IN THE UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF WEST VIRGINIA AT PARKERSBURG. v. Case No. 6:07-cv-00505

Transcription

1 IN THE UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF WEST VIRGINIA AT PARKERSBURG CSS, INC. a West Virginia corporation; H.E. GENE SIGMAN, individually and/b/a H. E. SIGMAN INVESTIGATIONS; NEUROLOGICAL CASE MANAGEMENT ASSOCIATES, L.L.C., a West Virginia corporation; and on behalf of themselves and all other similarly situated, Plaintiffs, v. Case No. 6:07-cv FIBERNET, L.L.C., a West Virginia Corporation, Defendant. FIBERNET, L.L.C. S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING THE PLAINTIFFS DAMAGES CLAIMS Now comes the Defendant, FiberNet, L.L.C. ( FiberNet ), by counsel John F. McCuskey and Shuman, McCuskey & Slicer, PLLC, and moves this Court, pursuant to Federal Rule of Civil Procedure 56, for partial summary judgment regarding the Plaintiffs damages claims and limiting same to those damages provided for in applicable federal and state tariffs that govern FiberNet s provision of services to the Plaintiffs. In support of its Motion, FiberNet submits the following Memorandum in Support. STATEMENT OF FACTS FiberNet is a West Virginia telecommunications company that provides telephone and data services to businesses and individuals in West Virginia, Pennsylvania and Maryland. The Plaintiffs and the class they purport to represent are FiberNet customers who allege they lost services they

2 purchased from FiberNet at various times and to varying degrees between July 10 and July 13, It is undisputed that during that time, a part of FiberNet s purchased equipment failed and some or all services to some portion of FiberNet s customer base were interrupted. The Plaintiffs brought this suit on July 12, 2007, approximately 48 hours after the outage began and before service was restored to all FiberNet customers. As part of their suit, the Plaintiffs seek compensatory damages, punitive damages, disgorgement, and attorney fees. Two documents govern the relationship between FiberNet and the Plaintiffs; both documents clearly establish a limitation of liability for service interruptions suffered by FiberNet customers. The first, the federal tariff approved by the Federal Communications Commission for FiberNet, states at sections 2.3.1, 2.3.2, and 2.3.3: The liability of the Company for damages arising out of the furnishing of its services, including but not limited to mistakes, omissions, interruptions, delays, or errors, other defects, or representations by the Company, or use of these services or damages arising out of the failure to furnish the service whether caused by acts of omission, shall be limited to the extension of allowances for interruption as set for in Section 2.6, below. The extension of such allowances for interruption shall be the sole remedy of the Customer and the sole liability of the Company. The Company will not be liable for any direct, indirect, incidental, special, consequential, exemplary or punitive damages to Customer as a result of any Company service, equipment or facilities or the acts or omissions or negligence of the Company s employees or agents The Company s liability for willful misconduct, if established as a result of judicial or administrative proceedings, is not limited by this tariff. With respect to any other claim or suit, by a Customer or by any others, for damages associated with the ordering (including the reservation of any specific number for use with a service), installation (including delays thereof), provision, termination, maintenance, repair, interruption or restoration of any service or facilities offered under this tariff, and subject to the provisions of Section 2.6, the Company s liability, if any, shall be limited as provided herein. 1 FiberNet specifically contests that the Plaintiffs represent a certifiable class. Page 2 of 11

3 2.3.3 The Company shall not be liable for any delay or failure of performance or equipment due to causes beyond its control, including but not limited to: acts of God, fire, flood, explosion or other catastrophes; any law, order, rule, regulation, direction, action or request of the United States government or of any other government, including state and local governments having or claiming jurisdiction over the Company, or of any department, agency, commission, bureau, corporation or other instrumentality of any one or more of these federal, state, or local governments, or of any military authority; preemption of existing service in compliance with national emergencies; insurrections; wars; unavailability of rights-of-way or materials, or strikes, lockouts, work stoppages, or other labor difficulties. See, Access Services Tariff of FiberNet, L.L.C., effective July 31, 2001, at page 4, attached in its entirety as Exhibit One to the Motion for Partial Summary Judgment Regarding the Plaintiffs Damages Claims. The second, a West Virginia tariff approved by the Public Service Commission of West Virginia, states: Except when a court of competent jurisdiction finds that gross negligence, willful neglect, or willful misconduct on the Company s part has been a contributing factor, the liability of the Company for any claim or loss, expense or damage (including indirect, special or consequential damage) for any interruption, delay, error, omission, or defect in any service, facility (including services and facilities in emergency calling activity) or transmission provided under this tariff shall not exceed an amount equivalent to the pro rata charge to the Customer or Subscriber for the period of service or facility usage during which such interruption, delay, error, omission or defect occurs. For the purpose of computing this amount, a month is considered to have thirty (30) days. See, PSC WV Tariff No. 2, at page 11, attached in its entirety as Exhibit Two to the Motion for Partial Summary Judgment Regarding the Plaintiffs Damages Claims. The tariffs govern and control the agreement between the Plaintiffs and FiberNet. Although the exact language of each provision differs slightly, the essence of both is the same: FiberNet s liability for an outage such as the one at issue in this case is expressly limited to a credit for the cost of service lost by a customer. Accordingly, the Plaintiffs claims for any other damages are barred Page 3 of 11

4 for reasons more specifically set out below. ARGUMENT The Plaintiffs Complaint asserts claims for damages that are affirmatively barred by the federal and state tariffs that govern FiberNet s provision of service to the Plaintiffs; accordingly, summary judgment is appropriate because the filed tariff doctrine bars all damages claims not allowed by the tariffs. The United States Supreme Court has held the remedies and liabilities contained in a tariff entirely control disputes between carriers and customers. AT&T Co. v. Central Office Telephone, Inc. 524 U.S. 214 (1998). In Central Office, a long-distance services reseller filed suit in federal court against AT&T asserting state claims for breach of contract and tortious interference with contract after AT&T delayed service and overbilled Central Office s customers. The state claims were based on the presumption that the tariffs involved were not singly controlling and were based in large part on statements made by AT&T personnel and brochures created by AT&T. Id. at 220. Central Office alleged that because AT&T s actions were willful, all damages were available under the tariff. Id. In district court, AT&T argued that Central Office s state law claims were preempted by the filed-tariff doctrine and 203 the Federal Communications Act (the FCA ). Id. at 221. The judge disagreed and the case went to a jury that found for Central Office and awarded it $13 million in lost profits. Id. The Ninth Circuit largely affirmed the judgment. Id. Upon review, the Supreme Court held that the filed tariff doctrine applied and that Central Office s claims were preempted by the FCA. Writing for the seven person majority (Justice Stevens dissented and Justice O Connor abstained from consideration of the case), Justice Scalia noted that 203(a) of the FCA requires every carrier to file with the FCC a tariff showing all charges and Page 4 of 11

5 showing the classifications, practices, and regulations affecting such charges. 47 U.S.C. 203(a). Section 203(c) makes it unlawful for a carrier to extend to any person any privileges or facilities in such communication, or employ or enforce any classifications, regulations, or practices affecting such charges, except as specified in such schedule. This provision, known as the filed rate doctrine, is modeled after similar provisions of the Interstate Commerce Act (ICA) and is designed to prevent unreasonable and discriminatory charges. The filed rate doctrine applies to the FCA as well. MCI Telecommunications Corp. v. AT&T Co., 512 U.S. 218 (1994). Justice Scalia dismissed the Ninth Circuit s reasoning regarding application of the filed tariff doctrine to Central Telephone. The Ninth Circuit had incorrectly held the doctrine was inapplicable because the suit did not involve rates and Central Office s suit only alleged poor provision of services and inaccurate billing. In response, Justice Scalia wrote: Rates, however, do not exist in isolation. They have meaning only when one knows the services to which they are attached. Any claim for excessive rates can be couched as a claim for inadequate services and vice versa. If discrimination in charges does not include non-price features, then the carrier could defeat the broad purpose of the statute by the simple expedient of providing an additional benefit at no additional charge... An unreasonable discrimination in charges, that is, can come in the form of a lower price for an equivalent service or in the form of an enhanced service for an equivalent price. Competitive Telecommunications Assn. v. FCC, 998 F.2d 1058, 1062 (C.A.D.C.1993). The Communications Act recognizes this when it requires the filed tariff to show not only charges, but also the classifications, practices, and regulations affecting such charges, 47 U.S.C. 203(a); and when it makes it unlawful to extend to any person any privileges or facilities in such communication, or employ or enforce any classifications, regulations, or practices affecting such charges except those set forth in the tariff, 203(c). Id. at Such an extension of privileges include variance from the remedies and liabilities contained in a tariff: Respondent can no more obtain unlawful preferences under the cloak of a tort claim than it can by contract. Id. at 227. Page 5 of 11

6 Since Central Office, lower courts have applied the filed tariff doctrine with consistent results. The Seventh Circuit Court of Appeals applied the filed tariff doctrine to a class action brought by an Illinois consumer against Sprint that alleged the carrier changed the terms of a Fridays Free international calling program to delete the countries from the service list. Cahnmann th v. Sprint Corp., 133 F.3d 484 (7 Cir. 1998). Judge Posner, writing for the panel, stated Sprint s tariff...is the contract. Any rights that the plaintiff has to complain about a breach of contract are rights granted to her by the original tariff...a tariff filed with a federal agency is the equivalent of a federal regulation. Id. at 488. As a result, the plaintiffs complaint was dismissed. Id. The Western District of Louisiana ruled that a business customer whose toll free line was misdirected by AT&T to an unrelated residential customer could not recover damages in excess of the monthly recurring charge for service, as limited by the filed tariff between the plaintiff and AT&T. Corporate Investigative Division, Inc. v. AT&T, 884 F.Supp. 220 (W.D.La. 1995). The tariff, like the tariffs involved in this case, included a provision that allowed the plaintiff to prove willful misconduct to remove the tariff s liability limitations. Id. The plaintiffs, however, could only show that the phone number was changed and that AT&T representatives failed to verify the new number. Id. Given the paucity of evidence showing an intentional or reckless disregard for the consequences of AT&T s acts or omissions, the District Court upheld the tariff limitations and granted AT&T s motion for partial summary judgment regarding damages. Id. A Colorado federal court ruled similarly when Qwest sued AT&T to recover unpaid fees. Qwest Corp. v. AT&T Corp., 371 F.Supp.2d 1250 (D. Colo. 2005). Upholding Qwest s claim for damages under the tariff, the court stated Valid tariffs conclusively and exclusively control the rights and liabilities between a carrier and its customer. Id. a 1251 (citing MCI Page 6 of 11

7 Telecommunications Corp. v. Graphnet, Inc., 881 F.Supp. 126, 132 (D. N.J. 1995)). The court stated further, the filed tariff doctrine prevents parties from contractually modifying tariffs. This prohibition includes not only modification of tariffs rates and terms, but also modification of a party s potential liability under tariffs, such as in the form of a release or waiver. Id. The issue was also examined as part of the Worldcom bankruptcy. In re Worldcom, Inc., 322 B.R. 530 (Bkrtcy. S.D. N.Y 2005). Telnet, a claimant, asserted breach of contract, fraud, and a host of other claims resulting from improper billing due to a flaw in Worldcom s Call Manager Software and misrepresentations regarding the manner in which Worldcom provided services. Id. Upon review, the bankruptcy court ruled that Telnet s claims were barred by the filed rate doctrine. Id. In response to Telnet s argument that the limitation of liability clause was unenforceable, the court stated The Debtors argue, and Telnet does not refute, that there is no holding in any case under the FCA that a limitation on liability clause must appear in a separate contract between the parties to be enforceable. Id. at 538. The Plaintiffs will undoubtedly attempt, despite the United States Supreme Court s holding in Central Telephone, to argue that the savings clause found at 47 U.S.C. 414 preserves their state law claims. Judge Posner states the argument opposing the Plaintiffs position this way: Although the provision is broadly written, if it were interpreted literally as permitting a state-law breach of contract suit regarding a tariffed service it would impair the Act s policy of confining telecommunications common carriers to tariffed services and vesting the FCC with primary jurisdiction to determine the validity of tariffs; indeed, it would effectively nullify the tariff provisions of the Communications Act. Such interpretations of savings clauses in common carrier statutes interpretations that would empower state courts to gut the federal regulatory scheme or would place the carrier under inconsistent obligations are therefore rejected. Cahnmann, at 488. Page 7 of 11

8 Further, even if the Plaintiffs had knowledge of the limitation of liability contained in the tariffs it is an insufficient defense to application of the clause. The general rule regarding whether a tariff s provisions regarding liability control is stated as a customer is conclusively presumed to know the contents and the effect of the tariff, and neither the customer s ignorance nor the carrier s misquotation of the applicable tariff alters the tariff s terms. Kanuco Technology Corp. v. Worldcom Network Services, Inc., 979 SW2d 368 (TX 1998). In conclusion, it is undisputed that, absent willful misconduct, the tariffs filed by FiberNet explicitly and unambiguously limit the damages available to the Plaintiffs to the cost of service that was interrupted by the accidental outage described in the Plaintiffs Complaint. The United States Supreme Court is unequivocal on the issue: the Plaintiffs can no more obtain unlawful preferences under the cloak of a tort claim than it can by contract. Central Telephone at 227. Accordingly, this Court should enter an Order expressly limiting the damages that may be sought by the Plaintiffs to the cost of interrupted services, the only damages permitted by the filed federal and state tariffs that govern this case. CONCLUSION FiberNet requests that this Court enter an Order granting partial summary judgment pursuant to Federal Rule of Civil Procedure 56 regarding the Plaintiffs claims that they are entitled to damages barred by the federal and state tariffs which control in this case. Page 8 of 11

9 FiberNet, L.L.C., By Counsel /S/ John F. McCuskey John F. McCuskey (WVSB #2431) Mark W. Browning (WVSB #508) Jason Wandling (WVSB #9259) Attorney for Defendants Shuman, McCuskey & Slicer, PLLC Post Office Box 3953 Charleston, West Virginia Telephone: (304) Fax: (304) Page 9 of 11

10 IN THE UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF WEST VIRGINIA AT PARKERSBURG CSS, INC. a West Virginia corporation; H.E. GENE SIGMAN, individually and/b/a H. E. SIGMAN INVESTIGATIONS; NEUROLOGICAL CASE MANAGEMENT ASSOCIATES, L.L.C., a West Virginia corporation; and on behalf of themselves and all other similarly situated, Plaintiffs, v. Case No. 6:07-cv FIBERNET, L.L.C., a West Virginia Corporation, Defendant. CERTIFICATE OF SERVICE The undersigned, counsel for the Defendant, FiberNet, L.L.C., does hereby certify that on August 27, 2007 that the foregoing FiberNet, L.L.C. s Memorandum in Support of its Motion for Partial Summary Judgment on the Plaintiffs Damages Claims was electronically filed with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following CM/ECF participants: James C. Peterson, Esq. Harry G. Deitzler, Esq. HILL, PETERSON, CARPER, BEE & DEITZLER NorthGate Business Park 500 Tracy Way Charleston, WV J. C. Powell, Esq. Anthony J. Majestro, Esq. POWELL & MAJESTRO 405 Capitol Street, Suite P-1200 Charleston, WV Page 10 of 11

11 FIBERNET, L.L.C., BY COUNSEL /S/ John F. McCuskey John F. McCuskey (WVSB #2431) Mark W. Browning (WVSB #508) Jason Wandling (WVSB #9259) Counsel for Defendants SHUMAN, MCCUSKEY & SLICER, PLLC Post Office Box 3953 Charleston, West Virginia Telephone: (304) Fax: (304) Page 11 of 11