 United States Court of Appeals
          FOR THE DISTRICT OF COLUMBIA CIRCUIT



Argued March 31, 2017                Decided August 11, 2017

                         No. 15-1354

     ALL AMERICAN TELEPHONE COMPANY, INC., ET AL.,
                     PETITIONERS

                               v.

   FEDERAL COMMUNICATIONS COMMISSION AND UNITED
               STATES OF AMERICA,
                  RESPONDENTS

                        AT&T CORP.,
                        INTERVENOR


            On Petition for Review of an Order of
          the Federal Communications Commission


     Jonathan E. Canis argued the cause and filed the briefs for
petitioners.

    C. Grey Pash, Jr., Counsel, Federal Communications
Commission, argued the cause for respondents. With him on
the brief were Robert B. Nicholson and Jonathan H. Lasken,
Attorneys, U.S. Department of Justice, Jonathan B. Sallet,
General Counsel at the time the brief was filed, Federal
Communications Commission, David M. Gossett, Deputy
General Counsel, and Richard K. Welch, Deputy Associate
                              2
General Counsel. Jacob M. Lewis, Associate General Counsel
and Lisa S. Gelb, Attorney, Federal Communications
Commission, entered appearances.

     James F. Bendernagel Jr. and Michael J. Hunseder were
on the brief for intervenor in support of respondents.

    Before: TATEL, GRIFFITH, and MILLETT, Circuit Judges.

    Opinion for the court filed by Circuit Judge MILLETT.

     MILLETT, Circuit Judge: The Federal Communications
Commission held that Petitioners All American Telephone Co.,
e-Pinnacle Communications Inc., and Chasecom improperly
engaged in a scheme designed to collect millions of dollars in
unwarranted long-distance access charges from AT&T. All
American and the other petitioning companies do not challenge
that liability determination.      They challenge only the
Commission’s award of damages to AT&T and statements in
the Commission’s decision that refer to the merits of the
companies’ state-law claims against AT&T, which are pending
in a separate action in the Southern District of New York. We
uphold the Commission’s award of damages, but vacate those
aspects of the Commission’s order that tread on the merits of
the companies’ state-law claims.

                              I

                              A

     The Federal Communications Commission regulates
common-carrier providers of wired telephone services,
including the fees that they charge to customers. See 47 U.S.C.
§ 201. One of the fees that the Commission regulates is for
“exchange access services” rendered for long-distance
                                3
telephone calls. See 47 C.F.R. § 61.26. Those fees are often
referred to as “access charges.” They work like this: When a
person places a long-distance call, a local exchange carrier
operating in the caller’s geographic area will route the call to
an “interstate exchange carrier,” also known as an
“interexchange carrier.” That interexchange carrier, in turn,
will connect the call to the recipient’s local exchange carrier.
When the recipient’s local exchange carrier completes the call
to the recipient, the interexchange carrier must pay an access
charge to the local carrier for the connection service. See
Northern Valley Communications, LLC v. FCC, 717 F.3d 1017,
1018 (D.C. Cir. 2013).

     When it comes to determining the amount of that access
charge, however, not all local carriers are the same under
federal communications law. As part of an effort to encourage
competition, federal law divides local carriers into “incumbent
local exchange carriers” and “competitive local exchange
carriers.” See United States Telecom Ass’n v. FCC, 359 F.3d
554, 561 (D.C. Cir. 2004) (noting Congress’s intent “to foster
a competitive market in telecommunications”). Incumbent
carriers are those that, on or prior to February 8, 1996, provided
service to a particular area or were part of an exchange carrier
association. 47 U.S.C. § 251(h). Competitive carriers are all
other local carriers, including new carriers that entered the
market after that time period and compete with the incumbent
carriers within a specific geographic region. See 47 C.F.R.
§ 51.903(a).

     Incumbent carriers cannot impose access charges unless
they file a valid tariff with the Commission. See 47 U.S.C.
§ 203(a). Competitive carriers, by contrast, can impose access
charges at or below a Commission-determined rate by filing
their own tariff, or they can impose access charges through a
contract they individually negotiate with the interexchange
                                  4
carrier. See 47 C.F.R. § 61.26(b); Hyperion Telecomms., 12
FCC Rcd. 8596, 8613 (1997).

                                  B

      It has been said that “[t]he darkest hour of any man’s life
is when he sits down to plan how to get money without earning
it.” 1 But that does not seem to keep people from trying.
Through a scheme known as “traffic pumping” or “access
stimulation,” some local exchange carriers sought to artificially
inflate the number of local calls they could connect, thereby
increasing both the call volume and the rates that they could
charge interexchange carriers. More specifically, a local
exchange carrier would enter into a contractual relationship
with a company that generates a high volume of telephone
calls, such as a conference calling provider or a provider of
sexually explicit chat lines. The local carrier would house the
phone-call-generating partner’s equipment on its premises for
free and would sometimes even provide the equipment itself at
no cost. Not only would the local carrier forgo charging its
partner for the phone calls that came in, but in fact the carrier
would pay the partner a share of the per-minute long-distance
access rates it charged the interexchange carriers. See, e.g.,
Qwest Communications Corp. v. Free Conferencing Corp., 837
F.3d 889, 893–894 (8th Cir. 2016); Northern Valley, 717 F.3d
at 1018.

     Those traffic-pumping arrangements were a “win-win” for
the local carrier and its phone-call-generating partner.
Northern Valley, 717 F.3d at 1018. The local carrier received
a higher call volume and thus more revenue from access
charges, while the partner got free service for its business plus
a cut of the local carrier’s revenue. On the losing end, however,

    1
        Attributed to Horace Greeley.
                                5
were the public and the interexchange carriers “who ha[d] to
* * * pay significant amounts to” the local exchange carriers in
the form of artificially inflated and distorted access charges to
complete the long-distance calls. Id. at 1018–1019.

     Starting in 2010, the Commission issued a series of orders
concluding that such traffic-pumping schemes were unlawful
under Sections 201(b) and 203(c) of the Communications Act,
47 U.S.C. §§ 201(b), 203(c). The Commission ruled in
particular that local exchange carriers could not charge
interexchange carriers to connect long-distance calls to a non-
paying end user. See, e.g., Qwest Communications Co. v.
Sancom, Inc., 28 FCC Rcd. 1982 (2013); Qwest
Communications Co. v. Northern Valley Communications,
LLC, 26 FCC Rcd. 8332 (2011), aff’d, Northern Valley, 717
F.3d at 1017; AT&T Corp. v. YMax Communications Corp., 26
FCC Rcd. 5743 (2011); Qwest Communications Corp. v.
Farmers & Merchants Mut. Tel. Co., 24 FCC Rcd. 14801
(2009), aff’d, Farmers & Merchants Mut. Tel. Co. v. FCC, 668
F.3d 714 (D.C. Cir. 2011).

     We have twice upheld that interpretation of the
Communications Act by the Commission. See Northern
Valley, 717 F.3d at 1019; Farmers, 668 F.3d at 724.
Accordingly, it is now “well-settled that a [local exchange
carrier] cannot bill an [interstate exchange carrier] under its
tariff for calls ‘terminated’ at a conference call bridge when the
conference calling company does not pay a fee for th[ose]
services.” Qwest Communications, 837 F.3d at 894.

                                C

   Petitioners All American Telephone Co., e-Pinnacle
Communications, Inc., and Chasecom (collectively, “the
Companies”) have held themselves out as competitive local
                                6
exchange carriers authorized to operate in Utah and Nevada.
Standing behind them were Beehive Telephone Company, Inc.
of Nevada, and Beehive Telephone Company, Inc. of Utah
(collectively, “Beehive”), which operated as incumbent local
exchange carriers in rural Nevada and Utah, respectively. Joy
Enterprises, Inc., is a Nevada corporation that provides
conferencing and sexually explicit chat line services. Until the
early 2000s, Joy and Beehive were engaged in a classic traffic-
pumping scheme: Beehive paid Joy kickbacks in exchange for
the inflated traffic that Joy’s conference and sexually explicit
chat line services generated. Beehive, however, soon became
a victim of its own success: As its traffic numbers skyrocketed,
its access charge rates, which were determined by a filed tariff,
began to plummet.

     Unwilling to let a good scheme end, Beehive worked to
create competitive local exchanges—the Companies—that
would have greater rate flexibility. Beehive then had the
Companies take its place in the arrangement. Beehive assisted
the Companies in preparing and filing tariffs, and worked free
of charge to obtain the necessary approval for All American to
operate in the state of Utah. Beyond the regulatory paperwork,
Beehive provided material support to all three Companies by
serving as the co-lessee/guarantor for equipment rentals,
installing and maintaining the Companies’ equipment at
Beehive’s facilities, assigning them telephone numbers
Beehive had obtained, and managing and coordinating the
Companies’ billings.

    All American began operating in Beehive’s territory in
Utah in 2004, although it did not apply for a certificate of public
convenience from the Utah Public Service Commission until
2006. See In the Matter of the Consideration of the Rescission,
Alteration, or Amendment of the Certificate of Authority of All
American to Operate as a Competitive Local Exchange Carrier
                               7
within the State of Utah at 1, No. 08-2469-01 (Utah Pub. Serv.
Comm’n April 26, 2010) (“Utah Commission Order”). Shortly
after All American obtained its certificate, Beehive and All
American entered into an interconnection agreement that
allowed All American to use Beehive’s equipment for a fee,
despite the fact that the Utah state license prohibited All
American from operating in Beehive’s territory. Id. at 6; see
47 U.S.C. § 252(d)(1) (addressing interconnection
agreements).

     The Companies that Beehive helped to create have never
marketed their services to the general public or to businesses in
Utah or Nevada. From the time it began operating, All
American has served only a single client: Joy Enterprises. In
addition, All American has never charged Joy Enterprises for
its services.

    Similarly, e-Pinnacle and Chasecom have only ever
serviced conference-calling companies and have never charged
them for their services. Like Joy Enterprises, e-Pinnacle and
Chasecom engaged in a traffic-pumping kickback scheme with
Beehive prior to becoming independent carriers.

     In exchange for all of its free aid, Beehive was paid
through the interconnection agreement with All American and
through revenue-sharing schemes with e-Pinnacle and
Chasecom. Beehive also directly benefited from the increased
traffic generated by All American’s arrangement with Joy
Enterprises, and by e-Pinnacle’s and Chasecom’s arrangements
with their conference-call providers, because Beehive could
directly charge interexchange carriers other types of fees (such
as tandem switching and transport fees) associated with the
inflated traffic. Petitioners e-Pinnacle and Chasecom ceased
operations in 2007. In 2010, the Utah Commission rescinded
All American’s certificate to operate as a competitive local
                               8
exchange carrier, concluding that it was “a mere shell
company, paying others for technical services, management
fees, consulting fees and equipment fees.” Utah Commission
Order at 18; see also id. at 35.

                               D

                               1

     In 2007, the Companies filed a civil suit against AT&T
Corporation in the United States District Court for the Southern
District of New York. In their complaint, the Companies
represented that they and AT&T were “telecommunications
common carriers, and their interstate service offerings are
subject to the jurisdiction of the FCC.” First Amended
Complaint ¶ 11, All American Tel. Co. v. AT&T Corp., No. 07-
cv-861 (S.D.N.Y. filed March 6, 2007). The Companies
alleged that, pursuant to valid tariffs filed with the
Commission, they had provided access services to AT&T for
which AT&T had refused to pay. Id. ¶¶ 37–42. The
Companies sought recovery of those access fees under both a
tariff collection action, id. ¶¶ 73–76, and a state-law quantum
meruit claim, id. ¶¶ 103–107.

     In response, AT&T filed a counterclaim alleging that the
Companies existed “for the sole purpose of executing ‘traffic
pumping’ schemes, not to offer wireline local telephone service
to the residents” in their service areas. Counterclaim ¶ 16, All
American Tel. Co. v. AT&T Corp., No. 07-cv-861 (S.D.N.Y.
filed March 26, 2007). As relevant here, AT&T claimed that
the Companies’ conduct violated their filed tariffs and Sections
201 and 203 of the Communications Act, 47 U.S.C.
§§ 201, 203. Id. ¶¶ 34, 43.
                               9
     In March 2009, the district court sua sponte decided to
refer    AT&T’s       counterclaims     arising     under    the
Communications Act to the Federal Communications
Commission pursuant to the primary jurisdiction doctrine.
Memorandum & Order at 7, All American Tel. Co. v. AT&T
Corp., No. 07-cv-861 (S.D.N.Y. March 16, 2009). Under the
primary jurisdiction doctrine, if “adjudicating a claim would
‘require[] the resolution of issues which, under a regulatory
scheme, have been placed within the special competence of an
administrative body,’” a court may “suspend the judicial
process ‘pending referral of such issues to the administrative
body for its view.’” United States v. Phillip Morris USA Inc.,
686 F.3d 832, 837 (D.C. Cir. 2012) (alteration in original;
citation omitted). The case is not “referr[ed]” to the agency in
the traditional sense because there is usually “no mechanism
whereby a court can on its own authority demand or request a
determination from the agency[.]” Reiter v. Cooper, 507 U.S.
258, 268 n.3 (1993). Instead, the court “merely stay[s] its
proceedings while the [parties] file[] an administrative
complaint” and the agency disposes of it. Id.

     Following the March 2009 referral, the district court
entered a second order supplementing the issues referred and
staying the litigation. Order Referring Issues to the Federal
Communications Commission at 2, All American Tel. Co. v.
AT&T Corp., No. 07-cv-861 (S.D.N.Y. Feb. 5, 2010)
(“Referral Order”).

    The key questions referred by the district court to the
Commission were whether: (1) the Companies engaged in
unreasonable conduct under the Communications Act; (2) the
Companies provided services “pursuant to the terms of valid
and applicable tariffs”; (3) the Companies “provide[d] some
other regulated service to AT&T for which they are entitled to
compensation”; (4) any recovery by the Companies “under a
                                 10
quantum meruit, quasi-contract, or constructive contract
theory” was permissible (i.e., not preempted); and (5) AT&T
“violate[d] § 201(b) or 203(a), or any other provision of the
Communications Act” when it failed to pay the billed charges.
Referral Order, supra, at 1, Ex. A.

                                  2

     To effectuate the referral, AT&T filed a complaint with the
Commission. In its complaint, AT&T raised the first, second,
third, and fourth questions. It also elected to bifurcate liability
and damages, as permitted by Commission rules, see 47 C.F.R.
§ 1.722(d). AT&T’s complaint alleged that the Companies,
Joy, and Beehive engaged in a modified version of a traffic-
pumping scheme, with the Companies serving as sham entities
designed to unlawfully and unreasonably inflate the rate of
access charges billed to AT&T. 2

     The Commission issued a decision on liability concluding
that the Companies had “participated in an access stimulation
scheme designed to collect in excess of eleven million dollars
of improper terminating access charges from AT&T[.]” AT&T
Corp. v. All American Tel. Co., 28 FCC Rcd. 3477, 3477 ¶ 1
(2013) (“Liability Order”). In its Liability Order, the
Commission found that the Companies were “‘sham’ [carriers]
created to ‘capture access revenues that could not otherwise be
obtained by lawful tariffs,’” in violation of Section 201(b) of

     2
       The Companies, in turn, filed a complaint that raised the fifth
question. The Commission denied that complaint on the ground that
the Communications Act does not regulate AT&T when it is acting
as a customer. All American Tel. Co. v. AT&T Corp., 26 FCC Rcd.
723, 732 ¶ 21 (2011) (“The law is settled that a carrier-customer’s
failure to pay tariffed access charges does not violate either section
201(b) or section 203(c) of the Act.”). The Companies have not
sought our review of that aspect of the Commission’s decision.
                               11
the Communications Act, 47 U.S.C. § 201(b). Liability Order,
28 FCC Rcd. at 3487 ¶ 24.

     The Commission further ruled that the Companies “had no
intention at any point in time to operate as bona fide [carriers]
or provide local exchange service to the public at large.”
Liability Order, 28 FCC Rcd. at 3488 ¶ 25. The Commission
found that the Companies “neither owned nor leased facilities,
nor did they purchase unbundled network elements typically
used by [carriers] to provide any telecommunications services
to the public.” Id. Rather, “Beehive installed and maintained
their equipment (which was collocated in Beehive’s facilities),
coordinated and managed their billing and collection services,
and provided power and other services” needed by the
Companies. Id. at 3483 ¶ 16 (footnotes omitted). Beehive’s
creation of the Companies “allowed the access stimulation
arrangements [between Beehive and Joy] to continue at rates”
that otherwise “would have been unsustainable.” Id. at 3489
¶ 27. On top of that, Beehive benefited from charging AT&T
“for tandem switching and transport of the stimulated traffic.”
Id. at 3489 ¶ 28.

    The Commission concluded that this arrangement
“constitute[d] an unjust and unreasonable practice in violation
of Section 201(b) of the Act.” Liability Order, 28 FCC Rcd. at
3488 ¶ 24. It also ruled that the Companies’ charges to AT&T
were not made under a valid tariff because all of the customers
served by the three Companies paid nothing for the service
provided. Id. at 3494–3495 ¶ 38. Therefore, under Farmers
and Northern Valley, the access charges were not incurred for
switching services to an end user within the meaning of the
Communications Act. Id. The Commission also noted that the
Companies charged AT&T under a tariff for services that
ended in Nevada, even though the actual “end user” was the
conferencing equipment at Beehive’s facility in Utah. Id. at
                                12
3492–3495 ¶ 35. Because the Companies did not have any
valid tariffs for access charges applied to calls terminating in
Beehive’s territory in Utah, they had no authority under the
Communications Act to charge AT&T for those services. Id.
at 3493 ¶ 34.

     The Commission denied the Companies’ petition for
reconsideration. See AT&T Corp. v. All American Tel. Co., 29
FCC Rcd. 6393 (2014). The Companies did not seek further
review of the Commission’s liability determination or its
factual findings.

                                 3

     Because of the bifurcation of liability and damages, the
Commission conducted a second proceeding to determine
whether AT&T should be awarded damages. The Companies
objected that the Commission lacked jurisdiction over them,
having found them to be sham entities. The Commission
disagreed, reasoning that it had jurisdiction because the
Companies had “held themselves out as ‘providing services as
common carriers,’ and * * * operated with nationwide
authority under” the Communications Act. AT&T Corp. v. All
American Tel. Co., 30 FCC Rcd. 8959, 8960 ¶ 8 (2015)
(“Damages Order”) (footnote omitted). Additionally, the
Companies had “obtained state certificates to operate as [local
exchange carriers], filed tariffs for their interstate services, and
billed for those services[.]” Id. at 8961 ¶ 8; see also id. at 8961
¶ 10 (“Defendants presented themselves to the public as
common carriers and therefore are themselves subject to
Section 208.”).

     The Commission then ordered the Companies to refund
the $252,496.37 that AT&T had previously paid them in access
charges. Damages Order, 30 FCC Rcd. at 8962 ¶ 11. The
                               13
Commission noted that the Companies “admit[ted]” that
Beehive was the entity that actually provided AT&T with
interconnection services. Id.

    The Companies filed a timely petition for review.

                               II

      We will “uphold the Commission’s decision unless it is
arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.” Achernar Broadcasting Co. v. FCC, 62
F.3d 1441, 1445 (D.C. Cir. 1995) (quoting 5 U.S.C.
§ 706(2)(A)); see 47 U.S.C. § 402(g) (providing for review of
FCC orders “in the manner prescribed by section 706 of Title
5”). An order from the Commission that exceeds the scope of
its statutory authority is, by definition, not in accordance with
the law and subject to vacatur. See, e.g., American Library
Ass’n v. FCC, 406 F.3d 689, 708 (D.C. Cir. 2005).

    We hold that the Commission’s damages award was
lawful, but that those portions of the Commission’s decision
touching on the merits of the Companies’ state-law claims are
without legal effect.

                                A

     The Companies’ opening salvo is jurisdictional.
Specifically, they contend that, because the Commission’s
Liability Order found them to be sham entities rather than
genuine common carriers, the Commission’s jurisdiction over
them evaporated, leaving it powerless to award damages. The
Companies cannot wiggle out of responsibility for their
violations of the Communications Act that easily.
                                  14
     The Commission has jurisdiction over complaints alleging
“anything done or omitted to be done by any common carrier
* * * in contravention of the provisions” of the
Communications Act. 47 U.S.C. § 208(a). Thus, for “common
carriers,” taking actions that run afoul of the Communications
Act does not get them out from under the Commission’s
authority.

     A “common carrier,” in turn, is “any person engaged as a
common carrier for hire, in interstate or foreign communication
by wire or radio.” 47 U.S.C. § 153(11). To “engage” someone
in the business context is to hire or secure the services of that
entity. 3 OXFORD ENGLISH DICTIONARY 173–174 (def. 5a)
(1933) (reprint 1978) (defining “engage” as “[t]o hire, secure
the services of (a servant, workman, agent, etc.)” and “[t]o
enter into an agreement for service”). 3 Thus, at the very least,
a “common carrier” includes entities providing services
pursuant to a tariff—an agreement—filed with the
Commission, even if the tariffs are subsequently determined to
be invalid.

     In addition, in deciding whether the Companies are
“common carriers,” we look to the common law meaning of
that phrase. See, e.g., National Ass’n of Regulatory Util.
Comm’rs v. FCC (“NARUC”), 525 F.2d 630, 640–642 (D.C.
Cir. 1976) (turning to the common law to interpret the statutory
definition of common carrier); see also Cellco P’ship v. FCC,
700 F.3d 534, 545–546 (D.C. Cir. 2012).



     3
       See also WEBSTER’S NEW INTERNATIONAL DICTIONARY 847
(transitive def. 8; intransitive def. 2) (2d ed. 1934) (defining
“engage” as “[t]o secure or bespeak the services of (a person); to hire;
enlist” and “[t]o embark in a business; * * * to employ or involve
oneself”).
                                15
     Importantly, under the common law, “one may be a
common carrier by holding oneself out as such[.]” NARUC,
525 F.2d at 643. As this Court has recognized, the “primary
sine qua non of common carrier status is a quasi-public
character,” which arises out of the “undertaking ‘to carry for
all people indifferently[.]’” National Ass’n of Regulatory Util.
Comm’rs v. FCC, 533 F.2d 601, 608 (D.C. Cir. 1976) (italics
added); see also Verizon v. FCC, 740 F.3d 623, 651 (D.C. Cir.
2014) (“[T]he basic characteristic that distinguishes common
carriers from ‘private’ carriers” is the “common law
requirement of holding oneself out to serve the public
indiscriminately[.]”) (citation omitted); Southwestern Bell Tel.
Co. v. FCC, 19 F.3d 1475, 1481 (D.C. Cir. 1994) (“[T]he
indiscriminate offering of service on generally applicable terms
* * * is the traditional mark of common carrier service.”)
(emphasis added).

     Substantial evidence supports the Commission’s
determination that the Companies held themselves out to the
public, including AT&T, as common carriers for hire. They
offered to provide their common-carrier services pursuant to an
agreement—a tariff that was filed with the Commission. They
also obtained state certificates to operate as common carriers,
and they represented in their district court complaint that they
were common carriers. Furthermore, the Companies sought to
obtain the benefits of common carrier status, such as the
protections of the filed-rate doctrine. See Oral Argument Tr. at
6:11–13 (Petitioners’ Counsel: “[W]e sought the benefits of
being a common carrier, the benefit of being able to file a tariff,
to collect regulated access fees under that tariff, and [to] us[e]
the filed rate doctrine[.]”). Indeed, an important predicate for
the Companies’ district court action is that AT&T accepted
access services and the Companies billed AT&T for those
services pursuant to a tariff filed with the Commission, albeit
one later found to be invalid.
                              16

     Notably, in Farmers, supra, we rejected a similar
jurisdictional argument as “flatly wrong.” 668 F.3d at 719.
There, the defendant company Farmers, as part of a traffic-
pumping scheme, had “held itself out as a common carrier
providing access service” to interexchange carriers, and billed
for that service pursuant to a tariff. Id. We held that the
Commission’s ruling that Farmers had violated the
Communications Act by improperly charging for its services
“could not immunize [Farmers] from the complaint process.”
Id.

     Likewise here, having held themselves out as common
carriers and having charged AT&T for services under a
common-carrier tariff, the Companies were “engaged as a
common carrier for hire,” 47 U.S.C. § 153(11), and thus were
subject to the Commission’s jurisdiction. They cannot now
wield their violation of the Communications Act as a shield
against remedial liability for that same wrongdoing.

                              B

    Turning to the merits, we hold that the Commission’s
damages award was permissible.            The Commission’s
conclusion that the Companies did not render any service to
AT&T chargeable under the Communications Act is supported
by substantial evidence in the record. Damages Order, 30 FCC
Rcd. at 8962 ¶¶ 11, 13.

     To begin with, the Companies themselves repeatedly
conceded that Beehive, not they, provided the access services
that AT&T received. See, e.g., Answer and Affirmative
Defenses ¶ 3, AT&T Corp. v. All American Tel. Co., File No.
EB-09-MD-010 (FCC filed Dec. 1, 2014) (“Nevertheless, [the
Companies] admit that they billed AT&T for Local Switching
                               17
service that was provided by Beehive[.]”); id. ¶ 57 (“[The
Companies] admit that Beehive carried all traffic relevant to
the case at bar, and was responsible for the routing and
termination of the calls that AT&T’s customers made to chat
and conference service providers.”); id. ¶ 59 (“[The
Companies] admit that all of the traffic at issue was routed from
AT&T to its point of termination in Beehive’s facilities by
Beehive.”).

    In addition, the Companies stipulated that the amount of
the award—$252,496.37—was the amount that AT&T had
paid to the Companies for access services. Damages Order, 30
FCC Rcd. at 8962 ¶ 11.

     Finally, the Commission reasonably concluded that the
Companies were obligated to reimburse AT&T the amount that
AT&T paid to them for what turned out to be no qualifying
access service. There is nothing arbitrary or capricious about
the Commission’s decision that paying something for nothing
that is properly chargeable under the Communications Act is a
compensable harm.

     The Companies argue that the proper measure of damages
should have been AT&T’s actual pecuniary loss, not the rate
they paid. They contend specifically that AT&T failed to prove
that it suffered an actual pecuniary loss because it received a
connection service and, whether rendered by Beehive or the
Companies, AT&T owed the same amount of money either
way. Paying the Companies rather than Beehive directly thus
took nothing extra out of AT&T’s pockets.

     The Companies are correct that AT&T bore the burden of
showing both a violation of the law and “actual damages
suffered as a consequence of such violation.” New Valley
Corp. v. Pacific Bell, 15 FCC Rcd. 5128, 5134 ¶ 14 (2000); see
                               18
also Communications Satellite Corp., 97 F.C.C.2d 82, 91 ¶ 26
(1984) (“It is also well established that in a complaint
proceeding, the complainant has the burden of proving both the
fact and the amount of damages[.]”).

     But New Valley and Communications Satellite stand only
for the proposition that the party seeking damages must prove
a financial loss that was caused by the alleged violation. See
New Valley, 15 FCC Rcd. at 5133 ¶ 12 (party had not proven
how the defendant’s failure to file tariff charges for services
actually rendered had caused any injury); Communications
Satellite, 87 F.C.C.2d at 92 ¶ 30 (party failed to show how its
failure to win a Department of Defense bid was the proximate
cause of any loss of profits).

     AT&T met that burden.          AT&T presented expert
declarations evidencing the amount of money it paid the
Companies for no actual access service authorized by the
Communications Act, and the parties ultimately stipulated to
that measure of damages. In addition, unlike New Valley and
Communications Satellite, AT&T causally linked its damages
to the Companies’ traffic-pumping scheme, showing that, in
the eyes of the Communications Act, they were sham entities
that rendered no chargeable access services to AT&T.

     The Companies’ actual-loss argument, at bottom, reduces
to the claim that its liability should be excused because AT&T
might have owed Beehive those same access charges. The
Commission, however, permissibly held the Companies
financially responsible for the payments they received as a
result of their own conduct. See Damages Order, 30 FCC Rcd.
at 8958 ¶ 1 (“Because Defendants may charge only for services
they actually provide, it would be unjust to allow them to retain
the amounts AT&T paid.”).
                              19
                              C

     Finally, the Companies contend that the Commission
improperly analyzed the merits of their state-law quantum
meruit claims, which include a claim of unjust enrichment.
Those state common law claims fall outside the Commission’s
wheelhouse, and are still pending before the district court. We
agree that a few aspects of the Commission’s decision have
strayed beyond its authority, and hold that those portions are
invalid to the extent that they speak to the merits of the
Companies’ state-law claims.

     The controverted language in the Commission’s liability
order appears in two places. First, in responding to the
Companies’ assertion of an unjust enrichment defense to
AT&T’s damages claim, the Commission explained that the
Companies had failed to show “that they may plead equitable
defenses in a Section 208 complaint proceeding,” Damages
Order, 30 FCC Rcd. at 8963 ¶ 13. Fair enough. The problem
is that the Commission went on to say that, “[e]ven assuming”
such a common-law claim could be decided by the
Commission, the Companies’ unjust enrichment claim is
without merit because the Companies had “failed to establish
the necessary elements for unjust enrichment, because they did
not provide a service to, or confer a benefit on, AT&T.” Id.

     Second, at the end of its decision, the Commission
dismissed the remaining referred issues as moot—which
included the quantum meruit claims, see Referral Order, supra,
at Ex. A, ¶ 2—because the Companies “did not provide any
service to AT&T.” Damages Order, 30 FCC Rcd. at 8966 ¶ 21.
                                20
                                 1

    Before proceeding to the merits of the Companies’
challenge to those aspects of the Commission’s decision, we
must first address the Commission’s threshold challenges to
our ability to decide that question.

     First, the Commission argues that the Companies lack
standing to raise these arguments because the Commission’s
statements do not injure them. The Commission contends that
the Companies will not be harmed by the decisional language
unless the district court gives effect to it in its own proceedings.

      To establish standing, the Companies must demonstrate
either actual injury from the Commission’s ruling, a “certainly
impending” injury, or “substantial risk” of such an injury.
Susan B. Anthony List v. Driehaus, 134 S. Ct. 2334, 2341
(2014). To have standing, then, the Companies must
demonstrate a substantial risk that the district court will credit
the Commission’s determinations in resolving the Companies’
common law claims. In this rather unique context, such a
substantial risk of injury to the Companies exists because,
going forward, the district court will be powerless to set aside
any erroneous Commission determinations pertaining to their
state-law claims. That is because the Hobbs Act vests
exclusive jurisdiction to review final decisions of the
Commission in the federal courts of appeals, not the district
courts. 28 U.S.C. § 2342(1); see also FCC v. ITT World
Communications, Inc., 466 U.S. 463, 468 (1984) (“Exclusive
jurisdiction for review of final [Commission] orders * * * lies
in the Court of Appeals.”). Litigants “may not evade these
provisions by requesting the District Court to enjoin action that
is the outcome of the agency’s order,” even if the agency order
is allegedly ultra vires. ITT World Communications, 466 U.S.
at 468.
                               21

     As a consequence, once the primary jurisdiction referral is
completed, the Companies will be powerless to challenge the
merits of the Commission’s decision before the district court,
and the district court will be “without authority to review the
merits of the [Commission’s] decision.” Port of Boston Marine
Terminal Ass’n v. Rederiaktiebolaget Transatlantic, 400 U.S.
62, 69 (1970).

     Given that, the Companies face a substantial risk that the
district court would take the Commission’s statements at face
value and hold that the common law unjust enrichment claim
is foreclosed. Because the Companies have no other avenue to
challenge that asserted overreach by the Commission, they
have standing to pursue that claim here.

     Second, the Commission insists that the Companies’
argument is foreclosed because they failed to file a petition for
reconsideration raising their objection to the Commission
addressing their common law claims. The filing of a petition
for reconsideration is a “condition precedent to judicial review”
whenever a party “relies on questions of fact or law upon which
the Commission * * * has been afforded no opportunity to
pass.” 47 U.S.C. § 405(a). Accordingly, those who wish to
challenge a Commission decision must ensure that the
Commission is afforded “a fair opportunity to review the
arguments” before raising them in court. BDPCS, Inc. v. FCC,
351 F.3d 1177, 1183 (D.C. Cir. 2003).

    We do not, however, require that the issue be raised with
“[a]bsolute precision,” and “judicial review is permitted so
long as ‘the issue is necessarily implicated by the argument
made to the Commission.’” EchoStar Satellite LLC v. FCC,
704 F.3d 992, 996 (D.C. Cir. 2013) (quoting Time Warner
Entm’t Co. v. FCC, 144 F.3d 75, 80 (D.C. Cir. 1998)); see also
                               22
Sprint Nextel Corp. v. FCC, 524 F.3d 253, 257 (D.C. Cir. 2008)
(“The pith of the test is this: ‘the argument made to the
Commission’ must ‘necessarily implicate[]’ the argument
made to us.”) (alteration in original; citation omitted).

     Here, the Companies (as well as AT&T) repeatedly argued
to the Commission that it lacked the authority to address the
state-law claims. The Companies pointed out that “the possible
merits of their equitable claims” were “not before the
Commission in the instant proceeding, as AT&T admits in
footnote 87, and so are irrelevant.” Answer and Affirmative
Defenses, supra, ¶ 78. Doubling down, the Companies added
that “the Commission lacks authority to hear [their] claims for
damages against AT&T, as a non-carrier,” and that “[t]o the
extent AT&T has arguments for the SDNY court, it should
make them there, and not in this proceeding.” Id. ¶ 88.

     AT&T agreed. See Supplemental Complaint of AT&T
Corp. for Damages ¶ 77 n.87, AT&T v. All American Tel. Co.,
File No. EB-09-MD-010 (FCC filed Oct. 24, 2014) (“[T]he
Commission does not generally have jurisdiction to address the
merits of any particular state law quasi-contract claim[.]”);
Reply Legal Analysis in Support of Supplemental Complaint
at 33, AT&T Corp. v. All American Tel. Co., File No. EB-09-
MD-010 (FCC filed Dec. 22, 2014) (“[T]he Commission
should not decide the merits of any state law claim[.]”); see
also Bartholdi Cable Co. v. FCC, 114 F.3d 274, 280 (D.C. Cir.
1997) (“[Section] 405 does not require that the party seeking
judicial review of an issue be the party that provided the
Commission with opportunity to pass on the issue.”).

    Because the Commission was afforded a full and fair
opportunity to consider its treatment of the state-law claims and
was fully apprised of the Companies’ position, Section 405(a)
is no bar to reaching the merits. See, e.g., Sorenson
                                 23
Communications, Inc. v. FCC, 765 F.3d 37, 50 (D.C. Cir. 2014)
(issue is ripe for review when “the Commission had an
‘opportunity to pass’ upon the question of fact or law raised in
the petition” even if no petition for reconsideration was filed)
(citation omitted). 4

                                 2

     The Companies are correct that the Commission lacked the
legal authority to discuss the merits of their state-law quantum
meruit claims. Congress has vested the Commission only with
the authority to address allegations of actions taken “in
contravention of” the Communications Act. 47 U.S.C.
§ 208(a). A state common law claim, by definition, does not
arise under or state a violation of the Communications Act, and
thus falls outside the scope of the Commission’s jurisdiction.

    In addition, the Companies’ state-law claims seek to
determine the rights of a carrier against a customer: the
Companies want the district court to order AT&T to pay them
for services allegedly rendered. But for more than half a
century, the Commission has held that it lacks jurisdiction to
“determin[e] * * * the carrier’s rights against a subscriber[.]”
Thornell Barnes Co. v. Illinois Bell Tel. Co., 1 F.C.C.2d 1247,
1275 (1965); see also AT&T Corp. v. Bell Atl.-Pa., 14 FCC

    4
       Prior decisions of this court have held that Section 405(a)
“constitutes ‘an exhaustion requirement, rather than * * * a
jurisdictional prerequisite.’” M2Z Networks, Inc. v. FCC, 558 F.3d
554, 558 (D.C. Cir. 2009) (citation omitted; alteration in original);
see also Southern Indiana Broadcasting, Ltd. v. FCC, 935 F.2d 1340,
1342 (D.C. Cir. 1991) (“[W]e have treated this as an ‘exhaustion’
requirement, rather than a jurisdictional prerequisite, and have
allowed exceptions[.]”). In any event, for the reasons given, the
briefing by both the Companies and AT&T fairly presented the issue
to the Commission.
                                 24
Rcd. 556, 599 n.240 (1998) (the Commission has “no
authority” to conduct “adjudications of carrier’s rights against
their customers”). Indeed, the Commission here dismissed the
Companies’ complaint against AT&T for that very reason. All
American Tel. Co., 26 FCC Rcd. at 726 ¶ 10. And we have
previously affirmed and enforced this limitation on the
Commission’s jurisdiction. See MCI Telecomms. Corp. v.
FCC, 59 F.3d 1407, 1417 (D.C. Cir. 1995) (vacating portion of
a Commission order that “involve[d] a determination of the
carrier’s rights against a [customer], over which this
Commission has no jurisdiction”) (second alteration in
original) (quoting Thornell Barnes Co., 1 F.C.C.2d at 1275
¶ 67).

     Accordingly, the Commission’s discussion of the
Companies’ ability to satisfy the “necessary elements for unjust
enrichment,” Damages Order, 30 FCC Rcd. at 8963 ¶ 13, and
its determination that the quantum meruit claims referred to the
Commission were “moot[ed]” by the Commission’s decision
that the Companies “did not provide any service to AT&T,” id.
at 8966 ¶ 21, were improper and ultra vires to the extent that
they addressed the Companies’ state-law claims.             The
Companies’ petition for review is granted only with respect to
those aspects of the decision that reached beyond the
Commission’s statutory authority.         The merits of the
Companies’ state-law claims must be decided by the district
court in the first instance. 5

                                  ***



    5
      Because the Commission’s order does not reach the question
of whether the Communications Act preempts the Companies’ state-
law claims, that question also remains open for the district court to
address in the first instance.
                              25
     The petition for review is granted in part and denied in
part. The Commission’s award of damages is affirmed, but
insofar as the Commission reached and decided any questions
of state law or the merits of the Companies’ quantum meruit
claims, those parts of the decision are without legal effect and
vacated in relevant part.

                                                    So ordered.
