Core Communications, Inc. v. Verizon Maryland LLC, 744 F.3d 310

Background

Core Communications (CLEC) adopted a previously approved interconnection agreement (ICA) with Verizon (ILEC); the Maryland PSC approved the Core ICA in 1999.
Core requested interconnection in September 1999; Verizon delayed, declined to use existing on-net equipment based on internal policy, and installed new equipment; interconnection completed December 1999.
The PSC later found Verizon breached the ICA; Verizon sought and won declaratory relief in district court; the Fourth Circuit reversed, finding Verizon breached and remanding to determine damages and whether there was bad faith.
On remand the district court consolidated Core’s 2002 state-law tort and contract claims with the remand proceedings; discovery included Core’s president admitting he could not identify any false Verizon statement and that he knew Core was a Verizon retail customer at the Wire Center.
Verizon invoked an exculpatory clause in the ICA (precluding consequential damages, including lost profits, but preserving liability for willful/intentional misconduct); district court first found the clause unenforceable on public-policy grounds as to torts and contract but, on reconsideration, enforced the clause for contract damages and awarded Core $1 nominal damages.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Waiver/timeliness of invoking ICA’s exculpatory clause	Core: Verizon waived clause by not pleading it as an affirmative defense in 2002 and not invoking it earlier	Verizon: Clause is part of the ICA and evident from the contract; no prejudice from raising after remand	Court: No abuse of discretion; clause need not be pleaded under Rule 8(c) when evident in contract and no prejudice occurred
Enforceability of exculpatory clause under federal/state law	Core: Clause violates Maryland public policy and is void	Verizon: FCC precedent allows such clauses in ICAs; PSC approved the ICA so state-law attack was untimely	Court: Federal law governs ICAs; Chevron/Brand X deference to FCC decisions applies; PSC approval forecloses later state-law invalidation; clause enforceable for contract damages
Summary judgment on concealment & unfair competition (intent/reliance)	Core: Facts established by prior appeal and discovery show concealment of “customer of record,” supporting tort claims	Verizon: No evidence of intent to defraud or reasonable reliance; Core’s president conceded lack of any untrue statements and knowledge that Core was a retail customer	Court: Affirmed summary judgment for Verizon; Core failed to show intent to deceive or justifiable reliance; tort claims essentially contractual in nature
Damages despite exculpatory clause (willful misconduct, "services" scope, performance penalties)	Core: Exclusion doesn’t apply because breach was willful/intentional; interconnection isn’t a "service"; or alternatively Core is entitled to ICA performance penalties	Verizon: No evidence of willful misconduct; "services" covers interconnection; Core didn’t meet section 27.3 quarterly-report trigger for penalties	Court: Rejected Core’s theories; no willful/intentional misconduct shown; plain term "services" includes interconnection; Core failed to satisfy performance-penalty prerequisites; nominal $1 damages affirmed

Key Cases Cited

Verizon Commc’ns, Inc. v. FCC, 535 U.S. 467 (Sup. Ct.) (context on Telecommunications Act and FCC authority)
Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (Sup. Ct.) (Chevron deference to agency interpretations)
Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (Sup. Ct.) (framework for judicial deference to agencies)
AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366 (Sup. Ct.) (federal regime for local telecom competition)
Verizon Md., Inc. v. Global NAPS, Inc., 377 F.3d 355 (4th Cir.) (ICAs as creations of federal law)
Caterpillar Overseas S.A. v. Marine Transp. Inc., 900 F.2d 714 (4th Cir.) (exception to Rule 8(c) where contractual provision was evident)
Lloyd v. Gen. Motors Corp., 916 A.2d 257 (Md. Ct. App.) (elements of concealment/fraud under Maryland law)