Opinion
Civil Action No. 00-1491 (NHP).
May 15, 2000
Paul J. Dillon, Esq., BLOOM, RUBENSTEIN, KARINJA DILLON, P.C., Livingston, N.J., Brant M. Laue, Esq., Anne E. Gusewelle, Esq., ARMSTRONG TEASDALE LLP, Kansas City, MO, Attorneys for Plaintiff.
Hugh P. Francis, Esq., FRANCIS O'FARRELL, Morristown, N.J., Glenn S. Richards, Esq., Barry H. Gottfried, Jaqualin Fried Peterson, Esq., SHAW PITTMAN, Washington, DC., Attorneys for Defendant.
THE ORIGINAL OF THIS LETTER OPINION IS ON FILE WITH THE CLERK OF THE COURT
Dear Counsel:
This matter comes before the Court on the Order to Show Cause application for a Preliminary Injunction of plaintiff, Sprint Communications Company L.P. An Order to Show Cause was issued on March 30, 2000, and a preliminary injunction hearing was conducted on May 5, 2000. For the following reasons, plaintiff's application for a Preliminary Injunction is GRANTED.
BACKGROUND
Plaintiff, Sprint Communications Company L.P. ("Sprint"), is a provider of long distance telephone service. See Verified Complaint ("Complaint") at ¶ 2. As an "interexchange carrier" or "IXC," Sprint provides long distance domestic and international communication services to millions of individuals and businesses through a nationwide fiber optic network. See id. at ¶ 10. Sprint's network consists of computerized switches and thousands of miles of fiber optic cables. See id. Defendant, CAT Communications International, Inc. ("CAT"), is a reseller of local telephone service. See id. at ¶ 12. As a Competitive Local Exchange Carrier, or "CLEC," CAT is a telephone company that competes with an Incumbent Local Exchange Carrier, or "ILEC," such as Bell Atlantic in New Jersey. See id. at ¶ 10. CAT provides local telephone service on a "prepaid" basis, which means customers pay in advance for service. See id. As a result, customers who may otherwise be denied phone service because of bad credit history may obtain local telephone service.As a long distance carrier, Sprint carries long distance calls forwarded to it by Local Exchange Carriers ("LECs") such as CAT. See id. at ¶ 17. In order to allow for the billing of the long distance caller by the long distance carrier, the LECs provide "billing name and address," or BNA, information to the long distance carrier. See id. at ¶ 18. If an individual does not meet certain requirements of Sprint, the individual can be "blocked" from accessing the Sprint long distance network by LECs like CAT. See id. at ¶ 19.
Sprint alleges that its network has been receiving numerous unauthorized long distance calls in a number of states from CAT's local service customers, especially in New Jersey. See id. at 20. Sprint requested BNA information from CAT in order to facilitate the billing of customers who used Sprint's network, but CAT did not respond. See id. at ¶ 21-23. It is alleged that CAT continues to forward calls from its local service customers into the Sprint long distance network.See id. at ¶ 24. The Verified Complaint claims that the unauthorized use of Sprint's network constitutes a trespass and conversion of Sprint's property. See id. at ¶ 1. Sprint claims that it cannot retrieve a nonsubscribed long distance caller's information until approximately thirty (30) days after the call is made. See id. at ¶ 28. As a result, Sprint contends, it cannot stop the unauthorized access to its network until after it has suffered the harm. See id. Absent injunctive relief, it is argued, Sprint will continue to be irreparably harmed by CAT's facilitation of unauthorized intrusion upon Sprint's fiber optic network. Sprint seeks a Preliminary Injunction enjoining CAT from permitting its customers to access Sprint's network.
It was revealed at oral argument that, after the filing of this Verified Complaint and Order to Show Cause, CAT did offer to enter into a contract with Sprint for the provision of BNA information. See Transcript at 26:24-25; 27:1-3. Apparently, Sprint rebuffed this overture by CAT.
On April 18, 2000, CAT sent a letter to the Federal Communications Commission ("FCC"), requesting that the FCC intervene in this lawsuit. The FCC has yet to respond.
DISCUSSION
It is well-established that a preliminary injunction may be granted if a plaintiff demonstrates the following: (1) it has a reasonable probability of success on the merits; (2) it will be irreparably injured by denial of relief; (3) the granting of preliminary relief will not result in even greater harm to the nonmoving party; and (4) the preliminary relief is in the public interest. See Doe v. Nat'l Bd. of Med. Examiners, 199 F.3d 146, 154 (3d Cir. 1999) (quoting American Civil Liberties Union of New Jersey v. Black Horse Pike Regional Bd. of Educ., 84 F.3d 1471, 1477 n. 2 (3d Cir. 1996) (en banc)); Allegheny Energy, Inc., v. DQE, Inc., 171 F.3d 153, 158 (3d Cir. 1999). An application for an injunction should be granted only if the plaintiff produces evidence sufficient to convince the court that all four factors favor preliminary relief. See Opticians Ass'n v. Independent Opticians, 920 F.2d 187, 192 (3d Cir. 1990). In determining whether an injunction should issue, a district court should balance these four factors. See Allegheny Energy, 171 F.3d at 158. Mindful that a preliminary injunction is an "extraordinary" remedy, see NutraSweet Co. v. Vit-Mar Enter., Inc., 176 F.3d 151, 153 (3d Cir. 1999), and upon careful consideration of the record as supplemented by oral argument and witness testimony, it is the opinion of the Court that Sprint has satisfied the above four factors and is entitled to a preliminary injunction.I. Likelihood That Sprint Will Prevail On the Merits
Sprint has demonstrated a reasonable probability of success on its claims against CAT. Sprint's network is the property of Sprint. CAT has facilitated its customers' unauthorized use of Sprint's fiber optic network without protecting Sprint's right to receive payment for the use of its network. Sprint simply does not possess the necessary information which would permit it to collect the unpaid charges from CAT's customers. Nor does it possess any reasonable means of protecting its property in advance of its use. Nor can Sprint block CAT's customers from using its network at the time the call is made; it is only after the network is used that Sprint can attempt to recoup its loss. And as pointed out by CAT's counsel at oral argument, the providing of the BNA information to Sprint from CAT is purely voluntary. See Transcript at 29:23-25; 30:15-20; 31:12-14. Even then, there is no guarantee that the unpaid charges can be collected. Thus, Sprint is without the power to stop the unauthorized use of its network and to recover the long distance charges accumulated by CAT's customers. Clearly, such actions constitute a trespass and conversion of Sprint's property.
CAT's arguments to the contrary are fruitless. First, CAT's contention that this matter should be referred to the FCC under the doctrine of primary jurisdiction is meritless. The Federal Communications Act ("FCA") provides that an aggrieved party may either file a suit in federal court or file a complaint with the FCC. See 47 U.S.C. § 207. Thus, Sprint was entitled to file this action in any district court which possesses jurisdiction.
The Federal Communications Act provides, in pertinent part:
Any person claiming to be damaged by any common carrier subject to the provisions of this chapter may either make complaint to the Commission as hereinafter provided for, or may bring suit for the recovery of the damages for which such common carrier may be liable under the provisions of this chapter, in any district court of the United States of competent jurisdiction; but such person shall not have the right to pursue both such remedies.47 U.S.C. § 207.
Secondly, the doctrine of primary jurisdiction "allows a federal court to refer a matter extending beyond the `conventional experiences of judges' or `falling within the realm of administrative discretion' to an administrative agency with more specialized experience, expertise, and insight." National Communications Ass'n v. American Tel. Tel. Co., 46 F.3d 220, 222-23 (2d Cir. 1995) (quoting Far East Conference v. United States, 342 U.S. 570, 574, 72 S.Ct. 492, 494, 96 L.Ed. 576 (1952)). Primary jurisdiction is only applied to cases involving technical and intricate questions of fact and policy that Congress has assigned to a specific agency. See Goya Foods, Inc. v. Tropicana Products, Inc., 846 F.2d 848, 851 (2d Cir. 1988). See also MCI Telecomm. Corp. v. Teleconcepts, Inc., 71 F.3d 1086, 1103 (3d Cir. 1995). In this case, no such technical or intricate questions of fact or policy involving the communications industry exist. Consequently, the expertise of the FCC is not required. Rather, the dispute falls within the general understanding and competence of the district court. See, e.g., MCI Telecomm. Corp. v. John Mezzalingua Assoc. Inc., 921 F. Supp. 936, 941 (N.D.N Y 1996) (refusing to refer case to FCC where long distance telephone company brought action against telephone local exchange carrier's central switching service and call transferring unit customer, seeking recovery of charges for fraudulent third-party long distance telephone calls placed through customer's system); MCI Telecomm. Corp. v. Ameri-Tel, Inc., 852 F. Supp. 659, 665 (N.D.Ill. 1994) (refusing to refer case to FCC where provider of interstate telecommunications services brought collection action against its corporate user which owned and operated coin operated pay telephones).
The United States Supreme Court has held that primary jurisdiction applies "where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views." United States v. Western Pacific R.R. Co . , 352 U.S. 59, 63-64, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956).
Likewise, CAT's argument that Sprint's state law claims are preempted by the FCA is futile. Section 414 of the FCA provides that "[n]othing in this chapter shall in any way abridge or alter the remedies now existing at common law or statute, but the provisions of this chapter are in addition to such remedies." This "savings clause" specifically preserves state common law remedies for breaches of duties that do not exist under the Act. See MCI Telecomm. Corp. v. Garden State Inv. Corp., 981 F.2d 385, 387 (8th Cir. 1992); Comtronics, Inc. v. Puerto Rico Tele. Co., 553 F.2d 701, 707 n. 6 (1st Cir. 1977); DeCastro v. AWACS, Inc., 935 F. Supp. 541, 551 (D.N.J. 1996); Weinberg v. Sprint Corp., 165 F.R.D. 431, 439-40 (D.N.J. 1996). Thus, Sprint's state law claims are not preempted by the FCA.
II. Irreparable Harm In the Absence of Injunctive Relief
Sprint has also established that it will suffer irreparable harm if no injunction issues. A plaintiff seeking a preliminary injunction must show that it is likely to experience irreparable harm without an injunction.See Adams v. Freedom Forge Corp., 204 F.3d 475, 484 (3d Cir. 2000). This risk of harm cannot be speculative. See Adams, 204 F.3d at 488 (citations omitted). The requirement of irreparable harm is met "if a plaintiff demonstrates a significant risk that he or she will experience harm that cannot adequately be compensated after the fact by monetary damages."Adams, 204 F.3d at 484-85 (citing Frank's GMC Truck Center, Inc. v. General Motors Corp., 847 F.2d 100, 102-03 (3d Cir. 1988)).
Through documentary evidence and the testimony of Lawrence Moyer, a manager for Billing Operations at Sprint, Sprint has proven that it has already suffered a total of $178,000 in unpaid long distance phone bills. However, it is also true that Sprint's property interest is continuously impinged upon, and Sprint will continue to sustain a loss in the future unless CAT blocks its customers from accessing Sprint's network. Sprint cannot unilaterally block CAT's customers from the Sprint network until approximately thirty (30) days after the intrusion into the network occurs. Once Sprint obtains this information after the thirty day period, however, many of CAT's customers may have disconnected or moved on, making it even more difficult to collect the unpaid calling charges.See Gerardi v. Pelullo, 16 F.3d 1363, 1373 (3d Cir. 1994) (reaffirming that the "unsatisfiability" of a money judgment can constitute irreparable injury for purposes of granting preliminary injunction);Hoxworth v. Blinder, Robinson Co., 903 F.2d 186, 205-06 (3d Cir. 1990) (concluding that the "unsatisfiability" of a money judgment can constitute irreparable injury).
The main point is that Sprint cannot bill the customers or block the customers' calls at the time the calls are made; it must wait thirty days to receive the customers' information, long after the harm is sustained. Consequently, the heavy burden of these unpaid phone bills falls squarely on Sprint. Simply put, the use of Sprint's property harms Sprint by encroaching upon Sprint's right to control the use of its property, and it has no means by which to halt this interference and collect payment. Although Sprint has quantifiable damages, its injuries also include the continuous infringement of its property rights for which monetary damages could not remedy.
As counsel for Sprint stressed at oral argument, there is also a property right issue in addition to the monetary damages issue. See Transcript at 20:18-22.
Without this Court's intervention, Sprint cannot protect itself or its property interest, good will, business integrity, and methods of doing business. In short, without equitable relief, Sprint will suffer incalculable losses in revenue and reputation as CAT customers continue to invade its network. Thus, the harm to Sprint is irreparable, and requires injunctive relief.
III. Harm To the Nonmoving Party and the Public Interest
The final two prongs of the preliminary injunction standard weigh in the favor of Sprint. CAT will suffer minimal harm if it is required to block its customers' unauthorized access to Sprint's fiber optic network. Indeed, CAT certainly cannot establish that it will be injured to a greater extent than Sprint would be absent the issuance of an injunction. At oral argument, counsel for CAT represented that CAT may incur an expense of seven dollars per customer for each customer it blocks out. See Transcript at 37. No affidavits or similar proofs were submitted by CAT, so that the cost is, at this juncture, mere conjecture. Regardless, such an expense is not significant when compared to the harm sustained by Sprint as heretofore outlined. Furthermore, the public interest will be served by the protection of Sprint's private property from the unauthorized invasion of its network perpetrated by CAT's customers. In addition, the intrusion into Sprint's fiber optic network is disruptive of the federal tariffs it is required to file with the FCC which contain the terms and conditions of long distance service.
CONCLUSION
Based on the foregoing, Sprint's application for a Preliminary Injunction is hereby GRANTED, enjoining and restraining the defendant CAT Communications from permitting its customers to access or place calls on Sprint's fiber optic long distance network, and defendant CAT Communications is directed to take such measures as are necessary to block all of CAT Communications' customers from accessing or placing calls on the Sprint fiber optic long distance network.
An appropriate Order accompanies this Letter Opinion.