Court Opinion

ID: 2827390
Source: CourtListenerOpinion
Date Created: 2015-08-14 15:01:26.527974+00
Date Added: 2024-06-11T12:24:57.618341
License: Public Domain

United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 14-3109
                        ___________________________

                     Sprint Communications Company, L.P.

                       lllllllllllllllllllll Plaintiff - Appellant

                                           v.

 Elizabeth S. Jacobs; Geri D. Huser;1 Nick Wagner, in their official capacities as
                      members of the Iowa Utilities Board

                     lllllllllllllllllllll Defendants - Appellees

                                           v.

     Windstream Iowa Communications, Inc.; Office of Consumer Advocate

                lllllllllllllllllllllIntervenor Defendants - Appellees
                                       ____________

                    Appeal from United States District Court
                 for the Southern District of Iowa - Des Moines
                                 ____________

                             Submitted: May 14, 2015
                              Filed: August 14, 2015
                                  ____________

Before WOLLMAN, SMITH, and BENTON, Circuit Judges.
                          ____________

      1
       Board member Huser is substituted for her predecessor in accordance with
Federal Rule of Appellate Procedure 43(c)(2).
WOLLMAN, Circuit Judge.

      As explained below, this case is before us yet again, with the present
proceeding being an appeal by Sprint Communications Company, L.P. (Sprint) from
the dismissal of its complaint against members of the Iowa Utilities Board (the
Board). We reverse and remand for further proceedings.

       Under the Telecommunications Act of 1996, local exchange carriers such as
Windstream Iowa Communications, Inc. (Windstream) must connect calls made to
their customers by the customers of national telecommunications companies such as
Sprint. Prior to 2009, Sprint paid Windstream state access charges for connecting
nonnomadic intrastate long-distance VoIP calls—that is, calls made by cable-
telephone customers over the Internet in Iowa, delivered to Sprint for format
conversion, and then transferred to Windstream for delivery to its telephone
customers in Iowa. In 2009, Sprint began withholding payment of state access
charges for these calls, claiming that VoIP calls were “information services” and that
payment to Windstream thus should be governed by a reciprocal compensation
agreement between the parties, not by state access charges. In response, Windstream
threatened to block Sprint traffic from reaching Windstream’s customers.

        The dispute was presented to the Board for resolution. In February 2011, the
Board found that the calls at issue were telecommunications services subject to state
regulation, not information services, and ordered Sprint to pay Windstream all unpaid
state access charges. Sprint petitioned for review of the Board’s decision in Iowa
state trial court. At the same time, Sprint brought an action in federal court against
members of the Board,2 seeking to enjoin the Board’s decision. The district court

      2
      Both Windstream and the Office of Consumer Advocate, a division of the
Iowa Department of Justice, later intervened as defendants.

                                         -2-
abstained because of the parallel state proceedings, a ruling that we affirmed in Sprint
Communications Co. v. Jacobs, 690 F.3d 864 (8th Cir. 2012), only to have our
judgment reversed by the Supreme Court in Sprint Communications, Inc. v. Jacobs,
134 S. Ct. 584 (2013). By the time the case returned to the district court following
our remand order, the state trial court had upheld the Board’s decision, including its
determination that VoIP calls were not information services preempted from state
regulation. The district court dismissed Sprint’s complaint, holding that issue
preclusion barred Sprint from raising the same arguments in federal court that the
state trial court had already addressed.

       Sprint appeals, arguing that although the elements of issue preclusion are met,
we should not give preemptive effect to the state trial court’s decision in this case.
We review this issue of law de novo. See Hines v. Anderson, 547 F.3d 915, 920 (8th
Cir. 2008).

       Sprint relies on Iowa Network Services, Inc. v. Qwest Corp., 363 F.3d 683, 690
(8th Cir. 2004), in which we held that a decision by the Board interpreting the
Telecommunications Act did not have preclusive effect in federal court. Here, the
issue is whether preclusive effect should be given to a state-court decision, not that
of the Board. Federal courts must accord state-court decisions “full faith and credit”
under 28 U.S.C. § 1738, whereas the common law governs the preclusive effect of
administrative decisions. See Astoria Fed. Sav. & Loan Ass’n v. Solimino, 501 U.S.
104, 107, 109 (1991). None of the defendants argued in their briefs that this
distinction mattered, however. Moreover, at oral argument, defense counsel
expressly disclaimed any reliance on this distinction, arguing instead that the
preclusive effect of a state-court decision under § 1738 is the same as that of an
agency decision under the common law. We will thus assume—without
deciding—that the Iowa Network Services framework applies here.

                                          -3-
        In Iowa Network Services, the parties disputed whether certain mobile calls
were local calls or long-distance calls under the Telecommunications Act. 363 F.3d
at 687. If the calls were local, the parties would be required to enter a reciprocal
compensation agreement, which would govern payment for the calls; if the calls were
long distance, payment for the calls would be governed by state access charges. Id.
The Board determined that the calls at issue were local calls and that compensation
should thus be governed by a reciprocal compensation agreement. Id. at 688-89. The
local exchange carrier then filed a collection action in federal district court, seeking
unpaid state access charges based on its argument that the calls were long distance.
Id. at 689. The district court held that because the Board had already determined that
the calls were local and not long distance, the claims were barred by res judicata. Id.
at 689. We reversed. Id. at 685. We recognized that unreviewed state administrative
decisions should be given preclusive effect unless Congress intended otherwise and
held that “Congress intended to supplant the common law principles of claim
preclusion when it enacted the [Telecommunications] Act, at least with respect to the
issues here involved.” Id. at 690. We further recognized that “[f]ederal courts have
the ultimate power to interpret provisions of the [Telecommunications] Act,” id. at
692, and that “if the federal courts believe a state commission is not regulating in
accordance with federal policy they may bring it to heel,” id. at 693 (quoting AT &
T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 378 n.6 (1999)). We reasoned that by
adopting the Telecommunications Act, “Congress greatly expanded the federal
government’s involvement in the telecommunications industry, even into areas . . .
that previously had been left to state regulation.” Id. at 690. We emphasized that the
Board had determined that payment for the traffic should be governed by a reciprocal
compensation agreement, the terms of which would eventually be subject to federal
review (after the parties entered into a reciprocal compensation agreement and had
it approved or rejected by the Board). Id. at 691-692. Because the Board’s
determination that the traffic was local would not have preclusive effect during
federal-court review of the terms of a reciprocal compensation agreement, we
reasoned that it did not have preclusive effect in the collection action. Id. at 692.

                                          -4-
       Sprint argues that the issue before the state court in this case is similar to the
issue before the Board in Iowa Network Services; consequently, preclusion principles
should not bar federal-court review of the issue here. As in Iowa Network Services,
the issue in the state proceedings in this case was whether payment for certain traffic
should be governed by a reciprocal compensation agreement under section 251 of the
Telecommunications Act or by state access charges. But here, the Board determined
(and the state court agreed) that the calls at issue were subject to state access charges;
in Iowa Network Services, the Board determined that the calls at issue should be
governed by a reciprocal compensation agreement. Sprint argues that whether a
federal court is bound by issue-preclusion principles should not depend on the
outcome in the state proceedings. We agree. Although in Iowa Network Services we
relied on the fact that the issue decided by the Board would ultimately be subject to
federal review once the parties entered a reciprocal compensation agreement, we held
that Congress intended to supplant common-law preclusion principles “with respect
to the issues here involved.” Id. at 690 (emphasis added). Thus, the holding in Iowa
Network Services that the Board’s decision did not have preclusive effect in federal
court depended on the issue the Board decided, not the Board’s resolution of that
issue.

        Nevertheless, Windstream and the Board argue that Iowa Network Services is
distinguishable for a different reason. At issue in Iowa Network Services was
whether certain mobile calls “involved local traffic rather than long-distance toll
service” under the Telecommunications Act “and as such, reciprocal compensation
under § 251(b)(5) rather than [state] access charges applied to the traffic.” Id. at 690.
Here, Windstream and the Board argue that whether a reciprocal compensation
agreement or state access charges applied to the traffic depended on the interpretation
of state law, not federal law. We disagree. It is true that the Board determined that
state law required Sprint to pay state access charges to Windstream for the VoIP calls
at issue. But Sprint did not contest that state law required Sprint to pay Windstream
state access charges. Rather, it argued that federal law preempted state law and

                                           -5-
therefore that the state regulations were invalid as applied to the VoIP calls at issue.
Sprint’s preemption argument turned on a matter of federal law—that is, whether
VoIP calls are information services or telecommunications services.3

       In light of our holding in Iowa Network Services, we conclude that Congress
did not intend that issue-preclusion principles bar federal-court review of the issue
involved here: whether the nonnomadic intrastate long-distance VoIP calls at issue
are information services, payment for which should be governed by a reciprocal
compensation agreement, or telecommunications services subject to state access
charges. We express no view on the merits of the parties’ arguments. It is for the
district court to determine in the first instance whether the calls are information
services or telecommunications services.

      The judgment of the district court is reversed, and the case is remanded for
further proceedings.
                     ______________________________

      3
        Windstream and the Board recognize that the Board spent most of its opinion
analyzing decisions by federal courts and the Federal Communications Commission.
They argue, however, that the Board merely analyzed federal law to determine that
it had jurisdiction. Whether the Board had jurisdiction, however, was intertwined
with the ultimate issue: whether state access charges applied to the traffic.

                                          -6-