United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 31, 2017 Decided August 11, 2017

No. 15-1354

ALL AMERICAN TELEPHONE COMPANY, INC., ET AL.,

PETITIONERS

v.

FEDERAL COMMUNICATIONS COMMISSION AND UNITED 

STATES OF AMERICA,

RESPONDENTS

AT&T CORP.,

INTERVENOR

On Petition for Review of an Order of 

the Federal Communications Commission

Jonathan E. Canis argued the cause and filed the briefs for 

petitioners.

C. Grey Pash, Jr., Counsel, Federal Communications 

Commission, argued the cause for respondents. With him on 

the brief were Robert B. Nicholson and Jonathan H. Lasken, 

Attorneys, U.S. Department of Justice, Jonathan B. Sallet, 

General Counsel at the time the brief was filed, Federal 

Communications Commission, David M. Gossett, Deputy 

General Counsel, and Richard K. Welch, Deputy Associate 
2

General Counsel. Jacob M. Lewis, Associate General Counsel 

and Lisa S. Gelb, Attorney, Federal Communications 

Commission, entered appearances.

James F. Bendernagel Jr. and Michael J. Hunseder were 

on the brief for intervenor in support of respondents.

Before: TATEL, GRIFFITH, and MILLETT, Circuit Judges.

Opinion for the court filed by Circuit Judge MILLETT.

MILLETT, Circuit Judge: The Federal Communications 

Commission held that Petitioners All American Telephone Co., 

e-Pinnacle Communications Inc., and Chasecom improperly 

engaged in a scheme designed to collect millions of dollars in 

unwarranted long-distance access charges from AT&T. All 

American and the other petitioning companies do not challenge 

that liability determination. They challenge only the 

Commission’s award of damages to AT&T and statements in 

the Commission’s decision that refer to the merits of the 

companies’ state-law claims against AT&T, which are pending 

in a separate action in the Southern District of New York. We 

uphold the Commission’s award of damages, but vacate those

aspects of the Commission’s order that tread on the merits of 

the companies’ state-law claims.

I

A

The Federal Communications Commission regulates

common-carrier providers of wired telephone services, 

including the fees that they charge to customers. See 47 U.S.C. 

§ 201. One of the fees that the Commission regulates is for 

“exchange access services” rendered for long-distance 
3

telephone calls. See 47 C.F.R. § 61.26. Those fees are often 

referred to as “access charges.” They work like this: When a 

person places a long-distance call, a local exchange carrier

operating in the caller’s geographic area will route the call to 

an “interstate exchange carrier,” also known as an 

“interexchange carrier.” That interexchange carrier, in turn, 

will connect the call to the recipient’s local exchange carrier. 

When the recipient’s local exchange carrier completes the call 

to the recipient, the interexchange carrier must pay an access 

charge to the local carrier for the connection service. See 

Northern Valley Communications, LLC v. FCC, 717 F.3d 1017, 

1018 (D.C. Cir. 2013). 

When it comes to determining the amount of that access 

charge, however, not all local carriers are the same under 

federal communications law. As part of an effort to encourage 

competition, federal law divides local carriers into “incumbent 

local exchange carriers” and “competitive local exchange 

carriers.” See United States Telecom Ass’n v. FCC, 359 F.3d 

554, 561 (D.C. Cir. 2004) (noting Congress’s intent “to foster 

a competitive market in telecommunications”). Incumbent 

carriers are those that, on or prior to February 8, 1996, provided 

service to a particular area or were part of an exchange carrier 

association. 47 U.S.C. § 251(h). Competitive carriers are all 

other local carriers, including new carriers that entered the 

market after that time period and compete with the incumbent 

carriers within a specific geographic region. See 47 C.F.R. 

§ 51.903(a). 

Incumbent carriers cannot impose access charges unless 

they file a valid tariff with the Commission. See 47 U.S.C. 

§ 203(a). Competitive carriers, by contrast, can impose access 

charges at or below a Commission-determined rate by filing 

their own tariff, or they can impose access charges through a

contract they individually negotiate with the interexchange 
4

carrier. See 47 C.F.R. § 61.26(b); Hyperion Telecomms., 12 

FCC Rcd. 8596, 8613 (1997).

B

It has been said that “[t]he darkest hour of any man’s life 

is when he sits down to plan how to get money without earning 

it.”1

 But that does not seem to keep people from trying. 

Through a scheme known as “traffic pumping” or “access 

stimulation,” some local exchange carriers sought to artificially 

inflate the number of local calls they could connect, thereby 

increasing both the call volume and the rates that they could 

charge interexchange carriers. More specifically, a local 

exchange carrier would enter into a contractual relationship 

with a company that generates a high volume of telephone 

calls, such as a conference calling provider or a provider of 

sexually explicit chat lines. The local carrier would house the 

phone-call-generating partner’s equipment on its premises for 

free and would sometimes even provide the equipment itself at 

no cost. Not only would the local carrier forgo charging its 

partner for the phone calls that came in, but in fact the carrier 

would pay the partner a share of the per-minute long-distance 

access rates it charged the interexchange carriers. See, e.g., 

Qwest Communications Corp. v. Free Conferencing Corp., 837 

F.3d 889, 893–894 (8th Cir. 2016); Northern Valley, 717 F.3d 

at 1018. 

Those traffic-pumping arrangements were a “win-win” for 

the local carrier and its phone-call-generating partner. 

Northern Valley, 717 F.3d at 1018. The local carrier received 

a higher call volume and thus more revenue from access 

charges, while the partner got free service for its business plus 

a cut of the local carrier’s revenue. On the losing end, however, 

 1 Attributed to Horace Greeley.
5

were the public and the interexchange carriers “who ha[d] to 

* * * pay significant amounts to” the local exchange carriers in 

the form of artificially inflated and distorted access charges to 

complete the long-distance calls. Id. at 1018–1019. 

Starting in 2010, the Commission issued a series of orders 

concluding that such traffic-pumping schemes were unlawful 

under Sections 201(b) and 203(c) of the Communications Act,

47 U.S.C. §§ 201(b), 203(c). The Commission ruled in 

particular that local exchange carriers could not charge 

interexchange carriers to connect long-distance calls to a nonpaying end user. See, e.g., Qwest Communications Co. v. 

Sancom, Inc., 28 FCC Rcd. 1982 (2013); Qwest 

Communications Co. v. Northern Valley Communications, 

LLC, 26 FCC Rcd. 8332 (2011), aff’d, Northern Valley, 717 

F.3d at 1017; AT&T Corp. v. YMax Communications Corp., 26 

FCC Rcd. 5743 (2011); Qwest Communications Corp. v. 

Farmers & Merchants Mut. Tel. Co., 24 FCC Rcd. 14801 

(2009), aff’d, Farmers & Merchants Mut. Tel. Co. v. FCC, 668 

F.3d 714 (D.C. Cir. 2011).

We have twice upheld that interpretation of the 

Communications Act by the Commission. See Northern 

Valley, 717 F.3d at 1019; Farmers, 668 F.3d at 724. 

Accordingly, it is now “well-settled that a [local exchange 

carrier] cannot bill an [interstate exchange carrier] under its 

tariff for calls ‘terminated’ at a conference call bridge when the 

conference calling company does not pay a fee for th[ose]

services.” Qwest Communications, 837 F.3d at 894.

C

Petitioners All American Telephone Co., e-Pinnacle 

Communications, Inc., and Chasecom (collectively, “the 

Companies”) have held themselves out as competitive local 
6

exchange carriers authorized to operate in Utah and Nevada. 

Standing behind them were Beehive Telephone Company, Inc.

of Nevada, and Beehive Telephone Company, Inc. of Utah 

(collectively, “Beehive”), which operated as incumbent local 

exchange carriers in rural Nevada and Utah, respectively. Joy 

Enterprises, Inc., is a Nevada corporation that provides 

conferencing and sexually explicit chat line services. Until the 

early 2000s, Joy and Beehive were engaged in a classic trafficpumping scheme: Beehive paid Joy kickbacks in exchange for 

the inflated traffic that Joy’s conference and sexually explicit 

chat line services generated. Beehive, however, soon became 

a victim of its own success: As its traffic numbers skyrocketed, 

its access charge rates, which were determined by a filed tariff,

began to plummet. 

Unwilling to let a good scheme end, Beehive worked to 

create competitive local exchanges—the Companies—that 

would have greater rate flexibility. Beehive then had the

Companies take its place in the arrangement. Beehive assisted 

the Companies in preparing and filing tariffs, and worked free 

of charge to obtain the necessary approval for All American to 

operate in the state of Utah. Beyond the regulatory paperwork, 

Beehive provided material support to all three Companies by 

serving as the co-lessee/guarantor for equipment rentals, 

installing and maintaining the Companies’ equipment at 

Beehive’s facilities, assigning them telephone numbers 

Beehive had obtained, and managing and coordinating the 

Companies’ billings. 

All American began operating in Beehive’s territory in 

Utah in 2004, although it did not apply for a certificate of public 

convenience from the Utah Public Service Commission until 

2006. See In the Matter of the Consideration of the Rescission, 

Alteration, or Amendment of the Certificate of Authority of All 

American to Operate as a Competitive Local Exchange Carrier 
7

within the State of Utah at 1, No. 08-2469-01 (Utah Pub. Serv. 

Comm’n April 26, 2010) (“Utah Commission Order”). Shortly 

after All American obtained its certificate, Beehive and All 

American entered into an interconnection agreement that 

allowed All American to use Beehive’s equipment for a fee, 

despite the fact that the Utah state license prohibited All 

American from operating in Beehive’s territory. Id. at 6; see 

47 U.S.C. § 252(d)(1) (addressing interconnection 

agreements).

The Companies that Beehive helped to create have never 

marketed their services to the general public or to businesses in 

Utah or Nevada. From the time it began operating, All 

American has served only a single client: Joy Enterprises. In 

addition, All American has never charged Joy Enterprises for

its services. 

Similarly, e-Pinnacle and Chasecom have only ever 

serviced conference-calling companies and have never charged 

them for their services. Like Joy Enterprises, e-Pinnacle and 

Chasecom engaged in a traffic-pumping kickback scheme with 

Beehive prior to becoming independent carriers. 

In exchange for all of its free aid, Beehive was paid 

through the interconnection agreement with All American and 

through revenue-sharing schemes with e-Pinnacle and 

Chasecom. Beehive also directly benefited from the increased 

traffic generated by All American’s arrangement with Joy 

Enterprises, and by e-Pinnacle’s and Chasecom’s arrangements 

with their conference-call providers, because Beehive could 

directly charge interexchange carriers other types of fees (such 

as tandem switching and transport fees) associated with the 

inflated traffic. Petitioners e-Pinnacle and Chasecom ceased 

operations in 2007. In 2010, the Utah Commission rescinded 

All American’s certificate to operate as a competitive local 
8

exchange carrier, concluding that it was “a mere shell 

company, paying others for technical services, management 

fees, consulting fees and equipment fees.” Utah Commission 

Order at 18; see also id. at 35.

D

1

In 2007, the Companies filed a civil suit against AT&T 

Corporation in the United States District Court for the Southern 

District of New York. In their complaint, the Companies 

represented that they and AT&T were “telecommunications 

common carriers, and their interstate service offerings are 

subject to the jurisdiction of the FCC.” First Amended 

Complaint ¶ 11, All American Tel. Co. v. AT&T Corp., No. 07-

cv-861 (S.D.N.Y. filed March 6, 2007). The Companies 

alleged that, pursuant to valid tariffs filed with the 

Commission, they had provided access services to AT&T for 

which AT&T had refused to pay. Id. ¶¶ 37–42. The 

Companies sought recovery of those access fees under both a 

tariff collection action, id. ¶¶ 73–76, and a state-law quantum 

meruit claim, id. ¶¶ 103–107.

In response, AT&T filed a counterclaim alleging that the 

Companies existed “for the sole purpose of executing ‘traffic 

pumping’ schemes, not to offer wireline local telephone service 

to the residents” in their service areas. Counterclaim ¶ 16, All 

American Tel. Co. v. AT&T Corp., No. 07-cv-861 (S.D.N.Y.

filed March 26, 2007). As relevant here, AT&T claimed that 

the Companies’ conduct violated their filed tariffs and Sections 

201 and 203 of the Communications Act, 47 U.S.C. 

§§ 201, 203. Id. ¶¶ 34, 43. 
9

In March 2009, the district court sua sponte decided to 

refer AT&T’s counterclaims arising under the 

Communications Act to the Federal Communications 

Commission pursuant to the primary jurisdiction doctrine. 

Memorandum & Order at 7, All American Tel. Co. v. AT&T 

Corp., No. 07-cv-861 (S.D.N.Y. March 16, 2009). Under the 

primary jurisdiction doctrine, if “adjudicating a claim would 

‘require[] the resolution of issues which, under a regulatory 

scheme, have been placed within the special competence of an 

administrative body,’” a court may “suspend the judicial 

process ‘pending referral of such issues to the administrative 

body for its view.’” United States v. Phillip Morris USA Inc., 

686 F.3d 832, 837 (D.C. Cir. 2012) (alteration in original; 

citation omitted). The case is not “referr[ed]” to the agency in 

the traditional sense because there is usually “no mechanism 

whereby a court can on its own authority demand or request a 

determination from the agency[.]” Reiter v. Cooper, 507 U.S. 

258, 268 n.3 (1993). Instead, the court “merely stay[s] its 

proceedings while the [parties] file[] an administrative 

complaint” and the agency disposes of it. Id.

Following the March 2009 referral, the district court 

entered a second order supplementing the issues referred and 

staying the litigation. Order Referring Issues to the Federal 

Communications Commission at 2, All American Tel. Co. v. 

AT&T Corp., No. 07-cv-861 (S.D.N.Y. Feb. 5, 2010)

(“Referral Order”). 

The key questions referred by the district court to the 

Commission were whether: (1) the Companies engaged in 

unreasonable conduct under the Communications Act; (2) the 

Companies provided services “pursuant to the terms of valid 

and applicable tariffs”; (3) the Companies “provide[d] some 

other regulated service to AT&T for which they are entitled to 

compensation”; (4) any recovery by the Companies “under a 
10

quantum meruit, quasi-contract, or constructive contract 

theory” was permissible (i.e., not preempted); and (5) AT&T 

“violate[d] § 201(b) or 203(a), or any other provision of the 

Communications Act” when it failed to pay the billed charges. 

Referral Order, supra, at 1, Ex. A. 

2

To effectuate the referral, AT&T filed a complaint with the 

Commission. In its complaint, AT&T raised the first, second, 

third, and fourth questions. It also elected to bifurcate liability 

and damages, as permitted by Commission rules, see 47 C.F.R. 

§ 1.722(d). AT&T’s complaint alleged that the Companies, 

Joy, and Beehive engaged in a modified version of a trafficpumping scheme, with the Companies serving as sham entities 

designed to unlawfully and unreasonably inflate the rate of 

access charges billed to AT&T.2

The Commission issued a decision on liability concluding

that the Companies had “participated in an access stimulation 

scheme designed to collect in excess of eleven million dollars 

of improper terminating access charges from AT&T[.]” AT&T 

Corp. v. All American Tel. Co., 28 FCC Rcd. 3477, 3477 ¶ 1

(2013) (“Liability Order”). In its Liability Order, the 

Commission found that the Companies were “‘sham’ [carriers]

created to ‘capture access revenues that could not otherwise be 

obtained by lawful tariffs,’” in violation of Section 201(b) of 

 2 The Companies, in turn, filed a complaint that raised the fifth 

question. The Commission denied that complaint on the ground that 

the Communications Act does not regulate AT&T when it is acting 

as a customer. All American Tel. Co. v. AT&T Corp., 26 FCC Rcd.

723, 732 ¶ 21 (2011) (“The law is settled that a carrier-customer’s 

failure to pay tariffed access charges does not violate either section 

201(b) or section 203(c) of the Act.”). The Companies have not 

sought our review of that aspect of the Commission’s decision. 
11

the Communications Act, 47 U.S.C. § 201(b). Liability Order, 

28 FCC Rcd. at 3487 ¶ 24. 

The Commission further ruled that the Companies “had no 

intention at any point in time to operate as bona fide [carriers]

or provide local exchange service to the public at large.”

Liability Order, 28 FCC Rcd. at 3488 ¶ 25. The Commission 

found that the Companies “neither owned nor leased facilities, 

nor did they purchase unbundled network elements typically 

used by [carriers] to provide any telecommunications services 

to the public.” Id. Rather, “Beehive installed and maintained 

their equipment (which was collocated in Beehive’s facilities), 

coordinated and managed their billing and collection services, 

and provided power and other services” needed by the 

Companies. Id. at 3483 ¶ 16 (footnotes omitted). Beehive’s 

creation of the Companies “allowed the access stimulation 

arrangements [between Beehive and Joy] to continue at rates”

that otherwise “would have been unsustainable.” Id. at 3489 

¶ 27. On top of that, Beehive benefited from charging AT&T

“for tandem switching and transport of the stimulated traffic.” 

Id. at 3489 ¶ 28. 

The Commission concluded that this arrangement 

“constitute[d] an unjust and unreasonable practice in violation 

of Section 201(b) of the Act.” Liability Order, 28 FCC Rcd. at 

3488 ¶ 24. It also ruled that the Companies’ charges to AT&T 

were not made under a valid tariff because all of the customers 

served by the three Companies paid nothing for the service 

provided. Id. at 3494–3495 ¶ 38. Therefore, under Farmers 

and Northern Valley, the access charges were not incurred for 

switching services to an end user within the meaning of the 

Communications Act. Id. The Commission also noted that the 

Companies charged AT&T under a tariff for services that 

ended in Nevada, even though the actual “end user” was the 

conferencing equipment at Beehive’s facility in Utah. Id. at 
12

3492–3495 ¶ 35. Because the Companies did not have any 

valid tariffs for access charges applied to calls terminating in 

Beehive’s territory in Utah, they had no authority under the 

Communications Act to charge AT&T for those services. Id.

at 3493 ¶ 34.

The Commission denied the Companies’ petition for 

reconsideration. See AT&T Corp. v. All American Tel. Co., 29 

FCC Rcd. 6393 (2014). The Companies did not seek further 

review of the Commission’s liability determination or its 

factual findings. 

3

Because of the bifurcation of liability and damages, the 

Commission conducted a second proceeding to determine 

whether AT&T should be awarded damages. The Companies 

objected that the Commission lacked jurisdiction over them, 

having found them to be sham entities. The Commission

disagreed, reasoning that it had jurisdiction because the 

Companies had “held themselves out as ‘providing services as 

common carriers,’ and * * * operated with nationwide 

authority under” the Communications Act. AT&T Corp. v. All 

American Tel. Co., 30 FCC Rcd. 8959, 8960 ¶ 8 (2015) 

(“Damages Order”) (footnote omitted). Additionally, the 

Companies had “obtained state certificates to operate as [local 

exchange carriers], filed tariffs for their interstate services, and 

billed for those services[.]” Id. at 8961 ¶ 8; see also id. at 8961 

¶ 10 (“Defendants presented themselves to the public as 

common carriers and therefore are themselves subject to 

Section 208.”).

The Commission then ordered the Companies to refund 

the $252,496.37 that AT&T had previously paid them in access 

charges. Damages Order, 30 FCC Rcd. at 8962 ¶ 11. The 
13

Commission noted that the Companies “admit[ted]” that 

Beehive was the entity that actually provided AT&T with 

interconnection services. Id.

The Companies filed a timely petition for review.

II

We will “uphold the Commission’s decision unless it is 

arbitrary, capricious, an abuse of discretion, or otherwise not in 

accordance with law.” Achernar Broadcasting Co. v. FCC, 62 

F.3d 1441, 1445 (D.C. Cir. 1995) (quoting 5 U.S.C. 

§ 706(2)(A)); see 47 U.S.C. § 402(g) (providing for review of 

FCC orders “in the manner prescribed by section 706 of Title 

5”). An order from the Commission that exceeds the scope of 

its statutory authority is, by definition, not in accordance with 

the law and subject to vacatur. See, e.g., American Library 

Ass’n v. FCC, 406 F.3d 689, 708 (D.C. Cir. 2005). 

We hold that the Commission’s damages award was 

lawful, but that those portions of the Commission’s decision 

touching on the merits of the Companies’ state-law claims are 

without legal effect.

A

The Companies’ opening salvo is jurisdictional. 

Specifically, they contend that, because the Commission’s 

Liability Order found them to be sham entities rather than 

genuine common carriers, the Commission’s jurisdiction over 

them evaporated, leaving it powerless to award damages. The 

Companies cannot wiggle out of responsibility for their 

violations of the Communications Act that easily. 
14

The Commission has jurisdiction over complaints alleging

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

* * * in contravention of the provisions” of the 

Communications Act. 47 U.S.C. § 208(a). Thus, for “common 

carriers,” taking actions that run afoul of the Communications 

Act does not get them out from under the Commission’s 

authority. 

A “common carrier,” in turn, is “any person engaged as a 

common carrier for hire, in interstate or foreign communication 

by wire or radio.” 47 U.S.C. § 153(11). To “engage” someone 

in the business context is to hire or secure the services of that 

entity. 3 OXFORD ENGLISH DICTIONARY 173–174 (def. 5a) 

(1933) (reprint 1978) (defining “engage” as “[t]o hire, secure 

the services of (a servant, workman, agent, etc.)” and “[t]o 

enter into an agreement for service”).3 Thus, at the very least, 

a “common carrier” includes entities providing services 

pursuant to a tariff—an agreement—filed with the 

Commission, even if the tariffs are subsequently determined to 

be invalid. 

In addition, in deciding whether the Companies are 

“common carriers,” we look to the common law meaning of 

that phrase. See, e.g., National Ass’n of Regulatory Util.

Comm’rs v. FCC (“NARUC”), 525 F.2d 630, 640–642 (D.C. 

Cir. 1976) (turning to the common law to interpret the statutory 

definition of common carrier); see also Cellco P’ship v. FCC, 

700 F.3d 534, 545–546 (D.C. Cir. 2012). 

 3 See also WEBSTER’S NEW INTERNATIONAL DICTIONARY 847 

(transitive def. 8; intransitive def. 2) (2d ed. 1934) (defining 

“engage” as “[t]o secure or bespeak the services of (a person); to hire; 

enlist” and “[t]o embark in a business; * * * to employ or involve 

oneself”). 
15

Importantly, under the common law, “one may be a 

common carrier by holding oneself out as such[.]” NARUC, 

525 F.2d at 643. As this Court has recognized, the “primary 

sine qua non of common carrier status is a quasi-public 

character,” which arises out of the “undertaking ‘to carry for 

all people indifferently[.]’” National Ass’n of Regulatory Util.

Comm’rs v. FCC, 533 F.2d 601, 608 (D.C. Cir. 1976) (italics 

added); see also Verizon v. FCC, 740 F.3d 623, 651 (D.C. Cir. 

2014) (“[T]he basic characteristic that distinguishes common 

carriers from ‘private’ carriers” is the “common law 

requirement of holding oneself out to serve the public 

indiscriminately[.]”) (citation omitted); Southwestern Bell Tel.

Co. v. FCC, 19 F.3d 1475, 1481 (D.C. Cir. 1994) (“[T]he 

indiscriminate offering of service on generally applicable terms 

* * * is the traditional mark of common carrier service.”)

(emphasis added).

Substantial evidence supports the Commission’s 

determination that the Companies held themselves out to the 

public, including AT&T, as common carriers for hire. They 

offered to provide their common-carrier services pursuant to an 

agreement—a tariff that was filed with the Commission. They 

also obtained state certificates to operate as common carriers, 

and they represented in their district court complaint that they 

were common carriers. Furthermore, the Companies sought to 

obtain the benefits of common carrier status, such as the 

protections of the filed-rate doctrine. See Oral Argument Tr. at 

6:11–13 (Petitioners’ Counsel: “[W]e sought the benefits of 

being a common carrier, the benefit of being able to file a tariff, 

to collect regulated access fees under that tariff, and [to] us[e]

the filed rate doctrine[.]”). Indeed, an important predicate for 

the Companies’ district court action is that AT&T accepted 

access services and the Companies billed AT&T for those 

services pursuant to a tariff filed with the Commission, albeit 

one later found to be invalid.
16

Notably, in Farmers, supra, we rejected a similar 

jurisdictional argument as “flatly wrong.” 668 F.3d at 719. 

There, the defendant company Farmers, as part of a trafficpumping scheme, had “held itself out as a common carrier 

providing access service” to interexchange carriers, and billed

for that service pursuant to a tariff. Id. We held that the 

Commission’s ruling that Farmers had violated the 

Communications Act by improperly charging for its services

“could not immunize [Farmers] from the complaint process.”

Id. 

Likewise here, having held themselves out as common 

carriers and having charged AT&T for services under a 

common-carrier tariff, the Companies were “engaged as a 

common carrier for hire,” 47 U.S.C. § 153(11), and thus were 

subject to the Commission’s jurisdiction. They cannot now 

wield their violation of the Communications Act as a shield 

against remedial liability for that same wrongdoing.

B

Turning to the merits, we hold that the Commission’s 

damages award was permissible. The Commission’s 

conclusion that the Companies did not render any service to 

AT&T chargeable under the Communications Act is supported 

by substantial evidence in the record. Damages Order, 30 FCC 

Rcd. at 8962 ¶¶ 11, 13.

To begin with, the Companies themselves repeatedly 

conceded that Beehive, not they, provided the access services 

that AT&T received. See, e.g., Answer and Affirmative 

Defenses ¶ 3, AT&T Corp. v. All American Tel. Co., File No. 

EB-09-MD-010 (FCC filed Dec. 1, 2014) (“Nevertheless, [the 

Companies] admit that they billed AT&T for Local Switching 
17

service that was provided by Beehive[.]”); id. ¶ 57 (“[The 

Companies] admit that Beehive carried all traffic relevant to 

the case at bar, and was responsible for the routing and 

termination of the calls that AT&T’s customers made to chat 

and conference service providers.”); id. ¶ 59 (“[The 

Companies] admit that all of the traffic at issue was routed from 

AT&T to its point of termination in Beehive’s facilities by 

Beehive.”). 

In addition, the Companies stipulated that the amount of 

the award—$252,496.37—was the amount that AT&T had 

paid to the Companies for access services. Damages Order, 30 

FCC Rcd. at 8962 ¶ 11.

Finally, the Commission reasonably concluded that the 

Companies were obligated to reimburse AT&T the amount that 

AT&T paid to them for what turned out to be no qualifying 

access service. There is nothing arbitrary or capricious about 

the Commission’s decision that paying something for nothing 

that is properly chargeable under the Communications Act is a 

compensable harm. 

The Companies argue that the proper measure of damages

should have been AT&T’s actual pecuniary loss, not the rate 

they paid. They contend specifically that AT&T failed to prove 

that it suffered an actual pecuniary loss because it received a 

connection service and, whether rendered by Beehive or the 

Companies, AT&T owed the same amount of money either 

way. Paying the Companies rather than Beehive directly thus 

took nothing extra out of AT&T’s pockets. 

The Companies are correct that AT&T bore the burden of 

showing both a violation of the law and “actual damages 

suffered as a consequence of such violation.” New Valley 

Corp. v. Pacific Bell, 15 FCC Rcd. 5128, 5134 ¶ 14 (2000); see 
18

also Communications Satellite Corp., 97 F.C.C.2d 82, 91 ¶ 26

(1984) (“It is also well established that in a complaint 

proceeding, the complainant has the burden of proving both the 

fact and the amount of damages[.]”). 

But New Valley and Communications Satellite stand only 

for the proposition that the party seeking damages must prove 

a financial loss that was caused by the alleged violation. See 

New Valley, 15 FCC Rcd. at 5133 ¶ 12 (party had not proven 

how the defendant’s failure to file tariff charges for services 

actually rendered had caused any injury); Communications 

Satellite, 87 F.C.C.2d at 92 ¶ 30 (party failed to show how its 

failure to win a Department of Defense bid was the proximate 

cause of any loss of profits). 

AT&T met that burden. AT&T presented expert 

declarations evidencing the amount of money it paid the 

Companies for no actual access service authorized by the 

Communications Act, and the parties ultimately stipulated to 

that measure of damages. In addition, unlike New Valley and 

Communications Satellite, AT&T causally linked its damages 

to the Companies’ traffic-pumping scheme, showing that, in 

the eyes of the Communications Act, they were sham entities 

that rendered no chargeable access services to AT&T. 

The Companies’ actual-loss argument, at bottom, reduces 

to the claim that its liability should be excused because AT&T 

might have owed Beehive those same access charges. The 

Commission, however, permissibly held the Companies 

financially responsible for the payments they received as a 

result of their own conduct. See Damages Order, 30 FCC Rcd. 

at 8958 ¶ 1 (“Because Defendants may charge only for services 

they actually provide, it would be unjust to allow them to retain 

the amounts AT&T paid.”). 
19

C

Finally, the Companies contend that the Commission 

improperly analyzed the merits of their state-law quantum 

meruit claims, which include a claim of unjust enrichment. 

Those state common law claims fall outside the Commission’s 

wheelhouse, and are still pending before the district court. We 

agree that a few aspects of the Commission’s decision have 

strayed beyond its authority, and hold that those portions are 

invalid to the extent that they speak to the merits of the 

Companies’ state-law claims. 

The controverted language in the Commission’s liability 

order appears in two places. First, in responding to the 

Companies’ assertion of an unjust enrichment defense to 

AT&T’s damages claim, the Commission explained that the 

Companies had failed to show “that they may plead equitable 

defenses in a Section 208 complaint proceeding,” Damages 

Order, 30 FCC Rcd. at 8963 ¶ 13. Fair enough. The problem 

is that the Commission went on to say that, “[e]ven assuming”

such a common-law claim could be decided by the 

Commission, the Companies’ unjust enrichment claim is 

without merit because the Companies had “failed to establish 

the necessary elements for unjust enrichment, because they did 

not provide a service to, or confer a benefit on, AT&T.” Id.

Second, at the end of its decision, the Commission 

dismissed the remaining referred issues as moot—which 

included the quantum meruit claims, see Referral Order, supra, 

at Ex. A, ¶ 2—because the Companies “did not provide any 

service to AT&T.” Damages Order, 30 FCC Rcd. at 8966 ¶ 21.
20

1

Before proceeding to the merits of the Companies’ 

challenge to those aspects of the Commission’s decision, we 

must first address the Commission’s threshold challenges to 

our ability to decide that question.

First, the Commission argues that the Companies lack 

standing to raise these arguments because the Commission’s 

statements do not injure them. The Commission contends that 

the Companies will not be harmed by the decisional language 

unless the district court gives effect to it in its own proceedings. 

To establish standing, the Companies must demonstrate 

either actual injury from the Commission’s ruling, a “certainly 

impending” injury, or “substantial risk” of such an injury. 

Susan B. Anthony List v. Driehaus, 134 S. Ct. 2334, 2341

(2014). To have standing, then, the Companies must 

demonstrate a substantial risk that the district court will credit 

the Commission’s determinations in resolving the Companies’ 

common law claims. In this rather unique context, such a 

substantial risk of injury to the Companies exists because, 

going forward, the district court will be powerless to set aside 

any erroneous Commission determinations pertaining to their 

state-law claims. That is because the Hobbs Act vests 

exclusive jurisdiction to review final decisions of the 

Commission in the federal courts of appeals, not the district 

courts. 28 U.S.C. § 2342(1); see also FCC v. ITT World 

Communications, Inc., 466 U.S. 463, 468 (1984) (“Exclusive 

jurisdiction for review of final [Commission] orders * * * lies 

in the Court of Appeals.”). Litigants “may not evade these 

provisions by requesting the District Court to enjoin action that 

is the outcome of the agency’s order,” even if the agency order 

is allegedly ultra vires. ITT World Communications, 466 U.S. 

at 468.
21

As a consequence, once the primary jurisdiction referral is 

completed, the Companies will be powerless to challenge the 

merits of the Commission’s decision before the district court,

and the district court will be “without authority to review the 

merits of the [Commission’s] decision.” Port of Boston Marine 

Terminal Ass’n v. Rederiaktiebolaget Transatlantic, 400 U.S. 

62, 69 (1970). 

Given that, the Companies face a substantial risk that the 

district court would take the Commission’s statements at face 

value and hold that the common law unjust enrichment claim 

is foreclosed. Because the Companies have no other avenue to 

challenge that asserted overreach by the Commission, they 

have standing to pursue that claim here.

Second, the Commission insists that the Companies’ 

argument is foreclosed because they failed to file a petition for 

reconsideration raising their objection to the Commission

addressing their common law claims. The filing of a petition 

for reconsideration is a “condition precedent to judicial review” 

whenever a party “relies on questions of fact or law upon which 

the Commission * * * has been afforded no opportunity to 

pass.” 47 U.S.C. § 405(a). Accordingly, those who wish to 

challenge a Commission decision must ensure that the 

Commission is afforded “a fair opportunity to review the 

arguments” before raising them in court. BDPCS, Inc. v. FCC, 

351 F.3d 1177, 1183 (D.C. Cir. 2003).

We do not, however, require that the issue be raised with 

“[a]bsolute precision,” and “judicial review is permitted so 

long as ‘the issue is necessarily implicated by the argument 

made to the Commission.’” EchoStar Satellite LLC v. FCC, 

704 F.3d 992, 996 (D.C. Cir. 2013) (quoting Time Warner

Entm’t Co. v. FCC, 144 F.3d 75, 80 (D.C. Cir. 1998)); see also 
22

Sprint Nextel Corp. v. FCC, 524 F.3d 253, 257 (D.C. Cir. 2008) 

(“The pith of the test is this: ‘the argument made to the 

Commission’ must ‘necessarily implicate[]’ the argument 

made to us.”) (alteration in original; citation omitted).

Here, the Companies (as well as AT&T) repeatedly argued 

to the Commission that it lacked the authority to address the 

state-law claims. The Companies pointed out that “the possible 

merits of their equitable claims” were “not before the 

Commission in the instant proceeding, as AT&T admits in 

footnote 87, and so are irrelevant.” Answer and Affirmative 

Defenses, supra, ¶ 78. Doubling down, the Companies added 

that “the Commission lacks authority to hear [their] claims for 

damages against AT&T, as a non-carrier,” and that “[t]o the 

extent AT&T has arguments for the SDNY court, it should 

make them there, and not in this proceeding.” Id. ¶ 88. 

AT&T agreed. See Supplemental Complaint of AT&T 

Corp. for Damages ¶ 77 n.87, AT&T v. All American Tel. Co., 

File No. EB-09-MD-010 (FCC filed Oct. 24, 2014) (“[T]he 

Commission does not generally have jurisdiction to address the 

merits of any particular state law quasi-contract claim[.]”); 

Reply Legal Analysis in Support of Supplemental Complaint 

at 33, AT&T Corp. v. All American Tel. Co., File No. EB-09-

MD-010 (FCC filed Dec. 22, 2014) (“[T]he Commission 

should not decide the merits of any state law claim[.]”); see 

also Bartholdi Cable Co. v. FCC, 114 F.3d 274, 280 (D.C. Cir. 

1997) (“[Section] 405 does not require that the party seeking 

judicial review of an issue be the party that provided the 

Commission with opportunity to pass on the issue.”).

Because the Commission was afforded a full and fair 

opportunity to consider its treatment of the state-law claims and 

was fully apprised of the Companies’ position, Section 405(a) 

is no bar to reaching the merits. See, e.g., Sorenson 
23

Communications, Inc. v. FCC, 765 F.3d 37, 50 (D.C. Cir. 2014) 

(issue is ripe for review when “the Commission had an 

‘opportunity to pass’ upon the question of fact or law raised in 

the petition” even if no petition for reconsideration was filed) 

(citation omitted).

4

2

The Companies are correct that the Commission lacked the 

legal authority to discuss the merits of their state-law quantum 

meruit claims. Congress has vested the Commission only with 

the authority to address allegations of actions taken “in 

contravention of” the Communications Act. 47 U.S.C. 

§ 208(a). A state common law claim, by definition, does not 

arise under or state a violation of the Communications Act, and 

thus falls outside the scope of the Commission’s jurisdiction.

In addition, the Companies’ state-law claims seek to 

determine the rights of a carrier against a customer: the

Companies want the district court to order AT&T to pay them 

for services allegedly rendered. But for more than half a 

century, the Commission has held that it lacks jurisdiction to 

“determin[e] * * * the carrier’s rights against a subscriber[.]” 

Thornell Barnes Co. v. Illinois Bell Tel. Co., 1 F.C.C.2d 1247, 

1275 (1965); see also AT&T Corp. v. Bell Atl.-Pa., 14 FCC 

 4 Prior decisions of this court have held that Section 405(a) 

“constitutes ‘an exhaustion requirement, rather than * * * a 

jurisdictional prerequisite.’” M2Z Networks, Inc. v. FCC, 558 F.3d 

554, 558 (D.C. Cir. 2009) (citation omitted; alteration in original); 

see also Southern Indiana Broadcasting, Ltd. v. FCC, 935 F.2d 1340, 

1342 (D.C. Cir. 1991) (“[W]e have treated this as an ‘exhaustion’ 

requirement, rather than a jurisdictional prerequisite, and have 

allowed exceptions[.]”). In any event, for the reasons given, the 

briefing by both the Companies and AT&T fairly presented the issue 

to the Commission. 
24

Rcd. 556, 599 n.240 (1998) (the Commission has “no 

authority” to conduct “adjudications of carrier’s rights against 

their customers”). Indeed, the Commission here dismissed the 

Companies’ complaint against AT&T for that very reason. All 

American Tel. Co., 26 FCC Rcd. at 726 ¶ 10. And we have 

previously affirmed and enforced this limitation on the 

Commission’s jurisdiction. See MCI Telecomms. Corp. v. 

FCC, 59 F.3d 1407, 1417 (D.C. Cir. 1995) (vacating portion of 

a Commission order that “involve[d] a determination of the 

carrier’s rights against a [customer], over which this 

Commission has no jurisdiction”) (second alteration in 

original) (quoting Thornell Barnes Co., 1 F.C.C.2d at 1275

¶ 67).

Accordingly, the Commission’s discussion of the 

Companies’ ability to satisfy the “necessary elements for unjust 

enrichment,” Damages Order, 30 FCC Rcd. at 8963 ¶ 13, and 

its determination that the quantum meruit claims referred to the 

Commission were “moot[ed]” by the Commission’s decision 

that the Companies “did not provide any service to AT&T,” id.

at 8966 ¶ 21, were improper and ultra vires to the extent that 

they addressed the Companies’ state-law claims. The 

Companies’ petition for review is granted only with respect to 

those aspects of the decision that reached beyond the 

Commission’s statutory authority. The merits of the 

Companies’ state-law claims must be decided by the district 

court in the first instance.5

* * *

 5 Because the Commission’s order does not reach the question 

of whether the Communications Act preempts the Companies’ statelaw claims, that question also remains open for the district court to 

address in the first instance. 
25

The petition for review is granted in part and denied in 

part. The Commission’s award of damages is affirmed, but 

insofar as the Commission reached and decided any questions 

of state law or the merits of the Companies’ quantum meruit

claims, those parts of the decision are without legal effect and 

vacated in relevant part.

So ordered.