At&T Corp. v. F.C.C.

• Citation: 323 F.3d 1081
• Decision Date: 08 April 2003
• Docket Number: No. 01-1485.,01-1485.
• Parties: AT&T CORPORATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1081

323 F.3d 1081

AT&T CORPORATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents.

No. 01-1485.

United States Court of Appeals, District of Columbia Circuit.

Argued February 19, 2003.

Decided April 8, 2003.

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

Daniel Meron argued the cause for petitioner. With him on the briefs were Joseph R. Guerra, Jonathan Cohn, Mark C. Rosenblum, and Peter H. Jacoby.

Richard K. Welch, Associate General Counsel, Federal Communications Commission, argued the cause for respondent. With him on the brief were Jane E. Mago, General Counsel, John E. Ingle, Deputy Associate General Counsel, Lisa E. Boehley, Counsel, and Catherine G. O'Sullivan, Chief Counsel, U.S. Department of Justice, and Steven J. Mintz, Counsel.

Before: TATEL and GARLAND, Circuit Judges, and WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge:

The Federal Communications Commission assessed $80,000 in forfeiture penalties against AT&T for "slamming" two customers — that is, changing their long-distance telephone service without their authorization. Having paid the forfeiture, AT&T now petitions for review, arguing that in both instances it complied with the Commission's procedures for verification of telemarketing sales. Concluding that we have jurisdiction over AT&T's post-compliance challenge to the forfeiture, we hold that the Commission's requirement that telecommunications carriers guarantee that the actual line subscriber has authorized the service change order exceeds the Commission's statutory authority to prescribe procedures to verify that authorization. Accordingly, we vacate the relevant portions of the forfeiture orders.

I.

In order to prevent telecommunications carriers from making unauthorized changes to subscribers' telephone service — a practice known as "slamming" — the Telecommunications Act of 1996 makes it unlawful for telecommunications carriers to "submit or execute a change in a subscriber's selection of a provider of telephone exchange service or telephone toll service except in accordance with such verification procedures as the Commission shall prescribe." 47 U.S.C. § 258(a). In its rules implementing section 258 — and conforming its preexisting anti-slamming regulations to the new statute — the Commission established various procedures that carriers must use to verify the subscriber's authorization to submit the preferred carrier change order. These procedures, which vary depending on how the carrier chooses to market its services, include obtaining the subscriber's written authorization, or, if the carrier has solicited the subscriber over the telephone, using an independent third party to confirm the subscriber's preferred carrier change order and obtain "appropriate verification data (e.g., the subscriber's date of birth or social security number)." 47 C.F.R. § 64.1150(b), (d) (1999) (currently codified as amended at 47 C.F.R. § 64.1120(a)(1), (c)(1), (c)(3)). In all circumstances, however, Commission rules require that carriers obtain both "(i) Authorization from the subscriber, and (ii) Verification of that authorization in accordance with the procedures prescribed in this section." 47 C.F.R. § 64.1120(a)(1) (formerly codified at 47 C.F.R. § 64.1100(a)(1) (1999)).

In December 2000, the Commission issued a notice of apparent liability (NAL) to AT&T for several violations of section 258 and the Commission's anti-slamming regulations. Notice of Apparent Liability for Forfeiture, 16 F.C.C.R. 438, 2000 WL 1862892 (2000). After considering AT&T's opposition to the NAL, the Commission found the company liable for eleven slamming incidents—including the two at issue in this case, in which AT&T, in the course of making telephone solicitations, changed the long-distance carriers of two sets of customers, Thomas Patterson and Tracie and Greg Ortega, without their authorization. Order of Forfeiture, 16 F.C.C.R. 8978, 2001 WL 378366 (2001). In both cases, AT&T argued that because it complied with the Commission's prescribed procedures for conducting independent third-party verification of carrier change orders, it made no difference that Patterson and the Ortegas later complained that they neither knew the individuals who agreed to change their service nor authorized those individuals to approve a change on their behalf. Rejecting this argument, the Commission ruled that "[a] carrier cannot comply with the Commission's verification procedures if it receives confirmation from an individual not authorized to make the change." Id. at 8985, ¶ 18 (footnote omitted). Then, acting pursuant to Communications Act section 503(b), which authorizes forfeiture penalties against any person who "willfully or repeatedly" fails to comply with the Act or Commission rules and regulations, 47 U.S.C. § 503(b), the Commission assessed a $40,000 forfeiture for each of these two incidents, as well as for each of seven others, and $80,000 for two involving forged letters of authorization, which the Commission regards as "a particularly egregious form of slamming," Notice of Apparent Liability, 16 F.C.C.R. at 452, ¶ 31 (footnote omitted). The forfeiture penalties add up to $520,000. Order of Forfeiture, 16 F.C.C.R. at 8986, ¶ 20.

AT&T promptly paid the full amount of the forfeiture penalties, but at the same time filed a petition for limited reconsideration, asking the Commission to rescind the portion of the Forfeiture Order finding it liable for changing the Ortegas' and Patterson's long-distance carriers without their authorization. In its Order on Reconsideration, the Commission upheld its previous findings, noting that its anti-slamming rules "impose a strict liability standard," and that AT&T "ultimately must determine for itself how to ensure that no unauthorized changes occur." 16 F.C.C.R. 16,596, 16,597, ¶ 5, 16,599, ¶ 9, 2001 WL 1041246. "Should AT&T's methods prove unsuccessful," the Commission concluded, "the company is liable for any resulting unauthorized changes." Id. at 16,599 ¶ 9 (footnote omitted). AT&T filed a petition for review in this court, contending that the Commission's requirement of actual customer consent exceeds the agency's statutory authority.

II.

Before considering the merits of AT&T's challenge, we must address the Commission's argument that we lack jurisdiction over appeals from NAL forfeiture proceedings. The NAL procedure is just one of two ways in which the Commission may impose forfeiture penalties, each of which comes with a different set of jurisdictional requirements—differences that are relevant to the issue before us. See generally Action for Children's Television v. FCC, 59 F.3d 1249, 1253-54 (D.C.Cir. 1995) (describing the two forfeiture procedures).

Under the first and more formal procedure, the Commission provides notice to the alleged violator and affords it an opportunity for a hearing before an administrative law judge, who may then choose to impose forfeiture penalties. 47 U.S.C. § 503(b)(3)(A). The resulting forfeiture order is then subject to review in the court of appeals. Id. If the penalty remains unpaid once the forfeiture determination becomes final, the United States may bring a collection action in district court. Id. § 503(b)(3)(B).

Under the less formal NAL procedure at issue in this case, the Commission issues a notice of apparent liability to the alleged violator, affording it only the opportunity to show, in writing, why no forfeiture penalty should be imposed. Id. § 503(b)(4). The Commission may then issue an order directing payment of the proposed forfeiture, reducing the amount to be paid, or canceling the forfeiture altogether. 47 C.F.R. § 1.80(f)(4). If the order becomes final and the forfeiture subject refuses to pay, then Communications Act section 504(a) permits the Commission to refer the matter to the Department of Justice for commencement of a civil action to recover the forfeiture in a district court, where the forfeiture subject is entitled to a trial de novo. 47 U.S.C. § 504(a).

The Commission argues that unlike the formal hearing forfeiture process, where the Communications Act expressly gives courts of appeals jurisdiction to review forfeiture orders, the less formal NAL forfeiture proceedings are not subject to review in courts of appeals. The plain language of the Communications Act indicates otherwise. Section 402(a), the Act's general review provision, vests in courts of appeals exclusive jurisdiction over "[a]ny proceeding to enjoin, set aside, annul or suspend" or determine the validity of final Commission orders, 47 U.S.C. § 402(a); see 28 U.S.C. § 2342(1)—a category that includes forfeiture orders, see Illinois Citizens Comm. for Broad. v. FCC, 515 F.2d 397, 402 (D.C.Cir.1974) (holding that the court of appeals has jurisdiction over a third party's challenge to a paid forfeiture order pursuant to section 402(a)). And although section 504(a) creates an exception to that general rule, that exception is, by its express terms, limited to government actions for the recovery of forfeiture penalties: Section 504(a) provides that NAL forfeitures "shall be recoverable ... in a civil suit in the name of the United States" brought in the district court, and that "any suit for the recovery of a forfeiture imposed pursuant to the provisions of this chapter shall be a trial de novo." 47 U.S.C. § 504(a) (emphasis added). Because section 504(a) says nothing about district court jurisdiction where the forfeiture has already been recovered, it appears to leave court of appeals jurisdiction intact where, as here, the forfeiture subject has paid the assessed penalty.

Though the Commission agrees that section 504(a) deals only with challenges to unpaid forfeiture orders, it argues that section 504(a) nevertheless overrides section 402(a), albeit implicitly, for purposes of challenging paid forfeiture...