based upon an assumption that further discovery was necessary but
rather upon the Court's view that the facts and arguments relevant to the
filed rate doctrine had not been developed adequately in Covad's motion
to dismiss. The parties' current briefs address the filed rate doctrine
with extreme thoroughness. Moreover, the record now contains the
requisite proof that the
Interconnection Agreements ("IA's" that govern the parties' relationship
are filed with the appropriate regulatory body in each state in which
Verizon and Covad do business with each other. Accordingly, the Court
concludes that Covad's motion is procedurally appropriate.
C. Rule 56(f) Request
Verizon submits a document entitled "Federal Rule of Civil Procedure
56(f) Declaration of Neil M. Gorsuch." In this document, Mr. Gorsuch
lists a number of areas about which Verizon would like to take
discovery, including whether the parties intended that the IA's cover
trouble tickets that are intentionally falsified. As is discussed more
fully below, the Court concludes that the issues presented by Covad's
motion are purely legal in nature, that any such factual issues thus are
immaterial, and that the proposed discovery would not inform the Court's
analysis of Covad's motion. Accordingly, Verizon's request for
continuance pursuant to Fed.R.Civ.P. 56(f) will be denied.
D. Application of Filed Rate Doctrine
The filed rate doctrine, also referred to as the filed tariff
doctrine, requires that common carriers and their customers adhere to
tariffs filed and approved by appropriate regulatory agencies. Brown v.
MCI Worldcom Network Services, 277 F.3d 1166, 1170 (9th Cir. 2002).
Accordingly, no party may bring a judicial challenge to the validity of a
filed tariff or bring a judicial proceeding to enforce any rate other
than the rate established by the filed tariff. Id. "In sum, the
filed-rate doctrine's purpose is to ensure that the filed rates are the
exclusive source of the terms and conditions by which the common carrier
provides to its customers the services covered by the tariff." Id.
(internal citation and quotation marks omitted). Two principles underlie
the filed rate doctrine. First, the doctrine prevents carriers from
engaging in price discrimination between customers (the
non-discriminatory strand). Fax Telecommunicaciones, Inc. v. AT&T,
138 F.3d 479, 489 (2d Cir. 1998). Second, the doctrine preserves the
exclusive role of regulatory agencies in approving rates and keeping
courts, which are far less competent to perform this function, out of the
rate-making process (the nonjusticiability strand). Id. "The
nonjusticiability strand recognizes that (1) legislatively appointed
regulatory bodies have institutional competence to address rate-making
issues; (2) courts lake the competence to set . . . rates; and (3) the
interference of courts in the rate-making process would subvert the
authority of rate-setting bodies and undermine the regulatory regime."
Id. (internal citation and quotation marks omitted).
In the instant case, the tariffs at issue are contained in IA's
approved by the regulatory agencies of each state in Verizon's territory
where Covad does business. Among the rates set forth in these IA's are
the amounts Verizon may charge Covad for a "customer misdirect." A
customer misdirect occurs when Covad opens a trouble ticket notifying
Verizon of a problem with Verizon's equipment, causing Verizon to send a
repair truck to the trouble site, and the problem ultimately is found to
be with Covad's equipment rather than Verizon's. In these circumstances,
Covad is required to reimburse Verizon for the cost of dispatching the
repair truck. The IA's approved in the relevant states provide
expressly the amount of compensation Verizon may recover for each
Covad asserts that the because the IA's establish the amounts Verizon
may recover for each trouble ticket, any attempt to vary this amount is
barred by the filed rate doctrine. The Court agrees. The parties
negotiated to the penny the amount Verizon may recover for each
misdirect. The instant proceeding in effect is an effort to alter this
rate by means of state law tort claims. However, as the Supreme Court has
held, "[t]he rights as defined by the tariff cannot be varied or enlarged
by either contract or tort." American Telephone and Telegraph Co. v.
Central Office Telephone, Inc., 524 U.S. 214, 227 (1998).
Verizon asserts that the filed rate doctrine applies only to claims of
customers against carriers, not to claims of carriers such as those
presented here. While the vast majority of the cases addressing the filed
rate doctrine do involve claims of customers, the Supreme Court has made
clear that the doctrine applies equally to claims of carriers. In
Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571 (1981), a regulated
seller of natural gas ("Seller") entered into a contract under which it
provided natural gas from the Sligo Gas Field in Louisiana to Arkansas
Louisiana Gas Co. ("Arkla"). The contract contained a fixed price
schedule and a "favored nations clause" providing that if Arkla purchased
Sligo Field natural gas from another party at a rate higher than that
negotiated with Seller, Seller would be entitled to that higher rate as
well. Seller filed the Arkla contract with the appropriate regulatory
agency and obtained approval of the contract rates. Seller subsequently
filed suit against Arkla, asserting that the favored nations clause had
been triggered but that because Arkla had not informed Seller of this
fact, Seller had not filed rate increases with the regulatory agency.
Seller sought damages in an amount equal to the difference between the
price it was paid and the price it would have been paid had it filed rate
increases pursuant to the favored nations clause. The Supreme Court held
that Seller could not recover what in effect would be a retroactive
increase in the filed rate notwithstanding the fact that Arkla's
misconduct prevented Seller from filing a higher rate that likely would
have been approved. Id. at 583. The Court noted that "[i]t would
undermine the congressional scheme of uniform rate regulation to allow a
state court to award as damages a rate never filed with the Commission
and thus never found to be reasonable within the meaning of the Act.
Following that course would permit state courts to grant regulated
sellers greater relief than they could obtain from the Commission itself"
Id. at 579.
Verizon attempts to distinguish Arkansas Louisiana Gas Co. on the
ground that the carrier's claims in that case did not sound in tort.
However, the decision is couched in extremely broad language, and its
rationale appears equally applicable to tort claims. Verizon argues that
the non-discrimination rationale underlying the filed rate doctrine would
not be served by imposing the doctrine upon claims of carriers. However,
as noted earlier, an equally important policy underlying the filed rate
doctrine is the preservation of the exclusive role of regulatory agencies
in approving rates. This policy is served by application of the doctrine
to claims of carriers.
Verizon argues that even assuming that the filed rate doctrine applies
to claims of carriers, the doctrine does not apply in the instant case
because Covad's conduct falls outside the scope of the negotiated
customer misdirect rates set forth in the IA's. It points to language in
the IA's requiring Covad to isolate the cause of the trouble initially
and to issue a trouble ticket to Verizon only after confirming that
Verizon's equipment is the source of the problem. It asserts that while
it was contemplated that a small number of innocent mistakes would
occur, the parties never contemplated that there would be wholesale,
deliberate abuse of the trouble ticket system at the time they negotiated
the customer misdirect rates. Verizon contends that because Covad failed
to fulfill its initial troubleshooting responsibilities under the IA's,
the customer misdirect rates set forth in the IA's simply do not apply.
Even assuming that Verizon is correct in its assertion that the
misdirect rates set forth in the IA's do not apply in light of Covad's
conduct, the Court concludes that the filed rate doctrine nonetheless
bars Verizon's claims. Boiled down to its essence, Verizon's argument is
that it is entitled to recover a greater amount of money for each
customer misdirect arising out of Covad's alleged scheme than is provided
for in the IA's. Verizon characterizes this greater amount of money as
"damages, " but in effect it is seeking an increased rate for deliberate
as opposed to accidental misdirects.
The IA's do not address deliberate misdirects specifically, and none of
the cases cited by the parties addresses an analogous factual situation.
However, all of the published cases addressing the filed rate doctrine
hold unequivocally that "no one may bring a judicial proceeding to
enforce any rate other than the rate established by the filed tariff."
Brown, 277 F.3d at 1170; see also American Telephone and Telegraph Co.,
524 U.S. at 222 (holding that a carrier's duly filed rate is the only
lawful charge and that deviation from such rate is not permitted upon any
pretext); Fax Telecommunicaciones, 138 F.3d at 482 (holding that
"[c]arriers are prohibited from providing communications services except
pursuant to a filed tariff, and may not charge, demand, collect or receive
a rate other than the rate listed in the applicable tariff"; Wegoland
Ltd. v. NYNEX Corp., 27 F.3d 17, 19 (2d Cir. 1994) (holding that "the
legal rights between a regulated industry and its customers with respect
to rates are controlled by and limited to the rates filed with and
approved by the appropriate regulatory agency"). "In addition to barring
suits challenging filed rates and suits seeking to enforce rates that
differ from the filed rates, the filed-rate doctrine also bars suits
challenging services, billing or other practices when such challenges, if
successful, would have the effect of changing the filed tariff." Brown,
277 F.3d at 1170.
Based upon these authorities, the Court concludes that Verizon may not
seek recovery of a new and higher rate for deliberate misdirects in this
Court. Such a rate does not appear in the tariffs filed with the
appropriate regulatory agencies, and intervention by this Court thus would
undermine the role of those agencies as defined by the Supreme Court.
Accordingly, the Court will grant Covad's motion for summary judgment on
the ground that Verizon's claims are barred by the filed rate doctrine.
III. VERIZON'S MOTION TO DISMISS
Verizon moves to dismiss Covad's counterclaims on a number of grounds.
At oral argument, counsel for Covad represented that Covad would agree to
dismissal of its
counterclaims if it were to prevail on its motion for
summary judgment. In light of this representation, the Court will dismiss
Covad's counterclaims and deem moot Verizon's motion to dismiss.
(1) Covad's motion for summary judgment is GRANTED;
(2) Covad's counterclaims are DISMISSED with prejudice;
(3) Verizon's motion to dismiss Covad's counterclaims is deemed MOOT; and
(4) Judgment shall be entered accordingly.