Core Communications, Inc. v. Verizon Maryland, Inc., No. 12-2572 (4th Cir. 2014)
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This case arose from a dispute over Core's interconnection agreement with Verizon. On appeal, Core challenged the district court's grant of summary judgment to Verizon with respect to tort claims pursued by Core under Maryland law. Core also contended that the district court erred when it awarded nominal damages to Core on its related claim for breach of contract (Reconsideration Order). The court concluded that the district court did not abuse its discretion in permitting Verizon to raise the Exculpatory Clause, post-remand, in the summary judgment proceedings; the district court did not err in enforcing the Exculpatory Clause in the consolidated proceedings where the Clause was not void under principles of Maryland contract law; the district court did not err in awarding Verizon summary judgment on Core's state law tort claims for concealment and unfair competition where Core failed to establish that Verizon acted with intent to defraud or deceive; and the district court properly entered judgment on Core's breach of contract claim in the nominal sum of one dollar. Accordingly, the court affirmed the judgment of the district court.
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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 Maryland, Inc., LLC, as successor entity to Verizon 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: Before WILKINSON, KING, and GREGORY, Circuit Judges. March 6, 2014 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 further erred Opinion ). when, as Core a contends result of that the granting court 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 to companies 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 the U.S.C. § 251. In the Baltimore area, Verizon was 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 another CLEC. approved ICA between Verizon s predecessor and 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 1 September 10, 1999. At a 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 companies Core agreed and that Verizon Core s on August interconnection 11, 1999, would occur the 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. tension with Core s proposed timeline, however, In Verizon estimated that it would take another four to six months before the essential including an new OC-12 equipment for multiplexer Core s (the interconnection 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 2 Only later 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 September 18, 1999, as Core had requested. by 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 complaint to do ( Civil under No. the Act. 3 08-503 ) Verizon s requested a district court 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. F. Supp. ruling, 2d and See Verizon Md., Inc. v. Core Commc ns, Inc., 631 690 we (D. Md. 2009). reversed. See Core appealed Verizon Md., the Inc. court s 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]. at 714. Id. 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 Id. 4 of good faith and fair dealing. B. On October 13, 2011, the district court consolidated the remand proceedings in Civil No. 08-503 with a separate sevencount complaint that had been filed by Core against Verizon in the Circuit 2002. Court Asserting for Baltimore federal City question nine years jurisdiction, earlier, Verizon in 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 breach of 2002 complaint, contract; Core three alleged related a single claims for count 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. consolidated Notably, proceedings and the parties also agree agreed here the that in our decision in the first appeal is entitled to preclusive effect on the issue of Verizon s liability for the claim alleged in Core s 2002 complaint. breach of contract The tort claims alleged in Civil No. 02-3180 derived from the proposition that Verizon had lied to Core about the in 1999, such interconnection breach of the Core ICA. reasons delay for delaying constituting Core s Verizon s 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 2, order of February 8 2012, that Core s promissory estoppel, unjust enrichment, and breach of warranty claims had been rendered superfluous by the first appeal, inasmuch as Core could recover nothing on those claims that it was not already entitled to for Verizon s breach of the Core ICA. At the same time, Core conceded that there was no independent action under Maryland law for breach of a duty of good faith and fair dealing, effectively removing that claim from the litigation. Thus, as of early 2012, the following resolution in the consolidated proceedings: issues remained for (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 Core s president. was Verizon s deposition of Bret Mingo, 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 impossible. that Instead, such Verizon an interconnection asserted had was the interconnection would violate its internal policies. that Mingo also acknowledged that Verizon had never advised Core that Verizon intended to deliberately unduly delay the Core interconnection the Core ICA. Critically, contravene or 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 retail customer. there was J.A. 260. 6 already in use by an unnamed 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, expert reports on the damages issue. the parties exchanged 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 ). to Verizon, the Exculpatory Clause barred the According 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. (Continued) 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 State s public policy. law because it contravened the 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 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 the following issues: whether the Exculpatory Clause had been timely invoked by Verizon; if so, its impact; Core s damages for Verizon s breach of the Core ICA; and whether Core s remaining tort claims concealment and unfair competition could be resolved on summary judgment, or should, on the other hand, be decided by a jury. 9 On August 10, 2012, the district court filed its Memorandum Opinion resolving those issues. As a preliminary matter, the court that rejected Core s assertion 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] 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 earlier since it was only after the Fourth Circuit s remand that [the district court] focused specifically on damages. With respect Exculpatory to Clause the on Id. enforceability and impact other the district the issues, conducted two separate analyses. of the court 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 competition to tort the merits claims, the of the district concealment court and rejected unfair 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 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 the existing multiplexer and Loop Ring were already assigned. Had Core known that it was actually that customer of record, Core s argument went, it could have demanded an immediate interconnection using the existing Wire Center equipment. theory, in the court s view, was fatally flawed. This 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. 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 That jury trial, of course, never occurred. Core asked the district court to reconsider its rulings on the tort claims, highlighting properly evidence evaluated. that it Verizon contended filed the own its court had not reconsideration motion, maintaining that the court had erred by declining to enforce the damages. Exculpatory Verizon Clause therein as a directed the bar to consequential 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. entitled to deference Those decisions, Verizon urged, were 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) v. (citing Council, Inc., Chevron, 467 U.S.A, Inc. 837, 843-44 U.S. Natural (1984) Res. Defense (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 17 on its breach of contract claim. When it entered the Reconsideration Order, the court issued a separate memorandum to 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 S.A. 3. 12 would enable the parties to appeal [those] rulings. Verizon responded December 3, 2012, to and the proposed nominal damages to Core. court that judgment. Core [did] Id. at 4. court s request that the a week judgment later, award on only Verizon therein represented to the not object to Verizon s proposed 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 December 26, 2012, prior to judgment being entered. appeal on 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. allowing enforcing the the First, it maintains that the court erred in Exculpatory Clause consequential damages. Clause as be invoked, bar a to to Core s and then recovery by of 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 19 court erred in ruling that Core was entitled to only nominal damages on its breach of contract claim. 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. 20 Caterpillar Overseas, S.A. v. Marine Transp. Inc., 900 F.2d 714, 725 n.7 (4th Cir. 1990). Although Overseas to not support nevertheless relying its identified specifically ruling the on on Caterpillar timeliness, salient the legal court 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. Wolf v. Ford, 644 A.2d 522, 532 (Md. 1994). See 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 for time 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 21 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). 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 resolution imposed of a by claim the Act regarding itself. the scope Accordingly, of that the 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 22 In re Cavalier Tel., LLC, 18 FCC Rcd. 25887, 25985-87 (Wireline Comp. Bur. 2003) (hereinafter cited as the Cavalier Order ). The Local Competition Order, in 1996, constituted the FCC s initial declaration provisions of the implementing Act. 14 the Therein, the local FCC competition 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 applicable here. improper, and that circumstance is not 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 14 ICA negotiations in 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. 23 Virginia. 15 Those parties had already agreed to an ICA provision 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 limitation at would the ILEC s greatly insistence, diminish the perform its obligations under the ICA. the broad exclusion effectively because ILEC s such incentive a to The ILEC countered that 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 proposed change to the exculpatory provision. the CLEC s Specifically, the FCC determined that the CLEC s effort to eviscerate the exculpatory provision was commercially 15 unreasonable. See 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 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 Cavalier Order 25986. The CLEC s concerns about undermining the ILEC s comply incentive to with the Act were mitigated, according to the FCC, by the remedies available elsewhere in the ICA and under applicable law. The FCC later issued an order approving an ICA between the parties that included the original exculpatory provision. See In re Cavalier Tel., LLC, 19 FCC Rcd. 4070 (Wireline Comp. Bur. 2004). The Reconsideration Order s deference decisions was entirely appropriate. to these FCC 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 the and alterations omitted). If statute is deemed ambiguous on the question, we defer at step two to the agency s interpretation so long as the construction policy choice for the agency to make. is a reasonable Id. (internal quotation marks omitted). Applying that framework, we observe that the Act not itself does provision in an ICA. address the viability of an exculpatory The FCC s decisions, on the other hand, convincingly illustrate the agency s reasonable conclusion that 25 an exculpatory provision in an ICA does not offend any aspect of the Act. We are therefore obliged to acknowledge that Verizon s reliance on the Exculpatory Clause is not precluded by federal law. Though federal exculpatory provision law in does an not ICA, prohibit the Act the use authorizes of a an 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 and identifying and a narrowly evaluating any invalidate part or all of an ICA. defined time state-level policy forum that for might Neither the Act nor any other provision of federal law, however, subjects a State commissionsanctioned 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 16 public interest. 16 In that 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., (Continued) 26 circumstance, no further consideration of Maryland law or policy is appropriate. 17 aptly observed, As our distinguished colleague Judge Michael [o]nce the [ICA] is approved, requires the parties to abide by its terms. the [Act] See Verizon Md., 377 F.3d at 364. Accordingly, the district court did not err in enforcing Exculpatory the 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. 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 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 Under Maryland law, the tort of concealment has five elements: (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 convincing evidence. elements must be proven by clear and 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 28 defraud or deceive, nor sufficient evidence of Core s reasonable reliance on Verizon s alleged deception. As a preliminary matter, we reject, as did the district court, Core s assertion that the facts we found in the first appeal are sufficient Core s tort to claims. establish First, it Verizon s is liability axiomatic appellate courts do not make factual findings. . . . for that 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 inferences that could be permissibly drawn therefrom. Core s concealment litigated at occurred all and unfair until the post-remand, and competition claims consolidated only then did Finally, were proceedings the the parties not that 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. element of offered no intent Our conclusion in that regard turns on the to evidence defraud or suggesting deceive. that Core Verizon s has simply failure to identify Core as the customer of record was driven by any intent to defraud or deceive Core. 29 When given the chance, Mingo, as Core s president, could merely assert that the failure to disclose occurred, and then theorize that Verizon must have done so intentionally interconnection. A in order claim built to improperly on such rank delay the Core 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)). 30 Accordingly, the district court did not err in awarding Verizon summary judgment on Core s tort claims. C. Lastly, we review the propriety of the district court s judgment awarding Verizon s breach nominal of the damages Core of ICA. one Core dollar to contends Core for 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 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 in tort, because an intent to defraud or deceive is ordinarily not at issue in a breach of contract claim. is unable to show that Verizon engaged In any event, Core 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 19 The offering of or to such directly to 47 U.S.C. § In the Clause, however, the parties do not Act defines a telecommunications service as the telecommunications for a fee directly to the public, classes of users as to be effectively available the public, regardless of the facilities used. See 153(53). 32 use the term Telecommunications Service, but instead use the single word services. distinction between services. We meaning, word the a Thus, the parties intended to draw a Telecommunications conclude that, services accorded in the Service its Clause and broad, must mere ordinary 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 certain that Core performance has not met. standards Section Verizon must 27.1 defines satisfy in connection with its obligations under the Core ICA, and section 27.2 requires Verizon to submit quarterly reports network s performance with respect to those standards. 531-32. of its See J.A. 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. Core has provided Id. 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. 33 Instead, it relies on only one arguable instance of non-compliance, which is insufficient to trigger the performance penalties provision of section 27.3. report Moreover, even if we were to ignore the quarterly requirement, assertion that we it are could not swayed prove performance failures by Verizon. by Core s thousands of unsupported unspecified 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
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