Appeals Court Decision Raises Doubts about U.S. Government’s Ability to Collect USF and TRS Debts Pursuant to the DCIA

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A recent decision by the U.S. Court of Appeals for the Fifth Circuit (“Fifth Circuit”) calls into question the FCC’s treatment of delinquent Universal Service Fund (“USF”) fees as “debts” owed to the U.S. government, subject to the collection procedures of the Debt Collection Improvement Act of 1996 (“DCIA”).   Under the DCIA, Congress authorized federal agencies, including the Federal Communications Commission (“FCC” or “Commission”) to adopt rules to address payment and collection of “debts” owed to government agencies.  The DCIA, however, does not clearly define “debt”, leaving agencies to determine what qualifies as a “debt” owed to the United States.  In its rules under the DCIA, the FCC defined “agency” to include the FCC and all “reporting components” of the Commission, including the USF and Telecommunications Relay Services (“TRS”) Fund.  The FCC has accordingly interpreted the term “debt” to include unpaid USF fees.   The Commission relies upon this as authority to collect delinquent USF contributions.

While the FCC has defined its USF and TRS Funds as “agencies” under the DCIA, the FCC does not actually administer these Funds.  Private non-profit entities administer these programs.  The Universal Service Administrative Company (“USAC”) administers the USF, while Rolka Loube Saltzer Associates (“RLSA”) manages the TRS Fund.  The Fifth Circuit recently called into question the assumption that either of these entities qualifies as an “agency” under the DCIA.  In U.S. ex rel. Shupe v. Cisco Sys., Inc., the Fifth Circuit found that, for purposes of the False Claims Act (“FCA”), USAC is not the U.S. government, and the USF is not a government fund.   Although the decision did not explicitly address the DCIA, the court’s findings may undermine the ability of the FCC, Treasury, and the Department of Justice (“DOJ”) to collect delinquent USF or TRS Fund contributions.  At least one company has argued, in comments before the FCC, that under this decision, delinquent USF fees do not qualify as “debts” owed to the U.S. government under the DCIA.

Although further analysis is required, the Fifth Circuit’s decision may present opportunities for a carrier faced with a collection action on outstanding USF fees to challenge the application of the DCIA collections process.  At a minimum, the decision calls into question the current assumptions that delinquent USF fees (and presumably TRS Fund contributions) qualify as “debts” owed to a federal “agency,” subject to collection under the DCIA. Clients facing outstanding USF liabilities and/or potential collection actions on outstanding USF or other Title II program fund fee invoices or forfeitures for non-payment of such fees should contact Jonathan S. Marashlian at jsm@commlawgroup.com  or (703) 714-1313 to discuss the options available given this decision.

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