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Unigestion Holding, S.A. v. UPM Technology, Inc.

United States District Court, D. Oregon

May 16, 2017

UNIGESTION HOLDING, S.A., a foreign corporation, d/b/a DIGICEL HAITI, Plaintiff,
UPM TECHNOLOGY, INC. d/b/a UPM TELECOM, INC. and UPM MARKETING, INC., an Oregon corporation; UPM TELECOM, INC., an Oregon a/b/n; UPM MARKETING, INC., an Oregon a/b/n; BENJAMIN SANCHEZ a/k/a BENJAMIN SANCHEZ MURILLO, an Oregon resident; BALTAZAR RUIZ, an Oregon resident; TYLER ALLEN, an Oregon resident; and DUY TRAN a/k/a BRUCE TRAN, Defendants.

          Richard K. Hansen and Anne M. Talcott, Schwabe, Williamson & Wyatt, PC, Robert C.L. Vaughan, Cherine Smith Valbrun, and Leah B. Storie, Kim Vaughan Lerner LLP, Attorneys for Plaintiff.

          Kathryn P. Salyer and Eleanor A. DuBay, Tomasi Salyer Martin, Christopher W. Savage, Davis Wright Tremaine, LLP, Attorneys for Defendants.


          Michael H. Simon United States District Judge

         Plaintiff, Unigestion Holdings, S.A., doing business as Digicel Haiti (“Digicel Haiti” or “Plaintiff”), asserts claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., and for common law fraud, conversion, and unjust enrichment against Defendants UPM Technology, Inc.; UPM Marketing, Inc.; UPM Telecom, Inc.; Benjamin Sanchez; Baltazar Ruiz; Tyler Allen; and Duy Tran (collectively, “Defendants”). Plaintiff and Defendants each provide mobile telecommunication services to Haiti. Plaintiff alleges that Defendants provide these services by fraudulently accessing Digicel Haiti's telecommunications network through the use of certain technologies and practices. Before the Court is Defendants' motion to dismiss Plaintiff's Second Amended Complaint (“SAC”). For the following reasons, Defendants' motion to dismiss is denied.


         A. Motion to Dismiss Under Rule 12(b)(1)

         Federal courts are courts of limited jurisdiction. Gunn v. Minton, __ U.S. __, 133 S.Ct. 1059, 1064 (2013) (citation omitted). As such, a court is to presume “that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (citations omitted); see also Robinson v. United States, 586 F.3d 683, 685 (9th Cir. 2009); Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) for lack of “subject-matter jurisdiction, because it involves a court's power to hear a case, can never be forfeited or waived.” United States v. Cotton, 535 U.S. 625, 630 (2002). An objection that a particular court lacks subject matter jurisdiction may be raised by any party, or by the court on its own initiative, at any time. Arbaugh v. Y&H Corp., 546 U.S. 500, 506 (2006); Fed.R.Civ.P. 12(b)(1). The Court must dismiss any case over which it lacks subject matter jurisdiction. Fed.R.Civ.P. 12(h)(3).

         A Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction may be either “facial” or “factual.” See Safe Air for Everyone, 373 F.3d at 1039. A facial attack on subject matter jurisdiction is based on the assertion that the allegations contained in the complaint are insufficient to invoke federal jurisdiction. Id. “A jurisdictional challenge is factual where ‘the challenger disputes the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction.'” Pride v. Correa, 719 F.3d 1130, 1133 n.6 (9th 2013) (quoting Safe Air for Everyone, 373 F.3d at 1039)). When a defendant factually challenges the plaintiff's assertion of jurisdiction, a court does not presume the truthfulness of the plaintiff's allegations and may consider evidence extrinsic to the complaint. See Terenkian v. Republic of Iraq, 694 F.3d 1122, 1131 (9th Cir. 2012); Robinson, 586 F.3d at 685; Safe Air for Everyone, 373 F.3d at 1039. A factual challenge “can attack the substance of a complaint's jurisdictional allegations despite their formal sufficiency.” Dreier v. United States, 106 F.3d 844, 847 (9th Cir. 1996) (citation and quotation marks omitted).

         B. Motion to Dismiss Under Rule 12(b)(6)

         A motion to dismiss for failure to state a claim may be granted only when there is no cognizable legal theory to support the claim or when the complaint lacks sufficient factual allegations to state a facially plausible claim for relief. Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). In evaluating the sufficiency of a complaint's factual allegations, the court must accept as true all well-pleaded material facts alleged in the complaint and construe them in the light most favorable to the non-moving party. Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012); Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). To be entitled to a presumption of truth, allegations in a complaint “may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). All reasonable inferences from the factual allegations must be drawn in favor of the plaintiff. Newcal Indus. v. Ikon Office Solution, 513 F.3d 1038, 1043 n.2 (9th Cir. 2008). The court need not, however, credit the plaintiff's legal conclusions that are couched as factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).

         A complaint must contain sufficient factual allegations to “plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.” Starr, 652 F.3d at 1216. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).


         Digicel Haiti alleges that it operates a mobile telecommunications network in Haiti. Digicel Haiti is part of the “Digicel Group” of companies, which includes Digicel USA, Inc. (“Digicel USA”) and Digicel Jamaica Limited (“Digicel Jamaica”). When an individual in the United States places a call to one of Digicel Haiti's subscribers in Haiti, that call is routed through a switch operated by Digicel USA, located in either Miami, Florida or New York, New York. The switch creates a Call Detail Record (“CDR”), which contains various information about the call, including the initiating caller's telephone number. Digicel USA's switch then transmits the call to a Digicel Haiti switch in Haiti, which routes the call to one of Digicel Haiti's cellsites in Haiti. That cellsite then connects the call to the subscriber's cellular telephone. Digicel Haiti's switch also creates a CDR when the call reaches Haiti.

         Digicel Haiti only authorizes international telecommunications traffic to enter its Haitian network through this switching system, not through any other means. This is because when a call does not enter Digicel Haiti's network through the switching system, Digicel Haiti cannot obtain the identifying information that it needs to classify the call as originating internationally. When Digicel Haiti cannot classify a call as international, it cannot charge the rate that it ordinarily charges for such calls, which is a minimum of 23 cents per minute, as set by the government of Haiti.

         Digicel Haiti also offers a program called the “Roam Like You're Home” (“RLYH”) Plan. In exchange for paying certain fees and agreeing to the applicable terms of service, Digicel Haiti's customers on the RLYH Plan pay lower, domestic Haitian rates on international calls made to Haiti while they are abroad.

         As alleged by Digicel Haiti, Defendants engaged in, and continue to engage in, what Digicel Haiti calls “bypass fraud.” Defendants allegedly have created a telecommunications network consisting of the internet, specialized software, SIM[1] boxes or servers, “receivers, ” and “false gateways.” Defendants allegedly use this network to route calls around, or “bypass, ” Digicel USA's and Digicel Haiti's international switches, thereby “disguising” international calls destined for Digicel Haiti's network as domestic Haitian calls. By “disguising” international calls as domestic, Defendants can place, or terminate, international calls on Digicel Haiti's network at lower, domestic rates, thereby depriving Digicel Haiti from receiving revenue that would come from imposing higher, international charges. Defendants allegedly sell to third parties minutes for calling Haiti from the United States at lower rates than those parties would otherwise have to pay if the calls were routed through Plaintiff's international switching system. Plaintiff also alleges that Defendants disguise ordinary international calls as international calls placed by Plaintiff's RLYH Plan subscribers.


         Defendants assert three independent arguments in support of their motion to dismiss. First, Defendants argue, under Rule 12(b)(6) of the Federal Rules of Civil Procedure, that Plaintiff's SAC fails to state a claim. Second, Defendants argue, under Rule 12(b)(1), that the Communications Act of 1934 (the “Federal Communications Act” or the “FCA”), 47 U.S.C. § 151 et seq., preempts the claims asserted by Plaintiff. Third, Defendants argue, under the doctrine of primary jurisdiction, that Plaintiff's claims should be dismissed or stayed while the Federal Communications Commission (“FCC”) decides certain threshold issues. As discussed more fully below, the parties, in essence, disagree over: (a) what Defendants actually did; and (b) whether what Plaintiff alleges Defendants actually did properly can be considered fraudulent. The first question cannot be resolved at this stage of the litigation, but must await either summary judgment or trial. The second question already has been answered by the Court in the affirmative.

         A. The Sufficiency of Digicel Haiti's Allegations

         This is not the first time that Defendants have moved to dismiss Digicel Haiti's claims under Rule 12(b)(6). See ECF 46 at 10-18. The Court previously denied Defendants' earlier motion to dismiss, holding that

Digicel has stated a claim for common law fraud, RICO violations, conversion, and unjust enrichment, all based on UPM's use of technology to actively conceal the origin of the telephone calls that UPM transmits to Digicel's telecommunications network.

ECF 58 at 23.

         Plaintiff alleges that when Defendants transmit calls to Digicel Haiti's network, they manipulate the calls to make them appear as if they have originated from a cellular telephone located in Haiti or from an RLYH Plan subscriber abroad, when in fact the calls originate in the United States by someone who is not contractually entitled to use the RLYH Plan. According to Plaintiff, Defendants engage in the allegedly deceptive practices to avoid detection by Digicel Haiti, which allegedly would not connect the calls transmitted by Defendants if Plaintiff's system recognized the calls as actually originating in the United States or from someone other than an RLYH Plan subscriber. Plaintiff's allegations that Defendants engaged in “active contrivances intended to hide information, mislead, avoid suspicion, or prevent further inquiry into a material matter, ” sufficiently state a claim of active concealment under the common law. See United States v. Colton, 231 F.3d 890, 899 (4th Cir. 2000). In addition, Plaintiff sufficiently alleges damages by claiming that Defendants diverted calls from Plaintiff's switches, thereby preventing Plaintiff from charging its higher international rates.

         As the Court previously ruled in connection with Plaintiff's First Amended Complaint, Plaintiff sufficiently pleads the elements of common law fraud in Oregon. ECF 58 at 19. Plaintiff's allegations also sufficiently state the RICO predicate acts of wire fraud, mail fraud, and access device fraud, based in part on Defendants' alleged use of the wires and mails to fund and provide equipment to their Haitian co-conspirators and Defendants' alleged unauthorized use of Digicel Haiti's SIM cards. Id. at 20-21. Plaintiff also sufficiently states claims for conversion and unjust enrichment. Id. at 22-23.

         Defendants' additional arguments raised in their most recent motion to dismiss also are unavailing. First, Defendants argue that Plaintiff's claims fail because Plaintiff has not shown that Defendants have an obligation under the law of Haiti to pay Plaintiff a rate of 23 cents per minute on all international calls from the United States to Haiti.[2] The essence of Plaintiff's case is that Plaintiff charges 23 cents per minute for international calls from the United States to Haiti, except for RLYH Plan subscribers. Plaintiff asserts that if Defendants (or their customers) want to use Plaintiff's network to make international calls from the United States to Haiti, then Defendants (or their customers) must pay the rate that Plaintiff charges. Defendants, however, allegedly through active concealment or other fraud, avoid paying those charges, which causes a loss of revenue to Plaintiff. It does not matter whether Plaintiff is legally obligated to charge any particular rate to ...

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