Opinion ID: 421797
Heading Depth: 2
Heading Rank: 1

Heading: Extension of the ENFIA Agreement.

Text: 51 By its terms, the ENFIA Agreement required the FCC to make its determination regarding extension prior to the end of Phase I; absent a timely Commission decision, the agreement was to terminate at [229 U.S.App.D.C. 216] the end of Phase I. ENFIA Agreement p 11, reprinted in 43 Fed.Reg. at 59,131-32. Phase I, the parties specified, was to expire three years from the effective date of [the] Agreement, id. p 10, reprinted in 43 Fed.Reg. at 59,131, a date that must be determined by reference to the date of release of a Commission Order accepting and approving [the] Agreement, id. p 6, reprinted in 43 Fed.Reg. at 59,131. Although the parties executed the ENFIA Agreement on December 13, 1978, the FCC did not issue its Acceptance Order until April 16, 1979. Looking only to the terms of the ENFIA Agreement itself, then, one would conclude that the FCC's Extension Order, which was released on April 14, 1982, complied with the timetable negotiated by the parties, albeit by the barest of margins. 52 MCI correctly observes, however, that the provisions of the ENFIA Agreement itself do not constitute the only available evidence of the parties' intent. Notwithstanding the apparent clarity of the deadline for FCC action established by Paragraph 11 of the ENFIA Agreement, MCI urges that we look also to the terms of the Illustrative Tariff that accompanied the agreement. That tariff, unlike the agreement itself, specified an exact date by which the FCC was required to act to implement Phase II--a date that unfortunately did not coincide with the timetable promulgated in Paragraph 11. Under the terms of the original tariff, the FCC's extension decision was due by February 1, 1982: In the event the FCC does not determine Factor P prior to February 1, 1982, this tariff and the rates and charges contained herein will expire on February 28, 1982. Illustrative Tariff 18, reprinted in J.A. 223. This discrepancy between the ENFIA Agreement and the tariff was eliminated in tariff amendments--filed by AT & T, served on all parties to the agreement and users of ENFIA service, and accepted by the FCC--that brought the deadline for FCC action specified by the tariff into line with the timetable established by Paragraph 11. 15 53 MCI objects strenuously to the manner in which these amendments were filed, but we need not address its factually opaque challenge because we do not treat the amendments as dispositive. If the amendments conform to the parties' original intent, we view them as unnecessary to the Commission's authority to extend the ENFIA Agreement; if the amendments contravene the intent of the parties, they cannot justify the Commission's lateness despite their technical procedural correctness. See ENFIA Agreement p 17, reprinted in 43 Fed.Reg. at 59,132. In either case, the original intent of the signatories to the ENFIA Agreement will control our disposition, and it is to an analysis of that intent that we now turn. 54 Our conclusions regarding the parties' intent depend, of necessity, primarily on the weight we attribute to Paragraph 11 of the ENFIA Agreement and the deadline provision of the Illustrative Tariff. To the extent that both provisions can be given meaning, we must strive to do so. See, e.g., Washington Metropolitan Area Transit Authority v. Mergentime Corp., 626 F.2d 959, 961 (D.C.Cir.1980); Papago Tribal Utility Authority v. Federal Energy Regulatory Commission, 610 F.2d 914, 929 (D.C.Cir.1979). But, as we read the provisions, they are fundamentally inconsistent: Paragraph 11 conferred on the FCC authority that was to continue in existence until the end of Phase I, while the original tariff provision purported to terminate that authority two-and-one-half months before Phase I was to expire. MCI's argument that Paragraph 11 and the tariff can be reconciled is thus unavailing. 55 It is necessary, therefore, to choose between the deadline established by Paragraph 11 and the one specified in the accompanying tariff. Under ordinary circumstances, this choice would be aided by the maxim that a specific contractual clause, if inconsistent with a more general clause, [229 U.S.App.D.C. 217] should be read as modifying or nullifying the general clause. 3 A. CORBIN, CONTRACTS § 547 (1960); see Mutual Life Insurance Co. v. Hill, 193 U.S. 551, 558, 24 S.Ct. 538, 540, 48 L.Ed. 788 (1904). In this case, however, it cannot be said that one of the relevant provisions is more specific than the other. Both Paragraph 11 and the Illustrative Tariff speak directly to the deadline for FCC action to implement Phase II. And, while it is true that the tariff specified a date certain on which the FCC's authority under the contract was to expire, the timetable that can be discerned by reading Paragraph 11 in light of Paragraphs 6, 10, and 19 is no less certain and no less specific. 56 Furthermore, strict adherence to the tariff provision alone would grossly distort the intent of the signatories of the ENFIA Agreement. Under the terms of the agreement, the provisions of the tariff were made subordinate to those of the contract itself. The tariff, after all, was not characterized as the primary embodiment of the parties' intent, but was intended to reflect the agreement reached herein, i.e., in the ENFIA Agreement itself. ENFIA Agreement p 6, reprinted in 43 Fed.Reg. at 59,131 (emphasis added). And the propriety of tariff amendments, the parties provided, was to be judged by their faithfulness to the terms of the ENFIA Agreement itself and not by reference to any subsidiary manifestation of the parties' original intent. Id. p 17, reprinted in 43 Fed.Reg. at 59,132. 57 As a result, the most reasonable interpretation of the February 1, 1982 deadline set forth in the original tariff is one that characterizes it as merely illustrative. AT & T argued, and the FCC apparently agreed, that the tariff provision constituted an attempt to project the date of FCC approval of the ENFIA Agreement and thus the date the Commission's authority to implement Phase II would expire. Consistent with Paragraph 18 of the ENFIA Agreement, which looked for FCC approval within approximately sixty days of December 13, 1978, id. p 18, reprinted in 43 Fed.Reg. at 59,132, the dates in the Illustrative Tariff were based on the assumption that the Agreement would be approved by the F.C.C. and, therefore, would be effective by March 1, 1979. AT & T Transmittal No. 46 (Nov. 10, 1981), reprinted in J.A. 333, 334. Since that assumption proved overly optimistic, the illustrative dates failed to coincide with the timetable established by the parties in Paragraph 11. But we have found no evidence that the parties intended the dates inserted in the Illustrative Tariff to prevail over the language of the ENFIA Agreement itself, and, accordingly, we conclude that the FCC's Extension Order was timely. 16 58
59 As we have already made clear, the intercarrier negotiations in 1978 led to an interim settlement agreement that was submitted to, reviewed, and approved by the FCC as in the public interest. The Commission's Acceptance Order acknowledged its public interest obligation, Acceptance Order, 71 F.C.C.2d at 441, 451, and its determination that an interim agreement would serve the public interest represented a legitimate and unchallenged discharge of its statutory responsibility. It is important to bear in mind, however, the interim nature of the charges established by the negotiated settlement agreement. Nothing could be [229 U.S.App.D.C. 218] clearer than that the FCC and the parties understood that this interim arrangement was tendered and approved pending the resolution of a number of fundamental issues--including the claim of discrimination--in the Docket 78-72 rulemaking proceeding. See id. at 443-44, 453; ENFIA Agreement pp 1, 3, 6 n., reprinted in 43 Fed.Reg. at 59,130-31. The Commission did not turn a blind eye to these issues, but concluded instead that their resolution would require evidence that presently simply does not exist. Acceptance Order, 71 F.C.C.2d at 453. It then responded to the pressing need for the expeditious establishment of interim ENFIA rates by approving the formula produced through arms-length bargaining among the affected parties. 60 No one challenged the manner in which the FCC ordered its priorities and dealt with the many complex issues before it in 1979, but several of the OCCs have argued that the Commission's similar decision last year ignored both the terms of the ENFIA Agreement and the requirements of the Communications Act. 61
62 Under the terms of the ENFIA Agreement, the negotiated settlement would expire at the end of Phase I unless the FCC determines that it is reasonable and in the public interest to implement Phase II. ENFIA Agreement p 11, reprinted in 43 Fed.Reg. at 59,131-32. The accompanying tariff purported to require even more of the FCC; it provided that the Phase II rates would go into effect if the FCC determines the rates are in the public interest. Illustrative Tariff 18, reprinted in J.A. 223. Several petitioners rely, in part, on this contractual language to support their claims that the FCC failed to make the determinations required in order properly to extend the ENFIA Agreement. The FCC, they argue, could not conclude that the implementation of Phase II would serve the public interest without first finding the rates established for that period by the negotiated formula to be just, reasonable, and nondiscriminatory. Were we to accept this enumeration of the duties imposed on the Commission by the signatories to the ENFIA Agreement, we would be forced to invalidate the Extension Order since it was not accompanied by pronouncements on the cost basis of the rates, the effect of the rates on competition, or the comparability of the contract rates and the charges imposed for like services. 17 63 We have concluded, however, that the FCC's more limited conception of the contractually established conditions precedent to the implementation of Phase II should govern. As interpreted by the Commission in 1979, an extension decision could legitimately rest on a simple finding that it is reasonable and in the public interest to continue the agreement. Acceptance Order, 71 F.C.C.2d at 447. This construction was reiterated in 1982, when the FCC declared that the contract required only an assessment of the usefulness of the agreement and the formula it establishes as an interim mechanism ... pending a more [229 U.S.App.D.C. 219] permanent resolution of the access charge issue for all interstate services in Docket 78-72. Extension Order, 90 F.C.C.2d at 9. The FCC's reasonable evaluation of the scope of the obligations imposed on it by the ENFIA Agreement is entitled to considerable deference, 18 and we have found no persuasive evidence that the parties intended a more painstaking examination of the public interest. 19 64 The adequacy of the Commission's public interest determination under this interpretation of the ENFIA Agreement cannot be gainsaid. As the Commission found, the need for an interim rate had not yet been eliminated, the negotiated formula had proved to be an acceptable compromise for three years, no more satisfactory solution was available, and an attempt to establish an alternative interim rate system would have disrupted the market and undermined the comprehensive Docket 78-72 rulemaking proceeding. Extension Order, 90 F.C.C.2d at 9-13. The petitioners have made only perfunctory attempts to cast doubt on these findings, and we are convinced that the ENFIA Agreement continued to represent a useful interim mechanism, the need for which fully satisfied the contractually specified public interest standard. 65 This conclusion regarding the public interest determination required by the ENFIA Agreement does not fully exhaust the contract-based challenges to the Extension Order. MCI presses the independent claim that the ENFIA Agreement was based on the FCC's representations that it would act expeditiously to eliminate the discrimination between like services produced by the negotiated settlement, and that Phase II could not commence while that discrimination persisted. In support of this argument, MCI points to the parties' recommendation that the FCC should quickly resolve the discrimination issue, ENFIA Agreement p 5, reprinted in 43 Fed. at 59,131, and the Commission's commitment to study the matter, Acceptance Order, 71 F.C.C.2d at 444, 456-57. 66 We believe, however, that MCI's self-serving assertion that it would not have signed the ENFIA Agreement if it had known that Phase II might be implemented despite the pendency of the discrimination issue may properly be ignored. 20 Not only did the FCC make no express promise to resolve the discrimination issue within three years, but also it plainly stated, in discussing possible resolutions of the discrimination problem, that [t]he parties' precatory language is ... not binding on us. Acceptance Order, 71 F.C.C.2d at 456 n. 30. MCI's unilateral hopes or expectations cannot limit the Commission's discretion to order the proceedings before it in the manner it deems most conducive to the effective discharge of its responsibilities. 21 As a result, [229 U.S.App.D.C. 220] MCI's discrimination argument, like the contract-based public interest claims advanced by its fellow OCCs, must be rejected. 67
68 Although the ENFIA Agreement did not, by its terms, require a determination that the Phase II rates were just, reasonable, and nondiscriminatory, the FCC also must conform to its governing statute. The Communications Act, several of the OCCs argue, imposes on the Commission the obligation to ensure that charges for common carrier services are nondiscriminatory and otherwise just and reasonable, whether those rates are established by tariff or by contract. See 47 U.S.C. §§ 201(b), 202(a) (1976). AT & T, on the other hand, argues that the only statutory requirement governing intercarrier rate agreements is that they be filed with the FCC, 47 U.S.C. § 211(a) (1976), and that there exists no affirmative requirement that agreed rates be shown, like unilateral carrier-initiated rates, to be just, reasonable, and nondiscriminatory. 69 The powers and obligations of the FCC with respect to intercarrier rate agreements have never been authoritatively determined. Sections 201(b) and 202(a) of the Communications Act appear, on their faces, to be fully applicable to rates established by contracts among carriers subject to the Act. 22 But there is no provision in the ... Act expressly authorizing the Commission to regulate (i.e. supervise in the public interest) privately negotiated contracts. 23 Notwithstanding this lack of express authority, the FCC has consistently taken the position that section 211(a), which requires the filing of intercarrier contracts, contemplates Commission supervision of such contracts and implicity authorizes [the FCC] to modify or abrogate carrier-to-carrier contracts as [it] find[s] is consistent with the public interest. 24 In Bell System Tariff Offerings, 25 for example, the Commission noted that, 70 [w]hile Section 211(a) does not specifically invest regulatory authority over ... contracts, it is reasonable to conclude that the provision which requires ... contracts to be filed confers upon the Commission the authority to determine whether the terms and conditions thereof are consistent with the provisions of the Act. 71 46 F.C.C.2d at 431. Under any other reading, the filing requirement would be a meaningless exercise. 26 Indeed, after reviewing a number of other provisions of the Act, the FCC held that it was not only authorized, but obligated, to determine the propriety of the terms and rates of ... [229 U.S.App.D.C. 221] contracts as well as those of ... tariffs. 46 F.C.C.2d at 435. 72 Our research has revealed no authority--in the Communications Act, its legislative history, or in notions of sound public policy--at odds with the FCC's previous assessments of its statutory powers and obligations, but we need not finally resolve the issue to decide this case. We assume, without deciding, that the FCC is both authorized and required to adjudicate challenges to the justness, reasonableness, and nondiscriminatory nature of contractually established rate structures. We need not hold as much since we deal here, not with a run-of-the-mill intercarrier contract, but with a settlement agreement drafted by parties to an ongoing tariff proceeding and approved by the Commission in order to terminate that proceeding and facilitate the comprehensive inquiry undertaken in Docket 78-72. 27 Unlike an ordinary intercarrier contract, this settlement agreement could neither take effect nor be extended absent an exercise of the FCC's statutory authority. To hold that the Commission could breathe life into such an agreement, and conclude its own statutorily required proceeding, in the face of patent unjustness, unreasonableness, or discrimination, would be to flout the mandates of the Communications Act. 73 We hold, therefore, that the FCC could not ignore the OCCs' statutory challenges to the interim rate structure when deciding whether to extend the ENFIA Agreement. But, while the FCC cannot continue in effect charges--established by tariff or by contract--it has determined to be unlawful, rates not yet found to be either just, reasonable, and nondiscriminatory or unjust, unreasonable, or discriminatory can avoid the stigma of unlawfulness, at least during a reasonable interim period in which the FCC is attempting to establish a more permanent rate structure. MCI Telecommunications Corp. v. FCC, 627 F.2d 322, 338 (D.C.Cir.1980). 74 When applied to the Extension Order, these principles compel a decision upholding the FCC's action. We defer to the Commission's judgment that it lacked the data necessary to prescribe just and reasonable rates, and we find that the Commission permissibly exercised its discretion to order its own proceedings, see note 21 supra, in deferring the discrimination question to the Docket 78-72 rulemaking proceeding. 28 While we do not sanction any undue delay in the resolution of the critical issues underlying the ENFIA rates, neither do we find that the FCC acted improperly in tolerating the agreed upon delay experienced in this case. 75 In the context of tariff revisions, we recently indicated that the delay between the filing of revisions by a carrier and the FCC's final decision should be judged under a rule of reason, and that the standard of 'just and reasonable' rates is subverted when the delay continues for several years. MCI Telecommunications Corp., 627 F.2d at 340. In short, [t]he best must not become the enemy of the good, as it does when the FCC delays making any determination while pursuing the perfect tariff. Id. at 341-42. Here, however, the parties and the FCC clearly anticipated from the outset that resolution of the fundamental and complex questions under consideration in Docket 78-72 might take as long as five years. That investigation was proceeding apace and nearing its end when the extension issue was presented to the FCC early in 1982. The Commission, moreover, did not delay[ ] making any determination, but affirmatively decided to continue in effect a [229 U.S.App.D.C. 222] good interim solution rather than to undermine the inquiry designed to establish a more perfect rate structure. Under the unique circumstances of this case, that decision did not contravene the Communications Act. 29 76
77 As the parties to the ENFIA Agreement and the FCC contemplated, many of the fundamental issues concerning the propriety of the ENFIA rate structure have now been resolved. In particular, the FCC has concluded that the existing combination of access service compensation arrangements violates Section 202(a) of the Communications Act. Third Report and Order at 19 (footnote omitted), reprinted in 48 Fed.Reg. at 10,326. With respect to the ENFIA rates, the Commission has found: 78 The level of the ENFIA charge has been negotiated to reflect a discount from the MTS access compensation. It was also designed to produce a rate that is higher than the local exchange rate paid by FX and CCSA customers. Since no one has attempted to justify the disparate rates charged for like access services in this proceeding, we must find them to be unlawfully discriminatory. 79 Id. This discrimination problem, the FCC has noted, could not be solved by maintaining the status quo, id. at 32, reprinted in 48 Fed.Reg. at 10,331; accordingly, the Third Report and Order lays the groundwork for a new access charge system designed to eliminate, on a prospective basis, all unjust and unreasonable discrimination among interstate services. 80 Although the Third Report and Order finds discriminatory the entire existing access system, the FCC did not make specific findings concerning the extent to which any of the petitioners were victimized by that discrimination. Counsel for the FCC made clear, moreover, that the Order itself will provide no retrospective cure for the unlawful discrimination the Commission found to exist, Transcript 52, and suggested that the finding of discrimination ... is not one that necessarily impugns the validity of the settlement agreement as an interim procedure for dealing with a difficult problem, id. at 55. Counsel went so far as to argue, in fact, that the Commission has the authority in framing a remedy for ... discrimination ... to confine itself to ... prospective [relief]. Id. at 64. 81 These statements, we believe, represent an overly generous view of the Commission's authority. We have been pointed to nothing in the Communications Act that empowers the Commission to forgive proven violations of the Act's clear prohibitions of unjust, unreasonable, and discriminatory rates. See 47 U.S.C. §§ 206, 209 (1976). And the FCC has expressly acknowledged that challenges to the ENFIA rates in complaint proceedings would be appropriate. Order on Reconsideration at 29 n. 65. Under the unique circumstances of this case, however, this concession from the FCC falls short of according the petitioners a determination to which they are entitled within the scope of this proceeding. The Commission has gone to great lengths to emphasize the interim nature of the rates it approved for Phase II. Now that those interim rates have been found to be part and parcel of an unlawfully discriminatory rate structure, the Commission is obligated to consider whether the petitioners are entitled to retroactive relief. That determination, moreover, must be made on remand in this case, and may not be relegated to independent complaint proceedings. The Commission's approval of the interim ENFIA rates has always been subject to further proceedings; indeed, the FCC stated at the outset that, during the term of the ENFIA Agreement, this proceeding shall remain open and the agreement itself is subject to further Commission order. Acceptance Order, 71 F.C.C.2d at 458-59 (emphasis in original). 82 [229 U.S.App.D.C. 223] For the petitioners who were parties to the ENFIA Agreement, the prospect of such further proceedings appears singularly uncomforting. Not only did those petitioners agree to pay the rates established by the contractual formula, but also the signatories promised to refrain from attacking or challenging the lawfulness of those rates. ENFIA Agreement p 3, reprinted in 43 Fed.Reg. at 59,130. In the oral argument before this court, counsel for the FCC took the position that the signatories had thus waived their rights to retrospective relief. Transcript 52. In positing that refunds would be appropriate only if the ENFIA Agreement had expired, 30 MCI appears to concede the validity of this construction of the contract. On remand, the FCC should consider whether the signatories waived their rights to relief for discriminatory charges produced by the application of the ENFIA Agreement. If not, the Commission also should determine and award the appropriate relief. 83 The situation of the nonsignatories is markedly different. We reject their contention that the FCC could not lawfully apply the rates established by the ENFIA Agreement to carriers who were not parties to the agreement. By its terms, the ENFIA Agreement was intended to produce a generally applicable interim rate; the FCC accepted it as such and properly concluded that the public interest would be served by the continued application of the interim arrangement to all of the OCCs. But, while the nonsignatories were properly subjected to the ENFIA rates on an interim basis, they are not bound by the terms of the ENFIA Agreement itself and have not waived their rights to relief from the discrimination the Commission has found to exist. Since the nonsignatories never agreed to be bound by the interim arrangement, the FCC must have contemplated that a determination in Docket 78-72 that the negotiated rates were unjust, unreasonable, or discriminatory would be followed by a refund order. 31 On remand, therefore, the FCC must evaluate the rates paid by the nonsignatories during the interim period in light of the finding of system-wide discrimination in Docket 78-72 and order appropriate relief. 32 84 Our resolution of this issue, we emphasize, is a limited one confined to the unique circumstances of this case, circumstances that we hope will never be duplicated. We express no view on the question whether provisions for retroactive adjustments are inherent in the very concept of interim rates, and we caution that our opinion should not be read as embracing any such general proposition. 85
86 The final challenge to the FCC's Extension Order concerns the manner in which the Commission established the Factor P discount to be used in computing Element 3 of the ENFIA rate for Phase II. By their terms, the ENFIA Agreement and the Illustrative Tariff required, respectively, only that the Commission determine or specify an appropriate Factor P. 33 Neither the agreement nor the tariff indicated how the necessary determination was to be made, but MCI attempts to find support in the Acceptance Order for the proposition that the FCC's decision must satisfy the statutory requisites for a prescription under section [229 U.S.App.D.C. 224] 205(a) of the Communications Act. 34 Because it did not conform to those statutory requirements, the argument goes, the Extension Order was unlawful. 87 The language of the Acceptance Order is admittedly somewhat ambiguous. The Commission referred, at one point, to the requirement that it specify[ ] ... [Factor P] for the remaining two years. Acceptance Order, 71 F.C.C.2d at 446. But it later suggested both that the ENFIA Agreement required it to prescribe an appropriate level for payment above specifically identifiable costs, id. at 447, and that any such prescription proceeding is likely to be lengthy, id. at 456. The use of these statutory terms of art, MCI argues, evinces the Commission's contemporaneous understanding that the parties intended a comprehensive section 205(a) inquiry. The contention, while plausible, ultimately must be rejected. 88 The FCC's contemporaneous interpretation of the settlement agreement, we have already indicated, is of central importance. See note 18 supra. But the Commission never referred to section 205(a), and its reference to the possible length of the proceeding necessary to determine Factor P easily could be taken as a simple acknowledgement of the parties' notorious capacity to disagree. There is, therefore, no evidence that the Commission's choice of language reflected its view that the ENFIA Agreement required a statutory rate prescription under section 205(a). In view of the parties' total lack of reference to the statutory requirements in either the ENFIA Agreement or the Illustrative Tariff, we conclude that the FCC used the word prescribe as no more than a colloquial synonym for determine or specify, and we hold that its determination of Factor P fully comported with the parties' intent.