Texas Federal Court Dismisses IXCs’ IntraMTA-Lawsuits Against ILECs
Nov. 17, 2015 – The United States District Court for the Northern District of Texas has dismissed over 35 multidistrict lawsuits brought by interexchange carriers (IXCs) against local exchange carriers (LECs), all of which dispute the IXCs’ payments of access charges for intraMTA traffic – telecommunications traffic that originates and terminates in the same Major Trading Area.[1] The court granted the defendant LECs’ motions and dismissed the IXCs’ federal law claims with prejudice based on the court’s conclusion that they are barred by the filed-rate doctrine. The court dismissed the Plaintiff IXCs’ state law claims based on the conclusion that the IXCs “failed to plead plausible claims that the LEC defendants cannot charge access fees under filed state tariffs,” but will allow the IXCs to replead their state-law claims. Notably, the court declined to refer the central issues in the cases to the Federal Communications Commission based on its finding that “there are no substantial issues for the FCC to decide.” Obviously, this dismissal is a win for the LECs.
Background: IntraMTA Traffic & Access Charges
IntraMTA traffic is telecommunications traffic exchanged between a mobile wireless provider like T-Mobile or Verizon (a commercial mobile radio service – CMRS provider) and a local phone company that originates and terminates within the same MTA, as determined at the time the call is initiated. The size of an MTA can vary considerably. Often, MTAs can encompass multiple states, meaning intraMTA traffic can be interstate, while other traffic within that same MTA can be intrastate. Under the FCC’s rules and recent orders, intraMTA traffic exchanged between an IXC and a LEC is subject to reciprocal compensation regardless of whether any of the traffic is routed, prior to termination, to a point outside the MTA borders or outside the local calling area of the LEC. Recip comp rates are set by interconnection agreements, with bill-and-keep being the default “rate” for intraMTA traffic when communications providers have not entered into an interconnection agreement.
Recent intraMTA traffic disputes involve traffic delivered from an IXC to a LEC over “long distance trunks.” Historically, any traffic that is delivered to a LEC over an IXC’s long distance trunks is treated as traffic that is subject to tariffed switched access charges. This is what is happening in the lawsuits at issue here. Two of the largest IXCs – Sprint Communications Company L.P. and MCI Communications Services, Inc. / Verizon Select Services Inc. – allege they are being overbilled by LECs. The IXCs claim the LECs are billing them access for intraMTA traffic which should not be not subject to access charges. They cite the intraMTA rule, claiming the traffic is subject to bill-and-keep, and want a refund.
The Texas Court: Federal Claims Are Barred; State Claims Dismissed But Can Be Refiled
The Texas court’s decision addresses 28 legal actions from 21 judicial districts, all of which are primarily concerned with the same fundamental question: whether LECs are permitted to charge IXCs access charges for exchanging wireless intraMTA traffic.[2] Nearly all of the defendant LECs jointly moved to dismiss the IXC plaintiffs’ federal and state claims pursuant to Federal Rule of Civil Procedure 12(b)(6), failure to state a claim.
As support for their motion to dismiss the federal law claims, the LEC defendants’ argued that the claims are barred by the filed rate doctrine – an entity can only charge rates for its services that are properly filed with the appropriate regulatory authority.[3] In response, the IXCs argued that a filed tariff cannot be enforced when it is contrary to law, and that the LECs cannot lawfully charge access fees on intraMTA traffic.
The court agreed with the LECs that the filed rate doctrine applies. The court looked at the judicial decisions relied on by the IXC plaintiffs, but it ultimately concluded none of them “support[] their position that LECs are precluded by FCC rules from charging IXCs access fees for access services that they provide the IXCs to enable them to exchange interstate wireless intraMTA calls.” The court dismissed the IXC plaintiffs’ federal-law claims with prejudice. The court declared them “incurable,” and the IXCs will not be able to replead them.
Addressing the IXCs’ state law claims, the court stated that “to the extent plaintiffs challenge defendants’ filed state tariffs on the basis that federal law prohibits access charges, [it] has already concluded above that such charges are permissible under federal law.” It then concluded that “to the extent plaintiffs intend to challenge defendants’ filed state tariffs on the basis that they are prohibited under state law, plaintiffs have not plausibly pleaded any state laws that prohibit these charges.” Nevertheless, the IXC plaintiffs may replead their state-law claims.
For the two cases in which AT&T is a named defendant, AT&T did not join the joint motion to dismiss, but instead moved to dismiss or stay the two cases based on the doctrine of primary jurisdiction, pending a referral to the FCC. While the court acknowledged that there are a number of situations where an agency referral is favored, it said this is not one of them, and declined the request. The court determined “it is lawful under federal law to charge IXCs access fees for access services that the LECs provide to enable the IXCs to exchange interstate wireless intraMTA calls,” and that authority “has not been explicitly superseded by FCC regulation.”
How Does The Texas Court’s Decision Compare To The Decision By The Court In Iowa In 2014?
The Northern District of Texas, by dismissing the IXCs’ lawsuits, has ruled that intraMTA traffic delivered by IXCs over long distance trunks to LECs is subject to tariffed access charges. It’s important to note the court did not need any help from the FCC to reach this conclusion. The Texas court’s decision is strikingly opposite of an Iowa court’s decision roughly one year ago. The Iowa court addressed identical lawsuits – IXCs v. Iowa and Minnesota LECs concerning access charges paid for intraMTA traffic.[4] The Iowa court, however, determined the disputed intraMTA issues should be sent to the FCC for more guidance, and the court did not reach a determination of whether the case should be dismissed for failure to state a claim upon which relief can be granted. Shortly after the Iowa court’s decision to stay the lawsuits and seek guidance from the FCC, a group of LECs involved in those lawsuits filed a petition for declaratory ruling asking the FCC to address the intraMTA issue.[5] It’s been nearly a year and the FCC has not issued any guidance clarifying the intraMTA rule.
********************
[1] In Re: Intramta Switched Access Charges Litigation, Civil Action No. 3:14-MD-2587-D, MDL No. 2587 (N.D. Tex. Nov. 17, 2015).
[2] See In Re: Intramta Switched Access Charges Litigation, 67 F.Supp.3d 1378 (2014).
[3] “[T]he ‘filed rate doctrine[‘]...forbids a regulated entity to charge rates for its services other than those properly filed with the appropriate federal regulatory authority.” Ark. La. Gas Co. v. Hall, 453 U.S. 571, 577 (1981) (citations omitted).
[4] Sprint Communications Company, L.P., v. Butler-Bremer Mutual Telephone Company, No. C 14-3028-MWB, 2014 U.S. Dist. LEXIS 141758, Memorandum Opinion and Order Regarding Defendants’ Motion to Dismiss or Stay (N.D. Iowa, Oct. 6, 2014).
[5] Petition for Declaratory Ruling to Clarify the Applicability of the IntraMTA Rule to LEC-IXC Traffic and Confirm That Related IXC Conduct is Inconsistent With the Communications Act of 1934, as Amended, and the Commission Implementing Rules and Policies, WC Docket No. 14-228 (filed Nov. 10, 2014).
