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County Emergency Communications District v. BellSouth Telecommunications LLC

United States Court of Appeals, Sixth Circuit

March 24, 2017

County Emergency Communications District (16-5149); Bradley County Emergency Communications District (16-5150); Blount County Emergency Communications District (16-5151); Bedford County Emergency Communications District (16-5152); Coffee County Emergency Communications District (16-5153); Roane County Emergency Communications District (16-5154); Franklin County Emergency Communications District (16-5155); Giles County Emergency Communications District (16-5156); Cheatham County Emergency Communications District (16-5157); Knox County Emergency Communications District (16-5158), Plaintiffs-Appellants,
v.
BellSouth Telecommunications LLC, dba AT&T Tennessee, Defendant-Appellee.

          Argued: September 14, 2016

         Appeal from the United States District Court for the Eastern District of Tennessee at Chattanooga. Nos. 1:11-cv-00330; 1:12-cv-00003; 1:12-cv-00056; 1:12-cv-00131; 1:12-cv-00138; 1:12-cv-00139; 1:12-cv-00149; 1:12-cv-00166; 1:12-cv-00176; 1:12-cv-00186-Curtis L. Collier, District Judge.

         ARGUED:

          Frederick L. Hitchcock, CHAMBLISS, BAHNER & STOPHEL, P.C., Chattanooga, Tennessee, for Appellants.

          Scott H. Angstreich, KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C., Washington, D.C., for Appellee.

         ON BRIEF:

          Frederick L. Hitchcock, Willa B. Kalaidjian, CHAMBLISS, BAHNER & STOPHEL, P.C., Chattanooga, Tennessee, for Appellants.

          Scott H. Angstreich, Jeremy S. Newman, KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C., Washington, D.C., for Appellee.

          Kate Comerford Todd, Steven P. Lehotsky, UNITED STATES CHAMBER LITIGATION CENTER, Washington, D.C., Jonathan G. Cedarbau, WILMER CUTLER PICKERING HALE AND DORR LLP, Washington, D.C., Brook Hopkins, Sameer Ahmed, WILMER CUTLER PICKERING HALE AND DORR LLP, Boston, Massachusetts, Misty Smith Kelley, BAKER, DONELSON, BEARMAN, CALDWELL & BERKOWITZ, PC, Chattanooga, Tennessee, Gregory L. Skidmore, KIRKLAND & ELLIS LLP, Washington, D.C., for Amici Curiae.

          Before: BATCHELDER, MOORE, and COOK, Circuit Judges.

          OPINION

          ALICE M. BATCHELDER, Circuit Judge.

         In this diversity action, the plaintiff municipal corporations operate the local "emergency communications" or "911" programs in their respective counties; specifically, the call centers that receive and route the 911 emergency calls to the proper emergency responders (e.g., police, fire, ambulance). They allege that the defendant telephone company-to reduce costs, offer lower prices, and obtain more customers- engaged in a covert practice of omitting fees mandated by Tennessee statute, and they seek compensation under that statute. They also allege that, while concealing this practice, the telephone company violated the Tennessee False Claims Act. The defendant telephone company moved to dismiss the first claim, arguing that the statute contained no implied private right of action. The district court agreed. The telephone company then moved for summary judgment on the second claim, arguing that its statements were not knowingly false. The district court agreed again, ending the action. When the plaintiffs appealed, we consolidated their appeals and, finding that the district court erred in both the dismissal and the summary judgment, we REVERSE both judgments and REMAND for further proceedings consistent with this opinion.

         I.

         In 1984, Tennessee passed its Emergency Communications District Law (hereinafter the "911 Law"), Tenn. Code Ann. (T.C.A.) § 7-86-101 et seq., to formally establish 911 as the primary emergency telephone number for all Tennessee residents.[1] The 911 Law created municipal corporations for each county, i.e., Emergency Communications Districts ("Districts"), to run the 911 programs, specifically including the call centers that receive and route the 911 emergency calls to the proper emergency service. Id. at §§ 104 to 107. To support these functions, the 911 Law empowers the Districts to levy a charge (the "911 charge") on telephone users' phone lines. Id. at § 108(a). Correspondingly, the 911 Law compels a telephone "service supplier" such as BellSouth to bill and collect these 911 charges from their "service users."[2] Id. at § 108(d). The 911 Law completes the loop by ordering the service suppliers (phone companies) to report and remit the 911 charges to the Districts.[3] Id. at § 110(a).

         Beginning in 2011, several Districts sued BellSouth to recover tens of millions of dollars in 911 charges that they believe BellSouth should have billed, collected, and remitted. They sought recovery on multiple theories, three of which persist to appeal. The Districts sought to recover directly under the 911 Law, but the district court dismissed that claim, holding that the 911 Law does not provide a cause of action against service suppliers such as BellSouth. Hamilton Cty. Emergency Commc'ns Dist. v. BellSouth Telecomms., LLC (Hamilton I), 890 F.Supp.2d 862, 876 (E.D. Tenn. 2012).[4] The Districts also sought to recover for a breach of fiduciary duty under an agency construct, but the court granted summary judgment to BellSouth, finding a lack of control and an "arm's-length business relationship, " not an agency relationship with fiduciary obligations.[5] Hamilton Cty. Emergency Commc'ns Dist. v. BellSouth Telecomms., LLC (Hamilton II), 154 F.Supp.3d 666, 692 (E.D. Tenn. 2016). Finally, the Districts sought recovery via the Tennessee False Claims Act (TFCA), T.C.A. § 4-18-101 et seq., but the court held that BellSouth's interpretations of the 911 Law were sufficiently reasonable and the Districts could not demonstrate "falsity" under the TFCA. Id. at 700.

         II.

         Our review in this appeal is de novo. See Hogan v. Jacobson, 823 F.3d 872, 883 (6th Cir. 2016); Yazdian v. ConMed Endoscopic Techs., Inc., 793 F.3d 634, 644 (6th Cir. 2015).

         A.

         The Districts contend that the district court erred by holding that the 911 Law implies no private right of action, arguing that the court overlooked Tennessee Code § 1-3-119(c)(4) and misapplied Brown v. Tennessee Title Loans, Inc., 328 S.W.3d 850 (Tenn. 2010). The district court relied on Brown and, after acknowledging that the 911 Law contained no express right of action against service suppliers (phone companies), accurately recited Brown's three-factor inquiry into "whether the legislature intended for such a right to be implied":

(1) whether the party bringing the action is an intended beneficiary within the protection of the statute,
(2) whether there is any indication of legislative intent, express or implied, to create or deny the private right of action, and
(3) whether implying such a remedy is consistent with the underlying purposes of the legislation.

Hamilton I, 890 F.Supp.2d at 874 (formatting modified) (quoting Brown, 328 S.W.3d at 855 & n.4 (relying on Cort v. Ash, 422 U.S. 66, 78 (1975), which had conceived these factors in the federal context)). The district court answered "no" to each query, announcing that: (1) the Districts were not the intended beneficiaries, id. at 875 (i.e., "the actual beneficiary of the statute is the public" and "[a]lthough [a District] is the conduit through which the public receives 911 service, it is not the actual beneficiary"); (2) "it is highly likely the Tennessee legislature did not intend to create such a right of action" given that "the [911] Law explicitly provides that legal action can be taken against service users [but does not include a similar provision for][6]service suppliers, " id.; and (3) "the primary purpose of the [911 Law] is to establish a uniform emergency number for the public" not to "ensur[e] service suppliers properly bill, collect, and remit 911 charges, " id. at 876 (touting the applicability of "other available remedies, " unspecified).

         Brown warrants some further examination before we proceed. The question in Brown was whether the Tennessee Title Pledge Act (TTPA)[7] implied a private right of action by a borrower against a lender who violated the TTPA by charging excessive interest or unauthorized fees. Brown, 328 S.W.3d at 853. In conducting the three-query analysis (supra), the Tennessee Supreme Court found that (1) the borrowers were the intended beneficiaries, but that neither the (2) legislative intent nor the (3) underlying purpose supported a private right of action. Id. at 858-61. In its analysis, the Brown court returned repeatedly to the fact that the TTPA had specific, express enforcement provisions, operating "entirely through criminal and administrative penalties" (e.g., criminal misdemeanor prosecution and license suspension). Id. at 857-60. And these governmental-enforcement provisions took on added importance with the court's proclamation that "where an act as a whole provides for governmental enforcement of its provisions, we will not casually engraft means of enforcement of one of those provisions unless such legislative intent is manifestly clear." Id. at 857 (editorial marks omitted) (quoting Premium Fin. Corp. of Am. v. Crump Ins. Servs. of Memphis, Inc., 978 S.W.2d 91, 94 (Tenn. 1998)); see also Am. Heritage Apts., Inc. v. Hamilton Cty. Water & Wastewater Treatment Auth., 494 S.W.3d 31, 52 (Tenn. 2016) (adopting the underlying court's reasoning to hold that Tennessee's Wastewater Treatment Authority Act, T.C.A. § 68-221-601 et seq., creates a private right of action (citing Am. Heritage Apts., Inc. v. Hamilton Cty. Water & Wastewater Treatment Auth., No. E201400302COAR3CV, 2015 WL 399215, at *10 (Tenn. Ct. App. Jan. 30, 2015), which emphasized the absence of any administrative remedy and applied the Brown factors)).[8]

         The 911 Law here, however, contained no such governmental-enforcement provisions against a service supplier; no express criminal sanctions for even the most wanton violation, no means of imposing any administrative penalty, no governmental oversight at all, in fact. See T.C.A. § 7-86-110. The 911 Law provided the Districts with no "other" remedy, no other means of enforcing the 911 Law's provisions against the service supplier (i.e., of compelling BellSouth to bill, collect, and remit the 911 charges), and no other means of penalizing a service supplier for failing to do so. This absence of any other enforcement provision in the 911 Law is a consummate distinction from the TTPA statute in Brown.

         Therefore, in considering the district court's application of Brown's three-part inquiry to the 911 Law, we begin with the importance Brown placed on the TTPA's governmental-enforcement provisions when analyzing the "underlying purpose" factor: the 911 Law, unlike the TTPA, has no comprehensive regulatory system, no enforcement provisions, no "Commissioner" or overseer with "broad enforcement authority, " and no prescribed penalties for violation.[9]

         The district court also deviated from Brown in two significant ways. After stating Brown's three-part inquiry clearly and accurately, Hamilton I, 890 F.Supp.2d at 874, the court altered two of those factors, converting the first factor's "an" intended beneficiary, Brown, 328 S.W.3d at 855, into a requirement that the plaintiff be "the" only intended beneficiary; and converting the third factor's "consistent with the underlying purposes, " id., into a limitation that the charge at issue be the statute's "primary purpose." The court's conclusion that the Districts could not satisfy the factors, and that the 911 Law did not imply a private right of action, inescapably relies on these modifications to the factors. See Hamilton I, 890 F.Supp.2d 875 ("the actual beneficiary of the statute is the public" and "[a]lthough [a District] is the conduit through which the public receives 911 service, it is not the actual beneficiary" (emphasis added)); id. at 876 ("the primary purpose of the [911 Law] is to establish a uniform emergency number for the public" not to "ensur[e] service suppliers properly bill, collect, and remit 911 charges" (emphasis added)). Our reading of Brown is, therefore, different from the district court's, which drastically affects the following analysis, given that we review this issue de novo.

         On de novo review, we must decide whether the Tennessee legislature intended the Districts to have a private right of action against a service supplier such as BellSouth under the 911 Law, based on the three-factor inquiry set out in Brown, 328 S.W.3d at 855.

         1. Intended Beneficiary: "whether the party bringing the cause of action is an intended beneficiary within the protection of the statute." Id. The Districts assert that a statute can intend multiple beneficiaries and that the 911 Law does just that, intending the general public as the ultimate beneficiary of the 911 program overall but the Districts as the specific beneficiary of the provisions ordering the service suppliers to bill, collect, and remit the money to the Districts. Stated another way, the general public is the direct beneficiary of the Districts' operating the 911 program (and the 911 Law's provisions that order the Districts to do so), whereas the Districts are the direct intended beneficiary of BellSouth's billing, collecting, and remitting of the 911 charges (and the 911 Law's provisions that order BellSouth to do so).

         BellSouth argues that "the 911 Law did not confer upon the [Districts] a benefit; it imposed upon them a duty to protect the public, " meaning that the Districts merely fill a "functional role"; and even if the Districts "'may benefit' in a secondary way" or receive a "residual benefit, " that is insufficient to make them an intended beneficiary. [Appellee Br. at 21-22.] The Districts answer that it is because the 911 Law commands them (i.e., imposes a "statutory responsibility" upon them) to operate the 911 program that "[t]hey are the principal beneficiary of the 911 Charge revenue that BellSouth is required to properly bill, because they cannot fulfill their statutory responsibilities without that revenue." [Apt. Reply Br. at 9.]

         The 911 Law created a scheme in which the Districts' funding is utterly dependent on BellSouth's proper billing, collecting, and remitting of the 911 charges; therefore, the Districts' very existence depends on BellSouth's proper compliance with the 911 Law. But BellSouth is not reciprocally beholden to the Districts in any way. These two entities are not collaborators or partners, they are wholly unrelated and independent but for this one thing. Each performs its ministerial functions as the 911 Law commands, and each receives only as the 911 Law bestows. The 911 Law commands BellSouth to bill, collect, and remit the 911 charges and it bestows that money on the Districts. This scheme, which makes the Districts so inescapably dependent on BellSouth, also makes the Districts an intended beneficiary of BellSouth's obligations.

         2. Legislative Intent: "whether there is any indication of legislative intent, express or implied, to create or deny the private right of action." Brown, 328 S.W.3d at 855 (emphasis added). The Districts propose three indications of legislative intent, beginning with Tennessee's stand-alone "Private Right of Action" statute:

[A court may] [r]ecognize a private right of action commenced by a state or local governmental entity to collect any fees owed for a governmental service or to recover such fees from a party that is obligated to bill and collect fees owed others for a governmental service.

T.C.A. § 1-3-119(c)(4) (enacted July 1, 2012). This fits our facts: the Districts are municipal entities, seeking to recover from BellSouth, a party obligated to bill and collect fees for the 911 program, a governmental service.[10] But as BellSouth explains, this provision "says only that a court may (not must) find an implied right of action"; the district court properly exercised its discretion in deciding whether to find a private right of action pursuant to Tennessee law (Brown); and therefore, this provision does not contravene the district court's decision. And as an indication of legislative intent, it is equally conflicted. This statute, enacted in 2012, does not speak to the legislature's intent when it enacted the 911 Law 28 years earlier. On the other hand, it does speak to the present state of mind of the Tennessee legislature.

         Next, the Districts-attempting to analogize an Alabama case under Alabama law-also point to the fact that the 911 Law created each District as "a 'municipality' or public corporation in perpetuity, " T.C.A. § 7-86-106, and Tennessee law empowers municipal corporations with the inherent right to sue, see Bd. of Park Comm'rs v. City of Nashville, 185 S.W. 694, 700 (Tenn. 1916). But that reasoning does not extend so far as to provide that the Districts' right to sue includes the specific right to sue BellSouth under the 911 Law. See, e.g., Abel v. Welch, 315 S.W.2d 268, 270 (Tenn. 1958). And neither the Alabama case nor the Alabama law speaks to the Tennessee legislature's intent when enacting the Tennessee 911 Law in 1984.

         Finally, the Districts point to the last provision in § 110, which states: "Good faith compliance by the service supplier [phone company] with the provisions of this chapter shall constitute a complete defense to any legal action or claim against the service supplier arising in connection with this part." T.C.A. § 7-86-110(e). The Districts argue that this good-faith-defense provision necessarily anticipates that phone companies would be sued, implying some legislative intent-or at least expectation-of a private cause of action against them. BellSouth reasserts the district court's conclusion that this good-faith-defense provision was likely intended to defend against only countersuits by customers whom BellSouth might have sued to enforce the 911 charge:

[T]his defense was included in the same section [§ 110] as the provision authorizing the service supplier 'to demand payment from any service user who fails to pay any proper service charge' and to 'take legal action, if necessary, to collect the service charge from the service user.' § 110(c). Hence, one logical interpretation of the good faith defense, read together with the aforementioned provision, is that the statute protects the service supplier in the event a service user takes legal action against it when acting pursuant to [§ 110(c)].

Hamilton I, 890 F.Supp.2d at 875-76 (citation form modified). While this is a reasonable speculation, it begs a counter speculation because this defense was also included in the same section (§ 110) as the provision ordering the service supplier (phone company) to remit the 911 charges to the Districts, § 110(a) ("The service supplier shall remit the funds collected as the service charge to the district every two (2) months. Such funds shall be remitted to the district no later than thirty (30) days after the last business day of such two-month period."). Hence, another "logical interpretation" of the good-faith-defense provision-which says, "shall constitute a complete defense to any legal action or claim against the service supplier arising in connection with this part [§ 110], " id. at § 110(e) (emphasis added)-is that it protects the service supplier (phone company) in the event a District sues it for violating § 110(a). Obviously, the legislature might have intended one or the other or both (or neither) of these speculations, but we need not speculate or choose from among these possibilities.

         BellSouth presses the district court's other finding of legislative intent, which was that the 911 Law granted the Districts an express right of action against the service users (telephone customers), T.C.A. § 7-86-110(c), but omitted any corresponding express right of action against service suppliers (phone companies), implying-through this exclusion-an intent to deny the Districts a private right of action against the phone companies. To be sure, such ...


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