                                                                                                                           Opinions of the United
2008 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-11-2008

Bus Edge Grp v. Champion Mtg
Precedential or Non-Precedential: Precedential

Docket No. 07-1059




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Recommended Citation
"Bus Edge Grp v. Champion Mtg" (2008). 2008 Decisions. Paper 1349.
http://digitalcommons.law.villanova.edu/thirdcircuit_2008/1349


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                                                 PRECEDENTIAL

           UNITED STATES COURT OF APPEALS
                FOR THE THIRD CIRCUIT




                           No. 07-1059




             THE BUSINESS EDGE GROUP, INC.,

                            Appellant,

                                 v.

         CHAMPION MORTGAGE COMPANY, INC.,




        On Appeal from the United States District Court
                  for the District of New Jersey
                      (D.C. No. 03-cv-5498)
         District Judge: Honorable Susan D. Wigenton


                     Argued January 3, 2008

 Before: FUENTES, JORDAN, Circuit Judges, and DUBOIS,*
                    District Judge.


                      (Filed March 11, 2008)

Steven F. Gooby (Argued)



        * Honorable Jan E. DuBois, Senior District Judge for the
United States District Court of the Eastern District of Pennsylvania,
sitting by designation.
DLA Piper
Two Tower Center Boulevard
Suite 1600
East Brunswick, New Jersey 08816

       Attorneys for Appellant

Thomas J. Burns (Argued)
Reed Smith
136 Main Street
Suite 250, Princeton Forrestal Village
Princeton, New Jersey 08540

       Attorneys for Appellees




                  OPINION OF THE COURT


FUENTES, Circuit Judge.

        This case involves a company, The Business Edge Group,
Inc. (“Business Edge”), which targeted and subscribed to a vanity
toll free telephone number in order to take advantage of the value
it presented to Champion Mortgage Company, Inc. (“Champion”).1
The issue we address is whether Business Edge’s actions violated
an FCC regulation which prohibits entities from acquiring toll free
telephone numbers in order to sell them and from hoarding toll free
telephone numbers. For the reasons that follow, we conclude that
Business Edge did not sell the telephone number at issue to
Champion and that the case must be remanded for a determination
of whether Business Edge engaged in hoarding.

                                 I.




       1
        A vanity telephone number is a number that spells a word
or phrase on a telephone number pad.

                                 2
        At some point prior to 1998, Business Edge acquired the toll
free telephone number 1-800-242-6740 (1-800-Champi0[n], or “the
Number”).2 Sheldon Kass, the President of Business Edge,
testified during a deposition that he acquired the Number because
“it had certain spellings” associated with it, namely, “the word
champion,” and thus the Number had potential application in the
mortgage business. (App. 98.) After subscribing to the Number,
Business Edge routed all calls to the Number to an unnamed
mortgage company. It then contacted Champion to inform them
that it had an 800 number that spelled “Champi0n” and that when
people misdialed Champion’s toll free telephone number, using a
“zero” rather than the letter “o,” they were being routed to another
mortgage company. When Cindy Stancavish, a marketing manager
at Champion, called the Number to validate Business Edge’s claim,
she found that the mortgage company did not identify itself,
leading callers to believe they were speaking with Champion.

        Because of the perceived loss of business, Champion
offered to purchase the number from Business Edge for $60,000,
but Business Edge rejected the offer. The parties then entered into
an agreement (the “1998 Agreement”) pursuant to which Business
Edge would route calls to the Number to Champion for $.10 per
minute, plus $3.00 per each customer with an unique telephone
number that called the Number.3 The purpose of the 1998
Agreement was to set up a trial period to show Champion the
volume of traffic to the Number so it could determine whether to
enter into a longer-term agreement with Business Edge. During the
pendency of the 1998 Agreement, Business Edge consulted Gelt
Financial, a local mortgage lender and servicing company, to get
a valuation of the routing arrangement from Champion’s


       2
         In contrast, Champion’s telephone number is 1-800-242-
6746, or 1-800-Champio[n]. Thus, the difference between the two
telephone numbers is whether you dial the “o” in Champion as a
zero or the letter “o,” which corresponds to a “6” on a telephone
number pad.
       3
        The parties appear to dispute whether the offer to buy the
Number occurred before or after entering the 1998 Agreement.
This dispute has no impact on the analysis.

                                 3
perspective.   Following Gelt’s report, Business Edge and
Champion agreed to an arrangement in which Champion would pay
$25,000 per month for five years in exchange for Business Edge
routing calls made to the Number to Champion (the “1999
Agreement”).

        The parties performed on the 1999 Agreement from August
1999 through December 2002. The following month, Champion
sent Business Edge a letter stating that the contract violated an
FCC regulation, 47 C.F.R. § 52.107, and demanded reimbursement
for the payments that had been made on the contract. Despite the
letter, Champion continued to pay on the 1999 Agreement through
April 2003. Champion failed to pay the final $375,000 remaining
on the 1999 Agreement and Business Edge terminated the contract
and its routing services.

        Business Edge filed a complaint in state court, claiming
breach of contract for Champion’s failure to pay the final $375,000
in monthly fees. Champion removed the case to federal court on
diversity grounds. In the District Court, Champion argued that the
case should be transferred to the FCC under the doctrine of primary
jurisdiction because resolution of the case requires interpretation
of FCC rules and policies, or, in the alternative, that the District
Court should determine that the 1999 Agreement was void ab initio
because Business Edge violated 47 C.F.R. § 52.107 by brokering
the Number to Champion. In contrast, Business Edge contended
that there was no technical sale of the Number, so there could be no
violation of 47 C.F.R. § 52.107. The District Court determined on
the eve of trial that no material issues of fact were in dispute and
the case could be disposed of as a matter of law.

        The District Court first decided that it was unnecessary to
transfer the case to the FCC under the doctrine of primary
jurisdiction. The District Court found that it was just as well suited
as the FCC to determine the principal issue in the case, whether the
contract violated 47 C.F.R. § 52.107, which provides that “[t]oll
free subscribers shall not hoard toll free numbers” and that “[n]o
person or entity shall acquire a toll free number for the purpose of
selling the toll free number to another entity or to a person for a



                                  4
fee.” 4 (App. 12-16.)

        The court then focused on whether Business Edge acquired
the number in order to sell it to Champion and found that because
the value of the 1999 Agreement was in line with the value that
Champion would receive for the calls, rather than being in line with
the cost of routing services, the 1999 Agreement should be re-
characterized as a sale of the Number. Thus, the District Court
held that the 1999 Agreement violated 47 C.F.R. § 52.107.
Finding that both parties had unclean hands in creating the 1999
Agreement, the court excused Champion from further payments
under the contract and denied restitution of the payments
previously made. Business Edge appeals the District Court’s
order.5


       4
           The regulation reads, in pertinent part, as follows:

       (a) As used in this section, hoarding is the
       acquisition by a toll free subscriber from a
       Responsible Organization of more toll free numbers
       than the toll free subscriber intends to use for the
       provision of toll free service. The definition of
       hoarding also includes number brokering, which is
       the selling of a toll free number by a private entity
       for a fee.
               (1) Toll free subscribers shall not hoard toll
               free numbers.
               (2) No person or entity shall acquire a toll
               free number for the purpose of selling the toll
               free number to another entity or to a person
               for a fee.

47 C.F.R. § 52.107(a).
       5
        The District Court had jurisdiction over the case pursuant
to 28 U.S.C. § 1332. The District Court’s December 11, 2006
summary judgment order disposed of all claims of all parties.
Accordingly, jurisdiction is proper in this court pursuant to 28
U.S.C. § 1291. We exercise plenary review over a district court’s
summary judgment ruling. Univ. of Pittsburgh v. United States,

                                   5
                                  II.

       A.      The Regulation

        Section 52.107(a) provides that “(1) [t]oll free subscribers
shall not hoard toll free numbers” and that “(2) [n]o person or
entity shall acquire a toll free number for the purpose of selling the
toll free number to another entity or to a person for a fee.”
Hoarding is defined as “the acquisition of more toll free numbers
than one intends to use for the provision of toll free service, as well
as the sale of a toll free number by a private entity for a fee.” 47
C.F.R. § 52.107(b). Number brokering, which is included in the
definition of hoarding, is defined as “the selling of a toll free
number by a private entity for a fee.” 47 C.F.R. § 52.107(a).

       B.      Primary Jurisdiction

       We will first review the District Court’s decision not to
transfer this case to the FCC under the doctrine of primary
jurisdiction. The parties did not raise this issue on appeal.
However, we can review, sua sponte, whether it is appropriate to
transfer the case to the FCC under the doctrine of primary
jurisdiction. See MCI Telecomms. Corp. v. Teleconcepts, Inc., 71
F.3d 1086, 1103 (3d Cir. 1995).

        Primary jurisdiction “requires a court to transfer an issue
within a case that involves expert administrative discretion to the
federal administrative agency charged with exercising that
discretion for initial decision.” Richman Bros. Records, Inc. v.
U.S. Sprint Commc’ns Co., 953 F.2d 1431, 1435 n.3 (3d Cir. 1991)
(citations omitted). According to Richman, “[t]he doctrine has
been applied . . . when an action otherwise within the jurisdiction
of the court raises a question . . . involv[ing] technical questions of
fact uniquely within the expertise and experience of an agency –
such as matters turning on an assessment of industry conditions.”
Id.



507 F.3d 165, 166 n.1 (3d Cir. 2007).

                                  6
        While this case presents “technical questions of fact” that
are “within the expertise” of the FCC, we believe it more
appropriate to remand to the District Court for further proceedings
than to transfer it to the agency because we find that the meaning
of the regulation can be determined from its text. See Advance
United Expressways, Inc. v. Eastman Kodak Co., 965 F.2d 1347,
1353 (5th Cir. 1992) (holding that a court need not refer a case
under the doctrine of primary jurisdiction if “it can resolve the
issues before it, using the plain language of the [regulations] and
the ordinary rules of construction”); cf. Distrigas of Massachusetts
Corp. v. Boston Gas Co., 693 F.2d 1113, 1118 (1st Cir. 1982)
(referring case under doctrine of primary jurisdiction because “the
meaning of the disputed language . . . cannot be determined solely
from the text itself, nor even by reference to the intent of the
parties”).

       C.       Defining Sale

        The District Court concluded that the 1999 Agreement was
a contract for the sale of the Number and thus violated 47 C.F.R.
§ 52.107. We disagree. First, we note that subscribers do not
“own” toll free telephone numbers. In the Matter of Toll Free
Service Access Codes, 20 F.C.C.R. 15089, 15090 ¶ 4, 2005 WL
2138620, at *2 (F.C.C. Sept. 2, 2005) (“Telephone numbers are a
public resource and neither carriers nor subscribers ‘own’ their
telephone numbers.”). Because subscribers do not own their
telephone numbers, they can never “sell” them outright. Instead,
they “sell” the interest that they have in the number; that is, the
right to use it to provide toll free service. In order to determine
whether the 1999 Agreement constituted a sale for the purposes of
47 C.F.R. § 52.107, we review dictionary definitions of “sale” and
“sell” to assess whether the agreement falls within the definitions.
Black’s Law Dictionary (8th ed. 2004) (“Black’s”) defines “sale”
as “[t]he transfer of property or title for a price,” id. at 1364, and
defines “sell” as “[t]o transfer (property) by sale,” id. at 1391.
Black’s defines “transfer” as “[a]ny mode of disposing of or
parting with an asset or an interest in an asset.” Id. at 1535.
Meanwhile, Merriam-Webster’s Online Dictionary defines “sale”
as “the act of selling; specifically: the transfer of ownership of and
title to property from one person to another for a price” and, in

                                  7
relevant part, defines “sell” as “to give up (property) to another for
something of value (as money).” Id. at http://www.merriam-
websters.com (last visited Feb. 12, 2008). Next, Random House
Webster’s Unabridged Dictionary (“Webster’s”) defines “sale,” in
relevant part, as a “transfer of property for money or credit,” id. at
1693, and “sell,” in relevant part, as “to transfer (goods) to or
render (services) for another in exchange for money; dispose of to
a purchaser for a price,” id. at 1739. Webster’s defines “dispose
of,” in relevant part, as “to transfer or give away, as by gift or
sale.” Id. at 568.

        Without exception, these definitions of “sale” and “sell”
emphasize the transfer of property or ownership for a price and the
finality of the transaction. Here, the fundamental features of the
1999 Agreement were that Business Edge retained control of the
Number, preserving responsibility for paying toll charges, and that
Business Edge would only perform routing services for a period of
five years. We, therefore, cannot conclude that the 1999
Agreement was a sale. Therefore, we vacate the District Court’s
decision that the 1999 Agreement should be invalidated for
violating the prohibition on selling toll free telephone numbers in
47 C.F.R. § 52.107.

       D.     Brokering

       At oral argument, the appellees focused their efforts on
convincing us that even if we do not find that the 1999 Agreement
constituted a sale, we should find that it constituted impermissible
number brokering. See 47 C.F.R. 52.107(a)(1). We find no
support for this notion. Again and again the FCC has defined
number brokering as the sale of a number. In the regulation itself,
number brokering is defined as “the selling of a toll free number by
a private entity for a fee.” 47 C.F.R. 52.107(a). The FCC repeated
the regulatory language in the December 21, 2007 decision,
indicating that “[s]ection 52.107(a)(2) of the Commission’s rules
prohibits ‘brokering,’ which is the selling of a toll-free number by
a private entity for a fee.” In the Matter of Toll-Free Service
Access Codes, 2007 WL 4481492, at *1. Ten years earlier, the
FCC indicated that “[b]rokering is the buying or selling of
numbers.” In the Matter of Toll Free Service Access Codes,

                                  8
Second Report and Order and Further Notice of Proposed
Rulemaking, 12 F.C.C.R. 11162, 11164-65 ¶ 2 n.10 (F.C.C. 1997).
Accordingly, we find no basis to conclude that number brokering
is broader than selling toll free telephone numbers.

       E.     Hoarding

        Finally, we consider whether the 1999 Agreement should
be invalidated because Business Edge improperly hoarded toll
free telephone numbers. Regulation 47 C.F.R. 52.107 defines
“hoarding,” as “the acquisition of more toll free numbers than
one intends to use for the provision of toll free service, as well as
the sale of a toll free number by a private entity for a fee.” 47
C.F.R. § 52.107(b). As discussed above, we cannot conclude
that Business Edge sold the Number to Champion. However, it
is possible that Business Edge acquired more numbers than it
intended to use for the provision of toll free service in violation
of the prohibition on hoarding. In In the Matter of Toll Free
Service Access Codes, Second Report and Order and Further
Notice of Proposed Rulemaking, 12 F.C.C.R. at 11189 ¶ 38, the
FCC discussed the purpose of regulating the hoarding and
brokering of toll free numbers:

       Hoarding occurs when a toll free subscriber
       acquires more numbers from a [telephone
       company] than it intends to use for the provision of
       toll free service. If a subscriber refuses to release
       numbers that are not in use, the pool of available
       numbers decreases. This will exacerbate toll free
       number depletion and necessitate the opening of an
       additional toll free relief code earlier than would
       be necessary otherwise. It is time consuming and
       costly for the industry to perform the necessary
       modifications to the network so that it can support
       calls using the new code. Hoarding can also result
       in some customers being unable to obtain toll free
       numbers, even though certain numbers are not
       being used.

       After defining the concept of hoarding, the FCC stated

                                 9
why number hoarding and number brokering is against the
public interest:

       Brokering provides motivation for hoarding and
       therefore results in quicker exhaustion of the
       current [supply of numbers] and interferes with the
       orderly allocation of numbering resources. Simply
       prohibiting a subscriber from hoarding a number
       will not fully eliminate the effects of hoarding. For
       example, a subscriber could acquire a group of
       numbers it expected to sell at a later date. The
       subscriber could then nominally place the numbers
       in service through “dummy” affiliates or other
       entities that otherwise would not employ a toll free
       number.

        Id. Given the record before us, we believe Business Edge
clearly violated the spirit of 47 C.F.R. § 52.107 as it did not
intend to use the Number for its own customers; Sheldon Kass
testified that he acquired the Number because it spelled “the
word champion,” and therefore could be marketed to a company
in the mortgage business. (App. 98.) However, we cannot
determine, in the first instance, whether Business Edge violated
47 C.F.R. § 52.107(a)(1).6 Hoarding requires subscribing to
more telephone numbers than the entity intends to use for the
provision of toll free service and the record before us is
inadequate to make that determination. Accordingly, we will
remand the case to the District Court for further proceedings

       6
          We are mindful that, given the way section 52.107 is
currently drafted, an entity such as Business Edge can avoid
running afoul of the regulation by simply refusing to “sell” a toll
free telephone number outright, and to instead offer a lease for the
number, as Business Edge apparently did here. It strikes us that the
goal of prohibiting the sale of toll free telephone numbers –
eliminating the motivation for hoarding and the resultant
accelerated exhaustion of the number supply – is equally served by
prohibiting toll free telephone number leasing. This represents a
clear loophole in the regulation that the FCC may wish to address.


                                10
consistent with this decision.




                                 11
