Reply Brief — GLOBAL CROSSING TELECOM. v. Metrophones

No. 05-705

IN THE

Supreme Court of the United States

GLOBAL CROSSING TELECOMMUNICATIONS, INC..,

V.

Petitioner,

METROPHONES TELECOMMUNICATIONS, INC.,

Respondent.

On Petition for Writ of Certiorari

to the United States Court of Appeals for the Ninth Circuit

REPLY BRIEF FOR PETITIONER

MICHAEL J. SHORTLEY, III

GLOBAL CROSSING NORTH

AMERICA, INC.

1080 Pittsford-Victor Road

Pittsford, New York 14534

(585) 255-1429

DANIEL M. WAGGONER

JEFFREY L. FISHER

Counsel of Record

JENNIFER LENGA LONG

DAVIS WRIGHT TREMAINE LLP

2600 Century Square

1501 Fourth Avenue

Seattle, WA 98101-1688

(206) 622-3150

TABLE OF CONTENTS

REE he S GURNEE FAIUR PTS EEE CIEUIEOE ceccncesnsnecccoccosenstioenoseseoten ]

I. This Court Should Resolve The Circuit Split Over

Whether Section 201(b) Creates A Private Cause Of

Action To Recover For Alleged Violations Of The

FCC’s Payphone Compensation Regulations. .............. l

A. The Conflict Is Genuine And Meaningful.................. l

B. The Ninth Circuit’s Decision Contravenes

I 3

Il. This Court Should Resolve Whether Section 276

Preempts Similar State Law Claims For Quantum

Meruit And Breach Of Implied Contract. .................0+ 4

III. The Issues This Case Presents Are Very Important. .....4

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TABLE OF AUTHORITIES

CASES:

APCC Services, Inc. v. Sprint Communications Co.,

418 F.3d 1238 (D.C. Cir. 2005) ........ccccccccssesseees 2, 3,5

Alexander v. Sandoval, 532 U.S. 275 (2001) .........:::ccccseeeeeees 2

Flying J Inc. v. Sprint Communications Co.,____ F.

Supp. 2d _, 2006 WL 18603 (D. Utah

= GE ae, 2,5

Gonzaga University v. Doe, 536 U.S. 273 (2002)..........::0000+ 2

National Cable & Telecommunications Ass "i v. Brand X

Internet Servs., 125 S. Ct. 2688 (2005)... eee ]

Smartstop, Inc. v. AT&T Corp., 374 F. Supp. 2d 930

Se RN Se csctrnistinniclteieatciernmeanieniiiantabiiiianisasieliatdion 2

Sosa v. Alvarez-Machain, 542 U.S. 692 (2004) 0.0... 2

Wolfe v. Global Rock Networks, Inc., No. 05-8328

at a PE iicdicccesncniecitasdceemmnniiiiinidniiicbdabutinindaa 5

STATUTES:

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Or eis Se A cenccicnccessciseiiescisiiendeniaietinniaddinatncspeabiiadckanahite 3

BF SEs BF stceencnsectiteanintinnismnsevesiisiiasatialiisiommnniieliinniiniennieiitinn 3

iii

OTHER AUTHORITY:

Brief for FCC as Amicus Curiae in Support of Appellee,

Metrophones Telecommunications, Inc. v.

Global Crossing Telecommunications,

Insurance, 423 F.3d 1056 (9th Cir. 2005) (No.

A SEES SE LRSM a Ad iat Ono ee He NE SON 6

Petition for Certiorari, APCC Servs., Inc. v. Sprint

Communications Co. (NO. 05-766) ........2...0c0ce0eeees 5,6

REPLY BRIEF FOR PETITONER

Respondent has not provided any convincing reason to

deny review of the questions this case presents. Respondent

tries to downplay the circuit split over whether payphone

owners may sue in federal court to recover extra

compensation for coinless calls, but the conflict is undeniably

square and consequential. Respondent also suggests that the

Ninth Circuit’s decision is correct, but it does not even

attempt to refute Petitioner’s central explanations as to why

the Ninth Circuit’s dual holdings are wrong. Finally,

Respondent suggests that this particular case is not important

enough to warrant this Court’s attention, but it ignores that

this case is one of many, and that ~ as the FCC itself has

stated — its legal issues are critical to the Nation’s interest

uniform and effective telecommunications law.

In all events, this Court should act without delay to

resolve whether lawsuits like this one may be brought in

federal court.

I. This Court Should Resolve The Circuit Split Over

Whether Section 201(b) Creates A Private Cause Of

Action To Recover For Alleged Violations Of The

FCC’s Payphone Compensation Regulations.

A. The Conflict ls Genuine And Meaningful.

Respondent contends that this case does not present a

serious conflict because (1) the only disagreement between

the Ninth and D.C. Circuits is “over the deference required

by Chevron” and (2) that disagreement turns on this Court’s

decision in National Cable & Telecommunications Ass'n v.

Brand X Internet Servs., 125 S. Ct. 2688 (2005). which is not

discussed in the D.C. C.rcuit’s opinion. BIO at 4-7. Neither

component of this argument withstands scrutiny.

2

1. The Ninth and D.C. Circuits are not divided merely

over some abstract Chevron issue; they are squarely divided

over whether § 201(b) of the Communications Act creates a

private cause of action to recover for alleged violations of the

FCC’s payphone compensation regulations. See Pet. App.

13a n.5 (acknowledging this conflict). Such lawsuits are

permissible in the Ninth Circuit but are prohibited in the D.C.

Circuit. For purposes of this Court’s certiorari consider-

ations, it does not matter whether this conflict is traceable to

a disagreement over an application of Chevron principles or

over other statutory-construction considerations. (It is

traceable to both.) The bottom line is that two federal

circuits — as well as district courts — expressly disagree over

whether a private cause of action exists to enforce a federal

law. Id.; see also Flying J Inc. v. Sprint Communications

Co., __ F. Supp. 2d_—_, 2006 WL 18603, at *4-5 (D. Utah

Jan. 4, 2006) (siding with Ninth Circuit); Smartstop, Inc. v.

AT&T Corp., 374 F. Supp. 2d 930 (D. Colo. 2005) (siding

with D.C. Circuit). This kind of conflict is a classic reason

for granting certiorari. See, e.g., Sosa v. Alvarez-Machain,

542 U.S. 692 (2004) (addressing whether a private cause of

action exists to enforce a federal statute create); Gonzaga

University v. Doe, 536 U.S. 273 (2002) (same); Alexander v.

Sandoval, 532 U.S. 275 (2001) (addressing issue whether a

private cause of action exists to enforce a federal regulation).

2. The D.C. Circuit’s failure to discuss Brand X in its

opinion does not provide any valid reason for delaying

review of this issue. The portion of Brand X that Respondent

contends is relevant here (BIO at 8) is nothing more than a

straightforward rendition of the familiar Chevron two-step

process for assessing the pertinence of administrative

regulations. Suffice it to say, the D.C. Circuit is perfectly

aware of how Chevron works. It simply held in its opinion

resolving this issue that the FCC had not issued any order

that is “entitled to Chevron deference.” APCC Servs., Inc. v.

Sprint Communications Co., 418 F.3d 1238, 1247 (D.C. Cir.

3

2005); see also id. at 1254 (Ginsburg, J., dissenting)

(arguing, to no avail, that 2003 Payphone Order is entitled to

deference).

Furthermore, even if Brand X were somehow relevant

to the circuit split here, Respondent itself acknowledges that

the D.C. Circuit had ample opportunity in the petition for

rehearing or rehearing en banc to consider whether Brand X

made any difference to its holding. BIO at 7n.4. The D.C.

Circuit declined to grant rehearing, indicating (quite rightly)

that it does not.

B. The Ninth Circuit’s Decision Contravenes This

Court's Precedent.

Respondent argues that a private cause of action must

exist to enforce the FCC’s payphone compensation regula-

tions because Petitioner acknowledges that payphone owners

may bring such claims administratively in the FCC. BIO at

11-13. Sections 206 and 207 of the Act give plaintiffs the

right to seek redress for certain injuries either in the FCC or

in federal court. Thus, in Respondent’s view, once it is clear

it may seek to enforce the FCC's regulations in the FCC, it

must also be able to do so in federal court. BIO at 7-9.

Respondent, however, overlooks the fact that payphone

service providers’ right to bring claims to the FCC seeking to

enforce FCC regulations derives from the FCC's general

powers described in 47 U.S.C. § 154(i), not from section 206

or 207. See 47 U.S.C. § 154(i) (The Commission may

perform any and all acts, make such rules and regulations,

and issue such orders, not inconsistent with this chapter, as

may be necessary in the execution of its functions.”); Pet. at

11-12. Sections 206 and 207 are triggered only when

something “in this chapter”— that is, the Act itself — has been

violated. And, as Petitioner explained extensively in its

Petition for Certioran (Pet. 13-15), failing to pay

4

compensation for coinless payphone calls does not violate

any provision of the Act. Respondent does not even contend

otherwise. Accordingly, this Court’s decision in Sandoval

forecloses a federal court from creating a private remedy

where Congress did not. See Pet. 13-15.

Il. This Court Should Resolve Whether Section 276

Preempts Similar State Law Claims For Quantum

Meruit And Breach Of Implied Contract.

Respondent asserts that certiorari is inappropriate with

respect to its state-law claims because there 1s no express

circuit conflict on the issue - that is, because the D.C.

Circuit's APCC decision does not expressly foreclose such

claims. BIO at 9-10. But Respondent never answers

Petitioner's argument that state-law claims are permissible

only if a private federal cause of action exists to enforce

violations of the FCC’s payphone compensation regulations.

See Pet. 16-17. Thus, the Ninth Circuit’s decision to allow

such claims is at odds with prevailing law in the D.C. Circuit.

In any event, whatever the extent of the circuits’

disagreement over the permissibility of bringing state-law

claims to obtain compensation for coinless payphone calls,

the issue warrants certiorari in its own right. For reasons

Petitioner has explained — and that Respondent does not even

try to refute — the Ninth Circuit’s ruling creates serious

logistical problems for long distance carriers and rests on a

careless reading of the FCC's regulations. Pet. App. 11-12,

17-18.

Ill. The Issues This Case Presents Are Very Important.

Respondent's final argument for denying review is that

this particular case is not important enough to justify review

5

because it involves only about $30,000. BIO at 10.' But

Respondent does not dispute that the questions presented are

sufficiently weighty to warrant expending this Court's

resources. Indeed, several payphone service providers

seeking certiorari in the D.C. Circuit case expressly have

acknowledged that the Petition for Certiorari here “correctly

identifies business and litigation uncertainty that arises from

conflicting lower court decisions” in this area. Petition for

Certiorari at 30, APCC Servs., Inc. v. Sprint Communications

Co. (No. 05-766) (“4PCC Pet. for Cert.”).? That is because,

in the aggregate, millions of dollars are at stake in the several

cases like this one that are pending or waiting in the wings

across the country. See Pet. 10-13: see also Flying J Inc.,

___ F. Supp. 2d at —_—_, 2006 WL 18603, at *4-6 (adopting

Ninth Circuit’s view of circuit conflict and allowing claims

under § 201(b) and state-law contract-related theories to go

forward). Indeed, Respondent’s counsel himself recently

filed another such case in California, secking over $600,000

' Respondent filed an initial complaint in late 2001. After Global Crossing

declared bankruptcy. Respondent filed a new complaint in March of 2003,

seeking only about $30,000. In early 2003, the district court entered an

order staying the litigation in the original case, but noting that the case

remained pending and that the stay “shall not prejudice the nights of any

party.” Order Removing Case from Active List at 1, Afetrophones

Telecommunications, Inc. v. Global Crossing Telecommunications, Inc.

(No. CO1-1852). Respondent's description in its bref in opposition of its

“complaint” refers only to its new complaint. See BIO at 2 n.1. In any

event, as Respondent implicitly recognizes, both of its complaints seek the

same kind of relief and raise both questions presented here.

* This case is plainly the superior vehicle for resolving the confusion in this

area of telecommunication law. There is scrious doubt in 4PCC whether

the plaintiffs petitioners have standing; the D.C. Circuit panel divided on

the issue. Compare APCC Servs., 418 F.3d at 1242-45 (majority opinion)

with id. at 1250-53 (Sentelie, J., dissenting). Furthermore, this case, unlike

APCC, raises the significant question whether payphone service providers

may advance state-law claims to recover compensation for coimless phone

calls.

6

in payphone compensation. See Complaint at 7 § 26 &

Exhibits A-C, Wolfe v. Global Rock Networks, Inc., No. 05-

8328 AHM (C.D. Cal.) (filed Nov. 23, 2005). And uni-

formity is vitally important in this area of telecommun-

ications law. See Pet. 11-12; APCC Pet. for Cert. at 29-30.

Lest there be any doubt on this score, the FCC itself

participated as amicus curiae in both the Ninth Circuit and

D.C. Circuit cases, stating that the cases “raise[] imporiant

issues regarding enforcement of the Communications Act, in

general, and the Act’s payphone compensation regulations, in

particular.” Brief for FCC as Amicus Curiae in Support of

Appellee at 1, Metrophones Telecommunications, Inc. v.

Global Crossing Telecommunications, Ins, 423 F.3d 1056

(9th Cir. 2005) (No. 04-35287). The FCC is correct, and this

Court should bring clarity and order to these matters.

CONCLUSION

For the foregoing reasons, as well as those stated in the

Petition for a Wnt of Certiorari, this Court should grant the

Petition for a Writ of Certiorari.

Respectfully submitted,

MICHAEL J. SHORTLEY, Ill DANIEL M. WAGGONER

GLOBAL CROSSING NORTH JEFFREY L. FISHER

AMERICA, INC. Counsel of Record

1080 Pittsford-Victor Road JENNIFER LENGA LONG

Pittsford, New York 14534 DAVIS WRIGHT TREMAINE LLP

(585) 255-1429 2600 Century Square

150] Fourth Avenue

Seattle, WA 98101-1688

(206) 622-3150

January 2006 Attorneys for Petitioner