Court Says Telco’s Competitive Bidding Suit Against D.C. Presents Federal Question

A federal court refused to toss a telecom company’s complaint that the Washington, D.C., government violated federal competitive bidding rules. Allied Telecom Group claimed in March 2022 that two D.C. agencies contracted with each other for telecom services in violation of U.S. competitive bidding rules implementing the 1996 Telecom Act. Denying D.C.’s motion to dismiss in an opinion Monday, the U.S. District Court for the District of Columbia disagreed with the city's arguments including that the court lacks subject-matter jurisdiction and that Allied failed to state a preemption claim.

Allied alleges D.C. Public Schools (DCPS) violated federal competitive bidding rules when it contracted with the D.C. Office of the Chief Technology Officer (OCTO) for telecom services and by obtaining E-rate funding. Allied claims DCPS issued a noncompetitive and higher priced award to OCTO rather than give the award to a competitive provider like Allied, which offered to provide services at a lower price. Allied also claimed OCTO unfairly influences DCPS and had inside information.

The District argued the court lacked subject-matter jurisdiction because Allied lacks a cause of action. Also, D.C. said Allied failed to state a preemption claim and the suit is time-barred by a three-year statute of limitations that started in 2015 when DCPS first gave OCTO a contract under dispute in the case. It also argued D.C. Code allowing agencies to contract with each other doesn't conflict with and isn't preempted by the Telecom Act or implementing rules.

"The District’s motion conflates the concepts of subject-matter jurisdiction and cause of action,” Judge Carl Nichols wrote Monday in case 1:22-cv-00653. “The District does little to support its position that Allied’s claims are 'devoid of merit.'" The judge disagreed that the existence of a cause of action bears on its jurisdiction. "The Court’s federal-question jurisdiction is otherwise clear,” he said. “Because Allied’s claims turn on the preemptive effect of federal law -- the Telecommunications Act and the FCC’s implementing regulations -- the case presents a federal question." The D.C. Office of Attorney General and Allied didn’t comment.

"The District’s half-hearted challenge to Allied’s standing ... falls short,” said Nichols. Allied satisfied its standing by alleging it sought to provide services but was prevented by DCPS operating its bidding process in a noncompetitive way, he said. The judge disagreed with the District’s argument that no cause of action exists “because the Declaratory Judgment Act, the Supremacy Clause, the Telecommunications Act, and the FCC regulations … do not create a private cause of action." Allied doesn’t “attempt to rely on any express or implied statutory cause of action" but rather makes a preemption claim under federal common law, said Nichols: The District hasn't asserted sovereign immunity or argued the statute implicitly precludes private enforcement.

D.C. and federal laws may not clash in a way that makes it impossible to comply with both, and D.C. contracting authority may not be an obstacle to the E–rate program, said the judge. But Nichols said it's reasonable to infer from factual allegations that DCPS violated the FCC's competitive bidding rules.

On the complaint’s timing, the court needn’t "decide whether the three-year statute of limitations or the doctrine of laches applies … because neither would conclusively bar Allied’s suit on the face of the complaint,” wrote Nichols. "Construing the factual allegations in Allied’s favor, it has alleged a series of unlawful contract awards” starting in 2015, and each violation could begin a new statute of limitations, he said. “Not only did the District omit any mention of the doctrine of laches from its initial motion, but it also failed to make the required showing of prejudice and unreasonableness on the face of the complaint."