Puerto Rico Telephone Co., Inc. v. Sprintcom, Inc.

United States Court of Appeals
For the First Circuit

Nos. 10-1609, 10-1610

PUERTO RICO TELEPHONE COMPANY, INC.,

Plaintiff-Appellant/Cross-Appellee,

v.

SPRINTCOM, INC.,

Defendant-Appellee/Cross-Appellant,

TELECOMMUNICATIONS REGULATORY BOARD OF PUERTO RICO;
SANDRA E. TORRES-LÓPEZ, in her official capacity as President
of the Telecommunications Regulatory Board of Puerto Rico;
GLORIA ESCUDERO-MORALES, in her official capacity as
Associate Member of the Telecommunications Regulatory Board
of Puerto Rico; NIXYVETTE SANTINI-HERNÁNDEZ, in her official
capacity as Associate Member of the Telecommunications
Regulatory Board of Puerto Rico,

Defendants, Appellees.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

[Hon. Jaime Pieras, Jr., U.S. District Judge]

Before

Torruella, Siler,* and Howard,
Circuit Judges.

Scott H. Angstreich, with whom Jeffrey M. Harris and Kellogg,
Huber, Hansen, Todd, Evans & Figel, P.L.L.C., were on brief for
appellant/cross-appellee.
Miguel J. Rodríguez-Marxuach, with whom Alexandra Rodríguez-

*
Of the Sixth Circuit, sitting by designation.
Díaz and Rodríguez Marxuach, PSC, were on brief for appellee/cross-
appellant.
Robert F. Reklaitis, with whom Leslie Paul Machado and Leclair
Ryan, were on brief for defendants/appellees.

November 9, 2011

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 TORRUELLA, Circuit Judge. This appeal arises out of

disputes between plaintiff-appellant/cross-appellee Puerto Rico

Telephone Company, Inc. ("PRTC") and defendant-appellee/cross-

appellant SprintCom, Inc. ("Sprint") concerning the intercarrier

compensation due under an interconnection agreement (the

"Agreement"), which they entered into in June 2000. PRTC and

Sprint both appeal from the district court's decision in P.R. Tel.

Co., Inc. v. Telecommns. Regulatory Bd., 704 F. Supp. 2d 104

(D.P.R. 2009), where the court upheld an order of the

Telecommunications Regulatory Board of Puerto Rico (the "Board")

adjudicating the disputes at issue. On appeal, PRTC argues that

the Board's order violated federal law and misinterpreted the

Agreement insofar as it mandated that -- pursuant to the terms of

the Agreement's change-of-law provision -- PRTC and Sprint were to

reciprocally compensate each other for internet-service-provider-

bound ("ISP-bound") traffic in accordance with the interim

compensation regime set forth by the Federal Communications

Commission ("FCC") in the ISP Remand Order.1 Sprint, on the other

hand, cross-appeals from the district court's decision upholding

the Board's dismissal of Sprint's claims on a separate (albeit

related) dispute in which Sprint alleged that PRTC had overcharged

1
In the Matter of Implementation of the Local Competition
Provisions in the Telecommunications Act of 1996, Intercarrier
Compensation for ISP-Bound Traffic [hereinafter "ISP Remand
Order"], 16 FCC Rcd. 9151, 2001 WL 455869 (2001), remanded by
WorldCom, Inc. v. FCC, 288 F.3d 429 (D.C. Cir. 2002).

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it for the termination of transit traffic. For the reasons stated

below, we reverse in part and affirm in part the district court's

decision and remand for further proceedings consistent with this

opinion.

I. Regulatory Background

We provide some background of the regulatory framework

under the Telecommunications Act of 1996 (the "1996 Act")2 to set

up the issues on appeal. Some of our prior cases provide further

background as to the general operation of this statute. See, e.g.,

Centennial P.R. License Corp. v. Telecomms. Regulatory Bd., 634

F.3d 17 (1st Cir. 2011); Global NAPs, Inc. v. Verizon New Eng. Inc.

("GNAPs VI"), 603 F.3d 71 (1st Cir. 2010), cert. denied sub nom

Gangi v. Verizon New Eng., Inc., 131 S. Ct. 1044 (2011); Global

NAPs, Inc. v. Verizon New Eng., Inc. ("GNAPs V"), 505 F.3d 43 (1st

Cir. 2007); Global NAPs, Inc. v. Verizon New Eng., Inc. ("GNAPs

IV"), 489 F.3d 13 (1st Cir. 2007); Global NAPs, Inc v. Verizon New

Eng., Inc. ("GNAPs III"), 444 F.3d 59 (1st Cir. 2006); Global NAPs,

Inc. v. Mass. Dep't of Telecomm. & Energy, ("GNAPs II"), 427 F.3d

34 (1st Cir. 2005); Global NAPs, Inc. v. Verizon New Eng., Inc.

("GNAPs I"), 396 F.3d 16 (1st Cir. 2005).

Prior to the enactment of the 1996 Act, telephone

services were provided mainly by incumbent local exchange carriers

2
Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat.
56 (1996) (codified as amended in scattered sections of Title 47 of
the United States Code).

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("LECs") who operated as state-regulated monopolies. See

Centennial P.R. License Corp., 634 F.3d at 21. In order to end the

local telephone monopolies and promote competition, the 1996 Act,

inter alia, removed all state barriers to entry, see 47 U.S.C.

§ 253, mandated that all telecommunications carriers interconnect

with one another, see id. § 251(a)(1), and imposed special

obligations on incumbent LECs to mitigate their dominant market

position, including the duty to share their telecommunications

facilities and services with their rivals (i.e., competing LECs),

id. § 251(c)(2). See Centennial P.R. License Corp., 634 F.3d

at 21.

"Interconnection3 allows customers of one LEC to call the

customers of another, with the calling party's LEC (the

'originating' carrier) transporting the call to the connection

point, where the called party's LEC (the 'terminating' carrier)

takes over and transports the call to its end point." Verizon

Cal., Inc. v. Peevey, 462 F.3d 1142, 1146 (9th Cir. 2006). To

ensure that each LEC is fairly compensated for these calls, the

1996 Act requires all LECs (both incumbent and competing) "to

establish reciprocal compensation arrangements for the transport

3
Although the 1996 Act does not define the term
"interconnection," the FCC has concluded that under 47 U.S.C.
§ 251(c)(2) the term refers to "the physical linking of two
networks for the mutual exchange of traffic." In the Matter of
Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996 [hereinafter "Local Competition
Order"], 11 FCC Rcd. 15499, 15514 ¶ 26 (1996).

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and termination of telecommunications." 47 U.S.C. § 251(b)(5); see

also 47 C.F.R. § 51.703. Under a reciprocal compensation

arrangement, "each of the two carriers receives compensation from

the other carrier for the transport and termination on each

carrier's network facilities of telecommunications traffic that

originates on the network facilities of the other carrier." 47

C.F.R. § 51.701(e).

An assumption behind this reciprocal compensation system

was that traffic back and forth on these interconnected networks

would be relatively balanced such that no carrier would

disproportionately benefit from the reciprocal payments. See

GNAPs V, 505 F.3d at 45; ISP Remand Order, 16 FCC Rcd. at 9162

¶ 20. The rise of "dial-up" internet access, however, disturbed

this balance and created an opportunity for classic regulatory

arbitrage.4 See GNAPs V, 505 F.3d at 45; ISP Remand Order, 16 FCC

Rcd. at 9162 ¶ 21. Specifically, because internet service

providers ("ISPs") receive a high volume of calls and typically

originate very few calls, some LECs began to heavily solicit ISPs

as customers (e.g., by providing free services or even paying their

4
Regulatory arbitrage refers "to the practice of operating a
business to take maximum advantage of the prevailing regulatory
environment (as opposed to delivering the maximum amount of value
to the business's customers), usually at the expense of consumers,
competitors, or taxpayers, as the case may be." AT&T Communs. of
Cal., Inc. v. Pac-West Telecomm, Inc., 651 F.3d 980, 984 n.4 (9th
Cir. 2011).

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ISP customers) so that such LECs would collect, instead of pay,

reciprocal compensation. See GNAPs V, 505 F.3d at 45. This

created a number of market distortions that hurt competition. ISP

Remand Order, 16 FCC Rcd. at 9162 ¶ 21.

The FCC5 first addressed the issue of reciprocal

compensation over ISP-bound calls in February 1999, when it

promulgated a short-lived ruling -- later vacated by the Court of

Appeals for the District of Columbia Circuit -- that classified

ISP-bound calls as non-local calls that did not qualify for

reciprocal compensation under 47 U.S.C § 251(b)(5). In the Matter

of Implementation of the Local Competition Provisions in the

Telecommun. Act of 1996, 14 FCC Rcd. 3689 (1999) [hereinafter, "ISP

Order No. 1"], vacated, Bell Atl. Tel. Cos. v. FCC, 206 F.3d 1

(D.C. Cir. 2000). The FCC said, however, that because "the [FCC]

[had] no rule governing inter-carrier compensation for ISP-bound

traffic, parties [could] voluntarily include this traffic within

the scope of their interconnection agreements under sections 251

and 252 of the [1996] Act, even if these statutory provisions [did]

not apply as a matter of law." ISP Order No. 1, 14 FCC Rcd. at

3702 ¶ 22. The FCC added that "pending adoption of [an FCC] rule

establishing an appropriate interstate compensation mechanism," it

5
"[T]he FCC, and not the individual state commissions, is the
agency with the power granted by Congress to administer the [1996
Act], through the formulation of policy, rulemaking, and
regulation." GNAPs III, 444 F.3d at 70 n.10 (quoting GNAPs I, 396
F.3d at 23 n.7).

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had "no reason to interfere with state commission findings as to

whether reciprocal compensation provisions of interconnection

agreements apply to ISP-bound traffic." Id. at 3702 ¶ 21. The

D.C. Circuit, however, vacated ISP Order No. 1 and remanded to the

FCC, holding that the FCC had not satisfactorily explained its

analysis for classifying ISP-bound calls. See Bell Atl. Tel. Cos.

v. FCC, 206 F.3d at 9.

On remand, the FCC issued (in April 2001) the ISP Remand

Order in which the FCC reexamined the grounds for its previous

conclusion that 47 U.S.C. § 251(b)(5) did not mandate reciprocal

compensation for ISP-bound traffic. See ISP Remand Order, 16 FCC

Rcd. at 9164 ¶ 30. This time using a different reason,6 the FCC

again "conclude[d] that ISP-bound traffic was not subject to the

reciprocal compensation provisions of section 251(b)(5)." Id. at

9167 ¶ 35. In addition, the FCC found that it had the authority

under 47 U.S.C. § 201 to establish rules governing intercarrier

compensation for ISP-bound traffic. Id. at 9175 ¶ 52. Pursuant to

6
In the ISP Remand Order, although the FCC stuck to its end-to-
end analysis for classifying ISP-bound traffic as predominantly
interstate in nature, see ISP Remand Order, 16 FCC Rcd. at 9175
¶ 52, it backed off from its prior statement concerning the scope
of 47 U.S.C. § 251(b)(5), see id. at 9167 ¶ 34. Specifically, the
FCC admitted that it was incorrect to construe the reciprocal
compensation provisions of 47 U.S.C. § 251(b)(5) as only limited to
"local" traffic, given that "local" is not a term used in section
251(b)(5). Id. at 9167 ¶ 34. The FCC instead surmised that,
because of the limitations imposed by section 251(g) on the scope
of section 251(b)(5), ISP-bound traffic was not subject to the
reciprocal compensation provisions of section 251(b)(5). Id. at
9167 ¶ 35.

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this authority, the FCC stated that it would examine the

desirability of adopting a uniform intercarrier compensation

mechanism applicable to all traffic exchanged among

telecommunications carriers, and, in that context, would examine

the merits of a "bill and keep"7 compensation regime for all

traffic, including ISP-bound traffic. Id. at 9181 ¶ 66. The FCC,

however, concluded that -- in order to address the then existing

market distortions and avoid a "flash cut" to a new compensation

regime -- an interim solution was necessary. Id. at 9186 ¶ 77.

Thus, under the ISP Remand Order, the FCC imposed an interim

intercarrier compensation regime for ISP-bound traffic (the "ISP

Remand Order Compensation Regime") comprising a hybrid mechanism

that included, inter alia, the following.

(1) Rate caps. The FCC imposed declining caps on

intercarrier compensation rates for ISP-bound traffic, starting at

$.0015 per minute-of-use ("mou") on the effective date of the ISP

Remand Order and stabilizing, 36 months thereafter, at $.0007 per

mou, id. at 9186-87 ¶¶ 77-78.

(2) Mirroring Rule. Because the FCC believed "[i]t would

be unwise as a policy matter, and patently unfair" to have allowed

incumbent LECs to benefit from lower rates for intercarrier

7
Under a "bill and keep" regime, each carrier bills its own
customers for its costs and keeps those payments as its
compensation, with no compensation exchanged between the
originating and terminating LECs. See ISP Remand Order, 16 FCC
Rcd. at 9153 ¶ 2 n.6.

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compensation of ISP-bound traffic (for which incumbent LECs were

usually net-payors), while they benefitted from higher rates for

traffic subject to reciprocal compensation under 47 U.S.C.

§ 251(b)(5) (for which incumbent LECs were generally net payees),

the FCC imposed a special "mirroring" rule. Id. at 9193 ¶ 89.

This rule established that "[t]he rate caps for ISP-bound

traffic . . . adopt[ed] [by the FCC under the ISP Remand Order]

apply . . . only if an incumbent LEC offers to exchange all traffic

subject to section 251(b)(5) at the same rate." Id. However,

"those incumbent LECs that choose not to offer to exchange section

251(b)(5) traffic subject to the same rate caps [adopted by the

FCC] for ISP-bound traffic, [are ordered] to exchange ISP-bound

traffic at the state-approved or state-arbitrated reciprocal

compensation rates reflected in their contracts." Id. at 9194

¶ 89. The ISP Remand Order allowed incumbent LECs to "make this

election on a state-by-state basis." Id. at 9194 n.179. In sum,

"the 'mirroring' rule ensures that incumbent LECs will pay the same

rates for ISP-bound traffic that they receive for section 251(b)(5)

traffic." Id. at 9194 ¶ 89. The FCC asserted that this was the

correct policy result, since it saw no reason why there should be

different rates for ISP-bound and voice traffic. Id. at 9194 ¶ 90.

This ISP Remand Order Compensation Regime became

effective starting June 14, 2001. GNAPs II, 427 F.3d at 40. By

its own terms, however, this regime does not apply in all

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situations. Rather, to avoid upsetting contractual expectations,

the ISP Remand Order establishes that the ISP Remand Order

Compensation Regime applies "as carriers re-negotiate expired or

expiring interconnection agreements" and "does not alter existing

contractual obligations, except to the extent that parties are

entitled to invoke contractual change-of-law provisions."8 ISP

Remand Order, 16 FCC Rcd. at 9189 ¶ 82.

Similar to ISP Order No. 1, the ISP Remand Order was

challenged before the D.C. Circuit, which again found the FCC's

alleged basis to be lacking and rejected the FCC's reliance on 47

U.S.C. § 251(g). WorldCom, Inc., 288 F.3d at 430. This time,

however, the D.C. Circuit decided not to vacate the FCC's order and

instead remanded the case (in 2002) for the FCC to provide an

alternative legal justification for the compensation rules adopted

8
Paragraph 82 of the ISP Remand Order, which governs the
application of the ISP Remand Order Compensation Regime,
establishes, in relevant part, as follows:

The interim compensation regime we establish here applies
as carriers renegotiate expired or expiring
interconnection agreements. It does not alter existing
contractual obligations, except to the extent that
parties are entitled to invoke contractual change-of-law
provisions. This Order does not preempt any state
commission decision regarding compensation for ISP-bound
traffic for the period prior to the effective date of the
interim regime we adopt here. Because we now exercise our
authority under [47 U.S.C. 201] to determine the
appropriate intercarrier compensation for ISP-bound
traffic, however, state commissions will no longer have
authority to address this issue.

ISP Remand Order, 16 FCC Rcd. at 9189 ¶ 82.

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under the ISP Remand Order. Id. Thus, the ISP Remand Order

remained in force.

The FCC, however, delayed in responding to the D.C.

Circuit's 2002 remand in WorldCom, Inc., causing the D.C. Circuit

to grant a writ of mandamus ordering that the FCC respond to the

2002 remand "in the form of a final, appealable order that explains

the legal authority for the Commission's interim intercarrier

compensation rules that exclude ISP-bound traffic from the

reciprocal compensation requirement of § 251(b)(5)." In re Core

Commc'ns, Inc., 531 F.3d 849, 861-62 (D.C. Cir. 2008). The FCC

complied in November 2008 by promulgating a new order addressing

its authority to regulate ISP traffic. See In the Matter of

Implementation of the Local Competition Provisions in the

Telecommunications Act of 1996, Developing a Unified Intercarrier

Compensation Regime, Intercarrier Compensation for ISP–Bound

Traffic [hereinafter, "Second ISP Remand Order"], 24 FCC Rcd. 6475

(2008). In the Second ISP Remand Order, the FCC provided yet

another basis for its authority to regulate ISP-bound traffic,

namely, "that although ISP-bound traffic falls within the scope of

section 251(b)(5), this interstate, interexchange traffic is to be

afforded different treatment from other section 251(b)(5) traffic

pursuant to [the FCC's] authority under section 201 and 251(i) of

the [1996] Act." Second ISP Remand Order, 24 FCC Rcd. at 6478 ¶ 6.

On review, the D.C. Circuit accepted the FCC's new legal

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justification for the ISP Remand Order's interim compensation

regime and affirmed. See Core Commc'ns, Inc. v. FCC, 592 F.3d 139,

141 (D.C. Cir. 2010).

II. Facts and Procedural History

The material facts for the resolution of this case are

not in dispute. Because this appeal involves two distinct (albeit

related) disputes, we divide our discussion of the facts into two

sections accordingly and generally discuss the facts relevant to

each dispute separately.

A. Dispute over whether the ISP Remand Order altered the Agreement

PRTC, a Puerto Rico corporation, is a telecommunications

carrier and incumbent LEC under the jurisdiction of the Board and

the FCC that provides local exchange, exchange access and intra-

island long distance services in Puerto Rico. Sprint, a Kansas

corporation authorized to do business in Puerto Rico, is a

communications common carrier and telecommunications carrier

providing commercial mobile services, commercial mobile radio

services, personal communications services, and personal wireless

services.

On June 26, 2000, PRTC and Sprint voluntarily negotiated

and entered into the Agreement to establish the terms and

conditions for interconnection of their networks. The Board

approved this Agreement in accordance with 47 U.S.C. 252(e)(1).

The Agreement had a one-year initial term, ending June 25, 2001.

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The parties, however, agreed on multiple occasions to extend its

terms beyond this date. Specifically, in June 2001, the parties

extended the Agreement for another year. Subsequently, in June

2002, the parties extended it for a three-month term, to September

26, 2002. Then, in September 2002, PRTC and Sprint extended it

indefinitely with automatic renewal every thirty days until written

notice of termination by either party. The Agreement finally

terminated on August 8, 2007. PRTC does not dispute that, during

each of these extensions, it never offered Sprint the rate caps

established under the ISP Remand Order. It is also undisputed that

Sprint never specifically asked that PRTC make such an offer.

Rather, the Agreement was extended each time under the same terms

and conditions. Nevertheless, Sprint has never argued that the

Agreement was ever an "expired or expiring agreement," within the

meaning of the ISP Remand Order, during or prior to such Agreement

extensions.

Effective July 19, 2002, PRTC entered into an

interconnection agreement with a competitor -- known as Centennial

-- in Puerto Rico, which contained rates for reciprocal

compensation based on the rate caps established by the FCC under

the ISP Remand Order. PRTC never notified other competitors of

this. Nevertheless, on December 9, 2003, during negotiations

between PRTC and AT&T Wireless (another competitor), the latter

became aware that PRTC had offered the ISP Remand Order rate caps

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to Centennial and requested that it also receive the same

treatment. As a result of the negotiations, PRTC amended its

interconnection agreement with AT&T Wireless in 2004, effective

June 2003, to include rates for reciprocal compensation based on

the ISP Remand Order's rate caps.

In August 2005, Sprint became aware that PRTC had offered

the ISP Remand Order rate caps to competitors. Sprint, however,

concedes that prior to August 2005 it neither asked PRTC nor

reviewed PRTC's publicly filed interconnection agreements to

ascertain this information.

Shortly thereafter in August 2005, Sprint informed PRTC

of its belief that the ISP Remand Order triggered the change-of-law

provision in the Agreement. In addition, Sprint requested that

PRTC amend the then existing Agreement and that such amendment be

effective as of the date PRTC first implemented the ISP Remand

Order rate caps with another carrier (i.e., July 19, 2002). PRTC,

however, rejected both Sprint's construction of the Agreement and

its request for implementation of the ISP Remand Order rate caps as

of July 19, 2002. PRTC thus continued to invoice Sprint based on

the reciprocal compensation rates set forth in the Agreement's

price schedule, which resulted in a composite reciprocal

compensation rate of approximately $0.011 mou, which is much higher

than the ISP Remand Order's rate caps.

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 After various discussions, matters escalated on March 21,

2007 when Sprint began to unilaterally adjust PRTC's charges for

reciprocal compensation, transit traffic and reverse toll billing

by applying the ISP Remand Order's capped rate of $0.0007. PRTC

responded on May 10, 2007, warning that it would terminate services

to Sprint unless Sprint paid the amounts withheld.

Thereafter, on May 21, 2007, Sprint filed a complaint

with the Board that sought to enjoin PRTC from terminating

services9 and for a ruling that the ISP Remand Order triggered the

Agreement's change-of-law provision as of the date PRTC began

exchanging traffic with another competitor in Puerto Rico pursuant

to the ISP Remand Order's rate caps (i.e., July 19, 2002), thus

entitling Sprint to the application of the ISP Remand Order's rate

caps as of such date. PRTC responded with a counterclaim seeking

payment for reciprocal compensation at the rates set forth in the

Agreement's price schedule.

The following timeline illustrates the relevant dates

concerning PRTC and Sprint's dispute over the applicable

intercarrier compensation rates for ISP-bound traffic.

(1) June 26, 2000. PRTC and Sprint enter into the

Agreement, which has a one year initial term.

(2) April 2001. FCC issues the ISP Remand Order.

9
The Board enjoined PRTC from terminating services to Sprint
during the pendency of the dispute. That decision, however, is not
before us in this appeal.

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 (3) June 14, 2001. The ISP Remand Order Compensation

Regime set forth in the ISP Remand Order becomes effective.

(4) June 25, 2001. PRTC and Sprint extend the Agreement

for one year.

(5) June 26, 2002. PRTC and Sprint extend the Agreement

for three months up to September 26, 2002.

(6) July 19, 2002. PRTC offers the ISP Remand Order's

rate caps to Centennial, a competitor of Sprint.

(7) September 27, 2002. PRTC and Sprint extend the

Agreement indefinitely with automatic renewal every thirty days

until written notice of termination by either party.

(8) August 2005: Sprint requests that PRTC amend the

existing Agreement to incorporate the ISP Remand Order's rate caps

and that such amendment be effective retroactively as of the date

PRTC first implemented such rate caps with Centennial, i.e., as of

July 19, 2002.

B. Dispute over alleged excess billing for transit traffic

Sprint alleges that, during the discovery period in the

aforementioned administrative proceeding, it became aware that

PRTC's reciprocal compensation invoices for the period from

December 2002 through July 2005 charged Sprint for transit traffic10

10
Transit traffic occurs when a call is originated by a Sprint
customer, routed (or "transited") through PRTC's network, and
delivered to a third-party carrier, which is the carrier that
provides service to the person Sprint’s customer called. Such calls
transit PRTC's network either because Sprint lacks a direct

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services at rates that were in excess of the amounts established in

the Agreement.

Thus, on January 2008, while discovery was ongoing,

Sprint filed a motion with the Board for leave to amend its

complaint to add a count seeking recoupment of amounts allegedly

paid in excess to PRTC for transit traffic between December 2002

and July 2005. The Board granted the motion.

The parties dispute whether the information provided in

PRTC's invoices was reasonably sufficient for Sprint to have

identified the alleged over billing of transit traffic.

Nevertheless, it is uncontested that Sprint did not object (in

writing or otherwise) to the invoices in question within thirty

days after PRTC mailed them and that Sprint paid the billed amounts

to PRTC. In fact, the first time Sprint objected to the transit

traffic charges in these invoices was in December 2007.

C. Decisions of the Board and the District Court

The Board issued a resolution and order on February 19,

2009, after the parties had filed cross-motions for summary

judgment.

connection with the network of the third-party carrier (both Sprint
and the third-party carrier, however, are directly connected to
PRTC's network), or because the direct connection between Sprint's
network and the third-party carrier's network is full (in which
case, the connection through PRTC's network serves as an "overflow"
route).

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 Having found that the ISP Remand Order triggered the

Agreement's change-of-law provision, the Board ruled in favor of

Sprint on the ISP Remand Order issue and granted Sprint's claim for

the application of the ISP Remand Order's rate caps as of July 19,

2002. The Board, however, closed the case without determining the

amounts that Sprint allegedly overpaid to PRTC for reciprocal

compensation and without ordering PRTC to credit Sprint for said

amounts.

On the other hand, with respect to the transit traffic

over billing dispute, the Board found, inter alia, that -- based on

its reading of Section XIII.A. of the Agreement -- the Board was

convinced "of the parties' intention to specifically limit

objections to the invoices for thirty (30) days after a bill is

mailed, a common practice in this type of agreement[]." The Board

thus dismissed Sprint's claims against PRTC for alleged excess

billing of transit traffic services.

PRTC challenged the Board's order on the ISP Remand Order

issue by filing a complaint in the district court. Sprint

responded by filing a cross-claim against the Board and a counter-

claim against PRTC challenging the Board's dismissal of Sprint's

claims against PRTC for the alleged over billing of transit

traffic. After the parties filed cross-motions for summary

judgment, the district court issued an opinion and order on March

18, 2010.

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 In its order, the district court held in favor of the

Board and Sprint on the ISP Remand Order dispute, ruling that

Sprint was entitled to the ISP Remand Order rate caps beginning on

July 19, 2002, i.e, the date PRTC offered Centennial the ISP Remand

Order rates. In addition, the district court granted Sprint's

request that the case be remanded to the Board for a determination

of the amounts due by PRTC to Sprint as a result of its decision.

Also, with respect to Sprint's claims against PRTC on account of

the latter's alleged over billing of transit traffic, the district

court again agreed with the Board and dismissed Sprint's claims.11

This appeal ensued.

III. Appellate Jurisdiction

Because federal courts must always be vigilant of their

jurisdiction, we begin by analyzing whether we have subject matter

jurisdiction over the underlying disputes.

A "district court has jurisdiction if 'the right of the

petitioners to recover under their complaint will be sustained if

the Constitution and laws of the United States are given one

construction and will be defeated if they are given another,'

unless the claim 'clearly appears to be immaterial and made solely

for the purpose of obtaining jurisdiction or where such a claim is

11
Specifically, the district court assumed, without deciding, that
PRTC's invoices over billed Sprint for transit traffic services
between December 2002 and July 2005 and agreed with the Board that
Sprint had waived its right to dispute such invoices, pursuant to
Section XIII.A. of the Agreement.

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wholly insubstantial and frivolous.'" Verizon Md., Inc. v. Pub.

Serv. Comm'n of Md. ["Verizon Md. I"], 535 U.S. 635, 643 (2002)

(quoting Steel Co. v. Citizens for Better Env't, 523 U.S. 83, 89

(1998)).

There are two types of actions that fall under the rubric

of federal question jurisdiction for purposes of 28 U.S.C. § 1331.

"The first (and most familiar) category involves direct federal

questions; that is, suits in which the plaintiff pleads a cause of

action that has its roots in federal law (say, a claim premised on

the United States Constitution or on a federal statute)." R.I.

Fishermen's Alliance, Inc. v. R.I. Dep't of Envtl. Mgmt., 585 F.3d

42, 48 (1st Cir. 2009) (citing Am. Well Works Co. v. Layne & Bowler

Co., 241 U.S. 257, 260 (1916) (Holmes, J.)). "The second (and far

more rare) category involves embedded federal questions; that is,

suits in which the plaintiff pleads a state-law cause of action,

but that cause of action 'necessarily raise[s] a stated federal

issue, actually disputed and substantial, which a federal forum may

entertain without disturbing any congressionally approved balance

of federal and state judicial responsibilities.'" Id. (alteration

in original) (quoting Grable & Sons Metal Prods., Inc. v. Darue

Eng'g & Mfg., 545 U.S. 308, 314 (2005)).

PRTC's complaint (filed in the district court) asserted

two counts. The first count ("Count 1") alleged that the Board's

order violated the ISP Remand Order, a federal ruling promulgated

-21-
under the 1996 Act, because it applied the ISP Remand Order

Compensation Regime to a situation where the FCC did not intend for

it to apply. The second count ("Count 2"), however, asserted a

contract enforcement action alleging that the Board misinterpreted

the Agreement insofar as it found that the ISP Remand Order

triggered the Agreement's change-of-law provision, and consequently

wrongfully applied the ISP Remand Order's provisions to the

parties' dispute.

The parties (including the Board) unanimously aver that

the district court had federal question jurisdiction over Count 1

under 28 U.S.C. § 1331 because this count asserts a violation of

federal law, and had supplemental jurisdiction under 28

U.S.C. § 1367 over the remaining claims, namely, (1) Count 2 of

PRTC's complaint and (2) Sprint's claims for recoupment of amounts

allegedly billed in excess by PRTC concerning transit traffic.12

As explained below, we agree. Thus, we express no opinion as to

whether federal question jurisdiction under 28 U.S.C. § 1331 is

proper over Count 2, which arguably may be construed as a state law

12
All parties (including the Board) unanimously asserted that the
district court had supplemental jurisdiction under 28 U.S.C. § 1367
over Count 2 of PRTC's complaint and Sprint's transit traffic over-
billing claim. Unlike the Board, however, PRTC and Sprint also
asserted that the district court had subject matter jurisdiction
over Count 2 under both 28 U.S.C. § 1331 (federal question) and 47
U.S.C. § 252(e)(6).

-22-
contract enforcement action13 with embedded questions of federal law

concerning the application of the ISP Remand Order.14 Similarly,

we issue no opinion as to whether 47 U.S.C. § 252(e)(6) granted

authority to the district court for reviewing the Board's

interpretation and enforcement of the Agreement. Verizon Md. I,

535 U.S. at 642 (expressly declining to decide whether 47 U.S.C.

§ 252(e)(6) can be so construed).

Our decision that the district court had federal question

jurisdiction over Count 1 is compelled by Verizon Md. I, where the

Supreme Court held that federal courts have jurisdiction under 28

13
See Global NAPs Cal., Inc. v. PUC of Cal., 624 F.3d 1225, 1228
(9th Cir. 2010) ("Although federal law requires LECs to execute
interconnection agreements, the contracts themselves are creatures
of state law." (citing Ill. Bell Tel. Co. v. Global NAPs Ill.,
Inc., 551 F.3d 587, 591 (7th Cir. 2008); Verizon Cal., Inc., 462
F.3d at 1152)).
14
See R.I. Fishermen's Alliance, Inc., 585 F.3d at 48 (noting that
federal question jurisdiction under 28 U.S.C. § 1331 is proper
where "the plaintiff pleads a state-law cause of action, but that
cause of action 'necessarily raise[s] a stated federal issue,
actually disputed and substantial, which a federal forum may
entertain without disturbing any congressionally approved balance
of federal and state judicial responsibilities.'" (alteration in
original) (quoting Grable & Sons Metal Prods., Inc., 545 U.S. at
314)); see also Verizon Md., Inc. v. Global Naps ["Verizon Md.
II"], 377 F.3d 355, 366 (4th Cir. 2004) (concluding that although
not "every dispute about a term in an interconnection agreement
belongs in federal court," federal question jurisdiction is proper
"when the contractual dispute... involves one of the 1996 Act's
essential duties"); BellSouth Telecomms., Inc. v. MCImetro Access
Transmission Serv., Inc., 317 F.3d 1270, 1278 (11th Cir. 2003) (en
banc) (concluding that "the Georgia Public Service Commission had
the authority to interpret and enforce the interconnection
agreements that it had approved in the first instance and the
federal district court had jurisdiction over th[e] case pursuant to
28 U.S.C. § 1331").

-23-
U.S.C. § 1331 over a claim alleging that a state commission's

order, which mandated reciprocal compensation between two carriers

in accordance with the terms of their interconnection agreement,

violated the 1996 Act and a federal ruling. Verizon Md. I, 535

U.S. at 642.

Similar to Verizon Md. I, Count 1 avers a direct

violation of federal law by alleging that the Board's order

violated an FCC ruling, in this case the ISP Remand Order. As

explained below, although it is unclear whether this claim

ultimately has merit, we find that the district court properly

exercised jurisdiction over it.

The ISP Remand Order expressly states that its interim

compensation scheme "applies as carriers renegotiate expired or

expiring agreements" and "does not alter existing contractual

obligations, except to the extent that parties are entitled to

invoke contractual change-of-law provisions." ISP Remand Order, 16

FCC Rcd. at 9189 ¶ 82 . Based on these provisions, it is clear

that a failure to apply the ISP Remand Order Compensation Regime in

situations where such regime applies by its own terms would violate

federal law. It is not so clear, however, whether applying the ISP

Remand Order Compensation Regime in other situations -- e.g.,

applying it to an existing interconnection agreement where the

applicable contractual change-of-law provision is not triggered by

the ISP Remand Order -- would constitute a violation of the ISP

-24-
Remand Order, as PRTC alleges, or only a breach of the existing

interconnection agreement. Nevertheless, for jurisdictional

purposes, the question is not whether PRTC's claim under Count 1

would ultimately succeed on the merits, but rather whether "the

claim clearly appears to be immaterial and made solely for the

purpose of obtaining jurisdiction or [whether] such a claim is

wholly insubstantial and frivolous." Verizon Md. I, 535 U.S. at

643 (internal quotations omitted). Because we find that PRTC's

claim under Count 1 -- that the Board's order violates federal law

-- was not "immaterial and made solely for the purpose of obtaining

jurisdiction" or "wholly insubstantial and frivolous," we find that

the district court had federal question jurisdiction over it. Id.

Having found that the district court had federal question

jurisdiction over PRTC's claim in Count 1, we conclude that the

district court had at least supplemental jurisdiction under 28

U.S.C. § 1367 over the remaining claims (i.e., Count 2 of PRTC's

complaint and Sprint's transit traffic over billing claim). See

GNAPs VI, 603 F.3d at 85 (finding that a defendant's counterclaim

was more than sufficiently related to the plaintiff's complaint for

purposes of supplemental jurisdiction where "[b]oth parties' claims

ultimately [arose] from a dispute over the same agreement and

involve[d] the same basic factual question: what fees the carriers

owe[d] each other"). We have jurisdiction to hear this appeal

under 28 U.S.C. § 1291.

-25-
 Furthermore, although we find that the district court had

federal question jurisdiction over PRTC's claim in Count 1, it is

unnecessary for us to resolve on appeal the merits of this claim

because, as explained below, we conclude that PRTC prevails on its

claim under Count 2 and thus the district court's grant of summary

judgment in favor of Sprint and the Board must be reversed insofar

as it found that the ISP Remand Order triggered the Agreement's

change-of-law provision. Accordingly, with respect to the dispute

over the compensation rates for ISP-bound traffic, our analysis

will focus on Count 2, which alleged that the Board misinterpreted

the terms of the Agreement's change-of-law provision, and

consequently wrongfully applied the ISP Remand Order Compensation

Regime to the Agreement.

IV. Standard of Review

"Where as here judicial review is based on the agency

record, we apply to the agency ordinary review standards, accepting

the district court decision merely as it may be persuasive."

Centennial P.R. License Corp., 634 F.3d at 26.

Accordingly, we review de novo the Board's

interpretations of federal and state law. Id. In addition,

although it is customary where any doubt exists to give some

deference to the agency charged with administering a statute, id.,

we give no deference to the Board's interpretation of the 1996 Act

because it is the FCC -- and not the individual state commissions

-26-
-- that has the authority to administer the 1996 Act through the

formulation of policy, rulemaking, and regulation. GNAPs III, 444

F.3d at 70 n.10 (quoting GNAPs I, 396 F.3d at 23 n.7). On the

other hand, the Board's interpretation of an interconnection

agreement that has been approved by it under the dual-regulation

scheme adopted by the 1996 Act, see 47 U.S.C. 252(e)(1), is

generally entitled to some deference. See GNAPs V, 505 F.3d at 47

(citing Boston Ed-ison Co. v. FERC, 441 F.3d 10, 12-13 (1st Cir.

2006)). Moreover, although we have not perfectly calibrated the

weight to be accorded to such interpretation, we note that if such

interpretation is reasonable then "at the very least close calls

tend to go its way." Boston Edison Co., 441 F.3d at 13 (citing

Sierra Club v. Larson, 2 F.3d 462, 468-69 (1st Cir. 1993)).

On the other hand, where no error of law exists, we

review the state agency's other determinations under the arbitrary

and capricious standard. Centennial P.R. License Corp., 634 F.3d

at 27 (quoting GNAPs I, 396 F.3d at 24 n.8).

V. Discussion

We turn now to the merits of this appeal, which involves

two distinct disputes concerning intercarrier compensation under

the Agreement, namely, (1) the dispute over whether the ISP Remand

Order triggered the Agreement's change-of-law provision, and

(2) the dispute over whether Sprint may recoup amounts allegedly

-27-
over billed by PRTC between December 2002 and July 2005 involving

transit traffic. We address these disputes in order.

A. Dispute over whether the ISP Remand Order altered the Agreement

The Board concluded in its order that the ISP Remand

Order triggered the Agreement's change-of-law provision and that,

in accordance with the ISP Remand Order, the Agreement was

"altered" at the moment PRTC offered the ISP Remand Order's rate

caps to Centennial. For the reasons stated below, the Board's

order misinterprets the Agreement and illustrates a

misunderstanding as to the operation of the ISP Remand Order

Compensation Regime (particularly, its mirroring rule).

Accordingly, we reverse the district court's grant of summary

judgment on this issue and remand for further proceedings.

As previously mentioned, the ISP Remand Order establishes

that the ISP Remand Order Compensation Regime "applies as carriers

renegotiate expired or expiring interconnection agreements" and

"does not alter existing contractual obligations, except to the

extent that parties are entitled to invoke contractual change-of-

law provisions." ISP Remand Order, 16 FCC Rcd. at 9189 ¶ 82

(emphasis added). Thus, to avoid upsetting contractual

expectations, the FCC expressly stated that the ISP Remand Order

Compensation Regime did not apply to or alter interconnection

agreements that existed as of the date such regime became effective

(i.e., June 14, 2001). Rather, in the context of then existing

-28-
agreements, the ISP Remand Order Compensation Regime only applied

if the respective parties had voluntarily agreed that their

contract would incorporate such a change of law of voluntary

application.

In the present case, Sprint has never alleged that the

Agreement was an "expired or expiring agreement" at some point

prior to August 2005 and consequently that the ISP Remand Order

Compensation Regime applied to the parties prior to August 2005 as

a matter of law. Neither did the Board address such a possibility

in its order. Rather, the issue properly before us in this appeal

is whether the ISP Remand Order Compensation Regime triggered the

Agreement's change-of-law provision. The resolution of this

question requires that we interpret the applicable terms of the

Agreement.

All parties assert that Section I.E. of the Agreement

sets forth the Agreement's change-of-law provision. This section

establishes as follows:

The parties agree that if 1) a regulatory
agency or court having jurisdiction finds that
the terms of this Agreement are inconsistent
in one or more material respects with
applicable federal or state law or any of its
respective decisions, rules or regulations, or
2) a regulatory agency or court having
jurisdiction alters or preempts the effect of
this Agreement, then in the event of the
occurrence of 1) or 2), which occurrence is
final and no longer subject to administrative
or judicial review, the parties shall
immediately commence good faith negotiations
to conform this Agreement with any such

-29-
 decision, rule, regulation or preemption. The
revised agreement shall have an effective date
that coincides with the effective date of the
original federal or state action giving rise
to such negotiations. The parties agree that
except as provided herein the rates, terms and
conditions of any new agreement shall not be
applied retroactively to any period prior to
such effective date.

(Emphasis added). Sprint alleged, and the Board found, that the

ISP Remand Order triggered alternative "2" in the provision cited

above. No party has argued that the ISP Remand Order triggered

alternative "1." Thus, we also focus our analysis on alternative

"2."

Section XXI of the Agreement establishes that the

Agreement's construction, interpretation and performance shall be

governed by and construed in accordance with the laws of the

Commonwealth of Puerto Rico. Accordingly, we are guided by the

following principles for purposes of construing the Agreement's

terms.

Articles 1233 through 1241 of the Puerto Rico Civil Code

(the "Civil Code") govern contract interpretation under Puerto Rico

law. See P.R. Laws Ann. tit. 31, §§ 3471-3479. As a basic rule

of interpretation, Article 1233 establishes that "[i]f the terms of

a contract are clear and leave no doubt as to the intentions of the

contracting parties, the literal sense of its stipulations shall be

observed." P.R. Laws Ann. tit. 31, § 3471; see also Unisys Puerto

Rico, Inc. v. Ramallo Bros. Printing, Inc., 1991 WL 735351, 128

-30-
P.R. Dec. 842, 852 (1991) ("When the terms of a contract, its

conditions and exclusions, are clear and specific, and leave no

room for ambiguity or for diverse interpretations, they should be

thus applied") (citations omitted). However, Article 1233 also

establishes that if the contract language "should appear contrary

to the evident intention of the contracting parties, the intention

shall prevail." P.R. Laws Ann. tit. 31, § 3471; see also Marcial

v. Tome, 1997 P.R.-Eng. 871,183, 144 P.R. Dec. 522, 536 (1997)

(noting that although the Puerto Rico Supreme Court ordinarily

"presupposes that the statements expressly set forth in the text of

the contract constitute the will of the contracting parties" the

Court will not hesitate to "thoroughly examine the true intent of

the parties" whenever the Court has doubts as to such intent).

Thus, determining the real and common intent of the contracting

parties is the fundamental criteria for contract interpretation

under Puerto Rico law. See Marcial, 1997 P.R.-Eng. 871,183, 144

P.R. Dec. at 537 ("Although the starting point of contract

interpretation must be the expressions contained in the words, the

trier cannot stop at the literal sense, but must fundamentally

investigate the intent of the parties and the spirit and purpose of

the transaction, as they are inferred from the overall conduct of

the interested parties and from the concurring circumstances that

may contribute to an adequate investigation of the will of the

executing parties."). In determining "the intention of the

-31-
contracting parties, attention must principally be paid to their

acts, contemporaneous and subsequent to the contract." P.R. Laws

Ann. tit. 31, § 3472; see also Marcial, 1997 P.R.-Eng. 871,183, 144

P.R. Dec. at 537-38. In addition, "[i]n determining the intent of

the contracting parties it is important to take into consideration

who the contracting parties are, as well as their experience and

expertise with the subject matter of the contract." Unisys Puerto

Rico, Inc. v. Ramallo Bros. Printing, Inc., 1991 WL 735351 (P.R.),

128 D.P.R. 842, 853 (1991); see also P.R. Laws Ann. tit. 31,

§ 3471.

Our review of the Board's determination -- that the ISP

Remand Order triggered the Agreement's change-of-law provision and

that the application of such FCC ruling caused the Agreement's

reciprocal compensation rates to be altered as of the date PRTC

first offered said order's rate caps to a competitor -- requires

the following analytical framework. First, it is necessary to

determine whether the ISP Remand Order in fact triggered the

Agreement's change-of-law provision. If we find that it did not,

then that ends our inquiry and the Board's order cannot stand. On

the other hand, if we were to find that the ISP Remand Order indeed

triggered the Agreement's change-of-law provision, then we would

turn to the second question, which would require that we determine

the effect of applying the ISP Remand Order Compensation Regime to

the Agreement (e.g., examining whether the Board correctly found

-32-
that the effect of applying the ISP Remand Order Compensation

Regime to the Agreement was to alter the Agreement's reciprocal

compensation rates as of the date PRTC offered the ISP Remand

Order's rate caps to Centennial). As further explained below, our

analysis of the first question indicates that the Board erred in

finding that the ISP Remand Order triggered the Agreement's change-

of-law provision. We therefore need not address the second

question.

The Agreement's change-of-law provision established a

general rule that all revisions made to the Agreement would be

effective as of the date in which the Agreement was revised by the

parties. See Section I.E. of Agreement ("The parties agree that

except as provided herein the rates, terms and conditions of any

new agreement shall not be applied retroactively to any period

prior to [the] effective date [of the revised agreement].").

However, said provision established two specific exceptions to this

general rule. If a change of law falls within one of these two

exceptions, then the effective date of an Agreement revision --

that incorporates such a change of law -- shall coincide with the

effective date of the federal or state action that caused the

Agreement to be revised.

The exception at issue in this case is the second

("Exception Two"), which is triggered "if . . . a regulatory

agency . . . alters or preempts the effect of th[e] Agreement."

-33-
(Emphasis added). A natural reading of this language indicates

that it is only triggered where a regulatory agency itself as a

matter of law alters or preempts the effect of the Agreement.

Contrary to Sprint's arguments, it is unreasonable to construe this

language as referring to a situation where PRTC and Sprint decide

to alter the Agreement in light of a change of law (by a regulatory

agency) whose application is voluntary. In such case, the

regulatory agency would have changed the law, but it would not have

"alter[ed] or preempt[ed] the effect of th[e] Agreement," as

Exception Two expressly requires. Rather, assuming that PRTC and

Sprint decide to voluntarily adopt such a change of law of

voluntary application, it would be PRTC and Sprint who would

"alter[] or preempt[] the effect of th[e] Agreement" and not the

regulatory agency, as expressly required by Exception Two.

Furthermore, Sprint's unreasonably broad interpretation

of Exception Two threatens to turn the exception into the general

rule by causing practically all revisions made by the parties to

the Agreement (incorporating a change of law) to have an effective

date that coincides with the effective date of the federal action

giving rise to the change of law. If Sprint intended this result,

as it now avers, then the Agreement's change-of-law provision

should have simply stated that Exception Two was triggered "if a

regulatory agency changes the law, regardless of whether it alters

or preempts the effect of the Agreement." The clear language of

-34-
the Agreement that was actually entered into by Sprint and PRTC,

however, does not support such interpretation.

Thus, the terms of the Agreement's change-of-law

provision are clear and leave no doubt as to the parties'

intentions that only those changes of law which by their own force

alter or preempt the effect of the Agreement will trigger Exception

Two. We therefore disagree with the district court's finding to

the contrary.

The ISP Remand Order Compensation Regime, however, was

not the type of change of law that altered or preempted -- by its

own force -- PRTC and Sprint's Agreement. To the contrary, the FCC

made expressly clear that this interim compensation regime "does

not alter existing contractual obligations, except to the extent

that parties are entitled to invoke contractual change-of-law

provisions." ISP Remand Order, 16 FCC Rcd. at 9189 ¶ 82 (emphasis

added). Thus, the ISP Remand Order Compensation Regime only

altered interconnection agreements -- which existed at the time

such regime became effective -- if the contracting parties had

voluntarily agreed that their agreements would be thus altered.

As previously mentioned, however, the Agreement's change-

of-law provision clearly expressed the parties' common intention

that Exception Two would not be triggered by a change of law that

did not by its own force alter or preempt the Agreement and whose

application to the Agreement was subject to the parties' common

-35-
intent. It is therefore necessary to conclude that the ISP Remand

Order Compensation Regime did not trigger Exception Two of the

Agreement's change-of-law provision. As a result, the ISP Remand

Order Compensation Regime applied to PRTC and Sprint as they re-

negotiated intercarrier compensation for a revised agreement and

not prior to such time.

The Board found, however, that the language of the

Agreement's Section III.A.2. ("Section III.A.2."), which governed

the intercarrier compensation for ISP-bound traffic under the

Agreement, provided further support for its conclusion that the ISP

Remand Order triggered alternative "2" of the Agreement's change-

of-law provision. This section states as follows:

Until the FCC establishes a means of
determining the amount of intercarrier
compensation for ISP-bound traffic,
compensation for such traffic shall be based
upon a division of revenues as follows:
compensation for traffic delivered to an ISP
shall be paid by the carrier whose customer
originates the call in the amount of 50% of
the amount billed by the originating carrier.
Any amount billed by the terminating carrier
to the ISP for delivery of such traffic shall
be credited against such payments by the
originating carrier and the net amount
remaining shall be paid by the originating
carrier.

In construing the import of this language, the Board

opined as follows: "Said language leads us to conclude the parties

were aware and in anticipation of a forthcoming FCC action that

could alter the rates adopted in the [Agreement]." We more or less

-36-
agree with this general proposition, given that, as the

aforementioned regulatory background illustrates, the Agreement was

signed on a date (i.e., June 26, 2000) when the FCC was

reconsidering on remand its ruling in the ISP Order No. 1. Thus,

it is expected for PRTC and Sprint to have anticipated a

forthcoming FCC action that could change the law in this area. We,

however, do not agree with the analytical leap made by the Board.

That is, we do not agree with the Board's apparent proposition that

the parties' anticipation of an FCC action in this area necessarily

entails that PRTC and Sprint agreed for any FCC action to have

altered their Agreement effective as of the date of the FCC's

action, and not as of the date in which such a change of law was

incorporated by the parties into a revised agreement.

Significantly, Section III.A.2. is silent with respect to

whether an FCC action in this area would necessarily alter the

Agreement and, more importantly, the effective date for such

purported alteration. Nowhere does Section III.A.2. say that an

FCC action such as the ISP Remand Order -- which did not by its own

force alter or preempt the then existing Agreement -- would

necessarily alter the Agreement as of the date of the FCC's action.

Rather, Section III.A.2. merely appears to open up the possibility

for negotiation on the issue of compensation for ISP-bound traffic

by establishing a conditional intercarrier compensation scheme that

would apply until the FCC established a means of determining

-37-
intercarrier compensation for ISP-bound traffic. These matters,

however, are expressly covered by the Agreement's change-of-law

provision, which established that -- except for changes of law that

by their own force alter or preempt the Agreement -- no changes of

law would be applied by PRTC and Sprint effective as of a date

prior to the date in which they consented to a revised agreement

implementing such changes of law. Thus, Section III.A.2. does not

support the Board's determination that the ISP Remand Order

Compensation Regime triggered Exception Two of the Agreement's

change-of-law provision.15

Notably, the Board's lead argument in this appeal was not

based on the grounds upon which its order rested (i.e., that the

ISP Remand Order Compensation Regime triggered the Agreement's

change-of-law provision).16 Rather, on appeal the Board argues for

15
It could have been argued that a possible interpretation of the
Agreement's text is to construe Section III.A.2. as a conditional
obligation that worked in the alternative by first mandating
compensation under the terms set forth therein and then, after the
FCC's action, implicitly mandating compensation under the
compensation scheme established by the FCC. Notably, under this
construction, the ISP Remand Order Compensation Regime would have
applied to the Agreement by operation of Section III.A.2. alone
without the need to alter the terms of the Agreement.
Nevertheless, no party in this case has advanced this
interpretation of Section III.A.2. and we are hesitant to consider
an interpretation of the Agreement that was not advanced by any
party, all of which have argued that the Agreement's terms required
alteration for the ISP Remand Order Compensation Regime to be
implemented. Thus, we do not consider the merits of this possible
argument here.
16
The argument that the ISP Remand Order Compensation Regime
triggered alternative "2" in the Agreement's change-of-law

-38-
the first time that PRTC should have offered the ISP Remand Order

Compensation Regime's rate caps in 2002 when PRTC and Sprint agreed

to multiple extensions of the Agreement, all of which were approved

by the Board pursuant to 47 U.S.C. § 252(e)(1). The Board thus

apparently suggests that the Agreement was an "expired or expiring

agreement" -- within the meaning of the ISP Remand Order -- at the

time that PRTC and Sprint negotiated the extensions of the

Agreement in 2002, and consequently that the ISP Remand Order

Compensation Regime applied to such negotiations as a matter of

law. See ISP Remand Order, 16 FCC Rcd. at 9189 ¶ 82 (establishing

that the ISP Remand Order Compensation Regime "applies as carriers

renegotiate expired or expiring interconnection agreements"). We

note that Sprint has never made this argument, the Board's order

did not rest on this ground or even address it, and the record is

not developed on this issue. Thus, we decline to consider this new

argument for purposes of this appeal. Moreover, the Board cannot

now defend its order based on this new argument, which leads to a

different result in terms of the date as of which the ISP Remand

Order Compensation Regime may have applied to PRTC and Sprint.

Thus, the Board's order on this dispute cannot stand and we remand

this case. We clarify, however, that we express no opinion as to

the merits of this new argument now brought by the Board.

Similarly, we issue no opinion as to whether Sprint is precluded

provision was presented by the Board in the alternative.

-39-
(through estoppel or otherwise) from claiming on remand that the

ISP Remand Order Compensation Regime applied as a matter of law at

the various times in which the Agreement was extended by PRTC and

Sprint after June 14, 2001 (i.e., the ISP Remand Order Compensation

Regime's effective date) because the Agreement was considered at

such times an "expired or expiring agreement" within the meaning of

the ISP Remand Order.

In sum, we conclude that the Board erred in finding that

the "ISP Remand Order triggered the [Agreement's] change of law

provision from the time PRTC opted to terminate that traffic with

another carrier at the rates adopted in the Order."17 We therefore

17
We find it useful to clarify that, even if the Board had been
correct in finding that the ISP Remand Order Compensation Regime
triggered Exception Two of the Agreement's change-of-law provision,
the Board nevertheless erred in finding that the Agreement was
first altered on July 19, 2002 when PRTC offered the FCC rate caps
to another carrier, namely, Centennial. Such a determination
ignored the application of the mirroring rule during the period
from June 14, 2001 (when the ISP Remand Order Compensation Regime
became effective) through July 18, 2002. As previously mentioned,
the mirroring rule "ensures that incumbent LECs will pay the same
rates for ISP-bound traffic that they receive for section 251(b)(5)
traffic." Id. at 9194 ¶ 89. Thus, because the Agreement
established different rates for the reciprocal compensation of
section 251(b)(5) traffic (e.g., voice traffic) as compared to the
rates for intercarrier compensation of ISP-bound traffic, a
determination that the ISP Remand Order Compensation Regime
triggered the Agreement's change-of-law provision would have
altered the Agreement such that at least these rates were made
equal as of the date the ISP Remand Order Compensation Regime
became effective (i.e., June 14, 2001), even if PRTC opted not to
offer the FCC's rate caps as of such date and the parties paid
reciprocal compensation at the rates set forth in the Agreement's
price schedule. Thus, if the Board had been correct in finding
that the ISP Remand Order Compensation Regime triggered the
Agreement's change-of-law provision, the Agreement would have been

-40-
reverse the district court's grant of summary judgment on this

issue and remand the case to the district court with instructions

that the court grant injunctive relief precluding the enforcement

of the Board's order on this issue and that the case then be

remanded to the Board for further proceedings consistent with this

opinion.

B. Dispute over alleged excess billing for transit traffic

This appeal also presents a dispute between PRTC and

Sprint as to whether PRTC's reciprocal compensation invoices for

the period from December 2002 through July 2005 billed Sprint for

transit traffic services at rates that were in excess of the

amounts established in the Agreement, and whether Sprint may

recover such amounts. The Board found and the district court

agreed that, even if PRTC over billed Sprint for transit traffic,

Sprint waived its right to challenge PRTC's invoices, pursuant to

Section XIII.A. of the Agreement (the "Waiver Provision"). Sprint

challenges this determination on appeal through various arguments.

For the reasons stated below, we agree with the Board's

determination and affirm the district court's grant of summary

judgment dismissing Sprint's claims for the recoupment of amounts

allegedly over billed by PRTC concerning transit traffic.

first altered effective June 14, 2001 to comport with the mirroring
rule.

-41-
 Section III.B.4. of the Agreement establishes that the

parties must reciprocally compensate each other for transit traffic

services in accordance with Section III.A., which in turn makes

reference to a price schedule attached to the Agreement. On the

other hand, Section XIII.A. of the Agreement, which governs the

payment of charges billed under the Agreement, requires that any

objection to reciprocal compensation charges must be made in

writing and received by the billing party within thirty days from

the date the billing party mailed the corresponding invoice.

Specifically, the Waiver Provision establishes as follows:

Each party is responsible for payment of all
charges for completed calls, services and
equipment chargeable to that party under the
terms hereof. If objection in writing is not
received by the billing party within (30) days
after a bill is mailed, the account shall be
deemed correct and binding upon the billed
entity.

Thus, under the Waiver Provision, a billed party's

failure to object to the billing party's invoice within thirty days

will cause the invoice to be "deemed correct" and be "binding upon

the billed party." Although the Agreement does not define the

words "deem" and "binding," these words are of common legal usage

and are defined in legal dictionaries. For example, Black's Law

Dictionary defines the word "deem" as follows: "To treat

(something) as if (1) it were really something else, or (2) it has

qualities that it does not have." Black's Law Dictionary 477-78

(9th ed. 2009) (noting that the word "deem" "has been traditionally

-42-
considered to be a useful word when it is necessary to establish a

legal fiction either positively by 'deeming' something to be what

it is not or negatively by 'deeming' something not to be what it

is" (quoting G.C. Thornton, Legislative Drafting 99 (4th ed.

1996))). Moreover, the word "binding" has been defined as "having

legal force." Black's Law Dictionary 190 (9th ed. 2009). Thus,

the text of the Waiver Provision clearly manifests PRTC and

Sprint's common intentions that a billed party's failure to object

in writing to an invoice during the specified time shall cause the

invoice (1) to be treated by the parties as if it were correct,

even if it was not, and (2) to have legal force between the

parties. Accordingly, under the terms of the Waiver Provision, a

billed party's failure to object to an invoice in accordance with

the procedures set forth in such provision constitutes a waiver of

that party's right to challenge the invoice.

Sprint, however, alleges that the Waiver Provision is

ambiguous because it conflicts with other provisions of the

Agreement, namely, the first sentence of Section XIII.A. and

Section XVII. As explained below, these arguments are unavailing.

The first sentence of Section XIII.A. states that "[e]ach

party is responsible for payment of all charges for completed

calls, services and equipment chargeable to that party under the

terms hereof." (Emphasis added). Sprint contends that the Waiver

Provision only applies insofar as the charges on an invoice are

-43-
"chargeable" under the terms of the Agreement, and because PRTC's

invoices for transit traffic were not, Sprint maintains that it has

not waived its right to challenge them. In other words, Sprint

argues that the Waiver Provision only applies insofar as the

invoice is correct. This argument is without merit and renders the

Waiver Provision a nullity. As previously mentioned, the Waiver

Provision's use of the term "deem" clearly suggests that the

provision is specifically intended to apply in cases where the

billed amounts were not properly chargeable under the terms of the

Agreement. Furthermore, interpreting the Waiver Provision as only

restricting the right of a billed party to challenge a correct and

properly chargeable invoice, as Sprint suggests, would render such

provision practically meaningless. We thus decline to adopt such

interpretation. See P.R. Laws Ann. tit. 31, § 3474 ("If any

stipulation of a contract should admit of different meanings, it

should be understood in the sense most suitable to give it

effect.").

In addition, Sprint argues that the Waiver Provision is

trumped or at least made ambiguous by the Agreement's Section XVII

(the "General Anti-Waiver Provision"), which is titled "No Waiver"

and establishes that "[a] failure or delay of either Party to

enforce any provision of this Agreement, to exercise any option

that is herein provided, or to require the performance of any

provision hereof shall in no way be construed to be a waiver of

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such provision or option." This argument also misses the mark. It

is a well-known precept for the interpretation of contracts that

specific provisions in a contract trump the general provisions.

Moreover, interpreting the General Anti-Waiver Provision as

negating the Waiver Provision, as Sprint suggests, would completely

nullify the latter. The same is not true, however, if we interpret

the Waiver Provision -- which expressly only applies in the context

of objections to billed charges -- as controlling over the General

Anti-Waiver Provision, which would still have applicability in

other contexts and would not be nullified. We therefore choose the

interpretation that gives effect to both of these provisions and

construe the Waiver Provision as controlling over the General Anti-

Waiver Provision. See P.R. Laws Ann. tit. 31, § 3474. Sprint's

argument thus fails.

Sprint's next argument is that it could not have waived

its right to challenge PRTC's invoices under the Waiver Provision

because PRTC's invoices did not provide sufficient information for

Sprint to have properly audited them. In essence, Sprint maintains

that, under the terms of the Agreement, the Waiver Provision's

thirty-day term for raising billing disputes is tolled until the

billing party provides sufficient information that would enable the

billed party to detect any errors in the billing. Sprint's

contention, however, has no basis in the Agreement, which included

no such exception to the operation of the Waiver Provision.

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Furthermore, Sprint points us to no evidence suggesting that the

parties commonly intended to include such an exception in the

Waiver Provision. Accordingly, we decline to read such an

exception into the Waiver Provision and conclude that Sprint's

argument is without merit. It is undisputed that Sprint was aware

of its obligation under the Agreement to compensate PRTC for the

latter's services involving transit traffic and that PRTC's

invoices charged Sprint for such services. If Sprint found that

the information provided in PRTC's invoices was insufficient for a

proper audit within the period specified by the Waiver Provision,

then Sprint was required under the terms of the Agreement to have

objected to such invoices during such period.

Sprint next avers that applying the Waiver Provision in

the present case -- to the effect that PRTC is relieved from

returning excess transit traffic charges -- would constitute a

violation of (1) the unjust enrichment doctrine and (2) Article

1795 of the Civil Code, P.R. Laws Ann. tit. 31, § 5121, which

establishes that "[i]f a thing is received when there was no right

to claim it and which, through an error, has been unduly delivered,

there arises an obligation to restore the same." This argument

does not hold water.

First, it is well-settled under Puerto Rico law that the

undue enrichment doctrine is not applicable where, as here, there

is a legal precept (e.g., a binding agreement) that excludes the

-46-
application of such doctrine. See Hatton v. Municipality of

Ponce, 1994 P.R.-Eng. 909,605, 134 P.R. Dec. 1001, 1010 (1994)

(noting that the requirements for the application of the unjust

enrichment doctrine are as follows: "1) existence of enrichment; 2)

a correlative loss; 3) nexus between loss and enrichment; 4) lack

of cause for enrichment; and 5) absence of a legal precept

excluding application of enrichment without cause") (emphasis

added) (citing Ortiz-Andujar v. Commonwealth, 22 P.R. Offic. Trans.

774, 122 P.R. Dec. 817, 823 (1988)). Thus, under Puerto Rico law,

the doctrine of unjust enrichment does not apply where, as here,

there is a contract that governs the dispute at issue. See

Westernbank Puerto Rico v. Kachkar, No. 07-1606, 2009 U.S. Dist.

LEXIS 126405, at *100, 2009 WL 6337949, at *29 (D.P.R. Dec. 10,

2009) (quoting Garriga, Hijo, Inc. v. Condominio Marbella del

Caribe, 143 P.R. Dec. 927, 934 (1997)). Sprint agreed that any

charges billed by PRTC pursuant to the Agreement and not objected

to within thirty days would be treated as if they were correct and

would bind the parties. Sprint cannot now evade compliance with

such pact by raising inapplicable equitable principles.

Second, Sprint's allegation that the Board's order

violated Article 1795 of the Civil Code similarly fails. See P.R.

Laws Ann. tit. 31, § 5121 ("Restitution of thing improperly

received"). Notably, Article 1795 is included within a chapter of

the Civil Code titled "Quasi Contracts". See P.R. Laws Ann.

-47-
tit. 31, §§ 5091-5127. This chapter is in turn included within

Part XVI, which is titled "Obligations Contracted Without

Agreement." See P.R. Laws Ann. tit. 31, §§ 5091-5150 (emphasis

added). It is clear that, similar to the unjust enrichment

doctrine, Article 1795 of the Civil Code does not apply where, as

here, there is a valid and binding agreement between the parties

that governs the dispute at issue and mandates a specific result,

i.e., that the invoices in question, which were belatedly

challenged by Sprint under the Waiver Provision, are deemed correct

and binding between PRTC and Sprint. Sprint's proposed expansive

interpretation of Article 1795 would essentially nullify any

contractual provision whereby a party waives the right to recover

amounts paid in excess under an agreement. Sprint cites to no

authority supporting such an outlandish interpretation of Article

1795 and we decline to adopt it here.

Finally, Sprint contends that the district court erred by

ignoring Sprint's allegations that PRTC acted in bad faith when it

overcharged Sprint for transit traffic. Moreover, Sprint alleges

that there was sufficient evidence in the record to support a

finding that such alleged bad faith actions by PRTC constituted

dolo (or "dolus") under the Civil Code and thus that PRTC is liable

for all damages that may clearly originate from its actions,

pursuant to Article 1060 of the Civil Code. See P.R. Laws Ann.

tit. 31, § 3024. Specifically, Sprint maintains that PRTC engaged

-48-
in bad faith by purposely over billing for transit traffic and then

concealing its actions. For the reasons stated below, we find that

these arguments are waived.

First, Sprint avers that its allegations of bad faith by

PRTC should have lead the district court to modify the terms of the

Agreement (particularly, the Waiver Provision) to avoid an

unequitable result, i.e., PRTC benefitting from its alleged bad

faith over billing. Thus, Sprint now urges that we intervene in

the contractual relationship and modify the terms of the Agreement.

In support, Sprint cites, inter alia, Utility Consulting Services,

Inc. v. Municipality of San Juan, 15 P.R. Offic. Trans. 120, 115

P.R. Dec. 88, 89-90 (1984), in which the Puerto Rico Supreme Court

exercised its power to revise an agreement where there was an

exorbitant lack of proportion in the reciprocal obligations between

the parties and the provisions were found to be so excessively

burdensome on the Municipality that they "reache[d] bad faith

proportions."

As an initial matter, we note that Utility Consulting is

not directly on point here, as that case dealt with bad faith at

the contracting stage (which resulted in excessively burdensome

contract terms) and the present case deals with alleged bad faith

during the performance of a contract whose terms are not on their

face excessively burdensome. Nevertheless, assuming arguendo that

the general principles of Utility Consulting and the other cases

-49-
cited by Sprint on this issue can somehow be construed as giving

Sprint a plausible argument for the modification of the Waiver

Provision, we do not consider the argument here because it has been

waived. See United States v. Zannino, 895 F.2d 1, 17 (1st Cir.

1990). Although Sprint did assert before the Board and the

district court that PRTC's over billing for transit traffic was

done in bad faith, Sprint never argued that the adjudicator should

have exercised its alleged power to modify the Waiver Provision.

A party is ordinarily not entitled to wait until an appeal, after

its arguments have failed, to spring newly-minted arguments based

on undeveloped references left in the record below. See McCoy v.

Mass. Inst. of Tech., 950 F.2d 13, 22 (1st Cir. 1991) ("If claims

are merely insinuated rather than actually articulated in the trial

court, we will ordinarily refuse to deem them preserved for

appellate review."). We see no reason to diverge from this rule

here and decline to consider Sprint's new argument for the

modification of the Agreement.

Second, Sprint maintains that PRTC's alleged bad faith

over billing of transit traffic constituted dolo (or "dolus") under

the Civil Code and that PRTC should be liable for all damages that

may originate from such bad faith performance of the Agreement,

pursuant to Article 1060 of the Civil Code. See P.R. Laws Ann.

tit. 31, § 3024 (establishing that a party who engages in dolo in

the performance of an obligation "shall be liable for all those

-50-
[damages] which clearly may originate from the nonfulfillment of

the obligation"). The Board and PRTC, however, contend that any

argument premised on an allegation of dolo is waived because Sprint

did not allege below that PRTC incurred in dolo. Sprint counters

by arguing that its allegations of bad faith before the Board and

the district were essentially allegations of dolo. As explained

below, although we agree with Sprint that its allegations of bad

faith may be construed as allegations of dolo, we nevertheless find

that its undeveloped dolo argument is waived.

The Puerto Rico Supreme Court has recognized that

contractual dolo is a broad term that "includes deceit, fraud,

misrepresentation, undue influence" and other insidious

machinations. Márquez v. Torres Campos, 11 P.R. Offic. Trans.

1085, 111 P.R. Dec. 854, 863-64 (1982). For example, although

there may be dolo without fraud, fraud always entails dolo. In

addition, Puerto Rico law distinguishes between contractual dolo

occurring at the contracting stage (i.e., during the formation of

the contract) and contractual dolo occurring in the course of the

performance of the contract. See Colón v. Promo Motor Imps., Inc.,

144 P.R. Dec. 659, 668 (1997) (official translation). Contractual

dolo that occurs during the formation of the contract, if deemed

serious, may give rise to the nullification of the contract. Id.

On the other hand, "contractual [dolo] that arises not at the

contracting stage, but in the course of the performance of the

-51-
contract," such as the one here alleged by Sprint, does not give

rise to the nullification of the contract. Colón, 144 P.R. Dec. at

668; see also Márquez, 11 P.R. Offic. Trans 1085, 111 P.R. Dec. at

863-64. Rather, in such cases, Article 1060 of the Civil Code

establishes that the party who engages in dolo is liable for all

damages "which clearly may originate from the nonfulfillment of the

obligation." P.R. Laws Ann. tit. 31, § 3024. This imposition of

damages (for a dolo-type performance of a contract) is broader than

that resulting from a good faith breach of contract, where, in

contrast, damages are limited to "those foreseen or which may have

been foreseen, at the time of constituting the obligation, and

which may be a necessary consequence of its nonfulfillment." Id.

Notably, the Puerto Rico Supreme Court has stated that dolo "in the

performance of obligations is equalized to bad faith." Canales v.

Pan Am., 12 P.R. Offic. Trans. 411, 112 P.R. Dec. 329, 340 (1982).

Based on the foregoing, it is reasonable to construe

Sprint's allegations that PRTC performed the Agreement in bad faith

as an assertion of dolo. Id., 12 P.R. Offic. Trans. 411, 112 P.R.

Dec. at 340. Nevertheless, Sprint's dolo argument is waived

because, even on appeal, Sprint has made no attempt at developed

argumentation. See Zannino, 895 F.2d at 17 (memorializing "settled

appellate rule that issues adverted to in a perfunctory manner,

unaccompanied by some effort at developed argumentation, are deemed

waived"). Sprint limits its discussion here to asserting that PRTC

-52-
engaged in dolo while billing for transit traffic, and thus that

PRTC is liable for all damages resulting from such nonfulfillment.

However, Sprint has made no attempt (neither before the Board, the

district court nor on appeal) to reconcile this assertion with the

Waiver Provision, under which Sprint waived its right to challenge

the invoices in question. Neither the district court nor this Court

should be expected to make the argument for Sprint. The argument

is therefore waived.

Notably, Sprint has never argued that, pursuant to

Article 1055 of the Civil Code, the Waiver Provision must be

interpreted as only a waiver of liability arising from a good-faith

breach of the Agreement and not as a waiver of liability resulting

from a dolo-type performance of the Agreement. P.R. Laws Ann. tit.

31, § 3019 ("Liability arising from [dolo] is demandable in all

obligations. The renunciation of the action to enforce it is

void."). Such argument may have been promising. See Casas Office

Machs., Inc. v. Mita Copystar Am., Inc., 961 F. Supp. 353, 358

(D.P.R. 1997) ("Article 1055 is aimed . . . at prohibiting the

parties to include in a contract an 'exclusionary clause' to

release before hand the future intentional and dolus breach of

their obligations under said contract."). However, because Sprint

has never raised it and it has not been argued by the parties, we

do not consider it at this juncture.

-53-
 Based on the above, we affirm the district court's grant

of summary judgment in favor of the Board and PRTC regarding

Sprint's claims for the recoupment of transit traffic charges

allegedly over billed by PRTC.

VI. Conclusion

Because we conclude that the Board erred in finding that

the ISP Remand Order Compensation Regime triggered the Agreement's

change-of-law provision, we reverse the district court's grant of

summary judgment on this issue. Accordingly, we remand the case to

the district court with instructions that the court grant

injunctive relief precluding the enforcement of the Board's order

on this issue and that the case then be remanded to the Board for

further proceedings consistent with this opinion. In addition, we

affirm the district court's grant of summary judgment in favor of

the Board and PRTC regarding Sprint's claims for the recoupment of

transit traffic charges allegedly billed in excess by PRTC. No

costs are awarded.

So ordered.

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