503 F.Supp.3d 608
N.D. Ill.2020Background
- Inteliquent, an interexchange carrier handling substantial T-Mobile traffic, routed calls through HD Tandem after signing a 2015 Master Addendum (MAA) to avoid high LEC tariff charges. Defendants include HD Tandem, Free Conferencing, Yakfree, Wide Voice, and CarrierX; Native American Telecom entities (NATs) provided DIDs and revenue‑sharing arrangements with Free Conferencing/Yakfree.
- Free Conferencing/Yakfree had revenue‑sharing agreements with the NATs that induced heavy conference‑call traffic to high‑tariff LECs (access stimulation); Inteliquent claims many such calls did not physically terminate on the NATs’ local infrastructure.
- Inteliquent alleges defendants misrepresented where calls terminated and the nature of their relationships to induce and keep Inteliquent in the MAA; suit alleges RICO (§1962(c) and (d)), fraud, breach of contract, state unfair‑competition/consumer‑fraud claims, unjust enrichment, and civil conspiracy. Defendants filed counterclaims (breach, interference, ICFA).
- The parties filed cross‑motions for summary judgment; the Court denied summary judgment on the central RICO, fraud (post‑MAA), ICFA and UCL claims due to triable facts, but granted/denied relief on various discrete claims.
- Key factual/contractual disputes: whether the MAA rates are governed solely by the rate sheet or must be tied to the LEC’s tariff where the call physically terminates; whether defendants and the NATs functioned as an association‑in‑fact enterprise; and whether defendants made material misrepresentations that Inteliquent reasonably relied upon.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| RICO §1962(c) (substantive) — operation/management, enterprise, pattern | Defendants ran a coordinated traffic‑pumping enterprise (association‑in‑fact), used misrepresentations and invoices as predicate acts yielding continuity | Defendants acted independently; no sufficient enterprise, operation/management, or continuity to show a RICO pattern | Summary judgment denied to both sides — triable issues exist on operation/management, enterprise, and continuity |
| RICO §1962(d) (conspiracy) | Each defendant knowingly agreed to further the traffic‑pumping enterprise | No agreement to join a single RICO conspiracy; disagreements about interrelationships | Cross‑motions denied — factual disputes preclude summary judgment |
| Breach of contract (Count IV — MAA rates) | MAA should be read to require rates tied to the tariff at the call’s physical termination (so Inteliquent was overcharged) | MAA unambiguously requires HD Tandem to charge the negotiated rate sheet; Section 3 only governs routing, not rate calculation | Defendants’ motion granted, Inteliquent’s denied — contract unambiguous: rates come from the identified rate sheet |
| Breach of contract (Count IX — MSA suspension) | HD Tandem improperly suspended services in 2016 | Suspension was authorized by MSA Attachment A upon Inteliquent’s failure to meet credit/payment demand; also Inteliquent first breached by re‑routing | Court denies summary judgment to both sides on HD Tandem liability (insufficient record re: credit limit, deposit); grants summary judgment for Free Conferencing and CarrierX (no evidence they withheld MSA services) |
| Fraud / Fraudulent inducement | Defendants misrepresented termination points and entity relationships to induce MAA and to keep Inteliquent in it | Defendants dispute falsity, materiality, reliance, and causation; argue Inteliquent knew or should have known | Cross‑motions denied on post‑MAA (Phase Three) fraud/fraudulent inducement (triable issues); summary judgment granted to Defendants on Phase One fraud (plaintiff failed to show inducement in Phase One) |
| State unfair competition / consumer‑fraud (UCL, ICFA) | Defendants’ scheme was unlawful/deceptive; plaintiff alleges California UCL and Illinois ICFA violations | Defendants challenge standing, choice of law, and lack of deceptive/unfair conduct toward Inteliquent | Court denies summary judgment on both sides for UCL and ICFA in main respects (standing to sue under UCL allowed; plaintiff’s UCL motion waived as underdeveloped); ICFA: plaintiff has consumer standing as a buyer of HD Tandem services, but merits remain fact‑bound; plaintiff’s motion denied |
| Unjust enrichment (Phase One) | Free Conferencing/Yakfree were unjustly enriched by revenue‑sharing based on unlawful tariff charges; seek restitution of $2,313,697 | Defendants point to Qwest remand authority and assert benefits conferred; dispute applicability of Farmers II | Court grants summary judgment to Inteliquent on unjust enrichment as to Free Conferencing and Yakfree for Phase One and awards/intends to adopt $2,313,697 damages (no genuine dispute) |
| Civil conspiracy | Defendants conspired with NATs to split unlawfully obtained revenue | Defendants challenge existence of an agreement and whether conduct was unlawful at the time | Court grants summary judgment to Inteliquent as to Yakfree and Free Conferencing (Phase One liability) but denies as to other defendants; damages left for later determination |
| Counterclaims — intentional interference & ICFA (by Free Conferencing, Wide Voice, HD Tandem) | Inteliquent’s whisper functionality and T‑Mobile one‑cent policy injured defendants’ prospective business and violated consumer statutes | Inteliquent argues lack of Article III standing, lack of causation, redressability; T‑Mobile acted as independent third party | Court grants summary judgment to Inteliquent on these counterclaims for lack of standing/traceability/redressability (whisper policy too limited; one‑cent policy trace broken by T‑Mobile’s independent action) |
| Personal liability of Matthew J. Carter | N/A (Inteliquent moved to dismiss claims against Carter) | Defendants assert Carter’s involvement in revenue concerns and communications with T‑Mobile warrant personal liability | Court grants summary judgment for Carter — no record of personal tortious conduct sufficient for individual liability |
Key Cases Cited
- Reves v. Ernst & Young, 507 U.S. 170 (operation/management test for §1962(c) liability)
- United States v. Turkette, 452 U.S. 576 (association‑in‑fact enterprise concept under RICO)
- H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (pattern: relatedness and continuity analysis)
- Boyle v. United States, 556 U.S. 938 (structure requirements for association‑in‑fact enterprises)
- Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (RICO proximate‑cause/standing principles)
- Brouwer v. Raffensperger, Hughes & Co., 199 F.3d 961 (7th Cir. on RICO conspiracy liability and facilitation)
- Goren v. New Vision Int’l, Inc., 156 F.3d 721 (7th Cir. on RICO elements and conspiracy pleading)
- United States v. Torres, 191 F.3d 799 (7th Cir. continuity and relatedness factors for RICO)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment / genuine issue standard)
- Qwest Commc’ns Corp. v. Free Conferencing Corp., 837 F.3d 889 (8th Cir. addressing Farmers II consequences and unjust enrichment context)