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

United States District Court, D. Oregon

September 3, 2019

UNIGESTION HOLDINGS, S.A. d/b/a DIGICEL HAITI, Plaintiff and Counterclaim-Defendant,
v.
UPM TECHNOLOGY, INC. d/b/a UPM TELECOM, INC. and UPM MARKETING, INC.; UPM TELECOM, INC.; UPM MARKETING, INC.; BENJAMIN SANCHEZ a/k/a BENJAMIN SANCHEZ MURILLO; BALTAZAR RUIZ; TYLER ALLEN; and DUY “BRUCE” TRAN, Defendants and Counterclaim-Plaintiffs,
v.
DIGICEL USA, INC., Additional Counterclaim Defendant.

          RICHARD K. HANSEN AND ANNE M. TALCOTT, SCHWABE, WILLIAMSON & WYATT, ROBERT C.L. VAUGHAN, CHERINE SMITH VALBRUN, AND LEAH B. STORIE, KIM VAUGHAN LERNER LLP, OF ATTORNEYS FOR PLAINTIFF, COUNTERCLAIM-DEFENDANT, AND ADDITIONAL COUNTERCLAIM-DEFENDANT.

          KATHRYN P. SALYER AND ELEANOR A. DUBAY, TOMASI SALYER BAROWAY, CHRISTOPHER W. SAVAGE, DAVIS WRIGHT TREMAINE, LLP, OF ATTORNEYS FOR DEFENDANTS AND COUNTERCLAIM-PLAINTIFFS.

          OPINION AND ORDER

          Michael H. Simon United States District Judge.

         Plaintiff Unigestion Holding, S.A. dba “Digicel Haiti” (“Digicel Haiti”) provides mobile telecommunication services in Haiti. Defendants (collectively, “UPM”) formerly provided mobile telecommunication services to Haiti. Digicel Haiti alleges that UPM provided these services by using certain practices and technologies fraudulently to access Digicel Haiti's telecommunications network in Haiti. In its Second Amended Complaint (“SAC”), Digicel Haiti alleges violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) under 18 U.S.C. §§ 1962(b)-(d), common law fraud, conversion, and unjust enrichment. ECF 104. In UPM's Second Amended Answer (“SAA”), UPM asserts counterclaims, alleging violations of §§ 201 and 202 of the Communications Act of 1934 under 47 U.S.C. § 151 et seq., breach of implied-in-fact contract, money had and received, conversion, unjust enrichment, intentional interference with prospective advantage, and monopolization and attempted monopolization in violation of § 2 of the Sherman Act under 15 U.S.C. § 2. ECF 158. Two motions are pending before the Court. The first is Digicel Haiti's motion to dismiss UPM's antitrust counterclaim. ECF 162. The second is UPM's motion to dismiss Digicel Haiti's RICO claims. ECF 178. For the following reasons, both motions are granted.

         STANDARDS

         A. 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)).

         B. Motion for Judgment on the Pleadings Under Rule 12(c)

         “Analysis under Rule 12(c) is ‘substantially identical' to analysis under Rule 12(b)(6) because, under both rules, a court must determine whether the facts alleged in the complaint, taken as true, entitle the plaintiff to a legal remedy.” Pit River Tribe v. Bureau of Land Mgmt., 793 F.3d 1147, 1155 (9th Cir. 2015) (quoting Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012)). Dismissal for failure to state a claim under Rule 12(b)(6) “is proper if there is a ‘lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.'” Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) (quoting Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1988)). In addition, “to survive a motion to dismiss, a complaint must contain sufficient factual matter to state a facially plausible claim to relief.” Shroyer v. New Cingular Wireless Services, Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)); see also Cafasso, United States ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 n.4 (9th Cir. 2011) (Iqbal standard applies to review of Rule 12(c) motions).

         BACKGROUND

         For purposes of Digicel Haiti's motion to dismiss UPM's antitrust counterclaim, the Court accepts as true the well pleaded facts alleged by UPM in its counterclaim. In addition, certain allegations from Plaintiff's SAC are included as background. In deciding Digicel Haiti's motion to dismiss, the Court gives no presumption of truth to Digicel Haiti's allegations in the SAC, except where UPM's antitrust counterclaim endorses or relies upon Digicel Haiti's allegations. For purposes of UPM's motion to dismiss Digicel Haiti's RICO claims, the Court accepts as true the well-pleaded facts alleged by Digicel Haiti in its SAC.

         A. Digicel Haiti

         Digicel Haiti is a wholly owned subsidiary of Digicel Holdings, Ltd., which also owns Additional Counterclaim Defendant Digicel USA, Inc. (“Digicel USA”) and Digicel Jamaica, Ltd. (“Digicel Jamaica”). Digicel Haiti is the leading provider of telecommunications services in Haiti, where it solely operates and has an estimated market share of between 75 and 90 percent of local telephone service in Haiti. SAA, ¶ 250 (ECF 158 at 29). Digicel USA operates a set of international telephone switching systems-equipment with the capacity to transmit a call from the United States to an overseas telecommunications network-located in Miami, Florida and New York City, New York.

         Digicel Haiti tracks and charges its local customers in Haiti through the use of pre-paid Subscriber Identity Module (“SIM”) cards. A SIM card acts as a small circuit board. When the card is placed inside a cellular telephone, the card identifies the device as associated with an individual customer's unique telephone number and account. SIM cards allow customers to access Digicel Haiti's cellular network and, in turn, allow Digicel Haiti to charge for communications made from cellular devices containing specific SIM cards. Digicel Haiti's customers use these SIM cards for voice, data, and messaging services on the Digicel Haiti network. Digicel Haiti's customers can add credits, in the form of minutes, to their SIM cards by using, among other methods, vouchers and online “top-ups.” When a user of a Digicel Haiti SIM card makes a local call within Haiti, that user incurs charges of approximately $0.09 per minute of wireless service. If a Digicel Haiti customer travels to the United States and uses his or her Digicel Haiti SIM card to make calls back to Haiti, the user of that SIM card generally incurs charges of at least $1.99 for each minute of wireless service used. Digicel Haiti also offers a Roam-Like-You're-Home (“RLYH”) pricing plan. For a monthly access fee of approximately $20 to $25, the RLYH plan allows registered Digicel Haiti customers to call back to Haiti while traveling in the United States at rates similar to the local rate in Haiti during the authorized, pre-paid period.

         When someone in the United States not registered on a Digicel Haiti RLYH plan originates a call to one of Digicel Haiti's subscribers in Haiti, a “third-party carrier”-typically, a United States telecommunications carrier, which does not have the internal capacity to transport a call to Haiti, also sometimes referred to as a “wholesaler”-picks up that telephone call from the United States-based originating caller and transports it to one of the Digicel USA switching gateways. From that switching gateway, Digicel USA picks up the call and transports it to Haiti, where Digicel Haiti “terminates” the call on its local network in Haiti. The terminating end of a call is the party being called by the party originating the call. On Digicel Haiti's behalf, Digicel Jamaica bills the third-party carrier at the rate of $0.23 per minute for international calls that terminate on Digicel Haiti's network. That fee includes the cost of terminating the call on Digicel Haiti's network and the cost of switching services performed by Digicel USA. Digicel Haiti then pays Digicel USA a fee for its services through an intercompany transfer. Digicel Haiti does not authorize international or domestic telephone traffic to enter its telecommunications network in Haiti by any other route or under any other form of agreement.

         B. UPM

         UPM is an Oregon corporation that facilitated international calls from the United States to people in Haiti on behalf of third-party carriers, at rates lower than what Digicel Haiti charged. UPM asserts that from April 2014 through November 2014 it essentially resold Digicel Haiti's local and RLYH services within the United States at a discount. Due to Digicel Haiti's effective efforts to prevent UPM from reselling Digicel Haiti's services, as described below, UPM no longer facilitates calls to Haiti. UPM's business operations involved paying full retail price to acquire large quantities of Digicel Haiti's SIM cards from authorized dealers and then using those cards in UPM servers to facilitate calls to Haiti through two distinct platforms: (1) the resale of the RLYH plan; and (2) the resale of Digicel Haiti's local wireless services.

         The first and most common way that UPM facilitated calls to Haiti began with UPM enrolling or registering in the RLYH plan the Digicel Haiti SIM cards that UPM purchased at full retail price. UPM would then place or assemble the RLYH-enrolled SIM cards into one or more SIM servers owned and maintained by UPM. These UPM servers were then connected to the internet and capable of accessing the wireless networks of AT&T and T-Mobile, the third-party carriers that have roaming arrangements in the United States with Digicel Haiti. Ordinarily, when a third-party carrier's customers called Haiti, the third-party carrier, and ultimately the customer, would have to pay the standard amount-a minimum of $0.23 per minute-for Digicel Haiti to connect the international call to its local network in Haiti. UPM offered to the third-party carriers a less expensive way to connect the calls based on the open wholesale “spot” market in the United States. A third-party carrier that elected to use UPM's services would switch a call bound for a Digicel Haiti customer in Haiti to UPM, instead of through Digicel USA's gateway. The third-party carrier's switch would convert or reformat the call into an internet-based protocol packet that carries the call (including the destination number in Haiti) over the internet to one of UPM's SIM servers located in Oregon. UPM's SIM server would then initiate the call to Haiti on the third-party carrier's wireless network. UPM's SIM server also would convert the call into the appropriate format for wireless transmission and essentially program or reformat the call to make it appear to come from a mobile telephone number already associated with one of the RLYH-enrolled Digicel Haiti SIM cards. After the call was made to look like a call registered on the RLYH plan, it would follow the typical route for calls switched directly to Digicel Haiti: the third-party carrier would route the newly-reformatted call to one of Digicel USA's switches in New York or Miami, Digicel USA would then carry the call to Haiti, and lastly Digicel Haiti would terminate the call on its local network in Haiti, charging the associated SIM card at the discounted RLYH rate.

         A second, although less common, way in which UPM facilitated international calls to Haiti was by transporting the calls to Digicel Haiti's local network in Haiti through a Voice-over-Internet-Protocol (“VoIP”). Similar to the first process, the customer of a third-party carrier would initiate a call to someone in Haiti, and the third-party carrier's switch would then select UPM to handle the call. The call would be sent to a UPM SIM server in Oregon in the same manner described above. Instead of initiating a wireless call to Haiti and converting the call for wireless transmission, however, UPM would leave the call in an Internet-based protocol packet (i.e., in VoIP format). UPM would use the internet to transmit the call to a receiver in Haiti, known as a Global System for Mobile communications (“GSM”) Gateway. The GSM Gateway would then format the call for wireless transmission and initiate a wireless call on Digicel Haiti's local network in Haiti using the account information associated with the UPM SIM card in Oregon. Digicel Haiti would then terminate (or complete) the call on its local network in Haiti, treating the call as a local call and charging the associated SIM card at the lower rate applicable to local calls.

         Digicel Haiti undertook an investigation into the international “resale” of its services. During the investigation, Digicel Haiti discovered that the calling and usage patterns of particular SIM cards were inconsistent with use by individual customers. Digicel Haiti then “de-authorized” those SIM cards so that calls associated with those cards could no longer be completed. Because Digicel Haiti de-authorized many of the SIM cards that UPM used to conduct its business, UPM was no longer able to facilitate international calls to Haiti through either RLYH plans or VoIP.

         DISCUSSION

         A. UPM's Amended Antitrust Counterclaim

         UPM alleges that Digicel Haiti has monopolized or attempted to monopolize two distinct product markets. The first is the product market for delivering calls from the United States to Haiti for calls terminating in Haiti (the “Haiti market”). SAA, ¶ 356 (ECF 158 at 54). The second is the product market for delivering calls from the United States to Haiti for calls terminating with a Digicel Haiti subscriber (the “Digicel Haiti submarket”). Id. For both product markets, UPM alleges a geographic market of the United States. SAA, ¶ 357 (ECF 158 at 55).

         In an earlier pleading, UPM alleged several different forms of anticompetitive conduct. See ECF 127, at 45-46, ¶¶335-340. Plaintiff moved to dismiss UPM's earlier antitrust counterclaim. During oral argument on that motion, UPM expressly stated that it was not relying upon the “essential facilities” doctrine as a theory of anticompetitive conduct. See ECF 154 at 26 n.5. The Court dismissed UPM's antitrust counterclaim but allowed UPM to replead. Id. at 31. In its amended antitrust counterclaim, UPM now bases its counterclaim almost exclusively on the essential facilities doctrine. UPM alleges:

As described more fully below, Digicel has violated Section 2 of the Sherman Act by denying UPM access to Digicel Haiti's local wireless network in Haiti, which is an “essential facility” in competing with Digicel within the United States for the business of carriers who seek the service of delivering calls to, and terminating those calls in, Haiti. In addition, Digicel has violated Section 2 by pricing the function of transporting and terminating calls from the United States to Haiti at the exact same level as the function of terminating calls in Haiti alone, in other words, by pricing the transport function at the undeniably predatory price of zero. The result has been that Digicel has monopolized the market for delivering and terminating calls from the ...

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