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Qwest Communications Corp. v. Free Conferencing Corp., 17-3724 (2019)

Court: Court of Appeals for the Eighth Circuit Number: 17-3724 Visitors: 28
Filed: Apr. 12, 2019
Latest Update: Mar. 03, 2020
Summary: United States Court of Appeals For the Eighth Circuit _ No. 17-3724 _ Qwest Communications Corporation, a Delaware corporation, now known as CenturyLink Communications, LLC, doing business as CenturyLink QCC lllllllllllllllllllllThird Party Plaintiff - Appellant v. Free Conferencing Corporation, a Nevada corporation lllllllllllllllllllllThird Party Defendant - Appellee _ Appeal from United States District Court for the District of South Dakota - Sioux Falls _ Submitted: October 18, 2018 Filed: A
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                 United States Court of Appeals
                             For the Eighth Circuit
                         ___________________________

                                 No. 17-3724
                         ___________________________

   Qwest Communications Corporation, a Delaware corporation, now known as
    CenturyLink Communications, LLC, doing business as CenturyLink QCC

                  lllllllllllllllllllllThird Party Plaintiff - Appellant

                                           v.

              Free Conferencing Corporation, a Nevada corporation

                 lllllllllllllllllllllThird Party Defendant - Appellee
                                       ____________

                     Appeal from United States District Court
                   for the District of South Dakota - Sioux Falls
                                   ____________

                            Submitted: October 18, 2018
                               Filed: April 12, 2019
                                   ____________

Before SHEPHERD, KELLY, and STRAS, Circuit Judges.
                           ____________

SHEPHERD, Circuit Judge.

     Following our prior remand, Qwest Communications Corp. v. Free
Conferencing Corp., 
837 F.3d 889
(8th Cir. 2016), the district court1 reconsidered

      1
       The Honorable Karen E. Schreier, United States District Judge for the District
of South Dakota.
Qwest Communications’ (Qwest) unjust-enrichment claim against Free Conferencing
(FC), which it had previously denied. The district court again denied Qwest’s claim,
albeit for different reasons. The district court found that, although Qwest had shown
it conferred a benefit upon FC and FC accepted that benefit, it would not be
inequitable for FC to retain that benefit without paying Qwest. The district court
explained that FC earned that benefit because it provided conference-calling services,
24-hour customer support, and access to a website in exchange for two cents per
minute for calls placed to FC’s conferencing bridges at Sancom. Moreover, Qwest
paid its own conference-calling vendor, Genesys, between two and four-and-a-half
cents per minute. Qwest again appeals. Having jurisdiction pursuant to
28 U.S.C. § 1291, we affirm.

                                          I.

      In reviewing a judgment after a bench trial, we review the district
      court’s factual findings and credibility determinations for clear error,
      and its legal conclusions de novo. We will overturn a finding of fact
      only if it is not supported by substantial evidence, it is based on an
      erroneous view of the law, or we are left with a definite and firm
      conviction that an error has been made.

Qwest, 837 F.3d at 895
(internal citations and quotation marks omitted).

      Qwest argues the district court erred when it found FC was not unjustly
enriched. “Unjust enrichment is an equitable remedy,” 
id. at 899
(citing Dowling
Family P’ship v. Midland Farms, 
2015 S.D. 50
, ¶ 10, 
865 N.W.2d 854
, 860), “and we
review a district court’s decision to deny an equitable remedy for abuse of
discretion.” 
Id. (citing Olivares
v. Brentwood Indus., 
822 F.3d 426
, 429 (8th Cir.




                                         -2-
2016)).2 “A district court abuses its discretion if it fails to consider a relevant factor
that should have been given significant weight, if it considers an improper or
irrelevant factor, or if it ‘commits a clear error of judgment in the course of weighing
proper factors.’” 
Id. (quoting Aaron
v. Target Corp., 
357 F.3d 768
, 774 (8th Cir.
2004)); cf. Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 
572 U.S. 559
, 563 n.2
(2014) (“The abuse-of-discretion standard does not preclude an appellate court’s
correction of a district court’s legal or factual error: ‘A district court would
necessarily abuse its discretion if it based its ruling on an erroneous view of the law
or on a clearly erroneous assessment of the evidence.’” (quoting Cooter & Gell v.
Hartmarx Corp., 
496 U.S. 384
, 405 (1990))).

       “To establish a claim for unjust enrichment, the plaintiff must prove (1) it
conferred a benefit upon another; (2) the other accepted or acquiesced in that benefit;
and (3) it would be inequitable to allow the other to retain that benefit without
paying.” 
Qwest, 837 F.3d at 899
(citing Dowling, 
2015 S.D. 50
, ¶ 
19, 865 N.W.2d at 862
). “[T]he fact that a benefit is retained, enjoyed, and profitably exploited by the
recipient, all without compensation, does not necessarily mean that the recipient has
been unjustly enriched.” 
Id. (alteration in
original) (internal quotation marks
omitted). “Rather, the beneficiary must obtain the benefit in a manner that the law
regards as unjustified.” 
Id. (internal quotation
marks omitted). “[T]he relevant
inquiry is whether the circumstances are such that equitably the beneficiary should
restore to the benefactor the benefit or its value.” 
Id. (alteration in
original) (quoting
Hofeldt v. Mehling, 
2003 S.D. 25
, ¶ 18, 
658 N.W.2d 783
, 788); see also Mack v.


      2
        Our case law and South Dakota case law have used “unjust enrichment” and
“restitution” synonymously. This use “has become prevalent.” James J. Edelman,
Unjust Enrichment, Restitution, and Wrongs, 
79 Tex. L. Rev. 1869
, 1869 (2001). In
this case, however, we will use “unjust enrichment” to refer to Qwest’s “claim” and
“restitution” as the “equitable remedy” available should liability be established.
See Johnson v. Larson, 
2010 S.D. 20
, ¶¶ 8, 11, 
779 N.W.2d 412
, 416 (referring to
unjust enrichment as a “claim” and restitution as an “equitable remedy”).

                                           -3-
Mack, 
2000 S.D. 92
, ¶ 27, 
613 N.W.2d 64
, 69 (“When unjust enrichment is found, the
law implies a contract, which requires the defendant to compensate the plaintiff for
the value of the benefit conferred.”).

                                           II.

        Based on the circumstances, we find no abuse of discretion by the district court
in its conclusion that it would not be inequitable for FC to retain the benefit conferred
by Qwest. Ultimately, our decision is driven by the relevant standard of review.
“The abuse-of-discretion standard means ‘the court has a range of choice, and that its
decision will not be disturbed as long as it stays within that range and is not
influenced by any mistake of law.’” Novus Franchising, Inc. v. Dawson, 
725 F.3d 885
, 895 (8th Cir. 2013) (quoting Kern v. TXO Prod. Corp., 
738 F.2d 968
, 970 (8th
Cir. 1984)). “The very concept of discretion presupposes a zone of choice within
which the trial courts may go either way.” 
Id. at 895-96
(quoting 
Kern, 738 F.2d at 971
). We are also “mindful that the district courts are closer to the facts and the
parties . . . .” 
Kern, 738 F.2d at 970
.

       The district court explained that FC earned the benefit conferred by Qwest
because it provided conference-calling services, 24-hour customer support, and
access to a website in exchange for two cents per minute for calls placed to FC’s
conferencing bridges at Sancom. Moreover, Qwest paid its own conference-calling
vendor, Genesys, between two and four-and-a-half cents per minute. Upon review
of the record, we have not identified any relevant factors the district court failed to
consider, nor any improper or irrelevant factors that it should not have considered,
nor any clear error of judgment on the part of the district court. Nor is the district
court’s decision legally erroneous, based on our reading of South Dakota law on
unjust enrichment.




                                          -4-
       While the dissent implies FC did not legally acquire the benefit it received from
Qwest because it did so “through billing practices that ‘were never legal,’” 
Qwest, 837 F.3d at 899
, and, therefore, it would be inequitable for FC to retain the benefit
conferred by Qwest, the dissent also concedes that we have previously concluded that
“FC was not itself acting illegally[.]” 
Id. at 900;
cf. Commercial Trust & Sav. Bank
v. Christensen, 
535 N.W.2d 853
, 858 (S.D. 1995) (“Unjust enrichment claims do not
arise simply because the landlord benefits from the efforts of tenants; ‘unjust’
enrichment implies illegal or inequitable behavior by the landlord in obtaining the
benefits conferred by the tenant.” (emphasis added)). Moreover, FC was not “a party
to the FCC proceedings” nor did “the FCC exercise[] . . . jurisdiction over FC [or]
criticize the motives of FC in entering into the contract with Sancom . . . .” 
Qwest, 837 F.3d at 901
(Shepherd, J., concurring in part & dissenting in part).

       The dissent also asserts the district court failed to consider the access
stimulation scheme between FC and Sancom, but the district court, who has presided
over this case for over a decade, acknowledged this scheme on remand and in prior
proceedings. See Qwest Commc’ns Corp. v. Free Conferencing Corp., No.
4:07-CV-04147-KES, 
2017 WL 5198190
, at *2 (D.S.D. Nov. 9, 2017) (“Sancom and
FC split[] the access charges paid by [Qwest] on calls destined for FC’s conference
bridges.”); see also Qwest Commc’ns Corp. v. Free Conferencing Corp., No. CIV.
07-4147-KES, 
2015 WL 3603866
, at *1 (D.S.D. June 5, 2015) (“During the time
period involved in the dispute between Sancom and Qwest, Sancom and FC engaged
in access stimulation.”); Qwest Commc’ns Corp. v. Free Conferencing Corp., No.
CIV. 07-4147-KES, 
2014 WL 5782543
, at *17 (D.S.D. Nov. 6, 2014), aff’d in part,
rev’d in part, remanded, 
837 F.3d 889
(8th Cir. 2016) (“On referral, the FCC found
that Sancom and FC engaged in an access stimulation scheme. The evidence at trial
showed that FC knew it was taking advantage of Sancom’s tariffs by engaging in
access stimulation with Sancom.”).




                                          -5-
       Finally, the dissent asserts the district court “gave dispositive weight to an
improper factor devised from inapposite South Dakota case law,” citing Parker v.
Western Dakota Insurors, Inc., 
2000 S.D. 14
, 
605 N.W.2d 181
. However, the district
court was not influenced by Parker but rather by the fact that, based on the
circumstances, it would not be inequitable for FC to retain the benefit without paying
Qwest. We left that merits determination to the district court’s discretion “based on
the full record.” 
Qwest, 837 F.3d at 900
& n.5 (“[E]ven though FC was not itself
acting illegally, its conduct might be characterized as inequitable . . . .” (emphasis
added)).

      Accordingly, the district court’s denial of Qwest’s unjust-enrichment claim was
not an abuse of discretion.

                                           III.

      The judgment is affirmed.

KELLY, Circuit Judge, dissenting.

       The abuse-of-discretion standard undoubtedly is deferential. But as the court
notes, it “does not preclude an appellate court’s correction of a district court’s legal
or factual error.” 
Highmark, 572 U.S. at 563
n.2. “A district court abuses its
discretion if it fails to consider a relevant factor that should have been given
significant weight” or “if it considers an improper or irrelevant factor.” 
Qwest, 837 F.3d at 899
. In my view, the district court both failed to consider a critical factor that
should have been given significant weight, and, influenced by inapposite South
Dakota case law, gave dispositive weight to an improper factor. Accordingly, I
respectfully dissent.




                                           -6-
       It is important to note that on remand, the district court was not deciding the
issue of unjust enrichment on a blank slate. One of our conclusions in Qwest was that
FC’s traffic-pumping scheme, which allowed FC to receive from Qwest the “benefit”
at issue here, was illegal and had always been so. 
Id. at 899–900
(explaining that the
billing practices under the Sancom-FC contract “were never legal” (emphasis added)).
And it was not a defense to Qwest’s unjust enrichment claim, we explained, that FC
did not know this scheme was illegal at the time it implemented it with Sancom. 
Id. at 900.
“[E]ven though FC was not itself acting illegally, its conduct might
[nevertheless] be characterized as inequitable because it retained a benefit based on
Sancom’s tariff violation, which it partly caused.” 
Id. Our view
on this issue was one
reason that compelled us to remand.

       But on remand, no consideration was given to our discussion of the illegality
of FC’s traffic-pumping scheme. The district court did not consider that FC earned
a benefit—one that Qwest did not know of, much less consent to—by inducing
Sancom to engage in billing practices that were “never legal.” Failure to consider this
factor not only runs afoul of Qwest, but it also runs afoul of South Dakota law and
therefore constitutes an abuse of discretion. See 
Cooter, 496 U.S. at 405
(“A district
court would necessarily abuse its discretion if it based its ruling on an erroneous view
of the law . . . .”). Under South Dakota law, “[a]n enrichment is unjust if it ‘lacks an
adequate legal basis; [i.e.,] it results from a transaction that . . . is nonconsensual.’”
Dowling, 865 N.W.2d at 864
(second alteration in original) (quoting Restatement
(Third) of Restitution & Unjust Enrichment § 1 cmt. b (2011)); see also Commercial
Tr., 535 N.W.2d at 858
(“‘[U]njust’ enrichment implies illegal or inequitable behavior
by the [defendant] in obtaining the benefits conferred by the [plaintiff].”). As we
intimated in Qwest, and as Dowling makes clear, the district court should have
considered—in a claim seeking equitable relief—that FC only obtained the benefits
it received from Qwest through an illegal traffic-pumping scheme, a scheme that




                                           -7-
Qwest did not consent to, bargain for, or request.3 In my view, retaining the benefits
received from such a scheme amounts to unjust enrichment.

       In addition, the district court gave dispositive weight to an improper factor
devised from inapposite South Dakota case law. The district court concluded that FC
“earned” the benefit it received from Qwest because “FC provided conference calling
services, 24-hour customer support, and access to a website in exchange for 2 cents
per minute for calls placed to FC’s conferencing bridges at Sancom.” But critically,
FC provided those services for the sole purpose of driving increased traffic to its
conferencing bridges. Every minute of additional traffic simply resulted in more
money for FC at Qwest’s expense. It is difficult to see how FC equitably “earned”
the benefit it received from Qwest by devising and implementing an illegal scheme
that served no purpose except to “tak[e] advantage of legal uncertainty” for FC’s
benefit. 
Qwest, 837 F.3d at 899
.

       The district court’s reliance on this factor seems to stem from Parker v.
Western Dakota Insurors, Inc., the only case it discussed in its substantive analysis.
The district court read this case as standing for the proposition that an unjust
enrichment claim cannot lie where “the defendant paid for the benefit” it received.
But in my view, Parker has no application here for at least two reasons. First, the
plaintiff in that case did not confer the benefit on the defendant, and thus the plaintiff

      3
        The court emphasizes the statement in Qwest that “FC was not itself acting
illegally,” and suggests that such a recognition absolves FC from liability in this
unjust enrichment claim. Supra, at 5. But as we also recognized in Qwest, that a
party might be acting lawfully is not dispositive on an equitable remedy. See 
Qwest, 837 F.3d at 899
–900 (explaining that whether FC’s intent was benign would not be
dispositive “because unjust enrichment is appropriate where the beneficiary gains a
benefit inequitably, even if the beneficiary does not intend to deprive the benefactor
of the benefit”); see also 
Johnson, 779 N.W.2d at 417
–18 (concluding that a party
was liable for unjust enrichment under South Dakota law even where it was not a
“wrongdoer[]” and “had no intent to deprive” the plaintiff of his benefit).

                                           -8-
failed even to establish the critical first element of an unjust enrichment claim.
Parker, 605 N.W.2d at 187
; see 
Qwest, 837 F.3d at 899
(explaining that the first
element in an unjust enrichment claim is proof that the “[plaintiff] conferred a benefit
upon another”). Here, in contrast, it is undisputed that Qwest conferred the benefit
on FC. 
Qwest, 837 F.3d at 899
–900. But second, and more fundamentally, Parker
found that there was no unjust enrichment because the defendant in that case had paid
for the benefit in question through a legitimate, negotiated transaction with the party
who conferred the benefit (First American). See 
Parker, 605 N.W.2d at 187
(“First
American conferred the benefit, which it had a right to do . . . .”). “[The defendant]
legally acquired the [benefits] and paid valuable consideration [to First American] for
them.” 
Id. at 186
(emphasis added). In contrast, as described above, under Qwest,
FC acquired the benefit it received from Qwest through billing practices that “were
never legal.” 
Qwest, 837 F.3d at 899
. Parker, therefore, has limited application here.

       This case presents an unusual set of circumstances, particularly in light of the
participation of a third party (Sancom), making analysis of Qwest’s unjust enrichment
claim rather challenging. But because I believe the district court abused its discretion
in how it analyzed that claim, I respectfully dissent.
                         ______________________________




                                          -9-

Source:  CourtListener

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