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Peerless Network, Inc. v. MCI Communications Services, Inc.

United States District Court, N.D. Illinois, Eastern Division

July 27, 2018

PEERLESS NETWORK, INC., et al., Plaintiffs,
v.
MCI COMMUNICATIONS SERVICES, INC., VERIZON SERVICES CORP., and VERIZON SELECT SERVICES, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

          Honorable Thomas M. Durkin United States District Judge.

         On March 16, 2018, the Court entered a Memorandum Opinion and Order granting in part plaintiff Peerless Network, Inc.'s motion for partial summary judgment. R. 243. Peerless then filed a motion for entry of final order and Rule 54(b) judgment. R. 248. The parties conferred and agreed to most of the damages Peerless sought in its motion. Before the Court are the two remaining issues-(1) whether the statute of limitations in 47 U.S.C. § 415(a) applies to bar some of Peerless's charges; and (2) whether Peerless may recover compound interest on the unpaid charges. The parties filed supplemental briefs on the two issues. R. 260, 262. The parties also filed a stipulation agreeing to the total amount of damages owed to Peerless based on the Court's decision on the two issues. R. 266. For the following reasons, the Court enters final judgment in the amount of $48, 456, 131.66.

         Analysis

         I. Statute of Limitations

         The parties first dispute whether the statute of limitations in 47 U.S.C. § 415(a) of the Communications Act bars portions of Peerless's tariff charges. Section 415(a) imposes a statute of limitations on suits “by carriers for recovery of their lawful charges” to two years. There is no question that Peerless is a “carrier” who seeks to recover its “lawful charges” under its filed tariffs.[1] See Espinal v. AFNI, Inc., 2018 WL 2733366, at *9-*10 (S.D.N.Y. June 7, 2018) (explaining that “lawful charges” in Section 415 include tariffed charges). Because Peerless filed this lawsuit on September 23, 2014, Verizon argues that Peerless may not recover any amounts for interstate traffic that were past due as of September 23, 2012. In response, Peerless argues that the parties' Standstill Agreement tolls the limitations period.

         The parties entered into the Standstill Agreement on September 18, 2013. That agreement provides that “[n]either Party shall initiate any litigation, arbitration, regulatory action, or other proceeding seeking resolution of the Verizon Disputes or the Peerless Demands.” R. 250-17, Standstill Agreement, § 2(f). The interpretation of a contract is a question of law, determined by “the four corners of the document, not to outside sources.” Kass v Kass, 91 N.Y.2d 554, 566 (1998).[2]“Where the document makes clear the parties' over-all intention, courts examining isolated provisions should then choose that construction which will carry out the plain purpose and object of the [agreement].” Id. at 567. But where the “instrument was negotiated between sophisticated, counseled business people negotiating at arm's length, ” courts are “reluctant to interpret an agreement as impliedly stating something which the parties have neglected to specifically include.” Vermont Teddy Bear Co. v 538 Madison Realty Co., 1 N.Y.3d 470, 475 (2004).

         Peerless argues that the Standstill Agreement operates as a tolling agreement because the parties' intent was to defer litigation. R. 262 at 7 (citing R. 250-17 at 1 (“[T]he Parties have determined that they wish to avoid litigation for a period of time.”)). While the Court agrees that the parties' general intent was to defer litigation, the Standstill Agreement does not clearly toll the limitations period. Indeed, it includes no mention of tolling. Peerless's argument would require the Court to read a non-existent tolling term into an unambiguous contract between two sophisticated parties, which New York law prohibits. See Vermont Teddy Bear, 1 N.Y.3d at 475. Furthermore, implying a tolling agreement term would run counter to the Agreement's merger clause that states: “[t]his Agreement represents the entire agreement between the Parties relating to the subject matter hereof and supersedes any other oral or written agreements and understandings relating thereto.” R. 250- 17 § 7. The merger clause bars “any claim based on an alleged intent that the parties failed to express in writing, ” Ashwood Capital, Inc. v. OTG Mgmt., Inc., 948 N.Y.S.2d 292, 298 (N.Y.App.Div. 2012), such as an intent to toll the statute of limitations here.

         The Court recognizes the hardship of its determination that the Standstill Agreement does not toll the statutory limitations period. But the Court finds it difficult to incorporate a tolling provision when the represented parties did not explicitly contract for one. While at first glance, the title “Standstill Agreement” presumably freezes the parties and all of their rights and obligations as of the date of the agreement, the Court is required to look at the actual language of such an agreement. If the Standstill Agreement did nothing other than impliedly toll the statute of limitations, this would be a more difficult decision. But the Standstill Agreement is not worthless because of the lack of a tolling agreement. Consideration was exchanged as part of its execution and meaningful benefits accrued to Peerless, even if one of them was not the tolling of claims. See, e.g., R. 250-17 § 1 (amending the tandem services agreement to include the “Wireless Termination Amendment”); id. § 2(a)-(d).

         And, it is not inconceivable that the parties' agreement would have contained different terms or considerations had a tolling provision been included. In fact, Verizon suggests that to be the case, pointing to Section 2(c) of the Agreement, which states: “Peerless Settlement Credits shall be applied first to the most recently disputed amount, followed (if necessary) by the next most recent disputes, and so forth until the oldest disputes are resolved.” R. 250-17 § 2(c) (emphasis added). Verizon argues it “specifically negotiated for this provision so that its payments would apply to the newest invoices, allowing Verizon to clear away the older disputes as they fell outside the two-year limitations window.” R. 260 at 8. The Court was not privy to those negotiations and absent an ambiguous agreement, cannot read a tolling provision into the Standstill Agreement now, despite the hardship it may cause Peerless.

         In any event, the Court finds that the limitations period in Section 415(a) could not be tolled even if the parties had an explicit tolling agreement. In Midstate Horticultural Co., Inc. v. Pennsylvania Railroad Co., 320 U.S. 356 (1943), the Supreme Court considered whether a time limitation in the Interstate Commerce Act for recovery of charges could be waived by an express agreement made before the end of the statutory period. Id. at 357. The Court first considered Congress's intent in promulgating the Commerce Act, explaining that the purpose of the Commerce Act was to impose a comprehensive scheme of regulation and to “secur[e] the general public interest in adequate, nondiscriminatory transportation at reasonable rates.” Id. at 361. The Court further explained that the Act required “rigid adherence to the statutory scheme and standards” even in “matters concerning which variation in accordance with the exigencies of particular circumstances might be permissible, if only the parties' private interests or equities were involved.” Id. The Court recognized the hardship of its ruling, but concluded that the action was time-barred despite the parties' agreement to extend the time period. Id. at 367.

         This Court, like other courts to have dealt with the issue, reads Midstate not to create a generally applicable rule against tolling through private agreements, but rather as a directive to consider the legislative intent and policy purposes behind each statute under consideration. See FDIC v. Williams, 60 F.Supp.3d 1209, 1214 & n. 7 (D. Utah 2014) (concluding that statute setting applicable statute of limitations was worded differently and had a different objective and policy than the Commerce Act, and distinguishing Midstate based on its discussion regarding congressional intent); In re Lehman Bros. Sec. & ERISA Litig., 2012 WL 6584524, at *2 (S.D.N.Y. Dec. 18, 2012) (estopping defendant from asserting time bar it had voluntarily tolled by agreement, and finding Midstate inapplicable because its policy concerns of uniformity and equality of treatment were not implicated).

         Here, the Communications Act has both a similar purpose to and uses similar language as the Commerce Act in Midstate. Like the Commerce Act's purpose to “secure the general public interest in adequate, nondiscriminatory transportation at reasonable rates, ” the Communications Act seeks to “regulat[e] interstate and foreign commerce in communication by wire and radio so as to make available . . . to all the people of the United States, without discrimination . . . [a] communication service with adequate facilities at reasonable charges.” 47 U.S.C. § 151. The limitations provisions of Section 415 also mimics the Commerce Act. The limitations provision at issue in Midstate read: “[a]ll actions at law by carriers subject to this Act for recovery of their charges, or any part thereof, shall be begun within three years from the time the cause of action accrues, and not after.” 320 U.S. at 357. The provision here is nearly identical: “[a]ll actions at law by carriers for recovery of their lawful charges, or any part thereof, shall be begun within two years from the time the cause of action accrues, and not after.” 47 U.S.C. § 415(a).

         The Court recognizes that courts have not ruled consistently on the issue. See, e.g., Level 3 Commc'ns, LLC v. Illinois Bell Tel. Co., 2017 WL 3128987, at *3 (E.D. Mo. July 24, 2017) (private agreement could toll limitations period of 47 U.S.C. § 415); Cent. Scott Tel. Co. v. Teleconnect Long Distance Servs. & Sys. Co., 832 F.Supp. 1317, 1321 (S.D. Iowa 1993) (same); cf. In the Matter of Am. Cellular Corp. & Dobson Cellular Sys., Inc., Complainants, 22 F.C.C. Rcd. 1083, 1093 (2007) (“[A] private agreement to toll the limitations period, without more, simply does not meet these narrow grounds for tolling.”) (listing cases). But the similarities between the Commerce Act provision in Midstate and the Communications Act here-coupled with the general agreement that the limitations period in Section 415 should be construed strictly (see Commc'ns Vending Corp. of Arizona v. F.C.C., 365 F.3d 1064, 1075 (D.C. Cir. 2004))-convinces the Court the limitations period in the Communications Act could not be tolled even if the parties had agreed to do so.

         Nor does the Court believe the limitations period should be equitably tolled. Equitable tolling of a statutory limitations period is allowed “only in extraordinary and carefully circumscribed instances.” Id. It is extended “only sparingly . . . in situations where the claimant has actively pursued his judicial remedies by filing a defective pleading during the statutory period, or where the complainant has been induced or tricked by his adversary's misconduct into allowing the filing deadline to pass.” Id. (citing Irwin v. Dep't of Veterans Affairs, 498 U.S. 89, 96 (1990)). This is not an extraordinary situation warranting equitable tolling. At bottom, Peerless was represented by counsel, chose to enter into the Standstill Agreement that did not include a ...


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