Qwest Communications Corp. v. Free Conferencing Corp.
837 F.3d 889
8th Cir.2016Background
- Qwest (IXC) stopped paying Sancom (LEC) for call-termination charges after discovering Sancom billed for calls terminating at Free Conferencing (FC) bridges; Sancom sued Qwest and Qwest asserted third‑party claims against FC.
- FC operated free conference-call bridges and contracted with Sancom: Sancom hosted the bridges and paid FC a per‑minute “marketing fee”; FC’s traffic dramatically increased minutes Sancom reported to IXCs.
- Sancom’s tariff allowed it to bill IXCs for calls to an “end user” (a subscriber); FC did not subscribe to Sancom’s services under the tariff.
- The FCC (in Farmers I then Farmers II) ultimately held that a conference provider that did not subscribe to the LEC could not be an “end user,” so LECs could not bill IXCs for bridged calls; the FCC reserved other compensation issues.
- After Qwest settled with Sancom, Qwest tried FC on claims for intentional interference with a business relationship, unfair competition, and unjust enrichment; the district court ruled for FC; on appeal the court affirmed on interference and unfair competition but reversed and remanded on unjust enrichment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Intentional interference with a business relationship | FC designed its business to induce Sancom to bill Qwest in breach of tariff, so interference was improper and intentional | FC reasonably believed its arrangement complied with the tariff and lacked an improper purpose or knowledge it was unlawful | Affirmed: Qwest failed to prove FC acted with an improper purpose; FC’s belief and credibility supported no tortious interference |
| Unfair competition (inducing regulatory violations) | FC’s inducement of tariff violations is an actionable unfair method of competition | South Dakota requires direct competition/economic rivalry for unfair competition; FC was not a competitor of Qwest | Affirmed: South Dakota would not recognize this new unfair‑competition theory absent direct competition |
| Unjust enrichment | FC received and retained benefit (Sancom’s tariff proceeds) inequitably and should disgorge value to Qwest | FC provided legitimate services, did not act unlawfully or inequitably, and Qwest already recovered from Sancom | Reversed and remanded: district court relied on irrelevant factors ("loophole" characterization and Sancom’s settlement); unjust enrichment must be reconsidered on full record |
Key Cases Cited
- Affordable Cmtys. of Mo. v. Fed. Nat’l Mortg. Ass’n, 815 F.3d 1130 (8th Cir. 2016) (standard of review for bench-trial factual findings and legal conclusions)
- Selle v. Tozser, 786 N.W.2d 748 (S.D. 2010) (elements of tortious interference under South Dakota law)
- Gruhlke v. Sioux Empire Fed. Credit Union, 756 N.W.2d 399 (S.D. 2008) (factors for determining impropriety in interference claims)
- ANR W. Coal Dev. Co. v. Basin Elec. Power Co-op., 276 F.3d 957 (8th Cir. 2002) (intent/knowledge standards in interference claims under Restatement approach)
- Dowling Family P’ship v. Midland Farms, 865 N.W.2d 854 (S.D. 2015) (unjust enrichment elements and equitable nature of remedy)
- Johnson v. Larson, 779 N.W.2d 412 (S.D. 2010) (measuring restitution by value of benefit unjustly received)
- Lien v. Nw. Eng’g Co., 39 N.W.2d 483 (S.D. 1949) (wrongful inducement of contract breach is actionable)