Amicus Curiae Brief — Louisiana Public Service Commission v. South Central Bell Telephone Co.

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Nos. 84-483, 84-870 and 84-900 MAY 23 1985

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In the Supreme Court of the Yuited State ;

i. i, \ Office-Supreme Court, U.&

(o) 4, ED

OCTOBER TERM, 1984

ARKANSAS PUBLIC SERVICE COMMISSION, ET AL.,

PETITIONERS

Vv.

SOUTHWESTERN BELL TELEPHONE COMPANY

LOUISIANA PUBLIC SERVICE COMMISSION, ET AL.,

APPELLANTS

Vv.

SouTH CENTRAL BELL TELEPHONE COMPANY

NEW ENGLAND TELEPHONE AND

TELEGRAPH COMPANY, PETITIONER

v.

PUBLIC UTILITIES COMMISSION OF MAINE, ET AL.

ON APPEAL AND ON PETITIONS FOR A WRIT OF

CERTIORARI TO THE UNITED STATES COURTS OF

APPEALS FOR THE FIRST, FIFTH AND EIGHTH CIRCUITS

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

REX E. LEE

Solicitor General

LAWRENCE G. WALLACE

Deputy Solicitor General

CHRISTOPHER J. WRIGHT

Jack D. SMITH Assistant to the

‘Solicitor General

Department of Justice

DANIEL M. ARMSTRONG Washington, D.C. 20530

Associate General Counsel (202) 633-2217

JOHN E. INGLE

Deputy Associate General Counsel

Federal Communications Commission

Washington, D.C. 20554

General Counsel

QUESTIONS PRESENTED

1. Whether a district court asked to enforce an

order of the Federal Communications. Commission

(FCC) under 47 U.S.C. 401(b) may deny enforce-

ment on the ground that the order is ultra vires,

where exclusive jurisdiction to determine the lawful-

ness of FCC orders rests in the courts of appeals, a

petition for review of the pertinent FCC order is

pending in a court of appeals at the time enforce-

ment is sought in a district court, and a stay could

be sought in the court of appeals.

2. Whether the Federal Communications Commis-

sion’s order preempting inconsistent regulation by

state commissions is an “order” that may be en-

forced under 47 U.S.C. 401(b).

3. Whether a district court exceeded its authority

to enforce an order of the Federal Communications

Commission by requiring a state commission to per-

mit a telephone company to increase its rates by a

specific amount so as to comply with depreciation

methods prescribed by the Federal Communications

Commission.

(1)

TABLE OF CONTENTS

Page

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TABLE OF AUTHORITIES

Cases:

Atchison, T. & S.F. Ry. v. Public Utilities Commis-

sion, 346 U.S. 346 ............... ts RS Ee Oe a . 18

Ambassador, Inc. v. United States, 325 U.S. 317 .... 11, 15

Chesapeake & Potomac Telephone Co. v. Public

Service Commission, 748 F.2d 879, petition for

cert. pending, No. 84-1862 ...................................... 16

City of Chicago v. Atchison, T. & S.F. Ry., 357

i cain ssl aiidgibibintincubaniieseveses 17

City of New Orleans v. Dukes, 427 U.S. 297 .......... 17

Columbia Broadcasting System v. United States,

a cecianeees 8, 11, 15

Doran Vv. Salem Inn, Inc., 422 U.S. 922 .......000000000.... 17-18

FCC v. ITT World Communications, Inc., No. 83-

871 (Apr. 30, 1984) ..... ee SHEDS ST CE 7

Federal Maritime Commission vy. Seatrain Lines,

Scene ecnsahasnanssnaceae 13

Fidelity Federal Savings & Loan Ass’n V. de la

a a a 5

Fornaris V. Ridge Tool Co., 400 U.S. 41 .0....000000000... 18

Hecht Co. ¥. Bowles, 821 U.S. 821 ............................ 13

Lake Erie & W.R.R. v. State Public Utilities Com-

no. <cceumnvscuidecweniecanere 18

Leedom Vv. Kyne, 358 U.S. 184 0.000. 13

Perry Education Ass’n v. Perry Local Educators’

Nee ee en. scnntvonsnassaustasesnocysccces 18

Prescription of Revised Percentages Depreciation,

In re:

8 F.C.C.20 1228 ................... aicpiaens = Pind UO 5

IE a 9,16

IV

Cases—Continued : Page

Property Depreciation, In re, 83 F.C.C.2d 267, re-

consideration denied, 87 F.C.C.2d 916 -............... 3

Silkwood vy. Kerr-McGee Corp., No. 81-2159 (Jan.

Bea NINE «osc ncnaulsicntch nudists Step ceeunensmbaateatedbetesinonenseuness 18

Slaker v. O’Connor, 278 U.S. 188 ..........................245 17,18

South Carolina Electric & Gas Co. v. Flemming,

Se I cr haboieniebinmaepehpaneneaian 17

Torres V. Puerto Rico, 442 U.S. 465 .......................... 18

Uniform System of Account, In re:

Ef a tte eens rE nena nA Rt nr mA ene ED 3

IND oassiick tavern vpi dsc doinstecenonsveseevicinminensis 4

Virginia State Corporation Comm’n v. FCC, 737

Se I ois ioct wdeek latscotepeundeaiassadasuaaedenboncabioaatuadiants 5

Statutes and rule:

Administrative Orders Review Act of 1950, 28

U.S.C. BB41 e€ o0¢. .................. te Dee ied ne oD 4

Se II... ss sccaddvadausegatuccaeeunconaceeecnnhe 4

I 7, capsincsbacestbeardensucen 5

Communications Act of 1934, 47 U.S.C. 151 et seq.:

I IE © ices ak cincn dein ahasiacnaneeniantaowin 20

ET UB.C. SEO) CE BRO (D) ) nncerccssccccsesscscsccens. 3, 4

Be I I eorrct aca tnt cc cenenninsepitorabeinipicossnieed 8, 15

I a ccatsuseniusncuamenséian 15

as at decdtakanmucqgubecamieal passim

a ca cde ei 8, 11, 15

SOMIIOO TOG, TE es TOTS ovcvvessncvencivnccccnescssonsvsscenes 20

Be Rs ED airs vacuesseusnevedbencdeevietuanbann 17, 18, 19

eT I rsd conan. puicncedndbiamingnrecbecceiaammbanese 18

ke ec eR ic ER Ree ONE Piet ee ie RR ORE : 21

te ae SID 10. cncctanioecniveiedbalsuaadacecieannneniea 4

Fed. R. App. P. 18 .............. pcobuidavedsbuincabbssaaiacvaesntdeunie 8,11, 15

Miscellaneous:

17 C. Wright, A. Miller & E. Cooper, Federal Prac-

tice and Procedure (1978) ....................00..cceecccnsceees 18

In the Supreme Court of the United States

OCTOBER TERM, 1984

No. 84-483

ARKANSAS PUBLIC SERVICE COMMISSION, ET AL.,

PETITIONERS

Vv,

SOUTHWESTERN BELL TELEPHONE COMPANY

No. 84-870

LOUISIANA PUBLIC SERVICE COMMISSION, ET AL.,

APPELLANTS

Vv.

SOUTH CENTRAL BELL TELEPHONE COMPANY

No. 84-900

NEW ENGLAND TELEPHONE AND

TELEGRAPH COMPANY, PETITIONER

Vv.

PUBLIC UTILITIES COMMISSION OF MAINE, ET AL.

ON APPEAL AND ON PETITIONS FOR A WRIT OF

CERTIORARI TO THE UNITED STATES COURTS OF

APPEALS FOR THE FIRST, FIFTH AND EIGHTH CIRCUITS

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

(1)

2

This brief is submitted in response to the Court’s

invitations to the Solicitor General to express the

views of the United States.

STATUTES INVOLVED

Relevant statutes are set forth in the petitioners’

appendix (at A71-A74) in No. 84-483.

STATEMENT

The Federal Communications Commission (FCC)

determined in 1983 that state commissions could not

order telephone companies to use depreciation meth-

ods contrary to those the FCC had prescribed. That

order was affirmed on review by the Fourth Cir-

cuit, which had exclusive jurisdiction to determine

the validity of the order and to stay or enjoin it

pending review. The three cases addressed in this

brief all involve disputes between telephone compa-

nies and state commissions that refused to permit the

telephone companies to follow the depreciation meth-

ods prescribed by the FCC. In each case, the tele-

phone company filed an enforcement action in a fed-

eral district court pursuant to 47 U.S.C. 401(b),

seeking to compel the state commission to permit it

to use the FCC’s depreciation methods in state rate-

making proceedings. In the Arkansas case, No. 84-

483, the Eighth Circuit overturned a district court

order refusing to enforce the FCC’s order on the

ground that the decision was ultra vires. In the

Maine case, No. 84-900, the First Circuit held that

the FCC’s decision that state commissions were pre-

empted from requiring the use of inconsistent de-

preciation methods was not the type of “order” that

telephone companies could enforce under Section 401

(b), and so it vacated an injunction issued by a dis-

3

trict court. In the Louisiana case, No. 84-871, the

Fifth Circuit expressly rejected the First Circuit’s

conclusion in the Maine case and upheld an injunc-

tion issued by a district court.

1. Section 220(b) of the Communications Act of

1934, 47 U.S.C. 220(b), authorizes the FCC to pre-

scribe “classes of property” for which depreciation

may be charged and to prescribe depreciation pro-

cedures; it states that carriers “‘shall not” use any

other classifications or depreciation procedures. In

1980, the Commission issued an order making two

changes in the depreciation procedures used by tele-

phone companies. In re Property Depreciation, 83

F.C.C.2d 267 (1980), reconsideration denied, 87

F.C.C.2d 916 (1981).' The next year, the Commis-

sion issued an order providing that a previously de-

preciable class of property should thenceforth be

treated as a current expense. In re Uniform System

of Accounts, 85 F.C.C.2d 818 (1981).2 The Commis-

sion made each of these changes because it concluded

that the prior practices had led to out-of-phase capi-

tal recovery and misallocation of costs, which con-

flicted with the FCC’s recently adopted policy of en-

1That decision substituted “equal life grouping” in place

of “vintage grouping” and the “remaining life” method of cor-

recting errors in forecasts in place of the “whole life’ method.

These depreciation rules are described briefly in our Motion

to Dismiss and Brief in Opopsition at 5-6 [hereinafter cited

as Fourth Circuit Opposition], in Louisiana Public Service

Comm’n Vv. FCC, No. 84-871 et al., in which the appellant and

the petitioners seeks further review in this Court of the Fourth

Circuit’s decision affirming the FCC’s preemption decision.

2 That decision determined that “inside wiring” should be

treated as a current expense rather than capitalized. The de-

cision is described briefly in our Fourth Circuit Opposition

at 7.

4

couraging competition and otherwise were inconsist-

ent with the public interest. The new depreciation

methods are intended to make the marketplace op-

erate more efficiently. 84-483 Pet. App. A19-A22.

The FCC, at the request of state commissions and

telephone companies, considered whether its deprecia-

tion decisions prohibited states from requiring tele-

phone companies to use inconsistent depreciation

practices in state ratemaking proceedings. After first

deciding that state commissions were not preempted

(In re Uniform System of Accounts, 89 F.C.C.2d 1094

(1982)), the Commission unanimously determined

that state commissions had to follow its recent de-

preciation decisions if the purposes of those decisions

were not to be frustrated. The Commission also de-

termined that Section 220(b), as a matter of law,

ousted the states from any role in setting deprecia-

tion rates for telephone equipment used in part for

interstate services unless the FCC expressly author-

ized such a role (84-483 Pet. App. Al-A34). The

FCC gave general notice of this order (the Preemp-

tion Order) by publication in the Federal Register

and by serving a copy of its order on each state com-

mission (id. at A25).

Pursuant to the Administrative Orders Review Act

of 1950, 28 U.S.C. 2341 et seqg., known as the Hobbs

Act, a court of appeals may review an FCC order,

such as the Preemption Order, if a petition is filed

within 60 days. The court of appeals in which the

petition is filed has “exclusive jurisdiction to make

and enter * * * a judgment determining the validity

of * * * the order of the agency” (28 U.S.C. 2349

(a)). A statutory transfer procedure provides that

all review of an agency order may be centralized in

one court of appeals (28 U.S.C. 2112(a)). That

icceteaaaasassacaaensnaeiaeiniiiimeaiaaaieeaieiaaiamaiilia

5

court of appeals may stay the FCC order pending ju-

dicial review, on a proper showing (28 U.S.C. 2349

(b); Fed. R. App. P. 18).

The Preemption Order was appealed to the Fourth

Cireuit by the Virginia State Corporation Commis-

sion. The Louisiana commission and the Arkansas

commission intervened in that proceeding and par-

ticipated in the briefing, along with 15 other state

commissions. None of the parties sought to stay the

FCC’s order. The Fourth Circuit upheld the Pre-

emption Order in June 1984. Applying this Court’s

decision in Fidelity Federal Savings d& Loan Ass’n

v. de la Cuesta, 458 U.S. 141, 154 (1982), the court

of appeals held that the FCC acted within the scope

of its “authority to insure efficient operation of the

interstate telephone network.” Virginia State Cor-

poration Comm’n v. FCC, 737 F.2d 388, 394 (4th

Cir. 1984). A jurisdictional statement and three pe-

titions for a writ of certiorari have been filed seek-

ing review of that decision (Nos. 84-871, 84-889, 84-

1054 and 84-1069).

2. The Arkansas case arose after the FCC’s Pre-

emption Order but prior to the Fourth Circuit’s de-

cision. A “three-way meeting” was held by the FCC,

the Arkansas Public Service Commission, and South-

western Bell.’ Following the meeting, the FCC issued

an order, in December 1983, prescribing depreciation

rates for Southwestern Bell’s operations in Arkansas.

In re Prescription of Revised Percentages of Depre-

3’ The FCC historically has called periodic “three-way meet-

ings” of telephone companies and federal and state regulators

to consider depreciation rates for particular companies. See

In re Prescription of Revised Percentages of Depreciation, 88

F.C.C.2d 1223, 1225 (1982).

6

ciation, 96 F.C.C.2d 257, 291 (1983). The order

made clear that state commissions were required to

follow the prescribed depreciation procedures (id. at

261-262 n.3). No party sought review of that order.

In January 1984, the Arkansas commission denied

Southwestern Bell’s rate proposal, which had sought

to recover increases in depreciation expenses that the

telephone company had calculated on the basis of the

FCC’s prescriptions. Re Southwestern Bell Telephone

Co., 58 Pub. Util. Rep. 4th (PUR) 82 (Ark. P.S.C.

1984). .The Arkansas commission took “administra-

tive notice” of the FCC’s December 1983 deprecia-

tion order for Southwestern Bell’s operations in Ar-

kansas (id. at 90); but it refused to comply with

that order and with the Preemption Order, stating

that it was “convinced that the FCC is totally with-

out any valid legal foundation to support its claim

of preemption over the states with regard to intra-

state depreciation rates” (id. at 93-94).

Southwestern Bell then sought enforcement of the

FCC’s orders in the United States District Court for

the Eastern District of Arkansas under 47 U.S.C.

401(b). Section 401(b) provides that, if “any per-

son fails or neglects to obey any order of the [FCC]

* * * any party injured thereby * * * may apply to

the appropriate district court of the United States

for the enforcement of such order.” The statute pro-

vides that the district court “shall enforce obedience

to such order” if it finds that the order was “regu-

larly made and duly served.” The Arkansas com-

mission stipulated that it was not obeying the Pre-

emption Order and that the order was “regularly

made and duly served.” It disputed the FCC’s au-

thority to issue depreciation prescriptions that pre-

empt state commissions.

7

The district court, in an opinion issued prior to

the Fourth Circuit’s decision upholding the Preemp-

tion Order, refused to enforce the FCC’s orders. It

noted that, under the Hobbs Act, “only a court of

appeals may invalidate an FCC order” (Pet. App.

A386). But the district court denied enforcement af-

ter determining that the Preemption Order was “ul-

tra vires” because its prescription of uniform de-

preciation procedures necessarily affected intrastate

ratemaking (ibid.).

The Eighth Circuit reversed (Pet. App. A43-A55).

It noted that this Court had made clear, in FCC v.

ITT World Communications, Inc., No. 83-871, slip

op. 4 (Apr. 30, 1984), that “[l]itigants may not

evade” the provision of the Hobbs Act providing that

exclusive jurisdiction to review FCC orders lies in

the courts of appeals by arguing in a district court

that an FCC order is ultra vires. But the district

court had “countenanced just such an evasion” by

the Arkansas commission (Pet. App. A50). The

Eighth Circuit did not read the Hobbs Act as “‘with-

holding all discretion from the district court with re-

spect to the issuance of an injunction,” but concluded

that, under the facts of this case, a refusal to enjoin

the Arkansas commission’s disobedience would be an

abuse of discretion (id. at A54). The Eighth Circuit

noted that the Arkansas commission was participat-

ing in the Fourth Circuit’s review of the Preemption

Order but had not sought a stay in that Court. The

Eighth Circuit characterized the Arkansas commis-

sion’s action as a “studied consideration of * * *

defiance” of the FCC’s order (id. at A54). It there-

fore ordered the district court to enter the injunc-

tion requested by Southwestern Bell, noting that it

8

could reconsider the injunction when the Fourth Cir-

cuit ruled on the validity of the Preemption Order.*

3. The Maine case arose in July 1982, when New

England Telephone sought a rate increase from the

Public Utilities Commission of Maine based on the

depreciation methods piescribed by the FCC. As in

the Arkansas case, the Maine commission refused to

permit the telephone company to follow the FCC’s

prescriptions because it held that “the FCC erred”

in concluding that it could issue preemptive deprecia-

tion prescriptions. New England Telephone & Tele-

graph Co., No. 82-124 (Apr. 26, 1983), slip op. 36.

New England Telephone filed an enforcement action

under Section 401(b), and the United States District

Court for the District of Maine issued an injunction

instructing the Maine commission to permit the tele-

phone company to use the depreciation practices pre-

scribed by the FCC (Pet. App. 42c-44c).

The First Cireuit reversed (Pet. App. la-14a).

It held that the Preemption Order is not an “order”

under Section 401(b). The court ruled that only

“adjudicative orders,” as opposed to orders resulting

from rulemaking proceedings, may be enforced un-

der that Section. The court recognized (Pet. App.

lla) that “our interpretation requires reading [or-

der] differently” in Section 401 than this Court read

the word “order” in Section 402 (47 U.S.C. 402) in

Columbia Broadcasting System v. United States, 316

U.S. 407 (1942). But the court found other argu-

‘On remand, and after the Fourth Circuit’s decision, the

district court issued an injunction instructing the Arkansas

commission to permit Southwestern Bell to use the deprecia-

tion methods prescribed by the FCC for state ratemaking

purposes.

9

ments persuasive. The court concluded that other

sections of the Act “use the word ‘order’ in a way

that seems to envision Commission decisions requir-

ing specifie actions of specific carriers,” while the

Preemption Order has general applicability (Pet.

App. 10a). In the court of appeals’ view, Section

401(b) “can be read more fairly and coherently” if

“order” is narrowed to permit enforcement actions

in district courts only of such specific orders (Pet.

App. 9a). Furthermore, as a policy matter, the court

thought it desirable to prohibit private parties from

enforcing orders of general applicability so that the

FCC could itself determine when enforcement actions

regarding such orders were needed.

New England Telephone sought rehearing. It ar-

gued that its enforcement action could be viewed as

an action enforcing a 1982 adjudicative order, Jn re

Prescription of Revised Percentages of Depreciation

(1982 Prescription Order), 92 F.C.C.2d 920 (1982),

the type of order that the First Circuit concluded

could be enforced by a private party under Section

401(b). The First Cireuit issued a supplemental

opinion rejecting this argument. It noted that the

1982 Prescription Order “expressly left open” the

issue whether its depreciation rules were preemptive

so that it was not accurate to say that New England

Telephone sought enforcement of that order (Pet.

App. 2b). Furthermore, the court stated, New Eng-

land Telephone had not made this argument pre-

viously, and it “would be unfair to other parties in

the case” to accept it on rehearing (ibid.).

4. The Louisiana case arose in May 1982, when

South Central Bell sought a rate increase that was

based in part on application of the FCC’s deprecia-

tion methods. The Louisiana Public Service Commis-

10

sion denied the telephone company’s request (J.S.

App. A99-A101). The Louisiana commission “clearly

implied its refusal to implement FCC-prescribed de-

preciation methods” (id. at A10 (footnote omitted) ).

South Central Bell filed an enforcement action under

Section 401(b) in the United States District Court

for the Middle District of Louisiana, and that court

issued a preliminary injunction ordering the Louisi-

ana commission to permit the telephone company to

use the depreciation practices prescribed by the FCC.

The Louisiana commission responded by finding

that application of those methods resulted in an in-

creased expense level of $40.5 million. But the Lou-

isiana commission decided, without further proceed-

ings, to reduce the telephone company’s rate of re-

turn from 13.5% to 12%, so it approved a rate in-

crease of $12.7 million rather than $40.5 million.

J.S. App. A10-A11.

The district court then concluded that the Louisi-

ana commission “has not complied with the order of

this court” (J.S. App. A55). The court stressed that

this commission “received no evidence” before ad-

justing the rate of return; it instead engaged in “a

simple exercise in arithmetic design to minimize the

increase in telephone rates” (ibid.). The district

court modified its injunction by ordering the com-

mission to permit South Central Bell to increase its

revenues in order to recover the entire amount the

commission had determined was required on account

of application of the depreciation practices prescribed

by the FCC.

The court of appeals affirmed (J.S. App. Al-A35).

It first considered the position adopted by the First

Circuit in the Maine case—that the Preemption Or-

der is not an “order” under Section 401(b)—and re-

11

jected it (J.S. App. A17-A23). The court noted that

“the First Circuit was not able to cite * * * a single

precedent in support of its” narrow interpretation

(id. at A18). On the contrary, Ambassador, Inc. v.

United States, 325 U.S. 317 (1945), in which the

Court assumed that “order” under Section 401 in-

cluded rulemaking orders, and Columbia Broadcast-

ing System v. United States, supra, in which the

Court read “order” under Section 402 to include rule-

making orders, strongly supported the conclusion that

the Preemption Order is an “order” (J.S. App. A18-

A20).

The Fifth Circuit also found the policy justifica-

tions underlying the First Circuit’s decision unper-

suasive. Contrary to the First Circuit, the Fifth

Circuit “simply [did] not see how the FCC’s respon-

sibility in developing and enforcing a coherent com-

munications policy would be significantly under-

mined” by reliance on private enforcement of rules

(id. at A22). Indeed, the court noted that unfair-

ness can result from non-compliance with an admin-

istrative rule, and situations exist where only a pri-

vate party has a sufficient interest to enforce com-

pliance (7d. at A21-A22). In any event, it also noted,

the FCC can “avoid private incursions upon its en-

forcement responsibilities” by intervening and by fil-

ing amicus briefs; and courts may apply the doctrine

of primary jurisdiction in order to obtain the FCC’s

views, when needed (id. at A22). Accordingly, the

Fifth Circuit held that “the FCC Preemption Order

is an order within the meaning of § 401(b)” (id. at

A23).

The court of appeals also rejected the Louisiana

commission’s attack on the district court’s modified

preliminary injunction. Like the district court, the

12

court of appeals recognized that state commissions

have primary authority to set intrastate rates (id.

at A28). But the court of appeals found that the

district court’s determination that the Louisiana com-

mission had adjusted the rate of return without fur-

ther proceedings merely to avoid high telephone rates

was not clearly erroneous (7d. at A30-A31). And the

court determined that, since “it is clear that the

Preemption Order in prohibiting inconsistent state

depreciation practices was intended also to preclude

state responses designed to evade the consequences and

the purposes of that presumption,” the Louisiana com-

mission erred in reducing the rate of return sum-

marily merely to offset increased depreciation ex-

penses (id. at A29-A30).

ARGUMENT

In our view, none of the issues raised by these

cases warrants the Court’s attention. The ultimate

issue underlying the disputes between the telephone

companies and the state commissions—the validity of

the FCC’s Preemption Order—is not properly pre-

sented by any of these cases. That issue is presented

by the petitions and jurisdictional statement chal-

lenging the Fourth Circuit’s affirmance of the FCC’s

Preemption Order. See our Fourth Circuit Opposi-

tion. While there is a conflict between the First and

Fifth Circuits regarding the type of “order” that

may be enforced by private parties under Section

401(b), and while we think that the First Circuit

erred in holding that private parties may not enforce

orders of the kind involved here, its decision is un-

likely to have any important consequences. Nor do

we think that the modified preliminary injunction

upheld by the Fifth Circuit requires review.

13

1. None of these three enforcement cases prop-

erly presents the issue whether the FCC acted within

the scope of its authority in issuing the Preemption

Order. The Eighth Circuit (Pet. App. A55), the

First Circuit (Pet. App. 5a), and the Fifth Circuit

(J.S. App. A138) each recognized that, under the

Hobbs Act, the Fourth Circuit had exclusive jurisdic-

tion over that issue. That is correct. And, as we

argue in our opposition to the Fourth Circuit peti-

tions, that court properly applied settled law in up-

holding the Preemption Order, so there is no need

for this Court to review that issue even in the one

case that properly presents it—the Fourth Circuit

case.

The Arkansas commission nevertheless argues (Pet.

6-19) that the Eighth Circuit should have held the

Preemption Order ultra vires, and that its refusal to

do so is inconsistent with three decisions of this

Court, Federal Maritime Commission v. Seatrain

Lines, Ine., 411 U.S. 726 (1978), Leedom v. Kyne,

358 U.S. 184 (1958), and Hecht Co. v. Bowles, 321

U.S. 321 (1944). But the Arkansas commission is

wrong in contending that the Eighth Circuit refused

to recognize that courts enforcing orders under Sec-

tion 401(b) retain equitable power to refuse to en-

force those orders. Citing Hecht Co. v. Bowles, su-

pra (Pet. App. A54), the Eighth Circuit held that

district courts retain some discretion to refuse to en-

force orders under Section 401(b) even when all the

_ statutory requirements for enforcement are met. It

instead merely held that, “[u]nder the circumstances

of this case, * * * denial of injunctive relief would

5 Thus, no error was committed of the sort that occasioned

our petition for a writ of certiorari in JCC v. Tri-State Motor

Transit Co., No. 84-1515 (filed Mar. 25, 1985).

14

be an abuse of discretion” (Pet. App. A54). In

reaching this conclusion, the court of appeals gave

particular weight to what it regarded as the Arkan-

sas commission’s studied defiance of the FCC’s order,

even though the state commission could have sought a

stay of that order in the Fourth Circuit review pro-

ceeding in which it was a party (ibid.). Thus, most

of the argument in the Arkansas petition misses the

mark because the commission has misread the Eighth

Circuit’s opinion.°

2. Despite the conflict in the circuits, we do not

think that this Court need consider the issue of what

type of ‘order’ may be enforced under Section 401

(b).” While, in our view, the First Circuit’s decision

is erroneous, that decision will probably not have im-

portant consequences. In part this is because the First

Cireuit’s holding, as modified on rehearing, should

not bar private enforcement actions involving FCC

depreciation prescriptions in the future. If we are

wrong, the Court may address the issue when a fu-

ture private enforcement action is barred.

6 Moreover, the Fourth Circuit’s decision upholding the

Preemption Order, which followed the Eighth Circuit’s de-

cision that the Preemption Order cannot be deemed ultra

vires, confirms that the Eighth Circuit was correct. Since, in

our view, there is no need for this Court to review the Fourth

Circuit’s decision (see our Fourth Circuit Opposition), which

squarely presents the issue of the FCC’s preemptive power

over depreciation methods, a fortiori there is no justification

for this Court to consider the issue as presented in the Arkan-

Sas case.

7 The conflict is between the First and the Fifth Circuits.

The Arkansas commission did not argue that the Preemption

Order is not an “order,” so the Eighth Circuit did not address

the issue.

15

On the merits, we think the Fifth Circuit has

shown that the First Circuit erred in its legal an-

alysis. The First Circuit acknowledged, in its first

decision, that its holding necessitated differing in-

terpretations of “order” in Section 401 and Section

402, in light of this Court’s decision in Columbia

Broadcasting System (Pet. App. lla-12a). In its

request for rehearing, New England Telephone noted

that the Court in Ambassador, Inc. v. United States,

supra, had assumed that private parties could enforce

rulemaking orders. In its supplemental opinion, the

First Circuit stated (Pet. App. 2b-3b) that Ambassa-

dor is distinguishable because it might have involved

Section 401(a) rather than Section 401(b), since the

Court did not specify which subsection of Section 401

was being construed. But the Fifth Circuit showed

that Ambassador involved Section 401(b), not Sec-

tion 401(a). The Fifth Circuit reasoned that, since

Section 401(a) authorizes actions to enjoin violation

of the Communications Act itself, while Section

401(b) authorizes actions to enforce orders of the

FCC, and the suit in Ambassador sought to enforce a

rule contained in a telephone company tariff, and not

to enforce a provision of the Act itself, it must have

been brought under Section 401(b) (J.S. App. A18-

A19 & n.18).

The First Circuit also erred in its policy analysis.

As the Fifth Circuit concluded (J.S. App. A22), fed-

eral interests are generally advanced by the avail-

ability of private enforcement of FCC orders, includ-

ing those orders resulting from proceedings similar

to those involved in these cases. In cases where that

is not so, the agency, by participating as an inter-

venor or an amicus, and the courts, by invoking the

doctrine of primary jurisdiction, can adequately pro-

tect federal interests.

_

16

But, despite these errors, the First Circuit’s de-

cision is not likely to cause harm beyond the loss to

the telephone company involved in that case. Its

position has not only been rejected by the Fifth Cir-

cuit, but by the Fourth Circuit as well (Chesapeake

& Potomac Telephone Co. v. Public Service Commis-

sion, 748 F.2d 879 (4th Cir. 1984), petition for cert.

pending, No. 84-1362), and we would expect it to be

rejected if raised in other circuits. In addition, as

the First Circuit itself noted (Pet. App. 3b), private

actions seeking enforcement of orders resulting from

FCC rulemaking proceedings have been rare. It may

be that, after the unusual flurry of litigation result-

ing from the recent changes in the telephone industry,

such actions will again become rare.

In any event, it is not clear to us that the First

Circuit’s opinion will be troublesome in the future,

even in cases brought in that circuit. In its rehearing

petition, New England Telephone argued that, even

if it could not seek enforcement of the Preemption

Order, the FCC’s 1982 Prescription Order was spe-

cific enough, under the First Circuit’s analysis, to

qualify as an adjudicative order that it could enforce.

The First Circuit gave two reasons for rejecting that

argument. One reason, which will not apply in the

future, was that it would be unfair to the other par-

ties in the Maine case to permit New England Tele-

phone to raise the argument on rehearing. The other

reason was that the 1982 Prescription Order pre-

ceded the Preemption Order and “expressly left open

the question” whether its prescriptions preempted the

states. Starting with the FCC’s 1983 Prescription

Order, however, each depreciation prescription order

specifically states that it preempts state rules (see,

17

e.g., 96 F.C.C.2d at 261-262 n.3). Since the FCC is-

sues depreciation prescriptiou orders for approxi-

mately one-third of the nation’s major telephone com-

panies each year (id. at 260)—after three-way meet-

ings involving the FCC, the telephone company, and

a state commission—by the end of this year a de-

preciation prescription order that expressly states

that it has a preemptive effect should be in force

for nearly all of the nation’s telephone companies. As

we read the First Circuit’s supplemental opinion,

even that Circuit may permit private actions to

enforce these prescription orders. Therefore, the

issue presented in this case may not arise again, at

least not after this year. Since the conflict in the cir-

cuits may have no future impact by the time this

Court can resolve it, there is no need for review of

this issue.*

3. The Louisiana commission also contends that

the Fifth Circuit erred in upholding the district

court’s modified preliminary injunction.’ It char-

8 If the Court concludes that it should resolve the conflict

between the First and Fifth Circuits on the issue whether the

Preemption Order is an “order” enforceable under Section

401(b), we submit that it should confine its grant of certi-

orari to that issue, affirm the Fifth Circuit, and reverse the

First Circuit.

® The Louisiana commission may not obtain review of this

issue by appeal under 28 U.S.C. 1254 (2).

First, the injunction at issue is a preliminary injunction.

Under Slaker v. O’Connor, 278 U.S. 188, 189-190 (1929), only

“final judgments” are subject to review under Section 1254 (2).

See South Carolina Electric & Gas Co. v. Flemming, 351 U.S.

901 (1956). That rule has been questioned (City of New

Orleans v. Dukes, 427 U.S. 297, 301-302 (1976) ; City of Chi-

cago V. Atchison, T. & S. F. Ry., 357 U.S. 77, 82-83 (1958) ),

but never repudiated. In Doran v. Salem Inn, Inc., 422 U.S.

OO

18

acterizes the district court’s action as requiring state

commissions to freeze authorized rates of return

(J.S. 23). This is simply not so. There is actually

922, 927 (1975), the Court dismissed an appeal, citing Slaker,

and noting that the party sought “review of the affirmance

of a preliminary injunction.” Commentators agree that Sec-

tion 1254(2), like 28 U.S.C. 1257(2), should be subject to a

“final judgment” requirement. 17 C. Wright, A. Miller &

E. Cooper, Federal Practice and Procedure § 4037, at 36-39

(1978). In particular, those commentators argue that appel-

late jurisdiction ought not lie under Section 1254(2) to re-

view “decisions that affirm a preliminary injunction” (id. at

38). That position is fortified by this Court’s recent state-

ments that statutes authorizing appeals are to be construed

narrowly (see, e.g., Silkwood v. Kerr-McGee Corp., No. 81-

2159 (Jan. 11, 1984), slip op. 7;:Perry Education Ass’n V.

Perry Local Educators’ Ass’n, 460 U.S. 37, 43 (1983)). A nar-

row construction leads to retention of the final judgment rule

of Slaker. Since the Louisiana commission challenges a pre-

liminary injunction, rather than a final order, an appeal is not

proper.

Second, the district court did not strike down any state

statute (see Silkwood, slip op. 7-8); it merely ordered the

Louisiana Public Service Commission to obey an injunction

requiring it to follow the FCC’s prescribed depreciation

methods. The Louisiana commission cites two cases, Atchison,

T. & S. F. Ry. v. Public Utilities Commission, 346 U.S. 346

(1953), and Lake Erie & W.R.R. v. State Public Utilities

Commission, 249 U.S. 422 (1919), decided under 28 U.S.C.

1257(2), that held that orders of state commissions were

“legislative in nature.” To be sure, ratemaking has leg-

islative origins, since in the past some state legislatures

set utility rates. In light of the policy that statutes authoriz-

ing appeals are to be construed narrowly, these decisions, de-

cided under Section 1257(2), ought not be extended to Sec-

tion 1254(2). See Fornaris v. Ridge Tool Co., 400 U.S. 41, 42

n.1 (197C) (Puerto Rican statute is not a state statute under

Section 1254(2)), and Torres v. Puerto Rico, 442 U.S. 465,

468 (1979) (appeal lies under Section 1257(2) to review a

19

very little difference between the parties on any ques-

tion of importance in the future. The only real issue

is whether the Louisiana commission followed the dis-

trict court’s original preliminary injunction. We

think that it is clear that the Louisiana commission

flouted the court’s order, necessitating the modified

injunction as a remedial action by the district court

to vindicate its own original order.

The Louisiana commission complains (J.S. 21) that

“Tt]he FCC never suggested that the Preemption De-

cision could bind a state commission to a previously

authorized rate of return,” implying that the FCC

has changed its position. The FCC has not changed

its position and agrees with the Louisiana commission

that a state commission may adjust its authorized

rate of return in light of the adjustment of other

factors, including depreciation practices, that affect

investor risk. Thus, there is no disagreement that

primary authority over intrastate ratemaking lies

with state commissions. The FCC’s interest is in re-

quiring adoption of depreciation methods that in-

sure accurate allocation of costs so that telephone com-

panies will replace equipment when, in economic

reality, it is efficient to do so. The FCC is not in

the business of setting intrastate telephone rates.

decision upholding a Puerto Rican statute). There is no good

reason to characterize ratemaking orders as state statutes

under Section 1254(2). Unlike statutes, they are not codified

and are generally transitory in nature, reflecting changes in

economic conditions. Accordingly, this Court should not ex-

tend the meaning of “state statute” under Section 1254(2)

to include ratemaking orders.

Should the Court disagree with our submission that an ap-

peal does not lie in No. 84-870, it should affirm the judgment

for the reasons stated in this brief.

20

The FCC and the Louisiana\ commission disagree

only on the specific question of whether the state com-

mission’s abrupt adjustment of the rate of return in

this case was correctly characterized as disobedience

to the district court’s injunction, rather than as a

separate ratemaking decision. We think the Fifth

Circuit’s opinion makes clear that it was properly

found to be the former. The state commission held

no hearings and considered no new evidence before

adjusting the rate of return (J.S. App A8l1). It

presented its argument that the adjustment was war-

ranted in light of reduced investor risk caused by the

change in depreciation practices for the first time

in its reply brief in the court of appeals (ibid.). In

these circumstances, the district court did not abuse

its discretion by modifying its injunction so as to ef-

fectuate its previous order. In any event, whether,

under the peculiar facts of this case, the district court

correctly determined that the Louisiana commission

was improperly evading compliance with the court’s

injunction is not a question warranting review by

this Court.”

10 The Louisiana commission’s other arguments also do not

warrant review by this Court. The Johnson Act, 28 U.S.C.

1342, does not foreclose federal court jurisdiction in this case

because jurisdiction is not based on diversity or on a claim

that the state’s rate order was unconstitutional, but on a

federal statute expressly authorizing the district court to act

(J.S. App. A33 n.28). There is, finally, no basis for the argu-

ment that state commissions are exempt from enforcement

actions under Section 401(b) on grounds that they are not

“persons.” The definition of “persons” in the Act is broad and

inclusive (47 U.S.C. 153(i)). No court of appeals has ac-

cepted this argument, and thus there is no conflict at that

level for this Court to resolve.

21

CONCLUSION

The Court should dismiss the appeal in No. 84-

870 for want of jurisdiction and treat the papers

on which that appeal was filed as a petition for a

writ of certiorari pursuant to 28 U.S.C. 2103. The

petitions for a writ of certiorari should be denied.

Respectfully submitted.

REX E. LEE

Solicitor General

LAWRENCE G. WALLACE

Deputy Solicitor General

CHRISTOPHER J. WRIGHT

Assistant to the

Solicitor General

JACK D. SMITH

General Counsel

DANIEL M. ARMSTRONG

Associate General Counsel

JOHN E. INGLE

Deputy Associate General Counsel

Federal Communications Commission

MAY 1985

YU. S. GOVERNMENT PRINTING OFFICE; 1985 461531 10223