Opinion
Civil No. 04-995 ADM/AJB.
June 21, 2004
David E. Wandling, Esq., Wandling Law Group, LLC, Minneapolis, MN, appeared for and on behalf of Plaintiff.
Robert E. Cattanach, Esq., and Theresa M. Bevilacqua, Esq., Dorsey Whitney, LLP, Minneapolis, MN, and Jason D. Topp, Esq., Qwest Corporation, Minneapolis, MN, appeared for and on behalf of Defendant.
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
This case is before the undersigned United States District Judge on Defendant Qwest Corporation's ("Qwest") Motion to Dismiss for Lack of Capacity to Bring Suit, [Docket No. 3] arguing Plaintiff Firstcom, Inc. ("Firstcom") cannot maintain this action because the corporation no longer exists and because the Complaint fails to state a legally cognizable claim. For the reasons set forth herein, Qwest's Motion is denied.
II. BACKGROUND
Firstcom was a telecommunications corporation organized under Minnesota law. In the 1990s, acting as a Competitive Local Exchange Carrier ("CLEC"), it began to resell Qwest telephonic services to its customers. Pursuant to the §§ 251 and 252 of the Telecommunications Act of 1996 (the "Act"), in the fall of 2000 Firstcom sought to purchase Unbundled Network Element, or "UNE-P," services from Qwest by selecting from the terms of the interconnection agreements between Qwest and other CLECs. Firstcom avers that Qwest wrongfully withheld certain services from Firstcom while providing more favorable treatment to its competitors in violation of Qwest's obligation to make all contract terms universally available. Compl. ¶¶ 18-20, 25 [Docket No. 1]. According to the Complaint, accepted as true for purposes of this Motion, Qwest repeatedly refused to offer voicemail service to Firstcom. When Firstcom inquired whether other CLECs were receiving voicemail under their UNE-P contracts, Qwest denied this fact and represented that Firstcom was receiving the same terms as all other CLECs. Firstcom alleges that by concealing agreements with various CLECs and offering more advantageous terms to certain carriers, Qwest breached its duties under §§ 251 and 252 of the Act and under the Minnesota Telecommunications Act. See Minn. Stat. § 237.01 et seq. Due to this preferential treatment of its competitors, Firstcom argues, Qwest placed Firstcom at a competitive disadvantage which forced it into voluntary dissolution. Firstcom ceased normal business operations in 2001 and filed dissolution documents on January 18, 2002.
Firstcom submits that former officers and shareholders first became aware of the alleged discrimination and undisclosed UNE-P agreements in the fall of 2002, through information contained in documents filed with the Minnesota Public Utilities Commission ("MPUC"). In response to a complaint against Qwest brought by the Minnesota Department of Commerce, an administrative law judge issued a Findings of Fact, Conclusions, Recommendation and Memorandum on September 20, 2002 ("MPUC Report"), addressing Qwest's alleged violations of federal and state telecommunications law. The Report, adopted in full by MPUC, found that Qwest concealed "discount agreements and ke[pt] them unavailable to other CLECs," as part of its willful violations the non-discrimination requirements of the Act. MPUC Report ¶¶ 4, 10, 12, 372, 373, at 53 (Wandling Aff. Ex. A).
III. DISCUSSION
Rule 12 of the Federal Rules of Civil Procedure provides that a party may move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). In considering a motion to dismiss, the pleadings are construed in the light most favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true. Hamm v. Groose, 15 F.3d 110, 112 (8th Cir. 1994); Ossman v. Diana Corp., 825 F. Supp. 870, 879-80 (D. Minn. 1993). Any ambiguities concerning the sufficiency of the claims must be resolved in favor of the nonmoving party. Ossman, 825 F. Supp. at 880. "A motion to dismiss should be granted as a practical matter . . . only in the unusual case in which the plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief." Frey v. City of Herculaneum, 44 F.3d 667, 671 (8th Cir. 1995).
A. Capacity
Qwest argues the action should be dismissed because Firstcom no longer exists and therefore lacks the capacity to bring suit.
Once a corporation has filed its articles of dissolution, its existence terminates and it is no longer a legal entity. Minn. Stat. § 302A.723, subd. 2; see Lyman Lumber Co. v. Favorite Construction Co., 524 N.W.2d 484, 487 (Minn.Ct.App. 1994). Therefore, it may not sue or be sued. See e.g, Mattson v. Underwriters at Lloyds of London, 385 N.W.2d 854, 857 (Minn.Ct.App. 1986) (internal quotation omitted). It is undisputed that Firstcom dissolved on or about January 18, 2002, and that it cannot instigate legal action as a corporation. However, Plaintiff argues that in fact, former Firstcom shareholders filed this suit in the name of the corporation.
The Minnesota Business Corporations Act provides that: "After a corporation has been dissolved, any of its former officers, directors, or shareholders may assert or defend, in the name of the corporation, any claim by or against the corporation." Minn. Stat. § 302A.783. Despite the plain language of this provision, Qwest contends that the legislative history and intent limit this section to the continuation of actions already commenced on behalf of the corporation prior to its termination. It relies on the portion of the official comment that states:
It is important to understand that this section in no way continues the corporate existence. Therefore, after dissolution, the corporation does not exist, cannot be sued, and cannot be served. . . . Thus, any claim filed after the Articles of Dissolution have been filed with the Secretary of State must be a claim against the officer, director or shareholder as an individual. . . . The officers, directors or shareholders may, but need not, continue the defense or prosecution of counterclaims in the suits or other proceedings pending at the time of dissolution.
General Comment to § 302A.783.
Accepting the truth of Firstcom's averment that they did not learn of the alleged fraud and unlawful conduct by Qwest until many months after official dissolution, Firstcom truthfully represented in its Articles of Dissolution that there were no pending legal proceedings by or against it at the time it terminated. See Bevilacqua Aff. Ex. 3. Essentially, Firstcom argues that Qwest's improper discrimination caused Firstcom to fail financially, and as such it would be inequitable to allow Qwest to escape liability based on the non-existence of the corporate entity, when Firstcom was not aware of the underlying unlawful actions until it had already dissolved.
This fact distinguishes this matter from the case relied on by Qwest in which the basis of plaintiff's claim was not only known to him prior to dissolution of the corporation, but pursued in a previous lawsuit. The case was dismissed on res judicata grounds, with the court adding that the plaintiff, the sole shareholder of a dissolved business, did not have standing to bring the action. Millar v. Unisys Corp., No. C3-93-378, 1993 WL 276873, at * 1, 3 (Minn.Ct.App. July 27, 1993).
The text of the disputed provision is clear and unambiguous: former shareholders may assert any claim in the name of the corporation. Minn. Stat. § 302A.783 (emphasis added). Moreover, the legislative intent of the section of commentary on which Defendant relies regarding continuing pending litigation is directed at actions against a dissolving corporation. See General Comment to § 302A.783 ("Under this provision, dissolution creates the certainty that no further claims will be made against the corporation, but protects the rights of litigants to damages."). A former officer, director or shareholder's ability, at her discretion, to continue proceedings pending at the time of dissolution references only the prosecution of counterclaims, not independent claims, by the corporation, reemphasizing the focus of the comment on suits brought against, rather than by, the company. Id. Based on this unrebutted plain language and the policy consideration against denying Firstcom a remedy for alleged concealed wrongdoing by Qwest, the Motion to Dismiss on the ground of incapacity is denied. However, because it is not readily apparent which specific former shareholders are prosecuting this suit, Firstcom is granted leave to amend the Complaint to so indicate.
Defendant next argues Count I of the Complaint must be dismissed for failure to allege an essential element of a violation of §§ 251 and 252 of the Act.
Section 252(i) of the Act, the focal provision, mandates that local exchange carriers such as Qwest "make available any interconnection, service, or network element provided under an agreement approved under this section to which it is a party to any other requesting telecommunications carrier upon the same terms and conditions as those provided in the agreement." The purpose of this requirement is to foster competition by preventing discrimination among CLECs. See Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, First Report and Order, 11 FCC Rcd 15499, 16139 ¶ 1315 (1996) ("FCC Order"). In order to further this goal, the Federal Communications Commission ("FCC") adopted a "broad construction" of the provision, concluding that CLECs must be allowed to pick and choose any individual elements of the agreement, rather than being forced to accept the entire package. FCC Notice of Apparent Liability for Forfeiture of 3/12/04 at 12 ("FCC Notice") (Wandling Aff. Ex. B); FCC Order at 16139 ¶¶ 1314, 1315. Accordingly, "the 'same terms and conditions' that an incumbent LEC may insist upon shall relate solely to the individual interconnection, service, or element being requested under section 252(i)." FCC Order at 16139 ¶ 1315.
Qwest asserts that because Firstcom could not match the volume purchase commitments made by the two cited competitors, Eschelon and McLeod, it could not "abide by 'the same terms and conditions'" of their interconnection agreements and therefore was not entitled to the preferable features. Def.'s Mem. at 8 (citing 47 C.F.R. § 51.809(a)). While a carrier selecting an individual interconnection, service or network element of a UNE-P agreement must do so on the same terms and conditions contained in the agreement with respect to that element, the failure to assert that Firstcom could meet minimum purchase levels does not defeat this claim. The essence of the Complaint is that Qwest unlawfully hid its agreements from Firstcom so that Firstcom was not even aware of what terms may have been available and upon what conditions. It avers that Qwest refused to make voicemail service available to Firstcom while offering it to other CLECs, thereby violating § 251(i). Qwest's reliance on its right to insist on equal conditions regarding the requested service does not save it from facing allegations of a failure to "make available" that individual term to all carriers. 47 U.S.C. § 251(i); see FCC Order at 16132 ¶ 1296, 16139 ¶ 1315; see FCC Notice ¶ 2 (Qwest's "disregard for the filing requirements [of the Act] prevented CLECs from "adopting interconnection terms otherwise available only to certain favored CLECs"). Its arguments regarding specific UNE-P terms and any attendant purchase commitments are questions of fact that are not ripe for disposition on a motion to dismiss. See Ossman, 825 F. Supp. at 880. Construing the pleadings liberally and taking Plaintiff's allegations as true, Count I of the Complaint properly states a claim and need not be dismissed at this juncture. See Fed.R. of Civ. Pro. 8 (setting forth minimal notice pleading requirement).
47 C.F.R. § 51.809(a) reflects the pro-competitive purpose and interpretation of § 251(i), stating that "[a]n incumbent LEC [Qwest] shall make available without unreasonable delay to any requesting telecommunications carrier any individual interconnection, service, or network element arrangement contained in any agreement to which it is a party that is approved by a state commission pursuant to section 252 of the Act, upon the same rates, terms, and conditions as those provided in the agreement." (Emphasis added).
IV. CONCLUSION
For the reasons set forth above and based on the files, records, and proceedings herein, IT IS HEREBY ORDERED that:1. Defendant's Motion to Dismiss [Docket No. 3] is DENIED; and
2. Plaintiff is granted leave to amend the Complaint [Docket No. 1] within 30 days to specify which former shareholders are maintaining this suit in the name of Firstcom, Inc.