In the UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT ---------------------------------------------------------------- SORENSON COMMUNICATIONS, INC., ) Petitioner ) v. ) Nos. 08-9503 ) 08-9507 FEDERAL COMMUNICATIONS COMMISSION ) 08-9545 and UNITED STATES OF AMERICA, ) Respondents ----------------------------------------------------------------- SUPPLEMENTAL OPPOSITION OF FEDERAL COMMUNICATIONS COMMISSION TO PETITIONER SORENSON’S CORRECTED MOTION FOR STAY Respondent Federal Communications Commission opposes the corrected motion for stay filed by petitioner Sorenson Communications, Inc. on September 23, 2008. BACKGROUND In 2007 and 2008, the Commission released orders that, in relevant part, interpret Commission regulations limiting the use of consumer information that Sorenson and other companies obtain solely because of their participation in a federal program – Telecommunications Relay Services (“TRS”) – that provides telecommunications services for persons with hearing and speech disabilities, as well as the use of federal money they receive in order to provide such services. Telecommunications Relay Services, 22 FCC Rcd 20140 (2007) (2007 Declaratory Ruling); Telecommunications Relay Services, 23 FCC Rcd (2008) (2008 Declara- tory Ruling). 2 Sorenson filed petitions for review of both orders and, on July 25, asked the Court for a stay of the relevant portions of the orders. The Commission filed its opposition on August 19. On September 19, the Court denied Sorenson’s stay request because it did not include mandatory showings specified in the Court’s rules, namely the bases for the agency’s and the Court’s jurisdiction. See Sorenson Communications v. FCC, No. 08-9503 (and consolidated cases), Order (Sept. 19, 2008) (citing 10th Cir. R. 8.1(A) and 10th Cir. R. 18.1). On September 23, Soren- son sought leave to file a corrected motion for stay, which the Court granted on October 7. The Court, at the same time, granted the Commission’s request that it have an opportunity to update its opposition to the stay motion. In the meantime, briefing on the merits of the case nearly has been com- pleted. Sorenson and GoAmerica, Inc. (another petitioner) filed separate opening briefs on September 8. Respondents’ brief was filed on October 17, and petition- ers’ reply briefs are due November 7. The Commission incorporates by reference its previous stay opposition, and files this supplement only to address additional points made relevant both by the passage of time between the two stay requests and by the filing of Sorenson’s brief on the merits. 3 DISCUSSION A. STAY OF THE FCC’S ORDERS IS UNNECESSARY AT THIS TIME. As the Commission demonstrated in its initial stay opposition, Sorenson’s irreparable harm showing was inadequate. See FCC Stay Opp. at 18-20. That showing has grown even weaker with the passage of time. When Sorenson filed its first stay motion, completion of briefing in this case was still months off. Now, however, briefing will be completed in only two weeks. The changed calendar now presents Sorenson with an adequate alternative to a stay: expedited oral argument (to which the Commission would consent) and deci- sion on the merits. In that way, Sorenson could secure a relatively quick ruling on its First Amendment (and other) claims without resort to the Court’s extraordinary equitable powers. Given the other procedural options open to it at this point, Sorenson cannot demonstrate that it would be irreparably harmed absent a stay. We believe that the Court could deny Sorenson’s renewed stay motion on this basis alone. In the alter- native, the Court could refer Sorenson’s stay motion to the merits panel, which would be free to address the motion as it saw fit after argument. B. SORENSON HAS FAILED TO DEMONSTRATE THAT STAY OF THE FCC’S ORDERS PENDING JUDICIAL REVIEW IS WARRANTED. The Commission’s initial stay opposition demonstrated that Sorenson had failed to demonstrate a likelihood of success on the merits of any of its claims. See FCC Stay Opp. at 6-17. We here make two additional points. 4 1. Sorenson’s Corrected Stay Motion argues that a stay is warranted because “the restrictions were adopted without the notice and comment that the APA requires.” Corrected Stay Mot. at 16. We explained in our initial opposition that this argument failed because Sorenson was challenging only “interpretative” or “declaratory” rulings, neither of which require notice and comment. See FCC Stay Opp. at 9-10. Sorenson has now implicitly conceded the point: its opening brief on the merits abandons the APA notice claim entirely. Sorenson obviously does not believe it has a substantial likelihood of success on the merits of a claim on which it is not even seeking a ruling on the merits. 2. Sorenson’s Corrected Stay Motion argues that the Commission’s reliance on Rust v. Sullivan, 500 U.S. 173 (1991), for the proposition that the government can permissibly insist that federal dollars support federal purposes was misplaced because TRS providers were not government grantees but instead contractors com- pensated for “services rendered.” Corrected Stay Mot. at 10. In our initial opposi- tion, we pointed out that this distinction, even if true, offered no help to Sorenson in its challenge to the portion of the orders involving its use of customer informa- tion for its own purposes. See FCC Stay Opp. at 12. We also demonstrated that neither Rust nor subsequent decisions supported any such distinction. See id. at 12- 15. Sorenson’s opening brief on the merits highlights another reason why its grantee-contractor dichotomy provides no assistance to Sorenson here: Even if 5 that distinction was one of First Amendment significance, Sorenson, as a func- tional matter, would fall on the grantee side of the line. Sorenson has now con- ceded in its merits brief that TRS payments are “‘designed to compensate TRS providers for reasonable costs of providing interstate TRS.’” Sorenson Br. at 23, quoting 47 C.F.R. § 64.604 (c)(5)(iii)(E). Explaining the rule highlighted by Sorenson, the Commission has stressed that the TRS “compensation rate is not a ‘price’ that is charged to, and paid by, a service user, but rather is a settlement mechanism to ensure that providers are compensated from the Fund for their actual reasonable cost of providing service.” 2007 Declaratory Ruling. 22 FCC Rcd at 20155 ¶ 25 (emphasis added). The Commission has issued “[s]pecific [g]uidelines on [a]llowable [c]osts” and said that companies such as Sorenson that “only offer relay services” should be compensated only for “costs [that] are reasonable and necessary to the provision of relay service.” Id. at 20175 ¶ 73 & n.197. Sorenson has now made clear in its opening brief that it is “not challenging any of the determinations regarding rates and rate methodologies” in that ruling, Br. at 8 n.2, including the determination that the rate the Commission adopted is intended to compensate Sorenson only for its “actual” cost of providing service. Given the (uncontested) nature of the TRS compensate rate, it was entirely reason- able and consistent with the First Amendment for the Commission to expect pro- viders to use the money received to actually provide service. There should not be excess money to engage in lobbying or other activities “entirely irrelevant to the 6 purpose of the TRS Fund,” Corrected Stay Mot. at 11. Instead, providers should be plowing the compensation they receive back into the provision of service by, for example, attracting better qualified communications assistants and improving training, see 47 C.F.R. § 64.604(a)(1), or increasing staffing in order to reduce wait times for TRS users, see id. § 64.604(b)(2). This expectation is especially reasonable in the case of Sorenson, which represented to the Commission in comments filed in this proceeding that any rate lower than the one ultimately adopted by the Commission would result in “VRS rates below, in some cases far below, the level needed to fund providers’ reason- able costs.” 1 If Sorenson is correct that the rate it supported (and that the Commis- sion ultimately adopted) is the bare minimum required to fund its “reasonable costs” of providing service to TRS customers, then it was not unreasonable for the Commission to expect it to use that compensation to actually do so. Sorenson claims that “the FCC’s reliance on the purported need to prevent activities that are ‘inconsistent with the purpose of the TRS fund,’ 2008 Decl. Ruling ¶ 10, is pretextual” because the Commission has not specifically proscribed other expenditures “that are entirely irrelevant to the purpose of the TRS Fund.” Corrected Stay Mot. at 11. Sorenson misunderstands the Commission’s analysis. The Commission noted the background rule that “revenue from the TRS Fund, or 1 Comments of Sorenson Communications, Inc. at 8 (filed May 16, 2007), avail- able at http://fjallfoss.fcc.gov/prod/ecfs/retrieve.cgi?native_or_pdf=pdf&id_document=6519411725. 7 information obtained from end users in the provision of services supported by the TRS fund” may not be used in ways that are “inconsistent with the purpose of the TRS Fund.” 2008 Declaratory Ruling, 23 FCC Rcd at 8998 ¶ 10. This is consistent with the Commission’s pre-existing (and unchallenged) regulation stating that TRS customer data “may not be used for any purpose other than to connect the TRS user with the called parties desired by that TRS user,” 47 C.F.R. § 64.604(c)(7), and its explanation that the TRS compensation rate is intended only to cover “reasonable actual costs of providing service,” 2007 Declaratory Ruling, 22 FCC Rcd at 20145 ¶ 5. The Commission identified contacting TRS users for lobbying purposes as an example of an activity falling outside the scope of the program, but by doing so it by no means implicitly stated that all other non-program-related activities were permissible. Mainstream Marketing Services, 358 F.3d 1228, 1238 (10th Cir.), cert. denied, 543 U.S. 812 (2004) (“As a general rule, the First Amendment does not require that the government regulate all aspects of a problem before it can make progress on any front.”). Rather, the Commission sought only to focus on the aspects of the problem that seemed most important at the time – the use of custo- mer data and TRS funds for lobbying and advocacy. 2008 Declaratory Ruling, 23 FCC Rcd at 8998 ¶10 (noting that a TRS provider had “bombarded deaf persons with material seeking to persuade them to support the provider’s position on mat- ters pending before the FCC.”). The Commission’s particular focus on lobbying 8 expenses was also consistent with the longstanding ratemaking principle that “lobbying” is a cost that is “typically given special regulatory scrutiny for ratemak- ing purposes” and that “[u]nless specific justification to the contrary is given, such costs are presumed to be excluded from the costs of service in setting rates.” 47 C.F.R. § 32.7300(h)(1). CONCLUSION In consideration of the foregoing, and the Commission’s opposition to Sorenson’s initial stay request, the Court should deny the motion for stay. Respectfully submitted, Mathew B. Bery General Counsel Joseph R. Palmore Deputy General Counsel Daniel M. Armstrong Associate General Counsel /s/ C. Grey Pash, Jr. C. Grey Pash, Jr. Counsel Federal Communications Commission Washington, D. C. 20554 (202) 418-1740 October 22, 2008 9 CERTIFICATE OF DIGITAL SUBMISSION I, C. Grey Pash, Jr., hereby certify that no privacy redactions were required on this document, and the digital-form submission of this document is an exact copy of the written document filed with the Clerk. The digital version of this document has been scanned for viruses using Symantec AntiVirus version 10.1.5.5010 (10/21/2008 rev.3). /s/ C. Grey Pash, Jr. ____________________ C. Grey Pash, Jr. October 22, 2008 10 CERTIFICATE OF SERVICE I, C. Grey Pash, Jr., hereby certify that the foregoing “Supplemental Opposition Of Federal Communications Commission To Petitioner Sorenson’s Corrected Motion For Stay” was served this 22nd day of October, 2008, by electronic mail and by mailing copies by First Class United States mail to the following persons at the addresses shown: Donald B. Verrilli, Jr. Jenner & Block LLP 1099 New York Ave., N.W. – Suite 900 Washington, D. C. 20005 dverrilli@jenner.com Robert J. Wiggers U. S. Department of Justice 950 Pennsylvania Ave., NW Washington, D. C. 20530 robert.wiggers@usdoj.gov Dana Frix Chadbourne & Parke LLP 1200 New Hampshire Ave., NW Washington, D. C. 20036 dfrix@chadbourne.com /s/ C. Grey Pash, Jr. ____________________ C. Grey Pash, Jr.