Sprint Communications v. APCC Services, Inc. (07-552)

Oral argument: April 21, 2008

Appealed from: United States Court of Appeals for the District of Columbia Circuit (2007)

ARTICLE III STANDING, PRUDENTIAL STANDING DOCTRINE, ASSIGNMENT, TELECOMMUNICATIONS ACT OF 1996

The Telecommunications Act of 1996 requires long-distance telephone companies, such as Sprint and AT&T, to fairly compensate payphone service providers (PSPs) when consumers use the companies' access codes to complete long-distance calls on payphones. About 1,400 PSPs assigned their rights "of collection" to a third-party aggregator, American Public Communications Council Services (APCC), in order for APCC to sue Sprint and AT&T for inadequate compensation on the PSPs' behalf. While the District Court for the District of Columbia initially dismissed APCC's suit for lack of standing under Article III, Section 2 of the Constitution, it later vacated its ruling and denied the motion to dismiss. The Court of Appeals for the District of Columbia Circuit ultimately found that APCC had standing to sue as well as the private right to sue in federal court.

On appeal, the Supreme Court will determine whether an assignment of claims "for purposes of collection" establishes standing for a third-party assignee.  The Court will examine whether APCC meets the standing requirements of injury-in-fact and redressability.  A decision for APCC could allow future parties to bring collective suits while bypassing legislative safeguards, such as those established for class actions. On the other hand, a decision for Sprint and AT&T may frustrate enforcement of the Telecommunications Act by preventing efficient collection efforts.

Question(s) presented

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.

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Issue(s)

Does an assignment of a claim "for purposes of collection" gives an otherwise uninvolved third-party assignee sufficient interest under Article III to bring a lawsuit in its own name?

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Facts

The Communications Act of 1934, codified at 47 U.S.C. Chapter 5, created the Federal Communications Commission (FCC), an independent federal agency regulating interstate and international radio, television, wire, satellite, and cable communications. Congress amended the Act in 1990 by passing the Telephone Operator Consumer Services Improvement Act, codified at 47 U.S.C. § 226, which forces payphone service providers (PSPs) to allow payphone users to place long-distance calls from payphones using access codes. These "dial-around" calls cost less than the long-distance telephone service offered directly by PSPs. See Brief for Petitioners at 4. PSPs received no payments for dial-around calls made from their payphones. See APCC Services, Inc. v. Sprint Communications Co., 418 F.3d 1238 (D.C. Cir. 2005). As a result, Congress passed the Telecommunications Act of 1996, codified at 47 U.S.C. § 276, which required the FCC to draft regulations that would ensure fair compensation by long-distance telephone companies to PSPs for all completed payphone calls, including dial-around calls made with 800 subscriber or access codes.

As the United States Court of Appeals for the District of Columbia Circuit explained in its 2005 APCC Services decision, however, the regulation the FCC eventually developed was "only half the battle for the PSPs . . . their challenge [was] to collect." 418 F.3d at 1241. PSPs worked with "aggregators," intermediary companies between the PSPs and long-distance carriers, to collect payments for dial-around calls. See id. The largest aggregator, American Public Communications Council Services, (APCC Services) represents 1,400 PSPs. See id. In exchange for a fee, these aggregators billed the long-distance carriers and passed the collected dial-around compensation payments to the PSPs. See id. When the aggregators had difficulty collecting payments from the long distance carriers, the PSPs signed "Assignment and Power of Attorney" agreements with the aggregators. See id. These agreements assigned the PSPs' rights and claims to the aggregators for the purposes of collecting dial-around compensation. See id.

After obtaining the PSPs' assignment of rights, the aggregators, including APCC Services, jointly sued long-distance carriers such as Sprint Communications and AT&T for violations of the FCC's dial-around compensation regulations. See id. In 2003, the United States District Court for the District of Columbia, on AT&T's motion, originally dismissed the aggregators' lawsuit for lack of standing. See id. Under Article III, Section 2 of the United States Constitution, only parties that have actually suffered an injury that the lawsuit will redress have standing to sue. See Brief for Petitioners at 12. The district court, however, later vacated its ruling and denied AT&T's motion. See APCC Services, 418 F.3d at 1242. The district court also denied another aggregator's motion to dismiss for lack of a private right of action under 47 U.S.C. § 276 and the FCC regulations for dial-around compensation. See id. After these denials, the district court allowed an interlocutory appeal to the Court of Appeals for the D.C. Circuit. See id.

On appeal, the D.C. Circuit reversed the denials of these motions to dismiss, holding that although the aggregators had standing to sue the long-distance carriers because the PSPs had validly assigned their claims to the aggregators, the aggregators had not cited any Communications Act sections that provided a private right to sue in federal court for dial-around compensation. See id. at 1249-50. In 2007, the Supreme Court granted the aggregators' petition for certiorari, vacated the D.C. Circuit's 2005 decision, and remanded the case to the D.C. Circuit for reconsideration based on its 2007 decision in Global Crossing Telecommunications, Inc. v. Metrophones Telecommunications, Inc. See APCC Services, Inc. v. Sprint Communications Co., 489 F.3d 1249 (D.C. Cir. 2007). In Global Crossing, the Supreme Court held that § 201(b) and § 207 of the Communications Act of 1934 provides PSPs with a private right of action in federal court against long-distance carriers for violation of the FCC's dial-around compensation regulations. See 127 S. Ct. 1513, 1516 (2007).

On remand, based on Global Crossing, the D.C. Circuit held that the aggregators could bring their claims against the long-distance carriers in federal court and remanded the case to the district court. See APCC Services, 489 F.3d at 1250. Sprint, AT&T, and the other long-distance carriers then appealed to the Supreme Court based on the D.C. Circuit's 2005 holding, over Judge Sentelle's dissent, that the PSPs' assignment of claims gave the aggregators standing to sue. See Petition for Certiorari at i, 6-9. The Supreme Court granted certiorari to decide whether the PSPs' assignment of claims "for purposes of collection" creates standing for the assignee aggregators litigating "on behalf of" the PSPs. See Questions Presented, Sprint Communications v. APCC Services, Inc., No. 07-552 (petition for certiorari granted Jan. 4, 2008).

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Discussion

Can a company transfer its Article III right to bring a lawsuit to an otherwise uninvolved third party? In Sprint Communications v. APCC Services, Inc., the Supreme Court will determine if payphone service providers' (PSPs) contracts for collection with third-party aggregators give the aggregators standing to sue long-distance telephone companies over payments. The Court's decision in Sprint Communications may help define when a broad assignment of legal rights gives an assignee third party sufficient interest to bring a lawsuit in its own name.

Sprint and AT&T ("Sprint") argue that American Public Communications Council Services ("APCC") and the other aggregators do not have Article III standing to bring a claim because APCC has not personally suffered an injury, nor shown any injury that will be redressed through the lawsuit. See Brief for Petitioners at 18, 22-23. Further, Sprint contends that the prudential standing doctrine prevents APCC's lawsuit because it involves a dispute over third-party monetary compensation, the PSPs can bring suit themselves, and that APCC is not within a "zone of interest" created by Congress. Id. at 44, 49-51.

APCC responds, however, that the PSPs' assignments transferred all of the PSPs' rights, title, and interest in their dial-around compensation claims. See Brief for Respondents at 16-17. APCC argues that this assignment of title creates standing to assert the collection claims regardless of the use of the recovery, and that federal courts have long permitted assignees to pursue these types of claims. See id. at 24-25, 30-31. Finally, APCC maintains that no reasons exist in this case to deny standing to APCC, and that Sprint's concerns about discovery and inability to bring counterclaims against the assignor PSPs are not substantial. See id. at 48, 55-56.

A decision for APCC could lead to third-party litigation that avoids the protections Congress and the judiciary established in rules that govern the filing of lawsuits on others' behalf. See Brief for Petitioners at 44-45. For example, representative parties like APCC could avoid Federal Rules of Civil Procedure Rule 23, which provides safeguards in class action lawsuits, and Rule 17, which explains that lawsuits must be conducted "in the name of the real party in interest." See id. at 42, 56. In this case, the individual long distance carriers may need class action safeguards because 1,400 PSPs consolidated their risks and effort by assigning their rights to sue to a single organization, APCC. See Brief of Amicus Curiae Qwest Communications Corp. In Support of Petitioners at 3-4. If the Court affirms that the PSPs' assignments provided APCC with Article III standing, other similarly situated companies could collectively exploit the advantages of class actions by simply assigning their rights to a representative third party while circumventing the burdensome safeguards of actually filing a class action suit. See Brief for Petitioners at 56.

A decision for Sprint, however, may prevent companies from collecting compensation by upsetting a long tradition of allowing assignees to sue to recovery money from commercial transactions. See Brief for Respondents at 24, 33-34. Lawsuits based onassignments for collection, such as the PSPs' assignments of their legal rights to APCC, may be the best, or only, means to collect compensation owed under the law. See id. at 44. If the Court holds that assignment of legal rights does not confer standing on a third party,assignees-for-collection could lose an efficient, established alternative to onerous requirements for bringing a class action lawsuit. See id. at 44-46. In this case, for the PSPs, "the reality [is] that, if these cases cannot be brought together, the vast majority will never be brought at all," thus preventing PSPs from collecting compensation owed under the Telecommunications Act by long-distance companies. See id. at 50.A decision for Sprint that assignment contracts do not provide sufficient interest for the assignee to bring a lawsuit may prevent some individuals and companies from bringing lawsuits because they lack the resources to file suits themselves. See id.

The future impact of Sprint Communications on PSPs and telephone companies may be limited.  Cell phones continue to replace pay phones, and some telephone carriers such as AT&T are leaving the pay phone market. See Jeffry Bartash, AT&T To Quit the Pay-Phone Business, Dec. 3, 2007. The outcome of Sprint Communications, however, has implications for any company that wants to pursue, or must defend, lawsuits brought by third parties whose only connection to cases is through assignments contracts.

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Analysis

I.          Whether Respondent APCC aggregators establish standing under Article III

Article III, Section 2 of the Constitution provides that the judicial power extends to all "Cases" and "Controversies." One component of this case-or-controversy requirement is that a plaintiff must establish standing to bring a suit in federal court. Brief for Petitioners at 16. To establish standing, the plaintiff has the burden to show (1) a personal "injury-in-fact" of a "legally protected interest," and (2) that the injury could be redressed by a favorable decision. See id. at 12-13.

A.         Whether Respondent APCC has established an "injury-in-fact"

Petitioners Sprint and AT&T ("Sprint") argue that Respondent American Public Communications Council Services ("APCC") fails the first prong of the standing test because APCC has not suffered any personal injuries-in-fact. Brief for Petitioners at 18. Sprint maintains that the payphone service operators ("PSPs") assigned to APCC only the right "of collection," and that such assignments do not transfer the PSPs' injuries. Id. Sprint argues that an interest only in litigating on behalf of a third party does not fulfill the injury-in-fact requirement. Id. at 32-33. Rather, APCC's motivation to enforce the law on behalf of its clients makes APCC no different than the clients' lawyers and "at best concerned bystanders." Id.at 33. In fact, Sprint argues, the assignment documents between the PSPs and the aggregators are nothing more than a contract for legal services. Id. at 35. In addition, Sprint argues that APCC fails to establish that the assignment made a complete transfer of the PSPs' injuries because the terms of the collection agreement explicitly advise the PSPs that they can take back their claims and pursue them on their own simply by discontinuing payment of litigation fees. See id. at 36.

Respondent APCC, on the other hand, argues that it does establish an injury-in-fact. APCC argues that the "Assignment and Power of Attorney" agreement ("APOA") between the aggregators and the PSPs assigned to APCC all rights, title, and interest in the PSPs' compensation claims against Sprint, including the PSPs' injuries-in-fact. See Brief for Respondents at 16-19. In addition, APCC notes that the APOA binds the PSPs to final judgments or settlements, and that the assignments cannot be revoked without the written consent of the aggregators. See id. at 18.Consequently,APCC argues that this complete transfer of legal title confers standing to APCC. See id. at 24. APCC emphasizes that the initial APOA contract assigns irrevocable legal title to the damages to APCC, and that the APOA is separate from APCC's later decision in the second agreement to turn over the litigation proceeds to the PSPs. See id. at 21-24. APCC further clarifies that only the cover letter to the agreements mentions the possibility that APCC might no longer represent a PSP in litigation, and that only in cases with prospective claims would a PSP be able to pursue the claim on its own. See id.at 23. In addition, APCC reiterates the D.C. Circuit's finding that APCC controls when this can occur, either by repudiating the assignment itself or giving consent to the PSP to withdraw. See id.

B.         Whether APCC has established redressability by a favorable decision

Furthermore, APCC maintains that because it has legal title to the litigation proceeds, it has legal authority to direct the proceeds how it wants. See Brief for Respondents at 21. In addition, APCC points out that the direction of the proceeds is determined by a contract between it and the PSPs, and does not involve Sprint or other third-party beneficiaries. See id. Furthermore, APCC contends that Sprint cannot cite to any cases where assignees who have legal title to their claims lack standing because of how they plan to use the litigation proceeds. Id. at 24. APCC cites to Vermont Agency of Natural Resources v. United States ex rel. Stevens to argue that the Court there rejected the bounty (i.e., opportunity for redress) as a basis for standing because it was an interest that was merely a "byproduct" of the suit itself. See id.at 27. Instead, APCC argues, the Court there found that the doctrine that an assignee has standing to assert the injury-in-fact suffices to establish standing. See id.at 24. Furthermore, APCC contends that this practice of allowing assignees-for-collection to bring suits in federal court was established when the Constitution was ratified and has been long recognized by federal courts. Id. at 30-31.

Conversely, Sprint argues that APCC has not suffered a redressable injury because the aggregators lack a direct and personal stake that can be redressed by a judgment in its favor. Brief for Petitioners at 18-19. Sprint maintains that the Court in Vermont Agency held that both the opportunity for redress and the injury-in-fact were critical to the decision. <cite?> Sprint contrasts Vermont Agency with Steel Co., where the Court held that a party lacked standing where injury-in-fact was paired with only a "request for relief that would be worthless to respondent or that would be paid to a third party." Id. at 25-26. Consequently, Sprint contends that APCC would have standing only if the assignments transferred the full legal right and title to both the claim and the recovery. See id. at 22. However, APCC' assignment merely "for collection" does not transfer the right and title to recovery, as the assignments require the aggregators to turn over any proceeds acquired from the litigation. See id.at 23. Sprint argues that here, as in Steel Co., APCC stands to "gain absolutely nothing" from the judgment. Id.Furthermore, Sprint maintains that parties may not manipulate their contracts to evade the Constitution's standing requirements, and that the Court examines the practical reality of the parties' status, looking past a plaintiff's formal legal status to determine whether there is a genuine stake in the litigation. See id. at 27-28.

II.        Whether allowing standing would violate the doctrine of prudential standing

Sprint contends that even if the Court finds APCC to have met the Article III requirements, APCC should still be denied standing because it would violate the doctrine of prudential standing. See Brief for Petitioners at 43-44. This judicially created doctrine serves to protect the institutional interests of the federal judiciary by self-imposing limits on its jurisdiction. Id.Thus, Sprint argues, even when a party has standing under Article III, federal courts may still decline to hear the case under the prudential standing doctrine. Id. Sprint maintains that APCC's attempt to establish standing violates three core elements of the doctrine. First, Sprint contends, APCC is litigating on behalf of third parties, which prevents full and fair litigation by creating the risks of lack of concrete adverseness, lack of meaningful discovery and the failure of the third parties to comply with the judgment. See id.at 46-48. Second, the doctrine dictates that bringing suit on behalf of third parties should be allowed only when third parties are unable to "advance their own interests." Id. at 49. Here, Sprint argues, the PSPs are fully capable of suing on their own, and at least one PSP is doing so in this case. Id. at 50. Sprint contends that consolidating the claims into a single lawsuit for "efficiency" reasons "may simply be another way of saying [the PSPs] lack motivation." Id. If the PSPs want to file collectively, they should file jointly or under a class action under Federal Rule of Civil Procedure 23, which provides safeguards to protect all of the parties' interests. Id. at 49, 54-58. Lastly, Sprint argues, APCC does not fall within the "zone of interests" that Congress intended to protect under law. Id. at 51. The Telecommunications Act and FCC's regulations concern only the long-distance carriers and PSPs, and do not extend to aggregators such as APCC. See id.

APCC, on the other hand, argues that the doctrine of prudential standing does not provide any reasons to depart from the established principle that assignees-for-collection can bring federal claims. Brief for Respondents at 42. First, APCC maintains that their claims establish concrete adverseness because they have a genuine stake in the litigation. Id. at 43. APCC argues that their interests are akin to those of the PSPs in their mutual financial interests in collecting compensation owed and in maintaining the long-standing business relationships between them. See id. In addition, APCC maintains that Sprint's alleged difficulties with obtaining discovery are exaggerated because Sprint in fact has received discovery from individual PSPs. Furthermore, Sprint is in the best position to acquire and already has the information necessary to prove liability and damages. See id. at 48-51. Second, APCC argues that the assignments for collection are not only the most fair and efficient method to obtain compensation owed, but are for many PSPs the only method, as PSPs are typically small businesses who lack the resources to track their compensation owed or pursue claims independently. See id.at 3, 44. In addition, APCC maintains that the problems related with class actions and the doctrine of associational standing do not exist where, as here, the assignors have voluntarily and expressly transferred all of their rights, title, and interest in their claims. See id. at 44-46. Lastly, APCC contends that they do fall within the "zone of interests" because their claims "fulfill the mandate of Congress that PSPs be compensated" and "effectuate the FCC's remedial scheme." See id. at 43-44.

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Conclusion

The Supreme Court's decision will determine whether an assignment of claims "for purposes of collection" establishes standing for a third-party assignee. In addition to determining whether APCC meets the standing requirements of establishing injury-in-fact and redressability, the Court may look at the broader implications and examine whether allowing APCC standing would violate the doctrine of prudential standing. On one hand, a decision for APCC could allow future parties to bring collective suits while bypassing legislative safeguards, such as those established for class actions. Conversely, a decision for Sprint and AT&T may prevent efficient and effective collection efforts by PSPs for compensation owed under the Telecommunications Act.

Authors

Prepared by: Hana Bae and Courtney Zanocco

Edited by: Heidi Guetschow

Acknowledgments

Additional Sources

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