United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 7, 2006 Decided June 27, 2006
No. 05-1186
AT&T INC.,
PETITIONER
v.
FEDERAL COMMUNICATIONS COMMISSION AND
UNITED STATES OF AMERICA,
RESPONDENTS
TIME WARNER INC. AND
TIME WARNER CABLE,
INTERVENORS
On Petition for Review of an Order of the
Federal Communications Commission
Jonathan E. Nuechterlein argued the cause for petitioner.
With him on the briefs were William T. Lake, Lynn R. Charytan,
Brian W. Murray, Stephen M. Obenski, James D. Ellis, and Gary
L. Phillips.
Nandan M. Joshi, Counsel, Federal Communications
Commission, argued the cause for respondent. On the brief
were Thomas O. Barnett, Acting Assistant Attorney General,
U.S. Department of Justice, Robert B. Nicholson and James J.
2
Fredricks, Attorneys, Samuel L. Feder, General Counsel,
Federal Communications Commission, Richard K. Welch,
Associate General Counsel, John E. Ingle, Deputy Associate
General Counsel, and Laurence N. Bourne, Counsel.
Before: RANDOLPH and TATEL, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge TATEL.
Concurring opinion filed by Circuit Judge RANDOLPH.
TATEL, Circuit Judge: Invoking section 10 of the
Communications Act of 1934, SBC Communications Inc. filed
a petition with the Federal Communications Commission
requesting that the Commission “forbear from applying Title II
common carrier regulation to IP platform services.” Fifteen
months later, the Commission denied the request for two
independent reasons: (1) the petition was “procedurally
defective” because the Commission had yet to determine
whether common carrier regulations even applied to IP platform
services, and (2) SBC failed to “identify with sufficient
precision” the regulations and services it intended the petition to
cover. Arguing that the first rationale conflicts with section 10
and the second is arbitrary and capricious, SBC—recently
renamed AT&T Inc.—petitions for review. Because we agree
that the Commission lacks section 10 authority to reject a
petition as procedurally improper just because it requests
forbearance from uncertain regulatory obligations, we reject the
Commission’s first rationale for denying SBC’s petition. And
because the Commission has failed to explain how its second
rationale is consistent with the specificity standard it has applied
in other contexts, we remand the case for further explanation
and consideration consistent with this opinion.
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I.
Congress enacted the Telecommunications Act of 1996 to
“encourage the rapid deployment of new telecommunications
technologies” by “promot[ing] competition and reduc[ing]
regulation” among telecommunications providers.
Telecommunications Act of 1996, Pub. L. No. 104-104, pmbl.,
110 Stat. 56, 56. Critical to Congress’s deregulation strategy,
the Act added section 10 to the Communications Act of 1934.
That section requires the Federal Communications Commission
to “forbear” from enforcing communications statutes and
regulations in certain specified circumstances. In particular,
section 10(a) provides that
the Commission shall forbear from applying any
regulation or any provision of [federal
telecommunications law] to a telecommunications
carrier or telecommunications service, or class of
telecommunications carriers or telecommunications
services, in any or some of its or their geographic
markets, if the Commission determines that—
(1) enforcement of such regulation or provision
is not necessary to ensure that the charges, practices,
classifications, or regulations by, for, or in connection
with that telecommunications carrier or
telecommunications service are just and reasonable
and are not unjustly or unreasonably discriminatory;
(2) enforcement of such regulation or provision
is not necessary for the protection of consumers; and
(3) forbearance from applying such provision or
regulation is consistent with the public interest.
47 U.S.C. § 160(a). Section 10(b) requires that in determining
whether forbearance is “consistent with the public interest,” the
Commission “shall consider whether forbearance from enforcing
the provision or regulation will promote competitive market
4
conditions, including the extent to which such forbearance will
enhance competition among [telecommunications] providers.”
Id. § 160(b). Section 10(c) allows telecommunications carriers
to petition the Commission for forbearance with respect to
particular services or facilities. Id. § 160(c). Should the
Commission fail to respond within one year, the petition “shall
be deemed granted,” although the Commission may extend the
one-year period by an additional 90 days if it “finds that an
extension is necessary to meet the requirements of subsection
(a).” Id.
On February 5, 2004, SBC Communications Inc. filed a
section 10 petition requesting forbearance from “Title II
common carrier regulation” for “IP platform services,” Petition
of SBC Commc’ns Inc. for Forbearance, WC Docket No. 04-29,
at 1 (filed Feb. 5, 2004) (“Forbearance Petition”), which it
defined as “those services that enable any customer to send or
receive communications in IP format over an IP platform, and
the IP platforms on which those services are provided,” id. at i.
Acknowledging some general uncertainty as to whether Title II
actually covers these services, SBC urged the Commission to
“eliminate any doubt concerning the unregulated status of IP
platform services by expressly forbearing from applying Title II
regulation . . . to the extent that such regulation might otherwise
be found to apply.” Id. at 2. In a second simultaneously filed
petition, SBC requested a declaratory ruling “confirm[ing] that
IP platform services . . . are not subject to Title II regulation.”
Petition of SBC Commc’ns Inc. for a Declaratory Ruling i (filed
Feb. 5, 2004) (“Declaratory Ruling Petition”).
One month after SBC filed its two petitions, the Commission
issued an “IP-Enabled Services” Notice of Proposed
Rulemaking (NPRM) raising many of the same issues presented
in SBC’s petitions. See IP-Enabled Services, 19 F.C.C.R. 4863
(proposed Mar. 10, 2004). The Commission consolidated SBC’s
5
declaratory ruling request with the rulemaking proceedings and,
given the “substantial overlap between the issues presented in
the SBC Forbearance Petition and the IP-Enabled Services
NPRM,” extended the period for comment on the forbearance
petition to coincide with the NPRM’s comment cycle. Wireline
Competition Bureau Extends Comment Deadlines for SBC’s “IP
Platform Services” Forbearance Petition, 19 F.C.C.R. 5607,
5607 (Mar. 30, 2004) (public notice). During the following
year, SBC and other interested parties filed comments and ex
parte submissions relating to both the rulemaking proceeding
and SBC’s two petitions.
After extending the one-year period by an additional ninety
days, the Commission denied SBC’s forbearance petition. The
Commission’s order explains:
We find that the petition is procedurally defective
because it asks us to forbear from the application of
statutory provisions and regulations that “may or may
not” apply to the telecommunications carrier or
telecommunications service at issue. In addition, the
evidence and arguments set out in SBC’s petition and
subsequent pleadings are insufficiently specific to
permit a finding that forbearance is appropriate.
In re: Petition of SBC Commc’ns Inc. for Forbearance from the
Application of Title II Common Carrier Regulation to IP
Platform Servs., 20 F.C.C.R. 9361, 9361 (May 5, 2005)
(“Forbearance Order”).
SBC filed a petition for review with this court, see 47
U.S.C. § 402(a) (allowing parties aggrieved by a Commission
order to appeal to this court) and, during briefing, merged with
AT&T Corp. to form a new company AT&T Inc. AT&T argues
that (1) nothing in section 10 permits the Commission to reject,
6
as procedurally improper, petitions seeking forbearance from
regulatory obligations that “may or may not” apply to the
facilities and services in question; and (2) the Commission acted
arbitrarily and capriciously in denying SBC’s petition on the
alternative ground that the petition lacked sufficient specificity
to determine whether section 10(a)’s requirements were
satisfied.
II.
We begin with the Commission’s first reason for rejecting
the petition—that the Commission had yet to determine the
extent to which Title II actually covers IP-enabled services. In
its order denying SBC’s petition, the Commission relied on
language from two different parts of section 10 to explain why
it may reject as procedurally improper any “conditional”
forbearance petition, that is, any petition seeking forbearance
from uncertain regulatory obligations.
First, section 10(a) uses the word “forbear,” which means,
the Commission says, “to desist from” or “cease.” Forbearance
Order, 20 F.C.C.R. at 9363 ¶ 5. Because “it would be
impossible” to “forbear” from applying a regulation “that does
not apply,” the Commission concluded, section 10 “do[es] not
govern petitions seeking such relief.” Id. In other words,
according to the Commission, it lacks authority to consider
conditional forbearance requests because “section 10 neither
contemplates nor permits grants of forbearance relating to
obligations that ‘may or may not’ apply to the . . . service at
issue.” Id. In its opening brief, AT&T offered a forceful
rebuttal to this interpretation of section 10, but we need not
consider the issue because the Commission, in addition to failing
to defend its position in its brief, affirmatively withdrew it at
oral argument. Oral Arg. 13:20-:35.
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We thus focus on the second provision the Commission
relied on to support its conclusion that conditional forbearance
petitions are “procedurally defective,” namely, section
10(a)(3)’s public interest requirement. The Commission
reasoned:
[W]e find that the grant of a petition seeking
forbearance from a requirement that does not
unambiguously apply is contrary to the public
interest, and therefore does not satisfy the
requirements for granting forbearance under section
10(a)(3) of the Act. It is not in the public interest to
forbear from requirements before the Commission has
fully considered whether and under what technical
conditions the requirements apply in the first place.
To do so could preclude fully considered analysis,
particularly in light of the statutory deadline for
acting on forbearance petitions. The opposite
conclusion would effectively impose a deadline for
the Commission to rule on the appropriate regulatory
treatment of IP-enabled services. In addition, it is not
in the public interest for the Commission to devote
resources to determine whether to forbear from
imposing or enforcing requirements that might not
even apply.
Forbearance Order, 20 F.C.C.R. at 9363 ¶ 6.
Critical to the issue before us, the Commission pointed to
nothing in SBC’s forbearance request that flunked section
10(a)(3)’s public interest requirement. Instead, the Commission
denied SBC’s petition on the ground that all conditional
forbearance requests are, as a procedural matter, contrary to the
public interest and thus require no substantive consideration.
See id. (declaring that “a petition” seeking conditional
8
forbearance is not in the public interest, with no mention of the
petition submitted by SBC) (emphasis added). Indeed, the
Commission’s entire discussion focuses on its generic concern
that it has neither time nor resources to respond to conditional
forbearance requests. Asked about this at oral argument,
Commission counsel confirmed that the SBC order announces
a new rule, namely, that the Commission will reject any
conditional forbearance petition as procedurally defective rather
than ruling on its merits. Oral Arg. 26:15-28:13. The question
before us, then, is whether section 10(a)(3)’s public interest
requirement permits the Commission to adopt such a rule.
We review the Commission’s interpretation of section
10(a)(3) in accordance with Chevron U.S.A. Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837 (1984), asking
first whether Congress has “directly spoken” to the issue before
us, id. at 842. To answer this question, we “employ[] traditional
tools of statutory construction,” id. at 843 n.9, beginning “as
always, with the plain language of the statute,” Citizens Coal
Council v. Norton, 330 F.3d 478, 482 (D.C. Cir. 2003). If
Congress has not clearly expressed its intent on the matter, we
move to Chevron’s second step, deferring to the agency’s
interpretation as long as it “is based on a permissible
construction of the statute.” Chevron, 467 U.S. at 843; see also
Kay v. FCC, 393 F.3d 1339, 1343 (D.C. Cir. 2005) (explaining
that “we accord a substantial measure of deference to the
Commission’s interpretation” of telecommunications statutes).
In this case, however, we have no need to consider the
reasonableness of the Commission’s interpretation, for as we
explain below, Congress “has directly spoken to the precise
question at issue” and we “must give effect to [its]
unambiguously expressed intent.” Chevron, 467 U.S. at 842-43.
To begin with, the Commission’s interpretation conflicts
with section 10(b), which expressly directs that in determining
9
whether forbearance is consistent with the public interest under
section 10(a)(3), the Commission “shall consider whether
forbearance . . . will promote competitive market conditions,
including the extent to which such forbearance will enhance
competition among providers of telecommunications services.”
47 U.S.C. § 160(b). Yet under the Commission’s newly
announced rule, the Commission will never consider market
conditions when addressing conditional forbearance requests
because it views such requests as automatically failing section
10(a)(3)’s public interest requirement. Nothing in section 10
gives the Commission authority to so ignore section 10(b).
The Commission’s approach violates section 10’s plain
language in a second respect. In the order before us, the
Commission effectively held that any conditional forbearance
petition will fail section 10(a)’s substantive “public interest”
requirement because section 10(c)’s deadline precludes “fully
considered analysis” of such petitions. In other words, the
Commission has declared it contrary to the public interest to
consider such petitions within the statutory time frame. Section
10(a)(3), however, gives the Commission authority to decide
only whether “forbearance . . . is consistent with the public
interest,” not to decide whether deciding whether to forbear is in
the public interest. Moreover, the Commission’s reasoning, if
extended, could gut section 10. For example, under the
Commission’s view, nothing would stop it from finding that the
statutory deadline permits “fully considered analysis” of only
narrow petitions, and thus adopting a rule that any petition
seeking forbearance from more than one regulation is contrary
to the public interest. This cannot be correct. Nothing in section
10(a)(3) allows the Commission to avoid ruling on the merits of
a forbearance petition whenever it finds the statutory deadline
inconvenient. Quite to the contrary, section 10(a)(3)’s very
purpose is to force the Commission to act within the statutory
deadline.
10
For these reasons, the Commission’s new rule conflicts with
the statute’s plain language, and the Commission offers us no
reason to believe that “Congress did not mean what it appears to
have said.” Engine Mfrs. Ass’n v. EPA, 88 F.3d 1075, 1089
(D.C. Cir. 1996). Indeed, the rule runs counter to the
Telecommunications Act’s purpose—“reduc[ing] regulation in
order to . . . encourage the rapid deployment of new
telecommunication technologies,” Telecommunications Act of
1996, pmbl., 110 Stat. at 56. Parties petitioning for conditional
forbearance seek elimination of regulatory uncertainty, and even
the Commission recognizes that “regulatory uncertainty . . . in
itself may discourage investment and innovation” regarding the
very technologies Congress intended the Act to promote.
Inquiry Concerning High-Speed Access to the Internet Over
Cable and Other Facilities, 17 F.C.C.R. 4798, 4802 ¶ 5
(proposed 2002); see also Amendment of the Commission’s
Space Station Licensing Rules and Policies, 18 F.C.C.R. 10,760,
10,781 ¶ 45 n.115 (2003) (“The Commission has noted on
several occasions that regulatory uncertainty can discourage
investment, and so unnecessary regulatory uncertainty should be
avoided.”).
Our conclusion finds support in AT&T Corp. v. FCC, 236
F.3d 729 (D.C. Cir. 2001). There, we considered whether the
Commission could deny a forbearance petition on the grounds
that an alternative route for seeking regulatory relief was
available. Answering no, we explained that Congress enacted
section 10 as a “viable . . . means of seeking forbearance” from
regulation, and the Commission “has no authority to sweep it
away” on the grounds that it would prefer to determine the
appropriate regulatory treatment of a telecommunications
service through a different mechanism. Id. at 738. So too here.
Just as the “availability of . . . an alternative route for seeking
[forbearance] does not diminish the Commission’s responsibility
to fully consider petitions under § 10,” id., a forbearance
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request’s conditional nature gives the Commission no discretion
to escape ruling on its merits.
We emphasize that nothing we say here precludes the
Commission from finding that the hypothetical nature of a
particular forbearance petition renders it impossible to determine
whether it satisfies section 10(a)’s substantive requirements. In
other words, when assessing the merits of a forbearance petition,
the Commission may take into account its conditional nature.
We hold only that the Commission may not refuse to consider
a petition’s merits solely because the petition seeks forbearance
from uncertain or hypothetical regulatory obligations.
III.
This brings us to the Commission’s alternative basis for
denying SBC’s petition—that the petition was “not sufficiently
specific to determine whether the requested forbearance satisfies
the requirements of section 10.” Forbearance Order, 20
F.C.C.R. at 9366 ¶ 14. Specifically, the Commission ruled that
SBC had failed to identify both (1) the services and facilities it
sought forbearance for, and (2) the statutory and regulatory
provisions it sought forbearance from. AT&T argues that SBC’s
petition was sufficiently specific in both respects and that the
Commission’s finding to the contrary is arbitrary and capricious.
See 5 U.S.C. § 706(2)(A) (directing reviewing courts to set aside
agency action that is “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law”); see also
Verizon Tel. Cos. v. FCC, 374 F.3d 1229, 1235 (D.C. Cir. 2005)
(applying the “arbitrary and capricious” standard to a
Commission order denying a forbearance petition). Our review
of this aspect of the Commission’s decision is “narrow” and we
may “not . . . substitute [our] judgment for that of the agency.”
Motor Vehicle Mfrs. Ass’n, Inc. v. State Farm Mut. Auto. Ins.
Co., 463 U.S. 29, 43 (1983). Put another way, the question is
not what we think about the petition, but whether the
12
Commission’s view of the petition is reasonable. See Eagle-
Picher Indus. v. EPA, 759 F.2d 905, 921 (D.C. Cir. 1985)
(“Under the arbitrary and capricious standard we look to see if
the agency has . . . articulated a rational explanation for its
action.”).
As for the Commission’s first basis for rejecting the
petition—that it insufficiently describes the services and
facilities it covers—the petition expressly seeks forbearance for
“IP platform services,” which it defines by reference to SBC’s
declaratory ruling petition. See Forbearance Petition 1. The
declaratory ruling petition devotes over five pages to defining
the term, explaining among other things that
“IP platform services” consist of (a) IP networks and
their associated capabilities and functionalities (i.e.,
an IP platform), and (b) IP services and applications
provided over an IP platform that enable an end user
to send or receive a communication in IP format. The
communication may be voice, data, video, or any
other form of communication, so long as it is sent to
or received by an end user in IP over an IP platform.
This definition is expansive in that it encompasses the
IP networks themselves and the uses to which these
networks are put. It also encompasses both “services”
and “applications,” since the distinctions between
these concepts are meaningless for regulatory
purposes in the IP context. Instead, the key
characteristic of an IP platform service is that the
service must leave or reach the customer in IP over an
IP platform.
Declaratory Ruling Petition 28-29. The Commission points to
nothing ambiguous about this expansive definition. Instead, it
compares a footnote in the declaratory ruling petition that
13
“appears to request forbearance for services that can ride over
legacy networks,” Forbearance Order, 20 F.C.C.R. at 9366 ¶ 14
(emphasis omitted), to a subsequent SBC pleading indicating the
company never sought forbearance for the legacy networks
themselves, see id. Neither in its order nor its brief, however,
does the Commission explain precisely what it finds confusing
about these statements, and we decline to speculate on its behalf.
In its order, the Commission’s primary concern appeared to
be that SBC sought forbearance for a wide range of services.
See id. ¶ 15 (“The scope of SBC’s petition is . . . potentially very
broad.”); Resp’t’s Br. 28 (“[T]he Commission found that the
extraordinary breadth and generality of SBC’s petition made it
impossible to assess whether the forbearance standards had been
met.”). But as Commission counsel wisely conceded at oral
argument, “breadth alone would [not] be a reason to deny the
petition.” Oral Arg. 30:30-31:00.
In sum, given SBC’s extensive definition of “IP platform
services” in its declaratory ruling petition and the Commission’s
failure to identify any inadequacies in that definition, the
Commission’s rejection of SBC’s petition as “insufficiently
specific” with respect to services and facilities was arbitrary and
capricious.
More persuasive is the Commission’s conclusion that SBC
failed to adequately identify the regulations from which it
sought forbearance. Although the petition requests forbearance
from only “common carrier” and “economic” regulation under
Title II, see Forbearance Petition 1, 11, the Commission
correctly points out that the petition “never clearly identifie[d]
which specific provisions of Title II this limitation is meant to
exclude,” Forbearance Order, 20 F.C.C.R. at 9367 ¶ 16. Indeed,
although other telecommunications carriers—including AT&T,
the very company SBC merged with during the course of these
proceedings—submitted comments criticizing SBC for failing
14
to specify which Title II regulations it intended its petition to
cover, SBC refused to provide any clarification, asserting
instead that “it would elevate form over substance if forbearance
could be granted only following an individual examination of
every single provision of Title II standing alone.” Reply
Comments of SBC Commc’ns, Inc., WC Docket No. 04-29, at
19 (filed July 14, 2004).
AT&T argues that further specificity was unnecessary
because the terms “economic” and “common carrier” clearly
refer to specific provisions in Title II. Citing an order and two
NPRMs in which the Commission itself used these terms—In
re: Vonage Holdings Corporation Petition for a Declaratory
Ruling Concerning an Order of the Minnesota Public Utilities
Commission, 19 F.C.C.R. 22,404 (2004) (“Vonage order”), IP-
Enabled Services, 19 F.C.C.R. 4863 (proposed 2004), and
Inquiry Concerning High-Speed Access to the Internet Over
Cable and Other Facilities, 17 F.C.C.R. 4798 (proposed
2002)—AT&T asserts that the Commission “has manifested its
understanding that ‘economic’ or ‘common carrier’ regulation
includes a readily identifiable list of certification, tariffing,
interconnection, service quality, and other related requirements
that are distinct from social policy and consumer protection
rules.” Pet’r’s Br. 30. AT&T also submitted a Rule 28(j) letter
pointing out that the Commission recently allowed a Verizon
forbearance petition to be “deemed granted” even though, like
the SBC petition, it “sought relief from the application of Title
II common carrier requirements without enumerating all the
requirements that fall into that category.” Pet’r’s 28(j) Letter,
Mar. 21, 2006; see also Fed. R. App. P. 28(j) (“If pertinent and
significant authorities come to a party’s attention after the
party’s brief has been filed . . . a party may promptly advise the
circuit clerk by letter . . . setting forth the citations.”).
The Commission has never attempted to reconcile either the
Vonage order or the two NPRMs with the case at hand, and it
15
remains unclear to us whether, in finding the SBC petition
insufficiently specific to warrant forbearance, the Commission
acted consistently with the specificity standard applied in these
other contexts. Perhaps the Vonage order differs from this case
because there the Commission used “economic” and “common
carrier” to describe a set of state, rather than federal,
telecommunications regulations. Perhaps the other two
examples differ because NPRMs require less specificity than
forbearance petitions. For us to so conclude, however, “would
impermissibly intrude on the agency’s prerogative to make
policy judgments for itself.” Nat. Res. Def. Council, Inc. v.
Herrington, 768 F.2d 1355, 1412 (D.C. Cir. 1985); see also
Cassell v. FCC, 154 F.3d 478, 483 (D.C. Cir. 1998) (“An
agency’s interpretation of its own precedent is entitled to
deference.”). As for the disposition of the Verizon petition,
although agencies normally “need not explain alleged
inconsistencies in the resolution of subsequent cases,” CHM
Broad. Ltd. P’ship v. FCC, 24 F.3d 1453, 1459 (D.C. Cir. 1994);
but cf. Williston Basin Interstate Pipeline Co. v. FERC, 165 F.3d
54, 61-62 (D.C. Cir. 1999); Panhandle E. Pipe Line Co. v.
FERC, 890 F.2d 435, 438-39 (D.C. Cir. 1989), we make an
exception where, as here, the later case is part of a pattern of
arguably inconsistent decision-making that began before the
challenged action, see Idaho Power Co. v. FERC, 312 F.3d 454,
464 (D.C. Cir. 2002) (vacating because, among other things, the
challenged orders were inconsistent with both prior and
subsequent agency actions). Accordingly, we remand the case
to the Commission with directions to either (1) explain how the
SBC petition is distinguishable from the four examples cited by
AT&T, or (2) reconsider the sufficiency of the SBC petition in
light of the specificity standard applied in those cases. See Fox
Television Stations, Inc. v. FCC, 280 F.3d 1027, 1048 (D.C. Cir.
2002) (finding remand, rather than vacatur, appropriate where
16
“we cannot say with confidence that the [agency action] is likely
irredeemable”).
So ordered.
RANDOLPH, Circuit Judge, concurring: I concur in the
disposition because, given the Commission’s refusal to grant the
forbearance petition, there is no practical difference in this case
between remanding, on the one hand, and vacating and
remanding on the other. Contrast Checkosky v. SEC, 23 F.3d
452, 490-493 (D.C. Cir. 1994) (opinion of Randolph, J.). The
court, rather than finding the Commission’s decision arbitrary
and capricious, decides that it cannot come to a judgment
without further explanation from the Commission concerning its
subsequent actions. In this exceptional circumstance, remand
for further explanation is appropriate. Contrast id. at 490-91;
Detroit Newspaper Agency v. NLRB, 435 F.3d 302, 312-314
(D.C. Cir. 2006) (Henderson, J., dissenting).