Notice & Comment

D.C. Circuit Review – Reviewed: And One More

The D.C. Circuit just added another case to its opinion page.* As you may recall, in June the Court decided a case called Global Tel*Link v. FCC about phone rates for prisoners. This is what I wrote then:

In Global Tel*Link, the Court addressed the FCC’s 2015 Order imposing a cap on rates for inmate phone calls. Traditionally, the FCC has regulated interstate telephone communication services while the States have maintained significant control over intrastate services. In its 2015 Order, however, the FCC attempted to set rate caps for both interstate and intrastate services, at least in the prison context. That order was challenged in and rejected by the D.C. Circuit. Importantly, Judge Edwards recognized that the FCC’s order would normally be “subject[ed] to review pursuant to Chevron.” Yet now that a new administration is town, “the [FCC] no longer seeks deference.” Edwards thus concluded that Chevron does not apply: “In these circumstances, it would make no sense for this court to determine whether the disputed agency positions advanced in the Order warrant Chevron deference when the agency has abandoned those positions.” The Court then concluded, based on its own best reading of the statute, that the agency decision cannot stand: “The Order at issue in this case is legally infirm because it purports to cap intrastate rates based on a ‘just, reasonable and fair’ test that is not enunciated in the statute, conflates distinct grants of authority under § 201 and § 276, and misreads our judicial precedent and the FCC’s own prior orders to support capping already compensatory rates under the guise of ensuring providers are ‘fairly compensated.’” (There is more going on, but that’s the heart of it.)

Interesting. It is noteworthy that Judge Edwards cites nothing for his Chevron conclusion — presumably because this is a novel question. Is he right? Probably. But it certainly warrants some thought. For instance, should the agency be able to do this via a brief, or must it issue a new order?

Today, the D.C. Circuit issued a revised opinion with an explanatory order. (Judge Pillard did not join the order.)

In part, this is what the order says:

Lest there be any confusion over the majority’s opinion going forward, there are two points that warrant clarification. first, the majority opinion carefully analyzes the terms of the FCC’s Order and the agency’s justifications in support ofthe Order. The majority does not second-guess the agency. Rather, the majority found the FCC’s justifications for the proposed caps on intrastate rates “manifestly contrary to the statute,” Chevron, 467 U.S. at $44, and clearly unworthy of deference. Second, as noted above, after reviewing the entire record in this case, the majority opinion concludes that “the Order’s proposed caps on intrastate rates exceed the FCC’s statutory authority under the 1996 Act.” It goes without saying that if an agency action exceeds its statutory authority, the agency is entitled to no deference under Chevron. See, e.g., Sullivan v. Zebley, 493 U.S. 521, 541 (1990); Goldstein v. SEC, 451 F.3d 873, 880—81 (D.C. Cir. 2006). As the concurring opinion notes, “the statute’s structure and context demonstrates that the agency’s interpretation would fail at Chevron’s second step; it is an unreasonable (impermissible) interpretation of section 276.” If this point was lost in the original opinion issued by the majority, we make it clear now. We need not and do not decide whether we were required to follow Chevron Step Two even though the agency declined to defend its position before the court. The important point here is that we have carefully analyzed the contested provisions ofthe FCC’s Order and found that they cannot survive review under either the “best reading” of the statute standard, Miller v. Clinton, 687 F.3d 1332, 1342 (D.C. Cir. 2012) (quoting Landmark Legal Found v. IRS, 267 F.3d 1132, 1136 (D.C. Cir. 2001)), or pursuant to Chevron Step Two.

There is no Chevron question with respect to the majority’s decision on the use of industry-averaged cost data as proposed in the Order. The majority found that provision arbitrary and capricious because it lacks justification in the record and is not supported by reasoned decisionmaking. The same is true with respect to the majority decision on the Order’s proposed wholesale exclusion of site commission payments from the FCC’s cost calculus. We found that provision devoid of reasoned decisionmaking and thus arbitrary and capricious. It is clear that no Chevron deference is due to agency decisions that are unsupported by reasoned decisionmaking.

I think that is all of the opinions for the week ….

* I probably should have also mentioned the Court’s order allowing intervention in the cost-sharing case from earlier this week. Nick Bagley discussed it earlier this week.

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