# Petition — Western Union Telegraph Co. v. Federal Communications Commission

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_0890%3A1

## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1977
- **Citation:** 429 U.S. 1092

## Text

Supreme Court, U. T
| FILED

IN THE NOV 15 1976
Supreme Court of the United A RODAK, N, GAE
OCTOBER TERM, 1976 —

no. 76-683

THE WESTERN UNION TELEGRAPH COMPANY,
Petitioner,
V. 1
FEDERAL COMMUNICATIONS COMMISSION, UNITED STATES
OF AMERICA, AMERICAN TELEPHONE AND TELEGRAPH
ComraNy, and the BELL SYSTEM OPERATING COM-

PANIES,
Respondents.

PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

WM. WARFIELD Ross
PHILIP ELMAN
WILLIAM R. WEISSMAN
NANCY H. HENDRY

Of Counsel: WALD, HARKRADER & Ross
RICHARD C. HOSTETLER 1320 Nineteenth St., N.W.
Vice President and Washington, D.C. 20036
General Counsel JOEL YOHALEM
The Western Union J ne
ACK WERNER
Telegraph Company 1828 L St., N.W.

One Lake Street .
Upper Saddle River, Washington, D.C. 20036

New Jersey 07485 Attorneys for Petitioner

November 15, 1976

WILSON ers PRINTING Co.. INC. - Re 7-6002 - WASHINGTON. O. C. 20001

TABLE OF CONTENTS

STATUTES INVOLVED .................. .. ̃ͤ 94

e iccenenncnsinencetvenianen

r RST Re SR TENE OIE

B. Proceedings Before. the Federal Communica-
I è ... euiaseeananiba

LL
REASONS FOR GRANTING THE WR rr
T ——— .
APPENDICES

APPENDIX A—Opinion of the United States
Court of Appeals for the Third
Circuit, filed July 28, 19768

APPENDIX B- Judgment of the United States
Court of Appeals for the Third
Circuit, entered July 28, 1976.

APPENDIX C—Order Denying Petition of The
Western Union Telegraph Com-
pany for Rehearing and Sug-
gestion of Rehearing En Banc,
entered August 18, 19766

ADDENDIX D—Memorandum Opinion and Or-
der of the Federal Communica-
tions Commission, released June
ER oR a

13

la

42a

II

TABLE OF CONTENTS (Continued)

Page
APPENDIX E- Memorandum Opinion and Or-
der of the Federal Communica-
tions Commission, released Oc-
rr. 64a
APPENDIX F— Sample Contract No. 1111 70a
APPENDIX G— Sample Contract No. 85a

APPENDIX H- Relevant Statutory Provisions... 97a

TABLE OF AUTHORITIES
CASES:

Bell System Tariff Offerings, 46 F.C. C. 2d 413,

aff'd, 503 F.2d 1250 (3d Cir. 1974), cert. de-

aed, GER UE. BEB CITI cececcccccccccncscncecsncsscccecess 4,11
Bell Telephone Co. v. FCC, 503 F.2d 1250 (3d Cir.

1974), cert. denied, 422 U.S. 1026 (1975) 5,7
FPC v. Sierra Pacific Power Co., 350 U.S. 348

r 5, 13
Pittston Stevedoring Corp. v. Dellaventura,

F.2d —— [389 Ap. L. 2d (P&F) 67] (2d Cir.

July 1, 1976), petition for cert. filed sub nom.

Northeast Marine Terminal Co. v. Caputo, 45

U.S.L.W. 3256 (U.S. Sept. 27, 1976) (No. 76-

— SR oan ec bs ai etna eee 11
Pure Oil Co. v. FPC, 299 F. 2d 370 (7th Cir. 1962) 10
SEC v. Chenery Corp., 318 U.S. 80 (1943) 2, 3, 7, 9,

10, 12, 13

SEC v. Cogan, 201 F.2d 78 (9th Cir. 1952) 10
Skelly Oil Co. v. FPC, 532 F.2d 177 (10th Cir.

EERIE RES Saar POSS SORES AANA ae nn 10
Texas Gas Transmission Corp. v. Shell Oil Co., 363

r = SES 2, 3, 7, 9, 10, 11, 13
United Gas Pipe Line Co. v. Mobile Gas Service

Ne ee 5, 10

United States v. Morgan, 313 U.S. 409 (1941) 13

III

TABLE OF AUTHORITIES (Continued)

Page
United States v. Seatrain Lines, Inc., 329 U.S. 424
| ROR A Sea RE En Se tv ae 13
Warren Petroleum Corp. v. FPC, 282 F.2d 312
2 10
| STATUTES:
| Communications Act of 1934:
Section 211 (a), 47 U.S.C. § 211 (a) 4
Section 402 (a), 47 U.S.C. § 402(a) 6
Administrative Procedure Act:
EET REE ee 6
S U.S.C. § 706(a) (2) (A) ................2................. 7,11
, e 2
s csudiiceiinicesbictabin 6
MISCELLANEOUS:
4 DAVIS, ADMINISTRATIVE LAW TREATISE § 30.07
Zen ... 12
4 DAVIS, ADMINISTRATIVE LAW TREATISE § 30.09
REE SS EEE . 12
Hearings on . to Title II of the Com-
munications Act of 1934 Before the House Com-
mittee on Interstate and Foreign Commerce,
88th Cong., 2d Sess. (1964) 4

— ee ta

IN THE

Supreme Court of the United States

OCTOBER TERM, 1976

No.

THE WESTERN UNION TELEGRAPH COMPANY,

Petitioner,

V.

FEDERAL COMMUNICATIONS COMMISSION, UNITED STATES
OF AMERICA, AMERICAN TELEPHONE AND TELEGRAPH
COMPANY, and the BELL SYSTEM OPERATING COM-

PANIES,
Respondents.
PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

Petitioner, The Western Union Telegraph Company
(“Western Union“), requests that this Court issue a
writ of certiorari to review the judgment and opinion of
the United States Court of Appeals for the Third Cir-
cuit entered in this case on July 28, 1976.

OPINIONS BELOW

The majority and dissenting opinions of the Court of
Appeals are reported at 541 F.2d 346 and appear at
Appendix A.“ The court, with Judge Garth dissenting,
affirmed the Memorandum Opinions and Orders of the
Federal Communications Commission (“FCC”), reported
at 55 F.C.C.2d 1045 and 49 F.C.C.2d 321, appearing at
Appendices D and E, respectively.

The appendices to this petition are cited as Pet. App.”

* as

2

JURISDICTION
The judgment of the Court of Appeals was entered on

July 28, 1976, and appears at Appendix B. A timely

filed petition for rehearing and suggestion of rehearing
en banc was denied on August 18, 1976, by order repro-
duced in Appendix C. The order denying rehearing noted
that all Third Circuit judges in regular active service
other than the three members of the original panel recused
themselves. The jurisdiction of this Court is invoked
under 28 U.S.C. § 1254(1).

QUESTION PRESENTED

The Bell System and Western Union have long ex-
changed facilities under a series of contracts filed with
the Federal Communications Commission but not other-
wise regulated under the Communications Act of 1934.
In 1974, Bell challenged the applicability of the contracts
to facilities employed by Western Union in supplying
certain common carrier services, having previously filed
tariffs seeking very substantial increases in the charges
for such facilities. The Commission concluded, solely from
the language of the contracts, that they did not apply
to such facilities. The Court of Appeals (with Judge
Garth dissenting) held that, even though the Commis-
sion relied only on “general legal precepts” in interpret-
ing the contracts, the matter was “within the ambit of
the FCC’s expertise” and hence its interpretation was
“entitled to greater deference from this court than would
be due a district court in a breach of contract action.”

The question presented is:

Whether, under the standard of judicial review es-
tablished by this Court in Chenery I and Texas Gas,’

2 The “Bell System” refers to American Telephone and Tele-
graph Company (“AT&T’’) and its telephone operating subsidiaries.

SEC v. Chenery Corp., 318 U.S. 80 (1943); Texas Gas Trans-
mission Corp. v. Shell Oil Co., 363 U.S. 263 (1960).

— ete nese ee

3

the Court of Appeals erred in totally deferring to the
FCC’s construction of the contracts where

(a) the contracts were filed with the Commission but
are not otherwise subject to regulation under the Com-
munications Act;

(b) the Commission relied solely on general common
law canons of construction of contracts, and not on any
claimed special agency competence or expertise; and

(e) only a question of law was presented as to the
meaning of the contracts’ language since the facts were
not in dispute.*

STATUTES INVOLVED

Pertinent provisions of the Administrative Procedure
Act and the Communications Act appear at Appendix
F, infra.

STATEMENT OF THE CASE

This litigation arose from a dispute between Western
Union and the Bell System over the scope of long-stand-
ing written contracts by which Western Union and the
Bell System have agreed to lease to each other at fixed
rates local and inter-city communications circuitry.

A. Background

The Bell System-Western Union exchange of facilities
contracts (commonly identified as the Bell-Western Union
contracts)* have a long history in the communications
industry, dating back in one form or another to the 19th
century—long before the enactment of the regulatory
scheme established by the Communications Act of 1934.

*The question presented as to the proper standard of judicial
review is also applicable to the Commission’s holding that Western
Union waived its contract rights by accepting a domestic satellite
grant. And see note 18 infra, at 13.

Relevant portions of sample contracts are reproduced in Ap-
pendices F & G, infra.

1

These contracts are not subject to the Act’s ratemaking
procedures; indeed, the Commission has disclaimed any
regulatory jurisdiction over them.

By the terms of these agreements, Western Union and
the Bell System companies may lease from the other at
fixed rates certain communications facilities for use in
providing that party’s authorized common carrier serv-
ices to the public. The contracts have no fixed term, are
revised by mutual agreement from time to time, and are
terminable by either party on five years’ written notice.
The present form of the exchange of facilities contracts
was adopted in 1928, and has been revised by mutual
agreement on several occasions, the most recent of which
was on January 1, 1970.

In September 1973, the Bell System invoked the five-
year termination clause. However, instead of honoring
these contracts for their remaining five-year term, the
Bell System companies attempted to abrogate them by
unilaterally filing tariffs charging substantially higher
rates.

Following Western Union’s protest, the Commission
summarily rejected the tariffs to the extent they applied
to Western Union as an unlawful attempt to abrogate ex-
isting contract rights by means of a unilateral tariff
filing. The Commission construed the Communications
Act as sanctioning private contractual arrangements be-
tween carriers and as conferring no authority on the FCC
to sanction modification by unilateral tariff filings. Bell
System Tariff Offerings, 46 F.C.C.2d 413 (1974). In so
ruling, the Commission relied upon this Court’s construc-
tion of similar provisions of the Natural Gas Act and

Se Hearings on Amendments to Title II of the Communications
Act of 1934 Before the House Committee on Interstate and Foreign
Commerce, 88th Cong., 2d Sess. 12-47 (1964). The contracts are
filed for information purposes with the FCC pursuant to Section
211(a) of the Communications Act, 47 U.S.C. §211(a).

Federal Power Act in United Gas Pipe Line Co. v. Mobile
Gas Service Corp., 350 U.S. 332 (1956), and FPC v.
Sierra Pacific Power Co., 350 U.S. 348 (1956). On re-
view, the Third Circuit affirmed the Commission’s appli-
cation of the Mobile-Sierra doctrine to the Communica-
tions Act, and this Court denied certiorari. Bell Tele-
phone Co. v. FCC, 503 F.2d 1250 (3d Cir. 1974), cert.
denied, 422 U.S. 1026 (1975).

The extent to which the Bell System tariffs remained
applicable to Western Union thus was controlled by the
scope of the contracts. If communications circuitry in-
tended for a particular common carrier service were
covered by the contracts, the lower contract rates gov-
erned; if not covered by the contracts, Western Union
would be obliged to pay the higher tariff rates which
would exceed the contract rates by several million dollars
over the remaining contract life.

B. Proceedings Before the Federal Communications
Commission

The instant litigation arose out of a contractual dis-
pute between Western Union and the Bell System over
two classes of common carrier private line communica-
tions services: (1) terrestrial private line services in-
volving connection to telephone company switching equip-
ment,’ and (2) domestic satellite communications serv-
ices. The issue before the Commission was whether the
Bell-Western Union contracts permit the lease of cir-
cuitry for use in providing these two classes of common
carrier service.

In its first Memorandum Opinion and Order (Pet.
App. 64a-69a), the Commission held that Western Union

Two particular private line switched services were at issue:
foreign exchange (“FX”) and common control switching arrange-
ment (“CCSA”) services. A description of these services appears
in the court’s opinion below. Pet. App. 4a n.1.

org

6

had “waived” its contracts rights when it accepted an
FCC domestic satellite grant subject to a condition that
Western Union operate its satellite system in accordance
with all present and future Commission policies appli-
cable to domestic satellite communications (Pet. App.
68a). Such a future policy, the Commission claimed, was
adopted when it subsequently directed AT&T to tariff
its interconnection arrangements with other domestic
satellite carriers (Pet. App. 68a).*

In a subsequent Memorandum Opinion and Order
(Pet. App. 45a-63a), the FCC refused to reconsider its
earlier ruling that Western Union had “waived” its con-
tract rights with respect to circuitry used for satellite
service, and further held that the contracts’ language
did not require the Bell System to lease local circuits to
Western Union for use in providing the switching serv-
ices described above. Its conclusions were based entirely
on general legal principles and ordinary canons of con-
tract construction, involved no resolution of disputed
facts, and in no way claimed to rely on any special agency
expertise.

C. The Proceedings Below

Upon review, the Court of Appeals for the Third Cir-
cuit, in a 2-to-1 decision, affirmed the FCC in all re-
spects.“ Pet. App. la-4la. Over a dissent by Judge
Garth, the majority construed Section 10(e) of the Ad-
ministrative Procedure Act, 5 U.S.C. § 706, as compelling
judicial deference to the agency’s interpretation of the
contracts, notwithstanding that the FCC relied only on

* That order did not authorize the Bell System to disregard its
outstanding contractuai obligations, but the Bell System tariffs
filed in response disregarded the contract rates and established a
sharply higher rate structure.

»The jurisdiction of the lower court was based upon Section
402(a) of the Communications Act, as amended, 47 U.S.C. § 402(a),
and 28 U.S.C. §§ 2341-50.

* ° :e::c%c% .=

<a

7

“general legal precepts,” concluding that the controversy
“falls within the ambit of the FCC’s expertise” (Pet.
App. lla). The majority exercised such deference even
though the FCC did not itself claim or invoke any spe-
cial expertise or judgment in construing the contracts.
On so deferential a standard of appellate review the
majority concluded that the FCC’s rulings were not
“arbitrary” or “capricious” (Pet. App. 17a, 20a).

The dissenting judge—who had acquired a familiarity
with the underlying dispute as a result of his authorship
of the earlier Bell Telephone decision - disagreed both
with the majority’s resolution of the merits and its re-
strictive standard of review. Distinguishing cases in
which agencies rely on “factors within their special
knowledge or experience” (Pet. App. 24a), Judge Garth
asserted that “plenary, de novo review” was required
here because the agency relied solely on general princi-
ples of law (Pet. App. 24a, 27a, 28a, 29a), not on policy
or technical grounds within the agency’s special compe-
tence (Pet. App. 32a). He relied on Texas Gas Trans-
mission Corp. v. Shell Oil Co., 363 U.S. 263 (1960), and
SEC v. Chenery Corp., 318 U.S. 80 (1943), neither of
which was cited or discussed in the majority opinion.

Judge Garth noted that Section 10(e) of the Adminis-
trative Procedure Act, 5 U.S.C. § 706 (a) (2) (A), com-
mands the reviewing court to “decide all relevant ques-
tions of law” and “set aside agency action” which is
“found to be... not in accordance with law... .” Pet.
App. 23a. Judge Garth concluded that the Commission
had misconstrued the scope of the contractual obligations
contemplated by the Bell-Western Union contracts and
that Western Union had not waived any contract rights

Bell Tel. Co. v. FCC, 503 F.2d 1250 (3d Cir. 1974), cert. de-
nied, 422 U.S. 1026 (1975).

8

by accepting the FCC’s grant of domestic satellite au-
thority."

Western Union’s petition for rehearing was denied
over Judge Garth’s dissent, and rehearing en banc was
automatically denied when all active Third Circuit judges
other than the three members of the panel recused them-
seives. Pet. App. 44a.”

REASONS FOR GRANTING THE WRIT

Review is warranted because the Court of Appeals
failed to apply to the Federal Communications Commis-
sion a basic standard of judicial review that this Court
in similar circumstances held applicable to the Federal
Power Commission and the Securities and Exchange
Commission. The Court of Appeals ignored these prece-
dents as well as numerous lower court decisions follow-
ing this Court’s standard. We believe it is important in
the enforcement of the Communications Act that it be
made clear that the same standard of judicial review
applies to FCC orders as to FPC and SEC orders.

A. Unlike most cases decided by the FCC involving
esoteric and technical issues of broadcast regulation, fre-
quency allocation and ratemaking, the instant litigation,
like cases decided every day by courts, involves a simple
question of the interpretation of written instruments.

The Commission was called upon to construe the cover-
age of the Bell-Western Union contracts and the scope

Although he joined the majority opinion, Chief Judge Seitz
indicated, without stating any reasons, that “even assuming that
the dissenting opinion has stated the applicable scope of review, he
would still deny the petition for review.” Judge Aldisert, the
author of the majority opinion, did not join in that statement.
Pet. App. 21a.

The Fourth Circuit was similarly disabled from entertaining a
suggestion of en banc consideration in another recent case involving
the Bell System. See Petition for Certiorari at 14 n.21, American
Tel. & Tel. Co. v. FCC, No. 76-332.

242

259

. K —

„ a tad beatin BS:
j

of a boilerplate license condition requiring Western Union
to comply with present and future FCC policies.“ In
reviewing the Commission’s actions, the Court of Appeals
deferred to a non-existent agency expertise. The FCC
interpreted the contracts as would any court of law of
competent general jurisdiction. No special expertise was
required to adjudicate these issues, and none was claimed
by the FCC. The Commission, as its opinion unequivo-
cally shows, resolved the issues of the interpretation of
the contract solely, as a court would, upon the meaning
of its terms in ordinary usage. Similarly, the determi-
nation of whether Western Union had waived its con-
tract rights was based on the wording of written instru-
ments. No factors derived from FCC “expertise” played
any part whatsoever in the agency decision.

Except for the fact that a Federal Power Commission
order was involved, this Court’s decision in Texas Gas
Transmission Corp. v. Shell Oil Co., 363 U.S. 263 (1960),
is on all fours. In that case, Mr. Justice Brennan, writ-
ing for a unanimous Court, held that no deference was
to be accorded by a reviewing court to a Federal Power
Commission construction of a contract for the sale of
natural gas, since the agency’s interpretation was based
not on “the application of its expert knowledge and judg-
ment to a highly technical field,” but rather on “the
application of ordinary rules of contract construction.”
Id. at 268-69. The language of the Texas Gas opinion
fits this case like a glove. Relying on SEC v. Chenery
Corp., 318 U.S. 80 (1943), Mr. Justice Brennan stated:

“The grounds upon which an administrative order
must be judged are those upon which the record dis-
closes that its action was based” .... Therefore,
since the Commission professed to dispose of the case

The Court of Appeals applied the ¢eference standard to the
FCC’s construction of both avcuments. The court’s error is the
same in both instances.

10

solely upon its review of the result called for by the
application of canons of contract construction em-
ployed by the courts, and did not in any wise rely
on matters within its special competence, the Court
of Appeals was fully justified in making its own
independent determination of the correct application
of the governing principles. [Id. at 270; citation
omitted. ]

In Chenery I, this Court reviewed the SEC’s applica-

tion of general principles of equity in approving a hold-
ing company reorganization plan, and concluded that
since the agency disavowed reliance on any special agency
competence or ex~2rtise and professed instead to be act-
ing as would a court of equity, no deference should be
accorded the agency’s judgment.“ There is no reason for
according the FCC greater deference when it purports
to be making a legal judgment based on general legal
principles.

The ruling below also conflicts with numerous lower
court decisions. The Federal Power Commission’s con-
struction of natural gas contracts was given no special
deference in a series of cases reviewed by the Seventh
and Tenth Circuits. See Pure Oil Co. v. FPC, 299 F.2d
370, 373 (7th Cir. 1962); Warren Petroleum Corp. v.
FPC, 282 F.2d 312, 315-16 (10th Cir. 1960). Recently,
the Tenth Circuit, in Skelly Oil Co. v. FPC, 532 F.2d
177 (10th Cir. 1976), held that no deference was to be
accorded the FPC’s construction of a natural gas sales
contract’s termination clause, since the question “is a
matter of ordinary contract law, a Williston-Corbin prob-
lem, and. .. nothing more than that.” Id. at 179. Cru-
cial to the decision was its conclusion, based on United
Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S.
332 (1956), that the “Natural Gas Act does not alter
the ordinary contractual relationships.” 532 F.2d at 179.

See also SEC v. Cogan, 201 F.2d 78, 85-87 (9th Cir. 1952).

~ *

11

The FCC, as affirmed by the court below, had previously
concluded that the Communications Act does not alter
ordinary inter-carrier contractual relationships. Bell
System Tariff Offerings, 46 F. C. C. 2d 413, aff'd, 503 F.2d
1250 (3d Cir. 1974), cert. denied, 422 U.S. 1026 (1975).

Similarly, writing for the Second Circuit in Pittston
Stevedoring Corp. v. Dellaventura, F.2d —— [39
Ap.L.2d (P&F) 67, 80-82] (2d Cir. July 1, 1976), peti-
tion for cert. filed sub nom. Northeast Marine Terminal
Co. v. Caputo, 45 U.S.L.W. 2356 (U.S. Sept. 27, 1976)
(No. 76-444), Judge Friendly rejected the “ ‘deference’
approach” in reviewing an agency’s construction of a
statutory term in performing an umpiring, rather than
policy making function. Id. at 81. In the present case,
also, the FCC’s role in contract interpretation was
merely that of an umpire, since it relied exclusively on
the language of the agreements in determining their
scope. Pet. App. 54a.

B. Despite this array of authoritative contrary prece-
dent, the majority below justified its limited review by
asserting without analysis that “this controversy talls
within the ambit of the FCC’s expertise.” Pet. App. IIa.
The Court of Appeals thus erroneously confused “exper-
tise” with “subject matter jurisdiction.”

In Texas Gas, the Federal Power Commission was
vested with jurisdiction to construe contracts for the sale
of natural gas. But that fact did not establish FPC
“expertise” to which a reviewing court must defer, where
the court is no less competent to construe the contracts
and is required by the APA to review “all questions of
law.” See Texas Gas Transmission Corp. v. Shell Oil Co.,
supra, 363 U.S. at 270; Administrative Procedure Act
§10(e), 5 U.S.C. § 706 (a) (2) (A). Similarly, approval
of a holding company’s reorganization plan fell within
the Securities and Exchange Commission’s jurisdiction.
But that fact did not establish SEC “expertise” in apply-

12

ing general principles fashioned by courts of equity. See
Chenery I, supra, 318 U.S. at 92-94.

The FCC is in a parallel position. It has jurisdiction
to construe these contracts between communications car-
riers, but its jurisdiction does not qualify the Commis-
sion as more expert than the FPC or SEC—or, indeed,
a reviewing court—in applying general canons of con-
tract construction. See 4 Davis, ADMINISTRATIVE LAW
TREATISE § 30.07, at 232 (1958).

C. As Judge Garth recognized (Pet. App. 21a), the
importance of this case transcends the interests directly
involved. The “deference” accorded by the majority to
the FCC’s legal conclusions is, on analysis, not defer-
ence but a decision to refrain from undertaking what
the majority saw as the arduous task of unravelling
contract meaning —a task which, though burdensome,
is normally performed by courts of law. If so limited a
view of judicial responsibility is permitted, administrative
agencies would have broader unreviewable authority than
United States district courts in deciding ordinary legal
issues. The exponential growth of government programs
affecting every aspect of private activity emphasizes the
continued need for proper allocation of authority be-
tween agencies and reviewing courts.

15 As Professor Davis points out:

The courts, not the agencies, are comparatively the experts in
many areas, including constitutional law, common law, ethics,
overall philosophy of law and government, judge-made law
developed through statutory interpretation, most analysis of
legislative history, and problems transcending the particular
field of the agency. [4 Davis, ADMINISTRATIVE LAW TREATISE,
§ 30.09, at 241 (1958).]

16 As the majority candidly stated:
But we need not decide what result we would reach if faced
with the necessity of construing de novo these Delphic con-
tractual provisions. What is clear only is that it is not clear
what these provisions, especially section 3(d), mean [Pet. App.
14a].

1

*

— nh ep . rr

13
CONCLUSION

We believe the error below is so patent, particularly
in view of the court’s failure even to cite or discuss the
Chenery and Texas Gas decisions, that the case may be
appropriate for summary reversal. In any event, we re-
spectfully urge review of the Court of Appeals’ “abdica-
tion” u of a meaningful role in the “partnership” be-
tween administrative agencies and reviewing courts as
“collaborative instrumentalities of justice.” United
States v. Morgan, 313 U.S. 409, 422 (1941). The peti-
tion for certiorari should be granted.“

Respectfully submitted,

WM. WARFIELD Ross

PHILIP ELMAN

WILLIAM R. WEISSMAN

NANCY H. HENDRY
WALD, HARKRADER & Ross
1320 Nineteenth St., N.W.
Washington, D.C. 20036

JOEL YOHALEM

JACK WERNER
1828 L St., N.W.
Washington, D.C. 20036

Attorneys for Petitioner

Of Counsel:

RICHARD C. HOSTETLER
Vice President and
General Counsel
The Western Union
Telegraph Company
One Lake Street
Upper Saddle River,
New Jersey 07485

November 15, 1976

Pet. App. 21a (Garth, J., dissenting) .

wf If the Court grants certiorari and sets this case down for full
briefing and oral argument, Western Union wishes to reserve the
right to brief and argue the following subsidiary issues which the
Court may deem appropriate for further review: (1) whether the
Bell-Western Union contracts cover facilities for common carrier
services involving connection to telephone company switching equip-
ment and domestic satellite transmissions; and (2) whether, in
light of United States v. Seatrain Lines, Inc., 329 U.S. 424 (1947),
and FPC v. Sierra Pacific Power Co., 350 U.S. 348 (1956), the
Commission could lawfully abrogate Western Union’s vested con-
tract rights by relying on an open-ended license condition requiring
licensee adherence to all existing and future agency policies.

APPENDICES

la
APPENDIX A

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 75-1796

THE WESTERN UNION TELEGRAPH COMPANY
One Lake Street, Upper Saddle River, New Jersey 07458,
Petitioner
V.

FEDERAL COMMUNICATIONS COMMISSION and
UNITED STATES OF AMERICA,

Respondents

AMERICAN TELEPHONE AND TELEGRAPH COMPANY
(“AT&T”) and THE BELL TELEPHONE COMPANY OF
PENNSYLVANIA; THE CHESAPEAKE AND POTOMAC TELE-
PHONE COMPANY, THE CHESAPEAKE AND POTOMAC
TELEPHONE COMPANY OF MARYLAND, THE CHESA-
PEAKE AND POTOMAC TELEPHONE COMPANY OF VIR-
GINIA, THE CHESAPEAKE AND POTOMAC TELEPHONE
COMPANY OF WEST VIRGINIA, CINCINNATI BELL, INC.,
DIAMOND STATE TELEPHONE COMPANY, ILLINOIS BELL
TELEPHONE COMPANY, INDIANA BELL TELEPHONE
COMPANY, MICHIGAN BELL TELEPHONE COMPANY, THE
MOUNTAIN STATES TELEPHONE AND TELEGRAPH COM-
PANY, NEW ENGLAND TELEPHONE AND TELEGRAPH
COMPANY, NEW JERSEY BELL TELEPHONE COMPANY,
NEW YORK TELEPHONE COMPANY, NORTHWESTERN
BELL TELEPHONE COMPANY, THE OHIO BELL TELE-
PHONE COMPANY, PACIFIC NORTHWEST BELL TELE-
PHONE COMPANY, THE PACIFIC TELEPHONE AND TELE-

2a

GRAPH COMPANY, SOUTH CENTRAL BELL TELEPHONE
COMPANY, SOUTHERN BELL TELEPHONE AND TELE-
GRAPH COMPANY, THE SOUTHERN NEW ENGLAND
TELEPHONE COMPANY, SOUTHWESTERN BELL TELE-
PHONE COMPANY, AND WISCONSIN TELEPHONE COM-

PANY,

Intervenors

ON PETITION FOR REVIEW FROM THE
FEDERAL COMMUNICATIONS COMMISSION

Argued May 6, 1976

Before: SErrz, Chief Judge, and ALDISERT and GARTH,

Of Counsel:

Circuit Judges.

Wm. Warfield Ross, Esq.
William R. Weissman, Esq.
J. Michel Marcoux, Esq.

Wald, Harkrader & Ross
1320 Nineteenth Street, N.W.
Washington, D.C. 20036

Jack Werner, Esq.

Joel Yohalem, Esq.
Laurence Singer, Esq.
1828 L Street, N.W.
Washington, D.C. 20036

Richard C. Hostetler
Vice President and General Counsel
The Western Union Telegraph Company

One Lake Street

Upper Saddle River, New Jersey 07458
Counsel for Petitioner

Of Counsel:

3a

Ashton R. Hardy, General Counsel

Daniel M. Armstrong, Associate
General Counsel

John E. Ingle, Counsel

Federal Communications Commission

Washington, D.C. 20554

Thomas E. Kauper, Assistant Attorney
General

Carl D. Lawson, Esquire

John Powers, Esquire

Department of Justice

Washington, D.C. 20530

Counsel for Respondents

Charles A. Horsky, Esq.

E. Edward Bruce, Esq.
Stephen G. Ryan, Esq.

Gary L. Reback, Esq.
Covington & Burling

888 Sixteenth Street, N.W.
Washington, D.C. 20006

Alfred C. Partoll, Esq.

Lee S. Cuteliff, Esq.

M. Jean Dabney, Esq.

195 Broadway

New York, New York 10007

F. Mark Garlinghouse, Esa.

195 Broadway

New York, New York 10007
Counsel for Intervenors

4a
OPINION OF THE COURT
(Filed July 28, 1976)

ALDISERT, Circuit Judge.

This petition for review of an order of the Federal
Communications Commission presents issues concerning
the scope and applicability of exchange of facilities con-
tracts in force between Western Union (WU) and Ameri-
can Telephone and Telegraph (AT&T). The Commission
concluded that the contracts did not cover AT&T facilities
to be used by WU to provide foreign exchange (FX) and
common control switching arrangement (CCSA) services,’
and that in accepting its satellite authorization WU had
waived any contract rights it might have had in con-
nection with facilities for its domestic satellite service.
WU, therefore, would be obliged to lease facilities for
these services at the higher rates set forth in AT&T tar-

1 Foreign exchange (FX) is a private line service that is
partially “switched”. It allows a businessman located in one
state, to, in effect, maintain a local phone in another state.
Under FX, for example, a businessman in Washington can be
reached by telephone subscribers in New York City and can
himself reach New York City telephone subscribers (through
a local leop in Washington, a Washington-New York inter-
exchange line, and a business line in the New York City ex-
change area). However, New York City telephone subscribers
could not reach Washington subscribers other than the Wash-
ington businessman over FX private line service and the latter
would have to maintain a separate telephone in order to tie into
the Washington exchange area. A Common Control Switching
Arrangement (CCSA) is a private line system for linking the
various offices of a large company through large switches on a
local telephone company’s premises instead of through PBX
switches on the customer’s premises.

46 F.C.C.2d 413, 418 n.5, aff'd sub nom. Bell Telephone Co. v. FCC,
503 F.2d 1250 (3d Cir. 1974), cert. denied, 422 U.S. 1026 (1975).
Reference may be had to previous decisions in this matter for
definitions of other technical or peculiar terms. In the interest of
simplicity, definitional material here will be minimal.

5a

iffs filed with the Commission, not at the lower

rates. We hold that the Commission acted — 5 —
tutory authority and that its conclusions were not arbi-
trary, capricious, an abuse of discretion, or otherwise not
in accordance with law.“ Accordingly, we deny WU’s pe-
tition for review.

I

A detailed history of the disputes underlying this liti-
gation is set forth in Bell Telephone Co. v. FCC, 503 F.2d
1250 (3d Cir. 1974), cert. denied, 422 U.S. 1026 (1975)
and will not be repeated here. That decision constitutes
the legal predicate for the litigation at bar. There we
affirmed a decision and order of the FCC which in
pertinent part (a) required AT&T to furnish to all
specialized common carriers—among them WU intercon-
nection facilities to provide authorized communications
services including FX and CCSA services, and (b) re-
jected AT&T tariffs insofar as they covered interconnec-
tion facilities and services already covered by Bell-West-
ern Union exchange of facilities contracts. Bell Telephone
Co. v. FCC established that the Communications Act does
not authorize the modification or abrogation of contracts
by subsequently filed tariffs. But the order of the Com-

25 U.S.C. $706. Scope of review

To the extent necessary to decision and when
0 tl t presented, the
reviewing court shall decide all relevant questions of law
—— ——— and statutory provisions, and determine
meaning or applicability of the term i
The reviewing court shall— oa

(2) hold unlawful and set asid ,
conclusions found to be— ide agency action, findings, and

(A) arbitrary, capricious, an abuse f . .
otherwise not in accordance with law; 3

(C) in excess of statutory jurisdiction, authori
. 2 2 ° orit „
limitations, or short of statutory right... . ine

6a

mission there affirmed also said that, with respect to
facilities not covered by exchange of facilities contracts,
AT&T was to charge pursuant to tariffs. 503 F.2d at
1282-84.

Following the decision in Bell Telephone Co. v. FCC,
AT&T refused WU’s requests to lease facilities for FX,
CCSA, and domestic satellite services at contract rates
although AT&T leased identical facilities at those rates
when the facilities were used for other services. WU
sought relief in administrative proceedings before the
Commission. On October 16, 1974, the Commission de-
cided that WU had waived any contract rights it might
have had in connection with facilities for its domestic
satellite service when it accepted its satellite authoriza-
tion, but emphasized that AT&T was required to inter-
connect with WU to permit WU to provide FX and CCSA
services. The Commission did not, at that time decide
whether the required FX and CCSA interconnections were
to be pursuant to tariff or contract, but asked the parties
to brief the question. 49 F.C.C.2d 321 (1974). On June
24, 1975 the Commission released its Memorandum Opin-
ion and Order rejecting WU’s contention that the ex-
change of facilities contracts covered FX and CCSA serv-
ices and denying reconsideration of its prior decision
that domestic satellite contract rights, if any, had been
waived. 53 F.C.C.2d 1045 (1975).

In concluding that FX and CCSA services were not
covered by the exchange of facilities contracts, the Com-
mission relied upon the language of the contraciz. Con-
ceding that facilities available under the contract are
technically capable of furnishing FX and CCSA services,
the Commission asked instead “whether the contracts
allow the use of these facilities for FX and CCSA serv-
ices.” 58 F.C.C.2d at 1050. This question it resolved by

7a

reference to contract sections 3 (b) and 3 (d),“ finding

(bb) Connection of Leased Circuits.

Circuits leased to the Telegraph Company hereunder, or
interexchange circuits of the Telegraph Company when con-

nected to such leased circuits, may be directly connected with
circuits owned by:

(1) Other telephone companies offering a general tele-

phone service to the public within the continental United
States.

(2) The United States Government on military bases,

and on reservations of the National Aeronautics and Space
Administration.

(3) Electric power, or oil, oil products, or natural gas
pipeline companies, or railroad companies where the cir-
cuits of such companies are provided primarily to com-
municate with points located along a right-of-way owned or
controlled by such company.

(4) Telegraph Companies offering international tele-
graph service under filed tariffs, where such circuits are
used exclusively in international service and connection is

made at terminals within the United States of such
circuits.

(5) Telegraph or telephone companies, or government-
operated telegraph or telephone systems, operating in com-
panies [sic] bordering the continental United States,
where such circuits are used exclusively in furnishing
service between such countries and the continental United
States, and connection is made at terminals within the
United States of such circuits.

Any other direct connection of such circvits with circuits
of others or of the Telephone Company shall be made only with
the written approval of the Telephone Company.

53 F.C.C.2d at 1048.

(d) Connection of Western Union Private Line Services

With Telephone Company Services.

Connection of Western Union private line services with Tele-
phone Company services shall be allowed only under the tariffs
of the Telephone Company and consistent with the terms and
conditions of such tariffs applicable to the connection of Western
Union provided services with services of the Telephone Com-
pany. No such connection shall at any time be made in any

8a

the controlling language in section 3(d) : “Connection of
Western Union private line services with Telephone Com-
pany services shall be allowed only under the tariffs of
the Telephone Company. .. .” The contracts distinguish
between services and facilities.“ Section 3(d) applies
expressly to services. In the Commission’s view, how-
ever, section 3(d) served a definitional purpose, referenc-
ing the contracts themselves to services allowed at the
date of contracting and thereby, limiting contract fa-
cilities to use for such services:

The purpose of this provision is to define those situ-
ations in which Western Union services utilizing
facilities obtained under the contracts, may be con-
nected to Bell services. Since this provision ref-
erences the applicable telephone company tariffs, the
question before us is whether the cross reference to
the applicable tariffs is to be made as of the time of
contracting (e.g., January 1, 1970) or as of the date

jurisdiction except as duly authorized by tariffs in force and
effect.

.C.C.2d at 1047. The Commission was aware that section 3(d)
anaes in Contract No. 1,. applicable to leasing within ex-
change areas, and not in Contract No. 2, applicable to leasing be-
tween exchange areas. WU mentions this variance by way of dis-
paraging reliance on section 3(d), but makes no argument that the
contracts ought to be separately construed as regards FX, CCSA,
or domestic satellite services. (Petitioner’s Brief at 20.)

5 ing to WU the “facilities” available under the contracts
3 — and microwave circuits, certain items of telephone
equipment, and duct and pole line attachment space.” (Petitioner's
Brief at 16.) Again according to WU, “Telephone Company serv-
ices” referred to in the contracts are “exchange switching (in
the case of FX) and CCSA switching (in the case of CCSA).’
(Petitioner’s Brief at 21.) In addition, a “private line service”,
like FX, “provides the large-scale telephone customer with full-time
private circuits for the transmission of communications between
locations specified by the customer. The service operates to give the
customer continuous communication without requiring the carrier
to establish a new connection for each call or message.” Bell Tele-
phone Co. v. FCC, supra, 503 F.2d at 1254 n.3.

9a

the interconnection of services is to be made. The
law is well settled that all parts or sections of a con-
tract must be given effect, force and meaning, if pos-
sible, and if it can fairly and reasonably be done;
and that a construetion rendering a provision or
term meaningless or superfluous should be avoided.
If there were no Section 3(d) in the contract, then
the terms and conditions governing the connection of
Bell Services with the services of other common car-
riers would be found in the then effective applicable
Bell System customer tariffs. If the cross reference
to the applicable telephone company tariffs is meant
to be to the then effective tariff provisions, then
Section 3(d) would be superfluous. Therefore, in
order to give meaning to Section 3(d), we conclude
that the cross reference to applicable telephone com-
pany tariffs is to be made as of the time of contract-
ing (e. g., January 1, 1970). Since the telephone
company tariffs, at that time, did not allow Western
Union to interconnect its private line services with
Bell’s service for the purpose of providing its own
FX and CCSA services, we conclude that Western
Union may not obtain under the contracts, facili-
ties which would be used in the provision of FX and
CCSA services. Western Union may, of course, ob-
tain such facilities pursuant to Bell tariffs on file
with this Commission, in the same manner and at
the same rates as other common carriers offering
FX and CCSA type services,

53 F.C.C.2d at 1051 (footnotes omitted).

The FCC authorized WU’s domestic satellite application
on January 18, 1973, subject to the condition that WU’s
“facilities shall be operated in accordance with all Com-
mission policies adopted in Docket No. 16495 [which
established basic domestic satellite policy objectives] and
all rules and policies subsequently made applicable to
domestic satellite communications. .” 38 F.C.C.2d
1197, 1199 (1973). Some eight months later, in the con-

10a -

text of AT&T’s domestic satellite application, the Com-
mission decided that tariffs, not private contracts, were
the means most conducive to achieving its basic policy ob-
jectives of reasonable and non-discriminatory satellite
licensee access to AT&T facilities.“ The effect of the
quoted conditional language, the Commission here con-
cluded, was to waive any contract rights WU might
have had in connection with its satellite operations, and
to subject those operations to the subsequently articulated
tariff policy. “We conclude that Western Union willingly
and knowingly accepted a condition in its domestic satel-
lite authorization, as implemented by the unchallenged
AT&T decision, which constituted a voluntary waiver of
its contract rights, if any existed.” 53 F.C.C.2d at 1054.

WU petitions for review under § 402(a) of the Com-
munications Act, as amended, 47 U.S.C. § 402(a), and 28
U.S. C. § 2342 (1).

We turn now to review of the Commission's conelu-
sions: first, concerning FX and CCSA services, and,
second, concerning domestic satellite service.

6 We see no reason why tariffs should not be filed by the Bell
System to cover facilities supplied to satellite licensees. The
statutory requirement under our Act for filing of tariffs is
based upon the national public interest in securing uniformity
of treatment to all, to suppress unjust discrimination and undue
preferences, and to prevent special and secret agreements, in
respect to interstate wire and radio communications, and to that
end to require that rates applicable thereto be established
in a manner calculated to give them publicity, to make them
inflexible while in force, and to cause them to be unalterable
except in a manner prescribed by statute.

21. Accordingly, we shall impose as a condition to the grant
herein of the AT&T applications that all charges, classifications,
regulations and practices applicable to the provision by the
Bell System companies of interconnection facilities shall be
set forth in tariff schedules to be filed pursuant to Section 203
of the Act and Part 61 of our Rules.

42 F.C.C.2d 654, 659-60 (1973).

lla

II.

Preliminarily, we must address a question raised con-
cerning the proper scope of our review of the FCC’s
conclusions concerning FX and CCSA services. Both
parties, correctly, agree that the pertinent statute is
§ 706 of the Administrative Procedure Act, note 2 supra,
which provides that a reviewing court shall set aside
agency conclusions found to be arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with
law. WU argues, however, that the Commission here was
net applying the Communications Act which is the
agency’s expert province, but was applying general com-
mon law precepts of contract construction in which the
agency has no particular expertise. Accordingly, the ar-
gument continues, the Commission here is entitled to no
greater deference from this court than would be due a
district court in a breach of contract action. We cannot
agree.

WU makes no attempt to harmonize its argument for
a more stringent standard of review with the apparently
clear language of the Administrative Procedure Act. We
find no ambiguity in the statutory standard. Nor do we
perceive any intimation that an agency’s resort to gen-
eral legal precepts in determining a matter within the
ambit of its expertise sufficies [sic] to divest that deter-
mination of judic al deference otherwise due. Certainly,
this controversy falls within the ambit of the FCC’s ex-
pertise. These agreements involve complex, sophisticated,
and rapidly-evolving communications technology. Quite
properly, WU took the matter to the FCC for resolution,
not to a district court.’ Moreover, the agreements impli-

An attempt to initiate this proceeding in the district court would
probably have resulted in a reference to the FCC under the doctrine
of primary jurisdiction. “Under the doctrine, a court should refer
a matter to an administrative agency for resolution, even if the
matter is otherwise properly before the court, if it appears that
the matter involves technical or policy considerations which are

12a

cate questions of national regulatory policy. They con-
cern the applicability of Commission-approved tariffs
intended to provide access to all common carriers on rea-
sonable and non-discriminatory terms. Under these cir-
cumstances, the fact that these are private agreements
cannot alter the statutory deference due the Commission.
See North Atlantic Westbound Freight Ass’n v. FMC,
397 F.2d 683, 685 (D.C. Cir. 1968); Manufacturers
Light & Heat Co. v. FPC, 374 F.2d 88, 89 (3d Cir.
1967). We will upset the Commission’s conclusion con-
cerning FX and CCSA only if it is arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance
with law. Meadville Master Antenna, Inc. v. FCC, ——
F.2d ——, No. 75-1889 (3d Cir., April 12, 1976).

WU objects to the FCC’s conclusion concerning FX
and CCSA in three respects. First, WU focuses on the
Commission’s determination that the contracts cover the
technical facilities that would provide FX and CCSA
services. This determination, WU contends, should have
been dispositive of the litigation. WU here contends, in
effect, for a plenary obligation on the part of AT&T to
provide contract facilities for any services that WU
might be authorized to, and choose to, provide during the
term of the contracts. But the Commission aptly an-
swered this contention: “the question to be resolved is
not whether the facilities available under the contracts
are capable of furnishing FX and CCSA services, but
rather whether the contracts allow the use of these fa-
cilities for FX and CCSA services.” 53 F.C.C.2d at 1050.

Second, WU takes issue with the Commission’s reli-
ance on section 3(d) as defining the services for which
contract facilities are available by reference to services
being provided by WU at the time of contracting in 1970.

beyond the court’s ordinary competence and within the agency’s
particular field of expertise.” MCI Communications Corp. v. AT&T,
496 F.2d 214, 220 (3d Cir. 1974).

13a

WU argues that the purpose of section 3(d) is not to
define services for which contract facilities are available,
but is “to acknowledge that such service connection con-
figurations are consistent with these facilities contracts.”
(Petitioner’s Brief at 22.) According to WU, section
3(d) contemplates an arrangement where WU would
lease facilities at contract rates and services at tariff
rates.“ AT&T’s response is multi-faceted. Distilled to its
essence, however, it is that WU’s interpretation results
in an “open-ended” obligation to provide facilities at con-
tract rates, and that other contract provisions evidence
no intention on the part of AT&T to assume such an obli-
gation. Most particularly, AT&T points to section 3(b),
note 3 supra, with its enumeration of five specific in-
stances in which circuits leased to WU under contract
may be connected with other circuits, and its require-
ment of AT&T approval for other connections. AT&T
also points to section 2(d)* of Contract No. 2, and sec-
tion 20g)“ of Contract No. 1 (identically reproduced in

; WU also argues that the FCC’s reference to 1970 tariffs in
interpreting the contracts will have the ‘preposterous consequences”
that all provisions of such tariffs “would be frozen as of that date
for the life of the contract.” (Petitioner’s Brief at 25.) We fail to
see the logic of this argument. There is no apparent logical connec-
tion between the Commission's reference to 1970 tariffs as part of
the process of construing these private exchange of facilities con-
tracts, and the statement that all provisions of the tariffs will be

frozen. If there is a logical connection, it escapes our powers of
discernment.

(d) Access and connection to a circuit section furnished here-

under may be had at points of termination of such circuit sec-
tion only by means of local terminal circuits procured from the
lessor or from its connesting telephone company by separate
agreement, or by connec.ions made by the lessee upon special
approval by the lessor.

(App. at 0111.)
(e) This Agreement does not apply to the furnishing by

either party to the other of anv telephone or telegraph services
or facilities under published tariffs.

(App. at 0087.)

14a

section 2 (f) of Contract No. 2), as evidence that the
parties did not contemplate the obligation that WU seeks
to impose. AT&T, of course, vigorously supports the
FCC’s reference to 1970 as the time for judging the
scope of the parties’ obligations, asserting that “it is
clear that section 3, read as a whole, plainly mandates”
such a reference. (Intervenors’ Brief at 31.)

Unfortunately, what is clear and plain to the advo-
cates is not always clear and plain to the court. This
aspect of the argument is slippery. But we need not
decide what result we would reach if faced with the
necessity of construing de novo these Delphic contractual
provisions. What is clear only is that it is not clear
what these provisions, especially section 3(d), mean. Cer-
tainly, it was not arbitrary or capricious to conclude, as
the Commission did, that the contracts embodied some
limitation on AT&T’s obligation to provide facilities tech-
nically covered by the specifications of the contracts.
Neither, we believe, was it arbitrary or capricious for
the Commission to interpret section 3(d) as imposing
that limitation by referencing the contracts to the time
of contracting. Accordingly, we reject WU’s argument
concerning the interpretation of section 3(d).

Finally, WU contends that the Commission’s decision
was tainted by the application of erroneous standards of
law, to-wit, by consideration of parol evidence as to the
contracting parties’ intentions, and by adoption of a
policy of strict construction of the exchange of facilities
contracts. WU’s parol evidence contention is based on
the Commission’s consideration of an affidavit concern-
ing AT&T’s intentions during the negotiations and in
the execution of the contracts." For this contention to

Our interpretation of the contracts is further buttressed by
the affidavits submitted by both parties in an attempt to explain
each party’s intentions at the time of contracting. AT&T
affirmatively states that [dluring the negotiations, and in

15a

have logical validity, WU would have to establish at a
minimum: (a) as a matter of administrative law, that
the Commission was bound to apply the parol evidence
rule, and (b) as a matter of contract law, that the rule
was applicable. WU has not established either of these
propositions. We have strong doubts on both scores, but
we have no occasion to go further than the basic precept
of administrative law set forth in 5 556 (d) of the Ad-
ministrative Procedure Act: Any oral or documentary
evidence may be received, but the agency as a matter
of policy shall provide for the exclusion of irrelevant,
immaterial, or unduly repetitious evidence.” 5 U.S.C.
556 (d).“ The paramount issue being the real intention

the execution of the contracts, it was not contemplated by those
representing the Bell System that the contracts covered con-
nection of Bell System services or facilities with Western
Union services or facilities for FX or CCSA services, or that
facilities would be furnished to Western Union under the con-
tracts for such purposes.” On the other hand, Western Union
did not state that, at the time of negotiations, it was intended
that facilities obtained under the contracts could be used for
FX or CCSA services or any other Western Union services
which required connection to Bell System services and which
were not already allowed by tariffs in effect at the time of the
signing. Rather Western Union merely states that at no time
prior to the execution of the contracts did AT&T inform
Western Union that the contracts did not cover leasing of Bell
System facilities to Western Union for FX or CCSA services.
Thus the intentions of the parties at the time of contracting,
as shown by the affidavits of the parties, was that contract
facilities could not be used for FX and CCSA services.

53 F.C.C.2d at 1051 n.12.

1 Referring to the parol evidence rule, Professor Thayer said:
“Few things are darker than this, or fuller of subtle difficulties.”
THAYER, A PRELIMINARY TREATISE ON EVIDENCE AT COMMON LAW
390 (1898). See, .., United States v. Clementon Sewerage Au-
thority, 365 F.2d 609, 613-14 (3d Cir. 1966).

7 “If these words mean what they say, an agency whose action
is subject to this provision cannot commit error by admitting par-
ticular evidence, no matter how incompetent or irrelevant the evi-
dence may be.” K. Davis, ADMINISTRATIVE LAW TREATISE § 14.08,
at 282 (1958).

16a

of the parties, Ludwig Honold Manufacturing Co. V.
Fletcher, 405 F.2d 1123, 1131 (3d Cir. 1969), and the
Commission having obviously concluded that an affidavit
speaking to that issue was not “irrelevant, immaterial,
or unduly repetitious”, we are not in a position to gain-
say that conclusion.“ The Commission considered a simi-
lar affidavit supplied by WU, note 11 supra, so clearly
the practice here was even-handed. And, in any event,
the agency’s opinion makes clear that the affidavits were
not dispositive in effect; they merely “buttressed” its
conclusions concerning FX and CCSA. Ibid. We reject
the parol evidence argument.

WU gets no further with its attack on the FCC’s an-
nounced policy of strict construction of the exchange of
facilities contracts." WU interprets this as a policy to
construe the contracts “not in accord with their literal
meaning, but as narrowly as possible” and asserts that
such a policy “necessarily would stem from authority
granted the agency in the Communications Act to abro-
gate, set aside or modify the contracts, and it is settled
that no such authority exists, except possibly under for-

14 We recognize that the parol evidence rule is frequently said to
be a rule of substantive law and not a rule of evidence. F. g., United
States v. Clementon Sewerage Authority, supra note 12, 365 F.2d
at 613: J. CALAMARI & J. PRULO, THE LAW OF CONTRACTS § 43, at
86 (1970). No reason is apparent why the FCC could not apply the
rule as a matter of substantive law or policy, if it chose to do so,
but we hardly imagine that it is required to do so in view of the
plain language of § 556(d) that “Ca]ny oral or documentary evidence
may be received.”

15 The Commission is cognizant that if the contract rates do
apply a disparity in treatment among carriers will exist. Such a
disparity, if unjustified, would be manifestly contradictory to
the Commission’s often enunciated policy of fair and full com-
petition and its policy that tariffs, rather than contracts,
should generally govern these matters. Because of this the
Commission intends to strictly construe the Bell-Western Union
contracts.

49 F.C.C.2d at 322.

17a

mal hearing procedures, not followed here.” (Petition-
er’s Brief at 31-32.) This argument misconceives the
agency’s action: the Commission here did not abrogate
set aside or modify the contracts, it construed them. Of
course, Opinions may differ as to the proper limits and
results of construction. But where, as here, the meaning
of contractual provisions is contested and unclear, we
have no hesitancy in characterizing the process as con-
struction. Moreover, while we would see no impropriety
in alertness to policy implications of contract construc-
tion, we find no evidence in the decision under review
of the application of any particular philosophy of con-
struction, strict or otherwise. We find simply an effort
to determine the intentions of the parties embodied in a
group of difficult contractual provisions. Again, we can
discern no basis to disturb the FCC’s conclusions.

We have considered WU’s arguments, and
reviewed the FCC’s conclusion that FX and CCSA —
ices are not covered by the exchange of facilities con-
tracts. We do not find that conclusion to be arbitrary
capricious, an abuse of discretion, or otherwise not in
accordance with law.

III.

Turning to the domestic satellite aspect of the petition
for review, we again address the threshold question of
the proper scope of our review. In this phase of the case
WU makes two substantive arguments: first, that the
WU satellite authorization was not, in fact, conditioned
on a waiver of contract rights; and second, that any
such condition imposed constituted an unlawful expan-
sion of the Commission’s regulatory powers. With re-
gard to WU’s first argument, our review must be based
on determining whether the FCC’s action was arbitrary
capricious, an abuse of discretion, or otherwise not in
accordance with law. The reasons set forth previously
for applying that standard apply here a fortiori. Pri-

18a

marily, this argument turns on an interpretation of the
FCC’s own prior action in imposing the contested waiver,
and upon a factual determination whether WU know-
ingly and voluntarily accepted its authorization subject
to the condition. We will accord the full deference of
the statutory standard to the Commission’s conclusions
on these points. With regard to WU’s second argument,
our review is of a different character. A claim that
agency action is “in excess of statutory jurisdiction, au-
thority, or limitations, or short of statutory right”, 5
U.S.C. § 706(2) (C), necessarily entails a first-hand judi-
cial comparison of the claimed excessive action with the
pertinent statutory authority. See, e.g., FPC v. Moss, 44
U.S.L.W. 4278 (U.S. Mar. 3, 1976).

In marked contrast to the parties’ contractual lan-
guage previously discussed, the Commission’s language in
its January, 1973, satellite authorization to WU was quite
explicit: “these [satellite] facilities shall be operated in
accordance with all Commission policies adopted in Docket
No. 16495 and all rules and policies subsequently made
applicable to domestic satellite communications.” 38
F.C.C.2d at 1199. Having argued that the FX and CCSA
contract terms were clear and unambiguous, WU here
contends that the Commission’s language was not suffi-
ciently clear to give fair notice of a waiver. WU asserts
that in January, 1973, it had no reason to suspect that
it was waiving contract rights. “No policy was then in
effect or subsequently adopted in the orders cited by the
FCC compelling Western Union to waive its contract
rights in order to receive the requested domestic satellite
authority.” (Petitioner’s Brief at 37.) But the FCC had
said in June, 1972, that its objective was “that all car-
riers providing retail interstate satellite services
have access at non-discriminatory terms and conditions to
local loop and interchange facilities.” 35 F.C.C.2d at
856 (1972). WU is not unsophisticated; at the least

19a

this language adumbrated the possbility that tariffs might
be applied. And surely a policy was “subsequently adopt-
ed”—in connection with AT&T’s satellite application, 42
F.C.C.2d at 656-60—which required that tariffs, not pri-
vate contracts, govern domestic satellite facilities. The
Commission said:

. . In summary, as a participant in Docket No.
16495, Western Union was on — notice of: (a)
the Commission's general poliey objective on access
and interconnection; (b) the regulatory approach
adopted by the Commission to develop appropriate
means to realize such policy objective and; (e that
as a potential domestic satellite licensee it would be
subject to any interconnection and access policies
— by the Commission pursuant to the Second

eport.

.. [Wie find it difficult to believe that as an
established common carrier Western Union would not
anticipate, either at the time of our Second Report
and Reconsideration Orders or at the time its au-
thorization was granted, that we might reach the de-
termination after appropriate consideration of AT
&T’s applications and interconnection proposal that
tariffs, rather than private contracts, would be the
most appropriate means to assure the realization of
our access and interconnection policy objectives which
stressed the goal of “reasonable and non-discrimina-
tory” interconnection. In light of the foregoing and
Section 203 of the Communications Act, we deem
Western Union’s claim of lack of notice to be un-
tenable. In any event, Western Union failed to chal-
lenge the AT&T grant, and is therefore now bound
by that final decision. We conclude that Western
Union willingly and knowingly accepted a condition
in its domestic satellite authorization, as imple-
mented by the unchallenged AT&T decision, which

20a

constituted a voluntary waiver of its contract rights,
if any existed.

53 F.C.C.2d at 1053-54 (1975).

We do not believe that this conclusion was arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law.

WU’s final argument—that the imposition of a waiver
exceeded the Commission’s statutory authority—is not
persuasive. The Commission is expressly authorized by
statute “to attach to the issuance of [a] certificate such
terms and conditions as in its judgment the public con-
venience and necessity may require.” 47 U.S.C. § 214
(e). Recognizing the existence of § 214(c), WU is forced
to argue that it cannot be considered as authorizing the
Commission to impose a waiver of contract rights as a
condition. The gravamen of the argument is that such
an interpretation would allow the Commission to do “in-
directly” by condition what it is forbidden to do “di-
rectly” by tariff, viz., modify or abrogate contracts. Bell
Telephone Co. v. FCC, supra. The argument fails because
of the brute fact that there is a significant difference
between a voluntary waiver of rights in order to secure
a benefit not otherwise obtainable,” and the extinguish-
ment of rights by tariffs which provide no quid pro quo.
Keeping in mind also that § 214 applies only to new
lines or extensions, we see no inconsistency between the
condition imposed in this case and the rule of Bell Tele-
phone Co. v. FCC that the Act does not authorize the
abrogation or modification of contracts by subsequently
filed tariffs. The Commission specifically stated that
At jhe condition we imposed on Western Union’s authori-

When an applicant accepts a Government permit which is sub-
ject to certain conditions, he cannot later assert alleged rights
which the permit required him to surrender in order to receive it.”
Capital Telephone Co. v. FCC, 498 F.2d 734, 740 (D.C. Cir. 1974).

21a

zation is reasonable and in our judgment serves the publie
convenience and necessity in assuring flexibile regulation
of domestic satellite communications and the provision
of services and facilities on a reasonable and non-dis-
criminatory basis.” 53 F.C.C.2d at 1055 (1975). Far
from overstepping its statutory bounds, the Commission
appears to have acted carefully and consciously within the
express language of § 214(c). We decline to hold the
Commission’s action unlawful.

We have considered all the contentions raised by the
petition for review. The petition will be denied.

Chief Judge Seitz joins in Judge Aldisert’s opinion.
However, even assuming that the dissenting opinion has
stated the applicable scope of review, he would still deny
the petition for review.

GARTH, Circuit Judge, dissenting:

The majority’s resolution of this petition for review
has, in my view, dangerously limited the scope of judicial
scrutiny of administrative decisions. The administrative
agency’s interpretation of the contracts at issue here was
based solely upon principles of contract construction and
not agency expertise. In according deference to the Fed-
eral Communications Commission’s interpretation of these
contracts, I believe the majority has given the agency vir-
tually unreviewable power in matters of law, a power
denied to federal district courts, although courts are pre-
sumably expert in such matters. Reason compels no such
abdication of our appellate function, nor does it require
substitution of our normal de novo standard of review
for the standard employed by the majority.

22a

I.

As stated by the majority (Majority Op. at 5-9), the
matters in issue here follow directly from the Federal
Communications Commission’s (FCC) order dated April
23, 1974 which this Court affirmed in Bell Telephone Co.
of Pennsylvania v. F.C.C., 503 F.2d 1250 (3d Cir. 1974),
cert. denied, 423 U.S. 886 (1975). That order required
the American Telephone and Telegraph Company (AT
&T) and the Bell System Operating Companies (Bell) to
furnish specialized common carriers,’ including Western
Union, with interconnection facilities pursuant to tariffs
for foreign exchange (FX) and common control switching
arrangement (CCSA)?* services. However, the April 23,
1974 order provided that the Bell Companies could not
abrogate Western Union’s existing contractual rights
through the adoption of tariffs. Therefore, interconnec-
tion facilities would be available to Western Union for
FX and CCSA services at contract rate if these facili-
ties were covered by the Bell-Western Union exchange of
facilities contracts, and would otherwise be available at
tariff rate.

Thereafter, Western Union requested that the Bell
Companies furnish interconnection facilities for FX,

1 See Bell Telephone Co. of Pennsylvania v. F.C.C., 503 F.2d at
1254, n.3, where this Court stated:

A “specialized” common carrier is a carrier that does not
provide the full range of communications services contemplated
by the Communications Act, 47 U.S.C. § 151 et seq. For the pur-
poses of this opinion, the phrase “specialized common carrier”
shall refer to carriers who specialize in “private line services.”

“Private line service” provides the large-scale telephone
customer with full-time private circuits for the transmission
of communications between locations specified by the customer.
The service operates to give the customer continuous communi-
cation without requiring the carrier to establish a new connec-
tion for each call or message.

2 See Majority Op. at n.1.

23a

CCSA, and domestic satellite communication services at
the lower contract rates. The Bell Companies refused,
claiming that these facilities were only available under
tariffs. As a result Western Union filed complaints with
the FCC against AT&T and the Bell Companies. It is
these complaints that give rise to this petition for review.

I am in complete accord with the majority’s statement
that our review of the FCC orders at issue here is gov-
erned by section 10(e) of the Administrative Procedure
Act (APA), 5 U.S.C. § 706 (a) (2) (A). That section
states in pertinent part:

To the extent necessary to decision and when pre-
sented, the reviewing court shall decide all relevant
questions of law, interpret constitutional and statu-
tory provisions, and determine the meaning and ap-
plicability of the terms of an agency action. The
reviewing court shall—

(2) hold unlawful and set aside agency action,
findings, and conclusions found to be—

(A) arbitrary, capricious, and abuse of dis-
cretion, or otherwise not in accordance with
„.

However, I believe § 706 (a) (2) (A) does not create a
single standard of review applicable to all situations. The
phrase arbitrary, capricious, and abuse of discretion, or
otherwise not in accordance with law“ is worded in the
disjunetive, thereby providing alternative tests for seru-
tinizing agency action. While the standard of arbitrary,
capricious, and abuse of discretion is appropriate in some
instances, Congress has required the reviewing court to
“decide all revelant questions of law” and thereafter to
set aside agency determinations “not in accordance with
law.” The APA thus recognizes a basic postulate of our
system of appellate jurisprudence—that while deference ~

24a

must be accorded to judgments of lower tribunals based
upon factors within their special knowledge or experi-
ence, an appellate court is entrusted with plenary, de
novo review of all questions of law. Consequently, I be-
lieve a determination of the appropriate APA standard
of review can only be made after examining the type of
agency action presented in this petition.

The FCC characterized the FX-CCSA issue as purely
a question of contract construction—whether “the Bell-
Western Union exchange of facilities contracts cover the
leasing of interconnection facilities to be used in furnish-
ing FX-CCSA services.” 53 F.C.C.2d 1045 (1975).
Moreover, in resolving this legal problem the FCC relied
solely upon principles of contract law. Paragraph 16 of
the Memorandum Opinion and Order of June 24, 1975
states:

16. Foreign exchange (FX) service involves the
connection of a pure private line service to a local
exchange service, and CCSA service is a switched
private line service involving the connection of vari-
ous private line services through AT&T’s Common
Control Switching Arrangements (CCSA). For
Western Union to provide FX and CCSA service it
is necessary in either case to connect Western Un-
ion’s private line services with Bell services. Thus
the controlling provision in the contracts is Section
3(d) which states, in pertinent part, that “Connec-
tion of Western Union private line services with
Telephone Company services shall be allowed only
under the tariffs of the Telephone Company... .”
The purpose of this provision is to define those situa-
tions in which Western Union services utilizing fa-
cilities obtained under the contracts, may be con-
nected to Bell services. Since this provision refer-
ences the applicable telephone company tariffs, the
question before us is whether the cross reference to
the applicable tariffs is to be made as of the time of
contracting (e.g., January 1, 1970) or as of the date

25a

the interconnection of services is to be made. The
law is well settled that all parts or sections of a
contract must be given effect, force and meaning, if
possible, and if it can fairly and reasonably be done;
and that a construction rendering a provision or
term meaningless or superfluous should be avoided."
If there were no Section 3(d) in the contract, then
the terms and conditions governing the connection of
Bell services with the services of other common car-
riers would be found in the then effective applicable
Bell System customer tariffs. If the cross reference
to the applicable telephone company tariffs is meant
to be to the then effective tariff provisions, then Sec-
tion 3(d) would be superfluous. Therefore, in order
to give meaning to Section 3(d), we conclude that
the cross reference to applicable telephone company
tariffs is to be made as of the time of contracting
(e.g., January 1, 1970). Since the telephone com-
pany tariffs, at that time, did not allow Western
Union to interconnect its private line services with
Bell’s services for the purpose of providing its own
FX and CCSA services, we conclude that Western
Union may not obtain under the contracts, facili-
ties which would be used in the provision of FX and
CCSA services. Western Union may, of course, ob-
tain such facilities pursuant to Bell tariffs on file
with this Commission, in the same manner and at
the same rates as other common carriers offering
FX and CCSA type services.“ (Footnote 12 omitted)
(Emphasis added.)

1 F. g., Meighan v. Finn, 146 F.2d 594 (2nd Cir. 1944),
affirmed 325 U.S. 300, 65 S. Ct. 1147 (1945); United Artists
Corporation v. Strand Productions, 216 F.2d 305 (9th Cir.
1954); Ludwig Honold Manufacturing Company v. Fletcher,
405 F.2d 1123 (3rd Cir. 1969); Gillentine v. McKeand, 426
F.2d 717 (1st Cir. 1970); see also 17A C.J.S. Contracts § 297;
Williston, Ch. 22, §619; Restatement of Contracts § 236.

53 F.C.C.2d at 1051.

26a

The second issue concerning the availability of inter-
connection facilities under the contracts for domestic
satellite services also presented a purely legal question—
whether Western Union in accepting domestic satellite
authorization waived any rights under the contracts.
Paragraphs 9 and 10 of the Memorandum Opinion and
Order of October 16, 1974 capsulize the FCC’s analysis:

9. Western Union also sought authorization from
the Commission to provide its own domestic satellite
communications. These applications were also grant-
ed subject to the condition that the facilities would
be operated in accordance with Commission policies
adopted in the Second Report and Order, 35 FCC2d
844 (1972), and “all rules and policies subsequently
made applicable to domestic satellite communica-
tions. Western Union Telegraph Co., 38 FCC
2d 1197, 1199 (1973). Western Union willingly ac-
cepted such a conditional grant.

10. Both Bell and Western Union willingly and
knowingly accepted their domestic satellite authori-
zations subject to the explicit condition that tariffs,
not private contracts, would be filed setting forth the
charges, classifications, regulations and practices ap-
plicable to such facilities. AT&T 42 FCC2d 654,
659 (1973). Bell System Tariff Offerings, 46 FCC2d
413, 437. We held that such tariffs were “the most
appropriate means by which to achieve our objective
that these facilities [should] be provided to other
satellite carriers on ‘reasonable and non-discrimina-
tory conditions.” AT&T, 42 FCC2d 654, 659
(1973).* Bell and Western Union thus agreed to
waive any rights, in any existed, to obtain such fa-
cilities by any means other than a tariff. Neither
can now allege a right to such facilities under any con-
tracts. “When an applicant accepts a government
permit which is subject to certain conditions, he
cannot later assert alleged rights which the permit
required him to surrender in order to receive it.”

27a

Capital Telephone Company v. Federal Communica-
tions Commission, slip op. 11, No. 72-1715, D.C. Cir.,
May 24, 1974. [498 F.2d 734, 740]. (Emphasis
added. )

49 F.C.C.2d 321, 323 (1974). On reconsideration of this
opinion and order the FCC further expanded upon its
waiver theory still relying upon the precise terms of the
satellite grant (see p. 32, infra). 53 F.C.C.2d at 1052-55.

The majority regards this issue of waiver as a factual
determination (Majority Op. at 16) which is again sub-
ject to the “arbitrary, capricious, and abuse of discre-
tion” standard. I cannot agree. The Commission itself
has predicated Western Union’s “waiver” solely upon the
precise terms of its grant of domestic satellite authoriza-
tion. Thus, in holding that Western Union “waived” its
contract rights, the FCC relied upon no factual determin-
ation and did not go outside the exact terms of the grant.
Nor did the question of Western Union’s knowing and
willing relinquishment of any rights under its contracts
involve the FCC’s interpretation of its own prior actions.
For “waiver” looks to the knowledge and conduct of
Western Union at the time of accepting the grant and not
to the FCC’s subsequent interpretation of its own intent
in authorizing the grant. Thus, while I acknowledge that
deference is accorded to an agency’s interpretation of its
own actions or agreements where the issue may involve
the meaning of that particular action or agreement, I see
no basis for “deference” when the issue for determina-
tion necessarily arises from the knowledge, conduct, and
intent of third parties such as Western Union here.

Since the waiver here involves neither factual conclu-
sions, nor interpretation requiring agency expertise, I find
no basis for applying an “arbitrary or capricious” stand-
ard which is traditionally applied in such circumstances.
Rather, here. . . where the only evidence as to waiver
is a writing, its construction and interpretation and

28a

whether or not it constitutes a waiver is a question of
law for the court.” Hanover Construction Co. v. Fehr,
392 Pa. 199, 139 A.2d 656, 658 (1958) ; Griffin v. United
States of America, 500 F.2d 1059, 1072 (3d Cir. 1974);
Crabb v. Commissioner of Internal Revenue, 121 F.2d
1015 (5th Cir. 1941). Hence the appropriate APA
standard to be applied here is the standard of “not in
accordance with law,” a standard which requires a plen-
ary, de novo review of the documents in question.

Applying strictly legal principles, the FCC concluded
that the Bell-Western Union contracts did not extend to
facilities for FX and CCSA services and that Western
Union waived any contract rights with respect to do-
mestic satellite services. In reviewing decisions that are
grounded upon principles of contract law, their “validity
must likewise be judged on that basis. The grounds upon
which an administrative order must be judged are those
upon which the record discloses that its action was
based.” S.E.C. v. Chenery Corp., 318 U.S. 80, 87 (1943);
Texas Gas Corp. v. Shell Oil Co., 363 U.S. 263, 270
(1960). Hence, I conceive of our function as being one
of reviewing the FCC’s application of strictly legal pre-
cepts to the Bell-Western Union controversy.

However, the majority evidently does not share in

this view. Instead the majority has characterized the
matter before us as

an agency’s resort to general legal precepts in
determining a matter within the ambit of its exper-
tise . . . Certainly this controversy falls with the
ambit of the FCC’s expertise. These agreements in-
volve complex, sophisticated, and rapidly-evolving
communications technology . . . . Moreover, the
agreements implicate questions of national regula-
tory policy ....

29a

Majority Op. at 10. Although the FCC does exercise
special competence with respect to the many decisions en-
trusted to it under the Federal Communications Act, 47
U.S.C. § 151 et seg., I know of no reason to conclude that
this competence extends to the subject of contract con-
struction—an area that has traditionally been considered
within the special province of a court’s expertise. More-
over, even if the FCC had special ability in such matters,
its decisions here were predicated solely on the basis of
contract law and not upon any expertise or policy con-
siderations. Thus, the possibility that this controversy
falls within the special competence of the FCC is irrele-
vant to our consideration since “[t]he grounds upon
which an administrative order must be judged are those
upon which the record discloses that its action was
based.” S.E.C. v. Chenery Corp., supra at 87. Hence, I
believe our review is strictly limited to the FCC’s ap-
plication of contract principles to the issues presented.

Our initial inquiry as to the appropriate APA stand-
ard for review of the FCC orders presented here may be
further refined as follows: Which of the § 706(a) (2) (A)
standards“ arbitrary, capricious, an abuse of discre-
tion” or “not in accordance with law“ must we apply
in reviewing agency decisions that are based exclusively
upon principles of contract law? This is by no means a

question of first impression. In a similar context, this

Court, without even discussing its scope of review, con-
sidered de novo the Federal Power Commission’s inter-
pretation of a clause in a contract for the sale of natural
gas. Shell Oil Co. v. F.P.C., 263 F.2d 223 (3d Cir.
1959). Our plenary review of the contract in Shell Oil
Co. resulted in a petition for certiorari which the Su-
preme Court granted, having been “particularly moved
to do so by the contention .. . that the Court of Ap-
peals exceeded the appropriate scope of judicial review
of the Commission’s determination.” Texas Gas Corp. V.
Shell Oil Co., 363 U.S. 263, 268 (1960).

30a

The Supreme Court analyzed the challenge to this
Court’s review of the F.P.C. contract interpretation as
follows:

We may assume with the petitioners that the
Court of Appeals did not treat the Commission’s
order as one which it was required to accept if
reasonably supported in the record, and instead con-
sidered that it could examine de novo the question
of the proper interpretation to be given the Shell
“favored nation” clause. The petitioners’ argument
that the Court of Appeals exceeded the allowable
limits of judicial review is based upon the premise
that the Commission’s interpretation of the “favored
nation” clause reflects the application of its expert
knowledge and judgment to a highly technical field,
so that the Court of Appeals was required to accept
the Commission’s interpretation if it had “ ‘warrant
in the record’ and a ‘reasonable basis in law,“
citing Unemployment Compensation Comm’n v. Ara-
gon, 329 U.S. 148, 153-154. But the record no-
where discloses that the Commission arrived at its
interpretation of the “favored nation” clause on the
basis of specialized knowledge gained from experi-
ence in the regulation of the natural gas business,
or upon the basis of any trade practice concerning
“favored nation” clauses. On the contrary the opin-
ions of the examiner and the Commission show that
both treated the question as one to be determined
simply by the application of ordinary rules of con-
tract construction.

363 U.S. at 268-69. I can find no difference between the
standard of review actually applied by the majority here
and the position urged by the petitioners upon the Su-
preme Court in Texas Gas Corp., supra. Therefore, the
Supreme Court’s total rejection of the petitioner’s argu-
ment in Texas Gas Corp. and its affirmance of this

31a

Court’s standards of de novo review,’ makes, in my view,
the majority’s position here untenable.

Confronted with precisely the same question as we are
here as to the appropriate standard for review for an
agency’s contract interpretation, the Supreme Court
stated:

“The grounds upon which an administrative order
must be judged are those upon which the record dis-
closes that its action was based.” Securities & Ex-
change Comm'n v. Chenery Corp., 318 U.S. 80, 87.
Therefore, since the Commission professed to dispose
of the case solely upon its view of the result called
for by the application of canons of contract con-
struction employed by the courts, and did not in any
wise rely on matters within its special competence,
the Court of Appeals was fully justified in making
its own independent determination of the correct ap-
plication of the governing principles. See Federal
Communications Comm’n v. RCA Communications,
Inc., 346 U.S. 86, 91. There applies here what the
Court said in Chenery: “Since the decision of the
Commission was explicitly based upon the appli-
cability of principles {of contract interpretation]
announced by courts, its validity must likewise be
judged on that basis.” 318 U.S., at 87.

363 U.S. at 270. Thus, where an administrative agency’s
construction of a contract was based solely upon legal
principles, the Supreme Court held that this Court “was
fully justified in making its own independent determina-
tion of the correct application of the governing prin-
ciples.” Id. at 270. Furthermore, I suggest that de novo
consideration of an agency’s resolution of legal issues is
not only “justified” but mandated by the APA. For

Although the Supreme Court affirmed this Court’s standard of
review, it reached a different interpretation of the contract clause
at issue. Hence the Supreme Court reversed this Court’s decision
on the merits.

32a
§706(a) requires that “the reviewing court . . de-
cide all relevant questions of law.. . Thus, this Court’s

position with respect to the proper standard of review in
Shell Oil Company v. F.P.C. as approved by the Supreme
Court in Texas Gas Corp. and the very terms of the
APA are, in my view, dispositive of the issue presented
here.

Reason, in addition to controlling authority, argues
against any other conclusion here. The scope of appellate
review of agency actions reflects to varying degrees the
limited competence of an appellate tribunal to pass upon
matters that involve specialized knowledge and impor-
tant policy considerations. In such matters deference
must be shown to the administrative agency specially cre-
ated by Congress to make decisions based upon expertise.
However, when, as here, an agency relies upon strictly
legal principles to resolve a controversy, an appellate
court is at least equally capable, and probably more
capable, of applying the legal precepts involved. More-
over, when a district court in an identical situation re-
solves questions of contract law, this Court engages in
de novo consideration of the issues. Thus, I perceive no
basis which requires this Court to give special considera-
tion to the application of legal principles by an adminis-
trative agency. Indeed, I believe the very opposite is
called for.

Nor am I in the least persuaded by the two cases
cited by majority in support of its view that deference
should be accorded to the FCC’s interpretation of the con-
tract questions at issue here. In Manufacturers Light
and Heat Co. v. F. P. C., 374 F.2d 88 (3d Cir. 1967) (per
curiam), this Court granted “substantial weight to the
expert judgment of the Commission” in the interpreta-
tion of a settlement agreement which had been confirmed
by the F.P.C. in a rate proceeding as to which the
F.P.C. was itself a party. The issue of how refunds

33a

under the agreement should be properly allocated im-
plicated the special knowledge of the F.P.C., and there-
fore this Court properly concluded that the F.P.C.’s judg-
ment should “not be lightly regarded.” Id. at 89.

Furthermore, the majority’s reliance upon North At-
lantic Westbound Freight Assoc. v. Federal Maritime
Comm'n, 397 F.2d 683 (D.C. Cir. 1968) (per curiam), is
also inapposite. There, with respect to judicial review
of conference agreements in the maritime freight indus-
try, the Court of Appeals stated:

Certainly where underlying issues of fact or policy
are involved an agency’s interpretation of agree-
ments is due judicial respect and deference... .
Specifically in regard to conference agreements, the
Commission is to be given “reasonable leeway in de-
lineating the scope” of these agreements. .. .

397 F.2d at 685. However, here, there is no suggestion
that the FCC’s interpretation of the Bell-Western Union
contracts was based upon underlying issues of fact or
policy. Nor are these Bell-Western Union contracts anal-
ogous to the industry-wide conference agreements at
issue in North Atlantic Westbound Freight Assoc. Thus,
I can only conclude that the majority’s reliance upon
these cases is completely misplaced.

Summarizing my view, since the FCC orders before
us were decided strictly upon legal principles, I believe
our task under the APA is to determine whether these
agency actions are “in accordance with law.” 5 U.S.C.
§ 706(a) (2) (A). In resolving such legal questions, our
scope of review is both plenary and de novo. Since the
APA does not suggest but requires that we “decide all
relevant questions of law,” I can find no authority for
the majority’s assertion that agency determinations of
legal questions must be accorded special consideration or
deference. Therefore, I believe this Court is required to

34a

engage in an independent review of the FCC’s decisions
concerning the availability of interconnection facilities for
Western Union’s FX, CCSA, and domestic satellite serv-
ices.

II.

Based upon a de novo review of the legal issues pre-
sented, see Part I, supra, I believe the FCC’s interpreta-
tion of the Bell-Western Union contracts is unwarranted
and tortured. As explained by the majority, see Major-
ity Op. at 6-8, the thrust of the FCC’s decision is found
in Paragraph 16 of the Memorandum Opinion and Order
of June 24, 1975, 53 F.C.C.2d 1045 (1975). See p. 22
supra. There the FCC concluded that Section 3(d) de-
fine d] those situations in which Western Union services
utilizing facilities obtained under the contracts, may be
connected to Bell services.” In “order to give meaning to
Section 3(d),” the FCC construed this provision as allow-
ing for the connection of Western Union services utiliz-
ing contract facilities to only those Bell services for
which tariffs existed as of the time of contracting, Janu-
ary 1, 1970. Therefore, under the Commission’s analysis,
the facilities necessary for Western Union’s FX and
CCSA services were not available under the contracts
since Bell tariffs in existence on January 1, 1970 did not
allow for the connection of Western Union services with
Bell FX and CCSA services.

I begin my analysis of these contracts with section 2,
which describes the general undertaking of the parties.
Under section 2 each party agreed to “lease to the other

. . circuits and certain related facilities, to be operated
by the lessee as part of or in connection with its plant
... in furnishing communication service to the public.”
(Emphasis added.) App. 86-87; 110-111. FX and CCSA,
two particular types of private line services, clearly con-
stitute a type of “communication service to the public.”

85a

The only explicit limitation placed upon the uses for
which facilities subject to the contracts could be put is
found in section 3. Under section 3(a),

... circuits leased to the Telegraph Company [West-
ern Union] hereunder may be used only in providing
its common carrier communications services for
which such circuits are suitable. (Emphasis added.)

App. 87, 112. Here, Western Union sought to lease con-
tract facilities to furnish FX and CCSA services, both of
which are “common carrier communications services.”
Furthermore, the FCC implicitly recognized the “suita-
bility” of these facilities for Western Union’s private
line services when it concluded:

. .. from a purely technical or operational viewpoint,
it appears that the circuits and related facilities
specified in the contracts provide the capability for
Western Union to access Bell’s exchange and CCSA
switching equipment, thus making it physically pos-
sible for Western Union to use contract facilities
for its own FX and CCSA services.

53 F.C.C.2d at 1050.

Sections 2 and 3 of the contracts thus indicate the
parties’ intentions to permit the leasing of all facilities
so long as they were used for common carrier communi-
cations services and the facilities were suitable for this
purpose. The parties, sophisticated corporations in the
communications industry, placed no limitation on the par-
ticular type of communications services for which the
facilities could be used. Nor do I believe that section
3(d), which the Commission relied on, imposes any such
limitations.

Section 3(d) simply provides for the connection of
Western Union services with Bell services:

Connection of Western Union private line services
with Telephone Company services shall be allowed

36a

only under the tariffs of the Telephone Company
and consistent with the terms and conditions of such
tariffs applicable to the connection of Western Un-
ion provided services with services of the Telephone
Company. No such connection shall at any time be
made in any jurisdiction except as duly authorized
by tariffs in force and effect.

App. 89. Whereas the other portions of the contracts
provide that facilities will be available at contract rate,

this section provides that tariff, rather than contract

rate, shall govern the interconnection of services. There
is no indication that this section was intended to freeze
the types of service for which facilities under the con-
tracts could be used. Moreover, the last sentence of the
section, ignored by both the FCC and the majority here,
further supports my interpretation. That sentence states:
“No such connection shall at any time be made in any
jurisdiction except as duly authorized by tariffs in force
and effect.” This specification that connection was only
to be made at “tariffs in force and effect” constitutes an
implicit recognition that the services subject to tariff as
well as the amount of the tariff were subject to change.
Thus, it would seem that only the tariffs “in force and
effect” at any particular time are relevant to the ques-
tion of whether Western Union and Bell services may be
connected under section 3(d).

Nor does such a construction render section 3(d) su-
perfluous as the FCC suggests. The provision represents
agreement by the parties that the services offered by each
may be connected, and it establishes the rate which gov-
erns such connection. Such a provision is both meaning-
ful and significant. Whether, in the absence of such a
provision, the services could be connected at the prevail-
ing tariffs is irrelevant to parties’ desire to reduce this
matter to writing and thereby avoid a possible area of
dispute.

37a

In concluding that the FCC erred in its interpretation
of the Bell-Western Union contracts, I see no need to
reach or decide Western Union’s arguments concerning
the parol evidence rule or the Commission’s strict con-
struction of the contracts. Hence, I would conclude based
upon a de novo review that the facilities necessary for
Western Union’s FX and CCSA services are available
under the Bell-Western Union contracts.

III.

Exereising an independent judgment as to the second
issue presented whether acceptance of domestic satellite
authorization constituted a waiver of any rights under
the contracts—I cannot agree with the FCC’s decision.
As previously stated, pp. 22-23, supra, the FCC concluded
that Western Union had waived its rights, if any existed,
under the Bell-Western Union contracts in accepting its
satellite authorization. In reaching this determination the
Commission relied upon the condition in the Western
Union satellite authorization that the facilities be oper-
ated in accordance with the Second Report and Order, 35
F.C.C.2d 844 (1972) and “all rules and policies subse-
quently made applicable to domestic satellite communica-
tions.” Thereafter the FCC decided that tariffs were the
“most appropriate means” to achieve the availability of
facilities on non-discriminatory terms. Based upon West-
ern Union’s conditional grant, the Commission concluded
that it had “willingly and knowingly accepted [its] .. .
domestic satellite authorizations subject to the explicit
condition that tariffs, not private contracts” would apply
to interconnection facilities. 49 F.C.C.2d at 323.

In denying reconsideration of the October 16, 1974
domestic satellite communication decision, the Commis-
sion altered its analysis. Although still relying upon the
conditional satellite authorization, the Commission stated:

38a

As to whether such condition placed Western
Union on actual notice of the nature of the intercon-
nection requirement we find it difficult to believe that
as an established common carrier Western Union
would not anticipate, either at the time of our Sec-
ond Report and Reconsideration Orders or at the
time its authorization was granted, that we might
reach the determination after appropriate considera-
tion of AT&T’s applications and interconnection pro-

posal that tariffs, rather than private contracts,

would be the most appropriate means to assure the
realization of our access and interconnection policy
objectives which stressed the goal of “reasonable
and non-discriminatory” interconnection. In light of
the foregoing and Section 203 of the Communica-
tions Act, we deem Western Union’s claim of lack
of notice to be untenable.

53 F.C.C.2d at 1054. This shift, from concluding that
Western Union “willingly and knowingly” accepted its
authorization subject to tariffs to concluding that West-
ern Union must have “anticipate[d]” the tariff policy, in
and of itself suggests the slippery quality of the FCC’s
reasoning. Moreover, when the FCC decisions concerning
domestic satellite communications are read in light of
Western Union’s satellite authorization, I believe the
Commission’s finding of a knowing and voluntary waiver
cannot be sustained.

The Commission’s Second Report and Order, 35 F.C.C.
2d 844 (1972), provides the starting point for analyzing
the issue presented here. There the Commission stated
with respect to domestic satellite communications:

. . . we will require existing terrestial carriers seek-
ing domestic satellite authorizations to submit for
commission approval, prior to action on their ap-
plications, a description of the kinds of interconnec-
tion arrangements they will make available to other
satellite systems and/or earth station licensees .. .

89a

35 F.C.C.2d at 856. This policy was designed to accom-
plish the Commission’s “objective of assuring that all
carriers providing retail interstate services.. . have ac-
cess at non-discriminatory terms and conditions to local
loop and interchange facilities as necessary for the pur-
pose of originating and terminating such interstate serv-
ices to their customers.” Id.

Thereafter, Western Union applied for satellite com-
munication authorization. The FCC granted Western
Union the right to construct three satellites subject to
certain terms and conditions. As specified in that order
the Commission required that “these facilities should be
operated in accordance with all Commission policies
adopted in Docket No. 16495 [Second Report and Order]
and all rules and policies subsequently made applicable
to domestic satellite communications.” Western Union
Telegraph Co., 38 F.C.C.2d 1197, 1199 (1973).

The Commission’s major policy pronouncement with
respect to satellite communications came one year after
the Second Report and Order in the grant of satellite
authorization to AT&T. In this proceeding the FCC re-
jected AT&T’s proposal that it furnish interconnection
facilities to other satellite service carriers on a negoti-
ated contract basis.“ American Telephone & Telegraph
Co., 42 F.C.C.2d 654 (1973). Instead the Commission
determined that “the filing of tariff schedules rather than
the negotiation of private contracts is the most appropri-
ate means by which to achieve our objective that these
facilities shall be provided to other satellite carriers on
‘reasonable and non-discriminatory conditions.’” Id. at
659.

The question presented here is whether Western Union,
in accepting its satellite authorization, waived any rights
that might exist under the Bell-Western Union contracts
and consequently became bound by the tariff rate. In ac-

40a

cepting the satellite authorization, Western Union became
subject to the Commission’s general policies with respect
to satellite communication set forth in the Second Report
and Order, 35 F.C.C.2d 844 (1972). In this report the
Commission sought to ensure satellite communication car-
riers “access at non-discriminatory terms and conditions
to local loop and interchange facilities. Id. at 856.
However, the Commission did not express any opinion
as to whether contract or tariff rates should govern the
lease of such facilities.

Nor should Western Union have assumed that only
tariff rates would be consistent with non-discriminatory
terms. For the leasing of interconnection facilities under
contracts as well as tariffs had long been an accepted
practice in the communications industry, a practice which
this Court subsequently upheld in Bell Telephone Co. of
Pennsylvania v. F.C. C., supra.

Thus, nothing in the Second Report announced in 1972
apprised Western Union that its acceptance of satellite
authorization was in any way conditioned upon abandon-
ment of its rights under the Bell-Western Union con-
tracts.

Moreover, Western Union’s satellite authorization was
granted on the further condition that the facilities “be
operated in accordance with. . . all rules and policies
subsequently made applicable to domestic satellite com-
munications. ...” (Emphasis added.) The question then
presented is whether acceptance of authorization under
such terms constituted a “. . . voluntary or intentional
relinquishment of a known right.” Royal Air Properties,
Inc. v. Smith, 333 F.2d 568, 571 (9th Cir. 1964). The
grant by its terms refers only to the operations of fa-
cilities used in satellite communications; it makes no
reference to existing interconnection rights of Western
Union, a significant matter which the majority has seen

41a

fit to ignore. Thus, there is no basis in the language to
conelude that Western Union's acceptance of this grant
constituted a voluntary or intentional” abandonment of
any rights that might exist under the Bell-Western Union
contracts.

Consequently, I would hold that the Commission erred
in concluding that Western Union waived any existing
rights to interconnection facilities under the Bell con-
tracts. Such a holding necessarily obviates any considera-
tion on my part of Western Union’s second argument that
the conditional grant of satellite authorization constituted
an unlawful expansion of the Commission’s regulatory

powers.
IV.

Based upon a de novo review of the two legal issues
presented, I believe the FCC erred in its interpretation of
the Bell-Western Union contracts and the Western Union
domestic satellite authorization. Accordingly, I dissent
and would grant the petition for review which the ma-
jority has denied.

A True Copy:
Teste:

Clerk of the United States Court of Appeals
for the Third Circuit.

4
42a 3a

PHONE COMPANY, THE PACIFIC TELEPHONE AND TELE-
GRAPH COMPANY, SOUTH CENTRAL BELL TELEPHONE
CoMPANY, SOUTHERN BELL TELEPHONE AND TELE-
GRAPH COMPANY, THE SOUTHERN NEW ENGLAND

APPENDIX B

UNITED STATES COURT OF APPEALS

20 TELEPHONE COMPANY, SOUTHWESTERN BELL TELE-
PHONE COMPANY, AND WISCONSIN TELEPHONE COM-
PANY,
Intervenors
No. 75-1796

ON PETITION FOR REVIEW OF AN ORDER OF THE

FEDERAL COMMUNICATIONS COMMISSION
THE WESTERN UNION TELEGRAPH COMPANY

One Lake Street, Upper Saddle River, New Jersey 07458, Present: SEITZ, Chief. Judge and ALDISERT and

Petitioner GARTH, Circuit Judges
v.
JUDGMENT
FEDERAL COMMUNICATIONS COMMISSION and
UNITED STATES OF AMERICA, This cause came on to be heard on the certified list
Respondents in lieu of the record from the Federal Communications

Commission and was argued by counsel.
AMERICAN TELEPHONE AND TELEGRAPH COMPANY

(“AT&T”) and THE BELL TELEPHONE COMPANY OF On consideration whereof, it is now here ordered and
PENNSYLVANIA; THE CHESAPEAKE AND POTOMAC TELE- adjudged by this Court that the petition to — the
PHONE COMPANY, THE CHESAPEAKE AND POTOMAC order of the Federal Communications Commission adopt-
TELEPHONE COMPANY OF MARYLAND, THE CHESA- ed June 18, 1975 and released June 24, 1975 is denied.
PEAKE AND POTOMAC TELEPHONE COMPANY OF VIR- Costs are taxed against the petitioner.
GINIA, THE CHESAPEAKE AND POTOMAC TELEPHONE ATTEST:
COMPANY OF WEST VIRGINIA, CINCINNATI BELL, INC., y

DIAMOND STATE TELEPHONE COMPANY, ILLINOIS BELL
TELEPHONE COMPANY, INDIANA BELL TELEPHONE

Illegible
COMPANY, MICHIGAN BELL TELEPHONE COMPANY, THE /8/ 4 J
MOUNTAIN STATES TELEPHONE AND TELEGRAPH Com- July 28. 1976
PANY, NEW ENGLAND TELEPHONE AND TELEGRAPH — os

COMPANY, NEW JERSEY BELL TELEPHONE COMPANY,
NEW YORK TELEPHONE COMPANY, NORTHWESTERN
BELL TELEPHONE COMPANY, THE OHIO BELL TELE-
PHONE COMPANY, PACIFIC NORTHWEST BELL TELE-

44a
APPENDIX C

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 75-1796
THE WESTERN UNION TELEGRAPH COMPANY,
. Petitioner,

FEDERAL COMMUNICATIONS COMMISSION AND
UNITED STATES OF AMERICA,

Respondents,

AMERICAN TELEPHONE AND TELEGRAPH COMPANY
(“AT&T”), ET AL.,

Intervenors.
SUR PETITION FOR REHEARING

Present: SEITZ, Chief Judge, and ALDISERT and
GARTH, Circuit Judges.*

The petition for rehearing filed by Petitioner in the
above entitled case having been submitted to the judges
who participated in the decision of this court and to
all the other available circuit judges of the circuit in
regular active service, and no judge who concurred in
the decision having asked for rehearing, and a majority
of the circuit judges of the circuit in regular active serv-
ice not having voted for rehearing by the court in banc,
the petition for rehearing is denied.

By the Court,
/s/ Aldisert

Judge
Dated: Aug. 18, 1976

* Judges Van Dusen, Adams, Gibbons, Rosenn, Hunter and Weis
have recused in this case.

Judge Garth would grant the petition for rehearing.

45a

APPENDIX D
FCC 75-726
BEFORE THE
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554

In the Matter of
INTERCONNECTION FACILITIES FOR THE
WESTERN UNION TELEGRAPH Co.

MEMORANDUM OPINION AND ORDER
(Adopted June 18, 1975; Released June 24, 1975)

BY THE COMMISSION: COMMISSIONER HOOKS CONCURRING
IN THE RESULT.

1. On October 16, 1974, we released a Memorandum
Opinion and Order herein in which we held (1) that
AT&T and the Bell System Operating Companies (Bell)
are required to provide to The Western Union Telegraph
Company (Western Union) interconnecting facilities for
its FX and CCSA services, and (2) that the leasing

49 F. C. C. 2d 321 (1974).

2 FX and CCSA, were defined in Bell System Tariff Offerings of
Local Distribution Facilities, 46 F.C. C. 2d 413, 418 n.5 (1974),
aff'd sub nom., Bell Telephone Company of Pennsylvania v. F. C. C.,
503 F.2d 1250 (3rd Cir. 1974), cert. denied, ——- U.S. ——— (1975),
as follows: “Foreign exchange (FX) is a private line service that is
partially “switched”. It allows a businessman located in one state,
to, in effect, maintain a local phone in another state. Under FX,
for example, a businessman in Washington can be reached by tele-
phone subscribers in New York City and can himself reach New
York City telephone subscribers (through a local loop in Washing-
ton, a Washington-New York interexchange line, and a business line
in the New York City exchange area). However, New York City
telephone subscribers could not reach Washington subscribers other

46a

from Bell of interconnection facilities by Western Union
to provide domestic satellite communications services shall
be only pursuant to tariffs filed with this Commission.
We further requested the parties to submit briefs and
reply briefs addressed to the question of whether the
Bell-Western Union exchange of facilities contracts cover
the leasing of interconnection facilities to be used in
furnishing FX and CCSA services.

2. We now have before us the briefs and reply briefs

of AT&T and Western Union with respect to FX and

CCSA interconnection facilities. We also have before us
Western Union’s Petition for Reconsideration of that
part of our October 16 Memorandum Opinion and Order
which held that satellite interconnection facilities shall
be provided pursuant to tariff rather than the Bell-West-
ern Union contracts.

FX AND CCSA INTERCONNECTION FACILITIES

3. For nearly 50 years Western Union has leased
a substantial portion of its facilities from the the Bell
System pursuant to privately negotiated exchange of fa-
cilities contracts. The most recent contracts are dated
January 1, 1970 and will expire on September 28, 1978
in accordance with notices of termination transmitted to
Western Union by the Bell System in September, 1973.
Two contracts have been entered into by Western Union,
on the one hand, and AT&T and each of the Bell
System operating companies on the other hand. Contract
No. 1 is applicable to the leasing of facilities within

than the Washington businessman over FX private line service and
the latter would have to maintain a separate telephone in order to
tie into the Washington exchange area. A Common Control Switch-
ing Arrangement (CCSA) is a private line system for linking the
various offices of a large company through large switches on a local
telephone company’s premises instead of through PBX switches
on the customer’s premises.”

47a

exchange areas, and Contract No. 2 covers the leasing
of circuits between exchange areas.

Western Union’s Position

4. Western Union claims that Bell System facilities
are available under the Bell-Western Union contracts for
connection of Western Union’s private line services to Bell
switching equipment so that Western Union may provide
its own FX and CCSA services. In support of its posi-
tion Western Union claims that for use in providing
FX service, it would need to lease circuits between a
Western Union office and a central office of the telephone
company, terminal loop circuits between a telephone com-
pany central office and a customer’s premises, and, de-
pending on the location of Western Union’s customer,
circuits between two or more telephone company central
offices. Western Union claims that the on'y Contract No.
1 facility it would need to connect a CCSA trunk is a
circuit between a central office of the telephone com-
pany and a Western Union office. Since each of these
types of facilities is expressly mentioned in Contract
No. 1, Western Union contends that all the facilities
necessary for use in providing its own FX and CCSA
services are available under Contract No. 1. Moreover,
in the event that it needs to obtain interexchange facili-
ties for use in providing its own FX and CCSA services,
it claims that the facilities it would require are available
under Contract No. 2.

5. In addition, Western Union notes that Section 3(a)
of each contract provides that facilities leased to it under
the contracts “may be used only in providing its com-
mon carrier communications services.. Western Union
claims that such provision means it may use contract
facilities as a link in a service offering to the public but
it may not use such facilities for any communications
system Western Union may establish for its own in-

48a

ternal use. Western Union claims that this construction
is reinforced by Section 2(a) of each contract which
specifies that the “circuits and certain related facilities”
leased under the contracts are to be used. . . in fur-
nishing communications services to the public.” Further,
Western Union claims that it is settled as a result of the
Commission decision in Bell System Tariff Offerings * that
FX and CCSA services are private line common carrier
services, and, therefore, as soon as Western Union tariffs
setting forth the rates, terms and conditions for those
services become effective, they will be common carrier
services offered by Western Union and thus embraced by
Section 3(a) of both contracts. Western Union notes
that section 3(a) of each contract further provides that
the Bell System facilities may be used only for Western
Union services “for which circuits are suitable.” West-
ern Union claims that the wire pair facilities described
above which are needed for FX and CCSA services, are
the same facilities currently available to other specialized
common carriers for their FX and CCSA services, pur-
suant to Bell System facility tariffs. In any event, West-
ern Union’s technical officials are satisfied that contract
facilities are suitable for it to provide its own FX and
CCSA services.

6. Western Union contends that the aforementioned
facilities may be used to connect Western Union services
with tariffed Bell System services, i. e., FX and CCSA
switching services, citing in support of its contention,
Section 3(d) of Contract No. 1 which provides as follows:

(d) Connection of Western Union Private Line
Services With Telephone Company Services.

Connection of Western Union private line services
with Telephone Company services shall be allowed
only under the tariffs of the Telephone Company

5 Ibid.

49a

and consi.ient with the terms and conditions of such
tariffs applicable to the connection of Western Un-
ion provided services with services of the Telephone
Company. No such connection shall at any time be
made in any jurisdiction except as duly authorized
by tariffs in force and effect.

Western Union contends that this Section makes a clear
distinction between „facilities“ which are available by
lease under the contract, and “services”, which Bell fur-
nishes pursuant to tariff and that such section applies
directly to the present controversy since FX and CCSA
are Western Union private line services and the Bell
System has filed tariffs permitting interconnection with
telephone company FX and CCSA exchange switching
equipment. In other words, Western Union claims that
interconnection by other common carriers with telephone
company FX and CCSA switching equipment is now
allowed. In summary, Western Union’s position is that
on the face of the contracts it is entitled to use contract
facilities, i.e., wire pairs, to connect with FX and CCSA
services offered by the Bell System pursuant to Bell
tariffs.

7. Finally, Western Union argues that the scope of the
contracts was not frozen at the time the contracts were
executed. It states that the only tariffed service specifi-
cally referred to in the contracts is Western Union’s pub-
lie message telegraph service, and that the contracts pro-
hibit Bell from offering public message telegraph service
through facilities leased from Western Union (Contract
No. 1, §5(a); Contract No. 2, 8 4).“ Western Union
claims that the specific reference to this service, together
with the omission of references to other purportedly fore-

*For example, Section 4 of Contract No. 2 provides: Circuits
leased to the Telephone Company may be used in the public com-
munications business of the Telephone Company but not for public
message telegraph service.

50a

closed services such as FX and CCSA, support a con-
struction that the contracts do not, except by their terms,
restrict any other utilization of leased facilities. Thus,
Western Union claims that the contracts plainly con-
template that it is free to utilize. leased Bell facilities
to provide any authorized common carrier service. West-
ern Union also claims that the past history of perform-
ance under the contracts confirms its interpretation. For
example, it notes that the Bell System, without objection

has provided contract facilities for Western Union’s .

DATACOM service even though such service was initiated
after the contracts were executed in 1970.

AT&T’s Position

8. AT&T contends that the contracts do not cover the
furnishing to Western Union of the facilities necessary
for the provision of FX and CCSA services. AT&T em-
phasizes that the question of coverage of the contracts
has been raised in the context of the issue whether tariff
or contract rates apply to interconnection facilities pro-
vided by Bell to Western Union to enable Western Union
to provide FX and CCSA services.

9. AT&T claims that the general purpose of the con-
tracts was not to establish interconnection contracts, i.e.,
as contracts to provide for interconnection between West-
ern Union and Bell facilities for through service to the
public. Moreover, AT&T claims that the Bell tariffs at
the time of the execution of the contracts specifically pre-
cluded connection of Bell services with Western Union
facilities for FX service, and the specified connections
permitted for Western Union under the Bell tariffs did
not include connection to Bell CCSA service. AT&T also
claims that Western Union did not construe the contracts
as including connections or facilities for FX service as
evidenced by Western Union’s 1971 request to use Bell-
provided FX service for the rendition of message tele-

51a

gram service. AT&T contends that Western Union’s pres-
ent intentions are primarily based on the Commission’s
Bell System Tariff Offerings decision rather than upon
any claim it may have properly based upon the contracts.

10. AT&T contends that certain specific terms of the
contracts show that facilities for FX and CCSA are not
covered. AT&T cites the language of Section 3(d) of
Contract No. 1 (see para. 6 above), namely, that “[c]on-
nections of Western Union’s private line services with
Telephone Company services, shall be allowed only under
the tariffs of the Telephone Company.. as proof that
in order to provide FX and CCSA services, Western
Union private line services may be connected with Tele-
phone Company services only under Telephone Company
tariffs, and not under the contracts. Furthermore, AT&T
notes that its obligation to provide FX and CCSA inter-
connection facilities is based on Commission decisions and
not on the contracts. AT&T also cites Section 3(b) of
both contracts which reads as follows:

(b) Connection of Leased Circuits.

Circuits leased to the Telegraph Company here-
under, or interexchange circuits of the Telegraph
Company when connected to such leased circuits,
may be directly connected with circuits owned by:

(1) Other telephone companies offering a gen-
eral telephone service to the public within the
continental United States.

(2) The United States Government on mili-
tary bases, and on reservations of the National
Aeronautics and Space Administration.

(3) Electric power, or oil, oil products, or
natural gas pipeline companies, or railroad com-
panies where the circuits of such companies
are provided primarily to communicate with
points located along a right-of-way owned or
controlled by such company. -

52a

(4) Telegraph Companies offering interna-
tional telegraph service under filed tariffs, where
such circuits are used exclusively in interna-
tional service and connection is made at ter-
minals within the United States of such cir-
cuits.

(5) Telegraph or telephone companies, or
government-operated telegraph or telephone sys-
tems, operating in countries bordering the con-

tinental United States, where such circuits are

used exclusively in furnishing service between
such countries and the continental United
States, and connection is made at terminals
within the United States of such circuits.

Any other direct connection of such circuits with
circuits of others or of the Telephone Company
shall be made only with the written approval of the
Telephone Company.

Pointing to the last sentence of this section, AT&T claims
that Western Union’s provision of FX and CCSA serv-
ices necessarily requires connection of Western Union
circuits with circuits of Bell and that it has not given
written approval to connection of Western Union circuits
with telephone company circuits for the purposes of FX
and CCSA services.

11. AT&T also relies upon Section 2(d) of Contract
No. 2 which relates to the connection of circuit sections
leased under Contract No. 2 to circuits leased under Con-
tract No. 1.“ AT&T contends that there is no provision
in either contract for the direct connection of a circuit
leased under the contracts and terminating in a Tele-

Section 2(d) of Contract No. 2 provides: Access and connection
to a circuit section furnished hereunder may be had at points of
termination

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_0890%3A1. Public record. Not legal advice.