The opinion of the court was delivered by: Hughes, U.S.M.J.
This matter having come before the Court upon Motion by Plaintiffs to Compel Defendant AT&T ("Defendant") to Produce Discovery, [Docket entry #124], returnable July 17, 2006. Defendant submitted opposition and the Court conducted Oral Argument on August 15, 2006. Plaintiffs claim that Defendant may not assert attorney-client privilege in opposition to Plaintiffs' discovery requests relating to Defendant's decision not to pay access charges because Defendant's "litigation posture demonstrates that it has placed this [legal] advice at issue, and has therefore waived such privilege." (Pls.' Br. at 1). Defendant claims that it has not, and will not, use an "advice of counsel" defense and, therefore, no waiver of the attorney-client privilege has occurred. (Def.'s Br. at 3). For the reasons stated below, Plaintiffs' Motion to Compel Discovery is denied.
Plaintiffs are local exchange carriers operating throughout the United States, who have brought suit against Defendant for its failure to pay access charges for using Plaintiffs' access services to originate and terminate Defendant's long-distance traffic. The dispute arises out of the parties' differing views on what constitutes traditional voice services as opposed to information services. The Federal Communications Commission ("FCC") has long distinguished between providers of traditional voice services over the interstate telecommunications network and providers of information services, including Internet Service Providers ("ISPs"). ISPs are permitted to "'pay business line rates and the appropriate subscriber line charge, rather than interstate access rates, even for calls that appear to traverse state boundaries.'" Access Charge Reform, 12 FCC Rcd. 15982, ¶ 342 (1997). Voice communications can also be transmitted over the Internet, and are known as voice over IP ("VOIP").
In addressing the issue of regulation of VOIP, the FCC distinguished between computer-to-computer IP telephony services and phone-to-phone IP telephony services. Report to Congress, Federal-State Joint Board on Universal Service, 13 FCC Rcd. 11, 501, ¶¶ 83-92 (1998)("Universal Service Report"). The Universal Service Report did not make any "definitive pronouncements" about how either type of VOIP should be regulated in the future. The Report went on to say that if it should find that such phone-to-phone IP telephony services were telecommunications services, "we may find it reasonable that they pay similar access charges" for the termination of their calls, but that "we likely will face difficult and contested issues relating to the assessment of access charges on these providers." Id. at ¶ 91.
Under this guidance, Defendant undertook to develop new technologies that used IP technology to provide high quality voice services over Defendant's Internet backbone. This program lasted from late 2000 until mid 2004, during which time Defendant used the new technology to provide a phone-to-phone IP telephony service for the termination of calls in selected geographical areas of 14 states. (Def.'s Br. at 6). Local carriers, including Plaintiffs in the above captioned case, objected to Defendant's use of this service without paying access charges to the local carriers. Defendant argued that not paying access charges on this long-distance traffic was permitted because the calls at some point had been transmitted over Defendant's Internet backbone, rather than over traditional telephone networks. As a result, Defendant filed a petition with the FCC in October 2002 for a declaratory ruling that Defendant's phone-to-phone IP telephony services were exempt from interstate access charges.
In its petition, and subsequent submissions to the FCC, Defendant argued that its phone-to-phone IP telephony service was not subject to interstate access charged under the FCC's prior decisions. In addition, Defendant claimed that the FCC should continue to exempt such services from payment of access charges in order to encourage the development of new IP-based services. Defendant also addressed the issue of "whether any FCC decision on this issue adverse to [Defendant] could lawfully and appropriately be applied on a retroactive basis." Id. at 6.
In April 2004, the FCC determined that Defendant's IP telephony service would be subject to interstate access charges. However, the FCC's ruling was limited to a determination on a prospective basis. Petition for Declaratory Ruling that AT&T's Phone-to-Phone IP Telephony Services are Exempt from Access Charges, 19 FCC Rcd. 7457 (2004)(emphasis added). The FCC did not determine whether the ruling "necessarily has a retroactive effect." Id. at ¶ 21. It expressly declined to apply its ruling retroactively, stating that the courts should address "the equities of permitting retroactive liability" on a "case-by-case basis." Id. at ¶ 23.
Defendant then filed a second petition with the FCC seeking declaratory judgment regarding its prepaid calling card traffic. Defendant argued that it should not have been required to pay intrastate access charges on certain calls where a call reached Defendant platform in another state, despite the fact that the caller and recipient were in the same state. Defendant argued that it took this position based on prior statements from the FCC. Again, the FCC found that under its traditional end-to-end analysis such calls are intrastate. In The Matter of AT&T Corp. Petition of Declaratory Ruling Regarding Enhanced Prepaid Calling Card Services, 20 F.C.C.R. 4826 (Feb. 16, 2005).
Following the FCC's declaratory ruling, Defendant ceased providing its phone-to-phone IP telephony service. Plaintiffs brought this lawsuit against Defendant contending that they are entitled to the payment of access charges for past periods. In its Answer to Plaintiffs' Complaints, Defendant asserted as its Sixth Affirmative Defense that "Plaintiffs' request for retroactive recovery would be inequitable and unlawful." Defendants also stated "[i]n incurring the costs to develop and deploy its phone-to-phone IP telephony service, [Defendant] detrimentally relied on its understanding that the service would not be subject to access charges," in its initial Rule 56 Statement.
In response to Plaintiffs' discovery requests, Defendant produced documents and also produced a privilege log, in which it identified thousands of pages of documents it intended to withhold based on attorney-client privilege. In a May 4, 2006 letter, Plaintiffs' counsel took exception to Defendant's claim of privilege, arguing that Defendant had put advice of counsel at issue, by claiming that it detrimentally relied on prior FCC rulings, and thereby waived the privilege. Further, Plaintiffs contend that Defendant's Sixth Affirmative Defense and its Rule 56 statement constitutes a waiver of Defendant's attorney-client privilege. Defendant states that the Sixth Affirmative Defense is not an "advice of counsel" defense and that Defendant "intended to show in support of its Sixth Affirmative defense that its position regarding the non-applicability of terminating access charges was objectively reasonable." (Schiffman Ltr. 05/18/06). Thus, Defendant stated that it did not put its advice of counsel at issue, did not waive the attorney-client privilege and thus, does not have to produce the privileged documents for Plaintiffs' review.
Plaintiffs filed the present motion to request the Court require Defendant to produce the documents, finding that Defendant waived the attorney-client privilege by putting advice of counsel at issue in the case.
Plaintiffs argue that Defendant is required to produce otherwise privileged documents because Defendant chose to put advice of counsel at issue in the above captioned case, thereby waiving the privilege. (Pls.' Br. at 7). Defendant claims that its Sixth Affirmative defense is not an "advice of counsel" defense and therefore, it did not waive the privilege. (Def.'s Br. at 3). The Court finds that Defendant did not put advice of ...