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Jul 11, 2003

THE LEGAL LINE

Ed Maldonado, Esq.

Dear Legal Line,

I am the owner of a small-sized prepaid calling company. We licensed and certified ourselves as an IXC prepaid calling company back in 2000 with the FCC and several state commissions. Lately we have been getting a lot of notices announcing that the states we are certified in are de-tariffing IXC services, and, we received advice from our regulatory guy that the FCC has de-tariffed carriers of domestic services for some time. When I first licensed the company, I was under the impression that the federal and state tariffs we filed were also important for defending lawsuits from our customers, because of the filed-rate principle. Is this still true? Our regulatory guy said that the FCC says that it is no longer applicable because they do not require paper tariffs to be filed. Do the tariffs protect us or not?

Texas Pete



Dear Pete,

The filed-rate (or filed tariff) doctrine is a long-standing Supreme Court created principle, that the courts give precedent, that protects common carriers from certain consumer claims, provided that the carrier has posted a tariff related to rates, terms and policies of carriage. The doctrine, at least from application in the courts, by the Supreme Court of published rates originated in 1906 and related first to railroad carriers. The doctrine has survived over time and has been applied to common carriers of telecommunication services through the 1934 and 1996 Telecommunications Acts. Largely, the doctrine has been used to bar recovery through the courts (state or federal) of consumer claims that challenge the advertised/represented rates or charges, versus what was actually charged by the carrier. The doctrine holds that if the carrier has “posted” their rates and charges through a tariff, the consumer is “presumed” to have been made aware of the rates through constructive notice. In essence, if the carrier “posts,” the consumer is presumed to have notice of that rate or charge. The consumer challenge, thereafter, is considered to be an Administrative Law matter that can be handled by either the FCC or the state PSC/PUC. For common carriers, it is a cost-effective way of shielding liability on certain consumer complaints and cases related to rates and charges.

In 1998, the FCC began the process of de-tariffing common carriers for statutory, administrative, and budgetary reasons, in light of the 1996 Act. The initial statements of the FCC alluded to the position that since the FCC was de-tariffing, the end-game result would be that the filed rate doctrine world be DEAD. This position was based on a perspective that an actual filed paper was the engine behind the legal doctrine and that posting was to be centralized in one place – the FCC. However, “mere paper does not a tariff make” and in that same year, the Supreme Court ruled in the case of AT&T v Central Office Telephone, Inc. 524 US 214 (1998) that the doctrine applied to the 1996 Act and that strict application was necessary to avoid discriminatory pricing. This upheld the doctrine and became a touchstone for further application by other state and federal courts.

Now, going back to high school civics, you may be getting the idea that the battle of whether the doctrine is dead or alive is a question of the balancing of power between the three branches of government (legislative, executive and judicial). Well, it is. The filed rate doctrine is a judicially created principle to be applied in Legal Causes of Action over those in the telecom industry that provide services to the public. The FCC ordering de-tariffing is an administrative branch order impacting the way the agency (the FCC) organizes itself to apply mandates from the 1996 Act. So who prevails? Both. In the courts, as it relates to the application of the doctrine, filed-tariff precedent is still good law and generally enforceable because the Supreme Court said so. In that magical realm of administrative law and regulatory work, companies do not need to file paper tariffs with the FCC over domestic LD and merely maintain the tariff on their websites. The only real question between the two comes in the issue of “posting.”

Again, going back to high school civics, now comes the difference between federal and state powers. The 1996 Telecom Act gave a fair amount of space for states to develop continuing policies and law related to local and long distance services within their borders. Following suit with the 1996 Act, many states implemented policies requiring tariffs and specific disclosure to protect consumers on the telecommunications services front. To a large extent, this is where the majority of telecom companies “post” their tariffs today – at the state level. The reason is because much of state law and regulation over telecom protects consumers within their borders. Also, the 1998 FCC order to de-tariff was not a mandate over the state commissions, but instead the FCC only, and the states are free to structure themselves where federal mandate does not control. Many states, from a state statutory, administrative and budgetary regime, are now in the process of de-regulating or de-tariffing selective services. So depending on the state, what constitutes “posting” rates and charges for purpose of the filed-rate doctrine varies at the state level.

Now to your question of whether the tariffs protect you or not, the answer is that they should. The caveat is that the ONLY true test is its use in defending litigation from a consumer. Likewise, if you are licensed in a state, and they have requirements different from an actual filed tariff, compliance with individual state requirements will be essential for showing that the doctrine should be applied. The best method of verifying this, and to know if you have sufficiently “posted,” is by talking with your lawyer, preferably a civil litigator, to see how it is applied in the jurisdiction you are concerned about. Battle experience of a civil litigator in telecom cases is sometimes key to getting good advice about how the doctrine is invoked in your particular circumstance.

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Good Luck and Success in the Industry.



•• Ed Maldonado is a principal of Maldonado & Glenn, a telecom legal firm. He can be reached atinfo@4counsel.net.

Send all of your Legal Line questions tolegalline@prepaidpress.com.

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