Qwest Communications Company, LLC, a Delaware limited liability company, doing business as CenturyLink QCC Plaintiff- Appellee
Free Conferencing Corp., a Nevada corporation Defendant-Appellant Audiocom, LLC, a Nevada limited liability company; Global Conference Partners, a California corporation; Basement Ventures, LLC, a California limited liability company; Vast Communications, LLC, a California limited liability company Defendants
Submitted: May 17, 2018
from United States District Court for the District of
Minnesota - Minneapolis
SHEPHERD, KELLY, and GRASZ, Circuit Judges.
tort action involves land-line telephone services. In the
district court, long-distance carrier Qwest
Communications Company LLC (Qwest) succeeded in showing that
a free conference call provider, Free Conferencing
Corporation (FC), intentionally interfered with its contract
with a local carrier called Tekstar. On appeal, FC claims that
it is not liable for tortious interference with Qwest's
contractual relationship with Tekstar, and that the district
court erred in calculating damages.
is a long-distance land-line telephone service carrier. When
a person places a long-distance phone call, their
long-distance carrier connects the call (also called
"traffic") to the local carrier where the dialed
number is located. The customer pays their long-distance
carrier for the call, and the receiving local carrier in turn
bills the long-distance carrier. The rate, terms, and
conditions required to impose these charges on long-distance
carriers are generally governed by tariffs filed with the
Federal Communications Commission (FCC). Here, we refer to
the contract between Qwest and Tekstar as a tariff. See
generally 47 U.S.C. § 203(a).
tariffs authorize long-distance carriers like Qwest to route
their customers' traffic through other long-distance
carriers when doing so would be less expensive than
transmitting the traffic through their own networks. This
practice is called "least cost routing." Whenever
least cost routing occurs, the long-distance carrier through
which the traffic is routed is entitled to reimbursement from
the routing long-distance carrier. For instance, when Qwest
least cost routes its traffic through AT&T, AT&T
charges Qwest for transmitting that traffic.
Qwest's tariffs was with a local carrier called Tekstar.
Tekstar services certain rural parts of Minnesota and North
Dakota. In rural areas, telecommunications infrastructure has
to cover expansive territory despite fewer paying customers.
Therefore, rural local carriers often charge long-distance
carriers higher rates to complete calls.
years before this case began, a new type of company sought to
leverage the relationship between long-distance and local
carriers: free conferencing companies, of which FC is one.
Free conferencing companies sought to increase long-distance
traffic to rural local carriers (with their higher tariff
rates), thereby making money for the local carriers and
themselves. To do this, free conferencing companies would
offer conference-calling services to the public-users would
sign up (at no charge to the user) to host a conference call
on the service. The free conferencing company would then
provide the conference-call organizer a number hosted by a
rural local carrier. When participants called the free
conferencing number, their long-distance carrier would
transmit each participant's call to the rural local
carrier. The local carrier would then bill the long-distance
carrier for all of the conference call traffic, ostensibly
pursuant to its tariff. And, pursuant to its contract with
the free conferencing company, it would pay the company a
fee. Local carriers did not charge the free conferencing
companies to place their numbers on their exchange. Tekstar
signed its first contract with a free conferencing company
(not FC) in 2005. FC began contracting with rural local
carriers (not Tekstar) in 2004.
telecommunications industry is regulated by the FCC; the FCC
approves and interprets the terms of tariffs between local
and long distance carriers. See generally All Am. Tel.
Co., Inc. v. FCC, 867 F.3d 81, 84 (D.C. Cir. 2017). Many
tariffs, including the one between Qwest and Tekstar, only
allowed the local carrier to bill the long-distance carrier
for calls delivered to "end users." After both
Tekstar and FC became involved in the free conferencing
industry, long-distance carriers began to challenge the
legality of the free conferencing business model. The basis
for the challenge was this: If the free conferencing
companies were not "end users," local carriers
could not charge long-distance carriers tariff rates for the
free conferencing traffic. See 47 U.S.C. §
203(c); Qwest Commc'ns Corp. v. Free Conferencing
Corp., 837 F.3d 889, 893 (8th Cir. 2016). The legal
question was, therefore, whether free conferencing companies
like FC were "end users." The FCC answered this
question twice: first it said yes, then it said no.
October 2007, the FCC held, in a case we call Farmers
I, that free conferencing companies were end
users under a tariff with Qwest. See Qwest Commc'ns
Corp. v. Farmers & Merchs. Mut. Tel. Co., 22 F.C.C.
Rcd. 17973, 17987-88 (2007). That conclusion was based in
substantial part on the free conferencing companies'
assertions that they "were billed the federal subscriber
line charge as well as for local telephone service and rental
of floor space in [the local carriers'] central
office[s]." Farmers & Merchs. Mut. Tel. Co. v.
FCC, 668 F.3d 714, 717 (D.C. Cir. 2011).
course of the Farmers I FCC proceeding, a
Farmers I litigant asked FC to assist in falsifying
documents that would show it was paying fees to the local
carriers it worked with. FC declined to do so, but was aware
that other free conferencing companies had agreed to provide
falsified billing records. FC was also aware that, in January
2008, the FCC granted in part a motion to reconsider
Farmers I, citing allegations "that [the local
carriers'] invoices to, and agreements with, the
conference calling companies were backdated." Qwest
Commc'ns Corp. v. Farmers & Merchs. Mut. Tel.
Co., 23 F.C.C. Rcd. 1615, 1618 (2008).
early 2008, most long-distance carriers, including Qwest,
were refusing to pay for free conferencing traffic. Some
long-distance carriers, however, entered
settlements with local carriers, whereby the
long-distance carrier agreed to pay for free conferencing
traffic, but at lower, below-tariff rates. Tekstar settled
April 2008, FC and Tekstar entered a contract. The contract
provided that FC would pay nothing to Tekstar, and that
Tekstar would pay FC a "per minute" fee for hosting
conference calls on its exchange. When it entered into the
contract, FC knew that Qwest was refusing to pay Tekstar for
its free conferencing traffic, and that Tekstar's
settlement with AT&T meant that most or all of its free
conferencing traffic would be least cost routed through
AT&T or another long-distance carrier that had settled at
sent Tekstar a Notice of Dispute, expressing the view that
the terminating access charges Tekstar was billing it for
free conference companies' traffic were invalid under the
tariff. Qwest suspected that Tekstar had entered an
impermissible agreement with FC (and other companies) for
conferencing services. In response, Qwest implemented a new
least cost routing protocol for Tekstar's traffic.
Instead of least cost routing Tekstar's free conferencing
traffic any time it was cheaper than transmitting
through its own lines, Qwest only least cost routed the
traffic when it was at least 50% cheaper to use another
long-distance provider's network. Thus, Qwest continued
to transmit some of Tekstar's free conferencing traffic
(including FC's traffic) on its own network, but
continued to refuse to pay Tekstar for it. This is what the
parties call the 50 Percent Rule.
reconsideration, in November 2009, the FCC reversed course in
an opinion we will call Farmers II. See Qwest
Commc'ns Corp. v. Farmers & Merchs. Mut. Tel.
Co., 24 F.C.C. Rcd. 14801, 14806 (2009). The FCC found
that free conferencing companies were not end users
based on "new evidence . . . previously withheld [that]
contradict[ed]" the claim that local carriers and free
conferencing companies enjoyed "a carrier/customer
relationship under the terms of the tariff."
Id.Thus, "[t]oday, it is well-settled
that a[ local carrier] cannot bill a[ long-distance carrier]
under its tariff for calls 'terminated' at a
conference call [number] when the conference calling company
does not pay a fee for the [local carrier's]
services." Qwest, 837 F.3d at 894.
Farmers II, Qwest initiated lawsuits against several
local carriers and free conferencing companies. This is one
of those suits. As relevant here, Qwest sued FC under
Minnesota law for tortiously interfering with its contract
(tariff) with Tekstar. After a bench trial, the district
court found FC liable and awarded Qwest damages. In
particular, the court determined that (1) FC knew of the
existence of the Tekstar-Qwest tariff, (2) FC knew its free
conferencing business model breached the Tekstar-Qwest
tariff, (3) FC induced Tekstar to breach its tariff by
pursuing the business relationship and negotiating terms that
required Tekstar to bill Qwest for impermissible access
charges, and (4) FC's interference was not justified.
district court awarded Qwest only "consequential"
damages. The court reasoned that direct damages were
unavailable because, by the time FC contracted with Tekstar,
Qwest was already refusing to pay for free conferencing
traffic that Qwest itself delivered. The court did, however,
award Qwest close to $1 million in damages, which it said
represented the costs that Qwest incurred in least cost
routing FC calls to other long-distance carriers. The court
concluded that these costs were foreseeable. The court also
awarded Qwest attorneys' fees. FC appeals.
appeal, FC challenges both the district court's liability
finding and award of attorneys' fees. We address each in
parties agree that Minnesota law governs this case. In
Minnesota, "[a] cause of action for tortious
interference with contract has five elements: (1) the
existence of a contract; (2) the alleged wrongdoer's
knowledge of the contract; (3) intentional procurement of its
breach; (4) without justification; and (5) damages."
Sysdyne Corp. v. Rousslang, 860 N.W.2d 347, 351
(Minn. 2015) (quoting Furlev Sales & Assocs., Inc.,
v. N. Am. Auto. Warehouse, Inc., 325 N.W.2d 20, 25
(Minn. 1982)). FC argues that it is not liable for tortious
interference because it did not induce or procure
Tekstar's breach, and even if it had, ...