source: Caselaw Access Project

author: WILLIAMS, Senior Circuit Judge:

license: Public Domain

text:
    AT&T CORP., Petitioner v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents Bandwidth.com, Inc., et al., Intervenors
    No. 15-1059
    United States Court of Appeals, District of Columbia Circuit.
    Argued September 8, 2016
    Decided November 18, 2016

      Joseph Guerra, argued the cause for petitioner. With him on the briefs were Peter D. Keisler, James P. Young, Kwaku A. Akowuah, Gary L. Phillips, Washington, DC, and David L. Lawson.
    Sarah E. Citrin, Counsel, Federal Communications Commission, argued the cause for respondents. On the brief were William J. Baer, Assistant Attorney General, Robert B. Nicholson and Robert J. Wiggers, Attorneys, Jonathan B. Sallett, General Counsel, Federal Communications Commission, David M. Gossett, Deputy General Counsel, Jacob M. Lewis, Associate General Counsel, Richard K. Welch, Deputy Associate General Counsel, and Lisa S. Gelb, Counsel. James M. Carr, Counsel, entered an appearance.
    Christopher J. Wright, argued the cause for intervenors. With him on the brief were John T. Nakahata, Timothy J. Si-meone, Stephen W. Miller, Joshua M. Bo-beck, Charles A. Zdebski, and Jeffrey P. Brundage. John R. Grimm, Washington, DC, entered an appearance.
    Before: ROGERS, Circuit Judge, and WILLIAMS and RANDOLPH, Senior Circuit Judges.
   WILLIAMS, Senior Circuit Judge:

This case arises from the ongoing transition of American telephony to the Internet. The process creates challenges to a regulatory system designed for the pre-Internet world, the familiar “public switched telephone network” or “PSTN.” We deal here with the fees that local exchange carriers (“LECs”) can charge inter-exchange carriers (“IXCs”) for certain services they provide, in coordination with providers of Voice over Internet Protocol (“VoIP”), for the completion of “inter-exchange” calls. Resolution of the dispute turns on how the disputed services are to be classified. The Federal Communications Commission says that they are end-office switching services. Petitioner AT&T says that they are tandem switching services. The prescribed rates for the latter have generally been lower; AT&T has no objection to paying them.

Two decisions of the Commission are critical. First, in 2011 the Commission made a broad effort to update its system for regulating intercarrier compensation. In re Connect America Fund, 26 FCC Red. 17663 (2011) (the “Transformation Order”). That order produced definitions of “End Office Access Service” and “Tandem-Switched Transport Access Service,” stated in subsections (d) and (i), respectively, of 47 C.F.R. § 51.903. The parties focus on subsection (d), providing:

End Office Access Service means:
(1) The switching of access traffic at the carrier’s end office switch and the delivery to or from of such traffic to the called party’s premises;
(2) The routing of interexchange telecommunications traffic to or from the called party’s premises, either directly or via contractual or other arrangements with an affiliated or unaffiliated entity, regardless of the specific functions provided or facilities used; or
(3) Any functional equivalent of the incumbent local exchange carrier access service provided by a non-incumbent local exchange carrier.

§ 51.903(d). Subsection (i), governing tandem switching access service, employs similar “functional equivalent” language.

The Transformation Order, recognized that LECs partnered with' VoIP providers to supply these services. It therefore specified that a LEC could collect for provision of access services “regardless of whether the [LEC] itself delivers such traffic to the called party’s premises or delivers the call ... via contractual or other arrangements with an affiliated or unaffiliated provider of interconnected VoIP service.” § 51.913(b). In short, the Transformation Order allowed a VoIP provider and its LEC partner (collectiyely, “VoIP-LEC”) to charge for providing the “functional equivalent” of end-office switching services, or tandem switching services, as the case might be.

In the second decision, In re Connect America Fund, 30 FCC Red. 1587, 1588, ¶ 2 (2015) (the “Declaratory Ruling”), the Commission wrestled with the contention of AT&T, an IXC, that the disputed services do not qualify as end-office access. The Commission ruled that the disputed services are indeed end-office access under subsection (3) of § 51.903(d). Id. at 1588-89, ¶ 3. It presented its ruling as an interpretation of the Transformation Order.

AT&T challenges the Declaratory Ruling on two grounds. First, it argues that the ruling cannot be upheld as an interpretation of the Transformation Order. On this issue we must uphold the Commission unless its proffered interpretation is “plainly erroneous or inconsistent with the regulation.” Auer v. Robbins, 519 U.S. 452, 461, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997) (quotation omitted). If the Declaratory Ruling fails that test, then imposition of the fees would require a change in the Commission’s rules, which could occur only through the usual notice-and-comment rulemaking under the Administrative Procedure Act, 5 U.S.C. § 553. In the end, we find that the Declaratory Ruling does not disclose the Commission’s reasoning with the requisite clarity to enable us to sustain its conclusion. S.E.C. v. Chenery Corp., 318 U.S. 80, 94, 63 S.Ct. 454, 87 L.Ed. 626 (1943); see Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 50, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). We therefore vacate and remand the order to the Commission for further explanation.

AT&T also contends that it was arbitrary and capricious of the Commission to apply its “interpretation” retroactively, thus requiring AT&T to pay end-office switching charges for access services it received before the Declaratory Ruling. On the view we take of the first claim, we need not reach this issue here.

We now double back to describe the disputed services. We start with end-office and tandem switching in a pure PSTN environment, and then move to the services’ respective places in the mixed universe of Internet and PSTN,

The PSTN depends on time-division multiplexing (“TDM”) technology, which allows multiple . calls to travel simultaneously over shared equipment before being separated onto individual lines. When a subscriber “originates” a long-distance call in the PSTN context, that call must travel from the subscriber’s premises over the subscriber’s line (“loop” in PSTN parlance) to an end-office switch, which will link the call to trunk lines, where it will travel in TDM format along with other conversations. For the called party, the process is similar, with an end-office switch moving the call from a trunk line to the subscriber’s line, thus enabling the call to be terminated. (Termination doesn’t refer to the end of the phone call, but to its reaching the called party.) The Commission has long regulated the rates for this access because of a risk that LECs would charge the IXCs monopolistic prices. See In re Access Charge Reform, Seventh Report & Order, 16 FCC Red. 9923, 9935-36, ¶¶30-34 (2001). A similar risk exists along the network of trunk lines running between the end-office switches for the calling and called parties. See In re Access Charge Reform, Eighth Report & Order, 19 FCC Red. 9108, 9116-17, ¶ 17 (2004). “Just as the loop runs from [customer premises] terminals to local switches, the trunks run from the local switches to centralized, or tandem, switches ..,, which operate much like railway switches, directing traffic into other trunks.” Verizon Communications, Inc. v. F.C.C., 535 U.S. 467, 490, 122 S.Ct. 1646, 152 L.Ed.2d 701 (2002); see also In re Access Charge Reform, First Report & Order, 12 FCC Red. 15982, 16051, ¶158 (1997). The Commission regulates switching costs in this second context as well.

The Commission has set the ceiling on rates chargeable by a “competitive” LEC at the , rates charged by the incumbent LEC with which it competes. (The incumbent LECs are mostly descendants of the “Baby BOCs”—the Bell Operating Companies that were split off from the old AT&T on the occasion of its break-up. The focus here is on competitive LECs, or “CLECS”; except as necessary we refer to the two interchangeably.) In the PSTN context, the chargeable switching rate depends on- the function of the switching service. Thus, the Commission has said, the benchmark switching rate “is [1] the end office switching rate when a competitive LEC originates or terminates calls to end users and [2] the tandem switching rate when a competitive LEC passes calls between two other carriers.” In re Access Charge Reform, PrairieWave Telecomms., Inc. Petition, 23 FCC Red. 2556, 2558, ¶6 (2008) (bracketed numbers added). In PSTN, then, end-office switching occurs between a trunk line and the subscriber’s line, while tandem switching occurs between trunk lines.

Given their TDM heritage these access charges do not map cleanly onto VoIP-PSTN traffic, which the Commission defined in the Transformation Order as “traffic exchanged over PSTN facilities that originates and/or terminates in IP format.” 26 FCC Red. at 18006, ¶940. There the Commission adopted the general principle that LECs could “charge the relevant intercarrier compensation for functions performed by it and/or by its retail VoIP partner, regardless of whether the functions performed or the technology used correspond precisely to those used under a traditional TDM architecture.” Id. at 18026-27, ¶ 970. That focus on functions of course undergirds the reliance on “functional equivalent^]” in § 51.903(d), (i).

The Transformation Order also explicitly asserted the application of its rules across technologies, saying that LECs are entitled to compensation for performing functions “using, in whole or in part, technology other than TDM transmission in a manner that is comparable to a service offered by a local exchange carrier,” 47 C.F.R. § 51.913(b).

To understand the application of that principle, and the present claims, we now must examine VoIP-PSTN services provided by a VoIP-LEC. The universe of these provider partnerships is. divided into two—“facilities-based” and “over-the-top.” Declaratory Ruling, 30 FCC Red. at 1588, ¶ 2. Facilities-based service occurs when a VoIP provider such as a cable company owns or leases the physical infrastructure connecting directly to subscribers’ homes and offices and thus completes the “last mile” of the call. Id. at 1592, ¶ 11 n.35.This is closely parallel to the equivalent PSTN process; -the charges levied by these providers are not at issue here.

Over-the-top VoIP providers do not connect directly to the last mile transmission network. Id. at 1588, ¶2. They “require the end user to obtain broadband transmission from a third-party provider.” Id. at 1592, ¶ 11 n.35 (citation omitted). Thus, suppose a call from a PSTN calling party to an over-the-top VoIP subscriber. The call will make its way via the calling party’s IXC to some intermediate point, at which the VoIP-LEC provider will “con-vertí] the call from TDM to IP format.” AT&T Corp. v. YMax Communications Corp. 26 FCC Red. 5742, 5746, ¶ 7 (2011) (“YMax I”). Now taking the form of data packets, the call will then proceed over the Internet until it reaches the network of the called party’s Internet service' provider (“ISP”). Id. That ISP will then direct the data packets to the called party’s customer premises equipment—which in YMax I were (perhaps typically) a VoIP device and a landline handset. See id. at 5744, 5746, ¶¶ 4, 7.

The Commission issued the Declaratory Ruling to resolve petitioner AT&T’s contention that the Transformation Order did not require it to pay over-the-top VoIP-LECs the end-office switching rate. 30 FCC Red. at 1594-95, ¶16. AT&T argued there, and argues here, that the Transformation Order authorizes LECs to obtain end-office switching charges only if they actually interconnect with the last-mile network leading into a customer’s home, a condition satisfied in the PSTN world and by facilities-based providers in the IP world. Id.

AT&T bolstered the argument by reference to RAO Letter 21, 7 FCC Red. 5205 (1992), a staff document that identified eight - “basic switching functions,” id. at 5205 & n.l. One of these eight functions is “[ijnterconnection [which] connects subscriber line to subscriber line or subscriber line to trunk,” while the remaining seven cover activities such as, “[attending [which] monitors for off-hook signals,” “[i]nformation receiving,” and “[i]nformation transmitting.” Id. at n.l.. In 1997, the Commission clarified the letter by stating that out of the eight functions, “interconnection, ie., the actual connection of lines and trunks, is the characteristic that distinguishes [end-office] switches from other central office equipment.” In re Petition for Reconsideration, RAO 21, 12 FCC Red. 10061, 10067, ¶ 11 (1997).

The Declaratory Ruling “recognize[d] that elements” of the RAO “decisions emphasize, among other things, the function of connecting lines and trunks in end-office switching,” but dismissed arguments based on these decisions as “necessarily tied to TDM-based technologies.” Declaratory Ruling, 30 FCC Red. at 1606, ¶38. It treated interconnection, formerly the sine qua non of end-office switching, as a mere technical exigency of TDM networks and not an inherent function of end-office switching. Id. at 1602, ¶ 30.

Instead the Commission selected from RAO Letter. 21 what it called an “aggregation of functions,” specifically “call control, i.e„ the functions necessary to ensure call set-up, conduct and take-down,” and pronounced this the functional equivalent of end-office switching. 30 FCC Red. at 1601, ¶ 28 (emphasis omitted). Finding that over-the-top VoIP services “undoubtedly provide, the call intelligence associated with call set-up, supervision and management” because these services “determine call destination and directly code the call for receipt and decoding by the called party,” it concluded that over-the-top VoIP providers supply “the functional equivalent of end-office switching.” Id. at 1602, ¶29 & n.105.

Its justification for the shift from interconnection rested in large part on a claim that the Transformation Order had ushered in a “new functional equivalence approach” that was not bound by “preexisting, technology-specific, TDM-based guidance for determining functional equivalency.” 30 FCC Red. at 1600, ¶26 & n.98. This “riew” approach, the Declaratory Ruling explained, requires a “holistic look at how calls are delivered to the end user” rather than a comparison of “key physical switching functions.” Id. at 1600-1601, ¶¶ 26-27 (explaining that a test based on “physical functions” is too “narrow” an interpretation of the Transformation Order). The Commission rooted this new standard in a passage from the Transformation Order saying that the functions or technologies used “do not need to correspond precisely to those used under a traditional TDM architecture.” 30 FCC Red. at 1600, ¶26 n.98 (quoting Transformation Order, 26 FCC Red. at 18026-27, ¶ 970) (internal quotation marks omitted). The Commission also found support for this approach in certain general statements the agency had previously made about functional equivalence, a concept with a long history in telecommunications regulation, which we need not recount here. See 30 FCC Red. at 1148, ¶27 n.100 (citing precedents); see also id. at 1150, ¶ 31 & n.114.

AT&T argues that the Commission misapplied this functional equivalence concept. As we saw, the Declaratory Ruling proclaimed the standard to be “new,” to require a “holistic look at how calls are delivered to the end user,” and not to require precise physical identity. But those propositions don’t tell us much about what functional equivalence does mean. This seems to turn on a comparison of the functions performed by PSTN end-office switches and by over-the-top VoIP-LECs. The Declaratory Ruling said that those entities’ provision of “call control” and call intelligence did the job. Declaratory Ruling at 1601, ¶28. This poses a key question: if those are the critical functions, what distinguishes end-office switching from tandem switching?

AT&T assails the Commission’s failure to explain why the activities of over-the-top VoIP-LECs should be classified as end-office rather than tandem switching. “They [the VoIP-LEC partners] perform only some limited subset of the call control functions performed traditionally by all types of sioitches.” Pet’r Br. at 10 (emphasis added). Indeed, AT&T had posed that problem in the proceedings leading to the Declaratory Ruling, clearly enough so that the Commission noted that it had argued that the services of the VoIP-LECs “ ‘more closely resemble tandem switching’ than end office switching.” Declaratory Ruling, 30 FCC Red. at 1604, ¶ 33. Having explicitly noted AT&T’s position, the Declaratory Ruling never again mentioned tandem switching. And at oral argument counsel for the agency was unable to point to any Commission language, in the Declaratory Ruling or elsewhere, indicating that call intelligence is not performed by tandem switches. Oral Argument at 32:06.

When the Commission applies the functional equivalence test, it necessarily draws a line around “the essential function[s]” of a service. See In re Investigation of Special Access Tariffs of Local Exchange Carriers, 12 FCC Red. 7026, 7041, 7052, ¶¶ 27, 48 (1997) (explaining that under “functional equivalence test,” services were not “like” when they failed to share an “essential function”); see In re Cellexis Internat’l, Inc. v. Bell Atlantic NYNEX Mobile Sys., Inc., 16 FCC Red. 22887, 22894, ¶ 19 (2001) (“[I]t is the purpose of a technical configuration, not the configuration itself, that is relevant in determining functional equivalence”)- The Declaratory Ruling held that “call control” was the essential, defining purpose of end-office switching while “interconnection” was not. 30 FCC Red. at 1601-1602, ¶¶28-30 (defining call control as “the intelligence associated with call set-up, supervision and management”). AT&T contends that this defining function is not defining at all. As we mentioned above, AT&T asserts that over-the-top VoIP-LECs “perform only some limited subset of the call control functions performed traditionally by all types of switches.” Pet’r Br. at 10.

Indeed, the Declaratory Ruling never explained its references to call set-up and the intelligence associated with it. But in prior rulings the Commission had repeatedly referred to “call set-up” in terms that seem to encompass the services of tandem switches, e.g., speaking of it as the process of “establishing] transmission paths over which telephone calls are carried.” In re Ameritech Operating Cos., 11 FCC Rcd. 3839, 3841, ¶ 4 (1996). Call setup determines the route necessary to get from the calling party’s phone to the called party’s phone. In a TDM phone call, this route is determined by a signaling network, such as the SS7 network. In re High-Cost Universal Serv. Support, 24 FCC Rcd. 6475, 6642, ¶ 327 n.848 (2008) (“SS7 is an out-of-band signaling system that is separate from, but runs parallel to, the public switched telephone network (PSTN) and is used to set up call paths between calling and called parties.”); In re Access Charge Reform, First Report & Order, 12 FCC Rcd. 15982, 16087, ¶ 244 (1997) (“[Signaling networks like SS7 establish and close transmission paths over which telephone calls are carried.”); see generally Transformation Order, 26 FCC Rcd. at 17892-96, ¶¶ 708, 715-17 (discussing different types of signaling networks, including SS7, Multi-Frequency signaling, and IP signaling).

In the most common type of signaling network, the call set-up process relies on databases: “[S]witeh[es] [] send queries ... to call-related databases, which return customer information or instructions for call routing to the switch.” In re Application of GTE Corp., 15 FCC Rcd. 14032, 14121, ¶ 189 n.431 (2000). Thus the “intelligence associated with-call set-up” exists not in end-office switches, but in these “call-related databases.” To the extent that end-office switches possess any of the “intelligence associated with call set-up,” that intelligence appears to be shared with tandem switches. Both end-office and tandem switches are, for signaling purposes, “service switching points ... capable of originating, transmitting, and receiving SS7 messages for call set-up and database transactions.” Ameritech, 11 FCC Red. at 3840-41, ¶ 3; see In re Access Charge Reform, First Report & Order, 12 FCC Rcd. at 16045, ¶ 145 (indicating that both end-office and tandem switches “process or formulate signal information”).

Because both tandem and end-office switches process “intelligence associated with call-setup,” the Declaratory Ruling’s functional equivalence analysis fails to distinguish between • them. If end-office switches traditionally perform functions A (call set-up) and B (interconnection between trunks and loops), while tandem switches perform functions A (call set-up) and C (interconnection between trunks), it is wholly arbitrary to say (without more) that the call set-up activity of VoIP-LECs is the functional equivalent of end-office switching but (implicitly) not the equivalent of tandem switching. Which is it—one, the other, or both? And what language in the Transformation Order gives the answer?

The Transformation Order prescribed entirely different consequences for services that are the functional equivalent of end-office switching and of tandem switching. Besides assigning them separate definitions, see 47 C.F.R. § 51.903(d), (i), it provided for different rate ceilings. Compare 47 C.F.R. § 51.907(g)(1) (end-office access service) with id. § 51.907(g)(2) (tandem switch service). In case the Transformation Order1 s rules did not insist on the distinction between them clearly enough, the Commission drew a picture, illustrating the two types of switching as occurring separately at different stages of a call’s path. Figure 13, 26 FCC Rcd. at 18112, ¶ 1306. So far the Commission has not pointed to anything in the Transformation Order from which a reader would understand that it meant for specific services provided by over-the-top VoIP-LEC providers to qualify as the functional equivalent of end-office switching and not tandem switching.

The Commission’s muddled treatment of functional equivalence requires vacatur and remand. But judicial economy suggests that we address some of AT&T’s other arguments to avoid re-litigation of identical issues in a subsequent petition. AT&T claims that language in the Transformation Order itself, and in Commission decisions before and after the ruling, illustrate that references to end-office switching services cannot be read as broadly as necessary to sustain the Declaratory Ruling.

In the preamble to the Transformation Order (the “concise general statement of [the rules’] basis and purpose” requited by 5 U.S.C. § 553(c)), the Commission explained that it was adopting rules to make clear that a carrier may impose origination and termination charges when it “uses Internet Protocol facilities to transmit ... traffic to or from the called party’s premises.” 26 FCC Rcd. at 18025, ¶ 969 (emphasis added) (brackets omitted). It went on to say, “[0]ur rules do not permit a LEC to charge for functions performed neither by itself or its [VoIP] partner.” Id. at 18027, ¶ 970. On their face these passages seem to deny an over-the-top provider authority to charge end-office switching rates. As we’ve pointed out, the Commission acknowledged that VoIP providers do not supply a last-mile connection and their end-users must obtain broadband transmission from others.

The Commission replies that the passage is “not itself a rule,” so that the Commission is free to deviate from its apparent meaning. Resp. Br. at 21-22. But at the very least, an agency’s “expla[nation] in the Federal Register” provides evidence of the agency’s “intent at the time of the regulation’s promulgation.” Consolidation Coal Co. v. Fed. Mine Safety & Health Review Comm’n, 136 F.3d 819, 821-22 (D.C. Cir. 1998) (quoting Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994)). An interpretation at odds with the agency’s expressed intent at the time of adoption enjoys no judicial deference. Comcast Cable Communications, LLC v. F.C.C., 717 F.3d 982, 1003 (D.C. Cir. 2013).

The Commission also contends that the preamble language is ambiguous; its theory for ambiguity is that most IXCs other than AT&T mutely paid the charges when billed by the VoIP-LECs. Parties’ silent decisions not to incur the cost of litigation seem a relatively remote basis for claiming ambiguity, which in common parlance is a matter of language. Nonetheless, the Transformation Order might conceivably have been using “transmit” in the sense of helping to cause another party to make the ultimate transmission.

AT&T also cites two decisions relating to YMax Communications Corp., an over-the-top VoIP provider. In the first, AT&T Corp. v. YMax Communications Corp. 26 FCC Rcd. 5742 (2011) (“YMax I”), which we’ve already mentioned, AT&T successfully resisted YMax’s claim to end-office switching fees. The pure holding of YMax I was narrow: that an over-the-top VoIP provider could not levy end-office switching charges based on a tariff that described end-office switching purely. in TDM terms. “The fundamental problem [with YMax’s position] appears to be that YMax chose to model its Tariff on .common language in LEC access tariffs, even though the functions YMax performs are very different from the access services typically provided by LECs.” YMax I, 26 FCC Rcd. at 5748, ¶ 14. Relying on the tariffs references to “End User station loops” and “end user lines”—language drawn from the TDM world—the Commission found that the tariff contemplated charges only for TDM services. Id. at 5755-59, ¶¶ 36-45. And under the filed rate doctrine YMax could charge only for services specified in the tariff. Id. at 5748, ¶ 12 (quoting 47 U.S.C. § 203(a), (c)).

In addition to its holding on YMax’s tariff language, the Commission hinted that YMax’s access charges might have failed to satisfy the functional equivalence standard but stopped short of addressing that issue. 26 FCC Red. at 5743, ¶ 1 n.7 (“[W]e emphasize that this Order addresses only the particular language in YMax’s Tariff and the specific configuration of YMax’s network architecture..., ”).

The Commission also refused to “address issues regarding the interearrier compensation obligations, if any, associated with [VoÍP] traffic in this Order.” Id.

The Commission cited YMax I with a “ef.” signal in the Transformation Order, 26 FCC Rcd. at 18027, ¶ 970 n.2028, and AT&T reads the citation as intended to illustrate that the services of an over-the-top VoIP do not qualify for end-office switching fees. The Commission insists here, as it did in the Declaratory Ruling, that the citation served merely as “part of a discussion of measures taken to prevent double billing,” 30 FCC Red. at 1604, ¶ 34 n.126. The evidence is mixed, but we find the Commission’s interpretation reasonable.

After the Transformation Order another matter involving YMax led the Commission’s Wireline Competition Bureau to amend one of the order’s rules. Shortly after the order was published, YMax sought “confirmation of its interpretation” that it need only provide “some portion of the interconnection with the PSTN” to qualify for the “full benchmark rate” of access charges, “even if [the rate] includes functions that neither [the LEC] nor its VoIP retail partner are actually providing.” In re Connect America Fund, 27 FCC Rcd. 2142, 2144, ¶ 4 (2012) (“YMax IF). The Bureau noted that YMax’s' request “highlight[ed]” a potential conflict between two of the Transformation Order’s rules. See id. at 2144, ¶ 5. While 47 C.F.R. § 51.913(b) prevents VoIP-LECs from “chargpng] for functions not performed by the [LEC] itself or the ... VoIP” provider, the Transformation Order amended 47 C.F.R. § 61.26(f) to provide an apparently much laxer standard:

If a CLEC provides some portion of the switched exchange access services .... [and] if the CLEC is listed in the database of the Number Portability Administration Center as providing the calling party or dialed number, the CLEC may assess a rate equal to the rate that would be charged by the competing ILEC for. all exchange access services required to deliver interstate traffic to the called number.

Transformation Order, 26 FCC Rcd. at 18226 (emphasis added) (amending § 61.26(f)). Thus, as YMax argued, § 61.26(f) seemed to allow carriers to bill for services not provided, as long as they performed “some portion” of the total services required to deliver a call. The Bureau rejected YMax’s interpretation of § 61.26(f) on the grounds that it could lead to “double billing”; it amended the rule to make clear that § 61.26(f) “is limited by section 61.913(b).” YMax II, 27 FCC Red. at 2144, ¶¶ 4-5; see id. at 2149 (amending § 61.26(f) with the qualifier “to the extent permitted by § 51.913(b)”).

AT&T asks us to read YMax II in light of both YMax’s letter to the Bureau and its filings in YMax I, which the Bureau did not cite. AT&T assumes that the Bureau read the “some portion” phrase in YMax’s letter as a specific reference to all the capabilities, including call control, that YMax had detailed in prior filings to the Commission. From this AT&T claims that “it is inconceivable that the Bureau would have denied” YMax’s request if the Transformation Order allowed a charge for end-office switching services merely on the basis of a VoIP-LEC’s providing call control. Pet’r Br. at 33-34. We find the argument a stretch. It is just as likely that the Bureau interpreted “some portion” to mean unspecified functions falling short of “call control.”

While neither YMax decision is a holding in favor of AT&T’s view, YMax I represents the Commission’s apparent understanding of the “commonly understood meaning[ ]” of end-office switching around the time of the Transformation Order. See YMax I, 26 FCC Red. at 5758, ¶ 43. The Commission was remarkably clear, even emphatic, in its statement about end-office switching. Charges for such switching, it said, “are authorized by law to allow local exchange carriers to recover the substantial investment required to construct the tangible connections between themselves and their customers throughout their service territory.” Id. at 5757, ¶ 40 & n.117. It therefore presents an additional problem with the Commission’s attempted application of the Transformation Order’s functional equivalence standard, besides the ones already discussed.

Here we note that the Declaratory Ruling also falls down in its effort to explain why VoIP-LECs’ failure to provide interconnection is not fatal to the claim that they provide the functional equivalent of end-office switching. As we saw, the RAO guidance and YMax I both appear to identify end-office switching as supplying actual or physical interconnection. See id. Indeed, the Declaratory Ruling acknowledged that interconnection is “critical” to end-office switching in a TDM call, but found that it was “not require[d]” in VoIP-PSTN calls. 30 FCC Red. at 1602, ¶ 30. The ruling’s only explanation for why interconnection is “not require[d]” is that, in VoIP-PSTN calls, “the customer is separately paying for [the] broadband connection, which interconnects” the call. Id. That the customer is paying for the broadband interconnection doesn’t support the conclusion that interconnection is unnecessary for end-office switching—it merely indicates that it is provided by a party other than a VoIP-LEC. Even assuming that the Transformation Order cast off interconnection as a remnant of “preexisting, technology-specific, TDM-based guidance for determining functional equivalency,” Declaratory Ruling, 30 FCC Red. at 1600, ¶ 26 n.98, that reading would still require the Commission to provide some distinctive “functional equivalence” criterion in its place. On the record before us, the Commission has not done so.

The Declaratory Ruling is accordingly

Vacated and remanded.


author: BRIGHT, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee v. Coleman CARPENTER, Defendant-Appellant
    No. 15-3563
    United States Court of Appeals, Eighth Circuit.
    Submitted: September 23, 2016
    Filed: November 23, 2016

      Thomas Christian Albus, Assistant U.S. Attorney, U.S. Attorney’s Office, Saint Louis, MO, for Plaintiff-Appellee.
    David Wayne Camp, Law Office of David W. Camp, Jacskson, TN, for Defendant-Appellant.
    Coleman Carpenter, Pro Se.
    Before WOLLMAN, BRIGHT, and KELLY, Circuit Judges.
   BRIGHT, Circuit Judge.

The government charged Coleman Carpenter with mail and wire fraud arising from a scheme in which he overpaid for commodities to the benefit of certain customers while managing a grain elevator for Bunge of North America (Bunge). After Carpenter pleaded guilty to one count of mail fraud, the district court sentenced him to twelve months and one day in prison. The district court also ordered him to pay $1,561,516.25 in restitution to Bunge, which included $87,536.65 in attorney’s fees and expenses Bunge paid to an outside counsel during the investigation of Carpenter’s fraudulent scheme and his prosecution.

Carpenter appeals arguing the district court erred in calculating the amount of restitution, and by including the attorney’s fees from Bunge’s outside counsel in the restitution award. We affirm the portion of the district court’s restitution award which does not include attorney’s fees ($1,473,-980.00), but vacate the portion awarding attorney’s fees and expenses ($87,536.65), and remand to the district court for further proceedings.

I

Bunge, a global agriculture commodities business, employed Carpenter as the manager of a grain elevator in Hickman, Kentucky. Bunge authorized Carpenter to purchase agricultural commodities, which included corn, wheat and soybeans, from producers and merchants “on the spot.” In addition, Carpenter could enter into futures contracts for commodities to'be delivered at a later date.

Futures contracts had two components: the futures price and’ the basis. The first component—the futures price—was set by commodities markets. Bunge provided Carpenter access to the current futures prices electronically and through a commercial trading desk (hedge desk) located at its St. Louis, Missouri headquarters. Carpenter was authorized to establish the futures price component of the per bushel price for a particular "futures contract based upon the current futures price as determined by the Chicago Board of Trade (CBOT).

The second component—the basis—was set by Bunge and depended on various market conditions, such as location of a point of purchase, operational needs of Bunge, and prices offered by a competitor. Bunge gave Carpenter the authority to “push the basis” in order to respond to changing market conditions or the operational needs of Bunge, but- limited this authority to $.08 per bushel at the most. So, for example, if the basis at a given time was $-.15, Carpenter had the authority to push it to $-.07.

Between 2009 and 2013, Carpenter frequently entered into futures contracts in excess of the combination of the CBOT current futures price and Bunge’s basis, and his limited authority to “push the basis.” In fact, on some occasions Carpenter increased the price Bunge paid for commodities by $.30, $.40, or $.50 per bushel. For example, on August 1, 2013, Carpenter entered into a futures contract for 60,000 bushels of corn at $5.25 per bushel. Carpenter utilized a futures price of $5.63 per bushel with a basis of $-.38, despite the fact that the hedge desk provided him with a CBOT current futures price of only $4.9075, and the highest price paid on the CBOT that day for corn was $4.9975.

Thus, Carpenter inflated the futures price component of the contract by $.7225 per bushel based on the CBOT current futures prices, or by $.6325 per bushel based on the CBOT high price, of the day. After adjusting fqr the basis, the amount Bunge lost on this single contract was $43,350, as measured by the difference between the $5.63 futures price utilized by Carpenter and the approved CBOT current futures price of $4.9075 (60,000 bushels x $.7225). Carpenter then misrepresented these unauthorized transactions in mailings to Bunge headquarters.

During the scheme, Carpenter received large payments of money from some of the grain elevator customers. For example, in consecutive years in March 2009 and 2010, Carpenter received $10,000 checks from Ronnie Bates Farms, one of the grain elevator’s customers. Carpenter’s bank account also showed large cash deposits made between 2009 and 2013 totaling over $38,000. Carpenter denies the cash deposits he made to his bank account during that time were related to the fraud scheme.

In 2013, Bunge discovered Carpenter’s fraud during an internal audit. Bunge asked the Thompson Coburn law firm in St; Louis to assist in reviewing and assessing Carpenter’s unauthorized transactions, while at the same time providing information to the government for potential criminal charges against Carpenter. Thompson Coburn assisted Bunge and the government in reviewing the transactions both before and after a federal grand jury returned an indictment against Carpenter on June 25, 2014. After being charged, Carpenter pleaded guilty to one count of mail fraud in violation of 18 U.S.C. § 1341.

Prior to sentencing, a probation officer prepared a Presentence Investigation Report (PSR) which, in part, calculated the amount of loss that resulted from Carpenter’s fraud pursuant to United States Sentencing Guidelines Manual (U.S.S.G.) § 2B1.1. The PSR determined loss using a “one-day Chicago Board of Trade high price” as the number to be subtracted from the inflated price paid by Carpenter. For its part, the government recommended loss should be calculated by comparing a “two-day” CBOT high price to the price of Carpenter’s unauthorized transactions, which was more conservative than the method recommended by the PSR and resulted in a lower loss amount. Using this two-day method of calculation, the- government determined Bunge overpaid its customers approximately $937,000 as the'result of Carpenter’s unauthorized transactions. In Carpenter’s plea agreement, he admitted his fraud scheme resulted in “approximately $937,000” in overpay-ments by Bunge to various customers.

At sentencing, the district court adopted the parties’ agreement as to amount of loss to calculate Carpenter’s advisory guidelines range, and then turned to the separate issue of determining the amount of loss for purposes of restitution. The district court agreed the precise amount of restitution was difficult to calculate because the market price at the exact time of day Carpenter entered into each of his fraudulent transactions was unknown. The district court ultimately adopted the PSR’s one-day method to determine restitution, however, because Bunge’s losses would be underestimated using either the one- or two-day method based on the CBOT high price of the day. Under the one-day method of calculation, the district court set the amount of Bunge’s loss for restitution purposes at $1,473,980.00.

Bunge also sought restitution for the attorney’s fees it paid to outside counsel prior to and during the government’s investigation. Carpenter objected to the attorney’s fees arguing, in part, that fees incurred after the government started its investigation were not “necessary.” See 18 U.S.C. § 3663A(b)(4) (“The order of restitution shall require that such defendant— in any case, reimburse the victim for ... necessary ... expenses incurred during participation in the investigation or prosecution of the offense.”). The district court reviewed the billing statements provided by Bunge’s counsel and then awarded 90% of the claimed fees, reflecting a 10% reduction for specific fees associated with a press release, reproduction charges, punitive damages issues, correspondence, and courier services, to which Carpenter had also objected. After the reduction, the fees and associated expenses totaled $87,536.65. Including the attorney’s fees, the total restitution the district court awarded to Bunge was $1,561,516.25. Bunge filed this timely appeal challenging the amount of restitution.

II

We review the district court’s decision to award restitution for abuse of discretion, but any fact findings as to the amount are reviewed for clear error. United States v. Chalupnik, 514 F.3d 748, 752 (8th Cir. 2008). “The government bears the burden of proving the amount of restitution based on a preponderance of the evidence.” United States v. Frazier, 651 F.3d 899, 903 (8th Cir. 2011).

A. The Overpayments

Carpenter contends the district court erred in awarding the initial $1,473,980.00 in restitution (the amount less the attorney’s fees) for two reasons. First, Carpenter contends the amount of restitution is difficult, if not' impossible, to determine and is not warranted. See 18 U.S.C. § 3663A(c)(3)(B) (“This section shall not apply ... if the court finds ... that determining complex issues of fact related to the ... amount of the victim’s losses would complicate or prolong the sentencing process to a degree that the need to provide restitution to any victim is outweighed by the burden on the sentencing process”). Second, Carpenter argues that Bunge did not sustain a loss because Bunge factored in his overpayments when it ultimately sold the commodities he purchased.

With respect to Carpenter’s first argument, we have consistently held that “the district court has wide discretion in ordering restitution.” United States v. DeRosier, 501 F.3d 888, 897 (8th Cir. 2007). When determining restitution, “the district court need make only a reasonable estimate of the loss, and we accord particular deference to the loss determination because of the district court’s unique ability to assess the evidence and estimate the loss.” Id. at 895 (quoting United States v. Scott, 448 F.3d 1040, 1044 (8th Cir. 2006)). In cases where the amount of loss (and by extension the amount of restitution) caused by fraud is difficult to calculate, “a district court is charged only with making a reasonable estimate of the loss.” United States v. Parish, 565 F.3d 528, 534 (8th Cir. 2009) (internal quotation marks and citation omitted).

Carpenter’s claim that the loss was impossible to calculate is belied by his own admission in the plea agreement that his fraud scheme resulted in “approximately $937,000” in overpayments by Bunge to various customers using the government’s more conservative two-day CBOT high price method of calculating the loss. Thus, the real issue presented in this appeal is limited to whether the district court erred by choosing the one-day method over the two-day method when calculating loss and restitution. The two-day method assumed that some of Carpenter’s fraudulent transactions were actually agreed to at the high price of one day, but due to administrative delays at the Hickman facility, may not have been completed until the next day. Using this method, the highest price over any given two-day period was used to compute loss. In contrast, the one-day method used the CBOT high price of the day a commodity purchase was made. Carpenter objects to the district court’s use of the one-day method because it resulted in a higher loss than that calculated under the two-day method.

We see no grounds for reversing the district court’s decision to choose the one-day method over the two-day method. As we previously stated, exact precision is not necessary when determining loss, only a reasonable estimate. Either method the district court would have chosen here would have been reasonable, as both methods underestimated Bunge’s actual loss. The times when Carpenter made unauthorized transactions occurred throughout each day, not necessarily every time the CBOT price was at its highest. For example, in the August 2013 purchase of corn discussed above, the CBOT current futures price provided to Carpenter at the time of sale was $4.9075, while the highest price paid on the CBOT that day for corn was $4.9975, a difference of $.09 per bushel, or a total of $5400 for the 60,000 bushel sale. The one-day method used by the district court did not capture the additional $5400 Bunge lost on this particular sale (as reflected in the PSR at ¶20, which only reported a loss of $37,950 on this particular transaction rather than the $43,350 Bunge actually lost), or the similar amounts B.unge lost on Carpenter’s many other fraudulent transactions. Because the exact times of the unauthorized trades could not be determined, the use of the CBOT daily high price automatically ensured that Bunge’s actual loss- would be underestimated under both methods of calculation.

Carpenter next argues that Bunge did not sustain a loss (and by extension was not entitled to restitution) because Bunge recouped his overpayments at the time of its sale. The district court used the correct standard' of lost profits to determine Bunge’s loss. See United States v. Chalupnik, 514 F.3d 748, 755 (8th Cir. 2008). Here, Bunge’s lost profits were based on the difference between the authorized purchase price and the amount of Carpenter’s unauthorized purchases. The lost profits remained constant regardless of the resale price. Finally, Bunge does not have exclusive control over the sale price as Carpenter seems to contend. The commodities market is a global market that dictates the sale price. The district court properly determined that the loss sustained by Bunge was the total amount of lost profits and that the lost profits remain constant regardless of the sale price.

B. The Attorney’s Fees

Carpenter contends that attorney’s fees incurred by Bunge’s outside counsel after the government took over the investigation were not “necessary” under 18 U.S.C. § 3663A(b)(4). Carpenter.relies primarily upon United States v. Papagno, 639 F.3d 1093 (D.C. Cir. 2011), which reversed a restitution order awarding expenses incurred by a victim during its own internal investigation of an employee’s fraud where there was no evidence the investigation was ever requested by criminal investigators or prosecutors, holding that under those circumstances the victim’s ‘“participation in the investigation or prosecution of the offense’ ” was not “ ‘necessary,’ ” Id. at 1095 (quoting 18 U.S.C. § 3663A(b)(4)).

Our circuit has taken a somewhat broader view of the loss that can be included in a restitution award, and have “specifically approved of the inclusion of attorney’s fees and investigative costs in a restitution award when these losses were caused by the fraudulent conduct.” DeRosier, 501 F.3d at 897 (citing United States v. Akbani, 151 F.3d 774, 780 (8th Cir. 1998); United States v. Piggie, 303 F.3d 923, 928 (8th Cir. 2002)). As Carpenter contends, however, the fact that there is no per se prohibition on awarding restitution for attorney’s fees or investigative costs does not relieve the government from satisfying the statutory requirement of showing such costs were “necessary ... expenses incurred during participation in the investigation or prosecution of the offense.” 18 U.S.C. § 3663A(b)(4).

Carpenter’s specific objection in the district court was that outside attorney’s fees incurred by Bunge after the government initiated its own investigation were unnecessary. The record does not show the district court ever directly addressed that claim, or made a specific finding that the fees were necessary. Instead, the district court only appears to have addressed Carpenter’s other objections to the attorney’s fees submitted by outside counsel. We therefore vacate the district court’s award of attorney’s fees and expenses and remand to the district court to specifically address whether the attorney’s fees incurred after the government initiated its own investigation were “necessary” under § 3663A(b)(4). If the district court determines that any portion of the fees ' were not “necessary,” those fees should not be included in the restitution award.

Ill

We affirm that portion of the district court’s restitution order awarding $1,473,980.00. We vacate the portion of the district court’s restitution order awarding attorney’s fees and remand for further proceedings consistent with this opinion.

      . Examples in the record report the basis as a negative number, such as $-.38. In other words, the final price of any particular futures contract for the selling farmer—after combining the CBOT current futures price and Bunge’s basis—would likely be below the CBOT current futures price to reflect Bunge’s operating costs.

      . If read liberally, Carpenter’s objection to the attorney’s fees in the district court also raised a claim that he should be entitled to a “set off” from the total amount of restitution awarded if Bunge’s insurance company pays for any claim related to Carpenter’s fraudu■lent conduct. To the extent Carpenter renews that claim on appeal, we reject it. When an insurer makes payments for a victim’s loss, a defendant is required to pay restitution back to the insurance provider under the Mandatory Victims Restitution Act, and is not entitled to a set off. United States v. Mancini, 624 F.3d 879, 882 (8th Cir. 2010),


author: HURWITZ, Circuit Judge:

text:
    Robin ANTONICK, an Illinois Citizen, Plaintiff-Appellant, v. ELECTRONIC ARTS, INC., a California corporation, Defendant-Appellee.
    No. 14-15298
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted March 16, 2016, San Francisco, California
    Filed November 22, 2016

      David Nimmer (argued), Irell & Manella LLP, Los Angeles, California; Stuart McKinley Paynter (argued), Jennifer L. Murray, and Sara Willingham, The Payn-ter Law Firm PLLC, Washington, D.C.; Robert B. Carey and Leonard W. Aragon, Hagens Berman Sobol Shapiro LLP, Phoenix, Arizona; Steve W. Berman, Ha-gens Berman Sobol Shapiro' LLP, Seattle, Washington; Walter H. Sargent, Walter H. Sargent P.C., Colorado Springs, Colorado; Peter S. Menell, Berkley, California; for Plaintiff-Appellant.
    Eric H. MacMichael (argued), Tia A. Sherringham, R. Adam Lauridsen, Steven A. Hirseh, and Susan J. Harriman, Keker & Van Nest LLP, San Francisco, California, for Defendant-Appellee.
    Before: ANDREW J. KLEINFELD, JOHNNIE B. RAWLINSON, and ANDREW D. HURWITZ, Circuit Judges.

      . Barr was only able to examine a partial draft version of the Apple II Madden source code, because the. complete final version could not be found. The draft version he examined was not introduced into evidence.

   OPINION

HURWITZ, Circuit Judge:

In this case, the plaintiff claimed copyright infringement. But the contents of the copyrighted work and the allegedly infringing works were never introduced into evidence. The district court held that the claim failed as a matter of law. We agree, and affirm.

I. Background

Robin Antonick developed the computer code for the original John Madden Football game for the Apple II computer (“Apple II Madden”). Electronic Arts, Inc. (“EA”) released Apple II Madden in 1988. Apple II Madden, the first football video game with 11 players on each side, was an instant hit, the best seller of any sports video game of its time. Antonick subsequently programmed Madden games for the Commodore 64 and IBM-compatible computers (“IBM Madden”).

In 1989, Antonick began working for EA on Madden games for the Nintendo and Sega Genesis entertainment systems. But in August 1990, EA told him to stop— Nintendo was becoming obsolete, and EA had decided on a new direction for the Sega game, hiring Park Place Productions to create a version with “more of an arcade style.” In November 1990, EA released its first version of Sega Madden. In late 1991 or early 1992, EA released Antonick’s last Madden game, an update of IBM Madden.

Each year from 1992 to 1996, EA released Madden games for Sega Genesis and Super Nintendo (“Super Nintendo Madden”). The Madden games have remained incredibly lucrative, selling millions of copies and even attracting a loyal fan base among professional football players.

Antonick’s 1986 contract with EA defined “a custom computer software program known as John Madden Football” designed for the “Apple [II] Family of Computers” as the “Work,” and provided that Antonick would receive royalties on any “Derivative Work,” defined as “any computer software program or electronic game which ... constitutes a derivative work of the Work within the meaning of the United States copyright law.” Antonick received no royalties for Sega Madden or Super Nintendo Madden, which EA assured him were not Derivative Works.

In 2011, Antonick brought this diversity action against EA, seeking contract damages in the form of unpaid royalties for Sega Madden and Super Nintendo Madden. The district court bifurcated the trial. In Phase I, the jury found that the statute of limitations did not bar Antonick’s claims. Phase II involved the merits of Antonick’s claims. Antonick produced evidence that Park Place was rushed and inadequately staffed, and argued that it copied his code to meét 'the demanding deadline for the first Sega Madden. Anton-ick’s expert, Michael Barr, opined that Sega Madden was substantially similar to certain elements of Apple II Madden. In particular, Barr opined that the games had similar formations, plays, play numberings, and player ratings; a similar, disproportionately wide, field; a similar eight-point directional system; and similar variable names, including variables that misspelled “scrimmage.” But neither the source code for Apple II Madden—the “Work”—nor the source code of any allegedly infringing works were introduced into evidence. Nor were images of the games at issue introduced.

Nonetheless, the jury found that the Sega Madden games were Derivative Works under the 1986 contract. The district court then granted judgment as a matter- of. law (“JMOL”) to EA, holding that Antonick had not provided sufficient evidence of copyright infringement, because neither the source code used for Apple II Madden nor Sega Madden was in evidence.

II. Discussion

A. The Sega Claims

Although this is a contract case, because'royalties are available to Antonick under the 1986 contract only for a derivative work of Apple II Madden “within the meaning of the United States copyright law,” he had to prove copyright infringement to prevail on his contract claims. Antonick was thus required to prove that EA “copied protected elements of the work.” Jada Toys, Inc. v. Mattel, Inc., 518 F.3d 628, 636 (9th Cir. 2008) (citations omitted). “Absent direct evidence of copying, proof of infringement involves fact-based showings that the defendant had ‘access’ to the plaintiffs work and that the two works are ‘substantially similar.’ ” Three Boys Music Corp. v. Bolton, 212 F.3d 477, 481 (9th Cir. 2000) (citation omitted).

“The Ninth Circuit employs a two-part test for determining whether one work is substantially similar to another.” Benay v. Warner Bros. Entm’t, Inc., 607 F.3d 620, 624 (9th Cir. 2010) (citation omitted).

[A plaintiff] must prove both substantial similarity under the “extrinsic test” and substantial similarity under the “intrinsic test.” The “extrinsic test” is an objective comparison of specific expressive elements. The “intrinsic test” is a subjective comparison that focuses on whether the ordinary, reasonable audience would find the works substantially similar in the total concept and feel of the works.

Id. (citations and question marks omitted). The district court granted JMOL to EA under the “intrinsic test” because “the jury had no evidence of Apple II Madden or Sega Madden as a whole to enable it to make this subjective comparison.”

• The district court was correct. An-tonick’s claims rest on the contention that the source code of the Sega Madden games infringed on the source code for Apple II Madden. But, none of the source code was in evidence. The jury therefore could not compare the works to determine substantial similarity. See Seiler v. Lucas-film, Ltd., 808 F.2d 1316, 1319 (9th Cir. 1987) (“There can be no proof of ‘substantial similarity and thus of, copyright infringement unless Seiler’s works are juxtaposed with Lucas’ and their contents compared.”) (applying the best evidence rule in a copyright action); id. (“[Pjroof of the infringement claim consists of the works alleged to be infringed.”); accord Airframe Sys., Inc. v. L-3 Commc’ns Corp., 668 F.3d 100, 107 (1st Cir. 2011) (“Having presented no evidence sufficient to prove the content of its registered source code versions, Airframe cannot show that any of its registered works is substantially similar to the allegedly infringing M3 program.”); Gen. Universal Sys., Inc. v. Lee, 379 F.3d 131, 146 (5th Cir. 2004) (per curiam) (“Without providing its own source code for comparison, GUS did not satisfy the requirement that the infringed and infringing work be compared side-by-side.”). And, absent evidence of the copyrighted work and the allegedly infringing works, the record is insufficient to allow appellate review of the jury’s verdict. See, e.g., Olson v. Nat’l Broad. Co., 855 F.2d 1446, 1448, 1451 (9th Cir. 1988) (granting JMOL to copyright defendant because no reasonable jury could have found substantial,similarity); cf. Shaw v. Lindheim, 919 F.2d 1353, 1355 (9th Cir. 1990) (“We have frequently affirmed summary judgment in favor of copyright defendants on the issue of substantial similarity.”).

Antonick argues there was no need to introduce the source code (or even the games at issue), because Park Place had access to the Apple II Madden code and a motive to copy it, and his expert and others testified to the similarity of the works. These arguments fail for three reasons.

First, the evidence at most demonstrates access and a possible motive to copy; it does not establish that -the “protected portions of the works are substantially similar.” Jada Toys, 518 F.3d at 637. Access alone cannot establish copyright infringement. Shaw, 919 F.2d at 1361.

Second, our law is clear that expert testimony cannot satisfy a plaintiffs burden of proof under the intrinsic test, which “depend[s] on the response of the ordinary reasonable person.” Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1475 (9th Cir. 1992) (quoting Sid & Marty Krofft Television Prods., Inc. v. McDonald’s Corp., 562 F.2d 1157, 1164 (9th Cir. 1977)). Barr’s testimony may have been enough to establish substantial similarity under the extrinsic test, but it cannot satisfy Antonick’s burden of production under the intrinsic test. Id.

Third, the lay testimony was about how the games appeared, not how they were coded—and Antonick does not assert a copyright interest in Apple II Madden’s audiovisual appearance, only in its coding.

Antonick argues that copying was shown by testimony of Michael Kawahara, an Apple II Madden assistant producer. When asked whether he recognized any of the plays in Sega Madden from Apple II Madden, Kawahara answered affirmatively, stating that “[it] was—well, since the interface was—well, it was the same as we used in the Apple II. It was very easy to look at all of the plays in the Genesis version and they looked identical ,.. to the original Apple II version.” This comment, however, does not establish that the source code for the two games were substantially similar. Kawahara had no programming responsibilities for Apple II Madden; did not understand the Apple II Madden code; did not see the Sega Madden code; and admitted that he had no knowledge about differences in the games’ codes.

Antonick also cites a statement by Richard Hilleman, an EA representative, that it was “possible” he had told an interviewer that “the Sega game took the system’s approach from Mr. Antonick’s game and just simply put a different aesthetic on top of it.” But, an “approach” is an idea that cannot be copyrighted—only its expression in code is protectable—and Sega Madden could have used Apple II Madden’s “approach” to football video games without violating the copyright laws. See Bikram’s Yoga Coll. of India, L.P. v. Evolation Yoga, LLC, 803 F.3d 1032, 1037-38 (9th Cir. 2015) (“[R]ecognizing this vital distinction between ideas' and expression, courts have routinely held that the copyright for a work describing how to perform a process does not extend to the process itself.”).

Finally, Antonick argues that EA’s post-verdict Rule 50(b) motion for JMOL regarding, the intrinsic test should not have been considered because the pre-verdict Rule 50(a) motion argued only that the evidence was insufficient to show substantial similarity between the two elements of the code that the district court had ruled protectable, rather than discussing similarity of the works as a whole. See EEOC v. Go Daddy Software, Inc., 581 F.3d 951, 961 (9th Cir. 2009) (“Because it is a renewed motion, a proper post-verdict Rule 50(b) motion is limited to the grounds asserted in the pre-deliberation Rule 50(a) motion.”)- But, both motions argued that the failure to place the source code in evidence was fatal to Antonick’s claim that EA had copied his work. That preserved the argument. ■ Id. (“Rule 50(b) ‘may be satisfied by an ambiguous or inartfully made motion’ under Rule 50(a).”) (quoting Reeves v. Teuscher, 881 F.2d 1495, 1498 (9th Cir. 1989)).

B. The Super Nintendo Claims

Antonick sought royalties for the Super Nintendo Madden games under Amendment 1 to his contract, which provided for royalties for derivative works for platforms in the “Same Microprocessor Family”, as the Apple II. The Amendment defined “Microprocessor Family” as “a single microprocessor and all related microprocessors that utilize the same instruction set and have the same instruction and data word size.”

Antonick’s expert, Garry Kitchen, testified that the Apple II used the 6502 processor, which had an 8-bit data word size and 56 instructions of up to 3 bytes in length. The Super Nintendo used the more advanced 5A22 processor, which in its native mode used a 16-bit data word size and at least 92 instructions of up to 4 bytes in length; but which could also act as a 6502 processor for purposes of backwards compatibility. Kitchen testified that this backwards compatibility meant that the microprocessors were in the same “family,” as the industry uses the term. He acknowledged that Super Nintendo Madden was designed to use that system’s advanced capabilities, utilizing a larger instruction set, longer data word sizes, and longer instructions than Apple II Madden.

After Kitchen’s testimony, the district court dismissed the Super Nintendo claims, holding that the Super Nintendo was not in the same Microprocessor Family as the Apple II under the contractual definition, because it used a larger instruction set, instruction size, and data size. Antonick argues that the two processors were in the same family as a practical matter because they could use the same instruction set, instruction size, and data size. Antonick’s factual premise may well be correct. But we deal here with contract interpretation, and the word “could” is not in the contractual definition.. Instead, the contract requires that, to be in the same family, two processors must “utilize the same instruction set and have the same instruction and data word size.” The Apple II and Super Nintendo processors have different instruction sizes and data word sizes. The district court therefore did not err in dismissing the Super Nintendo derivative work claims.

Antonick argues in the alternative that EA breached the contract by failing to give him the opportunity to develop the Super Nintendo Madden game. The contract provided that, if Antonick developed any Derivative Works for new microprocessor families, he would be entitled “to written notice and the opportunity to develop additional Derivative Works for the New Microprocessor Family.” Antonick developed a Madden game for the Apple II GS, which he argues, and EA does not appear to deny, is in the same microprocessor family as the Super Nintendo. As damages, he seeks royalties based on the actual Super Nintendo game sales.

The district court dismissed this claim because a fact-finder would have to speculate on whether Antonick could have developed such a work, how well an Antonick-developed Super Nintendo game would have sold, and what royalty rate the parties would have agreed upon; Antonick’s expert report did not address these issues. The district court was correct; the jury could not have determined Antonick’s damages from the alleged breach to a “reasonable certainty.” Sargon Enters., Inc. v. Univ. of S. Cal., 55 Cal.4th 747, 149 Cal.Rptr.3d 614, 288 P.3d 1237, 1254 (2012). Moreover, even if the district court erred, there was no harm, because'Anton-ick’s failure to introduce any source code precluded a finding that Super Nintendo Madden was a Derivative Work.

C. The Development Aids

The contract also gave EA a license to create derivative works using certain tools designed by Antonick (“Development Aids”), and provided that the parties would “negotiate in good faith” for further licenses if EA wanted to use the aids to create non-derivative works. Antonick alleges that EA used the aids to create non-derivative works without seeking that license.

The district court dismissed this claim because Antonick offered no evidence of purported damages. Antonick did not show the value of similar licenses or the benefit that EA received from using the Development Aids. Instead, Antonick cited only the report of his damages expert, which simply made generic royalty calculations based on existing sales without explaining how those calculations were relevant to the Development Aid claim. The district court correctly kept this unsubstantiated claim from the jury. See Amelco Elec. v. City of Thousand Oaks, 27 Cal.4th 228, 115 Cal.Rptr.2d 900, 38 P.3d 1120, 1130, 1132 (2002).

CONCLUSION

The judgment of the district court is AFFIRMED.

      . EA showed the jury a video of Sega Madden, but the jury did not view a video of Apple II Madden.

      . If the range of possible expression is narrow, the copyrighted work is entitled to thin protection, and a plaintiff must show virtual identity between the copyrighted work and the allegedly infringing work. See Mattel, Inc. v. MGA Entm't, Inc., 616 F.3d 904, 913-14 (9th Cir. 2010), If the range of possible expression is wide, the work is entitled to broad protection and the plaintiff must show only substantial similarity. Id.

      The district court held that "[d]ue to the narrow range of possible expression for a football video game and the fact that only two of the ten similar elements are protectable,” Antonick’s work was entitled only to thin .protection, requiring him to show virtual identity of the works as a whole. Antonick disputes that conclusion, arguing that he needed to show only substantial similarity. We need not resolve that dispute, because we conclude that Antonick, having presented insufficient evidence of the works as a whole, loses under either standard.

      . Antonick’s contrary cases are from- other circuits; of the two Ninth Circuit cases he cites, one is a memorandum disposition holding expert testimony admissible in a case in which the relevant works themselves were in evidence, Lucky Break Wishbone Corp. v. Sears Roebuck & Co., 373 Fed.Appx. 752, 755-56 (9th Cir, 2010), and the other concerned a special master’s report, not expert testimony, Johnson Controls, Inc. v. Phoenix Control Sys., Inc., 886 F.2d 1173, 1176 (9th Cir. 1989).
      Antonick is not alone in contending that experts should be allowed to help juries assess the holistic similarity of technical works such as computer programs, See Brown Bag, 960 F.2d at 1478 (Sneed, J., concurring); Comput. Assocs. Int’l, Inc. v. Altai, Inc., 982 F.2d 693, 713 (2d Cir. 1992). But, given our precedents, that argument must be addressed to an en banc court.

      . Arguably, the chips "utilize the same instruction set” because the 6502 uses a subset of the 5A22's instructions.


author: THOMAS, Chief Judge:

text:
    OREGON COAST SCENIC RAILROAD, LLC, an Oregon nonprofit corporation, Plaintiff-Appellant, v. State of OREGON DEPARTMENT OF STATE LANDS; Mary M. Abrams, Director of Department of State Lands, in her official capacity, Defendants-Appellees.
    No. 14-35414
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted October 5, 2016, Portland, Oregon
    Filed November 23, 2016

      Martin E. Hansen (argued) and Sarah E. Harlos, Francis Hansen & Martin LLP, Bend, Oregon, for Plaintiff-Appellant.
    Robert M. Wilsey (argued), Assistant Attorney General; Anna M. Joyce, Solicitor General; Ellen F. Rosenblum, Attorney General; Oregon Department of Justice, Salem, Oregon; for Defendants-Appellees.
    Before: SIDNEY R. THOMAS, Chief Judge, and RICHARD R. CLIFTON and JACQUELINE H. NGUYEN, Circuit Judges.
   OPINION

THOMAS, Chief Judge:

This case presents the question whether the federal Surface Transportation Board (“the Board”) has exclusive jurisdiction over railroad repair work done at the direction of a federally regulated rail carrier but performed by a contractor rather than the carrier itself. We conclude that it does, and we therefore reverse and remand.

I

The Oregon Coast Scenic Railroad (“Oregon Coast”) is a non-profit corporation that operates tourist trains on a portion of track in Oregon that is owned by the Port of Tillamook Bay (“the Port”). The Port is a federally regulated railroad authorized by the Board. The Port operates freight trains; it formerly ran trains on the portion of the railroad used by Oregon Coast, but in 2007 part of the track was damaged by a winter storm and freight traffic ceased on that portion of the track.

In 2012, Oregon Coast and the Port entered into a five-year agreement under which Oregon Coast would continue leasing this portion of the track, but instead of paying the Port for use of the track, Oregon Coast would instead use those funds “for deferred.maintenance and upgrading of [the Port’s] rail line and right-of-way.” The agreement provided that Oregon Coast would be “solely responsible” for rehabilitation of the railway, track maintenance, and compliance with federal and state safety and maintenance requirements. The agreement contemplated that the repair work might reestablish the track’s “connection to a mainline carrier providing service,” ' and freight traffic might resume at some point. If and when that happened, the parties agreed to negotiate a modification to the agreement that would allow Oregon Coast to continue to run tourist trains alongside the Port’s anticipated freight traffic.

Oregon Coast began repair work under this agreement in early 2014. On March 11, 2014, after approximately five weeks of work had beén completed and two to four weeks of work remained, the State of Oregon’s Department of State Lands (“the State”) sent Oregon Coast a cease and desist order. The order alleged that Oregon Coast’s repair work was violating a state “removal-fill law,” which, among other things, requires a state permit for the removal of any amount of material from waters designated as Essential Salmonid Habitat. The State alleged that Oregon Coast was engaging in unpermitted “removal-fill activity” in or near an Essential Salmonid Habitat section of the Salmon-berry River, and it contested Oregon Coast’s assertion that federal law preempted application of this state law to railroad repair work.

Oregon Coast filed a complaint in federal district court the following day, seeking declaratory and injunctive relief. Oregon Coast argued that the removal-fill law is preempted by the Interstate Commerce Commission Termination Act (“ICCTA”), 49 U.S.C. §§ 10101 et séq., which governs federal regulation of railroads. Oregon Coast sought a permanent injunction and a determination that application of the state law is federally preempted; that enforcement of the .removal-fill law constituted an impermissible burden on interstate commerce in violation of the Commerce Clause; and that enforcement of the law violated Oregon Coast’s federal rights under 42 U.S.C. § 1988. Oregon Coast also immediately moved for a preliminary injunction against the law’s enforcement.

The district court held a hearing on the preliminary injunction in April 2014. At the State’s request, the district court consolidated the preliminary injunction hearing with a hearing on the merits; it then issued a single order on all of Oregon Coast’s requested relief. The court concluded that the removal-fill law was not preempted because Oregon Coast’s tourist train activities were not sufficiently related to interstate commerce to bring Oregon Coast within the exclusive federal jurisdiction provision of the ICCTA. The court also concluded that Oregon Coast’s agreement with the Port was insufficient to establish federal preemption as to Oregon Coast on the basis of the Port’s status as a federally licensed carrier. Having concluded that Oregon Coast’s claims failed on the merits, the district court denied Oregon Coast’s requests for preliminary and permanent injunctions and for declaratory relief, and it dismissed the case.

Oregon Coast appeals, challenging (1) the district court’s conclusion that federal preemption does not apply to the repair work done by Oregon Coast; (2) its conclusion that Oregon Coast was not acting as an agent of the Port; and (3) its denial of Oregon Coast’s requests for preliminary and permanent injunctions and declaratory relief, Oregon Coast presents a federal question by alleging that enforcement of the state removal-fill law is preempted by the federal ICCTA; thus the district court had subject matter jurisdiction under 28 U.S.C. § 1331. See Indep. Training & Apprenticeship Program v. Cal. Dep’t of Indus. Relations, 730 F.3d 1024, 1031 (9th Cir. 2013) (citing Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96 n.14, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983)). We have jurisdiction over the appeal under 28 U.S.C. § 1291.

We review de novo a district court’s decision granting or denying declaratory relief. Wagner v. Prof'l Eng’rs in Cal. Gov’t, 354 F.3d 1036, 1040 (9th Cir. 2004). We review a district court’s denial of a preliminary or permanent injunction for abuse of discretion. All. for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011); Cummings v. Connell, 316 F.3d 886, 897 (9th Cir. 2003). In this context, “[a]n abuse of discretion will be found if the district court based its decision ‘on an erroneous legal standard or clearly erroneous finding of fact.’ ” Cottrell, 632 F.3d at 1131 (quoting Lands Council v. McNair, 537 F.3d 981, 986 (9th Cir. 2008) (en banc)).

Because it is a question of law, we review de novo a district court’s conclusion about the extent of federal preemption. In re Korean Air Lines Co., Ltd., 642 F.3d 685, 691 n.3 (9th Cir. 2011). Here, because the district court’s decisions on the preliminary injunction, permanent injunction, and declaratory relief all relied on the same analysis of the preemption question, a legal error in that analysis would affect the court’s decision on all three forms of requested relief. We therefore'focus our analysis on the district court’s conclusion as to the federal preemption question.

II

The ICCTA was passed in 1995, in part with the purpose of expanding federal jurisdiction and preemption of railroad regulation. See H.R. Rep. No. 104-311 at 95 (1995) (“[C]hanges are made to reflect the direct and complete preemption of State economic regulation of railroads.”). In order for federal preemption to apply under the ICCTA, the activity in question must first fall within the statutory grant of jurisdiction to the Surface Transportation Board, one of several federal agencies charged with railroad regulation. 49 U.S.C. § 10501(a). As modified by the ICCTA, 49 U.S.C. § 10501(a) provides in relevant part:

(1) Subject to this chapter, the Board has jurisdiction over transportation by rail carrier that is— .
(A) only by railroad; or
(B) by railroad and water [under specified circumstances].
(2) Jurisdiction under paragraph (1) applies only to transportation in the United States between a place in—
(A) a State and a place in the same or another State as part of the interstate rail network....

If the Board has jurisdiction under 49 U.S.C. § 10501(a), the question whether jurisdiction is exclusive—i.e., whether state regulation is preempted—is a separate question governed by 49 U.S.C. § 10501(b), which provides that “[t]he jurisdiction of the Board over ... (1) transportation by rail carriers ... and (2) the construction, acquisition, operation, abandonment, or discontinuance of spur, industrial, team, switching, or side tracks, or facilities, even if the tracks are located, or intended to be located, entirely in one State, is exclusive.”

In short, under the factual scenario presented by this case, Board jurisdiction under § 10501(a) is a threshold question requiring that the disputed activity meet three statutory prongs: it must be (1) “transportation” (2) “by rail carrier” (3) “as part of the interstate rail network.” Id. The parties do not dispute that the repair work done by Oregon Coast qualifies as “transportation,” which the ICCTA defines as including any “property, facility, instrumentality, or equipment of any kind related to the movement of passengers or property, or both, by rail” as well as “services related to that movement.” 49 U.S.C. § 10102(9). The parties’ central dispute focuses on the other two prongs of the jurisdiction analysis—that is, on whether the repair work can be considered work done “by rail carrier” through Oregon Coast’s relationship with the Port, and whether maintenance work done on an intrastate section of track can be considered “part of the interstate rail network.” For the reasons described below, we answer both questions in the affirmative.

A

The ICCTA defines “rail carrier” as “a person providing common carrier railroad transportation for compensation.” 49 U.S.C. § 10102(5). But the statute does not address whether, in the jurisdiction provision, the term “transportation by rail carrier” may include work actually performed by another party under the auspices of the rail carrier. Here, it is undisputed that the Port is a federally licensed and regulated rail carrier, authorized by the Board under the procedures set out in 49 U.S.C. § 10901. The State has conceded that the track repair work in this ease would fall under the Board’s jurisdiction if the Port were undertaking the repairs itself. Instead, the Port has essentially hired Oregon Coast to do this maintenance work on its behalf during the five-year agreement; the Port is paying Oregon Coast in the form of free track use for the duration of the agreement. This leaves us with the question whether the Port somehow divested the Board of jurisdiction over the repairs by hiring Oregon Coast to perform the work on its behalf. We conclude that it did not.

The Board itself has considered this question in similar contexts, and its decisions are instructive here. See Ass’n of Am. R.R.s v. S. Coast Air Quality Mgmt. Dist., 622 F.3d 1094, 1097 (9th Cir. 2010) (drawing “guidance on the scope of ICCTA preemption from the decisions of the Surface Transportation Board ..., to which we owe Chevron deference” (citing DHX, Inc. v. Surface Transp. Bd., 501 F.3d 1080, 1086 (9th Cir. 2007))). The Board’s decisions show that work done by a non-carrier can be considered activity “by a rail carrier” if there is a sufficient degree of integration between the work done by the non-carrier and the authorized rail carrier’s own operations. See, e.g., City of Alexandria, No. 35157, 2009 WL 381800, at *2 (S.T.B. Feb. 17, 2009); Town of Babylon, No. 35057, 2008 WL 275697, at *3 (S.T.B. Feb. 1, 2008); Hi Tech Trans, LLC, No. 34192, 2003 WL 21952136, at *4 (S.T.B. Aug. 14, 2003).

The Board’s decisions emphasize that this question is a “case-by-case, fact-specific determination.” City of Alexandria, 2009 WL 381800, at *2. Factors considered by the Board include the degree of control exercised by the carrier over the non-carrier’s operations, the involvement of the carrier in day-to-day operations, the structure of payments and cost agreements, and other terms of the agreement between the carrier and the non-carrier. Id. The Board weighs these factors to determine whether the non-carrier’s activities are “an integral part of [the rail carrier’s] provision of transportation by rail carrier.” Hi Tech, 2003 WL 21952136, at *4.

Applying this framework to the current case, the repairs are properly considered done by the Port. The agreement between Oregon Coast and the Port gives Oregon Coast responsibility for the specified repair and maintenance operations; yet. Oregon Coast must adhere to the agreed-upon maintenance plan, which gives the Port a degree of control by specifying particular tasks and timelines .that Oregon Coast must meet. Moreover, track maintenance and repair are essential to providing transportation over a railway. Thus by helping the Port maintain its track and re-establish its connection to the interstate rail network, the repair work performed by Oregon Coast is “an integral part of [the Port’s] provision of transportation by rail carrier.” See id.

Finally, we note the absurd result that would occur if the Port were able to divest the Board of jurisdiction simply by hiring a contractor to perform repair or maintenance work on its behalf. The ICCTA and its predecessor, the Interstate Commerce Act, ch. 104, 24 Stat. 379 (1887), have “been recognized as ‘among the most pervasive and comprehensive of federal regulatory schemes,'” City of Auburn v. United States, 154 F.3d 1025, 1027 (9th Cir. 1998) (quoting Chicago & N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 318, 101 S.Ct. 1124, 67 L.Ed.2d 258 (1981)). Allowing a rail carrier to avoid federal jurisdiction by hiring a contractor would defeat Congress’s purpose in creating such a far-reaching regulatory scheme. Because “statutory interpretations which would produce absurd results are to be avoided,” Ma v. Ashcroft, 361 F.3d 553, 558 (9th Cir. 2004) (citing United States v. Wilson, 503 U.S. 329, 334, 112 S.Ct. 1351, 117 L.Ed.2d 593 (1992)), we cannot conclude that Congress intended to exclude from federal jurisdiction any party carrying out a rail carrier’s essential transportation-related functions on its behalf.

Accordingly, the repair work done by Oregon Coast is properly considered “transportation by rail carrier” within the meaning of'49 U.S.C. § 10501(a)(1). The district court erred in concluding otherwise.

td

Once the other prongs of the jurisdictional inquiry are met, the ICCTA gives the Board jurisdiction over domestic rail transportation “between a place in ... a State and a place in the same or another State as part of the interstate rail network.” 49 U.S.C. § 10501(a)(2)(A). Because Oregon Coast’s repair work takeS place entirely within the state of Oregon, it satisfies this prong if it is done “as part of the interstate rail network.” Id. We conclude that it is.

' The phrase “as part of the interstate rail network” is not defined by statute, but the Board has interpreted it “broadly to include (but not be limited to) facilities that are part of the general system of rail transportation and are related to the movement of passengers or freight[ ]in interstate commerce.” DesertXpress Enters., LLC, No. 34914, 2010 WL 1822102, at *9 (S.T.B. May 7, 2010). The Board has also emphasized that the ICCTA actually expanded the Board’s jurisdiction to ensure that “transportation between places in the same state would be within the Board’s jurisdiction as long as that transportation was related to interstate commerce.” Id. at *6.

We confirmed this interpretation in City of Auburn, where we held that the Board had exclusive jurisdiction over an 'intrastate railroad repair project that aimed to prepare a section of track—at the time used only for local traffic—to join, a reestablished main line for through traffic. 154 F.3d at 1031. In that case, we “not[ed] that Congress and the courts long have recognized a need to regulate railroad operations at the federal level.” Id. at 1029. We also highlighted the fact that § 10501 itself expressly refers to the Board’s jurisdiction over “the construction ... of spur, industrial, team, switching, or side tracks, or facilities, even if the tracks are located, or intended to be located, entirely in one State.” Id. at 1030 (emphasis added) (quoting 49 U.S.C. § 10501(b)(2)).

The facts of the current case closely mirror City óf Auburn. Oregon Coast contracted with -the Port to perform repair work on a section of track that was previously connected to the interstate rail network and that would, once fully repaired, reconnect the track to the interstate rail network. The agreement between Oregon Coast-and the Port expressly contemplates that the track may be reconnected to the interstate network within the five-year span of the agreement, allowing the parties to negotiate a modification to the agreement—but leaving the agreement in place—if the'“rail connection to a mainline carrier providing service [is] re-established and freight traffic resumefs].” Similarly, the lease agreement gives Oregon Coast the “option ... to reinstall the rail line and recover” eighteen train cars that are currently stranded on the severed portion of track. These provisions suggest that Oregon Coast’s repair work is aimed at reconnecting the disconnected track to the interstate rail network. Thus, as in Auburn, this repair work is done “as part of the interstate rail network.”

Moreover, even if Oregon Coast’s work did not result in full reconnection of the track,- the repairs would still be considered “part of the interstate rail network” because they involve track that is still federally authorized as part of the interstate rail system. In a similar case that is instructive here, the Board concluded that it had jurisdiction over a project to rehabilitate a depot serving a rail line that had not been in service for years but was still federally authorized. City of Creede, No. 34376, 2005 WL 1024483, at *8 (S.T.B. May 3, 2005). Here, similarly, the repair work is being done on track that is owned by the Port and is still federally authorized under the Port’s Certifícate of Public Convenience and Necessity, despite the physical disconnection caused by storm damage. The fact these repairs are integral to the functioning of a federally authorized track segment establishes that the repairs are done “as part of the interstate rail network”' within the meaning of § 10501(a)(2)(A).

Although the State cites several cases purportedly demonstrating that the Board does- not have jurisdiction over wholly intrastate segments of track, those cases do not affect our analysis. We note that Mag-ner-O’Hara Scenic Railway v. Interstate Commerce Commission, a Sixth Circuit case considering a similar question, was decided before the ICCTA expanded Board jurisdiction over intrastate transportation. 692 F.2d 441, 442-43 (6th Cir. 1982). And we are unpersuaded by the logic of more recent cases citing Magner without acknowledging the significant expansion of jurisdiction under the ICCTA. See RLTD Ry. Corp. v. Surface Transp. Bd., 166 F.3d 808, 813 (6th Cir. 1999); Fun Trains, Inc., No. 33472, 1998 WL 92052, at *2 (S.T.B. Mar. 5, 1998).

We conclude, therefore, that the repair work performed by Oregon Coast under the agreement with the Port is properly considered done “as part of the interstate rail network.” 49 U.S.C. § 10501(a)(2)(A). Because the repair work also qualifies as “transportation by rail carrier,” as discussed above, we conclude that it falls within the Board’s jurisdiction under 49 U.S.C. § 10501(a).

Ill

Once jurisdiction is established under 49 U.S.C. § 10501(a), the broad preemption provision of 49 U.S.C. § 10501(b) makes the Board’s jurisdiction exclusive over “(1) transportation by rail carriers” and “(2) the construction, acquisition, operation, abandonment, or discontinuance of spur, industrial, team, switching, or side tracks, or facilities, even if the tracks are located, or intended to be located, entirely in one State.” This subsection also expressly provides that “the remedies provided under this part with respect to regulation of rail transportation are exclusive and preempt the remedies provided under Federal or State law.” 49 U.S.C. § 10501(b). Because the repair work here falls squarely within this preemption provision, we conclude that state regulation is preempted.

Our decision on this question ■ is controlled by City of Auburn, in which we held that 49 U.S.C. § 10501(b) preempted not just economic but also environmental regulation, “[f]or if local authorities have the ability to impose.‘environmental’ permitting regulations on the railroad, such power will in fact amount to ‘economic regulation’ if the carrier is prevented from constructing, acquiring, operating, abandoning, or discontinuing a line.” 154 F.3d at 1031. Looking to the language of 49 U.S.C. § 10501(b), we emphasized in City of Auburn that “[i]t is difficult to imagine a broader statement of Congress’s intent to preempt state regulatory authority over railroad operations.” Id. at 1030 (quoting CSX Transp., Inc. v. Ga. Pub. Serv. Comm’n, 944 F.Supp. 1573, 1581 (N.D. Ga. 1996)). As a result, we held that 49 U.S.C. § 10501(b) “explicitly grant[ed] the [Board] exclusive authority over railway projects like” the intrastate rail repair project at issue in City of Auburn, which closely resembles the project in this case. City of Auburn, 154 F.3d at 1030.

Our subsequent decision in Association of American Railroads v. South Coast Air Quality Management District clarified that the ICCTA “does not preempt state or local laws if they are laws of general applicability that do not unreasonably interfere with interstate commerce,” but it “preempts all ‘state laws that may reasonably be said to have the effect , of managing or governing rail transportation.’ ” 622 F.3d 1094, 1097 (9th Cir. 2010) (first, citing Bos. & Me. Corp. & Town of Ayer, No. 33971, 2001 WL 458685, at *4-6 (S.T.B. May 1, 2001); then quoting N.Y. Susquehanna & W. Ry. Corp. v. Jackson, 500 F.3d 238, 252 (3d Cir. 2007)). In determining whether a law of general applicability is permissible, we explained that “[w]hat matters is the degree to which the challenged regulation burdens rail transportation.” Id. at 1097-98 (quoting N.Y. Susquehanna, 500 F.3d at 252).

Here, the State’s removal-fill law requires that Oregon Coast apply for and be granted a permit before removing “any amount of material within waters designated Essential Salmonid Habitat.” Because “the ability to impose ‘environmental’ permitting regulations on the railroad” can in fact give local authorities the power to “prevent[ a carrier] from constructing, acquiring, operating, abandoning, or discontinuing a line,” City of Auburn, 154 F.3d at 1031, such a permitting scheme would “have the effect of managing or governing rail transportation,” Ass’n of Am. R.R.s, 622 F.3d at 1097 (quoting N.Y. Susquehanna, 500 F.3d at 252). Thus even under the more subjective approach used in Association of American Railroads, we conclude that the State’s removal-fill law is preempted by the ICCTA as applied to the repair work in this case.

IV

In sum, the repair work done by Oregon Coast under its agreement with the Port falls under the Board’s jurisdiction because the work is done under the auspices of a federally regulated rail carrier and is sufficiently related to the provision of transportation over the interstate rail network. The State’s removal-fill law is preempted as applied to this work, and the district court erred in concluding otherwise. Because the district court’s rulings on the preliminary injunction, permanent injunction, and declaratory relief were all premised on this incorrect legal' determination, we reverse and remand for further proceedings with respect to each form of relief.

REVERSED and REMANDED.

      . In fact, the Port undertook- very similar maintenance and repair work on almost the same segment of track in the mid-1990s. The Port hired a contractor to perform this work, and that contractor has testified that he completed the work under the auspices of the Port, without going through state permitting processes.

      . Although the parties focus on whether an agency relationship was created under Oregon law, the question whether a federal statute grants jurisdiction over a particular activity is a question of federal law that does not depend on the contours of a particular state’s agency law, See, e.g., Ass'n of Am. R.R.s v. S. Coast Air Quality Mgmt. Dist., 622 F.3d 1094, 1096-98 (9th Cir. 2010) (analyzing the issue of Board jurisdiction and preemption under federal law); City of Auburn v. United States, 154 F.3d 1025, 1029-31 (9th Cir. 1998) (same).

      . Although this language appears in the preemption provision, 49 U.S.C. § 10501(b), rather than in the jurisdictional grant, 49 U.S.C. § 10501(a), it nevertheless informs our interpretation of the jurisdictional provision, because the general jurisdictional grant of § 10501(a) must be at least as broad as the te elusive jurisdiction provision Of § 10501(b). See Medtronic, Inc. v. Lohr, 518 U.S. 470, 485-86, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996) (explaining that a court may properly look to the statutory framework and surrounding provisions for guidance in interpreting the scope of preemption).