DA 92-818 Federal Communications Commission Record 7 FCC Red No. 13 SOUTHERN BELL File No. E-91-23 Before the TELEPHONE AND Federal Communications Commission Washington, D.C. 20554 TELEGRAPH COMPANY, SOUTH CENTRAL BELL File No. E-91-24 In the Matter of TELEPHONE COMPANY, SOUTHWESTERN BELL File No. E-91-25 CABLE & WIRELESS TELEPHONE COMPANY, COMMUNICATIONS, INC., CINCINNATI BELL File No. E-91-26 Complainant, TELEPHONE COMPANY, and GTE SOUTHWEST, INC., File No. E-91-27 v. Defendants. NEW ENGLAND TELEPHONE File No. E-90-428 AND TELEGRAPH COMPANY, ORDER BELL TELEPHONE File No. E-90-429 Adopted: June 17, 1992; Released: June 24, 1992 COMPANY OF PENNSYLVANIA, By the Deputy Chief, Enforcement Division, Common CHESAPEAKE AND POTOMAC File No. E-90-430 Carrier Bureau: TELEPHONE COMPANY, CHESAPEAKE AND POTOMAC File No. E-90-431 TELEPHONE COMPANY I. INTRODUCTION OF MARYLAND, 1. In this Order we address discovery issues and establish a schedule for further discovery and the submission of CHESAPEAKE AND POTOMAC File No. E-90-432 briefs and reply briefs by the parties to the above-cap­ TELEPHONE COMPANY tioned proceedings to determine whether and to what ex­ OF VIRGINIA, tent the complainant, Cable & Wireless Communications, CHESAPEAKE AND POTOMAC File No. E-90-433 Inc. (Cable & Wireless), may be entitled to recover dam­ TELEPHONE COMPANY ages as a result of defendants' alleged violations of the Commission's rate of return prescription for the period OF WEST VIRGINIA, January 1, 1987 through December 31, 1988. DIAMOND STATE File No. E-90-434 TELEPHONE COMPANY, NEW JERSEY BELL File No. E-90-435 II.BACKGROUND TELEPHONE COMPANY, 2. The case that Cable & Wireless presents against the NEW YORK File No. E-90-436 defendant local exchange carriers (LECs) is virtually iden­ tical to those presented in MCI Telecommunications Cor­ TELEPHONE COMPANY, poration v. Pacific Northwest Bell Telephone Co. 1 and INDIANA BELL File No. E-90-439 American Telefhone & Telegraph Co. v. Northwestern Bell TELEPHONE COMPANY, Telephone Co. In those cases, the Commission found that MICHIGAN BELL File No. E-90-440 MCI and AT&T had met their burden of establishing that TELEPHONE COMPANY, the defendant LECs had violated Section 20l(b) of the Communications Act by earning in excess of the Commis­ THE OHIO BELL File No. E-91-19 sion's prescribed rate of return for the 1985-1986 monitor­ TELEPHONE COMPANY. ing period3 and were liable for damages to the extent that WISCONSIN BELL, INC., File No. E-91-20 MCI and AT&T could establish that they suffered actual PACIFIC BELL File No. E-91-21 damage as a result of the violations. The Commission, TELEPHONE COMPANY, however, addressed the issue of liability only and directed AT&T and MCI to file supplemental complaints for dam­ NEV ADA BELL, File No. E-91-22 ages if they wished to pursue their damages claims. Both AT&T and MCI subsequently filed such supplemental complaints and related pleadings. We recently issued or- 1 5 FCC Red 216 (1990) (MCI Liability Order), recon. denied, 5 2 5 FCC Red 143 (1990) (AT&T Liability Order), appeal dis­ FCC Red 3463 (1990), appeal dismissed sub nom. Mountain missed sub nom. Mountain States Tel. and Tel. Co., et al. v. States Tel. and Tel. Co., et al. v. FCC, 951 F.2d 1259 (10th Cir. FCC, 951 F.2d 1259 (10th Cir. 1991). 1991). 3 The complainants relied, as does Cable & Wireless in the instant complaints, on rate of return monitoring reports (Form 3996 7 FCC Red No. 13 Federal Communications Commission Record DA 92·818 ders in the AT&T and MCI supplemental proceedings that 5. The defendants raise a number of challenges to the established guidelines and timeframes. for further discovery complainant's damages claims, including arguments that and briefs on the issue of damages.4 have been considered and rejected by the Commission in 3. Because the operative facts and questions of law in­ the MCI and AT&T Liability Orders 8 The defendants argue volved in the instant cases parallel those raised in the in unison that any damages awards based on violations of AT&T and MCI proceedings, we will not adopt the bi­ the Commission's rate of return prescription would be furcated approach used by the Commission in those pro­ contrary to the court's decision in American Telephone and ceedings and postpone discovery and the submission of Telegraph Company v. FCC 9 and, therefore, unlawful. De­ additional pleadings on the issue of damages until defen­ fendants contend that the fact that their rates produced dants' liability for damages has been determined. We note overearnings in one access service category is not sufficient that both complainant and defendants have argued the to establish damage to the complainant. Some defendants issue of liability extensively in their pleadings filed in the contend that damages cannot be awarded on an access captioned cases.5 We believe that the Commission's, as well category level when their overall interstate rates of return as the parties', interests in obtaining the earliest practicable were below the authorized level. 10 Several of the defen­ resolution of these complaint proceedings will be better dants maintain that, under AT&T v. FCC, they must be served by requiring the parties to develop a full record on allowed to offset overearnings in individual access cate­ the issue of damages as well as liability at this time.6 gories against underearnings in access categories.11 Some defendants contend that an award of damages based on the measure advocated by the complainant would result in the III. DISCUSSION same consequences as the automatic refund rule found 4. Initially, we note that the issue of damages in a unlawful in AT&T v. FCC. 12 Section 208 complaint proceeding involves an issue of fact, 6. We have carefully reviewed the pleadings of the par­ the resolution of which depends on the particular cir­ ties and are unable to resolve on the record before us the cumstances involved in the case. Cable & Wireless' dam­ substantial factual issues raised by the parties regarding the ages claims rest primarily on the contention that the extent to which Cable & Wireless may have suffered actual proper measure of the damages it has incurred as a result damage as a consequence of defendants' alleged violations of defendants' alleged violations of the Commission's rate of the Commission's rate of return prescription. We tend of return prescription is the difference between the to agree with Cable & Wireless in principle, that a possible amount it actually paid defendants for interstate access measure of the damages stemming from defendants' al­ services during the period January 1, 1987 through De­ leged rate of return violations could be the difference cember 31, 1988, and the amount it would have paid if the between the rates it actually paid for defendants' interstate defendants' rates had produced earnings that did not ex­ access services and the rates it would have paid if defen­ ceed the Commission's prescribed rate of return.7 dants' rates had produced earnings within the authorized 492) filed with the Commission by the defendants as required 8 The ismes and arguments raised by defendants in response to by Section 65.600 of the Commission's rules. See 47 C.F .R, § Cable & Wireless' claims are identical in their essentials. For 65.600. the sake of convenience and clarity, we will refer to defendants' 4 See MCI Telecommunications Corporation v. Pacific Bell Tel. arguments as if they are part of the same pleading. To the Co., 7 FCC Red 2985 (Com.Car.Bur. 1992) (MCI Discovery extent that individual defendants raise separate or unique ar­ Order) and AT&T Communications v. Northwestern Bell Tel. ~uments, we will address them accordingly. Co., 7 FCC Red 2982 (Com.Car.Bur. 1992). 836 F.2d 1386 (D.C. Cir. 1988) (AT&T v. FCC). The court set 5 Complainant and defendants, should they choose, are free to aside the automatic refund rule adopted by the Commission in discuss the issue of liability in the briefs and reply briefs re­ Authorized Rates of Return for the Interstate Services of AT&T ~uired by this Order. Communications and Exchange Telephone Carriers, CC Docket We note that the Commission has pending a rulemaking No. 84-800, Phase I, FCC 85-527 (released Sept. 30, 1985), 50 proceeding that solicits comments. on, inter alia, a proposal that Fed. Reg. 41,350 (Oct. 10, 1985), modified on reconsideration, would amend the Commission's rules to prohibit any discovery Memorandum Opinion and Order, FCC 86-114 (released March regarding damages until after the Commission has decided the 24, 1986), 51 Fed. Reg. 11,033 (Apr. 1, 1986), further recon. issue of liability. See Amendment of Rules Governing Proce­ denied, 2 FCC Red 190 (1987). The court found the automatic dures to be Followed When Formal Complaints Are Filed refund mechanism to be arbitrary and capricious "because it is Against Common Carriers, CC Docket No. 92-26, 7 FCC Red inconsistent with the rate of return prescription it purports to 2042 (1992). Our decision here not to bifurcate damages and enforce." AT&T v. FCC, 836 F.2d 1386, 1390. The court ac­ liability for purposes of completing discovery should not be knowledged, however, that "the Commission has authority un­ viewed as prejudging the merits of the Commission's proposal. der the Act to order refunds where a carrier has violated an Rather, it reflects the protracted history and unique circum­ outstanding rate-of-return prescription." Id., 836 F.2d at 1392. stances underlying these rate of return complaint proceedings 10 Additionally, the Ameritech operating companies argue that and our desire to resolve these matters as expeditiously as the relevant overall interstate rate of return is that of the ~ossible.