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Decided: November 13, 2015  

The Fourth Circuit held that the judgment of the district court involving the calculation of damages and late fees was appropriate.

In accordance to the Telecommunications Act of 1996, CoreTel and Verizon entered into interconnection agreements (ICAs). The Act requires incumbent local exchange carriers such as Verizon to allow competitive local exchange carriers such as CoreTel to connect with end users over the incumbent’s network. Carriers negotiate private agreements with each other to establish the rates and terms in which their networks will be interconnected. The ICAs govern certain aspects of interconnection such as CoreTel’s use of Verizon’s physical telecommunications facilities.

In CoreTel I, the Fourth Circuit addressed a dispute between the parties involving what rates CoreTel must pay to use Verizon’s facilities. The Court held that Verizon should have billed CoreTel for facilities at the total element long-run incremental cost (TELRIC) rate instead of the tariff rates. Therefore, CoreTel was entitled to summary judgment regarding Verizon’s claim for declaratory relief relating to Verizon’s facilities charges. The Fourth Circuit did not resolve Verizon’s claim for damages associated with CoreTel’s breach of the ICAs. Instead, the case was remanded so that the district court could apply the proper TELRIC rates to calculate what CoreTel owes Verizon for the use of Verizon’s facilities.

On remand, the district court held a bench trial, where Verizon presented the tariff-based monthly bills it had issued to CoreTel and the “pricing attachments” to the ICAs. These monthly bills explained “(1) what facilities Verizon provided to CoreTel; (2) whether the facility was provided by Verizon Virginia or Verizon South and, if split between those two, the percentage of the facility in each company’s service area; and (3) for transport facilities billed by the mile, the number of transport miles provided. From the evidence, Verizon developed a summary spreadsheet showing the specific amount owed for each at TELRIC rates. The entries totaled $227,974.22 in damages. Verizon also calculated late fees at 1.5% per month on the facilities charges under the ICAs, totaling $131,885.25. CoreTel objected to Verizon’s proposed damages calculations, but the district court rejected and entered judgment for Verizon in the full amount. This appeal followed.

Here, CoreTel argues (1) that the district court violated the Fourth Circuit’s mandate in CoreTel I by awarding as damages any TELRIC-based facilities charges at all; (2) that even if Verizon can recover facilities charges, the district court erred in calculating the total amount owed; and (3) that the district court also erred in its calculation of late fees.  The Fourth Circuit clarified that the mandate rule applies, prohibiting lower courts from considering questions that the mandate of a higher court has laid to rest. CoreTel was incorrect in believing CoreTel I froze not only the law of the case but also all of the underlying facts. The only matter that the mandate of CoreTel I “laid to rest” was that TELRIC rates should apply, not tariff rates. The district court did not err and followed that ruling.

The Fourth Circuit determined that the district court did not err when it considered Verizon’s damages claim. In CoreTel I, the Court expressly did not resolve Verizon’s claim for damages associated with CoreTel’s breach of the ICAs. The case was remanded to the district court to consider Verizon’s damages claim, and the district court appropriately followed this mandate.

After discussing background information regarding the technical aspects of ICAs, the Fourth Circuit affirmed the district court’s calculation of the TELRIC-based facilities charges CoreTel owes Verizon. CoreTel must pay TELRIC based facilities charges for any Verizon facilities it uses to transport traffic between the point of interconnection (POI) and the relevant Verizon interconnection point (IP). The specific objections that CoreTel had with the district court’s damages calculations were addressed individually; however, the Fourth Circuit ultimately rejected each argument and affirmed the calculation of the facilities charges set forth by the district court.

Finally, CoreTel challenged the district court’s award of $138,724.47 in late fees to Verizon. CoreTel argued “(1) that it cannot owe late fees under the ICAs because Verizon has never issued it formal bills at the proper TELRIC rates, (2) that Virginia law limits any late fees to 5% per year rather than the ICA-prescribed 18% per year that the district court imposed, and (3) that the principal on which any late fees are calculated should be offset by certain payments Verizon has withheld from CoreTel during this course of litigation.” However, similarly, the Fourth Circuit rejected each of CoreTel’s arguments and concluded that the district court properly calculated the late-fees. Therefore, the ultimate judgment of the district court was affirmed.

Full Opinion

Austin T. Reed