20050331Petition for Enforcement of Agreement.pdf

BEFORE THE IDAHO PUBLIC UTILITIES coM,Ji~~b~i;"f".
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IN RE:
PETITION OF MCLEODUSA
TELECOMMUNICATIONS SERVICES,
INC., FOR ENFORCEMENT OF
INTERCONNECTION AGREEMENT
WITH QWEST CORPORATION
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Docket No. TI T- 05 -D
PETITION OF MCLEODUSA TELECOMMUNICATIONS SERVICES, INC.,
FOR ENFORCEMENT OF INTERCONNECTION AGREEMENT
WITH QWEST CORPORATION
McLeodUSA Telecommunications Services, Inc. ("McLeodUSA"), through its
undersigned counsel, and pursuant to Idaho Code ~ 61-501 , petitions the Idaho Public Utilities
Commission ("Commission ) for enforcement of its interconnection agreement with Qwest
Corporation ("Qwest"
).
This Petition stems from a dispute between McLeodUSA and Qwest
over Qwest' s right under the interconnection agreement to demand security deposits from
McLeodUSA for services provided under the agreement, and to discontinue services to
McLeodUSA should McLeodUSA not comply with Qwest's demand. Qwest has recently
demanded that McLeodUSA pay more than $15.9 million to Qwest within 10 days
$971 870.45 in Idaho alone--or Qwest will "suspend order activity" and "disconnect services
provided to McLeod USA. Rather than follow the clear terms of the interconnection agreement
regarding dispute resolution, Qwest has made extortionate demands rather than adopt the
..
approach of established telecommunications carriers that respect their contractual obligations.
McLeodUSA seeks an order from this Commission that Qwest may not demand a security
deposit and that Qwest may not "suspend order activity" or "disconnect services" until all
procedures for dispute resolution in the interconnection agreement have been satisfied. Because
Qwest has threatened to "suspend order activity" and "disconnect services" on April 1 , 2005
McLeodUSA asks this Commission to provide McLeodUSA with its requested relief on an
expedited, emergency basis, and has filed a Motion for Emergency Relief concurrently with this
Petition.
JURISDICTION
Both McLeodUSA and Qwest are authorized to provide local exchange services
in the State of Idaho pursuant to certificates issued by this Commission.
Pursuant to Section 252 of the Telecommunications Act of 1996 (the "Act"
McLeodUSA opted in an Interconnection Agreement (the "Interconnection Agreement" or
Agreement") that was filed with the Commission on September 18, 2000, and approved by the
Commission on November 13 2000. A copy of the relevant portions of the Agreement are
attached as Exhibit A and incorporated herein.
State commissions have the authority to interpret and enforce agreements they
approve when post-approval disputes arise. Michigan Bell Tel. Co. v. Strand 305 F.3d 580, 583
th Cir.
2002); Michigan Bell Tel. Co. v. Climax Tel. Co.202 F.3d 862, 868 (6th Cir.
),
cert.
denied 531 U.S. 816 (2000).
Thus, the Commission has clear jurisdiction to interpret the terms of the
Interconnection Agreement as alleged herein.
In addition, the Commission has jurisdiction to consider this Petition pursuant to
Idaho Code ~ 61-501.
PARTIES
McLeodUSA is a competitive local exchange carrier certified to provide local
exchange service (and intrastate interexchange service) in Idaho. Correspondence regarding this
Petition should be sent to McLeodUSA at the following address:
William Courter
Assistant General Counsel
McLeodUSA Telecommunications Services, Inc.
6400 C Street, SW
Cedar Rapids, IA 52406
- and
Mark Trinchero '
DAVIS WRIGHT TREMAINE LLP
1300 SW Fifth Avenue, Suite 2300
Portland, OR 97201-5682
Qwest is an incumbent local exchange carrier certified to provide local exchange
service (and intrastate interexchange service) in Idaho.
STATEMENT OF FACTS
This dispute is about Qwest's attempt to demand a security deposit for services
and facilities it provides to McLeodUSA under the terms of the Interconnection Agreement, even
though the Interconnection Agreement does not allow Qwest to do so. This dispute is also about
Qwest's attempt to ignore the dispute resolution provisions of the Interconnection Agreement
and to take unilateral action to terminate service to McLeodUSA, to refuse to process orders for
service by McLeodUSA, to terminate the Interconnection Agreement with McLeodUSA, and to
effectively leave customers served by McLeodUSA stranded without access to the public
switched network and customers served by carriers other than McLeodUSA. Action by this
Commission is needed to compel Qwest to honor the terms of the Agreement it executed with
McLeodUSA and to continue to provide services and facilities to McLeodUSA.
Qwest's most recent conduct in violation of the Interconnection Agreement comes
on the heels of other incidents of unlawful conduct by Qwest in violation of separate contracts
with McLeodUSA and in violation of its own tariffs, which are currently the subject of litigation
before federal courts in Iowa and Colorado. The substance of those disputes is explained in
detail in the Opinion and Temporary Restraining Order granted by a federal judge on March 23
2005, attached as Exhibit B. Although information regarding those disputes is not necessary to
resolve this dispute, the background places Qwest's current conduct in context. McLeodUSA
views Qwest's most recent attempt to extort funds from McLeodUSA in the guise of demanding
a security deposit as an exercise of its monopoly power as the provider of essential services and
facilities to McLeodUSA to coerce settlement of the certain claims now pending in federal court
in Iowa and Colorado on terms unfavorable to McLeodUSA.
10.The issues pending in those cases are completely separate from the issues raised
in this Petition. Although Qwest tries to merge those issues with its rights under the
Interconnection Agreement, the Commission must act to stop the ploy. At all times
McLeodUSA has performed all of its obligations under the Interconnection Agreement, has paid
all invoices for services and facilities provided by Qwest under the Interconnection Agreement
and has otherwise complied in all respects with the terms and conditions of the Interconnection
Agreement.
11.On March 21 2005, McLeodUSA received fourteen (14) letters from Stephen G.
Hansen, Vice President, Carrier Relations, Worldwide Wholesale Markets, Qwest
Communications, including one to James LeBlanc of McLeodUSA Telecom and Lauraine
Harding of McLeodUSA, Inc., regarding the Agreement for interconnection in the state of Idaho
Qwest Demand Letter
).
A copy of the Qwest Demand Letter is attached as Exhibit C and
incorporated herein.
12.In the Qwest Demand Letter, Qwest notified McLeodUSA that Qwest "requires a
security deposit to continue the provisioning of services ordered by (McLeodUSA) under the
Interconnection Agreement between the parties(.)" The basis for the demand was as follows:
After investigation and review of McLeod's unsatisfactory creditworthiness, recent
public statements of McLeodUSA concerning its financial condition, history of late
payments, and outstanding balances under the Interconnection Agreement and other
agreements, tariffs, or accounts, Qwest demands a deposit, based on two months' average
total billings under the Interconnection Agreement in the State of Idaho, to safeguard
Qwest's financial interests.
13.Qwest demanded a security deposit in the amount of $971 ,870.45 for the state of
Idaho that must be received by 5:00 p.m. Mountain Standard Time on April 1 , 2005. Similar
amounts were demanded in thirteen (13) other states, so that the combined total of deposits that
Qwest sought to collect from McLeodUSA within ten days from the date of the Qwest Demand
Letter was $15 920 431.42.
14.The Qwest demand came with a specific threat if the money was not received by
the deadline:
Qwest will commence the process of terminating the Interconnection Agreement
suspending order activity, disconnecting services, and/or any other remedy available to it
under law or equity in the State of Idaho.
15.The Qwest Demand Letter did not refer to any section of the Interconnection
Agreement that gave Qwest the right to demand a security deposit. It did not refer to any
section of the Agreement that gave Qwest the right to suspend order activity, disconnect services
terminate the Agreement, or seek any of the other relief identified. As McLeodUSA
demonstrates below, the Agreement does not permit Qwest to take any of the actions stated.
Even if Qwest were permitted to demand a security deposit under the Interconnection
Agreement=andit is not~the only recourse available to Qwest for McLeodUSA's failure to
comply with such a demand would be to invoke the Dispute Resolution provisions of the
Agreement.
16.On March 22, 2005, McLeodUSA responded to the Qwest Demand Letter and
informed Qwest that, unless Qwest could identify with specificity the facts that satisfy the
requirements for a security deposit, McLeodUSA rejected the Qwest demand. A copy of the
McLeodUSA March 22, 2005 response is attached as Exhibit D and incorporated herein.
17.On March 24, 2005, McLeodUSA provided a second response the Qwest Demand
Letter and notified Qwest that McLeodUSA was invoking the Dispute Resolution provisions of
the Interconnection Agreement ,and designated Joseph Ceryanec, Group Vice President
Controller and Treasurer, as the McLeodUSA representative authorized to resolve the dispute.
copy of the McLeodUSA March 24, 2005 response is attached as Exhibit E and incorporated
herein.
18.It is clear not only that Qwest's most recent demand for money has no basis in the
Interconnection Agreement, but the remedy that Qwest seeks is also in complete disregard of the
terms and conditions in the Agreement.
19.The Interconnection Agreement applies only to those services specifically
identified in the Agreement and related to the local competition provisions in the Act.
particular, the scope of the Interconnection Agreement is limited to unbundled network elements
interconnection facilities, reciprocal compensation arrangements, and resale of Qwest's retail
servIces.
20.McLeodUSA has never been delinquent in payments to Qwest for services
provided to McLeodUSA under the Interconnection Agreement. Services provided by Qwest
under the Interconnection Agreement are invoiced separately from services provided under either
Qwest's tariffs or the Wholesale Services Agreement.l McLeodUSA is current on all invoices
from Qwest for services provided under the Interconnection Agreement.
To the extent McLeodUSA has withheld payment as a defensive measure to counter Qwest's withholdingoffunds owed for McLeodUSA's provision of exchange access services, those withheld payments were for services
provided either under the Qwest tariffs or under a separate Wholesale Services Agreement. See Exhibit B at 5.
Qwest Has No Ri~ht To Demand A Security Deposit Under The Interconnection
A~eement.
21.Nothing in the Interconnection Agreement gives Qwest the right to demand a
security deposit from McLeodUSA at this time. Section (A)3.4.3 of Part A of the General Terms
provides Qwest's rights to a security deposit under certain conditions, but none of the conditions
allowing Qwest to invoke those rights have been satisfied. First, Section (A)3.4.3 is a
subsection of Section (A)3.4 titled "Payment." Section (A)3.4.1 defines the scope of Section
(A)3.4: "Amounts payable under this A~eement are due and payable within thirty (30) calendar
days after the date of invoice." (emphasis added) Thus, any rights to a security deposit under
Section (A)3.4.3 are limited to security for payments made for services provided under the
Interconnection Agreement. Therefore, Qwest is wrong to make the connection as it does in the
Qwest Demand Letter that "outstanding balances under the Interconnection Agreement and other
agreements~ tariffs~ or accounts " justify its demand that McLeodUSA provide Qwest with a
security deposit. Section (A)3.4.3 does not grant rights to Qwest to demand a security deposit
for payments under another agreement or under a Qwest tariff.
22.Section (A)3.4.3 provides as follows:
(Qwest) will determine McLeod's credit status based on previous payment history with
(Qwest) or credit reports such as Dun and Bradstreet. If McLeod has not established
satisfactory credit with (Qwest) or if McLeod is repeatedly delinquent in making its
payments, (Qwest) may require a deposit to be held as security for the payment of
charges. "Repeatedly delinquent" means being thirty (30) calendar days or more
delinquent for three (3) consecutive months.
23.Qwest fails to satisfy any of these conditions. Taking the second condition first
Qwest does not allege, and could certainly not prove, that McLeodUSA has been "repeatedly
delinquent" on any payments under the Interconnection Agreement. As stated above
McLeodUSA is current on all invoices for services provided by Qwest under the Agreement.
24.The other condition that if satisfied would permit Qwest to demand a security
deposit is whether McLeodUSA has established "satisfactory credit" with Qwest. The previous
sentence of the section defines what determines McLeodUSA's credit status and what constitutes
satisfactory credit": previous payment history by McLeodUSA or credit reports such as Dun
and Bradstreet. As stated above, McLeodUSA is current on all invoices for services provided
by Qwest under the Interconnection Agreement, and has paid all previous invoices from Qwest
in a timely fashiQn. Therefore, McLeodUSA's "previous payment history" under the
Interconnection Agreement is stellar. As for "credit reports such as Dun and Bradstreet
reliance on these reports was clearly intended to be a substitute in the absence of a previous
payment history. Since McLeodUSA has established an exemplary history of payments under
the Interconnection Agreement, there is no basis to refer to any other source to determine
McLeodUSA's creditworthiness.
25.Section (A)3.4.5 does not permit Qwest to demand a security deposit at this time
either. It provides
, "
(Qwest) may review McLeod's credit standing and modify the amount of
deposit required." This provision permits Qwest to modify the amount collected as a security
deposit, but only if Qwest first has the right to demand a security deposit. Because Qwest does
not have that right, Section (A)3.4.5 is not applicable.
Even If Qwest Were Permitted To Demand A Security Deposit From McLeodUSA,
Failure To Pay The Security Deposit Only Tri~~ers The Default Provisions Of The
A~eement
26.As demonstrated above, Qwest has no right under the Interconnection Agreement
to demand a security deposit from McLeodUSA at this time. Even if Qwest had the right to
demand a security deposit, failure by McLeodUSA to pay the security deposit triggers only the
default provisions of the Agreement and does not permit Qwest to "suspend order activity" or
disconnect services" as Qwest has threatened to do.
27.If Qwest were to have the right to demand a security deposit from McLeodUSA
and McLeodUSA were to fail to comply with the Qwest demand, McLeodUSA's conduct could
constitute a "default in the payment of any amount due" under the Interconnection Agreement.
Section (A) 3.13 of the Agreement provides the remedy available to Qwest in the event of a
default. First, Qwest must provide McLeodUSA with written notice of the default. Obviously,
such notice cannot be provided prior to the date of default because there would have been no
default prior to the deadline for performance. Therefore, assuming Qwest has the right to
demand payment of a security deposit by April 1 , 2005, and assuming McLeodUSA were not to
comply with the demand, Qwest would be obligated to provide written notice of default to
McLeodUSA on or after April 1, 2005.
28.McLeodUSA then would have thirty (30) days to cure the default.
McLeodUSA were to not cure the default within thirty days, the Interconnection Agreement
permits Qwest only to seek relief in accordance with the Dispute Resolution provisions. In no
situation does a "default in the payment of any amount due" under the Agreement permit Qwest
to "suspend order activity,
" "
disconnect services " or even terminate the Interconnection
Agreement.
Qwest Is Obli~ated To Follow The Dispute Resolution Provisions Of The
Interconnection Agreement In The Event Of A Default.
29.In. the event of a "default. in the paymentof any amount due" under the
Interconnection Agreement, written notice by Qwest, and a McLeodUSA failure to cure the
default in a timely manner, Qwest would be obligated to follow the dispute resolution provisions
of the Agreement.
30.Formal dispute resolution under the Interconnection Agreement is initiated by
written request. Section (A)3.17.2 and .3 requires the parties to designate an officer-level
employee at no less than the level of a Vice President to meet and negotiate resolution of the
dispute. The parties are required to negotiate a resolution of the dispute for at least thirty (30)
days. If the parties are unable to resolve the dispute within thirty days, then either party may
demand arbitration of the dispute before a single arbitrator knowledgeable about the
telecommunications industry. Nothing in the dispute resolution provisions permits Qwest to
short-circuit the dispute resolution process by "suspending order activity" or "disconnecting,
services" prior to a decision by the arbitrator.
31.Based on the foregoing, it is clear that Qwest does not have the right under the
Interconnection Agreement to demand a security deposit from McLeodUSA at this time. Even if
Qwest were to have such a right, and ifMcLeodUSA were not to comply with the demand
Qwest would be required to follow the dispute resolution provisions of the Agreement. Nothing
in the Interconnection Agreement permits Qwest to take the actions that Qwest has threatened to
take, namely "suspend order activity" or "disconnect services.
REO UES TED RELIEF
32.McLeodUSA asks the Commission to open a contested case proceeding based on
this Petition and, following such hearings or procedures to which the Parties may be entitled, rule
that Qwest may not demand a security deposit from McLeodUSA at this time. McLeodUSA
further requests that in the event of a default under the Interconnection Agreement, Qwest must
follow the dispute resolution 'provisions in the Interconnection Agreement and may not "suspend
order activity,
" "
disconnect services " or terminate the Agreement until those dispute resolution
procedures have been completed.
Dated this day of March, 2005.
Respectfully submi
Mark Trinchero, OSB 88322
DAVIS WRIGHT TREMAINE LLP
1300 SW Fifth Avenue, Suite 2300
Portland, OR 97201-5682
Telephone: [phone]Facsimile: [phone]
E-mail: marktrinchero(tijdwt.com
~-
Peter Richardson, ISB 3195
RICHARDSON & O'LEARY
515 N. 28th Street
Boise, ID 83702
Telephone: [phone]
Facsimile: [phone]
E-mail: petercatrichardsonandolearv.com
ATTORNEYS FOR MCLEODUSA
TELECOMMUNICATIONS SERVICES, INC.
9209944v2
Part A
General Terms
(A)3. TERMS AND CONDITIONS
(A)3.1 General Provisions
The Parties shall work cooperatively to minimize fraud associated
with third-number baled calls. caning card calls, and any other
services related to this Agreement.
Nothing in this Agreement shaD prevent e.ither party from seeking
to recover the costs and expenses, if any, it may incur in (a)
complying with and implementing its obligations under this
Agreement, the Act, and the rules, regulations and orders of the
FCC and the Commission, and (b) the development, modification,
technical installation and maintenance of any systems or other
Infrastructure which it requires to comply with and to continue
complying with its responsibDities and obfigations under this
Agreement
(A)3.2 Term of Agreement
This Agreement shall become effective upon Commission approval, pursuant to
---- . ",..~--~,,,
--~".mu. " -..--... _. -""-settions"'251--and252 of the ' Act, shalUenninateon-February'15, 2002 and shall
be 'binding upOn the Parties during that term. After the date specified above. this
Agreement shall continue in force and effect until terminated by either Party's
providing written notl~ of termination to the other Party at least ninety (90) days
in advance of the specified date of termination. In the event of such termination.
existing or pending service arrangements made avaHabie under this Agreement
shall continue In total' without interruption under either a) a new or adoption
agreement executed by the Parties, or b) tariff terms and conditions generally
available to all Co-Providers and resellers.
EXHIBIT
PAGE --L-:- OF
(A)3.
(A)3.
(A)3.
(A)3.
(A)3.
(A)3.
&._._
6'" ""t\ftlU-la8..,...... If'\ 001-
Each party shall use its best efforts to comply with the
Implementation Schedule provisions that wiD be mutually agreed
upon by the Parties.
The Parties are each solely responsible for participation In and
compliance with national network plans, Including the National
Network Security Plan and the Emergency Preparedness Plan.
NeIther Party shall use any 'service related to or use any of the
services provided In this Agreement In any manner that Interferes
with other persons in the use of their service, prevents other
persons from using their service, or otherwise impairs the quarRy
of service to other carriers or to either Party's end users, and each
Party may discontinue or refuse service if the other Party violates
this provision. Upon such violation, either Party shaD provide the
other Party notice of such violation at the ear1iest practicable time.
Each party is solely responsible for the services it provides to its
end users and to other T eIecommunica1ions Carriers.
. .. .. '. --...
Pace 14
Part A
General Terms
If the Parties are unable to negotiate a new agreement following
provision of the ninety (90) day notice of termination, the window
of opportunity to file for arbitration to resolve outstanding
contractual issues in accordance with the Act will end on the
termination date specified In the notice and an arbitration petition
will have to be filed.
'If the Parties are able to reach agreement, this Agreement shall
continue for the brief period of time needed to secure the
Commission approval of an adoption or new
interconnection/resale agreement In the case of Section
(A)3.1. this Agreement will expire on the termination date
specified in the ninety (90) day notice referenced above unless a
petition for arbitration has been filed, but if such a petition has
been filed then this Agreement shal continue for the brief period
necessary for the Commission to act and resolve the disputed
Issues so . that the Parties will have an effective
intercOnnection/resale agreement
(A)3.3 Proof of Authorization
Where So indicated in specific sections of this Agreement, each party shaH be
responsible for obtaining and having in Its possession Proof of Authorization
("POA ,. POA shall consist of documentation of the end use(s selection. Such
selection may be obtained in the foDowing ways:
. (A)3.
(A)3.
(A)3.
(A)3.
(A)3.
(A)3.
The end user's written Letter of Authorization.
The end user's electronic authorization by use of an 8XX number.
The end user's oral authorization verified by an independent third
party (with third party verification as POA).
A prepaid returnable postcard supplied by the new local service
provider which has been signed and retumed by end user. The
new local service provider will wait fourteen (14) calendar days after
mailing the postcard before placing an order to change.
The Parties shall make peAs available to each other upon request. A charg~ of
$100~OO' rslamming charge ) win be assessed if the peA cannot be provided
.-....,.. ..,-"".
suppOlting.the.change.i1,serviceprovlder. .llthere..is ,8 conflict between,the-end...,
user designation and the other Party's written evidence of its authority. the
Parties shan honor the designation of the end user and change the end user
back to the previous ~Envice provider.
, ,.....,---..,-......--...... ...--.-..,...-......".. '.... ,... .
(A)3.4 Payment
(A)3.Amounts payable under this Agreement are due and payable
within thirty (30) calendar days after the date of invoice. J\
EXHIBIT --t1.-
PAGE -:l- OF
paqe 15A .....-., ..nnn......",w.owl In 14-
(A)3.
Part A
General Terms
Should McLeodUSA dispute, in good faith. any portion of the
monthly billing under this Agreement. McLeodUSA will notify
Owest in writing within thirty (30) calendar days of the receipt
such bilng, Identifying the amount, reason and rationale of such
dispute. McLeodUSA shall pay an amounts due. Both
McLeod USA and Qwest agree to expedite the investigation of any
disputed amounts in an effort to resolve and settle the dispute
prior to initiating any other rights or remedies. Should the dispute
be resolved in McLeodUSA IS favor and the resolved amount did
not appear as a crecrat on McLeodUSA's next invoice from Qwest,
Qwest will reimburse McleadUSA the resolved amount plus
interest from the date of payment The amount of Interest will be
calculated using the late payment factor that would have applied
to such amount had it not been 'paid on time. Similarly. In
event McLeodUSA withholds payment for a disputed charge, and
upon resolution of the matter it is determined that such payments
should have been made to awest, awest is entiUed to collect
interest on the withheld amount, subject to the above provisions.
Should Qwest alSpute, in good faith, any portion of the monthly
bilfing under this Agreement, Qwest will notify McLeodUSA in
writing within thirty (30) calendar daYs of the receipt of such
biDing, identifying the amount. reason and rationale of such
cflSpute. Qwest shall pay aa amounts due. Both McLeodUSA and
Qwest agree to expedite the investigation of any cfasputed
amounts in an effort to resolve and settle the dispute prior
initiating any other rights or remecf.es. Should the cf'lSpUte be
resolved in Qwesfs favor and the resolved amount did not appear
as a credit on Qwest's next invoice from McleodUSA,
McLeodUSA will reinburse Qwest the resolved amount plus
interest from the date of payment. The amount of interest will be
calculated using the late payment factor that would have appfled
to such amount had I not been paid on time.. Similarly. in the
event Cwe$t withholds payment for 8 disputed charge. and upon
resolution of the matter it is determined that such payments
should have been made to McLeodUSA, McLeodUSA Is entitled
to coUect interest on the withheld amount. subject to the above
provisions.
Hq ._.u-(A)3.
~=~-~--
Qwest wil determine McLeodUSA'cred'it status ,based on
previous payment history with Qwest or creal! reports such
Dun and Bradstreet If McLeodUSA has not established
satisfactory crecftt with Qwest ~r if McLeodUSA is repeatedly
delinquent In making its payments. Qwest may require a deposit
to be held as s~urity for the payment of charges. -Repeatedly
delinquenr means being thirty (30) calendar days or more
delinquent for three (3) consecutive months. The deposit may not
exceed the estimated total monthly charges for a ~o (2)month
EXHIBIT
PAGE --3- OF -L-
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Auaust 7. 200DnhdIMcleod.ID.doc Page 16
(A)3.
(A)~.
(A)3.
Part A
General T enns
period. The deposit may be a surety bond, a letter of credit with
terms and canadians acceptable to Qwest or some other form of
mutually acceptable security such as. a cash deposit. Required
deposits are due and payable within ten (10) calendar days after
demand in accordance with Commission requirements.
Interest will be paid on cash deposits at the rate applying to
deposits under appficable Commission rules, regulations, or
Tariffs. Cash depos~s and accrued Interest will be credited to
McLeodUSA's account or refunded, as appropriate, upon the
earfler Of the tennination of this Agreement or the establishment of
satisfactory aecflt with Clwest, which win generally be one full year
of timely payments In full by McLeodUSA. The fact that a deposit
has been made does not relieve McLeodUSA tom any
requirements of this Agreement.
Qwest may review McleodUSA's credit standing and mocrlfy the
amount of deposit required.
The late payment charge for amounts that are billed under this
Agreement shaR be in accordance with Commission requirements.
(A)3.5 Taxes
Each Party purchasing services hereunder shall payor otherwise be responsible
for all federal, state, or local sales. use, excise, gross receipts, transaction or
simHar taxes, fees or surcharges levied against or upon such purchasing Party(or the providing Party when such provicfll1g party is pennitted to pass along to
the purchasing Party such taxes, fees or surcharges), except for any tax on
either Party's corporate existence. status or income. Whenever possible, these
amounts shaH be bOled as a separate item on the invoice. To the extent a sale claimed to be for resale tax exemption. the purchasing Party shall furnish the
providing party a proper resale tax exemption certificate as authorized or. required by statute or regulation by the juriscflCtion providing said resale taxexemption. Until such time as a resale tax exemption certificate Is provided, no
exemptions win be applied.
(A)3.6 Insurance
McLeodUSA shall at all times during the term of this Agreement, at its own cost
...", --,---- . ,.. -, -- "--"
---_h..,
:--
and-expense.,carry and ,maintain, the insurance,coverage..Jisted below with
insurers having a "seses" rating of B+ XIII.
. (A)3.
(A)3.
Aunust 7 'CQOllhdlNlcleod-ID.doc
...... -
Workers' Compensation with statutory limits as required In the state
of operation; and Employers' Uabllity Insurance with limits of not
less than $100,000 each accident
Commercial General Uabirrty Insurance covering claims for bodll
injury, death, personal injury or property damage occurring or
EXHIBIT
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PAGE Co(OF
Page 17
Part A
General Terms
issue. the issue shall be resolved through the Dispute Resolutionprocess contained in this Agreement.
(A)3.13 Default
If either Party defauhs in the payment of any amount due hereunder, or If either
Party violates any other material provision of this Agreement,. and such default
violation shall continue for thirty (30) calendar days after written notice thereof,
the other Party. may seek relief In accordance with the Dispute Resolution
provision of this' Agreement The failure of either Party to enforce any of the
provisions of this Agreement or the waiver thereof in any instance shaH not be
construed as a general waiver or reUnquishment on its part of any such
provision, but the same shall, nevertheless, be and remain in full force and
effect.
(A)3.14 Disclaimer of Agency
Except for provisions herein expressly authorizing a Party to act for another
nothing in this Agreement shall constitute 8 Party as a legal representative or
, agent of the other Party, nor shaD a Party have the right or authority to assume,
create or incur any liability or any obligation of any kind, express or implied.
against or in the name or on behalf of the other Party unless otherwise expressly
permitted by such other Party. Except as otherwise expressly provided in this
Agreement no Party undertakes to perform any obUgation of the other Partywhether regulatory or contractual. or to assume any responsibifaty for themanagement of the other party's business.
CA)3.iS Nondisclosure
(A)3.15.All Information, including but not limited to specifications, microfilm,
photocopies, magnetic crlSks, magnetic tapes,. drawings, sketches,
models, samples. tools, technical information. data, employee
records, maps, financial reports, and maf1(et data. (i) furnished byone Party to the other Party dealing with end user specific. facility
specific, or usage specific information, other than end user
information communicated for the purpose of providing directory
assistance or publication of directory database, or (ii) In written,
graphic. electromagnetic, or other tangible form and marked at the
time of derwery as .Confidentiar Dr .Proprietary" , or (iii)communicated and declared to the receMng Party at the time of
delivery, or by written notice given to the receiving Party within ten
(10) calendar days after delivery, to 'be .Confidential- or
""___
h. ,_n....,.
,._" . '--- -'-_. .
Proprietarf,(oollectivelyreferred toes .Proprietary Information
shall remain. the property of the disclosing Party. A Party who
receives Proprietary Information via an oral communication mayrequest written confinnation that the material is Proprietary
Information. A Party who deDvers Proprietary Information via
oral communication may request written confirmation that the Party
receiving the information understands that the material is
Proprietary Infonnation.
EXHIBIT A
PAGE
;;; ,
OF 4,~-
Auaust 7. 2O00nhcflMcleod.ID.doc Page 25
(A)3.15.
(A)3.15.
Part A
General Terms
Nothing herein is intended to prohibit a Party from supplying factual
Information about its network and Telecommunications Services on
or connected to its network to regulatory agencies including the
Federal Communications Commission and the Commission so long
as any confidential obngation is protected.
Effective Date Of This Section. Notwithstanding any other provision
of this Agreement, the Proprietary Infonnation provisions of this
Ag'reement shall apply to all information fumished by either Party to
the other In furtherance of the purpose of this Agreement. even if
furnished before the date of this Agreement
(A)3.16 Survival
Any liabilities or obligations of a Party for acts or omissions prior to the
cancellation or termination of this Agreement; any obligation of a Party under the
provisions regarding indemolfi~. Confidential or Proprietary Infonnation
limitations of fiability, and any other provisions of this Agreement which, by their
terms, are contemplated to survive (or to be performed after) termination of this
Agreement. shall survive cancellation or tennination hereof.
(A)3.17 Dispute Resolution
(A)3.17.If any claim, controversy or dispute between the Parties, their
agents, employees, officers, cfnctors or affiRated agents should
arise, and the Parties do not resolve it in the ordinary COlI'Se of their
dealings (the -Dispute', then It shaD be resolved in accordance with
the dispute resolution process set forth in this Section. Each notice
of def~ultt unless cand within the appfreable cure period, shall be
resolved in accordance herewith.
(A)3.17.At the written request of either Party. and prior to any other formal
di~pute resolution proceedings. each party shall designate an
officer-level employee. at no less than the vice president level, to
review, meet, and negotiate, in good faith, to resolve the Dispute.
The Parties intend that these negotiations be conducted by non-
lawyer, business representatives, and the locations, format,
frequency, duration. and conclusions of these discussions shall be
at the discretion of the representatives. By mutual agreement, the
representatives may use other procedures, such as mediation, to
. .,' "..,..-.."..,......--..---... -, ." ,,- ..,
assist ,In..these ' negotiations. The..discusslons and correspondence
among the representatives for the purposes of these negotiations
shan be treated as Confidentlallnfonnation developed for purposes
of settlement. and shan be exempt from DIScovery and production,
and shall not be admissible in any subsequent arbitration or other
proceedings without the concurrence of both of the Parties.
(A)3.17.
Aunll.,t 7. 2000/lhd/Mcleod-lD.doc
If the vice-presidential level representatives have not reached a
resolution of the Dispute within thirty (30) calendar days after the
EXHIBIT --A--.
PAGE --.l4- OF ..:t-.
Page 21
(A)3.17.
(A)3.17.
(A)3.17.
Part A
General Terms
matter is refened to them. then either PartY may demand that the
Dispute be settled by arbitration. Such an arbitration proceeding
shall be conducted by a single arbitrator, knowledgeable about the
telecommunications industry. The arbitration proceedings shall be
conducted under the then current Nies of the American Arbitration
Association (~"
).
The Federal Arbitration Ad, 9 U.C. Sections
. not state law, shaH govern the arbitrability of the Dispute.
The arbitrator shall not have authority to award punitive damages.
Ail' expedited procedures prescribed by the MA rules shall apply.
The albitrator's award shaD be final and bincfmg and may be
entered In any court having jurisdiction thereof. Each party shaH
bear its own costs and attorneys' fees, and shaD share equaUy in
the fees and expenses of the arbitrator. The arbitration proceedings
shall occur in the state where the dispute occurs in a mutually
agreed upon city. It Is acknowledged that the Parties. by mutual.
written agreem~nt. may change any of these arbitration practices
for a particular, some. or al Dispute(s).
Should it become necessary to resort to court proceedings toenforce a Party's compliance with the dispute resolution process set
forth herein, and the court directs or otherwise requires compfiance
herewith, then all of. the costs and expenses. including its
reasonable attorney fees. incurred by the Party requesting such
enforcement shall be reim burIed by the non-complying party to the
requesting Party.
Nothing in this Section Is Intended to divest ,or limit the jurisdiction
and authority of the Commission or the Federal Communications
Commission as provided by state or federal law.
N~ Dispute. regardless of the form of action, arising out of this
Agreement, may be brought by either Party more than two (2) years
after the cause of action accrues.
(A)3.18 Controlling Law
This Agreement was negotiated by the Parties in accordance wlh the terms of
the Act and the laws of the state where service is provided hereunder. It shall be
Interpreted solely in accordance with the terms of the Act and the applicablestate law in the state where the service Is provided.
.. ..-..,..,.... "'U'
...., ,, ..,- ..,......"..
(A)3.19 Joint Work Product
This Agreement is the joint work product of the Parties and has been negotiated
by the Parties and their respective counsel and shall be' fairly interpreted in
accordance with Us terms and. in the event of any ambiguities, no inferences
shall be drawn against either Party.
a......d 7 ?MMfvIJMfoJ """-In riM
EXHIBIT A
PAGE OF
~..
Page 28
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
CEDAR RAPIDS DIVISION
MCLEODUSA
. TELECOMMUNICATIONS
SERVICES, INC.
Plaintiff,
vs.
No. C 05-OO39-MWB
MEMORANDUM OPINION AND
ORDER REGARDING PLAINTIFF'S
MOTION FOR TEMPORARY
RESTRAINING ORDER
And
TEMPORARY RESTRAINING
ORDER
QWEST CORPORATION and
QWEST COMMUNICATIONS
CORPORA TIO N,
Defendants .
TABLE OF CONTENTS
1. INTRODUCTION..
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
A. Factual Background.
. . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . .
.. 2B. Procedural Background
. . . . . . . . . . . . . . . . . . . . . . " . . . . . . ..
A. Standards For A Temporary Restraining Order
. . . . . . . . . . . . . . ..
B. Consideration Of The Datapluzse Factors
. . . . . . . . . . . . . . . . . ..
1. likelihood of success on the merits
. . . . . . . . . . . . . . ..
a. The nature of the requirement
. . . . . . . . . . . . . .. """-""""""'-,-""""" .. " "
Aft l:iI.ItI#A
........"-"'-'' """'""'. '
ie'
. ... ,...----..""'--"""""""", ~
~fV
2. Irreparable harm
.............................
3. Balance of harms
. . . . . . . . . . . . . . . . . . . . . . . . . . . ..
4. The public interest
. . . . . . . . . . . . . . . . . . . . . . . . . ..
16
C. Rule 65 s Bond Requirement
. . . . . . . . . . . . . . . . . . . . . . . . . ..
11. UGAL ANALYSIS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ......, -..
EXH
~ --, ,. ..
PAGE OF .11/
D. Extension Of The Temporary Restraining Order
. . . . . . . . . . . .
.. 20
HI. CONCLUSION
.....................................
his is one of two lawsuits arising from a payment dispute between
telecommunications companies, plaintiff McLeodUSA Telecommunications
Services Inc., and defendants QWest Corporation and Qwest Communi~tions
Corporation. These parties provide each other with various services for initiation or
completion of intrastate, interstate, wireless, wire-line, long-distance, and "toll free
(8YY) cal1s to and from each other s customers. Although the parties held litigation at bay
pursuant to a standstill agreement, that agreement expired on February 23, 2005, and both
McLeodUSA and Qwest Communications Corporation have filed lawsuits, McLeodUSA' s
in this court, and Qwest's in Colorado. In this action, McLeodUSA has now moved for
a temporary restraining order or preliminary injunction to mainta~ the status quo pending
judicial or other resolution of the parties' dispute.
1. INTRODUCTION
A. Factual Background
To understand the dispute leading to McLeodUSA' s request for a temporary
,... -----...--... '
restraining order, a brief discussion of trade terminology and the relationship between the
parties is necessary. This background is drawn primarily from McLeodUSA' s Complaint
.,., "
J9- wbicb ~o ~\VeJ:,has yet~n fjJ~,~~4Jbe docwnellts ill support Qf McLeodUSJ\'
, ,
motion for a temporary restraining order or preliminary injunction.
EXHIBIT
. PAGE OF
-#-
The Telecommunications Act of 1996, 47 U.C. ~ 151 et seq., subdivided local
telephone companies (or " local exchange carriers ) into two different groups: the former
monopoly local telephone companies, which are termed incumbent local exchange carriers
ILECs ), and new entr~~ to the local market which are called competitive local
exchange carriers ("CLECs SeeRichard E. Wiley, et al., Communications Law 2004:
Contentious TImes in a Shifting lAndscape 813 PLIIPat 287, 300 .(December 2004)
(discussing telecommunications technology following passage of the 1996 Act).
McLeodUSA is a CLEC. Among other things, McLeodUSA provides access service to .
various customen, including long distance carriers (technically known as interexchange
carriers ("IXCs")) and wireless carriers (technically known as commercial mobile radio
service camers ("CMRS")). Defendant Qwest Corporation is an ILEC and Qwest
Communications Corporation is an IXC providing long distance telephone services,
including toll free services, to customers throughout the United States.
When a customer of a CMRS (wireless carrier) calls an IXC's (long distance
camer) customer, the CMRS must connect to the Public Switched Telephone Network
PSTN"
).
The CMRS can choose to connect to the PSTN through either an ILEC or a
CLEC. Therefore, as a CLEC, McLeodUSA would provide a means by which a CMRS
can access the PSTN. When a CMRS customer that bas chosen McLeodUSA to connect
to the PSTN places a call, the call is routed through McLeodUSA's facilities to the IXC
(long distance carrier).
A "toll free" call is a call in which the IXC's customer ("toll free customer ) is the
person called. This "toll free customer" is assigned an 8YY area code number-and calls
to "toll free customers" are termed "gyy traffic." In the case of gIT traffic, the "toll
"" .... " ......,.. """"" "
"U"""""""""'-"
"""", ,.....,
free customer" has agreed with the IXC to 'pay the IXC for the incoming call, typically at
a set rate per minute. In such instances, the !XC is obligated to pay McLeodUSA for the
EXHIBIT - ""B
PAGE ..3 OF ..a..i..
access that enabled the toll free call to reach the IXC, and hence, ultimately reach the "toll
free customer." Where the call originates from a wireless telephone, the call is routed
from the CMRS's Mobile Telecommunications Switching Office ("MTSO") to a
McLeodUSA facility (or ") which connects the CMRS's MTSO to the McLeodUSA
PSTN switch. If the tal! is a tOll.free call, the call is routed through McLeodUSA, and
then, at the IXC's option, either directly to the IXC whose customer is being called or
indirectly through the ILEC.
In this competitive market, McLeodUSA provides financial incentives to CMRSs
and institutions (i.e. hotels, colleges, airports) in order to encourage them to do business
. with McLeodUSA rather than the incumbent ILEC. In return for an agreement of CMRSs
or institutions to connect via McLeodUSA's facilities, McLeodUSA provides them a
commission based on revenues McLeodUSA receives from providing access services to
IXCs in connection with SYY traffic direct to theIXC's customers. Therefore, in order
to meet its contractual obligations with CMRSs committed to using McLeodUSA to
connect, McLeodUSA bills and collects access charges for providing access services to
IXCs in connection With the completion of long distance calls from the customers of other
carriers to an IXC's toll free customers, including SIT wireless calls.
McLeodUSA alleges that it has been providing both interstate and intrastate access
service to Qwest for years under federal and.state tariffs or implied contracts. Complaint,
Doc. No., at , 14. During that time, Mcleod USA has billed Qwest for inter- and
intrastate access charges on a regular basis. Qwest paid these bills without objection until
payment was ,due for access services billed in April 2004. Qwest refused to pay
McLeodUSA for any access services, both provided under tariff and implied contract,
, " ... ..
, _on.
.. "",-", ".... ...... "'" '..... ....
billed by McLeodUSA during April and May of 2004. Qwest contends that McLeodUSA
has improperly inserted itself as the "originator" of certain wireless calls and has
EXHIBIT
PAGE --J.:.. OF 9. '(
improperly, or fraudulently ~ claimed origination access fees for wireless customers by
billing Qwest as if McLeodUSA were actually the originator of the calls. For access
services billed by McLeodUSA from June 2004 through November 2004, Qwest refused
to pay approximately 50% 'o( each bill. McLeodUSA contends the total amount billed, but
unpaid, is approximately $5.5 riiillion.
Since June 19, 2001 , Qwest Communications Corporation has provided
McLeodUSA with certain services pursuant to a Wholesale Services Agreement.
Additionally, Qwest Communications CotpOration provides certain services to
McLeodUSA pursuant to tariff. Qwest bills McLeodUSA for the services that it provides
both under the Wholesale Services Agreement and pursuant to tariff. When the parties
failed to come to some agreement regarding Qwest's withholding of payment to
McLeodUSA, on about September 30, 2004, McLeodUSA began to withhold amounts
billed to it pursuant to the Wholesale Services Agreement. From September 30, 2004
through November 2004, McLeodUSA withheld approximately $3.8 million in payment
due to Qwest in order to set-off the $5.5 million McLeod.USA alleges it was owed by
Qwest.
In December 2004, McLeodUSA and Qwest entered into a standstill agreement by
which they agreed to stop the withholding of payments from one another at least until the
agreement expired on February 23, 2005 ~ McLeod.USA alleges that, should Qwest resume
withholding payments for Mcleod USA's services, it would impair McLeodUSA's cash
flow to the point that it will threaten McLeodUSA' s ability to continue providing services
to its other customers, iricluding residential consumers and small businesses. Upon the
expiration of the standstill agreement Qwest fIled suit in Colorado state court, and
" ,.. "", - """""'-""---"-" "..._" ..._... ""
McLeodUSA filed the present lawsuit in this federal court. McLeodUSA has since
removed the Colorado action to Colorado federal court.
EXHJBIT B
PAGE
~ --
OF J.:L
On March 18, 2005, in a letter to McLeodUSA on Qwest Communications
letterhead, authored by Steven Hansen-identified as "Vice President-Carrier Relations,
Worldwide Wholesale Markets" -Qwest asserted that McLeodUSA was in default of its
payment obligations to Q~~t, that McLeodUSA had failed to provide a previously
requested security amount of $900;000. 00 dollars, and,that unless payment of both the past
due amount of $83~,083. 72 and the $900,000.00 security deposit was made by 5:00 p.
Mountain Standard Time on March 23, 2005, Qwest might immediately tenninate the
services it provides to McLeodUSA under the Wholesale Services Agreement. Motion for
Temporary Restr3ining Order and/or Preliminary Injunction, Doc. No. 24, Exhibit D.
A second ~etter from Qwest to McLeodUSA, also dated March 18, 2005, and
authored by Steven Hansen, stated that McLeodUSA continued to be in default for
payment.to Qwest for tariffed services and that the past due amount was $287 207.94.
This letter demanded immediate payment of the past due amount, and stated that "Qwest
will suspend order activity and/or disconnect the referenced services if payment on the past
due amount is not made within five (5) calendar days." Motion for Temporary Restrainine
Order and/or Preliminary Injunction, Doc. No. 24, Exhibit E. This letter also stated that
McLeodUSA failed to provide Qwest with a $2.,852 944.00 security deposit, which Qwest
previously demanded be posted by November 29,2004. Qwest, therefore, contended in
the letter that it "may suspend order activity and/or disconnect the referenced services if
payment on the past due amount is not made within thirty (30) calendar days.Id. The
letter stated, further, that McLeodUSA would not receive any further notice prior to
suspension of tariffed services, and that if tariffed services are suspended, Qwest would
require full payment of all outstanding charges, the payment of late fees, and the posting
" """""""" .. .. "" ", ". ......
of the security deposit before restoring services.Id.
EXHIBIT
P AGE -.Jo..::. OFE.
In an affidavit s~bmitted by McLeodUSA, McLeodUSA avers that it received the
two letters discussed just above on Monday, March 21 , 2005.
B. Procedural Background
On February 24, 2005, Qwest Communications Corporation, one of the defendantS
in this matter, filed an action against McLeodUSA in the District Court, City and County
of Denver, Colorado. Qwest Corporation, which is a party to McLeodUSA' s lawsuit in
this CQurt, is not a party to the lawsuit in Colorado. McLeodUSA has since removed that
action to the United States District Court for the District of Colorado ("Colorado Action
(Doc. No. 25). McLeodUSA has also represented that it will, on or about March 23
2005, file a motion to dismiss the Colorado Action; or to transfer the Colorado Action to
Iowa. McLeodUSA also represents that it has advised the Qwest defendants of its intent
to move to dismiss the Colorado Action.
On February 25, 2005, McLeodUSA filed its own Complaint in this court alleging
the following eight causes of action: (1) declaratory judgrilent that McLeodUSA has not
breached its payment obligations to Qwest; (2) breach of contract and/or tariff; (3) breach
of implied contract under the constructive ordering doctrine; (4) action on open account;
(5) breach of implied contract based on quantum meruit; (6) unjust enrichment; (7) prima
facie tort under the Restatement (Second) of Torts ~ 870; and (8) declaratory judgment that
Qwest is in breach of its contract to pay McLeodUSA for access services. See Complaint
Doc. No.2. In its Statement Of Pendency Of Colorado Action, McLeodUSA avers that
this lawsuit was filed less than twenty-four hours after Qwest Communication Corporation
filed the Colorado Action. Qwest requested, and was granted" an extension of time until
.... ,......, "" ........... --.. .. .. --.... '.. .. ..,.........................._,_....' - "
April 20, 2005, in which to fIle an answer to McLeodUSA's Complaint. (Doc. Nos. 10
& 11).
EXHIBIT -'B
P AGE ---L OF .1J:!L
On March 22, 2005, McLeodUSA filed four documents with the court: (1) a First
Amended and Verified Complaint (Doc. No. 21); (2) the Affidavit of Todd M.
Lechtenberg ("Lechtenberg Affidavit") (Doc. No. 23); (3) a Motion for Temporary
Restraining Order And/Of Preliminary Injunction and accompanying supportive
memorandum (Doc. No. 24); and:(4) Plaintiff's Statement of Pendency of Colorado Action
(Doc. No. 25). ~ es~nce, McLeodUSA's Motion for Temporary Restraining. Order
And/Or PreJimirntry Injunction requests the court prevent Qwest from tenninating its
services to McLeodUSA as threatened by the March 18, 2005, letters.
The court heard telephonic oral argument on McLeodUSA' s Motion for Temporary
Restraining Order And/Or Preliminary Injunction on March 23, 2005. At the hearing,
Mc~USA was represented by Ky Elaine Kirby, who argued the motion, and Richard
M. RindIerofSwidler, Berlin, Shereff, Friedman, L.P., in Washington, D.C., and by
local counsel Diane Kutzko and Richard S. Fry 'of Shuttleworth & Ingersoll in Cedar
Rapids, Iowa. Qwest Cotporation and Qwest Communications Corporation were
represented by Amy L. Benson of Brownstein, Hyatt & Farber, P., in Denver
Colorado, who argued the motion, and by localcouosel Dennis Wayne Johnson and Sheila
K. Tipton of Dorsey & Whitney in Des Moines, Iowa, and Qwest's in-house counsel Kevin
Magnusson, Doug Shiao, and Lauren Schmidt. The arguments were liv~ly and
informative. The court must now provide expedited consideration to McLeodUSA'
request for a temporary restraining order.
.." .....- ""'...., ..
EXHIBIT
PAGE --i.- OF
H. LEGAL ANALYSIS
A. Standards For A Temporary Restraining Order
As this court explained in past cases, it is well-settled in this circuit that applications
for preliminary injunctions ,temporary restraining orders 1 are generally measured
against the standards set forth iIfDataphase 81s., Inc. v CL Sys., Inc., 640 F.2d 109, 113
(8th Cir. 1981) (en bane). See Doctor John's, Inc. v. Qty of Sioux City, Iowa 305 F.
Supp.2d 1022, 1033-34 (N.D. Iowa 2004); Branstad v. Glickman 118 F. Supp. 2d 925
937 (N.D. Iowa 2000);, Uncle B's Bakery, Inc. v. Rourke 920 F. Supp. 1405, 1411
(N .D. Iowa 1996). These factors include (1) the movant's probability of success on the
merits, (2) the threat of irreparable harm to the movant absent the injunction, (3) the
--, ---....,....---..--.
,..--,....u..
"-"
1n Branstad this court also discussed in some detail the differences between a
temporary restraining order and a preliminary injunction. See Branstad 118 F. Supp. 2d
at 935..937. Suffice it to say that, in that case, the court found the following factors should
be considered to distinguish a TRO from a preliminary injunction: (1) whether the hearing
was ex parte or adversarial; (2) whether the adversarial hearing allowed the basis for the
relief requested to be strongly challenged; (3) whether the order expired, by its own terms
within the ten days provided by Rule 65(b); and (4) the "substance" of the order. Id. this case, the court held an "adversarial" rather than an ex parte conference with the
parties, but it did not hold the sort of "adversary hearing," including presentation of
evidence beyond the affidavits and exhibits filed with McLeodUSA's motion and by Qwest
in response, that allowed the basis for the requested order to be "strongly challenged,such that it would be "'particularly unjustified'" to classify the resulting order as a
temporary restraining order. See id. at 936 (quoting Sampson v. Mu"ay, 415 U.S. 6187 (1974)). Moreover, the court has every intention that this order for injunctive relief
will expire in ten days, unless within that time, good cause is shown for extending it for
a like period. Id. (citing FED. R. CIv. P. 65(b)). Final1y, the "substance" of this order
is intended to be a temporary restraining order, rather than a preliminary injunction, not
l~~~,()f ~~ ~x~ted Datm"e of ~e ,p~~~gs ~d ruling ~d the lin~ited nature
of the relief that will be granted. Id. (citing Baker Elec. Coop. v. Chaske 28 F.3d 1466,
1472 (8th Cir. 1994)). Therefore, this order is a temporary restraining order, not a
preliminary injunction. Id.
EXHIBIT
"'"&
PAGE -L OF
balance between the harm and the injury that the injunction s issuance would inflict on
other interested parties, and (4) the public interest.
Dataphase, 640 F.2d at 114; accord
Doctor John's, Inc., 305 F. Supp. 2d at 1033; Branstad 118 F. Supp. 2d at 937 (quoting
similar factors fromEntetgy~Ark., Inc. v. Nebraska, 210 F.3d 887 898 (8th Cir. 2000));
~D. R. av. P. 65(b)(1).
" '
A district court has broad discretion when roling on requests for preliminary
injunctions, and (the appellate court) will reverse only for clearly erroneous factual
determinations, an error of law, or an abuse of that discretion.
'"
Entergy, Ark., Inc.210
~d at 898 (quoting United Indus. Corp. v. Clorox Co., 140 F.3d 1175 1179 (8th Cir.
1998)). The court assumes that it has the same discretion when ruling on a request for a
temporary restraining order. As the Eighth Circuit Court of Appeals has also explained,
These factors are not a rigid formula. However " (t)he basis
of injunctive relief in the federal courts has always beenirreparable harm and inadequacy of legal remedies.Beacon
Theatres, Inc. v. Westover 359 U.S. 500, 506-07, 79 S. Ct.
948, 3 L. Ed. 2d 988 (1959). Thus, to warrant a preliminary
injunction, the movmg party must demonstrate .a sufficient
threat of irreparable harm. See Adam-Me/lang v. Apartment
Search, Inc.96 F.3d 297, 299 (8th Cir. 1996).
Bandag, Inc. v. Jack's Tlre Oil, Inc., 190 F.3d 924, 926 (8th Cir. 1999); Baker Eke.
Co-op., Inc. v: Chaske 28 F.3d 1466,"1472 (8th Cir. 1994) (~No single factor in itself is
dispositive; in each case all of the factors must be considered to detennine whether o~
balance, they weigh towards granting the injunction. However, a party moving for a
preliminary uyunction is required to show the threat of irreparable ~.) (internal
quotation marks and, citations omitted).
,,_...... ... -.." _.. ..,..
----n_
_....."'..,,,.... ...
..., ,.m ,
EXHIBIT
PAGE \0 -OF
The court will, therefore, consider each of the Dataphase factors in turn, to
determine whether McLeodUSA has established that the balance of the
Dataphase factors
weighs in favor of issuance of a temporary restraining order in this caSe.
B. ConsideroJion Of The Dataphase Factors
1. Likelihood of success on the meritsa. The nature of the require.ment
In prior cases, this court has explained the meaning of "likelihood of success on the
..- ...., ,...'....,'......,..
merits" in the context of a motion for a preliminary uyunction as follows:
(A)t the early stage of a preJiminary injunction motion, thespeculative nature of this particular ('lilcelihood of successinquiry militates against any wooden or mathematical
application of the test. Instead, a court should flexibly weigh
the case s particular cirCUtIl$tances to determine whether the
balance of equities so favors the movant that justice requires
the court to intervene to preserve the status quo until the merits
are determined.United, Indus. Corp. v. Clorox Co., 1403d 1175, 1179 (8th Cir. 1998) (internal citations and quotation marks omitted). Thus, the court is not decidingwhether the movant for a preliminary injunction will ultimately
win. Heather K. v. City of Mallard 887 F. Supp. 1249, 1258
(citing Glenwood Bridge, Inc. v. aty of Minneapolis, 940 2d 367, 371 (8th Cir. 1991)). Rather, as this court
explained in its consideration of the Dataphase factors" inCurtis 1000, Inc. v. Youngblade 878 F. Supp. 1224 (N.
Iowa 1995),
Likelihood of success on the merits requires that the
movant find support for its position in governing law.
In order to weigh in the movant's favor, the movant'su~s on .tI1~ ,m~d~,lIlust be
, "
a.tle.~t . . 'sufficiently
likely to support the kind of relief it requests. "
Youngblade 878 F. Supp. at 1247 (citations omitted).
, ..,.... .......,.. "'-'"
EXHIBiT
PAGE --1L OF M-.
Branstad, 118 F. Supp. 2d at 939; ; accord Doctor John's, Inc.305 F. Supp. 2d at 1034
(quoting this section of Branstad); B D lAnd and livestock Co. v. Veneman, 231 F.
Supp. 2d 895, 906-07 (N.D. Iowa 2002) (also quoting this section of Branstad). Thus,
likelihood of success 011 ,the merits" necessarily r~quires consideration of the law
applicable to the plaintiff's claims.b. Application
Here, McLeodUSA relies on several rulings of the Federal Communications
Commission as supporting its contentions that the rates it charged Qwest for its services
were reasonable, that Qwest was required to pay the full amounts charged to it
McLeodUSA, and that Qwest was not entitled to withhold its payments. Similarly,
McLeodUSA has relied on contract and implied contract theories to establish that it was
entitled to "defensively" withhold i~ own payments to Qwest for services provided by
Qwest. While Qwest asserts that there is also .sufficient basis to find that McLeodUSA
cannot, ultimately, prevail on the merits of its claims, the court cannot resolve the merits
of the underlying dispute simply to determine whether or not temporary relief is
appropriate; indeed, this court is "not deciding whether the movant for (a temporary
restraining order) will ultimately win.Id.
Rather
, "
likelihood of success on the merits " for purposes of a temporary
restraining order, means only that "the movant find support for its position in governing
law.Id. There is sufficient support for McLeodUSA' s position under governing law,
as cited by McLeodUSA, to fmd that McLeodUSA has the necessary "likelihood of
....... "'---
success on the merits" to warrant temporary relief. See ide Moreover
, "'
at the early stage
9f ~ (~emp'()~, res~i~igg 9I4~rl11!oQQIJ." tb.(tspe,c1.IlativeJ.attlr~ of thi$ ("likelihood"of
success "1 inquiry militates against any wooden or mathematical application of the test'"
EXHIBIT
PAGE --11.. OF
..... .. ..
in favor of a "'flexibl(eJ weigh(ing ofJ the case s particular circumstances to determine
whether the balance of equities so favors the movant that justice requires the court to
intervene to preserve the status quo until the merits are determined. '" Id. (quoting United
Indus. Corp.140 F.3d at 1179). Under the circumstances of this case, the ultitDate
determination of the merits will be a very fact-intensive process. In the meantime
McLeodUSA's contentions are at least plausible for the court to intervene to maintain the
status quo until the merits can be reached. Id. Finally, the determination of whether or
not to issue a temporary restraining order does not depend solely upon the movant'
likelihood of success on the merits " but upon the. balancing of fill of the pertinent
Dataphase factors. See Baker Elec. Co-op., Inc., 28 F.3d at 1472 ("No single factor in
itself is dispositive; in each case all of the factors must be consider~ to determine whether
on balance, they weigh towards granting the injunction ) (internal quotation marks and
citations omitted). Here, this Dataphase factor is at worst neutral and at best weighs in
favor of issuance of a temporary restraining order.
2. l"eparable harm
The second Dataphase factor is "irreparable harm.See, e.g., Dataphase 640
2d at 114. As this court has also explained,
" '
The basis of injunctive relief in the federal courts has
always been irreparable harm and inadequacy of legal
remedies.
'"
Bandag, Inc., 190 F.3d at 926 (quoting Beacon
Theatres, Inc. v. Westover 359 U.S. 500, 506- 07, 79 S. Ct.
948, 3 L. Ed~ 2d 988 (1959)). "Thus, to warrant a
preliminary injunction, the moving party must demonstrate a
sufficient threat of irreparable harm.Id.; Adam-Mellang v.
Apartment Search, Inc.'96 3d 297~ 299 (8th Cir. 1996)
(~'
ITJh~_J~~~~() sho~"krepar~b.1e harm is, by itself, ,a ""sufficient ground upon which to deny a prelimin~ry
injunction. '") (quoting Gelco Corp. v. Coniston Partners, 811
EXHIBIT . "'B
PAGE OF .a..1...
....... ,
2d 414, 418 (8th Cir. 1987)). Various considerations may
. be relevant to a determination of "irreparable harm.For
example, a movant's delay in seeking relief or objecting to the
actions the movant seeks to enjoin "belies any claim of
irreparable injury pending trial.Hubbard Feeds v. Animal
Feed Suppkment; 182 F.3d 598, 603 (8th Cir. 1999).
Moreover, an adequate showing of "irreparable hann" cannot
be something that has never been the focus of the underlying
lawsuit. See United States v. Green Acres Enters., Inc.,
3d 130, 133 (8th Cir. 1996). A sufficient showing on this
factor can be made, for example, by showing that the movant
has no adequate remedy at law. Baker Ekc. Co-op.28 F.
at 1473. Conversely, where the movant has an adequate legal
remedy, a preliminary injunction will not issue. See Frank B.
Hall
&:
Co. v. Alexander
&:
Alexander, Inc.974 F.2d 10201025 (8th Cir. 1992). Even where money damages are
available to compensate for some of the hann to the movant,
other less iangible uyuries cannot be so easily valued or
compensated, so that the availability of money damages that do
..
not fully compensate the movant do not preclude a preliminary
injunction. Glenwood Bridge, 940 F.2d at 371-72.
Branstad 118 r. Supp. 2d at 941-42; accord Doctor John's, Inc. t 305 F. Supp. 2d at 1039
(quoting this portion of Branstad); B
&:
D Land and livestock Co., 231 F. Supp. 2dat 910
(also quoting this portion of Branstad).
In the present case, the affidavit of Todd M. Lechtenberg, submitted by
McLeodUSA in support of its Motion For Temporary Restraining Order And/Or
Preliminary Injunction, as supplemented by other exhibits submitted with McLeod USA t s
motion, provides sufficient b~is for a fmding of irreparable harm to McLeodUSA in the
absence of injunctive relief. Here, there has been no delay on~cLeodUSA' s part in
., ,-,..,,~~g-
to~!Y~inQwest's a~t~ons that n;dghJ "belie" McLeQ4USA'~c~a~ ()fiqeparab.~
injury. See BranstarJ, 118 F. Supp. 2d at 942. Rather, until February 23, 2005, the
EXHIBIT
PAGE --11- OF
parti~' dispute was "on hold" pursuant to their stanqstill agreement. It was not until that
standstill agreement expired and Qwest actually began withholding payments again and
reiterating demands for payment and deposits that ,McLeodUSA was realistically faced with
the need to seek injunctive ,relief. Furthermore, it is clear that McLeodUSA. has no
adequate remedy at law, should' Qwest terminate its services, in light of the potential for
interruption of McLeodUSA's services to its customers, the adverse impact on its
cashflow, and the difficulties that it would have in obtaining adequate alternative services
within any reasonable timeframe to prevent collapse of its system. Id. Finally, the
intangible injuries that McLeodUSA would suffer should Qwest cease providing' services
to McLeodUSA, arising from the interruption of McLeodUSA's services to its clients
cannot possibly be fully compensated by money damages at some uncertain date in the
future. Id.
,..' .........
Thus, the "irreparable harm" Dataphase factor weighs strongly in favor of the relief
McLeodUSA requests in its Motion For Temporary Restraining Order.
3. Balance of harms
As this court explained in Branstod
The next factor in the Dataphase analysis, the "balance
of harms, " requires the court to consider "the balance between
the harm (to the movant) and the injury that the injunction
issuance would inflict on other interested parties, and the
public interest.Pottgen v. Missouri State High Sch. Activities
Ass n, 40 F.3d 926, 929 (8th Cir. 1994). Whereas
irreparable harm" focuses on the harm or potential harm to
the plaintiff of the defendant's conduct or threatened conduct,
Dataphase, 640 F.2d at 114, the "balance of harm" analysis
examines ,the harm of granting or denying the injunction upon
..... ..q--
- ,." ., both of 'the'parties to' the 'dispute and upon' other interested
partiest including the public, as well. Id.; see also Glenwood
Bridge 940 F.2d at 272. Thus, an illusory harm to the
EXHIBIT
PAGE Of .a..~-
movant will not outweigh any actual harm to the nonmovant.Frank B. Hall 974 F.2d at 1023. What must be weighed
the threat to each of the parties' rights and economic interests
that would result from either granting or denying the
preliminary, injunction. See Baker Elec. Co-op.28 F .3d at
1473. Another consideration is whether the nonmovant has
already voluntarily, taken remedial action, which eitherhninatedor reduced the harm to the movant, or showed that
such remedial action did not harm the nomnovant. See
H.eather K.887 F. Supp. at 1260.
Branstad 118 F. Supp. 2d at 942-42; accord Doaor John's, Inc.305 F. Supp. 2d at 1040
(quoting Branstad); B
&:
D lAnd and livestock Co.231 F. Supp. 2d at 911 (also quoting
Branstad).
Here, as explained above, the threat to McLeod USA' s rights , including its economic
interests, is substantial. See ide at 943.. This harm is not "illusory," but real and
immediate. Id. On the other hand, Qwest has not convinced the court that it will suffer
any comparable economic or other harm from an injunction that, in essence, reinstates the
status quo under the parties' standstill agreement. Id. Finally, the court does not find that
Qwest has taken any remedial action that would eliminate or reduce the harni
McLeodUSA; rather, Qwest has pressed its claims and demands for payment and deposits.
Id.
Thus, the "balance of harms" Dataphase factor also weighs in favor of immediate,
albeit temporary, nyunctive relief.
4. The public interest
The last Dataphase factor the court must consider is the "public interest." Entergy,
Ark. Inc., 210 F .3d at 898; Bandag, Inc.190 F .3d at 926; Iowa Right to life Committee,
. -,-
inc.187F.3d at 966. In Branstad, this court observed
' "
EXHIBIT
PAGE --ilL OF 4.
~~.
(CJonsideration of the "public interest" factor has frequently
invited courts to indulge in broad observations about conduct
that is generally recognizable as costly or ~urious. See
Heather K., F. Supp. at 1260. However, there are more
concrete considerations, such as reference to the purposes and
interests anY Un~rlying legislation was intended to serve see
id.a preference for ,enjoining inequitable conduct see ide
1260 n.16, and the "public interest in jnjmi~ing
unnecessary costs" to be met from public coffers. Baker Elee.
Co-op., 28 F.3d at 1474.
Branstad, 118 F. Supp. 2d at 943; aecordDoctor John's, Inc., 305 F. Supp. 2d at 1042
(quoting Branstad); B & D I.mul and Livestock Co.231 F. Supp. 2d at 912 (also quoting
Branstad)
Here, there is plainly a substantial public interest in maintaining telecommunication
services to McLeodUSA's customers, notwithstanding the dispute, between the parties.
Indeed, maintenance of telecommunications services at fair costs is the purpOse of FCC
oversight and telecommunications regulatory legislation. See, e.
g.,
47 U.C. ~ 151 (the
FCC is to consider ~e public interest in light of the overall purpose of the
Communications Act "to make available, so far as possible, to all the people of the United
States a rapid, efficient, Nation-wide, and world-wide wire and radio communication
service with adequate facilities at reasonable charges. .
. "
). Thus, the potential
interruption of services resulting from Qwest's conduct, if not enjoined, would be contrary
to the public interest. Qwest counters that the public interest will not be served if
McLeodUSA is treated differently Ulan other customers who do not pay their bills.
However, the court fmds this argument unconvincing, not least because
McLeodUSA has
paid its bills to Qwest, pursuant to the standstill agreement, and because Qwest has already
, .... .. ... "... ", , ..-.. ,-.., ..... .. ........ ., .... ,
shown that it considered that the interests that motivated the standstill agreement
outweighed the supposed public interest in terminating services to McLeodUSA.
.., ... -- , ,
17
EXHIBIT
PAGE JL OF .l~L
Thus, this final Dataphase factor also weighs in favor of issuance of a temporary
restraining order. Because all of the pertinent factors weigh in favor of issuance of a
temporary restraining order in this case, such a temporary restraining order will issue.
. ,
Rule ,65's Bond Requirement
Because the court finds that it is proper, upon balancing the Dataphase factors
in the circwnstances presented here, to issue a temporary restraining order, the court turns
to the question of security for its issuance. Rule 65( c) provides, in pertinent part
, ,
follows:
(c) Security. No res~g order or prelirninaty
injunction shall issue except upon the giving of security by the
applicant, in such sum as the court deems proper, for the
payment of such costs and damages as may be incurred or
suffered by any party who is found to have been wrongfully
enjoined or restrained. No such security shall be required of
the United States or of an officer or agency thereof.
FED. R. av. P. 65(c). The bond posted under Rule 65(c) "is a security device, not a limit
on the dam~ges the defendants may obtain against (the movant) if the facts warrant such
aIi award.Minnesota Mining
&:
Mfg. Co. v. Raub Rubber, Inc.130 F.3d 1305, 1309
(8th Cir. 1997) . The Eighth Circuit Court of APpeals has warned that, " (a )lthough we
allow the district court much discretion in setting bond, we will reverse its order if it
abuses that discretion due to some improper purpose, or otherwise fails to require an
adequate bond or to make the necessary findings in support of its determinations.Hill
v. Xyquad, Inc., 939 F.2d 627, 632 (8th Cir. 1991) (citing Rathmann .Group v.
Tanenbaum 889 F.2d 787, 789 (8th Cir. 1989)). InRathmann-Group v. Tanenbaum 889
..-.. "" "", .....'..-..... "" -....
2d 787 (8th Cir. 1989), the Eighth Circuit Court of Appeals detennined that the district
court abused its discretion by not requiring a bond in addition to the $10,000.00 already
EXHIBIT
PAGE Of .R:L.
posted on the issuance and continuation of a temporary restraining order, which can be
read to mean that the bond for a preliminary injunction was mandatQry even where a
previous bond for a temporary restraining order was in place. Rathmann-Group, 889 F .
at 789. On the other hand;,~e court cited as suPPOI:t for its decision to remand Roth v.
Bank of the Commonwealth, 583- F.2d 527, 539 (6th Cir. 1978), which found error
according to the Rathmann-Group court
, "
not because (the) trial court failed to require a
bond in ,any particular amount, but because (the ~urt failed to exercise discretion required
by R~e 65(c) by expressly considering (the) question of requiring (a) bond,id.which
suggests that whether or not a bond is required is in the discretion of the court
In this case, Qwest ernands a bond in die amount of approximately $3 million for
an initial ten-day temporary restraining order, or double that, if the court extends the
temporary restraining order for an additional ten days. Qwest bases figure on its
contention that the services it will be compelled to provide to McLeodUSA under the
temporary restraining order, which it would otherwise terminate, would cost McLeodUSA
approximately $15.9 million for a two-monthpe,riod. Thus, the bond it demands for a ten-
day continuation of services is one-sixth of the smn for two months. McLeodUSA
counters that Qwest has already withheld $1.7 .million more than McLeodUSA has
withheld, McLeodUSA is otherwise current on all of its other bills to Qwest, and that
Qwest itself has estimated the costs of its services to McLeodUSA for two months to be
$3.8 million, not $15.9 million. Thus, McLeodUSA contends that Qwest's demand for
a bond in the amount of $3 million is plainly excessive. Qwest replies that it has other
offsets against the $1.7 million it purportedly withheld in excess of what McLeodUSA
owed for the services presently in dispute. Qwest also points out that McLeodUSA has
, ..... , , .., ,_.. -..... , ,.....,.. ... , ... , ... . , .. ,
made public disclosures of its financial difficultiest so that Qwest has reasonable concerns
that it will never be paid for services provided under the temporary restraining order.
EXHIBIT ~'B .
-..
PAGE
The court finds that there is insufficient basis in the present record to fmd that
Qwest will actually be out any money for costs and damages incurred by Qwest if it is
found to have been wrongfully enjoined or restrained" to continue its services to
McLeodUSA and to make:' ~n payments for services it obtains from McLeodUSA. See
FED. R. Cw. P. 65(c) (purpose of bond). Certainly, Qwest's demand for a bond in the
amount of $3 million for ten days of service that it must provide pursuant to the temporary
restraining order are out of proportion to Qwest's own estimates of the cost for two months
of the services to McLeodUSA at issue here; as elsewhere indicated in the record.
Moreover, Qwest does not dispute that McLeodUSA was making full payment on its bills
from Qwest while the parties were operating under ~eir standstill agreement. Qwest does
not appear to the court to be under any greater risk of non-payment for services provided
under the temporary restraining order than it was for payment for services under the
standstill agreement. Afthough the coon will revisit the question of an appropriate bOnd
for any preliminary injunction, the court concludes, in its discretion, that no bond should
be required for the issuance of a temporary restraining order that ~tains the status quo
the parties agreed to under the standstill agreement without any bond, deposit, or other
security. See Rathmann-Group, 889 F.2d at 789 (suggesting that whether or not a bond
, is required is in the discretion of the trial court).
D. Extension Of The Temporary Restraining Order
Rule 65(b) provides that a temporary restraining. order that was "granted without
notice. . . shall expire by its terms within such time after entry, not to exceed 10 days
as the court fixes." FED. R. CIV. P. 65(b). The present temporary restraining order is not
granted without notice " but the court will, nevertheless, assume .that the ten-day
limitation also applies. Therefore, a tempo~ restraining order entered today would
EXHIBfT
PAGE OF ~!:L
ordinary expire on Apri12, 2005. Rule 65(f?), however, also provides that the temporary
restraining order may "for good cause (be) extended for a like period.Id. (providing that
a temporary restraining order may be extended "for a longer period" upon consent of the
party against whom it is en~red). The court discussed with the parties the necessity of
extending the temporary restraiDing, order for a period in excess of ten days, because the
undersigned is scheduled to be out of the country, then to try one riminal trial
immediately upon his return, followed shortly thereafter by a four-month -federal death-
penalty trial, making it difficult, if not impossible, to hold a preliminary injunction bearing
within ten days. Consequently, the court stated that it intended to extend the temporary
restraining order for an additional ten days to and including April 12, 2005. Hearing
objection, the court finds good cause to extend the initial ten days for this temporary
restraining order for a "like period" of ten days, to and including April 12, 2005.
HL CONCLUSION
Upon the foregoing, the court concludes that McLeodUSA's March 22, 2005,
Motion for Temporary Restraining Order And/Or Preliminary Injunction (Doc. No. 24)
should be, and hereby is, granted to the extent that the court will issue the attached
temporary restrainil\f order.
EXHIBIT
PAGE OF
A hearing on McLeodUSA' s Motion For Preliminary Injunction shall be held at
8:00 a.m. on Saturday, April 9, 2005, in the third floor courtroom of the Federal
Courthouse in Sioux City, Iowa.
IT IS SO ORDEREJ).
DATED this 23rd day of March, 2005.
M.Jt rJ.
MARK W. BENNETI
CHIEF,uooE, U. S. DISTRICfCOURT
NORTHERN DISTRICT OF IOWA
EXHIBIT . i3
PAGE OF .
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
CEDAR RAPIDS DIVISION
MCLEODUSA
TELECOMMUNICATIONS, ,
SERVICES, INC.,
Plaintiff,No. C 05-OO39-MWB
TEMPoRARY RESTRAINJN
ORDER
VB.
QWEST CORPORATION and
QWEST COMMUNICATIONS
CORPORATION
Defendants .
WHEREAs, this matter came before the court pursuant to the March 22, 2005,
Motion for Temporary R~training Order And/Or Preliminary Injunction (Doc. No. 24)
of plaintiff McLeodUSA Teleco~unications Services, Inc. (McLeodUSA),
AND WHEREAS, pursuant to Rule 65 of the Federal Rules of Civil Procedure, the
court finds. that termination by Qwest Corporation and/or Qwest Communications
Corporation of services to McLeodUSA; imposition of a security requirement upon
McLeodUSA; the withholding of fut1her amounts by Qwest in set off against McLeodUSA
invoices; and failure of any of the parties to make full payment of their current and futUre
invoices from one another would impose irreparable harm or injury or the threat of such
irreparable harm or injury upon McLeodUSA, and upon further consideration of all other
relevant factors,
DEFENDANTS QWEST coRPoRATION1U1d QWFSr COMMuMCA TIONS
CORPORATION are hereby temporarily restrained from (1) terminating or threatening
to terminate services to McLeodUSA or requiring security from McLeodUSA as a
precondition t~ the start or continuation of any such services; (2) withholding any further
EXHIBIT -- i3
PAGE OF
.... -.. - ,---....
amounts ,in set off against McLeodUSA invoices; and (3) failing to make full payment of
their current and future invoices to McLeodUSA until expiration of this tempOrary
restraining order. Plaintiff McLeodUSA is likewise required to make full payment of its
current and future invoices from Qwest Corporation or Qwest Communications
Corporation until expiration of temporary restraining order.
The Court finds good cause for extension of this temporary restraining order for an
additional ten days beyond the initial ten days a temporary restraining order may remain
in force pursuant to Rule 65(b) of the Federal Rules of Civil Procedure owing to
scheduling conflicts with other equally urgent matters. Therefore, this temporary
restraining order shall remain in full force and effect to and mcluding April 12, 2005, or
until such time as this temporary restraining order is dissolved or vacated, by this court
or a reviewing court.
TJUs temporary restraining ord~r shall be binding upon the parties to this action,
their officers, agents, servan~, employees, and attorneys, and upon those persons in active
concert or participation with them who receive actuaI notice of this order.
This temporary restraining order shall issue without the posting of any bond, as the
court finds insufficient evidence that either Qwest Corporation or Qwest Communications
Corporation will incur any costs and damages incurred if they are "found to have been
wrongfully enjoined or restrained" to continue their services to McLeodUSA and to make
full payments for services,they obtain from McLeodUSA. See FED. R. av. P. 65(c)
(purpose of bond).
IT IS SO ORDERED.
DATED this 23rd day of March, 2005.
M~ rJ. Bo-*
MARK W. BENNEIT
CHIEF JUDGE, U. S. DISTRICT COURT
NORTHERN DISTRICT OF IOWA
EXHIBIT
PAGE - l!L OF
# .
Qwest
Spirit of Service
March 21. 2005
VUJ Ovemight Mail
James LeBlanc
Vendor Manager
McleodUSA Telecom
First Place Tower
15 E. 5th St. Ste. 1500
Tulsa. Oklahoma 14103
lauraine Harding
Sr. Manager, Interconnect Negotiation
McleodUSA, Inc.
6400 C Street
O. Box 3117
Cedar Rapids, IA 52406-1317
RE: Notice of Demand for ID ,Interconnection Ageement Security Deposit
Qwest Communbti"...
1801 California Street
sune 2400
Denver, CO 80202Telephone: [phone]Facsimile: 303-896-8887
stewn Q. .........
VICe President, Carrier Relations
WOfIdwide Wholesale Markets
Dear SirIMadam,
This fetter is 10 notify you that Qwest Corporation ("'Qwesr) requi'es a security deposit to continue the
provisioning of services ordered by McleodUSA TeIecoml1U1ications Services, Inc. and its CLECaffiliates (collectively, "'McLeodUSAj under the Interconnection Agreement between the pa1ies in the
State of Idaho. After irNestigation and review of Mcleod'unsatisfacb'y credilworthiness, recentpublic statements cI McleodUSA concerning its financial condition, history of late pa)menls', andoutstanding balances under the Interconnection Agreement and oIher agreements, tariffs, or accounts,
Qwest demands a deposit,based on two months' average total blings under the Interconnection
Agreement in the State of Idaho, to safeguard Qwest's financial interests.
The security deposit shall be in the form of 8 wire transfer inmecflately available funds or anirrevocable letter of credit in the amount of $971,870.45. It must be received in ten (10) calendar days.If the security deposit is not received by 5:00 D.m. Mountain Stand.!!fiITrne on ADriI~, Qwest willcommence the process of terminating the Interconnection Agreement, suspending order activity,disconnecting services, and/or any other remedy avalable to it under law or equity in the Slate Idaho.
If pa~t is processed by wire, it should be directed to-
FISt National Bank of Omaha
c/o Owest Corpa ation. m Omaha NE 68197'
.. '-. ,'.,. -- -.
ABA No. 104000016
Qwest Bank Acct. No. 36204689
.. ...... ...
The deposit will be held for a period of at least twelve (12) months and will be maintained in accordance
with the teRnS of the Interconnection Agreement or appI"JCable law. Additional security may be required,
~*~~BIT
. .
J:'
.,' .
. Page2
March 21, 2005
as necessary and ,allowable under the Interconnection Agreement or applicable Jaw. Shoulddisconnection occur, Qwest WIll require tuB payment of all outstanding charges and the posting of thesecurity deposit, and late payment charges will apply in accordance with the InterconnectionAgreement Additionally other charges may apply to have the account re-estabfished. If service orderprocessing is interrupted, all outstanding charges and the posting of the security deposit, including any
ackfrUonal past due amounts are due prior to restoration.
Qwest reserves any and aU ,rights and remed'aes it has under the Interconnection Agreement andapplicable law, including any remedies it may have if Mcleod fails to meet the terms set forth above.Qwest also reserves the right to request 10 increase the deposit request additional deposits fromMcleod under any othei ~r:eements between Qwest and Mcleod as well as under any other tariffs.~~e~
/f)H
Sleven Hansen
VICe President. Canier Reations
Cc: Ken Burkhardt, CFO
-.,. "
EXHIBIT
PAGE OF
March 22, 2005
Mr. Steve Hansen
Vice President - Carrier Relations
Qwest Communications
' .
1801 California Street.
Suite 2400
Denver, CO 80202
Re:Deposit Demand Letter - Arizona, Colorado, Idaho, Washington, Oregon,Montana, New Mexico, Utah
Dear Mr. Hansen:
This letter responds to your letter dated March 21, 2005, addressed toMcLeodUSA Telecommunications Services, Inc., attention J.J. LeBlanc and Lauraine
Harding, in which Qwest' demands security deposit in the form of an irrevocable letter of
credit or a wire transfer of immediately available funds, and threatens suspension of order activity, disconnection or other remedies. In support ofQwest's deposit demand, yourletter cites, among other items, a "history of late payments, outstanding balances under
the Interconnection Agreement and other agreements, tariffs, or accounts.
As Qwest has been infonned OD several prior occasions, McLeodUSA withheld
payments from Qwest (a) for non-interconnection ~eement charges, and (b) only indirect response to the impennissible and unlawful self-help that Qwest and its affiliateshave first undertaken in 2004 with respect to access charges assessed by McLeodUSA.
Self-help is an unjust and unlawful practice in violation of Section 201(b) of the Act, andthe FCC has consistently declared that if an interexchange carner disputes a CLEC'
presumptively reasonable charges, then the !XC must pay the charges first and protest
second. Qwest failed to fo now the law, leaving McLeodUSA no practical altemati ve but
to defensively set off against Qwest's non-interconnection agreement invoices to
McLeodU~A amounts properly due and owing to Qwest.
To the contrary, the McLeodUSA payment record with Qwest is stellar, with theonly exception involving this access charge dispute where we were forced to withhold in
... '
direct responSe to yoUr Utijtlst and uIllawful actions~
. , '., "..., -. .. ...
Accordingly, McLeodUSA disagrees with critical factual representations that form
the basis for Qwest's deposit demand. Second, your demand deposit for the States of Arizona, Colorado, Idaho, Washington, Oregon, Montana, New Mexico and Utah is
inconsistent with the terms of our interconnection agreement ("ICA"). A deposit may
EXHIBIT
0 a
PAGE -L Of
Mr. Steve Hansen
March 22, 2005
Page 2
only be required ifMcLeodUSA has not established a satisfactory credit or is repeatedlydelinquent in making payments, neither of which basis is satisfied in this case: Unless
. Qwest can identify with specificity the facts that satisfy the permissible basis for its
. demand deposit pursuant to the terms of the controlling ICA, McLeodUSA rejects your
deposit demand. If Qwest attempts to enforce its impermissible demand deposit
inconsistent with the tenrtS" of our interconnection agreement, McLeodUSA reserves any
and aU rights and remedies avmlableto it under law or equity for Qwest's intentionalviolation of the ICA
Please contact me to discuss the deposit demand at your earliest convenience.
Sincerely,
Ken Burckhardt
Executive Vice President and
Chief Financial Officer
cc: Roland Thornton
EXHIBiT
- 1) -
PAGE -SL OF fl-.
March 24, 2005
VIA OVERNIGHT MAIL
Qwest Communications
Director-Interconnection Compliance
1801 California Street, Suite 2410-
Denver, CO 80202
RE:Notice of Informal Dispute Resolution - ID
Dear Director-Interconnection Compliance:
Pursuant to Section (A)3.17 of the Interconnection Agreement (") for the State of Idaho
between McLeodUSA Telecommunications SerVices, Inc. ("McLeodUSA") and QwestCommunications ("Qwest"), McLeodUSA notifies Qwest that it is invoking the informal dispute
resolution process regarding the recent demand by Qwest for a security deposit
Pursuant to the McLeodUSA letter dated March 22, 2005 and addressed to Steve Hansen, Vice-
President - Carrier ,Relations, which states our position disputing the Qwest demand for a
security deposit, McLeod USA designates Joseph Ceryanec, Group Vice President, Controller
and Treasurer, as the McLeodUSA representative authorized to resolve the Dispute. Joseph
Ceryanec can be reached at 319- 790- 7399. McLeodUSA requests that Qwest designate its
representative as required by the ICA
In light of the Qwest threat to suspend service or disconnect our order activity if a security
deposit is not received by pm Mountain Standard Time on April!, 2005, McLeod USA
demands a response to this informal dispute notice no later than 2 pm Central Standard Time on
March 28, 2005. McLeodUSA reserves all rights and remedies available to it under law or
equity.
Sincerely,
William H. Courter
Assistant General Counsel
.............--- ......._... ...... ..... .._.
... .m_,....
00:Steve Hansen (notice VIA EMAIL)
Qwest General Counsel, Interconnection
Joseph Ceryanec
Roy McGraw
William A. Haas
Julia Redman-Carter EXHIBIT (:
PAGE
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this day, March 30 2005, I caused a true and
correct copy of the foregoing MCLEODUSA TELECOMMUNICATIONS SERVICES,
INC., MOTION FOR EMERGENCY RELIEF and PETITION OF MCLEODUSATELECOMMUNICATIONS SERVICES, INC., FOR ENDORCEMENT OF
INTERCONNECTION AGREEMENT WITH QWEST CORPORATION to be served by
the method indicated below, and addressed to the following:
Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise ID 83720-0074
( ) U.S. Mail, Postage Prepaid
(X) Hand Delivered
( )
Overnight Mail
( )
Facsimile
( )
Electronic Mail
Mary S.Hobson
Stoel Rives
101 S Capitol Blvd, Ste 1900
Boise ID 83702
(X) U.S. Mail, Postage Prepaid
( )
Hand Delivered
( )
Overnight Mail
( )
Facsimile
( )
Electronic Mail
Signed:
(\
Cw\~
Nina M. Curtis
CERTIFICATE OF SERVICE -