Petition for Writ of Certiorari — APCC Services, Inc. v. Sprint Communications Co., LP (No. 05-766)

; S S.

as

05-766DEC 12 2005

No. 05-

eeeeeenenaermmmmn tee hoe Je LHe CLERK

In the Supreme Court of the Gnited States

APCC SERVICES, INC., ET AL.,

Petitioners,

v.

SPRINT COMMUNICATIONS COMPANY L.P., ET AL.,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appea’s

for the District of Columbia Circuit

PETITION FOR A WRIT OF CERTIORARI

MICHAEL W. WARD Roy T. ENGLERT, JR.*

Michael W. Ward, P.C. DONALD J. RUSSELL

1608 Barclay Boulevard DAMON W. TAAFFE

Buffalo Grove, IL 60089 Robbins, Russell, Englert,

(847) 243-3100 — Orseck & Untereiner LLP

1801 K Street, N.V’

Suite 91]

Washington, D.C. 20006

(202) 775-4500

*Counsel of Record

QUESTION PRESENTED

Whether the express right of action to sue for damages

arising from common carriers’ violations of the Communica-

tions Act (47 U.S.C. §§ 206-207) permits suits against common

carriers that fail to pay compensation to payphone service pro-

viders in accordance with FCC orders, when the FCC has deter-

mined that a carrier’s failure to_pay violates (1) Section 201(b),

which prohibits unjust or unreasonable practices by common

carriers; (2) Section 416(c), which establishes a “duty of every

person * * * to observe and comply with” “[e]very order of the

Commission” and (3) Section 276, in which Congress directed

that payphone service providers must be “compensated for each

and every completed intrastate and interstate call.”

PARTIES TO THE- PROCEEDING

The petitioners, plaintiffs-appellecs below, are APCC

Services, Inc.; Data Net Systems, L.L.C.; Davel Communica-

tions Group, Inc.; Jaroth, Inc. d/b/a Pacific Telemanagement

Service; NSC Telemanagement Corp., n/k/a Intera Communica-

tions Corporation; and Peoples Telephone Co., Inc.

The respondents, defendants-appellants below, are Sprint

Communications Co., L.P., and AT&T Corporation.

RULE 29.6 STATEMENT

APCC Services, Inc., a Virginia corporation, is a for-profit

subsidiary of the American Public Communications Council,

Inc., a District of Co*umbia not-for-profit corporation that is not

publicly traded.

Data Net Systems, L.L.C., is an Illinois Limited Liability

Company that is not affiliated with any publicly traded

company.

Davel Communications Group, Inc. is an_ Illinois

corporation whose parent corporation, Davel Communications,

Inc., is a publicly traded corporation that holds a 10 percent or

greater ownership in Dave! Communications Group, Inc.

Jaroth, Inc. d/b/a Pacific Telemanagement Services is a

Califormia corporation that is not affiliated with any publicly

traded company.

NSC Telemanagement Corporation § n/k/a _Intera

Communications Corporation is a California corporation that is

not affiliated with any publicly traded coripany.

Peoples Telephone Company, Inc. is a Florida corporation

whose parent corporation, Davel Communications, Inc., is a

publicly traded corporation that holds a 10 percent or greater

ownership in Peoples Telephone Company, Inc.

iil

TABLE OF CONTENTS

Page

QUESTION PRESENTED ....... sessed (i)

PARTIES TO THE PROCEEDING .................. ii

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TAREE UP AUITHIAOM occ ccvcveccccuvesueevs Vv

CPT ox dksxeesdsanseeouweaeeNensess ]

FETE 606s Vetoes vceeeedeuseseeiereceee 1

STATUTORY PROVISIONS INVOLVED ............ l

POTISSEE i andes e505 nee reteaeeecce ee l

A. The Regulatory Framework Created By

I on on os eo nde ana eee es 4

B. The District Court Proceedings .............. 10

C. The Court of Appeals’ Decision ............. 11

REASONS FOR GRANTING THE PETITION ........ 16

I. The D.C. Circuit’s Holding That There Is No

Right Of Action Arising From A Violation Of

Section 201(b) Conflicts With Decisions By

This Court And Other Courts Of Appeals ...... 16

A. The Decision Conflicts With The Ninth

Circuit’s Holding In Metrophones That

There Is A Right Of Action To Sue For

Violations Of Section 201(b) And With

This Court’s Deference Decisions ........ 17

1V

B. The D.C. Circuit’s Decision Conflicts

With A Large Body Of Law Applying

The Primary Jurisdiction Doctrine ........ 19

Il. The Decision Deepens A Circuit Conflict On

The Recurring Question Whether References

To “Orders” In The Communicauuns Act

Encompass Rulemaking Orders.............. 22

I. The D.C. Circuit’s Decision That An IXC

Cannot Violate Section 276 Conflicts With

This Court’s Decision In Alexander v. Sandoval 25

IV. Confusion And Inconsistency In Lower Court

Decisions Threatens The Development And

Administration Of A Coherent Regulatory

Regime To Achieve Congressional Objectives .. 28

ee PCT ee TT PET PCLT CET ree 30

Vv

TABLE OF AUTHORITIES

Page(s)

Cases:

Alexander v. Sandoval, 532 U.S. 275 (2001) .. 3,25, 26, 27

Allnet Communication Service, Inc. v.

Nat'l Exchange Carrier Ass'n, Inc.,

ee ae BA as le BED 0 oc ccecc merece es 20

APCC ¥v. FCC, 235 F.34 31 (DOL. Cir. 2000) .....5... 5,8

Brown v. MCI WorldCom Network Services, Inc.,

roye ® Gh 5, Ge xe > d ere 21

Chevron U.S.A., Inc. v. Natural Resources Defense

Council, Inc. 467 U.S. 837 (1984) ............ passim

Columbia Broadcasting System, Inc. v. :

United States, 316 U.S. 407 (1942) .............. 23

Greene v. Sprint Communications,

340 F.3d 1047 (2003), cert. denied,

POT Ue: FORGE cccecvaveucstivivecescrss 11, 28

Hawaiian Tel. Co. v. Pub. Utilities Commission,

O27 F206 1266 (OU Cor. IGG) nn cre ccc cc eenes 23

In re Long Distance Telecommunications Litigation,

Bat Fae Ges COORG, TFG) nn cc cccewnvenns 20, 22

Metrophones Telecommunications, Inc. v.

Globai Telecommunications, Inc.,

423 F.3d 1056 (9th Cir. 2005), petition

for cert. pending, No. 05-705 ................ passim

Nader v. Allegheny Airlines, Inc.,

so pos hs oa here eek, 21

vi

TABLE OF AUTHORITIES—Continued

Page(s)

Nat'l Cable & Telecommunications Ass'n Vv.

Brand X Internet Services, '

125 S. Cr. GSS (2005) .....---2- 3 13, 15, ¥7, 16, 19

Nat'l Comm’ns Ass'n, Inc. v. AT&T, 46 F.3d 220

EE tee a ee uaa iw on Oa eee So 20, 21

Nat'l Railroad Passenger Corp. v.

Boston & Maine Corp., 503 U.S. 407 (1992) ....... 18

New England Telephone & Telegraph Ce. v.

Public Utilities Commission,

742 F.2d 1 (1st Cir. 1984) ..... we wedi 15, 23

Pac. Tel. & Tel. Co. v. MCI Telecommunications Corp.,

649 F.2d 1315 (9th Cir. 1981) ............... 20, 21

Phonetel Tech., Inc. v. Network Enhanced Telecomm.,

197 F. Supp. 2d 720 (E.D. Tex. 2002) ............ 10

Precision Pay Phones v. Qwest Communications Corp.,

210 F. Supp. 2d 1106 (N.D. Cal. 2002) ........... 10

Reiter v. Cooper, 507 U.S. 258 (1993) ..........-. 20, 22

Syntek Semiconductor Co., Ltd. v. Microchip

Technology, Inc., 307 F.3d 775 (9th Cir. 2002) ..... 22

United States v. Mead Corp., 533 U.S. 218 (2001) .... 3,17

United States v. Michigan National Corp.,

I BONE 6 oso n9.00 Shave ee enw eeawes 22

Vii

TABLE OF AUTHORITIES—Continued

Page(s)

Verizon Communications, Inc. v. FCC,

gt PRE ere Pre ee rr 19

Statutory Provisions:

OF Ae ENE doce dcckisecevasbrikucervendegus 7

Oe es 6 6.004964 cade beeeaseteieeen passim

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bi | Serr erry or 2, 8, 16, 23, 24, 26

SF Us RE bb dae woccnccovadnwaessces 27, 29

BT UBER SG BOGE kc bs dvivecvecss ‘aaweeuene et 7, 8,9

Be a ED 505 donee ae eek eee bane passim

ee Res OD 6X5 045k nee ok a eee aeaeel 5

Oe Uh ITED 6 6.8 cb od oeavensveddedearunes 5

ATUS.C. § 226(6 2)... eee eee cece e cere rene eees 5

Oe TEE ackao bak 4084 5hd eek ke eee ene passim

Pres RED bho ove ade dewksonseunienes 4,6

i oe | er rene pr par hres 15, 23

ee RG: UE ov ae tn ha en oo ere ee eres 23

A I ae 12

Vill

TABLE uf AUTHORITIES—Continued

Page(s)

OF Ue BEE vv tucriiscsdavecuvecieen 3, 4, 22, 24

47 U.S.C. § 416(c) ........... 4,11, 13, 15, 23, 27, 28, 29

CF OUR 6 i ens ceacet nes iakcenbiaee eee 8

RIUIBE. SFOS tcccventvessixseepuveetueeesenpen 8

BT UB SG ncn cccccscessssecvarsesieeeee 26

Miscellaneous:

Implementation of the Pay Telephone Reclassification

and Compensation Provisions of the Telecommunications

Act of 1996, Notice of Proposed Rulemaking,

ST FAA OPUS ree, bo nse de civianteeeee 7

Implementation of the Pay Telephone Reclassification

and Compensation Provisions of the Telecommunications

Act of 1996, Report and Order, 11 F.C.C.R. 20,541

CSOD 6 sho kkes Reseda aa. 7

Implementation of the Pay Telephone Reclassification

and Compensation Provisions of the Telecommunications

Act of 1996, Second Report and Order,

Re sk ok ER ef), ree Per ee 6

{mplementation of the Pay Telephone Reclassiciation

and Compensation Provisions of the Telecommunications

Act of 1996, Third Report and Order,

OTE Ae Pees nb kei neevnees coed rens 6, 7

1X

TABLE OF AUTHORITIES—Continued

Page(s)

Implementation of the Pay Telephone Reclassification

and Compensation Provisions of the Telecommunications

Act of 1996, Further Notice of Proposed

Rulemaking, 18 F.C.C.R. 11,003 (2003) ........... 8

Implementation of the Pay Telephone Reclassification

and Compensation Provision of the Telecommunications

Act of 1996, Report and Order, 18 F.C.C.R. 19,975

EES a 6, 8, 9, 12, 13, 17, 18, 29

Policies and Rules Concerning Operator Access and Pay

Telephone Compensation, Second Report and Order,

a 5-6

Policies and Rules Concerning Operator Service Access and

Pay Telephone Compensation, Report and Order and

Further Notice of Proposed Rulemaking,

re 5

PETITION FOR A WRIT OF CERTIORARI

OPINIONS BELOW

The majority and dissenting opinions of the court of appeals

(App., infra, 1a-30a) are reported at 418 F.3d 1238. The district

court’s order denying Sprint’s motion to dismiss and granting

in part petitioners’ motion to amend their complaint (App.,

infra, 79a-80a) is unreported, but the court’s reasons are

explained in a concurrent decision in a related case, APCC

Services, Inc. v. Cable & Wireless, Inc. (App., infra, 81a-93a),

which is reported at 281 F. Supp. 2d 52. The district court’s

orders denying motions for reconsideration and granting

certification ofan interlocutory appeal (App., infra, 31a-45a and

46a-60a) are reported at 297 F. Supp. 2d 90 and 297 F. Supp. 2d

101. Opinions of the district court addressing issues other than

the ones raised in this petition (App., infra, 61a-78a, 94a-108a,

and 109a-145a) are reported at 281 F. Supp. 2d 41, 254

F. Supp. 2d 135, and 305 F. Supp. 2d 1.

JURISDICTION

The judgment of the court of appeals was entered on

June 28, 2005. The orders of the court of appeals denying re-

hearing and rehearing en banc (App., infra, 148a-151a) were

entered on November 10, 2005. This Court’s jurisdiction is

invoked under 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVED

Relevant statutory provisions are set forth at App., infra,

152a-179a.

STATEMENT

These consolidated cases concern the manner by which

Congress creates an express private right of action, and the def-

erence owed to the Federal Communications Commission

(FCC) when it exercises its delegated authority to specify prac-

tices that violate the Communications Act. A common carrier

2

that violates the Act is liable for damages sustained in conse-

quence of the violation. 47 U.S.C. § 206. Injured persons may

recover damages, either through proceedings at the FCC or by

suing in district court, pursuant to a nght of action expressly

provided in the Act. 47 U.S.C. § 207. The FCC determined that

interexchange carriers (IXCs or, colloquially, long-distance

carriers) violate three separate provisions of the Act if they fail

to pay compensation to payphone service providers (PSPs) in

accordance with FCC orders that require such payment. If the

FCC’s determinations are given the deference they deserve,

PSPs have a right to sue in district court under Section 207' to

recover unpaid compensation. A divided panel of the D.C. Cir-

cuit held that PSPs have no right of action to bring such cases.

The panel held that petitioners have no right of action under

Section 207 to assert claims that respondents’ refusal to pay

compensation in accordance with the FCC’s rules is an “unjust

or unreasonable” practice that violates Section 201(b). In doing

so, it disregarded — it did not even acknowledge the existence of

—the FCC’s determination in a notice-and-comment rulemaking

that such a refusal would violate Section 201(b); the Commis-

sion’s reaffirmation of that conclusion in an amicus curiae brief

in this litigation; respondents’ own assertion to the court of ap-

peals (in earlier litigation involving APA review of the FCC’s

rules) that PSPs could recover damages under Section 207 if

IXCs failed to pay the required compensation; or the court’s en-

- dorsement of and reliance on that assertion when it upheld the

FCC’s rules. Instead, the panel asserted that “the Commission

did not attempt” to construe Section 201(b) to encompass a

violation of its payphone compensation rules. App., infra, 17a.

The Ninth Circuit reached the opposite conclusion when it

considered precisely the same question. Metrophones Telecom-

' Unless otherwise indicated, all references to “sections” in this petition refer

to sections codified in 47 U.S.C.

3

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

423 F.3d 1056 (2005), petition for cert. pending, No. 05-705.

It held that Congress delegated authority to the FCC to define

unjust or unreasonable practices, that the FCC had authorita-

tively construed the statute, and that its construction was reason-

able because “allowing for private actions to recover payphone

compensation is an integral part of the regulatory system that

Congress ordered the Commission to design.” /d. at 1070. The

Ninth Circuit properly granted deference to the FCC’s inter-

pretation of the statute, under the principles established in

Chevron U.S.A., Inc. v. Natural Resources Defense Council,

Inc., 467 U.S. 837 (1984), United States v. Mead Corp., 533

U.S. 218 (2001), and Nat'l Cable & Telecommunications Ass'n

v. Brand X Internet Services, 125 S. Ct. 2688 (2005). Notably,

the emphatic reaffirmation in Brand X of the deference owed to

the FCC occurred one day before the D.C. Circuit panel issued

its ruling, and the Ninth Circuit relied heavily on Brand X in

Metrophones, but the D.C. Circuit’s opinion makes no mention

of Brand X, and the panel did not amend its opinion on _‘ear-

ing after Brand X and Metrophones were called to its attention.

This conflict with the Ninth Circuit’s Metrophones decision

is only one of several circuit conflicts presented by this case.’

The D.C. Circuit held that there is no right to sue for a violation

of Section 201(b) if the FCC has not yet determined whether the

alleged practice is unjust or unreasonable — in other words, that

PSPs cannot even initiate a lawsuit because the merits of their

? Global Crossing Telecommunications, Inc., the appellant in Metrophones,

has also filed a petition for a writ of certiorari, No. 05-705 (docketed Dec. 2,

2005). That petition, like this one, seeks certiorari because of the circuit con-

flict on whether a violation of Section 201(b) gives rise to a right of action.

This petition also seeks review of related arguments not raised in the Metro-

phones petition: a circuit conflict concerning the interpretation of Section

416, and the D.C. Circuit’s misinterpretation of Alexander v. Sandoval, 532

U.S. 275 (2001), in holding that a right of action cannot be based on

violations of Section 276.

—

4

claims have not yet been decided. A long line of decisions by

this Court and by other courts of appeals reject that proposition.

The court of appeals also held that petitioners have no right

of action to allege that respondents violated Section 416(c).

That decision rests on the conclusion — again contrary to the

FCC’s construction of the statute — that Section 416, which re-

quires compliance with “[e]very order of the Commission,”

does not require compliance with the payphone compensation

order because it is a rulemaking order, rather than an adjudica-

tory order. As the D.C. Circuit acknowledged, six other circuits

have rejected that proposition.

Finally, the court held that Section 207 does not provide a

right of action to allege violations of Section 276. That statu-

tory provision unambiguously expresses Congress’s judgment

that PSPs must be compensated for “each and every completed

intrastate and interstate call using their payphone.” 47 U.S.C.

§ 276(b)(1). But the court decided that a carrier’s failure to pay

the compensation required by law does not violate Section 276.

The D.C. Circuit’s disregard for the views of the agency

charged with administering a complex regulatory scheme will

exacerbate confusion and inconsistency in the lower courts, will

undermine national uniformity in implementing an important

congressional policy, and will inflict a serious injustice on peti-

tioners by denying them the compensation Congress required.

A. The Regulatory Framework Created By Congress

Before 1990, PSPs frequently sent all long-distance calls

from their payphones to a single [IXC, pursuant to exclusive

contractual arrangements under which the [XC would bill the

caller (or the called party) and remit compensation to the PSP

for the use of its payphone.’ Congress ended such exclusive

> - This arrangement is more convenient for callers and entails much lower

5

arrangements in 1990. It enacted legislation — the Telephone

Operator Consumer Services Improvement Act of, 1990

(TOCSIA), codified at 47 U.S.C. § 226 — that required PSPs to

permit callers to use the services of any [XC, not just the IXC

who had contracted with the PSP. See 47 U.S.C. § 226(c)(1)(B).

“Dial-around” calls (so named beca’’se a caller can “dial

around” the [XC that has a contractual arrangement with the

PSP, e.g., by placing an “800” call to reach another [IXC’s

network) enabled companies like AT&T and Sprint to generate

millions of dollars in revenue by providing calling-card and toll-

free calling services that could be used from any payphone, but

left PSPs largeiy uncompensated. See APCC v. FCC, 215 F.3d

51, 53 (D.C. Cir. 2000) (describing industry history). Dial-

around calls constituted about one-third of payphone usage

when these cases were filed (APCC v. AT&T Compl. 15), and

the absence of compensation for such calls severely reduced

PSPs’ incentives to deploy and maintain payphones, threatening

the public’s access to a critical service.

Congress had some sense of this risk when it enacted

TOCSIA, and directed the FCC to “consider the need to pre-

scribe compensation (other than advance payment by con-

sumers) for owners of competitive public pay telephones” for

dial-around calls. 47 U.S.C. § 226(e)(2). The FCC did so ina

series of rulemakings. See Policies and Rules Concerning

Operator Service Access and Pay Telephone Compensation,

Report and Order and Further Notice of Proposed Rulemaking,

6 F.C.C.R. 4736 (1991) (First Report and Order); Policies and

Rules Concerning Operator Service Access and Pay Telephone

Compensation, Second Report and Order, 7 F.C.C.R. 3251

transaction costs than direct payment from the caller to the PSP. See /mple-

mentation of the Pay Telephone Reclassification and Compensation Provi-

sions of the Telecommunications Act of 1996, Report and Order, 13 F.C.C.R.

20,541, 20,580 § 77 (1996) (First Order).

6

(1992) (Second Report and Order). In those rulemakings, the

FCC stated that it was acting pursuant to its authority under

Section 201, which requires that “charges, practices, classifica-

tions, and regulations for and in connection with” a commen

carrier’s services must be “just and reasonable.” See, e.g., First

Report and Order 4 59; Second Report and Order 4 66.

It quickly became apparent that the TOCSIA regime would

not ensure adequate compensation for PSPs. In 1996, Congress

took forceful measures to address the problem. To “promote the

widespread deployment of payphone services to the public,”

Congress directed the FCC to “take al! actions necessary * * *

to prescribe regulations that establish a per call compensation

plan to ensure that all payphone service providers are fairly

compensated for each and every completed intrastate and inter-

state call using their payphones.” 47 U.S.C. § 276(b)(1). The

FCC developed such a plan and has modified it from time to

time through a series of notice-and-comment rulemakings. See

Implementation of the Pay Telephone Reclassification and Com-

pensation Provisions of the Telecommunications Act of 1996,

Report and Order, 18 F.C.C.R. 19,975, 19,977-19,983 § 5-17

(2003) (2003 Order) (describing regulatory history). The FCC’s

compensation plans generally have required an [XC to pay

compensation when it is the primary economic beneficiary of a

call. See, e.g., First Order, 11 F.C.C.R. at 21,277 4 83.

In rulemakings under the 1996 Act, as in rulemakings under

TOCSIA, the FCC identified Section 201 as one of the sources

of its statutory authority to prescribe regulations. See, e.g., First

Order, 11 F.C.C.R. at 20,720 4 364; Jmplementation of the Pay

Telephone Reclassification and Compensation Provisions of the

Telecommunications Act of 1996, Second Report and Order, 13

F.C.C.R. 1778, 1845 4 166 (1997); Implementation of the Pay

Telephone Reclassification and Compensation Provisions of the

Telecommunications Act of 1996, Third Report and Order, 14

F.C.C.R. 2545, 2648 § 232 (1999) (1999 Order). In the first

7

rulemaking, the FCC requested comment on its tentative conclu-

sion that it should exercise its jurisdiction under Section 201(b)

“to ensure that PSPs are compensated for international as well

as interstate and intrastate calls.” Implementation of the Pay

Telephone Reclassification and Compensation Provisions of the

Telecommunications Act of 1996, Notice of Proposed Rulemak-

ing, 11 F.C.C.R. 6716, 6726 4 18 (1996). After considering

comments on that question, the FCC concluded that Section

201(b) provided statutory “authority * * * to ensure that PSPs

are fairly compensated for international as well as interstate and

intrastate calls.” First Order, 11 F.C.C.R. at 20,569 4 54.* Sprint

and AT&T both participated in this rulemaking and sought

review of other aspects of the First Order, but did not seek

review of the FCC’s assertion of Section 201(b) jurisdiction. In-

deed, AT&T’s comments endorsed the FCC’s tentative conclu-

sion. AT&T Comments, Jmplementation of the Pay Telephone

Reclassification and Compensation Provisions of the Telecom-

munications Act of 1996 at 5 (July 1, 1996).

In its 1999 Order, the FCC decided that its per-call compen-

sation rate would not include allowances to cover the bad-debt

expenses that PSPs incurred when [XCs refused to pay the

amounts they owed. 1999 Order, 14 F.C.C.R. at 2618-2620

{| 160-162. PSPs challenged that decision in the D.C. Circuit.

AT&T and Sprint intervened to defend the FCC’s decision; they

argued that the decision was reasonable because a carrier’s

“failure to pay the required compensation is a violation of FCC

tules for which the carrier is subject to damages as well as fines

and penalties. See 47 U.S.C. §§ 206-208, 501-03.” Final Joint

Brief of Long Distance, Paging, and Consumer Intervenors in

Support of Respondents, APCC v. FCC, No. 99-1114 (filed

Sept. 7, 1999). That assertion necessarily means that a failure

‘ The FCC also invoked its authority under Section 4(i),47 U.S.C. § 154(i),

which authorizes the promulgation of rules that are “necessary in the

execution of [the Commission’s] functions.”

8

to pay compensation violates the Act (in addition to violating

the FCC’s rules) and that damage actions can be brought in

federal court {and not merely in FCC proceedings) because

Section 206 establishes liability only for violations of “this Act”

and Section 207 states that injured parties “may either make

complaint to the Commission * * * or may bring suit * * * in

any district court.” The court of appeals agreed that unpaid

compensation could be recovered under Sections 206-208 —

directly quoting AT&T’s and Sprint’s brief to emphasize the

point — and relied on that fact in holding that the FCC’s exclu-

sion of bad-debt costs was reasonable. APCC v. FCC, 215 F.3d

51, 56 (D.C. Cir. 2000).°

In its 2003 rulemaking, the FCC asked “whether PSPs have

access to adequate avenues of relief in instances where our PSP

compensation rules are violated.” Jmplementation of the Pay

Telephone Reclassification and Compensation Provisions of the

Telecommunications Act of 1996, Further Notice of Proposed

Rulemaking, 18 F.C.C.R. 11,003, 11,012 4 19 (2003). The

answer to that question had a direct bearing on which party

should be required to compensate PSPs for calls ultimately ter-

minated by “switch-based resellers.” To address the bad-debt

issue, the FCC sought to determine the available remedies for

nonpayment of required compensation. PSPs argued that IXCs

should be required to pay for such calls (with a right to recover

from switch-based resellers the amounts paid) because PSPs had

difficulty collecting from the switch-based resellers. AT&T, in

* In this litigation, AT&T and Sprint have argued exactly the opposite. They

have asserted that a failure to comply with the FCC’s payphone compensa-

tion regulations is not and cannot be a violation of the Act, and that Sections

206-208 authorize actions only based on violations of the Act. While conced-

ing that compliance with the payphone compensation rules may be enforced

through penalties payable to the government under Sections 502 and 503,

they have not conceded that PSPs can pursue an action for damages either at

the FCC or in federal court. See Oral Arg. Tr., APCC Services, Inc. v. Sprint

Communications Co. L.P., D.C. Cir. No. 04-7034, at 12-13 (Oct. 21, 2004).

9

response, pointed to PSPs’ right to recover damages under Sec-

tions 206-208 and argued that PSPs “should use those remedies

rather than simply shift the collection problem to someone

else.” Comments of AT&T Corp. at 19 (June 23, 2003). The

FCC again supported the position of the IXCs. Echoing

AT&T’s comments, the FCC opted to leave PSPs responsible

for pursuing collection of the unpaid compensation, emphasiz-

ing the court of appeals’ previous statement that Sections 206-

208 provided a remedy to recover unpaid compensation. The

FCC then stated, unequivocally, “A failure to pay in accordance

with the Commission’s payphone rules * * * constitutes both a

violation of section 276 and an unjust or unreasonable practice

in violation of section 201(b) of the Act.” Implementation of the

Pay Telephone Reclassification and Compensation Provisions

of the Telecommunications Act of 1996, Report and Order, 18

F.C.C.R. 19975, 19990 4 32 (2003) (2003 Order).

Despite the FCC rules, AT&T, Sprint, and other IXCs have

failed to pay the required compensation for millions of calls.

PSPs tumed to petitioners to seek recovery of this unpaid

compensation. Petitioners are “aggregators” who operate as

intermediaries between PSPs and IXCs. They collect billing

information from PSP clients, provide that information to IXCs

or their agents, collect the IXCs’ payments, and distribute those

payments to their PSP clients. Petitioners provide those billing

and collection services to approximately 1400 PSPs that own

and operate more than 400,000 payphones, each of which may

be entitled to compensation from hundreds of IXCs. Each PSP

whose compensation is at issue in this litigation initially granted

a power of attorney to its aggregator to deal with IXCs for

billing and collection matters and later assigned its claims to the

aggregator for litigation and collection.*

* Petitioners Jaroth, Inc., NSC Telemanagement, and Peoples Telephone Co.

also seek to recover unpaid compensation as owners of PSPs. Thus, they

assert direct claims, in addition to claims they assert as assignees.

10

B. The District Court Proceedings

Petitioners filed separate suits against Sprint and AT&T in

the district court for the District of Columbia, invoking the right

of action provided in Section 207 and alleging that defendants

had violated Section 276. Both cases were assigned to the same

district court judge, as were other cases asserting similar claims

against different defendants.’

Four years into the litigation, AT&T moved to dismiss the

complaint, asserting that petitioners lacked standing because

they had pledged to account to the assignor-PSPs for the litiga-

tion proceeds. The district court initially granted this motion

(App., infra, 108a) but reversed its decision on reconsideration.

App., infra, 78a. AT&T, in turn, requested reconsideration of

that decision, which the district court denied. App., infra, 59a.

While standing issues were being litigated in the AT&T

case, questions concerning PSPs’ rights to sue for damages were

raised in litigation in other jurisdictions. District courts strug-

gled with the question whether a violation of the payphone com-

pensation rules constitutes a violation of Section 276 that gives

rise to a cause of action under Section 207. A district court in

the Northern District of California held that there is a right of

action. Precision Pay Phones v. Qwest Communications Corp.,

210 F. Supp. 2d 1106 (N.D. Cal. 2002). District courts in the

Eastern District of Texas, the Southern District of California,

and the Central District of California held that there is no nght

of action. Phonetel Tech., Inc. v. Network Enhanced Tele-

comm., 197 F. Supp. 2d 720 (E.D. Tex. 2002); W. Communica-

tions Syst. v. Global Crossing Telecomm., Inc., No. 01-CV-

1468 (S.D. Cal. Sept. 20, 2001); Greene v. Sprint Communica-

tions, No. 02-CV-3841 (C.D. Cal. July 2, 2002).

’ Cases against WorldCom and Cable & Wireless were stayed when those

defendants sought bankruptcy protection.

1]

After the district court’s decision in Greene, petitioners

moved to amend their complaint against Sprint (and their com-

plaint against Cable & Wireless in a case before the same judge)

by adding claims under Sections 201(b) and 416(c). The court

granted leave to amend, holding that there is a right of action

under Section 207 to allege violations of Sections 201(b), 276,

and 416(c). App., infra, 81a-93a; see also id. at 32a & n.3, 79a-

80a. Contemporaneously, the Ninth Circuit affirmed dismissal

in the Greene case, finding no right of action arising from a

violation of Section 276. Greene v. Sprint Communications

Co., 340 F.3d 1047 (2003), cert. denied, 541 U.S. 988 (2004).

In light of the Ninth Circuit’s decision, Sprint sought reconsid-

eration of the district court’s decision to permit amendment of

petitioners’ complaint in this litigation and also moved to dis-

miss the amended complaint.’ The district court denied Sprint’s

motions and, noting the conflicting decisions in other courts,

certified both the private-right-of-action questions and the

standing question for interlocutory appeal. App., infra, 31a-4Sa.

The court of appeals accepted the interlocutory appeals and con-

solidated the Sprint and AT&T cases. App., infra, 146a-147a.

C. The Court of Appeals’ Decision

The court of appeals held (over Judge Sentelle’s dissent)

that the petitioner-assignees have standing, but a different ma-

* AT&T did not move to dismiss or otherwise challenge in the district court

the proposition that plaintiffs may sue for damages in federal court under the

Communications Act. See App., infra, 47a n.3. However, AT&T fully

participated in the appeal of that issue when its case was consolidated with

Sprint’s case in the D.C. Circuit, and the disposition of that issue will control

the case against AT&T on remand to the district court. Because AT&T never

moved to dismiss the case for lack of a private right of action, plaintiffs never

took the formality of amending their complaint to add citations to all the

Statutory sections they invoked against Sprint. Should this Court grant

certiorari and hold that there is a right of action under any section of the

Communications Act, the district court presumably would allow an

amendment of the complaint against AT&T, if necessary.

12

jority held that petitioners have no right of action to pursue the

claims.

Over Chief Judge Ginsburg’s dissent, two judges held that

the alleged violation of Section 201(b) did not give rise to a

cause of action under Section 207. The majority asserted that

the question “is not so much whether there is a private nght of

action, but where — directly in district court, or in the Commis-

sion’”” — and apparently believed that the conduct alleged in this

case could violate Section 201(b) only if “any * * * violation of

a Commission order” would be an unjust or unreasonable prac-

tice. App., infra, 15a (emphasis added). The majority observed

that the FCC cited Section 201(b) as a source of its authority to

issue the 1999 Order but found it significant that, in the body of

that order, the FCC did not discuss whether the rules would be

privately enforceable in court. App., infra, 16a. “A court

should be reluctant to put words in the Commission’s mouth —

here, the words ‘unjust and unreasonable.” The Commission

never, in its 1999 Order, specified that a carrier’s failure to pay

was of this magnitude. Given the potential consequences to

judicial dockets of the Commission’s making th-* finding, we

should require a clear statement (and analysis) by che agency.

App., infra, 16a. The majority did not question the FCC’s

“power to interpret § 201(b) to encompass violations of its rules

* ** We do say the Commission did not attempt to exercise

any such power here.” App., infra, 17a.

That conclusion entirely ignored the FCC’s 2003 Order,

which stated clearly that a failure to pay in accordance with the

* Although the court made clear that PSPs could file claims for damages in

FCC proceedings, it did not explain what effect, if any, the dismissal of cases

filed in district court might have on the application of the statute of

limitations (in FCC proceedings) to claims asserted in this litigation that

would lie outside the statute of limitations (if it is not tolled) if petitioners

take their complaint to the FCC. See 47 U.S.C. § 415(b) (two-year statute of

limitations for complaints seeking recovery of damages).

13

payphone rules violates Section 201(b). Even respondents con-

cede that the FCC “has spoken” on that issue.'° They have never

suggested that the FCC’s interpretation of the statute is unclear;

instead, they have argued that the interpretation was impermis-

sibly inconsistent with other provisions of the Act.''

The majority also ignored the amicus brief that the FCC had

submitted — even though counsel for the FCC had participated

in oral argument, and had made a post-argument written submis-

sion in further support of the FCC’s construction of Sec-

tion 201(b). The FCC’s brief explained that the FCC had deter-

mined that a failure to pay compensation in accordance with the

payphone rules is an unjust or unreasonable practice that vio-

lates Section 20i(b), and also violates Sections 276 and 416(c)

of the Act. The FCC explained that the statute confers on PSPs

a right to be fairly compensated for each and every completed

call; that the FCC exercised its delegated authority to apply and

interpret the statutory requirements by adopting the payphone

rules and by declaring a violation of those rules to be unjust or

unreasonable; and that — as the FCC was contemporaneously

arguing to this Court in Brand X - its authoritative interpretation

of the statute is entitled to deference under Chevron.

'° At argument, Judge Ginsburg quoted from paragraph 32 of the FCC’s

2003 Order, then asked respondents: “So the Commission has spoken to that,

right? Mr. Murray: Yes. Judge Ginsburg: They have said this is an unjust,

would be an unjust and unreasonable practice. Mr. Murray: Yes, Your

honor.” Oral Arg. Tr., APCC Services, Inc. v. Sprint Communications Co.

L.P., D.C. Cir. No. 04-7034, at 8 (Oct. 21, 2004).

'' The majority did not accept respondents’ legal arguments that Section

201(b) could not be construed to encompass violations of the payphone rules.

See App., infra, 17a (“We do not say that the Commission has no power to

interpret § 201(b) to * * * create private rights of action in courts * * *.”).

Judge Ginsburg emphatically rejected the arguments. App., infra, 28a

(respondents “do not even purport to ground that limitation in the text [of the

statute]. Nor is there any precedent supporting such a limitation.”). So did

the Ninth Circuit. Metrophones, 423 F.3d at 1067-1069.

id

The FCC also explained that respondents’ arguments would

undermine the congressional policy of ensuring fair compensa-

tion to PSPs. The logic of respondents’ statutory interpretation,

the FCC explained, would preclude recovery of damages in any

forum because the statutory provision that authorizes damage

actions in federal court — Section 207 — is the same provision

that authorizes such actions at the FCC. The Commission never

contemplated that all claims for damages would be brought

before the agency, and cutting off the right to pursue such

claims in court would impose unexpected burdens on FCC re-

sources. Moreover, the FCC’s brief explained that judicial reso-

lution of such cases would raise no genuine concern about the

consistent interpretation of FCC policy, because the cases in-

volve largely factual questions. Brief For Federal Communica-

tions Commission As Amicus Curiae In Support Of Appellees,

APCC Services v. Sprint Communications Co. L.P., D.C. Cir.

No. 04-7034 (Aug. 23, 2004) (FCC Br.). Yet the majority

opinion did not acknowledge the FCC’s brief.

Chief Judge Ginsburg dissented. He explained that the FCC

had offered its authoritative interpretation of Section 201(b),

and that the majority could say otherwise “only because it

makes no mention of the 2003 Report and Order and fails to

note that the Commission filed an amicus brief in this case

advancing the same position.” App., infra, 27a. He opined that

the FCC’s interpretation was consistent with the statute and was

entitled to deference under Chevron. “One would * * * be hard-

pressed to say the Commission acted unreasonably when it

deemed a common cartier’s failure to pay just and reasonable

compensation an unjust and unreasonable practice.” App.,

infra, 30a. He disputed the majority’s premise that the FCC’s

determination would mean that every violation of an FCC

regulation is an unjust Or unreasonable practice; the question is

whether a violation of his regulation is unjust or unreasonable.

Chief Judge Ginsburg also took issue with the majority’s

contention that the FCC did not adequately justify a statutory

15

interpretation that permits private suits in court. “It is not for

the Commission to decide whether the plaintiffs may sue in

federal court for a violation of the statute; the Congress has

already made that determination.” App., infra, 27a.

The court also held, unanimously, that there is no night of

action to allege violations of Sections 416(c) or 276. There

could be no violation of Section 416(c), the court held, because

that section’s reference to “[e]very order of the Commission”

should be read to mean only adjudicatory orders, not rulemaking

orders. The court recognized that six circuits have rejected that

reading, but adopted the reasoning in New England Telephone

& Telegraph Co. v. Public Utilities Commission, 742 F.2d 1 (1st

Cir. 1984), which construed the term “order” in Section 401 to

mean only adjudicatory orders. App., infra, 17a-20a.

Section 276 cannot support a right of action, the court held,

because it lacks “rights-creating language”’ and does not require

the FCC to designate IXCs as the party responsible for PSP

compensation. A violation of FCC regulations issued pursuant

to the statute is insufficient to support a right of action under

Section 207 because Section 207 requires a violation of the Act,

not merely a violation of FCC rules. App., infra, 11a-14a.

Petitioners sought rehearing and rehearing en banc, relying

on (among other things) this Court’s Brand X decision, which

deferred to the FCC’s interpretation of the Communications Act

one day before the D.C. Circuit in this case refused to defer to

the FCC’s interpretation of the same Act. While the rehearing

petition was pending, the Ninth Circuit (applying Brand X)

unanimously held in Metrophones that PSPs could sue for viola-

tions of Section 201(b). The Ninth Circuit noted that its holding

was in conflict with the D.C. Circuit’s recent decision in this

case, but expressly adopted the reasoning of Chief Judge

Ginsburg’s dissent and held that the FCC had reasonably deter-

mined that a failure to pay compensation is an unjust or unrea-

sonable practice. 423 F.3d at 1066 n.5. Petitioners informed

16

the D.C. Circuit that its decision conflicted with Metrophones,

but the court denied the petitions for rehearing (on a 2-1 vote)

and rehearing en banc (on a 5-3 vote). App., infra, 148a-15 la.

REASONS FOR GRANTING THE PETITION

I. The D.C. Circuit’s Holding That There Is No Right Of

Action Arising From A Violation Of Section 201(b)

Conflicts With Decisions By This Court And Other

Courts Of Appeals

Section 201(b) provides in pertinent part that “any * * *

charge [or] practice * * * that is unjust or unreasonable is here-

by declared to be unlawful.” The Act’s express private right of

action allows damages in court whenever a common carrier

“shall do * * * any act, matter, or thing in this chapter * * * de-

clared to be unlawful.” 47 U.S.C. § 206. Because in Sec-

tion 201(b) all unjust or unreasonable practices are “declared to

be unlawful” — the very language of Section 206 — it has never

been disputed in this litigation that every unjust or unreasonable

practice gives rise to an express private right of action.

What is in dispute is whether failure to comply with the

FCC’s dial-around compensation rules is an unjust or unreason-

able practice. Oddly, however, the D.C. Circuit’s opinion never

actually answers that question. Instead of holding that such a

failure is “just” and “reasonable” — as it would have to be for |

there noi to be private right of action under Congress’s express

words — the D.C. Circuit’s opinion focuses on the different

question whether the FCC has declared the practice to be unjust

or unreasonable. The answer to that question is indisputably

yes, but the D.C. Circuit somehow answered it no. The D.C.

Circuit therefore failed to defer to what the FCC has said.

Even if the relevant question were what the FCC has de-

clared, rather than what is “just or reasonable,” and even if the

FCC had been as silent as the D.C. Circuit claimed, it would not

follow that these lawsuits should be dismissed. What would

17

follow is that an appropriate mechanism — such as a primary jur-

isdiction referral — should be used to ascertain the FCC’s views.

A primary jurisdiction referral to ascertain views the FCC has

already expressed clearly would make little sense in this case.

That fact — and the existence of the doctrine for dealing with the

situation the D.C. Circuit claimed it was confronting, without

dismissing lawsuits as a result — simply highlights how un-

tenable is the D.C. Circuit’s insistence on disnissal of this case.

A. The Decision Conflicts With The Ninth Circuit’s

Holding In Metrophones That There Is A Right Of

Action To Sue For Violations Of Section 201(b)

And With This Court’s Deference Decisions

The D.C. Circuit’s ruling squarely conflicts with the Ninth

Circuit’s decision in Metrophones. Both cases presented pre-

cisely the same question: Can a PSP sue for damages in federal

court pursuant to the express night of action in Section 207,

alleging that an [XC has violated Section 201(b) by failing to

pay compensation in accordance with the FCC’s rules? The

Ninth Circuit held that there is a right of action fo bring such

suits; the D.C. Circuit held the opposite.

The two courts offered divergent answers to this question

because they disagreed on a recurring question of broad im-

portance: When does Chevron require deference to an agency’s

statutory interpretation?

The Ninth Circuit properly recognized that Chevron and

Brand X govern this case. Metrophones, 423 F.3d at 1065-

1070. It asked whether the FCC’s 2003 Order, supplemented by

its amicus brief, reflected an authoritative construction of an

ambiguous statutory provision, i.e., whether the agency was

exercising authority delegated by Congress to fill in the gaps of

the statutory scheme. See Chevron, 467 U.S. at 843-844; Mecd,

533 U.S. at 226-227. The Ninth Circuit rejected the argument

that the FCC’s construction should be disregarded because it

18

came after Greene, which held that there is no right of action

under Section 276. It correctly recognized that Brand X re-

quires deference to the agency’s interpretation, even if Greene

could be interpreted as an implicit interpretation of Section

201(b). Metrophones, 423 F.3d at 1065. :

The D.C. Circuit, however, did not believe that any of this

Court’s deference decisions even required consideration of the

FCC’s 2003 Order or its amicus brief. Perhaps the majority

believed the FCC’s interpretation was foreclosed by Greene, an

argument that the court that decided Greene later rejected in

Metrophones on the authority of Brand X. Perhaps it believed

that an agency’s brief is never entitled to deference or that the

FCC’s explanation was too cryptic. But cf. Nat’l Railroad

Passenger Corp. v. Boston & Maine Corp., 503 U.S. 407, 419-

420 (1992) (extending Chevron deference to interpretation

offered in agency’s brief when interpretation was “‘a necessary

presupposition” of the agency’s decision); Metrophones, 423

F.3d at 1065-1067 (extending Chevron deference despite brevity

of FCC’s interpretation). Whatever the reason for the majon-

ty’s unexplained refusal to consider the agency’s interpretation,

that refusal reflects a fundamental divergence with the Ninth

Circuit on an issue of great importance in administrative law.

The D.C. and Ninth Circuits also applied entirely different

standards when they evaluated the substance of the FCC’s inter-

pretation. The Ninth Circuit asked whether the FCC reasonably

interpreted Congress’s policy to ensure compensation to PSPs

and whether its interpretation would promote that congressional

objective. 423 F.3d at 1070. The D.C. Circuit never asked if

the FCC’s interpretation would promote the objectives of the

Act; instead, it demanded that the FCC justify its interpretation

in light of the “potential consequences to judicial dockets” and

faulted the FCC for failing to justify Congress's judgment,

expressed in Section 207, that damages could be recovered in

court as well as through FCC proceedings. App., infra, 16a.

19

These irreconcilable views of the proper relationship be-

tween agency and court can only lead to further confusion

among the lower courts when they apply Chevron and its

progeny, including the Brand X decision on which the Ninth

Circuit heavily relied. The potential for inconsistency is espe-

cially troublesome because the agency here was construing a

statute that requires “just and reasonable” rates and practices.

The “just and reasonable” standard is ubiquitous in federal regu-

latory schemes, and until now has always been thought to call

for the highest order of deference to the agency assigned to flesh

it out. See Verizon Communications, Inc. v. FCC, 535 U.S. 467,

501-502 (2002). The circuit conflict will undermine consis-

tency and transparency in review of agencies’ interpretations of

that standard — interpretations that control a wide array of busi-

ness practices in regulated industries.

Furthermore, the D.C. Circuit’s decision is simply wrong.

“If a statute is ambiguous, and if the implementing agency’s

construction is reasonable, Chevron requires a federal court to

accept the agency’s construction of the statute, even if the

agency’s reading differs from what the court believes is the best

statutory interpretation.” Brand X, 125 S. Ct. at 2699. Citing

Section 201(b), the very provision of the Communications Act

at issue here, this Court held in Brand X that “(t]he Chevron

framework governs our review of the Commission’s construc-

tion.” Jbid. The D.C. Circuit gave no reason — it did not even

try to give a reason — for its failure to apply the Chevron frame-

work to the FCC’s construction of Section 201(b).

B. TheD.C. Circuit’s Decision Conflicts With A Large

Body Of Law Applying The Primary Jurisdiction

Doctrine

Even if the FCC had not yet decided whether a failure to

pay compensation is an unjust or unreasonable practice, the

D.C. Circuit’s judgment would be wrong. That judgment sug-

gests that a practice cannot be unjust or unreasonable unless the

20

FCC has previously found it to be unjust or unreasonable — in

other words, that there is no right of action to assert a claim that

conduct is unlawful unless the agency has already determined

it to be unlawful. That proposition conflicts with Reiter v.

Cooper, 507 U.S. 258, 268 (1993), and other cases applying the

primary jurisdiction doctrine."

Federal courts have entertained countless cases alleging vio-

lations of Section 201(b) and closely related provisions. See,

e.g., In re Long Distance Telecommunications Litigation, 831

F.2d 627 (6th Cir. 1987); Pac. Tel. & Tel. Co. v. MCI Telecom-

munications Corp., 649 F.2d 1315 (9th Cir. 1981); Nat'l

Comm’s Ass'n, Inc. v. AT&T, 46 F.3d 220 (2d Cir. 1995); Alinet

Communication Service, Inc. v. Nat'l Exchange Carrier Ass'n,

Inc., 965 F.2d 1118 (D.C. Cir. 1992) (Section 203). These cases

are cognizable in court under the right of action expressly

provided in Section 207, but in many such cases it is unclear at

the outset whether the FCC would regard the alleged practice as

a violation of the Act. As this Court and others have recog-

nized, such uncertainty about the merits of a claim does not re-

quire dismissal; rather, uncertainty about whether a practice

qualifies as unjust or unreasonable calls for a primary

jurisdiction referral so the agency can address the unresolved

question before the court renders judgment on the claim that is

properly before it.

2 We did not suggest a primary jurisdiction referral to the FCC before the

D.C. Circuit panel issued its opinion, and we do not think it is the right dispo-

sition now. Our point, rather, is that primary jurisdiction referrals are one

way to deal with the situation — which this case does not present, though the

D.C. Circuit insisted it did — in which the expert agency’s view on a critical

question is “anyone’s guess.” App., infra, 16a. And our further point is that

the primary jurisdiction doctrine demonstrates that courts accept clarifica-

tions of agency positions affer litigation is under way, rather than demand —

as the D.C. Circuit seems to have done — a prior “clear statement (and analy-

sis) by the agency” just because of “potential consequences to judicial

dockets.” App., infra, 16a. :

21

The opinion below conflicts with a large body of law apply-

ing this doctrine. The panel majority’s view — that a practice is

not unjust or unreasonable unless the FCC has already deter-

mined that it is unjust or unreasonable — cannot be reconciled

with the existence of the primary jurisdiction doctrine. A pri-

mary jurisdiction referral presupposes an unresolved question

that requires the agency’s special competence; if there is no

such unresolved question, primary jurisdiction referral is un-

necessary and inappropriate. See, e.g., Nader v. Allegheny

Airlines, Inc., 426 U.S. 290, (1976) (reversing primary jurisdic-

tion referral of common-law tort claims because those claims

did not turn on whether practice was unfair or deceptive under

Federal Aviation Act); Brown v. MCI WorldCom Network

Services, Inc., 277 F.3d 1166, 1172 (9th Cir. 2002) (dismissal

of Section 207 case on primary jurisdiction grounds, merely be-

cause claim related to a tariff, reversed; primary jurisdiction re-

ferral is required only if a claim presents “‘an issue of first im-

pression, or * * * a particularly complicated issue that Congress

has committed to a regulatory agency”); Nat’! Comm ns Ass'n,

Inc. v. AT&T, 46 F.3d 220 (2d Cir. 1995) (primary jurisdiction

referral in Section 201(b) case reversed because case did not

present policy question that required agency expertise or entail

a risk of inconsistent interpretations); Pac. Tel. & Tel. v. MCI

Telecommunications Corp., 649 F.2d 1315 (9th Cir. 1981)

(summary judgment, entered by district court in Section 201(b)

case after FCC determined that practice was lawful, reversed

when FCC undertook reconsideration of its prior decision). If

the majority’s view were correct, there would never be occasion

for courts to make primary jurisdiction referrals.

This Court’s decision in Reiter provides a clear illustration.

The Interstate Commerce Act required carriers to charge “rea-

sonable” rates and provided a right of action to recover damages

from carriers if the ICC found that their rates were unlawful.

The respondents in Reiter argued, much as the D.C. Circuit held

here, that petitioners’ claims were “not yet cognizable in court”

22

because petitioners did not secure a determination of unrea-

sonableness from the agency before filing suit. 507 U.S. at 267-

268. This Court rejected that argument. Even though a primary

jurisdiction referral was required so that the agency could deter-

mine whether the rates were unreasonable, such a referral “does

not deprive the court of jurisdiction,” and therefore petitioners

could pursue their claims in court. /d. at 268.

Although a primary jurisdiction referral can sometimes re-

sult in the dismissal of a case, any such dismissal must be “with-

out prejudice” and can be entered only “if the parties would not

be unfairly disadvantaged.” Reiter, 507 U.S. at 268-269; see

also United States v. Michigan National Corp., 419 U.S. 1, 4-5

(1974). To dismiss litigation with prejudice because of purport-

ed uncertainty about agency views — rather than stay the litiga-

tion and allow the agency to makes its views known without

cutting off parties’ rights — is contrary to this Court’s decisions _

and is error. See Syntek Semiconductor Co., Ltd. v. Microchip

Technology, Inc., 307 F.3d 775, 777 (9th Cir. 2002) (on recon-

sideration, ordering stay rather than dismissal pending primary

jurisdiction referral because statute of limitations might pre-

clude refiling of claim); /n re Long Distance Telecommunica-

tions Litigation, 831 F.2d at 632 (reversing dismissal of 201(b)

claims and ordering stay pending primary jurisdiction referral).

II. The Decision Deepens A Circuit Conflict On The Re-

curring Question Whether References To “Orders” In

The Communications Act Encompass Rulemaking

Orders

The court of appeals also held (in this instance,

unanimously) that petitioners have no nght of action under

Section 207 to allege violations of Section 416, which imposes

a “duty” on “every person * * * to observe and comply with”

“{e]very order of the Commission.” The court held that the term

“order” in Section 416 refers only to adjudicatory orders and

does not encompass rulemaking orders.

a3

That holding adds to the confusion in the lower courts. The

term “order” is not defined in the Act, but is used ina series of -

interrelated statutory provisions. See, e.g.,47 U.S.C. § 401 (jur-

isdiction to enforce orders); id. § 402 (proceedings to set aside

orders); § 408 (effective date of orders); id. § 416(c) (duty to

obey orders). In Columbia Broadcasting System, Inc. v. United

States, 316 U.S. 407 (1942), this Court held that the term

“order” in Section 402 encompassed regulations issued through

the FCC’s rulemaking process. “[I]t is the substance of what the

Commission has purported to do and has done which is deci-

sive.” Id. at 416. The FCC’s regulations were deemed an

“order” because they were “adopted by the Commission in the

avowed exercise of its rule-making power” and “have the force

of law.” Jd. at 417.

Six circuits have followed that approach in holding that

FCC rulemaking orders are “orders.” See App., infra, 19a

(referencing precedents from the Fourth, Fifth, Sixth, Seventh,

Eighth, and Ninth Circuits). The First Circuit, however, while

recognizing this Court’s holding that an “order” under Section

402 could be a rulemaking order, nonetheless held that only

adjudicatory orders could be “orders” under Section 401. New

England Telephone & Telegraph Co. v. Public Utilities Com-

mission, 742 F.2d 1 (1st Cir. 1984) (Breyer, J.).

The circuit split is compounded by the Ninth Circuit’s

Metrophones decision. That decision (applying Hawaiian Tel.

Co. v. Pub. Utilities Commission, 827 F.2d 1264 (9th Cir.

1987)) held that the term “order” in Section 416(c) encompasses

the rulemaking order that requires payment to PSPs. It also

observed that “[ijt is technically true that § 416(c) makes a

violation of any ‘order’ of the Commission a violation of the

statute itself.” 423 F.3d at 1071. But then it concluded that it

was unreasonable for the FCC to interpret Section 416(c) in

accordance with the literal language of the statute: “[T]o hold

that §§ 206 and 207 encompass all violations of § 416(c) would

24

render superfluous the requirement that an action under § 206

allege a violation of a statute.” Ibid. (emphasis in original).

That reasoning makes no sense. If the language in Section

416 requires or permits the term “order” to be construed to en-

compass rulemaking orders, as the Ninth Circuit recognizes, it

is the unambiguous language of the statute — not the FCC’s con-

struction of the statute — that makes a violation of “every” order

a violation of the Act. That reading of Section 416 does not

mean that every violation of a regulation gives rise to a right of

action under Sections 206 and 207, and does not make those

sections superfluous.'? It simply means, as the statute plainly

says, that there is a duty to comply with all FCC orders, not

merely to comply with some orders. Since it is “technically

true” (and hardly surprising) that this is what the statute re-

quires, the FCC’s interpretation of the statute — which was reit-

erated in its brief in this case (FCC Br. 14) ~1s at least a permis-

sible interpretation, if not the only permissible interpretation.

Regardless of the merits, the conflicting interpretations of

the Act generate confusion and inconsistency. There are now at

least three conflicting views in the courts of appeals — the D.C.

and First Circuits’ view that “order” does not encompass rule-

making orders; the Fourth, Fifth, Sixth, Seventh, -and Eighth

Circuits’ view that “order” does encompass rulemaking orders;

and the Ninth Circuit’s view that “order” encompasses rule-

making orders, but that it is unreasonable to construe “every”

'? Sections 206 and 207 create a right of action only against common carriers

(not against other parties that violate FCC regulations); only if the plaintiff

suffers damages; and only if the damages are suffered “in consequence of”

the violation. Because of these requirements, most violations of FCC rules

are not redressable in court. Indeed, even though it has been clearly estab-

lished in six circuits that rulemaking orders are “orders” under the Act, very

few cases alleging violations of FCC rules have been filed in those circuits.

25

order to mean “every” order, in light of Section 206. Certiorari

should be granted to end this confusion.

Hil. The D.C. Circuit’s Decision That An IXC Cannot

Violate Section 276 Conflicts “ith This Court’s

Decision In Alexander v. Sandoval

The court also failed to acknowledge the FCC’s contrary

interpretation of the statute when it held (unanimously) that

PSPs have no right of action to allege violations of Section 276.

That holding was based largely on the court’s distinction

between a violation of the Act (which is required to invoke the

right of action under Section 207) and a violation of FCC regu-

lations. Section 276, the court suggested, “is by its terms

addressed neither to the nghts of PSPs nor to the obligations of

IXCs.” App., infra, 13a-14a. “Because the [XCs are not

regulated by § 276, there is no way in which they could have

violated that provision.” App., infra, 14a. The court’s

reasoning rests on a misreading of Alexander v. Sandoval, 532

U.S. 275 (2001), and a failure to apply Chevron principles when

defining nghts of action to enforce statutes and regulations.

Under the proper reading of Sandoval and Chevron, the

distinction between the Act and FCC regulations is a distinction

that makes no difference. Both the Ninth Circuit (in Greene)

and the D.C. Circuit (in this case) correctly recognized that

“rights-creating language” in a statute supports a nght of action.

Section 276 contains such language. Congress could hardly

have expressed more clearly its judgment that PSPs are entitled

to fair compensation for every call. Section 276 states that “the

Commission shall take ail actions necessary * * * to prescribe

regulations that (A) establish a per call compensation plan to

ensure that all payphone service providers are fairly compensat-

ed for each and every completed intrastate and interstate call”

(emphasis added). Unlike TOCSIA, which delegated discretion

to the FCC to “consider” whether compensation was needed,

Section 276 expresses an unambiguous congressional determi-

26

nation that a// PSPs must be compensated, and for every call.

See App., infra, 86a-88a. A compensation plan that did not sat-

isfy those requirements could not pass muster under Section

276. And Section 206 establishes liability (enforced through the

private right of action in Section 207) if a carrier does anything

“declared to be unlawful” or fails to do things “required to be

done” by the Act.

The observation that Section 276 does not specify who must

pay compensation is irrelevant. “If Congress has explicitly left

a gap for the agency to fill, there is an express delegation of

authority to the agency to elucidate a specific provision of the

statute by regulation. Such legislative regulations are given

controlling weight unless they are arbitrary, capricious, or mani-

festly contrary to the statute.” Chevron, 467 U.S. at 843-844.

Thus, the distinction between violations of the regulations and

violations of the Act is an illusion in this context. As Sandoval

explained, “[I]t is * * * meaningless to talk about a separate

cause of action to enforce the regulations apart from the statute.

A Congress that intends the statute to be enforced through a pri-

vate cause of action intends the authoritative interpretation of

the statute to be so enforced as well.” 532 U.S. at 284.

The cause of action asserted here is very different from the

cause of action that was denied in Sandoval, where the plaintiffs

sought to enforce disparate-impact regulations pursuant to a

right of action to enforce 42 U.S.C. § 601, which prohibited

only intentional discrimination. Sandoval rests on the point that

“the disparate-impact regulations do not simply apply § 601-

since they indeed forbid conduct that § 601 permits — and there-

fore * * * the private nght of action to enforce § 601 does not

include a private nght to enforce these regulations.” 532 U.S.

at 285. The Court made clear that regulations addressing inten-

tional discrimination — the conduct addressed in Section 601 —

could be enforced under a nght of action to enforce the statute:

“We do not doubt that regulations applying § 601’s ban on

27

intentional discrimination are covered by the cause of action to

enforce that section [because] [s]uch regulations * * * authori-

tatively construe the statute itself.” Jd. at 284.

The same logic should control this case. The FCC’s pay-

phone rules do no more than Congress required, when it de-

manded compensation for every payphone call. The regulations

authoritatively construe the requirements of Section 276 and

here, as in Sandoval, it is “meaningless” to distinguish between

a violation of that section and a violation of regulations that

authoritatively construe that section. The FCC’s refusal to draw

that meaningless distinction, and its determination that a viola-

tion of its rules is a violation of Section 276 is a reasonable

interpretation of the statute that is entitled to deference.

Although no judge of a court of appeals has yet accepted the

argument that there is an express private right of action to en-

force Section 276 and its implementing regulations, this Court

should grant certiorari to decide whether any provision of the

Communications Act allows these lawsuits to proceed. The

Court should not confine its attention to the statutory provisions

on which there are circuit splits. First, the misinterpretation of

Sandoval that underlies the reasoning of both the court below

and the Ninth Circuit in Greene deserves correction by the

Court that wrote the misinterpreted Sandoval opinion, lest that

misunderstanding create even more erroneous judgments (with

respect to this and other statutes) in the courts of appeals. Sec-

ond, if any one provision of the Communications Act is con-

strued (in conjunction with Sections 206-207) to allow this ac-

tion to proceed, construction of the other provisions will become

unnecessary, and this Court should not artificially exclude from

consideration the very statute in which Congress focused on the

problem being litigated, namely the nonpayment of PSPs for

dial-around calls. If the Court grants certiorari, it should con-

sider whether the Communications Act — not just Section 201(b)

or Section 416(c) — supports a private right of action for PSPs.

28

IV. Confusion And Inconsistency In Lower Court Deci-

sions Threatens The Development And Administra-

tion Of A Coherent Regulatory Regime To Achieve

Congressional Objectives

This Court should grant certiorari to address the palpable

confusion and inconsistency in the lower courts’ decisions. In

the Ninth Circuit, PSPs can sue in federal court by alleging a

violation of Section 201(b). In the D.C. Circuit, they cannot. In

the D.C. Circuit, though, they apparently can take their com-

plaint to the FCC, even though the statute that authorizes

damage actions at the FCC states unambiguously that com-

plaints may be filed at the FCC or in federal court.

In the First Circuit and the D.C. Circuit, PSPs cannot sue by

alleging a violation of Section 416(c) because, in those circuits,

a rulemaking order is not an “order.” In the Ninth Circuit, they

cannot sue because, even though an “order” is an “order,”

apparently “every” order cannot mean “every” order. In the

Fourth, Fifth, Sixth, Seventh, and Eighth Circuits, PSPs presum-

ably can sue under Section 207 by alleging violations of Section

416(c) — unless one or more of those circuits follows the Ninth

Circuit’s lead to hold that it is unreasonable for the FCC to con-

strue the Act in accordance with its plain language.

Even within individual circuits, confusion reigns. One

Ninth Circuit panel, iti Greene, heid that the need for a “coher-

ent national communications policy” is reason to deny a right of

action to sue under Section 276, iest “interpretation of a finely-

tuned regulatory scheme” rest in the hands of “judges, instead

of in the hands of the Commission.” 340 F.3d at 1053. Of

course, judges reached that conclusion without even considering

the conclusion of the FCC ~ the agency responsible for develop-

ing and administering a coherent national policy — that there is

a right of action under Section 276. When a different Ninth

Circuit panel considered the FCC’s views in Metrophones, it

held that “the ability of PSPs to recover compensation * * * in

29

private actions [is] integral to the proper functioning of the pay-

phone compensation system.” 423 F.3d at 1066. That panel,

though, refused to defer to the FCC’s construction of Section

416(c) — a construction that was consistent with the Ninth Cir-

cuit’s precedent in Hawaiian Telephone Co. — at the same time

that it extended deference to the FCC’s construction of Section

201(b) in its 2003 Order — an order whose construction of Sec-

tion 276 contradicted Ninth Circuit precedent.

The FCC’s construction of Section 201(b), which the Ninth

Circuit accepted, relied on the D.C. Circuit’s conclusion that

PSPs may recover damages under Sections 206-207. That inter-

pretation received deference from the Ninth Circuit, but the

D.C. Circuit would not even acknowledge the existence of the

order ~ even though it adopted and relied on the D.C. Circuit’s

own prior decision. And the closest the D.C. Circuit came to an

articulated reason for that disregard was the FCC’s failure to ex-

plain a policy judgment made by Congress: that plaintiffs may

sue in federal court, as well as complain to the FCC, when the

Act is violated. Even where there is not yet a conflict between

circuits — in the interpretation of Section 276 — the lower courts

have misconstrued Sandoval in a manner that will frustrate

clearly expressed congressional policy.

The confusing and conflicting rulings will seriously impede

the FCC’s efforts to develop and administer a coherent regula-

tory regime to achieve the objectives that Congress demanded.

A refusal to permit lawsuits to recover unpaid compensation im-

plicates both the substance and the enforcement of the FCC’s

compensation plan. The FCC has already made two critical

substantive decisions in the design of its compensation plan —

concerning the amount of compensation that should be paid for

every payphone cal! and the identity of the party responsible for

payment — that have been based in large measure on the FCC’s

belief that private suits for damages could be used to recover

compensation if [XCs refused to obey the Commission’s rules.

30

And, whatever the substance of the FCC’s rules, the plan cannot

succeed if IXCs can disregard the rules with impunity because

enforcement mechanisms are lacking. The FCC has already ex-

plained that its plan was designed with the assumption that judi-

cial enforcement would be available. If that assumption is

wrong, the FCC will undoubtedly need to revise its compensa-

tion plan, budget additional resources for its own enforcement

efforts, or both.

The confusion in the lower courts also disrupts the business

of providing payphone and long-distance calling services. Peti-

tioners disagree with much that is said in the petition for certio-

rari that has been filed in Metrophones, but that petition correct-

ly identifies business and litigation uncertainty that arises from

conflicting lower court decisions. Many PSPs and [XCs operate

nationwide businesses. Lawsuits to recover unpaid compensa-

tion have been filed in district courts throughout the country.

Allowing the confusion to continue would impose large costs

and produce few, if any, benefits. See 05-705 Pet. 10-13.

Amid ail this confusion, the lower courts have lost sight of

the principles that should govern here. Congress decided that

PSPs must be compensated for each and every completed call;

it delegated to the FCC the authority to devise a coherent

national policy to effectuate that directive; the FCC has con-

strued ambiguous statutory provisions to further that policy, and

to operate in conjunction with unambiguous statutory provisions

that the FCC reads to mean just what the language says. Failure

to adhere to these principles leaves congressional policy in a

shambles, and will deny to petitioners the compensation to

which Congress declared them entitled for millions of calls.

CONCLUSION

The petition for a wnt of certiorari should be granted.

31

Respectfully submitted.

MICHAEL W. WARD Roy T. ENGLERT, JR.*

Michael W. Ward, P.C. DONALD J. RUSSELL

1608 Barclay Boulevard DAMON W. TAAFFE

Buffalo Grove, IL 60089 Robbins, Russell, Englert,

(847) 243-3100 : Orseck & Untereiner LLP

1801 K Street, N.W.

Suite 41]

Washington, D.C. 20006

(202) 775-4500

*Counsel of Record

DECEMBER 2005