Davel Communications, Inc. v. Qwest Corp.

Citations: 460 F.3d 1075; 2006 WL 2371972Docket: No. 04-35677

Court: Court of Appeals for the Ninth Circuit; June 26, 2006; Federal Appellate Court

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The opinion filed on June 26, 2006, has been withdrawn and replaced by a new opinion, which includes several amendments. Key amendments include the removal of specific sentences regarding the filed-rate doctrine and its applicability to Davel’s complaint under Sections 201 and 276 of the 1996 Act. The opinion clarifies that, similar to the Supreme Court's ruling in Reiter, the filed-rate doctrine does not bar claims asserting that a carrier’s rates are unreasonable. It emphasizes that Section 201 requires telecommunications rates to be just and reasonable, while Section 276 prohibits discriminatory practices in payphone rates. The Supreme Court’s decision in Transcon Lines supports a regulatory agency’s authority to require a departure from filed rates to enforce valid regulations, which the FCC did in its Waiver Order. This order allowed for non-compliance with certain tariffs temporarily and mandated reimbursements to customers once compliant rates were established. Thus, the filed-rate doctrine does not prevent enforcing the Waiver Order’s reimbursement requirement, even if it results in different payments than those outlined in the tariffs from 1997 to 2002. The petition for panel rehearing and motion for judicial notice by Qwest Corporation were denied, and no further petitions for rehearing will be considered. The legal context is set against the backdrop of the Federal Telecommunications Act of 1996, which largely deregulated the telecommunications sector.

The 1996 Act aimed to enhance competition in the telecommunications industry by imposing regulations on incumbent local exchange carriers, including Qwest Corp., requiring them to provide access to their services at cost. Following the Act, the FCC issued orders in 1996 and 1997 that established standards for rates and services for payphone service providers. Davel Communications, Inc. and other providers claimed that Qwest owed them reimbursements for failing to file compliant tariffs as mandated by the FCC's orders. The district court dismissed these claims based on the filed-tariff doctrine and statute of limitations concerning overcharges for fraud protection services. Qwest argued the court lacked jurisdiction under the primary jurisdiction doctrine, which pertains to claims involving administrative agency expertise; however, this doctrine does not affect the court's subject matter jurisdiction. Consequently, the court confirmed its jurisdiction over the appeal under 28 U.S.C. 1291, vacated the district court's dismissal, and remanded for further proceedings. Davel and other appellants, who are payphone service providers purchasing services from Qwest across multiple states, compete with Qwest, which also operates its own payphones. The Federal Communications Act, as amended by the 1996 Act, mandates that common carriers charge just and reasonable rates and file those rates with the FCC or state agencies. Notably, Section 276 of the 1996 Act prohibits dominant carriers from subsidizing payphone services through other operations or discriminating in rates charged to competitors, leading the FCC to implement regulations requiring local exchange carriers like Qwest to set rates based on a new services test (NST).

The new services test mandates that telecommunications service rates reflect the actual cost of service plus a reasonable overhead. Local exchange carriers must develop compliant rates for public access lines used by intrastate payphone service providers and submit these rates to state utility commissions for approval. The Federal Communications Commission (FCC) requires the filing of 'unbundled features' rates with both state commissions and the FCC, with a deadline of January 15, 1997, and an effective date by April 15, 1997. Additionally, interexchange carriers are obligated to pay 'dial-around compensation' to payphone service providers for calls originating from their payphones. Incumbent local exchange carriers, like Qwest, must fully comply with tariff filing requirements before collecting this compensation.

On April 10, 1997, a coalition of regional Bell operating companies, including Qwest, requested a limited waiver to delay compliance with certain provisions of the Payphone Orders, specifically seeking a forty-five-day extension to file intrastate payphone service rates. The FCC had previously granted a similar extension for interstate rates. The coalition proposed to reimburse customers if the new rates were lower than existing rates.

On April 15, 1997, the FCC granted the waiver, allowing the extension until May 19, 1997, for filing compliant rates while permitting incumbent local exchange carriers to collect dial-around compensation starting April 15, 1997. Existing rates would remain in effect until the compliant rates took effect, and carriers relying on the waiver had to reimburse customers from April 15, 1997, if new rates were lower. The waiver was characterized as 'limited' and 'of brief duration.'

In 2002, the FCC clarified that the new services test for the payphone industry mandates forward-looking, cost-based rates that consider only ongoing service costs, excluding previously incurred infrastructure costs. This clarification was affirmed by the D.C. Circuit, which upheld the FCC's authority to regulate intrastate rates and require forward-looking cost estimates. Following this decision, Qwest reduced its tariffs for public access lines and fraud protection services. Davel claims that Qwest's rates from 1997 to 2002 were non-compliant with this test and argues that Qwest, having relied on the Waiver Order for dial-around compensation since April 15, 1997, is obligated to refund the difference between the non-compliant rates and those filed in 2002. Davel contends that Qwest did not file compliant rates in eleven states prior to 2002 and that the lower rates filed then demonstrate non-compliance during the earlier period. Additionally, Davel asserts that Qwest failed to file compliant rates for fraud protection services until 2003, violating the Act and entitling Davel to damages under 47 U.S.C. 206-207. Qwest moved to dismiss Davel's complaint, citing the filed-rate doctrine and a statute of limitations defense, and requested a stay for the referral of legal issues to relevant agencies. The district court dismissed Davel's claims, ruling them barred by the filed-rate doctrine and the statute of limitations, allowing Davel to pursue claims before appropriate administrative bodies. The dismissal was reviewed de novo. The filed-rate doctrine, applicable in regulated industries, mandates that common carriers publicly file service schedules and rates.

Common carriers must adhere to tariffs approved by regulatory agencies, as established by the filed-rate doctrine. This doctrine treats approved tariffs as definitive law, outlining the rights and liabilities between carriers and customers. Carriers cannot charge rates outside the filed tariff, and customers are deemed to have notice of these terms, preventing them from bringing actions that would alter the tariff. The Federal Communications Act has historically governed this doctrine in telecommunications, but the 1996 Act introduced provisions allowing the FCC to 'detariff' certain segments of the industry, meaning the doctrine may not apply where detariffing has occurred. However, where tariff filing remains mandated, the doctrine is fully applicable. The FCC has maintained tariff filing requirements for certain telecommunications services, such as payphone rates and fraud protection rates, indicating the doctrine's relevance in these contexts. Notably, while the doctrine generally shields carriers from suits that would change filed rates, it does not preclude actions aimed at enforcing regulatory statutes tied to tariff requirements, as established in Reiter v. Cooper, where claims of unreasonableness under the Interstate Commerce Act were not barred by the filed-rate doctrine.

Davel’s complaint is based on Sections 201 and 276 of the 1996 Act, which mandate that telecommunications rates be just and reasonable and prohibit carriers from setting payphone rates that discriminate in favor of their own services. Section 276 also requires regulatory agencies to implement regulations that adhere to these standards. The complaint asserts that these provisions, along with Davel's right of action for enforcement, are not obstructed by the filed rate doctrine, as established in Reiter and Transcon Lines. The Supreme Court has indicated that regulatory agencies can deviate from filed rates to enforce valid regulations consistent with the rate system. 

The FCC’s Waiver Order required a departure from filed rates for non-compliant intrastate public access line tariffs, permitting carriers to reimburse customers for discrepancies between compliant and non-compliant rates after April 15, 1997. This indicates that the filed rate doctrine does not hinder the enforcement of the Waiver Order regarding reimbursement.

However, the lawsuit cannot proceed without addressing certain technical and policy issues pertinent to Qwest’s refund claim, which fall under the primary jurisdiction doctrine. This doctrine suggests that matters requiring specialized knowledge should initially be resolved by the relevant regulatory agency rather than the courts. While an agency's competence to handle an issue is essential, it is not solely sufficient to mandate agency resolution of all claims within its jurisdiction.

The primary jurisdiction doctrine does not mandate that courts seek expert advice from regulatory agencies for every issue related to an agency's authority. Courts in this circuit evaluate the doctrine based on four factors: (1) the necessity of resolving an issue, (2) that the issue falls within the jurisdiction of an administrative body authorized by Congress, (3) that the issue involves a comprehensive regulatory scheme, and (4) that it requires expertise or uniformity in administration. If an issue is deemed to fall under an agency’s primary jurisdiction, the district court may "refer" the issue to the agency, which typically involves staying proceedings or dismissing the case without prejudice, allowing the parties to pursue administrative remedies independently.

Qwest asserts that two issues should be referred to the FCC for resolution to ensure uniformity: whether the refund obligation under the Waiver Order was limited to a specific period or was open-ended, and whether Davel is entitled to a refund based on the compliance of Qwest’s public access line rates before 2002. Qwest argues that a technical application of the new services test is required, an area it claims falls under the primary jurisdiction of state utility commissions and the FCC.

Conversely, Davel contends that the primary jurisdiction doctrine is not applicable at the motion to dismiss stage and argues that it has sufficiently alleged that Qwest’s rates were not cost-based, thus allowing its case to proceed. Davel cites a precedent, Cost Management Services, Inc. v. Washington Natural Gas Co., where the court found the primary jurisdiction doctrine inapplicable because the allegations established a violation of a tariff, indicating that the issue could be resolved without requiring specialized agency expertise.

Cost Management's primary jurisdiction holding aligns with standard pleading principles, stating that federal courts cannot dismiss a complaint unless it is evident that no relief can be granted based on any set of facts consistent with the allegations. In cases involving the primary jurisdiction doctrine, the key question is whether any facts could be proven that would avoid the doctrine's application. This doctrine serves to ensure that litigation respects the policy concerns that necessitate agency involvement.

The applicability of the primary jurisdiction doctrine can often be determined at the motion to dismiss stage, particularly when the issues raise policy concerns that require agency intervention. However, in Cost Management, the allegations did not necessitate such application, allowing the court to conform its decision to general motion-to-dismiss principles.

In the present case, the dispute revolves around the Waiver Order's reimbursement obligations, specifically whether it is limited to a forty-five-day waiver period or extends indefinitely until compliant rates are filed. Davel interprets the Waiver Order as having an open-ended obligation, while Qwest argues it is strictly limited to the forty-five days and asserts that if Davel claims no rates were filed during that timeframe, the refund obligation never arose. Qwest further contends that this issue should be referred to the FCC under the primary jurisdiction doctrine, which the court agrees with, emphasizing that the interpretation of agency orders falls within the agency's primary jurisdiction when policy concerns necessitate uniform resolution.

The Supreme Court case Serv. Storage, Transfer Co. v. Virginia establishes that the interpretation of a certificate of convenience and necessity issued by the ICC is under its primary jurisdiction, emphasizing the need for uniformity in federal policy implementation. This principle is particularly relevant to the FCC’s Waiver Order concerning the payphone industry, which mandates compensation for payphone service providers from interexchange carriers and the elimination of cost subsidies by incumbent local exchange carriers. There is debate over whether the Waiver Order's language is intended to be open-ended or if the FCC expected local exchange carriers to file compliant tariffs within a specified forty-five-day period. The subsequent Wisconsin Order in 2002 highlighted that this expectation may not have been met, raising complex policy questions regarding the application of the Waiver Order beyond the initial waiver period. These questions include the implications of good-faith efforts in tariff compliance, potential challenges to future tariff enforcement, and the risk of rewarding intentional non-compliance. Determining how the Waiver Order applies in this context necessitates an examination of these policy considerations, which are best addressed by the FCC, the agency responsible for the Waiver Order. Additionally, the national scope of the Waiver Order affects numerous stakeholders beyond the current litigation, reinforcing the need for a uniform interpretation by the FCC, which is currently reviewing multiple requests for clarification on this issue.

The primary jurisdiction doctrine aims to prevent conflicting rulings by courts and agencies on matters within an agency's expertise. Questions regarding the scope of the Waiver Order related to the Telecommunications Act of 1996 fall under the FCC's primary jurisdiction. The determination of whether the Waiver Order provides relief to Davel due to Qwest's alleged failure to file compliant public access line rates hinges on whether Qwest's rates from 1997 to 2002 met the new services test (NST). Without clarity on the Waiver Order's implications for refunds during this period, a merit-based evaluation of the refund claim remains unfeasible. The district court previously dismissed the case based on the filed rate doctrine; however, Davel argues that a stay, rather than dismissal, is the proper course under the primary jurisdiction doctrine. The decision to stay or dismiss a case when an agency has primary jurisdiction is at the district court's discretion, which includes considering potential disadvantages to the parties, such as the risk of the statute of limitations expiring during agency resolution. The district court did not assess whether Davel would face disadvantages from the dismissal.

The district court ruled that Davel's claims regarding Qwest's fraud protection rates were barred by a two-year statute of limitations under 47 U.S.C. § 415(b), which commenced when Qwest filed NST-compliant tariffs. Davel argued that its claims did not accrue until Qwest submitted these tariffs in 2003, as it lacked knowledge of the excessive rates before then. However, the court found that Davel had a valid cause of action once Qwest missed the 1997 deadline for filing fraud protection tariffs with the FCC, and Davel was paying based on state-filed rates. It established that Davel was on inquiry notice of potential overcharges as soon as Qwest failed to comply, regardless of when precise overcharge amounts became known. The D.C. Circuit's precedent in Sprint Communications Co. v. FCC reinforced this reasoning, asserting that a plaintiff's cause of action accrues when there is knowledge suggesting a claim, not when all facts or damages are ascertainable. Consequently, the case is remanded for the district court to consider whether to stay or dismiss the case without prejudice, taking relevant factors into account.

Upon discovering that Qwest had missed a federal filing deadline, Davel was required to conduct reasonable inquiries to assess any potential injury incurred. There is a distinct difference between the claims related to fraud protection services and those concerning the Waiver Order. According to Davel's interpretation, the right to reimbursement under the Waiver Order arose only after Qwest filed NST-compliant rates, which allegedly occurred in 2002. Consequently, Davel's claim against Qwest for violating the Waiver Order only began to accrue when Qwest failed to make reimbursements. In contrast, no reimbursement order applied to fraud protection services, meaning the cause of action for these claims accrued immediately when Qwest failed to comply with the Payphone Orders, resulting in Davel's injury.

Davel's claims related to fraud protection services are not entirely barred, as Qwest's tariff filing obligations were continuous. Each instance where Davel paid a non-NST-compliant tariff constituted a new injury due to Qwest's failure to file the required federal tariff. The court concluded that while claims for payments made before May 15, 1997, expired by May 15, 1999, claims for payments made under non-compliant tariffs within two years before the complaint were timely. Thus, the court reversed the dismissal of Davel's fraud protection claims concerning these payments and remanded for further proceedings.

Additionally, the court vacated the dismissal without prejudice of Davel's Waiver Order claims and returned the case to the district court to determine the appropriate handling under the primary jurisdiction doctrine. Qwest did not contest the FCC's authority to issue the Waiver Order. The ruling does not address whether the Waiver Order applies to the specific rates in question or any particular time frame, as the primary jurisdiction doctrine prevents such determinations. The appeal primarily concerns the statute of limitations regarding the fraud protection rates, without resolving the applicability of the filed-rate doctrine. All statutory references pertain to the 2000 edition of Title 47 of the United States Code unless stated otherwise. The excerpt also notes that prior to the 1996 Act, payphone providers could be bypassed by callers, who would then pay the interexchange carrier, leaving the payphone provider uncompensated for the call.

New regulations requiring dial-around compensation aim to ensure payphone providers receive compensation. The legal question of whether the 1996 Act allows a private right of action for enforcing payphone regulations, including the Waiver Order, is pending before the U.S. Supreme Court. Qwest has not disputed Davel's right to such action, and the court assumes for this case that such a right exists. Qwest did not challenge the FCC's authority to issue the Waiver Order and was part of the coalition that requested it. The court refrains from determining whether the Waiver Order applies to the rates in question or its scope, as the primary jurisdiction doctrine limits their ability to do so.

The arguments concerning fraud protection rates are tied to the district court's statute of limitations ruling, which remains undecided. Qwest suggests that the compliance of its rates with the new services test could be addressed in a motion to dismiss; however, the court finds that referral for proper construction of the Waiver Order is necessary and does not address this claim. The court also does not decide whether it is appropriate for the FCC to avoid addressing the Waiver Order's scope or whether the district court can proceed if the FCC declines.

Qwest argues that the evaluation of its pre-2002 intrastate public access line rates falls under the jurisdiction of state utility commissions. The court similarly cannot determine if this issue lies within the FCC's primary jurisdiction. Additionally, it notes that the Colorado Public Utilities Commission previously found Qwest’s fraud protection rates excessive. The court concludes that publicly available information enabled similarly situated parties to discover their claims within a year of the new regulations. It affirms that Davel's allegations indicate Qwest missed a federal filing deadline, and there is no reasonable basis to believe Davel was unaware of this omission until after 2002. The ruling on the fraud protection claims is limited to the statute of limitations, with Qwest allowed to present additional defenses on remand.