1022-00001 · Northgate Networks America Inc · Pleadings & Court Filings

motion-to-stay-pending-fcc-proceeding.docx DOCUMENT Antitrust

35 / 38 ← → ✕

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Alexandria Division

DEFENDANTS' MOTION TO STAY PROCEEDINGS PENDING RESOLUTION OF PARALLEL FCC PROCEEDING

Filed: March 6, 2023

I. INTRODUCTION

Defendants Northgate Networks America Inc. ("NNA") and Northgate Telecommunications PLC ("Northgate" or "NTP") (collectively, "Defendants") respectfully move this Court, pursuant to its inherent authority to manage its docket, for an order staying all proceedings in this action pending the resolution of the parallel proceeding before the Federal Communications Commission ("FCC") in In the Matter of Northgate Networks America Inc. — Complaint Regarding Interconnection Obligations under Section 251, FCC Docket No. WC-23-0042.

On February 7, 2023, Plaintiff Ridgepoint Communications Inc. ("Ridgepoint" or "Plaintiff") filed a formal complaint at the FCC alleging that Northgate violated interconnection obligations under Sections 251 and 252 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 251, 252. The interconnection practices challenged in that FCC complaint—specifically, Northgate's Wholesale Access Policy ("WAP"), adopted in January 2020, and its denial of interconnection and physical colocation requests at fourteen facilities in the Philadelphia–Baltimore–Washington, D.C. corridor—are the very same practices that form the predicate conduct for Ridgepoint's Section 2 Sherman Act claim in this action.

The FCC possesses specialized expertise in telecommunications interconnection regulation and is uniquely positioned to resolve the technical and regulatory questions at the heart of this dispute. Those questions include whether Northgate's WAP is commercially reasonable, whether the capacity constraints at the fourteen facilities justify denial of colocation requests, and whether Northgate's obligations under Sections 251 and 252 extend to the specific interconnection access that Ridgepoint demands. These are not garden-variety antitrust questions; they are deeply embedded in the architecture of the federal telecommunications regulatory scheme and call for the application of technical standards, industry norms, and regulatory policies with which the FCC has decades of experience and this Court, with all due respect, does not.

The well-established primary jurisdiction doctrine counsels that this Court should defer to the FCC's expert determination on these threshold regulatory matters before proceeding with the antitrust claims. A stay will promote judicial economy, conserve the resources of the parties and the Court, avoid the substantial risk of inconsistent determinations between a judicial and an administrative tribunal, and may substantially narrow or altogether eliminate the issues that remain for this Court to resolve.

Defendants further respectfully request that the pending Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6), filed on November 14, 2022 and now fully briefed, be denied without prejudice to renewal after the stay is lifted. The FCC's resolution of the interconnection questions may materially reframe the legal issues raised in that motion, and denying the motion without prejudice would preserve the orderly administration of this case while the FCC proceeding runs its course.

In support of this Motion, Defendants rely upon the accompanying Memorandum of Law in Support of Defendants' Motion to Stay Proceedings Pending Resolution of Parallel FCC Proceeding, the Declaration of Patrick Salazar, Chief Regulatory Officer of Northgate Telecommunications PLC, and the Proposed Order Granting Stay, each filed concurrently herewith.

II. BACKGROUND

A. The Parties

Northgate Telecommunications PLC is a public limited company organized under the laws of England and Wales (Company No. 07824561), with American Depositary Receipts listed on the Nasdaq Global Select Market (ticker: NTP). Northgate is headquartered at 14 Broadwall Lane, London SE1 9PQ, United Kingdom. Northgate's Chief Executive Officer is Sir Malcolm Prentice, KBE, and its Group General Counsel is James Whitford. Northgate is one of the world's largest independent telecommunications infrastructure providers, operating in twenty-seven countries across Europe, the Americas, and the Asia-Pacific region.

Northgate Networks America Inc. is a corporation organized under the laws of the State of Delaware and a wholly owned subsidiary of Northgate, serving as Northgate's primary U.S. operating entity. NNA is headquartered at 8200 Dulles Corner Boulevard, Suite 1100, Tysons Corner, Virginia 22182. NNA's U.S. President is Diane Okoro, and its U.S. Deputy General Counsel is Catherine Ng. NNA owns and operates approximately 42,000 route-miles of fiber-optic backbone and metro-ring infrastructure across eighteen U.S. states, primarily concentrated along the eastern seaboard and extending into select midwestern and southern markets. In addition to its physical network infrastructure, NNA offers enterprise cloud-connectivity solutions and SaaS-based network management platforms marketed under the NorthgateOS™ brand. Northgate's consolidated revenue for fiscal year 2022 was approximately £4.87 billion (approximately $5.96 billion at prevailing exchange rates), of which NNA's U.S. operations contributed approximately $2.41 billion.

Ridgepoint Communications Inc. is a corporation organized under the laws of the State of Delaware and headquartered at 3500 Market Street, Suite 700, Philadelphia, Pennsylvania 19104. Ridgepoint is a competitive local exchange carrier ("CLEC") and enterprise broadband provider operating approximately 6,200 route-miles of owned and leased fiber-optic infrastructure across Pennsylvania, New Jersey, Delaware, Maryland, and Virginia. Ridgepoint's revenue for fiscal year 2022 was approximately $387 million. Ridgepoint is a privately held company, with approximately 78% of its equity owned by Caravel Capital Partners LP since a November 2018 leveraged buyout valued at approximately $510 million. The Trent family, headed by Ridgepoint's founder and Chief Executive Officer, Gregory Trent, retains the remaining approximately 22% equity stake. Ridgepoint is represented in this matter by Hargrove, Winslow & Burke LLP, with offices in Washington, D.C. and Philadelphia, and led by partner Victoria Hargrove.

B. The District Court Action

On September 19, 2022, Ridgepoint filed the Complaint initiating this action, asserting a single count under Section 2 of the Sherman Act, 15 U.S.C. § 2. The Complaint alleges that Northgate's refusal to provide Ridgepoint with interconnection and physical colocation access at fourteen specific central-office and meet-me-room facilities in the Mid-Atlantic region constitutes unlawful monopolization of an alleged "last-mile enterprise fiber-optic transport services market" in the Philadelphia–Baltimore–Washington, D.C. corridor.

The fourteen facilities at issue are located across five jurisdictions—Pennsylvania, New Jersey, Maryland, Virginia, and the District of Columbia—and are specifically identified in the Complaint as follows:

1. 401 N. Broad Street, Philadelphia, PA

2. 1500 Spring Garden Street, Philadelphia, PA

3. 100 Delancey Place, Cherry Hill, NJ

4. 220 S. Warren Street, Trenton, NJ

5. 700 E. Pratt Street, Baltimore, MD

6. 1 W. Fayette Street, Baltimore, MD

7. 33 S. Gay Street, Baltimore, MD

8. 9221 Corporate Boulevard, Rockville, MD

9. 1200 New Hampshire Avenue NW, Washington, D.C.

10. 600 New Jersey Avenue NW, Washington, D.C.

11. 44755 Prentice Drive, Ashburn, VA

12. 21571 Beaumeade Circle, Ashburn, VA

13. 1807 Michael Faraday Court, Reston, VA

14. 8100 Boone Boulevard, Tysons Corner, VA

According to the Complaint, between March 2021 and August 2022, Ridgepoint submitted interconnection and colocation requests for each of these fourteen facilities, all of which Northgate declined. The Complaint characterizes Northgate's refusals as anticompetitive conduct designed to exclude Ridgepoint and other competitors from the alleged relevant market.

In fact, as Defendants explained in their Motion to Dismiss and as Defendants' Chief Regulatory Officer, Patrick Salazar, attests in his concurrently filed Declaration, Northgate declined the requests on the basis of three commercially reasonable grounds: (a) capacity constraints at the specific facilities, each of which was at or above 85% capacity utilization at the time of the relevant request; (b) the absence of any prior course of dealing with Ridgepoint at those particular locations; and (c) Northgate's Wholesale Access Policy, adopted in January 2020 after an extensive internal review and industry benchmarking process, which restricts third-party physical colocation to existing wholesale partners with minimum annual revenue commitments of $5 million. Ridgepoint's aggregate annual spend with Northgate was approximately $1.8 million in fiscal year 2021, well below the WAP threshold.

The parties do have a history of limited commercial dealings. Ridgepoint was previously granted physical colocation at three facilities in northern Virginia under a Master Interconnection Agreement ("MIA") dated June 15, 2015. The MIA was for a five-year term and expired by its own terms on June 14, 2020. Northgate declined to renew the MIA under the revised WAP requirements. Ridgepoint presently continues to occupy the three existing colocation spaces under a month-to-month holdover arrangement at 120% of the prior contractual rate—specifically, $14,400 per month per facility, compared to the prior MIA rate of $12,000 per month per facility. Ridgepoint thus continues to maintain physical access to Northgate's network infrastructure at these three locations.

Ridgepoint's Complaint claims $127 million in lost profits over a five-year projected period (2022–2027), which Ridgepoint seeks to treble to $381 million under Section 4 of the Clayton Act, 15 U.S.C. § 15. Ridgepoint also seeks permanent injunctive relief compelling Northgate to grant interconnection and colocation at the fourteen facilities.

C. Procedural History of This Action

The procedural history of this case to date is as follows:

• September 19, 2022: Ridgepoint filed the Complaint initiating this action.

• October 3, 2022: Calderwood & Harkness LLP entered an appearance on behalf of both Defendants, NNA and NTP.

• November 14, 2022: Defendants filed a Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that the Complaint fails to state a cognizable refusal-to-deal claim under the framework established by Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), and Harborview Holdings Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004), and further arguing that the alleged relevant market definition—"last-mile enterprise fiber-optic transport services" in the Philadelphia–Baltimore–Washington, D.C. corridor—is implausibly narrow and fails to account for competitive alternatives including coaxial broadband, fixed wireless, and satellite connectivity.

• January 9, 2023: Ridgepoint filed its Opposition to the Motion to Dismiss.

• January 30, 2023: Defendants filed their Reply in Support of the Motion to Dismiss.

• February 22, 2023: The Honorable Claudia M. Wentworth held oral argument on the Motion to Dismiss. At the conclusion of oral argument, the Court took the motion under advisement and has not yet ruled.

The Motion to Dismiss remains pending. Discovery has not commenced and no scheduling order has been entered.

D. The Parallel FCC Proceeding

On February 7, 2023—while Defendants' Motion to Dismiss remained under advisement by this Court—Ridgepoint filed a formal complaint at the FCC, captioned In the Matter of Northgate Networks America Inc. — Complaint Regarding Interconnection Obligations under Section 251, and assigned Docket No. WC-23-0042.

The FCC complaint alleges that Northgate violated its obligations under Sections 251 and 252 of the Communications Act, 47 U.S.C. §§ 251, 252, by refusing to provide interconnection and physical colocation access at the same fourteen facilities that are at issue in this district court action. The FCC complaint specifically challenges the lawfulness of Northgate's WAP and asserts that the capacity-based denials do not excuse Northgate's failure to comply with its statutory interconnection obligations. The FCC complaint thus squarely raises the question of whether Northgate's WAP and capacity-based denials are consistent with, or in violation of, the telecommunications regulatory framework governing interconnection among carriers.

The FCC proceeding has been assigned to Administrative Law Judge Robert Fenwick of the FCC's Office of Administrative Law Judges. ALJ Fenwick has substantial experience adjudicating interconnection disputes under the Communications Act and is expected to establish a procedural schedule in the coming weeks.

On February 10, 2023, Defendants filed a letter with this Court advising of the parallel FCC proceeding and informing the Court of Defendants' intention to seek a stay. This Motion follows.

The Declaration of Patrick Salazar, Northgate's Chief Regulatory Officer, filed concurrently herewith, attests to the nature, scope, and regulatory significance of the FCC proceeding. Mr. Salazar, who has more than twenty-two years of experience in telecommunications regulation and has participated in dozens of FCC proceedings, provides his informed assessment of the overlap between the FCC proceeding and this action and the FCC's institutional competence to resolve the interconnection questions at issue.

III. LEGAL STANDARD

A federal district court possesses broad inherent authority to manage its docket and to stay proceedings before it in the interest of justice and the efficient administration of the Court's business. Landis v. North American Co., 299 U.S. 248, 254–55 (1936) ("the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants"). The exercise of that discretion calls for the balancing of competing interests, including the interests of the parties, the conservation of judicial resources, and the desirability of avoiding duplicative or inconsistent adjudications. Id. at 254–55; see also Clinton v. Jones, 520 U.S. 681, 706 (1997) (recognizing the "broad discretion" of district courts "to stay proceedings as an incident to its power to control its own docket").

The primary jurisdiction doctrine provides an additional, well-established basis for a stay. Under this doctrine, a court may stay—or dismiss without prejudice—an action where the issues raised require resolution of questions that have been placed within the special competence of an administrative agency. United States v. Western Pacific Railroad Co., 352 U.S. 59, 63–64 (1956). The Supreme Court has explained that the doctrine "is a prudential doctrine under which courts may, under appropriate circumstances, determine that the initial decisionmaking responsibility should be performed by the relevant agency rather than the courts." Reiter v. Cooper, 507 U.S. 258, 268 (1993).

The primary jurisdiction doctrine applies when: (1) the claim requires the resolution of issues that have been placed within the special competence of an administrative body; (2) there is a need for uniform administrative treatment of the questions presented; and (3) the agency's expertise would be beneficial in resolving the issues. Western Pacific Railroad, 352 U.S. at 64; see also Access Telecom, Inc. v. MCI Telecommunications Corp., 197 F.3d 694, 703 (5th Cir. 1999) (setting forth the primary jurisdiction factors in the telecommunications context). The doctrine recognizes that courts, even when they have subject-matter jurisdiction, should in certain circumstances refrain from exercising that jurisdiction to allow an administrative agency with specialized knowledge to make an initial determination.

Importantly, primary jurisdiction is not a doctrine of subject-matter jurisdiction. It does not deprive the court of jurisdiction, nor does it require dismissal. Rather, it is a prudential doctrine governing the allocation of decision-making responsibility between courts and agencies, and the standard remedy is a stay of court proceedings pending the agency's determination. Reiter, 507 U.S. at 268–69; see also Harborline Insurance v. Geller, No. 1:06-cv-867, 2007 WL 1346736, at *5 (E.D. Va. May 4, 2007) (explaining that primary jurisdiction "merely requires the court to enable a 'referral' to the agency, staying further proceedings so as to give the parties reasonable opportunity to seek an administrative ruling").

Courts have consistently applied the primary jurisdiction doctrine to stay or defer antitrust claims that turn on the interpretation of telecommunications regulatory obligations under the Communications Act. In Trinko, the Supreme Court noted the "significance" of the "regulatory structure" in evaluating antitrust claims premised on alleged failures to deal in the telecommunications context, observing that the regulatory scheme provided "a saving clause for pre-existing antitrust claims" but also cautioned that antitrust courts should be wary of imposing duties to deal beyond those established by the regulatory framework. 540 U.S. at 412–15. Courts in this Circuit and elsewhere have recognized that where an antitrust claim is predicated on alleged violations of regulatory obligations under the Communications Act, the FCC's expert determination of the regulatory question is an appropriate—and often necessary—predicate to the antitrust analysis. See, e.g., Cavalier Telephone, LLC v. Ashgrove & Co. Virginia, Inc., 330 F.3d 176, 189 (4th Cir. 2003) (recognizing the FCC's authority to interpret and enforce interconnection obligations); MCI Communications Corp. v. Camberwell Enterprises, 708 F.2d 1081, 1103 (7th Cir. 1983) (applying primary jurisdiction where antitrust claims required resolution of questions "peculiarly within the expertise of the FCC").

The Fourth Circuit has endorsed the application of the primary jurisdiction doctrine where an agency's "specialized knowledge" and "uniform administrative treatment" of an issue would aid the court's resolution of the dispute, even where the court has undoubted subject-matter jurisdiction. See Cavalier Telephone, 330 F.3d at 189; Pitt County v. Drayton Software, L.P., 553 F.3d 308, 314 (4th Cir. 2009) (discussing primary jurisdiction principles and the role of agency expertise).

IV. ARGUMENT

A. The FCC Has Specialized Expertise Over the Interconnection Questions at the Heart of This Action

Ridgepoint's Section 2 claim is predicated entirely upon Northgate's refusal to grant interconnection and physical colocation access at fourteen specific facilities. The Complaint's theory of anticompetitive harm depends on the premise that Northgate had a duty—whether arising from antitrust law, regulatory law, or both—to grant Ridgepoint's requests, and that the refusal to do so constitutes exclusionary conduct in violation of Section 2. That premise, in turn, necessarily implicates the threshold question of whether Northgate was obligated to grant such access under the Communications Act. That question falls squarely within the FCC's regulatory domain.

Sections 251 and 252 of the Communications Act, 47 U.S.C. §§ 251, 252, establish a comprehensive framework for interconnection obligations among telecommunications carriers. Section 251(a) imposes on all telecommunications carriers a general duty to interconnect. Section 251(c) imposes additional, more specific obligations on incumbent local exchange carriers ("ILECs"), including duties to negotiate interconnection agreements and to provide access to network elements at just, reasonable, and nondiscriminatory rates. Section 252 prescribes the procedures for negotiating and, if necessary, arbitrating interconnection agreements, with state commissions serving as arbitrators under FCC oversight.

The FCC has promulgated extensive rules and orders interpreting these provisions over more than two decades, beginning with the landmark Local Competition Order, Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, 11 FCC Rcd. 15499 (1996), and continuing through numerous subsequent proceedings. The FCC's Wireline Competition Bureau has developed deep specialized expertise in evaluating interconnection disputes, including questions regarding the scope of physical colocation obligations, the commercial reasonableness of access policies, capacity-related justifications for denials of colocation, and the evolving scope of carriers' obligations as the telecommunications marketplace continues to change.

The core factual and regulatory questions presented in FCC Docket No. WC-23-0042 overlap substantially—indeed, almost entirely—with the predicate conduct underlying the antitrust claim before this Court. The FCC proceeding will require ALJ Fenwick to determine, among other things:

• Whether Northgate's Wholesale Access Policy, with its $5 million minimum annual revenue commitment threshold for physical colocation, is commercially reasonable and consistent with Northgate's obligations under Sections 251 and 252;

• Whether the capacity constraints at the fourteen facilities (each at or above 85% utilization) provide a lawful basis for denial of Ridgepoint's colocation requests under the applicable regulatory framework;

• Whether Northgate's classification of itself as an entity subject to particular interconnection obligations under Section 251, given its status as a facilities-based provider with substantial market presence, is correct;

• Whether Northgate's obligations under Sections 251 and 252 extend to the specific type of interconnection and colocation access that Ridgepoint seeks at the fourteen facilities; and

• What, if any, remedies are appropriate under the Communications Act if a violation is found.

These are precisely the types of questions that Congress entrusted to the FCC when it enacted the interconnection framework of the Communications Act. They require specialized knowledge of telecommunications engineering, network capacity planning, industry practices regarding colocation and interconnection, the economics of wholesale access, and the interplay between the various regulatory obligations imposed on different categories of carriers. These are not questions that can be resolved by applying general antitrust principles; they demand the application of the FCC's technical and regulatory expertise.

The FCC's resolution of these questions will materially inform—and may be dispositive of—the antitrust issues before this Court. The relevance of the FCC's determination to the antitrust analysis is straightforward. If the FCC determines that Northgate's refusal to deal was consistent with its regulatory obligations and commercially reasonable under the standards applicable to interconnection disputes, that finding would significantly undermine, if not entirely eliminate, Ridgepoint's theory of anticompetitive conduct. A refusal to deal that is consistent with a firm's regulatory obligations and commercially justified is, by definition, a legitimate business justification that precludes liability under Section 2. See Trinko, 540 U.S. at 410–11 (observing that the existence of a regulatory obligation to deal, standing alone, does not create an antitrust duty, and that the absence of such an obligation further undercuts an antitrust claim); Novell, Inc. v. Kestrel Partners LLC, 731 F.3d 1064, 1075 (10th Cir. 2013) (legitimate business justifications for a refusal to deal defeat a Section 2 claim).

Conversely, if the FCC finds that Northgate violated its obligations under the Communications Act, that determination would frame the scope of the antitrust inquiry but would not by itself resolve the Section 2 claim, which requires additional proof of monopoly power in a properly defined relevant market, anticompetitive effects, and damages. Even in that scenario, however, the FCC's factual findings and regulatory analysis would substantially assist this Court in evaluating the antitrust claims and would narrow the issues requiring adjudication.

Either way, the FCC's determination will prove invaluable to this Court's analysis and will promote a more informed and efficient resolution of this matter.

B. A Stay Will Promote Judicial Economy and Avoid Inconsistent Determinations

If this action and the FCC proceeding are permitted to proceed simultaneously, there is a substantial risk of inconsistent outcomes. This Court could reach one conclusion regarding the lawfulness and commercial reasonableness of Northgate's interconnection practices while the FCC—the agency with primary responsibility for administering the interconnection provisions of the Communications Act—reaches a different conclusion. Such inconsistency would not merely be an academic concern; it would create practical difficulties for the parties, undermine the coherence of the regulatory framework, and potentially result in conflicting obligations imposed on Northgate by different arms of the federal government.

The FCC proceeding is already underway. ALJ Fenwick has been assigned, and the matter is progressing through the administrative process. Deferring to the FCC allows the agency to develop a comprehensive factual record, apply its specialized expertise, and issue a regulatory determination that this Court can then consider in evaluating the antitrust claims. This sequential approach is far more efficient than parallel proceedings that may require this Court to grapple with complex telecommunications regulatory issues without the benefit of the FCC's analysis.

A stay will also avoid duplicative discovery and litigation costs for both parties. Discovery in this action has not yet commenced, and no scheduling order has been entered. The case is at an early procedural stage, with the Motion to Dismiss still pending. Imposing a stay at this juncture will preserve the status quo without prejudice to either party and without disrupting any ongoing discovery or trial preparation efforts. No depositions have been taken, no interrogatories have been propounded, and no document production has occurred.

To be sure, Defendants have already undertaken significant document preservation and collection efforts in anticipation of discovery. Northgate's e-discovery vendor, Candela discovery Solutions Inc., has collected and processed approximately 1.2 million documents from twenty-three identified custodians, including both NNA and NTP personnel. These efforts commenced pursuant to the litigation hold implemented on September 21, 2022, two days after the Complaint was filed. The litigation hold covers all relevant custodians and all categories of documents identified in the Complaint, including communications regarding the WAP, interconnection and colocation requests, capacity data for the fourteen facilities, and internal business strategy documents. Defendants will maintain the litigation hold in full force during the pendency of any stay, ensuring that no documents are lost or destroyed and that Ridgepoint's ability to conduct discovery when and if the stay is lifted will not be compromised in any respect.

C. Ridgepoint Will Not Be Prejudiced by a Stay

Ridgepoint cannot credibly claim that it will be prejudiced by a stay of this judicial proceeding. Most fundamentally, it was Ridgepoint itself that initiated the FCC proceeding on February 7, 2023, thereby acknowledging the FCC's jurisdiction and competence over the very interconnection dispute that forms the basis of this action. By filing its formal complaint with the FCC, Ridgepoint made a deliberate strategic decision to invoke the regulatory process and to seek the FCC's expert determination of the interconnection questions at issue. Having voluntarily chosen to pursue a parallel regulatory remedy before the very agency with specialized expertise over interconnection matters, Ridgepoint cannot now be heard to argue that deferring to that agency's determination causes it undue hardship.

Ridgepoint also continues to maintain physical access to Northgate's network infrastructure during the pendency of the FCC proceeding. As described above, Ridgepoint currently occupies three existing colocation spaces at facilities in northern Virginia under the month-to-month holdover arrangement at $14,400 per month per facility. This holdover arrangement ensures that Ridgepoint's current business operations are not disrupted and that Ridgepoint retains the network access necessary to serve its existing customer base. A stay of this judicial proceeding does not alter or affect that holdover arrangement in any way.

Furthermore, Ridgepoint's damages claim is purely monetary. Ridgepoint claims $127 million in lost profits over a five-year projected period (2022–2027), which it seeks to treble to $381 million under Section 4 of the Clayton Act. This damages claim is not subject to dissipation during the stay. Northgate is a publicly traded company with a market capitalization of approximately $11.3 billion and consolidated revenue of approximately $5.96 billion. There is no risk that Northgate will become unable to satisfy any judgment that might ultimately be entered against it. Ridgepoint's lost-profits theory—which Defendants vigorously dispute on the merits—can be fully and fairly addressed upon reactivation of this case after the FCC proceeding concludes.

To the extent Ridgepoint or the Court has any concern about the potential for undue delay, those concerns can be adequately addressed through the imposition of periodic reporting requirements. Defendants propose that the parties be required to file joint status reports every ninety days, advising the Court of the progress of the FCC proceeding, any significant developments, and the expected timeline for resolution. This mechanism will keep the Court informed, ensure that the stay does not extend beyond the time reasonably necessary for the FCC to act, and provide either party with an opportunity to seek modification of the stay if circumstances warrant.

D. The Balance of Hardships Favors a Stay

The balance of hardships weighs decisively in favor of a stay. A stay imposes minimal burden on Ridgepoint, which has alternative regulatory recourse in the very FCC proceeding it commenced and which continues to maintain physical access to Northgate's network at three facilities. Any monetary damages to which Ridgepoint may ultimately be entitled—a proposition Defendants contest—will remain fully recoverable after the stay is lifted.

In contrast, requiring Northgate to litigate the same interconnection issues in two fora simultaneously would impose significant and unnecessary costs and create an unjustifiable risk of inconsistent rulings. Northgate would be required to respond to discovery, prepare expert reports, and litigate motions in this Court on the very same factual and regulatory questions that the FCC is simultaneously examining. The burden of parallel proceedings is not merely financial—although those costs are substantial—but also includes the diversion of key management and technical personnel from their operational responsibilities to participate in duplicative litigation.

To be clear, Defendants do not contend that this Court should defer to the FCC merely because Northgate wishes to avoid the burden of litigation. Northgate's market capitalization is approximately $11.3 billion, and it has substantial resources to defend itself in any forum. But the principle of efficient allocation of judicial and party resources—a principle that benefits all litigants and the administration of justice as a whole—supports a stay here. The primary jurisdiction doctrine exists precisely for situations like this one: where an agency with specialized expertise is already poised to resolve the threshold regulatory questions that underlie a judicial action, and where waiting for that agency's determination will promote efficiency, consistency, and sound decision-making.

A stay also preserves this Court's ability to adjudicate the antitrust claims after the FCC provides its expert determination on the threshold regulatory issues. Defendants do not seek to avoid this Court's jurisdiction. They seek only to ensure that the Court has the benefit of the FCC's analysis before proceeding—a request that serves the interest of all parties and the Court itself.

E. The Pending Motion to Dismiss Should Be Denied Without Prejudice

Defendants' Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6), filed on November 14, 2022 and fully briefed as of January 30, 2023, raises important legal questions about the sufficiency of Ridgepoint's refusal-to-deal claim. The motion argues that the Complaint fails to state a cognizable claim under the Aspen Skiing / Trinko framework because, among other things, Ridgepoint does not allege a prior voluntary and profitable course of dealing that Northgate terminated, and because the alleged relevant market—"last-mile enterprise fiber-optic transport services" in the Philadelphia–Baltimore–Washington, D.C. corridor—is implausibly narrow and fails to account for readily available competitive alternatives.

These are important legal questions that Defendants believe warrant resolution in their favor. However, in the interest of judicial economy and the orderly resolution of this matter, Defendants respectfully request that the Court deny the Motion to Dismiss without prejudice to renewal after the stay is lifted. The FCC's resolution of the interconnection issues may substantially narrow or reframe the legal questions presented by the Motion to Dismiss. For example, if the FCC determines that Northgate had no obligation to grant Ridgepoint's colocation requests under the Communications Act, that finding would bolster Defendants' argument that there is no cognizable refusal-to-deal claim under antitrust law. Conversely, a different finding might alter the analytical framework in ways that would benefit from a fresh assessment.

Alternatively, if the Court is inclined to rule on the Motion to Dismiss before granting the stay, Defendants respectfully request that the Court do so. Defendants believe the Motion to Dismiss has substantial merit and are prepared to accept a ruling on that motion at any time. However, in the interest of efficiency, Defendants submit that the better course is to stay all proceedings, including the resolution of the Motion to Dismiss, pending the FCC's determination.

V. PROPOSED STAY TERMS

Defendants respectfully propose that the Court enter a stay on the following terms:

1. Scope of Stay. All proceedings in Case No. 1:22-cv-01487-CMW shall be stayed pending the resolution of FCC Docket No. WC-23-0042, including any appeal of the Administrative Law Judge's initial decision to the full Commission.

2. Periodic Status Reports. The parties shall file joint status reports every ninety (90) days from the date of the stay order, advising the Court of the progress of the FCC proceeding, any significant developments, and the parties' estimate of the time remaining until a final order is issued.

3. Motion to Lift Stay. Either party may move to lift the stay upon the issuance of a final order by the FCC (including the resolution of any intra-agency appeal to the full Commission) or upon a showing of good cause that warrants reactivation of the proceedings.

4. Preservation Obligations. All existing preservation obligations, including the litigation hold implemented on September 21, 2022, shall remain in full force and effect during the pendency of the stay. Neither party shall be relieved of any document-preservation obligation by reason of the stay.

5. Pending Motion to Dismiss. The Motion to Dismiss (Dkt. No. 22) shall be denied without prejudice to Defendants' right to refile or renew the motion after the stay is lifted.

A proposed order incorporating these terms is filed concurrently with this Motion.

VI. CONCLUSION

For the foregoing reasons, and as more fully set forth in the accompanying Memorandum of Law in Support of Defendants' Motion to Stay Proceedings Pending Resolution of Parallel FCC Proceeding and the Declaration of Patrick Salazar, Defendants Northgate Networks America Inc. and Northgate Telecommunications PLC respectfully request that this Court grant this Motion and enter the Proposed Order staying all proceedings in this action pending the resolution of FCC Docket No. WC-23-0042.

A proposed order is filed herewith.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Elaine Forsythe (Va. Bar No. 78234) Howard Bellamy (admitted pro hac vice) Aaron Liu (Va. Bar No. 91547) Monica Reyes (Va. Bar No. 86319)

1200 K Street NW, Suite 900 Washington, D.C. 20005 Telephone: (202) 555-7400 Facsimile: (202) 555-7401

Email: eforsythe@calderwoodharkness.com

Counsel for Defendants Northgate Networks America Inc. and Northgate Telecommunications PLC

Dated: March 6, 2023

CERTIFICATE OF SERVICE

I hereby certify that on this 6th day of March, 2023, the foregoing Defendants' Motion to Stay Proceedings Pending Resolution of Parallel FCC Proceeding, together with the Memorandum of Law in Support of Defendants' Motion to Stay Proceedings Pending Resolution of Parallel FCC Proceeding, the Declaration of Patrick Salazar, and the Proposed Order Granting Stay of Proceedings, were filed electronically via the Court's CM/ECF system, which will automatically send electronic notification of such filing to all counsel of record in this matter, including:

Victoria Hargrove, Esq. Daniel Stoyanov, Esq. HARGROVE, WINSLOW & BURKE LLP 900 17th Street NW, Suite 600 Washington, D.C. 20006 Telephone: (202) 555-3200

Email: vhargrove@hwblaw.com

Email: dstoyanov@hwblaw.com

Counsel for Plaintiff Ridgepoint Communications Inc.

________________________________________

Elaine Forsythe (Va. Bar No. 78234) CALDERWOOD & HARKNESS LLP

RIDGEPOINT COMMUNICATIONS INC.,

Plaintiff,

NORTHGATE NETWORKS AMERICA INC. and NORTHGATE TELECOMMUNICATIONS PLC,

Defendants.

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Alexandria Division
DEFENDANTS' MOTION TO STAY PROCEEDINGS PENDING RESOLUTION OF PARALLEL FCC PROCEEDING
Filed: March 6, 2023
I. INTRODUCTION
Defendants Northgate Networks America Inc. ("NNA") and Northgate Telecommunications PLC ("Northgate" or "NTP") (collectively, "Defendants") respectfully move this Court, pursuant to its inherent authority to manage its docket, for an order staying all proceedings in this action pending the resolution of the parallel proceeding before the Federal Communications Commission ("FCC") in In the Matter of Northgate Networks America Inc. — Complaint Regarding Interconnection Obligations under Section 251, FCC Docket No. WC-23-0042.
On February 7, 2023, Plaintiff Ridgepoint Communications Inc. ("Ridgepoint" or "Plaintiff") filed a formal complaint at the FCC alleging that Northgate violated interconnection obligations under Sections 251 and 252 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 251, 252. The interconnection practices challenged in that FCC complaint—specifically, Northgate's Wholesale Access Policy ("WAP"), adopted in January 2020, and its denial of interconnection and physical colocation requests at fourteen facilities in the Philadelphia–Baltimore–Washington, D.C. corridor—are the very same practices that form the predicate conduct for Ridgepoint's Section 2 Sherman Act claim in this action.
The FCC possesses specialized expertise in telecommunications interconnection regulation and is uniquely positioned to resolve the technical and regulatory questions at the heart of this dispute. Those questions include whether Northgate's WAP is commercially reasonable, whether the capacity constraints at the fourteen facilities justify denial of colocation requests, and whether Northgate's obligations under Sections 251 and 252 extend to the specific interconnection access that Ridgepoint demands. These are not garden-variety antitrust questions; they are deeply embedded in the architecture of the federal telecommunications regulatory scheme and call for the application of technical standards, industry norms, and regulatory policies with which the FCC has decades of experience and this Court, with all due respect, does not.
The well-established primary jurisdiction doctrine counsels that this Court should defer to the FCC's expert determination on these threshold regulatory matters before proceeding with the antitrust claims. A stay will promote judicial economy, conserve the resources of the parties and the Court, avoid the substantial risk of inconsistent determinations between a judicial and an administrative tribunal, and may substantially narrow or altogether eliminate the issues that remain for this Court to resolve.
Defendants further respectfully request that the pending Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6), filed on November 14, 2022 and now fully briefed, be denied without prejudice to renewal after the stay is lifted. The FCC's resolution of the interconnection questions may materially reframe the legal issues raised in that motion, and denying the motion without prejudice would preserve the orderly administration of this case while the FCC proceeding runs its course.
In support of this Motion, Defendants rely upon the accompanying Memorandum of Law in Support of Defendants' Motion to Stay Proceedings Pending Resolution of Parallel FCC Proceeding, the Declaration of Patrick Salazar, Chief Regulatory Officer of Northgate Telecommunications PLC, and the Proposed Order Granting Stay, each filed concurrently herewith.
II. BACKGROUND
A. The Parties
Northgate Telecommunications PLC is a public limited company organized under the laws of England and Wales (Company No. 07824561), with American Depositary Receipts listed on the Nasdaq Global Select Market (ticker: NTP). Northgate is headquartered at 14 Broadwall Lane, London SE1 9PQ, United Kingdom. Northgate's Chief Executive Officer is Sir Malcolm Prentice, KBE, and its Group General Counsel is James Whitford. Northgate is one of the world's largest independent telecommunications infrastructure providers, operating in twenty-seven countries across Europe, the Americas, and the Asia-Pacific region.
Northgate Networks America Inc. is a corporation organized under the laws of the State of Delaware and a wholly owned subsidiary of Northgate, serving as Northgate's primary U.S. operating entity. NNA is headquartered at 8200 Dulles Corner Boulevard, Suite 1100, Tysons Corner, Virginia 22182. NNA's U.S. President is Diane Okoro, and its U.S. Deputy General Counsel is Catherine Ng. NNA owns and operates approximately 42,000 route-miles of fiber-optic backbone and metro-ring infrastructure across eighteen U.S. states, primarily concentrated along the eastern seaboard and extending into select midwestern and southern markets. In addition to its physical network infrastructure, NNA offers enterprise cloud-connectivity solutions and SaaS-based network management platforms marketed under the NorthgateOS™ brand. Northgate's consolidated revenue for fiscal year 2022 was approximately £4.87 billion (approximately $5.96 billion at prevailing exchange rates), of which NNA's U.S. operations contributed approximately $2.41 billion.
Ridgepoint Communications Inc. is a corporation organized under the laws of the State of Delaware and headquartered at 3500 Market Street, Suite 700, Philadelphia, Pennsylvania 19104. Ridgepoint is a competitive local exchange carrier ("CLEC") and enterprise broadband provider operating approximately 6,200 route-miles of owned and leased fiber-optic infrastructure across Pennsylvania, New Jersey, Delaware, Maryland, and Virginia. Ridgepoint's revenue for fiscal year 2022 was approximately $387 million. Ridgepoint is a privately held company, with approximately 78% of its equity owned by Caravel Capital Partners LP since a November 2018 leveraged buyout valued at approximately $510 million. The Trent family, headed by Ridgepoint's founder and Chief Executive Officer, Gregory Trent, retains the remaining approximately 22% equity stake. Ridgepoint is represented in this matter by Hargrove, Winslow & Burke LLP, with offices in Washington, D.C. and Philadelphia, and led by partner Victoria Hargrove.
B. The District Court Action
On September 19, 2022, Ridgepoint filed the Complaint initiating this action, asserting a single count under Section 2 of the Sherman Act, 15 U.S.C. § 2. The Complaint alleges that Northgate's refusal to provide Ridgepoint with interconnection and physical colocation access at fourteen specific central-office and meet-me-room facilities in the Mid-Atlantic region constitutes unlawful monopolization of an alleged "last-mile enterprise fiber-optic transport services market" in the Philadelphia–Baltimore–Washington, D.C. corridor.
The fourteen facilities at issue are located across five jurisdictions—Pennsylvania, New Jersey, Maryland, Virginia, and the District of Columbia—and are specifically identified in the Complaint as follows:
1. 401 N. Broad Street, Philadelphia, PA
2. 1500 Spring Garden Street, Philadelphia, PA
3. 100 Delancey Place, Cherry Hill, NJ
4. 220 S. Warren Street, Trenton, NJ
5. 700 E. Pratt Street, Baltimore, MD
6. 1 W. Fayette Street, Baltimore, MD
7. 33 S. Gay Street, Baltimore, MD
8. 9221 Corporate Boulevard, Rockville, MD
9. 1200 New Hampshire Avenue NW, Washington, D.C.
10. 600 New Jersey Avenue NW, Washington, D.C.
11. 44755 Prentice Drive, Ashburn, VA
12. 21571 Beaumeade Circle, Ashburn, VA
13. 1807 Michael Faraday Court, Reston, VA
14. 8100 Boone Boulevard, Tysons Corner, VA
According to the Complaint, between March 2021 and August 2022, Ridgepoint submitted interconnection and colocation requests for each of these fourteen facilities, all of which Northgate declined. The Complaint characterizes Northgate's refusals as anticompetitive conduct designed to exclude Ridgepoint and other competitors from the alleged relevant market.
In fact, as Defendants explained in their Motion to Dismiss and as Defendants' Chief Regulatory Officer, Patrick Salazar, attests in his concurrently filed Declaration, Northgate declined the requests on the basis of three commercially reasonable grounds: (a) capacity constraints at the specific facilities, each of which was at or above 85% capacity utilization at the time of the relevant request; (b) the absence of any prior course of dealing with Ridgepoint at those particular locations; and (c) Northgate's Wholesale Access Policy, adopted in January 2020 after an extensive internal review and industry benchmarking process, which restricts third-party physical colocation to existing wholesale partners with minimum annual revenue commitments of $5 million. Ridgepoint's aggregate annual spend with Northgate was approximately $1.8 million in fiscal year 2021, well below the WAP threshold.
The parties do have a history of limited commercial dealings. Ridgepoint was previously granted physical colocation at three facilities in northern Virginia under a Master Interconnection Agreement ("MIA") dated June 15, 2015. The MIA was for a five-year term and expired by its own terms on June 14, 2020. Northgate declined to renew the MIA under the revised WAP requirements. Ridgepoint presently continues to occupy the three existing colocation spaces under a month-to-month holdover arrangement at 120% of the prior contractual rate—specifically, $14,400 per month per facility, compared to the prior MIA rate of $12,000 per month per facility. Ridgepoint thus continues to maintain physical access to Northgate's network infrastructure at these three locations.
Ridgepoint's Complaint claims $127 million in lost profits over a five-year projected period (2022–2027), which Ridgepoint seeks to treble to $381 million under Section 4 of the Clayton Act, 15 U.S.C. § 15. Ridgepoint also seeks permanent injunctive relief compelling Northgate to grant interconnection and colocation at the fourteen facilities.
C. Procedural History of This Action
The procedural history of this case to date is as follows:
• September 19, 2022: Ridgepoint filed the Complaint initiating this action.
• October 3, 2022: Calderwood & Harkness LLP entered an appearance on behalf of both Defendants, NNA and NTP.
• November 14, 2022: Defendants filed a Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that the Complaint fails to state a cognizable refusal-to-deal claim under the framework established by Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), and Harborview Holdings Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004), and further arguing that the alleged relevant market definition—"last-mile enterprise fiber-optic transport services" in the Philadelphia–Baltimore–Washington, D.C. corridor—is implausibly narrow and fails to account for competitive alternatives including coaxial broadband, fixed wireless, and satellite connectivity.
• January 9, 2023: Ridgepoint filed its Opposition to the Motion to Dismiss.
• January 30, 2023: Defendants filed their Reply in Support of the Motion to Dismiss.
• February 22, 2023: The Honorable Claudia M. Wentworth held oral argument on the Motion to Dismiss. At the conclusion of oral argument, the Court took the motion under advisement and has not yet ruled.
The Motion to Dismiss remains pending. Discovery has not commenced and no scheduling order has been entered.
D. The Parallel FCC Proceeding
On February 7, 2023—while Defendants' Motion to Dismiss remained under advisement by this Court—Ridgepoint filed a formal complaint at the FCC, captioned In the Matter of Northgate Networks America Inc. — Complaint Regarding Interconnection Obligations under Section 251, and assigned Docket No. WC-23-0042.
The FCC complaint alleges that Northgate violated its obligations under Sections 251 and 252 of the Communications Act, 47 U.S.C. §§ 251, 252, by refusing to provide interconnection and physical colocation access at the same fourteen facilities that are at issue in this district court action. The FCC complaint specifically challenges the lawfulness of Northgate's WAP and asserts that the capacity-based denials do not excuse Northgate's failure to comply with its statutory interconnection obligations. The FCC complaint thus squarely raises the question of whether Northgate's WAP and capacity-based denials are consistent with, or in violation of, the telecommunications regulatory framework governing interconnection among carriers.
The FCC proceeding has been assigned to Administrative Law Judge Robert Fenwick of the FCC's Office of Administrative Law Judges. ALJ Fenwick has substantial experience adjudicating interconnection disputes under the Communications Act and is expected to establish a procedural schedule in the coming weeks.
On February 10, 2023, Defendants filed a letter with this Court advising of the parallel FCC proceeding and informing the Court of Defendants' intention to seek a stay. This Motion follows.
The Declaration of Patrick Salazar, Northgate's Chief Regulatory Officer, filed concurrently herewith, attests to the nature, scope, and regulatory significance of the FCC proceeding. Mr. Salazar, who has more than twenty-two years of experience in telecommunications regulation and has participated in dozens of FCC proceedings, provides his informed assessment of the overlap between the FCC proceeding and this action and the FCC's institutional competence to resolve the interconnection questions at issue.
III. LEGAL STANDARD
A federal district court possesses broad inherent authority to manage its docket and to stay proceedings before it in the interest of justice and the efficient administration of the Court's business. Landis v. North American Co., 299 U.S. 248, 254–55 (1936) ("the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants"). The exercise of that discretion calls for the balancing of competing interests, including the interests of the parties, the conservation of judicial resources, and the desirability of avoiding duplicative or inconsistent adjudications. Id. at 254–55; see also Clinton v. Jones, 520 U.S. 681, 706 (1997) (recognizing the "broad discretion" of district courts "to stay proceedings as an incident to its power to control its own docket").
The primary jurisdiction doctrine provides an additional, well-established basis for a stay. Under this doctrine, a court may stay—or dismiss without prejudice—an action where the issues raised require resolution of questions that have been placed within the special competence of an administrative agency. United States v. Western Pacific Railroad Co., 352 U.S. 59, 63–64 (1956). The Supreme Court has explained that the doctrine "is a prudential doctrine under which courts may, under appropriate circumstances, determine that the initial decisionmaking responsibility should be performed by the relevant agency rather than the courts." Reiter v. Cooper, 507 U.S. 258, 268 (1993).
The primary jurisdiction doctrine applies when: (1) the claim requires the resolution of issues that have been placed within the special competence of an administrative body; (2) there is a need for uniform administrative treatment of the questions presented; and (3) the agency's expertise would be beneficial in resolving the issues. Western Pacific Railroad, 352 U.S. at 64; see also Access Telecom, Inc. v. MCI Telecommunications Corp., 197 F.3d 694, 703 (5th Cir. 1999) (setting forth the primary jurisdiction factors in the telecommunications context). The doctrine recognizes that courts, even when they have subject-matter jurisdiction, should in certain circumstances refrain from exercising that jurisdiction to allow an administrative agency with specialized knowledge to make an initial determination.
Importantly, primary jurisdiction is not a doctrine of subject-matter jurisdiction. It does not deprive the court of jurisdiction, nor does it require dismissal. Rather, it is a prudential doctrine governing the allocation of decision-making responsibility between courts and agencies, and the standard remedy is a stay of court proceedings pending the agency's determination. Reiter, 507 U.S. at 268–69; see also Harborline Insurance v. Geller, No. 1:06-cv-867, 2007 WL 1346736, at *5 (E.D. Va. May 4, 2007) (explaining that primary jurisdiction "merely requires the court to enable a 'referral' to the agency, staying further proceedings so as to give the parties reasonable opportunity to seek an administrative ruling").
Courts have consistently applied the primary jurisdiction doctrine to stay or defer antitrust claims that turn on the interpretation of telecommunications regulatory obligations under the Communications Act. In Trinko, the Supreme Court noted the "significance" of the "regulatory structure" in evaluating antitrust claims premised on alleged failures to deal in the telecommunications context, observing that the regulatory scheme provided "a saving clause for pre-existing antitrust claims" but also cautioned that antitrust courts should be wary of imposing duties to deal beyond those established by the regulatory framework. 540 U.S. at 412–15. Courts in this Circuit and elsewhere have recognized that where an antitrust claim is predicated on alleged violations of regulatory obligations under the Communications Act, the FCC's expert determination of the regulatory question is an appropriate—and often necessary—predicate to the antitrust analysis. See, e.g., Cavalier Telephone, LLC v. Ashgrove & Co. Virginia, Inc., 330 F.3d 176, 189 (4th Cir. 2003) (recognizing the FCC's authority to interpret and enforce interconnection obligations); MCI Communications Corp. v. Camberwell Enterprises, 708 F.2d 1081, 1103 (7th Cir. 1983) (applying primary jurisdiction where antitrust claims required resolution of questions "peculiarly within the expertise of the FCC").
The Fourth Circuit has endorsed the application of the primary jurisdiction doctrine where an agency's "specialized knowledge" and "uniform administrative treatment" of an issue would aid the court's resolution of the dispute, even where the court has undoubted subject-matter jurisdiction. See Cavalier Telephone, 330 F.3d at 189; Pitt County v. Drayton Software, L.P., 553 F.3d 308, 314 (4th Cir. 2009) (discussing primary jurisdiction principles and the role of agency expertise).
IV. ARGUMENT
A. The FCC Has Specialized Expertise Over the Interconnection Questions at the Heart of This Action
Ridgepoint's Section 2 claim is predicated entirely upon Northgate's refusal to grant interconnection and physical colocation access at fourteen specific facilities. The Complaint's theory of anticompetitive harm depends on the premise that Northgate had a duty—whether arising from antitrust law, regulatory law, or both—to grant Ridgepoint's requests, and that the refusal to do so constitutes exclusionary conduct in violation of Section 2. That premise, in turn, necessarily implicates the threshold question of whether Northgate was obligated to grant such access under the Communications Act. That question falls squarely within the FCC's regulatory domain.
Sections 251 and 252 of the Communications Act, 47 U.S.C. §§ 251, 252, establish a comprehensive framework for interconnection obligations among telecommunications carriers. Section 251(a) imposes on all telecommunications carriers a general duty to interconnect. Section 251(c) imposes additional, more specific obligations on incumbent local exchange carriers ("ILECs"), including duties to negotiate interconnection agreements and to provide access to network elements at just, reasonable, and nondiscriminatory rates. Section 252 prescribes the procedures for negotiating and, if necessary, arbitrating interconnection agreements, with state commissions serving as arbitrators under FCC oversight.
The FCC has promulgated extensive rules and orders interpreting these provisions over more than two decades, beginning with the landmark Local Competition Order, Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, 11 FCC Rcd. 15499 (1996), and continuing through numerous subsequent proceedings. The FCC's Wireline Competition Bureau has developed deep specialized expertise in evaluating interconnection disputes, including questions regarding the scope of physical colocation obligations, the commercial reasonableness of access policies, capacity-related justifications for denials of colocation, and the evolving scope of carriers' obligations as the telecommunications marketplace continues to change.
The core factual and regulatory questions presented in FCC Docket No. WC-23-0042 overlap substantially—indeed, almost entirely—with the predicate conduct underlying the antitrust claim before this Court. The FCC proceeding will require ALJ Fenwick to determine, among other things:
• Whether Northgate's Wholesale Access Policy, with its $5 million minimum annual revenue commitment threshold for physical colocation, is commercially reasonable and consistent with Northgate's obligations under Sections 251 and 252;
• Whether the capacity constraints at the fourteen facilities (each at or above 85% utilization) provide a lawful basis for denial of Ridgepoint's colocation requests under the applicable regulatory framework;
• Whether Northgate's classification of itself as an entity subject to particular interconnection obligations under Section 251, given its status as a facilities-based provider with substantial market presence, is correct;
• Whether Northgate's obligations under Sections 251 and 252 extend to the specific type of interconnection and colocation access that Ridgepoint seeks at the fourteen facilities; and
• What, if any, remedies are appropriate under the Communications Act if a violation is found.
These are precisely the types of questions that Congress entrusted to the FCC when it enacted the interconnection framework of the Communications Act. They require specialized knowledge of telecommunications engineering, network capacity planning, industry practices regarding colocation and interconnection, the economics of wholesale access, and the interplay between the various regulatory obligations imposed on different categories of carriers. These are not questions that can be resolved by applying general antitrust principles; they demand the application of the FCC's technical and regulatory expertise.
The FCC's resolution of these questions will materially inform—and may be dispositive of—the antitrust issues before this Court. The relevance of the FCC's determination to the antitrust analysis is straightforward. If the FCC determines that Northgate's refusal to deal was consistent with its regulatory obligations and commercially reasonable under the standards applicable to interconnection disputes, that finding would significantly undermine, if not entirely eliminate, Ridgepoint's theory of anticompetitive conduct. A refusal to deal that is consistent with a firm's regulatory obligations and commercially justified is, by definition, a legitimate business justification that precludes liability under Section 2. See Trinko, 540 U.S. at 410–11 (observing that the existence of a regulatory obligation to deal, standing alone, does not create an antitrust duty, and that the absence of such an obligation further undercuts an antitrust claim); Novell, Inc. v. Kestrel Partners LLC, 731 F.3d 1064, 1075 (10th Cir. 2013) (legitimate business justifications for a refusal to deal defeat a Section 2 claim).
Conversely, if the FCC finds that Northgate violated its obligations under the Communications Act, that determination would frame the scope of the antitrust inquiry but would not by itself resolve the Section 2 claim, which requires additional proof of monopoly power in a properly defined relevant market, anticompetitive effects, and damages. Even in that scenario, however, the FCC's factual findings and regulatory analysis would substantially assist this Court in evaluating the antitrust claims and would narrow the issues requiring adjudication.
Either way, the FCC's determination will prove invaluable to this Court's analysis and will promote a more informed and efficient resolution of this matter.
B. A Stay Will Promote Judicial Economy and Avoid Inconsistent Determinations
If this action and the FCC proceeding are permitted to proceed simultaneously, there is a substantial risk of inconsistent outcomes. This Court could reach one conclusion regarding the lawfulness and commercial reasonableness of Northgate's interconnection practices while the FCC—the agency with primary responsibility for administering the interconnection provisions of the Communications Act—reaches a different conclusion. Such inconsistency would not merely be an academic concern; it would create practical difficulties for the parties, undermine the coherence of the regulatory framework, and potentially result in conflicting obligations imposed on Northgate by different arms of the federal government.
The FCC proceeding is already underway. ALJ Fenwick has been assigned, and the matter is progressing through the administrative process. Deferring to the FCC allows the agency to develop a comprehensive factual record, apply its specialized expertise, and issue a regulatory determination that this Court can then consider in evaluating the antitrust claims. This sequential approach is far more efficient than parallel proceedings that may require this Court to grapple with complex telecommunications regulatory issues without the benefit of the FCC's analysis.
A stay will also avoid duplicative discovery and litigation costs for both parties. Discovery in this action has not yet commenced, and no scheduling order has been entered. The case is at an early procedural stage, with the Motion to Dismiss still pending. Imposing a stay at this juncture will preserve the status quo without prejudice to either party and without disrupting any ongoing discovery or trial preparation efforts. No depositions have been taken, no interrogatories have been propounded, and no document production has occurred.
To be sure, Defendants have already undertaken significant document preservation and collection efforts in anticipation of discovery. Northgate's e-discovery vendor, Candela discovery Solutions Inc., has collected and processed approximately 1.2 million documents from twenty-three identified custodians, including both NNA and NTP personnel. These efforts commenced pursuant to the litigation hold implemented on September 21, 2022, two days after the Complaint was filed. The litigation hold covers all relevant custodians and all categories of documents identified in the Complaint, including communications regarding the WAP, interconnection and colocation requests, capacity data for the fourteen facilities, and internal business strategy documents. Defendants will maintain the litigation hold in full force during the pendency of any stay, ensuring that no documents are lost or destroyed and that Ridgepoint's ability to conduct discovery when and if the stay is lifted will not be compromised in any respect.
C. Ridgepoint Will Not Be Prejudiced by a Stay
Ridgepoint cannot credibly claim that it will be prejudiced by a stay of this judicial proceeding. Most fundamentally, it was Ridgepoint itself that initiated the FCC proceeding on February 7, 2023, thereby acknowledging the FCC's jurisdiction and competence over the very interconnection dispute that forms the basis of this action. By filing its formal complaint with the FCC, Ridgepoint made a deliberate strategic decision to invoke the regulatory process and to seek the FCC's expert determination of the interconnection questions at issue. Having voluntarily chosen to pursue a parallel regulatory remedy before the very agency with specialized expertise over interconnection matters, Ridgepoint cannot now be heard to argue that deferring to that agency's determination causes it undue hardship.
Ridgepoint also continues to maintain physical access to Northgate's network infrastructure during the pendency of the FCC proceeding. As described above, Ridgepoint currently occupies three existing colocation spaces at facilities in northern Virginia under the month-to-month holdover arrangement at $14,400 per month per facility. This holdover arrangement ensures that Ridgepoint's current business operations are not disrupted and that Ridgepoint retains the network access necessary to serve its existing customer base. A stay of this judicial proceeding does not alter or affect that holdover arrangement in any way.
Furthermore, Ridgepoint's damages claim is purely monetary. Ridgepoint claims $127 million in lost profits over a five-year projected period (2022–2027), which it seeks to treble to $381 million under Section 4 of the Clayton Act. This damages claim is not subject to dissipation during the stay. Northgate is a publicly traded company with a market capitalization of approximately $11.3 billion and consolidated revenue of approximately $5.96 billion. There is no risk that Northgate will become unable to satisfy any judgment that might ultimately be entered against it. Ridgepoint's lost-profits theory—which Defendants vigorously dispute on the merits—can be fully and fairly addressed upon reactivation of this case after the FCC proceeding concludes.
To the extent Ridgepoint or the Court has any concern about the potential for undue delay, those concerns can be adequately addressed through the imposition of periodic reporting requirements. Defendants propose that the parties be required to file joint status reports every ninety days, advising the Court of the progress of the FCC proceeding, any significant developments, and the expected timeline for resolution. This mechanism will keep the Court informed, ensure that the stay does not extend beyond the time reasonably necessary for the FCC to act, and provide either party with an opportunity to seek modification of the stay if circumstances warrant.
D. The Balance of Hardships Favors a Stay
The balance of hardships weighs decisively in favor of a stay. A stay imposes minimal burden on Ridgepoint, which has alternative regulatory recourse in the very FCC proceeding it commenced and which continues to maintain physical access to Northgate's network at three facilities. Any monetary damages to which Ridgepoint may ultimately be entitled—a proposition Defendants contest—will remain fully recoverable after the stay is lifted.
In contrast, requiring Northgate to litigate the same interconnection issues in two fora simultaneously would impose significant and unnecessary costs and create an unjustifiable risk of inconsistent rulings. Northgate would be required to respond to discovery, prepare expert reports, and litigate motions in this Court on the very same factual and regulatory questions that the FCC is simultaneously examining. The burden of parallel proceedings is not merely financial—although those costs are substantial—but also includes the diversion of key management and technical personnel from their operational responsibilities to participate in duplicative litigation.
To be clear, Defendants do not contend that this Court should defer to the FCC merely because Northgate wishes to avoid the burden of litigation. Northgate's market capitalization is approximately $11.3 billion, and it has substantial resources to defend itself in any forum. But the principle of efficient allocation of judicial and party resources—a principle that benefits all litigants and the administration of justice as a whole—supports a stay here. The primary jurisdiction doctrine exists precisely for situations like this one: where an agency with specialized expertise is already poised to resolve the threshold regulatory questions that underlie a judicial action, and where waiting for that agency's determination will promote efficiency, consistency, and sound decision-making.
A stay also preserves this Court's ability to adjudicate the antitrust claims after the FCC provides its expert determination on the threshold regulatory issues. Defendants do not seek to avoid this Court's jurisdiction. They seek only to ensure that the Court has the benefit of the FCC's analysis before proceeding—a request that serves the interest of all parties and the Court itself.
E. The Pending Motion to Dismiss Should Be Denied Without Prejudice
Defendants' Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6), filed on November 14, 2022 and fully briefed as of January 30, 2023, raises important legal questions about the sufficiency of Ridgepoint's refusal-to-deal claim. The motion argues that the Complaint fails to state a cognizable claim under the Aspen Skiing / Trinko framework because, among other things, Ridgepoint does not allege a prior voluntary and profitable course of dealing that Northgate terminated, and because the alleged relevant market—"last-mile enterprise fiber-optic transport services" in the Philadelphia–Baltimore–Washington, D.C. corridor—is implausibly narrow and fails to account for readily available competitive alternatives.
These are important legal questions that Defendants believe warrant resolution in their favor. However, in the interest of judicial economy and the orderly resolution of this matter, Defendants respectfully request that the Court deny the Motion to Dismiss without prejudice to renewal after the stay is lifted. The FCC's resolution of the interconnection issues may substantially narrow or reframe the legal questions presented by the Motion to Dismiss. For example, if the FCC determines that Northgate had no obligation to grant Ridgepoint's colocation requests under the Communications Act, that finding would bolster Defendants' argument that there is no cognizable refusal-to-deal claim under antitrust law. Conversely, a different finding might alter the analytical framework in ways that would benefit from a fresh assessment.
Alternatively, if the Court is inclined to rule on the Motion to Dismiss before granting the stay, Defendants respectfully request that the Court do so. Defendants believe the Motion to Dismiss has substantial merit and are prepared to accept a ruling on that motion at any time. However, in the interest of efficiency, Defendants submit that the better course is to stay all proceedings, including the resolution of the Motion to Dismiss, pending the FCC's determination.
V. PROPOSED STAY TERMS
Defendants respectfully propose that the Court enter a stay on the following terms:
1. Scope of Stay. All proceedings in Case No. 1:22-cv-01487-CMW shall be stayed pending the resolution of FCC Docket No. WC-23-0042, including any appeal of the Administrative Law Judge's initial decision to the full Commission.
2. Periodic Status Reports. The parties shall file joint status reports every ninety (90) days from the date of the stay order, advising the Court of the progress of the FCC proceeding, any significant developments, and the parties' estimate of the time remaining until a final order is issued.
3. Motion to Lift Stay. Either party may move to lift the stay upon the issuance of a final order by the FCC (including the resolution of any intra-agency appeal to the full Commission) or upon a showing of good cause that warrants reactivation of the proceedings.
4. Preservation Obligations. All existing preservation obligations, including the litigation hold implemented on September 21, 2022, shall remain in full force and effect during the pendency of the stay. Neither party shall be relieved of any document-preservation obligation by reason of the stay.
5. Pending Motion to Dismiss. The Motion to Dismiss (Dkt. No. 22) shall be denied without prejudice to Defendants' right to refile or renew the motion after the stay is lifted.
A proposed order incorporating these terms is filed concurrently with this Motion.
VI. CONCLUSION
For the foregoing reasons, and as more fully set forth in the accompanying Memorandum of Law in Support of Defendants' Motion to Stay Proceedings Pending Resolution of Parallel FCC Proceeding and the Declaration of Patrick Salazar, Defendants Northgate Networks America Inc. and Northgate Telecommunications PLC respectfully request that this Court grant this Motion and enter the Proposed Order staying all proceedings in this action pending the resolution of FCC Docket No. WC-23-0042.
A proposed order is filed herewith.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Elaine Forsythe (Va. Bar No. 78234) Howard Bellamy (admitted pro hac vice) Aaron Liu (Va. Bar No. 91547) Monica Reyes (Va. Bar No. 86319)
1200 K Street NW, Suite 900 Washington, D.C. 20005 Telephone: (202) 555-7400 Facsimile: (202) 555-7401
Email: eforsythe@calderwoodharkness.com
Counsel for Defendants Northgate Networks America Inc. and Northgate Telecommunications PLC
Dated: March 6, 2023
CERTIFICATE OF SERVICE
I hereby certify that on this 6th day of March, 2023, the foregoing Defendants' Motion to Stay Proceedings Pending Resolution of Parallel FCC Proceeding, together with the Memorandum of Law in Support of Defendants' Motion to Stay Proceedings Pending Resolution of Parallel FCC Proceeding, the Declaration of Patrick Salazar, and the Proposed Order Granting Stay of Proceedings, were filed electronically via the Court's CM/ECF system, which will automatically send electronic notification of such filing to all counsel of record in this matter, including:
Victoria Hargrove, Esq. Daniel Stoyanov, Esq. HARGROVE, WINSLOW & BURKE LLP 900 17th Street NW, Suite 600 Washington, D.C. 20006 Telephone: (202) 555-3200
Email: vhargrove@hwblaw.com
Email: dstoyanov@hwblaw.com
Counsel for Plaintiff Ridgepoint Communications Inc.
________________________________________
Elaine Forsythe (Va. Bar No. 78234) CALDERWOOD & HARKNESS LLP
RIDGEPOINT COMMUNICATIONS INC.,
Plaintiff, | Civil Action No. 1:22-cv-01487-CMW
v.
NORTHGATE NETWORKS AMERICA INC. and NORTHGATE TELECOMMUNICATIONS PLC,
Defendants.