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Coretel Virginia, LLC v. Verizon Virginia, LLC

United States Court of Appeals, Fourth Circuit

May 13, 2014

CORETEL VIRGINIA, LLC, Plaintiff -- Appellant,

Argued, January 30, 2014

Page 365

Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. (1:12-cv-00741-CMH-TCB). Claude M. Hilton, Senior District Judge.


Edward Jay Tolchin, OFFIT KURMAN, P.C., Tysons Corner, Virginia, for Appellant.

Scott H. Angstreich, KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C., Washington, D.C., for Appellees.


Andrew M. Hetherington, KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C., Washington, D.C., for Appellees.

Before WILKINSON, NIEMEYER, and DUNCAN, Circuit Judges. Judge Duncan wrote the opinion, in which Judge Wilkinson joined. Judge Niemeyer wrote an opinion concurring in part and dissenting in part.


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DUNCAN, Circuit Judge

Two telecommunications carriers, CoreTel Virginia, LLC and Verizon Virginia, LLC, dispute their respective responsibilities under their interconnection agreement (" ICA" ), a contract which governs how the carriers connect their networks and exchange data. Each party contends that the other improperly billed it for various services. The district court granted summary judgment in Verizon's favor on each claim. For the reasons that follow, we vacate the district court's decision with respect to Verizon's facilities claims, but affirm as to the others.

Ironically, in pursuit of its preferred result, the dissent does exactly what it accuses the majority of doing. As we explain in greater detail below, the dissent interprets the ICA as the dissent imagines it should have been written, and not as it was. With no textual support, and in contravention of the cardinal rule that a contract must be interpreted as a whole, giving effect to all its terms, the dissent elevates § 11 to an isolated and independent status, renders superfluous the only provision that specifically deals with interconnection, and altogether ignores § 2.1, which explicitly provides that headings are to have no substantive effect on the agreement's meaning.


The CoreTel/Verizon ICA[1] at issue here is a private contract that implements duties imposed by the Telecommunications Act of 1996, Pub. L. 104-104, 110 Stat. 56, codified at 47 U.S.C. § 151 et seq. We therefore begin with a brief discussion of

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the relevant provisions of the Telecommunications Act and the key provisions of the parties' ICA before turning to the procedural history before us.


The Telecommunications Act seeks to foster competition in the telecommunications market by reducing the competitive advantages enjoyed by the telecommunications carriers, known as " incumbent carriers," that enjoyed a monopoly in the market at the time the statute was enacted. The Act requires incumbent carriers to share their physical networks with new market entrants, known as " competing carriers," to mitigate the prohibitive cost of building a new network. This appeal implicates two of the duties imposed on incumbent carriers under 47 U.S.C. § 251.

First, § 251(c)(3) allows a competing carrier to lease components of an incumbent carrier's physical network for any purpose if an incumbent's failure to provide these elements would impair the competing carrier's ability to provide services. 47 U.S.C. § § 251(c)(3), 251(d)(2)(B). An incumbent carrier must provide these network elements at cost-based rates, known as " TELRIC," as opposed to higher tariff rates.[2] 47 U.S.C. § § 251(c)(3), 252(d)(1); 47 C.F.R. § 51.505(b) (2010); see also Implementation of the Local Competition Provisions in the Telecommunications Act of 1996 [" Local Competition Order" ], 11 F.C.C.R. 15499, ¶ 29 (1996). These network elements also must be " unbundled," meaning that they must be offered individually, and not only as part of a broader package of services. 47 U.S.C. § 251(c)(3); Talk Am., Inc. v. Mich. Bell Tel. Co., 131 S.Ct. 2254, 2258, 180 L.Ed.2d 96 (2011); Local Competition Order, 11 F.C.C.R. 15499, ¶ 27.

Second, § 251(c)(2) promotes interconnection, the physical link between two telecommunications networks that allows each carrier's customers to call the other's. The FCC has interpreted § 251(c)(2) to require, among other things, that an incumbent carrier lease a competing carrier " entrance facilities" required for interconnection at TELRIC.[3] See Unbundled Access to Network Elements [" Remand Order" ], 20 F.C.C.R. 2533, ¶ 140 (2005); Review of the Section 251 Unbundling Obligations of Incumbent Local Exch. Carriers [" Triennial Review Order" ], 18 F.C.C.R. 16978, ¶ 366 (2003); see also Talk Am., 131 S.Ct. at 2261.

Until 2003, the FCC had also interpreted § 251(c)(3) to require incumbent carriers to provide all entrance facilities at TELRIC. However, the FCC reversed course in its Triennial Review Order and Remand Order. It concluded that because " entrance facilities are less costly to build, are more widely available from alternative providers, and have greater revenue potential,"

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an incumbent carrier's failure to provide access to these facilities would not impair the viability of competing carriers. Remand Order, 20 F.C.C.R. 2533, ¶ 138, 141 (2005). [4] The FCC determined, therefore, that incumbent carriers need not provide entrance facilities on an unbundled basis at TELRIC rates under § 251(c)(3). Id. at ¶ 137.

Significantly, however, the FCC did not alter incumbent carriers' duties under § 251(c)(2), the provision that specifically governs interconnection. Id. at ¶ 140. Therefore, while an incumbent carrier no longer has a general obligation to provide entrance facilities at TELRIC under § 251(c)(3), it remains obligated to provide entrance facilities at TELRIC when they are used for interconnection under § 251(c)(2). See Talk Am., 131 S.Ct. at 2264-65; Remand Order, 20 F.C.C.R. 2533, ¶ 140; Triennial Review Order, 18 F.C.C. 16978, ¶ ¶ 365, 366.


With this regulatory framework in mind, we now turn to the ICA between Verizon, an incumbent carrier, and CoreTel, a competing carrier. A close examination of the ICA is necessary because the § 251 duties discussed above are not directly enforceable. See 47 U.S.C. § § 251(c)(1), 252(a)(1). Instead, these duties only apply if they are incorporated into an ICA. See Core Commc'ns, Inc. v. SBC Commc'ns Inc., 18 F.C.C.R. 7568, ¶ 32 (2003), vacated on other grounds by SBC Communs., Inc. v. FCC, 407 F.3d 1223, 366 U.S.App. D.C. 27 (D.C. Cir. 2005).

The interplay between the ICA and the relevant statutory provisions is further complicated by the fact that the Verizon/CoreTel ICA is an adoption of an existing ICA under 47 U.S.C. § 252(i). Because the original ICA took effect before the FCC reinterpreted § 251(c)(3) in its Triennial Review Order and Remand Order, the adoption agreement that accompanies the CoreTel/Verizon ICA contains a provision meant to clarify Verizon's duties in light of the changed regulatory backdrop. See ICA Adoption Agreement § 1.B, J.A. 366. Section 1.B of the adoption agreement provides that, " adoption of the [ICA] does not include adoption of any provision imposing an unbundling obligation on Verizon that no longer applies to Verizon under [the Triennial Review Order and Remand Order]." J.A. 366.

To aid in our analysis, we will discuss four provisions of the ICA. Section 4 addresses interconnection, § 11 addresses the leasing of network elements, § 5.7 sets out a compensation regime for local cross-network calls, and Exhibit A lists the rates that apply to the agreement. We now address each briefly in turn.

ICA § 4, " Interconnection and Physical Architecture," addresses the physical interconnection of the parties' two networks. J.A. 216. This section provides that CoreTel may specify one of three physical methods to connect with Verizon at an agreed-upon interconnection point. ICA § 4.3.1, J.A. 218. One of the methods allows CoreTel to lease an entrance facility from Verizon.[5] Id. CoreTel may request

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any of the listed interconnection methods at the " rates and charges, set forth in this Agreement, in any applicable Tariff(s), or as may be subsequently agreed to between the parties." ICA § 4.3.3, J.A. 218. The ICA provides Verizon analogous rights to interconnect with CoreTel. ICA § 4.3.4, J.A. 218.

ICA § 11, " Unbundled Access," enumerates the network elements, including entrance facilities, that Verizon will provide to CoreTel on an unbundled basis. J.A. 240-66. This section primarily consists of a detailed list of network elements, expressed in highly technical terms, and the parameters under which they may be ordered.[6] Id.

ICA § 5.7, " Reciprocal Compensation and other Intercarrier Compensation Arrangements," provides a distinct billing regime for local calls originating within Verizon's network and terminating within CoreTel's network (i.e., local calls from Verizon customers to CoreTel customers), and vice versa. J.A. 222. These calls are billed per minute of usage as " reciprocal compensation" by the recipient carrier. See ICA § § 1.60, 1.60a, 5.7.1, J.A. 212, 222-23; ICA Exhibit A § § A.I, B.I, J.A. 322, 353.

Finally, ICA Exhibit A lists TELRIC rates for various network elements and includes rates for leasing entrance facilities under the heading " Unbundled Transport." ICA Exhibit A § A.II.C, J.A. 324. It also includes rates for reciprocal compensation. ICA Exhibit A § § A.I, B.I, J.A. 322, 353.


Soon after the parties agreed to their ICA, a dispute arose regarding the rates CoreTel is required to pay for interconnection entrance facilities. Verizon insisted that CoreTel pay tariff rates and CoreTel refused. This dispute continued until 2012 when Verizon finally threatened to terminate CoreTel's service. CoreTel brought suit seeking to enjoin Verizon's threatened service termination. Verizon filed various counterclaims, and CoreTel amended its complaint to add still more claims. The district court ultimately divided these claims and counterclaims into four broad categories: (1) Verizon's facilities claims relating to its bills to CoreTel for the entrance facilities CoreTel leased; (2) CoreTel's facilities claims relating to its bills to Verizon for the entrance facilities that CoreTel contends Verizon leased; (3) Verizon's reciprocal compensation claims; and (4) Verizon's claims that CoreTel improperly billed it for services under CoreTel's tariffs.

The district court granted summary judgment in Verizon's favor on each issue, but on liability only. It reserved the question of damages for trial. The parties then jointly moved for a final judgment reflecting " the stipulated damages that are required by [the district court's summary judgment] ruling" to expedite an appeal. Joint Motion, J.A. 1500. The district court entered the agreed-to final judgment, and this appeal followed.


Each of the issues discussed below was resolved on motions for summary judgment.

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Accordingly, we review each under the same familiar standard:

We review the district court's order granting summary judgment de novo, viewing the facts in the light most favorable to, and drawing all reasonable inferences in favor of, the nonmoving party. Summary judgment is appropriate when there are no genuine issues of material ...

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