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United States v. Unipoint Technologies, Inc.

United States District Court, D. Massachusetts

February 3, 2016

UNITED STATES OF AMERICA, Plaintiff,
v.
UNIPOINT TECHNOLOGIES, INC., d/b/a COMMUNICATIONS FIDELITY a/k/a COMFI.COM, Defendant.

ORDER ON MOTION FOR JUDGMENT ON THE PLEADINGS OR, IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT (DOC. NO. 24)

LEO T. SOROKIN UNITED STATES DISTRICT JUDGE.

Plaintiff the United States of America (“the government”) filed a Complaint against Defendant Unipoint Technologies Inc., d/b/a Communications Fidelity, a/k/a Comfi.com (“Unipoint”), to recover a monetary forfeiture the Federal Communications Commission (“FCC” or “The Commission”) had assessed against Unipoint “for violations of the Communications Act of 1934 (‘Act’) and various regulations implementing that Act.” Doc. No. 9 at 1. The government filed a Motion for Judgment on the Pleadings or, in the Alternative, Summary Judgment. Doc. No. 24. Unipoint opposed the motion. Doc. No. 29. The government responded to Unipoint’s opposition, Doc. No. 39, the Court held a motion hearing, Doc. No. 32, and the government, with leave from the Court, submitted supplemental briefing on some issues raised at the motion hearing. Doc. No. 37; see Doc. No. 35 (granting leave to file the supplemental briefing). After careful consideration of the parties’ briefs and arguments, the Court enters judgment for the government on the question of liability, but finds a genuine issue of material fact as to the forfeiture amount. Accordingly, the motion is ALLOWED IN PART AND DENIED IN PART.[1]

I. BACKGROUND

As the Court decides a motion for summary judgment, this factual recitation relies primarily on the government’s “Statement of Material Facts of Record as to which the United States of America Contends There is No Genuine Issue to Be Tried, ” which the government incorporated into its Memorandum of Law in Support of Motion for Judgment on the Pleadings or, in the Alternative, for Summary Judgment. See Doc. No. 25 at 1-5. Further, as Unipoint is the non-moving party, the Court “view[s] the facts in the light most favorable to [Unipoint, ] and draw[s] all reasonable inferences in [its] favor.” Ray v. Ropes & Grap LLP, 799 F.3d 99, 112 (1st Cir. 2015).[2]

Unipoint, a Massachusetts-based corporation, sells prepaid calling cards to consumers. Doc. No. 25 ¶ 1. These cards can make both domestic and international calls. Id. ¶ 2. In order to use the cards, customers must create an electronic account with, and make payments to, Comfi.com, a website Unipoint runs. Id. Upon making payment, customers receive an email with a personal identification number (PIN), a telephone access number, and dialing instructions. Id. Unipoint offers both refillable and non-refillable cards. Id. Customers with refillable cards can reuse their PIN, or create a PIN-less card by registering a telephone number with Comfi.com and linking that number to their electronic account. Id. The calling cards Unipoint sells come from third parties-Unipoint does not create the cards themselves, and the cards are branded as coming from third parties. Doc. No. 30 ¶ 3.

On April 22, 2009, Unipoint applied to the FCC for authority under 47 U.S.C. § 214(a) to provide international telecommunications service. Doc. No. 25 ¶ 3. The FCC granted that authorization on May 8, 2009. Id. On August 17, 2009, Unipoint, with the assistance of counsel, see Doc. No. 12 at 6 n. 37, self-reported potentially unlawful conduct. Doc. No. 25 ¶ 4. The FCC’s Enforcement Bureau investigated, and discovered that Unipoint may have provided international telecommunications services prior to receiving § 214 authorization. Id. The investigation revealed multiple additional purported violations, namely Unipoint’s failure to: 1) timely file its 2007 Annual Worksheet, which would report its 2006 calendar year revenues; 2) timely make its 2007 and 2008 TRS Fund contributions; and 3) “timely file its 2008, 2009, and 2011 international telecommunications traffic reports (for calendar years 2007, 2008, and 2010, respectively). Id. ¶ 6.

On October 11, 2012, the FCC issued a Notice of Apparent Liability for Forfeiture (“NAL”) against Unipoint. Id. ¶ 7; see Doc. No. 12 (The NAL). The NAL found that Unipoint, by the above-mentioned conduct, “had willfully or repeatedly violated Section 214(a) of the Act, as amended, and Sections 43.16, 52.17(b), 54.711, 63.18, and 64.604(c)(5)(iii)(A)-(B) of the Commission’s rules.” Doc. No. 25 ¶ 7. The NAL proposed a $179, 000.00 forfeiture against Unipoint, broken down as follows: 1) $100, 000 for unauthorized provision of international telecommunications service; 2) $50, 000 for not timely filing a 2007 Annual Worksheet; 3) $20, 000 for not making timely contributions to the TRS Fund in 2007 and 2008; and 4) $9, 000 for not timely filing its 2008, 2009, and 2011 international telecommunications traffic reports. Id. ¶ 8; see Doc. No. 12 ¶ 23.

Unipoint appealed the NAL on January 10, 2013. Doc. No. 25 ¶ 9; see Doc. No. 25-3 (Unipoint’s appeal). The appeal pushed three arguments: 1) that its violations were neither intentional nor willful; 2) that it was unable to pay a $179, 000 forfeiture; and 3) that an alternative amount of $55, 000 over thirty-six months was more appropriate.[3] Doc. No. 25 ¶ 9. Unipoint has never claimed that it took the actions that the FCC asserts Unipoint improperly failed to perform. See Doc. No. 25-3; Doc. No. 29. On February 11, 2014, the FCC issued its Forfeiture Order, affirming the NAL. Doc. No. 25 ¶ 10; see Doc. 12-1. On August 19, 2014, the government filed, pursuant to 47 U.S.C. § 504(a), the instant Amended Complaint to recover the forfeiture. Doc. No. 9.[4]

II. LEGAL STANDARD

Summary judgment is appropriate when “the movant 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). Once a party “has properly supported its motion for summary judgment, the burden shifts to the non-moving party, who ‘may not rest on mere allegations or denials of [its] pleading, but must set forth specific facts showing there is a genuine issue for trial.’” Barbour v. Dynamics Research Corp., 63 F.3d 32, 37 (1st Cir. 1995) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986)). The Court is “obliged to review the record in the light most favorable to the nonmoving party, and to draw all reasonable inferences in the nonmoving party’s favor.” LeBlanc v. Great Am. Ins. Co., 6 F.3d 836, 841 (1st Cir. 1993). Even so, the Court is to ignore “conclusory allegations, improbable inferences, and unsupported speculation.” Prescott v. Higgins, 538 F.3d 32, 39 (1st Cir. 2008) (quoting Medina-Muñoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir. 1990)). A court may enter summary judgment “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

III. DISCUSSION

Unipoint posits three broad reasons for why it should avoid liability for the $179, 000 forfeiture order. First, it argues that as “simply a retailer of calling cards and not the provider of the services available through those cards, ” it is “not subject to Section 214 and the [FCC] regulations related thereto.” Doc. No. 29 at 9. Second, it asserts that even if it acted unlawfully, its violations were neither willful nor repeated, rendering forfeiture inappropriate. Id. at 13-14. Finally, it contends that even if forfeiture is appropriate, the $179, 000 assessment is “excessive, unjustified and should be reduced.” Id. at 14. The Court addresses each of these arguments in turn. But before doing so, the Court describes the applicable law.

A. Legal Framework

47 U.S.C. § 214, with some irrelevant exceptions, requires FCC authorization before a carrier can “undertake the construction of a new line or of an extension of any line, or . . . acquire or operate any line, or extension thereof.” The Act defines a carrier, also known as a common carrier, as “any person engaged as a common carrier for hire, in interstate or foreign communication by wire or radio or interstate or foreign radio transmission of energy.” 47 U.S.C. § 153(11). The FCC has interpreted the term common carrier to include parties who resell communications services. Regulatory Policies Concerning Resale and Shared Use of Common Carrier Services and Facilities, 60 F.C.C.2d 261, 308 (1976); see also 47 C.F.R. § 63.18(e)(2) (describing procedure for resellers to comply with § 214’s authorization requirement).

A “telecommunications carrier” is, with an irrelevant exception, a “provider of telecommunications services.” 47 U.S.C. § 153(51). The Act in turn defines a “telecommunications service” as “the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.” 47 U.S.C. § 153(53). A telecommunication is a “transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received.” 47 U.S.C. § 153(50). The FCC interprets the term “telecommunications service” to include prepaid calling cards. Regulation of Prepaid Calling Card Servs., 21 FCC Rcd. 7290, 7293 (2006) (“[P]repaid calling card services are telecommunications services and . . . their providers are subject to regulation as telecommunications ...


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