United States District Court, N.D. Alabama, Southern Division
MEMORANDUM OPINION AND ORDER
K. KALLON, UNITED STATES DISTRICT JUDGE.
case arises out of a dispute over the appropriate discharge
of duties imposed by the Alabama Emergency Telephone Services
Act, Alabama Code §11-98-1 et seq. (1975) (the
ETSA). The Birmingham Emergency Communications
District (the District) raises numerous claims alleging that
Level 3 Communications, LLC and Level 3 Communications, Inc.
(collectively Level 3) violated the ETSA by failing to
properly report, collect, and remit required 911 charges on
thousands of active telephone lines. The court has already
ruled on Level 3's previous motion to dismiss finding
that, while most of the District's claims may go forward,
the District's claim for fraud failed to meet the
heightened pleading standard imposed by Fed.R.Civ.P. 9(b) and
was due to be dismissed. See Doc. 25 at 1-2. The
District has now filed an opposed Motion for Leave to File
First Amended Complaint, doc. 27, in an attempt to cure the
deficiencies identified by the court in its prior ruling.
That motion is now fully briefed, docs. 30; 34, and ripe for
review. After consideration of the parties' briefs and
the record, the court finds that the District's motion is
due to be granted.
Standard of Review
courts generally follow the view that "[i]f the
underlying facts or circumstances relied upon by a plaintiff
may be a proper subject of relief, [she] ought to be afforded
an opportunity to test [her] claims on the merits."
Foman v. Davis, 371 U.S. 178, 182 (1962). The
Federal Rules of Civil Procedure buttress this conclusion,
and provide that the court "should freely give leave [to
amend] when justice so requires." Fed.R.Civ.P. 15(a)(2).
However, "a district court may properly deny leave to
amend the complaint under Rule 15(a) when such amendment
would be futile." Hall v. United Ins. Co. of
Am., 367 F.3d 1255, 1262-63 (11th Cir. 2004). The
Eleventh Circuit has explained that an amendment is futile if
'"the complaint as amended is still subject to
dismissal.'" Id. at 1263 (quoting
Burger King Corp. v. Weaver, 169F.3d 1310, 1320
(11th Cir. 1999)).
the court's prior ruling in this case and the parties
undoubted familiarity with the record, the court provides
only a brief overview of the relevant facts. The ETSA was
enacted by the Alabama legislature to authorize the creation
of "communications districts for the purpose of
establishing local emergency telephone service and to provide
funding for such service." T-Mobile South, LLC v.
Bonet, 85 So.3d 963, 967 (Ala. 2011). The District was
created pursuant to this authorization in order to provide
emergency telephone services for Birmingham, Alabama. Doc.
27-1 at 2, 5. The District receives most of its funding from
telephone service suppliers who are required to bill,
collect, and remit to the District a small service fee
assessed to residential and business telephone users.
Id. at 2-6. For providers of voice over internet
protocol (VoIP) services, like Level 3, the ETSA requires the
assessment of a service charge for each assigned ten-digit
access number, excluding those provided to a person or entity
otherwise exempt from taxation. See Ala. Code
§§ 11-98-18, 11-98-5, 11-98-5.1.
to its undisputed obligations under the ETSA, Level 3
provided monthly 911 remittance forms to the District. Doc.
30-1 at 3-5. The forms provided information to the District
regarding the number of "gross units" and the
number of "exempt units" Level 3 serviced. Doc.
27-1 at 13. The parties have not directed this court to
specific reporting requirements in the ETSA, nor has the
court located any such provision on its own. Instead, the
ETSA provides only that a form, the contents of which are
agreed upon between the service supplier and the District, is
filed in connection with the service supplier's
remittance of the amount of the 911 service charge payable to
the District. See Ala. Code § ll-98-5(e).
Likewise, the ETSA does not provide specific definitions for
"gross units, " "exempt units, " or units
that are simply "excluded" from the Act. The
District asserts that it understood gross units, as reported
on Level 3's remittance form, to mean "active
telephone numbers." Doc. 27-1 at 13.
District alleges that in an attempt to provide services at a
lower cost and gain a competitive edge over its competitors,
Level 3 billed, collected, and remitted only a fraction of
the ten-digit access numbers provided to its VoIP customers.
Doc. Id. at 7-8. Significant here, the District
alleges that Level 3 incorrectly designated thousands of
numbers as "in-bound" only, and purportedly did not
disclose the existence of those numbers on the remittance
forms it submitted. Id. at 7. The District further
alleges that Level 3 provided active telephone numbers
wholesale to "resellers, " who actually supplied
end-user service, and similarly did not report those numbers
on its remittance forms. Id. More broadly, the
District claims that Level 3 had "tens of thousands of
unreported active telephone numbers within the district"
that it failed to properly report to the District.
Id. at 15.
argues that the District's proposed amendment to the
complaint is futile because the ETSA does not require Level 3
to report telephone lines designated "in-bound"
only, or lines that were sold, wholesale, to other service
suppliers, and because the complaint does not satisfy the
heightened pleading standards imposed on fraud claims by
Fed.R.Civ.P. 9(b). The court addresses each argument in turn.
Level 3 's Purported Compliance with the ETSA as a Matter
Level 3 identifies, the gist of the District's fraud
claim is that Level 3's 911 service charge remittance
forms failed to disclose the existence of thousands of active
telephone numbers. The District alleges that, even if Level 3
was not obligated under the ETSA to bill, collect, or remit a
service charge for those numbers, the ETSA still required
Level 3 to report those numbers as "gross" but
"exempt" on its monthly remittance form. Doc. 27-1
at 15. Level 3 counters that these unreported numbers consist
of "in-bound" only numbers and numbers it provided
wholesale to other service providers, categories of service
that are simply excluded from the duties imposed by the Act.
Moreover, Level 3 argues that the "gross units"
figure it provided to the District accurately reflected the
gross number of units actually within the scope of the ETSA.
Thus, Level 3 asserts that it could not have misrepresented
anything, and that it accurately provided the District with
the gross units it had a duty to collect and remit service
previously noted, the ETSA does not appear to create any
particularized reporting requirements for telephone service
providers, and instead allows service suppliers to work out
reporting arrangements with individual Emergency
Communications Districts. See Ala. Code §
ll-98-5(e). The ETSA also does not specifically define
particular types of services as "exempt" or as
"excluded." The Act simply provides that "each
provider of VoIP or similar service [shall] collect [a
service] fee for each 10-digit access number assigned to the
user." Ala. Code § 11-98-5.1(c). So, the 911
remittance form provided by Level 3 in connection with its
duties under the ETSA was not itself governed by the statute.
Instead, the form was simply intended to facilitate Level
3's compliance with its required duties to collect and
remit fees for each 10-digit access number that it serviced.
result, at this stage of the proceeding, even if this court
were to accept Level 3's argument that
"in-bound" only lines do not have access to the 911
network and are consequently outside the scope of the
ETSA's billing requirements, a factual question would
remain concerning whether Level 3 properly classified the
unreported lines as "in-bound" only. Indeed, the
District's proposed amended complaint specifically
provides, among other things, that Level 3 "billed,
collected, and remitted 911 charges for only a fraction of
the ten-digit access numbers provided to VoIP customers,
" and that Level 3 "did not bill, collect, and
remit a 911 charge to the District for thousands of 10-digit
access numbers that it provided to users of VoIP
technology." Doc. 27-1 at 3, 5; see also Id. at
16. These allegations, accepted as true, suggest that Level 3
serviced active numbers, capable of accessing 911, that were
neither properly reported to the District or assessed a
service charge. This is sufficient to underpin a plausible
claim that Level 3's remittance forms misrepresented the
service fees due to the District. Whether the District can
ultimately sustain ...