civ.P. 12(b)(1). It is well established that the party seeking to invoke the jurisdiction of the federal court bears the burden of establishing the court's subject matter jurisdiction. Scott v. Breeland, 792 F.2d 925, 927 (9th Cir. 1986).
On a motion to dismiss pursuant to Rule 12(b)(1), the standards the court is to apply vary according to the nature of the jurisdictional challenge. A motion to dismiss for lack of subject matter jurisdiction may either attack the allegations of jurisdiction contained in the complaint as insufficient on their face to demonstrate the existence of jurisdiction (a "facial attack") or may be made as a "speaking motion" attacking the existence of subject matter jurisdiction in fact (a "factual attack"). Thornhill Publ'g Co. v. General Tel. Elec. Corp., 594 F.2d 730, 733 (9th Cir. 1979); Mortensen v. First Fed. Sav. Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977).
If the 12(b)(1) motion constitutes a facial attack, the court must consider the factual allegations of the complaint to be true. Williamson v. Tucker, 645 F.2d 404, 412 (5th Cir. 1981);Mortensen, 549 F.2d at 891. If the motion constitutes a factual attack, however, "no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims." Thornhill, 594 F.2d at 733 (quoting Mortensen, 549 F.2d at 891).
In situations "[w]here a jurisdictional issue is separable from the merits of a case," the court "may consider the evidence presented with respect to the jurisdictional issue and rule on that issue, resolving factual disputes if necessary." Thornhill, 594 F.2d at 733. If, however,
the jurisdictional issue and substantive issues are so intertwined that the question of jurisdiction is dependent on the resolution of factual issues going to the merits, the jurisdictional determination should await a determination of the relevant facts on either a motion going to the merits or at trial.Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir. 1983). In ruling on a jurisdictional motion in which factual issues also go to the merits, the court should apply the standard used to determine motions for summary judgment brought pursuant to Federal Rule of Civil Procedure 56. Id.
ANALYSIS
Pac-West moves to dismiss the complaint pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction and Rule 12(b)(6) for failure to state a claim upon which relief can be granted. (Def.'s Mot. to Dismiss, filed June 10, 2010, at 2.) Regarding Rule 12(b)(1), Pac-West argues that: (1) the court lacks subject matter jurisdiction because plaintiff's claims are subject to the exclusive original jurisdiction of the CPUC; (2) the court should decline to exercise jurisdiction under the doctrine of primary jurisdiction; and (3) the court should decline to exercise jurisdiction under abstention doctrines. (Id.) Because the court finds that prudential considerations favor deferring this case until the CPUC has passed on the issues raised herein, and therefore stays this case, the court does not reach Pac-West's abstention or Rule 12(b)(6) arguments.I. Subject Matter Jurisdiction
Pac-West asserts that the MSA constitutes an "interconnection agreement" implementing obligations it has to PNG under 47 U.S.C. § 251(a)(1) and § 251(b)(1). (Def.'s Mem. P. A. Supp. Mot. to Dismiss ("Def's. Mem."), filed June 10, 2010, at 2.) Pac-West contends that under the regulatory scheme of 47 U.S.C. §§ 251 and 252, disputes pertaining to interconnection agreements are subject to the exclusive original jurisdiction of the applicable state commission — in this case, the CPUC. (Def's. Mem. at 2.) Thus, Pac-West argues, the court lacks jurisdiction because PNG has not first brought a claim to the CPUC. (Id. at 6.) Pac-West has attached a copy of the MSA to its motion. (Def's. Mem., Attachment A.) Because PNG relies on the MSA as the basis of all of its claims, the court treats the MSA as part of the complaint. See Ritchie, 342 F.3d at 908.
Because the contents of the MSA are also relevant to Pac-West's factual attack on the court's jurisdiction, the court may also consider the MSA on that basis. See Thornhill, 594 F.2d at 733.
In addition, Pac-West has itself brought a related complaint against PNG with the CPUC, filed May 11, 2010. (Def.'s Mem. at 2 (CPUC Case No. 10-05-011).) An administrative law judge has scheduled a pre-hearing conference in that case for August 27, 2010. (Def.'s Reply, filed July 30, 2010, at 3.) Pac-West has filed a request for judicial notice of several documents, including Pac-West's complaint filed with the CPUC (Def.'s Request for Judicial Notice ("RFJN"), Ex. C) and an Administrative Law Judge's Ruling Extending Time for Filing of Answer and Scheduling Pre-Hearing Conference (Def.'s Second Request Judicial Notice ("Second RFJN"), Ex. J). The court takes judicial notice of the these documents as records of an administrative agency. See Emrich, 846 F.2d at 1198.
The Telecommunications Act of 1996 was enacted "to promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies." Preamble, Telecommunications Act of 1996, Pub.L. No. 104-404, 110 Stat. 56 (1996). Sections 251 and 252 of the Act concern the obligations of different kinds of telecommunications carriers, including "local exchange carriers" ("LECs") and "incumbent local exchange carriers" ("ILECs"). 47 U.S.C. §§ 251, 252. A local exchange carrier is defined as "any person that is engaged in the provision of telephone exchange service or exchange access." 47 U.S.C. § 153(26). Incumbent local exchange carriers are "companies that traditionally provide local phone service." Core Communications, Inc. v. Verizon Penn., Inc., 493 F.3d 333, 335 (3d Cir. 2007). The general duties of telecommunications carriers include "to interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers." 47 U.S.C. § 251(a)(1). LECs are additionally subject, inter alia, to "[t]he duty not to prohibit, and not to impose unreasonable or discriminatory conditions or limitations on, the resale of [their] telecommunications services." Id. § 251(b)(1).
The Act imposes additional obligations on ILECs, which must "provide `interconnection' to newer local exchange carriers." W. Radio Servs. Co. v. Quest Corp., 530 F.3d 1186, 1190 (9th Cir. 2008). "Interconnection allows customers of one [local exchange carrier] to call the customers of another, with the calling party's [local exchange carrier] . . ., transporting the call to the connection point, where the called party's [local exchange carrier] . . . takes over and transports the call to its end point." Id. (citing Verizon Cal., Inc. v. Peevey, 462 F.3d 1142, 1146 (9th Cir. 2006)) (alteration and ellipses in original). An ILEC has the duty to negotiate an interconnection agreement with a requesting carrier to provide "for the transmission and routing of telephone exchange service and exchange access" according to "rates, terms, and conditions that are just, reasonable, and nondiscriminatory, in accordance with the terms and conditions of the agreement" and the requirements of the Act. 47 U.S.C. § 251(c)(1), § 251(c)(2)(A), (D).
Section 252 establishes a procedural framework for negotiation of § 251 agreements involving ILECs. An ILEC and a requesting carrier may conduct voluntary negotiations and enter an interconnection agreement. Id. § 252(a)(1). During negotiations, either party may ask the applicable state commission with regulatory jurisdiction over telecommunications carriers "to participate in the negotiation and to mediate any differences."See 47 U.S.C. §§ 153(41), 252(a)(2). Either party may also petition the state commission for compulsory arbitration regarding an interconnection agreement. Id. § 252(b)(1). "Once an interconnection agreement has been adopted either by negotiation or after compulsory arbitration, it must `be submitted for approval' to the state commission, which must either `approve or reject the agreement.'" W. Radio, 530 F.3d at 1190-91 (quoting § 252(e)(1)). The Act further provides that "[i]n any case in which a State commission makes a determination under this section, any party aggrieved by such determination may bring an action in the appropriate Federal district court to determine whether the agreement or statement" meets the requirements of §§ 251 and 252. 47 U.S.C. § 252(e)(6).
Here, PNG disputes Pac-West's contention that the MSA is an interconnection agreement negotiated pursuant to § 251, instead characterizing the MSA as merely a "services contract," and this case as "a straight-forward breach of contract dispute that happens to involve two competitive local exchange carriers." (Pl.'s Opp'n, filed July 23, 2010, at 2.) Because, as set forth below, the court finds that prudential considerations support deference to the CPUC, the court need not decide at this stage in the litigation whether the MSA is an interconnection agreement. However, even if the MSA were an interconnection agreement, the express terms of 47 U.S.C. §§ 251 and 252 would not preclude the court from exercising original jurisdiction. See Core Communications, 493 F.3d at 340 ("the Act is simply silent as to the procedure for post-formation disputes.").
The court observes that while plaintiff's counsel has asserted in the opposition and at oral argument that the MSA is not an interconnection agreement, a Joint Status Report, filed July 12, 2010, stated that the parties " entered into an interconnection agreement known as a Master Services Agreement" (emphasis added). This inconsistency strengthens defendant's contention that the CPUC is best situated to address in the first instance the complex and technical issues raised by this case, including whether or not the MSA is properly characterized as an interconnection agreement. (See Def.'s Reply at 5-10.)
Furthermore, contrary to defendant's assertions, while the case law it cites to the court suggests that deference to the CPUC may be appropriate, these precedents do not establish that a dispute involving an interconnection agreement belongs to the exclusive original jurisdiction of the applicable state commission. Defendant relies on Core Communications, in which the Third Circuit affirmed a district court's holding requiring an LEC to exhaust its administrative remedies by bringing a claim against an ILEC for breach of an interconnection agreement to the state commission that had approved the agreement before litigating the matter in federal court. 493 F.3d at 344. Defendant also relies on an unpublished California Court of Appeal decision citing, in dicta, Core Communications on this issue. See Cox California Telecom, LLC v. Global Naps California, Inc., No. A124213, 2009 WL 3298158, *5 (Cal. App. Oct. 14, 2009). Neither of these non-binding cases assert much less hold that this court lacks jurisdiction. Indeed, the only Ninth Circuit case defendant cites makes it clear that deference to state commissions is based on prudential, not jurisdictional, grounds. See W. Radio, 530 F.3d at 1200 (requiring an LEC's claim against an ILEC to be brought first before the relevant state commission, but emphasizing that "[t]his requirement . . . is a prudential limitation on adjudication, not a statutory or jurisdictional one.").
Moreover, not only does Pac-West fail to establish that the CPUC has exclusive original jurisdiction over PNG's claim, its argument is undermined by Western Radio. In that case, the Ninth Circuit considered whether 47 U.S.C. § 207 afforded a LEC a private cause of action in federal court against an ILEC to enforce the good faith negotiation requirements of § 251 and § 252. W. Radio, 530 F.3d at 1196. The Ninth Circuit held that any finality or exhaustion requirement under the Act "[did] not affect the subject matter jurisdiction of the district court in this case," and concluded that the district court had general federal question jurisdiction under 28 U.S.C. § 1331. Id. at 1193.
At oral argument, defendant's counsel attempted to distinguishWestern Radio, which involved ILEC obligations under § 252, from the instant case which involves only LECs. Counsel characterized the precise issue here — whether a federal district court has original jurisdiction over a dispute concerning an alleged interconnection agreement implementing LEC obligations under § 251 of the Act — as an issue of first impression. However, while unlike Western Radio no party here is an ILEC, thus rendering § 252 inapplicable, defendant fails to cite any precedential authority to establish that such a distinction somehow deprives the court of subject matter jurisdiction. In fact, the Ninth Circuit has expressly held that "there is nothing in the [Telecommunications] Act that limits federal question jurisdiction under 28 U.S.C. § 1331." Pac. Bell v. Pac-West Telecomm, Inc., 325 F.3d 1114, 1119 (9th Cir. 2003).
Here, PNG adequately alleges federal question jurisdiction under 28 U.S.C. § 1331 and 47 U.S.C. §§ 201 and 207, as well as diversity jurisdiction under 28 U.S.C. § 1332. (Compl. ¶ 2, 10.) Contrary to defendant's assertions, nothing in the Act or the caselaw precludes the court from exercising subject matter jurisdiction.
II. Primary Jurisdiction
The prudential considerations Pac-West raises, however, are relevant to its contention that the court should decline to exercise jurisdiction over this matter in favor of proceeding first to the CPUC. (Defs.' Mem. at 7-10.)
"Primary jurisdiction is not a doctrine that implicates the subject matter jurisdiction of the federal courts." Syntek Semiconductor Co., Ltd. v. Microchip Tech. Inc., 307 F.3d 775, 780 (9th Cir. 2002). "Rather, it is a prudential doctrine under which courts may, under appropriate circumstances, determine that the initial decisionmaking responsibility should be performed by the relevant agency rather than the courts." Id. Primary jurisdiction may apply where "a court determines that an otherwise cognizable claim implicates technical and policy questions that should be addressed in the first instance by the agency with regulatory authority over the relevant industry rather than by the judicial branch." Clark v. Time Warner Cable, 523 F.3d 1110, 1114 (9th Cir. 2008).
The application of the doctrine is within the court's discretion and is appropriate where a case presents "(1) the need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity to a comprehensive regulatory authority that (4) requires expertise or uniformity in administration." Syntek, 307 F.3d at 781.
In Western Radio, the Ninth Circuit considered the applicability of primary jurisdiction to a claim brought by an LEC against an ILEC for alleged failure to negotiate in good faith pursuant to the requirements of § 251 and § 252. 530 F.3d at 1200. The plaintiff LEC had filed a petition with the Oregon Public Utilities Commission ("PUC") seeking arbitration of its efforts to negotiate an interconnection agreement with an ILEC.Id. at 1189. When an arbitrator found in the defendant's favor on most issues and directed the parties to submit an interconnection agreement consistent with his decision to the PUC for approval, the plaintiff refused to sign the agreement prepared by the defendant and filed suit in federal court. Id.
Applying the factors set forth in Clark, the Ninth Circuit found that the doctrine of primary jurisdiction was "not a perfect fit" for the Telecommunications Act. Id. at 1200. The court observed that "the agency with `regulatory authority' in this context, in the sense of having the authority to promulgate substantive regulations, is the F.C.C., not the state commissions," and noted that the Ninth Circuit had previously questioned whether primary jurisdiction doctrine permits a case to be referred to a state agency rather than a federal agency (citing Cost Management Services, Inc. v. Washington Natural Gas Co., 99 F.3d 937, 949 n. 12 (9th Cir. 1996)). Id.
Nonetheless, the Western Radio court found that while "the established contours" of primary jurisdiction doctrine "[did] not quite apply, the basic concerns" underlying the doctrine were applicable, and thus, that the "only sensible conclusion" in the case was to require the plaintiff's claim to be brought first to the state commission. Id. The court reasoned that (1) "the federal statutory scheme specifically grants authority to a state agency to interpret and enforce the provisions of §§ 251 and 252"; (2) the policy consideration of relying on agency expertise supported deference because the PUC had already dealt with the issues, having arbitrated the interconnection agreement and issued an order; (3) failing to require the plaintiff to await an agency determination would produce "an extremely inefficient bypass of an administrative remedy"; (4) requiring the plaintiff to await an agency decision was consistent with the intent of § 251 and § 252; and (5) deference was "consistent with the general principle that we attempt to strike a balance between the rights of parties to bring their private causes of action in federal court and a statutory scheme providing an alternative means of resolution before an agency." Id. at 1200-02 (internal quotations and citations omitted).
Applying the prudential considerations elaborated in Western Radio to the instant case, the court finds it appropriate to defer to the CPUC. Like Western Radio, this case allegedly concerns interpretation of LEC obligations under § 251, and the statutory scheme specifically grants state commissions the authority to interpret § 251. See W. Radio, 530 F.3d at 1200. Furthermore, the CPUC has expertise in resolving interconnection disputes and in the highly technical field of telecommunications, an area beyond the ordinary experience of district courts. See Rural Telephone Serv. v. Alltel Commc'ns, Inc., No. 08-2052-JWL/JPO, 2008 WL 2169444, *6 (D. Kan. May 23, 2008). Morever, as the issues raised in this case are already pending before the CPUC, deference would avoid "an extremely inefficient bypass of an administrative remedy." W. Radio, 530 F.3d at 1201 (internal quotations omitted).
The court finds the case of Rural Telephone Services v. Alltel Communications to be instructive here. Alltel concerned claims for breach of contract, quantum meruit, and unjust enrichment arising out of a dispute over the alleged breach of an interconnection agreement. 2008 WL 2169444 at *1. The Alltel court found that "the parties' dispute [was] permeated with issues concerning intercarrier compensation obligations that are not within the conventional experience of judges," including whether the agreement between the parties was an interconnection agreement, whether the dispute was within a state commission's jurisdiction, and whether or not the plaintiff was entitled to compensation pursuant to the agreement between the parties. Id. at *6. All these issues are similarly present in the instant case. The Alltel court concluded that "the most prudent course of action [would be] to stay further action on [the plaintiff's] claims in this case pending resolution of the issues that can and should be determined by [the state commission] in the first instance." Id. at *7. The court finds the Alltel court's reasoning persuasive here.
Finally, plaintiff also suggests that the CPUC may not afford it adequate relief because this billing dispute involves multiple states. (See Pl.'s Opp. at 3-4.) This assertion, both in plaintiff's opposition and during oral argument, is jejune and lacking sufficient detail or any authority for the court to evaluate its merits. Furthermore, defendant disputes plaintiff's assertion, arguing that the CPUC can exercise jurisdiction over interstate disputes. (Def.'s Reply at 9.) In light of the technical complexity of this case, where the parties dispute the nature of the MSA and the services provided pursuant to that agreement, the court finds that the CPUC is best situated to determine in the first instance whether and to what extent it has the authority to resolve the issues raised. Accordingly, the court finds that the prudential considerations articulated inWestern Radio and Alltel Communications, on balance, support deference to the CPUC.
Indeed, the Ninth Circuit's decision in Pac. Bell v. Pac-West Telecomm., Inc., 325 F.3d at 1126 provides support for defendant's position. There, the court recognized that the Telecommunications Act of 1996 "granted the state commissions limited defined authority over interstate traffic under §§ 251 and 252 of the Act." Id.
Where a court defers to an administrative agency under the primary jurisdiction doctrine, the court "has discretion either to retain jurisdiction or, if the parties would not be unfairly disadvantaged, to dismiss the case without prejudice." Reiter v. Cooper, 507 U.S. 258, 268-69 (1993). Here, the court denies defendant's motion to dismiss pursuant to Rule 12(b)(1), finding that it has subject matter jurisdiction, but will stay the case pending disposition of the issues before the CPUC. Because prudential considerations lead the court to defer to the CPUC, the court does not reach Pac-West's abstention or Rule 12(b)(6) arguments.
CONCLUSION
For the foregoing reasons, defendant's motion to dismiss plaintiff's complaint is DENIED. However, the court will stay this case while the parties present the issues raised herein to the CPUC for determination. The Clerk of the Court is directed to enter a STAY of this case pending further order of the court.
The court directs the parties to file a joint status conference statement within 30 days of any disposition by the CPUC.
IT IS SO ORDERED.