Tenth Circuit Holds There is No Limitations Period for FCC Debt Collections

In a decision issued this week, the Tenth Circuit held that when the FCC acts to collect debts to the United States, rather than impose a fine or punishment, its actions are governed by the Debt Collection Improvements Act (DCIA), 31 U.S.C. §§ 3711-17, which means there is no limitations period.  Blanca Tel. Co. v. FCC, Nos. 20-9510 and 20-9524 (10th Cir Mar. 15, 2021).

The Universal Service Fund (USF) provides subsidies to telephone companies to promote universal availability of telephone service.  The FCC administers and enforces the rules governing the distribution of USF support to carriers.  During the relevant period (2005-2010) the FCC’s rules required incumbent local exchange carriers (incumbent LECs) to use accounting that allocated costs between regulated and unregulated activities, because those carriers could not receive USF support for unregulated activities or for service outside their designated “study area.”  Cellular service is an unregulated service for USF purposes (except for “basic” cellular service).  Blanca Telephone Co. was an incumbent LEC but did not separate its costs for regulated and unregulated service (such as cellular service), which resulted in Blanca receiving more than $6 million in USF support for non-basic cellular service and service outside its study area.

The FCC sought to recover that money in 2016 and eventually issued an order requiring repayment.  Blanca challenged the order, arguing the FCC was time-barred under either 47 U.S.C. § 503(b)(6) (one-year limitations period) or 28 U.S.C. § 2462 (five years). The FCC, however, said it acted under the DCIA, which expressly provides there is no limitations period.  31 U.S.C. §§ 3716(e)(1).  In deciding which statute applied, the first key issue was whether the FCC was imposing a penalty (and thus governed by one of the statutes Blanca cited) or engaged in debt collection.  The court held that even though Blanca violated a public law and the public was being protected by the FCC’s actions, including by deterrence of others, the action was best treated as debt collection because the FCC’s core purpose was to recover its overpayment of USF support to Blanca. The second key issue was whether the collection was of funds “owed to the United States” per 31 U.S.C. § 3701(b)(1).  The court held it was, as the FCC was collecting amounts “disallowed by audits performed by the Inspector General of the agency administering the program,” as allowed by 31 U.S.C. § 3701(b)(1)(c).  The decision is notable because, although it is tied to the specific facts of the case, it allows FCC recovery for potentially very old regulatory violations if they involve a true debt to the government.

If you have any questions regarding this post or other telecommunications issues, please contact Ty Covey (jtcovey@duanemorris.com) or Brian McAleenan (bamcaleenan@duanemorris.com).