United States District Court, N.D. New York
KEITH J. ROWLAND, ESQ., HERZOG LAW FIRM P.C., Albany, New York, Attorneys for Plaintiff.
MORDECHAI GROSS, ESQ., XCHANGE TELECOM CORP., Brooklyn, New York, Attorney for Plaintiff.
CHARLES W. STEESE, ESQ., ARMSTRONG TEASDALE LLP, Denver, Colorado, Attorneys for Defendants.
LAWRENCE H. SCHAEFER, ESQ., THOMAS D. LATIN, ESQ., SHEEHAN, GREEN, GOLDERMAN & JACQUES, LLP, Albany, New York, Attorneys for Defendants.
MEMORANDUM-DECISION AND ORDER
CHRISTIAN F. HUMMEL, Magistrate Judge.
Plaintiff XChange Telecom Corp. (hereinafter "XChange") commenced this action against defendants Sprint Spectrum, L.P., Nextel of New York, Inc., Nextel Partners of Upstate New York, Inc. and Sprint Communications Company L.P. (hereinafter "Sprint"), asserting various causes of actions pursuant to the Federal Communications Act of 1934, 47 U.S.C. §§ 151-621 and the New York Public Service Law to recover carrier access charges, as well as related common law contract claims. Compl. (Dkt. No. 1). Presently before the Court are motions to compel filed by both parties. Dkt. Nos. 40, 42. Both motions are opposed. Dkt. Nos. 44, 45, 52, 54. Both parties also seeks sanctions against the other and Sprint further requests XChange to disclose its damages computation. Dkt. Nos. 40, 42. For the reasons stated below (1) XChange's motion to compel is granted; (2) Sprint's motion to compel, as modified and outlined below, is granted; (3) both parties' motions for sanctions are denied; and (4) Sprint's request for a damages computation disclosure is granted.
On January 17, 2014 the instant action was filed. Compl. (Dkt. No. 1). In that complaint, XChange contends that it properly billed Sprint and that Sprint refused to pay those bills. Id . Accordingly, "[t]he primary question presented by this lawsuit is whether XChange's interstate and intrastate switched access tariffs apply to the calling in question." Sprint MTC Mem. of Law (Dkt. No. 42-9) at 3. Sprint contends that XChange is incorrect because charges do not apply to (1) local wireless (i.e. intraMTA) calls or (1) calls originated by or terminated to a telephone number not owned by an end user customer (i.e. involvement in traffic pumping."). Id.
A general overview of the relationships between the parties and industry terms are as follows:
Sprint is a nationwide long-distance carrier known in telecommunications lingo as an "interexchange carrier (IXC)." [XChange]... is a "local exchange carrier (LEC)". LECs usually own the "real estate" in telecommunications: the facilities that connect to users' telephones within the LEC. One of the things LECs do is provide switched access services to IXCs, which allow IXCs to transmit long-distance phone calls to customers in the LEC's area, even though the IXC does not own or lease the facilities that connect to the customers' telephones. When a call begins in the LEC and travels out of the LEC's area, the LEC charges an origination access fee to the IXC; when a call begins elsewhere and ends in the LEC's area, the LEC charges the IXC a termination access fee.
The Federal Communications Commission (FCC) establishes rules for the rates that LECs can charge IXCs for these services. These rates are based on tariffs filed with the FCC for interstate services and with the... [state p]ublic [u]tilities [c]ommission... for intrastate services. These fees for switched access services can be thought of as "rent": a fee paid by the IXC (here, Sprint) to the LEC (here, [XChange]) for the temporary use of the LEC's property - the facilities used to connect to customers' telephones - for purposes of connecting the IXC's customer to a customer within the LEC.
Where a telephone call originates and terminates within the LEC's area, no fees to an IXC are generated because the LEC handles the call from start to finish. It is only where the call originates from outside the LEC and terminates within the LEC (or vice versa) that the LEC is allowed to charge a switched access fee to the IXC. Enter the concept of "traffic pumping."
Traffic pumping occurs when an LEC artificially increases its long-distance telephone call volume by partnering with a service that purports to offer free (or nearly free) calling services. Usually, the free calling service is located outside the LEC, but it obtains a telephone number within the LEC. Then, when calls are placed to the calling service, they are routed through the LEC, often terminating in a place other than the LEC. Thus, sometimes the call neither originates in the LEC nor terminates there, but it "pumps" the LEC's long distance traffic, allowing the LEC to charge IXCs switched access fees. Traffic pumping schemes often involve an agreement between the LEC and the free calling service to share the switched access fees generated paid by the IXC...
Sprint accuses [XChange] of traffic pumping.
Sprint Commc'ns Co. L.P. v. Native Am. Telecom, LLC, No. 10-CV-04110-KES, 2015 WL 201243, at *1-2 (D.S.D. Jan. 14, 2015).
On March 28, 2014, Sprint filed a motion to dismiss some of XChange's causes of action. Dkt. No. 8. A Memorandum-Decision and Order dated September 16, 2014 granted Sprint's motion in its entirety, dismissing counts one, six and seven in whole and count three in part. MDO (Dkt. No. 30). Familiarity with the facts, which are outlined in that MDO, is assumed.
The Federal Rules of Civil Procedure allow for broad discovery demands so long as the information requested is relevant and not privileged or otherwise limited by a court order. FED. R. CIV. P. 26(b)(1). Demands are "construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on, any issue that is or may be in the case." Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978).
No longer can the time-honored cry of fishing expedition' serve to preclude a party from inquiring into the facts underlying his opponent's case. Mutual knowledge of all the relevant facts gathered by both parties is essential to proper litigation. To that end, either party may compel the other to disgorge whatever facts he has in his possession. The deposition-discovery procedure simply advances the stage at which the disclosure can be compelled from the time of trial to the period preceding it, thus reducing the possibility of surprise.
Hickman v. Taylor, 329 U.S. 495, 508 (1947).
Discovery is limited or denied if the court determines that:
(i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive;
(ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or
(iii) the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.
Fed. R. Civ. P. 26(b)(2)(C). "The Federal Rules distinguish between discoverability and admissibility of evidence... Therefore, the rules of evidence assume the task of keeping out incompetent, unreliable, or prejudicial evidence at trial. These considerations are not inherent bars to discovery, however." Sancom, Inc. v. Qwest Communications Corp., No. CIV 07-4147-KES, 2009 WL 136679, at *3 (D.S.D. Jan. 20, 2009). If a party fails to properly respond to a discovery demand, the party seeking the discovery is entitled to move for an order compelling disclosure. FED. R. CIV. P. 37(a).
Initially it is noted by the Court that both parties spend a majority of their memorandums of law, both in supporting and opposing the respective motions, making substantive arguments about who proffers the correct theory of the case. No party "possess the unilateral ability to dictate the scope of discovery based on their own view of the parties' respective theories of the case." Sentis Group, Inc. v. Shell Oil Co., 763 F.3d 919, 925 (8th Cir. 2014). Instead, the Federal Rules specify that any information not exempted by privilege or court order may be discoverable to the extent that it "may [be] use[d] to support its claims or defenses." FED. R. CIV. P. 26(a)(1)(A). Thus,
it matters not for the purpose of discovery which side's theory of the case might ultimately be proven correct. What matters is that each side is entitled to pursue intelligible theories of the case and [neither party can]... by their sole insistence, declare evidence undiscoverable or irrelevant merely because it does not fit into their own theory of the case.
Sentis Group, 763 F.3d at 926; see also Oppenheimer Fund, 437 U.S. at 351 (explaining that "discovery is not limited to issues raised by the pleadings, [as it].... is designed to help define and clarify issues, " neither is it "limited to the merits of a case, for a variety of fact-oriented issues may arise during litigation that are not related to the merits."). To the extent that "claims or defenses... have been stricken, or to events that occurred before an applicable limitations period, unless that information sought is otherwise relevant to issues in the case, " discovery should be denied. Oppenheimer Fund, 437 U.S. at 352. However, it is not presently appropriate given the pending motion, or within the jurisdiction of the undersigned, to determine whether the substantive issues raised during the briefing should lead to the decision that various claims or defenses need to be striken and that, by extension, the discovery demands are inappropriate. Instead such arguments regarding the viability of the remaining claims and defenses should be properly presented, in a dispositive motion, before the District Judge.
1. XChange's Motion to Compel
As relevant to the present motion, in XChange's first set of interrogatories it sought for Sprint to:
1. Identify each call record on these discs for which Sprint asserts XChange is not entitled to payment at the rates billed by XChange. For each call record identified, set forth:
a. The specific call by originating and terminating number;
b. The date and time the call was initiated;
c. The specific reason (factual or legal) Sprint asserts the amount billed is incorrect or that XChange is not entitled to compensation on that call;
d. If a disputed call from a Sprint end user was terminated by XChange, identify the specific Sprint entity which originated the call (as distinct from any Sprint entity acting as an intermediate carrier on such call); the telephone number of the originating caller; and the location where such call originated;
e. If a disputed call originated from XChange, and was terminated by a Sprint entity directly to a Sprint end user, identify the Sprint entity terminating the call; the telephone number of the called party; and the location of such called party when the call was terminated.
Dkt. No. 40-2 at 23. Sprint objected to the interrogatory, citing its response would be "unduly burdensome and oppressive, in requiring Sprint to provide details on a line-by-line basis on millions of individual call detail records ("CDRs")." Dkt. No. 40-2 at 28. Instead of "providing a table with millions of individual lines, Sprint... provide[d] business rules that XChange can utilize and apply to the millions of CDRs. With these business rules, the burden of deriving or ascertaining the answer will be substantially the same for... XChange. Thus, Sprint relied upon Fed.R.Civ.P. 33(d)." Dkt. No. 40-2 at 29. Sprint also states that a CDR analysis is best suited for an expert witness, which is something Sprint intends to pursue. Id.
Basically, XChange is asking Sprint to generate a spreadsheet, on a call by call basis, identifying each reason why Sprint refuses to pay for each individual call. Sprint Resp. (Dkt. No. 44) at 1. Sprint has identified four overarching reasons for why the calls as a whole were not compensable, indicating that some calls should not be paid for a variety of reasons and some for only one. Id. at 1-2. If Sprint is required to present a reason for non-compensability for each call, this interrogatory will require Sprint to generate four spreadsheets - one for each category of reasons Sprint disputes the charges - and identify which of the millions of identified calls fits into each category. Id. at 2.
Sprint's CDR expert propounds that he is qualified as an expert because he works for a company which does "CDR analytics [which o]n average... loads and analyzes between five and ten billion CDRs every day." Canfield Decl. (Dkt. No. 44-2) ¶¶ 2-3. A CDR is generated when a call is routed through a tandem switch, each switch captures data about each individual call and memorializes that data in the CDR. Id . ¶ 8. "CDRs are not human readable, but a series of dot-delimited records that can be read and understood with specialized software." Id . A CDR study analyzes the data contained within the CDR and "[t]he cost and complexity of such a study depends upon the time frames over which the study is being performed, the output desired, and other factors." Id . While Sprint analyzes its own CDRs on a regular basis and has software capable for doing that analysis, it does not receive or analyze CDRs from Verizon on a routine basis, thus, Sprint would need to generate new software to transform the Verizon CDR into a readable format from which a CDR analysis could be completed. Id . ¶¶ 18-19. Canfield estimates that, if the Verizon CDRs are used to complete the analysis, it will cost approximately $25, 000 to build a program which can read the CDR prior to an analysis being able to be conducted. Id . ¶ 23.
Canfield contends that CDRs, regardless of whether derived from Sprint's or Verizon's records, contain the same information, which carriers may then enhance in various ways to make them more usable to their systems and software, but in its most basic form, the CDRs from Sprint contain the same raw data as the CDRs from Verizon. Canfield Dec. ¶¶ 20-21. XChange's retained expert disagrees with Canfield's assessment that the Sprint and Verizon CDRs are essentially the same and thus made be used as the basis for the CDR analysis interchangeably. Malfara Aff. (Dkt. No. 52-1) ¶¶12-18; see also Acxiom Corp., 27. Supp. 2d at 483 (explaining that there can be "up to 256 different fields [of information in]... the CDR."). Further, Malfara disagrees with Canfield's cost estimate regarding the amount of money it would take to create software to read the Verizon CDRs. Malfara Aff. ¶ 19. Specifically, Malfara observes that software to read the millions of minutes of calls which compose the Verizon CRDs should not be difficult to create for a company like that which Canfield works for, which loads and analyzes billions of CRDs each day. Id . In fact, Malfara states that "[o]n several occasions, it has been necessary for [him] to load and analyze millions of CDRs for [his] clients... Even when such analysis calls for designing new database table formats to accommodate new CDR formats or fields... the time required to do so... is modest [and thus he]... find[s]... Canfield's cost projection... exceedingly high." Id.
Canfield also estimates that the CDR analysis which is contemplated, using either set of CDRs, would cost approximately $100, 000. Canfield Decl. ¶ 25. XChange's expert disagrees with this assessment as well. Instead, "the cost which would be incurred by Sprint or its contractor to process the useage data in [a useable]... manner... would be approximately $6, 000-$6, 500." Redden Aff. (Dkt. No. 52-3) ¶11.
Federal Rule of Civil Procedure 33 governs interrogatories to parties. Interrogatories "may relate to any matter that may be inquired into under Rule 26(b)." Fed.R.Civ.P. 33(a)(2). Interrogatories may be objected to by the responding party. Id . 33(b)(4). Further,
[i]f the answer to an interrogatory may be determined by examining, auditing, compiling, abstracting, or summarizing a party's business records... and if the burden of deriving or ascertaining the answer will be substantially the same for either party, the responding party may answer by:
1. specifying the records that must be reviewed, in sufficient detail to enable the interrogating party to locate and identify them as readily as the responding party could; and
2. giving the interrogating party a reasonable opportunity to examine and audit the records and to make copies, compilations, abstracts, or summaries.
FED. R. CIV. P. 33(d). "Rule 33 production is suited to those discovery requests requiring a compilation or analysis, accomplished as easily by one party as another, or where neither side has clear superiority of knowledge or familiarity with the documents. Accordingly, Rule 33 is well-suited to reply to inquiries of an intensely objective nature." United Oil Co., Inc. v. Parts Ass., Inc., 227 F.R.D. 404, 419 (D. MD 2005). Rule 33 is not appropriate where "interrogatories pose questions of fact or mixed questions of law and fact with require the exercise of particular knowledge and judgment on the part of the responding party." United Oil Co., 227 F.R.D. at 419; see also In re Savitt/Adler Litig., 176 F.R.D. 44, 49 (N.D.N.Y. 1997) (explaining that where interrogatories ask for facts, "Rule 33(b) require[s] that th[e interrogatories] be answered separately and fully and the resort to Rule 33(d) in response to these interrogatories was inappropriate.") (internal quotation marks and citations omitted). Further, Rule 33 requires reference to business records only, for which third party records do not apply. See In re M & L Bus. Mach. Co., Inc., 184 R.R. 366, 369 (D. Colo. 1995) (denying application of Rule 33(d) where the referenced records included "third-party expert reports... not the... business records....").
XChange's interrogatory is looking for a factual answer, requiring a separate and specific explanation regarding each call which Sprint objects to paying for. This inquiry is relevant, thus discoverable pursuant to Federal Rule 26(b) and 33(a)(2). Sprint first contends that it should not be forced to performing the CDR analysis and answer the interrogatory because doing so would cause an undue burden. The CDR analysis would initially decipher the underlying call information about where each call initiated and terminated and through which access switches it passed. Both sides have intimated that the above information from the CDR analysis is a necessary burden which must be undertaken during the course of the litigation. Factual questions surrounding the origins and termination of the calls are essential to meeting the burden of proof for any of the claims, counterclaims or defenses of both parties. Just because the information which goes into the CDR analysis, and which will be generated from that analysis, is voluminous is not, in and of itself, dispositive of demonstrating an undue burden. Conversely, for the reasons previously mentioned, it is a necessary burden for both parties. Accordingly, Sprint's argument is insufficient to relieve it from responding to XChange's interrogatory.
Even though the undersigned acknowledges that both sides require the basic information generated from the CDR analysis about the origination, duration and termination of the calls, Sprint's contentions that XChange should shoulder the financial burden of the CDR analysis and reliance on Rule 33(d) fails for a variety of reasons.
First, XChange's interrogatory seeks more than just objective information. The interrogatory asks Sprint to go a step further to provide relevant, specific, factual explanations and clarifications with regard to why it finds XChange's billing practices objectionable. It elicits specific answers for why Sprint refuses to pay for the calls which it has billed, for which a general referral to business records is insufficient. The underlying information from the CDR analysis about the call history is required to formulate the specifics behind Sprint's refusal to pay, which is the genesis of the lawsuit. Further, while Sprint contends that the CDRs are business records, and while the Sprint CDRs which have not been provided as a part of the initial disclosures may be business records, the Verizon CDRs which were provided by a third, unrelated party, are not. Therefore, they fall outside of the gambit of Rule 33(d) coverage.
While completing the CDR analysis will be burdensome, it is necessary for both parties. While the undersigned does not agree with Sprint's proffers that XChange should bear the full financial burden of the analysis pursuant to Rule 33(d), the Court is also not persuaded that in the interests of fairness Sprint should be required to shoulder the entire financial burden either, as the bulk of the information generated from the CDR analysis will be helpful to both parties. The undersigned cannot stress enough that XChange's interrogatory is proper and shall be answered because it asked Sprint to provide additional, specific, factual information on top of the results of the CDR analysis - one of the enumerated reasons why Rule 33(d) was inapplicable. However in deciding how the underlying CDR analysis should best be accomplished, a middle ground seems most appropriate.
The undersigned agrees that using the Verizon CDRs provided to Sprint by XChange is the most appropriate set of records with which to undertake the CDR analysis. If Sprint disagrees and wishes to do an additional CDR analysis with their own records, they may do so at their own expense. Further, as cost is a factor which is now relevant to both parties, the undersigned directs that parties agree upon a contractor to develop the appropriate software to read the Verizon CDRs and ultimately perform the CDR analysis and verification and that the cost of that be born equally by both parties. If the parties cannot reach a consensus ...