Southwestern Bell Telephone Co. v. Federal Communications Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 8, 1999 Decided June 25, 1999

No. 98-1197

Southwestern Bell Telephone Company, et al.,
Petitioners

v.

Federal Communications Commission and
United States of America,
Respondents

AT&T Corporation, et al.,
Intervenors

On Petition for Review of an Order of the
Federal Communications Commission

Geoffrey M. Klineberg argued the cause for petitioners.
With him on the briefs were Michael K. Kellogg, Mark L.
Evans, James D. Ellis, Robert M. Lynch, Durward D. Dupre,

Michael J. Zpevak, Thomas A. Pajda, Michael E. Glover, and
Edward Shakin.

Joel Marcus, Counsel, Federal Communications Commis-
sion, argued the cause for respondents. On the brief were
Joel I. Klein, Assistant Attorney General, U.S. Department of
Justice, Robert B. Nicholson and Robert J. Wiggers, Attor-
neys, Christopher J. Wright, General Counsel, Federal Com-
munications Commission, John E. Ingle, Deputy Associate
General Counsel, and Carl D. Lawson, Counsel.

Maria L. Woodbridge, Donald B. Verrilli, Jr., Nory Miller,
Mark C. Rosenblum, Peter H. Jacoby, Jules M. Perlberg and
Stephen F. Smith were on the brief for intervenors MCI
Telecommunications Corporation and AT&T Corporation.
Matthew B. Pachman and Gene C. Schaerr entered appear-
ances.

Before: Wald, Silberman, and Ginsburg, Circuit Judges.

Opinion for the Court filed by Circuit Judge Ginsburg.

Ginsburg, Circuit Judge: The Federal Communications
Commission determined that the method by which six local
exchange carriers (LECs) calculated the "common line bas-
ket" in arriving at their 1997-98 tariffs resulted in unjust and
unreasonable rates charged to interexchange carriers (IXCs),
and it ordered the LECs to refund the overcharges. Two of
the LECs, Southwestern Bell Telephone Company and the
Bell Atlantic telephone companies, sought reconsideration of
that order, which the Commission denied. Southwestern Bell
then petitioned for review of the order denying reconsidera-
tion. As explained below, an order denying reconsideration is
not reviewable for material error but only for new evidence or
changed circumstances. Applying that standard of review,
we deny the petition.

I. Background

In 1990 the Commission adopted a price cap system for
larger LECs, including petitioner Southwestern Bell and
intervenor Bell Atlantic. The general features of the price
cap system are described in other opinions of this court. See,

e.g., Illinois Pub. Telecomm. Ass'n v. FCC, 117 F.3d 555, 570
(1997); Southwestern Bell Tel. Co. v. FCC, 100 F.3d 1004,
1005 (1996). The component of the price cap pertinent to this
case is the "common line basket," which contains all the
interstate charges associated with the "local loop"--the facili-
ties that carry traffic between the end user and a LEC's
central switch.

The cost of the local loop is shared by end users and the
IXCs. The precise formula for determining the amounts to
be paid by the two groups is quite complex, see generally 47
C.F.R. s 69, but a simple description will suffice for this case.
The portion of the "common line basket" not allocated auto-
matically to the IXCs is known as the base factor portion
(BFP). The BFP is divided by the projected end user
common line (EUCL) demand to arrive at a monthly EUCL
charge. End users are charged the lower of that amount or
their EUCL cap. Prior to 1998 the caps were $3.50 for
residential and single-line business subscribers, and $9.00 for
multi-line business subscribers. That is, if the calculated
EUCL charge was less than or equal to $3.50, then a LEC
would recover the full BFP from end users. If the calculated
EUCL charge was more than $3.50, then residential and
single-line business users would pay $3.50 and multi-line
business users would pay the lower of the EUCL charge or
$9.00; the LEC would recover the remainder of the BFP
through a per-minute carrier common line (CCL) charge to
the IXCs. Accordingly, between $3.50 and $9.00 a change in
the level of the EUCL charge would inversely affect the level
of the CCL charge to the IXCs.

At the urging of the IXCs, which claimed that the LECs
had been overcharging them for per-minute access to the
local loop since the inception of the price cap system, the
Commission suspended for one day the 1997-98 tariffs filed
by the price cap LECs. In the Commission's view the LECs
had not adequately supported their BFP revenue require-
ments or their end user demand projections. In its order
designating issues for investigation, the Commission required
each LEC to submit its actual and projected BFP revenue
requirements from 1991 to 1997, as well as a detailed explana-

tion of the method by which it arrived at its BFP projection
for the 1997-98 tariff. The Commission also noted that
under-forecasting the BFP requirement would not necessarily
reduce a LEC's total common line revenue; for reasons that
need not detain us for the purposes of this case, "so long as
this year's growth in minutes of use per common line is
expected to exceed half the previous year's growth, the price
cap LEC would expect to receive greater total common line
revenues by charging relatively lower EUCLs and relatively
higher CCL charges."

In its Investigation Order, which concluded its inquiry into
the LECs' 1997-98 tariffs, the Commission found that six of
the twelve LECs under investigation--petitioner Southwest-
ern Bell, intervenor Bell Atlantic, US West, NYNEX, GTE,
and Sprint--"employed forecasts that reflect a consistent
downward bias." The Commission concluded that the 1997-
98 tariffs filed by five of the six LECs contained the same
bias, and that the tariff filed by the sixth, Bell Atlantic, had a
specific flaw in its forecasting methodology. For the reasons
set out in its Designation Order, the agency rejected the
LECs' contention that they have little or no incentive to
underestimate their BFP revenue requirements because, in
their view, the allocation of charges between end users and
the IXCs is a zero-sum game. The Commission next ana-
lyzed the pattern of underestimation in the LECs' forecasts
of their per-line BFP revenue requirements, that is, the
result of dividing the BFP by projected end user demand.
The Commission concluded that "their forecasting techniques
underestimate the per-line BFP revenue requirement in a
statistically significant manner" and, therefore, that their
1997-98 "forecasts are likely to be the product of biased
forecasting techniques." Finally, the Commission canvassed
the reasons proffered by the LECs for their underestimates
and rejected them, ultimately concluding that the 1997-98
per-minute charges to the IXCs were not just and reasonable.

The Commission then prescribed for each LEC a method
for determining just and reasonable CCL charges for the
purpose of ordering refunds to the IXCs, although it acknowl-
edged that it had not previously prescribed a methodology for

forecasting the BFP and stated that it continued "to believe
that there are many different methods that could produce
reasonable forecasts for individual LECs." It ordered the six
LECs to use the revised BFP forecasts to calculate the
refunds owed to the IXCs for the period July 1 to December
31, 1997 and to recalculate the EUCL and the CCL charges
for use from January 1 through June 30, 1998.

Bell Atlantic petitioned for rehearing. In its petition, the
LEC challenged the assumptions underlying the Commis-
sion's conclusion that underestimating the BFP revenue re-
quirement is not necessarily a zero-sum game and the analy-
sis upon which the Commission relied in concluding that the
LECs' underestimates were the result of bias. Bell Atlantic
also claimed that for tariffs filed in years prior to 1997 its
method was more accurate than the Commission's. Finally, it
argued that if the agency was going to order the LECs to
make refunds to the IXCs, then it should have "provid[ed] a
method to recover that same amount--which no one disputed
they were entitled to recover--from end-users." Southwest-
ern Bell submitted comments in support of Bell Atlantic's
petition and also filed its own petition for rehearing, in which
it challenged a different aspect of the Commission's decision.
The agency denied both petitions for reconsideration.

Southwestern Bell then petitioned this court for review of
the Reconsideration Order only. Bell Atlantic intervened and
the two filed the joint briefs now before us.

II. Analysis

The Commission, along with AT&T and MCI, which inter-
vened in support of the agency, argue that the Reconsidera-
tion Order is not a reviewable order and, therefore, that this
court must dismiss the petition to review that order for lack
of jurisdiction. For the reasons given today in Beehive
Telephone Co. v. FCC, No. 98-1293, we hold that we have
jurisdiction over the petition for review pursuant to 47 U.S.C.
ss 402(a) and 405(b)(2). See slip op. at 6-8. We agree that
the petition is unreviewable, however, and we deny it on that
ground.

A. Standard of Review

Twenty-five years ago we regarded it as "settled [law] that
an order which merely denies rehearing of another order is
not itself reviewable" and that the filing of a petition for
reconsideration simply "toll[s] the period for seeking judicial
review" of the underlying order. Microwave Communica-
tions, Inc. v. FCC, 515 F.2d 385, 387 n.7 (1974). The Su-
preme Court reached the same conclusion thirteen years later
in ICC v. Brotherhood of Locomotive Engineers, 482 U.S. 270,
279-80 (1987), citing our earlier decision with approval.

In the Supreme Court case a union representing railroad
employees sought review of two decisions of the Interstate
Commerce Commission, one denying the Union's petition for
clarification, which was "in effect a petition to reopen," id. at
285, and the other denying its petition for reconsideration of
the first petition. The Court held that when an agency
"refuses to reopen a proceeding, what is reviewable is merely
the lawfulness of the refusal ... [and] overturning the refusal
to reopen requires 'a showing of the clearest abuse of discre-
tion.' " Id. at 278 (emphasis in original). Reviewing its past
decisions, the Court noted that it had entertained a petition to
review an agency's refusal to reopen a proceeding only in
cases involving new evidence or changed circumstances and
never in a case alleging solely material error. The Court
explicated the distinction as follows:

If review of denial to reopen for new evidence or changed
circumstances is unavailable, the petitioner will have
been deprived of all opportunity for judicial consider-
ation--even on a "clearest abuse of discretion" basis--of
facts which, through no fault of his own, the original
proceeding did not contain. By contrast, where no new
data but only "material error" has been put forward as
the basis for reopening, an appeal places before the
courts precisely the same substance that could have been
brought there by appeal from the original order--but
asks them to review it on the strange, one-step-removed
basis of whether the agency decision is not only unlawful,

 but so unlawful that the refusal to reconsider it is an
abuse of discretion. Id. at 279 (emphasis in original).

The Court went on to explain that the latter sort of appeal

serves no purpose whatever where a petition for recon-
sideration has been filed within a discretionary review
period specifically provided by the agency (and within
the period allotted for judicial review of the original
order), since in that situation the petition tolls the period
for judicial review of the original order, which can there-
fore be appealed to the courts directly after the petition
for reconsideration is denied. Id. (emphasis in original).

When, as in BLE, a petition for reconsideration is filed
outside the period allotted in the Hobbs Act for judicial
review of an agency order, allowing review of the denial of
reconsideration "would serve only the peculiar purpose of
extending indefinitely the time within which seriously mistak-
en agency orders can be judicially overturned." Id. (empha-
sis in original).

The Court also noted that the Hobbs Act specifies only the
"form of proceeding for judicial review," 5 U.S.C. s 703,
whereas the Administrative Procedure Act "codifies the na-
ture and attributes of judicial review, including the traditional
principle of its unavailability 'to the extent that ... agency
action is committed to agency discretion by law.' " BLE, 482
U.S. at 282 (quoting 5 U.S.C. s 701(a)(2)). The Court held
that this limitation upon judicial review in the APA "applies
to the general grant of jurisdiction [in] the Hobbs Act." Id.
Noting the "tradition of nonreviewability ... with regard to
refusals to reconsider for material error," the Court conclud-
ed that "the agency's refusal to go back over ploughed ground
is nonreviewable." Id. at 282-84.

As we read BLE, therefore, a petition seeking review of an
agency's decision not to reopen a proceeding is not reviewable
unless the petition is based upon new evidence or changed
circumstances.

B. New Evidence

Southwestern Bell argues that its petition for reconsidera-
tion did raise new evidence, and therefore the Commission's
denial of that petition is reviewable. Yet the evidence to
which the petitioner points does not satisfy the test for new
evidence set forth in BLE: "facts which, through no fault of
[the petitioner's], the original proceeding did not contain."
Id. at 279; see also 47 U.S.C. s 405(a) (limiting evidence
admissible upon reconsideration to "newly discovered evi-
dence, evidence which has become available only since the
original taking of evidence, [and] evidence which the Commis-
sion ... believes should have been taken in the original
proceeding").

First, the Bells point to data showing the growth in min-
utes of use per common line from 1991 to 1997. Bell Atlantic
relied upon these data to argue before the Commission that
"there is no basis [for a LEC] to assume that future growth
will always exceed [last year's growth divided by two]." But
this evidence is not new in the sense of being discovered after
the Commission issued its Investigation Order. Nor is it
true, as the petitioner contends, that "[n]o party to the tariff
proceeding had any reason to submit [this] evidence until
after the FCC" issued that order. The Designation Order
clearly set forth the Commission's view that under-
forecasting the BFP revenue requirement would be to a
LEC's benefit if it could expect in the upcoming year that its
increased growth in minutes per line would exceed half its
increased growth during the previous year. The second
alleged piece of new evidence--a demonstration that the
method the Commission chose for prescribing the LECs'
rates is less accurate than Bell Atlantic's method when ap-
plied to the tariffs filed prior to 1997--is not evidence at all,
but simply an argument that the Commission made a material
error.

Because Southwestern Bell has not shown that its petition
for reconsideration was based upon new evidence or changed
circumstances, we must deny its petition for review unless, as
Southwestern argues next, its petition seeks review of some-

thing other than the agency's refusal to reopen the proceed-
ing. The petitioner has two arguments to that effect, which
we discuss in the next section.

C. Other Grounds for Reviewing the Reconsideration Order

First, Southwestern Bell argues that by responding to its
claim based upon the growth in minutes of use per common
line from 1991 to 1997 and by including those data in the
Reconsideration Order, the Commission reopened the pro-
ceeding and, therefore, the denial of reconsideration is re-
viewable on its merits. To this end, the petitioner correctly
points out that in BLE the Court, in a dictum, stated that
when an agency "reopens a proceeding for any reason and,
after reconsideration, issues a new and final order setting
forth the rights and obligations of the parties, that order--
even if it merely reaffirms ... the original order--is reviewa-
ble on its merits." 482 U.S. at 278. In that case the Court
also made clear, however, that whether an agency has re-
opened a proceeding depends upon the formalities of its
action: "Where the Commission's formal disposition is to
deny reconsideration, and where it makes no alteration in the
underlying order, we will not undertake an inquiry into
whether reconsideration 'in fact' occurred." Id. at 280.
Here, the petitioner can point to no formal action of the
Commission reopening the proceeding or otherwise modifying
the underlying order. As we have noted before, even "dis-
cuss[ion of] the merits at length ... does not necessarily
mean the agency has reopened the proceedings. ... Only
when the agency has clearly stated or otherwise demonstrat-
ed that it has reopened the proceeding will the [denial of
reconsideration] be ... subject to judicial review." Sendra
Corp. v. Magaw, 111 F.3d 162, 167 (D.C. Cir. 1997).

Second, Southwestern Bell suggests that we should read its
petition for review of the Reconsideration Order as a petition
for review of the Investigation Order. Review of the Investi-
gation Order in this case, unlike review of the first order in
BLE, would not circumvent the time limit in the Hobbs Act
because Southwestern Bell's petition for reconsideration was
filed within the 30-day period for such a filing, see 47 U.S.C.

s 405(a), and therefore also within the 60-day period for
seeking judicial review under the Hobbs Act. That is, having
tolled the time limitation in the Hobbs Act, Southwestern Bell
could have sought review of the Investigation Order after the
Commission issued the Reconsideration Order. The petition-
er also correctly points out that, in the cases upon which the
agency and the intervenors rely, review of the denial of
reconsideration would have effected an end run around the
time limits for judicial review, see, e.g., Sendra, 111 F.3d at
166 (petition for reconsideration filed after statute of limita-
tions had run), or the finality doctrine, see, e.g., City of
Benton v. NRC, 136 F.3d 824, 826 (D.C. Cir. 1998) (per
curiam) (permitting petition naming non-final order to bring
final order before court "would make unclear the point at
which agency orders become final").

We have previously set out a test for determining whether
a filing that names one order suffices to bring a different
order before the court. See Brookens v. White, 795 F.2d 178,
180 (1986) (per curiam) ("[A] mistake in designating the
judgment ... should not result in loss of the appeal as long
as the intent to appeal from a specific judgment can be fairly
inferred from the notice and the appellee is not misled by the
mistake"); accord Nichols v. Board of Trustees of Asbestos
Workers Local 24 Pension Plan, 835 F.2d 881, 889 & n.73
(D.C. Cir. 1987); see also Foman v. Davis, 371 U.S. 178, 181
(1962). In Brookens, we held that "the specification of [other]
orders and hearing dates and the failure to mention the
[disputed] order in either the notice of appeal or the docket-
ing statement indicate[d] an intent not to appeal the earlier
grant of summary judgment." 795 F.2d at 181 (emphasis in
original). In Nichols, however, we excused the appellants'
failure to designate the judgment appealed from because
their "Rule 10(b)(1) certificate plainly reveal[ed] their inten-
tion." 835 F.2d at 889.*

__________
* Although Brookens and Nichols each involve a notice of appeal
filed pursuant to Federal Rule of Appellate Procedure 3 that
specified the wrong judgment of the district court, no party to the
present case suggests that such a notice is not analogous to a

 Applying the test of Brookens and Nichols, it is clear that
the intent to seek review of the Investigation Order cannot
fairly be inferred from either Southwestern Bell's petition for
review or its subsequent filings (all of which were filed by
inside counsel). The petition for review names only the
Reconsideration Order and only that order is appended to the
petition. The docketing statement that Southwestern Bell
filed again mentions and attaches only the Reconsideration
Order. Finally, Southwestern Bell's preliminary statement of
issues both begins and ends by referring to the Reconsidera-
tion Order and mentions only issues raised in its and Bell
Atlantic's petitions for reconsideration. In short, nothing
prior to the brief filed in this court (by appellate counsel)
gave the Commission any notice of Southwestern Bell's intent
to seek review of the Investigation Order. Nor should that
intent have been obvious.

Southwestern Bell's intent to seek review of the Investiga-
tion Order might seem obvious if its petition would otherwise
appear to seek review of an obviously unreviewable order.
As we have seen, however, under BLE a petitioner can obtain
review of a denial of its petition for reconsideration if the
petition was based upon new evidence or changed circum-
stances; so there no doubt are cases in which a petitioner
rationally seeks review only of the order denying reconsidera-
tion. Accordingly, we will not impose upon the respondent
agency the obligation to determine when a party seeking
review must have meant to name a different order in its
petition for review because the order actually named in that
petition is unreviewable.

Finally, because Southwestern Bell can point to nothing
from which its "intent to appeal from [the Investigation
Order] can be fairly inferred," Brookens, 795 F.2d at 180, we
place no weight upon its claim that neither the Commission
nor the intervenors were prejudiced by its failure to name the
correct order. The lack of prejudice is a necessary, not a

__________
petition for review filed pursuant to Federal Rule of Appellate
Procedure 15. See also Gottesman v. INS, 33 F.3d 383, 388 (4th
Cir. 1994).

sufficient, condition for excusing a petitioner's mistake in
naming the order of which review is sought. See id.

In sum, we reject Southwestern Bell's arguments that it
sought review of something other than an order denying
rehearing.

III. Conclusion

Southwestern Bell sought review of an order of the Com-
mission over which we have jurisdiction but which, for the
reasons set forth in Parts II.B and C above, is not reviewable.
The petition for review is therefore

Denied.