AT&T Corp v. FCC, et al, No. 01-1188 (D.C. Cir. 2003)
Annotate this Case
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 10, 2002 Decided January 24, 2003
No. 01-1188
AT&T Corporation,
Petitioner
v.
Federal Communications Commission and
United States of America,
Respondents
Atlas Telephone Company, Inc., and
Total Telecommunications Services, Inc.,
Intervenors
Consolidated with
01-1201
On Petitions for Review of an Order of the
Federal Communications Commission
---------
Russell M. Blau argued the cause and filed the briefs for
petitioners Atlas Telephone Company, Inc. and Total Tele-
communications Services, Inc.
Daniel Meron argued the cause for petitioner AT&T Cor-
poration. With him on the briefs were David W. Carpenter,
Mark C. Rosenblum, and Peter H. Jacoby. Peter D. Keisler
entered an appearance.
Richard K. Welch, Counsel, Federal Communications Com-
mission, argued the cause for respondents. On the brief were
John Rogovin, Deputy General Counsel, John E. Ingle, Depu-
ty Associate General Counsel, and Laurel R. Bergold, Coun-
sel, and Marion L. Jetton and Robert B. Nicholson, Attor-
neys, U.S. Department of Justice.
Daniel Meron, C. John Buresh, David W. Carpenter, Mark
C. Rosenblum and Peter H. Jacoby were on the brief for
intervenor AT&T Corporation.
Russell M. Blau was on the brief for intervenors Atlas
Telephone Company, Inc. and Total Telecommunications Ser-
vices, Inc.
Before: Ginsburg, Chief Judge, Sentelle, Circuit Judge,
and Silberman, Senior Circuit Judge.
Opinion for the Court filed by Chief Judge Ginsburg.
Ginsburg, Chief Judge: Atlas, Total, and AT&T appeal
different parts of a single order of the Federal Communica-
tions Commission. The Commission held that Atlas, an in-
cumbent local exchange carrier (ILEC), created Total, osten-
sibly a competitive access provider, as a sham entity solely in
order to increase the rates charged to AT&T, an interex-
change carrier (IXC), and thereby engaged in an unjust and
unreasonable practice, in violation of s 201(b) of the Commu-
nications Act of 1934, 47 U.S.C. s 151 et seq. The Commis-
sion also held that AT&T had legitimately blocked calls to
Total; Atlas must pay damages to AT&T in the amount that
AT&T paid to Atlas for tandem switched transport; and
AT&T is liable to Atlas for reasonable access charges. The
Commission then dismissed AT&T's counterclaim under the
Telephone Disclosure and Dispute Resolution Act (TDDRA),
47 U.S.C. s 228, "as moot, without prejudice."
We reject all Atlas' claims and deny its petition for review.
We reject the Commission's argument that AT&T does not
have standing to seek review of the Order, the preclusive
effect of which could prejudice AT&T in defending against
Total's pending lawsuit to collect access charges. We grant
in part AT&T's petition for review and remand the Order to
the Commission to consider AT&T's argument that Total did
not provide access service and to clarify the effect of its
having dismissed AT&T's counterclaim.
I. Background
Atlas Telephone Co., Inc. is the ILEC in Big Cabin,
Oklahoma, where it serves approximately 1,500 customers.
Atlas provides local exchange service to the end users and
provides originating and terminating access service to IXCs.
Total Telecommunications Services, Inc., formed in 1995,
offers service to only one customer, Audiobridge of Oklahoma,
Inc., which runs a free chat-line service allowing multiple
callers to dial in and talk to one another. During the relevant
time period, a long-distance call to Audiobridge placed by an
AT&T customer went through that customer's local telephone
company to AT&T, which provided interexchange service by
transporting the call across its network to a point of presence
(POP) located near Big Cabin and served by Southwestern
Bell Telephone Company. From the POP, Southwestern Bell
transmitted the call through its facilities to a "meet point"
with Atlas, which then carried the call through its tandem
switch to Total. As the "terminating access provider," Total
completed the call to Audiobridge. (Total provided no local
exchange or originating access service.)
Atlas and Total have a close relationship -- to say the least.
The President of Atlas is the Chairman of Total's Board of
Directors; Total received a $20,000 startup loan from the
Atlas pension fund; Total's only office is in an Atlas building;
and Total leased all its transmission facilities from Atlas.
As an ILEC, Atlas was subject to "dominant carrier"
regulation of its rates and therefore had to get its tariffs
preapproved by the Commission. To that end, Atlas elected
to charge the rates in the tariff filed by the National Ex-
change Carriers Association (NECA), which prepares and
files a joint tariff on behalf of 1100 small ILECs. NECA
participants pool their revenues, and each receives an amount
equal to its costs and its pro rata share of all earnings. Thus,
for calls to Audiobridge, Atlas charged AT&T the tandem
switching transport fee in the NECA tariff.
In July 1995 Total, as a non-dominant carrier, filed its own
tariff, which was effective immediately, pursuant to which it
charged AT&T at a rate 27 percent higher than what Atlas
was charging under the NECA tariff. Total then split with
Audiobridge the revenues Total received from AT&T. This
was Audiobridge's only source of income.
Total began completing calls from AT&T customers to
Audiobridge in August 1995. When AT&T received from
Total unexpected bills for terminating access service -- in
addition to Atlas' bills for tandem switching transport -- and
found out about the relationship between Total and Atlas, it
first threatened to, and starting on November 22 did, block
calls from its customers to Audiobridge. AT&T also refused
to pay Total, which had already terminated about 10 million
minutes of calls. Unbeknownst to AT&T, in July 1996 Total
gave Audiobridge different numbers that AT&T did not block.
On November 24 Atlas and Total filed suit against AT&T in
the United States District Court for the Northern District of
Oklahoma. That court referred the case to the Commission
pursuant to the doctrine of primary jurisdiction. See Total
Telecommunications, Inc. v. AT&T, Civ. Action. No. 95-C-
1163 (N.D. Okla.); see also Reiter v. Cooper, 507 U.S. 258,
268-69 (1993). Atlas and Total then brought essentially the
same suit in the United States District Court for the District
of Columbia, with the same result. See Total Telecommuni-
cations Services, Inc. v. AT&T Co., 919 F. Supp. 472, 483-84
(D.D.C. 1996), aff'd, 99 F.3d 448 (D.C. Cir. 1996).
Finally Atlas and Total filed a complaint with the Commis-
sion, alleging that AT&T's blocking calls to Audiobridge
violated the Communications Act of 1934. AT&T counter-
claimed, alleging that Atlas and Total had violated the Act by
creating a sham entity and charging unreasonable rates.
The Commission denied Atlas' and Total's claims. 16
F.C.C.R. 5726 (2001) (Order). The Commission first conclud-
ed that "Atlas created Total as a sham entity designed to
impose increased access charges on calls made to Audio-
bridge." Id. at p 14. Therefore, the Commission held, Atlas
and Total had engaged in an unjust and unreasonable prac-
tice, in violation of 47 U.S.C. s 201(b). Order, 16 F.C.C.R.
5726 at p p 15-18. As a consequence, AT&T did not have an
obligation under 47 U.S.C. s 201(a) to complete calls to
Audiobridge through Total: "Requests by AT&T's customers
to send traffic to Audiobridge via Total do not constitute
'reasonable requests' for service for purposes of section
201(a), because they would require AT&T to purchase access
service that we have previously determined is unreasonably
priced and the product of a sham arrangement." Id. at p 21.
Atlas and Total had argued that AT&T's blocking calls also
violated the IXC's duty under 47 U.S.C. s 251(a)(1) to "inter-
connect directly or indirectly with the facilities and equipment
of other telecommunications carriers." The Commission re-
jected that argument, too, reading the text and structure of
the Act, along with its own regulation defining "interconnec-
tion," to mean that "interconnect" refers to a "physical linking
of two networks, and not to the exchange of traffic between
networks." Id. at p 23 (emphasis in original).
The Commission denied in part and granted in part
AT&T's counterclaims. Whereas AT&T had argued that it
should pay nothing to Atlas and Total, the Commission con-
cluded that AT&T would have to pay a "reasonable access
charge," which in this case was "the fee that Atlas would have
charged AT&T for terminating traffic directly to Audiobridge,
had Total never existed," id. at p 38, and that the NECA
tariff supplied the appropriate rate. Id. at p 39. The Com-
mission, however, did not order AT&T to pay Atlas and Total
because, it determined, they had failed in their complaint
explicitly to "state a claim for relief based on [the calls made
by AT&T customers from August 1 to November 22, 1995]."
Id. at p 37 n.82. (The Commission did not advert to AT&T's
possible liability for access charges with respect to calls made
by AT&T customers to Audiobridge after July 1996, when
Total activated the new numbers.) The Commission also held
that Atlas should pay damages to AT&T in the amount AT&T
had paid Atlas for tandem switched transport because "[b]ut
for its unlawful relationship with Total, Atlas would not have
charged AT&T anything at all for tandem switched transport
to Total." Id. at p 40. Finally, the Commission dismissed "as
moot, without prejudice" AT&T's claim that Atlas and Total
violated the TDDRA; even if Atlas and Total violated the
TDDRA, the Commission stated, that violation "would not
vitiate AT&T's obligation to pay a reasonable access charge
for services already provided." Order, 16 F.C.C.R. 5726 at
p 41.
II. Analysis
Atlas and Total, which filed a joint brief, and AT&T each
challenge various aspects of the Order. Atlas/Total argues
that the Commission erred in (1) finding that Total was a
sham entity; (2) interpreting "reasonable request" in
s 201(a); (3) interpreting "interconnect" in s 251(a)(1); (4)
ordering Atlas to refund tandem switched transport charges;
and (5) denying Total a remedy for AT&T's refusal to pay for
access services. AT&T (1) complains that the Commission
failed to address its claim that Total did not provide "access
service," and argues that the agency (2) arbitrarily resolved
its unreasonable rate claim, and (3) erred in dismissing its
counterclaim (in the nature of a defense) under the TDDRA.
We may set aside the Order only insofar as it is "arbitrary,
capricious, an abuse of discretion, or otherwise not in accor-
dance with law." 5 U.S.C. s 706(2)(A).
A. The Atlas/Total Petition
1. Total as a sham entity
Section 201(b) of the Act declares unlawful "any [communi-
cation common carrier's] charge, practice, classification, or
regulation that is unjust or unreasonable." The Commission
found that "Atlas created Total as a sham entity designed
solely to extract inflated access charges from IXCs, and that
this artifice constitutes an unreasonable practice ... in viola-
tion of section 201(b) of the Act." Order, 16 F.C.C.R. 5726 at
p 16. Atlas/Total does not quarrel with the underlying facts
upon which the Commission based its determination that
Total was a sham entity. Rather, Atlas/Total argues that the
"FCC's finding that Total was a sham entity because it was
not truly independent of Atlas is inconsistent with many past
FCC rulings concerning affiliates of dominant carriers," such
as those allowing an affiliate to sell cellular or interexchange
service. In response, the Commission points out that those
rulings involved an affiliate offering a competitive service;
the provision of access service by an ILEC, in contrast, is
subject to dominant carrier rate regulation, which would be
circumvented if an ILEC could offer access service through
an affiliate. The Commission also argues that because Total
is not independent of Atlas, those prior decisions do not
apply.
We agree with the Commission in both respects. None of
the cases cited by Atlas/Total supports the proposition that an
ILEC may create an alter ego to provide access service in the
same geographic area as the ILEC and thereby avoid regula-
tion as a dominant carrier. If accepted, Atlas/Total's argu-
ment would enable every ILEC completely to avoid dominant
carrier regulation by a mere artifice. In this respect, it is
noteworthy that, although the Commission determined that
"Atlas created Total to increase access charges for calls to
Audiobridge," id., Atlas/Total does not argue on appeal that
Total had any other purpose, or indeed that it had any
economic substance at all. Clearly, the entire arrangement
was devised solely in order to circumvent regulation of Atlas
as a dominant carrier, deserves to be treated as a sham, and
cannot benefit from precedents set with respect to legitimate
affiliates.
2. Section 201(a) "reasonable requests"
Section 201(a) of the Act provides that a communications
common carrier has a duty to "furnish ... communication
service upon reasonable request." 47 U.S.C. s 201(a). The
Commission determined that an AT&T customer who called
Audiobridge was not thereby making a "reasonable request"
for service because AT&T would have had to purchase a
service that was "unreasonably priced and the product of a
sham arrangement." Order, 16 F.C.C.R. 5726 at p 21. Be-
cause the Congress has not "directly spoken to the precise
question at issue," we must decide whether the Commission
permissibly construed the statute. Chevron USA Inc. v.
National Resources Defense Council, 467 U.S. 837, 842-43
(1984).
Atlas/Total argues the Commission misinterpreted s 201(a)
because AT&T's refusal to serve customers who wanted to
call Audiobridge frustrated the goal of universal service as-
sertedly underlying that section. According to Atlas/Total,
instead of unilaterally blocking calls to Audiobridge, AT&T
should have paid Total and then sought a refund by filing a
complaint with the Commission pursuant to s 208 of the Act.
The Commission responds that AT&T could legitimately
block service because Total was a sham entity.
If, as Atlas/Total suggests, AT&T could not refuse as
"unreasonable" a request for service the provision of which
would have required it in turn to procure a service available
only at an unreasonable price from a sham entity, then the
modifier "reasonable" in s 201(a) would have little if any
meaning. The inclusion of that term in the statute implies
that a common carrier may lawfully deny service to a custom-
er in some circumstances, whatever its effect upon universal
service. The question is, were there here such circumstances
or, more precisely, could the Commission reasonably so con-
clude? Surely the answer is yes.
As a rule, grievances are to be raised, as Atlas/Total says,
via s 208 and not by resort to self-help. The Commission
itself has so stated. See, e.g., Bell Atlantic-Delaware v.
Frontier Communications Services, Inc., 15 F.C.C.R. 7475,
p 9 (2000) ("[T]he proper way for an IXC to challenge a
LEC's [rate] is to initiate a Section 208 proceeding at the
Commission"). Here the Commission recognized an excep-
tion to the rule, that allowing an IXC to block calls when a
sham entity is charging it unreasonable rates for access
services. If the Commission later held that Total was not a
sham entity or that Total had charged reasonable rates, then
the agency presumably would have found AT&T liable to
Total for blocking the calls. In other words, by blocking calls
to Audiobridge AT&T was acting at its peril. Elkhart Tele-
phone Co., Inc. v. Southwestern Bell Telephone Co., 11
F.C.C.R. 1051, p 34 (1995) ("Those who choose the course of
non-compliance are on notice that they will be acting at their
own peril, should the question of the legitimacy of their
refusal to meet their common carrier obligations be decided
against them").
The Commission's decision is not inconsistent with its
precedents: None of the cases Atlas/Total cites for the propo-
sition that AT&T first had to file a complaint with the
Commission involved a sham entity. Nor do we see how the
seemingly narrow exception for a sham entity charging an
unreasonable rate will swallow the rule of s 208, as Atlas/
Total predicts. The Commission specifically declined "to
address the broader question of what other circumstances
might permit an IXC to refuse to purchase, or discontinue
purchasing, access service from a competitive LEC." Order,
16 F.C.C.R. 5726 at p 21 n.50. Any carrier that engages in
self-help, therefore, runs the risk that the Commission will
find against it -- even if its underlying position is vindicat-
ed -- and hold it liable solely for engaging in self-help. In
these circumstances, the Commission's judgment that it has
not opened Pandora's box is surely reasonable.
3. Section 251(a)(1) "interconnect"
Section 251(a)(1) provides in part that "[e]ach telecommuni-
cations carrier has the duty ... to interconnect directly or
indirectly with the facilities and equipment of other telecom-
munications carriers." In the Order, the Commission inter-
preted this duty to "interconnect" as referring "solely to the
physical linking of two networks, and not to the exchange of
traffic between networks." 16 F.C.C.R. 5726 at p 23 (empha-
sis in original).
Atlas/Total argues that "the duty ... to interconnect" in
s 251(a)(1) "encompasses the duty to exchange traffic" be-
tween networks, not just the duty to establish a physical
linkage between networks. Atlas/Total contends that (1) the
history of the requirement of interconnection and the legisla-
tive history of s 251 both indicate that to "interconnect"
means to exchange traffic, and (2) the meaning given to
"interconnect" in the Order (a) ignores the phrase "or indi-
rectly" in s 251(a)(1), and (b) does not comport with 47
C.F.R. s 51.5. We review the Commission's interpretation of
"interconnect" under the two-step test of Chevron, 467 U.S. at
842-43, looking first to the intent of the Congress and then, if
the term is still ambiguous, determining whether the agency's
construction of the statute is a reasonable one. Here we
need not go beyond the first step.
As the Commission points out, both the text of s 251(a)(1)
and the structure of s 252 strongly indicate that to "intercon-
nect" and to exchange traffic have distinct meanings. The
former section refers only to "facilities and equipment," not to
the provision of any service. See also Competitive Telecom-
munications Ass'n v. FCC, 117 F.3d 1068, 1072 (8th Cir.
1997) (stating of s 251(c)(2), "By its own terms, this reference
is to a physical link, between the equipment of the carrier
seeking interconnection and the LEC's network"). The latter
section, which establishes pricing standards for agreements
between carriers, provides separately for "interconnection
and network element charges" (s 252(d)(1)) and for "charges
for transport and termination of traffic" (s 252(d)(2)). Sec-
tion 252 thus contemplates the very distinction between phys-
ical linkage and exchange of traffic the Commission applied in
the Order.
Atlas/Total argues that the Commission's definition of "in-
terconnect" ignores the phrase "or indirectly": "If AT&T
were not required to exchange traffic with Atlas or Total, and
is not required to establish a physical connection to their
facilities, then section 251(a)(1) would not require AT&T to do
anything at all." But Atlas/Total has no basis for saying
AT&T is not required to establish a physical connection with
them; the Commission has never said that, and in fact AT&T
does connect indirectly with Atlas through a meet point
established by Southwestern Bell. Nothing in the Commis-
sion's approach, therefore, deprives the term "indirectly" of a
role in the statute. Because "we do not resort to legislative
history to cloud a statutory text that is clear," Ratzlaf v.
United States, 510 U.S. 135, 147-48 (1994), we do not consider
Atlas/Total's argument that the background of the intercon-
nection requirement and the legislative history of s 251 re-
quire a different interpretation of "interconnect." The Com-
mission's definition of "interconnect" in the Order faithfully
follows the meaning of that term in s 251(a)(1).
4. Tandem switched transport charges
Atlas/Total argues that the Commission should not have
ordered it to refund the tandem switched transport charges
paid by AT&T because Atlas would have provided and AT&T
would have had to pay for the same service even if Total had
never existed. We must turn first, however, to the Commis-
sion's objection that we do not have jurisdiction to address
that argument because it was not raised before the Commis-
sion.
Section 405 of the Act bars a court from considering any
issue of law or fact upon which the Commission "has been
afforded no opportunity to pass." Where, as here, the issue
was not raised explicitly, we must determine whether "a
reasonable Commission necessarily would have seen the
question raised before [the Court] as part of the case present-
ed to it." Time Warner Entertainment Co., v. FCC, 144 F.3d 75, 81 (D.C. Cir. 1998) (emphasis in original). We do so
bearing in mind that Atlas/Total, as a litigant before the
Commission, had "at least a modicum of responsibility for
flagging the relevant issues which its documentary submis-
sions presented." Bartholdi Cable Co., Inc. v. FCC, 114 F.3d 274, 280 (D.C. Cir. 1997).
Atlas/Total argues that it raised the present issue in a
single sentence in its opposition to AT&T's motion to dismiss
and in an exhibit listing Atlas' and Total's various charges for
different types of services. The sentence in question, which
Atlas/Total points out was intended to rebut AT&T's claim
"that Total charged 'nearly ten times' as much to terminate
an AT&T call" as did Atlas, is: "A call terminated [by Atlas]
at one of AT&T's own customer premises would be subject to
a total charge, under NECA Tariff No. 5, of 6.63 cents,
consisting of tandem switched transport and tandem switch-
ing charges plus local switching, carrier common line, RIC
and an information surcharge." This sentence, which is not
self-evidently about the tandem switched transport charges
AT&T would have paid if Total did not exist, merely states a
fact; it does not constitute an argument, let alone an argu-
ment made with the requisite clarity. See Bartholdi, 114 F.3d at 279 ("The Commission need not sift pleadings and
documents to identify arguments that are not stated with
clarity by a petitioner"). Therefore, we cannot say that a
reasonable Commission "necessarily would have seen" that
Atlas/Total had presented a question to the agency about
payment of tandem switched transport charges. Atlas/Total
claims it could not foretell the need for this specific argument.
Perhaps not, but then under s 405 Atlas/Total should have
filed a petition for rehearing so the Commission could consid-
er the argument in the first instance.
As a fallback, Atlas/Total argues that we should loose the
bond of s 405 in this case because "unreasonable delay [by
the Commission] preclude[s] strict application of the exhaus-
tion doctrine." The Commission is supposed to decide a case
within 15 months after the filing of the complaint, see 47
U.S.C. s 208(b), but in this case the agency did not issue a
decision for four and one half years. Atlas/Total contends
that because it could have no confidence the Commission
would issue a ruling on a petition for reconsideration within
the 90-day deadline set in 47 U.S.C. s 405(b), it should be
allowed to bypass the agency and seek judicial review at once.
The case upon which Atlas/Total relies for this argument
states that "exhaustion is not required when unreasonable
delay would render the administrative remedy inadequate."
Southwestern Bell Telephone Co. v. FCC, 138 F.3d 746, 750
(8th Cir. 1998). But in this case the petitioners seek only
damages for AT&T's failure to pay Total's bills and for
AT&T's blocking calls to Audiobridge. We fail to see how
giving the Commission more than 90 days to consider the
issue of AT&T's liability for tandem switched transport
charges would render any resulting monetary relief inade-
quate.
In sum, Atlas/Total has not shown it comes within any
exception to s 405. That provision therefore bars our consid-
eration of the issue whether the Commission should have
ordered Atlas to refund the tandem switched transport
charges paid by AT&T.
5. Remedy for AT&T's refusal to pay
Atlas/Total argues that the Commission erred in denying it
a remedy for AT&T's refusal to pay access charges for calls
to Audiobridge between August 1, 1995 and November 22,
1995. The Commission concluded that "although [Atlas/
Total's] complaint refers to AT&T's failure to pay certain
access charges incurred before AT&T began blocking calls to
Audiobridge the complaint does not state a claim for relief
based on that conduct." 16 F.C.C.R. 5726 at p 37 n.82
(emphasis in original).
Unlike a complaint governed by the notice pleading system
of the Federal Rules of Civil Procedure, a complaint filed with
the Commission must set forth "[a]ll matters concerning a
claim ... fully and with specificity" and must "complete[ly]
identif[y] ... [the] conduct complained of and the nature of
the injury sustained." 47 C.F.R. ss 1.720(a), 1.721(a)(6)
(1994). Atlas/Total's complaint clearly seeks damages for
AT&T's having blocked service to Audiobridge but never
specifically alleges that Atlas is entitled to recover from
AT&T access charges for calls completed before the blocking
began.
Atlas/Total tries to salvage its claim by arguing that "[t]he
issue of unpaid access charges was raised in the Complaint as
a component of the larger interconnection issue." There is no
logical connection, however, between the alleged duty to
interconnect and the payment of bills for access services; this
is even more apparent once one realizes that the duty to
interconnect requires only a physical linkage of facilities, not
the provision of services. Therefore, we agree with the
Commission that Atlas/Total's complaint failed to state a
claim for AT&T's nonpayment of access charges allegedly
incurred prior to November 22, 1995.
B. AT&T's Petition
AT&T argues that it should not be liable for access service
because the Commission (1) failed to address its claim that
Total did not provide "access service," (2) arbitrarily resolved
its unreasonable rate claim, and (3) erred in dismissing as
moot its counterclaim under s 228. The Commission, before
defending the Order on its merits, maintains that AT&T does
not have standing under Article III of the Constitution of the
United States to challenge the Order because it has not been
injured thereby. Because the question of standing goes to
our jurisdiction over the case, we must consider it first. See
Steel Co. v. Citizens for a Better Env., 523 U.S. 83, 94-95
(1998).
1. Standing
For standing to pursue its objections, AT&T must show
that it has suffered an "actual or imminent injury," that the
conduct of which it complains caused that injury, and that a
favorable decision of the Court would redress the injury. See
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).
The Commission contends that AT&T has not suffered an
injury because, "[a]lthough the Commission in the Order held
that Total lawfully could assess AT&T reasonable terminating
access charges for the calls it had completed to the Audiob-
ridge chat-line ... the Order did not require AT&T to pay
Total anything." The Commission also asserts that any
charges Total might seek under the Order are time-barred.
AT&T responds that its standing rests upon the collateral
estoppel effects of two closely related rulings in the Order.
AT&T contends that the ruling in the Order requiring AT&T
to pay Total a "reasonable access charge" will harm it in
pending litigation between itself and Total. Total Telecom-
munications Services, Inc. v. AT&T Corp., Civil Action No.
02-0813 (D.D.C. filed April 29, 2002). First, since July 1996,
when Total changed the exchange on which it terminated calls
to Audiobridge, AT&T has not been able to block those calls.
Total has continued to bill AT&T, and indeed has billed it $2.8
million for calls terminated within the last two years and
therefore within the statute of limitations.
Second, AT&T argues that the Commission's dismissal as
moot of its counterclaim -- in which it alleged that the
revenue-sharing arrangement between Total and Audiobridge
violated sections 228 and 201(b) of the Act -- could be given
collateral estoppel effect not only in Total's but also in other
like actions pending against AT&T. Specifically, the Com-
mission held that the alleged violation, "standing alone, would
not vitiate AT&T's obligation to pay a reasonable access
charge for services already provided." Upon this basis the
Commission purported to dismiss parts of AT&T's counter-
claim "as moot, without prejudice."
With respect to AT&T's first point -- that the Commis-
sion's ruling on access charges exposes it to liability in
litigation -- we note the Supreme Court's teaching that "[i]n
an appropriate case, appeal may be permitted from an ad-
verse ruling collateral to the judgment on the merits at the
behest of the party who has prevailed on the merits, so long
as that party retains a stake in the appeal satisfying the
requirements of Art. III." Deposit Guaranty Nat'l Bank v.
Roper, 445 U.S. 326, 334 (1980) (citing Electrical Fittings
Corp. v. Thomas & Betts Co., 307 U.S. 241 (1939)). As we
observed recently in Alabama Municipal Distributors Group
v. FERC, 312 F.3d 470 (D.C. Cir. 2002), however, neither the
Supreme Court nor this court "has actually found standing on
the basis of collateral estoppel." Id. at 474. Nonetheless, we
think this is "an appropriate case" in which to do so. The
Commission issued its Order after the district court had
referred the case to it pursuant to the doctrine of primary
jurisdiction. Although AT&T ultimately prevailed before the
Commission on the merits, along the way the Commission
determined that AT&T was liable to Total for reasonable
access charges and, as it turns out, some of those charges do
not appear to be time-barred. Upon the resumption of the
litigation, the district court will be bound to follow the Order,
giving it a preclusive effect more akin to law of the case than
to mere collateral estoppel. The Order thus injures AT&T
and gives it a stake in this appeal sufficient to support its
standing to petition for review of the Commission's ruling on
its liability for access charges. In addition, since the Total
claim is ripe and AT&T's counterclaim is intertwined with
that claim, it would make little sense to decline to decide
AT&T's claim now.
With respect to AT&T's second point -- that it is preju-
diced by the Commission's having dismissed its counterclaim
as moot -- we are unable to determine the preclusive effect, if
any, of the Commission's ruling. The Commission reasoned
that AT&T's counterclaim based upon s 228 was moot be-
cause AT&T is obligated in any event to pay reasonable
access charges. Nonetheless, the Commission dismissed
AT&T's claim against Atlas "as moot, without prejudice."
We simply do not know what it means to dismiss a claim "as
moot, without prejudice." If a claim is moot, then it cannot
be refiled; if a claim is dismissed without prejudice, then it
can be refiled. So which is it? At oral argument counsel for
the Commission could not say, and neither can we. Hence,
we cannot determine whether the dismissal will have the
preclusive effect that would give AT&T standing to seek
review of that ruling. We therefore remand the Order to the
Commission to explain or reform its disposition of AT&T's
counterclaim. Consequently, we do not reach AT&T's stand-
ing to argue that s 228 bars Atlas and Total from recovering
anything from AT&T.
2. Access service
We now turn to the merits of AT&T's argument with
respect to its liability for access service. Before the Commis-
sion AT&T argued, among other things, that Total in fact had
not provided AT&T with "access service":
In its tariff [Total] claims to provide "local transport"
and "local switching," and it has billed AT&T for pur-
portedly providing those services. Both industry prac-
tice and Commission regulation, however, establish that
"local transport" consists of the carriage of calls to an
end office, and there is clearly no end office behind
[Total], only an end user.
Motion of AT&T to Dismiss or for Judgment on the
Pleadings at 26. The Commission acknowledges that it did
not consider AT&T's argument in the Order, but maintains
that "[h]aving successfully urged the Commission to pierce
the Atlas/Total corporate veil, AT&T should not be heard to
complain that the Commission failed to consider whether
Total would have provided exchange access if it had not been
a creature of Atlas."
We do not understand AT&T to be questioning "whether
Total would have provided exchange access if it had not been
a creature of Atlas." AT&T's position is simply that Total
did not provide exchange access and therefore AT&T should
not have to pay it for that. The Commission may regard
AT&T as ungrateful but that is not a reason for failing to
address its argument. Yet the Order is silent regarding
whether any entity -- Total or Atlas or the two combined --
actually provided access service to AT&T. We therefore
remand the Order to the Commission to consider AT&T's
argument that Total did not provide access service.
3. Unreasonable rate claim
AT&T contends that the Commission erred by assuming
that, if Total had not existed, then Atlas would have served
Audiobridge under the NECA tariff: "no carrier that decides
to engage in a chat line revenue sharing scheme would
continue participating in the NECA pool," which could mean
sharing its revenue with the 1100 other members of the
NECA. The Commission argues that AT&T raises this
argument for the first time in this court. In order to give the
agency an opportunity to pass upon the issue, the Commis-
sion maintains that AT&T should have filed a petition for
rehearing pursuant to s 405.
AT&T responds that "no claim can be made that [the
relevant] evidence was not in the record." And, of course, no
such claim is made. But enough of the passive voice: the
Commission claims that AT&T did not make the argument,
not that the record evidence does not support the argument.
The point could not be lost upon AT&T's counsel, which is, no
doubt, why the company's half-hearted rejoinder lies buried
in a footnote. In any event, we are barred by s 405 from
reaching the question whether the Commission erred in as-
suming Atlas would have adhered to the NECA tariff.
III. Conclusion
We deny Atlas/Total's petition for review. We grant in
part AT&T's petition for review and remand the Order to the
Commission (1) to clarify its disposition of AT&T's counter-
claim, which it dismissed "as moot, without prejudice," and (2)
to respond to AT&T's argument that Total did not provide it
with access service.
So ordered.
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 10, 2002 Decided January 24, 2003
No. 01-1188
AT&T Corporation,
Petitioner
v.
Federal Communications Commission and
United States of America,
Respondents
Atlas Telephone Company, Inc., and
Total Telecommunications Services, Inc.,
Intervenors
Consolidated with
01-1201
On Petitions for Review of an Order of the
Federal Communications Commission
---------
Russell M. Blau argued the cause and filed the briefs for
petitioners Atlas Telephone Company, Inc. and Total Tele-
communications Services, Inc.
Daniel Meron argued the cause for petitioner AT&T Cor-
poration. With him on the briefs were David W. Carpenter,
Mark C. Rosenblum, and Peter H. Jacoby. Peter D. Keisler
entered an appearance.
Richard K. Welch, Counsel, Federal Communications Com-
mission, argued the cause for respondents. On the brief were
John Rogovin, Deputy General Counsel, John E. Ingle, Depu-
ty Associate General Counsel, and Laurel R. Bergold, Coun-
sel, and Marion L. Jetton and Robert B. Nicholson, Attor-
neys, U.S. Department of Justice.
Daniel Meron, C. John Buresh, David W. Carpenter, Mark
C. Rosenblum and Peter H. Jacoby were on the brief for
intervenor AT&T Corporation.
Russell M. Blau was on the brief for intervenors Atlas
Telephone Company, Inc. and Total Telecommunications Ser-
vices, Inc.
Before: Ginsburg, Chief Judge, Sentelle, Circuit Judge,
and Silberman, Senior Circuit Judge.
Opinion for the Court filed by Chief Judge Ginsburg.
Ginsburg, Chief Judge: Atlas, Total, and AT&T appeal
different parts of a single order of the Federal Communica-
tions Commission. The Commission held that Atlas, an in-
cumbent local exchange carrier (ILEC), created Total, osten-
sibly a competitive access provider, as a sham entity solely in
order to increase the rates charged to AT&T, an interex-
change carrier (IXC), and thereby engaged in an unjust and
unreasonable practice, in violation of s 201(b) of the Commu-
nications Act of 1934, 47 U.S.C. s 151 et seq. The Commis-
sion also held that AT&T had legitimately blocked calls to
Total; Atlas must pay damages to AT&T in the amount that
AT&T paid to Atlas for tandem switched transport; and
AT&T is liable to Atlas for reasonable access charges. The
Commission then dismissed AT&T's counterclaim under the
Telephone Disclosure and Dispute Resolution Act (TDDRA),
47 U.S.C. s 228, "as moot, without prejudice."
We reject all Atlas' claims and deny its petition for review.
We reject the Commission's argument that AT&T does not
have standing to seek review of the Order, the preclusive
effect of which could prejudice AT&T in defending against
Total's pending lawsuit to collect access charges. We grant
in part AT&T's petition for review and remand the Order to
the Commission to consider AT&T's argument that Total did
not provide access service and to clarify the effect of its
having dismissed AT&T's counterclaim.
I. Background
Atlas Telephone Co., Inc. is the ILEC in Big Cabin,
Oklahoma, where it serves approximately 1,500 customers.
Atlas provides local exchange service to the end users and
provides originating and terminating access service to IXCs.
Total Telecommunications Services, Inc., formed in 1995,
offers service to only one customer, Audiobridge of Oklahoma,
Inc., which runs a free chat-line service allowing multiple
callers to dial in and talk to one another. During the relevant
time period, a long-distance call to Audiobridge placed by an
AT&T customer went through that customer's local telephone
company to AT&T, which provided interexchange service by
transporting the call across its network to a point of presence
(POP) located near Big Cabin and served by Southwestern
Bell Telephone Company. From the POP, Southwestern Bell
transmitted the call through its facilities to a "meet point"
with Atlas, which then carried the call through its tandem
switch to Total. As the "terminating access provider," Total
completed the call to Audiobridge. (Total provided no local
exchange or originating access service.)
Atlas and Total have a close relationship -- to say the least.
The President of Atlas is the Chairman of Total's Board of
Directors; Total received a $20,000 startup loan from the
Atlas pension fund; Total's only office is in an Atlas building;
and Total leased all its transmission facilities from Atlas.
As an ILEC, Atlas was subject to "dominant carrier"
regulation of its rates and therefore had to get its tariffs
preapproved by the Commission. To that end, Atlas elected
to charge the rates in the tariff filed by the National Ex-
change Carriers Association (NECA), which prepares and
files a joint tariff on behalf of 1100 small ILECs. NECA
participants pool their revenues, and each receives an amount
equal to its costs and its pro rata share of all earnings. Thus,
for calls to Audiobridge, Atlas charged AT&T the tandem
switching transport fee in the NECA tariff.
In July 1995 Total, as a non-dominant carrier, filed its own
tariff, which was effective immediately, pursuant to which it
charged AT&T at a rate 27 percent higher than what Atlas
was charging under the NECA tariff. Total then split with
Audiobridge the revenues Total received from AT&T. This
was Audiobridge's only source of income.
Total began completing calls from AT&T customers to
Audiobridge in August 1995. When AT&T received from
Total unexpected bills for terminating access service -- in
addition to Atlas' bills for tandem switching transport -- and
found out about the relationship between Total and Atlas, it
first threatened to, and starting on November 22 did, block
calls from its customers to Audiobridge. AT&T also refused
to pay Total, which had already terminated about 10 million
minutes of calls. Unbeknownst to AT&T, in July 1996 Total
gave Audiobridge different numbers that AT&T did not block.
On November 24 Atlas and Total filed suit against AT&T in
the United States District Court for the Northern District of
Oklahoma. That court referred the case to the Commission
pursuant to the doctrine of primary jurisdiction. See Total
Telecommunications, Inc. v. AT&T, Civ. Action. No. 95-C-
1163 (N.D. Okla.); see also Reiter v. Cooper, 507 U.S. 258,
268-69 (1993). Atlas and Total then brought essentially the
same suit in the United States District Court for the District
of Columbia, with the same result. See Total Telecommuni-
cations Services, Inc. v. AT&T Co., 919 F. Supp. 472, 483-84
(D.D.C. 1996), aff'd, 99 F.3d 448 (D.C. Cir. 1996).
Finally Atlas and Total filed a complaint with the Commis-
sion, alleging that AT&T's blocking calls to Audiobridge
violated the Communications Act of 1934. AT&T counter-
claimed, alleging that Atlas and Total had violated the Act by
creating a sham entity and charging unreasonable rates.
The Commission denied Atlas' and Total's claims. 16
F.C.C.R. 5726 (2001) (Order). The Commission first conclud-
ed that "Atlas created Total as a sham entity designed to
impose increased access charges on calls made to Audio-
bridge." Id. at p 14. Therefore, the Commission held, Atlas
and Total had engaged in an unjust and unreasonable prac-
tice, in violation of 47 U.S.C. s 201(b). Order, 16 F.C.C.R.
5726 at p p 15-18. As a consequence, AT&T did not have an
obligation under 47 U.S.C. s 201(a) to complete calls to
Audiobridge through Total: "Requests by AT&T's customers
to send traffic to Audiobridge via Total do not constitute
'reasonable requests' for service for purposes of section
201(a), because they would require AT&T to purchase access
service that we have previously determined is unreasonably
priced and the product of a sham arrangement." Id. at p 21.
Atlas and Total had argued that AT&T's blocking calls also
violated the IXC's duty under 47 U.S.C. s 251(a)(1) to "inter-
connect directly or indirectly with the facilities and equipment
of other telecommunications carriers." The Commission re-
jected that argument, too, reading the text and structure of
the Act, along with its own regulation defining "interconnec-
tion," to mean that "interconnect" refers to a "physical linking
of two networks, and not to the exchange of traffic between
networks." Id. at p 23 (emphasis in original).
The Commission denied in part and granted in part
AT&T's counterclaims. Whereas AT&T had argued that it
should pay nothing to Atlas and Total, the Commission con-
cluded that AT&T would have to pay a "reasonable access
charge," which in this case was "the fee that Atlas would have
charged AT&T for terminating traffic directly to Audiobridge,
had Total never existed," id. at p 38, and that the NECA
tariff supplied the appropriate rate. Id. at p 39. The Com-
mission, however, did not order AT&T to pay Atlas and Total
because, it determined, they had failed in their complaint
explicitly to "state a claim for relief based on [the calls made
by AT&T customers from August 1 to November 22, 1995]."
Id. at p 37 n.82. (The Commission did not advert to AT&T's
possible liability for access charges with respect to calls made
by AT&T customers to Audiobridge after July 1996, when
Total activated the new numbers.) The Commission also held
that Atlas should pay damages to AT&T in the amount AT&T
had paid Atlas for tandem switched transport because "[b]ut
for its unlawful relationship with Total, Atlas would not have
charged AT&T anything at all for tandem switched transport
to Total." Id. at p 40. Finally, the Commission dismissed "as
moot, without prejudice" AT&T's claim that Atlas and Total
violated the TDDRA; even if Atlas and Total violated the
TDDRA, the Commission stated, that violation "would not
vitiate AT&T's obligation to pay a reasonable access charge
for services already provided." Order, 16 F.C.C.R. 5726 at
p 41.
II. Analysis
Atlas and Total, which filed a joint brief, and AT&T each
challenge various aspects of the Order. Atlas/Total argues
that the Commission erred in (1) finding that Total was a
sham entity; (2) interpreting "reasonable request" in
s 201(a); (3) interpreting "interconnect" in s 251(a)(1); (4)
ordering Atlas to refund tandem switched transport charges;
and (5) denying Total a remedy for AT&T's refusal to pay for
access services. AT&T (1) complains that the Commission
failed to address its claim that Total did not provide "access
service," and argues that the agency (2) arbitrarily resolved
its unreasonable rate claim, and (3) erred in dismissing its
counterclaim (in the nature of a defense) under the TDDRA.
We may set aside the Order only insofar as it is "arbitrary,
capricious, an abuse of discretion, or otherwise not in accor-
dance with law." 5 U.S.C. s 706(2)(A).
A. The Atlas/Total Petition
1. Total as a sham entity
Section 201(b) of the Act declares unlawful "any [communi-
cation common carrier's] charge, practice, classification, or
regulation that is unjust or unreasonable." The Commission
found that "Atlas created Total as a sham entity designed
solely to extract inflated access charges from IXCs, and that
this artifice constitutes an unreasonable practice ... in viola-
tion of section 201(b) of the Act." Order, 16 F.C.C.R. 5726 at
p 16. Atlas/Total does not quarrel with the underlying facts
upon which the Commission based its determination that
Total was a sham entity. Rather, Atlas/Total argues that the
"FCC's finding that Total was a sham entity because it was
not truly independent of Atlas is inconsistent with many past
FCC rulings concerning affiliates of dominant carriers," such
as those allowing an affiliate to sell cellular or interexchange
service. In response, the Commission points out that those
rulings involved an affiliate offering a competitive service;
the provision of access service by an ILEC, in contrast, is
subject to dominant carrier rate regulation, which would be
circumvented if an ILEC could offer access service through
an affiliate. The Commission also argues that because Total
is not independent of Atlas, those prior decisions do not
apply.
We agree with the Commission in both respects. None of
the cases cited by Atlas/Total supports the proposition that an
ILEC may create an alter ego to provide access service in the
same geographic area as the ILEC and thereby avoid regula-
tion as a dominant carrier. If accepted, Atlas/Total's argu-
ment would enable every ILEC completely to avoid dominant
carrier regulation by a mere artifice. In this respect, it is
noteworthy that, although the Commission determined that
"Atlas created Total to increase access charges for calls to
Audiobridge," id., Atlas/Total does not argue on appeal that
Total had any other purpose, or indeed that it had any
economic substance at all. Clearly, the entire arrangement
was devised solely in order to circumvent regulation of Atlas
as a dominant carrier, deserves to be treated as a sham, and
cannot benefit from precedents set with respect to legitimate
affiliates.
2. Section 201(a) "reasonable requests"
Section 201(a) of the Act provides that a communications
common carrier has a duty to "furnish ... communication
service upon reasonable request." 47 U.S.C. s 201(a). The
Commission determined that an AT&T customer who called
Audiobridge was not thereby making a "reasonable request"
for service because AT&T would have had to purchase a
service that was "unreasonably priced and the product of a
sham arrangement." Order, 16 F.C.C.R. 5726 at p 21. Be-
cause the Congress has not "directly spoken to the precise
question at issue," we must decide whether the Commission
permissibly construed the statute. Chevron USA Inc. v.
National Resources Defense Council, 467 U.S. 837, 842-43
(1984).
Atlas/Total argues the Commission misinterpreted s 201(a)
because AT&T's refusal to serve customers who wanted to
call Audiobridge frustrated the goal of universal service as-
sertedly underlying that section. According to Atlas/Total,
instead of unilaterally blocking calls to Audiobridge, AT&T
should have paid Total and then sought a refund by filing a
complaint with the Commission pursuant to s 208 of the Act.
The Commission responds that AT&T could legitimately
block service because Total was a sham entity.
If, as Atlas/Total suggests, AT&T could not refuse as
"unreasonable" a request for service the provision of which
would have required it in turn to procure a service available
only at an unreasonable price from a sham entity, then the
modifier "reasonable" in s 201(a) would have little if any
meaning. The inclusion of that term in the statute implies
that a common carrier may lawfully deny service to a custom-
er in some circumstances, whatever its effect upon universal
service. The question is, were there here such circumstances
or, more precisely, could the Commission reasonably so con-
clude? Surely the answer is yes.
As a rule, grievances are to be raised, as Atlas/Total says,
via s 208 and not by resort to self-help. The Commission
itself has so stated. See, e.g., Bell Atlantic-Delaware v.
Frontier Communications Services, Inc., 15 F.C.C.R. 7475,
p 9 (2000) ("[T]he proper way for an IXC to challenge a
LEC's [rate] is to initiate a Section 208 proceeding at the
Commission"). Here the Commission recognized an excep-
tion to the rule, that allowing an IXC to block calls when a
sham entity is charging it unreasonable rates for access
services. If the Commission later held that Total was not a
sham entity or that Total had charged reasonable rates, then
the agency presumably would have found AT&T liable to
Total for blocking the calls. In other words, by blocking calls
to Audiobridge AT&T was acting at its peril. Elkhart Tele-
phone Co., Inc. v. Southwestern Bell Telephone Co., 11
F.C.C.R. 1051, p 34 (1995) ("Those who choose the course of
non-compliance are on notice that they will be acting at their
own peril, should the question of the legitimacy of their
refusal to meet their common carrier obligations be decided
against them").
The Commission's decision is not inconsistent with its
precedents: None of the cases Atlas/Total cites for the propo-
sition that AT&T first had to file a complaint with the
Commission involved a sham entity. Nor do we see how the
seemingly narrow exception for a sham entity charging an
unreasonable rate will swallow the rule of s 208, as Atlas/
Total predicts. The Commission specifically declined "to
address the broader question of what other circumstances
might permit an IXC to refuse to purchase, or discontinue
purchasing, access service from a competitive LEC." Order,
16 F.C.C.R. 5726 at p 21 n.50. Any carrier that engages in
self-help, therefore, runs the risk that the Commission will
find against it -- even if its underlying position is vindicat-
ed -- and hold it liable solely for engaging in self-help. In
these circumstances, the Commission's judgment that it has
not opened Pandora's box is surely reasonable.
3. Section 251(a)(1) "interconnect"
Section 251(a)(1) provides in part that "[e]ach telecommuni-
cations carrier has the duty ... to interconnect directly or
indirectly with the facilities and equipment of other telecom-
munications carriers." In the Order, the Commission inter-
preted this duty to "interconnect" as referring "solely to the
physical linking of two networks, and not to the exchange of
traffic between networks." 16 F.C.C.R. 5726 at p 23 (empha-
sis in original).
Atlas/Total argues that "the duty ... to interconnect" in
s 251(a)(1) "encompasses the duty to exchange traffic" be-
tween networks, not just the duty to establish a physical
linkage between networks. Atlas/Total contends that (1) the
history of the requirement of interconnection and the legisla-
tive history of s 251 both indicate that to "interconnect"
means to exchange traffic, and (2) the meaning given to
"interconnect" in the Order (a) ignores the phrase "or indi-
rectly" in s 251(a)(1), and (b) does not comport with 47
C.F.R. s 51.5. We review the Commission's interpretation of
"interconnect" under the two-step test of Chevron, 467 U.S. at
842-43, looking first to the intent of the Congress and then, if
the term is still ambiguous, determining whether the agency's
construction of the statute is a reasonable one. Here we
need not go beyond the first step.
As the Commission points out, both the text of s 251(a)(1)
and the structure of s 252 strongly indicate that to "intercon-
nect" and to exchange traffic have distinct meanings. The
former section refers only to "facilities and equipment," not to
the provision of any service. See also Competitive Telecom-
munications Ass'n v. FCC, 117 F.3d 1068, 1072 (8th Cir.
1997) (stating of s 251(c)(2), "By its own terms, this reference
is to a physical link, between the equipment of the carrier
seeking interconnection and the LEC's network"). The latter
section, which establishes pricing standards for agreements
between carriers, provides separately for "interconnection
and network element charges" (s 252(d)(1)) and for "charges
for transport and termination of traffic" (s 252(d)(2)). Sec-
tion 252 thus contemplates the very distinction between phys-
ical linkage and exchange of traffic the Commission applied in
the Order.
Atlas/Total argues that the Commission's definition of "in-
terconnect" ignores the phrase "or indirectly": "If AT&T
were not required to exchange traffic with Atlas or Total, and
is not required to establish a physical connection to their
facilities, then section 251(a)(1) would not require AT&T to do
anything at all." But Atlas/Total has no basis for saying
AT&T is not required to establish a physical connection with
them; the Commission has never said that, and in fact AT&T
does connect indirectly with Atlas through a meet point
established by Southwestern Bell. Nothing in the Commis-
sion's approach, therefore, deprives the term "indirectly" of a
role in the statute. Because "we do not resort to legislative
history to cloud a statutory text that is clear," Ratzlaf v.
United States, 510 U.S. 135, 147-48 (1994), we do not consider
Atlas/Total's argument that the background of the intercon-
nection requirement and the legislative history of s 251 re-
quire a different interpretation of "interconnect." The Com-
mission's definition of "interconnect" in the Order faithfully
follows the meaning of that term in s 251(a)(1).
4. Tandem switched transport charges
Atlas/Total argues that the Commission should not have
ordered it to refund the tandem switched transport charges
paid by AT&T because Atlas would have provided and AT&T
would have had to pay for the same service even if Total had
never existed. We must turn first, however, to the Commis-
sion's objection that we do not have jurisdiction to address
that argument because it was not raised before the Commis-
sion.
Section 405 of the Act bars a court from considering any
issue of law or fact upon which the Commission "has been
afforded no opportunity to pass." Where, as here, the issue
was not raised explicitly, we must determine whether "a
reasonable Commission necessarily would have seen the
question raised before [the Court] as part of the case present-
ed to it." Time Warner Entertainment Co., v. FCC, 144 F.3d 75, 81 (D.C. Cir. 1998) (emphasis in original). We do so
bearing in mind that Atlas/Total, as a litigant before the
Commission, had "at least a modicum of responsibility for
flagging the relevant issues which its documentary submis-
sions presented." Bartholdi Cable Co., Inc. v. FCC, 114 F.3d 274, 280 (D.C. Cir. 1997).
Atlas/Total argues that it raised the present issue in a
single sentence in its opposition to AT&T's motion to dismiss
and in an exhibit listing Atlas' and Total's various charges for
different types of services. The sentence in question, which
Atlas/Total points out was intended to rebut AT&T's claim
"that Total charged 'nearly ten times' as much to terminate
an AT&T call" as did Atlas, is: "A call terminated [by Atlas]
at one of AT&T's own customer premises would be subject to
a total charge, under NECA Tariff No. 5, of 6.63 cents,
consisting of tandem switched transport and tandem switch-
ing charges plus local switching, carrier common line, RIC
and an information surcharge." This sentence, which is not
self-evidently about the tandem switched transport charges
AT&T would have paid if Total did not exist, merely states a
fact; it does not constitute an argument, let alone an argu-
ment made with the requisite clarity. See Bartholdi, 114 F.3d at 279 ("The Commission need not sift pleadings and
documents to identify arguments that are not stated with
clarity by a petitioner"). Therefore, we cannot say that a
reasonable Commission "necessarily would have seen" that
Atlas/Total had presented a question to the agency about
payment of tandem switched transport charges. Atlas/Total
claims it could not foretell the need for this specific argument.
Perhaps not, but then under s 405 Atlas/Total should have
filed a petition for rehearing so the Commission could consid-
er the argument in the first instance.
As a fallback, Atlas/Total argues that we should loose the
bond of s 405 in this case because "unreasonable delay [by
the Commission] preclude[s] strict application of the exhaus-
tion doctrine." The Commission is supposed to decide a case
within 15 months after the filing of the complaint, see 47
U.S.C. s 208(b), but in this case the agency did not issue a
decision for four and one half years. Atlas/Total contends
that because it could have no confidence the Commission
would issue a ruling on a petition for reconsideration within
the 90-day deadline set in 47 U.S.C. s 405(b), it should be
allowed to bypass the agency and seek judicial review at once.
The case upon which Atlas/Total relies for this argument
states that "exhaustion is not required when unreasonable
delay would render the administrative remedy inadequate."
Southwestern Bell Telephone Co. v. FCC, 138 F.3d 746, 750
(8th Cir. 1998). But in this case the petitioners seek only
damages for AT&T's failure to pay Total's bills and for
AT&T's blocking calls to Audiobridge. We fail to see how
giving the Commission more than 90 days to consider the
issue of AT&T's liability for tandem switched transport
charges would render any resulting monetary relief inade-
quate.
In sum, Atlas/Total has not shown it comes within any
exception to s 405. That provision therefore bars our consid-
eration of the issue whether the Commission should have
ordered Atlas to refund the tandem switched transport
charges paid by AT&T.
5. Remedy for AT&T's refusal to pay
Atlas/Total argues that the Commission erred in denying it
a remedy for AT&T's refusal to pay access charges for calls
to Audiobridge between August 1, 1995 and November 22,
1995. The Commission concluded that "although [Atlas/
Total's] complaint refers to AT&T's failure to pay certain
access charges incurred before AT&T began blocking calls to
Audiobridge the complaint does not state a claim for relief
based on that conduct." 16 F.C.C.R. 5726 at p 37 n.82
(emphasis in original).
Unlike a complaint governed by the notice pleading system
of the Federal Rules of Civil Procedure, a complaint filed with
the Commission must set forth "[a]ll matters concerning a
claim ... fully and with specificity" and must "complete[ly]
identif[y] ... [the] conduct complained of and the nature of
the injury sustained." 47 C.F.R. ss 1.720(a), 1.721(a)(6)
(1994). Atlas/Total's complaint clearly seeks damages for
AT&T's having blocked service to Audiobridge but never
specifically alleges that Atlas is entitled to recover from
AT&T access charges for calls completed before the blocking
began.
Atlas/Total tries to salvage its claim by arguing that "[t]he
issue of unpaid access charges was raised in the Complaint as
a component of the larger interconnection issue." There is no
logical connection, however, between the alleged duty to
interconnect and the payment of bills for access services; this
is even more apparent once one realizes that the duty to
interconnect requires only a physical linkage of facilities, not
the provision of services. Therefore, we agree with the
Commission that Atlas/Total's complaint failed to state a
claim for AT&T's nonpayment of access charges allegedly
incurred prior to November 22, 1995.
B. AT&T's Petition
AT&T argues that it should not be liable for access service
because the Commission (1) failed to address its claim that
Total did not provide "access service," (2) arbitrarily resolved
its unreasonable rate claim, and (3) erred in dismissing as
moot its counterclaim under s 228. The Commission, before
defending the Order on its merits, maintains that AT&T does
not have standing under Article III of the Constitution of the
United States to challenge the Order because it has not been
injured thereby. Because the question of standing goes to
our jurisdiction over the case, we must consider it first. See
Steel Co. v. Citizens for a Better Env., 523 U.S. 83, 94-95
(1998).
1. Standing
For standing to pursue its objections, AT&T must show
that it has suffered an "actual or imminent injury," that the
conduct of which it complains caused that injury, and that a
favorable decision of the Court would redress the injury. See
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).
The Commission contends that AT&T has not suffered an
injury because, "[a]lthough the Commission in the Order held
that Total lawfully could assess AT&T reasonable terminating
access charges for the calls it had completed to the Audiob-
ridge chat-line ... the Order did not require AT&T to pay
Total anything." The Commission also asserts that any
charges Total might seek under the Order are time-barred.
AT&T responds that its standing rests upon the collateral
estoppel effects of two closely related rulings in the Order.
AT&T contends that the ruling in the Order requiring AT&T
to pay Total a "reasonable access charge" will harm it in
pending litigation between itself and Total. Total Telecom-
munications Services, Inc. v. AT&T Corp., Civil Action No.
02-0813 (D.D.C. filed April 29, 2002). First, since July 1996,
when Total changed the exchange on which it terminated calls
to Audiobridge, AT&T has not been able to block those calls.
Total has continued to bill AT&T, and indeed has billed it $2.8
million for calls terminated within the last two years and
therefore within the statute of limitations.
Second, AT&T argues that the Commission's dismissal as
moot of its counterclaim -- in which it alleged that the
revenue-sharing arrangement between Total and Audiobridge
violated sections 228 and 201(b) of the Act -- could be given
collateral estoppel effect not only in Total's but also in other
like actions pending against AT&T. Specifically, the Com-
mission held that the alleged violation, "standing alone, would
not vitiate AT&T's obligation to pay a reasonable access
charge for services already provided." Upon this basis the
Commission purported to dismiss parts of AT&T's counter-
claim "as moot, without prejudice."
With respect to AT&T's first point -- that the Commis-
sion's ruling on access charges exposes it to liability in
litigation -- we note the Supreme Court's teaching that "[i]n
an appropriate case, appeal may be permitted from an ad-
verse ruling collateral to the judgment on the merits at the
behest of the party who has prevailed on the merits, so long
as that party retains a stake in the appeal satisfying the
requirements of Art. III." Deposit Guaranty Nat'l Bank v.
Roper, 445 U.S. 326, 334 (1980) (citing Electrical Fittings
Corp. v. Thomas & Betts Co., 307 U.S. 241 (1939)). As we
observed recently in Alabama Municipal Distributors Group
v. FERC, 312 F.3d 470 (D.C. Cir. 2002), however, neither the
Supreme Court nor this court "has actually found standing on
the basis of collateral estoppel." Id. at 474. Nonetheless, we
think this is "an appropriate case" in which to do so. The
Commission issued its Order after the district court had
referred the case to it pursuant to the doctrine of primary
jurisdiction. Although AT&T ultimately prevailed before the
Commission on the merits, along the way the Commission
determined that AT&T was liable to Total for reasonable
access charges and, as it turns out, some of those charges do
not appear to be time-barred. Upon the resumption of the
litigation, the district court will be bound to follow the Order,
giving it a preclusive effect more akin to law of the case than
to mere collateral estoppel. The Order thus injures AT&T
and gives it a stake in this appeal sufficient to support its
standing to petition for review of the Commission's ruling on
its liability for access charges. In addition, since the Total
claim is ripe and AT&T's counterclaim is intertwined with
that claim, it would make little sense to decline to decide
AT&T's claim now.
With respect to AT&T's second point -- that it is preju-
diced by the Commission's having dismissed its counterclaim
as moot -- we are unable to determine the preclusive effect, if
any, of the Commission's ruling. The Commission reasoned
that AT&T's counterclaim based upon s 228 was moot be-
cause AT&T is obligated in any event to pay reasonable
access charges. Nonetheless, the Commission dismissed
AT&T's claim against Atlas "as moot, without prejudice."
We simply do not know what it means to dismiss a claim "as
moot, without prejudice." If a claim is moot, then it cannot
be refiled; if a claim is dismissed without prejudice, then it
can be refiled. So which is it? At oral argument counsel for
the Commission could not say, and neither can we. Hence,
we cannot determine whether the dismissal will have the
preclusive effect that would give AT&T standing to seek
review of that ruling. We therefore remand the Order to the
Commission to explain or reform its disposition of AT&T's
counterclaim. Consequently, we do not reach AT&T's stand-
ing to argue that s 228 bars Atlas and Total from recovering
anything from AT&T.
2. Access service
We now turn to the merits of AT&T's argument with
respect to its liability for access service. Before the Commis-
sion AT&T argued, among other things, that Total in fact had
not provided AT&T with "access service":
In its tariff [Total] claims to provide "local transport"
and "local switching," and it has billed AT&T for pur-
portedly providing those services. Both industry prac-
tice and Commission regulation, however, establish that
"local transport" consists of the carriage of calls to an
end office, and there is clearly no end office behind
[Total], only an end user.
Motion of AT&T to Dismiss or for Judgment on the
Pleadings at 26. The Commission acknowledges that it did
not consider AT&T's argument in the Order, but maintains
that "[h]aving successfully urged the Commission to pierce
the Atlas/Total corporate veil, AT&T should not be heard to
complain that the Commission failed to consider whether
Total would have provided exchange access if it had not been
a creature of Atlas."
We do not understand AT&T to be questioning "whether
Total would have provided exchange access if it had not been
a creature of Atlas." AT&T's position is simply that Total
did not provide exchange access and therefore AT&T should
not have to pay it for that. The Commission may regard
AT&T as ungrateful but that is not a reason for failing to
address its argument. Yet the Order is silent regarding
whether any entity -- Total or Atlas or the two combined --
actually provided access service to AT&T. We therefore
remand the Order to the Commission to consider AT&T's
argument that Total did not provide access service.
3. Unreasonable rate claim
AT&T contends that the Commission erred by assuming
that, if Total had not existed, then Atlas would have served
Audiobridge under the NECA tariff: "no carrier that decides
to engage in a chat line revenue sharing scheme would
continue participating in the NECA pool," which could mean
sharing its revenue with the 1100 other members of the
NECA. The Commission argues that AT&T raises this
argument for the first time in this court. In order to give the
agency an opportunity to pass upon the issue, the Commis-
sion maintains that AT&T should have filed a petition for
rehearing pursuant to s 405.
AT&T responds that "no claim can be made that [the
relevant] evidence was not in the record." And, of course, no
such claim is made. But enough of the passive voice: the
Commission claims that AT&T did not make the argument,
not that the record evidence does not support the argument.
The point could not be lost upon AT&T's counsel, which is, no
doubt, why the company's half-hearted rejoinder lies buried
in a footnote. In any event, we are barred by s 405 from
reaching the question whether the Commission erred in as-
suming Atlas would have adhered to the NECA tariff.
III. Conclusion
We deny Atlas/Total's petition for review. We grant in
part AT&T's petition for review and remand the Order to the
Commission (1) to clarify its disposition of AT&T's counter-
claim, which it dismissed "as moot, without prejudice," and (2)
to respond to AT&T's argument that Total did not provide it
with access service.
So ordered.
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