Filed: Mar. 06, 2014
Latest Update: Mar. 02, 2020
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-2572 CORE COMMUNICATIONS, INC., Plaintiff – Appellant, v. VERIZON MARYLAND LLC, as successor entity to Verizon Maryland, Inc., Defendant – Appellee, and MARYLAND PUBLIC SERVICE COMMISSION; STEVEN B. LARSEN, In his official capacity as Chairman of the Maryland Public Service Commission; HAROLD D. WILLIAMS, In his official capacity as Commissioner of the Maryland Public Service Commission; ALLEN M. FREIFELD, In his official cap
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-2572 CORE COMMUNICATIONS, INC., Plaintiff – Appellant, v. VERIZON MARYLAND LLC, as successor entity to Verizon Maryland, Inc., Defendant – Appellee, and MARYLAND PUBLIC SERVICE COMMISSION; STEVEN B. LARSEN, In his official capacity as Chairman of the Maryland Public Service Commission; HAROLD D. WILLIAMS, In his official capacity as Commissioner of the Maryland Public Service Commission; ALLEN M. FREIFELD, In his official capa..
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-2572
CORE COMMUNICATIONS, INC.,
Plaintiff – Appellant,
v.
VERIZON MARYLAND LLC, as successor entity to Verizon
Maryland, Inc.,
Defendant – Appellee,
and
MARYLAND PUBLIC SERVICE COMMISSION; STEVEN B. LARSEN, In
his official capacity as Chairman of the Maryland Public
Service Commission; HAROLD D. WILLIAMS, In his official
capacity as Commissioner of the Maryland Public Service
Commission; ALLEN M. FREIFELD, In his official capacity as
Commissioner of the Maryland Public Service Commission;
SUSANNE BROGAN, In her official capacity as Commissioner of
the Maryland Public Service Commission; LAWRENCE BRENNER,
In his official capacity as Commissioner of the Maryland
Public Service Commission,
Defendants.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. J. Frederick Motz, Senior District
Judge. (1:02-cv-03180-JFM)
Argued: December 12, 2013 Decided: March 6, 2014
Before WILKINSON, KING, and GREGORY, Circuit Judges.
Affirmed by published opinion. Judge King wrote the opinion, in
which Judge Wilkinson and Judge Gregory joined.
ARGUED: Ralph Lee Gleaton, II, GLEATON WYATT HEWITT, PA,
Greenville, South Carolina, for Appellant. Scott H. Angstreich,
KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C.,
Washington, D.C., for Appellee. ON BRIEF: Andrew M.
Hetherington, Jessica C. Collins, KELLOGG, HUBER, HANSEN, TODD,
EVANS & FIGEL, P.L.L.C., Washington, D.C., for Appellee.
2
KING, Circuit Judge:
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 (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.
I.
A.
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 (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
3
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”). 1
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
1
As the district court explained, “[r]ather than negotiate
a new agreement with Verizon, Core decided to adopt the terms of
Verizon’s (then Bell Atlantic’s) agreement with American
Communications Services of Maryland, Inc.” See Memorandum Op.
6. That agreement had been approved by the PSC about two years
earlier, in 1997. Pursuant to regulations promulgated by the
Federal Communications Commission under the Act, “an [ILEC]
shall make available . . . to any [CLEC] any [ICA] in its
entirety to which the [ILEC] is a party that is approved by a
state commission.” See 47 C.F.R § 51.809(a).
4
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.
Desiring to avoid having its preferred date of
interconnection delayed for several months, Core suggested that,
instead of installing the new OC-12 Mux and OC-12 IOF Ring,
Verizon should utilize an existing multiplexer and “Loop Ring”
already in the Wire Center. Verizon acknowledged that it would
be technically feasible to use the existing equipment for the
Core interconnection, but, as a matter of internal policy, it
declined to do so. On August 15, 1999, Verizon advised Core
that, in any event, the existing multiplexer and Loop Ring were
already assigned to a Verizon “customer of record.” 2 Only later
2
On August 20, 1999, Core amended its initial notification
to request that its interconnection with Verizon be deferred
from September 10, 1999, until September 18, 1999.
5
did Verizon disclose that the customer of record to which it had
referred was Core itself, already a Verizon retail customer in a
separate context. The existing equipment was never used for the
Core interconnection, and the new OC-12 Mux and OC-12 IOF Ring
were installed by Verizon in late November 1999. The Core
interconnection was consummated on December 23, 1999.
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. 3 Verizon’s district court
complaint (“Civil No. 08-503”) requested a declaration that
Verizon had neither violated the Core ICA nor any duty of good
faith and fair dealing relating thereto. In June 2009, the
court granted Verizon’s request for summary judgment, thereby
3
Pursuant to 47 U.S.C. § 252(e)(6), federal judicial review
in the appropriate district court is the exclusive means of
contesting a State commission’s determinations relating to
enforcement of an ICA. See Iowa Util. Bd. v. FCC, 120 F.3d 753,
803-04 (8th Cir. 1997), aff’d in part, rev’d in part on other
grounds,
525 U.S. 366 (1999).
6
overturning the PSC’s 2004 decision ruling Verizon in breach of
the Core ICA. See Verizon Md., Inc. v. Core Commc’ns, Inc., 631
F. Supp. 2d 690 (D. Md. 2009). Core appealed the court’s
ruling, and we reversed. See Verizon Md., Inc. v. Core
Commc’ns, Inc., 405 F. App’x 706 (4th Cir. 2010) (unpublished)
(the “first appeal”). In so doing, we concluded that “Verizon
had a duty to provide Core with the requested interconnection
[in September 1999] and therefore breached [the Core ICA].” Id.
at 714. We then remanded the matter to the district court for
further proceedings, “including a determination of damages” and
an assessment of “whether Verizon also breached an implied duty
of good faith and fair dealing.”
Id. 4
B.
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, Verizon had
removed the state court complaint to the District of Maryland
4
Because Core had never lodged a counterclaim in Verizon’s
declaratory judgment action, the district court might have been
technically unable to comply with our instruction to calculate
and award damages for Verizon’s breach of the Core ICA. That
latent pitfall, however, was obviated by the consolidation of
the remand proceedings with Core’s 2002 complaint, as described
further herein.
7
(“Civil No. 02-3180”), where, on January 8, 2003, it was
administratively closed without prejudice to being reopened upon
disposition of the PSC proceedings.
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
8
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. 5
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
5
In its August 10, 2012 Memorandum Opinion, the district
court recognized Core’s concession on the good faith and fair
dealing claim. Therein, the court concluded that “dismissal of
Verizon’s claim for declaratory relief that it did not breach an
implied duty of good faith and fair dealing is appropriate.”
Memorandum Op. 2 n.2.
9
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 became “perplexed” when Verizon advised him that the only
multiplexer located there was already in use by an unnamed
retail customer. J.A. 260. 6 Mingo did not share with Verizon,
however, his contemporaneous belief that Core “must be [that]
customer.” Id. at 263. Finally, Mingo admitted that he knew
that different Verizon employees were assigned to handle retail
transactions — as opposed to wholesale transactions, such as
that relating to the Core ICA — and he could not say whether any
of those employees ever communicated with each other.
6
Citations herein to “J.A. __” refer to the contents of the
Joint Appendix filed by the parties in this appeal.
10
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.
11
Verizon directed the district court to section 26.2 of the Core
ICA, which provides that
[n]either Party shall be liable to the other in
connection with the provision or use of services
offered under this Agreement for indirect, incidental,
consequential, reliance or special damages, including
(without limitation) damages for lost profits
(collectively, “Consequential Damages”), regardless of
the form of action, whether in contract, warranty,
strict liability, or tort, including, without
limitation, negligence of any kind . . . .
Notwithstanding the foregoing limitation, a Party’s
liability shall not be limited by this subsection in
the event of its willful or intentional misconduct.
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. 7
7
As explained further herein, at least three aspects of the
Exculpatory Clause are pertinent here:
• That consequential damages cannot be recovered by
either party;
• that negligence claims are barred; and
• that tort claims involving willful or intentional
misconduct are preserved.
12
Core objected to Verizon’s reliance on the Exculpatory
Clause, asserting that Verizon had waived any rights thereunder
by failing to timely invoke the Clause as an affirmative defense
under Rule 8(c) of the Federal Rules of Civil Procedure, that
is, by not properly pleading the Clause in its answer to Core’s
2002 complaint. Core also pointed out that Verizon had not
relied on the Clause at all in its declaratory judgment action. 8
If the Clause was not waived, Core argued, it was nevertheless
unenforceable under Maryland law because it contravened the
State’s public policy. Finally, Core maintained, if the Clause
were enforced, Core was yet entitled to recover damages based on
Core’s interpretation of the Clause, as well as the “performance
penalties” authorized by section 27.3 of the Core ICA.
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
8
Relatedly, Core asserted that Verizon’s invocation of the
Exculpatory Clause was untimely because Verizon had not sought
an interpretation of the Clause by the PSC. That contention is
foreclosed by our recent decision in Central Telephone Co. of
Virginia v. Sprint Communications Co. of Virginia, Inc., in
which we ruled that the Act “does not require a State commission
to interpret and enforce an ICA in the first instance.” See 715
F.3d 501, 514 (4th Cir. 2013).
13
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. 9
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.
9
Although Core’s 2002 complaint alleged both “negligent”
and “intentional” concealment, Maryland law recognizes a single
cause of action for concealment, and intent to defraud or
deceive is an essential element thereof. See Lloyd v. Gen.
Motors Corp.,
916 A.2d 257, 274 (Md. 2007). The Maryland courts
have sometimes referred to the concealment action as “fraudulent
concealment.” See
id. In any event, Core abandoned its claim
for negligent concealment in the district court.
14
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. 10 With respect to the
contract damages issue, the court opined that its enforcement of
the Clause would frustrate the Act’s goal of removing
impediments to competition in local telecommunications markets.
Thus, the Memorandum Opinion recited, the Clause could not bar
Core’s request for consequential damages on the breach of
contract claim.
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,
10
The district court’s public policy analysis of the
Exculpatory Clause, as applied to Core’s intentional tort
claims, was arguably unnecessary. Such claims, by the plain
terms of the Clause, were outside its scope, and therefore
preserved. See supra note 7.
15
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., 916 A.2d 257, 274 (Md. 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. 11 The court
then explained that Core’s unfair competition claim failed for
the same reasons, that is, there was a lack of proof on the
issue of intent to defraud or deceive. See
id. at 14.
Accordingly, the court awarded summary judgment to Verizon on
each of the remaining tort claims. A jury issue nonetheless
remained, according to the court, with respect to the proper
measure of damages for Verizon’s breach of the Core ICA.
That jury trial, of course, never occurred. Core asked the
district court to reconsider its rulings on the tort claims,
11
As an alternative basis for awarding summary judgment to
Verizon on the concealment claim, the district court explained
that, even if Core could have established Verizon’s intent to
defraud or deceive, Core “[could not] prove that it took action
in justifiable reliance on the concealment.” Memorandum Op. 11.
On this record, according to the court, “Core knew or should
have realized that it was the unidentified customer of record.”
Id. at 12.
16
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
(2005) (citing Chevron, U.S.A, Inc. v. Natural Res. Defense
Council, Inc.,
467 U.S. 837, 843-44 (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 Reconsideration Order therefore enforced the Exculpatory
Clause as a bar to Core’s recovery of any consequential damages
on its breach of contract claim. When it entered the
Reconsideration Order, the court issued a separate memorandum to
17
the parties, requesting them to “agree upon a form of judgment”
that would be consistent with the “limited amount that the ICA
permits in light of the rulings [the court] made,” and which
would “enable the parties to appeal [those] rulings.” S.A. 3. 12
Verizon responded to the court’s request a week later, on
December 3, 2012, and proposed that the judgment award only
nominal damages to Core. Verizon therein represented to the
court that Core “[did] not object” to Verizon’s proposed
judgment. Id. at 4. Core did not independently or directly
respond to the court’s request or to Verizon’s representation of
Core’s position, but instead filed a notice of appeal on
December 26, 2012, prior to judgment being entered. Thereafter,
on January 15, 2013, the court adopted Verizon’s proposal for
nominal damages and entered judgment accordingly, awarding Core
the sum of one dollar. We possess jurisdiction pursuant to the
provisions of 28 U.S.C. § 1291. 13
12
Our citation to “S.A. __” refers to the contents of the
Supplemental Appendix filed by the parties in this appeal.
13
In accordance with Rule 4(a)(2) of the Federal Rules of
Appellate Procedure, Core’s premature notice of appeal was
effective upon the district court’s entry of the judgment.
Core, nonetheless, filed an amended post-judgment notice of
appeal on January 17, 2013.
18
II.
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 (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).
III.
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.
19
A.
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.
1.
Core argues that Verizon waived the benefit of the
Exculpatory Clause by neglecting to invoke it as an affirmative
defense under Rule 8(c) of the Federal Rules of Civil Procedure,
that is, by not properly pleading the Clause in its answer to
Core’s 2002 complaint. Lest Verizon’s inattention be construed
as a mere oversight, Core reminds us that Verizon continued to
ignore the Clause in its declaratory judgment action. Thus,
according to Core, the district court abused its discretion in
permitting Verizon to raise the Clause, post-remand, in the
summary judgment proceedings.
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
20
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.
2.
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, 644 A.2d 522, 532 (Md. 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 (1999).
21
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
In re Cavalier Tel., LLC, 18 FCC Rcd. 25887, 25985-87 (Wireline
Comp. Bur. 2003) (hereinafter cited as the “Cavalier Order”).
22
The Local Competition Order, in 1996, constituted the FCC’s
initial declaration implementing the local competition
provisions of the Act. 14 Therein, the FCC “reject[ed]” the
contention that it would be impermissible for an ILEC to request
that a CLEC “limit its legal remedies as part of a negotiated
[ICA].” Local Competition Order 15576. The FCC also recognized
that exculpatory provisions are a legitimate negotiating tool;
for example, “A party may voluntarily agree to limit its legal
rights or remedies in order to obtain a valuable concession from
another party.” Id. The Local Competition Order identified
only one circumstance where a request to limit a party’s legal
rights might be improper, and that circumstance is not
applicable here. See
id. (explaining that “an [ILEC] may not
demand that the [CLEC] attest that the [ICA] complies with all
provisions of [the Act], federal regulations, and state law”).
In the 2003 Cavalier Order, the FCC arbitrated a dispute
between an ILEC and a CLEC involving ICA negotiations in
Virginia. 15 Those parties had already agreed to an ICA provision
14
Certain of the regulations adopted in the Local
Competition Order were subsequently vacated after review in the
federal courts. See Verizon Commc’ns, Inc. v. FCC, 535 U.S. 467
(2002). All aspects of the Order upon which we rely today,
however, remain undisturbed.
15
In the proceedings leading to the Cavalier Order, the FCC
assumed jurisdiction when the State commission declined to
resolve the Virginia dispute. See 47 U.S.C. § 252(e)(5) (“If a
(Continued)
23
functionally identical to the Exculpatory Clause, which limited
the ILEC’s liability for lost profits and other consequential
damages. The CLEC, however, sought to add a broad exclusion to
the proposed ICA’s exculpatory provision that would entitle the
CLEC to damages “where [the ILEC] violat[ed] any law governing
communications.” See Cavalier Order 25985. The CLEC argued
that its right to damages under the Act should not be curtailed
or eliminated at the ILEC’s insistence, because such a
limitation would greatly diminish the ILEC’s incentive to
perform its obligations under the ICA. The ILEC countered that
the broad exclusion effectively gutted the proposed ICA’s
exculpatory provision, and that the ICA otherwise provided the
CLEC with sufficient protection.
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,
State commission fails to act to carry out its responsibility
under this section in any proceeding or other matter under this
section, then the [FCC] . . . shall assume the responsibility of
the State commission . . . with respect to the proceeding or
matter and act for the State commission.”).
24
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 Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545
U.S. 967, 986 (2005) (citing Chevron, U.S.A, Inc. v. Natural
Res. Defense Council, Inc.,
467 U.S. 837, 843-44 (1984)).
First, we assess “whether the statute’s plain terms directly
address the precise question at issue.”
Id. (internal quotation
marks and alterations omitted). If the statute is deemed
ambiguous on the question, “we defer at step two to the agency’s
interpretation so long as the construction is a reasonable
policy choice for the agency to make.”
Id. (internal quotation
marks omitted). Applying that framework, we observe that the
Act itself does not address the viability of an exculpatory
provision in an ICA. The FCC’s decisions, on the other hand,
convincingly illustrate the agency’s reasonable conclusion that
an exculpatory provision in an ICA does not offend any aspect of
the Act. We are therefore obliged to acknowledge that Verizon’s
25
reliance on the Exculpatory Clause is not precluded by federal
law.
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. 16 In that
16
We are constrained to note that Core, like a man who buys
a dog yet cannot abide fleas, seeks to avoid a key provision of
the very agreement, that is, the Core ICA, that it previously
insisted upon. Core’s position in the district court and on
appeal — that the Exculpatory Clause is inconsistent with
Maryland’s public interest — is a complete U-turn from the
position Core took in 1999 when it sponsored the Core ICA before
the PSC. Though we reject on the merits Core’s newfound
contentions regarding the enforceability of the Clause, we would
not condone in any event Core’s apparent effort to manipulate
our court system. See King v. Herbert J. Thomas Mem’l Hosp.,
159 F.3d 192, 196 (4th Cir. 1998) (recognizing application of
judicial estoppel to party who “assert[s] a position that is
factually incompatible with a position taken in a prior judicial
or administrative proceeding,” where tribunal has accepted
(Continued)
26
circumstance, no further consideration of Maryland law or policy
is appropriate. 17 As our distinguished colleague Judge Michael
aptly observed, “[o]nce the [ICA] is approved, the [Act]
requires the parties to abide by its terms.” See Verizon Md.,
377 F.3d at 364. Accordingly, the district court did not err in
enforcing the Exculpatory Clause in the consolidated
proceedings.
B.
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 competition. The Exculpatory
Clause presents no obstacle to those intentional torts, inasmuch
as the Clause does not limit the liability of either party for
“willful or intentional misconduct.” See J.A. 531.
Under Maryland law, the tort of concealment has five
elements:
initial position and party has assumed contrary position to gain
unfair advantage) (citations omitted).
17
It may well be that, in the absence of governing federal
principles, a court should draw on appropriate state law
contract principles for an interpretation of an ICA. See, e.g.,
Cent. Tel. Co. of Va. v. Sprint Commc’ns of Va., Inc., 715 F.3d
501, 517 (4th Cir. 2013). Such a limited use of state law
principles, however, falls far short of Core’s assertion that
Maryland law “controls” our analysis of whether a party to an
ICA may limit its liability thereunder.
27
(1) the defendant owed a duty to the plaintiff to
disclose a material fact; (2) the defendant failed to
disclose that fact; (3) the defendant intended to
defraud or deceive the plaintiff; (4) the plaintiff
took action in justifiable reliance on the
concealment; and (5) the plaintiff suffered damages as
a result of the defendant’s concealment.
See Lloyd v. Gen. Motors Corp., 916 A.2d 257, 274 (Md. 2007).
Each of those five elements must be proven by clear and
convincing evidence. See Rhee v. Highland Dev. Corp.,
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. Anderson Windows, Inc.,
218 F. Supp. 2d
729, 733 (D. Md. 2002) (citing Balt. Bedding Corp. v. Moses,
34
A.2d 338, 342 (Md. 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.
28
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
29
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.
Core’s unfair competition tort claim fails for the same
reason, that is, the lack of evidence on the element of intent
to defraud or deceive. Though we are content to affirm the
district court’s rulings on the merits of Core’s intentional
tort claims, we also note our concern that those claims amount
to little more than “the assertion of a contract claim in the
guise of a tort.” See Sibley v. Lutheran Hosp. of Md., Inc.,
871 F.2d 479, 487 (4th Cir. 1989) (Murnaghan, J., concurring).
Under Maryland law, “where the essence of a relationship between
the parties is contractual in nature and the basis for the claim
of defendant’s dereliction is its failure to perform the
contract, the cause of action . . . is not available in [tort],
but only in an action for breach of contract.” Abt Assoc., Inc.
v. JHPIEGO Corp.,
104 F. Supp. 2d 523, 527 (D. Md. 2000) (citing
Baird v. C & P Tel. Co. of Balt.,
117 A.2d 873, 879 (Md. 1955)).
Accordingly, the district court did not err in awarding Verizon
summary judgment on Core’s tort claims.
30
C.
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. 18
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
18
Verizon contends that Core waived its arguments for
damages notwithstanding the Exculpatory Clause by failing to
object to Verizon’s proposed form of judgment awarding nominal
damages only. Verizon’s point is that the district court
specifically requested the parties’ views on what damages were
available in light of its ruling that the Clause was
enforceable, and Core remained silent. Core, however, maintains
that it misunderstood the court’s request and believed it had no
other recourse than to appeal. In these circumstances, we
decline to deem Core’s arguments waived and are content to
address their merits.
31
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”); see also
id. at 486, 496,
509, 512, 515, 524. 19 In the Clause, however, the parties do not
use the term “Telecommunications Service,” but instead use the
single word “services.” Thus, the parties intended to draw a
19
The Act defines a “telecommunications service” as “the
offering of telecommunications for a fee directly to the public,
or to such classes of users as to be effectively available
directly to the public, regardless of the facilities used.” See
47 U.S.C. § 153(53).
32
distinction between a “Telecommunications Service” and mere
“services.” We conclude that, accorded its broad, ordinary
meaning, the word “services” in the Clause must include the
provision of an interconnection at Core’s request.
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
33
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.
IV.
Pursuant to the foregoing, we affirm the judgment of the
district court.
AFFIRMED
34
