Farmers & Merchants Mutual Telephone Co. v. Fed. Commc'ns Comm'n

• Decision Date: 30 December 2011
• Docket Number: No. 10–1093.,10–1093.
• Citation: 668 F.3d 714,55 Communications Reg. (P&F) 75
• Parties: FARMERS AND MERCHANTS MUTUAL TELEPHONE COMPANY OF WAYLAND, IOWA, Petitioner v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, RespondentsNorthern Valley Communications, LLC, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

55 Communications Reg. (P&F) 75

668 F.3d 714

FARMERS AND MERCHANTS MUTUAL TELEPHONE COMPANY OF WAYLAND, IOWA, Petitioner

v.FEDERAL COMMUNICATIONS COMMISSION and United States of America, RespondentsNorthern Valley Communications, LLC, et al., Intervenors.

No. 10–1093.

United States Court of Appeals, District of Columbia Circuit.

Argued Dec. 7, 2011.Decided Dec. 30, 2011.

On Petition for Review of Orders of the Federal Communications Commission.John F. Cooney argued the cause for petitioner. With him on the briefs were James U. Troup, Tony S. Lee, and Christine McLaughlin.

Ross A. Buntrock argued the cause for intervenor Northern Valley Communications, LLC. With him on the briefs was G. David Carter. Jonathan E. Canis and Stephanie A. Joyce entered appearances.

Joel Marcus, Counsel, Federal Communications Commission, argued the cause for respondents. With him on the brief were Austin C. Schlick, General Counsel, Peter Karanjia, Deputy General Counsel, and Richard K. Welch, Acting Associate General Counsel. Robert B. Nicholson and Robert J. Wiggers, Attorneys, U.S. Department of Justice, and Daniel M. Armstrong III, Associate General Counsel, Federal Communications Commission, entered appearances.David H. Solomon argued the cause for intervenors Qwest Communications Company, LLC, et al. With him on the brief were Craig J. Brown, Russell P. Hanser, Robert B. McKenna, Charles W. McKee, Michael B. Fingerhut, Scott H. Angstreich, Gregory G. Rapawy, M. Robert Sutherland, Gary L. Phillips, Paul K. Mancini, Michael E. Glover, Karen Zacharia, and Christopher M. Miller. David L. Lawson and James P. Young entered appearances.

Before: ROGERS, TATEL and KAVANAUGH, Circuit Judges.

Opinion for the Court by Circuit Judge ROGERS.

ROGERS, Circuit Judge:

In the three challenged orders, the Federal Communications Commission addressed a “traffic pumping” (or access stimulation) scheme in which the holder of the filed tariff entered into contractual arrangements with conference calling companies and charged the interexchange carrier the tariff rate for providing switched access service. Interpreting the tariff to require switched access service to be provided to an end user, the Commission determined that the contractual arrangements were inconsistent with the subscriber relationship required by the tariff and violated 47 U.S.C. §§ 201(b) and 203(c). The Commission also determined, in the alternative, that the tariff holder had exceeded the permissible rate of return under the tariff and violated 47 U.S.C. § 201(b). Farmers & Merchants Mutual Telephone Company (“Farmers”), the holder of the tariff, petitions for review on the grounds that in addition to ignoring jurisdictional requirements, the Commission misread the tariff and failed to adhere to its precedent and rules. For the following reasons, we deny the petition.

I.

In May 2007, Qwest Communications Corporation (“Qwest”), an interexchange carrier (“IXC”) receiving access services from Farmers, filed a complaint alleging that Farmers was collecting “unreasonably high terminating switched access charges by inflating the amount of traffic delivered to it by Qwest and other [IXCs] in a manner that rendered Farmers's rates wholly unrelated to its costs.” Compl. at 1. Qwest argued the charges to it were unlawful under sections 201(b) and 203(c) of the Communications Act of 1934, as amended, and elected to have the amount of any damages determined in a separate proceeding. In response, the Commission issued the challenged orders:

—In Farmers I,¹ the Commission ruled that Farmers had violated section 201(b) by earning an excessive rate of return, but Qwest could not recover damages because Farmers' tariff was “deemed lawful” under 47 U.S.C. § 204(a)(3). In its answer to the complaint, Farmers stated that the conference calling companies were subscribers to Farmers' interstate access service and were billed the federal subscriber line charge as well as for local telephone service and rental of floor space in Farmer's central office (where the conference bridges were located). Answer at vii.

—In Farmers II,² the Commission, after granting Qwest's request for partial reconsideration and initiating additional proceedings, found that new evidence supported Qwest's assertion that the conference calling companies, in fact, never took tariffed services from Farmers.³ The Commission found that because the companies were not end users under the tariff, “Farmers' transport of traffic to them did not constitute ‘switched access' under the tariff” and therefore Farmers' corresponding charges to Qwest were unlawful under sections 201(b) and 203(c) of the Communications Act. Farmers II, 24 FCC Rcd. at 14813. The Commission also reaffirmed its ruling on Farmers' unreasonable rate-of-return. Consequently, Farmers had violated sections 201(b) and 203(c) and was liable to Qwest for damages.

—In Farmers III,⁴ the Commission denied Farmers' petition for reconsideration, rejecting challenges to its authority to issue Farmers II and its determination that the companies were not “end users” under Farmers' tariff.

II.

As a threshold matter, Farmers, joined by intervenor Northern Valley Communications, LLC (“Northern Valley”), contends that the Commission lacked authority to overturn its decision in Farmers I because it failed, as 47 U.S.C. § 405(b) requires, to act within 90 days on Qwest's petition for partial reconsideration and, consequently, Farmers I became a final, appealable order. This contention is based on a misreading of the statute.

Section 405(b) requires the Commission to “issue an order granting or denying” a petition for reconsideration within 90 days, 47 U.S.C. § 405(b)(1), and provides that any such order granting or denying a petition shall be a final, appealable order, id. § 405(b)(2). By its plain terms, this provision does not speak to the finality of the original order for which reconsideration is sought, but rather to the Commission's need to grant or deny a petition for reconsideration. See Chevron U.S.A. Inc. v. Nat'l Res. Def. Council, Inc., 467 U.S. 837, 842–43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).

The Commission granted in part Qwest's petition for partial reconsideration on January 29, 2008, within 90 days after Qwest filed its petition on November 1, 2007. In its order, the Commission initiated additional proceedings to compel production of and to consider previously undisclosed evidence. Qwest's Second Supplement to Petition for Reconsideration was submitted as part of the additional proceedings, and was not, the Commission maintains, a separate petition for reconsideration of an order, decision, report, or action taken by the Commission. The Commission's interpretation of section 405 and its rule, see 47 C.F.R. § 1.106, as allowing it to defer a ruling on the merits pending completion of the additional proceedings appears reasonable and entitled to deference. See Chevron, 467 U.S. at 843, 104 S.Ct. 2778. But even if the Commission had missed the 90–day deadline, it would not have lost jurisdiction to issue Farmers II because Congress established no consequence for failing to meet that deadline.⁵ See Brock v. Pierce Cnty., 476 U.S. 253, 265–66, 106 S.Ct. 1834, 90 L.Ed.2d 248 (1986); Gottlieb v. Pena, 41 F.3d 730, 733 (D.C.Cir.1994); AT & T Corp. v. Beehive Tel. Co., 17 FCC Rcd. 11641, 11652 & n. 80 (2002). Contrary to intervenor Northern Valley's contention during oral argument, we find nothing in the legislative history to support a contrary reading of section 405. See S. Rep. No. 100–142 (1987), 1988 U.S.C.C.A.N. 4103.

Farmers' suggestion that the Commission lacked subject matter jurisdiction ab initio over Qwest's complaint “is flatly wrong.” Resp't's Br. at 38. Farmers maintains that if the Commission was correct that Qwest was not required to pay Farmers' access-service tariff rates, then the service Farmers provided was not a common-carrier service offered in a tariff and the Commission exceeded its authority by considering Qwest's complaint under the Communications Act's Title II common-carrier provisions. The Commission had jurisdiction to consider Qwest's complaint pursuant to 47 U.S.C. § 208(a), which provides authority to adjudicate complaints “of anything done or omitted to be done by any common carrier” in violation of the Communications Act. Farmers held itself out as a common carrier providing access service to IXCs such as Qwest and billed Qwest for that service. Section 203(c)(3) makes unlawful a common carrier's provision of service outside of the terms of its tariff; Qwest's complaint alleged Farmers violated section 203(c) and a Commission ruling Farmers did so could not immunize it from the complaint process.

III.

The merits question is whether the Commission properly determined that Farmers was not entitled to bill Qwest for access service under Farmers' tariff because Farmers had not provided interstate “switched access service” as that term is defined in Farmers' federal access tariff. In matters of tariff interpretation, the court applies a deferential standard of review and will uphold the Commission's interpretation where it is “reasonable [and] based upon factors within the Commission's expertise.” Global NAPs, Inc. v. FCC, 247 F.3d 252, 258 (D.C.Cir.2001) (internal citation omitted).

The Commission relied on three key provisions in Farmers' tariff in concluding that the tariff allowed Farmers to provide (and bill for) switched access service only when it delivers a call to an end user, i.e., a person or entity that subscribes to Farmers' service under the tariff. At the relevant time, Farmers was operating under the Kiesling Associates LLP FCC Number 1 Tariff (“Kiesling Tariff”), which incorporates provisions of the National Exchange Carrier Association FCC Tariff Number 5 (“NECA Tariff”), e.g., Kiesling Tariff §§ 2, 6. Under Farmers' tariff: (1) “switched access” means a service that allows an IXC “to terminate calls from a...