Petition for Writ of Certiorari — Blanca Telephone Company, Petitioner v. Federal Communications Commission, et al.
Supreme Court briefSep 24, 2021
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No. _________
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In The
Supreme Court of the United States
---------------------------------♦--------------------------------BLANCA TELEPHONE COMPANY,
Petitioner,
v.
THE UNITED STATES OF AMERICA;
FEDERAL COMMUNICATIONS COMMISSION,
Respondents.
---------------------------------♦--------------------------------On Petition For A Writ Of Certiorari
To The United States Court Of Appeals
For The Tenth Circuit
---------------------------------♦--------------------------------PETITION FOR A WRIT OF CERTIORARI
---------------------------------♦--------------------------------TIMOTHY E. WELCH, ESQ.
Counsel of Record
HILL AND WELCH
1116 Heartfields Drive
Silver Spring, MD 20904
(202) 321-1448 (cell)
welchlaw@earthlink.net
Counsel for Petitioner
================================================================================================================
COCKLE LEGAL BRIEFS (800) 225-6964
WWW.COCKLELEGALBRIEFS.COM
i
QUESTIONS PRESENTED
1. Whether FCC staff seizure of Universal Service Fund funding via civil forfeiture, a procedure unsupported by rulemaking, is “pure debt collection”
under the Debt Collection Improvement Act of 1996,
Slip Op. App. 21, where the Record shows no outstanding Federal debt and where other circuit courts hold
that: the DCIA does not authorize agency debt adjudication; the FCC cannot seize USF funding; the FCC is
not directly involved in USF administration; and the
USF contains no Federal funds.
2. Whether civil forfeiture is punitive and time
barred, Kokesh v. SEC, 137 S. Ct. 1635 (2017); Liu v.
SEC, 140 S. Ct. 1936 (2020), when it is undisputed
that: the Record shows no outstanding Federal debt;
the forfeiture serves multiple law enforcement purposes; excessive financial penalties beyond the purported debt are collected; and the forfeiture exceeds
profits.
3. Whether deference to a civil forfeiture which
fails to specify a legislative rule prohibition, Slip Op.
App. 36, 37 n.17 is proper where the forfeiture order
furthers False Claims Act litigation and where uniform
appellate precedent holds that deference in rule adjudications denies fair notice.
ii
PARTIES TO THE PROCEEDINGS BELOW
All parties are disclosed in the case caption.
RULE 29.6 DISCLOSURE STATEMENT
Petitioner, Blanca Telephone Company, is a nonpublic, closely held, Incumbent Local Exchange Carrier (ILEC), with no publicly owned subsidiaries, and
is organized, and located, in Colorado. The sole owner
is a citizen of the United States.
RELATED CASES
Blanca Tel. Co. v. FCC & USA, Nos. 20-9510 & 20-9524,
order denying review entered March 15, 2021, 991 F.3d
1097 (CA10 2021), Slip Op. App. 1; unpublished order
denying rehearing and rehearing en banc entered May
6, 2021; App. 174.
Blanca Tel. Co. v. FCC & USA, No. 18-9587, United
States Court of Appeals for the Tenth Circuit; unpublished order dismissing case for a jurisdictional defect
entered March 12, 2019; unpublished order denying rehearing and rehearing en banc entered April 30, 2019;
Blanca Tel. Co. v. FCC, 140 S. Ct. 225 (2019) (No. 19134) (denying interlocutory cert petition).
Blanca Tel. Co. v. FCC & USA, No. 18-9502, United
States Court of Appeals for the Tenth Circuit; unpublished order dismissing case for jurisdictional defect entered October 25, 2018; unpublished order
denying rehearing and rehearing en banc entered December 10, 2018.
iii
RELATED CASES – Continued
In re: Blanca Tel. Co. v. FCC & USA, No. 17-1451,
United States Court of Appeals for the Tenth Circuit;
unpublished order denying petition for extraordinary
writ of mandamus relief entered December 29, 2017;
unpublished order denying stay pending ruling on
mandamus petition entered December 28, 2017.
In re: Blanca Tel. Co. v. FCC & USA, No. 16-1216,
United States Court of Appeals for the District of Columbia Circuit; unpublished order denying petition for
extraordinary writ of prohibition relief entered October 21, 2016; unpublished order denying rehearing and
rehearing en banc entered December 12, 2016.
iv
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED ................................
i
PARTIES TO THE PROCEEDINGS BELOW .....
ii
RULE 29.6 DISCLOSURE STATEMENT ...........
ii
RELATED CASES ...............................................
ii
TABLE OF CONTENTS ......................................
iv
TABLE OF AUTHORITIES ................................. vii
PETITION FOR A WRIT OF CERTIORARI .......
1
OPINIONS BELOW.............................................
2
JURISDICTION ...................................................
2
STATUTORY PROVISIONS AND RULES .........
2
STATEMENT .......................................................
3
A.
B.
Blanca’s Wireless Exchange Service .........
3
1. Provider of Last Resort .......................
3
2. Wireless Exchange Service ..................
3
3. USF Created ........................................
5
The FCC’s Civil Forfeiture ........................
6
1. USF Audit And Settlement .................
6
2. FCC Refers Blanca To The DOJ ..........
8
3. FCC1 Imposes Civil Forfeiture ...........
9
a. No Comment Opportunity ..............
9
b. Significant Omissions ..................... 10
c. “Framework” Violation ................... 13
v
TABLE OF CONTENTS – Continued
Page
4. FCC2 Affirms Civil Forfeiture ............. 14
5. FCC3 Reaffirms Civil Forfeiture ......... 15
C.
The Tenth Circuit’s Decision ..................... 16
1. Appellate Jurisdiction ......................... 16
2. Standard of Review ............................. 17
3. No CFR Violation Charged .................. 18
4. Fair Notice ........................................... 18
5. Punitive Purpose Discounted .............. 20
6. Statute of Limitations ......................... 21
7. Defective Agency Record ..................... 21
8. “Pure Debt Collection” ......................... 23
9. The FCC-USF Conundrum .................. 23
REASONS FOR GRANTING THE PETITION ... 24
I.
RULE ADJUDICATION DEFERENCE .... 24
A. Deference Means No Notice ................ 24
1. Rule Explanation Violation ............ 25
2. Conflict with Eleven Circuits ..........
28
3. FCC Conceded Lack of Notice ........ 31
4. The OIG’s Silence ........................... 32
B. Improper Burden Shifting ................... 33
II.
AGENCY DEBT ADJUDICATION:
CIRCUIT CONFLICT ................................ 33
III.
LIMITATIONS: KOKESH & LIU .............. 34
vi
TABLE OF CONTENTS – Continued
Page
IV.
NATIONAL IMPORTANCE ...................... 36
A. FCC Admits USF Error ....................... 36
B. Rural Wireless Rendered Illegal ......... 38
C. Inconsistent Appellate Review ............ 39
CONCLUSION..................................................... 42
APPENDIX INDEX
210315 Order Denying Petition for Review
CA10 20-9510 & 20-9524 ................................. App. 1
200305 FCC Second Order on Reconsideration
and Order (FCC 20-28) (FCC3) ..................... App. 48
171208 FCC Memorandum Opinion and Order
(FCC 17-162) (FCC2) ..................................... App. 93
160602 FCC Forfeiture Order (FCC1) ............ App. 153
210506 Order Denying Rehearing & Rehearing
En Banc CA10 20-9510 & 20-9524 .............. App. 174
47 U.S.C. § 503 Forfeitures .............................. App. 176
47 C.F.R. § 1.1910 Effect of insufficient fee payment delinquent debts, or debarment ......... App. 183
31 U.S.C. § 3712 Time limitations for presenting
certain claims of the Government ............... App. 187
28 U.S.C. § 2462 Time for commencing proceedings ............................................................... App. 189
vii
TABLE OF AUTHORITIES
Page
CASES
Agility Public Warehousing v. U.S., 969 F.3d
1355 (CAFC 2020) ...................................................33
Astrue v. Ratliff, 560 U.S. 586 (2010) .........................11
Auer v. Robbins, 519 U.S. 452 (1997) .................... 24, 26
Blanca Tel. Co. v. FCC & USA, 991 F.3d 1097
(CA10 2021) ...............................................................2
Blanca Tel. Co. v. FCC, 140 S. Ct. 225 (2019) ............. ii
Bush v. U.S., 717 F.3d 920 (CAFC 2013), cert.
den., 571 U.S. 1132 (2014) .......................................29
Cellco P’ship v. FCC, 700 F.3d 534 (CADC 2012) ........4
Chevron U.S.A., Inc. v. Nat. Res. Def. Council, 467
U.S. 837 (1984) ........................................................24
Christopher v. SmithKline Beecham Corp., 567
U.S. 142, 183 L.Ed.2d 153 (2012) ...................... 12, 27
Citizens United v. Schneiderman, 882 F.3d 374
(CA2 2017) ...............................................................29
Cummings v. AT&T Corp., 619 F.3d 1188 (CA10
2010) ..........................................................................4
ExxonMobil Pipeline Co. v. USDOT, 867 F.3d
564 (CA5 2017) ........................................................29
Farmers Tel. Co. v. FCC, 184 F.3d 1241 (CA10
1999) .................................................................... 7, 34
FCC v. Fox TV Stations, Inc., 567 U.S. 239 (2012).......28
General Electric Co. v. EPA, 53 F.3d 1324 (CADC
1995) .................................................................. 28, 30
viii
TABLE OF AUTHORITIES – Continued
Page
Global Green, Inc. v. SEC, 631 Fed. Appx. 868
(CA11 2015) .............................................................29
Gutierrez-Brizuela v. Lynch, 834 F.3d 1142
(CA10 2016) .............................................................30
Kisor v. Wilkie, 139 S. Ct. 2400 (2019) ................. 26, 40
Kokesh v. SEC, 137 S. Ct. 1635 (2017) ........... 24, 34, 36
Kokesh v. SEC, 834 F.3d 1158 (CA10 2016), rev’d,
Kokesh v. SEC, 137 S. Ct. 1635 (2017) ....... 24, 34, 36
Liu v. SEC, 140 S. Ct. 1936 (2020) ....................... 34, 36
Perez v. Mortg. Bankers Ass’n, 575 U.S. 92 (2015) ....... 26
Qwest Corp. v. Minn. PUC, 427 F.3d 1061 (CA8
2005) ........................................................................29
Rocky Mt. Radar, Inc. v. FCC, 158 F.3d 1118 (CA10
1998), cert. den., 525 U.S. 1147 (1999) ........ 28, 30, 40
Safeco Insurance Co. of America v. Burr, 551 U.S.
47 (2007) ..................................................................27
Salzer v. FCC, 778 F.2d 869 (CADC 1985) .................29
Satellite Broadcasting Co. v. FCC, 824 F.2d 1
(CADC 1987) ...........................................................28
Schechter Poultry Corp. v. U.S., 295 U.S. 495
(1935) .......................................................................13
Skidmore v. Swift, 323 U.S. 134 (1944) ......................24
SNR Wireless Licensco, LLC v. FCC, 868 F.3d
1021 (CADC 2016), cert. den., 138 S. Ct. 2674
(2017) .......................................................................37
ix
TABLE OF AUTHORITIES – Continued
Page
U.S. ex rel. Purcell v. MWI Corp., 807 F.3d 281
(CADC 2015) ...........................................................27
U.S. ex rel. Shupe v. Cisco Sys., 759 F.3d 379
(CA5 2014) ..................................................... 5, 23, 34
U.S. v. Ancient Coin Collectors Guild, 899 F.3d
295 (CA4 2018) ........................................................29
U.S. v. Approx. 64,695 Pounds of Shark Fins, 520
F.3d. 976 (CA9 2008) ...............................................29
U.S. v. Bank, 965 F.3d 287 (CA4 2020) .......................36
U.S. v. Harra, 985 F.3d 196 (CA3 2021) .....................28
U.S. v. Mead Corp., 533 U.S. 218 (2001) .....................17
U.S. v. Reed, 908 F.3d 102 (CA5 2018) ........................36
U.S. v. Telluride Co., 146 F.3d 1241 (CA10 1998).......24
USAC v. Post-Confirm. Comm. of Unsec. Cred. (In
re Incomnet), 463 F.3d 1064 (CA9 2006)....... 5, 23, 34
Western Union Tel. Co. v. FCC, 773 F.2d 375
(CADC 1985) ...........................................................17
Wisc. Res. Prot. Council v. Flambeau Mining Co.,
727 F.3d 700 (CA7 2013) .........................................29
ADMINISTRATIVE DECISIONS
Basic Universal Service Offering Provided by
Western Wireless, 17 FCC Rcd. 14802 (2002),
vacated as moot, 22 FCC Rcd. 12015 (2007) ..... passim
Notice of Prop. Rule., 17 FCC Rcd. 23096 (2002) ..... 10, 11
Report and Order, 9 FCC Rcd. 6513 (1994) ........... 4, 11
x
TABLE OF AUTHORITIES – Continued
Page
STATUTES
5 U.S.C. § 555(c) ..........................................................22
5 U.S.C. § 702 ..............................................................17
5 U.S.C. § 704 ..............................................................17
5 U.S.C. § 706(2) ..........................................................17
28 U.S.C. § 1254(1) ........................................................2
28 U.S.C. § 2342(1) ......................................................17
28 U.S.C. § 2343 ..........................................................17
28 U.S.C. § 2344 ..........................................................17
28 U.S.C. § 2347(b) ......................................................17
28 U.S.C. § 2462 ............................ 3, 8, 21, 36, App. 189
31 U.S.C. § 3701(b)(1)(C) ........................................ 7, 32
31 U.S.C. § 3711 et seq. ...............................................21
31 U.S.C. § 3712 ......................................2, 21, App. 187
47 U.S.C. § 151 ............................................................36
47 U.S.C. § 201 ..............................................................4
47 U.S.C. § 202 ..............................................................4
47 U.S.C. § 254 ........................................................ 5, 36
47 U.S.C. § 332(c)(1)(A) .................................................4
47 U.S.C. § 332(c)(3)(A) ........................................... 3, 11
47 U.S.C. § 402(a) ........................................................17
47 U.S.C. § 503 .................................. 2, 10, 21, App. 176
47 U.S.C. § 503(b)(6)(B) ............................... 8, App. 182
xi
TABLE OF AUTHORITIES – Continued
Page
REGULATIONS
4 C.C.R. 723-2-2821(a) ...................................... 4, 11, 37
47 C.F.R. § 1.10 ...........................................................22
47 C.F.R. § 1.1901(e) ............................................. 10, 33
47 C.F.R. § 1.1910 .........................................................2
47 C.F.R. § 1.1910(b)(3)(i) ..................................... 16, 20
47 C.F.R. § 1.1912(c) ...................................................10
47 C.F.R. § 1.1940 .......................................................16
47 C.F.R. § 36.126(a)(3).................................................5
47 C.F.R. § 54.1 et seq. ..................................................5
47 C.F.R. § 54.201(d) ...................................................12
47 C.F.R. § 54.5 ....................................................... 5, 12
47 C.F.R. § 54.7(b) ................................................... 5, 12
47 C.F.R. § 69.601(b) .....................................................7
1
PETITION FOR A WRIT OF CERTIORARI
The essential facts of this case are undisputed. In
December 2007 the FCC’s OIG mailed a Universal Service Fund (USF) audit notice informing Blanca Telephone Company that it had been randomly selected for
USF audit. Blanca promptly disclosed its accounting
practices. The FCC audited Blanca’s USF accounting
for the next five years, but otherwise sat on its hands
enforcement-wise, all the while approving Blanca’s
monthly USF reimbursement payments.
In June 2016 a mid-level FCC staffer inferred a
civil forfeiture authority under the Debt Collection Improvement Act of 1996 (DCIA); made findings of fact;
cited no USF rule prohibition, but found a violation of
a synthesis of three accounting rule parts, Slip Op.
App. 36, 37 n.17; converted that violation into debt; and
ordered recovery of about $7 million in 2005-2010 USF
disbursements, plus penalties. FCC1 App. 153, 168.
The civil forfeiture issued without any type of hearing. Record 1, 15, 23 (case begins with the civil forfeiture).
Petitioner Blanca Telephone Company respectfully petitions for a writ of certiorari to review the
judgment of the United States Court of Appeals for the
Tenth Circuit which affirmed the FCC’s novel civil forfeiture.
---------------------------------♦---------------------------------
2
OPINIONS BELOW
Blanca Tel. Co. v. FCC, 991 F.3d 1097 (CA10 2021),
Nos. 20-9510, 20-9524, entered March 15, 2021, affirming FCC; Slip Op. App. 1; unpublished Order denying
rehearing and rehearing en banc entered May 6, 2021;
App. 174.
---------------------------------♦---------------------------------
JURISDICTION
The Tenth Circuit’s judgment was entered on
March 15, 2021. Slip Op. App. 1. Petitioner timely
sought rehearing and rehearing en banc on April 26,
2021, within the 45 day limit specified at F.R.A.P. 35(c),
40(a)(1)(A), (B). The Tenth Circuit denied rehearing
and rehearing en banc on May 6, 2021, App. 174, and
the instant petition is timely filed within 150 days
thereafter. See Guidance Concerning Clerk’s Office Operations issued July 19, 2021. The Court’s jurisdiction
is invoked under 28 U.S.C. § 1254(1).
---------------------------------♦---------------------------------
STATUTORY PROVISIONS AND RULES
47 U.S.C. § 503 Forfeitures .............................. App. 176
47 C.F.R. § 1.1910 Effect of insufficient fee payment, delinquent debts, or debarment ........ App. 183
31 U.S.C. § 3712 Time limitations for presenting
certain claims of the Government ............... App. 187
3
28 U.S.C. § 2462 Time for commencing proceedings ............................................................... App. 189
---------------------------------♦---------------------------------
STATEMENT
A. Blanca’s Wireless Exchange Service
1. Provider of Last Resort
Blanca is a “provider of last resort” telephone exchange service in Colorado, required to provide telephone exchange service upon request. It is undisputed
that Blanca’s service area is high cost and that Blanca
is an Eligible Telecommunications Carrier (ETC) authorized to receive Universal Service Fund (USF) support. FCC1 App. 157 n.2.
In 1980 Blanca began providing telephone exchange service to hard to serve subscribers using the
radio technology available at the time: Basic Exchange
Telephone Radio Service (BETRS, pronounced “betters”). A significant number of Blanca’s subscribers
used radio technology because the cost to provide wire
service was, and remains, cost prohibitive owing to
mountainous terrain and lack of electricity. FCC2 App.
164-65 & n.16; Record 26.
2. Wireless Exchange Service
In 1993 Congress enacted 47 U.S.C. § 332(c)(3)(A)
which expanded the use of wireless for telephone exchange service and directly authorized the states to
regulate wireless used as “a substitute for land line
4
telephone exchange service . . . necessary to ensure the
universal availability of telecommunications service at
affordable rates.” Colorado authorizes any technology
to provide subscriber voice service. 4 C.C.R. 723-22821(a) (defining “telephone access line” to include
voice service provided by any technology). The FCC implemented this Congressional directive in 1994 when
it authorized state regulated telephone exchange carriers to use cellular frequencies to provide telephone
exchange service. Report and Order, 9 FCC Rcd. 6513,
6571 (1994).
In 1995 Blanca upgraded its radio telephone exchange service to provide cutting edge cellular radio
technology to its high cost area. Blanca’s cellular telephone exchange service was tariffed with the Colorado
PUC and provided upon request without discrimination; Blanca charged the same tariff regulated price
regardless of the underlying transmission technology. Record 26. The Colorado PUC never expressed
any concern regarding Blanca’s cellular telephone exchange service.
Cellular carriers are statutory common carriers.
Cellco P’ship v. FCC, 700 F.3d 534, 538 (CADC 2012);
Cummings v. AT&T Corp., 619 F.3d 1188, 1199 (CA10
2010). Record 333 (47 U.S.C. §§ 201-202, 332(c)(1)(A)
require just and reasonable rates and practices).
Blanca’s CA10 Brief 17, 27.
5
3. USF Created
In 1997 the FCC implemented Part 54 USF funding rules as authorized by Congress in the Telecommunications Act of 1996. 47 U.S.C. § 254 Universal
Service; 47 C.F.R. § 54.1 et seq. The USF is funded by
carrier contributions and not by tax receipts and the
USF does not contain any federal funds. U.S. ex rel.
Shupe v. Cisco Sys., 759 F.3d 379, 381, 388 (CA5 2014);
USAC v. Post-Confirm. Comm. of Unsec. Cred. (In re Incomnet), 463 F.3d 1064, 1066 (CA9 2006). The FCC “has
no ability to control the USF through direct seizure.”
USAC, 463 F.3d at 1071. The Universal Service Administrative Company (USAC) “is responsible for day-today administration of the [USF’s] high-cost support
program.” FCC3 App. 54 ¶ 5.
Various FCC rules explicitly provide that USF
funding is available for cellular telephone exchange
service. For instance, 47 C.F.R. § 54.5 defines a “telecommunications channel” as a “telephone line, or, in
the case of wireless communications, a transmittal line
or cell site.” (Emphasis added.) The § 54.5 definition
of “telecommunications carrier” explicitly “includes cellular mobile radio service (CMRS) providers.” USF
funding is available for “telecommunications and information services” without any technology or carrier
class limitation. 47 C.F.R. § 54.7(b). Record 19-20. Regulated carriers are authorized to include “radio
equipment” in their rate base. 47 C.F.R. § 36.126(a)(3)
(“Radio transmitters, receivers, repeaters and other radio central office equipment”). The FCC’s accounting
rules require that “investment and expenses * * * that
6
are used for both regulated and nonregulated services,
are recorded in the regulated accounts.” FCC2 App. 9899 ¶ 5.
In 2002 the FCC affirmed that USF funding was
available to “a telecommunications carrier * * * designated by a state or the Commission as an ETC whether
it provides a fixed or a mobile universal service.” Basic
Universal Service Offering Provided by Western Wireless, 17 FCC Rcd. 14802, 14812, 14816 ¶¶ 18, 24 (2002),
vacated as moot, 22 FCC Rcd. 12015 (2007).1 Western
Wireless holds that USF funding is available to cellular
carriers without regard to whether the wireless service
is regulated, provided under tariff, provided roaming
service, provided cell-to-cell handoff, or otherwise had
mobile service characteristics.
B. The FCC’s Civil Forfeiture
1. USF Audit And Settlement
Between 2005-2012 Blanca claimed USF reimbursement for its wireless telephone exchange service.
In December 2007 the FCC’s Office of Inspector General (OIG) sent randomly selected carriers like Blanca
generic USF audit notices which did not provide notice
of any rule violation. The FCC’s purpose in conducting
random USF audits is “to coordinate prosecutions for
waste, fraud, and abuse.” FCC2 App. 104 ¶ 10. The audit notice is not part of the agency Record; except for
1
Respondents’ CA10 Brief 29 n.10 relied upon this agency
case and revived it.
7
documents Blanca submitted as part of its agency relief filings, the Record compiled by the FCC contains
no documents the FCC relied upon in its forfeiture order. Blanca’s CA10 Brief 22-30.
During 2008 Blanca disclosed its USF accounting
practices to the FCC. The information Blanca provided
permitted the OIG, in November 2009, to formulate the
first of five detailed subpoenas regarding Blanca’s USF
accounting practices. Record 59-78 (copy of the OIG’s
November 2009 subpoena). Blanca timely and fully responded to each subpoena, FCC1 App. 154, producing
about 1.5 terabytes of documentation for the OIG.
The DCIA designates the OIG as the FCC official
authorized to audit and disallow USF funding. 31
U.S.C. § 3701(b)(1)(C). While Blanca was being audited
between 2007-2012, monthly USF payments were disbursed to Blanca notwithstanding Blanca’s disclosure
of its USF accounting practices. At no time did the OIG
disclose that there was an audit problem or take issue
with Blanca’s accounting practices. The OIG never issued any report faulting Blanca.
In 2013, after five years of auditing, Blanca received notice through the National Exchange Carrier
Association (NECA) that the FCC objected to Blanca’s
USF accounting practices.2 Promptly upon receiving notice, and to avoid protracted litigation, Blanca
2
NECA is an association of high cost carriers; Blanca’s membership is mandatory. 47 C.F.R. § 69.601(b). NECA provides various services for the FCC. Farmers Tel. Co. v. FCC, 184 F.3d 1241,
1245 (CA10 1999).
8
settled the USF accounting matter through NECA, adjusted its accounting for two years, returned approximately $1 million to the USF, and ceased claiming
reimbursement for its cellular telephone exchange.3 No
violation findings were entered and no enforcement notice was issued. Record 27-28 & n.11, 30 n.15, 40 (discussing the 2013 settlement and arguing that the civil
forfeiture constituted a settlement breach).
2. FCC Refers Blanca To The DOJ
By January 2014, without notice to Blanca, the
FCC referred Blanca to Respondent Department of
Justice (DOJ) for prosecution under the False Claims
Act. Record 79 (copy of the DOJ’s January 30, 2014
Civil Investigative Demand); Record 53 (Public Notice,
October 19, 2015 – USF cases are referred to the DOJ
for “prosecution under the False Claims Act”). The
FCC’s referral was unsupported by any rule violation
findings. Under the “doctrine of primary jurisdiction”
the DOJ did not have a colorable false claims case because the FCC had not entered any rule violation or
false statement findings relating to the USF. Record 25
& n.6.
The DOJ subsequently informed Blanca that it
was referring the case back to the FCC because of
3
The FCC operates under a one-year statute of limitation.
47 U.S.C. § 503(b)(6)(B). Relative to the June 2016 civil forfeiture, the 2005-2010 accounting period is beyond that limitation,
NECA’s two-year accounting period, FCC2 App. 107 n.37, and the
five-year limitation at 28 U.S.C. § 2462.
9
statute of limitations concerns which purportedly did
not constrain the FCC. Record 25 n.7. Respondents’
False Claim Act case remains live by execution of a series of statute of limitations tolling agreements, most
recently through December 2021. Blanca’s CA10 Brief
3. Respondents have never commented upon the DOJ
referral made in the absence of any FCC finding of rule
violation or false statement, or upon the DOJ’s referral
back to the FCC, or explained why the FCC instituted
two enforcement proceedings against Blanca to “tag
team” a small company to obtain multiple recoveries of
the “same pile of USF money.” Record 27 n.10, 32, 36.
3. FCC1 Imposes Civil Forfeiture
a. No Comment Opportunity
The June 2016 civil forfeiture issued without prior
notice or opportunity to comment. FCC1 App. 153; Record 1 (the forfeiture order is the first Record document). The June 2016 civil forfeiture does not address
the Managing Director’s lack of delegated authority to
issue the novel civil forfeiture. Blanca’s CA10 Brief 8,
35-36; Blanca’s CA10 Reply Brief 20-21. Blanca was
faulted because
NECA issued a report on January 29, 2013,
which concluded Blanca impermissibly received USF high-cost support because its
claims for support included costs and facilities
for a mobile wireless system.
FCC1 App. 154-55 (emphasis in original). The NECA
report is not part of the Record.
10
The forfeiture order does not point to any USF
funding rule which prohibited LECs like Blanca from
claiming USF reimbursement for cellular telephone
exchange costs. Slip Op. App. 36, 37 n.17. The FCC separated itself from USF administration: NECA’s USF
settlement with Blanca did not bind the Government
and USF administration does not implicate the exercise of governmental power. Slip Op. App. 41; FCC3
App. 76 ¶ 30. The FCC does not control day-to-day USF
administration. FCC3 App. 54 ¶ 5.
b. Significant Omissions
The civil forfeiture fails to consider a myriad of
procedural and substantive issues. For example:
(a)
The DCIA
authorizes the establishment of offsets to pay
down pre-existing debt that has been established by order of court or that has been
acknowledged by a debtor by partial payment
of a forfeiture issued after a notice of apparent
liability. The DCIA does not rewrite Section
503 of the Communications Act and it does not
authorize the FCC to enter rule violation findings years after the FCC knew about the underlying facts.
Record 14-16, 30 & n.15, 31, 33, 37; 47 C.F.R.
§ 1.1901(e) (valid claim or debt requires either payment on a notice of apparent liability or a “final” court
debt adjudication); 47 C.F.R. § 1.1912(c) (administrative offset applies to “delinquent” debt); Notice of Prop.
11
Rule., 17 FCC Rcd. 23096 ¶ 1 (2002) (DCIA exists to
collect “delinquent” debt owed to the United States).
See also Astrue v. Ratliff, 560 U.S. 586, 589 (2010) (offset is used “to satisfy a pre-existing debt that the litigant owes to the United States”).
(b) The FCC failed to provide Blanca with any
type of hearing, but instead issued a civil forfeiture
finding an interpretive rule violation which failed to
cite any legislative rule violation. Record 13, 14, 16, 23
& n.3, 24, 30 & n.15, 31-33.
(c) 47 U.S.C. § 332(c)(3)(A) expanded the use of
wireless for telephone exchange service and directly
authorized the States to regulate wireless services
used as “a substitute for land line telephone exchange
service . . . necessary to ensure the universal availability of telecommunications service at affordable rates.”
(d) Colorado authorizes last resort providers to
use any technology for voice service. 4 C.C.R. § 723-22821(a).
(e) The FCC implemented § 332(c)(3)(A) in 1994
and authorized state regulated LECs like Blanca to
use cellular frequencies to provide telephone exchange
service. Report and Order, 9 FCC Rcd. 6513, 6571
(1994).
(f ) The FCC completely discounted Blanca’s
wireless service to a significant portion of Blanca’s subscriber base which lacked electricity and/or resided in
the mountains, FCC1 App. 164-65, when the FCC’s accounting rules plainly require that “investment and
12
expenses * * * that are used for both regulated and
nonregulated services, are recorded in the regulated
accounts.” FCC2 App. 98-99 ¶ 5.
(g) USF funding rules explicitly provide that
USF funding is available for wireless exchange service
without carrier class limitation. For instance, 47 C.F.R.
§ 54.5 defines a “telecommunications channel” as a
“telephone line, or, in the case of wireless communications, a * * * cell site.” (Emphasis added). The § 54.5
definition of “telecommunications carrier” explicitly
“includes cellular mobile radio service (CMRS) providers.” USF funding is available for “telecommunications
and information services” without any technology or
carrier class limitation. 47 C.F.R. § 54.7(b). A carrier is
eligible to receive USF funding “throughout” its wireless service area. 47 C.F.R. § 54.201(d). Record 19-20,
22, 32.
(h) The FCC’s 2002 Western Wireless decision
holds that USF funding is available to cellular carriers
without regard to whether the wireless service is regulated or provides a mobile service including roaming
and cell-to-cell handoff. Western Wireless, 17 FCC Rcd.
at 14812, 14816 ¶¶ 18, 24.
(i) The forfeiture order does not discuss the fact
that it promoted the False Claims Act case initiated
against Blanca years earlier. Record 13, 23-24 n.4, 27
& n.10 citing Christopher v. SmithKline Beecham
Corp., 183 L.Ed.2d 153, 170 (2012) (discounting rule
interpretations advancing agency litigation).
13
c. “Framework” Violation
The 2016 civil forfeiture does not cite a specific
rule prohibition, Blanca is faulted for violating a “regulatory framework” informed by “truisms” and pieced
together via passing reference to three FCC rule parts:
Part 36 Jurisdictional Separations; Part 64 Miscellaneous Rules Affecting Common Carriers; and Part 69
Access Charges. Slip Op. App. 36, 37 n.17; FCC2 App.
95-106 ¶¶ 3-11; FCC3 79 ¶ 32; FCC1 152. Excluded
from the FCC’s synthesis is reference to the Part 54
Universal Service funding rules, even though Blanca
is faulted for improperly using USF funding. Record
13, 14, 31-32, 37, 38.
The FCC adopted an industrial code purportedly
“widely accepted by the industry” and enforced by
NECA. FCC3 App. 55 ¶ 7; FCC2 129 ¶ 39; FCC1 15354, 156. Respondents failed to explain how industrial
code enforcement passes muster under Schechter Poultry Corp. v. U.S., 295 U.S. 495 (1935). Blanca’s CA10
Brief 40.
The FCC determined that the civil forfeiture issued against Blanca constituted a “debt adjudication”
authorized by the Communications Act and the DCIA.
FCC2 App. 105-06 ¶ 11, 128-31 ¶¶ 39-40. However, it
cites no specific statutory authorization supporting its
novel view.
Since January 2018 the FCC has been seizing
Blanca’s 2005-2010 USF reimbursements because Blanca
used that funding to provide “mobile cellular service.”
FCC1 App. 156-59, 162-64. The FCC improperly used
14
the 2013 NECA settlement as proof of rule violation
over Blanca’s objection to misuse of settlement information. FCC1 App. 159-60, 164-65; Record 24 n.5, 30
n.15.
The civil forfeiture assessed $150,000+ in explicit “DCIA” and PEN” penalties. Record 348 (FCC
June 2016 “Bill for Collection”). USAC’s April 2018
statement assessed an additional “DCIA Penalty Adjustment” of $754,328.28 and a “Late Payment Fee Adjustment” of $125,721.38, while noting that Blanca’s
“Account is in good standing.” That’s over $1 million in
Federal penalties even though Record 367 (FCC generated financial statement) continues to show that no
Federal debt is outstanding. Despite the FCC’s assertion that USAC does not exercise governmental power,
Slip Op. App. 5, 41, USAC continues to impose monthly
“HC Penalty” and “HC Interest” penalties for the Government.4
4. FCC2 Affirms Civil Forfeiture
In June 2016 Blanca timely filed for administrative review of the civil forfeiture order. Blanca raised
numerous due process objections to the FCC’s belated
entry of vague rule part violations in a novel civil forfeiture proceeding. Blanca cited “a score” of USF
4
The lower court rejected Blanca’s motion to supplement the
Record with damage calculation information; Blanca’s ability to
show the extent of its injury was improperly limited by Respondents’ concession that it had caused a courthouse door opening
minimal injury. Slip Op. App. 15 n.12. Blanca’s CA10 Reply at 4,
filed May 8, 2020.
15
funding rules which authorized Blanca’s receipt of
USF funding. Slip Op. App. 42.
The FCC’s December 2017 order affirmed its earlier order, FCC2 App. 95 ¶ 2 (FCC 17-162), but did not
discuss the “score” of rules Blanca cited. More than two
years later the FCC explained that those rules did not
apply to regulated carriers. FCC3 App. 54 ¶ 6. No rule
was cited which prohibited a regulated carrier from
providing USF funded telephone exchange service using wireless technology and no justification is provided
for making such funding available to non-LECs to the
disadvantage of LECs.
In response to Blanca’s argument that FCC1 had
failed to assert any false statements, FCC2 asserted
“fraud,” “wrongdoing,” and “egregious” misconduct, but
failed to point to any supporting evidence or any false
statement. FCC2 App. 104, 115, 129 n.106, 149, 151.
The civil forfeiture faults Blanca’s provision of “barely
break even telecommunications service,” Record 28, as
misusing the USF as “a piggy bank for all manner of
inappropriate expenses” and equates provision of public telecom service, Record 211-13, to buying “yachts or
country club golf memberships.” FCC2 App. 149, 150.
The FCC found Blanca’s “clean hands” and lack of false
statements irrelevant even though it asserted fraud.
FCC3 App. 57 ¶ 9; FCC2 App. 132 ¶ 41.
5. FCC3 Reaffirms Civil Forfeiture
Shortly after Blanca timely filed for further administrative review, January 2018, the FCC directed
16
USAC to seize Blanca’s monthly USF reimbursements
even though collection is prohibited during case review.
Blanca’s CA10 Brief xii, 3, 15 & n.7, 34 n.13, 49 citing
47 C.F.R. § 1.1910(b)(3)(i) (App. 185). As of August
2021 USAC had seized approximately $4,492,348 from
Blanca: $3,330,259 as debt reduction and $1,162,089
as penalties. Respondents do not explain how interest accumulates when Record 367 shows no Federal
debt outstanding or how financial penalties are nonpunitive under 47 C.F.R. § 1.1940 (penalties imposed
without regard to compensatory considerations). FCC1
App. 168.
FCC3 App. 48 (FCC 20-28) reaffirmed the “framework” violation and rejected Blanca’s “attempts to
challenge these truisms.” FCC3 App. 79 ¶ 32. FCC3
found that NECA “discovered” Blanca’s accounting
procedure in 2012, FCC3 App. 49 ¶ 1, ignoring the
OIG’s five year audit and the FCC’s admission that
NECA does not exercise governmental power. FCC3
does not explain the four year gap between NECA’s
“discovery” and the June 2016 civil forfeiture.
C. The Tenth Circuit’s Decision
1. Appellate Jurisdiction
On January 21, 2020, because the FCC had not
acted on Blanca’s December 2017 reconsideration pleading for more than two years, Blanca filed No. 20-9510
with the Tenth Circuit. Thereafter, on March 5, 2020
the FCC denied Blanca’s request for further administrative review. FCC3 App. 48 (FCC 20-28). On March
17
18, 2020 Blanca timely filed No. 20-9524 with the
Tenth Circuit as a protective and supplemental review
petition as authorized by Western Union Tel. Co. v.
FCC, 773 F.2d 375, 380 (CADC 1985) and sought review of all FCC orders. The Tenth Circuit consolidated
No. 20-9524 with No. 20-9510.
The Tenth Circuit’s jurisdiction was invoked pursuant to 47 U.S.C. § 402(a); 28 U.S.C. § 2342(1); 28
U.S.C. § 2343; 28 U.S.C. § 2344; and 28 U.S.C. § 2347(b).
Blanca requested that the FCC’s forfeiture order be set
aside, and that other relief be granted, pursuant to 5
U.S.C. §§ 702, 704, 706(2).
2. Standard of Review
The lower court used the deferential “arbitrary
and capricious” standard to review most of the case.
Slip Op. App. 16-18, 38-47. Respondents and the lower
court did not comment upon Blanca’s argument that
the FCC’s novel civil forfeiture procedure was unsupported by a rulemaking and de novo review was the
appropriate review standard. Blanca’s CA10 Brief
20-21 citing U.S. v. Mead Corp., 533 U.S. 218, 227-29
(2001).
18
3. No CFR Violation Charged
The lower court determined that the FCC never
pointed to any legislative rule prohibition. Slip Op.
App. 36, 37 n.17.5 However, the Tenth Circuit discounted “a score of regulations and orders dealing with
treatment of cellular services” Blanca had cited as authorizing USF funding because “the FCC considered
the regulations but found them inapplicable.” The
court adopted the FCC’s explanation that while some
carriers could obtain USF funding for mobile exchange service, Blanca could not, even though there
was no rule prohibition. Slip Op. App. 36, 37 n.17, 4243.
The lower court did not address the fact that
Blanca had updated its tariffed radio telephone exchange service to new cellular technology to serve its
remote, electricity deprived, hard to serve, high cost radio telephone exchange subscribers. Blanca did not discriminate among customers, the customer selected the
technology suited to their situation. Blanca’s CA10
Brief 26-27.
4. Fair Notice
Despite acknowledging the FCC’s failure to charge
a specific a rule prohibition, Slip Op. App. 36, 37 n.17,
5
At an appropriate time during oral argument undersigned
counsel asked the lower court to “point” to a specific rule that
Blanca violated; no rule was cited.
19
the lower court limited the FCC’s notice responsibility
to explaining its USF funding “framework”:
The FCC supported its decision to initiate
debt collection with an explanation of the
rules Blanca had violated and a calculation of
the overpayments Blanca had received.
Slip Op. App. 47. The lower court accepted the FCC’s
“explanation of the rules” even though, after twelve
years, the FCC had never cited a specific rule prohibition.
The lower court found that the 2013 NECA settlement was contemporaneous with the 2016 forfeiture
order and served as a rule violation notice to Blanca.
Slip Op. App. 37 n.17. The lower court leaves unexplained how NECA provided “fair notice” for the Government when it does not exercise governmental
power. Slip Op. App. 41; FCC3 App. 76 ¶ 30. The lower
court did not address Blanca’s argument that notice in
2013 was not “fair notice” regarding Blanca’s 20052010 conduct. Moreover, the lower court ignored the
fact that Blanca settled to avoid “protracted litigation”
and that the FCC misused settlement as an admission.
Blanca’s CA10 Brief 30-31. Record 24 n.5, 27-28 & n.11,
30 n.15, 40.
The lower court found that Blanca was responsible
“to correctly apply” complex FCC rules, Slip Op. App.
33, notwithstanding its recognition that the FCC failed
to specify any rule prohibition which Blanca could apply. Slip Op. App. 36, 37 n.17. The lower court did not
address Blanca’s argument that the forfeiture order
20
“concedes that there was no legislative rule and that
Blanca was authorized to interpret USF funding rules
in the absence of a written rule” and that “this case is
about the FCC’s belated disagreement with Blanca’s
reasonable” good faith rule application. FCC2 App.
117-18 ¶ 29. Blanca’s CA10 Brief 17, 25-26, 36, 41-42.
5. Punitive Purpose Discounted
The lower court discounted various Record items
regarding the punitive nature of the FCC’s civil forfeiture order. For example, the FCC’s punitive 2014 False
Claims Act referral is discounted because the DOJ
“never acted on this referral.” However, this nod to noblesse oblige ignores the fact that the Government has
prosecuted the case and the forfeiture order relies
upon information obtained from that still live prosecution. FCC1 App. 162-63 n.13.
The lower court justified Respondents’ imposition
of increased financial penalties as “simply a recognition of the time-value of money.” Slip Op. App. 24 n.14.
However, Respondents did not offer that justification
and the reasoning does not consider that: 1) the FCC
is collecting when the Record shows that Blanca has
no debt; 2) collection is occurring during debt litigation
in violation of 47 C.F.R. § 1.1910(b)(3)(i), App. 185; and
3) an excessive penalty was imposed on the day that
the forfeiture order issued. Record 348; Blanca’s CA10
Brief 3 & n.2, 15 & n.7, 16, 49, 54.
21
The lower court dismissed multiple agency admissions of law enforcement purpose expressed over multiple years as “a single, passing reference.” Slip Op.
App. 25. Blanca’s CA10 Brief 14, 28, 31, 35, 39, 48 &
n.22, 49.
6. Statute of Limitations
The lower court found that two statutes of limitations, 47 U.S.C. § 503 and 28 U.S.C. § 2462, do not apply because “pure debt collection” is not punishment.
Slip Op. App. 17, 21. While the lower court found that
the FCC complied with the DCIA, 31 U.S.C. §§ 3711 et
seq., Slip Op. App. 17, the lower court’s decision, like
Respondents’ CA10 Brief, failed to discuss 31 U.S.C.
§ 3712’s recognition that the statute of limitations
applies to DCIA-related debt adjudications. Blanca’s
CA10 Brief 46.
7. Defective Agency Record
The lower court found that it had a “full record to
evaluate,” that it “presume[s] the agency’s record is
complete,” and that “Blanca had the entire record in its
possession.” Slip Op. App. 15 n.12, 34. The lower court
also found:
Blanca has presented clear and convincing evidence that the record before us is not the full
administrative record the FCC had before it
throughout the proceedings. The FCC references documents throughout the demand letter and subsequent orders that it did not
22
include in the record presented to this court.
To be sure, the FCC erred by depriving this
court of the full administrative record.
Slip Op. App. 44.
The lower court rejected Blanca’s argument that
the FCC improperly withheld records finding that
Blanca did not provide a specific objection regarding
the records to which it was denied access. Slip Op. App.
44 n.20. The lower court did not discuss how Blanca
could comment upon documents it had not seen.
Blanca’s CA10 Brief 23.
Also unaddressed is Blanca’s argument that
The Record’s incompleteness is not a theoretical concern. * * * central to Respondents’ case
is their argument that Blanca provided a “mobile” service, but that Blanca “misreport[ed]
that all of its costs were for fixed services.”
* * * Moreover, Respondents’ Brief does not
point to any Record item contradicting the
fact that in the mid-1990s Blanca upgraded
its obsolete BETRS technology serving 150
BETRS subscribers, but only after the FCC
had released the 1994 cellular BETRS rulemaking which aimed to advance technology
improvements in rural areas.
Blanca’s CA10 Reply Brief 3-4 citing 47 C.F.R. § 1.10 &
5 U.S.C. § 555(c) (statutory right to record review).
Blanca “reported” telecom costs, nothing in the record
shows that Blanca “misreported” anything.
23
8. “Pure Debt Collection”
While the lower court found civil forfeiture to be
“pure debt collection,” Slip Op. App. 21, it failed to discuss that “the FCC is not merely collecting a debt, it is
finding rule violations and adjudicating a debt claim”
in a proceeding “which did not afford Blanca any process whatsoever.” The lower court does not discuss the
Ninth Circuit’s holding that the FCC cannot seize USF
funding. USAC, 463 F.3d at 1066. Blanca’s CA10 Brief
7-8, 38, 40, 44, 46.
9. The FCC-USF Conundrum
The lower court found that USF administration is
not governmental activity and that NECA’s 2013 USF
settlement with Blanca did not bind the Government.
Slip Op. App. 41; FCC3 App. 76 ¶ 30. The FCC
acknowledged that USAC is responsible for day-to-day
USF administration. FCC3 App. 54 ¶ 5. Moreover, the
USF is funded by carrier contributions, not by tax receipts; the FCC does not administer distribution of
USF funds; the FCC “has no ability to control the USF
through direct seizure;” and USF funds are not federal
funds. Shupe, 759 F.3d at 381, 388; USAC, 463 F.3d at
1066, 1071. Blanca’s CA10 Brief 7-8, 50.
The lower court recognized the FCC-USF disconnect, but found that the 2013 NECA settlement
provided “adequate notice of the violations,” Slip
Op. App. 37 n.17, without explaining how a nongovernmental entity provided “adequate notice” for
the Government. Also unexplained is how the FCC
24
properly used the DCIA, or how USAC properly collects “DCIA penalties,” where USF administration is
not governmental activity and USF funds are carrier
money, not public money.
Slip Op. App. 24 relies upon U.S. v. Telluride Co.,
146 F.3d 1241, 1246 (CA10 1998) to support a nonpunitive view of law enforcement. However, Kokesh v.
SEC, 834 F.3d 1158, 1162, 1164, 1167-68 (CA10 2016)
relied extensively on Telluride and the lower court was
unanimously reversed in Kokesh v. SEC, 137 S. Ct.
1635, 1643 (2017) because “sanctions imposed for the
purpose of deterring infractions of public laws are inherently punitive.” USF rule enforcement used against
Blanca sought, inter alia, to detect and deter fraud,
FCC2 App. 129 n.106, yet the lower court determined
that the civil forfeiture was not penal. Blanca’s CA10
Brief 8, 14, 31-32, 36-38, 40-41, 46-47, 47-50; Blanca
Reply Brief at 21-23; Blanca’s CA10 Petition for Rehearing and Rehearing En Banc 8-9. Record 277-78.
---------------------------------♦---------------------------------
REASONS FOR GRANTING THE PETITION
I.
RULE ADJUDICATION DEFERENCE
A. Deference Means No Notice
The lower court failed to explain how the FCC’s
June 2016 explanation of its “complex and highly
technical” USF funding “framework,” for which the
FCC sought Chevron, Auer, and Skidmore deference,6
6
Respondents’ CA10 Brief 24-26 & n.9.
25
provided timely notice of what was required prior to
the 2005-2010 accounting period. Respondents’ CA10
Brief asserted eight times that Blanca violated
“longstanding” FCC rules, but failed to cite any rule
which prohibited Blanca’s accounting practice. Slip
Op. App. 36, 37 n.17. The FCC’s forfeiture order is fatally defective because it does not cite any rule prohibition which provided notice, it merely discusses a rule
“framework” concocted for this case. Record 13-15, 18,
23 & n.3, 31-33.
1. Rule Explanation Violation
The lower court determined that Blanca had the
responsibility “to correctly apply” complex FCC rules,
Slip Op. App. 33, but also recognized that the FCC
failed to specify any legislative rule prohibition. Slip
Op. App. 36, 37 n.17. The lower court excused the
FCC’s failure to cite a legislative rule prohibition because the FCC
supported its decision to initiate debt collection with an explanation of the rules Blanca
had violated and a calculation of the overpayments Blanca had received.
Slip Op. App. 47.
The lower court’s finding that the FCC explained
“the rules Blanca had violated” not only contradicts the
court’s finding that the FCC did not cite any rule prohibition, it faults Blanca for violating a rule explanation. However,
26
interpretive rules, even when given Auer deference, do not have the force of law. . . . An interpretive rule itself never forms “the basis for
an enforcement action”. . . . An enforcement
action must instead rely on a legislative rule,
which (to be valid) must go through notice and
comment.
Kisor v. Wilkie, 139 S. Ct. 2400, 2420 (2019) (plurality)
(emphasis in original). Blanca’s CA10 Brief 42.
Whether an agency issues its interpretation
in a press release or something it chooses to
call an “adjudication,” all we have is the
agency’s opinion about what an existing rule
means, something that the APA tells us is not
binding in a court of law or on the American
people.
Kisor v. Wilkie, 139 S. Ct. at 2435 (Gorsuch, J., concurring). “Citizens arrange their affairs not on the basis of
their legislators’ unexpressed intent, but on the basis
of the law as it is written and promulgated.” Perez
v. Mortg. Bankers Ass’n, 575 U.S. 92, 130-31 (2015)
(Thomas, J., concurring) (internal quote omitted). The
lower court ignored the fact that after a five year audit
“the OIG did not glean a prohibition from anything the
FCC had issued and it is unreasonable to expect more
from Blanca.” Blanca’s CA10 Brief 20-21, 35-37, 42;
Blanca’s CA10 Petition for Rehearing and Rehearing
En Banc 16.
The task the FCC assigned to Blanca in this novel
rule violation proceeding was proving the consistency
of its past conduct to the FCC’s recent rule “synthesis”.
27
Slip Op. App. 36; FCC2 App. 141 ¶ 48; FCC1 App. 156.
Blanca demonstrated that its conduct complied with
the FCC’s legislative rules in effect during the 20052010 accounting period and that: 1) the OIG failed to
fault Blanca; 2) the FCC did not cite a rule prohibition;
3) Blanca provided a reasonable rule-based explanation for its accounting practice citing “a score” of rules
which on their face authorized Blanca, Slip Op. App.
42; 4) the FCC approved Blanca’s USF reimbursement
requests for years with full knowledge of Blanca’s accounting practice; 5) the FCC’s financial records show
that Blanca does not have any outstanding Federal
debt; 6) the FCC determined that the USF program
was flawed; and 7) Blanca has “clean hands.”
This case concerns the FCC’s belated disagreement with Blanca’s reasonable “good faith” rule compliance in the absence of contrary guidance. Neither
Respondents nor the lower court discussed the permissive sphere within which Blanca operated given the
FCC’s lack of guidance – Blanca’s past conduct was improperly adjudicated through the lens of today. Safeco
Insurance Co. of America v. Burr, 551 U.S. 47, 69-70
(2007) (absent timely regulatory guidance, parties cannot be penalized for reasonable rule interpretation
even if later shown to be incorrect); SmithKline, 567
U.S. 142, 156-57 (2012) (agency should not issue rule
interpretation in a case determining damages); U.S. ex
rel. Purcell v. MWI Corp., 807 F.3d 281, 288-89 (CADC
2015). Blanca’s CA10 Brief 8, 10, 11, 15-19, 21-22, 2526, 36-37, 39, 41-42, 44, 49, 51; Blanca’s CA10 Reply
Brief 10.
28
2. Conflict with Eleven Circuits
The lower court’s deference conflicts with eleven
circuit court decisions, including the Tenth Circuit’s
own precedent. For example, General Electric Co. v.
EPA, 53 F.3d 1324, 1330 (CADC 1995) rejects deference
in agency enforcement proceedings and holds that
the “face” of the regulation must provide “fair notice”
of the prohibition. Explicit pre-enforcement notice is
also required in non-enforcement adjudications.
Satellite Broadcasting Co. v. FCC, 824 F.2d 1, 2 (CADC
1987) (notice required before application dismissal for
interpretive rule violation).
The Tenth Circuit holds that “suspected violators”
are entitled to pre-enforcement notice and an opportunity to come into compliance, facing liability on a going forward basis only if the guidance is ignored. Rocky
Mt. Radar, Inc. v. FCC, 158 F.3d 1118, 1122 n.7 (CA10
1998), cert. den., 525 U.S. 1147 (1999). Blanca’s CA10
Brief 42-43; Blanca’s CA10 Reply Brief 17-18 (noting
Respondents’ failure to address Rocky Mt. Radar);
Blanca’s CA10 Petition for Rehearing and Rehearing
En Banc at 2-3. The court below completely ignored its
own decisionally significant precedent, stretching deference well beyond the breaking point.
See also FCC v. Fox TV Stations, Inc., 567 U.S. 239,
257 (2012) (FCC must be able to “point” to a regulation
which provides “affirmative notice” of the legal requirement); U.S. v. Harra, 985 F.3d 196, 213 (CA3 2021)
(“fair warning requires that government agencies communicate their interpretation of their own regulations
29
with ‘ascertainable certainty’ before subjecting private
parties to punishment under that interpretation”); U.S.
v. Ancient Coin Collectors Guild, 899 F.3d 295, 321-22
(CA4 2018) (“a regulation provides fair notice if it is
‘reasonably comprehensible to people of good faith’ ”);
Citizens United v. Schneiderman, 882 F.3d 374, 389
(CA2 2017) (“when an executive agency changes which
behavior violates its regulations, it must provide notice
that it has done so, before faulting” a regulated entity);
ExxonMobil Pipeline Co. v. USDOT, 867 F.3d 564, 578
(CA5 2017) (an agency “may not deprive a party of
property by imposing civil or criminal liability” unless
the prohibition can be discerned “by reading the regulations”); Global Green, Inc. v. SEC, 631 Fed. Appx.
868, 870 (CA11 2015) (unpublished) (“fair notice” is
lacking when civil penalties are imposed upon a
change in regulatory enforcement); Wisc. Res. Prot.
Council v. Flambeau Mining Co., 727 F.3d 700, 708
(CA7 2013) (the fair notice requirement is “thoroughly
incorporated into administrative law” and does not exist when the agency previously approved the conduct
now found to be a problem); Bush v. U.S., 717 F.3d 920,
924 n.4 (CAFC 2013), cert. den., 571 U.S. 1132 (2014)
(government accounting form must provide fair notice of legal obligations); U.S. v. Approx. 64,695 Pounds
of Shark Fins, 520 F.3d. 976, 980 (CA9 2008) (a regulation must provide “fair notice” before property is
taken); Qwest Corp. v. Minn. PUC, 427 F.3d 1061, 1068
(CA8 2005) (“application of a rule may be successfully
challenged if it does not give fair warning that the allegedly violative conduct was prohibited”); Salzer v.
FCC, 778 F.2d 869, 871-72 (CADC 1985) (“fundamental
30
fairness” requires “full and explicit notice of all prerequisites” before an application is dismissed). Blanca’s
CA10 Brief 35-42.
Clear USF rules and Western Wireless authorized
Blanca’s wireless exchange cost accounting and the
FCC approved Blanca’s USF funding for years after
accounting practice disclosure. There is nothing in the
Record which shows that any of Blanca’s accounting
forms limited the technology which Blanca could use
in providing telephone exchange service. After directing Blanca down a path regarding USF accounting, the
rug was abruptly pulled out from underneath.
Gutierrez-Brizuela v. Lynch, 834 F.3d 1142, 1148 (CA10
2016).
The lower court seeks to avoid the notice issue by
“attribut[ing] to Blanca the specialized knowledge of a
telecommunications carrier,” Slip Op. App. 36, finding
that Blanca should have found the same “framework”
prohibition as the FCC. Imputed expertise did not limit
the pre-enforcement notice requirement in Rocky Mt.
Radar or General Electric. Moreover, the lower court
leaves unexplained why Blanca’s expert rule interpretation, based upon “a score” of plain text rules, Slip Op.
App. 42, was ignored merely because it conflicted with
the agency’s recently articulated “framework” rule issued to promote Respondents’ False Claims Act litigation.
31
3. FCC Conceded Lack of Notice
The FCC weakly attempted to show timely rule
notice, but instead demonstrated a lack of notice while
conceding that there was no legislative rule violation
and acknowledging that Blanca was authorized to interpret the USF rules. FCC2 App. 117-18 ¶ 29 & n.73.
Each of the four agency cases that FCC2 relied upon
were issued after Blanca’s 2005-2010 accounting period and could not possibly have provided notice. The
FCC also relied upon two mid-Twentieth Century Supreme Court cases, but both cases predate the USF by
decades. Blanca’s CA10 Brief 36-37. Respondents’
CA10 Brief 9 n.5 conceded that from 1997-2011, covering the entire 2005-2010 accounting period at issue,
the USF rules allowed wireless cost reimbursement to
LECs like Blanca.
The lower court determined that the 2013 NECA
settlement provided notice to Blanca, Slip Op. App. 37
n.17, despite finding that USAC and NECA are private
parties which are unable to speak for the FCC or settle
Government claims, Slip Op. App. 41, and failing to
address the fact that notice in 2013 was not notice
prior to 2005. Moreover, the lower court failed to explain why it was proper for the FCC to sit on its hands
for five years after Blanca’s 2008 accounting practice
disclosure, as Blanca continued to receive USF reimbursement, and for another three years after the 2013
NECA settlement.
32
4. The OIG’s Silence
The Government attempted to create an OIGbased USF funding disallowance, where none exists,
when “the FCC claimed to be acting on an audit by
the Office of Inspector General.” Slip Op. App. 27. The
FCC’s “claim” notwithstanding, it is undisputed that
the OIG issued no audit report and there is no OIG
audit report in the Record. The lower court does not
explain how the FCC could have relied and acted upon,
literally, nothing. Moreover, the civil forfeiture
plainly disclaims OIG reliance stating that the “determination is based on the information you [Blanca]
either provided or were unable to provide,” and on that
basis the FCC preemptively and improperly denied
Blanca access to the FCC’s records. FCC1 App. 169.
The Record is clear that the civil forfeiture is not supported by the OIG.
The OIG is the only FCC official designated by the
DCIA to audit and disallow Blanca’s USF funding. 31
U.S.C. § 3701(b)(1)(C). The OIG’s five year audit did not
disallow a single penny of Blanca’s USF funding and
the only reasonable assumption is that the OIG found
nothing wrong. Even if the USF funding had been
properly disallowed by OIG, mid-level FCC staff employees are not authorized by the DCIA to issue civil
forfeitures and it was plain error for the reviewing
court to have found otherwise. FCC2 App. 146 ¶ 53;
Blanca’s CA10 Brief 8, 22, 28, 37, 38, 44, 51.
33
B. Improper Burden Shifting
Rule enforcement deference improperly shifts the
burden from the agency proving a past rule violation,
to the target proving an unreasonable agency rule interpretation. The FCC’s novel rule enforcement procedure required Blanca to prove the unreasonableness of
the FCC’s “framework” explanation. Slip Op. App. 4647. Rule violation proceedings do not measure the reasonableness of new rule interpretations, they point to
a specific rule violation.
II.
AGENCY DEBT ADJUDICATION:
CIRCUIT CONFLICT
The lower court affirmed civil forfeiture as “pure
debt collection.” Slip Op. App. 21. However, the DCIA
authorizes the establishment of offsets to pay
down pre-existing debt that has been established by order of court or that has been
acknowledged by a debtor by partial payment
of a forfeiture issued after a notice of apparent
liability. The DCIA does not rewrite Section
503 of the Communications Act. . . .
Record 14-16, 30-33, 100-01; 47 C.F.R. § 1.1901(e).
Two circuits hold that Federal agencies lack authority to issue money judgments. The Federal Circuit
holds that the DCIA “does not give the United States
a freestanding mechanism to create a debt.” Agility
Public Warehousing v. U.S., 969 F.3d 1355, 1364 (CAFC
2020). The Ninth Circuit holds that the FCC “has no
ability to control the USF through direct seizure.”
34
USAC, 463 F.3d at 1071. The DCIA does not authorize
the FCC to adjudicate USF debt claims using any type
of procedure. Record 32-33, 171-72, 277-78, 338-39.
The USF is funded by carrier contributions, not by
tax receipts, the FCC does not directly administer
distribution of USF funds, and USF funds are not
federal funds. Shupe, 759 F.3d at 381, 388; USAC,
463 F.3d at 1066. USF administration does not implicate governmental power because USAC and NECA
are private parties and they cannot settle Government
debt claims. Slip Op. App. 41; Farmers Tel. Co., 184
F.3d at 1250. However, USAC and NECA routinely resolve USF financial claims. FCC2 App. 151 (“USAC has
been attempting to recoup certain overpayments from
a decade ago”). Even if the DCIA authorized civil forfeiture, given the lower court’s reasoning that USAC
and NECA lack authority to act on behalf of the
Government, but also given that USAC and NECA
routinely resolve USF financial claims, USF financial
claim resolution is a private affair which cannot implicate the DCIA. Record at 277-78.
III. LIMITATIONS: KOKESH & LIU
The June 2016 civil forfeiture assesses $150,000+
in explicit penalties. Record 348 (the FCC’s June 2,
2016 “Bill for Collection” assessing “DCIA” and “PEN”
penalties). On April 20, 2018 USAC assessed a “DCIA
Penalty Adjustment” of $754,328.28 and a “Late Payment Fee Adjustment” of $125,721.38. USAC is imposing monthly “HC Penalty” and “HC Interest” charges.
35
That’s over $1 million in Federal financial penalties.
Blanca’s CA10 Motion to Correct and Supplement the
Record Pacer pages 15, 40. These penalties were assessed even though the FCC’s financial records show
no outstanding debt, Record 367, and even though the
FCC asserts that USAC does not act on behalf of the
Government. Slip Op. App. 41.
The FCC’s USF audits “detect and deter waste,
fraud, and abuse” and uncover statutory and rule violations “for prosecution under the False Claims Act.”
FCC2 App. 129 n.106; Record 53 (October 2015 Public
Notice). Even with USF funding, Blanca’s wireless exchange was only “marginally” profitable, yet the civil
forfeiture disgorges all USF funding. Blanca’s CA10
Brief 10; Blanca’s CA10 Reply Brief 12 citing Record
28.
Blanca produced numerous FCC statements made
over the course of years evidencing multiple law enforcement purposes served by the civil forfeiture, including rooting out “waste, fraud, and abuse” and
otherwise protecting the public and competitors.
Blanca’s CA10 Brief 14, 28, 31, 35, 39, 48 & n.22, 49.
The FCC explicitly acknowledged that Blanca’s civil
forfeiture constituted “enforcement activity.” Blanca’s
CA10 Reply Brief 15. The lower court dismissed these
multiple admissions as “a single, passing reference”
without explaining why even a single acknowledgment
of law enforcement purpose should be ignored. Slip Op.
App. 25.
36
The FCC’s action against Blanca is plainly punitive and the lower court erred by holding the statute of
limitations inapplicable. Kokesh, 137 S. Ct. at 1643
(“sanctions imposed for the purpose of deterring infractions of public laws are inherently punitive”); Liu v.
SEC, 140 S. Ct. 1936, 1946 (2020) (disgorgement is punitive if it fails to account for legitimate expenses and
extracts more than net profits); U.S. v. Bank, 965 F.3d
287, 294 (CA4 2020) (“disgorgement is a penalty for
statute of limitations purposes”); U.S. v. Reed, 908 F.3d
102, 126 (CA5 2018) (“§ 2462 governs civil forfeitures”)
(emphasis in original). Blanca’s CA10 Brief 47-50;
Blanca’s CA10 Reply Brief 21-23; Blanca’s CA10 Petition for Rehearing and Rehearing En Banc 8-14.
IV. NATIONAL IMPORTANCE
A. FCC Admits USF Error
Universal service is a foundation of the Communications Act. 47 U.S.C. §§ 151, 254(b). Direct beneficiaries of USF funded telecom and broadband services
include high cost areas, schools, libraries, and rural
health care clinics. More than 9 million people and organizations receive telecom and information services
from USF reimbursed carriers. In 2020 the USF reimbursed carriers approximately $8.3 billion, approximately $5 billion of that funding was for the high cost
program.7 The FCC’s view is that everyone benefits
from universal service.
7
https://www.usac.org/about/universal-service/faqs/general/
37
With limited exception, all telecommunications
companies pay into the USF. However, only state or
FCC designated entities (Eligible Telecommunications
Carriers – ETCs) receive funds from the USF. Colorado
granted Blanca ETC status in 1997. FCC1 App. 157-58
n.2. There is no technology limitation associated with
Blanca’s ETC designation and Colorado authorizes
Blanca to provide service using any available technology. 4 C.C.R. 723-2-2821(a).
The FCC has stated on at least three occasions
that the USF program did not work as intended. “Confusion at the ground level” evidences the lack of “fair
notice”. SNR Wireless Licensco, LLC v. FCC, 868 F.3d
1021, 1045 (CADC 2016), cert. den., 138 S. Ct. 2674
(2017). First, the FCC determined in 2011, after the
2005-2010 period at issue in this case, that its high cost
“identical support” USF funding was misused by funding cellular carriers rather than to LECs. Respondents’
CA10 Brief 9 n.5 (“this rule ‘has not functioned as intended’ ”). Blanca is both a LEC and a cellular carrier
and remained eligible for wireless exchange cost reimbursement even after the clarification.
Second, in October 2015, several months before
the FCC issued the civil forfeiture in this case, the
FCC issued a Public Notice which “clarified” that
USF reimbursement was for “fixed and mobile” services, Record 53-58, and not for personal travel, political and charitable contributions, scholarships, etc.
While Blanca did not rely upon a 2015 Public Notice in
2005, the point is that the FCC plainly acknowledged
38
retroactive USF policy concerns after Blanca’s 20052010 accounting period had concluded.
Third, the FCC admitted, even as it penalized
Blanca’s purported rule violations, the FCC was still
attempting to update its USF funding rules “to delineate what types of expenses cannot be funded through
universal service or allowed in the rate base.” FCC2
App. 150. This admission concedes the FCC’s confusion
sown by its USF rules and Western Wireless.
The OIG’s five year audit didn’t find any problem
with Blanca’s accounting during which time Blanca
continued to receive USF reimbursements. The FCC’s
belated, over the top forfeiture order charged Blanca
with “fraud” and criminal activity without a scintilla of
supporting evidence. Respondents’ CA10 Brief 47 n.17
(asserting “misappropriation”). Blanca has learned
from the communications bar that civil forfeiture is
routinely used to resolve USF accounting issues. FCC2
App. 151 (“USAC has been attempting to recoup certain overpayments from a decade ago”).
B. Rural Wireless Rendered Illegal
Blanca isn’t accused of using USF reimbursement
for personal travel, or political or charitable contributions, or scholarships, or yachts, or golf memberships,
etc. Blanca is faulted for using USF reimbursement
to provide wireless exchange service to a high cost, remotely located, very poor area in southern Colorado.
The lower court approved the FCC’s conflation of
39
apparently fraudulent USF fund use with legitimate
telecom related use.
The FCC did not conduct a rule violation proceeding before ordering a civil forfeiture for a decade-old
accounting issue, but it knew eight years earlier how
Blanca was using USF funding after it commenced a
five year USF audit. Then one day, after approving
Blanca’s accounting practices for years in conformance
with a “score” of rules and Western Wireless, a mid-level
FCC staffer outside of the OIG’s office decided that rural “last resort” wireless exchange service was no
longer needed and issued a “ruinous” forfeiture order.
FCC1 App. 153. Record 15-16. No rulemaking proceeding supported the exercise of civil forfeiture authority.
Blanca eventually terminated its wireless exchange
service.
The FCC’s “remedy” for Blanca’s provision of wireless last resort telephone exchange service in 20052010 is an ongoing seizure of all of Blanca’s current
USF funding used for its wireline last resort telephone
exchange service. In the FCC’s haste to seize Blanca’s
property without procedure, the FCC utterly failed to
consider to “the public interest harm which results
when the FCC shuts down the carrier of last resort including its provision of 911 service.” Record 15.
C. Inconsistent Appellate Review
The lower court agreed that the novel civil forfeiture was “too little, too late,” FCC2 App. 149, finding
that the FCC was “far from exemplary throughout its
40
investigation of and proceedings involving Blanca.”
Slip Op. App. 13 n.9. However, the lower court’s deferential review failed to properly consider significant
legal and factual flaws. Kisor. For instance, the lower
court 1) ignored its own long established Rocky Mt.
Radar precedent and failed to require fair notice of the
“framework,” “truisms,” and industrial code applied to
the 2005-2010 accounting period even after acknowledging the FCC’s failure to cite a legislative rule violation; 2) discounted numerous FCC assertions of public
law enforcement/punitive purpose; 3) upheld the law
enforcement purpose of preventing unfair competition
via LEC cross-subsidization. Slip Op. App. 7-8, even
though the same wireless USF funding was available
to Blanca’s competitors under Western Wireless and it
is Blanca who is being treated unfairly funding-wise;
4) ignored numerous FCC admissions that the USF
program was materially flawed while holding Blanca
responsible for corrective USF policy changes; 5)
acknowledged a defective Record, but failed to require
that the FCC produce record evidence of USF cost
“misreporting;” 6) found that the forfeiture order was
based upon a DCIA authorized OIG audit even though
the Record does not contain any OIG report; 7) ignored
the fact that monthly USF disbursals were remitted to
Blanca for years after Blanca disclosed its accounting
practice to the OIG, 8) attributed rule expertise to
Blanca, Slip Op. App. 36, but discounted that expertise
merely because Blanca’s view conflicted with the FCC’s
rule interpretation issued years later to fix its False
Claims Act case; 9) found that NECA is a private party
with no governmental power, but found that NECA
41
could provide rule notice for the government; 10) allowed the FCC to misuse settlement information as
admission of wrong doing; and 11) found that the DCIA
authorizes USF claim adjudication even though A) the
Record shows that there is $0 of Federal debt, B) the
FCC distanced itself from USF administration by disavowing the 2013 NECA settlement as private activity,
C) USAC and NECA are private entities, not arms of
the government, and day-to-day USF administration,
including USF-related financial settlement, is not governmental action, and D) the DCIA exists to collect delinquent debt, it does not authorize debt adjudication.
---------------------------------♦---------------------------------
CONCLUSION
The petition for a writ of certiorari should be
granted.
Respectfully submitted,
TIMOTHY E. WELCH, ESQ.
Counsel of Record
HILL AND WELCH
1116 Heartfields Drive
Silver Spring, MD 20904
welchlaw@earthlink.net
(202) 321-1448
Counsel for Petitioner
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.