Supreme Court News

by William Funk^*

The Telecommunications Act of 1996 constituted a revolution in telecommunications regulation by creating a procedure for beginning competition at the local telephone service level, and the issue in AT&T Corp. v. Iowa Utilities Board, 119 S.Ct. C (1999), and the seven other cases consolidated with it for argument and decision, was: how revolutionary was it?

The first and major attack on the statute was made by incumbent Local Exchange Carriers (LECs) and state utility commissions, alleging that the Act did not give authority to the Federal Communication Commission generally to adopt regulations implementing the local competition provisions of the Act. The Eighth Circuit, where the cases had been consolidated below, had agreed with the challengers, but the Supreme Court, by a vote of 5-3 reversed, upholding the FCC=s jurisdictional authority. All were agreed that the Act outlines the terms by which new competitors may obtain the use of facilities maintained by LECs; the disagreement was over which entity had the primary responsibility and duty for implementing this process: the FCC or the state utility commission. Historically, of course, regulation of LECs was the domain of the states to the extent that it did not involve interstate or foreign phone service. Thus, states could (and did) grant monopoly status to LECs, set their rates, and regulated their service. The 1966 Act clearly changed what the state could regulate, setting national policy to facilitate the destruction of the monopoly system. Nevertheless, the Act also clearly gave state utility commissions an important role in this process, specifying that they arbitrate issues that cannot be determined by agreement between the new entrants and the LECs, that they establish rates for interconnection, services, or network elements, and that they establish schedules for providing the interconnection services. The majority, in an opinion by Justice Scalia, for himself and Justices Stevens, Souter, Kennedy, and Ginsburg, however, found that the FCC had explicit authority to adopt regulations implementing all of the Communications Act of 1934, even that part of it adopted as amendments in the 1996 Act. Therefore, it was for the FCC to flesh out the terms of the statute and make the policy under which the state utility commissions would operate, rather than have the state commissions interpret and implement the federal statute themselves.

For the majority the issue was one of plain language. Section 201(b) of the 1934 Act provides that AThe Commission may prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of this Act.@ The 1966 Act, rather than being a self-standing Act, was itself an amendment to the 1934 Act, so its provisions became part of the AAct@ which the FCC could issue regulations to carry out.

The AAct,@> however, is not always consistent. For example, another provision of the original 1934 Act, section 2(b), unamended by the 1966 Act, states that Anothing in this [act] shall be construed to apply or to give the Commission jurisdiction with respect to . . . charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service. . . .@ The problem with this language is that it cannot be given effect consistent with the 1996 Act, which clearly applies the AAct@ to these aspects of intrastate communication service, leading the majority to characterize the 1996 amendments as a Amodel of ambiguity@ and Aself-contradictory.@ To the dissent, with opinions by Justice Thomas, for himself and Justices Breyer and Rehnquist, and by Justice Breyer, this is all explained by interpreting the 1996 Act to continue the historic and long-recognized state supremacy in regulating intrastate communications, but constraining many of the states= substantive powers. The Section 201(b) provision=s language granting FCC general rulemaking authority over the AAct@ was no more intended to apply to the 1996 provisions, than section 2(b) was. In short, Congress was not cognizant of the substantive effect of making the 1996 Act an amendment to the 1934 Act, rather than make it its own self-standing law.

The way the Court split is interesting, with Aconservative@ Justices Scalia and Kennedy joining Aliberal@ Justices Stevens and Ginsburg for the majority, while the dissent joins the Aconservative@ Justices Thomas and Rehnquist with the Aliberal@ Justice Breyer. Justice O=Connor did not participate in the decision. At one point, Justice Scalia characterizes the dissent as appealing to AStates= rights,@ but, because all agree that the state utility commissions would be interpreting and implementing federal law under the dissent=s formulation, Justice Scalia notes that A[t]his is, at bottom, a debate not about whether the States will be allowed to do their own thing, but about whether it will be the FCC or the federal courts that draw the lines to which they must hue.@

The jurisdictional issue was not the only issue in the case. There were also challenges to particular rules the FCC had issued. Most of these challenges were rejected as reasonable interpretations of the statute in light of Chevron, with the Court almost unanimous. One aspect of one of the rules, however, was rejected as inconsistent with the statutory language, although Justice Souter thought that under Chevron that aspect still passed the test.

For years the Census Bureau has reported that its census data, based upon mail-return forms and house-to-house visits, do not fully count certain groups of people. To make its data more accurate, it has suggested the use of certain sampling techniques to supplement the normal mail-return and house-to-house visits. While the use of sampling for census purposes unrelated to apportionment (e.g., for various demographic reports) has been uncontroversial, with Congress first authorizing it in 1957 and then requiring it in 1976, so long as the Secretary of Commerce deemed it feasible, it has been highly controversial in the context of apportionment. The Amore accurate@ counting of certain groups through sampling has been viewed as politically beneficial to one party, rather than another, and to some regions of the country, rather than others.

In Clinton v. Glavin, 119 S.Ct. ---- (1999), the question was whether the statutory language in the 1976 Census Act allowed for the use of sampling in counting persons for purposes of apportionment. By a 5-4 vote, the Court concluded that the statutory language prohibited the use of sampling for apportionment. The 1957 law had provided that: AExcept for the determination of population for apportionment purposes, the Secretary may where he deems appropriate, authorize the use of the statistical method known as >sampling= in carrying out the provisions of this title.@ At this point the law was clear, but the 1976 amendments confused things. First, Congress amended section 141, entitled APopulation and other census information,@ to authorize the Secretary to Atake a decennial census of population . . . in such form and content as he may determine, including the use of sampling procedures and special surveys.@ This language seemingly authorized the using of sampling generally with respect to the decennial census. However, Congress also amended only slightly the 1957 language quoted above, in a section entitled AUse of Sampling,@ to provide: AExcept for the determination of population for purposes of apportionment of Representatives in Congress among the several states, the Secretary shall, if he considers it feasible, authorize the use of the statistical method known as >sampling= in carrying out the provisions of this title.@ Now, instead of allowing the Secretary to use sampling (for purposes other than apportionment), if feasible, this provision required the Secretary to use sampling (for purposes other than apportionment), if feasible.

AIn light of this history,@ the government declined to invoke Chevron, USA, Inc. v. NRDC, 467 U.S. 837 (1984). This is interesting, because in Chevron itself, the government had reversed its position over time as to the meaning of the statute, including taking different positions in courts.

The majority found the history of the census illuminating, in that sampling had never been authorized for apportionment before 1976, and it seemed unlikely that if such a major change were intended, it would not have been made more obvious. Moreover, nothing in the legislative history suggested such a change.

Also interesting is the fact that four justices (all of the majority but for Justice O=Connor, who wrote the Court=s opinion) specially concurred to indicate that part of the reason they interpreted the Census Act to prohibit sampling for apportionment purposes was the belief that allowing sampling would raise Aserious constitutional doubt@ under the census provision of the Constitution, which requires an Aactual enumeration.@ Justice Scalia again demonstrated his penchant for dictionaries, quoting three published between 1773 and 1828 for the proposition that the word Aenumeration@ was inconsistent with sampling. Perhaps more telling was his suggestion that sampling was not unknown to the founders (indeed, Thomas Jefferson made a 1782 estimate of the population of Virginia that was widely believed at the time to be very accurate) and the fact that actually counting people then was likely more difficult and expensive than it would be today.

Medicare providers submit annual cost reports to a fiscal intermediary, which acts as the Secretary of HHS=s agent and determines the appropriate amount of reimbursement. The provider may appeal this determination within 180 days to the Provider Reimbursement Review Board, with a further possible review in federal district court. In addition, the provider can request the fiscal intermediary to reopen its reimbursement determination within three years. In Your Home Visiting Nurse Services, Inc. v. Shalala, 119 S.Ct. ---- (1999), the provider had not appealed the determination within 180 days but later requested the fiscal intermediary to reopen its determination. The fiscal intermediary denied the request, and the provider tried to appeal the decision to the Provider Reimbursement Review Board, which held it had no jurisdiction over such appeals. The provider then sued in district court seeking review of the Board=s refusal to hear the appeal or, in the alternative, review of the fiscal intermediary=s refusal to reopen.

The Court unanimously ruled against the provider. The applicable regulation is plausibly ambiguous as to whether the Board is precluded from reviewing decisions to reopen, but the Medicare Manual explicitly states that a refusal to reopen is not appealable to the Board. The Court made no mention of the fact that the Manual constitutes only a policy statement or interpretive rule, nor did it make any mention of the Court deferring to the agency=s interpretation as found in the Manual. Rather, it appeared that the Manual itself settled the issue. The provider then tried to rely on a statutory provision that allows for a Board hearing if a provider Ais dissatisfied with a final determination of . . . its fiscal intermediary as to the amount of . . . reimbursement due the provider.@ The Court=s answer to this was that A[t]he Secretary . . . maintains that this phrase does not include a refusal to reopen, which is not a >final determination . . . as to the amount,= but rather the refusal to make a new determination.@ The Court did not indicate where the Secretary made this interpretation, and the lack of citation suggests perhaps that it was Amaintain[ed]@ in the Secretary=s brief to the Court. Nevertheless, the Court cited Chevron and held the Secretary=s interpretation Awell within the bounds of reasonable interpretation, and hence entitled to deference.@

The Court also found no basis for judicial review of the intermediary=s decision not to reopen. First, general federal question jurisdiction was lacking because of the Medicare Act preclusion of review under 28 U.S.C. ' 1331. Second, mandamus was not available because there was no Aclear nondiscretionary duty.@

Both to support its approval of the Secretary=s interpretation and its own denial of jurisdiction, the Court cited ICC v. Locomotive Engineers, 482 U.S. 270 (1987), for the proposition that Athe traditional rule of administrative law [is] that an agency=s refusal to reopen a closed case is generally >committed to agency discretion by law.=@ Accordingly, here, all doubts about reviewability should be resolved against review.

In Department of the Army v. Blue Fox, Inc., 119 S.Ct. --- (1999), a prime contractor for the Army failed to pay one of its subcontractors. Unable to collect upon a judgement against the prime contractor, the subcontractor brought an action against the Army for an equitable lien against any monies that might be still due the prime. The Ninth Circuit held that the APA=s section 702 constituted a waiver of sovereign immunity, and that the action could be brought under the APA. The Supreme Court reversed unanimously. The APA=s waiver of sovereign immunity only extends to actions Aseeking relief other than money damages.@ The Ninth Circuit interpreted this to mean that it extended to equitable rather than legal claims, relying upon Bowen v. Massachusetts, 487 U.S. 879 (1988), in which the Court had upheld an APA claim against the Department of Health and Human Services, where the relief sought was an injunction requiring HHS to pay the State for certain Medicaid services. The Supreme Court, however, clarified that in Bowen the relief was not merely equitable, it was to provide specific relief C to provide the very Medicaid payments required by law. Here, however, the equitable lien was to provide Blue Fox not with the very payment to which it was entitled from the prime contractor, but to provide it with compensatory or substitute monetary relief from the Army. This is precisely, the Court said, what is meant by Amoney damages.@

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