Federal Internet Law & Policy
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Notes: Sec. 201, 202 (Discrimination) Dont be a FOOL; The Law is Not DIY

Section 201 Reasonable and Just

Erdman Technologies Corporation v. US Sprint Communications Company, Order on Reconsideration, 15 FCC Rcd 7232, 7245-46 (1999).

Section 202 Discrimination

Section 202(a) provides:

It shall be unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.

47 U.S.C. §  202(a).  The district court instructed the jury, and the parties do not dispute, that a §  202(a) claim consists of three elements: (1) whether the services are "like";  (2) if so, whether the services were provided under different terms or conditions;  and (3) whether any such difference was reasonable.  See NCA II, 1998 WL 851588, at *1;  see also MCI Telecomms. Corp. v. FCC, 917 F.2d 30, 39 (D.C.Cir.1990).
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The district court instructed the jury that, while NCA would bear the burden of proof on the first two of the three elements that comprise a §  202(a) claim, AT & T would bear the burden of proving the last one:

First, NCA must prove that both NCA and another AT & T customer or class of customers took services that are like one another.  Second, if the services in question are like one another, NCA must prove that AT & T provided like services to another customer or class of customers under different terms or conditions than those offered or provided to NCA. And third, if NCA has proved these first two elements, then AT & T must prove that any difference in treatment with respect to the like services was not unreasonable or unjust.

NCA II, 1998 WL 851588, at *1 (emphasis added).  AT & T argues that it was error for the court to have required it to bear the burden of showing that any discrimination was reasonable.
        The Court of Appeals for the D.C. Circuit has stated in the §  202 context that "[i]f the services are 'like,' the carrier offering them has the burden of justifying the price disparity as reasonable."  MCI, 917 F.2d at 39. Because the MCI court decided ultimately that the services were not "like" one another, its discussion of the burdens is dicta.  However, in an earlier case, not cited by the parties, the same court held that the FCC did not err when it placed the burden of proof on the carrier to justify a difference in rates for like services.  See Am. Trucking Ass'ns, Inc. v. FCC, 377 F.2d 121, 133 (D.C.Cir.1966).  The court in American Trucking justified the burden-shifting under §  202 as "in accord with rulings usually applied when a party comes forward with an affirmative defense to a prima facie illegality."  Id. at 133.
        The FCC in its amicus brief similarly characterizes a complaining party's proof of the first two "elements"--"likeness" of service and discrimination in treatment--as "establish[ing] a prima facie case of discrimination" requiring a justification from the carrier.  The FCC's characterization is supported by, among other things, this court's recognition in Western Union  Int'l Inc. v. FCC, 568 F.2d 1012 (2d Cir.1977), that because the two services before us were "like," such that they shared a "functional similarity," there was "good cause to suspect that there was little justification for [a] large difference in the rates charged[.]"  Western Union, 568 F.2d at 1017-18 & n. 11.
          The concept of the shifted burden as an affirmative defense is also found in the context of analogous anti-discrimination provisions.  In Trailways of New England, Inc. v. Civil Aeronautics Bd., 412 F.2d 926, 932 & n. 13 (1st Cir.1969), the First Circuit Court of Appeals drew an analogy between the Federal Aviation Act of 1958 ("FAA"), 49 U.S.C. §  1374(b), the Interstate Commerce Act of 1887 ("ICA"), 49 U.S.C. § §  10741(a) and (b), and the CA, and it held that the shifting of the "affirmative burden of showing ... that the discrimination is justified" under FAA is analogous to rules under other non-discrimination provisions that "place[ ] upon the carrier the burden of disproving discrimination by the affirmative defense of competitive need, once the complaining party establishes a prima facie case of discrimination."
           Persuaded by these authorities and the underlying rationales for assigning burdens, we hold that the district court properly placed the burden on AT & T to prove that any discrimination between resellers and its commercial customers in the provision of like SDN services was reasonable.  See also Western Union, 568 F.2d at 1018-19 ("[O]nce the FCC demonstrated a basis for its determination of likeness, the burden shifted to the [party defending the disparity in treatment] to disprove the discrimination in their favor."); American Broad. Cos. v. FCC, 663 F.2d 133, 139 (D.C.Cir.1980) (noting that once likeness and price difference had been shown, "the Commission shifted the burden to AT & T to justify the discrimination").
      As its amicus brief to this court chronicles, the FCC has consistently supported the MCI court's assignment of burdens in §  202(a) cases.  See, e.g., Bowles v. United Tel. Co. of Mo., 12 FCCR. 9840, at   20 & n. 81 (1997);  Panamsat Corp. v. Comsat Corp., 12 FCCR. 6952, at   34 & n. 90 (1997);  Allnet Communication Servs., Inc. v. U.S. West, Inc., 8 FCCR. 3017, at   38 & n. 87 (1993);  In re Competition in the Interstate Interexchange Marketplace, 6 FCCR. 5880, at   132 & n. 216 (1991).  We find the FCC's consistent practice to be persuasive.  See Aguirre v. INS, 79 F.3d 315, 317 (2d Cir.1996) (following an agency interpretation even though not required to do so by Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)).
    While the reasoning behind assigning such burdens is often obscure, see 2 John W. Strong, McCormick on Evidence §  337, at 415 (5th ed.1999) ("there is no key principle governing the apportionment of the burdens of proof");  see also Wilkins v. Am. Ex. Isbrandtsen Lines, Inc., 446 F.2d 480, 484 & n. 9 (2d Cir.1971), here we believe three rationales support placing the burden on AT & T. First, all else being equal, the burden is better placed on the party with easier access to relevant information.  See Ralph K. Winter, Jr., The Jury and the Risk of Nonpersuasion, 5 Law & Soc'y Rev. 335, 335 (1971);  McCormick §  337, at 413;  21 Charles A. Wright & Kenneth W. Graham, Jr., 21 Federal Practice and Procedure:  Evidence §  5122, at 557 (1977 & Supp.2000).  AT & T unquestionably has better access to facts showing that the delay differential between resellers and commercial customers was reasonable. Moreover, in applying a similar burden shift to other sections of the Act, the FCC has considered *131 information asymmetry.  See, e.g., In re Implementation of the Non Accounting Safeguards of Sections 271 and 272 of the Communications Act of 1934, 11 FCCR. 21,905, at   348-49 (1996).  Second, all else again being equal, courts should avoid requiring a party to shoulder the more difficult task of proving a negative.  "The general rule is that the party that asserts the affirmative of an issue has the burden of proving the facts essential to its claim."  Auburndale State Bank v. Dairy Farm Leasing Corp., 890 F.2d 888, 893 (7th Cir.1989).  Following this principle, it is preferable to require AT & T to prove the reasonableness of any discrimination in the provision of like services, rather than requiring NCA to prove unreasonableness.
       Third, the policies underlying the statute at issue are appropriately considered by courts when allocating the burden of proof.  See Federal Practice and Procedure §  5122, at 557.  Here, the Congressional concern in enacting the CA generally, and §  202(a) specifically, was to eliminate the use of monopolistic power to stifle competition.  See, e.g., S.Rep. No. 73781, at 4 ("Section 202 ... make[s] unjust discrimination and undue preference unlawful");  see also MCI Communications Corp. v. AT & T Co., 462 F.Supp. 1072, 1079-80 (N.D.Ill.1978) ("Congress concentrated on vesting the FCC with sufficient powers to insure that AT & T provided telephone users, both public and private, with nondiscriminatory and reasonable rates and with efficient, rapid and uniform service." (footnote omitted)).  Accordingly, in view of the CA's disapproval of anti-competitive conduct, it is appropriate to shift the burden to AT & T to prove that it did not discriminate against NCA. Cf. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 608-09, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985) (In the antitrust context, the burden of establishing a legitimate business justification for the conduct is placed on the defendant.).
          Moreover, such burden allocation is particularly appropriate in situations like this one, where the common carrier has allegedly discriminated against a customer with which it is also in competition.  See Cities of Bethany, Bushnell et al. v. FERC, 727 F.2d 1131, 1140-41 (D.C.Cir.1984);  18 C.F.R. §  2.17(e) (burden-shifting furthers the policy of the anti-discrimination provision of the Federal Power Act in price-squeeze situations, where a dominant utility supplier competes with a wholesale customer in a retail market).  Taking all these factors into consideration, we find that the district court properly assigned to AT & T the burden of proving that the difference in provisioning like SDN services was justified.
          AT & T raises several objections to such a rule.  It argues that the FCC has not consistently shifted the burden of persuasion on the justification element.  In Connecticut Office of Consumer Counsel v. AT & T Communications, 4 FCCR. 8130 (1989), the FCC noted that

[i]n a complaint proceeding, the complainant has the burden of proof.  This burden does not shift to the defendant once the complainant has proved that the services are like.... [I]t is the burden of proceeding which shifts to the defendant after the complainant has established a prima facie case and not the burden of proof.

Id. at   19.  AT & T also relies on Connecticut Office and its progeny to further argue that is should not carry the burden of persuasion but rather the burden of production.  See IT & E Overseas, Inc. v. Micronesian Telecomms. Corp., 13 FCCR. 16,058, at   5 (1998);  US Sprint Communications Co. v. Pacific Bell Tel. Co., 9 FCCR. 7767, at   14 (1994); Clark Bader, Inc. v. Pacific Bell, 8 FCCR. 4202, at   8 (1993);  ACC Long Distance Corp. v. Yankee Microwave, Inc., 10 FCCR. 654, at   31 (1995);  General Communications Inc. v. Alascom, 3 FCCR. 700,705, at   33 (1988).
        We reject these arguments.  General Communications was decided before the decision in MCI, and the FCC has argued convincingly that it has subsequently adhered to MCI's burden-shifting scheme, see cases cited supra, a fact which AT & T concedes in response to the FCC's brief in this case.
         AT & T also points to our decision affirming the FCC's Connecticut Office decision in Connecticut Office of Consumer Counsel v. Fed. Communications Comm'n ("Connecticut Office II"), 915 F.2d 75 (2d Cir.1990).  In that case, Connecticut customers argued that AT & T had unreasonably passed on to them a Connecticut gross receipts tax, thereby increasing their interstate telephone rates as compared to customers in other states.  By quoting selectively from our decision affirming the denial of the Connecticut customers' §  202(a) claim, AT & T argues that we "reject[ed] ... out of hand" the consumers' argument that "the Commission should have assigned AT & T the burden of proving that the [price differential] was either a 'business necessity' or the least discriminatory means of serving the desired end."  See Connecticut Office II, 915 F.2d at 80.  However, the argument that we characterized there as "border[ing] on the ridiculous" was not the burden- shifting argument at issue here;  it was the quite different contention that the FCC should have used disparate impact analysis in its consideration of a §  202(a) discrimination claim.  Id. To be sure, disparate impact analysis under Title VII does include shifting a burden (of production) to the defendant to justify discrimination.  See EEOC v. Joint Apprenticeship Comm., 186 F.3d 110, 120-21 (2d Cir.1999).  But the proposition we rejected in Connecticut Office II was the broader one that disparate impact analysis, which is designed to ferret out facially neutral employment practices that in fact discriminate invidiously, should be imported wholesale into "this very different area." Id.
         Finally, we reject AT & T's argument that the availability of more powerful discovery procedures in district court requires NCA to bear the burden of proof on all three elements of its §  202 claim even if it is appropriate to shift the burden of proof in an FCC proceeding.  As discussed above, assigning the burden of proof may ameliorate an information asymmetry, and discovery procedures are likewise designed to provide a party access to information possessed by its adversary.  Access to discovery may therefore be an appropriate consideration when assigning burdens of proof.  However, we do not think that the availability of greater discovery in district court, as compared to the FCC, demands a different outcome in this case.  First, it is not clear to us that the FCC's discovery procedures are as anemic as AT & T claims.  See 47 C.F.R. §  1.729 (providing for discovery in FCC complaint proceedings against common carriers);  IT&E Overseas, 13 FCCR. 16,058, at   16 ("The Commission's rules provide for discovery where the most probative evidence of an alleged violation is solely within the possession of a defendant carrier.").  Second, as we have noted above, information asymmetry, while a factor, is rarely a controlling factor when assigning burdens.  Our conclusion is supported by the historical observation that expanded discovery has not generally led to reallocation of burdens:

Expanded pretrial discovery would seem to have diminished greatly whatever importance [information asymmetry] had in allocating the burdens. However, there has been no rush by the courts to reassess allocations between the parties in light of expanded discovery, perhaps attesting to the fact that exclusive knowledge in one party has seldom been *133 the controlling reason for assigning the burdens of proof.

McCormick §  337, at 413 n. 11.
---National Communications Association, Inc., v. AT&T Corp., 238 F3d 124 (6th Cir. 2001)

AT&T Corp. v. Business Telecom, Inc.; Sprint Communications Company, L.P. v. Business Telecom, Inc., Memorandum Opinion and Order, 16 FCC Rcd 12312, 12323-24 (rel. May 30, 2001) Carriers similarly situated create an expectation of similar treatment

   13.  An inquiry into whether a carrier is discriminating in violation of section 202(a) has three prongs. The complainant has the burden of persuasion to establish that (1) the services at issue are "like", and (2) there is disparate pricing or treatment between the "like" services. If the complainant succeeds in establishing the first two prongs, thereby making a prima facie showing of discrimination, the defendant has the burden of persuasion to establish that (3) the disparity is not unjust or unreasonable.
-- Metrocall, Inc. v. WorldCom, Inc., Memorandum Opinion and Order, 15 FCC Rcd 10826, 10830 (June 19, 2000)