Sorenson Commc'ns Inc. v. Fed. Commc'ns Comm'n

• Citation: 755 F.3d 702
• Decision Date: 20 June 2014
• Docket Number: 13–1246.,Nos. 13–1122,s. 13–1122
• Parties: SORENSON COMMUNICATIONS INC. and CaptionCall, LLC, Petitioners v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

755 F.3d 702

SORENSON COMMUNICATIONS INC. and CaptionCall, LLC, Petitioners

v.FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents.

Nos. 13–1122, 13–1246.

United States Court of Appeals,

District of Columbia Circuit.

Argued May 13, 2014.

Decided June 20, 2014.

On Petitions for Review of Orders of the Federal Communications Commission.

Christopher J. Wright argued the cause for petitioners. With him on the brief were John T. Nakahata and Timothy J. Simeone.

Mark D. Schneider was on the brief for amici curiae Hearing Loss Association of America, et al. in support of petitioners.

C. Grey Pash Jr., Counsel, Federal Communications Commission, argued the cause for respondents. With him on the brief were Jonathan B. Sallet, Acting General Counsel, and Jacob M. Lewis, Associate General Counsel. Robert B. Nicholson, Attorney, U.S. Department of Justice, Finnuala K. Tessier, Trial Attorney, and Richard K. Welch, Deputy Associate General Counsel, Federal Communications Commission, entered appearances.

Before: BROWN, GRIFFITH and MILLETT, Circuit Judges.

Opinion for the Court filed by Circuit Judge BROWN.

BROWN, Circuit Judge.

The word “captioning” typically conjures up an image of a television set with black bars scrolling at the bottom, transcribing a speaker's words with varying degrees of accuracy. For hearing-impaired individuals, however, it may also evoke the image of something else: telephones that have words scrolling on a screen during a call.

Sorenson Communications is a purveyor of these devices; its technology uses the Internet to transmit and receive both the call itself and the derived captions. Departing from common industry practice, the company gives its phones out for free, with the captioning feature turned on. The Federal Communications Commission, concerned about a dramatic spike in costs correlated with these tactics, hurriedly promulgated rules clamping down on both practices. After bypassing the notice and comment process for the interim rules, the FCC considered input from various stakeholders before finalizing an amended version of the rules. Sorenson now challenges the two rules, claiming they violate the Americans with Disabilities Act of 1990 and the Administrative Procedure Act. The company also asserts the Commission had no legal basis for skipping core rulemaking steps in its hurry to set forth the rules. We agree with most of Sorenson's arguments and therefore grant its petitions for review.

I

Title IV of the Americans with Disabilities Act of 1990 requires the Federal Communications Commission (“FCC” or “the Commission”) to arrange for telecommunications relay services (TRS) that are “functionally equivalent to the ability of a hearing individual who does not have a speech disability.” 47 U.S.C. §§ 225(a)(3), 225(b)(1). To carry out this directive, the FCC created a TRS Fund, collecting contributions from common carriers and other communications companies. See47 C.F.R. § 64.604(c)(5)(iii)(A). The Commission uses this Fund to compensate TRS providers for their services; rates range from $1.2855 per minute to $6.2390 per minute, depending on the kind of service provided.

One type of TRS service is the Internet Protocol Captioned Telephone Service (IP CTS), which uses the Internet to transmit phone conversations and captioned messages between hearing-impaired users, third-party callers, and relay operators. See generallyFed. Commc'ns Comm'n, Internet Protocol (IP) Captioned Telephone Service, available at https:// www. fcc. gov/ guides/ internet- protocol- ip- captioned- telephone- service. IP CTS providers are compensated at a rate of $1.7877 per minute, and prior to the rulemakings at issue, they served a population of about 150,000 users.

Sorenson Communications is an IP CTS provider. Unlike its competitors, who generally require their users to purchase a phone,¹ Sorenson provided its phones to customers at no charge. This led to the belief that Sorenson's unusual method of expanding its market presence resulted in a strain on the TRS fund, with actual disbursements to providers far exceeding projected amounts.

On January 25, 2013, the FCC released an Interim Order, without notice and comment, promulgating several interim rules. Misuse of Internet Protocol (IP) Captioned Telephone Service (“Interim Order”), 28 FCC Rcd. 703 (2013). It cited the potential for Fund depletion caused by IP CTS misuse as “good cause” for bypassing the notice-and-comment requirements of the Administrative Procedure Act (APA). Id. at 703 ¶ 1. Of the rules promulgated in the Interim Order, two are pertinent to this appeal. First, the Commission required all new users to register and self-certify their hearing loss, but only if the provider sold the IP CTS equipment for $75 or more. If the phone was distributed for free or for less than $75, the FCC required users to submit third-party professional certification of their hearing impairment. Id. at 718–19 ¶¶ 24, 25. Second, all IP CTS capable phones were to be distributed with the captions turned off; users were to activate the captioning feature for each call as needed. Id. at 722 ¶ 33. Commissioner Pai dissented in part, questioning whether self-certification would actually deter fraud and misuse. Sorenson petitioned for review of the Interim Order on April 8, 2013.

The FCC issued a Final Order on August 26, 2013, which made permanent—after notice and comment—most of the rules promulgated in the Interim Order. Misuse of Internet Protocol (IP) Captioned Telephone Service (“Final Order”), 28 FCC Rcd. 13420 (2013). It tweaked the price-floor rule, eliminating the option to be certified by a third-party professional; instead, all phones were to cost $75 or more to be eligible for TRS reimbursement, unless the phone was distributed through a state-run program (“the $75 Rule”). As for the default captions rule, the Commission added an exception: all IP CTS-capable phones were to be distributed with captions turned off by default, unless the user applied for an exemption based on a certification by an independent professional that the user was either too physically or mentally disabled to turn captions on manually (“the Default–Off Rule”). Sorenson petitioned this court for review of the Final Order on September 6, 2013.

II

We begin by examining whether the Commission had good cause for bypassing notice and comment in promulgating the Interim Order.² An agency can bypass the notice-and-comment requirement of the APA when it “for good cause finds ... that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.” 5 U.S.C. § 553(b)(3)(B).

But first, the standard of review. We have never expressly articulated the scope of our review in evaluating an agency's invocation of good cause. The Commission claims it is entitled to some measure of deference. We are not persuaded.

To accord deference would be to run afoul of congressional intent. From the outset, we note an agency has no interpretive authority over the APA, see Envirocare of Utah, Inc. v. NRC, 194 F.3d 72, 79 n. 7 (D.C.Cir.1999); we cannot find that an exception applies simply because the agency says we should. Moreover, the good-cause inquiry is “meticulous and demanding.” N.J. Dep't of Envt'l Protection v. EPA, 626 F.2d 1038, 1046 (D.C.Cir.1980). Our caselaw indicates we are to “narrowly construe[ ]” and “reluctantly countenance[ ]” the exception. See Mack Trucks, Inc. v. EPA, 682 F.3d 87, 93 (D.C.Cir.2012) (citations omitted). Deference to an agency's invocation of good cause—particularly when its reasoning is potentially capacious, as is the case here—would conflict with this court's deliberate and careful treatment of the exception in the past. Therefore, our review of the agency's legal conclusion of good cause is de novo.³

The Commission suggests notice and comment were impracticable. Impracticability is an “inevitably fact-or-context dependent” inquiry. See Mid–Tex Elec. Coop. v. FERC, 822 F.2d 1123, 1132 (D.C.Cir.1987). In the past, we have approved an agency's decision to bypass notice and comment where delay would imminently threaten life or physical property. See, e.g., Jifry v. FAA, 370 F.3d 1174, 1179 (D.C.Cir.2004) (upholding assertion of good cause when rule was “necessary to prevent a possible imminent hazard to aircraft, persons, and property within the United States”); Council of the S. Mountains, Inc. v. Donovan, 653 F.2d 573, 581 (D.C.Cir.1981) (noting the case was one of “life-saving importance” involving miners in a mine explosion); see also Jifry, 370 F.3d at 1179 (observing the good-cause exception should be invoked only in “ emergency situations ... or where delay could result in serious harm” (emphasis added)). This is no such case.

The Commission cited—and continues to cite—the threat of impending fiscal peril as cause for waiving notice and comment. Curiously, however, there were no factual findings supporting the reality of the threat. Instead, the agency speculatively stated “absent Commission action, there could be insufficient funds available ... to meet the needs of the Fund.” Interim Order,28 FCC Rcd. at 707 (emphasis added). Commissioner Pai, dissenting in part from the Commission's decision, helped fill in some of the blanks: $128 million had been allocated and collected for the 2012–2013 fiscal year, but the Fund had already paid out $70 million within the first six months. See id. at 750–51. This, he explained, would have created an unsustainable payout rate, leaving the Fund with obligations somewhere in between $108 and $159 million for the remainder of the year. See id. at 751.

Cause for concern? Perhaps. But hardly a crisis. Though we do not exclude the possibility that a fiscal calamity could conceivably justify bypassing the notice-and-comment requirement, this case does not provide evidence of such an exigency. The Commission's record is simply too scant to establish a fiscal emergency....