Plaintiff Core Communications, Inc. appeals the district court's award of summary judgment to defendant Verizon Maryland, LLC, successor to Verizon Maryland, Inc. (interchangeably "Verizon"), with respect to a pair of tort claims pursued by Core under Maryland law. See Core Commc'ns, Inc. v. Verizon Md., Inc., No. 1:02-cv-03180, 2012 WL 3292899 (D.Md. Aug. 10, 2012), ECF No. 66 (the "Memorandum Opinion"). Core contends that the court further erred when, as a result of granting partial reconsideration of its Memorandum Opinion, it awarded nominal damages of only one dollar to Core on its related claim for breach of contract. See Core Commc'ns, Inc. v. Verizon Md., Inc., No. 1:02-cv-03180 (D.Md. Nov. 27, 2012), ECF No. 73 (the "Reconsideration Order"). As explained below, we affirm.
The Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56 (codified as amended in scattered sections of 47 U.S.C.) ("the Act"), was designed to increase competition in local telephone markets. See Verizon Commc'ns, Inc. v. FCC, 535 U.S. 467, 489, 122 S.Ct. 1646, 152 L.Ed.2d 701 (2002). To that end, the Act required established telephone companies to enter into contracts known as interconnection agreements (in the singular, an "ICA") with new market entrants seeking to connect with existing networks. See 47 U.S.C. § 251. In the Baltimore area, Verizon was the established phone company, that is, the incumbent local exchange carrier ("ILEC"), and Core was one of several new market entrants, known as competitive local exchange carriers (in the singular, a "CLEC"). Pursuant to the Act, Core sought an ICA with Verizon, and, in order to expedite negotiations, the two companies agreed — at Core's suggestion — to adopt the terms of a previously approved ICA between Verizon's predecessor and another CLEC. On July 14, 1999, the companies jointly submitted their proposed ICA to the Maryland Public Service Commission (the "PSC") for its review and approval. On September 15, 1999, the PSC approved that ICA (the "Core ICA").
On July 27, 1999, while the PSC's approval of the Core ICA was pending, Core wrote Verizon to request that the proposed interconnection — as to which Core would be a wholesale customer of Verizon — be accomplished by September 10, 1999. At a meeting between Core and Verizon on August 11, 1999, the companies agreed that Core's interconnection would occur at Verizon's "Wire Center" in Baltimore, which was "on-net" with Verizon, that is, the Wire Center was physically connected to Verizon's central network and housed the needed equipment. In tension with Core's proposed timeline, however, Verizon estimated that it would take another four to six months before the essential new equipment for Core's interconnection — including an OC-12 multiplexer (the "OC-12 Mux") and a corresponding OC-12 facility ring (the "OC-12 IOF Ring") — was available for use.
On October 8, 1999, Core filed a complaint with the PSC, alleging that Verizon had breached the Core ICA by delaying the interconnection. In 2004, the PSC ruled against Verizon, concluding that Verizon was obliged, under the Core ICA, to use its existing equipment and make the Core interconnection by September 18, 1999, as Core had requested. In 2008, Verizon sought review of the PSC's adverse order by filing a complaint for declaratory relief in the District of Maryland, as it was entitled to do under the Act.
On October 13, 2011, the district court consolidated the remand proceedings in Civil No. 08-503 with a separate seven-count complaint that had been filed by Core against Verizon in the Circuit Court for Baltimore City nine years earlier, in 2002. Asserting federal question jurisdiction,
In its 2002 complaint, Core alleged a single count for breach of contract; three related claims for promissory estoppel, unjust enrichment, and breach of warranty; and three state law tort claims — misrepresentation (both negligent and intentional), concealment (both negligent and intentional), and unfair competition. Notably, the parties agreed in the consolidated proceedings — and also agree here — that our decision in the first appeal is entitled to preclusive effect on the issue of Verizon's liability for the breach of contract claim alleged in Core's 2002 complaint. The tort claims alleged in Civil No. 02-3180 derived from the proposition that Verizon had lied to Core about the reasons for delaying Core's interconnection in 1999, such delay constituting Verizon's breach of the Core ICA. In a similar vein, Core alleged that Verizon had improperly failed to disclose, in or about August 1999, Core's status as the Verizon "customer of record" assigned to the existing equipment at the Wire Center in Baltimore.
The district court's 2011 consolidation of the proceedings in Civil No. 08-503 and Civil No. 02-3180 engendered an early round of dispositive motions. After hearing argument, the court ruled, by order of February 2, 2012, that Core's promissory estoppel, unjust enrichment, and breach of warranty claims had been rendered superfluous by the first appeal, inasmuch as Core could recover nothing on those claims that it was not already entitled to for Verizon's breach of the Core ICA. At the same time, Core conceded that there was no independent action under Maryland law for breach of a duty of good faith and fair dealing, effectively removing that claim from the litigation. Thus, as of early 2012, the following issues remained for resolution in the consolidated proceedings: (1) Core's damages for Verizon's breach of the Core ICA; and (2) Core's tort claims for misrepresentation, concealment, and unfair competition.
On remand following the first appeal, the parties, in aid of the consolidated proceedings, engaged in further discovery. Of some importance was Verizon's deposition of Bret Mingo, Core's president. Mingo testified about, among other things, Core's initial entry into the telecommunications marketplace in Maryland in 1997. With respect to Verizon's refusal in August 1999 to use the existing multiplexer and Loop Ring at the Wire Center for Core's interconnection, Mingo clarified that Verizon had never maintained that such an interconnection was impossible. Instead, Verizon had asserted that the interconnection would violate its internal policies. Mingo also acknowledged that Verizon had never advised Core that Verizon intended to unduly delay the Core interconnection or deliberately contravene the Core ICA. Critically, Mingo acknowledged that he could not identify any untrue statement made in that regard by any Verizon employee.
Mingo also conceded that, at the time the Core interconnection negotiations were ongoing, he knew that Core was a retail customer of Verizon's at the Wire Center. Accordingly, upon visiting the Wire Center prior to the Core interconnection, Mingo
During the discovery proceedings, the parties exchanged expert reports on the damages issue. Core's expert opined that the interconnection delay of roughly three months had resulted in several million dollars of lost profits to Core from 1999 to 2011. Verizon's rebuttal expert, unsurprisingly, took a strong view to the contrary. The parties thereafter agreed to defer any expert depositions and Daubert motions pending completion of the summary judgment proceedings.
In early 2012, the parties submitted cross-motions for summary judgment regarding contract damages and the resolution of Core's surviving tort claims. Core reasoned that it was entitled to summary judgment on each of its tort claims for misrepresentation, concealment, and unfair competition, insisting that the facts necessary to prove each claim had been definitively established by our decision in the first appeal. In opposition to Core's motion for summary judgment and in support of its own cross-motion, Verizon emphasized the evidence that it had gleaned in discovery — particularly the deposition of Mingo — indicating that Verizon had neither intentionally breached the Core ICA nor deceived Core in any way.
In its summary judgment papers, Verizon argued for the first time that the Core ICA contained an exculpatory provision that served to insulate Verizon from the damages Core pursued. Verizon directed the district court to section 26.2 of the Core ICA, which provides that
J.A. 531 (the "Exculpatory Clause" or the "Clause"). According to Verizon, the Exculpatory Clause barred the consequential, lost-profit damages that Core was demanding for Verizon's breach of the Core ICA. From that premise, Verizon reasoned, the only contract damages available to Core, consistent with the evidence it had forecast, were nominal in nature. Verizon contended, moreover, that the Clause barred recovery of damages for any tort claims, except those involving "willful or intentional misconduct," which, Verizon insisted, Core was unable to prove.
During the pendency of the summary judgment motions, Core withdrew its tort claim for misrepresentation, acknowledging that no evidence suggested that Verizon had made an affirmative misrepresentation of any kind. That concession left in dispute the following issues: whether the Exculpatory Clause had been timely invoked by Verizon; if so, its impact; Core's damages for Verizon's breach of the Core ICA; and whether Core's remaining tort claims — concealment and unfair competition — could be resolved on summary judgment, or should, on the other hand, be decided by a jury.
On August 10, 2012, the district court filed its Memorandum Opinion resolving those issues. As a preliminary matter, the court rejected Core's assertion that Verizon had waived the benefit of the Exculpatory Clause by failing to properly and timely invoke the Clause in its pleadings. The court reasoned, "Unlike a statute of limitations affirmative defense ... the [Exculpatory Clause was] an integral part of the contract at issue," and thus not subject to the pleading requirements of Rule 8(c). Memorandum Op. 15 n. 6. Furthermore, the court explained that "no adverse consequences resulted from Verizon's failure to formally raise and discuss the [Exculpatory Clause] earlier since it was only after the Fourth Circuit's remand that [the district court] focused specifically on damages." Id.
With respect to the enforceability and impact of the Exculpatory Clause on the other issues, the district court conducted two separate analyses. As to the tort claims, the court ruled, on the basis of state law public policy principles, that the Clause could not be enforced.
Turning to the merits of the concealment and unfair competition tort claims, the district court rejected at the outset Core's contention that the essential elements of those claims had been established by our decision's factual recitation in the first appeal. The court set forth that the crux of the concealment claim was that Verizon had obfuscated Core's status as the "customer of record" at the Wire Center in 1999, to which the existing multiplexer and Loop Ring were already assigned. Had Core known that it was actually that customer of record, Core's argument went, it could have demanded an immediate interconnection using the existing Wire Center equipment. This theory, in the court's view, was fatally flawed. Focusing on the concealment claim's element of intent to defraud or deceive, see Lloyd v. Gen. Motors Corp., 397 Md. 108, 916 A.2d 257, 274 (2007), the court could discern "no evidence supporting Core's contention that Verizon's motive in not disclosing the identity of the customer of record was to deceive Core, and thereby cause a delay in interconnection." Memorandum Op. 10.
That jury trial, of course, never occurred. Core asked the district court to reconsider its rulings on the tort claims, highlighting evidence that it contended the court had not properly evaluated. Verizon filed its own reconsideration motion, maintaining that the court had erred by declining to enforce the Exculpatory Clause as a bar to consequential damages. Verizon therein directed the court's attention to decisions of the Federal Communications Commission (the "FCC") in which the FCC had consistently sanctioned similar exculpatory provisions in other ICAs. Those decisions, Verizon urged, were entitled to deference and application, in adherence to the Supreme Court's decision in National Cable & Telecommunications Ass'n v. Brand X Internet Services. See 545 U.S. 967, 980-81, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005) (citing Chevron, U.S.A., Inc. v. Natural Res. Defense Council, Inc., 467 U.S. 837, 843-44, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984) (explaining that agency's reasonable implementation of statute it administers is entitled to acceptance by federal courts)). Verizon also argued that the PSC's 1999 approval of the Core ICA was a conclusive determination that the Exculpatory Clause was consistent with the public interest.
The district court, by its Reconsideration Order of November 27, 2012, granted Verizon's motion and denied Core's. The
We review for abuse of discretion a district court's ruling that a defense was properly and timely raised. See Polsby v. Chase, 970 F.2d 1360, 1364 (4th Cir.1992), vacated and remanded on other grounds, 507 U.S. 1048, 113 S.Ct. 1940, 123 L.Ed.2d 646 (1993). We review de novo a district court's award of summary judgment, viewing the facts and inferences reasonably drawn therefrom in the light most favorable to the nonmoving party. See Woollard v. Gallagher, 712 F.3d 865, 873 (4th Cir.2013). A summary judgment award is appropriate only when the record shows "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R.Civ.P. 56(a).
On appeal, Core challenges three aspects of the district court's rulings. First, it maintains that the court erred in allowing the Exculpatory Clause to be invoked, and then by enforcing the Clause as a bar to Core's recovery of consequential damages. Second, Core contends that the court's summary judgment awards to Verizon on Core's concealment and unfair competition tort claims were erroneously made. Finally, Core argues that, notwithstanding the Exculpatory Clause, the court erred in ruling that Core was entitled to only nominal damages on its breach of contract claim.
We will first assess the timeliness and application of the Exculpatory Clause. On this front, Core advances two arguments: first, that Verizon failed to timely invoke the Clause; and, second, that the Clause is void under principles of Maryland contract law.
Core argues that Verizon waived the benefit of the Exculpatory Clause by
Put succinctly, we discern no abuse in the district court's ruling. In analyzing a party's failure to timely invoke an exculpatory provision, we have recognized an exception to Rule 8(c) where, as here, the pertinent provision was "evident" in the contract "before the trial court." Caterpillar Overseas, S.A. v. Marine Transp. Inc., 900 F.2d 714, 725 n. 7 (4th Cir.1990). Although not relying specifically on Caterpillar Overseas to support its ruling on timeliness, the court nevertheless identified the salient legal principle. Furthermore, the court properly observed that Core was neither unfairly surprised nor unduly prejudiced by Verizon's delay in invoking the Exculpatory Clause, in that the parties did not have occasion to address the issue of damages until after the first appeal. Thus, the Clause was timely and appropriately invoked.
Next, Core contends that the Exculpatory Clause cannot be enforced because Maryland law bars the use of "exculpatory agreements in transactions affecting the public interest." See Wolf v. Ford, 335 Md. 525, 644 A.2d 522, 526 (1994). Verizon counters, however, that the Clause is enforceable under federal law, and that state law principles cannot, at this stage, void a provision of an ICA already approved by the appropriate State commission. Verizon maintains that, pursuant to the Act, the proper time for Core to object on the asserted basis of Maryland's public policy was prior to the PSC's approval of the Core ICA. We agree with Verizon.
The Telecommunications Act "t[ook] the regulation of local telecommunications competition away from the States," imposing a federal regime to govern certain aspects of such competition. See AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 378 n. 6, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). Approved ICAs between ILECs and CLECs are the "tools" through which the Act is implemented and enforced, and are thus, as we have explained, "creation[s] of federal law." See Verizon Md., Inc. v. Global NAPS, Inc., 377 F.3d 355, 364 (4th Cir.2004) (internal quotation marks omitted). The contractual duty at issue in this case — Verizon's duty to interconnect with Core — is a duty imposed by the Act itself. Accordingly, the resolution of a claim regarding the scope of that statutory duty, including the remedies available for its breach, depends on the interpretation and application of federal law. See id.
None of our sister courts of appeals have weighed in on the specific issue of whether the Act abides the existence of an exculpatory provision in an approved ICA. Nonetheless, we are satisfied with the district court's conclusion that "exculpatory clauses, like section 26 of the [Core] ICA, are not void under the Telecommunications Act." See Reconsideration Order 1. The court so concluded by deferentially applying FCC decisions that have approved the use of exculpatory provisions under the Act. See In re Implementation of the Local Competition Provisions in the Telecomm's Act of 1996, 11 FCC Rcd. 15499, 15576 (1996) (hereinafter cited as the "Local Competition Order"); see also
The Local Competition Order, in 1996, constituted the FCC's initial declaration implementing the local competition provisions of the Act.
In the 2003 Cavalier Order, the FCC arbitrated a dispute between an ILEC and a CLEC involving ICA negotiations in Virginia.
The FCC agreed with the ILEC and rejected the CLEC's proposed change to the exculpatory provision. Specifically, the FCC determined that the CLEC's effort to "eviscerate" the exculpatory provision was "commercially unreasonable." See Cavalier Order 25986. The CLEC's concerns about undermining the ILEC's incentive to comply with the Act were mitigated, according to the FCC, by the remedies available elsewhere in the ICA and under applicable law. The FCC later issued an order approving an ICA between the parties that included the original exculpatory provision. See In re Cavalier Tel., LLC, 19 FCC Rcd. 4070 (Wireline Comp. Bur.2004).
The Reconsideration Order's deference to these FCC decisions was entirely appropriate. In Chevron, the Supreme Court "established a familiar two-step procedure for evaluating whether an agency's interpretation of a statute is lawful." See Nat'l
Though federal law does not prohibit the use of an exculpatory provision in an ICA, the Act authorizes a State commission to reject any provision of an ICA that the commission deems "not consistent with the public interest, convenience, and necessity." See 47 U.S.C. § 252(e)(2)(A)(ii). This statutory prescription creates a narrowly defined time and forum for identifying and evaluating any state-level policy that might invalidate part or all of an ICA. Neither the Act nor any other provision of federal law, however, subjects a State commission-sanctioned ICA to any subsequent attack on the basis of a state law principle. By its approval, the PSC affixed the imprimatur of the State of Maryland on the Core ICA, confirming that it worked no injury to Maryland's public interest.
We next assess Core's challenge to the district court's summary judgment awards with respect to Core's state law tort claims for concealment and unfair
Under Maryland law, the tort of concealment has five elements:
See Lloyd v. Gen. Motors Corp., 397 Md. 108, 916 A.2d 257, 274 (2007). Each of those five elements must be proven by clear and convincing evidence. See Rhee v. Highland Dev. Corp., 182 Md.App. 516, 958 A.2d 385, 389 (Md.Ct.Spec.App.2008). The related tort of unfair competition, on the other hand, is a more "flexib[le]" cause of action, but in all instances requires proof of "fraud, deceit, trickery or unfair methods of any sort." See Delmarva Sash & Door Co. of Md., Inc. v. Andersen Windows, Inc., 218 F.Supp.2d 729, 733 (D.Md. 2002) (citing Balt. Bedding Corp. v. Moses, 182 Md. 229, 34 A.2d 338, 342 (1943)).
Core relies upon the same conduct to support both of its intentional tort claims: that Verizon failed to disclose that Core was the "customer of record" to which the then existing multiplexer and Loop Ring in the Wire Center had been committed, and that, had Core known that fact, it could have demanded an immediate interconnection. Verizon asserts that, viewed in the proper light, Core failed to produce any evidence of intent to defraud or deceive, nor sufficient evidence of Core's reasonable reliance on Verizon's alleged deception.
As a preliminary matter, we reject, as did the district court, Core's assertion that the facts we "found" in the first appeal are sufficient to establish Verizon's liability for Core's tort claims. First, "it is axiomatic ... that appellate courts do not make factual findings." See Robinson v. Wix Filtration Corp. LLC, 599 F.3d 403, 419 (4th Cir.2010). Second, even if our factual recitation in the first appeal is accorded some weight, Core substantially overstates the inferences that could be permissibly drawn therefrom. Finally, Core's concealment and unfair competition claims were not litigated at all until the consolidated proceedings that occurred post-remand, and only then did the parties conduct discovery with an eye toward developing evidence specifically related to those intentional torts.
Based on our de novo review of the summary judgment record, we agree with the district court's assessment that no reasonable jury could find that Verizon unlawfully concealed any material fact from Core. Our conclusion in that regard turns on the element of intent to defraud or deceive. Core has simply offered no evidence suggesting that Verizon's failure to identify Core as the "customer of record" was driven by any intent to defraud or deceive Core. When given the chance, Mingo, as Core's president, could merely assert that the failure to disclose occurred, and then theorize that Verizon must have done so intentionally in order to improperly delay the Core interconnection. A claim built on such rank speculation is insufficient to survive summary judgment, as the court properly recognized. Moreover, Mingo's concession that he knew, and did not share, that Core was a retail customer in the Baltimore Wire Center establishes that Core could not have reasonably relied on the intentional concealment it alleges.
Lastly, we review the propriety of the district court's judgment awarding nominal damages of one dollar to Core for Verizon's breach of the Core ICA. Core contends that, the Exculpatory Clause notwithstanding, it is yet entitled to more than nominal damages for three reasons: (1) Verizon's breach of the Core ICA involved "willful or intentional misconduct"; (2) the Core interconnection was not a "service" for purposes of the Clause; and (3) the Clause permits the award of "performance penalties," as provided for in section 27.3 of the Core ICA.
Core's first theory, that it can recover consequential damages for Verizon's breach of the Core ICA because the breach involved "willful or intentional misconduct," is without merit. The "willful or intentional misconduct" exclusion to the Exculpatory Clause would apply exclusively to actions sounding in tort, because an intent to defraud or deceive is ordinarily not at issue in a breach of contract claim. In any event, Core is unable to show that Verizon engaged in any "willful or intentional misconduct."
Second, Core emphasizes that the Exculpatory Clause only limits Verizon's liability for consequential damages "in connection with the provision or use of services offered under [the Core ICA]." J.A. 531 (emphasis added). According to Core, interconnection is not a "service" within the meaning of the Clause. For this proposition, Core relies on a district court decision from New Jersey, deciding that interconnection is not a "`telecommunications service[]' for purposes of [the Act]." See Global NAPs, Inc. v. Bell Atlantic-N.J., Inc., 287 F.Supp.2d 532, 547 (D.N.J.2003). Verizon correctly responds that the court's ruling in Global NAPs has no bearing on the Clause. The phrase "Telecommunications Service" has a precise meaning under the Act, which the Core ICA expressly incorporates and employs in several instances. See J.A. 484 ("`Telecommunications Service' is as defined in the Act");
Finally, Core maintains that it is entitled to "performance penalties" under section 27.3 of the Core ICA, which provides for a limited remedy not barred by the Exculpatory Clause. Verizon responds that section 27.3 imposes specific evidentiary requirements that Core has not met. Section 27.1 defines certain "performance standards" Verizon must satisfy in connection with its obligations under the Core ICA, and section 27.2 requires Verizon to submit quarterly reports of its network's performance with respect to those standards. See J.A. 531-32. If, "based on a statistically significant number of [such] reports" Core believes that Verizon is "not complying with the performance standards referenced in [section] 27.1," then section 27.3 permits Core to seek redress in a court of competent jurisdiction. Id.
Core has provided no evidence to satisfy the predicate conditions for the performance penalties provided for in section 27.3. Core does not point to any quarterly report, much less a "statistically significant number" thereof. Instead, it relies on only one arguable instance of non-compliance, which is insufficient to trigger the performance penalties provision of section 27.3. Moreover, even if we were to ignore the quarterly report requirement, we are not swayed by Core's unsupported assertion that it could prove thousands of unspecified performance failures by Verizon. Core had the opportunity to marshal such evidence in the summary judgment proceedings, and it failed to do so. Accordingly, Core is not entitled to performance penalties under section 27.3.
The Exculpatory Clause therefore bars any liability for consequential damages arising from Verizon's breach of the Core ICA, and Core has failed to establish its entitlement to any other remedy. As a result, the district court properly entered judgment on Core's breach of contract claim in the nominal sum of one dollar.
Pursuant to the foregoing, we affirm the judgment of the district court.
AFFIRMED.
