Opinion
Civil Action No. 3:99-CV-2876-D
September 4, 2001.
MEMORANDUM OPINION AND ORDER
Plaintiff Staton Holdings, Inc., d/b/a Staton Wholesale ("Staton") sues defendant MCI WorldCom Communications, Inc. ("MCI") for alleged willful misconduct under a provision of a tariff that governs MCI's provision of telecommunications services to Staton. MCI moves for summary judgment. For the reasons that follow, the court grants the motion and dismisses this action by judgment filed today.
MCI objects to three affidavits that Staton has submitted as summary judgment evidence. Because the evidence does not affect the court's ruling, it overrules the objections as moot.
I
Staton entered into a Master Communications Services Agreement for telephone service with a company that eventually became part of a subsidiary of MCI. MCI provided the services via its Alliance Network. It advised Staton in July 1999 that the Alliance Network was not Y2K-compliant and that it was necessary to transfer Staton to another network beginning in August 1999. Staton maintains that, shortly thereafter, MCI indicated that the transfer would have to be completed by October 31, 1999, despite the fact that the original agreement provided for service through December 31, 1999. During September and October MCI and Staton worked to coordinate the migration of services from the Alliance Network. Staton asserts that it repeatedly insisted that the transfer occur only after-hours so as not to interfere with Staton's business, which is dependent on its 800-number service. On October 15, 1999 MCI attempted the changeover — termed a "hot cut" — but due to a string of errors and miscommunications, its engineers failed to receive proper notice and the transfer did not occur. MCI attempted another hot cut — allegedly without notifying Staton — on October 25, 1999. The hot cut was scheduled for 7:00 p.m. but, despite Staton's warnings and MCI's promises — took place at 10:45 a.m., resulting in the immediate shut-down of Staton's 800-number service. Staton alleges that the telephone number remained out of service for about four hours and caused significant harm to its business.
By January 19, 2000 order and June 26, 2000 memorandum opinion and order, the court has dismissed Staton's state-law claims as preempted by the Federal Communications Act ("FCA") and the filed-tariff doctrine. Section 203(a) of the FCA requires every common carrier to file with the Federal Communications Commission tariffs "showing all charges" and "showing the classifications, practices, and regulations affecting such charges." 47 U.S.C. § 203 (a); Am. Tel. Tel. Co. v. Cent Office Tel, Inc., 524 U.S. 214, 221 (1998). The filed-tariff doctrine provides that when a claim alleges that the rate or tariff provisions regarding services provided by a common carrier are other than those contained in the carrier's public tariff on file with the appropriate regulatory body, the "filed tariff" provision applies for the services provided pursuant to the tariff. See Maislin Indus., U.S. v. Primary Steel, Inc., 497 U.S. 116, 126 (1990). This doctrine prevents a carrier from being placed in an untenable position if the agency and court disagree on what is the reasonable rate, so that the carrier could not abide both by the rate filed with the agency and with the court's determination.
The court permitted Staton to amend its pleadings to allege any claims it could maintain under the FCA, consistent with the filed-tariff doctrine. Staton has filed a third amended complaint ("amended complaint") in which it asserts a claim for willful misconduct based on § B-4.02 of MCI's tariff, which provides: "MCI's liability for willful misconduct, if established as a result of judicial or administrative proceedings, is not limited by this tariff" D. App. 1. Staton argues that this proviso creates a willful misconduct exception to the filed-tariff doctrine.
MCI moves for summary judgment on four grounds: (1) the willful misconduct exception in tariffs is inconsistent with the FCA and cannot create or revive claims otherwise barred by the filed tariff doctrine; (2) there is no evidence that MCI committed an act or omission constituting willful misconduct; (3) the FCA and tariff preclude the recovery of punitive damages; and (4) there is no clear and convincing evidence to support an award of punitive damages.
Because the court grants summary judgment for MCI on the first and, alternatively, on the second ground of its motion, it need not reach the third and fourth grounds, which address the issue of punitive damages.
II
The court considers first whether the FCA bars Staton's willful misconduct claim.A
Staton argues that the filed-tariff doctrine does not apply to cases that do not involve rates or rate-setting and cites several opinions for this proposition. With one exception, each such opinion was decided before the Supreme Court's 1998 decision in American Telephone Telegraph, 524 U.S. 214. There the Court held that the tariff governs not just prices or rates, but also services related to price. "Rates . . . do not exist in isolation. They have meaning only when one knows the services to which they are attached. Any claim for excessive rates can be couched as a claim for inadequate services and vice versa., discriminatory `privileges' come in many guises, and are not limited to discounted rates." Am. Tel. Tel., 524 U.S. at 223-24; see also Access Telecom v. MCI Telecomms. Corp., 197 F.3d 694, 711 (5th Cir. 1999) (relying on American Telephone Telegraph in holding that "federal law preempts claims concerning the price at which service is to be offered" and "claims concerning the services that are offered").
Just as the filed-tariff doctrine is not limited to cases involving rates, however, it does not extend to all cases involving services. For claims based on services to fall within the ambit of FCA preemption, they must arise from some sort of "privilege" allegedly granted by the communications company to a customer. See Am. Tel Tel, 524 U.S. at 225 (reasoning that each claim was for some sort of "special service" and thus was preempted by FCA and barred by filed-tariff doctrine). See also Chicago Alton R.R. Co. v. Kirby, 225 U.S. 155 (1912) (rejecting shipper's breach-of-contract claim against railroad for failure to ship carload of race horses by particularly fast train); Davis v. Cornwell, 264 U.S. 560 (1924) (invalidating carrier's agreement to provide shipper with certain number of railroad cars on specified day). If a court were to enforce an agreement granting special services to a particular customer, or if it were to award damages based on a claim arising from such an agreement, the customer granted the relief would receive more service for the same price. This is the equivalent of a discriminatory rate, which the FCA seeks to prevent. See Am. Tel Tel, 524 U.S. at 223.
Staton does not explicitly set out the underlying facts that give rise to its willful misconduct claim in the portion of its brief that addresses the scope of the FCA and the filed-tariff doctrine. In its amended complaint, however, Staton alleges two sets of facts that potentially support such a claim. First, it asserts that MCI's insistence that the transfer must occur by October 31, 1999 "was a willful and deliberate attempt to leave Plaintiff with no ability to consider changing service providers." P.3d Am. Comp. at ¶ 4. This allegation may allege a willful misconduct cause of action that is independent of any damage later done by the actual transfer, and it does not involve a preference or a special service. As discussed below in relation to MCI's second ground for summary judgment, however, Staton has failed to adduce evidence of the breach of contract that could establish each of the elements of willful misconduct. The court need not, therefore, decide whether this component of Staton's willful misconduct claim, assuming it is one, is barred by the filed-tariff doctrine.
On June 21, 2001 the court filed an order pointing out that Staton's summary judgment response violates N.D. Tex. Civ. R. 56.4(c) because it contains argument. The order provided that "[b]ecause the court has already once ordered Staton to amend its summary judgment pleadings, and because doing so will not materially interfere with the decisional process of the court, the court will simply disregard any part of the June 21, 2001 response that violates a local civil rule of this court." Under the rubric "background facts," Staton has set out several pages of argument. See P. Resp. at 1-4. In accordance with its order, the court has not considered them unless Staton has also set them out in its brief.
Staton also alleges that MCI conducted the network transfer during business hours, thereby damaging Staton's business. According to the amended complaint, MCI did so "without any advance warning to Staton, and in defiance of clear instructions by Staton and promises by [MCI][.]" Id at ¶ 6. This is a claim that seeks to enforce a specific alleged promise (not to conduct the transfer during business hours) regarding a particular service (transfer from the Alliance Network to one that was Y2K-compliant). Because it falls within the preemptive scope of the tariff, the court cannot enforce this type of agreement for privileges or special services. See Am. Tel. Tel, 524 U.S. at 225 (holding claims based on "service supports" barred by filed-tariff doctrine); Access Telecom, 197 F.3d at 711 (holding negligent misrepresentation claims preempted); Corporate Investigative Div. v. Am. Tel Tel, 884 F. Supp. 220, 223 (W.D.La. 1995) (holding that business customer's claims against long distance carrier arising out of misdirection of customer's incoming 800 calls were covered by tariff).
Staton cites Access Telecom, decided after American Telephone Telegraph, arguing that it holds that although certain claims related to services and arising out of a contract may be barred by the filed-tariff doctrine, torts related to services are not because they do not "directly relate" to rates. See P. Br. at 3. Staton misapprehends the Fifth Circuit's interpretation of the doctrine.
Access Telecom holds that the relevant test for tort claims, gleaned from American Telephone Telegraph, is whether the claim is derivative of the underlying contract in a case. See Access Telecom, 197 F.3d at 711. In Access Telecom the tortious interference cause of' action was based on MCI's alleged release of its customer's confidential information. Because this services-related claim fell outside the scope of the contract and had no relation to rates, the Fifth Circuit held that it was not barred. Id In the present case, the tort claim of willful misconduct, so far as it is based on the network transfer, rests on MCI's alleged violation of an express or implied promise not to conduct the transfer during business hours. This services-related claim is within the scope of the original contract because it pertains to a typical service-support mailer. It also directly relates to rates in that conferring such a privilege would mean that Staton received more service than did MCI's other customers, but at the same rate. Because the FCA forecloses this outcome, the court holds that MCI's tariff exclusively governs the allegations by Staton arising from the October 25, 1999 transfer. As a matter of law, the filed-tariff doctrine bars this component of its willful misconduct claim.
B
The tariff's willful misconduct proviso — § B-4.02 — does not remove Staton's cause of action from the filed-tariff bar. This provision only applies to the tariff itself and does not create a separate cause of action. The Supreme Court held in American Telephone Telegraph that such a clause
cannot be construed to do what the parties have no power to do. It removes only those limitations upon liability imposed by the tariff not those imposed by law. It is the Communications Act that renders the promise of preferences unenforceable. The tariff can no more exempt the broken promise of preference that is willful than it can the broken promise of preference that is unintentional.Am. Tel. Tel, 524 U.S. at 228. Claims outside a tariff's scope, like the tortious interference claim for release of confidential information in Access Telecom, can proceed with proof of willful misconduct because the proviso prevents the tariff itself from barring such claims. Claims inside the tariff's scope, and therefore legally barred, like the transfer-related claim here, cannot be revived in the tariff or otherwise. Section B-4.02 of the tariff does not, therefore, remove the bar of the filed tariff doctrine because it is a limit imposed by law, not by the tariff itself
III
Assuming arguendo that the filed-tariff doctrine does not apply to a willful misconduct based on MCI's alleged insistence that the service transfer occur by October 31, 1999, and that the doctrine does not otherwise preclude any aspect of Staton's willful misconduct clam, the court must next decide whether a reasonable jury could find in favor of Staton — that is, whether there is a genuine issue of material fact that requires a trial.
A
Both parties agree that a willful misconduct claim requires proof of
the intentional performance of an act with knowledge that the performance of that act will probably result in injury or damage, or . . . in such a manner as to imply reckless disregard of the probable consequences . . ., [or] the intentional omission of some act, with knowledge that such omission will probably result in damage or injury[.]Stand Buys Ltd. v. Mich. Bell Tel. Co, 646 F. Supp. 36, 38 (E.D. Mich. 1986) (quoting Berner v. British Commonwealth Pac. Airlines, Ltd., 346 F.2d 532, 536-37 (2d Cir. 1965)); see also Corporate Investigative Div., 884 F. Supp. at 223-24. In other words, proof of negligence or gross negligence is not enough. There must be evidence of knowledge of harm or reckless disregard of potential harm.
Staton argues that when state of mind is at issue, a court should not grant summary judgment. This principle does not prevent summary judgment, however, when a reasonable trier of fact could not find in the nonmovant's favor and the nonmovant will have the burden of proof on the issue at trial. Because MCI will not have the burden as to Staton's willful misconduct claim, it can meet its summary judgment obligation by pointing the court to the absence of evidence to support the cause of action. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once MCI does so, Staton must then go beyond its pleadings and designate specific facts showing that there is a genuine issue for trial. See id. at 324; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per curiam). Moreover, Staton must produce evidence to establish the existence of each element for which it bears the burden of proof. See Dunn v. State Farm Fire Cas. Co., 927 F.2d 869, 872 (5th Cir. 1991). Summary judgment is mandatory where the nonmoving party fails to meet this burden. Little, 37 F.3d at 1076.
MCI has pointed to a lack of evidence to support a willful misconduct claim. See D. Br. at 7. The court therefore considers whether Staton has offered any summary judgment evidence in response that would support such a claim.
B
Staton first alleges a breach of contract and forced migration from the Alliance Network by October 31, 1999, rather than the agreed-upon date of December 31, 1999. It offers the deposition of MCI employee Katheryn Pieters ("Pieters"), in which she agreed that MCI had made it understood that Staton would have to leave that network by the earlier date. See P. Br. at 6. Staton also offers evidence from MCI expert, Linda Jacobs ("Jacobs") that the letter from MCI to Staton indicating the necessity of the October 31, 1999 switch was "a very good marketing piece." Id at 7. Considered together, this evidence is inadequate to permit a reasonable trier of fact to find the willful misconduct element of knowledge that the act at issue — the alleged forced migration at an early date — would probably result in injury or damage to Staton. Pieters' testimony indicates an intentional act, but Jacobs' testimony only indicates that MCI thought that moving the transfer date forward was a smart business ploy, not that it also thought or knew that doing so would actually harm Staton's business. Because Staton has not offered evidence that would support a reasonable finding in its favor as to each element of willful misconduct relating to the alleged forced migration, the court grants summary judgment dismissing this component of Staton's willful misconduct cause of action.
C
Staton also maintains that in its efforts to trap existing customers, MCI did not leave itself enough time for a safe transfer. Staton again offers two sources of evidence. It cites the deposition testimony of Jacobs, who testified that the transfer from one network to the other should take somewhere between four and six weeks. See id at 8. According to Jacobs, by giving itself until October 31, 1999, MCI allowed six weeks to complete the transfer. See id Although Jacobs appears to admit this schedule did not allow for a final "contingency plan," id at 9, her testimony does not supply the necessary evidence to raise a genuine issue of material fact as to each element of this ground for Staton's willful misconduct claim. If a transfer should take four-to-six weeks and a company allows itself six weeks to conduct such a transfer, then to support a willful misconduct claim, there must be additional evidence of knowledge that the time schedule would probably cause harm to the customer. Staton has introduced no such evidence. It simply offers the deposition of MCI employee Vivian Wilson ("Wilson"), who opines that conducting the transfer over the weekend prior to the October 31, 1999 deadline, "at the very last second," was not "a good business practice." Id. This testimony would not permit a trier of fact reasonably to find that MCI knew that specific harm would result to Staton, or intended that result, from the last-minute transfer. The argument that MCI did not leave itself enough time for a safe transfer therefore cannot serve as a basis for a willful misconduct cause of action.
D
Staton alleges that the October 25, 1999 transfer was a deliberate act that willfully and recklessly interrupted its 800 service. It has adduced some general proof that indicates network transfers usually cause interruptions in service, see id at 9-12, but has not produced specific evidence that would permit a reasonable trier of fact to find that MCI intended the particular four-hour service interruption to occur, or that MCI knew or recklessly disregarded the possibility that the transfer would cause damage to Staton's business. A reasonable trier of fact would find it counterintuitive, and thus implausible, that a company in business to make a profit would intentionally cause a multi-hour service interruption. Staton's evidence at best supports a negligence or gross negligence claim, but not a willful misconduct cause of action.
E
Staton offers several sources of evidence to support the premise that the October 25, 1999 transfer was completely unauthorized by Staton, and that transfers during business hours are generally unwise. See id at 13-19. All the testimony concerning lack of authorization and the illogic of a daytime transfer is consistent with a scenario in which MCI mistakenly believed Staton had authorized the transfer, or even in which MCI thought that in Staton's case, the transfer would have no ill effects. In other words, this evidence fails to address the specific knowledge of harm required as an element of willful misconduct. As such, even if it could sustain a negligence or gross negligence claim, it cannot support a reasonable finding of willful misconduct.
F
Staton also maintains that the transfer occurred secretly and even now is the subject of a coverup by MCI. All evidence of a potential coverup after the transfer is of no relevance to a willful misconduct claim, because such proof does not address the elements of intent to commit the act and knowledge of probable harm, both of which are determined as of the time of the act, which in this case was the morning of October 25, 1999.
Whether the transfer occurred secretly is relevant. Assuming that Staton was unaware of the daytime transfer, MCI employee Wilson agrees that for a transfer to work, someone on the customer's end must be aware of its timing in order to be on-site and set up the customer's equipment to communicate properly with MCI's equipment. See id. at 23. It is nevertheless insufficient to support a willful misconduct claim because this evidence is consistent with a simple mistake by MCI, which makes it probative of negligence or gross negligence, but not of willful misconduct.
MCI is therefore entitled to summary judgment, even assuming that Staton has asserted a willful misconduct claim that is not barred by the FCA and the filed-tariff doctrine.
* * *
The court grants MCI's May 25, 2001 amended motion for summary judgment and dismisses this action by judgment filed today.
SO ORDERED.