Central Office Telephone, Inc. v. American Telephone & Telegraph Co.

108 F.3d 981, 97 Daily Journal DAR 2016, 97 Cal. Daily Op. Serv. 1339, 1997 U.S. App. LEXIS 3395, 1997 WL 78442
CourtCourt of Appeals for the Ninth Circuit
DecidedFebruary 26, 1997
DocketNos. 94-36116, 94-36156
StatusPublished
Cited by3 cases

This text of 108 F.3d 981 (Central Office Telephone, Inc. v. American Telephone & Telegraph Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Central Office Telephone, Inc. v. American Telephone & Telegraph Co., 108 F.3d 981, 97 Daily Journal DAR 2016, 97 Cal. Daily Op. Serv. 1339, 1997 U.S. App. LEXIS 3395, 1997 WL 78442 (9th Cir. 1997).

Opinions

SAMUEL P. KING, District Judge.

American Telephone & Telegraph Company (“AT&T”) appeals the judgment of the magistrate judge, following a three-week jury trial, awarding Central Office Telephone, Inc. (“COT”) $1,154 million in damages, and denying AT&T’s claim for over $1 million in unpaid federally tariffed charges for long distance services, under the Federal Communications Act of 1934, (“Communications Act” or “Act”) 47 U.S.C. § 153(h). COT’s action against AT&T alleged breach of contract, breach of implied covenant of good faith and fair dealing, and tortious interference with contract. COT cross-appeals the magistrate judge’s decision not to allow the jury to consider an award of punitive damages, as well as the magistrate judge’s post-trial order reducing the original jury verdict of $13 million in compensatory damages in favor of COT.

COT, a reseller of long distance services, entered into a contract with AT&T for Software Defined Network (“SDN”) services, which COT later resold to its customers. AT&T is a provider of long distance services and is classified as a common carrier under the Communications Act, 47 U.S.C. § 153(h), and therefore, its long distance services are subject to the requirements of § 203 of the Act, which contains statutory filed tariff requirements.1 47 U.S.C. § 203.

The tariffs filed with the Federal Communications Commission (“FCC”) by AT&T set forth the rates for each of its long distance services. One of the services provided by AT&T is SDN, a long distance service which provides a physically separate long distance network for a customer’s long distance service. In addition to describing rates for the service, the SDN tariff limits AT&T’s liability for all but wilful misconduct.

SDN customers make large volume commitments, and therefore, SDN rates are lower than rates for other AT&T services. Because the set-up of an SDN network is complex, the tariff provides for an up-front installation charge to the customer. Once SDN is set up, the customer may add new locations or drop old ones from the network.

SDN has several characteristics attractive to switchless resellers2 such as COT. It accommodates switched access, allowing resellers to offer the service to its customers who are generally small businesses or residences. Furthermore, Multiloeation Billing (“MLB”),3 added by AT&T in 1989, allows volume discounts to be apportioned between an SDN customer and individual locations on its network, in a proportion chosen by the customer. Under this option, AT&T sends bills directly to the reseller’s customers, however, the reseller remains responsible for all payments. Another billing option offered is the Location Account Billing Option (“LABO”), under which AT&T sends bills to each location at the discount rate, and each location is responsible for payment.

AT&T also instituted two tariffed pricing promotions in 1989 which are attractive to resellers. Expanded Volume Pricing plans (“EVPs”), offering additional discounts from [987]*987the basic SDN rates for customers making large usage and duration commitments, and another promotion which waived the installation charges and per-location installation charges for customers making multi-year commitments, subject to penalties for early termination.

Following the 1989 changes in SDN service, orders from resellers increased, and AT&T experienced delays in provisioning SDN, especially switched access service. Billing problems also occurred, most notably, “suppressed billing”4 which resulted in customers not receiving bills for calls for up to one year after the calls were made.5

In light of the problems with SDN, AT&T limited the number of new SDN customers. AT&T also transferred servicing of all reseller customers to the Channel Development and Operations Center (“CDOC”).6 The CDOC was the successor to the Carrier Service Center, which had previously done business with AT&T’s reseller customers.

COT placed orders for SDN, after COT’s president became aware of SDN in 1989, and contacted AT&T’s Portland office regarding the service. On October 80, 1989, COT signed an agreement for SDN service, and selected Multi Location Billing. AT&T represented to COT that the service would be provisioned in four to five months, and thereafter, additional orders within 30 days. In February, AT&T advised COT that new orders would take 45 to 90 days due to provisioning problems, and informed COT that another AT&T service, Multi Location Calling Plan (“MLCP”) would serve COT’s customers until they were provisioned onto SDN.

COT began reselling SDN services in April 1990, and immediately experienced problems with the network including provisioning delays and suppressed billing. COT also experienced an additional billing problem; COT’s customers received 100% of the discount instead of the 50% COT had selected, because COT was billed under the LABO billing option rather than the MLB billing COT had selected. COT continued to experience problems with provisioning and billing, and in October 1990 COT switched from MLB billing to Network Billing, under which AT&T sent COT a single bill which COT was responsible for paying. COT then sent individual bills to its customers.

Although COT continued to sell SDN, it was ultimately unable to meet its usage commitment for the first period in which it was applicable. In addition, AT&T claimed that COT had failed to pay nearly $200,000 in bills from the period in which COT was under MLB billing. On September 21,1992, COT’s president informed AT&T that COT was terminating its contract as of September 30, 1992, with lj¿ years remaining in the contract.

COT filed suit on November 27, 1991. COT ultimately pursued three state law claims at trial: breach of contract, breach of implied covenant of good faith and fair dealing, and tortious interference with contract.7 COT’s state law claims were based on COT’s allegation that the contracts entered into with AT&T did not constitute the ordering of long distance pursuant to the requirements of AT&T’s tariff, but rather constituted voluntary contracts in which COT agreed to purchase, and AT&T agreed to provide long distance services. COT also claimed that the contracts encompassed more than the written orders, and included all the understandings that COT’s president had from reading service brochures and from talking with AT&T representatives.

COT argued that AT&T’s failure to provision SDN orders in a reasonable manner, [988]

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108 F.3d 981, 97 Daily Journal DAR 2016, 97 Cal. Daily Op. Serv. 1339, 1997 U.S. App. LEXIS 3395, 1997 WL 78442, Counsel Stack Legal Research, https://law.counselstack.com/opinion/central-office-telephone-inc-v-american-telephone-telegraph-co-ca9-1997.