Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-99-01220/USCOURTS-caDC-99-01220-0/pdf.json

Parties Involved:
Federal Communications Commission
Respondent
Hi-Tech Furnace Systems, Inc.
Petitioner
Robert E. Kornfeld
Petitioner
Sprint Communications Company L.P.
Intervenor
United States of America
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 22, 2000 Decided August 8, 2000

No. 99-1220

Hi-Tech Furnace Systems, Inc. and

Robert E. Kornfeld,

Petitioners

v.

Federal Communications Commission and

United States of America,

Respondents

Sprint Communications Company L.P.,

Intervenor

On Petition for Review of an Order of the

Federal Communications Commission

Michael C. Spencer argued the cause and filed the briefs

for petitioner. Steven G. Schulman entered an appearance.

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Laurel R. Bergold, Counsel, Federal Communications Commission, argued the cause for respondent. With her on the

brief were Joel I. Klein, Assistant Attorney General, U.S.

Department of Justice, Robert B. Nicholson and Robert J.

Wiggers, Attorneys, Christopher J. Wright, General Counsel,

Federal Communications Commission, and John E. Ingle,

Deputy Associate General Counsel.

Leon M. Kestenbaum and Michael B. Fingerhut were on

the brief for intervenor Sprint Communications Company

L.P.

Before: Edwards, Chief Judge, Tatel and Garland, Circuit

Judges.

Opinion for the Court filed by Circuit Judge Garland.

Garland, Circuit Judge: Hi-Tech Furnace Systems, Inc.

and its president, Robert E. Kornfeld,1 filed a complaint with

the Federal Communications Commission (FCC) concerning

revisions Sprint Communications made in a long distance

calling program known as "Fridays Free." Concluding that

the revisions were lawful, the FCC denied the complaint. We

affirm.

I

Sprint, a common carrier regulated under the Communications Act of 1934, provides long distance telephone service to

the public. See 47 U.S.C. ss 153(h), 203. Hi-Tech is a small

business located in the state of Michigan. On December 14,

1995, Sprint filed tariff provisions proposing to offer its new

and existing "Business Sense" customers a promotion under

which they would be able to make free domestic and international long distance calls on one day of the week for twelve

months. Sprint selected Friday as the day for free service

and promoted its new offering as "Fridays Free." The

__________

1 For ease of reference, Hi-Tech and its president will be referred to collectively as "Hi-Tech" or "petitioner."

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Fridays Free tariff provisions went into effect on January 1,

1996.2

On February 29, 1996, Hi-Tech enrolled in the Fridays

Free program by signing Sprint's standard agreement form.

The agreement committed subscribers to a minimum enrollment term of two years and a minimum monthly usage

requirement of $50. In compliance with the agreement, HiTech switched its long distance service to Sprint.

Shortly after initiating Fridays Free, Sprint began experiencing a substantial increase in international call volume on

Fridays. The growth was so pronounced that it produced

capacity problems at Sprint's international gateway switch in

New York.3 The volume of traffic impaired the carrier's

ability to complete calls to many international locations and

threatened to crash Sprint's international network. See HiTech Furnace Sys. v. Sprint Communications Co., 14

F.C.C.R. 8040, 8047-48 (1999) [hereinafter Hi-Tech]. Sprint

tried to handle the overload by installing a new, more powerful processor at the New York gateway. Nonetheless, call

volume on Fridays remained at dangerously high levels and

continued to increase. See id. at 8042, 8047.

On April 4, 1996, in an effort to ameliorate the overload

problem, Sprint filed a tariff revision to take effect on April

18. Under the revision, Sprint removed 10 countries4 with

high numbers of calls from the list of approximately 220

foreign locations to which free calling was permitted under

the Fridays Free program. Sprint subsequently restored one

__________

2 Section 203(a) of the Communications Act requires every communications common carrier to file with the FCC a schedule of its

charges, and the "classifications, practices, and regulations affecting

such charges." 47 U.S.C. s 203(a). In this case, the Fridays Free

promotion was a revision of Sprint's existing Business Sense tariff.

3 During the period at issue in this case, an international call had

to go through the "gateway switch" that connected with the international cable system serving the country to which the call was made.

See Sprint Br. at 4 n.7.

4 The deleted countries were Bolivia, China, the Dominican Republic, Ecuador, India, Iran, Israel, Myanmar, Pakistan, and Thailand.

country, the Dominican Republic, to the list, leaving a total of

nine deletions. Sprint notified its subscribers of the modifications by mailgram. In lieu of free Friday calling to the

deleted countries, Sprint offered subscribers a 25% discount

on calls to those countries every day of the week. Sprint also

allowed Fridays Free customers who did not want to continue

in the program to terminate their subscription without penalty--although it did not advise subscribers of this option

unless they affirmatively communicated their lack of continued interest.

The tariff revisions immediately remedied Sprint's system

capacity problems. The occupancy level of the New York

gateway switch declined from 109% on April 12, to 59% on

April 19, the day after the program was revised. The total

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number of calls made to those countries dropped from 3.69

million on April 12 to 1.43 million on April 19, 1996. See HiTech, 14 F.C.C.R. at 8048.

On April 18, 1996, the day the tariff revisions became

effective, Hi-Tech filed a class action in Missouri state court,

alleging that Sprint had breached its contract with its Fridays

Free subscribers. Sprint removed the case to the United

States District Court for the Western District of Missouri.

There, the district court concluded that Hi-Tech's complaint

required a determination of the reasonableness of Sprint's

revised tariff, and that such a determination was within the

primary jurisdiction of the FCC. See Hi-Tech Furnace Sys.

v. Sprint Communications Co., No. 96-0566-CV-W-3 (W.D.

Mo. May 9, 1997). The court permitted Hi-Tech to amend its

complaint to add counts alleging violations of the Communications Act, and thereafter referred the case to the FCC "for all

further proceedings." Hi-Tech Furnace Sys. v. Sprint Communications Co., No. 96-0566-CV-W-3 (W.D. Mo. Aug. 29,

1997). At the same time, it dismissed Hi-Tech's contract

claim without prejudice and denied its motion for class certification as moot.

On April 17, 1998, Hi-Tech filed a complaint against Sprint

with the FCC, alleging that Sprint's curtailment of the Fridays Free program violated section 201(b) of the CommunicaUSCA Case #99-1220 Document #534716 Filed: 08/08/2000 Page 4 of 21
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tions Act because it was unjust and unreasonable,5 and section 203(c) because it was in breach of Sprint's existing

tariffs.6 On April 16, 1999, the Commission ruled against HiTech on both claims. See Hi-Tech, 14 F.C.C.R. at 8041. HiTech then petitioned for review in this court, limiting its

petition to the claim that Sprint violated section 201(b). See

Hi-Tech Br. at 4 n.1. Petitioner challenges the FCC's decision on both procedural and substantive grounds, and we

consider those challenges in turn.

II

Hi-Tech levels two procedural attacks against the FCC's

decision. First, it contends that the Commission improperly

assigned it the burden of proof on the question of whether

Sprint's tariff revisions were just and reasonable. Second, it

argues that the Commission improperly denied its requests

for discovery from Sprint.

A

The FCC assigned Hi-Tech the burden of proof, holding

that "[i]t is well established that, in a formal complaint

proceeding brought under section 208 of the Act, the complainant has the burden of proof to demonstrate that the

carrier has violated the Act." Hi-Tech, 14 F.C.C.R. at 8044.

Hi-Tech argues that this allocation was error. First, it

contends that it brought this proceeding not under Communications Act section 208,7 but rather under section

__________

5 Section 201(b) requires that "[a]ll charges, practices, classifications and regulations" of communications common carriers "shall be

just and reasonable." 47 U.S.C. s 201(b).

6 Section 203(c) provides that "no carrier shall (1) charge, demand, collect, or receive a greater or less or different compensation

... for any service ... than the charges specified in the [tariff]

then in effect." 47 U.S.C. s 203(c).

7 Section 208, entitled "Complaints to the Commission," states:

(a) Any person ... complaining of anything done or omitted to

be done by any common carrier subject to this chapter, in

contravention of the provisions thereof, may apply to said

Commission by petition.... If such common carrier within

the time specified shall make reparation for the injury alleged

204,8 which expressly places the burden of proof on the

carrier. See 47 U.S.C. s 204 ("At any hearing involving a

new or revised charge, or a proposed new or revised charge,

the burden of proof to show that the new or revised charge,

__________

to have been caused, the common carrier shall be relieved of

liability to the complainant.... If such carrier ... shall not

satisfy the complaint within the time specified or there shall

appear to be any reasonable ground for investigating said

complaint, it shall be the duty of the Commission to investigate

the matters complained of in such manner and by such means

as it shall deem proper.

47 U.S.C. s 208.

8 Section 204, entitled "Hearings on new charges," states:

(a)(1) Whenever there is filed with the Commission any new or

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revised charge ... or practice, the Commission may either

upon complaint or upon its own initiative without complaint ...

enter upon a hearing concerning the lawfulness thereof; and

pending such hearing and the decision thereon ... may suspend the operation of such charge ... or practice, ... but not

for a longer period than five months beyond the time when it

would otherwise go into effect; and after full hearing the

Commission may make such order with reference thereto as

would be proper in a proceeding initiated after such charge ...

or practice had become effective. If the proceeding has not

been concluded and an order made within the period of the

suspension, the proposed new or revised charge ... or practice

shall go into effect at the end of such period.... At any

hearing involving a new or revised charge, or a proposed new

or revised charge, the burden of proof to show that the new or

revised charge, or proposed charge, is just and reasonable shall

be upon the carrier....

(b) Notwithstanding the provisions of subsection (a) of this

section, the Commission may allow part of a charge ... or

practice to go into effect, based upon a written showing by the

carrier or carriers affected ... that such partial authorization

is just, fair, and reasonable. Additionally, or in combination

with a partial authorization, the Commission, upon a similar

showing, may allow ... a charge ... or practice to go into

effect on a temporary basis pending further order of the

Commission.

47 U.S.C. s 204.

or proposed charge, is just and reasonable shall be upon the

carrier...."). Second, even if the proceeding had been

brought under section 208, Hi-Tech contends it would be

unlawful to allocate the burden differently under that section.

We agree with the FCC that the complaint was brought,

and properly so, under section 208 rather than section 204.9

That Hi-Tech brought the complaint under section 208 is

apparent from its own pleadings, which attached a form

identifying section 208(a) as the statutory basis for the claims.

See Formal Complaint Intake Form (J.A. at 79). That section 208 was the proper avenue derives from an analysis of

the purposes of the two sections.

The FCC interprets section 204 as granting it a quasilegislative authority to evaluate a carrier's proposals for new

or revised rates. It understands section 208, by contrast, as

granting it authority, upon complaint by an injured party, to

adjudicate the lawfulness of a carrier's past and present rates

and practices. See, e.g., National Exchange Carrier Ass'n, 2

F.C.C.R. 3679, 3679 (1987) ("[I]ssues [that] ... relate to

currently effective tariff provisions ... cannot be raised in a

petition for a Section 204 investigation. Objections to an

existing tariff provision may be presented in a Section 208

complaint."). We have previously expressed the same understanding,10 and the distinction is similar to that which courts

__________

9 At oral argument, petitioner verified that these are the only

sections at issue. Hi-Tech did not, it conceded, endeavor to bring

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its complaint under another possibly relevant section, section 205,

which permits the FCC (on its own initiative or upon complaint) to

determine that an existing rate is unjust or unreasonable and to

provide prospective relief. See 47 U.S.C. s 205; Illinois Bell Tel.

Co. v. FCC, 966 F.2d 1478, 1482 (D.C. Cir. 1992).

10 Compare Southwestern Bell Tel. Co. v. FCC, 168 F.3d 1344,

1350 (D.C. Cir. 1999) ("Section 204(a) gives the Commission the

authority to approve or suspend a proposed charge...."), and

Southwestern Bell Corp. v. FCC, 43 F.3d 1515, 1524 (D.C. Cir. 1995)

("Upon complaint or on its own initiative, the Commission may hold

hearings and declare unlawful proposed rate increases under section 204."), with AT&T v. FCC, 978 F.2d 727, 732 (D.C. Cir. 1992)

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have made with respect to analogous provisions in both the

Interstate Commerce Act (ICA)11 and the Natural Gas Act

(NGA).12 As the FCC's construction constitutes a reasonable

interpretation of the statutory language,13 we are bound to

__________

(describing s 208 proceeding as one in which the FCC's task was,

"as an adjudicator of private rights," to determine "whether or not

[the carrier] has been, and currently was, violating the law"). See

also Direct Mktg. Ass'n v. FCC, 772 F.2d 966, 969 (D.C. Cir. 1985).

11 49 U.S.C. ss 10101 et seq. See Southern Ry. v. Seaboard

Allied Milling Corp., 442 U.S. 444, 446, 450, 454 (1979) (noting

distinction between proceedings under ICA s 15(8)(a) to challenge

proposed rate increases, and "posteffective proceedings" to protect

"aggrieved" parties under ICA s 13(1)); Baer Bros. Mercantile Co.

v. Denver & Rio Grande R.R., 233 U.S. 479, 486 (1914) ("[A]warding

reparation for the past and fixing rates for the future involve the

determination of matters essentially different. One is in its nature

private and the other public. One is made by the Commission in its

quasi-judicial capacity to measure past injures sustained by a

private shipper; the other, in its quasi-legislative capacity, to

prevent future injury to the public."); see also MCI Tel. Corp. v.

FCC, 59 F.3d 1407, 1418 (D.C. Cir. 1995) ("Because the Congress

borrowed heavily from the Interstate Commerce Act when it drafted the Communications Act of 1934 ... both this court and the

[FCC] often turn to decisions under the ICA for guidance in

interpreting the Communications Act."). The Interstate Commerce

Commission was abolished in 1996, and its remaining functions were

transferred to the Surface Transportation Board. See ICC Termination Act of 1995, Pub. L. No. 104-88, 109 Stat. 803 (1995).

12 15 U.S.C. ss 717 et seq. See Public Serv. Comm'n v. FERC,

866 F.2d 487, 488 (D.C. Cir. 1989) (noting distinction between

proceedings concerning "proposed rates" under NGA s 4, and

proceedings concerning existing rates under s 5); see also Las

Cruces TV Cable v. FCC, 645 F.2d 1041, 1047 (D.C. Cir. 1981)

(stating that ratesetting provisions of Communications Act are

analogous to provisions of NGA and "trace their lineage" to ICA).

13 Section 204 contains repeated indications of its intended application to charges not yet in effect. It applies to "any new or

revised" charge or practice; it permits suspension of such charge or

practice for not longer than five months "beyond the time when it

would otherwise go into effect"; if an order has not been issued

defer to it. See Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837,

842-45 (1984).

Hi-Tech did not file a complaint with the Commission

before the Fridays Free revisions went into effect. Instead,

it challenged them two years after they had been in place.

Accordingly, under the foregoing interpretation of the two

statutory provisions, Hi-Tech's complaint falls within section

208.

Unlike section 204, section 208 is silent as to which party

bears the burden of proof. Hi-Tech argues that it is unlawful

for the FCC to place the burden on the complainant in section

208 proceedings, when the statute places it on the carrier in

proceedings under section 204. We disagree.

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Well-established FCC precedent imposes the burden of

proof on the complainant in section 208 proceedings.14 So

__________

within the period of the suspension, it provides that "the proposed

new or revised" charge or practice "shall go into effect"; and it

authorizes the Commission to allow a charge or practice "to go into

effect on a temporary basis" pending further order. Section 208, by

contrast, contains repeated indications of its intended application to

past actions. For example, it permits any person complaining of

anything "done or omitted to be done" by any common carrier to

petition the FCC, and it relieves the carrier of liability if it makes

reparations "for the injury alleged to have been caused." See 47

U.S.C. s 204, set out at supra note 8; 47 U.S.C. s 208, set out at

supra note 7.

14 See Beehive Tel., Inc., 12 F.C.C.R. 17950, 17961-62 (1995)

("Although carriers who file new or revised rates bear the burden of

proof in Section 204 proceedings, it is well settled that complainants

in Section 208 formal complaint proceedings bear the burden of

proof."), aff'd on other grounds, 179 F.3d 941 (D.C. Cir. 1999); see

also Ascom Communications, Inc. v. Sprint Communications Co.,

15 F.C.C.R. 3223, 3230 n.41 (2000); AT&T v. Bell Atlantic, 14

F.C.C.R. 556, 570 (1998); Directel, Inc. v. AT&T, 11 F.C.C.R. 7554,

7560 (1996); Connecticut Office of Consumer Counsel, 4 F.C.C.R.

8130, 8133 (1989), aff'd on other grounds, 915 F.2d 75 (2d Cir. 1990).

The petitioner's references to FCC opinions in agency proceedings

initiated under sections other than s 208 are inapposite.

does our own.15 Such an allocation is consistent with the

Administrative Procedure Act (APA), which takes into account the distinction between statutory provisions that do and

do not mention the burden of proof, and which directs that:

"Except as otherwise provided by statute, the proponent of a

rule or order has the burden of proof." 5 U.S.C. s 556(d). It

is likewise consistent with the Supreme Court's allocation of

the burden of proof under the analogous provisions in the

ICA,16 and with our own allocation of the burden under the

analogous provisions in the NGA.17 Accordingly, we find

__________

15 See American Message Ctrs. v. FCC, 50 F.3d 35, 41 (D.C. Cir.

1995) (stating, regarding a case brought under s 208, that "[t]he

rules place the burden of pleading and documenting a violation of

the Act on [the complainant]. They do not require [the carrier] to

prove it has not violated the Act."); Aeronautical Radio, Inc. v.

FCC, 642 F.2d 1221, 1235 n.34 (D.C. Cir. 1980) (noting that the

complaint procedure of ss 206-209 "shifts the burden of proof onto

the aggrieved party"). See generally Copley Press, Inc. v. FCC, 444

F.2d 985, 988 (D.C. Cir. 1971) (holding s 204 burden-allocation

provision may not be relied upon to assess burden in non-204

proceeding).

16 See Southern Ry., 442 U.S. at 446, 450, 454 (noting that burden

of proof is on carrier in s 15(8)(a) proceeding, while burden is on

shipper (customer) in s 13(1) proceeding); Aeronautical Radio, 642

F.2d at 1235 n.34 (relying on Southern Railway for conclusion that

ss 206-209 of Communications Act "shift[ ] the burden of proof

onto the aggrieved party"). See generally supra note 11.

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17 In Public Service, we held that "[u]nder s 4 [of the NGA] the

company has the burden of showing that [its] proposed rates are

just and reasonable, while under s 5 the Commission must show

that the [filed] rates it would alter are not just and reasonable....

The unifying principle is that the proponent of change bears the

burden." 866 F.2d at 488. Section 4 of the NGA, 15 U.S.C.

s 717c(e), like section 204 of the Communications Act, expressly

provides that "[a]t any hearing involving a rate or charge sought to

be increased, the burden of proof to show that the increased rate or

charge is just and reasonable shall be upon the natural-gas company." Section 5 of the NGA, like section 208 of the Communications

Act, is silent as to the burden of proof. See ANR Pipeline v.

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nothing unlawful about the FCC's decision to impose upon

Hi-Tech the burden of proof regarding the reasonableness of

the tariff revisions.

B

After filing its complaint with the FCC, Hi-Tech served

Sprint with a set of seven interrogatories. Sprint objected

and, Hi-Tech contends, FCC counsel declined to direct the

carrier to respond.18 Instead, the Commission undertook its

own investigation, making its own demands for information

from the parties and following up with supplemental inquiries.

Hi-Tech contends that the agency acted unlawfully in failing

to allow petitioner to conduct its own discovery.

The FCC responds that this court has no jurisdiction to

review its decision not to permit discovery. It asserts that

discovery is agency action "committed to agency discretion by

law" within the meaning of the APA, 5 U.S.C. s 701(a)(2), and

thus is not subject to judicial review. See generally Heckler

v. Chaney, 470 U.S. 821, 828-29 (1985). For support, the

FCC points to the broad language of Communications Act

s 208(a), which states that "it shall be the duty of the

Commission to investigate the matters complained of in such

manner and by such means as it shall deem proper." And it

further cites our decision in Sprint Communications Co. v.

FCC, 76 F.3d 1221, 1231 (D.C. Cir. 1996), which it reads as

declaring, albeit in dictum, that the Commission's refusal to

permit discovery under section 208(a) is a matter within its

unreviewable discretion.

The United States, represented by the Department of

Justice, is by law a co-respondent with the FCC in this case.

See 28 U.S.C. ss 2344, 2348. In contrast to the FCC, the

United States believes that the agency's decision regarding

discovery is reviewable. See Resp'ts Br. at 32 n.69. We

agree. The FCC's position confuses the narrow category of

agency action wholly committed to agency discretion under

__________

FERC, 771 F.2d 507, 513 (D.C. Cir. 1985) (discussing different

burdens of proof under NGA). See generally supra note 12.

18 The FCC contends that Hi-Tech never filed a motion to compel

a response.

APA s 701(a)(2), with the primary category of agency action

that is subject to review for "abuse of discretion" under APA

s 706(2)(A). See Heckler, 470 U.S. at 828-29. We do not

lightly place a matter within the former category, as the APA

embodies "a 'basic presumption of judicial review.' " Lincoln

v. Vigil, 508 U.S. 182, 190 (1993) (quoting Abbott Labs. v.

Gardner, 387 U.S. 136, 140 (1967)). The exception for agency

action "committed to agency discretion by law" is a "very

narrow" one, reserved for "those rare instances where statutes are drawn in such broad terms that in a given case there

is no law to apply." Citizens to Preserve Overton Park v.

Volpe, 401 U.S. 402, 410 (1971) (internal quotation omitted);

see Lincoln, 508 U.S. at 191.

As the United States correctly points out, this court's

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dictum in Sprint Communications does not support the

FCC's claim to immunity from judicial review. Sprint stated

that "it appears that the FCC's decision whether to investigate a particular matter is an 'agency action ... committed

to agency discretion by law.' " 76 F.3d at 1231 (emphasis

added).19 The court suggested, by its immediately-following

citation to Heckler v. Chaney, that an agency's decision not to

commence an investigation is analogous to an agency's decision not to take enforcement action--which the Supreme

Court held unreviewable in Heckler. See Heckler v. Chaney,

470 U.S. at 832. An agency's decision not to permit discovery, however, is not analogous to a decision not to take

enforcement action. Unlike the latter, which the Court noted

has long been regarded as committed to an agency's absolute

discretion, see id. at 831 (citing precedent dating to 1869), this

court and others have long reviewed agency decisions regarding discovery.20 In fact, in American Message Centers v.

__________

19 Although the Sprint opinion noted the petitioner's objection "to

the FCC's failure to permit discovery or to conduct an evidentiary

proceeding in order to investigate the alleged fraudulent concealment," the court's comment on reviewability mentioned only the

"decision whether to investigate a particular matter." Sprint Communications, 76 F.3d at 1231 (emphasis added). Moreover, notwithstanding its comment, the court went on to review the FCC's

failure and found no abuse of discretion. See id.

20 See Lakeland Bus Lines v. ICC, 810 F.2d 280, 287-88 (D.C. Cir.

1987) (reversing in part ICC denial of petitioner's discovery request

FCC, 50 F.3d 35, 40-41 (D.C. Cir. 1995), we reviewed for

abuse of discretion the FCC's refusal to compel discovery in a

section 208 proceeding. We follow that course here as well.

This court reviews such a determination, however, with

"extreme deference." Lakeland Bus Lines v. ICC, 810 F.2d

280, 286 (D.C. Cir. 1987). "[T]he conduct and extent of

discovery in agency proceedings is a matter ordinarily entrusted to the expert agency in the first instance and will not,

barring the most extraordinary circumstances, warrant the

Draconian sanction of overturning a reasoned agency decision." Trailways Lines v. ICC, 766 F.2d 1537, 1546 (D.C.

Cir. 1985). Although we have concluded that the Commission's actions are reviewable for abuse of discretion, we agree

with both the United States and the Commission that there

has been no such abuse here.

In this case, a body of evidence was generated by the

formal written submissions of the litigants. In addition, the

FCC made its own inquires, directing the parties to respond

to detailed requests for information. The Commission also

had available Sprint's responses to the discovery requests

served by Hi-Tech during proceedings in the district court.

As our analysis in Part III below makes clear, the sum of

these measures created the record necessary to make the just

and reasonableness determination contemplated by 47 U.S.C.

s 201(b).

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on ground that denial relied on inaccurate factual premise); Trailways Lines v. ICC, 766 F.2d 1537, 1546 (D.C. Cir. 1985) (reviewing,

but upholding as reasonable, ICC's rejection of petitioners' discovery request); Cross-Sound Ferry Svcs., Inc. v. ICC, 738 F.2d 481,

486-87 (D.C. Cir. 1984) (holding that ICC's failure to gather sufficient evidence from applicant for common carrier authority was

arbitrary and capricious); McClelland v. Andrus, 606 F.2d 1278,

1286 (D.C. Cir. 1979) (reviewing agency discovery decision and

remanding for further consideration); Virginia Petroleum Jobbers

Ass'n v. FPC, 293 F.2d 527, 529 (D.C. Cir. 1961); see also, e.g.,

Pacific Gas and Elec. Co. v. FERC, 746 F.2d 1383, 1387-88 (9th Cir.

1984); Armstrong, Jones & Co. v. SEC, 421 F.2d 359, 364 (6th Cir.

1970); NLRB v. Gala-Mo Arts, Inc., 232 F.2d 102, 106 (8th Cir.

1956).

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Hi-Tech's real dispute is not with the discovery measures

the FCC took, but with additional measures it did not take.

Specifically, petitioner insists that the Commission should

have permitted Hi-Tech itself to take discovery from Sprint,

in the form of its own interrogatories and depositions, in

order to test Sprint's responses "through normal adversarial

proceedings." Hi-Tech Br. at 17. But Hi-Tech's demand

misapprehends the nature of the administrative process it

entered into when its complaint was ousted from the district

court and referred to the FCC. As we have pointed out

before in affirming an FCC decision not to compel discovery

sought by a petitioner: Complaint proceedings under the

Communications Act, "unlike court litigation or

administrative-trial type hearings, are often resolved solely on

the written pleadings," and the Commission has properly

"placed limitations on the scope and methods of discovery in

its formal complaint proceedings that do not exist in trials

governed by the Federal Rules." American Message Ctrs.,

50 F.3d at 41; see McClelland v. Andrus, 606 F.2d 1278, 1285

(D.C. Cir. 1979) ("The extent of discovery that a party

engaged in an administrative hearing is entitled to is primarily determined by the particular agency: ... courts have

consistently held that agencies need not observe all the rules

and formalities applicable to courtroom proceedings.").

Nothing in either the Communications Act or the APA

entitles a party to the specific procedures Hi-Tech demands.

To the contrary, and as the FCC properly emphasizes, section

208 of the Communications Act expressly authorizes the

Commission "to investigate the matters complained of in such

manner and by such means as it shall deem proper." 47

U.S.C. s 208; cf. FCC v. Schreiber, 381 U.S. 279, 289 (1965).

Moreover, the Supreme Court has firmly instructed us that

"courts are not free to impose upon agencies specific procedural requirements that have no basis in the APA" or statute.

Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 654

(1990). Although "[a]gencies are free to grant additional

procedural rights in the exercise of their discretion,"21 "re-

__________

21 FCC regulations permit complainants to file requests for interrogatories, but leave it to Commission staff to "determine the

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viewing courts are generally not free to impose them if the

agencies have not chosen to grant them." Vermont Yankee

Nuclear Power Corp. v. NRDC, 435 U.S. 519, 524 (1978).

Cross-Sound Ferry Services, Inc. v. ICC, cited by petitioner, is not to the contrary. 738 F.2d 481, 486-87 (D.C. Cir.

1984). In that case, a ferry company challenged the ICC's

decision to grant common carrier authority to its competitor,

the Bridgeport & Port Jefferson Steamboat Company

(B&PJ). On appeal from the agency, this court held that the

ICC had acted arbitrarily in failing to gather the information

necessary to make the statutory determination of whether the

proposed service was " 'required by the present or future

public convenience and necessity.' " Id. at 482-84 (quoting 49

U.S.C. s 10922(a)). We did not, however, say that the error

was the ICC's failure to permit discovery by the complainant.

Rather, the error was the Commission's refusal to generate

an appropriate record--"by requiring greater specificity from

B&PJ or by permitting Cross-Sound to ferret out relevant

evidence through discovery"--which left the ICC without

"sufficient record evidence to permit a reasoned application of

statutory directives." Id. at 484 (emphasis added).

As we have noted above, the FCC did compile a record

sufficient to make the statutory determination at issue in this

case. Hi-Tech does not specify any additional information

that should have been obtained, nor does it point out any way

in which conducting its own discovery would have made a

difference--other than to emphasize its skepticism of the

"self-serving" nature of Sprint's responses and the need to

test them by the adversary process. Since the Supreme

Court has made clear that we are not permitted to impose

any such testing procedure on an agency, we have no basis

for setting aside the FCC's decision.

__________

interrogatories, if any, to which parties shall respond." 47 C.F.R.

s 1.729(d). The regulations also authorize the Commission, in its

discretion, to allow additional discovery, including depositions. See

47 C.F.R. s 1.729(h).

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III

With these preliminary matters attended to, we now reach

the merits of Hi-Tech's complaint. We review the FCC's

denial only to determine whether it was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance

with law." 5 U.S.C. s 706(2)(A); see American Message

Ctrs., 50 F.3d at 39.

The gravamen of Hi-Tech's complaint is that the changes

Sprint made in its Fridays Free program breached the

requirement of section 201(b) that "charges, practices, classifications, and regulations ... be just and reasonable." 47

U.S.C. s 201(b). To determine whether the revisions met the

statutory standard, Hi-Tech urged the Commission to employ

its so-called "substantial cause" test: that is, to determine

whether Sprint had "substantial cause" to amend the tariff.

See Hi-Tech Br. at 21-23; see generally Showtime Networks

Inc. v. FCC, 932 F.2d 1 (D.C. Cir. 1991) (discussing "substantial cause" test for determining whether tariff modifications

are just and reasonable); RCA American Communications,

Inc., 86 F.C.C.2d 1197, 1201-02 (1981) (holding that a carrier's decision "to revise material provisions in the middle of a

term" will be considered "reasonable" if the carrier can make

a showing of "substantial cause" for so doing). The FCC

noted that it had previously applied the substantial cause test

only to revisions of individually-negotiated contract tariffs and

to revisions of generic, long-term service tariffs filed by

dominant carriers. See Hi-Tech, 14 F.C.C.R. at 8045-46.

The Commission had not yet decided, however, whether the

test should be applied to "a nondominant carrier's generic,

long-term service tariff, such as the Fridays Free promotion

at issue here." Id. at 8046. Nonetheless, the FCC agreed to

apply the standard, arguendo, to Sprint's tariff revisions. See

id.

Under the substantial cause test, the FCC measures the

reasonableness of a tariff modification by weighing two principal considerations: the "carrier's explanation of the factors

necessitating the desired changes at that particular time,"

and the "position of the relying customer." RCA American,

86 F.C.C.2d at 1201; see Hi-Tech, 14 F.C.C.R. at 8045. The

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FCC resolved the first factor in Sprint's favor, concluding

that "Sprint has demonstrated that the tariff revisions were

necessary to prevent the overloading of Sprint's network,

despite reasonable efforts by Sprint to preserve the Fridays

Free promotion in its original form." Hi-Tech, 14 F.C.C.R.

at 8046. The Commission found that on each successive

Friday after the promotion began, call volume increased

dramatically. See id. By late March, "the extraordinarily

high call volumes on Fridays threatened to bring down

Sprint's New York international gateway switch ... which

repeatedly reached over 100% of designed traffic capacity."

Id. at 8047. Moreover, "because of this international overload, the New York domestic switch ... also approached

overload levels." Id. Together, "[t]hese system overloads

prevented the completion of many international calls from all

over the country." Id.

The FCC also found that Sprint had taken steps to try to

resolve the overload problem short of deleting countries from

the Fridays Free program. See id. Sprint purchased and

installed a new processor, and it changed the routing of calls

so that the domestic New York switch would receive less

traffic. See id. Despite these efforts, "[t]raffic loads continued to increase dangerously" and threatened to crash the

gateway switch. Id. at 8047-48. Sprint then filed its tariff

revisions, and on the first Friday after they took effect, call

volume dramatically decreased and the threat was eliminated.

See id. at 8048.

These findings reasonably support the FCC's conclusion

that Sprint satisfied the first half of the substantial cause

test, by establishing its need for the revisions in the Fridays

Free program. This was not a case in which the carrier

sought midterm changes based merely on a "generalized

assertion of rising costs," RCA American, 86 F.C.C.2d at

1205, or on a claim "that it will make less money" without

them, AT&T Communications, 5 F.C.C.R. 6777, 6779

(1990)--rationales the agency has found unpersuasive in the

past. Here, the FCC concluded that revisions were necessary "to protect the integrity of [Sprint's] network"--to prevent the crash of key switches with consequent disruption for

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all of Sprint's subscribers. Hi-Tech, 14 F.C.C.R. at 8050.

Although Hi-Tech argues that Sprint could have expanded its

facilities rather than curtail the program, the FCC reasonably

noted that Sprint had already tried that to no avail, and that

further expansion of Sprint's international capacity would

have required negotiations with a foreign carrier, a process

that could not have been completed in time to resolve the

capacity crisis. See id. at 8048.

Hi-Tech also argues that Sprint should have employed a

"less onerous" alternative than deletion of the nine countries.

Hi-Tech Br. at 26. Of course, deletion was itself a less

drastic alternative than canceling the entire program: Sprint

continued to permit free Friday calling to more than 200

foreign locations, as well as to all domestic locations. Nonetheless, Hi-Tech argues that Sprint could have retained free

calling to the nine countries, but "spread the program benefits over more days of the week" by "designating different

days of the week for different segments of customers." Id. at

26-27 (quoting Compl. p 27). Sprint should not be permitted

to revise its tariff "in a way that is economically beneficial to

the carrier," Hi-Tech insists, "when better and fairer alternatives are available." Id. at 27.

The FCC rejected this demand. The Commission noted

Sprint's representations that such a plan would have been

impractical, and noted that Hi-Tech had failed to offer any

evidence to the contrary. See Hi-Tech, 14 F.C.C.R. at 8049.

It further pointed out that Hi-Tech had failed to show why

free calling on one day of the week was any more reasonable

than the alternative Sprint adopted: a 25% discount every

day. The FCC's statutory mandate is only to ensure that

tariff revisions are "just and reasonable," 47 U.S.C. s 201(b),

not that they are the "least onerous" alternative available.

See Showtime, 932 F.2d at 4 (holding that substantial cause

test is only an aid in ascertaining whether newly filed modifications to long-term tariffs are "within the zone of reasonableness," and "not an additional hurdle" for carriers to

overcome). And our statutory mandate is only to ensure that

the agency's determinations are themselves reasonable, regardless of whether there may be other "better and fairer"

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alternatives. Cf. Serono Labs., Inc. v. Shalala, 158 F.3d 1313,

1321 (D.C. Cir. 1998). The FCC's finding with respect to

Sprint's need for the tariff revisions meets that standard.

Turning to the second half of the substantial cause test, the

FCC looked for evidence of Hi-Tech's reliance on the provisions of the Fridays Free plan--and found it to be minimal.

Hi-Tech's president conceded that he had switched to Sprint

not only because of the Fridays Free promotion, but also

because Sprint's "rate was attractive in itself." J.A. at 228

(Kornfeld Dep.). There was no evidence that, during the

month and a half in which it subscribed to the unrevised

Fridays Free program, Hi-Tech had made any calls to any of

the nine deleted countries--with the exception of three calls

its president made after Sprint announced the revisions, calls

he conceded making to take advantage of the last free-calling

opportunity under the program. See Hi-Tech, 14 F.C.C.R. at

8049; J.A. at 237, 239, 241 (Kornfeld Dep.). Nor did the

company offer evidence to show that it had been any better

off under Fridays Free than it was under the new 25%-

discount plan. And while Hi-Tech contends that it should be

able to support its case by showing the detrimental reliance

of Sprint customers other than itself--because it initially filed

the case in court as a class action22--there is no evidence of

such reliance in the record. To the contrary, the Commission

concluded that because Sprint permitted Fridays Free customers to terminate their contracts without penalty if they

were dissatisfied with the revisions, they were "no worse off

than if they had never enrolled in Sprint's Fridays Free

promotion." Hi-Tech, 14 F.C.C.R. at 8050.23

__________

22 But see Krauss, 14 F.C.C.R. 2770, 2774 (1999) (finding it

inappropriate to determine carrier's liability for injuries to other

subscribers, as that "would, in effect, transform this section 208

complaint proceeding into a class action suit, a result neither

contemplated by, nor consistent with, the private remedies created

under sections 206 through 209 of the Act"); Certified Collateral

Corp., 2 F.C.C.R. 2171, 2173 (1987) (noting that FCC rules "do not

contemplate class action complaints").

23 The FCC also noted that the standard order form signed by

Hi-Tech stated that the promotion was "governed by the applicable

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In sum, we discern no abuse of discretion in the agency's

conclusion that the tariff revisions were just and reasonable

under both prongs of the substantial cause test.

IV

As a final argument, Hi-Tech contends that the FCC

should have used "commercial contract law principles" to

resolve this case, and that if it had, Hi-Tech would have

prevailed. It further argues that because the FCC did not

employ such principles, we are obliged to vacate the Commission's order. Without deciding what the result would be

under "commercial contract law principles," it is clear that

petitioner has misperceived both the Commission's role in this

dispute and our own.

Hi-Tech's breach-of-contract claims were dismissed by the

district court in Missouri, and we have no jurisdiction (and

have not been asked) to review that decision. Instead, under review here is the FCC's determination of whether

Sprint's tariff revisions were just and reasonable--which is,

as we have noted above, the only authority the Commission

has under section 201(b) of the Communications Act. At

Hi-Tech's own request, the Commission agreed to evaluate

reasonableness under the "substantial cause" standard.

That test requires an evaluation of the carrier's need for

tariff revisions and of the subscriber's reliance on the tariff's

original terms. Although these factors may reflect familiar

contract law principles, see, e.g., Restatement (Second) of

Contracts s 261 (1979), they are not intended to replicate

__________

Sprint tariffs, as they may be amended from time to time." HiTech, 14 F.C.C.R. at 8050. The Commission did not rest on this

point in stating its ultimate conclusion, see id. at 8050, and we would

not regard it as sufficient to establish lack of justified reliance on

the part of Hi-Tech. Although Sprint was free to amend its tariff,

it could not do so--regardless of the boilerplate language--unless

the amendment was "just and reasonable" under s 201. See RCA

American, 86 F.C.C.2d at 1202 ("[T]he mere presence of some

sweeping reservation to unilaterally change any and all terms and

conditions will not serve to lessen our original concerns.").

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contract law analysis, but only to assist the FCC in determining whether the revisions were "within the zone of reasonableness" required by the statute. Showtime, 932 F.2d

at 4; see Cahnmann v. Sprint Corp., 133 F.3d 484, 488 (7th

Cir. 1998) (holding that "[a]ny rights that the plaintiff has to

complain about a breach of contract" in a tariff revision case

are evaluated "by the principle of reasonableness that the

FCC uses to determine the validity of ... an amendment to

a tariff.")

As we have also stressed above, our authority is limited to

determining whether the FCC's determination was itself reasonable--that is, whether the agency's decision was "arbitrary, capricious, [or] an abuse of discretion." 5 U.S.C.

s 706(2)(A). Finding no violation of that deferential standard, we deny the petition for review.

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