Supreme Court Hears Case Pitting Long Distance Carriers Against Payphone Companies

At issue is the standing of the American Public Communications Council, which collects charges for hundreds of small pay phone service providers (PSPs), to pursue payment in federal court. Sprint and other long distance companies argue that Article 3 of the Constitution allows federal court action generally “only by parties that are seeking to protect their own interests.” The Court of Appeals for the District of Columbia Circuit split on this question, finding in a majority vote that APPC had standing.

The long distance companies claim that the “bedrock rule” behind Article 3 requires a plaintiff to show “it has its own “personal stake in the outcome” of a suit. However, APCC only passes proceeds to PSPs and so lacks a stake, Sprint said. “Like an ordinary agent or attorney, the aggregators stand to gain or lose nothing from the lawsuit, no matter how it is resolved,” Sprint said.

APCC countered that Sprint’s reading flies in the face of precedent. “No court has ever held that an assignee with unfettered legal title to a claim lacks standing to pursue it merely because it has reached a collateral agreement to dispose of litigation proceeds in a particular way,” APCC said. APCC also argued that it plays a critical role. “Without aggregators, PSPs may be unaware that a claim even exists,” it said. “An IXC’s failure to compensate PSPs is often revealed only by comparing the IXC’s total dial-around call volume in a period to the total dial-around compensation it paid in that period.”

Court conservatives, including Chief Justice John Roberts and Justice Antonin Scalia, seemed sympathetic to Monday’s long-distance company arguments. Roberts said that with varied arguments over standing before the court, a “tie” should “go to Article 3… Article 3 does trump tradition.” He hinted that, for example, the Sierra Club lacks automatic standing to file in all environmental cases and instead must demonstrate its legal standing in each case.

But Carter Phillips, the attorney for the long distance companies, faced tough questions from justices about what the companies stand to gain should the court rule that the 1,400 PSPs must sue individually rather than be represented by an aggregator. Phillips told the court that since individual PSPs didn’t sue, the carrier had issues with legal discovery, obtaining information from each.

“I don’t see how you can get the benefits you feel you're entitled to with 1,400 cases,” said Justice David Souter. “Do we really want to require 1,400 cases so you can have your perfect paradigm?” Justice Ruth Bader Ginsburg told Phillips that even if his client prevailed, “you will still have the same problem with respect to discovery, same problem with respect to counter claims.”

If Sprint wins “the implication for other kinds of litigation potentially could be enormous,” putting many class-action lawsuits “under a constitutional cloud,” wrote Paul Stephan, a professor at the University of Virginia School of Law, in a brief of the case for the American Bar Association.

“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,” Cornell University Law School said in its analysis. “Conversely, a decision for Sprint and AT&T may prevent efficient and effective collection efforts by PSPs for compensation owed under the Telecommunications Act.”