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Birmingham Emergency Communications District v. Level 3 Communications, LLC

United States District Court, N.D. Alabama, Southern Division

November 1, 2017




         This 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).[1] 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.

         I. Standard of Review

         Federal 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)).

         II. Facts

         Given 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.

         Pursuant 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.[2]

         The 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.

         III. Discussion

         Level 3 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.

         A. Level 3 's Purported Compliance with the ETSA as a Matter of Law

         As 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 fees for.

         As 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.

         As a 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 ...

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