F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
July 23, 2007
UNITED STATES CO URT O F APPEALS Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT
TON SERVICES, INC., a Utah
corporation,
Plaintiff-Appellant,
v. No. 06-4052
QW EST CORPO RATION, a Colorado
corporation,
Defendant-Appellee.
A PPE AL FR OM T HE UNITED STATES DISTRICT COURT
FOR T HE DISTRICT OF UTAH
(D.C. NO . 1:04-CV-35-TS)
Floyd A. Jensen, Floyd Andrew Jensen PLLC, Salt Lake City, Utah, for Plaintiff-
Appellant.
David A. Vogel (Douglas P. Lobel with him on the brief), Cooley Godward LLP,
Reston, Virginia, for Defendant-Appellee.
Before L UC ER O and M U RPH Y, Circuit Judges, and R OBIN SO N, * District
Judge.
M U RPH Y, Circuit Judge.
*
The Honorable Julie A. Robinson, District Judge, United States District
Court of the District of Kansas, sitting by designation.
I. IN TR OD UC TIO N
The current action is one of a number of pending judicial and
administrative actions raising the question whether incumbent local exchange
carriers (“LECs”) generally, and the former Bell Operating Companies (“BOCs”)
in particular, are required to provide refunds to independent payphone service
providers (“PSPs”) for noncompliance with the anti-discrimination and anti-
subsidization requirements in 47 U.S.C. § 276(a) and Federal Communication
Commission (“FCC” or “Commission”) orders implementing § 276. 1
1
The Ninth Circuit recently addressed this issue in Davel Com munications,
Inc. v. Qwest Corp., 460 F.3d 1075 (9th Cir. 2006). The Davel court determined
the issue’s resolution turned on the Commission’s interpretation of a 1997 FCC
order [hereinafter “W aiver/Refund Order”]. Id. at 1089–90. The Davel court
invoked the primary jurisdiction doctrine and referred interpretation of the 1997
order to the FCC. Id. That action is now pending before the Commission. In re
Implementation of Pay Telephone Reclassification and Compensation Provisions
of the Telecommunications Act of 1996, Petition of Davel Communications, Inc.,
et. al for Declaratory Ruling, CC Docket No. 96-128 (filed Sept. 11, 2006)
(“Davel Petition”), available at http://svartifoss2.fcc.gov/prod/ecfs/retrieve.cgi?
native_or_pdf=pdf& id_document=6518461589.
The Davel Petition is just one of several related actions awaiting
Commission consideration under Common Carrier Bureau Docket Number 96-
128, entitled “In the M atter of the Implementation of Pay Telephone
Reclassification and Compensation Provisions of the Telecommunications Act of
1996.” See New England Public Communications Council, Inc., Filing of Letter
from Supreme Judicial Court of M assachusetts Regarding Implementation of the
Pay Telephone Compensation Provisions of the Telecommunications Act of 1996,
Notice, 21 F.C.C.R. 3519, 3519 & n.3 (2006) (stating that the New England
Public Communications Council requests resolution of public access line refund
availability per primary jurisdiction referral from the Supreme Judicial Court of
M assachusetts and explaining that the court’s request w ill be considered in
conjunction with four pending petitions for declaratory rulings from the Illinois
Public Telecommunications Association, the Southern Public Communication
(continued...)
-2-
Plaintiff TO N Services, Inc. (“TO N”) is a Utah-based PSP w hich owns and
operates payphones in more than thirteen states. TON filed suit against Qwest
Corporation (“Qwest”) for violations of the Telecommunications Act of 1996
(“A ct”). 2 Qwest provides public access line (“PAL”) services to TON in Q west’s
role as an LEC. 3 Qwest also operates its own payphones in the same region as
TON, making TON both a customer of Qwest and one of its competitors.
1
(...continued)
Association, and the Independent Payphone Association for New York, all filed in
2004, and the Florida Public Telecommunications Association, filed in January
2006). The Illinois Public Telecommunications Association recently petitioned
the United States Supreme Court for certiorari on the issue of availability of
refunds for noncompliance with § 276, but the petition was denied. Ill. Pub.
Telecomms. Ass’n v. Illinois Commerce Comm’n, 127 S.Ct. 1254 (2007).
A more fact-intensive inquiry involving issues similar to those in the
instant case is also pending before the FCC. See Pleading Cycle Established for
M ichigan Pay Telephone Association Petition for Declaratory Ruling, Notice, 21
F.C.C.R. 6289, 2006 W L 1519441 (2006).
2
Qwest is a successor to the telecommunications company U.S. W est
Communications. See Qwest Corp. v. AT&T Corp., 479 F.3d 1206, 1208 (10th
Cir. 2007). U.S. W est Communications was one of the BOCs formed in the wake
of the breakup of AT& T in 1982. See 47 U.S.C. § 153(3), (4). As a successor to
U.S. W est, Qwest is thus subject to the regulations Congress imposed on BOCs in
its 1996 overhaul of telecommunications law and regulation. Id. § 153(4)(B).
Although some of the allegations of unlawfulness in TON’s complaint occurred
while Qwest was operating as U.S. W est, this opinion refers at all times to the
Defendant-Appellee as “Qwest” for ease of identification.
3
PA Ls connect payphones to the public switched telephone network and
enable payphone users to make local and long distance intrastate and interstate
telephone calls. The PAL tariffs at issue in this case involve those for intrastate
calls.
LECs “originate, transmit, and terminate telephone communications to
customers within a given geographic calling area.” Qwest Corp., 479 F.3d at
1208.
-3-
In the district court, TON alleged Qwest’s failure to file tariffs and
supporting cost data for the PA L services Qwest provided to TON, and the PAL
rates Qwest charged TON from April 1997 through April 2002, violated the anti-
discrimination and anti-subsidization provisions of 47 U.S.C. § 276(a). TON
further alleged Qwest’s actions violated not only § 276(a), but also § 201(b),
which declares unlawful a common carrier’s unreasonable and unjust practices,
and § 416(c), which creates an obligation to obey FCC orders. Qwest moved
under Rule 12(b)(6) to dismiss TON’s complaint and, pursuant to the doctrine of
primary jurisdiction, asked the district court to refer TON’s claims to state
regulatory agencies. The district court concluded that, absent an initial
administrative ruling that Qwest’s filed rates from 1997 to 2002 were unlaw ful,
the filed rate doctrine barred the relief TO N sought. The court invoked the
primary jurisdiction doctrine and dismissed TON’s complaint w ithout prejudice.
TON moved the court to reconsider or to alter or amend the judgment. It
specifically asked the court to stay its claims pending a primary jurisdiction
referral to the FCC rather than dismissing its complaint. The court denied TON’s
motion.
This court takes jurisdiction of TO N’s appeal pursuant to 28
U.S.C. § 1291. 4 W e conclude the district court misconstrued the nature of TON’s
4
The district court stated it was dismissing TON’s “complaint,” but the
record clearly indicates the court was dismissing TON’s entire action. The
(continued...)
-4-
claims and that, although a primary jurisdiction referral is appropriate, the district
court’s dismissal of TON’s action was an abuse of the court’s discretion. This
court, therefore, vacates the district court’s dismissal of TO N’s complaint and
remands TON’s action to the district court for further proceedings consistent
with this opinion.
II. B AC KGR OU N D
A. Statutory and Regulatory Background
An understanding of the applicable federal statutes and regulations and
their background is required to properly assess TON’s claims and the district
court’s disposition of TO N’s action. 5
1. The 1996 Telecom munications Act and the FCC’s Payphone O rders
The telecommunications industry is regulated by Chapter 5 of the Federal
Communications Act of 1934, as amended by the Telecommunications Act of
1996, codified at 47 U.S.C. § 151 et seq. Prior to 1996, LECs, which owned
payphone lines used by all PSPs, routinely subsidized and discriminated in favor
of their own payphone services. See New Eng. Pub. Commc’ns Council, Inc. v.
4
(...continued)
court’s dismissal without prejudice is, therefore, a final, appealable order under
this court’s “practical approach.” See, e.g., M oya v. Schollenbarger, 465 F.3d
444, 449–51 (10th Cir. 2006) (quotation omitted).
5
The developments in federal telecommunications law relevant to this
appeal were recently summarized in Davel, a case involving claims nearly
identical to those here. See Davel Commc’ns, 460 F.3d at 1081–83.
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FCC, 334 F.3d 69, 71 (D .C. Cir. 2003). In 1996, in an effort to increase
competition in the payphone industry and ensure widespread access to payphones,
Congress prohibited BOCs from subsidizing their own payphone services w ith
revenues from their other operations and from discriminating in favor of their
own payphone services. See 47 U.S.C. § 276(b), (a). 6 Section 276(a) reflects
congressional intent to “replace a state-regulated monopoly system w ith a
federally facilitated, competitive market.” New Eng. Pub. Commc’ns Council,
334 F.3d at 77. In § 276(b)(1)(C), Congress directed the FCC to adopt
nonstructural safeguards to implement § 276(a) by preventing BOCs from cross-
subsidization of their payphone services. “In essence, a BOC must place its ow n
payphones on equal footing with those that PSPs operate, and it must not obtain a
profit from PSP payphones.” Nw. Pub. Commc’ns Council v. Pub. Util. Comm’n,
100 P.3d 776, 779 (Or. Ct. App. 2004) (W olheim, J., concurring). The
instrument the FCC chose to implement § 276(b)(1)(C) is the so-called “New
Services Test” (“NST”), which mandates that tariff rates should be based solely
on a carrier’s overhead costs. See 47 C.F.R. § 61.49(g)(2). 7
6
Section 276(a) states that, after the effective date of FCC rules
promulgated pursuant to § 276(b), “any Bell operating company that provides
payphone service— (1) shall not subsidize its payphone service directly or
indirectly from its telephone exchange service operations or its exchange access
operations; and (2) shall not prefer or discriminate in favor of its payphone
service.”
7
The regulation at 47 C.F.R. § 61.49(g)(2) states, “Each tariff filing
(continued...)
-6-
The FCC explained the process by which LECs should demonstrate NST
compliance in a series of orders known collectively as the “Payphone Orders,”
issued under Common Carrier Bureau Docket Number 96-128, entitled “In the
M atter of Implementation of Pay Telephone Reclassification and Compensation
Provisions of the Telecommunications Act of 1996.” See Davel Commc’ns, Inc.
v. Qwest Corp., 460 F.3d 1075, 1081 (9th Cir. 2006); New Eng. Pub. Commc’ns
Council, 334 F.3d at 71–72. A lthough the FCC’s initial order directed all PAL
tariffs to be filed with the FCC itself, 11 F.C.C.R. 20541, 20614–16 ¶¶ 146–48,
1996 W L 547458 (1996) (“Initial Payphone Order”), its Order on Reconsideration
directed LECs to file their intrastate payphone tariffs w ith state utility
comm issions. 11 F.C.C.R. 21233, 21307–08 ¶¶ 162–163, 1996 W L 658824
(1996) (“Order on Reconsideration”).
In the O rder on Reconsideration, the C ommission explained more
thoroughly the application of the NST. It indicated states should evaluate LECs’
7
(...continued)
submitted by a local exchange carrier . . . that introduces a new service or a
restructured unbundled basic service element (BSE) . . . must be accompanied by
cost data sufficient to establish that the new service or unbundled BSE will not
recover more than a reasonable portion of the carrier’s overhead costs.”
The FCC ultimately clarified that, in the context of PAL tariffs, the NST
requires a forward-looking, cost-based methodology that prohibits BOCs from
charging “more for payphone line service than is necessary to recover from PSPs
all monthly recurring direct and overhead costs incurred by BOCs in providing
payphone lines.” In re Wisconsin Public Service Com mission, Order Directing
Filings, 17 F.C.C.R. 2051, 2069 ¶ 60, 2002 W L 122570 (2002) (“New Services
Test O rder”).
-7-
PA L tariffs to ensure they were “(1) cost-based; (2) consistent with the
requirements of Section 276 with regard, for example, to the removal of subsidies
from exchange and exchange access services; and (3) nondiscriminatory.” Id. at
21308 ¶ 163. All tariffs were required to be filed by January 15, 1997, and
effective by April 15, 1997. Id. The FCC clarified that the tariff filings w ere to
be accompanied by supporting cost data as provided for in 47 C.F.R. §
61.49(g)(2). See id. at 21308 ¶ 163 & n.492. The Commission further provided
that, where LECs had already filed intrastate tariffs for PA L rates and other
unbundled services, the states were permitted, “after considering the requirements
of this order, [to] conclude: 1) that existing tariffs are consistent with the [Initial
Payphone] report and order as revised herein; and 2) that in such case no further
filings are required.” Id. at 21308. 8 Finally, the Commission explicitly retained
jurisdiction over intrastate tariffs in the event a state was “unable” to review
intrastate tariffs for N ST compliance. Id. at 21308 ¶ 163.
In a separate section of the Order on Reconsideration, the FCC addressed
the special requirements an LEC must satisfy to recover costs for connecting calls
8
The Commission later determined the scope of the Order on
Reconsideration was too broad and that, by statute, it was only authorized to
require BOCs, rather than all LECs, to file NST-compliant PAL tariffs. See New
Services Test Order, 17 F.C.C.R. at 2060–61 ¶ 31. Because Qwest is a BOC, the
narrow ing of the filing requirements had no effect on Q west’s obligations.
-8-
from its payphones to long distance service providers. 9 Id. at 21293 ¶ 131. To
promote compliance with the requirements of paragraph 163, the Commission
ordered that an LEC which itself owns and operates payphones would not be
permitted to recover “per-call compensation” (also frequently referred to as “dial-
around compensation”) for allowing calls from its payphones to be connected to
long distance carriers until the LEC was able to certify it had completed
paragraph 163’s requirements for implementing the § 276 regulatory scheme. Id.
at 21293 ¶ 131. As part of its certification obligation, an LEC would have to
certify its tariff rates were NST compliant, i.e., that they “reflect[ed] the removal
of charges that recover the costs of payphones and any intrastate subsidies.” Id.
A further order issued by the Common Carrier Bureau of the FCC eleven days
prior to the April 15, 1997, effective date for N ST-compliant tariffs again
emphasized the link between NST compliance and an LEC’s qualification to
recover per-call compensation. See 12 F.C.C.R. 20997, 21011 ¶¶ 29–30, 1997
W L 159904 (1997) (“Bureau Waiver Order”) (emphasizing that BOCs must meet
the Order on Reconsideration’s state tariffing requirements before being eligible
to receive per-call payphone compensation).
9
All payphone providers are entitled to compensation from long distance
carriers for connecting payphone customers to the long distance carrier of the
customer’s choice. See 47 U.S.C. § 276(b)(1)(A); 47 C.F.R. § 64.1300.
-9-
2. BOC Waiver Request and the FCC’s Waiver/Refund Order
On April 10, 1997, five days before NST-compliant intrastate PAL tariff
rates were to be effective, the coalition of Regional Bell Operating Companies
(“RBOC Coalition”) asked the FCC to delay the effective date for NST-compliant
intrastate tariffs for forty-five days. The RBOC Coalition’s letter stated the
BOCs had not previously understood the Payphone Orders to require that rates for
existing, previously tariffed intrastate payphone services had to comply with the
NST. The RBOC Coalition requested an extension until M ay 19, 1997, to file
new, NST-compliant tariffs in states where existing tariffs were not NST
compliant, but asked to be allowed to begin collecting per-call compensation as
scheduled on April 15. In exchange for the ability to receive per-call
compensation as scheduled, the BOCs volunteered to reimburse or credit PSPs in
states w here the new , NST-compliant rate w as lower than the prior tariff rate. In
a follow-up letter on April 11, 1997, the RBOC Coalition explained, “The waiver
will allow LECs . . . to gather the relevant cost information and either be prepared
to certify that the existing tariffs satisfy the costing standards of the “new
services” test or to file new or revised tariffs that do satisfy those standards.”
The FCC approved the RBOC Coalition’s request for a waiver in an April
15, 1997, order. 12 F.C.C.R. 21370, 21379 ¶ 19, 1997 W L 180285 (1997)
(“W aiver/Refund Order”). In its W aiver/Refund Order, the Commission granted
LECs a “limited waiver” until M ay 19, 1997, to “enable[] LECs to file intrastate
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tariffs consistent with the ‘new services’ test of the federal guidelines detailed in
the Order on Reconsideration and the Bureau Waiver Order, including cost
support data.” Id. at 21370–71 ¶ 2 (footnote omitted). Under the W aiver/Refund
Order, an LEC would “remain eligible to receive [per-call] payphone
compensation on April 15, 1997” provided it was able to certify it had met all the
other prerequisites set out in paragraph 131 of the Order on Reconsideration. Id.
at 21371 ¶ 2. The Commission indicated, however, “A LEC who seeks to rely on
the waiver granted in the instant Order must reimburse its customers or provide
credit from April 15, 1997 in situations where the newly tariffed rates, when
effective, are lower than the existing tariffed rates.” Id. Finally, the Commission
specified, “The existing intrastate payphone service tariffs will continue in effect
until the intrastate tariffs filed pursuant to this Order become effective.” Id. at
21379 ¶ 19.
The Commission ordered the states to “act on the tariffs filed pursuant to
this Order within a reasonable period of time,” id. at 21379 ¶ 19 n.60, but was
silent as to whether the LECs, PSPs, or the Commission itself should take action
if the states failed to conduct the inquiry required by the Payphone Orders and
was similarly silent on a suggested process for regulators or PSPs to follow if
LECs failed to submit the required tariffs and supporting documentation.
-11-
3. Other FCC Orders
Several other FCC orders provide guidance about BOCs’ obligations in
complying with the FCC’s NST requirements. These orders make clear the
Commission’s intention that LEC s are to bear the burden of demonstrating NST
compliance to regulators and illuminate the difference between the per-call
compensation “certification” requirement and the burden of demonstrating actual
NST compliance.
As to the burden placed on LECs to demonstrate NST compliance, in 2000,
after the W isconsin Public Service Commission declined jurisdiction to consider
whether four W isconsin LECs’ tariffs were NST compliant, the FCC’s Common
Carrier Bureau invoked its own jurisdiction under § 276 to ensure the LECs’
compliance. See In re Wisconsin Public Service Com mission, 15 F.C.C.R. 9978,
9980 ¶ 5, 2000 W L 232182 (2000) (“Bureau Wisconsin Order”). The Common
Carrier Bureau required the LECs to submit “a copy of a tariff and supporting
information.” Id. at 9981 ¶ 7. Each LEC subject to the Bureau Wisconsin Order
was instructed to “submit complete cost studies with full documentation” for each
rate element. Id. The Order stated “[t]o satisfy the new services test, an
incumbent LEC filing payphone line rates must demonstrate that the proposed
rates do not recover more than the direct costs of the service plus a ‘just and
reasonable portion of the carrier’s overhead costs.’” Id. at 9981 ¶ 9 (quoting 47
C.F.R. § 61.49(f)(2)) (emphasis added). It further specified, “[i]n determining a
-12-
just and reasonable portion of overhead costs to be attributed to services offered
to competitors, the LEC must justify the methodology used to determine such
overhead costs.” 10 Id. at 9982 ¶ 11 (emphasis added).
Upon reconsideration of the Bureau Wisconsin Order, the FCC determined
it could require NST compliance only of BOCs rather than all LECs. See In re
Wisconsin Public Service Com mission, Order Directing Filings, 17 F.C.C.R. 2051,
2060–61 ¶ 31 2002 W L 122570 (2002) (“New Services Test Order”). As to the
BOCs, however, the FCC endorsed the Common Carrier Bureau’s language
regarding the burden of demonstrating NST compliance. Id. at 2069 ¶ 58
(“Consistent with Commission precedent, the BOCs bear the burden of justifying
their overhead allocations for payphone services and demonstrating compliance
with our standards.”); see also Nw. Pub. Commc’ns Council, 100 P.3d at 781
(Wollheim, J., concurring) (stating that, under the N ST, BOCs “must
affirmatively justify their overhead allocations”). Unlike the Bureau W isconsin
Order, which explicitly applied only to the four W isconsin LECs named in the
10
Although the Bureau W isconsin Order applied only to the W isconsin
LECs specifically identified in the Order, 15 F.C.C.R. 9978, 9982 ¶ 13, 2000 W L
232182 (2000), the language is indicative of the Commission’s understanding of
how its regulations should be interpreted to ensure BOC compliance with 47
U.S.C. § 276(a).
Notably, U.S. W est Communications was a member of the coalition
requesting a stay of the Bureau W isconsin Order. See LEC Coalition Files
Petition for Stay and Application for Review, Public Notice, 15 F.C.C.R. 6238,
2000 W L 369637 (2000). Presumably, then, U.S. W est was familiar with the
supporting data the Commission expected LECs to provide to state commissions
in support of their intrastate tariff rates.
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Order, 15 F.C.C.R. at 9982 ¶ 13, the New Services Test O rder was intended to
apply to BOCs generally. New Services Test O rder, 17 F.C.C.R. at 2151 ¶ 2; see
also New Eng. Pub. Commc’ns Council, 334 F.3d at 75 (stating the New Services
Test Order “establishes a rule that affects payphone line rates in every state”).
A separate line of FCC adjudicatory orders distinguishes the relatively easy
process of LEC “certification” for the purposes of receiving per-call
compensation, referenced in the Order on Reconsideration, 11 F.C.C.R. at 21293
¶ 131, from the far more burdensome process of ensuring actual NST compliance,
mandated in the Order on Reconsideration’s paragraph 163. In In re Bell
Atlantic-Delaware v. Frontier Communications Services, Inc., M em. Op. and
Order, 17 Commc’ns Reg. 955, 1999 W L 754402 (1999), the FCC declared the
term “certification” meant that an LEC seeking per-call compensation from a long
distance carrier had only to “attest[] authoritatively” that it had met the
requirements set out in paragraph 131. Id. at ¶ 3. Certification, the Commission
said, did not require LECs to provide a data-based demonstration of compliance
to long distance carriers. Id. 11 The Commission explained, however, that “a
11
The Bell Atlantic-Delaware adjudication, In re Bell Atlantic-Delaware v.
Frontier Commc’ns Servs., Inc., M em. Op. and Order, 17 Commc’ns Reg. 955,
1999 W L 754402 (1999), merely reiterated the distinction made in the
W aiver/Refund Order, which had specified that certification only involved an
understanding between the LEC and the long distance carrier from which it
sought compensation and did not involve any certification to be filed with the
FCC, see 12 F.C.C.R. at 21380 ¶ 22, whereas NST-compliant intrastate tariffs had
to be approved by state regulators, see id. at 21379 ¶ 18, 21381 ¶ 23.
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LEC’s certification letter does not substitute for the LEC’s obligation to comply
with the requirements as set forth in the Payphone O rders.” Id. at ¶ 28. It
reiterated that “[d]etermination of the LEC’s compliance [with the Payphone
Orders] . . . is a function solely within the Commission’s and the state’s
jurisdiction,” id., thereby implicitly emphasizing the difference between per-call
compensation “certification” and the process of obtaining approval of NST-
compliant tariff rates. See also In re Am eritech Ill. v. M CI Telecomms. Corp.,
M em. Op. and Order, 1999 W L 1005080 at ¶ 19 (1999) (determining two letters
submitted by U.S. W est to long distance carrier M CI certifying U.S. W est’s
compliance with paragraph 163 of the Order on Reconsideration satisfied U.S.
W est’s certification obligations under paragraph 131 and the Bell Atlantic-
Delaware adjudication’s articulation of those obligations).
B. Factual Background
At the heart of TON’s complaint is the allegation that, from April 1997 to
April 2002, Qwest failed to file new intrastate PAL tariffs with state regulatory
comm issions and also failed to file cost data supporting the rates in its existing
tariffs as required by 47 C.F.R. § 61.49(g)(2) and the FCC’s Order on
Reconsideration and W aiver/Refund Order. TON alleges that once Qwest filed
new tariffs in April 2002, its new PAL rates were “substantially lower” than its
prior rates, giving rise to the inference that TO N’s prior rates were not NST
compliant and triggering Qwest’s duty to pay refunds under the terms of the
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W aiver/Refund Order. TON contends Qwest’s actions violated § 276(a), the
Act’s requirement that BOCs may not subsidize or discriminate in favor of their
own payphone services; § 201(b), the provision declaring unlawful any unjust or
unreasonable practice by a common carrier; and § 416(c), which declares it the
duty of all persons to comply with FCC orders. 12 Because it alleges Qwest failed
to act in accordance with provisions of the Act, TON claims it is entitled to bring
an action for damages in federal court. See 47 U.S.C. §§ 206 (damages) and 207
(election of forum either in FCC or federal court).
Qwest filed a motion to dismiss, claiming the filed rate doctrine, the
prohibition on retroactive ratemaking, the primary jurisdiction doctrine, and the
statute of limitations barred TON’s ability to proceed in federal court. Qwest’s
basic argument to the district court was that the regulatory agencies in each of the
states in which Qwest’s tariffs w ere to be filed were in the best position to
determine whether Qwest’s pre-2002 rates were “reasonable.” A
“reasonableness” review, Qwest alleged, is the only review to which TO N was
entitled because the filed rate doctrine precludes the payment of refunds on filed
tariffs unless such tariffs are declared to be unreasonable and unlawful. Qwest
urged the district court to resist adjudicating the “threshold issue in the law suit –
12
TON’s complaint also includes state common law unjust enrichment,
third-party beneficiary contract, and conversion claims based on the facts
underlying its federal claims, as w ell as a federal claim based on Qwest’s failure
to file fraud protection service tariffs and related cost studies with the FCC.
Neither party addresses these ancillary claims on appeal.
-16-
whether Qwest’s tariffed rates were consistent with applicable regulations”
because, under the primary jurisdiction doctrine, that issue falls within the
“exclusive province” of administrative agencies.
TON, in response, contended it was not challenging the reasonableness of
Qw est’s rates, but was instead challenging Qw est’s unlawful failure to file NST-
compliant rates or supporting documentation and Qwest’s failure to pay refunds
under the Waiver/R efund O rder once it filed NST-compliant rates in 2002. TON
then provided several reasons for the inapplicability of the filed rate doctrine.
TON further argued referral to state agencies or the FCC was unnecessary
because it sought relief for Qwest’s failure to file required rates and cost data, an
issue which a federal court is equipped to adjudicate and which does not involve
agency expertise or policymaking discretion. TON also claimed the calculation of
damages would require no special expertise.
In the event of a primary jurisdiction referral, however, TON requested the
court stay rather than dismiss its case because of its concern that the statute of
limitations might bar refiling the case with the FCC and because dismissal would
deny TO N its right to a judicial forum as provided by § 207. Finally, TON
refuted Qwest’s allegations that the two-year statute of limitations pursuant to
§ 415(b) barred its claims by asserting it could not have discovered Qwest’s pre-
April 2002 rates were noncompliant until Q west filed its new rates in April 2002.
As to the relief due to TON under the W aiver/Refund Order, TON argued Qwest’s
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reading of the Order, which would have restricted any claim to refunds to the
forty-five day period between April 15, 1997, and M ay 19, 1997, would be a
“strained reading” that is inconsistent with the purposes of § 276(a).
W hen ruling on Qwest’s motion to dismiss, the district court labeled the
parties’ “chief dispute” as whether “TO N’s complaint allege[d] improper conduct
by Qwest or whether TON is challenging the tariffed rates charged by Qwest from
1997 to 2002.” W ithout making a threshold determination as to whether Qwest’s
conduct was unlawful, the court accepted Q west’s characterization of TON’s
complaint and concluded TO N was essentially challenging the reasonableness and
lawfulness of Qwest’s tariffed rates. The district court stated that the question
“whether these rates and associated tariffs comply with the [FCC] regulations is a
question within the primary jurisdiction of state public service or regulatory
commissions or the Federal Communications Commission.” The district court
also concluded the filed rate (or “filed tariff”) doctrine barred the relief TON
sought. As a result of its conclusion regarding the agency’s primary jurisdiction,
the court dismissed TO N’s action without prejudice.
TON moved the court to reconsider dismissal of its complaint. It argued
that if referral to the FCC was required, the court should have stayed the federal
court litigation in order to preserve TO N’s right to elect a federal court forum
under § 207 and avoid a potential statute-of-limitations challenge by Qwest. It
also argued the court could simply stay the litigation pending the FCC’s
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resolution of similar claims already under Commission consideration. Qwest, in
response, contended that FCC orders directed payphone providers to challenge
PAL rates before state regulatory agencies and, therefore, any unfair prejudice to
TON based on the district court’s dismissal was of its own making.
The district court denied TON’s motion to reconsider, again stating its
decision to invoke the doctrine of primary jurisdiction and dismiss without
prejudice. It explained TO N could always seek judicial review of the FCC’s final
order should TON decide to pursue its administrative remedies before the
Commission. W ithout addressing TON’s argument regarding the statute of
limitations under § 415(b) or its election-of-forum argument under § 207, the
court concluded TON would not be unfairly disadvantaged by dismissal.
TON filed an appeal in this court, raising the same arguments it made to the
district court regarding the nature of its claims, the inapplicability of the filed rate
and primary jurisdiction doctrines, and the prejudice it will suffer from the
dismissal of its claims. TON also filed a motion to stay its appeal pending agency
action.
III. D ISC USSIO N
A. Standard of Review
This court reviews de novo the district court’s dismissal of a plaintiff’s
complaint on a Rule 12(b)(6) motion. Prior to the Supreme Court’s recent
decision in Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007), we
-19-
review ed the sufficiency of a complaint de novo and upheld dismissal only when
it appeared the plaintiff could prove no set of facts in support of the claims that
would entitle him to relief. Coosewoon v. M eridian Oil Co., 25 F.3d 920, 924
(10th Cir. 1994). In Bell Atlantic, the Supreme Court articulated a new
“plausibility” standard under which a complaint must include “enough facts to
state a claim to relief that is plausible on its face.” 127 S. Ct. at 194; see also
Alvarado v. KO B-TV, LLC, 2007 W L 2019752 at *3 (10th Cir. July 13, 2007)
(“W e look for plausibility in th[e] complaint.”). 13 Under either standard, all well-
pleaded factual allegations are accepted as true and construed in the light most
favorable to the plaintiff. Alvarado, 2007 W L 2019752 at *3. For the reasons
discussed below , TON satisfies its burden under either the older “no set of facts”
standard or the new “plausibility” standard. As a consequence, we need not
address here the potential distinctions betw een the tw o standards.
B. Filed Rate Doctrine
The federal filed rate doctrine, codified at 47 U.S.C. § 203, is a central
tenet of telecommunications law . 14 See M CI Telecomms. Corp. v. Am. Tel. & Tel.
13
In Erickson v. Pardus, 127 S. Ct. 2197, 2200 (2007), a case decided
shortly after Bell Atlantic, the Supreme Court indicated that, even under the new
“plausibility” regime, a complaint need not provide “specific facts” but need only
“give the defendant fair notice of what the . . . claim is and the grounds upon
which it rests.” (quotation omitted).
14
Each state in w hich TON operates payphones has a similar statutory
provision. See, e.g., Utah Code Ann. § 54-3-7. State filed rate doctrines are,
(continued...)
-20-
Co., 512 U.S. 218, 229–30 (1994). The doctrine generally requires that providers
of services in regulated industries, such as the communications and shipping
industries, adhere to tariffs approved by and filed with the regulatory agency
overseeing the industry. See Ark. La. Gas Co. v. Hall, 453 U.S. 571, 577 (1981);
Davel Commc’ns, 460 F.3d at 1084. In the telecommunications context, the
doctrine provides that “once a carrier’s tariff is approved by the FCC [or an
appropriate state agency], the terms of the federal tariff are considered to be the
law and therefore conclusively and exclusively enumerate the rights and liabilities
as between the carrier and the customer.” Davel Commc’ns, 460 F.3d at 1084
(quotations omitted). In order to prevent price discrimination and preserve
agencies’ exclusive role in ratemaking, courts have no power to adjudicate claims
which would “invalidate, alter, or add to the terms of the filed tariff.” Davel
Commc’ns, 460 F.3d at 1084 (quotation omitted); see Hill v. BellSouth
Telecomms., Inc., 364 F.3d 1308, 1316 (11th Cir. 2004) (discussing the rationale
for the doctrine).
As the Davel court explained, however, “[T]he filed-rate doctrine does not
bar a suit to enforce a command of the very regulatory statute giving rise to the
tariff-filing requirement, even where the effect of enforcement [i.e., the remedy
TON seeks under 47 U.S.C. § 206] would be to change the filed tariff.” Id. at
14
(...continued)
however, preempted by 47 U.S.C. § 276(c).
-21-
1085. In the context of the Interstate Commerce Act, the statute upon which the
comm on carrier provisions of the 1934 Communications Act were modeled and
from which the filed rate doctrine in the telecommunications context derives, see
Am. Tel. & Tel. Co. v. Cent. Office Tel., Inc., 524 U.S. 214, 222 (1998), the
failure to file a required tariff has been held to defeat the application of the filed
rate doctrine. See Rushton v. Am. Pac. Wood Prods., Inc. (In re Am ericana
Expressways, Inc.), 133 F.3d 752, 757–58 (10th Cir. 1997) (failure to file new
tariffs or adopt existing tariffs foreclosed bankruptcy trustee’s undercharge suit
against a shipper (citing M acLeod, Trustee for BGR Transp. Inc. v. ICC, 54 F.3d
888, 890 (D.C. Cir. 1995))). Qwest provides no compelling reason why the
failure to file required tariffs or cost support data should not apply with equal
force here.
In this case, TON alleges and provides a factual basis for its allegations
that (1) Q west failed to timely file tariffs and supporting cost data w ith state
regulators, (2) such failures precluded regulators from determining Qwest’s NST
compliance, and (3) under the W aiver/Refund Order, TON was entitled to refunds
once NST-compliant rates were filed. Because “[c]arriers must comply with the
comprehensive scheme provided by the statute and regulations promulgated under
it[,]” the failure to comply “may justify departure from the filed rate.” ICC v.
Transcon Lines, 513 U.S. 138, 147 (1995). At this stage of the litigation, where
the procedural posture of the case requires all allegations in the complaint to be
-22-
construed in TON’s favor and this court’s reading of TO N’s complaint
demonstrates that TON’s central challenge involves Qwest’s procedural
compliance with FCC orders and regulations rather than a challenge to the
reasonableness of Qwest’s rates, the filed rate doctrine cannot categorically
preclude TON’s claims. 15 Accord Davel Commc’ns, 460 F.3d at 1085. The
district court’s conclusion to the contrary, and its reliance on AT&T v. Central
Office Telephone, an inapposite case involving state law contract and tort claims,
was erroneous.
M oreover, TON’s complaint alleges the W aiver/Refund Order put Qwest on
notice that it might owe PSPs a refund on its previously filed rates and asserts
that Qwest was part of the coalition which initially proposed the refund. 16
15
Until it is determined (1) w hether Q west’s procedural noncompliance with
the NST gives rise to a violation of 47 U.S.C. §§ 201(b), 276(a), or 416(c), and
(2) w hether Qwest’s tariffed rates complied substantively with the NST, it is
impossible to determine whether the filed rate doctrine bars TON’s claims. Only
if both of these issues are resolved against TON would the filed rate doctrine
likely preclude TON’s ability to proceed in federal court.
16
Although the filed rate doctrine ordinarily precludes a claim or the
assertion of a defense where a supplier and customer agree to a rate different than
the filed tariff rate, see, e.g., Reiter v. Cooper, 507 U.S. 258, 266 (1993), it is not
clear that result would apply here. In this case, the RBOC Coalition explicitly
promised the FCC that, notwithstanding the filed rate doctrine, the BOCs w ould
“voluntarily undertake” to provide a “retroactive rate adjustment” in the event
their NST-compliant rates were lower than their prior rates in exchange for
permission to delay the effective date for NST-compliant tariffs. In the usual
case, the doctrine is intended to avoid discriminatory pricing in relation to
particular customers. M aislin Indus., U.S., Inc. v. Primary Steel, Inc., 497 U.S.
116, 127–28 (1990). In this case, however, the change in rates would have
(continued...)
-23-
See W aiver/Refund Order, 12 F.C.C.R. at 21375–76 ¶¶ 13–14 (discussing April
10 RBOC Coalition letter to the FCC requesting a waiver); id. at 21379–80 ¶¶
19–20 (specifying that an LECs’ reliance on the waiver required it to provide
refunds for the difference between its NST-compliant rates and its prior rates).
Although it is often said the doctrine is to be strictly adhered to, see, e.g., M aislin
Indus., U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116, 127 (1990), this court has
previously held that once a party has notice about a possible future rate change,
the doctrine may be inapplicable. See Nw. Pipeline Corp. v. FERC, 61 F.3d 1479,
1490–91 (10th Cir. 1995) (“The filed rate doctrine simply does not extend to
cases in which buyers are on adequate notice that resolution of some specific
issue may cause a later adjustment to the rate being collected at the time of
service. Certainly, this same reasoning is especially applicable w here, as here, it
is the [supplier] pipeline . . . who is put on notice that its requested rate increase
may be subject to refund.” (quotation and citations omitted)).
Finally, as the Davel court concluded, the W aiver/Refund Order
contemplated a future “departure from a filed rate” in the form of refunds once a
BOC filed NST-compliant PAL tariffs. Davel Commc’ns, 460 F.3d 1085–86
(relying on ICC v. Transcon Lines, 513 U.S. at 147). The FCC justified the
16
(...continued)
applied to all PSP customers and would have effected the congressional command
in § 276(a) that PA L tariff rates not include subsidies or result in price
discrimination.
-24-
departure as a means of furthering the Commission’s overall policies in
implementing § 276(a). See Order on Reconsideration, 12 F.C.C.R. at 21381
¶ 23. Transcon Lines specifically approves of a regulatory agency’s decision to
“require[] departure from the filed rate w hen necessary to enforce other specific
and valid regulations adopted under the Act” and emphasizes that “the [agency]
can require that filed rates be suspended or set aside in various circumstances.”
513 U.S. at 147. Although Transcon Lines involved an ICC proceeding against a
particular shipper, the same logic applies to a more general order promulgated by
the FCC. This is especially so where the FCC was attempting to carry out, as
quickly as practicable, congressional intent to promote competition in the
telecommunications industry by ensuring both the absence of subsidies for BOCs
and fair compensation for all LECs. See 47 U.S.C. § 276(a) and (b)(1)(C).
Accordingly, as the W aiver/Refund Order expressly anticipated that PSPs might
be entitled to pay PA L rates lower than those on file during the waiver period, an
application of the filed rate doctrine would be contrary to the purposes behind the
congressionally-sanctioned regulatory scheme. See Davel Commc’ns, 460 F.3d at
1086.
Based on the determination that TON’s claims are not, at their core, a
challenge to the reasonableness of Qwest’s rates, and in light of the analysis
above, the filed rate doctrine does not bar TON’s ability to proceed in federal
court at this stage of the litigation.
-25-
C. Primary Jurisdiction
1. Primary Jurisdiction Doctrine
Even where a court has subject matter jurisdiction over a claim, courts have
discretion to refer an issue or issues to an administrative agency. M arshall v. El
Paso Natural Gas Co., 874 F.2d 1373, 1376 (10th Cir. 1989). The doctrine of
primary jurisdiction is “specifically applicable to claims properly cognizable in
court that contain some issue within the special competence of an administrative
agency.” Reiter v. Cooper, 507 U.S. 258, 268 (1993).
The purpose of the doctrine is to “allow agencies to render opinions on
issues underlying and related to the cause of action.” Crystal Clear Com mc’ns,
Inc. v. Sw. Bell Tel. Co., 415 F.3d 1171, 1179 (10th Cir. 2005). It is “designed to
allow an agency to pass on issues within its particular area of expertise before
returning jurisdiction to the federal district court for final resolution of the case.”
Id. at 1176; see also Williams Pipe Line Co. v. Empire Gas Corp., 76 F.3d 1491,
1496 (10th Cir. 1996) (“[C]ourts apply primary jurisdiction to cases involving
technical and intricate questions of fact and policy that Congress has assigned to a
specific agency.”). The doctrine of primary jurisdiction is distinct from the
concept of exhaustion, which prevents a federal court from exercising jurisdiction
over a claim until all administrative remedies have been pursued. See United
States v. W. Pac. R.R. Co., 352 U.S. 59, 63–64 (1956); M ountain States Natural
Gas Corp. v. Petroleum Corp. of Tex., 693 F.2d 1015, 1019 (10th Cir. 1982).
-26-
In this circuit, a district court’s decision to invoke the primary jurisdiction
doctrine “require[s] it to consider whether the issues of fact in the case: (1) are
not within the conventional experience of judges; (2) require the exercise of
administrative discretion; or (3) require uniformity and consistency in the
regulation of the business entrusted to the particular agency.” Crystal Clear
Commc’ns, 415 F.3d at 1179. Additionally, when the regulatory agency has
actions pending before it which may influence the instant litigation, invocation of
the doctrine may be appropriate. See Mical Commc’ns, Inc. v. Sprint Telemedia,
Inc., 1 F.3d 1031, 1037–38 (10th Cir. 1993). There is, however, no “fixed
formula . . . for applying the doctrine.” W. Pac. R.R. Co., 352 U.S. at 64. Courts
should consider case-by-case whether “the reasons for the existence of the
doctrine are present and whether the purposes it serves [i.e., uniformity and resort
to administrative expertise] will be aided by its application in the particular
litigation.” Id.
W hen the primary jurisdiction doctrine is invoked, “the judicial process is
suspended pending referral of such issues to the administrative body for its
views.” Id. Referral does not automatically divest the court of jurisdiction.
Reiter, 507 U.S. at 268. The district court may retain jurisdiction over the
proceedings by staying the plaintiff’s claims pending agency action or, if neither
party will be unfairly disadvantaged, dismissing the case without prejudice. Id. at
268–69; see also Crystal Clear Commc’ns, 415 F.3d at 1174, 1176 (explaining
-27-
district court administratively closed case but would allow it reopened upon a
party’s motion, indicating the court’s “contemplat[ion of] continued litigation
after completion of administrative proceedings”).
2. District Court’s Primary Jurisdiction Ruling
This court applies an abuse of discretion standard to the district court’s
decisions to invoke the primary jurisdiction doctrine and to either stay or dismiss
the action without prejudice. S. Utah Wilderness Alliance v. BLM , 425 F.3d 735,
750 (10th Cir. 2005). The district court in this case properly invoked the doctrine
of primary jurisdiction, but did so without evaluation of the issues to be referred,
the purposes to be served by referral, or a clear statement that the FCC is the
appropriate agency to consider the referred issues.
The district court’s invocation of the primary jurisdiction doctrine was
apparently based on its mischaracterization of TON’s claims. Although the court
initially recognized that TON intended its complaint to be read to allege the
illegality of Q west’s conduct, it ultimately concluded TON’s claims were
fundam entally about the reasonableness and lawfulness of Qwest’s intrastate PA L
tariff rates. By interpreting TON’s claims in this manner, the court conflated
TON’s allegations concerning Qwest’s procedural failure to file required tariffs
and cost studies with allegations concerning the substantive unreasonableness of
Qwest’s rates. The court never considered whether Qwest’s procedural
noncompliance might have affected state regulators’ ability to assess Qwest’s
-28-
substantive compliance with § 276(a) and the FCC’s regulations implementing
that statutory provision.
In ruling on Qwest’s motions to dismiss and for referral, the court simply
stated Reiter stands for the proposition that the question whether Qwest’s filed
tariffs complied with the NST is w ithin the primary jurisdiction of “state public
service or regulatory commissions or the Federal Communications Commission”
and that TON’s relief might follow from FCC proceedings in other, related
matters. The court further stated dismissal would “allow TON to determine how
best to pursue an administrative decision that will resolve whether Qwest owes
TON a refund” without specifying whether it was referring the case to the FCC or
to state regulatory agencies. The court confused the exhaustion doctrine with the
concept of primary jurisdiction when it stated it would not “interfere with the
appropriate state and federal agencies by allowing [TO N] to make an end-run
around the established administrative remedies.” See Brown v. M CI Worldcom
Network Servs., Inc., 277 F.3d 1166, 1173 (9th Cir. 2002) (“The
[Communications Act] does not require that a plaintiff exhaust his administrative
remedies before proceeding to federal court . . . . In providing a federal court
forum under the [Act], Congress made it clear that it did not intend to require that
suits . . . first be decided by the FCC.” ). Furthermore, the court nowhere
addressed the impact of §§ 206 and 207 in providing TON a private right of
action in federal court, nor did it articulate how TON’s rights under these
-29-
provisions might be accommodated notwithstanding a primary jurisdiction
referral. Cf. Allnet Commc’ns Servs., Inc. v. Nat’l Exch. Carrier Ass’n, 965 F.2d
1118, 1122 (D.C. Cir. 1992). Finally, when ruling on TON’s motion to reconsider
its dismissal of TO N’s complaint, the district court failed to recognize the
potential prejudice TON might suffer from dismissal.
Although this court affirms the district court’s general determination that a
primary jurisdiction referral is appropriate in this case, the district court erred by
misidentifying the issues to be referred and failing to clearly direct its primary
jurisdiction referral to the FCC. Furthermore, because TO N may be prejudiced by
dismissal rather than a stay of its action pending primary jurisdiction referral, the
district court abused its discretion in dismissing TON’s claims, albeit without
prejudice. This court therefore vacates the district court’s order of dismissal and
remands to the district court with instructions to stay TON’s claims.
a. Application of the Primary Jurisdiction Doctrine
Because FCC orders are central to defining BOCs’ obligations under the
Communications Act, the FCC is the appropriate body for primary jurisdiction
referral. As set out below, the three Crystal Clear Communications factors, 415
F.3d at 1179, lead this court to identify the following three issues as meriting
district court consideration for primary jurisdiction referral to the Commission:
(1) whether a violation of FCC orders gives rise to statutory liability; (2) whether
the PAL rates Qwest charged during the period of its procedural noncompliance
-30-
with FCC orders were substantively compliant with the NST; and, (3) if not, how
damages should be calculated. Notwithstanding the number of related actions
currently pending before the FCC, the district court should consider immediate
referral to ensure the issues dispositive to TON’s claims receive full agency
consideration. 17 Factual questions outside the scope of the issues referred to the
Commission should be retained and decided, when appropriate, by the district
court. See M arshall, 874 F.2d at 1377 (“The district court is not required to defer
factual issues to an agency under the doctrine of primary jurisdiction if those
factual issues are of the sort that the court routinely considers.”).
As detailed above in Part II.A.3, many of the FCC’s orders specify LECs
bear the burden of demonstrating or justifying their tariff rates to state regulators
and are responsible for ensuring their rates are NST compliant. 18 See, e.g., New
17
Some of the most relevant actions currently pending before the
Commission were filed many years ago. See, e.g., In re Implementation of the
Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996, Illinois Public Telecommunications Association
Petition for a Declaratory Ruling Regarding the Remedies Available for
Violations of the Commission’s Payphone O rders (filed July 30, 2004), available
at http://svartifoss2.fcc.gov/prod/ecfs/retrieve.cgi?native_or_pdf=pdf& id_
document=6516286237. Although the Commission, pursuant to 47 U.S.C. §
208(b)(1), is obligated to issue an order concluding an investigation into actions
or omissions that contravene the Communications Act within five months of the
filing of a complaint, the Commission’s docket involving the implementation of
the Act’s payphone provisions clearly indicates the FCC is not complying with
the statutory timetable.
18
Contrary to Qwest’s assertion that its “certification” to M CI for the
purposes of receiving per-call compensation satisfied this burden, the FCC’s
(continued...)
-31-
Services Test Order, 17 F.C.C.R. at 2069 ¶ 158; Bureau Wisconsin Order, 15
F.C.C.R. at 9881, 9882 ¶¶ 9,11; W aiver/Refund Order, 12 F.C.C.R. at 21379 ¶ 18.
The threshold issue in this litigation, therefore, is whether Qwest’s admitted
failure to file new tariffs or cost data supporting its existing tariffs, which
violated 47 C.F.R. § 61.49(g)(2), the Order on Reconsideration, and portions of
the W aiver/Refund Order, gives rise to liability under each of §§ 201(b), 276(a),
and 416(c). 19 If Qwest’s failure to meet its burden is interpreted to constitute a
18
(...continued)
orders make clear that BOCs bear a much higher burden to demonstrate actual
NST compliance under paragraph 163 of the Order on Reconsideration than they
do to “certify” compliance under paragraph 131. See In re Bell Atlantic-
Delaware, 17 Commc’ns Reg. at ¶¶ 3, 28; com pare Order on Reconsideration, 11
F.C.C.R. at 21294 ¶ 131, with id. at 21308 ¶ 163. “Certification” merely requires
the LEC seeking compensation to “attest authoritatively” to the long distance
carrier from which it seeks per-call compensation that it has complied with the
prerequisites enumerated in paragraph 131 of the Order on Reconsideration. In re
Bell Atlantic-Delaware, 17 Commc’ns Reg. at ¶¶ 3, 6; see also In re Am eritech
Ill. v. M CI Telecomms. Corp., M em. Op. and Order, 1999 W L 1005080 at ¶ 19–20
(1999). Actual compliance, in contrast, requires the submission of cost data to
regulators and the receipt of state regulators’ approval that tariff rates comply
with the NST. See, e.g., 47 C.F.R. § 61.49(g)(2); Order on Reconsideration, 11
F.C.C.R. at 21308 ¶ 163.
19
TON contends it may assert its claims under 47 U.S.C. §§ 201(b), 276(a),
and 416(c). Qwest provides no argument to the contrary. As a consequence, this
court assumes, without deciding, that for the purposes of this appeal, a private
right of action exists under each of these statutes in accordance with the facts
asserted by TON. See Burks v. Lasker, 441 U.S. 471, 475–76 & n.5 (1979) (“The
question whether a cause of action exists is not a question of jurisdiction, and
therefore may be assumed without being decided.”); M andy R. ex rel M r. & M rs.
R. v. Owens, 464 F.3d 1139, 1143 (10th Cir. 2006) (applying the Burks principle
to private right of action to enforce M edicaid provisions); see also Steel Co. v.
Citizens for a Better Env’t, 523 U .S. 83, 89–90 (1998) (holding that as long as a
(continued...)
-32-
violation of the Communications A ct, TON is entitled to have its claim
adjudicated by a federal court under § 207 and may be entitled to damages under
§ 206. See 47 U.S.C. § 206 (providing for damages arising from a common
carrier’s failure to do “any act, matter, or thing in this chapter required to be
done”); Global Crossing Telecomms., Inc. v. M etrophones Telecomms., Inc., 127
S. Ct. 1513, 1520 (2007) (holding § 207 gives payphone providers a private right
of action for violation of § 201(b) as lawfully implemented by a 2003 FCC
regulatory order addressing per-call compensation). In light of the Supreme
Court’s guidance in Global Crossing Telecom munications that not “every
violation of FCC regulations” constitutes a statutory violation, 127 S. Ct. at 1521,
and that courts should apply Chevron deference to the Commission’s views on
whether a violation of its regulations gives rise to statutory liability, id. at
1520–23, the district court should consider whether the FCC is in the best
position to determine in the first instance if its regulatory orders contemplate that
failures to comply procedurally with its regulations amount to violations of
§§ 201(b), 276(a), or 416(c). A desire for uniformity in interpretation of the
comprehensive regulatory scheme suggests this issue is appropriate for agency
resolution. See Crystal Clear Commc’ns, 415 F.3d at 1179.
19
(...continued)
stated claim is not “frivolous or immaterial,” the absence of a valid cause of
action does not implicate subject matter jurisdiction). The Davel court made the
same assumption regarding the availability of a private right of action in that
case. Davel Commc’ns, 460 F.3d at 1085 n.3.
-33-
The district court should also consider whether agency expertise is
necessary to evaluate Qwest’s substantive compliance w ith the NST. If Qwest’s
procedural noncompliance gives rise to statutory liability, a substantive-
compliance analysis will be necessary in order to determine whether TON may
seek refunds or other damages in federal court for Qwest’s violation of FCC
orders. Even if a procedural violation of FCC orders does not give rise to
statutory liability, a substantive evaluation of Qwest’s NST compliance would
nevertheless be necessary to assist the court in determining w hether Qwest
directly violated § 276(a)’s anti-subsidization and anti-discrimination commands.
Because of the complexities of tariffing and the number of states in w hich Qwest
was required to file NST-compliant tariffs, the district court should consider
whether agency expertise is necessary for the resolution of this issue. If so, the
FCC, perhaps with assistance from state regulators using the conference
procedure set forth in 47 U.S.C. § 410(b), could determine whether Qwest’s April
1997 to April 2002 tariff rates in each jurisdiction were cost-based and consistent
with all aspects of § 276(a), including § 276’s anti-discrimination and anti-
subsidization requirements. See Order on Reconsideration, 11 F.C.C.R. at 21308
¶ 163.
If Qwest’s rates did not comply substantively with the requirements of the
NST by failing to be cost-based, containing subsidies, or discriminating in favor
of Qwest, TON is entitled to seek damages under § 206 for Qwest’s violations of
-34-
§ 276(a). 20 The FCC, again perhaps w ith the assistance of state agencies, is likely
to be in the best position to calculate the difference between Qwest’s pre-April
2002 noncompliant rates and rates that would have been NST compliant. This
calculation would assist the court in considering TON’s claim for damages and, if
appropriate, awarding such damages.
b. Stay of TON’s Claims
Dismissal of an action pending primary jurisdiction referral is appropriate
when the parties will not be prejudiced or “unfairly disadvantaged.” Reiter, 507
U.S. at 268–269; United States v. M ich. Nat. Corp., 419 U.S. 1, 5 (1974) (per
curiam) (“Dismissal rather than a stay has been approved where there is assurance
that no party is prejudiced thereby.”); Far East Conference v. United States, 342
U.S. 570, 577 (1952) (determining dismissal was appropriate where case involved
only questions within the scope of agency jurisdiction, judicial review of an
agency order w ould be available, and similar suit could be easily initiated later).
W here, for example, the relief sought is an injunction or declaratory judgment,
dismissal may be appropriate. See, e.g., Far East Conference, 342 U.S. at 577.
W here damages are sought and the relevant statute of limitations might
preclude relief, however, a stay is likely to be preferable. See Carnation Co. v.
Pac. Westbound Conference, 383 U.S. 213, 223 (1966) (distinguishing treble-
20
If it is determined that failure to comply with FCC regulatory orders gives
rise to statutory liability under §§ 201(b) and 416(c), TON could also seek
recovery in its federal court action for violation of those provisions.
-35-
damages relief sought by instant plaintiff with injunctive relief sought by Far
East Conference plaintiffs and explaining “a treble-damage action for past
conduct cannot be easily reinstituted at a later time” and may face a statute-of
limitations bar). Additionally, where further judicial proceedings are
contemplated, the court should ordinarily retain jurisdiction by staying the
proceedings. Davel Commc’ns, 460 F.3d at 1091; accord Crystal Clear
Commc’ns, 415 F.3d at 1178 n.6 (stating a stay is usual course of action in
antitrust cases). Finally, where pending FCC actions may affect the outcome of a
plaintiff’s federal court litigation, this court has previously assumed a stay is
appropriate. M ical Commc’ns, 1 F.3d at 1040 (raising primary jurisdiction sua
sponte and ordering district court to stay case pending issuance of FCC ruling);
see also Davel Com mc’ns, Inc. v. Qwest Corp., No. C03-3680P, slip op. at 6
(W .D. W ash. Jan. 29, 2007) (unpublished) (concluding, upon remand from the
Ninth Circuit, the possibility of further judicial proceedings following FCC
resolution of threshold issue warranted a stay).
In this case, TON alleges two potential bases for prejudice. First, because
§ 415(b) creates a two-year statute of limitations for damage actions before the
FCC, TON contends it may be precluded from refiling its complaint before the
Commission. TON asserts the statute of limitations began to run in April 2002
when Qwest filed its NST-compliant rates. Accord Davel Commc’ns, 460 F.3d at
1091–93 (observing that, under Davel’s interpretation of the W aiver/Refund
-36-
Order, Davel’s right to reimbursement came into existence only upon Qwest’s
filing of NST-compliant rates and, therefore, its cause of action only began to
accrue when Qwest failed to pay the reimbursements). TON’s limitations period,
therefore, would have expired in April 2004. Second, TON alleges that § 207,
which functions as an election-of-forum provision, gave it the right to file suit
either in federal district court or before the FCC, but not in both fora. It contends
its decision to file in federal court may foreclose it from seeking subsequent relief
before the Commission.
Qwest fails to respond directly to TON’s assertions. Instead, Qwest
contends: 1) the decrease in its rates was caused by the FCC’s revisions to the
NST in the 2002 New Services Test Order and, therefore, there is no evidence
that its pre-2002 rates were unreasonable or discriminatory; 2) TON’s
interpretation of the Waiver/R efund Order is misguided and does not entitle TO N
to refunds or damages; and 3) any claim that Qwest’s rates became unlawful on
April 15, 1997, or M ay 19, 1997, when Qwest failed to file new tariffs or cost
studies, would have been time-barred after April or M ay 1999 and, therefore, are
already precluded by the statute of limitations. 21 As to whether TON will be
21
Although Qwest may be correct in asserting the statute of limitations w ill
limit TON’s recovery, it is incorrect in asserting the statute of limitations w ill
necessarily be a complete bar to recovery. TON’s ability to recover for the entire
April 1997 to April 2002 period based on a failure-to-file theory could be limited
by the “discovery of injury” rule applied by other circuits. See Com mc’ns
Vending Corp. of Ariz., Inc. v. FCC, 365 F.3d 1064, 1073–1074 (D.C. Cir. 2004)
(continued...)
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prejudiced by dismissal, Qwest says only that TON should have filed its claims
with the state commissions charged with determining NST compliance rather than
filing in federal court and, thus, any resulting prejudice is of TON’s own making.
It also claims that because the FCC is currently considering the same issues in
several existing proceedings, TON “may well” get the relief it seeks without
further judicial action.
Because dismissal might result in a § 415(b) statute-of-limitations bar to
TON’s claims under the W aiver/Refund Order and because § 207’s election-of-
forum provision might prevent TON from seeking agency relief, the district court
abused its discretion in dismissing, rather than staying, TON’s suit.
Qwest expressly declined to waive a statute-of-limitations defense before
the district court and again before this court. Although it seems logical that the
statute of limitations in § 415(b) w ould be tolled during the pendency of TON’s
federal court litigation, neither party has called the court’s attention to any such
21
(...continued)
(stating the “discovery of injury” rule has been applied to § 415(b) by the FCC
and the D.C., Third, and Ninth Circuits, where “a cause of action accrues either
when a readily discoverable injury occurs or, if an injury is not readily
discoverable, when the plaintiff should have discovered it”). In Davel, the Ninth
Circuit concluded Qwest’s failure to file federal fraud protection rates with the
FCC beginning in 1997 put Davel on inquiry notice that Qwest failed to comply
with the Payphone Orders. Davel Commc’ns, 460 F.3d at 1092. The Davel court
determined Davel could only recover reimbursement on its fraud protection
claims for the amounts paid under noncompliant tariffs w ithin two years prior to
Davel’s filing of its federal court complaint. Id. at 1092–93. The same principle
may limit the period of TO N’s right to recovery on some of its claims here.
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tolling provision or related case law, nor has the court located any on its own. To
the contrary, other courts have suggested the limitations period would not be
tolled. Cf. Brown, 277 F.3d at 1173 (stating district court should stay claim
during primary jurisdiction referral because statute of limitations under § 415 had
run); Davel Commc’ns, No. C03-3680P, slip op. at 6 (recognizing risk that statute
of limitations may run pending FCC’s interpretation of W aiver/Refund Order).
Because it appears TON may be unfairly disadvantaged by dismissal, this court
concludes the district court abused its discretion by dismissing TON’s complaint.
Additionally, TON asserts that § 207 entitles it to proceed in federal court,
that the district court’s ruling essentially denied it a federal forum, and that there
is a risk, under the plain language of § 207, that it will be precluded from refiling
its dismissed complaint before the Commission. Courts have consistently
recognized § 207 as an “election-of-remedies provision” such that “once an
election is made by either filing a complaint with the FCC or filing a complaint in
federal court, a party may not thereafter file a complaint on the same issues in the
alternative forum, regardless of the status of the complaint.” Premiere Network
Servs., Inc. v. SBC Commc’ns, Inc., 440 F.3d 683, 688 (5th Cir. 2006) (citing
cases). Contrary to Qwest’s assertion that TON should have known it was
required to file its claims before the state commissions rather than in federal
court, § 207 has clearly been construed not to require exhaustion of administrative
remedies. See, e.g., Brown, 277 F.3d at 1173; APCC Servs., Inc. v. Worldcom,
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Inc., 305 F. Supp.2d 1, 10–11 (D.D.C. 2001). Even if, as Qwest asserts, the
Commission did instruct parties to challenge an LEC’s compliance with the
FCC’s filing requirements before state regulators, Qwest does not explain how
this direction divests the court of jurisdiction under § 207 or bars TON from
taking advantage of the choice Congress provided to it under § 207. Because
Qwest has engaged only in unsupported argument to the contrary, we conclude
that TON’s arguments regarding the nature of § 207 provide an additional reason
for staying TON’s claims.
Finally, contrary to the statement in its brief that TON “may well” get the
relief it seeks, Q w est conceded to the district court that predicting whether TO N
would benefit from a positive resolution of the FCC’s pending matters was like
“trying to look into a crystal ball.” Q west admitted the FCC could issue very
limited orders in the matters currently pending before it which might not entitle
TON to relief. Furthermore, at oral argument before this court, Qwest conceded
that, although it believed dismissal was appropriate, it did not strongly oppose a
stay.
IV . C ON CLU SIO N
For the reasons set forth above, the district court’s dismissal of TON’s
complaint is VACATED. This matter is REM AND ED to the district court for
further proceedings not inconsistent with this opinion, including the issuance of a
stay during the pendency of any proceedings referred to the FCC.
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