Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-07271/USCOURTS-cand-3_06-cv-07271-1/pdf.json

Nature of Suit Code: 950
Nature of Suit: Constitutionality of State Statutes
Cause of Action: 28:1331 Fed. Question

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

AT&T COMMUNICATIONS OF

CALIFORNIA, et al.

Plaintiffs,

 v.

PAC-WEST TELECOMM, INC., et al.

Defendants.

 /

No. C 06-07271 JSW

ORDER GRANTING PLAINTIFF

AT&T’S MOTION FOR LEAVE

TO MAKE DEPOSIT IN COURT

PURSUANT TO FRCP 67. 

INTRODUCTION

This matter comes before the Court upon consideration of the Motion to Make Deposit

In Court Pursuant to Federal Rule of Civil Procedure 67, filed by Plaintiff AT&T

Communications of California (“AT&T”). Having considered the parties’ pleadings and

relevant legal authority, and having had the benefit of oral argument, the Court HEREBY

GRANTS AT&T’s motion on the conditions set forth herein.

BACKGROUND

On November 27, 2006, Plaintiffs AT&T, Teleport Communications Group of Los

Angeles, and Teleport Communications Group of San Diego (collectively “Plaintiffs”) filed this

action against Defendant Michael R. Peevey, in his official capacity as the Commissioner of the

California Public Utilities Commission, and Defendants Geoffrey F. Brown, Dian M.

Grunewich, John Bohn, and Rachelle Chong, in their official capacities as Commissioners of

the California Public Utilities Commission (hereinafter, collectively, “the CPUC”). Plaintiff

seeks 

Case 3:06-cv-07271-JSW Document 38 Filed 04/13/07 Page 1 of 4
United States District Court

For the Northern District of California

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a declaration that the CPUC violated the Supremacy Clause of the United States Constitution

when it rendered a decision against AT&T and in favor of Defendant Pac-West Telecom, Inc.

(“Pac-West”), which requires AT&T to compensate Pac-West, according to a Pac-West tariff,

for internet service provider bound traffic that originated on AT&T’s network but that

terminated on Pac-West’s network. (See Complaint ¶¶ 48-54.) AT&T also brings a cause of

action for unjust enrichment and restitution against Pac-West to recover sums paid to Pac-West

in accordance with the CPUC’s decision. (Id. ¶¶ 55-60.)

AT&T brings this motion because it is obligated to continue to pay sums to Pac-West

under the CPUC decision.

ANALYSIS

Federal Rule of Civil Procedure 67 provides, in relevant part,:

In any action in which any part of the relief sought is a judgment for a sum

of money or the disposition of any other thing capable of delivery, a party,

upon notice to every other party, and by leave of court, may deposit with

the court all or any part of such sum or thing, whether or not that party

claims all or any part of the sum or thing.

Fed. R. Civ. P. 67. Rule 67 enables a party to be relieved of responsibility for a disputed fund,

while the parties litigate ownership of the fund. See, e.g., Qwest Corp. v. City of Portland, 204

F.R.D. 468, 470 (D. Or. 2001) (quoting Cajun Elec. Power Coop., Inc. v. Riley Stoker Corp.,

901 F.2d 441, 444-45 (5th Cir. 1990). The question of whether or not to grant a Rule 67 motion

is a matter committed to the Court’s discretion. See Gulf States Util. Co. v. Alabama Power

Co., 824 F.2d 1465, 1475 (5th Cir. 1987), modified on other grounds 831 F.2d 557 (5th Cir.

1987).

AT&T argues that the Court should grant it leave to pay any sums due to Pac-West

because the question of whether AT&T owes Pac-West these monies genuinely is in dispute. 

See Gulf States, 824 F.2d 1475 (finding that district court did not abuse discretion in granting

Rule 67 motion where parties genuinely disputed whether funds were owed under contract). 

Pac-West argues that the Court should deny the motion because AT&T cannot succeed on the

merits of its claim. Pac-West is correct that the Court may consider the likelihood of success

when ruling on the motion, but, unlike a motion for a preliminary injunction, AT&T need not

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1 Pac-West also did not argue that it would suffer any undue hardship if the

Court granted the motion.

2 The CPUC appeared at the hearing but did not present argument and has not

filed an opposition to the instant motion.

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establish a likelihood of success before this Court can grant its motion. See id. at 1475 n.11. It

is evident to the Court that the parties genuinely dispute whether AT&T is required to pay the

sums in dispute to Pac-West and, thus, this fact weighs in favor of granting the motion.1

 

Pac-West also argues that if it grants AT&T’s motion, the Court will alter the legal

obligations between the parties. (Opp. Br. at 7-8.)2

 The crux of Pac-West’s argument appears

to be that it has calculated a rate of interest on delinquent payments that compensates for the

fact that it has no choice but to provide the service in question. However, that argument relates

to the fact that Pac-West may be denied use of the funds for some period of time. That,

however, is the purpose of depositing the funds in an interest bearing account. See, e.g.,

American Nat’l Property and Casualty Co. v. Lindgren, 736 F. Supp. 275, 276 (N.D. Ga. 1990).

In support of its argument that it would be improper to use Rule 67’s procedures if it

would alter the legal obligations of the parties, Pac-West relies on LtV Corp. v. Gulf States

Steel, Inc. of Alabama, 969 F.2d 1050 (D.C. Cir. 1992). In that case, the parties signed a

promissory note that permitted a certain rate of interest if the defendant defaulted on payments. 

Id. at 1063. At the time the district court permitted defendant to deposit sums due and owing to

the plaintiff into the court registry, the defendant already had defaulted on the promissory note. 

As such, the court of appeals concluded that the district court abused its discretion in granting

defendant’s Rule 67 motion, because it permitted the defendant to avoid the contractual interest

rate it owed the plaintiff. 

In this case, at the time it filed the motion, AT&T was not delinquent on any payments

due to Pac-West. Thus, the concerns at issue in LTV Corp. were not implicated. However, after

it filed the motion, AT&T notified Pac-West that it would not pay any invoices until the Court

resolved the motion. The parties confirmed at the hearing that AT&T is now delinquent on

certain payments. The Court finds that it would alter the legal obligations to the parties if it

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allowed AT&T to avoid an interest rate that it would be otherwise required to pay for these

delinquent payments, simply because it wishes to make payments to the Court, rather than to

Pac-West. Accordingly, the Court shall grant AT&T’s motion, but only on the condition that if

AT&T fails to make a timely payment, it shall be subject to the interest rate called for by the

Pac-West tariff. 

Accordingly, it is HEREBY ORDERED that AT&T’s motion is GRANTED and it shall

be permitted to deposit funds due to Pac-West with the Court in an interest bearing account. 

The Court’s Order is conditioned upon AT&T making those payments within the time the

payments would otherwise be due to Pac-West. In the event AT&T fails to make a payment to

the Court registry within the required time period, Pac-West shall be entitled to late charges due

and owing under its tariff, and shall so notify AT&T and the Court that such charges are due

and the amounts due and owing.

 It is FURTHER ORDERED that AT&T’s first payment of at least $32,408.92, shall be

due to the Clerk within five (5) days of the date of this Order. The parties are ordered to

calculate any additional interest that has accrued on that interest between the date of the hearing

and the date the payment is made and to include that amount in AT&T’s first payment to the

Court.

IT IS SO ORDERED.

Dated: April 13, 2007 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

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