Sprint Communications v. APCC Services

The issue in this complex case regarding reimbursement of payphone service provides ("PSP") is whether the intermediaries with whom these PSP's have assigned their interests through contracts, called Aggregators, have standing to sue communications carriers ("Carriers") such as Sprint, who are required under federal law to reimburse the PSP's for collect calls. That is a mouthful of a sentence, and it will require this entire essay just to lay out what it means.

Let me begin, however, with a historical note. At one time, for those of you under 30 years of age who read this, pay phones were really important in American life. You travelled or you were away from home or office and you needed to get in touch with someone. What did you do? Drop a dime in a pay phone and call a person (if it was local) or drop much more if it was "long-distance." The invention of cell phone technology in the early 1990s, and the omnipresence of cell phones today, has almost made pay phones obsolete. Yet, there is an important provision of both a 1990 and 1996 law that regulates how various entities are to reimburse each other once someone like you drops a dime (now a quarter or more, I suppose) into a pay phone. This case is all about that. Within a decade we will be looking at this case as if we are arguing about orguinettes that play by winding a crank....

A Little History

In 1990 Congress enacted the Telephone Operator Consumer Services Improvement Act (47 USC 226) which requires PSPs to allow consumers to use an access code (e.g., 10-10-220) or a subscriber 800 number to make calls from a payphone. Before then, many PSPs had blocked the use of access codes and 800 numbers because they enabled customers to "dial around" the PSP's selected Interexchange Carrier ("IXC"--such as Sprint), with the result that neither the IXC nor the PSP received any payment for the call.

In implementing the Act, the Federal Communications Commission ("FCC") required IXC's to compensate PSP's only for access code calls, not for calls to subscriber 800 numbers, but that rule was overturned by the DC Circuit in 1995 (54 F3d 857). Then, the Telecommunications ACt of 1996 was passed. It required the Commission to devise a new plan that would:

"ensure that all payphone service providers are fairly compensated for each and every completed instrastate and interstate call using their payphone[s]," 47 USC sec. 276(b)(1)(A).

After several tries, the Commission was able to devise such a plan. Phew. But then another problem developed. The PSPs, which now had a right to the money from the payphone calls, had difficultiy collecting. In other words, the IXC's didn't pay the PSPs what they were entitled to recover.

Well, how to do you collect? Either you do it yourself (that is, through your collection department and lawyers) or you hire out the service. The PSPs, which were getting screwed, decided on the latter course of action. They decided to hire what are called Aggregators as intermediaries between them and the IXC's. An Aggregator, acting on behalf of a PSP, submits billing information to the IXC's and pays over to the PSP the monies it receives from the IXC's. The Aggregator charges the PSP a fee based on the number of telephone lines the PSP operates. The largest Aggregator is American Public Communications Council Services (APCC). It represents more than 1,400 PSPs, which in turn own and operate more than 400,000 payphones nationwide. I didn't know there were still that many....

The Course of the Litigation

When APCC noted that certain IXC's didn't pay the required compensation (called "dial-around compensation" in the cases), they sought authorization from their client PSPs to sue IXC's on the PSP's behalf, and agreed to pass back to the PSPs any amounts they recovered by lawsuit. Each PSP then signed an "Assignment and Power of Attorney" providing, in part, that the PSP:

"assigns, transfers, and sets over to [the aggregator] for purposes of collection all rights, title and interest of the [PSP] in the [PSP's] claims, demands or causes of action for “Dial-Around Compensation” (“DAC”) due the [PSP] for periods since October 1, 1997, pursuant to Federal Communications Commission rules, regulations and orders."

The Aggregators, then, acting as assignees of the claims of the PSPs, then filed lawsuits against Sprint, AT & T and other IXCs, claiming that each IXC had violated the Commission's regulations implementing the statute bolded near the top of this essay. Then, the fun began. AT & T moved to dismiss the cases on the ground that the Aggregators lacked standing to sue. The District Court for the District of Columbia agreed. But then, it changed its mind, and decided the Aggregators had standing to sue. Then, on appeal, the DC Circuit Court panel divided right down the middle. The Aggregators had brought two causes of action; that they had standing to sue and that a private right of action existed in the 1996 statute which enabled them not only to have standing to sue but actually to bring a case--through a private right of action. In 2005 the DC Circuit concluded 2-1 that they had standing to sue, but, by the same margin (with different judges) decided that they didn't have a private cause of action. The net effect of the 2005 decision (418 F3d 1238) was to throw the PSPs case, argued by the Aggregators, out of court.

Meanwhile, out in the State of Washington, the action was proceeding on another such case. This case made it all the way to the US Supreme Court, which decided in 2007 (Global Crossing v. Metrophones, 127 S Ct 1513), that there was a private right of action under the 1996 statute. So, all our questions are answered except the first one--do the Aggregators have standing to sue on behalf of the PSPs in this action? You might think that since there is a private right of action under the 1996 law that the Aggregators automatically have a right to sue, but that would be getting ahead of yourself. The Court might decide that only the actual injured parties themselves, and not their assignees, have this power to sue. So, now we see why we have a case before the Supreme Court...I hope.

The Case Before the Supreme Court

With all this background in mind, you ought to be able now to understand the "Question Presented" in Petitioner's Brief for a Writ of Certiorari:

"Federal regulations require petitioner telephone companies to make certain payments to the owners of payphones (“payphone service providers” or “PSPs”). This case arises from the PSPs' assignments to other companies - respondents here - of the right to litigate their dispute with petitioners over the amount of compensation. After the PSPs assigned their claims to respondents “for purposes of collection” and agreed to finance the litigation, respondents sued petitioners “on behalf of” the PSPs. Under the assignments, respondents can gain or lose nothing from the outcome of the case because all the proceeds will go to the PSPs. A divided panel of the D.C. Circuit nonetheless held that respondents have standing to sue petitioners.

The question presented is:

Whether the assignment of a claim “for purposes of collection” confers standing on assignees which have no personal stake in the case and which avowedly litigate only “on behalf of” the assignors."

Now we see that this is a rather straight-up standing case, so to speak. Have the Aggregators suffered the necessary "injury-in-fact" (the key words to establish standing) in order to confer standing upon themselves? It would seem that they have this standing--for if not, we just have to litigate this case all over again with the PSP's directly hiring lawyers to argue the case. Isn't there a more efficient way of answering a question??

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