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Fiberlight, LLC v. Washington Metropolitan Area Transit Authority

United States District Court, District of Columbia

November 8, 2018

FIBERLIGHT, LLC, Plaintiff/Counter-Defendant,
v.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Defendant/Counter-Plaintiff.

          MEMORANDUM OPINION

          ELLEN S. HUVELLE, UNITED STATES DISTRICT JUDGE

         Plaintiff FiberLight, LLC (“FiberLight”), a provider of fiber optic cables to government and commercial customers in the Washington, D.C. area, contracted in 2006 with defendant Washington Metropolitan Area Transit Authority (“WMATA”)-a publicly-funded entity that operates the Washington region public transit system-to place its fiber optic cables within the WMATA System. (Am. Compl. ¶¶ 1, 9, 10, ECF No. 13.)[1] In 2014, FiberLight stopped paying the contractually required license fees because it began to question WMATA's authority to charge them. (Id. ¶¶ 22, 27; Am. Countercls. ¶ 17, ECF No. 15.) After two years of correspondence and meetings failed to resolve the parties' disagreement (Am. Countercls. ¶ 18), FiberLight brought this suit in 2016, alleging that 1) WMATA breached the October 23, 2006 License Agreement (“License Agreement” or “Agreement, ” ECF No. 62-6); 2) it was entitled to a declaratory judgment regarding the parties' legal rights and obligations; and 3) WMATA breached the implied covenant of good faith and fair dealing. In response, WMATA brought counterclaims alleging that 1) FiberLight was in breach of the contract due to its failure to pay its license fees, and 2) FiberLight was unjustly enriched by maintaining its cables in the WMATA System without paying its license fees. (Am. Countercls. ¶¶ 26-40.) Both sides have moved for summary judgment as to liability. (See WMATA's Memo. in Supp. of Mot. for Summ. J., ECF No. 54-1 (“WMATA Mot.”); FiberLight's Memo. in Supp. of Cross-Mot. for Summ. J. (“FiberLight Mot.”), ECF No. 62-1.) For the reasons set forth below, the Court grants summary judgment in favor of WMATA on FiberLight's three claims and on WMATA's counterclaim for breach of contract. The Court grants summary judgment to FiberLight on WMATA's counterclaim for unjust enrichment.

         BACKGROUND

         WMATA is an interstate compact agency that was created by the District of Columbia, Virginia, and Maryland to operate the mass transit system in the Washington, D.C. area. (See Am. Compl. ¶ 9; Am. Countercls. ¶ 5.) It was established in 1967 when its enabling legislation, the WMATA Compact, was passed. (WMATA's Statement of Undisputed Facts (“WMATA Facts”) ¶ 1, ECF No. 58 (citing D.C. Code § 9-1107.1; Md. Code Ann. Transp. § 10-204; Va. Code Ann. §§ 56-529 & 56-530).) Since its establishment, WMATA has built an expansive public transit railway system, commonly known as “Metro, ” which today consists of over 117 miles of track, about 50 miles of which is underground. (WMATA Fiscal Year 2018 Proposed Budget at 1-2, Ex. 2 to WMATA Mot., ECF No. 54-4.) About 1.1 million trips are made on WMATA's transit system every weekday. (Id.)

         Operating, constructing, and maintaining the railway system is costly. WMATA's estimated fiscal year 2018 budget is over $3 billion. (Id. at 2-2.) While most of its funding comes from passenger fares and government funding (id.), it has in recent years also received revenue from the “Metro Fiber Optic Program.” (Id. at 2-7.) Under this program, established in 1986, WMATA has received fees from telecommunications providers who install and maintain fiber optic cables within WMATA's railway tunnel system. (Id.) In fiscal year 2018, it is expected that WMATA will receive $15.6 million in revenue from its fiber optic cable contracts. (Id.)

         FiberLight is one of the companies that entered into a fiber optic cable agreement with WMATA. FiberLight is a Delaware limited liability company that “constructs, owns, and operates fiber optic facilities for sale or lease to government and commercial carrier customers in the Washington, D.C. metropolitan area.” (Am. Compl. ¶ 1.) FiberLight entered into a License Agreement with WMATA on October 23, 2006. (Id. ¶ 10; see also License Agreement.) Under the terms of this Agreement, FiberLight received, “a non-exclusive license (“License”) to construct, install, operate, maintain, upgrade and replace telecommunications facilities (the “FIBERLIGHT System”), in, over, under, upon, across and through the WMATA System, the Track Bed and the Terminus Stations.” (License Agreement, Art. 3.1.)[2] In this Agreement, WMATA made the express representation that “it has the power and authority to own and operate the WMATA System[] and to lease conduit rights” to FiberLight. (Id., Art. 14.1.) The License Agreement specified that it was to be in effect for three years and then renew automatically for an additional ten years. (Id., Arts. 2.1, 2.2.) Article 10 of the Agreement specifies that FiberLight is required to make annual payments and details the method for calculating the license fees owed. (Id., Art. 10.) For approximately eight years, FiberLight made annual license payments to WMATA in accordance with the Agreement. (WMATA Facts ¶ 14.)

         In 2013, FiberLight began reviewing its license agreements with railroads and subways around the country, attempting to negotiate new rates with its contractual counterparts where FiberLight felt there was a discrepancy between the rates charged and the entity's authority. (FiberLight's First Supp. Answers to WMATA's First Set of Interrogs. at 7-10, Ex. 17 to WMATA Mot., ECF No. 54-19.) As part of its systematic review, FiberLight sent a letter to WMATA on August 22, 2014, inquiring about WMATA's property rights in its system and its authority to enter into the License Agreement. (Id.; Ex. 2 to Am. Compl., ECF No. 13-2.)

         WMATA responded in a January 22, 2015 letter, explaining that “WMATA's authority to own and operate the WMATA System is established in the WMATA Compact.” (Ex. 12 to WMATA Mot., ECF No. 54-14.) FiberLight did not find this response sufficient to credit WMATA's representation in the Agreement that it has the authority to “lease conduit rights.” (Am. Compl. ¶ 30.) As a result, in 2014 FiberLight stopped paying the license fees provided for under the Agreement, and it has not made payments since then. (See Am. Countercls. ¶ 17; Am. Compl. ¶ 22.)

         On March 10, 2015, FiberLight sent a letter requesting that WMATA provide a basis for its authority to charge fees or, in the alternative, agree to eliminate fees from the Agreement. (Ex. 11 to WMATA Mot., ECF No. 54-13.) FiberLight argued that as a certified telecommunications carrier, it had the independent right to utilize the area below the public rights-of-way, where the WMATA System is located. (Id.; see also Am. Compl. ¶ 7.)[3] WMATA disputed FiberLight's position, and on August 24, 2016, WMATA provided notice that if FiberLight failed to pay its outstanding balance-two years' worth of invoices-within the next 15 days, it would be considered in default under Article 20.1(a) of the License Agreement. (Ex. 10 to WMATA Mot., ECF No. 54-12.) Article 20.1(a) states that an “event of default” includes “the failure of FIBERLIGHT to make any payment hereunder within fifteen (15) calendar days after FIBERLIGHT's receipt of notice from WMATA of FIBERLIGHT's failure to make such payment when due.” (License Agreement, Art. 20.1(a).)

         On August 30, 2016, FiberLight requested WMATA to engage in negotiations. (Am. Compl. ¶ 63.) The parties met on September 14, 2016. (Id. ¶ 64.) FiberLight alleges that at this meeting WMATA “advised it would provide FiberLight written evidence to substantiate its Article 14.1 representations, ” but according to FiberLight, WMATA later failed to do so. (Id. ¶¶ 64-65.) On October 14, 2016, WMATA sent FiberLight another letter. (Ex. 14 to WMATA Mot., ECF No. 54-16.) WMATA reiterated its position that “FiberLight has no right to withhold payment.” (Id.) WMATA notified FiberLight:

If full payment of the past due amount is not received by WMATA within fifteen (15) days of the date hereof, WMATA will: (i) terminate the Agreement, and (ii) unless FiberLight notifies WMATA before the end of the fifteen (15) day period that it will need additional time for orderly termination as described in the Agreement, immediately discontinue any services provided thereunder. If FiberLight does not require additional time for orderly termination, FiberLight must include its proposed plan as part of its notice and any such proposed plan shall in no event exceed more than sixty (60) days from the date of termination. Otherwise, at the close of the fifteen (15) day period WMATA will advise FiberLight of WMATA's election to accept ownership of the FiberLight System, or have it removed.

(Id.)

         On October 25, 2016, FiberLight responded, indicating: it believed WMATA to be in violation of Articles 14.1, 21.1, and 27.4; it sought to pursue mediation, just as it had with AMTRAK in a “similar case”; and “[o]ut of an abundance of caution, ” it “provide[d] notice that it will need additional time to resolve this dispute and, if necessary, provide for orderly termination.” (Ex. 15 to WMATA Mot., ECF No. 54-17.) On November 2, 2016, WMATA replied that after “nearly two years” of “good faith negotiations, ” it was terminating the Agreement and unless it received FiberLight's past-due payment within ten days, it would initiate litigation. (Ex. 13 to WMATA Mot., ECF No. 54-15.) WMATA further stated, “Although WMATA does not currently intend to interrupt whatever service FiberLight provides over its network, WMATA nonetheless puts FiberLight on notice that WMATA has the contractual right to do so in the event FiberLight fails to promptly provide its proposed orderly termination plan.” (Id.) On November 11, 2016, FiberLight filed this suit against WMATA. WMATA answered and filed counterclaims on December 7, 2016.

         The parties continued to exchange letters in December 2016. On December 6, 2016, FiberLight inquired whether it would be given continued access to the WMATA System for the purpose of installing new fiber optic cables. (See Ex. 6 to Am. Compl, ECF No. 13-6.) In a December 16, 2016 letter, WMATA declined this request and stated its position that “by operation of WMATA's termination of the Agreement, the ‘FiberLight System' became WMATA's property.” (Id.)

         FiberLight then filed an amended complaint on December 28, 2016. (See Am. Compl.) WMATA filed an answer to the amended complaint and amended counterclaims on January 13, 2017. (See Am. Countercls.) FiberLight brings three claims in its Amended Complaint: breach of contract, declaratory judgment, and breach of the implied covenant of good faith and fair dealing. WMATA brings two counterclaims: breach of contract and unjust enrichment. WMATA filed a motion to dismiss on January 13, 2017 (ECF No. 16), which was denied by this Court. See FiberLight, LLC v. Washington Metro. Area Transit Auth., No. 16-cv-2248, 2017 WL 2544131 (D.D.C. June 12, 2017).

         On November 29, 2017, WMATA filed a motion for summary judgment as to liability on all counts of the Amended Complaint and Amended Counterclaims. (See WMATA Mot.) In addition to arguing that it should succeed on the merits as to FiberLight's claims, WMATA also argues that FiberLight's claims are barred by the statute of limitations, estoppel, and waiver. (WMATA Mot. at 12-17.) On December 21, 2017, FiberLight filed a cross-motion for summary judgment as to liability regarding all counts of the Amended Complaint and Amended Counterclaims. (See FiberLight Mot.)[4]

         ANALYSIS

         I. LEGAL STANDARD

         Pursuant to Federal Rule of Civil Procedure 56(a), “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Where there are “cross-motions for summary judgment, each must carry its own burden under the applicable legal standard.” Fay v. Perles, 59 F.Supp.3d 128, 132 (D.D.C. 2014) (quoting Ehrman v. United States, 429 F.Supp.2d 61, 67 (D.D.C. 2006)). “Thus, each party ‘bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions[, ] . . . admissions on files, together with the affidavits . . . which it believes demonstrate the absence of a genuine issue of material fact.'” Fay, 59 F.Supp.3d at 132 (quoting Hodes v. Dep't of Treasury, 967 F.Supp.2d 369, 372 (D.D.C. 2013)). “[E]ach side concedes that no material facts are at issue only for the purposes of its own motion.” Sherwood v. Washington Post, 871 F.2d 1144, 1148 n.4 (D.C. Cir. 1989) (quoting McKenzie v. Sawyer, 684 F.2d 62, 68 n.3 (D.C. Cir. 1982)).

         Where a moving party has carried its burden, “the responsibility then shifts to the nonmoving party to show that there is, in fact, a genuine issue of material fact.” 905 F.2d 1558, 1561 (D.C. Cir. 1990). “A dispute is ‘genuine' only if a reasonable fact-finder could find for the non-moving party; a fact is ‘material' only if it is capable of affecting the outcome of the litigation.” Physicians Comm. for Responsible Med. v. United States Dep't of Agric., 316 F.Supp.3d 1, 7 (D.D.C. 2018).

         II. FIBERLIGHT'S CLAIMS

         FiberLight brings three claims: breach of contract (Count I), declaratory judgment (Count II), and breach of the implied covenant of good faith and fair dealing (Count III). The breach of contract claim includes the alleged breach of three provisions of the License Agreement: Article 14.1, Article 21.1, and Article 27.4.[5] Article 14.1 contains an affirmative representation by WMATA regarding its authority, while Articles 21.1 and 27.4 govern remedies in the event of default and dispute resolution. The declaratory judgment claim asks that the Court declare WMATA to be in breach of the Agreement and declare the parties' respective rights and obligations. The breach of implied covenant claim argues that WMATA behaved in bad faith during the parties' pre-litigation discussions. For the reasons described below, the Court concludes that WMATA is entitled to summary judgment as to each of these claims.

         A. COUNT I: BREACH OF CONTRACT

         There are four required elements for a breach of contract claim: “(1) a valid contract between the parties; (2) an obligation or duty arising out of the contract; (3) a breach of that duty; and (4) damages caused by breach.” Xereas v. Heiss, 933 F.Supp.2d 1, 7-8 (D.D.C. 2013) (quoting Tsintolas Realty Co. v. Mendez, 984 A.2d 181, 187 (D.C. 2009)). The parties agree that they entered into a valid contract that imposed obligations upon both parties. (Am. Compl. ¶ 76; Am. Countercls. ¶ 27.) The parties' dispute hinges on the third element: whether WMATA breached any article of the License Agreement. FiberLight contends that WMATA breached Articles 14.1, 21.1, and 27.4. (Am. Compl. ¶¶ 82-83.) Each alleged breach will be addressed- and rejected-in turn below.

         1. Article 14.1

         FiberLight's primary argument rests on the assertion that WMATA made a material misrepresentation in Article 14.1 of the License Agreement, which reads:

WMATA hereby represents that it has the power and authority to own and operate the WMATA System, and to lease conduit rights in the WMATA ROW to FIBERLIGHT for the operation and maintenance of the FIBERLIGHT System and to perform the ...

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