DC Circuit Judges Question FCC Inmate Calling Service Order; Agency Shift Cited

Federal judges questioned the sustainability of FCC inmate calling service regulations contained in a 2015 order that limited ICS rates and charges, major parts of which the new Republican-run commission is no longer defending. Citing the agency's shift, Judge Laurence Silberman seemed skeptical about the legal justification for much of the order, and Judge Harry Edwards also raised some doubts, while Judge Cornelia Pillard hypothesized the panel could still uphold the order. The three judges of the U.S. Court of Appeals for the D.C. Circuit pressed litigants to clarify what they wanted their panel to do about the case, Global Tel*Link v. FCC, No. 15-1461, as they struggled to sort out various complexities in oral argument Monday that ran 90 minutes, after being scheduled for 40 minutes.

An attorney for ICS provider petitioners asked the panel to vacate the order. An attorney for state petitioners suggested the court hold the litigation in abeyance. An FCC lawyer asked the court to affirm ICS ancillary service fee regulations and hold the rest of the order in abeyance. An attorney for inmate families asked the court to uphold the order. Inmate family advocates who attended the hearing told reporters they wanted the court to rule on the merits of the case, which grew out of a petition filed in 2001. "We have punted and punted and punted," said FCC Democratic Commissioner Mignon Clyburn, who spearheaded ICS regulatory efforts.

The FCC in 2015 imposed interstate and intrastate caps to drive down ICS rates, restricted ancillary service fees and discouraged provider "site commissions" payments to correctional authorities after finding that prices being charged inmate families weren't just and reasonable (see 1510220059). The Democratic majority voted for the order; Republican commissioners dissented. Parts of that order and 2013 and 2016 ICS orders were stayed by the D.C. Circuit, pending further review of challenges by providers, states and sheriffs.

FCC Deputy General Counsel David Gossett last week told the court in a letter (in Pacer): "A majority of the current Commission does not believe that the agency has the authority to cap intrastate rates under section 276" of the Communications Act and so the agency was "abandoning" related regulation. "We are also abandoning, and I am also not authorized to defend, the argument ... that the Commission lawfully considered industry-wide averages in setting the rate caps contained in the Order" (see 1701310061).

What's Left?

Judges asked what was left for the court to decide in light of the new FCC position, which left it to inmate family advocate intervenors to defend much of the 2015 order. Mithun Mansinghani, representing Oklahoma and other states, said it may mean much of the case is "mooted." Mansinghani said states particularly objected to intrastate rate regulations but also had concerns about commission interstate rate decisions that states believed were arbitrary and capricious and deprived providers of revenue to pay site commissions. Asked by Silberman if a 2016 FCC reconsideration order -- which raised the rate caps to account for some site commission costs -- was before the court, Mansinghani said it wasn't, and no other attorney or judge disputed that.

The FCC's recent letter "really kills the entire order," said Michael Kellogg, representing Global Tel*Link and other ICS providers. Silberman said he didn't think the letter went that far, prompting back and forth. Kellogg said Section 276 does apply to interstate ICS rates, but the FCC's retreat on intrastate rate caps meant it doesn't believe it has "plenary ratemaking authority" under that section, and must therefore rely on Section 201 authority, which he suggested was not as strong. Silberman asked about an "administrative law problem" requiring the FCC to keep its regulations in effect unless it removes them subject to proper notice and comment. Kellogg said that's why the court should vacate the order.

Pillard asked Kellogg about the possibility the court could rule the order was valid despite the FCC's new position. Kellogg said his clients had their own arguments why the order should be vacated, which Edwards seemed to agree deserved attention. Silberman suggested the FCC had forfeited its right to Chevron judicial deference by abandoning much of its position.

Kellogg said FCC refusal in 2015 to include site commissions in ICS costs meant many provider rates would be "under water." Pillard suggested ICS providers could look at site commissions "in a dynamic way" and factor in the FCC consequences before agreeing to such terms. Kellogg said that didn't account for existing contracts. He also said the agency was trying to "squeeze" ICS providers, but if the FCC believes site commissions shouldn't be allowed, it should issue and justify a rule banning them. Edwards suggested the FCC "wants to have their cake and eat it, too," by squeezing providers without banning site commissions. Pillard said the FCC was engaging in "soft pre-emption" of site commissions in deference to state jurisdiction. Kellogg said ICS providers weren't taking a position on the legality of site commissions, but wanted to recover their costs if required to make the payments.

The FCC's Gossett said he was defending the ancillary service fee restrictions, when asked about the letter. He said when the FCC initially capped interstate ICS rates in 2013, provider ancillary service fees started "sprouting like bunnies" to "circumvent" the caps. Silberman questioned whether it raised a problem for the ancillary fee limits that most ICS calls were intrastate. Gossett said most ancillary services were for general account management, but if the court had a concern, he said it could remand the regulation without vacating it. In response to questions, Gossett said new reporting requirements being challenged got Office of Management and Budget approval but hadn't yet been published in the Federal Register. He urged the court to affirm the order's ancillary service fee restrictions and hold the rest in abeyance.

Andrew Schwartzman, representing the Wright Petitioners and inmate families, said the FCC order should be upheld under Section 276 despite the agency's shift. When Silberman said the group didn't make that argument in its brief, Schwartzman said it did but kept it short -- to support the agency's prior position -- in response to constant court requests not to make repetitive arguments. He said various D.C. Circuit payphone rulings involving Edwards pointed to FCC authority to ensure providers aren't being overcompensated. Edwards said he read the cases differently, but Schwartzman repeatedly pointed to FCC authority to ensure providers are being "fairly compensated." Kellogg argued the mandate was to ensure providers weren't forced to offer free calls, an argument both Silberman and Edwards cited. Saying inmate families have been waiting 15 years for ICS relief, Schwartzman urged the court to uphold the order, not put off a decision based on speculation about further FCC action.

Reaction

"This is an unusual situation that the court was obviously troubled by," Schwartzman said afterward. Edwards "was hard to read," Schwartzman said, but Kellogg "didn't get much traction" in arguing for vacating the entire order.

"Today we took another step towards #PhoneJustice on behalf of the millions burdened by the egregious costs of communicating with a loved one who is currently incarcerated," Clyburn said in a later statement. “Regardless of how the Court rules, I will continue to press forward to ensure that inmates and their families receive just, reasonable, and fair phone rates. Justice demands it, and so do I.”

Inmate family advocates were happy to defend the FCC order, United Church of Christ Policy Adviser Cheryl Leanza told us: "There's no question that Chairman [Ajit] Pai's decision to abandon defending parts of the case was a serious issue for the judges, and if families are forced to wait even longer for justice, it will be on his shoulders." Pai and some ICS providers declined comment.

Rep. Keith Ellison, D-Minn., objected to the FCC's not defending the intrastate rate caps. The agency “announced they are no longer fighting to cap the prison phone call rates,” Ellison noted on Twitter Monday. “A terrible decision.” He foresaw big consequences, he said in another tweet: “Families bear the cost of exorbitant fees for calling loved ones -- not prisoners. This decision will hurt thousands of people.” He co-chairs the Congressional Progressive Caucus and is a contender for chairing the Democratic National Committee.