DA 92-790 Federal Communications Commission Record 7 FCC Red No. 13

I. INTRODUCTION Before the 1. In this Order we address discovery issues and establish Federal Communications Commission a schedule for further discovery and the submission of Washington, D.C. 20554 briefs and reply briefs by the parties to the above-cap­ tioned proceedings to determine whether and to what ex­ In the Matter of tent the complainant, Williams Group, Inc. (WTG), may be entitled to recover damages as WILLIAMS TELECOMMUNICATIONS a result of defendants'1 alleged violations of the Commis­ GROUP, INC., sion's rate of return prescription for the period January 1, 1987 through December 31, 1988. Complainant,

v. II.BACKGROUND 2. The case that WTG presents against the defendant BELL ATLANTIC, File No. E-90-444 local exchange carriers (LECs) is virtually identical to BELLSOUTH File No. E-90-445 those presented in MCI Telecommunications Corporation v. COMPANIES, Telephone Co.2 and American Tele­ 3 File No. E-90-446 phone & Telegraph Co. v. Telephone Co. In those cases, the Commission found that MCI and AT&T TELEPHONE COMPANY, had met their burden of establishing that the defendant File No. E-90-447 LECs had violated Section 201(b) of the Communications TELEPHONE COMPANY, Act by earning in excess of the Commission's prescribed File No. E-90-448 rate of return for the 1985-1986 monitoring period4 and TELEPHONE COMPANY, were liable for damages to the extent that MCI and AT&T could establish that they suffered actual damage as a result THE File No. E-90-449 of the violations. The Commission, however, addressed the TELEPHONE COMPANY, issue of liability only and directed AT&T and MCI to file , INC., File No. E-90-450 supplemental complaints for damages if they wished to THE MOUNTAIN STATES File No. E-90-451 pursue their damages claims. Both AT&T and MCI subse­ TELEPHONE AND quently filed such supplemental complaints and related pleadings. We recently issued orders in the AT&T and TELEGRAPH COMPANY, MCI supplemental proceedings that established guidelines NORTHWESTERN BELL File No. E-90-452 and timeframes for further discovery and briefs on the TELEPHONE COMPANY, issue of damages. 5 , File No. E-90-453 3. Because the operative facts and questions of law in­ , and File No. E-90-454 volved in the instant cases parallel those raised in the File No. E-90-455 AT&T and MCI proceedings, we will not adopt the bi­ furcated approach used by the Commission in those pro­ TELEPHONE COMPANY, ceedings and postpone discovery and the submission of Defendants. additional pleadings on the issue of damages until defen­ dants' liability for damages has been determined. We note that both complainant and defendants have argued the ORDER issue of liability extensively in their pleadings filed in the captioned cases.6 We believe that the Commission's, as well Adopted: June 16, 1992; Released: June 25, 1992 as the parties', interests in obtaining the earliest practicable

By the Deputy Chief, Enforcement Division, Common Carrier Bureau:

Northwestern , Mountain States FCC, 951 F.2d 1259 (10th Cir. 1991). Telephone and Telegraph Company and Pacific Northwest Bell 4 The complainants relied upon, as does WTG in the instant Telephone Company have consolidated. U S West Communica­ complaints, rate of return monitoring reports (Form 492) filed tions, Inc. is the remaining company. See 5 FCC Red 1982 with the Commission by the defendants as required by Section (1990). The subject complaints, however, relate to a period prior. 65.600 of the Commission's rules for the relevant monitoring to the consolidation. Accordingly, we shall refer to the carriers feriod. See 47 C.F .R. § 65.600. as they were named in the complaints. See MCI Telecommunications Corporation v. Pacific Bell Tel. 2 5 FCC Red 216 (1990) (MCI Liability Order), recon. denied, 5 Co., 7 FCC Red 2985 (Com.Car.Bur. 1992) (MCI Discovery FCC Red 3463 (1990), appeal dismissed sub nom. Mountain Order) and AT&T Communications v. Northwestern Bell Tel. States Tel. and Tel. Co., et al. v. FCC, 951 F.2d 1259 (10th Cir. Co., 7 FCC Red 2982 (Com.Car.Bur. 1992). 1991). 6 Complainant and defendants, should they so choose, are free 3 5 FCC Red 143 (1990) (AT&T Liability Order), appeal dis­ to discuss the issue of liability in the briefs and reply briefs missed sub nom. Mountain States Tel. and Tel. Co., et al. v. required by this Order.

3986 7 FCC Red No. 13 Federal Communications Commission Record DA 92-790

resolution of these complaint proceedings will be better plaints.9 A number of defendants have opposed the served by requiring the parties to develop a full record on interrogatory requests, which are currently the subject of the issue of damages as well as liability at this time.i motions to compel and related pleadings.10 5. The defendants raise a number of challenges to the complainant's damages claims, including arguments that III. CONTENTIONS OF THE PARTIES have been considered and rejected by the Commission in 4. Initially, we note that the issue of damages in a the MCI and AT& T Liability Orders.11 The defendants Section 208 complaint proceeding involves an issue of fact, argue in unison that any damages awards based on viola­ the resolution of which depends on the particular cir­ tions of the Commission's rate of return prescription cumstances involved in the case. WTG's damages claims would be contrary to the court's decision in American rest primarily on the contention that the proper measure Telephone and Telegraph Company v. FCC 12 and, therefore, of the damages it has incurred as a result of defendants' unlawful. Defendants contend that the fact that their rates alleged violations of the Commission's rate of return pre­ produced overearnings in one access service category is not scription is the difference between the amount it actually sufficient to establish damage to the complainant when paid defendants for interstate access services during the their overall interstate rates of return were below the period January 1, 1987 through December 31, 1988, and authorized level.13 Defendants maintain that, under AT&T the amount it would have paid if the defendants' rates had v. FCC, they must be allowed to offset overearnings in produced earnings that did not exceed the Commission's individual access categories against underearnings in access prescribed rate of return.8 WTG has asked the Commission categories. Defendants contend that an award of damages to direct defendants to provide such computations by re­ based on the measure advocated by the complainant would questing that the Commission issue show cause orders effectively reinstate the automatic refund rule found un­ against the defendants as it has done in the MCI and lawful in AT&T v. FCC. Some defendants argue that even AT&T proceedings. In addition, WTG has propounded assuming that violations of the Act and actual damages in interrogatories to each defendant that asks each defendant consequence thereof can be established, it would be in­ to provide a calculation of its overearnings for each service equitable to award damages to WTG since WTG would not and/or service segment that is the subject of WTG's com-. flow through such damages to its own customers.14

7 We note that the Commission has pending a rulemaking tion of SBT, defendants have opposed the motions to compel. proceeding that solicits comments on, inter alia, a proposal that We note that, while initially objecting to the interrogatory would amend the Commission's rules to prohibit any discovery request, BellSouth has provided answers to the interrogatories. regarding damages until after the Commission has decided the Additionally, we note that with respect to CBT, WTG has issue of liability. See Amendment of Rules Governing Proce­ withdrawn that portion of its complaint dealing with interstate dures to be Followed When Formal Complaints Are Filed Against Common Carriers, CC Docket No. 92-26, 7 FCC Red switched access. WTG agrees that CBT did not provide such 2042 (1992). Our decision here not to bifurcate damages and service to WTG during the relevant period. See Reply to Op­ liability for purposes of completing discovery should not be position to Motion to Compel, File No. E-90-446 at n.2 (filed viewed as prejudging the merits of the Commission's proposal. February 24, 1992). Rather, it reflects the protracted history and unique circum­ 11 The issues and arguments raised by defendants in response stances underlying these rate of return complaint proceedings to WTG's claims are identical in their essentials. For the sake of and our desire to resolve these matters as expeditiously as convenience and clarity, we will refer to defendants' arguments ~ossible. as if they are part of the same pleading. To the extent that WTG also seeks interest on this amount. We note that some individual defendants raise separate or unique arguments, we defendants argue that the Commission has no authority to will address them accordingly. award interest in a Section 208 complaint proceeding. Although 12 836 F.2d 1386 (D.C. Cir. 1988) (AT&T v. FCC). The court an award of interest does not fall squarely within the ambit of set aside the automatic refund rule adopted by the Commission Section 208 of the Communications Act, the Commission's au­ in Authorized Rates of Return for the Interstate Services of thority under Section 4(i) and other sections of the Act to AT&T Communications and Exchange Telephone Carriers, CC award interest in a common carrier complaint proceeding is Docket No. 84-800, Phase I, FCC 85-527 (released Sept. 30, well established. See MCI Discovery Order at para. 15. Whether 1985), 50 Fed. Reg. 41,350 (Oct. 10, 1985), modified on reconsi­ an award of interest is appropriate in the instant complaint deration, Memorandum Opinion and Order, FCC 86-114 (re­ proceedings will depend on the particular facts established by leased March 24, 1986), 51 Fed. Reg. 11,033 (Apr. 1, 1986), the parties. further recon. denied, 2 FCC Red 190 (1987). The court found 9 WTG uniformly conditioned its requested calculation, by the automatic refund mechanism to be arbitrary and capricious asking each defendant to "because it is inconsistent with the rate of return prescription it purports to enforce.'' AT&T v. FCC, 836 F.2d 1386, 1390. The assume a study area defined by the geographical reach of court acknowledged, however, that "the Commission has au­ [defendant's] filed tariffs, a maximum allowable rate of thority under the Act to order refunds where a carrier has 12.25 percent per overall interstate earnings, and a maxi­ violated an outstanding rate-of-return prescription." Id., 836 mum allowable rate of return for any access service cate­ F.2d at 1392. gory of 12.40 percent. 13 Additionally, the companies contend that the 10 WTG has filed motions to compel against the BellSouth relevant overall interstate rate of return is that of Ameritech in Telephone Companies (BellSouth), Cincinnati Bell Telephone the aggregate, not each of its component operating companies. Company (CBT), Indiana Bell Telephone Company, Michigan The Commission previously addressed and rejected this ar­ Bell Telephone Company, the Ohio Bell Telephone Company, gument in the MCI and AT&T Liability Orders. See, e.g., 5 FCC Wisconsin Bell, Inc., the Mountain States Telephone and Tele­ Red at 146 and 148 (1990). · graph Company, Northwestern Bell Telephone Company, and 14 See, e.g., Motion to Dismiss, File No. E-90-453 (filed Novem­ Southwestern Bell Telephone Company (SBT). With the excep- ber 19, 1990). We do not reach that issue in this interlocutory ruling. We are concerned here only with establishing a schedule for further discovery and briefing.

3987 DA 92-790 Federal Communications Commission Record 7 FCC Red No. 13

6. Defendants also advance a number of arguments in charged and the rates that would have been charged if the opposition to complainant's discovery requests. Some de­ defendants' rates had produced earnings at or within the fendants argue that the requests are premature because authorized level on an individual category basis. there has been no finding of liability .15 Some defendants 9. The defendants' argument that discovery regarding argue that providing the requested information would re­ damages is premature is unavailing since we have decided quire them to admit a factual issue in dispute, that is, that not to adopt a bifurcated approach in these proceedings. defendants overearned.16 Defendants maintain that they Rather, as stated above, we have concluded that the par­ have no legal obligation to compute damages for com­ ties' and the Commission's interests in obtaining the earli­ plainant and argue that the burden is on complainant to est practicable resolution of this matter will be better plead and prove damagesY served by requiring the parties to develop a full record on 7. WTG responds that under the holding in the MCI the issues of liability and damages at this time. Accord­ Liability Order, WTG can rely on the data in defendants' ingly, we will grant complainant's motions to compel to Forms 492 to make out a prima facie case that defendants the extent indicated herein and will require defendants to are liable and, therefore, WTG is entitled to the requested make available to the complainant information necessary information in order to compute damages. WTG further to compute the difference between the amount complain­ responds that defendants can characterize the earnings in­ ant actually paid for the defendants' access services during formation requested by complainant as they wish; WTG is the relevant monitoring period and the amount complain­ interested in the amount, not how it is labelled at this ant would have paid if the defendants' rates had produced juncture. WTG further responds that the information re­ earnings at the Commission's prescribed rate of return quested is uniquely within defendants' knowledge. during that period. We will also afford the defendants the opportunity to develop evidence of offsets or other mitigat­ ing factors with regard to damages as discussed in para­ IV. DISCUSSION graph 8 herein. 8. We have carefully reviewed the pleadings of the par­ ties and are unable to resolve on the record before us the substantial factual issues raised by the parties regarding the V. CONCLUSION extent to which WTG may have suffered actual damage as 10. In order to facilitate a resolution of the factual a consequence of defendants' alleged violations of the questions posed by the parties in their pleadings, and to Commission's rate of return prescription. We tend to agree assure that the parties have a full and fair opportunity to with WTG, in principle, that a possible measure of the present their claims, we will afford complainant and de­ damages stemming from defendants' alleged rate of return fendants the opportunity to engage in further discovery in violations could be the difference between the rates it these proceedings pursuant to the timetable set forth here­ actually paid for defendants' interstate access services and in. Additionally, we will establish a timeframe for the the rates it would have paid if defendants' rates had pro­ filing of briefs and reply briefs by complainant and defen­ duced earnings within the authorized levels. We are not, dants.18 however, persuaded on the record before us that a dam­ ages determination based on such a measure would nec­ essarily reflect actual damages incurred by complainant if VI. ORDERING CLAUSES defendants are found to be liable. On the contrary, it is 11. Accordingly, IT IS ORDERED THAT, pursuant to conceivable that for the relevant service categories the Section 4(i), of the Communications Act of 1934, as defendants may be able to produce evidence or identify amended, 47 U.S.C. § 154(i), and the authority delegated circumstances surrounding or impacting complainant's by Section 0.291 of the Commission's rules, 47 C.F.R. § taking of their access service offerings to establish or sup­ 0.291, that complainants's Motions to Compel filed on port their claims that complainant suffered no actual harm December 27, 1991, January 27, 1992, February 11, 1992, or incurred no ascertainable damages which can be attrib­ and February 27, 1992, ARE GRANTED to the extent uted to defendants' excessive earning levels. Moreover, the indicated herein and are otherwise DENIED. defendants' factual showings could serve to mitigate or 12. IT IS FURTHER ORDERED THAT within 10 days otherwise reduce complainant's damages claims. We will, of the release date of this Order, the complainant may for example, consider any evidence submitted by the de­ direct to the defendants written requests for the informa­ fendants that would tend to show that WTG's share of the tion necessary to perform the computation discussed in excessive earnings realized by defendants in a particular paragraph 9 herein. Such discovery shall be completed and access category should be offset or otherwise reduced due all documents exchanged within 30 days of the release date to facts and circumstances surrounding WTG's purchase of of this Order. In the alternative, defendants may perform other interstate access services from defendants for the the calculation and provide this information to complain­ relevant monitoring period. We will also consider any ant within the thirty-day period. other evidence submitted by the defendants that would refute WTG's claim that the damage it suffered should be measured by the difference between the rates actually

15 See, e.g., Opposition to Motion to Compel, File Nos. E- 18 Section 208 provides in pertinent part that it shall be the 90-447, et al. (filed February 13, 1992). duty of the Commission to investigate unsatisfied complaints 16 Id. "in such manner and by such means as it shall deem proper." i; See, e.g., Opposition to Complainant's Motion to Compel,. 47 u.s.c. § 208. File Nos. E-90-451, et al. (filed February 27, 1992). We note that this pleading was filed 1 day late. As no party has objected to the late filing, the pleading is accepted.

3988 7 FCC Red No. 13 Federal Communications Commission Record DA 92-790

13. IT IS FURTHER ORDERED THAT the complain­ ant and the defendants may develop, through discovery, additional information regarding the calculation of dam­ ages for the relevant monitoring period consistent with the guidelines set out in paragraph 8 herein. Such discovery shall be initiated within 10 days of the release date of this Order and be completed and all documents exchanged within 30 days of the release date of this Order. 14. IT IS FURTHER ORDERED THAT the complain­ ant and the defendants shall file their initial briefs no later than 20 days after the close of the thirty-day discovery period and that complainant and defendants shall submit reply briefs no later than 10 days after the submission of initial briefs.

FEDERAL COMMUNICATIONS COMMISSION

Gregory A. Weiss Deputy Chief (Operations) Common Carrier Bureau

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