U.S. Opposes Cert. Petition in Hawaiian Telecom’s Subsidy Dispute

Last Friday, the Federal Communications Commission (FCC) filed an opposition brief arguing that the Sandwich Isles Communications Inc.’s (SIC) petition for a writ of certiorari should be denied. The case concerns a takings challenge lodged by SIC against the FCC over $27 million that agency determined was improperly awarded to the Hawaiian telecommunications provider in high-cost support funds between 2002 and 2015.

The facts leading up to the case date to the mid-1990s when SIC was approved as a rural telecommunications provider and began receiving funds from the FCC to support high-cost services. As previously reported, issues arose for SIC when the FCC reduced its subsidies, SIC’s founder was convicted of tax fraud, and the company was eventually required to pay the eight-figure amount back.

In 2019, SIC filed a constitutional challenge in the Court of Federal Claims under the Tucker Act arguing that “the cumulative effect of the reductions of its subsidies” was to a taking of property without just compensation in violation of the Fifth Amendment. SIC lost before both the CFC and the U.S. Court of Appeals after both found that SIC’s takings claim could not proceed under the Tucker Act because the Communications Act of 1934  provides the exclusive path for review of FCC orders.

In this week’s brief, the FCC argues that the nation’s high court should deny the petition on precisely those grounds. In support, the FCC cites another petition that the court recently denied concerning similar issues and standing for the same proposition: although a Takings Clause claim for just compensation must be brought to the CFC in the first instance, it cannot proceed in that forum if “Congress has withdrawn the Tucker Act grant of jurisdiction in the relevant statute.”

Here, the FCC argues that the Communications Act unequivocally withdraws Tucker Act jurisdiction over SIC’s Takings Clause claim. The government asserts that contentions to the contrary are unavailing and SIC’s proper course of action is through the judicial review scheme set forth by the Communications Act.  

SIC is represented by Kobayashi Sugita & Goda LLP and the federal government by the Solicitor General.