On May 20 of last year, the Supreme Court issued its decision in Arlington v. F.C.C (2013). The decision settled — in favor of administrative agencies — a long-standing administrative law question: whether the Chevron doctrine applies in cases where a court must decide whether an agency was given authority by Congress to interpret and implement a particular provision within a statute.

In Chevron U.S.A. Inc. v. NRDC (1984), the Supreme Court concluded that when a court reviews an agency’s construction of the statute which it administers, it is confronted with two questions. First, applying the ordinary tools of statutory construction, the court must determine “whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.” But “if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.”

Chevron thus clearly contemplated that where Congress left an agency a statutory “gap” that it intended the agency to fill, the courts should give the agency significant latitude in choosing how best to implement the law.

But what about cases where an agency had not clearly been given authority to fill a “gap,” or where Congress’ intent was to limit an agency’s role, but the scope of the limitation was unclear? Prior to Arlington, the circuit courts and academia had disagreed as to the standard to be applied in such cases. As an administrative agency’s “gap-filling” authority is no broader than the scope of the powers delegated by Congress, some argued that it would be inappropriate to defer to the agency’s view of its own powers. That view lost in Arlington, where Justice Scalia, writing for five Justices (with three dissents and a concurrence by Justice Breyer), confirmed that Chevron makes no distinction between “jurisdictional” and “non-jurisdictional” issues. (Justice Breyer would apply different levels of deference based on an independent review by courts as to the agency’s authority to act in a particular area.)

Justice Scalia went on to emphasize that he was not suggesting that Chevron gave administrative agencies a blank slate. Instead he stated: “[t]hose who assert that applying Chevron to ’jurisdictional’ interpretations ’leaves the fox in charge of the henhouse’ overlook the reality that a separate category of ’jurisdictional’ interpretations does not exist. The fox-in-the-henhouse syndrome is to be avoided not by establishing an arbitrary and undefinable category of agency decisionmaking that is accorded no deference, but by taking seriously, and applying rigorously, in all cases, statutory limits on agencies’ authority. Where Congress has established a clear line, the agency cannot go beyond it; and where Congress has established an ambiguous line, the agency can go no further than the ambiguity will fairly allow. But in rigorously applying the latter rule, a court need not pause to puzzle over whether the interpretive question presented is ’jurisdictional.’ If ’the agency’s answer is based on a permissible construction of the statute,’ that is the end of the matter.”

Significance, Generally

The significance of the decision has been hotly debated – some suggesting that it merely reaffirms Chevron, while others argue that it will allow and encourage agencies to interpret the scope of their authority far more aggressively. What is clear is that the decision has been cited in several Court of Appeals, district court, and agency decisions involving a wide range of agencies and subject matters. Setting aside for the moment one of the most significant decisions, the “net neutrality” decision of the D.C. Circuit, the cases include  several which use Arlington to re-affirm the breadth of agency authority. One example is  Riffin v. Surface Transportation Board,  (D.C.Cir. 2013) where an applicant for rail certificate claimed common carriers had common law right to refuse to carry certain types of freight – in this case, toxic wastes. The court held the agency had authority to define the scope of common carriage obligations, and upheld the decision denying the application because the applicant indicated it would not carry toxic wastes on its proposed spur track. There have been almost a dozen more reported cases since Arlington was issued.

Perhaps more intriguing are cases which cite Arlington, but reject an agency’s reading of the law.

Zivkovic v. Holder (7th Cir 2013): in applying statute that established standards for deportation of persons convicted of crimes, the agency considered convictions that had occurred years before statute had been enacted. Rather than apply Arlington and defer to the agency view of retroactive applicability of statute, and its interpretation of what constituted a “crime of violence” that justified deportation, the majority concluded Arlington/Chevron did not apply. First: “some questions of law do not depend on agency expertise for their resolution.” The definition of “crime of violence,” the court reasoned, cross-referenced other provisions of the U.S.Code, and because the agency did not have sole authority to interpret those other provisions, the court concluded that it was not required to defer to the agency’s interpretation of the term. With respect to retroactivity, the court reasoned, “we have the benefit of a Supreme Court decision that is directly on point. In I.N.S. v. St. Cyr (2001), the Court addressed the question whether certain amendments to the INA should be applied retroactively….We only defer, however, to agency interpretations of statutes that, applying the normal “tools of statutory construction,” are ambiguous. [Chevron, 467 U.S.] at 843, n.9; INS v. Cardoza-Fonseca (1987). Because a statute that is ambiguous with respect to retroactive application is construed under our precedent to be unambiguously prospective, Landgraf v. USI Film Products (1994), [**10] there is, for Chevron purposes, no ambiguity in such a statute for an agency to resolve.”

And because there was no ambiguity the Circuit concluded: “Arlington does not drive our analysis here.”

Shweika v. Department of Homeland Security, (6th Cir. 2013) found that deference was not due where the issue is the scope of the court review of an agency action – even where the review provision is part of a statute the agency was given authority to administer.

Carter v. Welles-Bowen Realty, Inc. (6th Cir. 2013). Carter involved an action against a real estate firm that had referred a client to a real estate settlement firm in which the real estate firm owned an interest. There was no question that the firm fell within a statutory “safe harbor,” for referrals, but the referral was not consistent with guidelines that the HUD had issued as a policy statement, which established some additional conditions as to what referrals were considered bona fide. The majority concluded that no deference was owed to such guidelines pre- or post-Arlington; the concurrence found that the statute could not be read to give the agency authority to “clarify” the statutory “safe harbor” since the “rule of lenity” requires that ambiguous criminal statutes be read in favor of the accused – and thus not as a grant of administrative authority.

Significance – Telecommunications

The Arlington case began as a challenge to rules the FCC adopted to implement Section 332(c)(7) of the Communications Act of 1934, 47 U.S.C. Sec. 332(c)(7). That provision – designed to preserve local zoning authority – had an exceptionally clear legislative history, by legislative history standards. The FCC had moved to consider whether to adopt rules regulating local cell tower zoning. Congress, as part of the Telecommunications Act of 1996, considered adopting a provision that would have set standards for local zoning and allowed the FCC to implement those standards.It then rejected that approach, adopted 332(c)(7), and in the legislative history, directed the FCC to bring its pending proceeding on cell tower siting to a close.

Half a decade later, the FCC asserted it had authority to adopt standards implementing the provisions of Section 332(c)(7) (but asserted it could not go any further to regulate local zoning). The Fifth Circuit found the scope of the FCC authority to implement Section 332(c)(7) ambiguous; deferred to the agency view of its jurisdiction under Chevron; and the Supreme Court affirmed, as discussed above.

Arlington has been cited in at least three reported cases involving cell tower siting, one primarily in passing. In two of the cases, however, a critical issue was whether the denial would result in a significant gap in service that amounted to an effective prohibition of service violating Section 332(c)(7). The communities in the cases argued “gap” should be measured from the perspective of the end user (so if an area is already served by one company, there is no “gap” in service, even if a subscriber to a different company’s service cannot make calls). The companies argued that “service gap” should be measured from the provider’s perspective. The Circuits were somewhat split on the issue. However, the rules upheld in Arlington make it clear that the mere fact that service is available from one provider does not justify denial of an application for a tower from another company. Post-Arlington, the FCC rule clearly controls. Crown Castle NG East v Town of Greenburgh (2d Cir. January 17, 2014); Towercom V, LLC, v. College Park, 2013 U.S. Dist. LEXIS 126534 (U.S.D.C. N.D. Ga. 2013).

However, where Arlington’s role may prove most significant is in connection with the debate over “net neutrality.”

The FCC adopted simple rules that were designed to prevent an entity like Comcast or Verizon from blocking access to any Internet site, or to make it more expensive or more difficult to purchase, for example, music from Amazon or streaming video services from Apple than to purchase the same service from the owner of a wireline network. The D.C. Circuit concluded that the FCC did not have the authority to impose those rules, and struck down the central elements of the FCC’s net neutrality order in Verizon v. F.C.C. (D.C. Cir. reissued January 15, 2014).

In adopting its net neutrality rules, the FCC made two critical decisions. It first decided that Section 706 of the Telecommunications Act of 1996 gave it authority to regulate the provision of Internet service. There was substantial question as to whether Section 706 was jurisdictional – in fact, the FCC had earlier concluded it was not jurisdictional. While other provisions of the Communications Act give the FCC some authority over Internet services, the FCC largely relied on Section 706 as a source for the authority to adopt the net neutrality rules. Applying Arlington, the D.C. Circuit concluded that the FCC had reasonably determined that it could regulate the Internet, and also determined that the net neutrality rules were rules of the sort that could be adopted pursuant to Section 706 – so long as the rules did not conflict with other provisions of the Communications Act. (This was a significant victory for the agency, as some commenters have noted, but its practical significance for Internet regulation was blunted by the remainder of the decision).

The second choice that the FCC made was with respect to the classification of Internet service. The FCC had to decide whether the service was a common carrier telecommunications service (a service offered to the public for a fee, and involving the transmission of information of a user’s choosing); or whether it was an information service, involving computer-assisted storage and forwarding of information via telecommunications (voice mail being a classic information service). Information services are not common carrier services and can’t be treated as such. The FCC chose not to classify Internet access as a common carrier service for purposes of its net neutrality rules, and concluded it could impose its net neutrality rules on Internet service even if the service was not a telecommunications service. While the FCC recognized that one cannot impose common carrier obligations on an communications company to the extent that it is engaged in the provision of information services, it concluded that its “net neutrality” regulations did not impose common carrier obligations on providers.

The D.C. Circuit disagreed, and in this part of the decision gave no deference to the FCC’s view as to what constitutes a “common carrier” obligation. Rather, the court applied common law concepts of common carriage, as those have been developed in case law in the United States, and concluded that the net neutrality “no blocking” and “no discrimination” obligations essentially imposed common carrier obligations on providers.

The decision leaves the FCC with three basic paths: accept the decision and adopt different rules that do not directly prevent blocking or discrimination; reclassify Internet service as a common carrier service; or appeal, in part based on the failure of the court to accord deference to the view of the agency as to what constitutes common carriage. Arlington will play a significant role if the agency adopts either of the last two courses.

And commenters have begun to argue that the Verizon decision – and Arlington – will allow the FCC to take many actions which (proponents argue) would change the pattern of broadband deployment.

•  Advocates for publicly-owned broadband networks argue that the FCC may use its Section 706 authority to broadly preempt state laws that prevent localities from building and owning broadband networks that compete with private systems.
• Advocates for the wireless industry argue that Arlington gives the FCC authority to find that a locality that fails to act within an FCC deadline will be deemed to have granted an application for a wireless tower – leaving the applicant free to build without seeking court review.
• Advocates argue that Arlington gives the FCC authority to set the price that may be charged for access to publicly-owned facilities and infrastructure (including rights of way) and to limit fees to costs.

Whether, of course, any of these results can follow from Arlington is, at best, an open question – but it is clear the case will affect approaches to FCC rulemakings into the future.

Originally presented by Joseph Van Eaton at LSI Seminar: Deployment of Wireless Telecommunications Facilities, Los Angeles, California, February 3, 2014.