deal dixon and i represent north county communications this case is much about the misinterpretation of the telecom act by the district court in making its determination about the case the district court decided it needed to determine whether or not north county communications was a local exchange carrie because the contract which was a settlement agreement between the parties in a switch to access agreement on going forward basis so said that north county would be providing so much tax or service in those places were also provided local exchange service now the difficulty is local exchange service itself is not defined in the act but local exchange provider or local exchange carrier is defined in the act it's section one fifty three subsection thirty two which defines out as any person engaged in the provision of telephone exchange service or exchange access to district court i'm sure you've read the opinion it's focused on telephone exchange service deciding that that term was most analogous to local exchange service but the district court did not pay any attention to the fact that a local exchange carrier doesn't have to provide just telephone exchange service it could provide in the alternative exchange access and the term exchange access is defined and it says the offering and this is in section one fifty three also in subsection twenty that that is the offering of access to telephone exchange services or facilities for the purpose of origination or terminations of telephone toll services now this is important because it's in the destructive origination or determination and part of the district court's order pointed out and focused on the fact that this was one way traffic that the cause sprin north county that terminated seach if he only went one way and that's permissible under this definition and that would make north county a local exchange carrier under the act so i think the district court also thought that you had overcharged sprint and therefore had breached i'm wondering if we need to decide any of the issues you just talked about if we think the disappoint was correct some on the overcharge issue i think the overcharge it's a big number but i don't think the size of the overcharge necessarily makes it material sprint also had an obligation under the agreement which is part of the record here to notify in a timely manner of overcharges and that didn't occur the overcharges can also be resolved by credits can i stop you about this and they didn't notify you so as i understand it they stopped paying you when that be notification that would be notification in february of two thousand and eight yes so from february of two thousand and two six years later february two thousand and eight there were no disputes related to actually there were there were in that's in the record too there were over billing disputes where they thought invoices were incorrect or the rates were incorrect and those were all resolved that was around two thousand and four so sprint could have brought up the same issue and said we're being overbilled at this point but for those years when they didn't object in the way that you're saying they should have they also paid you right so so for the years that they didn't pay and they have jacked it by not paying or do you think they needed to object even more in some way they objected by not paying from two thousand and eight and so may of two thousand and ten but it wasn't until may of two thousand ten that they actually terminated the contract in this settlement agreement contract has a provision that says after the first four years which would have been any time after february two thousand and six any party could terminate for no reason at all with sixty days notice and our position has always been when february two thousand he came around they wanted to notify north county that sprint was no longer going to be paying but they waited two and a half years to terminate the contract because they continued to resell the service provided to their customers customers were able to make long distance calls that terminated to a chat line and they were able to terminate those calls without having to pay north county where any other carrier they would have had to pay them north county tried to get facilities in the verizon territory and it couldn't actually get an inner connection agreement with horizon so it ended up going into the leaf river territory which is the neighboring exchange  and that's where they were able to obtain inner connection in a very quick manner and that's where they started providing their service it may seem kind of strange but they were competing with leave forever they might have been in verizon they might have been in chicago or wherever they were outside of actually in dekalb and this is what i'm from illinois and so i was curious  i wanted to address the court's questions about the statute of limitations and i will just try to make that as quick as possible obviously statue of limitations is something that's review whether or not the correct statute was used and i think in the cases that were supplied by the court and the other cases later that cite those cases it seems pretty clear to me that the two year statute of limitations under the telecom act will apply to causes of action that spring from telecom related services and for that reason i believe it's very clear that the f c c to your statute of limitations under section four fifteen would apply and not the four year california contract statue of limitation it is a contract cause of action that right the counterclaim the counter claim there are six counter claims the first four i believe  alleged violations of the telecom act two a one two zero two zero six two a one b and only near the end of the counterclaims is the phrase in the alternative breach of contract but i believe it was the pavlik case that said no matter how you phrase it no matter how you dress it up it's still a telecom issue in the two years statute of limitation should apply do you contend north country is a carrier you said for fifteen applies from anything that springs from a telecommunications service but that isn't what for fifteen says it's a suit against a carrier yes north county is a carrier north county communications is a local exchange carriers the public utility commission in every state has issued certificate saying that in two thousand and nine in this case is also in north counties brief in two thousand and nine the f c c determined in the metro p c s case that north county was a local exchange carrier and that was providing local exchange services to its truck lines  that decision itself from the f c c in two thousand and nine refers specifically to the fact that north county was providing services to chat lines what portion of the district court's order finding that you weren't a carrier  is clearly erroneous w to look at telephone access service and focus on this issue of subscriber disappear pay you something as i was just pointing out that's only half the possibility the possibility to be a local exchange carriers you're also providing exchange access and in this case north county was giving sprint and its wholesale customers and their end users the opportunity to terminate their calls to the numbers they dialed and they went to chat lines and sprint received the benefit of the bargain here the benefit of the bargain was north county would terminate all the traffic that's been sent to it and spent it would terminate it with itself because northern only is the it's a phillip wholly owned affiliate h f t right it's an affiliate but if you look at the cases out of the f c c that are cited in our briefs and particularly the later decision by the f c c and it's two thousand and eleven in a carrier compensation order providing a service to an affiliate is not unlawful it's not a violation and it doesn't mean that the traffic that you terminate is not compensable i don't think the district court found that it was unlawful it just found that it was dealing with itself it was nothing other than itself  but i don't think i don't think that they followed what the f c c had said about dealing with yourself or dealing with an affiliate in the se like access reform orders are in the twenty eleven order i think the district court was wrong to determine that there are two that the two companies are simply one in the same in those cases that we saw from the f c c make clear that they're not the same company and you can terminate that traffic and you can get compensation for that can i take you back to the counter claim statute of limitations issue so as i understand it the district court thought that it was a state law contract cause of action that was at issue in the counter claim but said that the agreement expressly subjects interpretation and enforcement to the communication acts rules i'm trying to figure out if that was correct because i'm not sure that the agreement is so clear that it should be the communications act instead of california law it has provisions for both and it doesn't say which one trumps the other i would argue that the the end result was the correct result the rationale getting there was not the correct russia now so where did the district court go right how do you get there a different way than the district court did to get to the to your statue of limitations i support the to your statue of i'm right i know that so how do you get there you said the reasoning was wrong but you got how do you get there i believe part of the reason was wrong simply because there was a confusion of whether or not state law controlled or whether the telecom act and trolled and i think the case is the public case the m f s case there are a couple other cases that have come under the communications act instead of a cap counterclaim under california contract law because it's an over billing issue but it's over billing based on the contract right i mean based on reading the agreement on whether th think i would imagine the district court would say that it determined the contract it apply to any of these calls i think the contract should apply to the calls in the t of limitations for the federal act would probably applies the statute of limitations if you want to go back in time under these cases if north county had filed this two years after it was filed it would have been dismissed because it didn't meet the  even though it was a separate contract it didn't meet the requirements under four fifteen i would like to reserve just a couple of minutes for  afternoon may it please the court my name is phil shaken bergen i'm here on behalf of sprint communications company i like to start with something mr dixon just said which was if north county had filed their action its action  would have been subject to a two year statute of limitations and in that in that context i want to address the m f s international case that you asked the parties to address on the statute of limitations issue this was  position of north county at the time that it filed its second amended complaint in two thousand and eleven all the way through until what i think mr dixon said two minutes ago was that the tariff had nothing to do with  service agreement and what that means is this is not a claim to enforce a tariff the building party disclaimed all reliance on a tear and pound of its hand hands on the table time after time and said this was a contract claim if this had been a filed rate doctor in case we do won this case years ago north county communications f c c tariff filed in two thousand and three and in effect addition at some point during the dispute period here and this isn't really called out in the briefs or the order but north county transferred its authorization is to do business and its network to its affiliates and that's when judge of angle refers to providing local service through affiliates and so query in that case whether there's a ability to even talk about foundry doctrine cases when you've got at that point a carrier not even a carrier and entity who has a bill or but not even a telecom carrier because it's transferred it's authorizations to affiliates whether doctrine cases could apply now we did argue that the foul rate doctrine prevented north county from pursuing its claims and absence of a valid tariff that was an issue teed up for the federal communications commission when this case was referred it for a period of time but judge bench vango severed the contract claims and counterclaims and the defenses and said we're going to try these as contract claims and so when a federal district court judge says try it on for a case we try to concrete contract case and we were fairly confident that we could win that because the contract stated very clearly that north county had to provide local exchange service that's in so i have a question about this that they never changed what they were doing did they but for a long time you paid and even you entered the contract using this language knowing what their business was is that right yes there is certainly testimony on the record that at the time that the contract was entered that the dispute that the parties were having at that time time was a different kind of dispute it wasn't over whether h f he was a bona fide end user it was over rates so certainly there is such testimony but what the district court did was was under california's parole evidence r ambiguities in this contract it required north county to provide i'm sorry it applied only in erie as were north county was providing local exchange service not operating as a local exchange carrier which is an important distinction compared to what mr dixon was talking about and so what the district court did was took that phrase was informed by mr lessers testimony about what he understood the contract to mean the kinds of testimony that you're talking about your honor and she was also informed by testimony from sprint's witnesses and testimony from an expert who testified about what an access agreement is and how it's used in the industry how it differs from other kinds of telecommunications contracts and gave testimony that custom and usage in this particular industry would lead one to believe that the phrase local exchange service would require one interpret in the contract to go back to the essentially the federal regulatory regime regarding how when when access charges get applied as well as state law regarding what you have to do to provide local exchange server what did sprint get the thought it was supposed to get under the agreement north county never terminated any calls to local exchange service customers and under the federal regulatory requite the question i asked i mean sprint entered into this agreement after it had been gauged in business of some kind with north county i don't see how north counties business changed at all north county appears didn't provide the service it said it would provide we had provided before what expectation did sprint have that it would get any more than it had previously gotten and how did sprint lose out because of that i politics for interrupting sprint's expectation and sign this agreement was that if it was going to have to pay regulated charges those regulated charges were going to be for calls that met the requirements of the regulatory regime the tariff regime allows and to to use who are regulated in certain circumstances to force their rates on those if you don't follow the rules if they're not the right kind of calls those regulated charges don't apply this is again some of these issues were described and discussed by mr wood our expert pages for sixty five of the transcript through about five fifty i think are very helpful to see what the what the court was was listening to and the dialogue she had with our witness on these points is the issue that farmers was decided and that changed misprints understanding of what this contract meant you know out of the testimony was graphic pumping or access stimulation which became a very significant initiative both with sprint another long distance carriers started to become started to bubble to the service in two thousand and seven and two thousand and eight and then the farmer's decision in two thousand and nine certainly gave guidance that hadn't been there before but it's no surprise when you have a big company that pays billions of dollars a year in these kinds of charges that the company is going to do its best to try to focus on over billings that are significant immaterial ms clowes or sprint's witness testify that her work on over one hundred of these traffic pumping or access stimulation cases helped save the company hundreds of millions of dollars of improper charges so mr lester may have been doing this for a long time and he may have been doing it under the radar and then it wasn't on the radar anymore for various reasons that were described by sprin witnesses sprint invoked its right to challenge and the findings of the district court that are not clearly erroneous and for which there's no basis to find there are clearly erroneous is that north county didn't do that which it was required to do one of the contract as required by california law if you're going to force a country and in a couple of respects north county never provided a reasonably acceptable bill even if they provided service local exchange service to an end user they never provided a reasonably acceptable bill is your counter claim based on the lack of reasonably acceptable bills or is it based on them not providing  service it's based on them billing sprint for amounts that weren't authorized by the contract says that about the lack of the local service we tried it both ways we certainly alleged in the in the pre trial order and proved put on a case to prove that not only did north county breached the contract by providing i'm sorry for billing for nine compensable services because h f he was not a bona fide end user of didn't find that suggests that overbilling can be so material breaches to justify nonpayment even for the services that were provided might have been properly built we did not  cases and i don't have any such cases that question is only relevant in the event that you reverse the just record as to whether north county provided local exchange services of all are alternatives routes i understand that but but you've offered up overbilling as one route and i understand the theory of it but i haven't encountered before now maybe because the overbuilding is unusual here but i found that there were some proper charges then you might have had that question raised as it would be up for the judge to decide if there if this was a local exchange service but there was over whoever the incumbent local exchange would be presumably that entity would be entitle to a fee for making that last connection between sprint down the phone number that was through an incumbent carrier perhaps and then a competitive carrier and then on to that yet line and the problem is that this business practice is built around a relationship between telephone company and chat line company or conference line company in which they have to be business partners for this venture to work because the telephone company builds the longest distance industry and they split the profits to fund the venture and the problem is and it's been shown time after time in farmers in the northern valley case in the case in south dakota of all the native american telecom that i think we put in a rule twenty eight letter or i'm sorry but in our brief  that in that instance where you're doing business together and you're not a common carriers customer this is far different from what the reason we have regulation of these kinds of utilities which is to provide  service to the general public so i disagree with your your premise dr that you would have a situation in which the traffic pump or chat line would be receiving a call and would be a traditional end user it may be out there it may be happening but it certainly wasn't happening like i confess i'm not sufficiently familiar with adult chat lines but is it is this are the phone calls i the fees collected by their partner the only way they're receiving you know it's a little number it's not like i'm being charged right it's not that it's not at eight whatever the number but and you don't pay a fee for using the chat line for the time per minute or something  and that's why this business relationship is so important and it's the business relationship that undermines the ability to charge into the regulatory regime and we spend more time on chat lines let me just respond to one question or one point that judge clifton made and it relates to dick dekalb and lee forever the question is not whether north county communications own equipment switching equipment is in dekalb the question is whether its alleged customer is into kelp and in this case h f t's equipment was in de kalb if h f t's equipment had been in leaf river we might have had a different result but it's the fact that h f t's equipment wasn't a cow that makes  difference here well i'll take you over time to ask about the response it seemed to me it was likely driven by the fact that we forevers local exchange could charge a higher rate as a rural local exchange but the explanation being offered up and there was a reference to it being in the record someplace was advise and wouldn't enter into an interconnection agreement this well i think i've had some prior cases but we've gone beyond my expertise here what do you have to say about  explanation as to why leaf river number was used i don't recall that being in the record but it certainly maybe that wouldn't prohibit h f use equipment from being physically located in lea hold up thank you thank you i'd like to address two quick points there may be a question about because i saw the look of surprise that nobody pays for this yes i would like to know if you agree with this description of the business model there are different business models for this business model one is divided by through an affiliate to one's own affiliate the other and these are the farmers northern valley and several other cases chatline company exists solely by itself and then enters into a revenue sharing arrangement with the local exchange carriers but so does your client make money only through the telephone charges or do you charge like a membership so there's no there's no membership fee there's advertising revenue for the hold time that they get from sponsors and but the rest of the money for these calls would be made from the switched access service for terminating one thing i wanted to address was the question about a case that says you get the service for free and in north counties opening brief there is a reference to an f c c decision called america's choice and its eleven f c c record twenty two for ninety four in paragraph twenty four and the f c c says that a purchaser of telecommunications services is not absolved from paying for services rendered solely because the services furnished were not properly t and i think the same could apply here we're not talking about tariff services but we are talking about a billing mistake or in the case of a tariff if your tariff is wrong it's a billing stake there might be other things that could be wrong based on what your tariff says but your claim all along was that the billing was wrong through the contractor they should've been paying you under the contract not of the tariff right that the that the contracts set forth what those rates would be and only for state calls did those rates refer to a tariff otherwise you simply referred to the f c c as two thousand and one see large c like access reform order as the benchmark meaning north county could only charge what the incumbent local exchange carriers charged in that same area but i mean you're argue you sued them because they weren't paying you and you said under the contract they have to pay us under the contract in the contract the pricing just the pricing was based on federal regulations and princip