UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) SANDWICH ISLES ) COMMUNICATIONS, INC., et al., ) ) Plaintiffs, ) ) v. ) Civil Action No. 10-02341 (ABJ) ) NATIONAL EXCHANGE ) CARRIER ASSOCIATION, ) ) Defendant. ) ____________________________________)
MEMORANDUM OPINION
Plaintiffs Sandwich Isles Communications (“SIC”), Gold Ivory LLC (“Gold Ivory”),
Healii Heine, and Harry Johnston bring this action against the National Exchange Carrier
Association (“NECA”) alleging claims for breach of contract, violations of the Equal Protection
Clause of the U.S. Constitution, and tortious interference with Gold Ivory’s prospective business
opportunities. NECA moved to dismiss this action for lack of subject matter jurisdiction and for
failure to state a claim upon which relief can be granted. Since there is a proceeding pending
before the Federal Communications Commission (“FCC”) addressing the same matters, the
Court will grant defendant’s motion and dismiss this case.
I. Background
Defendant NECA is a nonprofit corporation that was formed by the FCC following the
breakup of AT&T to perform certain services on behalf of local telephone companies (local
exchange carriers or “LECs”). Allnet Commc’n Svc., Inc. v. Nat’l Exch. Carrier Ass’n, 965 F.2d
1118, 1119 (D.C. Cir. 1992). See also 47 C.F.R. § 69.601 et seq.; Compl. ¶¶ 27–31. NECA administers the FCC’s “access charge” plan by creating revenue pools into which LEC members
contribute their revenue, and by making distributions from those pools to reimburse members for
their respective costs. Compl. ¶ 28. See also 47 C.F.R. § 69.601 et seq.
Plaintiff SIC was established to provide telephone and broadband service to native
Hawaiian home sites located in the Hawaiian Home Lands (“HHL”). Compl. ¶ 1. In light of the
unique geography of Hawaii, its distance from the mainland, and other factors, providing service
to the HHL is particularly costly. Id. ¶ 32. To fulfill its mission, SIC contracted with NECA to
participate in its revenue pools, including one known as the Traffic Sensitive Pool (“Pool”). Id.
¶¶ 2, 37, 48. The purpose of the Pool is to enable high-cost LECs to be reimbursed for their
network expenses so they can provide telecommunications services to customers in more remote
locations at affordable rates. Id. ¶ 2. SIC and approximately 800 other rural LECs submit their
eligible construction and operational costs to the Pool, and NECA compensates them in
accordance with FCC rules. To fund the Pool, SIC and the other rural LECs agree to charge an
“access” tariff to other carriers delivering calls to their customers, and they turn those payments
over to NECA. Id.
The dispute in this case arose when NECA refused to reimburse SIC for 100% of the
lease expenses it incurred in utilizing the Paniolo cable network (“Paniolo”) – a submarine and
terrestrial fiber optic cable connecting five Hawaiian Islands – to connect its networks on those
islands. Id. ¶ 3. On May 20, 2009, NECA advised SIC that in its view, the lease costs SIC paid
for Paniola were not “used and useful” and they would be excluded from the June 16, 2009,
2 access charge tariff. As a result, SIC could not recover those costs from the Pool. Id. ¶¶ 4, 61;
Mot. to Dismiss, App. B. 1
On June 26, 2009, SIC initiated a proceeding before the Wireline Competition Bureau
(“WCB”) of the FCC in which it sought a declaratory ruling that the Paniola lease costs were
“used and useful,” and that NECA was required to accept them in the Pool. Compl. ¶75; Mot. to
Dismiss, App. C at 1. On September 29, 2010, the WCB ruled that “some – but not all – of [the
Paniola lease] costs are properly recoverable consistent with Commission rules and precedent.”
See Mot. to Dismiss, App. A, In re Sandwich Isles Communications, Inc. Petition for
Declaratory Ruling, Declaratory Ruling, WC Docket No. 09-133, DA 10-1880, slip op. at 1
(Wir. Comp. Bur., rel. Sept. 29, 2010) (“Declaratory Ruling”).
[W]e do not find 100 percent of [SIC]’s lease expenses per se “used and useful” and appropriate for inclusion in the NECA pool. Nor do we find NECA’s determination not to include the lease costs in its pool unreasonable as a matter of that entity performing its role in the pooling process. Id. at 4. But the WCB noted that the FCC possessed the “flexibility itself to consider a
variety of equitable factors beyond current and actual usage in evaluating the costs that
are ‘used and useful’ and appropriate for inclusion in the revenue requirement.” Id.
Based on that analysis and relevant Commission precedent, the FCC concluded that 50%
of SIC’s lease expenses should be included in the Pool. Id.
Not satisfied with that result, SIC filed a petition for reconsideration of the FCC’s
Declaratory Ruling with the WCB on October 29, 2010. Mot. to Dismiss, App. D (“Petition for
Reconsideration” or “Petition”). Among other arguments, SIC asserted in its Petition that
instead of applying the “used and useful” doctrine, NECA should have applied its Spare Fiber
1 NECA did propose to provide SIC with $1.9 million per year. Declaratory Ruling at 8, ¶18.
3 C&WF Investment Cost Reporting Guidelines (“Spare Fiber Guidelines” or “SFG”) in
determining whether SIC’s costs should have been included in the Pool. Id. at i–iv, 1–12. Under
those Guidelines, SIC argued, NECA would have been required to reimburse SIC in full. Id. at
iii.
While the Petition for Rehearing was still pending before the FCC, Compl. ¶ 81, SIC,
along with plaintiffs Gold Ivory, Healii Heine, and Harry Johnston, brought suit in this Court.
Gold Ivory is a corporate affiliate of SIC’s parent company. Compl. ¶ 124. In 2010, Gold Ivory
allegedly filed two applications for $180 million in stimulus grants to develop a public safety
broadband network in Hawaii that would have relied on the Paniolo network. Id. ¶¶ 125–26.
Heine is a native Hawaiian and a customer of SIC, and Johnston is a native Hawaiian
homesteader in the HHL who is not currently being served by SIC. Id. ¶ 12–13. 2
In the December 30, 2010 complaint, SIC sued NECA for breach of contract (Count I),
for breach of the implied covenant of good faith and fair dealing (Count II), and for violating of
the Equal Protection Clause of the Fourteenth Amendment by applying a different standard – the
“used and useful” doctrine – to SIC than to other similarly situated rural LECs (Count III). See
id. ¶¶ 82–108. SIC, Heine, and Johnston also claim that NECA violated the Equal Protection
Clause because the application of the standard will result in a lack of telecommunications
services for native Hawaiian customers in the HHL (Count IV). Id. ¶¶ 109–122. Finally, Gold
Ivory sued NECA for tortious interference with prospective business advantage (Count V),
alleging that its grant applications were unsuccessful because of concerns about the viability of
SIC and its network that arose out of NECA’s non-payment decision. Id. ¶¶ 127–29.
2 According to defendant, plaintiffs Heine and Johnston are also employees of SIC, Defendant’s Memorandum in Support of Motion to Dismiss (“Def.’s Mem.”) at 6, and plaintiffs do not dispute that assertion.
4 Plaintiffs seek compensatory damages of not less than $160 million for SIC and $180
million for Gold Ivory. Id. at 31. They also seek a judgment directing NECA to apply the Spare
Fiber Guidelines and to include all of SIC’s Paniola lease costs in the Pool. Id.
On December 30, 2010, NECA moved to dismiss the complaint under Fed. R. Civ. P.
12(b)(1) and 12(b)(6), arguing that this Court lacks subject matter jurisdiction or, alternatively,
that the complaint fails to state a claim upon which relief can be granted.
II. Legal Standard
In evaluating a motion to dismiss, the Court must “treat the complaint’s factual
allegations as true . . . and must grant plaintiff ‘the benefit of all inferences that can be derived
from the facts alleged.’” Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir.
2000), quoting Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir. 1979) (citations omitted).
Nevertheless, the Court need not accept inferences drawn by the plaintiff if those inferences are
unsupported by facts alleged in the complaint, nor must the Court accept plaintiff’s legal
conclusions. Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002).
When considering a motion to dismiss for lack of jurisdiction, the plaintiff bears the
burden of establishing jurisdiction by a preponderance of the evidence. See Lujan v. Defenders
of Wildlife, 504 U.S. 555, 561 (1992); Shekoyan v. Sibly Int’l Corp., 217 F. Supp. 2d 59, 63
(D.D.C. 2002). Federal courts are courts of limited jurisdiction and the law presumes that “a
cause lies outside this limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 377 (1994); see also Gen. Motors Corp. v. EPA, 363 F.3d 442, 448 (D.C. Cir. 2004) (“As a
court of limited jurisdiction, we begin, and end, with examination of our jurisdiction.”). Because
“subject-matter jurisdiction is ‘an Art[icle] III as well as a statutory requirement . . . no action of
the parties can confer subject-matter jurisdiction upon a federal court.’” Akinseye v. District of
5 Columbia, 339 F.3d 970, 971 (D.C. Cir. 2003), quoting Ins. Corp. of Ireland v. Compagnie des
Bauxites de Guinee, 456 U.S. 694, 702 (1982).
Moreover, unlike when deciding a motion to dismiss under Rule 12(b)(1), the court “is
not limited to the allegations of the complaint . . . .” Hohri v. United States, 782 F.2d 227, 241
(D.C. Cir. 1986), vacated on other grounds, 482 U.S. 64 (1987). Rather, a court “may consider
such materials outside the pleadings as it deems appropriate to resolve the question whether it
has jurisdiction to hear the case.” Scolaro v. D.C. Bd. of Elections & Ethics, 104 F. Supp. 2d 18,
22 (D.D.C. 2000). See, e.g., Herbert v. Nat’l Acad. of Sciences, 974 F.2d 192, 197 (D.C. Cir.
1992); see also Jerome Stevens Pharms., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C. Cir. 2005).
ANALYSIS
III. The Court Lacks Jurisdiction
Defendants argue that in essence, plaintiffs are seeking review of an FCC order, and since
the court of appeals has exclusive jurisdiction to review final orders of that agency, this Court
lacks jurisdiction to hear the case. The Court agrees.
A. The court of appeals has exclusive jurisdiction to review final FCC orders. As an initial matter, the Court notes that the Hobbs Act, 28 U.S.C. § 2342(1), 3 and the
Communications Act, 47 U.S.C. § 402(a), 4 only permit judicial review of “final orders.” The
pendency of a petition for reconsideration renders the underlying agency action non-final.
United Transportation Union v. ICC, 871 F.2d 1114, 1116 (D.C. Cir. 1989) (“We think it plain
3 28 U.S.C. § 2342 provides: “The court of appeals (other than the United States Court of Appeals for the Federal Circuit) has exclusive jurisdiction to enjoin, set aside, suspend (in whole or in part), or to determine the validity of – (1) all final orders of the Federal Communications Commission made reviewable by section 402(a) of title 47.”
4 47 U.S.C. § 402(a) provides: “Any proceeding to enjoin, set aside, annul, or suspend any order of the Commission under this chapter (except those appealable under subsection (b) of this section) shall be brought as provided by and in the manner prescribed in chapter 158 of Title 28.”
6 that a pending petition for rehearing must render the underlying agency action non-final (and
hence unreviewable) with respect to the filing party.”); see also Int’l Telecard Ass’n v. FCC, 166
F.3d 387, 388 (D.C. Cir. 1999) (“Ongoing agency review renders an order nonfinal for purposes
of judicial review, and a petition for review of the order is incurably premature.”). Thus, “a
petition for judicial review filed during the pendency of a request for agency reconsideration will
be dismissed for lack of jurisdiction.” Wade v. FCC, 986 F.2d 1433, 1433 (D.C. Cir. 1993).
Here, SIC has appealed the WCB Declaratory Ruling by filing the Petition for Reconsideration.
The WCB has not ruled on that Petition, so there can be no dispute that the FCC has not issued a
final order for purposes of judicial review.
Once the FCC does issue a final order, it is undeniable that the court of appeals will have
exclusive jurisdiction to review it. FCC v. ITT World Commc’ns, Inc., 466 U.S. 463, 468 (1984)
(“Exclusive jurisdiction for review of final FCC orders, such as the FCC’s denial of respondents’
rulemaking petition, lies in the Court of Appeals.”); Media Access Project v. FCC, 883 F.2d
1063, 1066 (D.C. Cir. 1989) (“[T]here is no dispute that, under 28 U.S.C. § 2342(1), the court of
appeals has exclusive jurisdiction over all ‘final orders of the Federal Communications
Commission made reviewable by section 402(a) of title 47.’”). 5
Plaintiffs contend that this case does not amount to an effort to obtain judicial review of
the FCC’s Declaratory Ruling because the complaint raises different claims, it includes new
5 The parties agree that plaintiffs were not required to seek redress before the FCC in the first instance. Therefore, NECA acknowledges that this Court would have had jurisdiction over a challenge to NECA’s actions if plaintiffs had filed an action in this court first. Transcript of Motions Hearing, July 20, 2011 (“Tr.”) at 3 (“You would have had the power had they filed it only here.”). But according to NECA, once plaintiffs initiated the FCC proceedings that are still pending, they triggered the Hobbs Act and Communications Act provisions that locate exclusive jurisdiction in the court of appeals. Id. at 3–4. 7 parties, and much of the relief sought cannot be obtained in the FCC proceeding. Opp. at 12–15.
None of these arguments is persuasive.
B. Plaintiffs’ complaint, in substance, seeks the same relief on the same issues as SIC’s Petition for Reconsideration. Plaintiffs seek compensatory damages and an order “directing NECA” to apply the Spare
Fiber Guidelines and include 100% of their lease costs in the pool. Compl. at 31. But the
particular NECA decision that prompted this lawsuit is no longer operative – it has been
effectively superseded by the Declaratory Ruling of the WCB. Plaintiffs acknowledge – indeed,
they specifically allege – that NECA is required to follow the orders of the FCC. See id. ¶¶ 68
(“NECA is responsible for complying with . . . the orders and rules of the FCC . . . .”) and 101
(“NECA is obligated to implement the FCC’s rule interpretations . . . .”). Thus, while plaintiffs
are asking this Court to order NECA to do one thing, the FCC, in the WCB’s Declaratory Ruling,
has already ordered it to do something else. That order is presently under review, and whether it
is upheld or overturned, NECA will be bound to comply with the FCC’s ruling on
reconsideration. See Pls.’ Opp. at 14 (“A final ruling in the FCC Proceeding that NECA had
incorrectly applied the ‘used and useful’ doctrine to exclude 44% of SIC’s Paniolo costs from the
Pool would result in SIC’s reimbursement for those costs.”). And the FCC’s ruling will never be
subject to review in this Court.
Plaintiffs cannot bypass the jurisdictional statute by asserting that their complaint seeks a
form of relief not available in the FCC proceeding. The Supreme Court has held that “[l]itigants
may not evade the [exclusive jurisdiction] provisions by requesting the District Court to enjoin
action that is the outcome of the agency’s order.” ITT World Commc’ns, Inc., 466 U.S. at 468.
In that case, the Court found that, “[i]n substance, the complaint filed in the District Court raised
the same issues and sought to enforce the same restrictions upon agency conduct as did the
8 petition for rulemaking that was denied by the FCC.” Id. The Court therefore held that plaintiffs
must obtain judicial review through the court of appeals and not the district court. Id.
In Wilson v. A.H. Belo Corp., 87 F.3d 393, 395 (9th Cir. 1996), the plaintiffs, like the
plaintiffs here, brought state law claims including breach of contract and breach of the covenant
of good faith and fair dealing. Citing ITT World Commc’ns, Inc., 466 U.S. at 468, the court held
that when the complaint filed in the district court “raise[s] the same issues and seek[s] the same
relief in substance as the declaratory ruling” of the FCC, the jurisdictional statutes require review
in the courts of appeals. Id. at 399. The court dismissed all of the causes of action because they
“would have required the district court to determine the substantive validity of a final FCC order
reviewable under 47 U.S.C. § 402(a),” which was the exclusive jurisdiction of the court of
appeals. Id. at 400.
Similarly, in CE Design, Ltd. v. Prism Business Media, Inc., 606 F.3d 443 (7th Cir.
2010), the court reviewed the substance of the complaint and determined that the plaintiff’s
lawsuit was a veiled challenge to the validity of an FCC rule. The Seventh Circuit upheld the
district court’s ruling that it lacked jurisdiction to consider the validity of the FCC rule. 606 F.3d
at 448. The court found that when the defendant raised the FCC rule as a defense to the
plaintiff’s claim, “it inherently called upon the district court to enforce the FCC’s rule.” Id.
“Because [the plaintiff] argued that the district court should ignore – or in other words, invalidate
– the FCC’s [rule] for purposes of this suit, the Hobbs Act’s jurisdictional bar came into play.” 6 Id. See also United States v. Any and All Radio Station Transmission Equip., 207 F.3d 458,
6 It is true that the parties in CE Design were expressly invoking an agency order, and plaintiffs here maintain they are seeking relief “on issues completely separate and distinct from the issues in the WCB Declaratory Ruling.” Pls.’ Opp. at 22–23. But as will be discussed in more detail in this section of the opinion, that argument does not withstand scrutiny, so the case cannot be distinguished on those grounds. 9 463 (8th Cir. 2000) (“Whichever way it is done, to ask the district court to decide whether the
regulations are valid violates” the Hobbs Act).
Nor can plaintiffs evade jurisdictional requirements by invoking the Constitution or
bringing an action under laws other than the Communications Act. “A plaintiff may not escape
an exclusive avenue of judicial review through artful pleading.” American Bird Conservancy v.
FCC, 545 F.3d 1190, 1194 (9th Cir. 2008); see also Folden v. United States, 379 F.3d 1344 (Fed.
Cir. 2004) (holding that in deciding whether the jurisdictional provision applies to a breach of
contract claim, the court “must look to the true nature of the plaintiffs’ claims, not how plaintiffs
characterize it.”). In American Bird, the Ninth Circuit rejected the plaintiff’s characterization of
its suit as a challenge to the agency’s compliance with federal environmental laws rather than to
the agency’s ultimate order. 545 F.3d at 1193. In Any and All Radio Station Transmission
Equipment, the court held that the fact that the district court challenges were based in part on
constitutional grounds did not permit the plaintiff to evade FCC and appellate jurisdiction. 207
F.3d at 463. And in Wilson, the Ninth Circuit dismissed several state law causes of action
because they required the court to determine the substantive validity of a final FCC order. 87
F.3d at 400.
So the question to be determined in ruling on the motion to dismiss is whether this case
raises the same issues that are pending before the FCC and whether it calls into question the
validity of an FCC order. While plaintiffs contend that it does not, that position is so obviously
belied by a comparison of the complaint and the Petition for Rehearing that it seems
disingenuous. The complaint seeks a judgment directing NECA to include all of SIC’s Paniola
lease costs in the Pool and directing it to apply the Spare Fiber Guidelines to SIC’s request to
10 include its costs in the Pool. Compl. at 31. The Petition for Reconsideration requests precisely
the same relief:
[The Spare Fiber Rule] clearly applies to spare Paniolo fiber and application of that rule clearly provides that SIC is entitled to recover 100 percent of its spare fiber costs from the NECA Pool. As a result, the Bureau must: (a) reconsider the cost recovery methodology adopted in the [Declaratory Ruling]; and (b) award SIC 100 percent cost recovery.
Petition for Reconsideration at 2.
Plaintiffs claim that this case and the FCC proceeding are different because the WCB
Declaratory Ruling only concerned the application of the “used and useful” doctrine and did not
address the superiority of the Spare Fiber Guidelines. See, e.g., Pls.’ Opp. at 13–14 (“The
Complaint’s allegations of unequal treatment were not the subject of the FCC Proceeding, as
evidenced by the fact that the WCB Declaratory Ruling makes no reference to the Spare Fiber
Guidelines whatsoever.”). But that is because plaintiffs did not ask the FCC to apply those
guidelines in its initial request for review of the NECA decision, and they did not raise the issue
of the applicability of a different set of guidelines until they petitioned for reconsideration.
As plaintiffs acknowledged during the hearing on the motion to dismiss, the pending
petition squarely raises the issues before this Court. 7 In both proceedings, plaintiffs argue that
NECA was obliged to follow the Spare Fiber Guidelines, that it lacked any justification for
treating SIC differently than other rural LECs, and that the FCC’s approach was inconsistent
with previous FCC orders that deemed the construction of SIC’s network to be in the public
7 At oral argument, plaintiffs agreed that in the FCC petition, they complained that NECA had applied the wrong rules and the Spare Fiber Guidelines should have been used instead, that NECA had not followed its own rules and treated SIC differently than it had treated others before, and that NECA’s actions were inconsistent with the FCC Study Area Waiver Rules that had supported the development of telecommunications infrastructure in Hawaii. See Tr. at 16– 17. And they conceded that same issues were raised in the complaint (Question: “Every single one of those things is in your complaint.” Answer: “Correct.”). 11 interest and authorized SIC to participate in the NECA Pool. Compare Compl. ¶¶ 69–72, with
Petition for Reconsideration at 2–8; compare Compl. ¶ 8, with Petition for Reconsideration at 12;
compare Compl. ¶¶ 21–24, with Petition for Reconsideration at 17–19.
Before it filed this action, SIC availed itself of the right to seek FCC review of the NECA
decision, and the WCB within the FCC has already ruled. So, if the Court were to hear this case
now, it would have to review the WCB Declaratory Ruling to decide whether it was appropriate
for the agency to continue to apply the used and useful standard invoked by NECA as opposed to
the Spare Fiber Guidelines. It would have to compare the WCB’s Declaratory Ruling with other
FCC orders and rules. That is exactly what the Petition for Reconsideration asks the FCC to do.
In short, the gravamen of the complaint is plaintiffs’ disagreement with an agency decision that
is not yet final. And once the FCC issues a final order, plaintiffs will have to take it up with the
court of appeals.
C. Plaintiffs’ damages claims do not give this Court jurisdiction. The fact that the complaint includes claims for damages does not change the character of
the complaint or allow plaintiffs to bypass the administrative process. See Aguilar v. U.S.
Immigration and Customs Enforcement, 510 F.3d 1, 17 (1st Cir. 2007) (“Courts also have
rebuffed litigants’ attempts to bypass congressionally mandated exhaustion requirements by
demanding remedies that the administrative procedures cannot grant.”).
In Computer Consulting & Network Design, Inc. v. Universal Serv. Admin. Co., 2008 WL
2435932, at *2 (W.D. Ky. June 12, 2008), the district court was asked to review a decision by
another non-profit corporation designated by the FCC to administer one of its programs. USAC
was authorized to manage the delivery of discount internet services to the schools. Id. at *1.
The plaintiff, CCND, brought suit in the district court alleging that USAC sent false and
12 defamatory letters to school districts denying payment for its services, and that USAC interfered
with its prospective contractual relations. Id.
The court rejected the plaintiff’s argument that it should keep the case because the
administrative process could not address tort claims for monetary damages. Id. at *6. It
observed, “[w]hile this is true, administrative review does allow for a full and complete look at
USAC’s conduct. Thereafter, an aggrieved party may obtain judicial review by a Court of
Appeals.” Id. The court explained that if the court of appeals found that USAC acted according
to proper FCC directives, the district court would be bound by that conclusion, and the plaintiff’s
claims would not be viable. And if USAC’s conduct was wrongful or illegal, then the plaintiff
would have a viable state law claim. But whether USAC acted with proper FCC directives is “a
matter which is squarely within the realm of the FCC and the Courts of Appeals, not this Court.”
Id.
The case is instructive because both USAC and NECA are non-profit entities with
delegated authority from the FCC and “[a]ny person aggrieved” by them “may” seek review
from the FCC. Id. at *4, quoting 47 C.F.R. § 54.719(c). 8 And as the court concluded in CCND,
in this case a claim for damages will only remain if the FCC reverses itself or if the court of
appeals finds its ruling to be invalid. On the other hand, if the FCC approves NECA’s action and 9 its decision is affirmed by the court of appeals, no viable action for damages will survive.
Moreover, the court in CCND found that it did not have jurisdiction even though the plaintiff did
8 See 47 C.F.R. § 1.115 (“Any person aggrieved by any action taken pursuant to delegated authority may file an application requesting review of that action by the Commission.”)
9 When the Court asked plaintiffs’ counsel at the hearing on the motion how it could even deal with the plaintiffs’ claims for damages unless and until the FCC had determined that NECA’s refusal to pay SIC’s costs was wrong, he replied, “that’s a fair point.” Tr. 15.
13 not have a pending proceeding before the FCC. 10 Here, the case for dismissal is even stronger
since SIC elected to seek relief before the FCC in a proceeding governed by the Hobbs and
Communications Acts. The fact that that proceeding is not yet final only solidifies the Court’s
view that it lacks jurisdiction to hear the case.
D. The presence of other parties in this dispute does not confer jurisdiction. Neither the involvement of plaintiffs other than SIC, nor the absence of the FCC as a
defendant, gives this Court jurisdiction. Courts have held that whether the plaintiffs challenge
the agency directly or indirectly, the jurisdictional bar exists. In CE Design, the plaintiff sued a
private party whose “defense . . . inherently called upon the district court to enforce the FCC’s
rule.” 606 F.3d at 448. The court held that the fact the plaintiff’s “challenge to the FCC’s []
defense arises in a dispute between private parties makes no difference – the Hobbs Act’s
jurisdictional limitations are ‘equally applicable whether [a party] wants to challenge the rule
directly . . . or indirectly, by suing someone who can be expected to set up the rule as a defense
in the suit.’”. Id., quoting City of Peoria v. Gen. Elec. Cablevision Corp., 690 F.2d 116, 120 (7th
Cir. 1982). See also ITC-DeltaCom Commc’ns, Inc. v. BellSouth Telecommunications, Inc., 193
Fed. App’x 413, 416 (6th Cir. 2006) (When plaintiff argued it was not requesting relief from the
conduct of the FCC, but rather the conduct of BellSouth, the court found, “[t]his argument is also
10 The court held that the regulations providing for administrative review, while using permissive language (“may”), were mandatory and that the plaintiff must first exhaust their remedies through the FCC. 2008 WL 2435932, at *6. The court found that the plaintiff’s claims “all hinge upon the allegation that USAC’s conduct in administering the E-Rate Program was ‘improper, wrongful, and reckless.’” Id. Because USAC contended that the FCC issued orders to USAC approving and requiring the conduct about which the plaintiff complained, the court found that to address the plaintiff’s claims it would “be necessary to determine the propriety of the actions taken by USAC in the administration of the program.” Id. The court held that USAC and the FCC should be given the opportunity to pass on the issues underlying the plaintiff’s claims prior to judicial review. Because the plaintiff had not exhausted its administrative remedies, the court dismissed the complaint.
14 without merit because no matter how Plaintiff attempts to fashion the argument, the gist of its
complaint is that it is seeking to divest the FCC of jurisdiction to rule on BellSouth’s petition,
which this Court has already held cannot be done.”). Thus, it makes no difference that plaintiffs
brought suit against NECA instead of the FCC; the operative decision by which NECA must
abide is the WCB’s Declaratory Ruling, which approved both NECA’s use of the “used and
useful” standard and its decision not to include 100% of the lease costs in the Pool.
The fact that Gold Ivory and employees of SIC joined SIC as plaintiffs in the suit does
not confer jurisdiction on this Court either. Like SIC’s claims, both the individual plaintiffs’
claims and Gold Ivory’s tortious interference claim are entirely dependent on a finding of
whether the FCC’s utilization of the “used and useful” methodology was improper – which is the
very question pending reconsideration. Since the claims brought by all of the plaintiffs
essentially call upon the Court to ignore or set aside an agency ruling it is not authorized to
review at all, and to do that before the ruling is even final, this Court lacks jurisdiction to hear
the entire case. See City of Peoria, 690 F.2d at 120 (holding that the district court does not have
jurisdiction when plaintiffs seek relief that “is in effect an action to set aside the [FCC] rule”).
Plaintiffs argue that this Court should not dismiss an action in favor of an administrative
proceeding “when doing so would effectively ‘foreclose all meaningful judicial review’” of their
claims. Pls.’ Opp. at 21, quoting Aguilar, 510 F.3d at 12. But there will be meaningful judicial
review of the claims. The court of appeals will review a decision made by the FCC if either
party to that proceeding chooses to appeal. And if there are viable claims to be brought once the
FCC and the court of appeals have ruled, there will be no bar to bringing them then.
15 IV. The Court Would Dismiss this Case Under Primary Jurisdiction Even if it Had Jurisdiction
Even if the Court did have jurisdiction and it was permitted to hear the case, the Court
would decline to do so and dismiss the case because the FCC has primary jurisdiction.
A. The primary jurisdiction doctrine would apply to this case.
The primary jurisdiction doctrine is invoked when a court has jurisdiction but the case
will require resolution of issues that Congress has placed in the hands of regulating agencies.
Himmelman v. MCI Commc’ns Corp., 104 F. Supp. 2d 1, 3 (D.D.C. 2000). The doctrine “rests
both on a concern for uniform outcomes (which may be defeated if disparate courts resolve
regulatory issues inconsistently), and on the advantages of allowing an agency to apply its expert
judgment.” Allnet, 965 F.2d at 1120 (internal citations omitted). Courts in this district have
applied four factors to determine whether to apply the primary jurisdiction doctrine: (1) whether
the question at issue is within the conventional experience of judges; (2) whether the question
lies peculiarly within the agency’s discretion or requires the exercise of agency expertise; (3)
whether there exists a danger of inconsistent rulings; and (4) whether a prior application to the
agency has been made. Himmelman, 104 F. Supp. 2d at 4. See also United States v. Philip
Morris USA Inc., --- F. Supp. 2d ---, 2011 WL 2144571, *8 (D.D.C. 2011).
All of the factors strongly favor applying the primary jurisdiction doctrine in this case.
The first two factors recognize that courts should defer to a specialized agency in cases that
require administrative expertise and raise “issues of fact not within the conventional experience
of judges.” Himmelman, 104 F. Supp. 2d at 4, quoting Far East Conference v. United States,
342 U.S. 570, 574 (1952). “The courts have not hesitated, in appropriate cases, to defer to the
expertise of administrative agencies such as the FCC.” Id. (collecting cases); see also Allnet, 965
16 F.2d at 1120 (“[C]ourts have frequently invoked primary jurisdiction in cases involving tariff
interpretations.”).
Here, whether NECA and the FCC should have applied the Spare Fiber Guidelines as
opposed to the the “used and useful” doctrine when considering the Paniola lease costs is a
question best left to the FCC, the agency that promulgated those guidelines and delegated
authority to NECA to apply them. See Allnet, 965 F.2d at 1123 (“Allnet’s core claim is that
NECA’s tariff violates the Commission’s regulations, a matter squarely within its expertise.”).
Plaintiffs have pointed out that the Spare Fiber Guidelines were created by NECA, are based
upon FCC rules, and are not available in public database or susceptible to public research.
Petition for Reconsideraton at iii. They argue that the WCB’s ruling was inconsistent with other
FCC orders, so it is clear from plaintiffs’ own contentions that the case presents matters better
resolved by the FCC in the first instance. Moreover, the determination of what percentage of the
lease costs to include in the pool will implicate the FCC’s technical expertise and its policy
judgments. See Total Telecommunications Servs., Inc. v. AT&T, 919 F. Supp. 472, 478 (D.D.C.
1996) (“The powers granted to the FCC are a reflection of Congress’ intention that one
governmental entity be vested with the responsibility of developing, coordinating and enforcing
a uniform telecommunications policy.”).
Looking at the third and fourth factors related to primary jurisdiction, application to the
agency has already been made, and there would be a significant risk of inconsistent rulings if this
Court were to exercise jurisdiction over the case now. The NECA decision at the heart of the
complaint has been rendered moot by the WCB Declaratory Ruling. Plaintiffs are asking this
Court to order relief that was denied in the Declaratory Ruling, on the basis of the very
arguments that are currently before the FCC. So if this Court were to rule, there is a substantial
17 risk that its decision will conflict with the FCC decision on reconsideration, or with a decision by
the court of appeals if the final agency order is ultimately appealed. Thus, an evaluation of all
four factors militates in favor of a finding that the FCC has primary jurisdiction.
B. The Court would dismiss, rather than stay, the action.
The primary jurisdiction doctrine allows a district court to dismiss, or stay, an action over
which it has subject-matter jurisdiction. Himmelman, 104 F. Supp. 2d at 7. The Court’s
discretion to dismiss is appropriately exercised only where “the parties would not be unfairly
disadvantaged . . . .” Id. at 8, quoting Reiter v. Cooper, 507 U.S. 258, 268 (1993). Plaintiffs
argue that the FCC proceeding “will not resolve the claims at issue in this action, or encompass
the vast majority of damages Gold Ivory and SIC seek in this action.” Pls.’ Opp. at 31. They
argue, then, that if the Court applies the primary jurisdiction doctrine, it should stay, and not
dismiss, their claims.
In Total Telecommunications, 919 F. Supp. at 484, the court applied the primary
jurisdiction doctrine and dismissed several common law claims, including claims for breach of
contract intentional interference. The court found that those claims “are fundamentally premised
on the central claims; and are thus incidental in nature.” Id. at 483. Similarly here, all of the
claims are fundamentally premised on the same central claim about whether the Spare Fiber
Guidelines applied to the Paniola lease costs and the damages claims are incidental to the FCC’s
allegedly wrongful decision. 11
11 Plaintiffs rely on American Ass’n of Cruise Passengers v. Cunard Line, Ltd., 31 F.3d 1184 (D.C. Cir. 1994) to argue that the doctrine is inapplicable, but the opinion is distinguishable. AACP was an antitrust case, in which a travel agency sued several cruise lines and trade associations. There were claims related to certain routes (between the U.S. and foreign ports) that should have been brought before the Federal Maritime Commission, the agency that regulated common carriers. But the complaint also raised claims related to purely foreign routes, where the lines were not acting as common carriers, and therefore the agency had no authority. 18 In Allnet, a carrier sued NECA, seeking a declaratory judgment that it was not liable for
particular charges. 965 F.2d at 1119. The district court had subject matter jurisdiction because
the carrier brought its case there in the first instance. Id. at 1119–20. The D.C. Circuit held that
the primary jurisdiction doctrine applied because there was a potential conflict between an FCC
staff letter and an FCC order as to whether the access tariffs in question were valid. Id. at 1120.
But it decided not to hold the court case in abeyance; it noted that the parties would not be
prejudiced by a dismissal because the carrier had agreed to waive its statute of limitations
defense to any future claims brought by NECA. Id. at 1123. Here, NECA has agreed to waive
any statute of limitations defenses to plaintiffs’ claims if they are dismissed now under the
doctrine of primary jurisdiction. Reply at 22. This means that if the FCC proceeding is
ultimately resolved in a manner that would give the plaintiffs a viable cause of action, they will
not have been prejudiced by a dismissal. Therefore, even if the Court did have jurisdiction over
The court held that the district court should not have dismissed the non-common carrier claims because the primary jurisdiction doctrine was inapplicable to them, and that it was required to exercise its jurisdiction. By contrast, here, all of the claims implicate the FCC’s primary jurisdiction. See Total Telecomms. Svcs., Inc. v. AT&T, 919 F. Supp. 472, 484 n.17 (D.D.C. 1996) (differentiating Cruise Passengers on the same grounds).
Plaintiffs also rely on APCC Services, Inc. v. Worldcom, Inc., 305 F. Supp. 2d 1 (D.D.C. 2001). In that case, pay phone service providers sought compensation from three phone carriers for calls made from pay phones – but charged to the carriers – over a several year period. Plaintiffs sued under a statute that specifically permits suits to be brought in court or before the FCC: 47 U.S.C. § 206 gives rise to a cause of action for damages and attorneys’ fees against common carriers subject to the FCC. The court found that the actions did not involve the resolution of issues within the special competence of the FCC; among other factors, the court would not need to determine a rate at issue, and the FCC orders were sufficiently clear. Id. That reasoning does not apply in this case, where the interpretation and application of multiple FCC doctrines and orders is at issue.
19 any of plaintiffs’ claims, it would dismiss those claims in deference to the FCC’s primary
jurisdiction. 12
V. Conclusion For the reasons described above, and after thorough consideration of the motion, the
opposition, and the entire record in this case, the Court will grant defendant NECA’s motion to
dismiss the complaint for lack of jurisdiction. Even if this Court did have jurisdiction over any
of plaintiffs’ claims, the Court would dismiss those claims under the doctrine of primary
jurisdiction. Accordingly, the Court will dismiss this action without prejudice to the bringing of
future claims, should they be viable, after the FCC proceedings, and any appeals, are final. A
separate order will issue.
AMY BERMAN JACKSON United States District Judge DATE: July 29, 2011
12 Plaintiffs also argue that they will be prejudiced by dismissal or a stay of this case because they will be forced into bankruptcy if they do not obtain relief within six to twelve months. Pls.’ Opp. at 23. But they offer no support for their contention that the FCC process could drag on indefinitely. Moreover, the FCC has already weighed these issues in depth, issued the Declaratory Ruling on September 29, 2010, and has had the Petition for Reconsideration pending since October 29, 2010. So it is not obvious that this Court would reach the merits first.