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Argument preview: Sprint communications v. APCC Services

The following preview is by Steven Wu, an associate at Akin Gump.

On Monday, the Supreme Court will hear argument in No. 07-552, Sprint Communications Co. L.P. v. APCC Servs., Inc.. Carter G. Phillips of Sidley Austin LLP in Washington, D.C., will argue on behalf of petitioners Sprint and AT&T; Roy T. Englert, Jr., of Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP, also in Washington, D.C., will argue on behalf of respondent APCC Services. The question presented is whether an assignee of a claim “for purposes of collection” has standing to sue, but a full understanding of the case requires a brief digression into the surprisingly complex world of payphones.

Most payphones are not operated by large telecommunications companies such as Sprint and AT&T; instead, they are operated by smaller companies known as payphone service providers (PSPs). The PSPs, in turn, rely upon a network of “exchange carriers” to actually connect payphone callers to call recipients. Simplifying somewhat, when somebody places a call through a payphone, a “local exchange carrier” is the first to receive the call. If the call is local, the local exchange carrier can complete the call itself. However, if the call is long distance, the local exchange carrier transfers the call to a long-distance carrier, which may in turn transfer the call to numerous other carriers (and other services) before the connection is complete. (These long-distance carriers are technically known as “interexchange carriers,” though this overview will avoid that term.)

Before 1990, a typical PSP would route all users of its payphones through a single, preferred long-distance carrier. But in 1990, in response to complaints about high rates for long-distance payphone calls, Congress passed a statute requiring PSPs to give payphone users the freedom to choose their own long-distance carrier. This led to a proliferation of “dial-around” methods — such as access codes (e.g., “10-10-220”) — that allowed payphone users to make coinless calls through the long-distance carrier of their choice. To ensure that PSPs would not be unfairly disadvantaged by this new free market, Congress required the long-distance carriers to compensate the PSPs for dial-around calls under a regulatory scheme propounded by the Federal Communications Commission.

Under this scheme, most PSPs do not deal directly with the long-distance carriers. Instead, PSPs tend to rely on “aggregators” to act as intermediaries. These aggregators, each of which represents a large number of PSPs, submit billing information from the PSPs to the long-distance carriers and then distribute any compensation they receive to their PSP clients. APCC Services, the respondent in this case, is the country’s largest aggregator; it represents over 1,400 PSPs, which in turn own over 400,000 payphones.

The litigation currently before the Court began when several PSPs accused long-distance carriers (including petitioners Sprint and AT&T) of shirking their compensation obligations under the FCC’s regulatory scheme. But, rather than suing the long-distance carriers directly, the PSPs instead assigned their claims to their aggregators, including APCC. These assignments, which were expressly “for purposes of collection,” required the aggregators to litigate “on behalf of” the PSPs and to “pass back to the [PSPs] any amounts [the aggregators] recovered thereby.” The question before the Supreme Court this Monday is whether such assignments give the aggregators standing to sue the long-distance carriers for their alleged failure to compensate the PSPs.

Petitioners Sprint and AT&T argue that the aggregators do not have standing. First, petitioners argue that the aggregators lack Article III standing because the assignments related only to the PSPs’ claims, and not to any recovery, and did not transfer to the aggregators the PSPs’ alleged entitlement to compensation. As a result, the aggregators can expect no practical or concrete benefit from this litigation aside from the purely psychological thrill of victory. Second, even if the assignments created Article III standing, the aggregators lack prudential standing because the individual PSPs are fully capable of litigating their own claims and because the underlying claims will, in any event, ultimately require individualized proof of the PSPs’ injuries.

Two amici curiae filed briefs in support of petitioners. The brief by Qwest Communications Corp. emphasizes the practical consequences of recognizing third-party standing. (Along with Sprint and AT&T, Qwest is one of the three biggest long-distance carriers in this country, and it has also been sued by aggregators on similar grounds.) In particular, Qwest notes that long-distance carriers’ ability to defend themselves in this litigation or to bring counter-claims would be severely constrained if the aggregators are the suing parties, because the aggregators themselves do not own or operate payphones. Qwest contends that a class action by the PSPs would be a more appropriate procedural vehicle. Sounding a similar note, the second brief, by Network IP and Network Enhanced Telecom, criticizes the aggregators for their abusive litigation techniques — and particularly their tendency to interfere with defendants’ attempts to obtain the underlying facts from the PSPs.

In response, APCC first contends that there are two agreements at issue here — an assignment of claims and an agreement about returning any proceeds from this litigation — and that standing can be established under the assignment without reference to the separate agreement about proceeds. Second, APCC relies heavily upon Vermont Agency of Natural Resources v. United States ex rel. Stevens (2000), in which the Court upheld the standing of qui tam relators in part on the theory that “the assignee of a claim has standing to assert the injury in fact suffered by the assignor.” Third, APCC argues that assignees-for-collection like APCC have historically been deemed to have standing to sue. Finally, APCC dismisses the petitioners’ and amici’s complaints about their inability to obtain discovery from individual PSPs, contending that such discovery has already been ordered and is, at any rate, relevant only to the trial court, not the Supreme Court.

Petitioners’ reply, aside from reiterating the arguments in the opening brief, makes two new points. In response to APCC’s contention that there were two agreements, petitioners argue that both the assignment of the claim and the transfer of proceeds are in fact part of just a single document — and that every court that had considered this case had so recognized. In response to APCC’s reliance on Vermont Agency and historical practice, petitioners contend that these precedents are distinguishable because they involved assignments of an entire claim plus recovery, and not the narrower assignment solely “for purposes of collection” that was made here.