Public Serv. Comm’n of Md. v. Chesapeake & Potomac Telephone Co. of Md.

PETITIONER:Public Serv. Comm’n of Md.
RESPONDENT:Chesapeake & Potomac Telephone Co. of Md.
LOCATION:Court in Ouachita County

DOCKET NO.: 84-1362
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Fourth Circuit

CITATION: 476 US 445 (1986)
ARGUED: Jan 13, 1986
DECIDED: May 27, 1986

D. Michael Stroud – on behalf of Respondent
Jack D. Smith – on behalf of FCC, as amicus curiae, in support of Respondent
Kirk J. Emge – on behalf of Petitioner

Facts of the case


Audio Transcription for Oral Argument – January 13, 1986 in Public Serv. Comm’n of Md. v. Chesapeake & Potomac Telephone Co. of Md.

Warren E. Burger:

Mr. Emge, I think you may proceed whenever you’re ready.

Kirk J. Emge:

Mr. Chief Justice and may it please the Court:

This case involves the authority of the United States district court to issue a preliminary injunction under Section 401(b) of the Communications Act enforcing an FCC rulemaking order on behalf of a private party against a state regulatory commission.

Specifically, the issue in this case is whether a private party can use the FCC preemption order as a basis for obtaining an injunction from the United States district court which will require a state commission to use a particular ratemaking methodology in establishing intrastate telephone rates.

Our principle argument in support of our contention that the preemption order cannot be enforced by a private party against the Maryland commission is that the preemption is an FCC rulemaking and not an order, and that under Section 401 only FCC orders can be enforced by private parties.

William H. Rehnquist:

Mr. Emge, with respect to the case that was just argued before your case, will your case be a live case in the event that the Court of Appeals’ judgment were, in the earlier case, was reversed and in the case that it was affirmed?

Kirk J. Emge:

The district court order in our case indicates that if the Fourth Circuit decision is reversed that the judgment would be entered in favor of the defendants in that case, which is the Maryland commission.

However, there are numerous cases involving other matters than the preemption order under Section 401 enforcement proceedings that have just recently been instituted, and since there is a conflict between the First and the Fourth Circuits on whether a private party can enforce the preemption… an FCC rulemaking order… there will be other instances where the decision will depend upon which circuit you’re in.

So although the commission’s decision… the commission as a defendant will have a judgment in its favor in the event the preceding case is ruled in favor of the states, there are still conflicts that will remain that will arise in other areas.

If the Court agrees that the preemption order is not the type of FCC decision that can be enforced by a private party, it would be unnecessary to address or reach the broader question as to whether a state commission is a person and to what extent the state commission is a person for purposes of the Communications Act.

Under the enforcement scheme established by Congress in Section 401, the FCC has the sole authority to enforce compliance with provisions of the Act, and it’s important to note at this point that in the preemption order the FCC based its decision on the fact that it said that Section of the Communications Act preempted inconsistent state depreciation practices.

Clearly, enforcement of the preemption order is nothing more than enforcing compliance with the Act, and under the enforcement scheme established by Congress is Section 401 the [= FCC] and not private parties has the sole authority to determine when and if those violations, such violations, should be enforced.

Under the enforcement scheme in Section 401, private parties can only enforce obedience to FCC orders.

It is clear that by limiting enforcement under Section 401(b) to orders, Congress clearly understood that there were other types of FCC actions that would not be enforceably by private parties under that subsection.

It’s clear that there was a distinction, well known distinction, between what constitutes an agency order and what constitutes a rule.

Congress chose to use the word “order” with respect to the type of actions that could be enforced by a private party.

In addition, if Congress had intended private parties to be able to enforce FCC rules, which are the functional equivalent of statutes, the provisions of Section 401(a) would have no meaning.

The sole responsibility, once again, for enforcing the compliance with the Act resides only in the FCC.

The Respondents and their supporting amici curiae concede that not all FCC actions are enforceable under Section 401(b).

For example, the Respondent implies in its brief that regulations and rules which are sufficiently general in their terms and applicability may not be enforceable by private parties under Section 401(b).

They merely say… allege in this case that the Court doesn’t have to reach that because of their position that the preemption order is not one of those orders.

But we submit that if you review the terms and provisions of the preemption order, it clearly is a rule of general applicability and is addressed to a broad group of entities.

They seem to indicate, the Respondents that is, that there is a hybrid action called a rulemaking order, and that rulemaking orders such as the preemption order can be enforced by private parties under Section 401(b).

The first point to be made with respect to that argument is that the fact that the FCC calls the action an order is under this Court’s decision in CBS not determinative.

It’s the substance of what the FCC has done, rather than what it classifies its actions to be, that controls.

Secondly, if the FCC adopted a rule by an order, it’s clear that if that action were to be enforced, it would not be the order adopting the rule that would be enforced, it would be the substance of the rule that would be enforced by the court.

So therefore you once again get back to the situation where, although the FCC has the sole responsibility to adopt… to enforce provisions of the Communications Act, a private party under the enforcement scheme suggested by the Respondents would also share that responsibility.

In order to preserve the enforcement scheme that was established by Congress in Section 401 and thereby maintain the role assigned to the FCC by the Act, enforcement under Section 401(b) must be limited to FCC orders which determine the specific rights and responsibilities of specific individual parties and are based upon findings which take into account specific facts associated with that situation.

These orders, in short, must be specific in their requirements and self-executing.

By self-executing, we mean that in order for a court to enforce the FCC order there is no further determination required by the Federal Communications Commission, for, as the FCC has noted in its brief, under the enforcement scheme established by Congress in Section 401(b), the court’s role in the enforcement of FCC orders is very limited.

Kirk J. Emge:

So in order for the federal court’s role to be limited, the order that is sought to be enforced must be very specific in what it requires, it must be directed to a specific party, and must be based upon specific facts that were presented to the agency, not a general pronouncement of policy, agency policy.

The preemption order is clearly not a self-executing FCC order, but rather is a broad policy statement containing agency interpretation of its statutory authority, and it prescribes conduct that’s applicable to a broad class of individuals.

It is a quasi-legislative action, which is the functional equivalent of the Communications Act.

And once again to point out that the FCC’s decision in the preemption order was based upon the fact that it found that the Communications Act, Section 220, preempted the states from using inconsistent practices, and that the enforcement of that preemption order is no different from enforcing compliance with that section of the Communications Act.

There are numerous policy considerations which underlie the enforcement scheme that was adopted by Congress and which is set forth in Section 401, and the consideration of these policies indicates that private enforcement of the preemption order is precluded.

For example, if the goal of promoting the development of uniform, nationwide interstate policy permits the FCC to preempt inconsistent state depreciation practices, then that policy also dictates that the FCC and not private parties enforce the preemption order under Section 401(b).

You cannot have uniformity absent the FCC determination that a state ratemaking order is in violation of the preemption order.

The cases that have arisen in Maine, in the district courts of Maine, Louisiana, and Kentucky, illustrate that the federal courts in order to enforce the preemption order are required to make a detailed analysis, conduct judicial review of a state ratemaking order to determine if that state’s order complies with the FCC preemption order.

In determining… and reviewing a state rate order involves a substantial amount of judgment to be exercised by the reviewing court, and will result in contrary decisions, inconsistent decisions, in privately instituted enforcement cases.

The cases that have arisen illustrate clearly that, absent FCC enforcement of the preemption order, there will be inconsistent implementation of that policy embodied in that preemption order.

The FCC has argued that the availability of that agency to participate in district court proceedings is sufficient to ensure that uniformity will be maintained.

However, it’s obvious that the FCC may not participate in each and every case that’s instituted under Section 401(b).

It may not be invited by the parties or by the district court to make its views known.

Consequently, the action of the district court may in fact be contrary to the policies that the FCC has articulated.

But more importantly, it deprives the FCC of its opportunity to choose the cases that it believes should be enforced and leaves that decision in the hands of private parties.

A specific case that’s instituted by a private party following private interests, rather than the public interest that the FCC is charged with promoting–

William H. Rehnquist:

Well, that would make some sense if… perhaps more sense if it were an argument advanced by the FCC.

But here the FCC is supporting your opponents, are they not?

Kirk J. Emge:

–Well, the FCC is supporting the opponents in this case, and I agree that perhaps if the agency thought about maintaining its prerogatives under the Act, and the prerogative being it has the sole responsibility for enforcing the provisions of the Communications Act, perhaps they would take a different position.

But these cases arose and then the FCC came in subsequently in order to deputize the private party’s enforcement of the preemption order.

And even if the FCC takes that position, I don’t think the Communications Act authorizes the FCC to send out 50 separate private deputies to enforce an order that it doesn’t want to enforce, or may not want to enforce.

Now, they argue that they don’t have the resources to enforce all of these actions in 50 states.

Well, I’m not really sure I understand that argument, because in order to maintain uniformity they say they can participate in as many cases as are instituted.

It’s difficult to understand how resources will be conserved when the FCC has to intervene in proceedings it may not have even chosen to start in the first place.

Instead of choosing to enforce perhaps one or two cases, it may find itself faced with ten or 15 cases and being an unwilling participant in these proceedings in order to ensure that its policies are carried out.

John Paul Stevens:

May I ask you, insofar as the proceeding is against the commission itself… and I gather the individual commissioners are sued as well… do you make any Eleventh Amendment argument?

Kirk J. Emge:

We have not made an Eleventh Amendment argument, and we’re not making one.

We haven’t made one and we wouldn’t make one now, because I think the cases are clear, Your Honor, that under Younger, if you name the individuals as defendants, then you avoid any Eleventh Amendment possibility of problems.

And although Younger is mentioned in the Respondent’s brief, we have not made any Eleventh Amendment argument is this case.

In addition to the conservation of resources of the Federal Communications Commission being a consideration, I think it’s also an appropriate consideration to take into account the need to conserve the resources of the federal courts.

Kirk J. Emge:

The FCC implies that because its resources are somewhat limited that parties should rely upon the assets that are available or the resources that are available to the federal courts, and we don’t think Congress intended that, for a number of reasons.

One is that there is, if the FCC is required to enforce its order, there is the possibility that it may decide that what was alleged to be a violation doesn’t warrant enforcement.

So the case may never get to federal court.

Secondly, it requires, as I’ve indicated previously, the federal courts to delve into state ratemaking orders, which is a very complex and complicated subject.

It will require a great deal of the court’s time to determine if the preemption order is in fact being violated by a rate order of a specific state commission.

Moreover, if you permit enforcement of rules that are developed in rulemaking proceedings by private parties against private parties who may not have been a party to the agency proceeding, the district court may be required to again add additional procedures to ensure that the due process rights of a non-party were protected.

If the FCC is required to enforce its own orders, such procedures would not be necessary and the court could function, as Congress had intended, in a very narrow way, looking to see if there was… the order was regularly made and duly certified, limiting its inquiry to the matters of that nature.

Finally, by allowing the Federal Communications Commission to delegate the enforcement to private parties, you will end up with a significant amount of issue splitting, cases being… part of a rate case being tried in a federal court, part of a rate case being decided in a state court; consequently the resources of both the parties and the courts will not be conserved.

For these reasons, we believe that the decision of the Circuit Court for the First Circuit properly articulates the policies underlying the enforcement scheme that Congress chose to adopt with respect to Section 401 of the Communications Act.

Consequently, we would submit that the preemption order is not an FCC order which can be enforced by a private party in federal district court under Section 401(b).

Thank you.

Warren E. Burger:

Mr. Stroud.

D. Michael Stroud:

Mr. Chief Justice, may it please the Court:

On January 6th, 1983, the FCC issued its preemption order in this case.

That order was regularly made and duly served on the state commissions across this court… country, rather, including the Maryland Public Service Commission.

If the Maryland Public Service Commission had implemented that order, it would have had the effect in Maryland of raising local exchange rates by one penny per day.

However, instead of implementing that order, the Maryland Public Service Commission defied that order.

As a result of its defiance, it was necessary for the Chesapeake & Potomac Telephone Company to seek injunctive relief in the district court.

That relief was obtained and the Fourth Circuit Court of Appeals affirmed the district court action.

The Petitioner in this case asserted two defenses to that injunction.

First of all, it claims that the injunction was obtained under Section 401(b)of the 1934 Communications Act and that Act authorizes the issuance of injunctions against persons.

The Maryland Public Service Commission claimed that it is not a person within the meaning of that statute.

Their other argument, Justices, is that in looking at Section 401(b), it talks about any order of the commission.

It claimed that the order, the preemption order in this case, was not an order within the meaning of Section 401(b).

Now, even though counsel has elected to argue only one of these defenses, I would like to address both of them today.

I’d like to start with them in the order that I’ve just identified.

First of all with respect to the term “person”, it is a fundamental principle of statutory construction that when trying to determine the meaning of a word we should look to its plain meaning as the word is used in the statute.

In this particular case, the word 153(i) of the Communications Code, and that definition says:

“The term “person” includes an individual, a partnership, an association, a joint stock company, a trust or a corporation. “

It includes an individual.

D. Michael Stroud:

Now, if you look at the complaint which C&P filed with the district court, it named not only the Maryland Public Service Commission, but it named the individual commissioners themselves.

And indeed, it was on the basis that they are in fact individuals that the Fourth Circuit Court of Appeals found that the requirements of the statute had been satisfied.

We would ask this Court to do–

John Paul Stevens:

Were they sued in their individual capacities?

D. Michael Stroud:

–Yes, they can be, Your Honor.

John Paul Stevens:

But were they?

Weren’t they sued in their official capacities as members of the commission?

D. Michael Stroud:

They were sued as individual members of the commission, Your Honor.

But if you’re asking whether or not this implicates the Eleventh Amendment, I would say that it does not.

John Paul Stevens:

No, I’m not asking that.

I’m asking, if they’re not sued in their individual capacity, but merely in their official capacities, legally that’s the same thing as suing the commission, isn’t it?

D. Michael Stroud:

It’s not the same, Your Honor, under the doctrine of Ex Parte Young.

What we are saying–

John Paul Stevens:

Well, for Eleventh Amendment purposes I agree it’s different.

D. Michael Stroud:


John Paul Stevens:

For statutory construction purposes, wouldn’t you normally… you couldn’t get damages against these people individually, could you?

D. Michael Stroud:

We’re not seeking damages, Your Honor.

We’re seeking injunctive relief.

And the answer is no, I could not get damages, and I think if I were suing them in their individual capacity and looking for damages that I would have a severe Eleventh Amendment problem.

In this particular case, under this Court’s holding in Ex Parte Young, et cetera, I am looking only for injunctive relief, and I am suing them in their individual capacities.

John Paul Stevens:

Well, my questions really are not intended to raise the Eleventh Amendment problem, but the statutory definition that you referred to of “person” does not include official commissions as an example of a commission, and there is a separate… I mean of a person.

And there is a separate statutory definition of the term “state commission”, isn’t there?

D. Michael Stroud:

You are right, Your Honor, it does not include them.

However, it does not exclude them as well.

And indeed, there is a separate section which defines state commissions.

But of course, that is not an unusual problem, and if you look at cases which have been decided by this Court and which I refer to in my papers, including Georgia v. Evans, Simmons v. U.S., Ohio v. Helvering, you will see that in a number, a variety of different statutory contexts, you see the term “person” and you have “state” defined separately somewhere else in that statute.

In each of the cases that I have quoted to you, the term “person” has been construed to include state, even though there’s a separate definition in the statute for the word “state”.

And that of course is case law that is not cited by the Petitioner in this case.

Now, Petitioner argues that… well, I’d like to, before I go back to get to the policy questions, I’d like to make another point with respect to the definitional section.

If you look at the Section 153(i) and the words that Congress used, it said in connection with the definition of the term “person” that “the definition includes”.

D. Michael Stroud:

It didn’t say that the definition means.

It says that “the definition includes”.

And it suggests there, we contend, that the entities enumerated in the definition are only illustrative of the types of entities which could be included there.

And indeed, I believe the Petitioner in this case concedes that point.

The only argument that the Petitioner makes is that there has to be some common denominator, some common thread between the entities that are included and those which are sought to be included within the definition.

That argument, we would suggest, Your Honors, is not an argument based on law.

In fact, the law is different.

It says that there are no hard and fast rules for determining exclusion or inclusion, and what you really have to do is to look to the legislative context.

If you look at the cases that I’ve just referred to… Georgia v. Evans, Simmons v. U.S., et cetera… you would see that the controlling factor is the legislative context.

Those statutes have exactly the same kinds of provisions which are set forth in the Communications Act, and this Court has consistently construed “persons” to include states.

The policy arguments that Petitioner offers in support if his definition of the term “person” are not persuasive.

First of all, he argues that states should be excluded from the definition of the term “persons” because or in deference to what he claims to be a federal policy of deference to the states.

We would argue, Justices, that that policy position is incorrect, and indeed we would cite the Court to the language of the Fourth Circuit wherein it said that even if the individual commissioners themselves were not persons, that the court would nevertheless find that states were included within the definition of the term 1934 Communications Act.

How would that happen?

Well, if you look back to the legislative history of the 1934 Act, if you look even to the letter from President Roosevelt to Sam Rayburn, you see that at that time the communications policy in this country was in chaos.

The policy was distributed between the Interstate Commerce Commission, between the Postmaster General’s Office, and between the Radio Commission.

And in that letter to Congress, the President asked that Congress pull this all together and put it under one agency, so that we could have a unified communications policy and a system of regulation in this country.

And indeed, courts have held that the power of the FCC, the recipient of this authority and the agency which has the responsibility for implementing national and international communications policy, that power extends to all regulatory actions necessary to ensure achievement of the commission’s statutory responsibilities.

And we would argue that that policy responsibility would not be achieved in indeed the states were excluded from the definition of the term “person”.

If such a result occurred, one could readily imagine an event in which the states were evading lawful orders of the FCC and the FCC would be powerless under the Act to seek enforcement of those orders, even the adjudicatory kinds of orders to which Petitioner refers.

And we would argue that if the Congress intended that after the FCC issued an order against a commission like the Maryland commission, if Congress intended that it had to go to Anne Arundel County or some other circuit court in order to get that order enforced, that it would have said so, and indeed it did not say so.

Now, what other language do we have in the statute to suggest what Congress intended with respect to the word “person”, whether they intended that states be included within that definition.

It has been argued, and correctly so, that Section 401(b) is in fact based upon Section 1612 of the Interstate Commerce Act, and there is no real dispute about that.

But if you look back at that statute, if you look back at Section 1612, you see that the Section 401(b) was not copied directly after that statutory section.

Everywhere you see the word 401(b), under the old 1612 that word was “carrier”.

So that when 401(b) was enacted, the word was changed from “carrier” to “person”.

In looking at the legislative history, there is no explanation for this change.

However, we would argue that, in view of the fact that Congress changed that word, and certainly in view of the fact that the term FCC, and the carriers, that the reason Congress changed that word from “carriers” to “persons” was to make it broad enough to include states like the Petitioner in this case.

I would now like to turn to the second argument that has been made by the Petitioner in this case, and that is that the preemption order is in fact not an order within the meaning of Section [= 401(b)].

And the reason that argument is advanced is because Petitioners argue that an order generated from an adjudicatory proceeding is different than an order generated in a rulemaking proceeding.

D. Michael Stroud:

They argue that adjudicatory orders are enforceable, rulemaking orders are not enforceable under Section 401(b).

Moreover, they argue that the preemption order in this case was a product of a rulemaking proceeding and therefore is not enforceable.

We would argue, Justices, that Petitioner’s claim on this point is totally without merit.

Moreover, if that position were adopted, prompt enforcement of FCC orders would be impossible.

And I might also point out at this juncture that this is not the position that the Petitioners took before the district court.

There seemed to be little doubt in that proceeding that this was an enforceable order.

This argument about adjudicatory orders, enforceable orders, is one that was raised for the first time before the Fourth Circuit Court of Appeals.

However, if you look at the statutory provision which is at issue here, you see that that statutory section does not distinguish between rulemaking orders and executory orders.

In fact, the statute does contain an exception.

It says

“orders except for the payment of money. “

And from that we conclude that Congress did indeed identify a statutory exception which it wanted included.

It did include, it did not intend to include, the exception which is being argued for here today.

Nothing in the legislative history of that statute supports the Petitioner’s position on this point.

In fact, if you look at the Petitioner’s argument you see that the primary basis for his argument is in fact the Administrative Procedure Act.

With respect to that Act, we would point out only a couple of things.

First of all, it is true that the Administrative Procedure Act does contain a definitional section and it does contain a definition of the word “order”, and “orders” under that section would exclude rulemaking orders.

I would point out, however, that the Administrative Procedure Act has no relevance of application whatsoever to the [= 1934] Communications Act.

The Administrative Procedure Act was passed more that ten years after the 1934 Act.

Moreover, if you look at the definitions set forth in the Administrative Procedure Act, you see that those definitions are expressly limited to the Act itself.

So Petitioner in this case has failed to give this Court, or anyone else for that reason, any reason for believing that you should engraft onto the 1934 Act definitions which were not considered by Congress until ten years later.

In addition to ignoring the plain language of the statute and the legislative history, the Petitioner in this case has already… also ignored a number of cases by this Court which indicates that orders which are the product of rulemaking are indeed enforceable.

And in that regard… this regard, I would cite to the Court the case of Ambassador v. U.S. and also CBS versus United States.

Now, with respect to the CBS case I should point out that that decision was a decision which was made pursuant to Section 402(a).

But Section 402(a), of course, does use the word 401(b).

Therefore, we would argue that where the same word is used in different parts of the same statute, those words should have the same meaning in both places.

And that would suggest to you that if an order is an order for purposes of 402(a), it also should be an order for purposes of 401(b).

Ultimately, though, after looking at the statutory information that is available and also the precedents that exist in this area, ultimately the question is whether or not the preemption order is itself enforceable.

And in looking for guidance on that question, we would refer the Court to the CBS case.

In that case, the Court held that labels are not dispositive, you cannot judge a book by its cover.

D. Michael Stroud:

And indeed, I believe that’s the fallacy that’s implicit in counsel’s argument, and I believe that was the problem with the First Circuit decision.

Indeed, you must look at the substance.

And if you look at the substance, there are certain things that you should look for.

You should look to determine whether or not the order is fully executory, look to see if there’s anything else that is left to be done, look to see if that order determines rights, look to see if it was intended to be binding on the parties to whom it was addressed, look to see if it was served on the persons who would be affected by it.

William H. Rehnquist:

How about your opponents’ contention that if the argument requires a great deal of tailoring, or the order requires a great deal of tailoring or work by the federal court, perhaps it ought not be enforced by private parties?

D. Michael Stroud:

Your Honor, I am not making the argument that every order or every piece of paper that is denominated by the FCC as an order need be enforced under Section 401(b).

What I am trying to do is no suggest, as the Court did in the CBS case, a standard of review, a set of criteria which could be used to evaluate in an individual case whether or not an order is or is not enforceable.

There may be some orders which are so… which are denominated as orders, but which are so imprecise that they could not be enforced.

The order in Kroeger v. Stahl, for example, is exactly that kind of order, where the FCC called something an order, but it was merely an authorization to conduct certain kinds of tests.

It didn’t require anybody to do anything.

That type of order perhaps… in fact was not and perhaps should not be enforced under Section 401(b).

John Paul Stevens:

May I ask, in this case we have kind of a frontal assault on the FCC’s order to the Maryland commission.

Supposing that the utility just complained about the application of the order to one set of accounts, say they didn’t like the way they depreciated… the commission required depreciation of the telephone poles in Anne Arundel County, but everything else was all right.

Could you bring a federal lawsuit to review the validity of that kind of a rule?

D. Michael Stroud:

The review of any order of the FCC, if in fact–

John Paul Stevens:

Well, I mean it actually would me a Maryland commission would enter an order on some kind of a depreciation schedule, and then the utility would say, well, that really doesn’t comply with in all respects with the preemption order, the depreciation order of the commission, the FCC.

Could you get federal review of every one of those claimed violations, claimed departures from the federal rule?

D. Michael Stroud:

–I could get review of that situation certainly before the [= FCC].

John Paul Stevens:

No, I mean in a federal court, under 401.

Or do you have to have a wholesale assault on the order, as you have in this case?

D. Michael Stroud:

As opposed to one piece of it?

John Paul Stevens:

As opposed to just one application.

To what extent are we opening up the federal courts to review of particular applications of depreciation rulings by state commissions, is what I’m asking.

D. Michael Stroud:

Justice, I would have to say this, that the FCC’s orders are intended to be binding until they are reviewed and reversed, and if indeed an order is executory and meets all of the criteria that I mentioned before and is served on the commission and it elects to disobey that order–

John Paul Stevens:

Oh, no, I’m assuming a case in which the commission says, we’re trying to obey it, but we think it means something else than you.

You can have fights over–

D. Michael Stroud:

–Oh, fine, okay.

If that’s the situation, then I think what we would try to do would be to get the FCC involved in the process and see if we couldn’t work that out before the commission.

If, after that process had been concluded, we still were in a position where we felt that the commission was not in good faith compliance with the FCC–

John Paul Stevens:

–It’s in good faith, it’s just wrong, under your view.

D. Michael Stroud:

–Well, if it’s just wrong I would think that we wouldn’t want to go to district court on that.

I would think we’d want to–

John Paul Stevens:

Do you think you could go to district court?

That’s my question.

D. Michael Stroud:

–Well, if you have… let me assume the underlying points again.

If you have an FCC order–

You do.

D. Michael Stroud:

–the commission is acting in good faith, but we think it’s wrong–


D. Michael Stroud:

–and the question is should we get that reviewed in the district court or–

John Paul Stevens:

Does the district court have the jurisdiction to entertain a claim that it’s just plain wrong?

D. Michael Stroud:

–I would think that it does.

John Paul Stevens:

You think it does?

D. Michael Stroud:


Now, in addition to the case law and the considerations that were set forth in CBS, the Petitioner in this case has also raised certain policy considerations, and I’d like to address just some of those because I have counsel following me who will address others.

But with respect to the issue of whether or not construing the term C&P request would have the effect of creating a private cause of action not intended by Congress, we would argue that that clearly would not be the result.

Thank you very much.

Warren E. Burger:

Very well.

Mr. Smith.

Jack D. Smith:

Thank you, Mr. Chief Justice, and may it please the Court:

Congress intended Section 401(d) of the Act as a broad enforcement mechanism, available both to parties injured by violations of the Act and to the FCC itself.

The section fairly bristles with the word “any”.

It says that if any person violates any provision of the Communications Act, the FCC or any party injured thereby may appeal to the appropriate district court for enforcement of such order.

Yet Petitioner reads this broad language very narrowly, in a manner that would have this Court exclude a significant class of potential violators and a large category of FCC orders.

Neither the statutory language, legal precedent, or common sense supports that result.

As to whether the state of Maryland is a person under the Communications Act, I don’t think I need to repeat my arguments made in the brief as to the broadness and inclusiveness of Section 3(i) of the Act.

Suffice it to say that in 50 years of practice the FCC has never, at least to my knowledge, ruled that a person does not include a state or a state commission.

To the contrary, we have always afforded state commissions and state officials all the rights and duties and obligations under the Communications Act afforded to any other person.

For example, Section 301 of the Communications Act prohibits use of radio channels by anyone unless they’re a person duly authorized by the FCC.

But states and state agencies are among the largest licenseholders in the whole country.

Jack D. Smith:

The state of Maryland alone holds well over 100 FCC licenses, licenses for police and fire communications, licenses for police radar, for highway maintenance, even licenses for the University of Maryland to run a broadcast station just down the road.

Every one of these licenses is signed by a Maryland state official, and he binds the state to abide by all regulations of the FCC heretofore and hereafter made.

And this is how it has to be.

Otherwise, our nationwide system of clear channel communications would soon degenerate into a cacophony of interference noises.

The same thing holds true for our preemption orders.

The state must be bound by the FCC’s preemption orders.

These orders are critical to avoid frustration of valid and important federal goals by states and state commissions.

If enforcement can’t be obtained against the states in federal courts, then the FCC’s enforcement orders would lead… the FCC’s enforcement orders would not be able to be enforced and it would lead to a situation where our unified system would be fragmented by conflicting federal and state orders.

Justice Stevens asked, what about the fact that Section [= 3(i)] contains a separate definition for state commissions.

Well, as a matter of fact Section 3(i)… Section 3 contains 39 definitions, all told.

The very next one after Section 3(i) is corporations, and corporations is included and definitely named in Section 3(i).

And in fact, there is at least a quarter… a quarter of the 39 definitions are other examples of persons: carriers, connecting carriers, ship operators, radio officers.

That is no indication that states or state commissions are not persons, because they’re separately identified in 3.

The commission’s preemption order said that the states were required to abide by the FCC’s rules allowing telephone companies to make their depreciation calculations according to the FCC’s prescriptions.

The order was duly served on all the states, including the state of Maryland.

The commission intended for it to be immediately binding.

Whether that order is characterized procedurally as a rulemaking or an adjudication doesn’t seem to make any difference to us.

It’s a final action.

We declared the obligations of all the state commissions, including the state of Maryland, and we didn’t contemplate entering any other orders.

As such, that order is enforceable under Section 401(b), just as much as that order is reviewable by this Court under Section 402.

Petitioner contends nevertheless that, since it was produced according to, using rulemaking proceedings, that it is not capable of enforcement under Section 401(b).

But as has already been said and bears repeating, it is the substance of what the agency purports to do, not the procedures that are used, that dictate reviewability and enforceability.

In recent years, the commission’s workload has expanded greatly.

We have all read about it in the papers.

At the same time, the pressures upon the Government have been to reduce expenditures.

John Paul Stevens:

May I ask, then, Mr. Smith, if the order had had the label “rule” on it instead of being called an order, and then the preemption order had been called an interpretation or something, the same argument would apply?

Jack D. Smith:

The order–

John Paul Stevens:

The fact that it’s called an order doesn’t really make any difference?

Jack D. Smith:

–No, it doesn’t as far as we’re concerned.

But our practice is that all those orders would be called memorandum opinion and order, and we don’t label anything a rule per se that’s on a written document like that.

Jack D. Smith:

We do have a body of rules under 47 CFR, and of course this is not a rule; it’s not in 47 CFR.

It was a separate order.

It was never incorporated as a rule itself, as part of the commission rules.

To meet the challenge brought on by increased workload and federal deficits, the FCC and other Government agencies have increasingly turned toward rulemakings and we have decreased our emphasis on procedures that are more time-consuming like adjudications.

There have been numerous decisions by this Court and other courts that have approved these efforts, and Petitioner’s arguments pleading for more burdensome requirements definitely tend to run contrary to that more progressive trend.

Nor is Petitioner correct that our nationwide communications policy will be undermined if private parties are allowed to seek enforcement of FCC orders.

The FCC is the one responsible for maintaining that uniformity and we vigorously disagree with that position.

Under Section 401(b), the district court doesn’t review the propriety of the FCC’s orders.

Its effort is confined to enforcement.

If there’s any question that arises about the FCC’s policies or communications policy in general, they are free and have ample authority to seek the views of the FCC or to refer it to us under the doctrine of primary jurisdiction.

They can always solicit our views as an amicus or an intervenor.

And it’s not true to say that this puts burdens on the FCC that are just the same as if we went in ourselves.

It’s much more burdensome to go in and sustain a suit by yourself than it is to just file as an intervenor.

In fact, many times we can file the same brief that we filed in a previous case.

Our experience has been especially good in many contexts like this: antitrust, Section 401, and other statutes authorizing district court litigation.

We have had very good success with this process.

The fact is that with a shrinking budget, we are considerably aided by private enforcement of our actions, particularly in the instant case, where it should be remembered that there was no question what the FCC’s order was.

We said that you should allow them to use these methods.

There was no question that the state disobeyed it.

They were proud of it.

They said, we are not going to follow it.

So there’s no factfinding for the district court to make there.

It’s a simple case of enforcement.

Lastly, the Court doesn’t have to get involved in ratemaking, either.

It’s just not true that the district court has to review the rates set by the state.

In this case, all we did again was say that you have to abide by these methods.

In enforcing that order, the district court doesn’t have to review the rates, it doesn’t have to review the rate of return set by the state, and it doesn’t have to review the many other aspects of state ratemaking.

Those are issues for state courts.

Of course–

John Paul Stevens:

What would you say, Mr. Smith, to the question I asked Mr. Stroud?

John Paul Stevens:

Supposing there was a fight about the meaning of the order in a particular application.

Would there be district court jurisdiction?

Jack D. Smith:

–I would hope that we… in the Common Carrier Bureau we have an accounting and audits division, and they’re always free to talk with people about the meaning of the orders, and they would work that out.

John Paul Stevens:

I’m not interested in what you’d hope.

What do you think, would there be jurisdiction or not?

Jack D. Smith:

If we found that they were acting inconsistent with our decision and they had violated the decision, yes, it would be in the district court.

John Paul Stevens:

If you found what… well, supposing that the private party goes directly to the federal court without asking you.

Jack D. Smith:

Your first question–

John Paul Stevens:

The jurisdiction doesn’t depend on what you find, does it?

Jack D. Smith:

–Your first question is one if there is ambiguity, if there is ambiguity about whether they have violated it or not.

John Paul Stevens:

Or there’s a dispute between one side and the commission.

Jack D. Smith:

The answer would be it would probably in the district court, and the district court would say: Gee, this looks very complicated to me; FCC, I’m going to defer this to you under primary jurisdiction.

John Paul Stevens:

But your answer is there would be federal jurisdiction?

Jack D. Smith:

Yes, sir, exactly.

Byron R. White:

And does the FCC have declaratory… does it issue declaratory orders?

Could there be a filing with the FCC and you could issue a declaratory order as to what your prior order meant?

Jack D. Smith:


If there’s any confusion or there’s a need for clarification, we can always do that, and we’d be happy to do something like that.

Thank you very much.

Warren E. Burger:

Do you have anything further, Mr. Emge?

Kirk J. Emge:

Just briefly, Mr. Chief Justice.

The Respondent in its brief and in the argument today places a great deal of reliance on the Court’s decision in the CBS case.

But I think, reading that case, it’s clearly distinguishable from the case now before the Court.

In that case, the Court was concerned with whether an FCC action is reviewable and there is a presumption that actions are in fact reviewable unless Congress expressly states otherwise, particularly in the exceptional circumstances that were before the Court in that case, where if they did not… if the Court did not permit review of the FCC action, CBS, whose rights were clearly being injured, would have absolutely no remedy.

Here we’re not talking about reviewability.

We’re talking about enforceability and who can enforce the Act.

I think the policy considerations that we outlined in our brief and I outlined earlier in my argument clearly distinguish that enforcement question of whether an order can be enforced from the question of whether an order is subject to judicial review.

Contrary… secondly, contrary to the FCC’s assertion, I think it’s clear that enforcement of the preemption order by private parties requires the courts to review state ratemaking decisions.

If you look at the decision of the district court in Maine when it tried to determine whether or not the Maine commission had complied with the FCC’s preemption order, it made findings with respect to rate of return, rate design, as well as depreciation rates.

There are a large number of interdependent factors involved in ratemaking.

Kirk J. Emge:

Depreciation is only one of them.

In order to determine whether or not a state commission has complied with the FCC’s order, courts have engaged in what amounts to judicial review of state ratemaking decisions.

With respect to the question that Justice Stevens asked Mr. Stroud concerning whether you have the situation where a state does not completely disagree with the FCC’s decision, but instead maybe there is a question as to whether it has complied with one aspect of it, I think the case that arose in Kentucky is the example of that sort of instance, where the state commission said: We agree that the FCC can preempt us, our ratemaking order reflects the preemption order.

The telephone company said: No, you haven’t properly reflected.

They filed an action in federal district court, and the federal district court is required to review that order, which the Kentucky district court is still doing, to determine if the rate order, although the state commission says we will follow the FCC, whether that rate order is in fact consistent and complies with the preemption order.

Although in the case involving the Maryland commission the commission’s decision said, we don’t believe the FCC has the authority to preempt us and on the basis of that conclusion and the fact that they didn’t think the rates prescribed by the FCC were reasonable for intrastate ratemaking purposes… although that was the basis of the commission’s decision, once the district court issued its preliminary injunction the problems associated with private enforcement of the FCC preemption order were still present in this case when the commission, the Maryland commission, had to decide how to comply with the FCC’s preemption order, since the order was general in its terms and did not… and there’s no determination by the FCC of what constitutes a rate order that complies, the Maryland commission had to conduct proceedings in which it had to take comments as to how it should redefine its order in order to be in compliance with the FCC’s preemption order and the district court’s injunction.

And although the commission ultimately opted to adopt the telephone company’s proposals as to what constituted compliance, it was done with one dissenting commissioner and there was a significant amount of discussion as to what constitutes compliance.

The problems are still there, even in the Maryland case.

But there are specific examples in other jurisdictions where the state commission said, we will abide by the FCC’s preemption order and this is what we think the effect is in our ratemaking order, and the telephone company is not satisfied with that and they file suit in federal district court, and then it’s up to the federal district court to review the rate order to determine if it’s in compliance.

Thank you.

Warren E. Burger:

Thank you, gentlemen.

The case is submitted.

The honorable Court is now adjourned until tomorrow at 10 o’clock.