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Free Conferencing Corporation v. T-Mobile Us, Inc.

United States District Court, C.D. California

December 30, 2014

FREE CONFERENCING CORPORATION, Plaintiff,
v.
T-MOBILE US, INC. and BRYAN FLEMING, Defendants.

ORDER GRANTING DEFENDANT T-MOBILE US, INC.'S MOTION TO STAY [22] AND GRANTING DEFENDANT FLEMING'S MOTION TO DISMISS [23]

OTIS D. WRIGHT, II, District Judge.

I. INTRODUCTION

There are two motions before the Court. The first motion is Defendant T-Mobile US, Inc.'s Motion to Dismiss or Stay Pursuant to the Doctrine of Primary Jurisdiction. (ECF No. 22.) The second motion is Defendant Bryan Fleming's Rule 12(b)(2) Motion to Dismiss for Lack of Personal Jurisdiction. (ECF No. 23.) In the five-count Complaint, Plaintiff Free Conference Corporation alleges that Defendants wrongfully blocked calls from T-Mobile customers attempting to use Plaintiff's free conference call services. For the reasons discussed below, the Court GRANTS Defendant T-Mobile US, Inc.'s Motion to Stay and GRANTS Defendant Bryan Fleming's Motion to Dismiss.[1]

II. FACTUAL BACKGROUND

Free Conferencing Corporation ("Free Conferencing") is headquartered in Long Beach, California, and operates websites that promote "free" conference call services for its customers. (Erickson Decl. ¶ 2.) Free Conferencing contracts with local phone companies-also known as local exchange carriers ("LECs")-which provide the telecommunications infrastructure to host conference calls for Free Conferencing's customers. (Peterson Decl. ¶ 3.) The LECs provide the initial dial-in telephone number as well as the "conferencing bridges and other equipment" to facilitate the conference calls. ( Id. ) LECs then charge a termination fee to the telephone service providers-also known as interexchange carriers ("IXCs")-of the individuals on the conference call. ( Id. ) In other words, Free Conferencing provides its customers a conference call phone number associated with an LEC, and when the call ends the LEC charges the customers' phone providers-the IXCs-a termination fee.

Free Conferencing does not make money directly from its customers in this business model. Instead, the LECs pay Free Conferencing a "marketing fee" based on the amount of termination fees collected from IXCs. (Erickson Decl. ¶ 2.) This legal business model is called "access stimulation" and is regulated by the Federal Communications Commission ("FCC").[2]

The success of an access stimulation business model is dependent on high termination fees charged by the LECs. LECs in rural areas are exempt from filing rate-control tariffs for termination fees and are authorized to charge higher termination fees than LECs in competitive markets. See 47 C.F.R. § 61.26(e). LECs are also authorized to privately negotiate termination fee agreements with individual IXCs. Id. at § 61.26(a)(3)(ii).[3]

An access stimulation business model is not at issue in this case, but is instead the salient backdrop for the dispute. Here, the relevant LEC is Great Lakes Communications Corporation ("Great Lakes"), a company with operations in Iowa. (Erickson Decl. ¶ 3.) The relevant IXC is Defendant T-Mobile US, Inc. ("T-Mobile"). Free Conferencing and Great Lakes are currently in a contract under which Free Conferencing's conference calls are supported by Great Lakes, and Free Conferencing is paid a marketing fee based on the amount of calls terminated by Great Lakes. (Erickson Decl. ¶ 2.) Great Lakes and T-Mobile also have a contractual agreement regarding the termination fees Great Lakes charges when one of T-Mobile's customer's calls is terminated on the Great Lakes network. (Erickson Decl. ¶¶ 6, 8.)

In August, 2014, a dispute arose between Great Lakes and T-Mobile regarding their termination fee contract. (Erickson Decl. ¶ 8.) T-Mobile then began routing all phone traffic bound for the Great Lakes network through alternate networks, such as AT&T's network. (Petersen Decl. ¶ 8.) T-Mobile claims that Great Lakes "forced" it to reroute traffic. (ECF 22-1 ["Def. PJD Br."] at 6.) As a result of overloading the capacity of the AT&T network, T-Mobile customers immediately began receiving "all circuits busy" messages when attempting to call the Free Conferencing numbers associated with Great Lakes. (Petersen Decl. ¶ 8; Erickson Decl. ¶ 3.) Inundated with customer service complaints, Free Conferencing in turn complained to T-Mobile about the connection problems. (Erickson Decl. ¶¶ 4-6.) T-Mobile directed Free Conferencing's complaints to Great Lakes and refused to disclose any information regarding its dispute with Great Lakes. ( Id. )

Free Conferencing alleges that T-Mobile purposefully limited calls from its own customers to the Great Lakes network as a "negotiation strategy" with Great Lakes. (Erickson Decl. ¶¶ 8-9.) Negotiations between Great Lakes and T-Mobile have allegedly broken down and the parties are currently engaged in a confidential alternative dispute resolution process. (Peterson Decl. ¶ 13.) By overloading the AT&T network and disrupting its own customers' calls, T-Mobile cost Free Conferencing "more than 33 million minutes of use" and associated marketing fees. (Peterson Decl. ¶ 7.) The contract dispute between Great Lakes and T-Mobile is also allegedly costing Free Conferencing past and future customers. ( Id. )

Free Conferencing brings five causes of action against Defendants T-Mobile and Bryan Fleming ("Fleming"), a T-Mobile executive. Count I alleges intentional interference with contract-T-Mobile intended to disrupt the performance of Free Conferencing's contract with Great Lakes by limiting traffic to the Great Lakes network. (Compl. ¶¶ 24-31.) Count II alleges intentional interference with Free Conferencing's "Terms and Conditions" agreements with its registered users-T-Mobile intended to disrupt these customer agreements by limiting traffic to the Great Lakes network (Compl. ¶¶ 32-39.) Court III alleges intentional interference with prospective economic relations-T-Mobile intended to disrupt the relationships between Free Conferencing and future customers by limiting traffic to the Great Lakes network. (Compl. ¶¶ 40-48.) Court IV alleges a violation of the California's Unfair Competition Law ("UCL"), Business & Professions Code § 17200-T-Mobile, by violating Section 201 of the Federal Communications Act ("FCA"), 47 U.S.C. § 201, engaged in an unlawful business practice. (Compl. ¶¶ 49-54.) And Count V alleges a violation of Washington's Unfair and Deceptive Practices Act, RCW § 19.86.010-T-Mobile engaged in an unfair method of competition by limiting traffic to the Great Lakes network. (Compl. ¶¶ 55-60.)

III. PRIMARY JURISDICTION

T-Mobile moves the Court to stay or dismiss all five counts in the Complaint on the grounds that the doctrine of primary jurisdiction applies. (Def. PJD Br. at 1.) T-Mobile brings the Motion "pursuant to Fed.R.Civ.P. 12(b)(1) and the doctrine of primary jurisdiction." ( Id. ) However, "[p]rimary jurisdiction is not a doctrine that implicates the subject matter jurisdiction of the federal courts." Syntek Semiconductor Co. v. Microchip Tech. Inc., 307 F.3d 775, 780 (9th Cir. 2001). As discussed infra, staying or dismissing the Complaint implicates the prudential powers of the Court, and not the Court's subject matter jurisdiction.

As an initial matter, the Court rejects Free Conferencing's argument that FCC "has no expertise or jurisdiction to handle the state tort claims at issue here." (ECF No. 27 ["Pl. PJD Br."] at 1.) The primary jurisdiction doctrine is used "whenever enforcement of the claim requires the resolution of issues, " and an issue in this case is whether T-Mobile violated federal telecommunications statutes and regulations. See United States v. W. P. R.R. Co., 352 U.S. 59, 63-64 (1956) (emphasis added). While it is true that the FCC cannot adjudicate a California intentional interference or UCL cause of action, the FCC can issue a declaratory ruling on whether or not T-Mobile's practices violate federal telecommunications law. See 47 U.S.C. § 207. The resolution of that issue, whether by the Court or the FCC, is not the adjudication of any cause of action in this case.

For the reasons discussed below, the Court finds that the primary jurisdiction doctrine applies to the entire Complaint, and therefore this case is stayed pending the resolution of Free Conferencing's administrative proceedings.

A. LEGAL STANDARD

"The primary jurisdiction doctrine allows courts to stay proceedings or to dismiss a complaint without prejudice pending the resolution of an issue within the special competence of an administrative agency." Clark v. Time Warner Cable, 523 F.3d 1110, 1114 (9th Cir. 2008). The doctrine is considered a "prudential" measure, "under which a court determines that an otherwise cognizable claim implicates technical and policy questions that should be addressed in the first instance by the agency with regulatory authority over the relevant industry rather than by the judicial branch." Id.

While there is "[n]o fixed formula for applying the doctrine of primary jurisdiction, " Davel Commc'ns, Inc. v. Qwest Corp., 460 F.3d 1075, 1086 (9th Cir. 2006), the Court is instructed by the holding in United States v. General Dynamics Corp., 828 F.3d 1356, 1362 (9th Cir. 1987). General Dynamics instructs that four factors are "uniformly present in cases where primary jurisdiction is properly invoked: (1) the need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity to a comprehensive regulatory scheme that (4) requires expertise or uniformity in administration." Id. The Ninth Circuit further explains that primary jurisdiction is proper for an "issue of first impression, or a particularly complicated issue" where the "protection of the integrity of a regulatory scheme dictates preliminary resort to the agency which administers the scheme." Clark, 523 F.3d at 1114 (internal citations and quotation marks omitted).

B. APPLICATION

T-Mobile asserts that the Court should dismiss or stay all five counts in the Complaint under primary jurisdiction. (Def. PJD Br. at 2.) In order for this Court to determine whether primary jurisdiction applies, it must first decide whether each cause of action invokes a comprehensive regulatory scheme-the first three factors from General Dynamics. The Court must then decide whether or not the telecommunications issues involve complicated technical and policy questions, and whether the Court has sufficient regulatory guidance to adjudicate such issues-the fourth factor from ...


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