Court Opinion

ID: 9407316
Source: CourtListenerOpinion
Date Created: 2023-07-06 16:00:49.358075+00
Date Added: 2024-06-11T17:20:36.890522
License: Public Domain

United States Court of Appeals
                             For the Eighth Circuit
                         ___________________________

                                 No. 22-2129
                                 No. 22-2190
                         ___________________________

                   Venture Communications Cooperative, Inc.

                lllllllllllllllllllllPlaintiff - Appellant/Cross Appellee

                                           v.

        James Valley Cooperative Telephone Company; Northern Valley
                           Communications, LLC

             lllllllllllllllllllllDefendants - Appellees/Cross Appellants
                                       ____________

                    Appeals from United States District Court
                    for the District of South Dakota - Central
                                  ____________

                            Submitted: February 14, 2023
                                Filed: July 6, 2023
                                  ____________

Before LOKEN, COLLOTON, and BENTON, Circuit Judges.
                          ____________

LOKEN, Circuit Judge.

       The Federal Communications Commission (FCC) provides subsidies to
encourage telecommunication companies to expand high-speed broadband internet
services in rural areas where customer revenues would otherwise be insufficient to
justify the cost of doing business. See generally AT&T, Inc. v. FCC, 886 F.3d 1236,
1241-44 (D.C. Cir. 2018). In determining the subsidy a carrier should receive, the
FCC excludes census block locations where an “unsubsidized competitor” provides
sufficiently fast broadband speeds. The FCC identifies census blocks disqualified by
the presence of an unsubsidized competitor based on its FCC Form 477, a local
competition and broadband reporting form that each provider submits semiannually.
Form 477 “provide[s] the Commission with uniform and reliable data not
comprehensively available elsewhere.” In the Matter of Modernizing the FCC Form
477 Data Program, 28 FCC Rcd. 9887, 9889 (June 27, 2013).

       Venture Communications Cooperative (“Venture”) provides broadband
services1 to rural South Dakota customers. James Valley Cooperative Telephone
Company and its wholly owned subsidiary, Northern Valley Communications
(collectively, “Northern Valley”), is a competing provider. Venture filed this lawsuit
against Northern Valley in April 2020. The primary claim is that Northern Valley
violated 47 U.S.C. § 220(e) by filing a Form 477 that “intentionally, deliberately,
fraudulently, and maliciously misrepresent[ed]” information “for the sole unlawful
purpose of harming [Venture]” by depriving Venture of FCC subsidies in census
blocks where Northern Valley was deemed to be an unsubsidized competitor.2 For
violations of § 220(e), 47 U.S.C. §§ 206 and 207 provide a private right of action to
recover damages. Venture claims it is losing $1,268,370 of subsidies each year. It
also asserted state law claims for tortious interference, fraud, unfair competition, and
civil conspiracy.

      1
       Broadband is high-speed internet, not available by dial-up. It can be provided
by fiber optic cable, wireless, satellite, digital subscriber line, or a cable modem.
      2
       Section 220(a) provides that the FCC may “prescribe the forms of any and all
accounts, records, and memoranda to be kept by carriers subject to this chapter.”
Section 220(e) makes it a misdemeanor for any person to “willfully make any false
entry in the accounts . . . or in any record or memoranda kept by any such carrier.”
Here, James Groft, Northern Valley’s CEO, certified that all information in the Form
477 at issue was accurate.

                                          -2-
       After dismissing the fraud and unfair competition claims, the district court3
granted Northern Valley summary judgment, concluding “there is no evidence that
Northern Valley willfully overreported its broadband capabilities.” The court
dismissed the tortious interference claim because Northern Valley committed no
“intentional and unjustified act of interference” and the civil conspiracy claim for lack
of an underlying tort. Venture appeals the grant of summary judgment. Reviewing
de novo, we affirm. See MCC Iowa, LLC v. City of Iowa City, 887 F.3d 370, 372
(8th Cir. 2018) (standard of review).

       A. In the American Recovery and Reinvestment Act of 2009, Congress charged
the FCC with developing a National Broadband Plan “to ensure that all people of the
United States have access to broadband capability and [to] establish benchmarks for
meeting that goal.” Pub. L. No. 111-5, § 6001(k), 123 Stat. 115, 515-16 (2009). The
FCC’s National Broadband Plan, submitted to Congress in March 2010, estimated
that 14 million people did not then have access to terrestrial broadband infrastructure
capable of meeting the agency’s target capability, creating a “broadband availability
gap.” In 2011, the FCC established the Connect America Fund (CAF) to provide
funding that would bridge this gap in unserved areas. See generally In re FCC 11-
161, 753 F.3d 1015, 1038-40 (10 Cir. 2014).4

      The FCC uses the Alternative Connect America Cost Model (A-CAM) to
determine CAF support for a particular broadband provider. Venture was excluded
from A-CAM I funding in areas where it deployed fiber optic cable, an exclusion

      3
       The Honorable Roberto A. Lange, Chief Judge of the United States District
Court for the District of South Dakota.
      4
        The CAF is one of four programs within the Universal Service Fund
established by the FCC to implement the principle of universal access to
communication services. It is funded by contributions from telecommunications
providers based on their end-user revenues. See 47 U.S.C. § 254(d)-(e); Tri-Cnty.
Tel. Ass’n, Inc. v. FCC, 999 F.3d 714, 717 (D.C. Cir. 2021).

                                          -3-
eliminated in A-CAM II, which began in March 2018. But A-CAM II excludes
census blocks where an unsubsidized competitor offers broadband speeds of at least
25/3 Mbps, a determination based on the competitor’s Form 477 filings.5

       B. On July 1, 2017, Northern Valley acquired the assets and customers of
Northern Wireless, an unsubsidized broadband provider competing with Venture in
525 census blocks in South Dakota (the “Overlap Area”). In its last Form 477 before
being acquired, Northern Wireless reported broadband speeds as high as 70/8 Mbps
in some census blocks. In its first post-acquisition December 2017 Form 477 filing,
Northern Valley reported broadband speeds of 25/3 Mbps in the Overlap Area, speeds
that would disqualify Venture from A-CAM II subsidies in those 525 census blocks.
Worried that Venture would be excluded from funding, Venture consultant John
Kuykendall wrote the FCC in April 2019, referencing Northern Valley’s reported
speeds of 25/3 Mbps and urging adoption of an A-CAM II challenge process to allow
affected broadband carriers to correct erroneous information. Kuykendall also e-
mailed CEO James Groft, asking that Northern Valley file a corrective letter advising
the FCC that it did not provide 25/3 Mbps speeds in the Overlap Area.

       On May 2, the FCC announced the A-CAM II grants, giving Venture
$10,379,546 annually for the ten-year period but no funding for census blocks in the
Overlap Area. Four days later, Kuykendall e-mailed Groft, including a draft
correction letter Kuykendall urged Northern Valley to file with the FCC. Groft
refused, explaining Northern Valley cannot submit a letter saying it has not deployed
that level of broadband service “because it is not accurate,” referring to Northern
Valley’s purchase of Northern Wireless’s network. Groft did, however, sign a

      5
        Broadband speeds are measured in megabytes per second (“Mbps”), written
as a fraction. The numerator is the speed at which a user can download information
per second and the denominator is the speed at which a user can upload information
per second. Higher numbers indicate higher quality (downloading 25 megabytes per
second is faster than downloading 10 megabytes per second, the A-CAM I standard).

                                         -4-
modified letter to the FCC stating that Northern Valley did not provide voice service
in the Overlap Area and asking the FCC to revise the A-CAM II grants accordingly.
On June 5, the FCC issued A-CAM II program modifications but did not include the
correction Northern Valley requested.6 On June 12, Venture accepted its A-CAM II
grant. This lawsuit followed.

       C. In the summary judgment proceedings, Tanya Berndt, CFO of Northern
Valley, testified that, in preparing Northern Valley’s December 2017 Form 477 filing,
she relied on Northern Wireless’s prior Form 477 that reported speeds of 70/8 Mbps.
Berndt also confirmed that Northern Wireless had billed customers for speeds over
25/3 Mbps. She reduced the speeds Northern Valley reported to 25/3 Mbps because
Northern Valley did not advertise 70/8 Mbps.

       Venture presented reports by its expert, Dominic Villecco, who performed a
“coverage analysis” of Northern Valley’s broadband network and determined that, in
341 census blocks in the Overlap Area, Northern Valley could not provide 25/3 Mbps
to at least one household. Venture argued this created a material issue of fact
precluding the grant of summary judgment -- whether the maximum advertised speed
claimed by Northern Valley was “available” to at least one end user in the Overlap
Area census blocks.

       The district court concluded Villecco’s report did not create a genuine issue of
material fact regarding whether Northern Valley willfully violated 47 U.S.C. § 220(e)
in its December 2017 Form 477 filing:

      It is undisputed that [Northern Valley] provided broadband services in
      the Overlap Area after acquiring [Northern Wireless]. It is also

      6
       This was likely because the FCC counts a broadband provider as providing
voice service in a census block so long as it provides voice services somewhere in the
State, which Northern Valley did. Voice service is not an issue on appeal.

                                         -5-
      undisputed that the FCC requires broadband providers to report
      maximum advertised speeds, and [Northern Valley] advertised speeds
      of at least 25/3 Mbps as [it] reported in its 2017 Form 477.

                                   *   *    *    *   *

      Although a broadband provider need not prove the actual speeds it
      offers by census block to comply with the Telecommunications Act,
      Northern Valley believed that it offered broadband speeds of 25/3 Mbps
      or higher in the Overlap Area based on information from [Northern
      Wireless] during the acquisition, including information that [Northern
      Wireless] reported providing broadband speeds of 70/8 Mbps and 25/3
      Mbps in its 2017 Form 477.

The court rejected the claim that Northern Valley’s actions were motivated by pure
animus, noting the email exchange between Kuykendall and Groft in which Groft
agreed to assist Venture in its correspondence with the FCC, and Northern Valley’s
genuine belief that it offered the advertised 25/3 broadband speeds after acquiring
Northern Wireless.

      On appeal, Venture argues the district court erred in granting summary
judgment dismissing its § 220(e) claim because Northern Valley certified broadband
service based solely on the service it advertised, knowing (i) it was required to report
service it both advertised and could make available, and (ii) it could not make the
service it advertised available in hundreds of census tracts being reported. Northern
Valley argues (i) it accurately reported its broadband coverage based on advertised
speeds, as the FCC required, and (ii) Venture failed to create a disputed issue of fact
whether Northern Valley willfully submitted a false Form 477.7 We have carefully

      7
       Northern Valley also renews its assertion that the district court erred in
assuming subject matter jurisdiction because (i) 47 U.S.C. § 207 allowed Venture to
either make a complaint to the FCC or bring suit in district court, but not both; (ii)
Venture repeatedly complained to the FCC about Northern Valley’s allegedly false
Form 477 filings; (iii) the FCC rejected this informal complaint and made an

                                           -6-
reviewed these complex FCC reporting requirements that have rather rapidly evolved
as the agency gained more experience in regulating broadband internet providers in
a now-competitive telecommunications market. We agree with the district court.

       D. Of critical importance to resolving this legal issue are the FCC’s instructions
to providers such as Northern Valley regarding how to report broadband internet
speeds on a Form 477 filed in 2017. The published FCC Instructions for Forms 477
filed through June 30, 2019 told telecommunication companies providing fixed
broadband connections to consumer end users to report a list “of all census blocks in
which the filer . . . makes broadband connections available to end-user premises,” and
“the maximum upload and download speeds . . . as specified in a separate document,
How Should I Format My Fixed Broadband Deployment Data?”8 This separate
document instructed filers to list the “maximum advertised downstream bandwidth
available in the census block in Mbps” and “the maximum advertised upstream
bandwidth that is offered with the above maximum advertised downstream bandwidth
available in the census block” (emphasis added). The Glossary section of the Form
477 Instructions defined these important terms:

unfavorable A-CAM II ruling; and (iv) the Hobbs Act bars district courts from
issuing orders to “enjoin, set aside, suspend (in whole or in part), or to determine the
validity of . . . all final orders of the [FCC] made reviewable by [47 U.S.C. § 402(a)].”
28 U.S.C. § 2342(1). We agree with the district court that this is a question of
statutory jurisdiction, “not the type of jurisdictional issue that must be decided before
addressing the merits of the controversy.” Lukowski v. I.N.S., 279 F.3d 644, 647 n.1
(8th Cir. 2002); cf. Butcher v. Wendt, 975 F.3d 236, 242-44 (2d Cir. 2020).
      8
        FCC Form 477 Local Telephone Competition and Broadband Reporting
Instructions for Filings Through June 30, 2019 at 16, OMB Control No. 3060-0816
(2019) https://us-fcc.app.box.com/v/Form477InstThruJune19 (hereafter “Form 477
Instructions”). The separate document is found at
https://us-fcc.app.box.com/v/FBDFormattingThruJune19.

                                          -7-
      Advertised speeds: For purposes of this form, the terms “advertised
      speeds” or “advertised bandwidths” are to be distinguished from . . .
      engineering-based concepts that do not represent the downstream and
      upstream bandwidths that the end user reasonably may expect to receive.
      . . . Among other methods, a service is “advertised” to the end user
      when it is described at point of sale or when the end user is charged at
      a rate associated with a particular grade of service in the end user’s area.

      Available: For purposes of this form, fixed broadband connections are
      available in a census block if the provider does, or could . . . without an
      extraordinary commitment of resources -- provision two-way data
      transmission to and from the Internet with advertised speeds exceeding
      200 kbps in at least one direction to end-user premises in the census
      block.

Form 477 Instructions at 33.

      The FCC’s focus on advertised speeds rather than speeds actually delivered
was explained in its June 27, 2013 Order “modernizing” the Form 477 Data Program:

      The Commission currently collects data on advertised speeds. The
      Commission sought comment on whether . . . for example, providers
      should provide information about actual speeds . . . . We conclude that
      it is not appropriate or feasible to collect actual speed information from
      broadband providers via Form 477. Many commenters expressed
      concern because there is no way for providers to report actual speed
      information in a meaningful way. Commenters explain that the
      collection of these data is a highly complex, time consuming, and
      expensive undertaking that requires the use of specialized equipment in
      the providers’ networks and at their customers’ premises. As the
      Commission found in 2008, “the record of this proceeding does not
      identify a methodology or practice that could be applied, consistently
      and by all types of broadband filers, to measure the information transfer
      rates actually observed by end users.” We continue to believe that
      conclusion is correct.

                                          -8-
28 FCC Rcd. at 9906-07. The district court concluded it is undisputed that Northern
Valley in fact “advertised speeds of at least 25/3 Mbps as [it] reported in its 2017
Form 477.”

       E. On appeal, Venture argues the district court erred by ignoring the definition
of “available” in the Form 477 Instructions Glossary -- “fixed broadband connections
are available in a census block if the provider does, or could . . . without an
extraordinary commitment of resources -- provision two-way data transmission to and
from the Internet.” Venture posits that expert Villecco’s opinion that Northern Valley
could not make its maximum advertised speed of 25/3 Mbps available to even one
household in 341 of the 525 census blocks in the Overlap Area creates a genuine
issue of material fact on this issue and precludes summary judgment.

       We reject Venture’s argument for a number of related reasons. First, the
definition in the 2017 Form 477 Instructions Glossary states that service is “available
in a census block if the provider does, or could . . . provision two-way data
transmission . . . with advertised speeds exceeding 200 kbps . . . to end-user premises
in the census block.” Form 477 Instructions at 17, 33 (emphasis added).9 In other
words, Northern Valley could report advertised bandwidths of 25/3 Mbps only if it
could actually provide at least 200 kbps to households in the census block, a much
slower speed. Venture’s expert reported only that Northern Valley could not make
its maximum advertised speed of 25/3 Mbps available to at least one household in
341 census blocks. As the FCC does not require providers to report information
about actual speeds delivered, Villecco’s report was not evidence establishing that

      9
       Venture relies in part on somewhat different wording in the Background
section of a 2017 FCC Further Notice of Proposed Rulemaking that invited comment
on the Form 477 process. See In the Matter of Modernizing the FCC Form 477 Data
Program, Further Notice of Proposed Rulemaking, 32 FCC Rcd. 6329, 6330 (Aug.
4, 2017). A notice of proposed rulemaking does not supersede or modify the 2017
Form 477 Instructions on which the district court relied. Indeed, the notice explicitly
referred to the FCC’s existing “availability” definition. Id. at 6339.

                                         -9-
Northern Valley, reporting broadband service acquired from Northern Wireless, filed
a willfully false Form 477.

       Second, CFO Berndt of Northern Valley testified that, in preparing the
December 2017 Form 477 at issue, she relied on Northern Wireless’s prior Form 477
that reported advertised speeds of 70/8 Mbps and confirmed that Northern Wireless
had billed customers for speeds over 25/3 Mbps. This was affirmative evidence that
Northern Valley reported advertised speeds that were in fact available in the Overlap
Area. The FCC did not require Northern Valley to collect data on actual speeds
delivered to end-user premises, a highly complex, time consuming, and expensive
undertaking.

       Third, we agree with the district court that Venture presented no evidence that
Northern Valley willfully made a false Form 477 entry regarding its broadband
capabilities that would support a private right of action for damages under 47 U.S.C.
§§ 206, 207, and 220(e). Northern Valley reported maximum advertised speeds in the
Overlap Area based on Northern Wireless operations as previously reported to the
FCC. Though Venture argues Northern Valley misinterpreted the Form 477
Instructions, it cites no FCC order or judicial interpretation that even arguably, much
less clearly, supports Venture’s strained interpretation of how the FCC required that
advertised speeds availability be determined and reported. Venture made no showing
of intentional impropriety in Northern Valley’s record-keeping practices. See
Hoffman v. Rashid, 388 F. App’x 121, 123 (3d Cir. 2010).

        In response, Venture argues that its allegations of Northern Valley’s “history
of ill will and hostility towards Venture and its CEO,” and Northern Valley’s “history
of manipulating Form 477 data” during the A-CAM I period, make its willful intent
to injure Venture a material disputed issue of fact. But these general allegations of
ill will are not evidence of willful intent to injure in this case. As the district court
noted, Venture’s claim of intent to injure is belied by Northern Valley helping

                                          -10-
Venture by filing a letter with the FCC clarifying that Northern Valley did not offer
voice service in the Overlap Area.

     For these reasons, we conclude the district court correctly granted summary
judgment dismissing Venture’s Telecommunications Act claims.

       F. We likewise affirm the dismissal of Venture’s tortious interference and civil
conspiracy claims under South Dakota law. Tortious interference with a business
relationship or expectancy requires “(1) the existence of a valid business relationship
or expectancy; (2) knowledge by the interferer of the relationship or expectancy; (3)
an intentional and unjustified act of interference on the part of the interferer; (4) proof
that the interference caused the harm sustained; and (5) damages to the party whose
relationship or expectancy was disrupted.” Selle v. Tozser, 786 N.W.2d 748, 753
(S.D. 2010) (cleaned up). We agree with the district court that Venture proffered no
evidence of an “intentional and unjustified act of interference” because Northern
Valley complied with all FCC reporting requirements.

       Under South Dakota law, a claim of civil conspiracy requires proof that two or
more persons committed one or more unlawful overt acts that proximately caused the
damages claimed. See Reuben C. Setliff, III, M.D., P.C. v. Stewart, 694 N.W.2d 859,
866-67 (S.D. 2005). Civil conspiracy is “not an independent cause of action,” but
rather is “sustainable only after an underlying tort claim has been established.”
Yankton Cnty. v. McAllister, 977 N.W.2d 327, 341 (S.D. 2022) (quotation omitted).
As Northern Valley complied with the Telecommunications Act in filing the Form
477 at issue, there is no plausible underlying tort alleged. Summary judgment is
warranted on this claim.

       The judgment of the district court is affirmed.
                      ______________________________

                                           -11-