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APCC Services, Inc. v. Cable & Wireless

September 3, 2003

APCC SERVICES, INC., ET AL., PLAINTIFFS,
v.
CABLE & WIRELESS, INC., DEFENDANT.



The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge

MEMORANDUM OPINION

This case is one of several before the Court that have been brought pursuant to sections 206 and 207 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 206, 207.*fn1 Plaintiffs in these cases seek to collect payment of so-called "dial-around compensation" from a common carrier of telephone calls pursuant to the compensation payment obligations mandated by section 276 of the Act and its implementing regulations. Plaintiffs are aggregators or clearinghouses and have brought suit as assignees of the claims of various payphone service providers ("PSPs").*fn2

In each case, the Court faces the same initial hurdle of whether plaintiffs have Article III standing. While the Court initially dismissed one of these cases on March 28, 2003, finding that plaintiffs lacked standing ( see APCC Services, Inc. v. AT&T Corp., 254 F. Supp. 2d 135 (D.D.C. 2003)), by a Memorandum Opinion issued today, it has granted reconsideration and reinstated that action, having now concluded that the assignments executed by the PSPs bestow on the aggregator-plaintiffs standing sufficient to survive an Article III challenge. Because Cable & Wireless, Inc. ("C&W") presents the same arguments for dismissal based on lack of standing as did AT&T, the Court's newly issued Memorandum Opinion in AT&T also resolves C&W's Motion to Dismiss for Lack of Subject Matter Jurisdiction.*fn3

In light of its denial of C&W's motion to dismiss for lack of subject matter jurisdiction, the Court must now address the two remaining motions in this case: (1) C&W's Rule 12(b)(6) motion to dismiss on the grounds that plaintiffs cannot state a claim under section 276 because that statutory provision does not provide for a private right of action; and (2) plaintiffs' motion to amend to add additional grounds for relief under the Communications Act.*fn4

LEGAL ANALYSIS

I. Private Right of Action

The issue presented by C&W's motion is whether section 276(b)(1)(A) of the Communications Act and its implementing regulation, codified at 47 C.F.R. § 64.1300 et seq, confer a private right of action based on a common carrier's alleged failure to pay adequate dialaround compensation. Plaintiffs base their claims on sections 206 and 207 of the Act. Section 206 provides that if a common carrier "shall do, or cause or permit to be done, any act, matter, or thing in this chapter prohibited or declared to be unlawful... such common carrier shall be liable to the person or persons injured thereby." 47 U.S.C. § 206. Section 207, in turn, permits the bringing of a suit "for the recovery of damages for which such common carrier may be liable under the provisions of this chapter." 47 U.S.C. § 207.

The Act addresses dial-around compensation in section 276(b)(1)(A), which directs the Federal Communications Commission (FCC) to prescribe regulations that "establish a per call compensation plan to ensure that all payphone service providers are fairly compensated for each and every completed intrastate and interstate call using their payphone." 47 U.S.C. § 276(b)(1)(A). While section 276 does not speak in terms of a private right of action, sections 206 and 207 clearly allow private suits to recover damages based on violations of rights protected by the Act. In this case, however, defendant argues that plaintiffs' claims are not actionable under those provisions because the claims do not allege a violation of section 276 itself, but only of the regulations promulgated pursuant thereto.*fn5 Defendant notes that section 276 is "merely a directive to the FCC to promulgate regulations regarding [the payment of] DAC [compensation]" and that, as a result, only the FCC's failure to create such regulations would amount to a violation. (Def.'s Mem. at 22-23.) Defendant contends that because it is only the regulation that requires specific payment, the failure to pay violates only the regulation, and thus cannot be enforced through the private right of action created by sections 206 and 207.

This very issue has been addressed by district courts with mixed results. Compare Precision Pay Phones v. Qwest Communications Corp., 210 F. Supp. 2d 1106, 1113 n.3 (N.D. Cal. 2002) (holding that private right of action exists to enforce section 276 regulations and citing cases reaching that conclusion), with Phonetel Tech., Inc. v. Network Enhanced Telecomm., 197 F. Supp. 2d 720, 722 (E.D. Tex. 2002), Greene v. Sprint Communications, No. 02-CV-3841 (C.D. Cal. July 2, 2002), appeal docketed, No. 02-56339 (9th Cir. 2002), W. Communications Sys. v. Global Crossing Telecomm., Inc., No. 01-CV-1468 (S.D. Cal. Sept. 20, 2001) (holding that no private right of action exists).*fn6

No court in this jurisdiction has squarely confronted the issue of whether there is either an explicit or implied private right of action to sue for dial-around compensation. The D.C. Circuit has, however, recognized that where a local exchange carrier exceeds the maximum rate of-return established by the FCC, the carrier thereby violates section 201(b)'s mandate that a carrier must maintain "just and reasonable" rates, 47 U.S.C. § 201(b), and the carrier's customer may sue for damages under section 206. See MCI Telecommunications Corp. v. FCC, 59 F.3d 1407, 1413-14 (D.C. Cir. 1995). In reaching this conclusion, the Court reiterated its position that rate, as well as rate-of-return, prescriptions have the force of law. Id. While MCI is instructive, since the Court appears to recognize that an FCC order finding that a carrier violated a rate regulation is actionable under section 206, it does not completely resolve the issue here as it involved a challenge to an FCC order rather than a suit between private parties.

While the teaching of MCI is helpful, the most relevant case bearing on whether a private right of action extends to a violation of a regulation is Alexander v. Sandoval, 532 U.S. 275 (2001), which defendant unfortunately does not meaningfully address. In Sandoval, the Supreme Court held that "[a] Congress that intends the statute to be enforced through a private cause of action intends the authoritative interpretation of the statute to be so enforced as well." Id. at 284. The issue there was the existence of a private right of action to enforce regulations promulgated under section 602 of Title VI of the Civil Rights Act of 1964. Section 601 of Title VI prohibits recipients of federal funds from engaging in racial or national origin discrimination. It has been interpreted to prohibit only intentional discrimination and to provide a private right of action. Id. at 279-80. Section 602 of Title VI authorizes federal agencies to promulgate regulations to effectuate section 601. The regulations at issue in Sandoval, promulgated under section 602, prohibit recipients of federal funds from engaging in facially neutral practices which have a disparate impact. Since the Court found that the regulations went beyond the substantive provisions of section 601, which bar only intentional discrimination, it concluded that the private right of action to enforce section 601 did not also encompass a right to enforce disparate-impact regulations. Id. at 281-82. However, the Court affirmed that the regulations applying the ban on intentional discrimination provided for in section 601 came within the private right of action to enforce the statute. Id. at 284.

Sandoval 's analysis is directly relevant here. The Supreme Court found that the "regulations applying § 601's ban on intentional discrimination are covered by the [private] cause of action to enforce that section," because "[s]uch regulations... authoritatively construe the statute itself,... and it is therefore meaningless to talk about a separate cause of action to enforce the regulations apart from the statute." Id. (citations omitted). In contrast, the Court found that "the disparate-impact regulations do not simply apply § 601– since they indeed forbid conduct that § 601 permits – and [it is] therefore clear that the private right of action to enforce section 601 does not include a private right to enforce these regulations." Id. at 285.

Thus, the Supreme Court found that the private right of action contained in section 601 included a right to vindicate violations of the regulations implementing section 601's ban on intentional discrimination because the regulations simply interpreted and implemented the statute and did not substantively expand it. The same is true with the statutory provision (section 276(b)(1)(A)) and the regulation (47 C.F.R. § 64.1300) at issue here. See Precision Pay Phones, 210 F. Supp. 2d at 1115 (applying Sandoval in this context). The statute is not merely a directive to the FCC as defendant suggests – it confers upon PSPs a right to be "fairly compensated for each and every completed intrastate and interstate call using their payphone[s]." 47 U.S.C. § 276(b)(1)(A). The regulation, in turn, simply provides the details necessary to implement the statutory right created by section 276. Like the intentional discrimination regulations in Sandoval,

"[I]t is meaningless to talk about a separate cause of action to enforce" the FCC regulation at 47 CFR 64.1300 apart [from] its authorizing statute, 47 U.S.C. 276(b)(1)(A). A suit to enforce the right of PSPs under 276(b)(1)(A) to be "fairly compensated" would be meaningless without ...


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