This suit, brought by the State of Oklahoma on Feb. 12, 2016, challenges a Federal Communications Commission (FCC) order that set new rate caps for local (intrastate) and long-distance (interstate) inmate calling. More information on the prior administrative proceedings can be found here. The State brought this suit pursuant to the Administrative Procedure Act (APA), alleging the FCC violated the APA's prohibition of arbitrary and capricious regulations and regulations that exceed statutory authority. The State sought to enjoin the FCC's Second Order issued in Oct. 2015.

The State argued that the order exceeded the FCC's authority by doing more than just "level[ing] the playing field between payphone providers." The state contended that the Federal Communications Act ("the Act") granted the FCC authority to create "regulations that protect payphone service providers from state or local laws and unfair practices by infrastructure providers that render payphones not financially viable." The Act, however, did not authorize the FCC to promulgate regulations that "benefit prison inmates at the expense of taxpayers and phone service providers." Moreover, the State argued that in most circumstances the FCC was precluded from preempting state policy, and so it generally did not have authority over intrastate communications unless expressly provided in the Act. The state further argued that in so doing, the FCC ignored recorded evidence of the cost of providing inmate calling services.

This case was consolidated with the following cases also pending in the Circuit Court: 15-1461, 15-1498, 16-1012, 16-1029, 16-1038, and 16-1046 between Jan. and Feb. 2016. Network Communications International Corp. intervened in the case on behalf of the FCC (date unknown based on docket).

On March 23, 2016, the court stayed the FCC's order with respect to its imposition of interim calling rate caps to intrastate calling services, but not interstate calling services. The parties then proceeded to brief the issues, and oral arguments were held on Feb. 6, 2017.

On June 13, the court ruled in favor the State, invalidating the FCC order's proposed caps on intrastate rates on the basis that that provision exceeded the agency's statutory authority under the Act. The court further concluded that the FCC's cost calculations did not reflect reasoned decision-making, and so violated the APA's provision against arbitrary and capricious regulations. Finally, the court remanded to the FCC consideration of if it can separate out permissible interstate call caps from the now-impermissible intrastate call caps. 866 F.3d 397.

Specifically, the FCC asserted that it issued intrastate caps under the authority of an Act provision requiring the FCC to create a "per call compensation plan to ensure that all payphone service providers are fairly compensated for each and every completed intrastate and interstate call using their payphone." The State argued that that provision does not preclude another Act provision prohibiting the FCC from exercising jurisdiction over "charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service." The court agreed with the State, finding there is a presumption against the FCC's authority over specifically intrastate rates. The court drew a distinction in what the Act allowed the FCC to do: it was expressly permitted to exercise its authority to ensure interstate rates were just and reasonable, and it was to separately ensure that phone service providers were fairly compensated. But, the court argued, the latter provision did not mandate that the FCC had authority to ensure intrastate rates were just and reasonable too. The court further found that in ensuring providers were fairly compensated, the FCC was not required to consider consumers (i.e. inmates) in its fairness assessment. 866 F.3d 397.

The case is now closed.

Virginia Weeks - 12/03/2017


compress summary