19981116.docx

MEMORANDUM
TO:THORPE ORTON, DEPUTY CHIEF OF STAFF
TERRY COFFIN, DIVISION CHIEF
FROM:DON HOWELL, DAG
DATE:NOVEMBER 16, 1998
RE:PETITION FOR CERTIORARI FILED IN SBC COMMUNICATIONS V. FCC (BILL OF ATTAINDER CASE)
In December 1997, a Federal District Court in Texas granted summary judgement to SBC Communications (Southwestern Bell Telephone Company) holding that certain provisions of the federal Telecommunications Act of 1996 were unconstitutional because they violated the Bill of Attainder Clause of the United States Constitution.  In September 1998 the Fifth Circuit reversed, holding that the so-called “special provisions” (§§ 271-274) of the Telecom Act do not constitute a Bill of Attainder.  SBC Communications v. FCC, 154 F.3d 226, 231 (5th Cir. 1998) (attached).  The DC Circuit has also rejected a Bill of Attainder argument relating to the special provisions.  BellSouth Corp. v. FCC, 144 F.3d 58 (D.C. Cir. 1998) (attached).  SBC and U S WEST Communications have filed a Petition for Certiorari requesting that the United States Supreme Court review the Fifth Circuit’s decision.  67 U.S.L.W. 3301 (October 20, 1998) (No. 98-653).  For the reasons cited below, I recommend TAG not join or support the Petition for Certiorari.
BACKGROUND
As the Fifth Circuit recognized, one of the goals of the federal Telecommunications Act of 1996 (Telecom Act) was to open “all telecommunication markets to competition.”  SBC Communications, 154 F.3d at 231 quoting SBC Communication v. FCC, 138 F.3d 410, 413 (D.C. Cir 1998).  The Telecom Act’s “special provisions” specifically superseded the 1982 line-of-business restrictions found in the antitrust decree commonly referred to as the MFJ.  The Telecom Act lifted and replaced the MFJ restrictions applicable to BOCs and “impose renewed line-of-business restrictions on the activities of the twenty remaining BOCs.”  SBC, 154 F.3d at 232.  The Telecom Act’s line-of-business restrictions (i.e., the special provisions) are at issue in this case.
Under the first line-of-business restriction (§ 271 of the Telecom Act), each BOC must obtain prior authorization from the FCC before it is permitted to offer interstate long-distance telephone calls within its multi-state service territory.  For example, U S WEST must obtain § 271 approval before it can offer its Idaho customers long-distance calling to Arizona.  SBC, 154 F.3d at 232.  Another line-of-business restriction (under § 273 of the Act) prohibits a BOC from manufacturing or providing telecommunications equipment to their customers until they receive 271 approval from the FCC.  Finally, sections 274 and 275 prohibit BOCs from providing electronic publishing or alarm monitoring services until February 8, 2001, unless they do so by separate affiliate or joint venture and, in the case of alarm monitoring, only if they were engaged in the business prior to November 30, 1995.  Id.
SBC argued to the federal District Court that the line-of-business restrictions operated as an unconstitutional Bill of Attainder because they legislatively punish a named corporation.  A Bill of Attainder is a legislative act which “determines guilt and inflicts punishment upon an identified individual without provision of the protections of a judicial trial.” Id. at 233, quoting Nixon v. Administrator of General Services, 433 U.S. 425, 568 (1977).  In December 1997, the District Court in Texas held that the special provisions were unconstitutional but stayed its order until the Fifth Circuit could take up the appeal.
FIFTH CIRCUIT’S OPINION
Although SBC was specifically named in the Telecommunications Act, the Fifth Circuit found that the special provisions do not impose punishment on the BOCs.  Id. at 234.  After reviewing the Supreme Court’s jurisprudence regarding Bills of Attainder, the Fifth Circuit found that the special provisions are not punitive because:
1.They do not impose a perpetual bar on the BOC’s entry into the specific lines of business;
2.They serve legitimate antitrust purposes and are to be lifted at such time as the BOC’s can show competition in local markets;
3.There is no legislative evidence of a punitive intent by Congress to punish the BOCs for past antitrust violations; and
4.They are part of a larger quid pro quo included in the Telecommunications Act.  The special provisions represented a “hard-fought compromise.”
Id. at 242-44.
In his dissent, Circuit Judge Smith observed that “the list of punishments forbidden by the Bill of Attainder Clause has expanded to include legislative bars to participation by individuals or groups in specific employment or professions.”  Id. at 248, quoting Selective Service System v. Minnesota PIRG, 468 U.S. 841, 852 (1984).  Despite the legislative quid pro quo or the fact that the Telecom Act’s special provisions allow the BOCs to be free of the special provisions once certain conditions are met, Judge Smith wrote that the provisions still constituted punishment.
POSITION OF THE PARTIES
In the Fifth Circuit, NAAG on behalf of 14 states filed an amicus brief supporting the FCC and the U.S. Department of Justice arguments that the special provisions do not constitute punishment under the Bill of Attainder Clause.(footnote: 1)  The National Association for Regulatory Utility Commissioners (NARUC) also submitted an amicus brief supporting the FCC.(footnote: 2)  The Attorneys General of Texas, Arkansas and Kansas supported SBC and will likely support the Petition for Certiorari.
 I also understand that the Arizona Attorney General had circulated a draft brief urging the Supreme Court to grant certiorari.  As explained in greater detail in my April 13, 1998 memo on this subject, I believe that NAAG’s position supporting the special provisions is correct.  Consequently, it is unadvisable to support the Arizona brief.
RECOMMENDATION
I recommend that TAG not support the Petition for Certiorari.  I believe that the Fifth and D.C. Circuits’ opinion regarding the Bill of Attainder argument were correctly decided.
Don Howell
vld/M:BOCs.dh
FOOTNOTES
1:
The 14 states are: Alabama, Florida, Georgia, Iowa, Maryland, Massachusetts, Missouri, Montana, New York, Pennsylvania, Rhode Island, Utah, Washington, and Wisconsin.
2:
The NARUC brief was joined by at least eight utility commissions including: Illinois, Iowa, Montana, Oregon, Pennsylvania, Tennessee, Vermont, and Washington.