Qwest Corp. v. Federal Communications Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 9, 2001 Decided June 15, 2001

No. 00-1376

Qwest Corporation, et al.,
Petitioners

v.

Federal Communications Commission and
United States of America,
Respondents

Metrocall, Inc., et al.,
Intervenors

Consolidated with
00-1377

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

Michael K. Kellogg argued the cause for petitioners. With
him on the briefs were Aaron M. Panner, Michael E. Glover,

Edward Shakin, Joseph Dibella, Dan L. Poole, Robert B.
McKenna, Jeffry A. Brueggeman, James D. Ellis, Roger K.
Toppins and Hope E. Thurrott. Alfred G. Richter entered an
appearance.

Richard K. Welch, Counsel, Federal Communications Com-
mission, argued the cause for respondents. On the brief were
Jane E. Mago, Acting General Counsel at the time the brief
was filed, John E. Ingle, Deputy Associate General Counsel,
Laurel R. Bergold, Counsel, John M. Nannes, Deputy Assis-
tant Attorney General, U.S. Department of Justice, Catherine
G. O'Sullivan and Nancy C. Garrison, Attorneys. Daniel M.
Armstrong, Associate General Counsel, Federal Communica-
tions Commission, entered an appearance.

Frederick M. Joyce, Christine McLaughlin, Ronald E.
Quirk, Jr., Marianne Roach Casserly, Jonathan J. Nadler
and Robert L. Hoggarth were on the brief for intervenors
Metrocall, Inc., Arch Wireless, Inc. and Personal Communica-
tions Industry Association. Angela E. Giancarlo entered an
appearance.

Before: Williams, Ginsburg and Rogers, Circuit Judges.

Opinion for the Court filed by Circuit Judge Williams.

Williams, Circuit Judge: When a local caller dials the
number of a paging service customer, the caller's Local
Exchange Carrier ("LEC") sends the call to a paging termi-
nal, operated by the paging service. Once the terminal
validates the call and receives the "call-back" number or
message, it sends out a radio broadcast that sets off the
customer's pager. Thus the call starts out on the LEC's
network but is handed off to the paging carrier, which
completes the call. This case concerns the Federal Commu-
nications Commission's rule forbidding any LEC charge to
the paging company for carrying such calls, 47 CFR
s 51.703(b).

The Commission enforced this no-compensation rule
through adjudication of complaints brought by providers of

one-way paging services, who contended that certain LECs
had violated s 51.703(b). The LECs object to use of this
procedure to resolve the dispute. They contend that under
the Telecommunications Act of 1996, Pub. L. No. 104-104, 110
Stat. 56 (the "1996 Act"), such disputes can be resolved only
through state-managed negotiation and arbitration under 47
U.S.C. ss 251(c)(1), 252. But another court has already
resolved against these very LECs an underlying issue that is
vital to their claim. In Iowa Utilities Bd. v. FCC, 120 F.3d
753 (8th Cir. 1997), aff'd in part and rev'd in part sub nom.,
AT & T Corp. v. Iowa Utilities Bd., 525 U.S. 366 (1999), the
Eighth Circuit rejected the LECs' claim that 47 CFR
s 51.703(b) was wholly ultra vires. Rather, the court found
that, as applied to Commercial Mobile Radio Service
("CMRS"), which includes paging, the regulation was validly
grounded in 47 U.S.C. s 332, a provision adopted well before
the 1996 Act, in the 1982 amendments to the Communications
Act of 1934. See Communications Amendments Act of 1982,
Pub. L. No. 97-259, s 331, 96 Stat. 1087, 1096-97. The
Eighth Circuit's decision meets the criteria for issue preclu-
sion. Petitioners are therefore bound by its holding that the
validity of 47 CFR s 51.703(b) (as applied to CMRS) is wholly
independent of the 1996 Act. The LECs themselves do not
contend that a rule so grounded may be enforced solely
through the negotiation and arbitration procedures of the
1996 Act. Accordingly we uphold the Commission's use of its
complaint procedure. We also affirm the Commission's sub-
stantive interpretation of s 51.703(b) as barring charges for
facilities used to deliver LEC-originated traffic.

* * *

The Commission promulgated s 51.703(b) in its first major
order implementing the 1996 Act. See Implementation of the
Local Competition Provisions in the Telecommunications
Act of 1996, 11 F.C.C.R. 15,499, 16,228 (1996) ("Local Compe-
tition Order"). The rule states:

A LEC may not assess charges on any other telecommu-
nications carrier for local telecommunications traffic that
originates on the LEC's network.

47 CFR s 51.703(b); see also Local Competition Order, 11
F.C.C.R. at 16,016 p 1042. In resolving a broad challenge to
that order, the Eighth Circuit upheld s 51.703(b) as applied
to CMRS providers, Iowa Utilities Bd., 120 F.3d at 800 n.21;
the LECs did not petition for certiorari on that issue.

After the Eighth Circuit's decision the FCC's Common
Carrier Bureau ruled that s 51.703(b)'s bar on LEC charges
for completion of LEC-originated calls also covered charges
for certain facilities used by LECs to provide such services.
In response to a request for clarification from several LECs,
the then chief of the Common Carrier Bureau, A. Richard
Metzger, Jr., issued a letter saying that the LECs could not
charge paging service providers for the cost of "LEC trans-
mission facilities that are used on a dedicated basis to deliver
to paging service providers local telecommunications traffic
that originates on the LEC's network." Metzger Letter of
December 30, 1997, 13 F.C.C.R. 184, 184 (1997). The LECs
filed applications for review of the letter; three years later,
the Commission has yet to rule on the matter.

Shortly before and after the release of the Metzger letter,
one-way paging providers TSR Wireless, LLC and Metrocall,
Inc. filed a series of complaints with the Commission under 47
U.S.C. s 208 (authorizing complaints "of anything done or
omitted to be done by any common carrier subject to this
chapter, in contravention of the provisions thereof"). The
complaints claimed (in the aggregate) that the four LECs
now petitioning for review had charged for facilities used to
deliver LEC-originated traffic, in violation, as the paging
companies saw it, of s 51.703(b). TSR Wireless also chal-
lenged Qwest's refusal to provide a "T-1 circuit" to handle
paging traffic between Yuma and Flagstaff, Arizona. The
LECs argued that the Commission lacked jurisdiction to
adjudicate the complaints, on the theory that the carriers
could enforce the LECs' interconnection obligations only
through the 1996 Act's negotiation and arbitration provisions.
See 47 U.S.C. ss 251(c)(1), 252.

The Commission held that it had jurisdiction to resolve the
paging carriers' complaints. Although relying primarily on a

different interpretation of the 1996 Act from the LECs', it
also invoked 47 U.S.C. s 332, the provision that had won the
day for the Commission in the Eighth Circuit. TSR Wireless,
LLC v. US WEST Communications, Inc., 15 F.C.C.R. 11,166,
11,172, 11,172-73 n.42, 11,189-90 p p 13, 41-42 (2000) ("Or-
der"). On the merits the Commission concluded that
s 51.703(b) prevented the LECs from imposing charges for
the facilities used to deliver LEC-originated traffic to the
paging carriers. It also held (subject to a qualification) that
Qwest was required to meet TSR Wireless's request for a T-1
line between Yuma and Flagstaff, Arizona at its own expense.
Id. at 11,189 p 40.

* * *

The parties' dispute over the propriety of CMRS providers
enforcing s 51.703(b) via the Commission's s 208 complaint
procedure entails two steps--steps that the Commission col-
lapses into one in its somewhat confusing issue preclusion
argument. The first step is to identify the source of the
Commission's authority to adopt s 51.703(b) insofar as it
applies to CMRS. (The LECs here do not challenge the
substantive validity of s 51.703(b) as applied to CMRS.) The
second step is to determine whether adversely affected par-
ties may pursue relief for non-compliance only via the 1996
Act's negotiation and arbitration provisions, see 47 U.S.C.
ss 251(c)(1), 252, or whether they may get relief via com-
plaints to the Commission under 47 U.S.C. s 208.

The link between the two is that if s 51.703(b) (as applied
to CMRS) rests solely on the 1996 Act, the second question,
that of available remedy, is sharply contested. But if
s 51.703(b) (as applied to CMRS) is validated by prior legisla-
tion, specifically 47 U.S.C. s 332, then 47 U.S.C. s 208 is
indisputably available. Perhaps because the second step (the
proper channels of enforcement) is so easy on the second
hypothesis (47 U.S.C. s 332), the Commission tends to over-
look it. By coincidence, the Eighth Circuit decision ad-
dressed the issues of both substantive power and remedy.

 In the Eighth Circuit litigation the LECs challenged the
substantive validity of s 51.703(b) and many other provisions
of the Local Competition Order. That order in fact rested on
the 1996 Act, and for many contexts the court found the
regulations adopted invalid. But insofar as s 51.703(b) and
several kindred sections applied to CMRS, the court found
support in 47 U.S.C. s 332:

Because Congress expressly amended section 2(b) to
preclude state regulation of entry of and rates charged
by Commercial Mobile Radio Service (CMRS) providers,
see 47 U.S.C. ss 152(b) (exempting the provisions of
section 332), 332(c)(3)(A), and because section
332(c)(1)(B) gives the FCC the authority to order LECs
to interconnect with CMRS carriers, we believe that the
Commission has the authority to issue the rules of special
concern to the CMRS providers, i.e., 47 C.F.R. ss 51.701,
51.703, 51.709(b), 51.711(a)(1), 51.715(d), and 51.717, but
only as these provisions apply to CMRS providers. Thus,
rules 51.701, 51.703, 51.709(b), 51.711(a)(1), 51.715(d), and
51.717 remain in full force and effect with respect to the
CMRS providers, and our order of vacation does not
apply to them in the CMRS context.

Iowa Utilities Bd., 120 F.3d at 800 n.21 (emphasis added).1
In the Local Competition Order itself, interestingly, the
Commission had not invoked s 332 in support of the regula-
tion. See 11 F.C.C.R. at 16,005-06 p p 1023, 1025. Compare
SEC v. Chenery Corp., 332 U.S. 194, 196 (1947).

The LECs also raised the remedial issue presented here
(though in a much broader version), persuading the court that
the Commission could not use s 208 complaint proceedings to

__________
1 Section 332(c)(1)(B) provides: "Upon reasonable request of
any person providing commercial mobile service, the Commission
shall order a common carrier to establish physical connections with
such service pursuant to the provisions of section 201 of this title.
Except to the extent that the Commission is required to respond to
such a request, this subparagraph shall not be construed as a
limitation or expansion of the Commission's authority to order
interconnection pursuant to this chapter."

enforce the whole family of duties to which s 51.703(b) (as it
applied generally) belonged. On this they won. Iowa Utili-
ties Bd., 120 F.3d at 803-04. But the victory was short-lived;
the Supreme Court vacated the ruling as unripe. AT&T
Corp. v. Iowa Utilities Bd., 525 U.S. at 386.

The Eighth Circuit's substantive ruling that s 51.703(b)
was validly grounded in s 332 seems on its face to meet the
criteria for issue preclusion. Under that doctrine, judgment
in a prior suit can preclude relitigation of an issue actually
litigated and necessary to the outcome of the first action so
long as no unfairness results. See Parklane Hosiery Co. v.
Shore, 439 U.S. 322, 326 n.5 (1979); Milton S. Kronheim &
Co. v. District of Columbia, 91 F.3d 193, 197 (D.C. Cir. 1996);
see also Southern Pac. R.R. Co. v. United States, 168 U.S. 1,
48-49 (1897).

The LECs' strongest response is that Iowa Utilities Bd.
did not really find that s 332 was the statutory authority for
s 51.703(b). The court's use of s 332, they say, was only to
parry a claim that s 51.703(b) and many associated regula-
tions were invalid intrusions on state authority under s 2(b)
of the Communications Act of 1934, 47 U.S.C. s 152(b). But
this cuts the Iowa Utilities Bd. decision too fine. The LECs'
basic attack was that the 1996 Act failed to support
s 51.703(b) and the associated regulations. The Eighth Cir-
cuit by and large agreed (though the Supreme Court did not).
But having agreed on the general proposition, the Eighth
Circuit was convinced that an exception applied for CMRS, as
to which it plainly found an independent basis of support
outside the 1996 Act, in s 332.

The petitioners did not seek certiorari as to the Eighth
Circuit's holding on s 332--making it a final judgment with
preclusive effects. The Supreme Court, discussing the pre-
clusive effect of a judgment that the loser was entitled to
appeal to the Supreme Court, has held that the loser's failure
to do so left him as badly off as if he had appealed and lost.
Angel v. Bullington, 330 U.S. 183, 189 (1947). As a general
matter we cannot see that certiorari should be on a different
footing. Of course the odds are against such relief; most

litigants will not have it granted even if they do seek it. Yet
the judgments of intermediate federal appellate courts none-
theless have issue preclusive effect. See Johnson Steel Street
Rail Co. v. William Wharton, Jr. & Co., 152 U.S. 252, 261
(1894).

The LECs go on to argue that theirs is a special case--they
"had no motivation to challenge section 51.703(b)" because
they reasonably thought the rule applied only to traffic (for
which they say they never charged); the FCC only later
revealed its view that the rule embraced charges for facilities.
See Petitioners' Br. at 38-39. But this seems somewhat
disingenuous on two counts. First, so far as appears they did
contest the rule in the Eighth Circuit. Indeed, they evidently
did so in the specific context of CMRS (at least footnote 21
gives no hint that it sprang out of the blue, and the LECs
make no claim that it did). Second, the Eighth Circuit
disposed of rehearing petitions in Iowa Utilities Bd. on
October 14, 1997, so that the 90-day period for filing a
petition for a writ of certiorari, see S. Ct. R. 13, only closed
well after the December 30, 1997 Metzger letter clearly put
the LECs on notice of the rule's application to facilities. In
any event, and recognizing that litigants must be highly
selective in framing petitions for certiorari, we cannot see any
serious unfairness in giving preclusive effect to the judgment
of a sister circuit.

Petitioners also invoke the doctrine launched in Functional
Music, Inc. v. FCC, 274 F.2d 543 (D.C. Cir. 1958). But that
doctrine has no bearing on issue preclusion, as it relates
simply to a party's right, once it has passed up a chance to
bring suit attacking a rule, to resist its later application.
Public Citizen v. Nuclear Regulatory Commission, 901 F.2d
147, 153 n.3 (D.C. Cir. 1990); Western Coal Traffic League v.
Interstate Commerce Commission, 735 F.2d 1408, 1411 (D.C.
Cir. 1984).

Petitioners' procedural victory, the Eighth Circuit's holding
that the Commission could not use complaint proceedings to
enforce the LECs' 47 U.S.C. ss 251-252 obligations, is also of
no use to them. Because of the Supreme Court's authorita-
tive ruling that the issue was unripe, AT&T Corp. v. Iowa

Utilities Bd., 525 U.S. at 386, the Commission cannot be
bound by its loss, and petitioners cannot (contrary to the
Commission's rather bizarre effort to deploy claim preclusion)
be bound by their failure to pose the procedural issue in the
CMRS context in the Eighth Circuit. See Norfolk & Western
Ry. Co. v. United States, 768 F.2d 373, 377-78 (D.C. Cir.
1985).

Petitioners acknowledge that the Commission referred to
s 332 in the Order, but stress, in a footnote, that the refer-
ences were tucked away in a diminutive footnote and in the
ordering clauses. See Order, 15 F.C.C.R. at 11,172-73 n.42,
11,189-90 p p 41-42. Petitioners' footnoted claim that under
McElroy Electronics Corp. v. FCC, 990 F.2d 1351 (D.C. Cir.
1993), a footnote will not suffice, is incorrect. There we held
that an ambiguous footnote in a Commission order failed to
provide adequate notice, id. at 1361-62, but here the footnote,
though small, is not obscure.

* * *

The Commission makes no claim that Iowa Utilities Bd.
bars petitioners' attack on its conclusion that s 51.703(b)
prohibits charges for facilities as well as traffic. We review
the Commission's reading of its regulation under highly def-
erential standards, and would reverse only a clear misinter-
pretation. See, e.g., National Medical Enterprises, Inc. v.
Shalala, 43 F.3d 691, 697 (D.C. Cir. 1995).

Petitioners argue that the Commission's inclusive reading
is unreasonable and "contrary to the plain language of the
FCC's regulation." See Petitioners' Br. at 43. We see no
barrier in the plain language. As to reasonableness, the
Commission's explanation seems compelling; its interpreta-
tion prevents LECs from "re-designating the 'traffic' charges
as 'facilities' charges." Order, 15 F.C.C.R. at 11,181 p 25.
The opposite reading would create an apparently artificial
distinction, giving LECs an incentive to game the system by
providing dedicated facilities at the paging providers' expense
in cases where they could conveniently carry the traffic at
their own expense.

 Petitioners suggest that 47 CFR s 51.709(b) contradicts
the Commission's ruling. That section provides:

The rate of a carrier providing transmission facilities
dedicated to the transmission of traffic between two
carriers' networks shall recover only the costs of the
proportion of that trunk capacity used by an intercon-
necting carrier to send traffic that will terminate on the
providing carrier's network. Such proportions may be
measured during peak periods.

That the regulation mentions facilities, while s 51.703(b) does
not, is surely not enough to establish the principle that when
the Commission wants to target charges for facilities, it must
do so explicitly. Moreover, as we do not understand the
LECs to claim that the traffic in question "terminate[s] on
the providing carrier's network," we do not see how the
regulation assists them. The Commission reads s 51.709(b)
as entirely congruent with s 51.703(b), confirming the ban on
charges, whether labeled as for traffic or for facilities, for
LEC-originated local calls. See Order, 15 F.C.C.R. at
11,181-82 p 26. The present case does not call on us to pass
on the Commission's reading of s 51.709(b), but we can say
that the provision does not seem to pose the contradiction
claimed by petitioners.

Finally, the petitioners say they reasonably fear that the
paging carriers will use the Commission's interpretation to
demand unnecessary and expensive facilities. But they have
not by any means established that such "gold-plating" is
likely. There are three uses of facilities--so far as appears
not uncommon--for which the paging carriers themselves
must pay: (1) for "transiting traffic"--"traffic that originates
from a carrier other than the interconnecting LEC but
nonetheless is carried over the LEC network to the paging
carrier's network," Order, 15 F.C.C.R. at 11,177 n.70; (2) for
connecting parts of a paging carrier's own network, such as
those linking a paging terminal with its antennas, id.; and (3)
for delivering traffic that originates or terminates outside the
Major Trading Area (essentially the local calling area), id. at
11,184 n.102. As a result of these three facility uses, paging
services that insisted on gold-plating would run up their own

costs. Further, the Commission observes that LECs can ask
the Commission for a waiver of s 51.703. Commission Br. at
45 n.92. The suggestion seems to reflect a view that paging
carriers' efforts at gold-plating would be unreasonable, and
thus that the Commission would afford relief on a proper
record. We cannot assume the contrary. In the absence of
gold-plating, the Commission's order simply requires the
LECs to look to their own customers to recoup the needed
costs of their facilities.

The LECs' petitions are

Denied.