Richman Bros. Records, Inc. v. Federal Communications Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Decided September 19, 1997

No. 96-1044

Richman Bros. Records, Inc.,

Petitioner

v.

Federal Communications Commission and

United States of America,

Respondents

On Petition for Review of an Order of the

Federal Communications Commission

Glenn B. Manishin and Christy C. Kunin, were on the
briefs for petitioner.

Joel I. Klein, Acting Assistant Attorney General, Robert B.
Nicholson and Marion L. Jetton, Attorneys, United States
Department of Justice, William E. Kennard, General Coun-
sel, Daniel M. Armstrong, Associate General Counsel, John
E. Ingle, Deputy Associate General Counsel, and Laurel R.

Bergold, Counsel, Federal Communications Commission, were
on the briefs for respondents.

Leon M. Kestenbaum and Michael B. Fingerhut, filed a
brief for intervenor Sprint Communications Co., L.P.

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

Opinion for the Court filed by Circuit Judge Ginsburg.

Ginsburg, Circuit Judge: Richman Bros. Records, Inc.
seeks review of a decision issued by the staff of the Federal
Communications Commission upholding the validity of the
limitation of liability provision in a tariff filed by U.S. Sprint
Communications Co. The FCC argues, among other things,
that Richman's petition should be dismissed because Rich-
man, having failed to ask the Commission to review the
decision of the staff, did not exhaust its administrative reme-
dies before seeking judicial review. We agree.

* * *

In 1987 Richman transferred its 12 existing WATS lines
from Telesphere, Inc. to Sprint and at the same time added
six new lines. For more than three months after the service
was switched to Sprint, Richman was unable to make outgo-
ing long-distance calls on its pre-existing lines. Richman
sued Sprint in New Jersey state court for damages resulting
from the three-month loss of service. Sprint defended on the
ground that its agreement with Richman incorporated the
tariff that Sprint then had on file with the FCC, which
included a limitation upon Sprint's liability for damages.
Meanwhile Sprint sued Richman in the United States District
Court for the District of Kansas to recover unpaid long-
distance charges.

The two actions were consolidated before the United States
District Court for the District of New Jersey. The district
court determined that under the doctrine of primary jurisdic-
tion, the validity of the tariff provision limiting Sprint's
liability should be submitted to the FCC. Richman's appeal
of that decision was dismissed by the Third Circuit for want

of a final order. See Richman Bros. Records, Inc. v. U.S.
Sprint Communications Co., 953 F.2d 1431 (1991), cert. de-
nied, 505 U.S. 1230 (1992).

Richman then duly applied to the FCC for a declaratory
judgment that the provision of the tariff limiting Sprint's
liability is not a defense to its state law action. The Common
Carrier Bureau of the FCC, acting pursuant to delegated
authority, see 47 C.F.R. s 0.91 (1996), rejected Richman's
arguments and denied its petition. Without asking the Com-
mission to review that decision Richman filed a petition for
review in this court.

We conclude that s 5(c)(7) of the Communications Act, 47
U.S.C. s 155(c)(7), precludes the court from exercising juris-
diction over Richman's petition. That section makes the
filing of an application for review by the Commission "a
condition precedent to judicial review" of a decision taken
pursuant to delegated authority.

Invoking United States v. Western Pacific R.R. Co., 352
U.S. 59, 72-73 (1956) and Reiter v. Cooper, 507 U.S. 258, 268-
69 (1993), Richman contends that the jurisdictional hurdle
raised by s 5(c)(7) presents no obstacle to judicial review of
the staff decision in this case because it was occasioned by
referral from a court under the doctrine of primary jurisdic-
tion. Richman's reliance upon Western Pacific and Reiter is
misplaced, however.

In Western Pacific the Supreme Court held that the two-
year limitation (as provided in s 16(3) of the Interstate
Commerce Act) upon the suit of a carrier against a shipper
(in that case the United States) "does not bar a [judicial]
reference to the Interstate Commerce Commission of ques-
tions raised by way of defense and within the Commission's
primary jurisdiction." 352 U.S. at 74. The purpose of the
statute of limitations is to keep stale litigation out of the
courts. That purpose would not be served by applying the
statute of limitations to the referral of a question arising in
the course of the defense. Id. at 72. Rather, the result
would be to require the district court to render a decision
"without the benefit of all the applicable law." Id.

According to Richman, "[t]his case is a virtual clone of
Western Pacific."

First, Section 5(c)(7) says nothing about primary jurisdic-
tion referrals, and there is "therefore no language which
militates against the conclusion that the statute does not
apply" in primary jurisdiction cases. Second, the policy
behind Section 5(c)(7), avoiding judicial interference until
administrative remedies are exhausted, "has no relevance
here" because the purpose of primary jurisdiction is to
allocate decision-making responsibility, not prevent judi-
cial interference with exclusive administrative powers.
Finally, it is irrelevant whether Section 5(c)(7) is "juris-
dictional" because this entire tariff matter is one that has
been referred as an issue "incident to judicial proceed-
ings," not a case originally before the Commission.

Richman's first and third points are essentially defensive.
The petitioner's case-in-chief, as it were, is that the policy
behind the exhaustion requirement in administrative law, like
the policy behind the statute of limitations in Western Pacific,
"has no relevance" to a matter that arises in the first instance
in a court and is only then put before an agency out of
deference to the agency's primary jurisdiction. Richman
badly misreads both the exhaustion requirement and Western
Pacific. As for the case, Richmond ignores the extent to
which the Supreme Court based its decision upon the inequity
of permitting an action against the United States without
permitting the United States to raise a defense because of the
shorter statute of limitations for actions before the ICC.
Only a clear directive from the Congress could compel such a
result. 352 U.S. at 71.

Richman offers no comparably compelling reason to believe
that the Congress intended to suspend the exhaustion re-
quirement of s 5(c)(7) in the case of a referral made under
the doctrine of primary jurisdiction. In such a case the
district court stays its hand in order for the parties to get a
ruling from the agency and thus to bring the agency's exper-
tise--including its policy judgment--fully to bear upon a
question within the agency's peculiar competence. There is

every reason to think, therefore, that the Congress did not
intend that the court review a staff decision that has not been
adopted by the Commission itself.

Richman next argues that this case is governed by Reiter,
in which (per Richman) "the Court held that the administra-
tive exhaustion requirements of the [Interstate Commerce
Act] do not apply to primary jurisdiction referrals." Reiter
held no such thing, but rather stands for the common-sense
proposition that a party need not exhaust its administrative
remedies before an agency that is without the power to grant
the remedy it seeks. 507 U.S. at 269. There is no similar
remedial problem in this case, however. Richman sought a
declaratory order (that a limitation of liability provision in a
tariff may not be invoked as a defense to a tort claim
sounding in state law) and the FCC is authorized to grant
such relief in an appropriate case. 5 U.S.C. s 554(e); 47
C.F.R. s 1.2 (1996). See, e.g., Wilson v. A.H. Belo Corp.,
Nos. CV-91-1206 and CV-92-659 (E.D. Cal. April 27, 1992)
(complaint dismissed in light of declaratory ruling In re
Exclusive Jurisdiction with Respect to Potential Violations
of the Lowest Unit Charge Requirements of Section 315(b) of
the Communications Act of 1934, As Amended, 6 F.C.C.R.
7511 (1991)), aff'd, 87 F.3d 393 (9th Cir. 1996); In the Matter
of Earth Satellite Communications, Inc., 95 F.C.C.2d 1223
(1983) (declaratory order preempting state regulation of satel-
lite master antenna television), aff'd, New York State Comm'n
on Cable Television v. Federal Communications Comm'n,
749 F.2d 804 (D.C. Cir. 1984).

In summary, Richman failed to exhaust its administrative
remedies and presents no valid reason why this failure should
be excused. Therefore, we do not reach Richman's argu-
ments on the merits, and its petition for review is

Dismissed.