Sixth Circuit Reverses Dismissal of Single-Issue Case, Reminding District Courts that Facts Must be Plausible- Not Persuasive- To Survive a Motion to Dismiss

On Friday, the Sixth Circuit reminded district courts that the pleading requirements articulated by the Supreme Court in Iqbal and Twombly require that facts pleaded be plausible, not necessarily that they be persuasive, to survive a motion to dismiss.

In Mediacom Southeast v. BellSouth Telecommunications, Inc., Mediacom challenged AT&T’s right to offer video services over its telephone wires pursuant to a perpetual telephone franchise or whether a new cable franchise was required.  The District Court for the Western District of Kentucky granted AT&T’s motion to dismiss for failure to state a claim, finding that as a matter of law AT&T’s franchise permitted it to offer the service under the existing franchise.

The case was initiated by Kentucky cities against AT&T for a declaratory judgment that a new cable franchise was required for AT&T’s distribution of its U-Verse video service over its existing telephone lines.  The initial parties settled, entering into a settlement agreement that AT&T did not require a new franchise to provide U-Verse.  Mediacom intervened after dismissal, seeking a declaration that AT&T was required to obtain a new franchise.

On appeal, the Sixth Circuit reversed the district court, holding that only after sufficient discovery, with an adequate factual record, can the district court make such a determination. (PDF)  The Sixth Circuit found that the district court had committed two errors in granting AT&T’s motion to dismiss:  1)  improperly assigning the burden to the nonmoving party Mediacom when stating that “Mediacom’s contention that AT&T Kentucky requires a separate franchise…is unpersuasive”; and 2) relying on self-serving facts  written by AT&T in a stipulated agreement that conflicted with facts pleaded in the Complaint, i.e. whether the U-Verse transmissions are one-way or two-way transmissions.

Thus, though the sole issue may be whether the video signals fall within the scope of the existing franchise, that is an issue for summary judgment – not a motion to dismiss.  This case serves as yet another refinement of the pleading standard that the Sixth Circuit commenced in earnest last year in the wake of Twombly/Iqbal.