F IL E D
United States Court of Appeals
Tenth Circuit
PU BL ISH
March 14, 2007
U N IT E D ST A T E S C O U R T O F A PP E A L S
Elisabeth A. Shumaker
Clerk of Court
FO R T H E T E N T H C IR C U IT
QW EST CORPORATIO N,
Plaintiff-Counter-Defendant - No. 05-1443
Appellant,
v.
A T& T CO RP.; A T& T
CO M M U NICA TIO NS, IN C.; A T& T
C OM M UN IC ATIO N S O F TH E
PA CIFIC N ORTH W EST, IN C.; A T& T
C OM M UN IC ATIO N S O F TH E
M ID W EST, IN C.; A T& T
C OM M UN IC ATIO N S O F TH E
M O U NTA IN STA TES, IN C.; A T& T
C OM M UN IC ATIO N S O F TH E
SOUTHW EST, IN C.,
Defendants-Counter-Claimants -
Appellees.
A PPE A L FR O M T H E U N IT ED ST A T ES D IST R IC T C O U R T
FO R T H E D IST R IC T O F C O L O R A D O
(D .C . N o. 04-N -909 (M JW ))
B. Lawrence Theis (Steven J. Perfrement and Jennifer C. M iner with him on
briefs), M usgrave & Theis, LLP, Denver, Colorado, for Plaintiff-Counter-
Defendant - Appellant.
David W . Carpenter (David M . Schiffman, Sidley Austin LLP, Chicago, Illinois;
Jane M ichaels, Holland & Hart LLP, Denver Colorado; David L. Lawson, Paul J.
Zidlicky, and Ileana M . Ciobanu, Sidley Austin LLP, W ashington, D.C.; and Dina
M ack, AT& T, Inc., Bedminster, New Jersey with him on briefs), Sidley Austin
LLP, Chicago, Illinois, for Defendants-Counter-Claimants - Appellees.
Before T A C H A , Chief Circuit Judge, M cK A Y , and H E N R Y , Circuit Judges.
M cK A Y , Circuit Judge.
Qwest Corporation (“Qwest”) filed this action against AT& T Corporation
and various of its regional subsidiaries (collectively, “AT& T”) seeking collection
of access charges allegedly accrued by the transmission of AT& T long-distance
calls through Qwest’s network. Qwest alleges that AT& T fraudulently concealed
the nature of certain long-distance calls in an effort to avoid paying the tariffed
rate for transmitting these calls. The district court granted AT& T partial
summary judgment after concluding that Qwest, by executing a standard form
agreement of a type long used between Qwest and AT& T to settle billing
disputes, released its collection claim. Qwest filed this interlocutory appeal,
arguing that any release and settlement violates the filed-rate doctrine.
B ACKGROUND
AT& T operates a nationwide long-distance network. Qwest also operates a
nationwide long-distance network, and, since its acquisition of U S W est
Communications Inc. (“U S W est”) in June 2000, it has also operated a local
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telephone network in fourteen states. Local exchange carriers (“LECs”) originate,
transmit, and terminate telephone communications to customers within a given
geographic calling area. Long-distance providers, or interexchange carriers
(“IXCs”), enable customers in different local exchanges to call each other,
generally by routing communications from one LEC network to the IX C network
and from that IX C netw ork to a different LEC network. Qwest offers two
relevant LEC services: access services and primary rate interface (“PRI”)
services. Access services are used, and the accompanying access charges are
accrued, for connecting long-distance calls to LEC networks. PRI services are
used by IXCs for end-user administrative purposes. Qwest’s access charges w ere
priced significantly higher than its PRI charges. Qwest properly listed the rates
for these services in tariffs filed with the Federal Communications Commission
(“FCC”) for interstate communications and with the applicable state commissions
for intrastate communications.
Starting in 1998, AT& T began to use phone-to-phone internet protocols
(“IP telephony”) to route some long-distance telephone calls over A T& T’s
internet backbone and through then-U S W est’s local exchange system. This
method sent interstate calls to U S W est’s PRI service, and therefore allowed
AT& T to avoid paying the higher access charges that would otherwise have been
associated with these calls. Qwest, in its IXC operations around the same time
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period, was doing the same.
In 1999, U S W est filed a petition with the FCC requesting that it determine
whether access charges apply to IP telephony. That petition was w ithdrawn in
2001 before a decision was rendered, however, following U S W est’s merger with
Qwest. The FCC declined promulgating clear rules about IP telephony “in the
absence of a more complete record focused on individual service offerings.” In
the M atter of Federal-State Joint Board on Universal Service, 13 F.C.C.R. 11501
¶¶ 83, 90 (1998). On October 18, 2002, AT& T, facing numerous demands by
LECs that it pay access charges on IP telephony interexchange transmissions,
filed a petition with the FCC seeking a declaration that its IP telephony practices
were not subject to LEC access charges. On April 21, 2004, the FCC issued a
decision in which it ruled against AT& T. In the matter of Petition for
Declaratory Ruling that AT&T’s Phone-to-Phone IP Telephony Services are
Exempt from Access Charges, 19 F.C.C.R. 7457 (2002) [hereinafter FCC Order].
The FCC’s ruling applied only prospectively; it expressly declined retroactive
application.
Long before this ruling, access-charge billing had been a point of contention
between A T& T and U S W est. Frequent disputes over the assessment of access
charges— charges that amounted to hundreds of millions of dollars per billing
cycle— made company accounting and book closing difficult. For that reason, in
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1992, the companies entered into an operating agreement 1 that incorporated a “Bill
Period Closure Agreement” (the “BPCA” or the “Agreement”). Qwest assumed
U S W est’s obligations under the BPCA following the merger.
In sum, the BPCA provides for monthly settlements relating to access
charges. All billing issues not encompassed by the BPCA or listed on a BPCA
Supplement Exemption Form that have been or could have been asserted for all
periods prior to and including the billing period closed by a specific BPCA
Supplement are forever w aived and released by execution of that Supplement.
Section B of the BPCA Supplement specifically exempts from release issues listed
under BPCA Paragraphs 2, 3, and 4 as w ell as issues that are expressly recorded in
a BPCA Supplement Issue Exemption Form. (A ppellant’s App., vol. 2 at 500, §
B.) W hile U S West initially submitted BPCA Supplement Issue Exemption Forms
for several billing periods in 1999 and 2000 regarding AT&T’s IP telephony
routing practices in certain states, Qwest later withdrew these exemptions. The
BPCA Supplements for the billing periods July 2000 through February 2004 were
submitted without Exemption Forms relating to AT& T’s IP telephony routing
practices.
1
The operating agreement stated that “[i]f any provision of this Agreement
conflicts with [U S W est’s/Qwest’s] tariffs concerning access billing, the terms of
the tariff shall govern.” (Appellant’s App., vol. 2 at 248 (Order and M em. of
Decision at 7, No. 04-CV-909-EW N-M JW (D. Colo. June 10, 2005) (quotation
omitted) [hereinafter District Ct. Order]).)
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On April 21, 2004, the FCC Order was issued. AT& T immediately ceased
routing long-distance calls using IP telephony in all states except M innesota; the
practice did not cease in that State until June 2004. On M ay 5, 2004, Qwest filed
the instant action against AT& T to recover access charges from 2000 through
2004. Just five days later, on M ay 10, 2004, the parties executed a BPCA
Supplement covering the February 2004 billing cycle. This BPCA Supplement did
not append an Exemption Form relating to IP telephony services. According to
Qwest, “lower level access billing personnel” mistakenly executed this BPCA
Supplement. (Appellant’s Br. at 8.) In June 2004, the parties executed a BPCA
Supplement covering the M arch 2004 billing cycle. This time Qwest filed an
Exemption Form expressly reserving its “right to recover any and all access
charges” associated with AT& T’s IP telephony use. (Id. at 261 (District Ct. Order
at 20 (quotation omitted)).)
On January 5, 2005, AT& T filed four separate summary judgment motions,
the first seeking partial summary judgment on all of Qwest’s claims for relief
relating to charges prior to M arch 2004, based on the M ay 10, 2004 BPCA
Supplement. Qwest’s interlocutory appeal requests reversal of the district court’s
award of partial summary judgment in favor of AT& T on this issue.
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A NALYSIS
W e review the district court’s grant of partial summary judgment de novo,
applying the same legal standards as the district court. E.Spire Commc’ns, Inc. v.
N.M . Pub. Regulation Comm’n, 392 F.3d 1204, 1206-07 (10th Cir. 2004). Because
Qwest’s claims arise in part from its allegations that AT& T violated tariffs set in
accordance with §§ 203 and 206 of the Communications Act of 1934, as amended,
47 U.S.C. §§ 203, 206, we review the district court’s interpretation of that federal
law de novo. See M arker v. Pac. M ezzanine Fund, L.P., 309 F.3d 744, 747 (10th
Cir. 2002).
As detailed above, this appeal arises out of a long-simmering dispute over
mutual practices involving the use of IP telephony in certain circumstances.
Qwest, itself a one-time user of IP telephony in its role as an IXC, claims that by
using IP telephony to avoid paying access charges and relying on the BPCA
Supplement to effect a “release” of the dispute, AT& T is attempting to enforce a
“unilaterally selected[,] alternative off-tariff arrangement for the completion” of
its calls in violation of the filed-rate doctrine. (Appellant’s App., vol. 3 at 575.)
The filed-rate doctrine, or filed-tariff doctrine, provides that “‘the rate of
the carrier duly filed is the only lawful charge,’” and “‘[d]eviation from it is not
permitted upon any pretext.’” M aislin Indus., U.S., Inc. v. Primary Steel, Inc., 497
U.S. 116, 127 (1990) (quoting Louisville & N ashville R.R. Co. v. M axwell, 237
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U.S. 94, 97 (1915)). The doctrine admits of few exceptions: “‘This rule is
undeniably strict and it obviously may work hardship in some cases, but it
embodies the policy which has been adopted by Congress.’” Id. (quoting M axwell,
237 U.S. at 97). Because “Qwest’s entire case is based upon the assumption that
AT& T should have been paying Qwest for access services when AT& T placed
terminated calls on Qwest’s network through AT& T’s phone-to-phone IP
telephony” (Appellant’s App., vol. 2 at 269 (District Ct. Order at 28)), the district
court elected to view the parties’ dispute by “assuming that AT& T’s actions of not
paying Qwest access charges for AT& T’s phone-to-phone IP telephony services
breached Qwest’s tariffs” (id. at 272 (District Ct. Order at 31); see also id. at 274
(D istrict Ct. Order at 33)). Operating under this assumption, the district court held
that “there must be an exception to the filed-rate doctrine for good faith
settlements of legal disputes over tariffs.” (Id. at 276 (District Ct. Order at 35).)
It therefore concluded that Qwest, by executing the February 2004 BPCA
Supplement without including the contractually mandated Exemption Form
disputing AT& T’s IP telephony practice, released AT& T from any filed-rate-
doctrine violation.
Qwest’s interlocutory appeal therefore asks this court to determine
“whether, in order to settle a dispute between two parties, the parties may execute
a release of any claims that a party charged a rate in contravention of the filed-
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tariff [sic].” (O rder and M em. of Decision at 9, No. 04-CV-00909-EW N-M JW (D .
Colo. Aug. 4, 2005).) Taking both Qwest’s and the district court’s assumptions at
face value, the answer to the certified question would be a resounding “No.” The
filed-rate doctrine makes clear that the tariff on file sets the rate that is to be
charged— no more, no less, no negotiation allowed. See 47 U.S.C. § 203(c)(1); see
also M aislin, 497 U.S. at 127; Atchison, Topeka & Santa Fe Ry. Co. v. Bouziden,
307 F.2d 230, 234 (10th Cir. 1962) (“The salutary purpose of the [filed-rate
doctrine] is to secure uniform treatment . . . and to shut out opportunity for
discrimination and favoritism.”); Empire Petroleum Co. v. Sinclair Pipeline Co.,
282 F.2d 913, 916 (10th Cir. 1960) (“[T]he intricacies of private contract cannot
be permitted to result in rate discrimination, actual or potential.”).
It is our responsibility on de novo review, however, to look beyond these
assumptions. See Paper, Allied-Indus., Chem. & Energy Workers Int’l Union v.
Cont’l Carbon Co., 428 F.3d 1285, 1291 (10th Cir. 2005) (“An appellate court can
and should address a different legal question if it controls the disposition of the
certified order.” (citing Homeland Stores, Inc. v. Resolution Trust Corp., 17 F.3d
1269, 1272 (10th Cir.1994))). In so doing, we are convinced that these
assumptions led to a fundamental misperception regarding the true nature of the
dispute and, as a result, an inaccurate characterization of the issue.
The fact that Qwest’s entire case is predicated upon the unestablished
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contention that AT& T definitively violated Qwest’s access service tariff is critical.
Unfortunately for Qwest, the FCC expressly refused to extend its IP telephony
ruling to permit retroactive application. The FCC clearly limited the scope of its
decision and explained the reasons for imposing that limitation:
W e do not make any determination at this time regarding the
appropriateness of retroactive application of this declaratory ruling
against AT& T or any other party alleged to owe access charges for
past periods. W hile we recognize the strong interest in providing
certainty— and indeed that is a primary reason for issuing this
ruling— we are unable to make a blanket determination regarding the
equities of permitting retroactive liability. W e believe that the
equitable inquiry is inherently fact-specific.
FCC Order, 19 F.C.C.R. at 7471 (footnote omitted). The prospective/retroactive
dichotomy established by the FCC Order is crucial to understanding this case. It
makes clear that, absent the erroneous assumptions, the dispute is not over
unilateral selection of an “off-tariff” rate, but rather over a previously unresolved
disagreement as to which tariffed rate applied. See Am. Tel. & Tel. Co. v. Cent.
Office Tel., Inc., 524 U.S. 214, 223 (1998) (“[R]ates . . . do not exist in isolation.
They have meaning only when one knows the services to w hich they are
attached.”). Consequently, reading the question presented on appeal in light of
this ruling, the real question is whether the filed-rate doctrine precludes the good
faith settlement of a dispute regarding a federal tariff’s applicability in the first
instance in the absence of a regulatory or judicial ruling directly resolving the
issue. W e believe that it does not, for this scenario simply does not implicate the
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policies of preventing collusion and discrimination that would otherwise justify
strict application of the filed-rate doctrine. Indeed, the FCC’s calculated decision
constitutes an implied recognition of the right to settle such a dispute, if not an
outright invitation to do so.
W e observe that neither party cited cases bearing directly on the instant
situation, nor have we located any. AT& T relies heavily on Panhandle Eastern
Pipeline Co. v. F.E.R.C., 95 F.3d 62 (D.D.C. 1996), where the appeals court
reasoned that simply because one party would have fared better had it vigorously
pursued litigation over the filed rate, settlement of that issue was not prohibited.
W hile that reasoning is elucidating, the highly complex factual and procedural
history of that case dilutes its applicability to the instant action.
Qwest’s cited cases primarily involve disputes concerning under- or over-
payment of a clearly established and certainly applicable rate. Only Bernstein
Bros. Pipe & M ach. Co. v. Denver R.G.W.R. Co., 193 F.2d 441, 443 (10th Cir.
1951), presented a situation where “[t]he correct rate depend[ed] upon which of
two tariffs [was] applicable.” But that case concerned whether this court had
jurisdiction to decide which rate applied, not whether the parties could have settled
that issue. Id. at 444-45 (“If the question is w hich of two rates apply, and there is
no contest about the reasonableness of either rate, and the tariffs contain no
technical words or phrases employed in a peculiar meaning, the question is not
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primarily one for the Interstate Commerce Commission, but is a judicial question
of which the courts have jurisdiction in the first instance.”).
Qwest attempts to fall back upon AT& T’s so-called “inconsistent
advocacy.” (Appellant’s Supplemental Authority at 2.) To that end, Qwest alleges
that A T&T’s position in a recent Third Circuit decision, AT&T Corp. v. JM C
Telecom, LLC, 470 F.3d 525 (3d Cir. 2006), contradicts representations A T& T
made to this court regarding the effect of the BPCA. Qwest’s reliance on this case
is unavailing. In JM C Telecom, the parties entered into a contractual arrangement
for the resale of AT& T prepaid long-distance calling cards. W hen JM C failed to
pay, AT& T sued. JM C claimed that AT& T breached the contract by failing to
honor a contract addendum that required AT& T to lower rates should JM C suffer
certain business losses. The Third Circuit disagreed, finding that the addendum
was not filed with the FCC and, therefore, could not justify off-tariff rates.
Here, the BPCA does not set rates. Rather, the parties executed a settlement
resolving the factual issue regarding retroactive application. Because the
settlement at issue resolves payments pertaining to a period of time for which the
applicability of different filed tariffs remains unresolved, the settlement does not
impact the public policy behind the otherwise strict interpretation of the filed-rate
doctrine.
Qwest therefore seeks to have this court invalidate its otherwise valid
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settlement. Having determined that the settlement at issue does not violate the
filed-rate doctrine, we believe it is appropriate to address w hether the district court
correctly found that the February BPCA Supplement is an otherwise valid
settlement of the dispute. See Yam aha M otor Corp. U.S.A. v. Calhoun, 516 U.S.
199, 205 (1996) (“[T]he appellate court may address any issue fairly included
within the certified order because it is the order that is appealable, and not the
controlling question identified by the district court.” (quotation omitted)). After a
thorough review of the record, we believe that it is. Qwest, with full knowledge of
its litigation options, executed that BPCA Supplement settling all past billing
periods five days after it filed suit in this case, weeks after the FCC issued its
order, and long after Qwest was aware of AT& T’s actions, actions that Qwest
itself committed prior to its merger w ith U S W est. Accordingly, we are
convinced that Qwest validly and purposely released its claims in accordance with
the terms of the BPCA. This is especially so considering the parties’ course of
conduct. In particular, we note that in June 2004, just after executing the February
BPCA Supplement, Qwest submitted an Exemption Form for the M arch 2004
billing cycle that disputed whether IP telephony-related calls were subject to
access charges. This is a clear recognition of the BPCA’s ongoing applicability
and the need to specifically exempt the type of charges at issue here. The fact that
the dispute w as settled within the BPCA framework is not surprising: the BPCA is
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a settlement agreement, created with the express purpose of amicably and
efficiently settling access-charge disputes.
Qwest’s cries of mistake evoke no sympathy. As an initial matter, this issue
was never raised below. See Walker v. M ather, 959 F.2d 894, 896 (10th Cir. 1992)
(declining to address certain issues given general rule that appellate courts do not
consider issues not raised before district court). Regardless, the record shows that
the parties were engaged in “high-level” discussions concerning this issue in
February 2004. (Appellant’s App., vol. 1 at 141.) W e consider it highly dubious
that “low-level” staff— apparently ignorant of the highly contentious
atmosphere— executed the BPCA by mistake just days after the lawsuit w as filed.
W e are equally unpersuaded by Qwest’s argument regarding bad faith and lack of
consideration.
Thus, we A FFIR M the district court’s grant of summary judgment on
claims released by the February BPCA Supplement.
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