Sprint Communications Co., L.P. v. F.C.C., 94-1667

• Decision Date: 23 February 1996
• Docket Number: No. 94-1667,94-1667
• Citation: 76 F.3d 1221
• Parties: SPRINT COMMUNICATIONS COMPANY, L.P., Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and the United States of America, Respondents, AT & T Corporation, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1221

76 F.3d 1221

316 U.S.App.D.C. 168

SPRINT COMMUNICATIONS COMPANY, L.P., Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and the United States of

America, Respondents,

AT & T Corporation, Intervenor.

No. 94-1667.

United States Court of Appeals, District of Columbia Circuit.

Argued Oct. 2, 1995.

Decided Feb. 23, 1996.

Donald E. Ward argued the cause for petitioner, with whom Leon M. Kestenbaum, Washington, DC, was on the briefs.

Laurel R. Bergold, Counsel, Federal Communications Commission, Washington, DC, argued the cause for respondents, with whom William E. Kennard, General Counsel, Daniel M. Armstrong, Associate General Counsel, and John E. Ingle, Deputy Associate General Counsel, Federal Communications Commission, and Anne K. Bingaman, Assistant Attorney General, Robert B. Nicholson and Robert J. Wiggers, Attorneys, U.S. Department of Justice, Washington, DC, were on the brief.

Peter D. Keisler, Washington, DC, argued the cause for intervenor, with whom Jonathan E. Nuechterlein, Washington, DC, Jules M. Perlberg, Chicago, IL, Mark C. Rosenblum, and Peter H. Jacoby, Basking Ridge, NJ, were on the brief.

Before: BUCKLEY, GINSBURG, and TATEL, Circuit Judges.

Opinion for the court filed by Circuit Judge GINSBURG.

GINSBURG, Circuit Judge:

In 1987 Sprint complained to the FCC that AT & T had been charging it unlawfully high rates for Digital Data Service. The Common Carrier Bureau dismissed Sprint's claim insofar as it related to damages suffered outside the two-year limitations period of 47 U.S.C. § 415--that is, damages suffered before January 1985. The Commission affirmed the Bureau's decision and Sprint petitioned this court for review.

Sprint argues first that AT & T should be denied the protection of the statute of limitations with respect to damages incurred before 1985 because, until November 12, 1985, AT & T fraudulently concealed the cost justification data upon which Sprint's claim is based. Fraud aside, Sprint argues in the alternative that under the "discovery rule" the statute of limitations did not begin to run until November 12, 1985, when AT & T first publicly revealed and Sprint first discovered the information upon which the claim is based. Finally, Sprint objects to the FCC's refusal to permit discovery or conduct evidentiary proceedings with regard to the statute of limitations issues. As explained below, we affirm the FCC's decision in all respects.

I. Background

Digital Data Service (DDS) is a private line communications service that AT & T first offered in 1974, pursuant to its Tariff 267. AT & T offered DDS at four different speeds, the highest of which was 56 kilobits per second (kbps).

From the outset the carrier proposed and sought to justify higher rates for the higher-speed versions of DDS. In 1977, after conducting an evidentiary hearing, the FCC held that the DDS rates in general were noncompensatory--that is, that the overall rate structure for DDS would yield too low a rate of return on AT & T's investment in the service. In addition, although it made no finding about the reasonableness of the rates for any particular DDS offering, the FCC did find that the progressively higher rates for higher speeds of service were not cost-justified because AT & T's own analysis demonstrated that there was little increase in cost to correspond with an increase in the speed of the service provided. The agency therefore directed AT & T to develop new, fully compensatory rates for DDS in accordance with the "fully distributed cost" methodology that the Commission had prescribed in Docket No. 18128, which established basic ratemaking standards for AT & T's private line services. Until such new rates were in place, AT & T was permitted to adopt interim DDS rates that either were targeted to earn a 9.5% rate of return or conformed to the rate structure for AT & T's analog private line service. See AT & T, 62 F.C.C.2d 774 (1977), affd. sub nom. AT & T v. FCC, 602 F.2d 401 (D.C.Cir.1979).

Subsequently, AT & T submitted a revision of Tariff 267 in which it proposed interim DDS rates along the lines of its analog rates. The revised 56 kbps rates were five times the rates for the next-fastest DDS offering. Over the objections of customers who claimed that the 56 kbps rates were too high, the FCC nevertheless concluded that AT & T's method of calculating the 56 kbps rates was "not unreasonable for an interim period" and allowed them to go into effect. AT & T, 63 F.C.C.2d 936, 938 (1977).

In July 1977 AT & T filed another revision of its Tariff 267. In March 1978 the FCC rejected the DDS rates proposed in this revision because they did not conform with the specific requirements set out in the earlier DDS order and in Docket No. 18128. AT & T was given 90 days to tell the Commission when it would be able to file a fully justified DDS tariff that complied with all the relevant FCC orders. See AT & T, 67 F.C.C.2d 1195, 1231 (1978) (60 days); AT & T, 70 F.C.C.2d 616, 634 (1979) (30-day extension). AT & T then requested a meeting with the Common Carrier Bureau to discuss the particular requirements with which its rates would have to comply. AT & T claimed that it would be ready after that meeting to tell the FCC when it would file cost-justified rates. The meeting never took place.

In late 1979 the Commission held that AT & T's analog rates, upon which the interim DDS rates were based, were unjustifiable under the "fully distributed cost" methodology prescribed in Docket No. 18128. This decision was based in part upon the agency's finding that some DDS costs were being paid for by customers using other AT & T services. See AT & T, 74 F.C.C.2d 1 (1979). The Commission allowed the analog rates to remain in place, however, pending subsequent Commission action or a tariff revision.

In 1981, in the course of a rulemaking proceeding addressed to cost allocation issues, the Commission again found that the methodology AT & T used to justify its rates was inadequate and unreliable because certain private line services, including DDS, were not allocated their full cost burden. Consequently, the FCC directed AT & T to develop rates using the Interim Cost Allocation Manual (ICAM), which uses a cost methodology similar to that prescribed in Docket No. 18128. See AT & T, 84 F.C.C.2d 384 403 (1981) [hereinafter ICAM Order ], affd. sub nom. MCI Telecomm. Corp. v. FCC, 675 F.2d 408 (D.C.Cir.1982). Meanwhile, the interim DDS rate structure put into place in 1977 remained in effect until 1985, when AT & T restructured the rates for nearly all its private line services.

While the overall rate scheme for DDS remained the same, the rates themselves were raised incrementally each time the FCC increased AT & T's authorized rate of return. When the FCC increased the carrier's rate of return in 1981, it also considered and rejected various customers' arguments that AT & T's rates for 1.544 mbps and 56 kbps DDS earned an excessive rate of return. The Commission concluded that there was inadequate factual support for this contention, particularly in light of its earlier concerns that the DDS rates were unreasonably low. AT & T, 86 F.C.C.2d 689, 701 (1981).

Nonetheless, that November GTE Telenet Communications Corporation filed a complaint with the FCC alleging that AT & T's rates for 56 kbps DDS were indeed excessive. Telenet argued that the interim DDS rates, which the FCC had approved without cost-justification, had been in place for longer than a reasonable interim period. Moreover, Telenet pointed out, the FCC had since determined that the analog rates upon which AT & T's interim DDS rates were based were themselves inadequately cost-justified. Telenet also cited certain filings that AT & T had made with the Commission in 1978 and 1980 documenting that its earnings from 56 kbps DDS were roughly twice the carrier's then-authorized rate of return. In its answer to the Telenet complaint, AT & T denied that its rates were unlawful but admitted that in 1980 its rate of return on 56 kbps DDS was approximately 15%, or half-again its then-authorized rate of return.

In the course of investigating Telenet's complaint, the FCC staff asked AT & T to submit more cost-justification data and earnings information. Accordingly, on November 12, 1985 AT & T filed data showing that its actual rates of return on the 56 kbps service for 1979-81 and for 1983, and its projected rates of return for 1982-85, substantially exceeded its authorized rates of return for each of those years. GTE Telenet Comm. Corp. v. AT & T, File No. 81-32, Response of American Telephone & Telegraph Co., at tbl. A (Nov. 12, 1985).

In May 1986 the Common Carrier Bureau held that Telenet's complaint was barred by the two-year statute of limitations in 47 U.S.C. § 415 insofar as it related to damages suffered before November 1979. The Bureau also concluded that Telenet had failed to prove that AT & T's 56 kbps rates were unlawful during the period November 1979 to January 1982. With respect to Telenet's claims arising from later periods, the FCC held that AT & T must pay restitution. The parties then settled the case and the FCC dismissed the complaint and vacated the order.

In January 1987 Sprint likewise filed a complaint with the FCC seeking to recover damages suffered by a subsidiary (Uninet) that had paid AT & T's tariffed rates for 56 kbps DDS from 1982 to 1986. Sprint based this claim exclusively upon AT & T's November 12, 1985 report to the FCC. Sprint and AT & T reached a settlement with regard to the claims arising within the two-year limitations period, see U.S. Sprint Comm. Co. v. AT & T, 3 F.C.C.R. 6644 (Common Carrier Bureau 1988), and AT & T moved to dismiss the portion of the claim that sought damages suffered more than two years earlier. Sprint opposed on the ground that both the discovery rule and the doctrine of fraudulent concealment preclude AT & T's resort to the statute of limitations.

After consolidating Sprint's claim...