Court Opinion

ID: 9486968
Source: CourtListenerOpinion
Date Created: 2023-08-05 12:05:03.425358+00
Date Added: 2024-06-11T17:52:02.049652
License: Public Domain

*207STEPHEN F. WILLIAMS, Circuit Judge,
dissenting:
When a carrier files a tariff, the Federal Communications Commission has a range of options, from outright rejection at one extreme, through suspending the tariff and setting it for hearing, to outright acceptance. Under the precedents of the Commission and this circuit, the Commission may choose the extreme of outright rejection only where the filed tariff is for some reason a “patent nullity”. Here the court finds that criterion satisfied for no better reason, so far as I can see, than that the tariff depended upon a premise that the Commission had never before affirmatively accepted. No matter that the premise was a perfectly sensible one — so sensible, in fact, that the Commission explicitly embraced it not long after the rejection here.
Capital Network System, Inc. is an independent provider of long-distance telecommunications services to businesses and payphone providers. AT & T, by failing to give its cardholders adequate instructions about how to dial around such firms, placed Capital in a bind. First, Capital could complete the call itself; being unable to verify the card number, however, because AT & T simultaneously refused Capital access to its proprietary database, it would be denied reimbursement if the caller had used a fraudulent billing number. (Reimbursement for calls by proper AT & T cardholders is evidently not a problem.) Alternatively, Capital could refuse the call altogether. But as the court’s opinion makes clear, Capital was in no position to do so. AT & T customers would complain of inferior service to the payphone proprietors, such as hotels, who in the interests of preserving their customers’ goodwill would respond by dropping Capital. The Commission appears not to challenge this reality. In the Matter of Billed Party Preference for 0 -f InterLATA Calls, 7 FCCRcd 7714, 7716 ¶ 5 (1992) (noting independents’ claim that customers become angry when unable to complete calls). Finally, Capital could — and did — transfer the calls to the local exchange carrier for transmission via AT & T, thereby incurring uncompensated costs of between $100,000 and $200,000 a month. The tariff in dispute seeks to charge for these transfer services.
We have held that outright rejection of a tariff filing is suitable either for extreme defects of form, Municipal Light Boards v. FPC, 450 F.2d 1341, 1346 (D.C.Cir.1971) (“a technique for calling on the filing party to put its papers in proper form or order”), or where the filing was “so patently a nullity as a matter of substantive law, that administrative efficiency and justice are furthered by obviating any docket at the threshold rather than opening a futile docket”, id. The Commission recognizes that its authority “to reject a carrier’s tariff is very limited.” American Telephone and Telegraph Co., 67 FCC2d 1134, 1157 (1978). In what it described as “a comprehensive interpretation of [its] rejection powers”, id. at 1158, the Commission said: “[W]e have accepted and will continue to accept tariffs which are reasonably clear on their face and which contain the minimum in supporting documentation required by our rules, leaving any more detailed issues of lawfulness to the hearing process where appropriate ”. Id. (emphasis added). As the paradigm for rejection it offered the ease “where the tariffs filed by a carrier are in direct response to a prior Commission decision after hearing, which established specific guidelines and tariff justification requirements for the instant filing” and the filing fails to comply with this prior Commission decision. Id. at 1158-59; see also RCA American Communications, Inc., 89 FCC2d 1070, 1076 & n. 11 (1982) (declining to reject tariff even though it “present[ed] substantial questions of lawfulness”, id. at 1077).
When Capital filed a tariff to collect from AT & T for the unwanted calls, the Commission rejected the filing on the ground that it was “patently an unreasonable practice for Capital to automatically charge an entity [AT & T] for a service it [1] did not order and [2] may not have received.” In the Matter of Capital Network Systems, Inc., 7 FCCRcd 8092, 8093 ¶ 9 (1992) (brackets added). I address these two complaints in turn.
For the idea that an entity may be charged only if it has “order[ed]” a service, the Commission pointed only to In the Matter of The *208Bell Atlantic Telephone Companies, 4 FCCRcd 455 (1988). But that decision laid down no such marker. True, the filing accepted there imposed charges on parties who ordered service; I suppose tariffs normally do. But the case simply does not address the issue of whether a firm may charge a competitor that has manipulated matters so as to assure that the would-be charging firm must carry the call.
The court tries to assist the Commission by suggesting that its supposed principle was set forth in In the Matter of AT & T’s Private Payphone Commission Plan, 7 FCCRcd 7135 (1992). Not so. That decision’s only discussion of “customers” and “subscribers” is for purposes of analyzing the prohibition against rebates. See id. at 7135-36 ¶8. Even in that context, the decision does not say that customers must be subscribers (though it does say that subscribers need not be customers).
In sustaining the Commission, the majority is therefore reduced to insisting that there was no pre-existing case by the Commission construing “ ‘customer’ to encompass parties beyond those who affirmatively requested services from a carrier.” Maj.Op. at 205. True enough, but it surely cannot be the case that every filing without an affirmative precedent is ipso facto “patently unreasonable”. If the Commission were to proceed on any such theory — which, not surprisingly, it has not endorsed — it would rob itself of the flexibility needed to deal with novel circumstances.
Looking at the matter in terms of principle, the question would seem to be whether one can become a customer by acts as well as by words. The next time that issue was presented to the Commission, it answered in the affirmative. In United Artists Payphone Corp., 8 FCCRcd 5563 (1993), the Commission held that AT & T could collect from a payphone lessee that had never ordered service. The lessee, it said, could be deemed to have “constructively ordered” such service by operating payphones in a manner that allowed third parties to make fraudulent calls using AT & T’s facilities. Id. at 5565, 5566-67 ¶¶ 8, 13. Yet just a year before the Commission evidently regarded it as not merely unreasonable but “patently” unreasonable for Capital to try to charge AT & T when its instructions to its cardholders, coupled with its preservation of its proprietary database, effectively forced Capital to handle its calls.
Of course the existence of a later contrary decision does not in itself render the Commission’s Capital decision unreasoned; it is the later shift that the agency must explain if that decision is challenged. See, e.g., CHM Broadcasting Limited Partnership v. FCC, Slip Op. at 11 (June 14, 1994), citing Amor Family Broadcasting Group v. FCC, 918 F.2d 960, 962 (D.C.Cir.1990). But the standard is one of patent unreasonableness. By invoking Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), the court suggests that no more is involved than the Commission’s giving the statute one reasonable reading today, another reasonable reading tomorrow. If that were the issue, affirmance would surely be in order. But here the established standard of patent unreasonableness requires more of the Commission. So long as Capital’s position was not beyond the pale of admissibility, the Commission was bound to set the matter for hearing. Common sense, and the United Artists decision, suggest instead that Capital’s premise was well within the pale.
The majority oddly invokes Bowen v. Georgetown University Hospital, 488 U.S. 204, 109 S.Ct. 468, 102 L.Ed.2d 493 (1988), holding that rules may not normally be applied retroactively. Maj.Op. at 205. But United Artists is not a rule but an adjudication, and, more pertinently, Capital is not seeking retroactive application of the United Artists holding. It invokes it only as evidence of what is and is not patently unreasonable.
The Commission also said that the tariff sought to assess charges for services that might never be received — because the local exchange carrier to which Capital handed off the call might not effect the transfer. But even though the tariff does assess charges at a point before it is possible to know whether the call has been successfully completed, see Tariff § 3.1 (call “is deemed transferred when CNSI activates the switch to transfer *209the call”), the Commission has in the past handled such difficulties by setting the matter for a hearing. In the Matter of American Satellite Corporation Revisions to Tariff F.C.C. No. 1, 67 FCC2d 1487, 1490 (1978). In that ease, it denied a petition for rejection, but instituted an investigation of a tariff where the absence of a termination clause might cause the customer to “be obligated to pay charges for service he did not receive or could not use”, id. at 1492 ¶ 17. Here, Capital offered a solution in its Application for Expedited Review, a solution that the Commission in its brief says would impose undue monitoring burdens on AT & T, see Commission Br. at 18, although it failed to offer that critique before. Of course traditional phone customers routinely incur monitoring costs for billed service to ensure they are not charged for uncompleted outgoing calls. In any event, as in American Satellite, the issue could have been explored at a hearing.
* * *
Because I reject those of the Commission’s rationales that the majority embraces, I must proceed to the Commission’s alternative basis for rejecting the tariff — that it violated §§ 61.2 and 61.54(j) of the Commission’s rules requiring clear statements of the conditions governing the tariff. See 47 CFR §§ 61.2 & 61.54(j). Once the Commission reasonably finds a tariff in violation of its clear statement rules, it has authority to reject the tariff outright. See, e.g. In the Matter of AT & T Communications Tariff F.C.C. No. 12, 7 FCCRcd 5604, (CCB 1992); In the Matter of US West Communications, Inc. Tariff F.C.C. No. 1, 7 FCCRed 2245 (CCB 1992); In the Matter of Centel Telephone Companies Revisions to Tariff F.C.C. No. 1, 6 FCCRcd 1001 (CCB 1991). The inquiry then becomes whether the Commission’s action was reasonable or arbitrary.
The Commission found the tariff ambiguous because it “did not clearly describe when a party would be charged for a call transfer”. 7 FCCRed at 8093. The Commission opinion never clearly explained exactly what it found to be ambiguous. It used as an example § 2.2 of the tariff, “Limitations on service”, containing a passage that “reserve[d] the right to refuse to process Credit Card or Calling Card billed calls when authorization for use of the card cannot be validated”. Tariff § 2.2(d). The Commission apparently believed the provision meant that Capital retained discretion to transfer some calls but not others to the LEC. Capital persuasively explains that “refusal to process” does not refer to a refusal to transfer, but only a refusal to complete calls on its own system. This reading seems the only sensible one, given that the discretion to refuse hinges on the inability to validate cards. The only time this inability matters to Capital is when it completes the call itself, not when it transfers the call. After all, Capital incurs the exact same costs in transferring calls by valid AT & T customers as by invalid ones;1 it is only when Capital completes the call itself that Capital’s inability to validate the caller’s card exposes it to financial risk, and hence might create an incentive for it to refuse. The Tariff confirms that it is precisely inability to validate that triggers Capital’s preference for transferring the call over completing it. See § 3.1 (if the user “insists on using a non-joint use calling card and not a calling card or other payment mechanism that can be validated and billed by CNSI, CNSI will transfer the call”). Since the natural reading of § 2.2(d) makes sense only if one understands “proeess[ing]” a call to mean “completing” it, the provision creates no ambiguity as' to when a party will be charged for transfer service, the subject of the tariff. But to the extent that the Commission used this as merely an example of *210several ambiguities, there may be a basis for its adhering to its original conclusion. Accordingly, I would remand to the Commission for it to consider whether there are other ambiguities justifying rejection of the filing. Cf. Pittsburgh Press Co. v. NLRB, 977 F.2d 652, 662 (D.C.Cir.1992) (“we cannot defer to what we imagine the agency had in-mind”).

. Capital would be paid under the tariff for transferring calls by invalid as well as valid customers, as the call is “deemed transferred” at the time the switch is activated. Thus, if Capital transferred a call that the LEC operator, acting jointly with AT & T, then refused to complete because the billing number was invalid, the Tariff would hold AT & T responsible for the transfer costs. I do not understand this scenario to drive the concern stated in the Commission's brief about instances where the transfers "did not in fact result in the routing of credit card calls to AT & T”, Commission Br. at 18, evidently referring to cases of end user frustration or a decision by the LEC to handle the call itself, id..-, see also Capital Network Systems, 7 FCCRed at 8093 n. 10.