Judicial review of streamlined tariff protest denials.

• Author: Krogh, Frank W.

Table of Contents I. Introduction II. The Effect Of The "Deemed Lawful" Presumption On Reviewability III. Denials Of Petitions To Reject Or Suspend LEC Streamlined Tariffs Are Not Committed To FCC Discretion IV. Streamlined Tariff Protest Denials Should Be Reviewed Under The APA's "Arbitrary And Capricious" Standard V. Overcoming The Initial Obstacles To Judicial Review VI. Conclusion I. INTRODUCTION

Section 204(a) of the Communications Act of 1934 ("Communications Act"), as amended, sets forth the authority of the Federal Communications Commission ("FCC" or "Commission") to review new interstate service tariffs filed by telecommunications common carriers. (1) Section 204(a) states, in part:

Whenever there is filed with the Commission any new or revised charge ... or practice, the Commission may either upon complaint or upon its own initiative ... enter upon a hearing concerning the lawfulness thereof; and pending such hearing and the decision thereon the Commission ... may suspend the operation of such charge ... or practice.... (2) Under section 204(a), a party may petition to reject or suspend and investigate a carrier's new tariff filing. (3) Such tariff protests are reviewed under the procedures outlined in the FCC's Rule 1.773(a)(1), which provides that a tariff meeting certain technical criteria "will not be suspended ... unless" the petition shows:

(A) That there is a high probability the tariff would be found unlawful after investigation;

(B) That the suspension would not substantially harm other interested parties;

(C) That irreparable injury will result if the tariff filing is not suspended; and

(D) That the suspension would not otherwise be contrary to the public interest. (4)

The FCC will not suspend a proposed tariff "if any one of these prongs is not met." (5)

Traditionally, a decision denying a petition to reject or suspend and investigate a new tariff filing has been treated as nonfinal and unreviewable, both in the case of FCC tariff protest denials and similar orders of other agencies overseeing parallel tariff regimes. (6) That is because judicial review is appropriate only in cases involving agency "orders of definitive impact, where judicial abstention would result in irreparable injury to a party." (7) Typically, agency denial of a petition challenging a tariff, thereby allowing the tariff to go into effect without suspension or investigation, is unreviewable because: (1) denial of such a tariff protest is an interlocutory action involving no determination on the merits; (2) review is not necessary to prevent irreparable injury, since there is the possibility of refunds or damages; and (3) judicial intervention would invade the province reserved to agency discretion. (8)

Most significantly, for purposes of this article, a party may later challenge the same tariff in a formal complaint brought under sections 20608 of the Communications Act (9) and collect damages for any injury caused by a tariff found to be in violation of the statute. (10) That is because

A denial of a mere petition to reject or to suspend and investigate a tariff filing is neither an approval of the filed rates nor a barrier of [sic] challenges to their lawfulness.... Their lawfulness ... remains subject to challenge until the FCC approves the rates after "full opportunity for hearing." That hearing may be initiated by filing a complaint under [section] 208.... (11) Section 402(b)(1)(A)(iii) of the Telecommunications Act of 1996 ("1996 Act"), however, upended this regime in the case of interstate tariffs filed by local exchange carriers ("LECs") by adding a new subsection (3) to section 204(a). (12) Section 204(a)(3) enables LECs to file tariffs "on a streamlined basis" and provides that such a tariff "shall be deemed lawful and shall be effective" seven days (in the case of a rate reduction), or fifteen days (in the case of an increase), "after the date on which it is filed ... unless the Commission takes action [to suspend or investigate the tariff] ... before the end of that ... period." (13) According to the FCC, this provision was intended to accelerate its review of LEC tariffs. (14) All LEC tariffs meeting the criteria of section 204(a)(3) are eligible for streamlined treatment. (15)

In the Streamlined Tariff Order, (16) the FCC adopted rules implementing the new provision that eliminated the retrospective damages remedy conferred by sections 206-07 of the Communications Act in the case of LEC streamlined tariffs permitted to become effective without suspension or investigation. (17) The FCC interpreted the phrase "shall be deemed lawful" (18) to mean that a new LEC streamlined tariff, unless suspended or investigated, is "conclusively presumed to be reasonable and, thus, a lawful tariff during the period that the tariff remains in effect." (19) Accordingly, in any subsequent section 208 complaint case that results in a finding that a streamlined tariff is unlawful, the FCC will invalidate the tariff prospectively but will also deny any damages relief for the entire period that the tariff was in effect up to the date of its invalidation. (20)

The Commission also set forth the procedures to be followed when parties seek to challenge LEC streamlined tariffs. Such tariffs are not "deemed lawful" immediately upon filing. (21) Rather, they "become both effective and 'deemed lawful'" only if the Commission has not exercised its suspension or investigation authority by the end of the seven or fifteen day notice period. (22) The Commission denied petitions for reconsideration of its interpretation of "deemed lawful" in the Streamlined Tariff Reconsideration Order. (23)

The consequences of this "deemed lawful" treatment of streamlined tariffs are illustrated by an FCC order denying any damages to a long distance carrier in its formal complaint case against an LEC in spite of the FCC's finding that the LEC "vastly exceeded the prescribed rate of return" over a two year period,24 a finding that would have resulted in damages liability prior to the 1996 Act. (25) Even though the LEC "manipulated the Commission's rules to achieve a result unintended by the rules," (26) damages were denied solely because the LEC's overearning tariffs had been filed on a streamlined basis and had not been suspended or investigated. Thus, the conclusive presumption of lawfulness arising from an FCC decision not to investigate or suspend such a tariff confers on the tariffing LEC an extraordinary immunity from damages. (27)

In light of the immunity from damages and irreparable injury to customers that results from this presumption of lawfulness, judicial review should be available to parties who are unsuccessful in challenging new LEC streamlined tariffs at the FCC. Currently, there are at least two pending applications seeking review by the full Commission of denials by the Wireline Competition Bureau ("Bureau") of petitions challenging a streamlined tariff. (28) Affirmance by the full Commission of the Bureau's denial would directly present the question of whether such a denial is judicially reviewable and thus whether petitioners can ever secure damages relief from harmful practices in the case of a wrongful protest denial.

Part I of this article provides a general discussion of the effect of the "deemed lawful" presumption on the judicial reviewability of orders denying streamlined tariff protests. Part II examines in greater detail one aspect of this issue, namely, whether such orders are "committed to agency discretion by law" under 5 U.S.C. section 701(a)(2). The remainder of the article delves into some of the implications of judicial review of streamlined tariff protest denials. Part III discusses the standards to be applied by courts in reviewing such orders and the interplay of the standard of review and the issue of reviewability. Finally, Part IV examines some of the practical problems that are likely to be encountered in vindicating the right to judicial review of streamlined tariff protest denials.

2. THE EFFECT OF THE "DEEMED LAWFUL" PRESUMPTION ON REVIEWABILITY

   In the Streamlined Tariff Order, the Commission recognized that its interpretation of the "deemed lawful" language in section 204(a)(3) changed "significantly the legal consequences of allowing tariffs filed under this provision to become effective without suspension." (29)

   Under current practice, a tariff filing that becomes effective without suspension or investigation is the legal rate but is not conclusively presumed to be lawful for the period it is in effect. Indeed, if such a tariff filing is subsequently determined to be unlawful in a complaint proceeding ... customers who obtained service under the tariff prior to that determination may be entitled to damages. In contrast, tariff filings that take effect, without suspension, under section 204(a)(3) that are subsequently determined to be unlawful ... would not subject the filing carrier to liability for damages for services provided prior to the determination of unlawfulness. (30) The Commission found that a streamlined tariff could be found unlawful in a section 208 complaint proceeding or in a tariff investigation under section 205, but only "as to its future effect." (31) Thus, for streamlined tariffs the "deemed lawful" provision reversed the legal status of a filed, unsuspended tariff from what it would have been under the regime prior to the 1996 Act--from merely "legal" to conclusively "lawful"--at least during the period the tariff is in effect. (32)

   Although the Commission recognized some of the implications of its interpretation of "deemed lawful," it has overlooked the effect of that interpretation on the potential reviewability of its decisions not to suspend or investigate such tariffs. Generally, under section 402 of the Communications Act, "any order of the Commission" may be appealed to the United States Court of Appeals for the District of Columbia. (33)

   There is, however, an...