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Lssi Data Corp v. Time Warner Cable

May 23, 2012

LSSI DATA CORP., PLAINTIFF,
v.
TIME WARNER CABLE, INC.,
DEFENDANT.



The opinion of the court was delivered by: Paul A. Engelmayer, District Judge:

OPINION & ORDER

Plaintiff LSSi Data Corp. ("LSSi") moves, pursuant to 47 U.S.C. §§ 202(a), 251(b)(3), and 406, for a preliminary injunction compelling defendant Time Warner Cable, Inc. ("TWC") to provide it with all directory assistance listing data for TWC's telephone subscribers. For the following reasons, LSSi's motion is denied.

I.Regulatory Background

LSSi's primary claim in this case is made under the Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996) (the "TCA"). The provision on which LSSi relies, 47 U.S.C. § 251(b)(3), as interpreted by the Federal Communications Commission ("FCC"), entitles certain telecommunications industry participants to access, under nondiscriminatory terms, the directory assistance ("DA") listing data of industry participants known as "local exchange carriers," or LECs. TWC is, in many states, a LEC, and LSSi claims that it is entitled under § 251(b)(3) to TWC's DA data. Alternatively, LSSi claims that it is entitled to the same data under 47 U.S.C. § 202(a), a provision of the Communications Act of 1934 ("the Communications Act"), 47 U.S.C. § 151 et seq., which prohibits a common carrier from engaging in discriminatory practices "in connection with its provision of communications services."

Understanding the complex regulatory framework is imperative to understanding LSSi's claims and the parties' respective arguments.

The Communications Act put in place the initial framework for federal regulation of the telecommunications industry. Enacted in response to the dominance of the telephone industry by American Telephone & Telegraph Company and its affiliates, the Communications Act gave the FCC broad authority to regulate interstate telephone service. See, e.g., Global Crossing Telecomms., Inc. v. Metrophones Telecomms., Inc., 550 U.S. 45, 48 (2007); MCI Telecomms. Corp. v. AT&T Co., 512 U.S. 218, 235 (1994) (Stevens, J., dissenting). The FCC, in turn, used this authority to develop a traditional regulatory system much like the systems other commissions had applied when regulating railroads, public utilities, and other common carriers. A utility or carrier would file with a commission a tariff containing rates, and perhaps other practices, classifications, or regulations in connection with its provision of communications services. The commission would examine the rates, etc., and, after appropriate proceedings, approve them, set them aside, or, sometimes, set forth a substitute rate schedule or list of approved charges, classifications, or practices that the carrier or utility must follow.

Global Crossing Telecomms., 550 U.S. at 48.

The Communications Act also included provisions specifically aimed at "eliminat[ing] the use of monopolistic power to stifle competition." Law Offices of Curtis V. Trinko v. Bell Atl. Corp., 305 F.3d 89, 99 (2d Cir. 2002), rev'd on other grounds by Verizon Commc'ns v. Trinko, 540 U.S. 398 (2004); see also MCI Telecomms. Corp., 512 U.S. at 235. One such provision, codified at 47 U.S.C. § 202(a), provides a remedy for market participants aggrieved by discriminatory practices of a common carrier. Section 202(a) provides:

It shall be unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.

See, e.g., Trinko, 305 F.3d at 98--99; National Commc'ns Ass'n, Inc. v. AT&T, 238 F.3d 124, 127 (2d Cir. 2001); Li Xi v. Apple Inc., 603 F. Supp. 2d 464, 471 (E.D.N.Y. 2009); Net2Globe Int'l v. Time Warner Telecom of N.Y., 273 F. Supp. 2d 436, 460 (S.D.N.Y. 2003). As noted, LSSi brings this suit based, in part, on § 202(a).

In 1996, Congress enacted the TCA, which dramatically altered the regulatory landscape. The TCA sought to move the telecommunications industry from an environment characterized by close regulation, a finite number of competitors, and high barriers to entry, to one marked by a "procompetitive, deregulatory national policy framework designed to accelerate rapid private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition." S. Conf. Rep. No. 104-230, 104th Cong., 2d Sess. 1 (1996).

In implementing that policy, Congress recognized that a significant barrier to entry was presented by the fact that incumbent local exchange carriers ("ILECs") tended to "own[] the local exchange networks[,] the physical equipment necessary to receive, properly route, and deliver phone calls among customers." Talk Am., Inc. v. Mich. Bell Tel. Co., 131 S. Ct. 2254, 2257--58 (2011) (citing Verizon Commc'ns., Inc. v. FCC, 535 U.S. 467, 490 (2002)). Without congressional action, "a new, competitive LEC could not compete with an incumbent carrier without basically replicating the incumbent's entire existing network" at prohibitive cost. Talk Am., Inc., 131 S. Ct. at 2258. To redress that competitive disadvantage, the TCA "imposed a number of duties on incumbent providers of local telephone service in order to facilitate market entry by competitors." Id. at 2257. Most relevant here, Congress "require[ed] incumbent LECs to share their networks with competitive LECs." Id. at 2258.*fn1

In enacting the TCA, Congress further recognized that "the competitive provision of directory assistance is a necessary element of a competitive local telecommunications market." Provision of Directory Listings Information Under the Communications Act of 1934, as Amended, First Report and Order (the "2001 Order"), 16 FCC Rcd. 2736, at ¶ 2 (2001). As the FCC has explained, giving local exchange carriers access to local directory assistance data is vital to the goal of attaining robust competition in local telecommunications markets. That is because, "[w]ithout nondiscriminatory access to the incumbents' directory assistance databases, competing DA providers may be unable to offer a competitive directory assistance product. This, in turn, may affect the ability of both DA providers and the [competing LECs] that rely on them to compete in the local exchange marketplace." 2001 Order, 16 FCC Rcd. 2736 at ¶ 3.

To achieve these ends, Congress enacted § 251(b)(3), which is central to this litigation. It provides:

(b) Obligations of all local exchange carriers. Each local exchange carrier has the following duties: . . .

(3) Dialing parity. The duty to provide dialing parity to competing providers of telephone exchange service and telephone toll service, and the duty to permit all such providers to have nondiscriminatory access to telephone numbers, operator services, directory assistance, and directory listing, with no unreasonable dialing delays.

47 U.S.C. § 251(b)(3).

The TCA does not itself amplify on the standards by which an entity in the industry may qualify as a "competing provider[] of telephone exchange service" under § 251(b)(3), so as to require a LEC (hereinafter, the "providing LEC") to provide it with access to its DA data. However, the FCC has addressed this issue, in a series of orders construing the TCA. These include the 2001 Order, supra, and In the Matter of Implementation of the Telecommunications Act of 1996: Telecommunications Carriers' Use of Customer Proprietary Network Information and Other Customer Information; Implementation of the Local Competition Provisions of the Telecommunications Act of 1996; Provision of Directory Listing Information under the Communications Act of 1934, as Amended (the "2005 Order"), 20 FCC Rcd. 9334 (2005).

Specifically, the FCC has determined that three categories of market participants are entitled under § 251(b)(3) to nondiscriminatory access to the DA data of a providing LEC: (1) a competing LEC, known as a "CLEC"; (2) an agent of a competing LEC who provides directory assistance services for that CLEC; and (3) a competing provider of "call competition services." 2005 Order, 20 FCC Rcd. 9334, at ¶ 3; 2001 Order, 16 FCC Rcd. 2736, at ¶¶ 14, 22, 27--29. In its orders, the FCC has explained why affording these entities access to a providing LEC's DA data vindicates the statute's text and procompetitive purpose. The FCC has also elaborated on the contours of the three categories. Later in this opinion, the Court addresses each category in detail, in the course of discussing LSSi's claims to fit within each.

II.Background to the Current Dispute*fn2

A. The Parties

The plaintiff, LSSi, is a subsidiary of VoltData Resources LLC ("Volt"). LSSi has consistently held itself out as a data aggregator and seller-an entity that collects, combines, and sells data relating to telephone subscribers. LSSi Supp. Br. 1, 3. As LSSi described itself to another federal court:

LSSi is an aggregator of data from all of the carriers in North American and in other countries. What we do is we take direct feeds from the phone companies, we take all of those feeds and we combine them together to create a national directory assistance file. We then use that file with our customers for a variety of directory assistance related purposes . . . we also provide the data for companies to do things like credit collections where you want to find out where somebody is located, we provide the data so they can look up people by name and address or name to find address information or name to find phone information.

LSSi Data Corp. v. Comcast Phone, LCC, Civil Action No. 1:11-cv-0124-CAP (N.D. Ga.), April 20, 2011 Hg. Tr., at 33 (Sherman Decl. Ex. 5). LSSi's website similarly states, in a "Company Overview," that LSSi: uniquely delivers the most current and accurate names, addresses, and phone numbers with associated detail as an enterprise-based vendor to source contact information directly from AND for major telecommunication providers . . . .

Business, residential and government contacts are included in data resources measured in the hundreds of millions of records.

Oldach 3d Supp. Decl., Ex. 1 at LSSI 00004521. And the website of LSSi's parent company, Volt, describes LSSi as performing: database-marketing services, data-processing, listing verification, and mobile and online data solutions to a variety of companies across a broad spectrum of industries, including telecommunications service providers and cable operators, credit and collections, direct marketers, and online and offline retail providers.

Id. at LSSI00004527.

The parties agree that a data aggregator and seller does not, without more, have a right to access a LEC's DA data under § 251(b)(3). Rather, an entity has such rights only if it also fits into one or more of the categories of industry participants the FCC recognized in the 2001 Order. See Hg. Tr. 161 (statement of LSSi's counsel). Here, LSSi claims to fit into all three: It claims to be (1) a LEC competing with TWC, (2) an agent providing directory assistance services for a LEC competing with TWC, and (3) a competing provider of qualifying "call competition services." The central issue in this case is whether LSSi has substantiated these claims, by competent proof.

The defendant, TWC, is a telecommunications carrier. Ans. ¶ 9. It provides telephone services in 28 states.*fn3 In many, including New York, TWC is state-certified as a LEC.

B.Factual Background

This dispute has its origins in a 2010 negotiation in which LSSi sought, but ultimately failed, to acquire access to and unrestricted use of TWC's directory assistance data.

1.TWC's Negotiations with LSSi and Others

In 2003, TWC introduced digital telephone service. Minshew Decl. ¶ 2. Until 2010, TWC provided its telephone customers with service by using the network facilities of Sprint Communications Co. Loyer Decl. ¶ 2. Sprint thus connected TWC's customers with customers of existing LECs in TWC's service areas. Id. Sprint was also solely responsible for providing DA listing data for TWC's customers to other directory assistance providers. Id.

In 2010, TWC decided to transition to a new, "Go-It-Alone" business model, under which it would gradually cease using Sprint's network facilities to provide services to its customers, and would instead use its own. Id. at ¶ 3. TWC, however, lacked a directory assistance platform. It also lacked the technical capability to access its customers' listing information in a format that could be made available to other directory assistance providers. Minshew Decl. ¶ 4. To address the latter situation, TWC initiated negotiations with vendors, seeking to retain a vendor or vendors who would (1) create a customer database for TWC, and (2) interact with outside directory assistance providers on TWC's behalf, including making TWC customers' data available to them. Id. at¶¶ 4--5.

One vendor that TWC approached was LSSi. In March 2010, TWC approached LSSi to inquire whether LSSi could act as TWC's vendor, for the purpose of providing TWC's customers' DA data to other directory assistance providers. Id.; Oldach Dep. 6 (Sherman Decl. Ex. 3). Those negotiations broke down, however, when TWC insisted on maintaining control over the uses to which LSSi would put TWC customers' information. In particular, TWC insisted on prohibiting LSSi from selling such data to telemarketers. Loyer Decl. ¶ 6; Minshew Dep. 118--21, 126--27, 130--32. LSSi did not agree to that restriction. Loyer Decl. ¶ 6.

TWC then entered into discussions with a different company, Targusinfo ("Targus"), to act as TWC's vendor to distribute its customer data to directory assistance providers. Loyer Decl. ¶ 8. Unlike LSSi, Targus agreed not to sell TWC's customer data to telemarketers; to use that data only as TWC expressly permitted; and not to use TWC's customer data for its own purposes without TWC's express consent. Id. at ¶¶ 8, 10--11. TWC ultimately entered into an agreement with Targus that embodied those restrictions. Id. ¶¶ 9--10. Under that agreement, TWC "outsourced its subscriber listing and directory assistance data collection, management, and distribution functions to Targus." Minshew Decl. ¶ 6. Targus was given TWC's DA data; it took on responsibility for both aggregating TWC's data into a database formatted so as to be accessible by directory assistance providers, and managing that database. Id. ¶¶ 9--11; Loyer Decl. ¶¶ 8--10; see also Davis Decl., Ex. A. (reproducing TWC/Targus agreements).

TWC retained two other outside vendors to perform distinct roles relating to its customer data. It retained a company called Neustar to, inter alia, filter, process and convert TWC's raw customer data into a "data feed." Minshew Decl. ¶ 4. Neustar generates and delivers this data feed to Targus. Id. at ¶ 8. Targus, in turn, uses the data feed to create and augment the DA database for which it is responsible. Id. at ¶ 9.*fn4

TWC also retained kgb USA ("KGB"). KGB's role is to provide directory assistance (i.e., 411 service) on TWC's behalf, to TWC's digital phone customers. TWC determined that- much as it was more economical to outsource its data collection and distribution functions to Targus-it was more economical to outsource its directory assistance functions to KGB than to develop a directory assistance capability of its own. Id. ¶ 13. To enable KGB to provide such directory assistance, KGB entered into an agreement with Targus. Id. ¶ 14. Under the KGB/Targus agreement, Targus sells KGB access to TWC's subscriber listing and DA database, for the sole purpose of allowing KGB to provide directory assistance services. Id.; see also Ainge Decl. ¶¶ 6--7 (attesting, on Targus's behalf, that "TWC has agreed to allow Targus to provide TWC's subscriber listings and directory assistance data to [KGB] . . . KGB pays Targus for this information and agrees to use it only for its directory assistance business. KGB is prohibited from selling this information to any third parties, including telemarketers.").

2. LSSi's Demand for TWC's Directory Assistance Listing Data

In June 2010, TWC notified LSSi that it had selected another vendor to provide directory assistance listing services for it. Loyer Decl. ¶ 9.

In September 2010, LSSi contacted TWC. LSSi demanded access to TWC subscribers' DA data. It claimed, for the first time, a legal right to such access under the Communications Act and the TCA. Loyer Decl. ¶¶ 7, 12; Hg. Tr. 104; LSSi Supp. Br. 7. TWC responded by informing LSSi that LSSi should direct its request for access to that database to Targus, because Targus is responsible for managing TWC's DA database and making it accessible to directory assistance providers. See Sept. 30, 2010 Loyer e-mail to LSSi (Sherman Decl. Ex. 21). LSSi did not, apparently, contact Targus.

In May 2011, LSSi again contacted TWC to demand its DA data. LSSi claimed a statutory right to receive such data, based on 47 U.S.C. § 251(b)(3). LSSi stated that it was (1) a competing LEC of TWC's, (2) an agent providing directory assistance services for a competing LEC of TWC's, and (3) a provider of qualifying "call competition services." LSSi Supp. Br. 14. LSSi also claimed that TWC was unlawfully discriminating against it, in violation of 47 U.S.C. § 202(a), by providing Targus, and not LSSi, direct access to TWC's database. TWC responded, through counsel, by demanding proof that LSSi did, in fact, have a right to such access under § 251(b)(3). Brill Decl. ¶¶ 3--4 & Ex. 1; LSSi Supp. Br. 14; Davis Decl. Ex. F. LSSi did not supply TWC with any such proof. Instead, after a series of email exchanges between counsel, see Brill Decl. ¶¶ 4--5; Davis Decl. Ex. F, LSSi filed this lawsuit.

C.Procedural History

On July 5, 2011, LSSi filed a Complaint against TWC and a motion for a preliminary injunction in the U.S. District Court for the Northern District of Georgia. Dkt. 1--2. LSSi's Complaint sought a declaratory judgment, pursuant to 28 U.S.C. § 2201, that TWC had violated § 251(b)(3) of the TCA and § 202(a) of the Communications Act by refusing to provide its DA data to LSSi on the same terms that it had provided that data to Targus, whom LSSi described as its competitor, or on the same terms as TWC received such data itself. Two months earlier, LSSi had obtained a preliminary injunction from the same court in a lawsuit against a different LEC, Comcast Phone, LLC ("Comcast"), in which LSSi had sought similar relief. See LSSi Data Corp. v. Comcast Phone, LLC, 785 F. Supp. 2d 1356 (N.D. Ga. 2011) ("the Comcast decision").

On August 16, 2011, LSSi's motion for a preliminary injunction in this case was fully submitted. Dkt. 19.

On November 1, 2011, the Hon. Charles A. Pannell, Jr., without addressing the merits, granted TWC's motion to transfer this action to the Southern District of New York. Dkt. 34.*fn5

On November 16, 2011, by letter, TWC requested expedited discovery on LSSi's preliminary injunction motion. Dkt. 89. On November 29, 2011, by letter, LSSi opposed that application. Dkt. 90.

On December 7, 2011, the Court held an extended telephone conference with the parties to discuss TWC's request for expedited discovery on LSSi's motion. Dkt. 51. TWC stated that it disputed LSSi's claim of a statutory entitlement under 47 U.S.C. § 251(b)(3), in particular,that LSSi is (1) a competing LEC with respect to TWC, (2) the directory assistance agent of a LEC competing with TWC, or (3) a provider performing qualifying call completion services. TWC argued, in essence, that although LSSi would like to access TWC's subscriber data so as to permit it to sell such data, including to telemarketers, LSSi has no statutory right to it. To enable it to resolve this dispute, the Court authorized the taking of discovery on LSSi's motion. The Court directed the parties to jointly develop a schedule for expedited discovery.

On December 13, 2011, the Court endorsed the parties' proposed schedule with respect to discovery and briefing. Dkt. 52. The schedule authorized each party to obtain document discovery and to take five depositions, on the topics of (1) LSSi's statutory entitlement to TWC's data, (2) the alleged harm to LSSi if an injunction were not granted, (3) the alleged harm to TWC and the public interest if an injunction were granted, and (4) LSSi's delay in bringing this lawsuit. Id.

On January 27, 2012, at TWC's request, the Court extended the pre-motion fact discovery deadline from January 31, 2012 to February 14, 2012. Dkt. 57.*fn6

On February 28, 2012, LSSi submitted a supplemental memorandum of law and supporting materials in support of its motion. These materials consisted of three declarations of fact from LSSi's President and Rule 30(b)(6) witness, Richard Oldach, and various supporting materials.*fn7 On March 14, 2012, TWC filed an opposition, with supporting factual materials.*fn8 On March 21, 2012, LSSi submitted its reply.*fn9

On April 19, 2012, the Court held a hearing on LSSi's motion.*fn10 At that hearing, the Court heard testimony from Oldach, whom LSSi had designated as its corporate representative, pursuant to Fed. R. Civ. P. 30(b)(6). The Court also heard extended oral argument.

D. Summary of Arguments on LSSi's Preliminary Injunction Motion

1. LSSi's Arguments

LSSi argues that it is likely to succeed on the merits of its claim of entitlement to TWC's data under 47 U.S.C. § 251(b)(3). On this issue, LSSi urges the Court to look to Judge Pannell's Comcast decision for guidance, because that decision states that LSSi is a competing LEC, a provider of call completion services, and a directory assistance agent of a competing LEC. In any event, LSSi argues, the evidence adduced in discovery in this case establishes that it fits within each of these three categories. LSSi further argues that TWC is violating its duty to furnish access to its DA data on nondiscriminatory terms, principally because, it claims, its competitor, Targus, is receiving TWC's data on preferential terms. For similar reasons, LSSi argues that TWC has violated 47 U.S.C. § 202(a), by engaging in discriminatory practices with respect to access to its DA data.

As to the other elements required to obtain a preliminary injunction, LSSi claims that it is suffering, and absent an injunction, will continue to suffer, irreparable harm. It states that its inability to access TWC's DA data is inhibiting it from competing with Targus in the market for the sale of DA data. LSSi also argues that Targus is unfairly exploiting its preferential access to TWC's data to gain other advantages in the marketplace.

2. TWC's Arguments

TWC disputes LSSi's entitlement under all three § 251(b)(3) categories. It argues that the evidence shows that: (1) LSSi is a certified LEC in only three states, in none of which TWC is a LEC; thus, in no state is LSSi a LEC competing with TWC; (2) LSSi does not have an agency relationship with any LEC competing with TWC pursuant to which it provides that LEC with the directory assistance services sufficient to qualify for a right of access under the 2001 Order; and (3) LSSi does not conduct "call completion services" as defined by the FCC. TWC also argues that no deference is due to the Comcast decision, because LSSi's claim in that case to be a "competing provider of telephone exchange service" under § 251(b)(3) was assumed to be true based on its pleadings, and was not litigated. TWC also argues that, even if LSSi fit § 251(b)(3), TWC has not discriminated against it with respect to access to its DA data, because TWC has merely outsourced to Targus its responsibility for disseminating that data, and Targus is prohibited from using TWC's data for its own purposes. TWC also argues, as to § 202(a), that any competition between LSSi and Targus is in the market for the sale of customer data, with which § 202(a) is not concerned.

As to irreparable harm, TWC claims that LSSi has not been irreparably harmed because LSSi waited 10 months to file this lawsuit after learning (in September 2010) that TWC disputed its entitlement to TWC's DA data. TWC also argues that LSSi filed this suit when (and where) it did not because it was suffering irreparable harm, but to capitalize on its victory (now on appeal) in the Comcast litigation in the Northern District of Georgia.

III.Discussion

A.Standard for a Preliminary Injunction

A preliminary injunction is an extraordinary remedy never awarded as of right. In each case, courts must balance the competing claims of injury and must consider the effect on each party of the granting or withholding of the requested relief. In exercising their sound discretion, courts of equity should pay particular regard for the public consequences in employing the extraordinary remedy of injunction.

Salinger v. Colting, 607 F.3d 68, 79 (2d Cir. 2010) (quoting Winter v. Natural Res. Def. Council, 555 U.S. 7, 24 (2008)). A plaintiff seeking a preliminary injunction must normally "establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Psihoyos v. John Wiley & Sons, Inc., 2011 U.S. Dist LEXIS 115835, at *3 (S.D.N.Y. Oct. 4, 2011) (citing Winter, 555 U.S. at 20 (2008)); see also Reckitt Benckiser Inc. v. Motomco Ltd., 760 F. Supp. 2d 446, 451--52 (S.D.N.Y. 2011).

LSSi's burden in this case is heightened, because it seeks an "injunction that alters the status quo by commanding some positive act, as opposed to a prohibitory injunction seeking only to maintain the status quo."*fn11 Cacchillo v. Insmed, Inc., 638 F.3d 401, 406 (2d Cir. 2011) (citing Citigroup Global Mkts., Inc. v. VCG Special Opportunities Master Fund Ltd., 598 F.3d 30, 35 n.4 (2d Cir. 2010)). Under these circumstances, an injunction may "issue only upon a clear showing that the moving party is entitled to the relief requested, or where extreme or very serious ...


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