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Illinois Bell Telephone Company, Inc. v. Global NAPs Illinois

December 22, 2008


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 06 C 3431-John W. Darrah, Judge.

The opinion of the court was delivered by: Posner, Circuit Judge


Before EASTERBROOK, Chief Judge, and POSNER and EVANS, Circuit Judges.

This appeal in a suit against a group of affiliated corporations charges that in violation of the plaintiff's federal tariffs filed with the Federal Communications Commission, its state tariffs filed with the Illinois Commerce Commission, and the interconnec- tion agreement between the plaintiff and one of the affiliates, Global NAPs Illinois, the defendants failed to pay for telecommunications services that the plaintiff had sold to that company.

Questions about our jurisdiction led us to invite supplemental briefs. The plaintiff's points out that a suit to enforce a tariff filed with the FCC is deemed to arise under federal law and is therefore within the federal-question jurisdiction of the district court. Louisville & Nashville R.R. v. Rice, 247 U.S. 201, 201-03 (1918); Thurston Motor Lines, Inc. v. Jordan K. Rand, Ltd., 460 U.S. 533 (1983) (per curiam); Cahnmann v. Sprint Corp., 133 F.3d 484, 488-89 (7th Cir. 1998). It argues that the suit is within the diversity jurisdiction as well because, while Illinois Bell is an Illinois corporation, none of the defendants either is incorporated in Illinois or has its principal place of business there. That the case is within the diversity jurisdiction as well as the federal-question jurisdiction is potentially important because the plaintiff has at least one, and possibly two, claims under state law-one for failure to comply with its state tariffs and the other for violation of the interconnection agreement. Although both are within the supplemental jurisdiction conferred on the federal courts by 28 U.S.C. § 1367, the exercise of that jurisdiction is, as the statute makes clear, discretionary; the exercise of diversity jurisdiction is not.

An exhibit to the plaintiff's supplemental brief contains an admission by Global NAPs Illinois that "to the extent Global [NAPs Illinois] denied [that] it is a Delaware corporation with its principal place of business at 10 Merrymount Road, Quincy, MA that denial was inadvertent and in error." The defendants' supplemental brief says, in a reversal of their previous position, that Global NAPs Illinois "obviously has its principal place of business in Illinois, the only state in which it is licensed and has established interconnection facilities." But its being licensed to do business in Illinois and having "established interconnection facilities" are not evidence that it is a citizen of Illinois. AT&T is licensed to do business in Illinois and has "established interconnection facilities," but is not a citizen of Illinois.

When the facts that determine federal jurisdiction are contested, the plaintiff-or if it is a case that has been removed to federal court, the defendant-must establish those facts by a preponderance of the evidence. Meridian Security Ins. Co. v. Sadowski, 441 F.3d 536, 543 (7th Cir. 2006); Gafford v. General Elec. Co., 997 F.2d 150, 159-60 (6th Cir. 1993). Global NAPs Illinois has not mounted a sufficiently colorable challenge to diversity jurisdiction to require the plaintiff to present additional evidence of diversity. Global NAPs Illinois does not have an Illinois corporate charter. Nor is Illinois where it has its principal place of business. It admits that it has no employees other than its corporate officers, and they are all in Massachusetts.

A company's principal place of business is where its "nerve center" is located, or, more concretely, where its executive headquarters are located. Krueger v. Cartwright, 996 F.2d 928, 931 (7th Cir. 1993); Metropolitan Life Ins. Co. v. Estate of Cammon, 929 F.2d 1220, 1223 (7th Cir. 1991); Dimmitt & Owens Financial, Inc. v. United States, 787 F.2d 1186, 1191 (7th Cir. 1986). There are no nerves (in all but the simplest animals) without a brain, and there is no human brain without a human being. An executive head-quarters without any executives is similarly oxymoronic. We can imagine an automated company that has no office anywhere but consists of pieces of equipment operated by telecommuting employees scattered across the globe. But what we have in this case is commonplace: a company located in one state (Massachusetts) that has contracts with firms in other states, including Illinois.

"[A] corporation whose center of gravity is in the same state [as the opposing party] even though it may be incorporated elsewhere . . . [is] sufficiently 'local'-sufficiently identified with the state-to avoid the obloquy that may attach to a 'foreign' corporation in litigation with a local resident and that provides the modern rationale of the diversity jurisdiction. The words 'principal place of business' are to be construed with this purpose in mind." Dimmitt & Owens Financial, Inc. v. United States, supra, 787 F.2d at 1190. There is nothing local about a corporation chartered in another state, managed in another state, administered in another state, headquartered in another state, its local "presence" actually a ghostly absence of living bodies.

But the defendants argue that even if there is prima facie federal jurisdiction, whether based on a federal question or diversity of citizenship, the Telecommunications Act of 1996, 47 U.S.C. §§ 151 et seq., withdraws that jurisdiction from a suit of this kind. To understand the argument one must understand the two types of charge that one telecommunications carrier can extract from another pursuant to the Telecommunications Act. Iowa Network Services, Inc. v. Qwest Corp., 363 F.3d 683, 686 (8th Cir. 2004). First, an "incumbent local exchange carrier" (a carrier that provided local phone service when the Act was passed, such as Illinois Bell) is required to interconnect on demand with other carriers that provide local telecommunications services within its service area. 47 U.S.C. § 251(c)(2). A carrier demanding interconnection must negotiate with the incumbent local exchange carrier on price and other terms. If the two carriers cannot reach agreement, their disagreement is submitted to what is called "arbitration" but is really the first stage in a regulatory proceeding, as the "arbitration" decision must be submitted to the state regulatory com-mission for its approval, as must an agreement reached by negotiation. Id., §§ 252(a)(1), (b)(1), (e)(1); Illinois Bell Tel. Co. v. Box, No. 08-1489, 2008 WL 5006614, at *1 (7th Cir. Nov. 26, 2008); Illinois Bell Tel. Co. v. Box, 526 F.3d 1069, 1070 (7th Cir. 2008).

The interconnection agreement between the plaintiff and Global NAPs Illinois was approved by the Illinois Commerce Commission. A party aggrieved by the state commission's decision, whether imposing or altering the terms of an interconnection agreement, can seek judicial review in federal district court on the ground that the decision violates sections 251 or 252 of the Telecommunications Act. 47 U.S.C. § 252(e)(6). But so far as appears both parties were content with the agreement and neither sought judicial review of the commission's order approving it. Nor did anyone else.

If as in this case the incumbent local exchange carrier sues merely to collect the interconnection charge specified in the approved interconnection agreement, the suit is not based on federal law in any realistic sense, but on a price term in a contract. Just as a suit to enforce a copyright license is held to arise under state rather than federal law even though the grant of a copyright is governed by federal law, Gaiman v. McFarlane, 360 F.3d 644, 652 (7th Cir. 2004); T. B. Harms Co. v. Eliscu, 339 F.2d 823, 824, 826-27 (2d Cir. 1964) (Friendly, J.), so likewise, while "section 252(c)(6) authorizes a federal court to determine whether the agency's decision departs from federal law," "a decision 'interpreting' an agreement contrary to its terms creates a different kind of problem-one under the law of contracts, and therefore one for which a state forum can supply a remedy." Illinois Bell Tel. Co. v. Worldcom Technologies, Inc., 179 F.3d 566, 574 (7th Cir. 1999); see also Connect Communications Corp. v. Southwestern Bell Tel., L.P., 467 F.3d 703, 708 (8th Cir. 2006); Southwestern Bell Tel. Co. v. Public Utility Comm'n, 208 F.3d 475, 484-86 (5th Cir. 2000).

Judge Friendly analogized a suit on a contract by a motor carrier regulated by the Interstate Commerce Commission to a copyright license, in words equally applicable to this case: "That the contracts could not lawfully be carried out save with ICC approval does not, without more, demonstrate that Congress meant all aspects of their performance or non-performance to be governed by law to be fashioned by federal courts rather than by the state law applicable to similar contracts relating to businesses not under federal regulation. This is not to say that a particular issue concerning such a contract, e.g., whether ICC approval had or had not been granted prior to a particular date, would not require determination under federal principles. But the complaint does not suggest that any such issue is present here." McFaddin Express, Inc. v. Adley Corp., 346 F.2d 424, 426-27 (2d Cir. 1965) (citation omitted); see also Chicago & North Western Ry. v. Toledo, Peoria & Western R.R., 324 F.2d 936, 938-39 (7th Cir. 1963).

We are mindful that Verizon Maryland, Inc. v. Global NAPs, Inc., 377 F.3d 355, 364-65 (4th Cir. 2004), says that interconnection agreements are so important to the federal regulation of telecommunications that suits to enforce them arise under the Telecommunications Act. But that was a very different case from this. Verizon was suing state commissioners to block their order requiring it to pay compensation to another carrier, and while it was doing so in part because it thought they had misinterpreted the interconnection agreement, "according to Verizon's complaint, whether it must pay reciprocal compensation on ISP-bound traffic under the terms of the agreement depends in substantial measure upon the requirements of the Act and the FCC's regulations and ...

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