NATIONAL LIFELINE ASSOCIATION, PETITIONER v. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS
No. 20-1006
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 13, 2020 Decided December 22, 2020
On Petition for Review of an Order of the Federal Communications Commission
Maureen K. Flood, Counsel, Federal Communications Commission, argued the cause for respondents. With her on the brief were Makan Delrahim, Assistant Attorney General, U.S. Department of Justice, Michael F. Murray, Deputy Assistant Attorney General, Robert B. Nicholson and Andrew DeLaney, Attorneys, Thomas M. Johnson, Jr., General Counsel, Federal Communications Commission, Ashley S. Boizelle, Deputy General Counsel, and Jacob M. Lewis, Associate General Counsel. Richard K. Welch, Deputy Associate General Counsel, Federal Communications Commission, entered an appearance.
Opinion for the Court filed by Senior Circuit Judge EDWARDS.
EDWARDS, Senior Circuit Judge: The Federal Communications Commission (the “Commission” or “FCC“) runs the Lifeline program (“Lifeline“), which offers low-income consumers discounts on telephone and broadband Internet access service. Qualified consumers receive service from eligible telecommunications carriers, or “ETCs,” who in turn receive a monthly federal support payment for each Lifeline subscriber they serve. In 2005, “the Commission decided to allow non-facilities-based providers (or ‘wireless resellers‘) to provide Lifeline services.” Nat‘l Lifeline Ass‘n v. FCC, 921 F.3d 1102, 1108 (D.C. Cir. 2019) (as amended Apr. 10, 2019). To offer service to their subscribers, reseller ETCs usually purchase usage allotments from facilities-based carriers who possess their own wireless networks.
Many ETCs, including some resellers, use a standard fee-for-service model, in which subscribers pay the ETC a recurring, discounted monthly fee in exchange for service. A substantial number of reseller ETCs, however, offer prepaid wireless plans for which ETCs receive monthly Lifeline support payments on behalf of subscribers.
Since 2012, the Commission has adopted several reforms to the Lifeline support payment process. Currently, FCC rules require ETCs to initiate a process of de-enrolling Lifeline subscribers on prepaid plans who have not used their Lifeline service within the preceding 30 days.
The issue in this case concerns support payments to ETCs for prepaid Lifeline subscribers in cure periods because of their non-usage of the service. Two provisions of the FCC‘s rules are most notably in play. One provision states that ETCs will receive payments for each “actual qualifying low-income customer[] [the ETC] serves directly as of the first of the month.” Id.
Petitioner‘s statutory argument – that the Commission‘s interpretation of its applicable rules violates
I. BACKGROUND
A. Lifeline Service
In 1985, the Commission created the Lifeline program by regulation “to ensure that low-income consumers had access to affordable, landline telephone service following the divesture of AT&T.” Nat‘l Lifeline Ass‘n, 921 F.3d at 1106 (citing MTS and WATS Market Structure; and Establishment of a Joint Board; Amendment, 50 Fed. Reg. 939 (Jan. 8, 1985)). In 1996, Congress codified the program. Mozilla Corp. v. FCC, 940 F.3d 1, 68 (D.C. Cir. 2019) (per curiam) (citing
The Commission‘s rules require the Universal Service Administrative Company (the “Administrator“) to administer
Between 2005 – when the Commission first allowed wireless resellers to participate in Lifeline – and 2012, Lifeline support disbursements more than doubled, from under $1 billion annually to approximately $2.2 billion. See 2019 Lifeline Order at 10,888, J.A. 8. As this growth in Lifeline occurred, so did waste, fraud, and abuse in the program. See id. at 10,889, J.A. 9. In response, the Commission took several steps designed to combat these problems without undermining the goals of the program. See, e.g., Lifeline and Link Up Reform and Modernization, 27 FCC Rcd. 6656, 6670 (Jan. 31, 2012) (“2012 Lifeline Order“); 2019 Lifeline Order at 10,893, J.A. 13.
As mentioned above, many ETCs, including some resellers, use a standard fee-for-service model, in which subscribers pay the ETC a monthly fee in exchange for service. See 2012 Lifeline Order at 6767-68. Other reseller ETCs instead offer prepaid wireless plans. See 2019 Lifeline Order at 10,888, J.A. 8. For these plans, reseller ETCs often provide subscribers with a free phone and a set amount of monthly
In 2012, the Commission issued an Order establishing a centralized database listing all Lifeline subscribers – the National Lifeline Accountability Database (“NLAD“) – in order “to detect and prevent duplicative support” attributable to individual subscribers. 2012 Lifeline Order at 6734. To populate the database, ETCs enter Lifeline subscriber data. Id. at 6737-39. The ETCs and Administrator then must take steps to ensure that there are no duplicative support payments disbursed for individual Lifeline subscribers. See id. at 6743-44, 6748-49.
The 2012 Lifeline Order also required ETCs to begin a process of “de-enrolling” prepaid Lifeline subscribers who had not used their Lifeline service in the prior 60 days. Id. at 6768-69. The Commission explained that, due to the lack of a regular billing relationship between ETCs and these subscribers, there is a significant risk of “phantom accounts” for which the subscriber is not “receiving the benefit of the supported service.” Id. at 6771. In particular, “[t]he possibility that a wireless phone has been lost, is no longer working, or the subscriber has abandoned or improperly transferred the account is much greater.” Id. As a result, for prepaid plans,
Rather than simply requiring ETCs to shut off prepaid Lifeline service once there had been 60 days of non-usage, the Commission allowed these subscribers a “cure period” of 30 days. See id. at 6875. At the beginning of the cure period, the ETC was required to notify the subscriber that continued non-usage would result in service termination. See
Along with these changes, the Commission revised
While the 2012 Lifeline Order established a de-enrollment process and timeline, it did not require ETCs to submit Lifeline support payment requests to the Administrator based on subscribership levels as of particular dates. As a result, ETCs submitted their requests to the Administrator reflecting their number of Lifeline subscribers for different days each month.
In 2016, the Commission issued an Order mandating creation of the National Lifeline Eligibility Verifier (the “National Verifier“), an operations system with a central database for Lifeline subscriber records building off the NLAD. See Lifeline and Link Up Reform and Modernization, 31 FCC Rcd. 3962, 4006, 4010, 4016-17 (Mar. 31, 2016) (“2016 Lifeline Order“). To reflect these changes, the Commission again revised the text of
Thus, by October 2016,
B. Procedural History
In late 2016, numerous ETCs approached the FCC‘s Wireline Competition Bureau (the “Bureau“) seeking to “clarify the interplay between” the foregoing rules. Petition at 2-3, J.A. 148-49. According to Petitioner, the Bureau provided informal guidance that non-usage cure period Lifeline subscribers on prepaid plans as of snapshot dates could be included in reimbursement requests. Id. at 3, J.A. 149. The Administrator then posted on its website that “[Lifeline s]ervice providers must provide[] eligible subscribers with service during the cure period and may include subscribers in the cure period in their monthly snapshot.” Petition Ex., J.A. 158 (emphasis added). As a result, from late 2016 through late 2017, ETCs included prepaid cure period subscribers in Lifeline support payment requests. See Comments of Sprint Corp. at 1, J.A. 133.
In late 2017, the Administrator reversed its position, revised its website, and required ETCs to remove non-usage cure period subscribers from their monthly snapshots. See id. The Administrator‘s website also explained that ETCs could upwardly adjust a previous month‘s claims to receive
On February 7, 2018, Petitioner filed the Petition for Declaratory Ruling with the Commission, advancing several arguments in support of its view that ETCs should receive payments for prepaid Lifeline subscribers in non-usage cure periods as of snapshot dates. See J.A. 147-56. First, Petitioner claimed that the text of
Three ETCs filed Comments with the Commission in support of the Petition. In addition to endorsing the Petition‘s arguments, the ETCs advanced their own arguments. First, Sprint Corporation (“Sprint“) asserted that the Commission should allow support payments for cure period subscribers because ETCs incur costs to provide such subscribers with service. See Comments of Sprint at 2-3, J.A. 134-35. Second, Smith Bagley, Inc. (“Smith Bagley“) explained that ETCs receive support payments for subscribers in cure periods facing de-enrollment for reasons other than non-usage. See Comments of Smith Bagley at 5, J.A. 141. Smith Bagley thus argued that
On November 14, 2019, the Commission published the 2019 Lifeline Order denying the Petition. 2019 Lifeline Order at 10,937, J.A. 57. According to the Commission, the plain language of its rules mandated that ETCs exclude non-usage cure period subscribers from support payment requests. See id. In interpreting
A. Standards of Review
The Petition for Review challenges the Commission‘s interpretation of its rules covering the Lifeline Program. The Petition for Review does not assert that the Commission lacked statutory authority to adopt and enforce the rules on which the Commission relied in the disputed Order.
An agency may receive deference when it reasonably interprets its own “genuinely ambiguous” regulations. Kisor v. Wilkie, 139 S. Ct. 2400, 2414 (2019); see also Auer v. Robbins, 519 U.S. 452, 461 (1997). However, the Court made it clear in Kisor that “if there is only one reasonable construction of a regulation – then a court has no business deferring to any other reading, no matter how much the agency insists it would make more sense.” Id. at 2415.
Ambiguity, however, is necessary but not sufficient for us to afford deference. The court must also ask “whether the character and context of the agency interpretation entitles it to controlling weight.” Kisor, 139 S. Ct. at 2416 (citing Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 155 (2012)).
The Supreme Court has set forth some guiding principles to determine whether an agency‘s interpretation of its own regulations is entitled to deference. First, the interpretation at issue “must be one actually made by the agency.” Id. at 2416. That is, “it must be the agency‘s ‘authoritative’ or ‘official position,’ rather than any more ad hoc statement not reflecting the agency‘s views.” Id. (quoting United States v. Mead Corp., 533 U.S. 218, 257-59, 258 n.6 (2001) (Scalia, J., dissenting)). Second, “the agency‘s interpretation must in some way implicate its substantive expertise.” Id. at 2417. Third, “an
In determining whether a disputed agency action is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,”
Finally, we review constitutional challenges to agency action de novo. See C-SPAN v. FCC, 545 F.3d 1051, 1054 (D.C. Cir. 2008) (citing Jifry v. FAA, 370 F.3d 1174, 1182 (D.C. Cir. 2004)).
B. Standing
Petitioner asserts, and the Commission does not contest, that it has standing. We agree.
“In order to establish Article III standing, a plaintiff ‘must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” N.Y. Stock Exch. LLC v. SEC, 962 F.3d 541, 552 (D.C. Cir. 2020) (quoting Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016) (as
It is clear that some of the ETCs that are members of Petitioner would have standing to sue in their own right. As a result of the 2019 Lifeline Order, ETCs have not received support payments for prepaid Lifeline subscribers who are in cure periods on snapshot dates. See Decl. of David B. Dorwart, Final Br. for Pet‘r Addendum 2 (“Dorwart Decl.“) ¶¶ 5-7. Even if this harm is small, as the Commission supposes, it is an injury-in-fact nonetheless. Furthermore, this injury is traceable to the Commission‘s determination that such support payments are not allowed under its rules. And, if this court were to grant the Petition for Review, it would redress the ETCs’ injuries by mandating reimbursement for cure period Lifeline subscribers moving forward. Thus, any ETCs offering prepaid Lifeline service have standing to challenge the denial of the Petition in the 2019 Lifeline Order. Several such ETCs are members of Petitioner. See Dorwart Decl. ¶¶ 3-5, 7. Because “at least one of its members would have standing,” this first requirement for associational standing is satisfied. See Sierra Club v. EPA, 292 F.3d 895, 898 (D.C. Cir. 2002).
Petitioner also satisfies the second requirement. “The germaneness requirement mandates ‘pertinence between litigation subject and organizational purpose.‘” Ctr. for Sustainable Econ., 779 F.3d at 597 (quoting Humane Soc‘y of the U.S. v. Hodel, 840 F.2d 45, 58 (D.C. Cir. 1988)). Petitioner
Finally, Petitioner satisfies the third requirement for associational standing. “Member participation is not required where a ‘suit raises a pure question of law’ and neither the claims pursued nor the relief sought require the consideration of the individual circumstances of any aggrieved member of the organization.” Id. (quoting Int‘l Union, United Auto., Aerospace, & Agric. Implement Workers of Am. v. Brock, 477 U.S. 274, 287 (1986)). Petitioner raises several arguments before this court, but all are legal questions principally related to the Commission‘s interpretation of its regulations in the 2019 Lifeline Order. And “the relief [Petitioner] seeks is invalidation of agency action,” rather than any remedy particularized to individual members. See id. Therefore, members of Petitioner do not need to participate in the proceedings.
In sum, it is clear from the record in this case that Petitioner has associational standing to press its arguments before this court.
In the claims presented to the court, Petitioner belatedly asserts that the Commission‘s interpretation of its applicable rules violates
a petition for reconsideration shall not be a condition precedent to judicial review of any [Commission] order, decision, report, or action, except where the party seeking such review . . . relies on questions of fact or law upon which the Commission . . . has been afforded no opportunity to pass.
Neither the Petition nor any of the supporting Comments that were submitted to the Commission alleged that denial of the Petition would violate
D. The Lifeline Rules Unambiguously Foreclose Payments to ETCs for Subscribers in Prepaid Plans Who Have Not Used Lifeline Service for 30 Consecutive Days or Who Have Not Cured Their Nonusage
The principal issue in this case concerns Petitioner‘s claim that the Commission misinterpreted its established regulations, not that the agency impermissibly promulgated a new rule. In addition, Petitioner does not challenge the legality of any existing rule covering the Lifeline program. Indeed, any such challenge would likely be untimely. See Vernal Enters., Inc. v. FCC, 355 F.3d 650, 655 (D.C. Cir. 2004) (explaining that petitions for review of Commission orders outside of certain enumerated situations “must be filed within 60 days of the date of public notice” (citing
As explained above, there has been some confusion in recent years over de-enrolling Lifeline subscribers on prepaid
In support of its interpretation, the Commission rests primarily on section 54.407(c)(2). Since 2012, this provision has stated that when an ETC does not charge its subscribers a monthly fee for Lifeline service, it “shall only continue to receive universal service support reimbursement for such Lifeline service provided to subscribers who have used the service within [a specified time period], or who have cured their non-usage.”
In response, Petitioner asserts that section 54.407(c)(2) does not, in any way, relate to whether ETCs may receive support payments for non-usage cure period subscribers. Instead, according to Petitioner, that regulatory provision merely “creates a process for eliminating future reimbursement for de-enrolled subscribers once the non-usage and cure periods both have elapsed.” Final Br. for Pet‘r at 44; accord Final Reply Br. for Pet‘r at 5. Thus, in Petitioner‘s view, “[n]owhere does [section 54.407(c)(2)] prohibit Providers from claiming Lifeline reimbursement for cure period subscribers still enrolled in the program and served as of the snapshot date.” Final Reply Br. for Pet‘r at 5. Instead, Petitioner believes
Petitioner is correct that section 54.407(a) appears, at first blush, to require support payments for all “actual qualifying low-income customers” whom ETCs serve as of the first day of a month. And section 54.405(e)(3) appears to require that ETCs must provide service to non-usage cure period subscribers on prepaid plans. However, Petitioner is mistaken in claiming that section 54.407(c)(2) does nothing more than “create[] a process for eliminating future reimbursement for de-enrolled [Lifeline] subscribers.” Final Br. for Pet‘r at 44. As the Commission noted in the 2019 Lifeline Order, the plain text of section 54.407(c)(2) prohibits support payments for prepaid Lifeline subscribers in non-usage cure periods: ETCs ”shall only continue to receive universal service support reimbursement for such Lifeline service provided to subscribers who have used the service within the last 30 days, or who have cured their non-usage.”
Because the Snapshot Rule arguably requires what
We should make it clear, however, that even if the rules are seen to be genuinely ambiguous, “the character and context of the agency interpretation entitles it to controlling weight.” Id. at 2416 (citation omitted). The Supreme Court has cautioned that, with respect to this inquiry, our analysis cannot be “reduce[d] to any exhaustive test.” Id. However, if we adhere to the interpretive guideposts set forth by the Supreme Court in Kisor, we have little trouble in concluding that we would be obliged to defer to the Commission‘s position in this case if the rules were genuinely ambiguous.
First, the disputed interpretation was “actually made by the agency.” Id. Put another way, it was “the agency‘s ‘authoritative’ [and] ‘official position‘” on this issue and “emanate[d] from those actors, using those vehicles, understood to make authoritative policy in the relevant context.” Id. (quoting Mead, 533 U.S. at 257-59, 258 n.6 (Scalia, J., dissenting)). The Commission denied the Petition in a formal Order published in the Federal Register. It cannot be doubted that this expressed an “authoritative” and “official position” on the matter in issue.
Second, the interpretation espoused in the 2019 Lifeline Order “implicate[d] [the Commission‘s] substantive expertise.” Id. at 2417. The Court has explained that, under this factor, “the basis for deference ebbs when ‘[t]he subject matter of the [dispute is] distan[t] from the agency‘s ordinary’ duties or ‘fall[s] within the scope of another agency‘s authority.‘” Id.
Third, the Commission‘s interpretation “reflect[ed its] ‘fair and considered judgment.‘” Id. at 2417 (quoting Christopher, 567 U.S. at 155). Based on the record, the Commission carefully considered Petitioner‘s arguments – from both a policy and an interpretative standpoint – and rejected them. Furthermore, the Commission did not adopt its interpretation as merely a “‘convenient litigating position’ or ‘post hoc rationalizatio[n] advanced’ to ‘defend past agency action against attack.‘” Id. (alteration in original) (quoting Christopher, 567 U.S. at 155).
It is true that under this factor, “a court may not defer to a new interpretation, whether or not introduced in litigation, that
Accordingly, we find that the character and context of the Commission‘s interpretation of its regulations in the 2019 Lifeline Order are sufficient for deference under Kisor if the rules are seen to be genuinely ambiguous. Thus, if the interpretation is “reasonable,” or “within the zone of ambiguity” the language of the regulations reasonably permits, it is entitled to deference. Id. at 2415-16 (citation omitted). Under that standard, the Commission‘s interpretation easily passes muster.
When two provisions irreconcilably conflict, the specific one generally governs. See Adirondack Med. Ctr. v. Sebelius, 740 F.3d 692, 698 (D.C. Cir. 2014). Section 54.407(a) establishes a general rule: ETCs receive support payments for Lifeline subscribers “serve[d] directly as of the first of the
Furthermore, the Commission‘s interpretation gives meaning to every provision in the rules: The general reimbursement rule contained in section 54.407(a) applies to fee-for-service Lifeline plans, while the specific exceptions in section 54.407(c) apply only to prepaid plans. To read the regulations otherwise would render significant portions of section 54.407(c)(2) nugatory, a result to be avoided if possible. See Del. Dep‘t of Nat. Res. & Env‘t Control v. EPA, 895 F.3d 90, 99 (D.C. Cir. 2018) (“[W]e strive to construe [a] statute[] ‘so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant.‘” (quoting Corley v. United States, 556 U.S. 303, 314 (2009))).
In sum, we hold that the disputed rules clearly foreclose payments to ETCs for subscribers in prepaid plans who have not used Lifeline service for 30 consecutive days or who have not cured their nonusage. We see no genuine ambiguity in the rules requiring us to apply “Auer deference.” Kisor, 139 S. Ct. at 2410. Given this finding, it goes without saying that the
E. The Commission‘s Action was not Arbitrary and Capricious
Petitioner also argues that, even if the Commission‘s interpretation of its rules was permissible, the denial of the Petition in the 2019 Lifeline Order was arbitrary and capricious for want of reasoned decisionmaking and lack of evidentiary support. We disagree.
First, we reject Petitioner‘s argument that the Commission‘s interpretation violates the purpose and design of the Snapshot Rule. We agree with Petitioner that the Snapshot Rule in
Second, Petitioner argues that the 2019 Lifeline Order runs counter to specific record evidence. According to Petitioner, the Commission ignored its contention that if ETCs “are prohibited from seeking reimbursement for providing Lifeline service to eligible subscribers in a cure period as of the snapshot date, they will have difficulty maintaining current service offerings.” Final Br. for Pet‘r at 25. Furthermore, Petitioner asserts that the Commission ignored Sprint‘s Comment “detail[ing] the significant investments [ETCs] make to provide Lifeline service to cure period subscribers.”
Petitioner‘s policy arguments should have been raised in 2012, when the Commission adopted the specific language in section 54.407(c)(2) that supports the Commission‘s decision here to prohibit reimbursement for non-usage, cure-period subscribers. Even if we assume that these claims can be properly reviewed now, say, because the FCC effectively reopened the matters for further consideration, we still find no merit in Petitioner and Sprint‘s claims. Neither Petitioner nor Sprint provided any quantitative data to back up its assertions, such as: (1) how many prepaid subscribers are in cure periods on snapshot dates? (2) how much does it cost ETCs to provide service for non-usage cure period subscribers? (3) what percentage of prepaid subscribers ultimately cure their non-usage? or (4) how much would it likely cost to update internal ETC systems to implement any necessary changes? Given the record in this case, the Commission justifiably concluded that the alleged burden imposed on ETCs under its interpretation of the rules would not be particularly onerous. See 2019 Lifeline Order at 10,939, J.A. 59.
Third, Petitioner asserts that the 2019 Lifeline Order did not properly address Smith Bagley‘s claim that the FCC‘s enforcement scheme is unreasonable because it is internally inconsistent. Final Br. for Pet‘r at 28-30. Smith Bagley pointed out in its Comment that Lifeline users can be de-enrolled for several reasons, only one of which is non-usage. See Comments of Smith Bagley at 5, J.A. 141;
However, as the Commission explained, the applicable rules do provide a basis for such a distinction. The plain text of section 54.407(c)(2) – carving out non-usage as a specific exception to the general reimbursement rule of section 54.407(a) – provides a strong textual basis for differentiated treatment between non-usage cure periods and all other cure periods. And the Commission has explained why non-usage in the prepaid category is unique and, thus, requires unique treatment. See 2012 Lifeline Order at 6771. In sum, the full reach of the Commission‘s rationale justifying the 2012, 2015, 2016, and 2019 Lifeline Orders makes it clear that Smith Bagley‘s “inconsistent enforcement” argument is without merit.
Fourth, as suggested above, the 2019 Lifeline Order did not trample any reasonable reliance interests held by Petitioner or ETCs such that denial of the Petition was arbitrary and capricious. According to Petitioner, ETCs were misled when
In addition, the Petition itself effectively acknowledged that there was some confusion over how
F. Petitioner Has Not Established a Viable Regulatory Takings Claim
Finally, we reject Petitioner‘s argument that denial of the Petition violated the Takings Clause of the Constitution. The Fifth Amendment prohibits the taking of “private property . . . for public use, without just compensation.” Under this clause, “whether a particular restriction will be rendered invalid by the government‘s failure to pay for any losses proximately caused by it depends largely” upon an ad hoc inquiry for a given case. Penn Cent. Transp. Co. v. City of N.Y., 438 U.S. 104, 124 (1978) (citation omitted). However, when an owner of property voluntarily participates in a regulated market, additional regulations that “may reduce the value of the property regulated” do not result in a taking. Bowles v. Willingham, 321 U.S. 503, 517 (1944); see also Garelick v. Sullivan, 987 F.2d 913, 916 (2d Cir. 1993) (“[W]here a service provider voluntarily participates in a price-regulated program or activity, there is no legal compulsion to provide service and thus there can be no taking.“).
Before this court, Petitioner argues that its members’ property interests subject to a taking are “the voice/data usage allotments purchased” by wireless resellers “to provide Lifeline service to subscribers in a cure period.” Final Br. for Pet‘r at 51. According to Petitioner, ETCs purchase such allotments specifically to serve prepaid Lifeline subscribers in cure periods, and those allotments cannot be repurposed. See id. at 51-52.
III. CONCLUSION
For the reasons set forth above, we dismiss the Petition for Review as to Petitioner‘s statutory argument and deny all other claims.