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Supreme Court Decision Update - Global Crossing Telecommunications, Inc. v. Metrophones Telecommunications, Inc.

phoneB.jpgToday’s last opinion comes in Global Crossing Telecommunications, Inc. v. Metrophones Telecommunications, Inc. (PDF of the opinion). This case is about a very narrow issue – whether a company which owns payphones can sue a long-distance provider for that provider’s failure to pay FCC-regulated fees to the payphone company.

QuizLaw Analysis: Yes, they can sue. That’s really all there is to this. I mean, yeah there’s more, about whether the relevant FCC regulations are legal, and a short quasi-history lesson on phone regulations. But the two more significant things about this case are (i) that it’s the third one of the day where the Scalia was a dissenter – he’s a grumpy one today; and (ii) the majority actually affirmed the Ninth Circuit. These days, that’s some shocking stuff.

So what’s the background here? It’s pretty simple and straightforward. But in the majority opinion, Justice Breyer says it’s best to start with a history lesson.

So it all started when Congress enacted the Communications Act of 1934, granting the FCC authority to regulate interstate telephone communications. The FCC then put together a regulatory system similar to the way other agencies regulate other common carriers (like railroads or public utilities) - essentially, the utility gives the agency the rates it plans to use, and the commission eitherapproves them, suggests changes, or dings them. It made sense for the FCC to track these other systems in light of the fact that Congress copied much of the 1934 Act’s language from the Interstate Commerce Act of 1887, which applied to regulation of the railroads.

In the 70’s, the FCC updated some of its regulations to allow for new carriers to enter into the long-distance market. And Congress then amended the 1934 Act in 1990, along with enacting new statutes, encouraging such long-distance competition.

There are two sections of the 1934 Act relevant here, and these weren’t changed by Congress in the 90’s. These are sections 201(b) and 207:

The relevant sections (in both statutes) authorize the commission to declare any carrier “charge,” “regulation,” or “practice” in connection with the carrier’s services to be “unjust or unreasonable”; they declare an “unreasonable,” e.g., “charge” to be “unlawful”; they authorize an injured person to recover “damages” for an “unlawful” charge or practice; and they state that, to do so, the person may bring suit in a “court” “of the United States.”

What does any of this have to do with this case? Well “[t]he regulatory problem that underlies this lawsuit arises at the intersection of traditional regulation and newer, more competitively oriented approaches.” And that intersection is pretty easy to follow - in 1990, Congress passed laws requiring payphone operators to allow payphone users to have free access to the long-distance carrier of their choice. But it also didn’t want to put the cost of this on the payphone operator, so Congress told the FCC to setup regulations which would require the long-distance carriers to make some payment to the payphone operators. The FCC did this, requiring the carriers to pay the operators $0.24 for each “free” long-distance call made (although it told the carriers that this cost could be billed to the customers). Later, the FCC said that if a carrier refused to make such a payment to a payphone operator, this would be considered an “unreasonable practice.”

So how does this case involve the long-distance and payphone stuff? Metrophones is a payphone operator and Global Crossing is a long-distance carrier. In 2003, Metrophones sued Global Crossing, because Global Crossing was refusing to pay that $.24/call for long-distance calls made on Metrophones’ payphones via Global Crossing’s services. An issue came up, during the lawsuit, about whether Metrophones was even entitled to file this lawsuit. It relied on the above-mentioned sections 201(b) and 207 of the 1934 Act to say that Global Crossing’s refusal to pay gave it the right to file this federal lawsuit. The District Court agreed, and the Ninth Circuit affirmed, which gets us to where we are today.

So what’s the majority say? We’ve got a majority opinion from Justice Breyer, joined by everyone but the Scalia and Justice Thomas (who each filed their own dissenting opinions). Breyer begins by noting that the relevant language of both the 1934 Act and the Interstate Commerce Act make it clear that the purpose of the relevant statutory sections is to allow someone who has been injured by a violation of section 201(b) of the Communications Act to file a federal lawsuit in federal court for damages. Such a lawsuit is allowed wherever the damages result from an unlawful act, and section 201(b) says that an “unlawful” act is one which is deemed “unjust or unreasonable.” So:

Insofar as the statute’s language is concerned, to violate a regulation that lawfully implements section 201(b)’s requirements is to violate the statute.

Thus, the only “difficult question” here, as far as Breyer is concerned, is whether the FCC regulation about long-distance payments is a lawful implementation of the Communications Act’s prohibition of an “unreasonable practice.”

And is the FCC regulation a lawful implementation of the ban on “unreasonable practices?” Breyer says the regulation is reasonable, and therefore lawful. The regulation “easily fits within the language of the statutory phrase:”

That is to say, in ordinary English, one can call a refusal to pay Commission-ordered compensation despite having received a benefit from the payphone operator a “practic[e] … in connection with [furnishing a] communication service … that is … unreasonable.”

Plus, the regulated activity here at issue is similar to other transportation and communications activities which have been regulated by agencies for a long time. In other words, it’s typical to see an agency set some type of rate-sharing of revenues when the service at issue has been provided by different entities along different segments. For example, when different call providers cover different segments of a call, such a sharing of revenues has been regulated. Similarly, with regard to transportation, there is a similar sharing scheme for the situation where different carries offer transportation services for various segments of the service.

Breyer notes that this is not meant to suggest that any violation of an FCC regulation is an “unreasonable practice:”

Here there is an explicit statutory scheme, and compensation of payphone operators is necessary to the proper implementation of that scheme. Under these circumstances, the FCC’s finding that the failure to follow the order is an unreasonable practice is well within its authority.

It’s also worth noting that when Congress rewrote certain provisions in the 90’s to promote competition, it left the language of section 201(b) untouched and in place. “That fact indicates that the statute permits, indeed it suggests that Congress likely expected, the FCC to pour new substantive wine into its old regulatory bottles.”

And that’s it.

Is that really it? Sort of. Breyer goes on to address some of the arguments made by Global Crossing, supporting amici (briefs from third-parties) and the dissents. There was an argument that section 207 only authorizes lawsuits related to statutory violations, not for violations of regulations, but Breyer says this case is about a statutory violation, because ultimately, we’re talking about a violation of the prohibition against “unreasonable practices.” Further, ” ‘[a] Congress that intends the statute to be enforced through a private cause of action intends the authoritative interpretation of the statute to be so enforced as well.’ ”

The next argument (courtesy of the Scalia) was that there can’t be a lawsuit for violation of a substantive regulation, because a violation of such a regulation is not the same as a violation of the Act. Breyer doesn’t buy this argument because the FCC “has explicitly and reasonably ruled that the particularly regulatory violation does violate section 201(b).” Plus, Breyer says the distinction between substantive regulations and interpretive regulations doesn’t matter, because the Act doesn’t refer to any such distinction.

Thomas, in his dissent, argued that only customers could bring such lawsuits, not carrier suppliers. Breyer isn’t buying this either, because that’s not what the Act says, and there’s no legislative or regulatory history to support such a distinction.

And what of the dissents? Well I gave you a one-sentence overly-simplified summary above. You can read the rest for yourself in the actual opinion, ‘cause it’s quitting time for me.