BellSouth Telecommunications v. MCImetro Access

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
________________________ January 10, 2003
THOMAS K. KAHN
No. 00-12809 CLERK
________________________
D. C. Docket No. 99-00248-CV-JOF-1
BELLSOUTH TELECOMMUNICATIONS, INC.,
Plaintiff-Counter-
Defendant-Appellant-
Cross-Appellee,
UNITED STATES OF AMERICA,
Intervenor-Appellant,
versus
MCIMETRO ACCESS TRANSMISSION
SERVICES, INC.
Defendant-Counter-
Claimant-Appellee,
GEORGIA PUBLIC SERVICE COMMISSION,
ROBERT B. BAKER, JR., in his
official capacity as Chairman,
LAUREN "BUBBA" MCDONALD, in his
offficial capacity as Commissioner,
ROBERT DURDEN, in his official
capacity as Commissioner,
STANCIL O. WISE, in his official
capacity as Commissioner,
Defendants-Appellees-
Cross-Appellants.
________________________
Appeals from the United States District Court
for the Northern District of Georgia
_________________________
(January 10, 2003)
Before EDMONDSON, Chief Judge, TJOFLAT, ANDERSON, BIRCH, BLACK,
CARNES, BARKETT, MARCUS and WILSON, Circuit Judges.*
BARKETT, Circuit Judge:
In this appeal we were originally asked to review two orders of the Georgia
Public Service Commission (the “GPSC”), which interpreted the contract between
BellSouth Telecommunications, Inc. (“BellSouth”) and MCImetro Access
Transmission Services, Inc. (“MCImetro), and the contract between BellSouth and
WorldCom Technologies, Inc. (“WorldCom”). Both contracts were
interconnection agreements mandated by the Federal Telecommunications Act of
1996, Pub. L. No. 104-104, 110 Stat. 56 (1996) (“FTCA”). The GPSC was asked
*
Judges Joel F. Dubina and Frank M. Hull recused themselves and did not
participate in the disposition of this case.
2
to interpret the meanings of provisions in each contract which established
reciprocal compensation rates for local telephone traffic.1 BellSouth claimed that
calls made to internet service providers (“ISPs”) could not be considered “local
traffic” subject to reciprocal compensation under the contracts. MCImetro and
WorldCom both claimed that such calls were “local” and therefore subject to
reciprocal compensation. They demanded payment under their respective contracts
and sought relief before the GPSC. The GPSC determined that calls to ISPs were
“local traffic” under the contracts and thus reciprocal compensation must be paid
by BellSouth. BellSouth then commenced an action in the district court, asserting
that the GPSC decision was contrary to federal law and claiming that the district
court had jurisdiction under 47 USC § 252(e)(6) and 28 USC § 1331. The district
court affirmed the GPSC’s order and BellSouth appealed. A split panel of this
court did not reach the merits of the appeal, reversing the district court’s order on
the grounds that there was no statutory authority for the GPSC to interpret and
enforce these interconnection agreements in the first instance.
A majority of the judges in active service granted the petition for rehearing
en banc filed by MCImetro Access Transmission Services and WorldCom
1
The term “reciprocal compensation rates” simply means that Carrier A
would pay Carrier B for any calls made by a Carrier A customer that terminated in
Carrier B’s network, and vice-versa.
3
Technologies and vacated the panel opinion in this case. We now address, en
banc, the appropriateness of the GPSC’s order and the extent of federal jurisdiction
over challenges to that order.
Discussion
To address the natural monopoly in place in the telecommunications
industry and promote competition in local telephone service, Congress passed the
FTCA in 1996. Pub. L. No. 104-104, 110 Stat. 56. Its regulatory scheme was
designed to counteract the deterrence of competition inherent in the high, fixed
initial cost of telephone service and the need for all customers to interconnect with
one another. Thus, in order to open intrastate telephone markets to competition, it
required incumbent Local Exchange Carriers (“ILECs”), such as BellSouth, to
share access to loops and exchanges with competing LECs (“CLECs”), like
MCImetro and WorldCom. 47 U.S.C. § 251(a)(1).2 The FTCA further required
ILECs and CLECs that are sharing resources to “establish reciprocal compensation
arrangements for the transport and termination of telecommunications.” 47 U.S.C.
2
“Each telecommunications carrier has the duty to interconnect directly or
indirectly with the facilities and equipment of other telecommunications carriers.”
47 U.S.C. 251(a)(1).
4
§ 251(b)(5).3 These agreements were to be submitted for approval or rejection to
the state public service commission and, in making this determination, the
commissions were to consider several specific factors. 47 U.S.C. § 252(e)
provides:
(e) Approval by State commission.
(1) Approval required.
Any interconnection agreement adopted by negotiation or arbitration
shall be submitted for approval to the State commission. A State
commission to which an agreement is submitted shall approve or
reject the agreement, with written findings as to any deficiencies.
(2) Grounds for rejection.
The State commission may only reject--
(A) an agreement (or any portion thereof) adopted by negotiation
under subsection (a) of this section if it finds that--
(i) the agreement (or portion thereof) discriminates against a
telecommunications carrier not a party to the agreement; or
(ii) the implementation of such agreement or portion is not consistent
with the public interest, convenience, and necessity; or
(B) an agreement (or any portion thereof) adopted by arbitration under
subsection (b) if it finds that the agreement does not meet the
requirements of section 251 [47 USC § 251], including the regulations
prescribed by the Commission pursuant to section 251 [47 USC §
251], or the standards set forth in subsection (d) of this section.
(3) Preservation of authority.
Notwithstanding paragraph (2), but subject to section 253 [47 USC §
253], nothing in this section shall prohibit a State commission from
establishing or enforcing other requirements of State law in its review
of an agreement, including requiring compliance with intrastate
telecommunications service quality standards or requirements.
3
“Each local exchange carrier has . . .[t]he duty to establish reciprocal
compensation arrangements for the transport and termination of
telecommunications.” 47 U.S.C. 251(b)(5).
5
(4) Schedule for decision.
If the State commission does not act to approve or reject the
agreement within 90 days after submission by the parties of an
agreement adopted by negotiation under [47 U.S.C. § 252(a)], or
within 30 days after submission by the parties of an agreement
adopted by arbitration under [47 U.S.C. § 252(b)], the agreement shall
be deemed approved. No State court shall have jurisdiction to review
the action of a State commission in approving or rejecting an
agreement under this section.
(5) Commission to act if State will not act.
If a State commission fails to act to carry out its responsibility under
this section in any proceeding or other matter under this section, then
the Commission shall issue an order preempting the State
commission’s jurisdiction of that proceeding or matter within 90 days
after being notified (or taking notice) of such failure, and shall assume
the responsibility of the State commission under this section with
respect to the proceeding or matter and act for the State commission.
(6) Review of State commission actions.
In a case in which a State fails to act as described in paragraph (5), the
proceeding by the Commission under such paragraph and any judicial
review of the Commission’s actions shall be the exclusive remedies
for a State commission's failure to act. In any case in which a State
commission makes a determination under this section, any party
aggrieved by such determination may bring an action in an
appropriate Federal district court to determine whether the agreement
or statement meets the requirements of [47 USC § 251] and this
section.
While § 252 expressly gives state commissions authority to approve or reject
interconnection agreements, the statute does not specifically say that this
empowerment includes the interpretation and enforcement of interconnection
agreements after their initial approval. We agree with all the parties before us,
however, that a common sense reading of the statute leads to the conclusion that
6
the authority to approve or reject agreements carries with it the authority to
interpret agreements that have already been approved. We find further support for
this conclusion in the recent decision of the Supreme Court in Verizon Md., Inc. v.
PSC, 535 U.S. 635, 122 S. Ct. 1753 (2002), in the decisions of all other circuit
courts to have considered the question, and in the determination of the Federal
Communications Commission, (“ FCC”), which is entitled to deference in the
interpretation of the pertinent statute. See In re Starpower, 15 F.C.C.R. 11277, ¶ 6,
at 1129–80 (2000).
The Verizon case involved a public service commission order like the one
before us that had resolved the question of whether calls made to an ISP could be
considered “local calls” subject to reciprocal compensation pursuant to the
interconnection agreement of the parties. While the procedural posture of Verizon
differs from that of the case at bar, the Verizon case arose from a set of facts
identical to those here. In Verizon, WorldCom and Verizon had negotiated an
interconnection agreement that had been approved by the Maryland Public Service
Commission (the “MPSC”). Several months after the interconnection agreement
had been approved, Verizon refused to pay WorldCom for calls made to ISPs.
WorldCom filed a complaint with the MPSC. The MPSC determined that, as a
matter of state contract law, ISP calls were compensable local traffic under the
7
interconnection agreement between Verizon and WorldCom. Verizon sued the
MPSC in federal district court, asserting jurisdiction under 47 U.S.C. § 252(e)(6)
and 28 U.S.C. § 1331. Verizon claimed that the MPSC order violated the FTCA
and a ruling of the FCC. The district court dismissed the action without reaching
the merits, holding that neither the FTCA nor 28 USC § 1331 gave it jurisdiction
over Verizon’s claims against private defendants. The Fourth Circuit affirmed.
The Supreme Court granted certiorari, addressing the question of “whether federal
district courts have jurisdiction over a telecommunication carrier’s claim that the
order of a state utility commission requiring reciprocal compensation for telephone
calls to [ISPs] violates federal law.” Verizon, 535 U.S. at __, 122 S. Ct. at 1754.
The Court reversed the Fourth Circuit and held that the federal district court had
jurisdiction under 28 U.S.C. § 1331 to review the state utility commission’s
interpretation of the interconnection agreement at issue. Id. at 1761. Because it
found jurisdiction under 28 U.S.C. § 1331, the Court did not decide whether there
was also jurisdiction under § 252(e)(6). The determination that the district court
did have jurisdiction to review the MPSC’s order interpreting the interconnection
agreement assumed that the state utility commission had the authority to interpret
the interconnection agreements in the first instance. The Court noted that the
“parties dispute whether it is in fact federal or state law that confers this authority,
8
but no party contends that the Commission lacked jurisdiction to interpret and
enforce the agreement.” Id. at 1758 n.2.
Other circuits have expressly recognized state commissions’ authority to
interpret the interconnection agreements at issue. In Bell Atl. Md., Inc. v. MCI
WorldCom, 240 F.3d 279, 304 (4th Cir. 2001), the court noted that: “The critical
question is not whether State commissions have authority to interpret and enforce
interconnection agreements -- we believe they do -- but whether these decisions are
to be reviewed by State courts or federal courts.” As noted, the Fourth Circuit’s
determination that federal courts did not have authority to hear challenges to the
decision of the MPSC was vacated by the Supreme Court in Verizon, 535 U.S. at
__, 122 S. Ct. at 1761. The Fifth Circuit, in Southwestern Bell Tel. Co. v. PUC,
208 F.3d 475, 479-80 (5th Cir. 2000), noted that “the Act's grant to the state
commissions of plenary authority to approve or disapprove these interconnection
agreements necessarily carries with it the authority to interpret and enforce the
provisions of agreements that state commissions have approved.” In Southwestern
Bell Tel. Co. v. Brooks Fiber Communs. of Okla., Inc., 235 F.3d 493, 497 (10th
Cir. 2000), the court deferred to the FCC’s conclusion that state commissions have
the authority to interpret and enforce interconnection agreements. In Puerto Rico
Tel. Co. v. Telecommunications Regulatory Bd., 189 F.3d 1, 10-13 (1st Cir. 1999),
9
the court held that there was no jurisdiction over a dispute between an ILEC and a
CLEC regarding whether long-distance charges applied to certain cellular calls,4
but did not question the state commission’s authority to resolve the dispute.5 In
Illinois Bell Tel. Co. v. Worldcom Techs., Inc., 179 F.3d 566, 573 (7th Cir. 1999),
the court stated that, in deciding a dispute between a CLEC and an ILEC over
whether ISP calls were local traffic, the state commission “was doing what it is
charged with doing in the Act and in the FCC ruling. It was determining what the
parties intended under the agreements.” Finally, in Iowa Util. Bd. v. F.C.C., 120
F.3d 753, 804 (8th Cir. 1997), the court commented that “state commissions retain
the primary authority to enforce the substantive terms of the agreements made
pursuant to sections 251 and 252.” Iowa Utilities was reversed in part on other
grounds by AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 385 (1999), which
held that, under the FTCA, the FCC has authority to “design a pricing
methodology” and to promulgate rules regarding various other matters.
4
The plaintiffs in Puerto Rico did not allege a violation of federal law, and
the parties did not assert 28 U.S.C. § 1331 as a basis for jurisdiction.
5
The court expressly mentioned “post-approval/rejection determinations”
and proceeded to discuss the district court’s jurisdiction to review these, not the
state commission’s authority to make them. Id.10
No court has held or suggested that a state commission does not have the
authority to interpret and enforce interconnection agreements after they have been
approved. Moreover, the entity charged with the implementation of the FTCA, the
FCC, has clearly stated that state commissions have the authority to interpret
interconnection agreements. In re Starpower, 15 F.C.C.R. 11277. In Starpower,
the FCC held that a determination of whether ISP traffic was subject to reciprocal
compensation under an interconnection agreement was a determination that a state
commission was required to make under § 252(e)(5). Id. In that case, Starpower
Communications had asked the FCC to preempt the jurisdiction of the Virginia
State Corporation Commission (“Virginia Commission”) to resolve disputes over
interconnection agreements between Starpower and Bell Atlantic Virginia and
GTE South. Id. As in this case, the dispute in Starpower was over whether calls to
ISPs were local calls. Id. Starpower filed petitions with the Virginia Commission
against Bell Atlantic and GTE, seeking compensation under the interconnection
agreements for calls made to ISPs. Id. The Virginia Commission declined
jurisdiction in both of Starpower’s actions. Id. Starpower then petitioned the FCC
to hear its complaint. Id. Because the Virginia State Corporation Commission had
failed to make a determination concerning the dispute over ISP traffic, the FCC
11
assumed jurisdiction of the dispute.6 Id. at 11278. In determining whether to take
jurisdiction, the FCC stated that it “must first determine whether a dispute arising
from interconnection agreements and seeking interpretation and enforcement of
those agreements is within the states’ ‘responsibility’ under section 252.” Id. At
11279. The FCC decided that interpretation and enforcement of interconnection
agreements were responsibilities of the states under section 252, citing
Southwestern Bell, 208 F.3d 475 and Illinois Bell, 179 F.3d 566 for support. Id.7
Under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467
U.S. 837 (1984), agency determinations are entitled to due deference if (1) the
statute is silent or ambiguous with respect to the issue at hand and (2) “the
agency’s answer is based on a permissible construction of the statute.” Id. at 843.
“A court may not substitute its own construction of a statutory provision for a
reasonable interpretation made by the administrator of an agency.” Id. at 844.
Although the FCC’s ruling in Starpower relied on federal court decisions that were
6
“If a State commission fails to act to carry out its responsibility under this
section in any proceeding or other matter under this section, then the [FCC] shall
issue an order preempting the State commission’s jurisdiction of that proceeding or
mater . . . and shall assume the responsibility of the State commission under this
section with respect to the proceeding or matter and act for the State commission.”
47 U.S.C § 252(e).
7
The cited decisions relied on an FCC ruling that was subsequently vacated.
12
based on a vacated FCC ruling, the FCC also pointed out, approvingly, that the
courts had based their decisions on a recognition that “due to its role in the
approval process, a state commission is well-suited to address disputes arising from
interconnection agreements.” Starpower, 15 FCC Rcd. at 11280. This observation
of the state commissions’ suitability for the interpretation of interconnection
agreements is not unreasonable, nor is it contrary to the language of the statute.8
Moreover, the language of § 252 persuades us that in granting to the public
service commissions the power to approve or reject interconnection agreements,
Congress intended to include the power to interpret and enforce in the first instance
and to subject their determination to challenges in the federal courts. Section
252(e)(6) gives federal courts jurisdiction to review “determinations” made by
state commissions. 47 U.S.C. § 252(e)(6). In contrast, § 252(e)(4) abrogates state
court jurisdiction “to review the action of a State commission in approving or
rejecting an agreement under this section.” 47 U.S.C. § 252(e)(4). The use of the
word “determination” in § 252(e)(6) rather than a specific reference to the approval
or rejection of agreements leads us to believe that Congress did not intend to limit
8
An agency’s interpretation of a statute is unreasonable and thus does not
merit deference if it is “arbitrary, capricious, or clearly contrary to law.” Alabama
Power Co. v. FERC, 22 F.3d 270, 272 (11th Cir. 1994) (citing Chevron, 467 U.S. at
844).
13
state commissions’ authority to the mere approval and rejection of agreements.
See Russello v. United States, 464 U.S. 16, 23 (1983) (“[Where] Congress includes
particular language in one section of a statute but omits it in another section of the
same Act, it is generally presumed that Congress acts intentionally and purposely
in the disparate inclusion or exclusion.”) (quoting United States v. Wong Kim Bo,
472 F.2d 720, 722 (5th Cir. 1972)). It is reasonable to read the grant of authority in
252(e) as encompassing the interpretation of agreements, not just their approval or
rejection.
Given the extensive federal regulation of interconnection agreements and the
role state commissions play in their formation, it would be illogical to say that the
GPSC’s interest in an interconnection agreement is extinguished as soon as the
agreement is approved, and that the agreement should thereafter be treated as any
other contract.9 At least one circuit has described state commissions as “deputized
federal regulator[s]” authorized to exercise regulatory power and ensure
9
A state commission’s authority to approve or reject an interconnection
agreement would itself be undermined if it lacked authority to determine in the first
instance the meaning of an agreement that it has approved. A court might ascribe
to the agreement a meaning that differs from what the state commission believed it
was approving – indeed, the agreement as interpreted by the court may be one the
state commission would never have approved in the first place. To deprive the
state commission of authority to interpret the agreement that it has approved would
thus subvert the role that Congress prescribed for state commissions.
14
compliance with federal law as set out in the FTCA. MCI Telcoms. Corp. v.
Illinois Bell Tel. Co., 222 F.3d 323, 344 (7th Cir. 2000). Interconnection
agreements are tools through which the FTCA enforced. Thus, it is consistent with
the FTCA to have state commissions interpret contracts and subject their
interpretations to federal review in the district courts.
Additionally, the Supreme Court has specifically held in Verizon that federal
courts have jurisdiction under 28 U.S.C. § 1331 to hear challenges to the orders of
state public service commissions interpreting interconnection agreements exactly
like the one before us. 122 S. Ct. at 1761. Section 1331 provides that “the district
courts shall have original jurisdiction of all civil actions arising under the
Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. There is
no question that the controversy before us arises under the FTCA and that all of the
public service commission’s decisions are permeated by federal questions. For
example, § 252(e)(2)(A)(ii) requires public service commissions to interpret
negotiated agreements prior to approval to ensure that they are “consistent with the
public interest, convenience, and necessity.” 47 U.S.C. § 252(e)(2)(A)(ii). After
an agreement is approved, each party to the agreement is required to “make
available any interconnection, service, or network element provided under [the
15
agreement] to any other requesting telecommunications carrier upon the same
terms and conditions as those provided in the agreement.” 47 U.S.C. § 252(i).
The resolution of each issue need not depend completely upon an
interpretation of federal law. For purposes of 28 U.S.C. § 1331 jurisdiction, all
that is required is that there be an arguable claim arising under federal law. As the
Supreme Court said in Verizon:
“It is firmly established in our cases that the absence of a valid (as opposed
to arguable) cause of action does not implicate subject-matter jurisdiction,
i.e., the court’s statutory or constitutional power to adjudicate the case.” . . .
As we have said, “the district court has jurisdiction if ‘the right of the
petitioners to recover under their complaint will be sustained if the
Constitution and laws of the United States are given one construction and
will be defeated if they are given another,’unless the claim ‘clearly appears
to be immaterial and made solely for the purpose of obtaining jurisdiction or
where such claim is wholly insubstantial and frivolous.’” ... Here, resolution
of Verizon’s claim turns on whether the Act, or an FCC ruling issued
thereunder, precludes the Commission from ordering payment of reciprocal
compensation, and there is no suggestion that Verizon’s claim is
“‘immaterial’” or “‘wholly insubstantial and frivolous.
535 U.S. at __, 122 S. Ct. at 1758-59.
In this case, as in Verizon, the complaint alleges that the GPSC’s
determination is inconsistent with the FTCA and its implementing regulations and
also argues that the GPSC erred in its interpretation of the contracts. This involves
the same federal question presented in Verizon. Federal courts must resolve the
question of whether a public service commission’s order violates federal law and
any other federal question as well as any related issue of state law under its
16
pendent state jurisdiction. Thus, pursuant to Verizon, the Georgia Public Service
Commission had the authority to interpret and enforce the interconnection
agreements that it had approved in the first instance and the federal district court
had jurisdiction over this case pursuant to 28 U.S.C. § 1331. Moreover, through
the FTCA, Congress conferred upon the public service commissions the power to
interpret and enforce the interconnection agreements mandated by the FTCA and
federal district courts have jurisdiction over challenges to these interpretations and
enforcement orders.
CONCLUSION
For the foregoing reasons, we conclude that the Georgia Public Service
Commission has the authority under federal law to interpret and enforce the
interconnection agreements at issue between the parties and that its determination
is subject to review in the federal courts. We refer all other issues to a panel of this
Court and instruct the Clerk of the Court to assign this case to the next available
oral argument panel to resolve the merits of this case.
17
EDMONDSON, Chief Judge, concurring in part:
I concur in the judgment of the Court and in the opinion by Judge Barkett,
except that I decide nothing about jurisdiction under 47 U.S.C. § 252(e)(6).
18
ANDERSON, Circuit Judge, concurring, in which BLACK, Circuit Judge, joins:
I concur and join most of the opinion of Judge Barkett. The parties were
asked to brief two issues for the en banc court: first, does federal law give state
commissions, like the Georgia Public Service Commission (“GPSC”), the authority
to resolve disputes between telecommunications carriers regarding the
interpretation of the contractual terms of an interconnection agreement that has
already been approved pursuant to 47 U.S.C. §252(e); and, second, if not, does
Georgia law give the GPSC this authority.
With respect to the first issue, I agree with Judge Barkett that the most
plausible reading of the federal statute is that it contemplates that GPSC not only
has the expressly stated authority to approve or reject the interconnection
agreement at issue here, but also has the implicit authority to interpret the
agreement after it has already been approved. I agree with Judge Barkett that it
would make little sense to grant the obvious authority to interpret the agreement in
connection with the approval thereof, but then deny the authority to later
implement and enforce same and resolve disputes as to the original interpretation.
In so holding, we are joining the numerous circuit courts of appeal discussed by
Judge Barkett, and providing appropriate deference to the Federal Communications
Commission (“FCC”). See In re Starpower Communications, 15 FCC Red. 11277,
19
11279, ¶6 (2000). Having thus resolved that GPSC has authority pursuant to the
federal statute, I need not address the second issue briefed by the parties en banc,
whether or not such authority might also have been provided by state law.
I also agree with Judge Barkett that the district court had jurisdiction
pursuant to 28 U.S.C. §1331 to entertain BellSouth’s claim in the instant case.1 I
agree with Judge Barkett that BellSouth’s claim is precisely the same as that
presented by Verizon, with respect to which the Supreme Court held that the
district court had jurisdiction under 28 U.S.C. §1331. In both cases, the dispute
between the parties revolved around whether or not the incumbent local exchange
carrier (“ILEC”) (Verizon in the Supreme Court case and BellSouth here) was
required to pay reciprocal compensation to a competitive local exchange carrier
(“CLEC”) with respect to calls to local access numbers of internet service
providers (“ISPs”). In both cases, the interconnection agreement between the two
parties was one which had been voluntarily negotiated.2 In both cases, the public
1
Because there is §1331 jurisdiction, I would not address whether there may
also be jurisdiction under 47 U.S.C. §252(e)(6). To the same effect, see Verizon
Md., Inc. v. Pub. Serv. Comm’n of Md., 535 U.S. 635, 122 S.Ct . 1753, 1758
(2002).
2
No party suggests that there is any difference in the language or substance
of the interconnection agreement in the two cases that would affect the resolution
of this case.
20
service commission had originally approved the interconnection agreement at an
earlier time, and the dispute arose later. In both, the dispute was presented to the
state agency which rendered its determination resolving the dispute. In both cases,
the decision of the public service commission was challenged in federal district
court. Thus, the dispute at issue in the instant case is factually identical to that in
Verizon, and the posture of the claim before the district court is the same.
BellSouth’s claim in the instant case is that the GPSC order is inconsistent
with the Act and its implementing regulations. BellSouth’s claim is
indistinguishable from that asserted by Verizon in the Supreme Court case.
Verizon had taken the position that “it would no longer pay reciprocal
compensation for telephone calls made by Verizon’s customers to the local access
numbers of internet providers (“ISPs”), claiming that ISP traffic was not ‘local
traffic’ subject to the reciprocal compensation agreement.” Id. at ___, 122 S.Ct. at
1757. After Maryland’s Public Service Commission ruled against it, Verizon filed
a complaint in the district court challenging the Public Service Commission’s
order, and claiming “that the determination that Verizon must pay reciprocal
compensation . . . for ISP traffic violated the 1996 Act, and the FCC ruling.” Id.BellSouth’s claim is identical. Like Verizon, BellSouth claims that the GPSC
order here, construing ISP calls as “local” and requiring BellSouth to pay
21
reciprocal compensation, violates the Act and its implementing regulations. As in
Verizon, BellSouth relies upon the FCC ruling characterizing such ISP traffic as
non-local. The instant case being indistinguishable from Verizon with respect to
the §1331 jurisdictional issue, I readily conclude that the district court had original
jurisdiction of BellSouth’s claim pursuant to §1331.3
3
Judge Tjoflat’s comprehensive and forceful opinion deserves comment.
Whatever the merit of Judge Tjoflat’s position, I respectfully suggest that it is not
consistent with Verizon. In attempting to distinguish BellSouth’s claim from that
of Verizon, Judge Tjoflat draws a distinction between an argument that the agency
order is preempted by a federal statute, on the one hand, and on the other hand, an
argument that the agency order violated the statute and its implementing
regulations. Judge Tjoflat posits that Verizon held there was §1331 jurisdiction
over the former, but not the latter. I respectfully submit that this attempt to parse
the language of the Verizon opinion is not consistent with the opinion itself.
Rather, Justice Scalia’s opinion equates the argument that the agency order
violated the Act and the FCC ruling, with the argument that the order was
preempted by federal statute.
Verizon alleged in its complaint that the Commission violated
the Act and the FCC ruling when it ordered payment of reciprocal
compensation for ISP-bound calls. Verizon sought a declaratory
judgment that the Commission’s order was unlawful, and an
injunction prohibiting its enforcement. We have no doubt that federal
courts have jurisdiction under § 1331 to entertain such a suit. Verizon
seeks relief from the Commission’s order “on the ground that such
regulation is pre-empted by a federal statute which, by virtue of the
Supremacy Clause of the Constitution must prevail,” and its claim
“thus presents a federal question which the federal courts have
jurisdiction under 28 U.S.C. § 1331 to resolve.” Shaw v. Delta Air
Lines, Inc., 463 U.S. 85, 96 n.14, 103 S.Ct. 2890, 77 L..Ed.2d 490
(1983).
22
Although the jurisdictional issue can begin and end with Verizon, it is
appropriate to note, as Judge Barkett does, that §1331 jurisdiction requires only an
arguable federal claim, that is, one which is not wholly insubstantial and frivolous.
A concise summary of BellSouth’s federal question argument illustrates why the
Court in Verizon found that the claim was not frivolous and that there was §1331
jurisdiction. BellSouth’s several reasons for finding federal question jurisdiction
follow.
Id. at , 122 S.Ct. at 1758. The Court first states Verizon’s claim as being that the
order “violated the Act and the FCC ruling,” and with respect to that claim the
Court stated: “We have no doubt that federal courts have jurisdiction under § 1331
to entertain such a suit.” Then the Court apparently restates the same claim in
terms of preemption. Respectfully, I do not believe that the Fourth Circuit on
remand from the Supreme Court opinion in Verizon would feel free to parse the
holding of the Supreme Court as suggested by Judge Tjoflat. Like Verizon,
BellSouth in the instant case claims that the Public Service Commission order
violates the Act and its implementing regulations and rulings, the same claim
asserted by Verizon in the Supreme Court.
Judge Tjoflat also expresses concern that all state public service commission
decisions affecting interconnection agreements will be deemed federal questions
and will flood the federal courts. I would not address such other claims; I would
address only the claim asserted by BellSouth here, which I submit is the same
claim presented by Verizon to the Supreme Court. Incidentally, I note that
BellSouth never asserts in its briefs on appeal a state law contract claim. Indeed,
BellSouth notes that the district court in an “alternative holding” did address a state
contract law issue, but BellSouth argues only that such issue is irrelevant because
the contract is governed by federal law and the FCC rulings. Thus, the potential
claim – a pure state law claim – that concerns Judge Tjoflat has not been argued
and is not before us.
23
First, BellSouth points out that the interconnection agreement at issue here
was mandated by federal statute. 47 U.S.C. §251(b)(5).
Second, the federal statute mandates that it be nondiscriminatory. 47 U.S.C.
§252(e)(2)(A)(i). This means that the terms of the agreement must be available to
all carriers, similar to a tariff.
Third, the statute mandates that the terms of the agreement must be
consistent with the public interest, convenience and necessity. 47 U.S.C.
§252(e)(2)(A)(ii). BellSouth implicitly suggests that this provision probably
adopts and perhaps federalizes well-established state standards.
Fourth, in addition as a practical matter, even a voluntarily negotiated
agreement, as here, is cabined by the obvious recognition that the parties to the
agreement had to agree within the parameters fixed by the federal standards set out
in 47 U.S.C. §§251 and 252. BellSouth reasons that the negotiating parties
obviously know that if they do not agree, such standards will be imposed. Section
252(b). Thus, the parties know that they cannot deviate significantly from all of
the federally imposed standards. Accordingly, BellSouth argues that significant
nondiscriminatory and public convenience standards are absolutely mandatory, and
that the rest of the federal standards, including the pricing standards of §252(d), are
as a practical matter “coerced” by the federal statute into such agreements.
24
Fifth, and significant in light of the particular matter at issue – whether ISP
calls are “local telecommunications traffic” – BellSouth points out that the
definition of “local telecommunications traffic” is set out in regulations
promulgated by the FCC. 47 C.F.R. §51.701(b). BellSouth argues that the
construction of that federal definition presents a federal question.
Sixth, further with respect to the particular matter at issue, BellSouth argues
that the FCC has ruled that ISP calls, such as the ones at issue here, are interstate
rather than local in nature, and therefore not governed by the reciprocal
compensation provision of §251(b)(5). See Implementation of the Local
Competition Provisions in the Telecommunications Act of 1996, Inter-Carrier
Compensation for ISP-Bound Traffic, 14 FCC Rcd 3689 (1999) (applying an “end-
to-end” analysis to exclude ISP calls from reach of § 251(b)(5) on theory that they
are indeed not “local”), vacated and remanded by Bell Atlantic Tel. Cos. v. F.C.C.,
206 F.3d 1, 5, 8 (D.C. Cir. 2000), reinstated on remand by 16 FCC Rcd 9151(2001) (FCC determining that it was authorized under §251(g) to “carve out” ISP
calls from § 251(b)(5)’s reciprocal compensation provision and establish a “bill
and keep” system), remanded by WorldCom, Inc. v. F.C.C., 288 F.3d 429, 434
(D.C. Cir. 2002) (remanding because it rejected the FCC’s reliance on § 251(g),
but stating that it is likely that the FCC has authority from some other source to
25
elect the system set forth in the remand order). BellSouth notes that the GSPC in
its consideration of these issues and almost every other court have always looked
to the FCC rulings in ascertaining the meaning of such terms of art which
obviously fall squarely within the core concerns of the agency’s expertise.
Seventh, the Supreme Court in Verizon, indicated in dicta that §252(e)(6)4
may not be a simple procedural device setting forth federal court subject-matter
jurisdiction to review state commissions decisions, but rather “reads like the
conferral of a private right of action.” 122 S.Ct. at 1759. If a federal statute
creates a private cause of action, there would clearly be a federal question.
Finally, BellSouth argues that the interconnection agreement at issue here
should not be considered an ordinary commercial contract because it really
constitutes a kind of federally mandated agreement,5 similar in many ways to a
4
Section 252(e)(6) provides: “In any case in which a State commission
makes a determination under this section, any party aggrieved by such
determination may bring an action in an appropriate Federal district court to
determine whether the agreement or statement meets the requirements of §§251
and 252.”
5
BellSouth points out that federal law requires of BellSouth the following
with respect to the interconnection agreements: (1) to negotiate these agreements to
discharge their obligations under the federal act; (2) to enter into good-faith
negotiations with a CLEC against its wishes and indeed, even if state law would
otherwise prohibit such inter-carrier negotiations and agreements; (3) to agree
within the minimum terms subject to governmental approval; (4) to publicly file
the agreements; (5) to make the same terms and conditions available to any
26
tariff, and points to cases holding that the interpretation of such federally mandated
agreements raise issues of federal law. See Thurston Motor Lines, Inc. v. Jordan K.
Rand, Ltd., 460 U.S. 533, 534, 103 S.Ct. 1343, 1343, 75 L.Ed.2d 260 (1983)
(notwithstanding that the dispute involves a simple contract collection, the duty
and obligation to pay grows out of and is dependant upon the federal act mandating
the agreement between the parties); Louisville & N.R.R. v. Rice, 247 U.S. 201,
202-03, 38 S.Ct. 429, 429, 62 L.Ed. 1071 (1918); Western Union Int’l v. Data
Dev., 41 F.3d 1494, 1496 (11th Cir. 1995) (same with respect to a suit to collect
payment of a tariff under the Communications Act of 1934).6
Considering BellSouth’s arguments,7 as summarized above, I cannot
conclude that BellSouth makes a merely frivolous claim that the issue before us
requesting CLEC; and (6) to provide service in accordance with an approved
agreement.
6
Bell South distinguishes Jackson Transit Auth. v. Local Division 1285, 457
U.S. 24, 102 S.Ct. 2202 (1982), as a case in which there was a clear congressional
intent that the contract was to be “governed by state law applied in state courts.”
Id. at 29, 102 S.Ct. at 2210.
7
Perhaps the best judicial expression of BellSouth’s arguments appears in
Southwest Bell Tel. v. Connect Communications Corp., 225 F.3d 942 (8th Cir.
2000). Although the Eighth Circuit there holds the identical claim is subject to
federal court jurisdiction pursuant to §252(e)(6), its reasoning parallels BellSouth’s
argument that the claim presents a federal question over which district courts have
original jurisdiction pursuant to §1331.
27
presents a federal question. Indeed, as explained above, the Supreme Court in
Verizon so held.
In sum, I conclude that the GPSC had authority to entertain this case, and
that the district court had jurisdiction under 28 U.S.C. §1331 to entertain the claim
presented by BellSouth.8 Like Judge Barkett, I would refer other issues to a panel.
BLACK, Circuit Judge, concurring, in which ANDERSON, Circuit Judge, joins:
I concur in Judge Anderson’s separate opinion. I write to expand upon the
deference this Court owes the decisions of the Federal Communications
Commission under Chevron, U.S.A., Inc. v. Natural Res. Def. Counsel, 467 U.S.
837, 104 S. Ct. 2778 (1984).
As Judge Barkett states, agency interpretations of the statutes they are
charged with administering are entitled to deference under a two-step analysis.
First, if Congress has spoken to the precise question at issue, then the
unambiguously expressed intent of Congress governs. Id. at 842–43, 104 S. Ct. at
8
Because I conclude that the district court has original jurisdiction under 28
U.S.C. § 1331, I need not address whether or not there would have been
supplemental jurisdiction under 28 U.S.C. § 1367 if BellSouth had also presented a
pure state law claim.
28
2781. Second, if the statute is silent or ambiguous, then the agency’s interpretation
must be given effect so long as it is based on a permissible reading of the statute.
Id. at 843, 104 S. Ct. at 2782. FCC has interpreted the Telecommunications Act to
authorize Public Service Commissions to adjudicate post-agreement disputes under
47 U.S.C. § 252. See In re Starpower, 15 F.C.C.R. 11277, ¶ 6, at 1129–80 (2000).
Under Chevron, the FCC’s interpretation is entitled to deference.
At Chevron step one, the precise question at issue here has no clear answer
in the statutory text. We granted rehearing en banc to answer the following
question:
Does federal law, specifically 47 U.S.C. §§ 251 and 252, give state
commissions, like the GPSC, the authority to resolve disputes between
telecommunications carriers regarding the interpretation of the
contractual terms of an interconnection agreement that has already been
approved pursuant to 47 U.S.C. § 252(e)?
No statutory text clearly authorizes or forecloses PSC adjudications of post-
agreement disputes. The statute authorizes PSCs to “approve or reject”
interconnection agreements submitted to them. 47 U.S.C. § 252(e)(1). The statute
goes on, however, to refer to “determination[s] under this section.” Id. § 252(e)(6).
While it may be possible to cabin these “determinations” to PSC decisions
approving or rejecting interconnection agreements, “determinations” can also be
fairly construed to encompass determinations in post-agreement disputes.
29
Congress could have easily avoided this interpretation by replacing the phrase
“makes a determination under this section” in § 252(e)(6) with the words
“approves or rejects.” In this statutory context, the narrower interpretation is
hardly the “unambiguously expressed intent of Congress.” Chevron, 467 U.S. at
843, 104 S. Ct. at 2781. Because Congress did not express its intent so clearly, we
must conclude that this statute is ambiguous.1
At Chevron step two, we must defer to the agency’s interpretation if it is
based upon a permissible reading of the statute. Chevron, 467 U.S. at 843, 104 S.
Ct. at 2782. There should be little doubt that FCC’s interpretation in Starpower is
entitled to deference in this case. See S.E.C. v. Zandford, 535 U.S. 813, ___, 122
S. Ct. 1899, 1903 (2002) (finding that an SEC interpretation in the context of a
formal adjudication is entitled to deference). That conclusion is not disturbed by
the recent Supreme Court cases articulating some limits on Chevron deference.
See United States v. Mead Corp., 533 U.S. 218, 228, 121 S. Ct. 2164, 2171 (2001)
1
Judge Tjoflat now claims the statute is unambiguous, indeed, that it is “clear
as a bell.” Tjoflat opinion at 81. I note, however, Judge Tjoflat’s earlier Chevron
analysis concluded that the statute was silent on the precise question at issue. See
BellSouth Telecomms., Inc. v. MCImetro Access Transmissions Servs., Inc., 278
F.3d 1223, 1235 (11th Cir. 2002) (“In this case, the statute in question, the Federal
Telecommunications Act of 1996, is silent as to whether state commissions have
the authority to interpret previously approved interconnection agreements.”),
vacated and reh’g en banc granted by 297 F.3d 1276 (11th Cir. 2002).
30
(recognizing that “[t]he fair measure of deference to an agency administering its
own statute has been understood to vary with circumstances, and courts have
looked to the degree of the agency's care, its consistency, formality, and relative
expertness, and to the persuasiveness of the agency's position”) (citations omitted);
Christensen v. Harris County, 529 U.S. 576, 587, 120 S. Ct. 1655, 1662–63 (2000)
(declining to defer to an agency interpretation reached without formal adjudication
or notice-and-comment rulemaking); see also Edelman v. Lynchburg Coll., 535
U.S. 106, ___, 122 S. Ct. 1145, 1150 (2002) (“[D]eference under Chevron does not
necessarily require an agency’s exercise of its express notice-and-comment
rulemaking power”) (citation omitted).
Nor is the deference owed to FCC altered by any dissatisfaction we may
have with the quality of the agency’s legal reasoning in Starpower. Agencies
derive their authority to interpret the statutes they administer—and thereby bind
federal courts—from Congressional delegation. Chevron, 467 U.S. at 843–44, 104
S. Ct. at 2782.2 By virtue of that Congressional delegation, an administrative
2
Judge Tjoflat asserts Chevron deference is grounded in the expertise of
agency decisionmakers, suggesting that where agencies fail to exercise their
expertise, they are entitled to no deference. Tjoflat opinion at 81-82. The Supreme
Court in Chevron, however, cited Congressional delegation—not inherent agency
expertise—as the source of the authority afforded administrative agencies. See
Chevron, 467 U.S. at 843–44, 104 S. Ct. at 2782 (“If Congress has explicitly left a
gap for the agency to fill, there is an express delegation of authority to the agency
31
agency need not cite any cases in reaching its interpretation; its interpretation is
authoritative because it has been posited by the agency. Of course, the agency’s
interpretation cannot be “procedurally defective, arbitrary or capricious in
substance, or manifestly contrary to the statute,” Mead Corp., 533 U.S. at 227, 121
S. Ct. at 2171, and legal errors in the agency’s decision might transgress these
limits. Within these boundaries, however, an agency is entitled to deference
simply because it has acted.3
It follows, therefore, that deference to an agency interpretation is not
automatically defeated4 by any perceived weakness in judicial opinions on which
to elucidate a specific provision of the statute by regulation.”). Congress may
choose to delegate because of the agency’s perceived expertise, or, as the Supreme
Court has recognized, it may delegate because of a failure to recognize the precise
question at issue or because it failed to achieve a legislative compromise that could
be codified in the statute. See id. at 865, 104 S. Ct. at 2793. According to the
Supreme Court, “For judicial purposes, it matters not which of these things
occurred.” Id. Agency expertise may give a reason for Congressional delegation,
but it is the fact of delegation, not expertise, that provides the source for agency
authority.
3
Judge Tjoflat does not argue that FCC’s Starpower decision was
procedurally defective or arbitrary and capricious. As discussed above, the
ambiguity that exists in the Telecommunications Act means that FCC’s
interpretation is not manifestly contrary to the statute.
4
While Judge Tjoflat says initially that he only “hesitates” to defer to FCC’s
interpretation because of its reliance on the precedents of our sister circuits, Tjoflat
opinion at 81, he later cites this as a sufficient reason not to defer. Tjoflat opinion
at 83 (“Any of these five reasons standing alone would eliminate the requirement
of deference.”).
32
the agency relies in formulating its interpretation. In this respect, an agency
interpretation differs from a judicial precedent. The authoritativeness of an opinion
might be diminished if its rationale is undermined;5 a valid agency interpretation,
on the other hand, is like a statute, which continues to be authoritative even if the
reasons for enacting the statute pass. Like a statute, an agency interpretation is
entitled to deference because it has been posited by an institution with
authority—in this case, the FCC, which derives its authority from a Congressional
delegation. FCC need not have cited any legal precedent in its Starpower decision;
its interpretation of § 252 would have been entitled to exactly the same deference
from this Court.6
5
There are certain well known exceptions to this common law understanding
of the authority of judicial decisionmaking. See, e.g., Rodriguez de Quijas v.
Shearson/American Express, 490 U.S. 477, 109 S. Ct. 1917 (1989).
6
For this reason, I think it does not matter that FCC’s interpretation is
“[h]ardly a model of legal reasoning.” Tjoflat opinion at 82, n.37. Nor is there any
problem posed by litigants’ allegedly “laundering” circuit court opinions through
administrative agencies. Tjoflat opinion at 80. If an administrative agency has
been delegated authority by Congress to resolve statutory ambiguities, then we can
expect the agency to exercise that delegated authority in good faith. If, in its
considered judgment, the agency agrees with the result reached by circuit courts
confronting the same issue, it can exercise its authority (consistent with any
applicable limitations on that authority) to interpret the statute in accordance with
those judicial opinions. The agency’s interpretation would then be entitled to
deference, not because of the authority of the precedents it relied upon, but only
because of the authority Congress delegated to the agency to make a decision.
Within certain limits, see Mead Corp., 533 U.S. at 227, 121 S. Ct. at 2171, the
33
I do not think FCC’s Starpower decision is based on an impermissible
construction of the Telecommunications Act, so we must defer to the agency’s
interpretation. I concur with the conclusion that the Georgia Public Services
Commission has the authority to interpret and enforce the interconnection
agreements at issue here.
agency need not exercise model legal reasoning because it simply posits its
interpretations and thereby renders them binding on the courts.
34
TJOFLAT, Circuit Judge, dissenting, in which BIRCH, Circuit Judge, joins:
I. Background
A. The Telecommunications Act of 1996 and reciprocal compensation
In 1996, Congress amended the Communications Act of 1934, see
Telecommunications Act of 1996 (“1996 Act”), Pub. L. 104-104, 110 Stat. 56(codified at 47 U.S.C. § 151 et seq.), in an effort to deregulate the
telecommunications industry – especially the local exchanges once thought to be
entrenched natural monopolies. Sections 251 and 252 form the heart of the 1996
Act. Section 251 imposes several obligations on incumbent local exchange carriers
(“ILECs”).1 Section 252 covers the implementation of these obligations, giving
significant authority to states in a regulatory scheme that has been dubbed
“cooperative federalism.” See, e.g., Philip J. Weiser, Chevron, Cooperative
Federalism, and Telecommunications Reform, 52 Vand. L. Rev. 1 (1999). Section
252 establishes two tracks for interconnecting ILECs and competitive local
exchange carriers (“CLECs”). One is the “voluntary” track pursuant to section
1
These include: the duty to negotiate interconnection agreements in good
faith; the obligation to interconnect with competitors; the obligation to provide
competitors with unbundled access to its network elements (“UNEs”) at reasonable
rates; the duty to offer for resale at wholesale rates any telecommunications service
that the ILEC provides at retail; and the duty to allow collocation of the CLECs’
equipment on the ILEC’s premises. See 47 U.S.C. § 251(c).
35
252(a)2 and section 252(e).3 If the ILEC and CLEC enter into a voluntary
agreement, the state public service commission (“PSC”)4 is charged with the task
of approving or rejecting the agreement. See 28 U.S.C. § 252(e). There are only
two available grounds for rejecting the agreement. First, the PSC might believe
that the agreement is discriminatory and thus unfair to a third-party CLEC.
Second, the PSC might believe that the agreement is inconsistent with the public
interest, convenience, and necessity. See 47 U.S.C. § 252(e)(2)(A). The PSC
cannot impose specific obligations on the parties who reach a voluntary agreement.
In other words, the parties are exempt from the specific obligations of section 251.
2
Section 252(a)(1) states:
Upon receiving a request for interconnection, services, or
network elements pursuant to section 251 of this title, an . . . [ILEC]
may negotiate and enter into a binding agreement with the requesting .
. . [CLEC] without regard to the standards set forth in subsections (b)
and (c) of section 251 of this title. The agreement shall include a
detailed schedule of itemized charges for interconnection and each
service or network element included in the agreement. The
agreement, including any interconnection agreement negotiated before
February 8, 1996, shall be submitted to the State commission under
subsection (e) of this section.
3
Section 252(e)(1) sates:
Any interconnection agreement adopted by negotiation or
arbitration shall be submitted for approval to the State commission. A
State commission to which an agreement is submitted shall approve or
reject the agreement, with written findings as to any deficiencies.
4
The 1996 Act refers only to “state commissions.” “PSC” and “state
commission” are used interchangeably throughout this opinion.
36
See 47 U.S.C. § 252(a) (“[ILECs and CLECs may] enter into a binding agreement .
. . without regard to the standards set forth in subsections (b) and (c) of section 251
of this title.”). Another option comes into play if the ILEC and CLEC refuse to
come to an agreement: the state PSC can arbitrate the dispute and, in the process,
impose section 251 obligations on the parties. See 47 U.S.C. § 252(b)
(“Agreements arrived at through compulsory arbitration”). Both determinations by
the PSC – the decision to approve or reject a voluntary agreement and the decision
to impose various requirements through arbitration – are reviewable in federal
court. See 28 U.S.C. § 251(e)(6).5
One obligation that all LECs have under section 251 is the duty to form a
reciprocal compensation agreement with competing LECs. See 47 U.S.C. §
251(b)(5). When a customer of LEC A calls a customer of LEC B, LEC B is
entitled to demand compensation for terminating the call of LEC A’s customer.
One option the LECs have is to agree to a “bill and keep” system of compensation
whereby each LEC considers the total termination costs a wash, thereby
eliminating the necessity of a billing arrangement and its concomitant
5
Section 252(e)(6) states in pertinent part:
In any case in which a State commission makes a determination under
this section, any party aggrieved by such determination may bring an
action in an appropriate Federal district court to determine whether the
agreement or statement meets the requirements of section 251 of this
title and this section.
37
administrative costs. See Stuart M. Benjamin, Douglas G. Lichtman, and Howard
A. Shelanski, Telecommunications Law and Policy 934 (2001). Another option is
for each LEC to pay the other for every call termination. In the past, ILECs and
CLECs have frequently chosen the latter option in their voluntary agreements.
This choice caused ILECs trouble when CLECs sought as their primary customers
certain entities that were net receivers of telephone calls (and therefore rarely
placed calls to the customers of ILECs). One such customer is the Internet service
provider (“ISP”), whose metaphysical status has caused the FCC tremendous
definitional problems.
The FCC eventually weighed in, however, in an effort to fix the perceived
asymmetry.6 The FCC made the tentative conclusion that ISP-bound calls are
“interstate,” rather than “local,” and thus not subject to reciprocal compensation
charges. That is, ILECs were not required to pay CLECs for the termination of
ISP-bound calls. In accordance with the statute, the FCC left open the possibility
of private agreements to the contrary. A CLEC and an ILEC could, for example,
6
The FCC’s initial decision was vacated by the D.C. Circuit. See
Implementation of the Local Competition Provisions in the Telecomm. Act of
1996; Intercarrier Compensation for ISP-Bound Traffic, 14 F.C.C.R. 3689 (1999),
vacated and remanded sub nom., Bell Atl. Tel. Cos. v. FCC, 206 F.3d 1 (D.C. Cir.
2000). The FCC eventually issued a new order on remand. See Implementation of
the Local Competition Provisions in the Telecomm. Act of 1996; Intercarrier
Compensation for ISP-Bound Traffic, 16 F.C.C.R. 9151 (2001), remanded sub
nom., WorldCom, Inc. v. FCC, 288 F.3d 429 (D.C. Cir. 2002).
38
pay each other for the termination of ISP-bound calls notwithstanding the FCC’s
conclusion that ISP-bound calls are not “local.”
B. This dispute
The ILEC in this case, BellSouth Telecommunications, Inc. (“BellSouth”),
declined to pay reciprocal compensation fees to various CLECs. The Georgia
Public Service Commission (“GPSC”) adjudicated the dispute, holding that the
parties were required to compensate each other for the termination of ISP-bound
calls.7 BellSouth sought review in federal district court of the GPSC’s Order,
asserting federal jurisdiction under 28 U.S.C. § 1331 and 47 U.S.C. § 252(e)(6).
The district court rejected BellSouth’s arguments on the merits, holding that (1) the
GPSC’s Order did not violate federal law and (2) the GPSC’s application of
Georgia contract law to the voluntary agreement was not an “arbitrary and
capricious” analysis.8 A panel of this court reversed, holding that the GPSC lacked
7
As will be discussed in part V infra, it is unclear whether the GPSC took
one of two positions. Did it hold that the parties intended to compensate each other
for the termination of ISP-bound calls because (a) it believed the parties intended
to track federal law and (b) federal law defines ISP-bound calls as “local” rather
than “interstate” (which would have been an erroneous understanding of federal
law)? Or did it believe that the parties contracted to compensate each other for the
termination of ISP-bound calls notwithstanding how federal regulations might
define ISP-bound traffic?
8
As the district court framed the issues: “The heart of the present disputes
involve two questions: First, did the PSC orders violate federal law, as reflected in
the 1996 Act and in the FCC’s rules and regulations? Second, did the PSC
39
authority under state and federal law to enforce and interpret interconnection
agreements and that this authority must rest with state courts rather than PSCs.
The panel also held that the district court lacked jurisdiction under 47 U.S.C. §
252(e)(6). See BellSouth Telecomms., Inc. v. MCImetro Access Transmission
Servs., Inc., 278 F.3d 1223 (11th Cir. 2002), vacated, BellSouth Telecomms., Inc.
v. MCImetro Access Transmission Servs., Inc., 297 F.3d 1276 (11th Cir. 2002).
After the panel’s decision was rendered, the Supreme Court issued its decision in
Verizon Md. Inc. v. Pub. Serv. Comm’n of Md., __ U.S. __, 122 S. Ct. 1753, 152
L. Ed. 2d 871 (2002), which touches upon many of the issues in this case.
I would hold that (1) the authority of the GPSC under Georgia law is a state
law issue that this court should decline to reach, and that federal law does not
preclude PSCs from adjudicating post-agreement disputes if states make the choice
to allocate adjudicative power to their PSCs; (2) the district court did not have
jurisdiction under 47 U.S.C. § 252(e)(6) for several reasons, not least among which
is the fact that the plain language of the statute does not provide for appellate
review in the district courts of PSC adjudications of post-agreement disputes; (3)
the district court did not have jurisdiction under 28 U.S.C. § 1331 over any of the
correctly interpret the interconnection agreement under Georgia law?” BellSouth
Telecomms., Inc. v. MCImetro Access Transmission Servs., Inc., 97 F. Supp. 2d
1363, 1376 (N.D. Ga. 2000).
40
claims BellSouth now presses on appeal,9 primarily because the posture of the
district court was that of an “appellate” court and not a court of “original”
jurisdiction; (4) the district court did have supplemental jurisdiction over
BellSouth’s state law “federal element” claim pursuant to the Supreme Court’s
holding in City of Chicago v. Int’l Coll. of Surgeons, 522 U.S. 156, 118 S. Ct. 523,
139 L. Ed. 2d 525 (1997), because the district court had original jurisdiction over
the (now-dropped) Verizon-like claim of federal preemption;10 and (5) on the
merits, there is no way the district court could have determined whether the GPSC
held (a) that the parties intended to track evolving standards of federal law or (b)
that the parties intended to pay each other for the termination of ISP-bound traffic
9
The Supreme Court did not hold that federal jurisdiction exists to review all
PSC interpretation/enforcement decisions pursuant to 28 U.S.C. § 1331. The only
place section 1331 was implicated in Verizon was with regard to the federal
question – namely, whether a PSC conclusion that the CLECs and the ILEC had
agreed to deem ISP-bound calls “local” is preempted by federal law. The Court
never said that a PSC adjudication of an interconnection agreement inherently
entails a federal question. In his concurrence, Justice Souter made clear that the
Court was not deciding what the majority of this court claims it decided: “Whether
the interpretation of a reciprocal compensation provision in a privately negotiated
interconnection agreement presents a federal issue is a different question which
neither the Court nor I address at the present.” Verizon, 122 S. Ct. at 1763 n.4
(emphasis added).
10
In asserting jurisdiction over the supplemental claim, the the district court
should have sat as if it were a Georgia superior court, reviewing the GPSC’s
decision under the standard of review provided by Georgia law.
41
notwithstanding federal law. Accordingly, I would vacate the decision of the
district court and instruct it to remand the case to the GPSC so that it can more
clearly articulate the basis for its conclusion, and also so that it can adjudicate the
dispute in light of the FCC’s recent regulations.
II. Section 1331 Jurisdiction
A. Is there section 1331 jurisdiction if one assumes, arguendo, that the
proceeding before the district court was an “original” proceeding?
There are many claims in this litigation that are allegedly federal in nature.
Assuming, for the moment, that the litigation before the district court in this case
was an “original” proceeding, it is questionable whether all of BellSouth’s
complaints “arise under” federal law for purposes of 28 U.S.C. § 1331.
1. Federal preemption
One contention in BellSouth’s “petition for judicial review” is that the
GPSC’s Order violates the 1996 Act and the FCC’s regulations thereunder.
Although the “petition for judicial review” is unclear on this point, I think I
understand BellSouth to be adopting the position more clearly articulated by the
plaintiff in Verizon, where the plaintiff sought relief “‘on the ground that such
regulation is pre-empted by a federal statute which, by virtue of the Supremacy
Clause of the Constitution, must prevail.’” Verizon, 122 S. Ct. at 1757. An
42
identical cause of action could have been asserted in this case under 42 U.S.C. §
1983 or under Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96, 103 S. Ct. 2890,
2899, 77 L. Ed. 2d 490 n.14 (1983) (holding that plaintiffs may assert a private
right of action directly under the Supremacy Clause of the Constitution).
On appeal, BellSouth no longer disputes that the GSPC could have ordered
the parties to pay each other for the termination of ISP-bound calls, and for good
reason: the FCC has consistently promulgated regulations, consistent with the 1996
Act’s affinity for voluntary agreements, that enable ILECs and CLECs to enter into
reciprocal compensation agreements on the subject of ISP-bound traffic
notwithstanding any federal regulations that might deem ISP-bound traffic
“interstate” as a matter of law. In the FCC’s first (and now-vacated) ISP ruling, for
example, the FCC was careful to note that “parties may voluntarily include this
[ISP-bound] traffic within the scope of their interconnection agreements” as those
agreements are “interpreted and enforced by state commissions.” Implementation
of the Local Competition Provisions in the Telecomms. Act of 1996; Intercarrier
Compensation for ISP-Bound Traffic, 14 F.C.C.R. 3689, ¶ 12, at 3703 (1999). The
FCC concluded, “Nothing in this Declaratory Ruling, therefore, necessarily should
be construed to question any determination a state commission has made, or may
make in the future, that parties have agreed to treat ISP-bound traffic as local
43
traffic under existing interconnection agreements.” Id. ¶ 24, 3704. On remand
from the D.C. Circuit, the FCC reached an identical conclusion. See
Implementation of the Local Competition Provisions in the Telecomms. Act of
1996; Intercarrier Compensation for ISP-Bound Traffic, 16 F.C.C.R. 9151, ¶ 82, at
9189 (2001) (“The interim compensation regime we establish here . . . does not
alter existing contractual obligations, except to the extent that parties are entitled to
invoke contractual change-of-law provisions. This Order does not preempt any
state commission decision regarding compensation for ISP-bound traffic for the
period prior to the effective date of the interim regime we adopt here.”). Since the
GPSC’s conclusion that BellSouth owed the CLECs reciprocal compensation fees
was based upon its interpretation of the voluntary interconnection agreement,
federal law certainly creates no impediment to the GPSC Order. Indeed, I might be
inclined to find that BellSouth’s claim does not meet the standard for well-pleaded
complaints under Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 776, 90 L. Ed.
939 (1946), and its progeny. See Steel Co. v. Citizens for a Better Env’t, 523 U.S.
83, 89, 118 S. Ct. 1003, 1010, 140 L. Ed. 2d 210 (1998) (district courts do not have
jurisdiction if the claim “clearly appears to be immaterial and made solely for the
purpose of obtaining jurisdiction or where such a claim is wholly insubstantial or
frivolous”). However, the Supreme Court held that an identical claim in Verizon
44
was not “immaterial” or “wholly insubstantial and frivolous,” Verizon, 122 S. Ct.
at 1758-59, and so this court is obliged to extend BellSouth the same treatment as
that received by Verizon.
2. “Coerced” contracts and federal common law
Another argument is that either the rule of decision for all post-agreement
disputes is some sort of federal common law of contracts, or else the disputes
“arise under” federal law even if state law provides the rule of decision because the
agreements are “coerced” by the federal government and they are an integral part
of a federal regulatory scheme. Therefore, BellSouth argues, all interconnection
disputes can wind up in federal court pursuant to 28 U.S.C. § 1331.
a. “Coerced” contracts
The fact that the interconnection agreements are “coerced” and made
pursuant to a federal regulatory scheme is not enough to make run-of-the-mill
contract claims – say, a dispute over performance or price – subject to section 1331
jurisdiction. If state law is the rule of decision, then ordinary contract claims
would not raise a “federal issue” for district courts to resolve. Indeed, one
Supreme Court case has expressly held that a federally compelled contractual
provision was not to be construed in federal court under principles of federal law,
but rather under state law applied in state courts. See Jackson Transit Auth. v.
45
Local Div. 1285, Amalgamated Transit Union, 457 U.S. 15, 29, 102 S. Ct. 2202,
2210, 72 L. Ed. 2d 639 (1982).
Many post-agreement interconnection disputes would raise only state law
claims, and any federal ingredient would be so far removed from the issues for
judicial resolution that many claims would not even come close to what Justice
Frankfurter called the “litigation provoking problem” of a federal element in a state
law cause of action. See Textile Workers Union of Am. v. Lincoln Mills of Ala.,
353 U.S. 448, 470, 77 S. Ct. 912, 928, 1 L. Ed. 2d 972 (1957) (Frankfurter, J.,
dissenting). The only possible theory that BellSouth might invoke is the idea of
“protective jurisdiction” – the notion that “with regard to subjects concerning
which Congress has legislative power under Article I, it can pass a statute granting
federal jurisdiction and that the jurisdictional statute is itself a ‘law of the United
States’ within Article III, even though Congress has not enacted any substantive
rule of decision and thus state law is to be applied.” 13B Charles Alan Wright,
Arthur R. Miller, & Edward H. Cooper, Federal Practice and Procedure § 3565 (2d
ed. 1984). This theory is inapposite to this discussion, however, because we are
positing that the only jurisdictional statute is 28 U.S.C. § 1331. The theory of
protective jurisdiction applies only within the context of a special jurisdiction
statute; no one has ever argued that section 1331 itself amounts to a grant of
46
jurisdiction to entertain state law claims on particular matters of federal concern.
Moreover, doubt on the validity of protective jurisdiction was cast by Mesa v.
California, 489 U.S. 121, 109 S. Ct. 959, 103 L. Ed. 2d 99 (1989). In that case, the
Court held that the jurisdictional provision found in 28 U.S.C. § 1442(a)(1)
required federal officers to raise a federal defense before removing to federal court.
The Court refused to take the broader position that even if no federal issue is
presented for judicial resolution, Congress can enact a statute granting federal
courts jurisdiction in order to protect the federal interest at stake. Such an
interpretation of the statute would, according to the Court, raise “serious doubt”
about to the statute’s constitutionality, because it would implicate the outer
boundaries of Congress’s ability to define the scope of federal jurisdiction. Mesa,
489 U.S. at 136, 109 S. Ct. at 968.
b. Federal common law
If interconnection agreements are to be interpreted under a federal common
law of contracts, then all post-agreement disputes would raise a federal question
and thereby satisfy the “arising under” requirement of 28 U.S.C. § 1331. However,
there is no compelling reason why federal common law should be the rule of
decision in adjudications of post-agreement disputes between CLECs and ILECs.
47
There is no indication in the 1996 Act that Congress intended the rule of
decision to be one of federal common law. The fact that the contracts are
“coerced” is inapposite; as the Court held in Jackson Transit Auth., supra, federally
compelled contractual provisions are not necessarily to be construed in federal
court under principles of federal common law. Jackson, 457 U.S. at 29, 102 S. Ct.
at 2202. Rather, the Court held that the contract in that case had to be enforced in
state courts under principles of state law. Id.Without explicit congressional authorization for the courts to craft common-
law rules for interpreting interconnection agreements, state law must be the rule of
decision. Professor Chemerinsky describes the presumption against federal
common law:
There long has been a strong presumption against the federal courts
fashioning common law to decide cases. The Rules of Decision Act,
which was part of the Judiciary Act of 1789 and which remains
largely unchanged to this day, states that “the laws of the several
states, except where the Constitution or treaties of the United States or
Acts of Congress otherwise require or provide, shall be regarded as
rules of decisions in civil actions in the courts of the United States, in
cases where they apply.” 28 U.S.C. § 1652. This law, by its very
terms, seems to deny the existence of federal common law; the Rules
of Decision Act commands that in the absence of positive federal law,
federal courts must apply state law.
See Erwin Chemerinsky, Federal Jurisdiction § 6.1, at 350 (3d ed. 1999) (footnote
omitted).
48
In a narrow category of cases, Congress has authorized federal courts to
create a body of common law rules. See, e.g., Textile Workers Union of Am. v.
Lincoln Mills of Ala., 353 U.S. 448, 77 S. Ct. 912, 1 L. Ed. 2d 972 (1957) (labor-
management contract disputes); Nat’l Soc’y of Prof. Eng’rs v. United States, 435
U.S. 679, 687-88, 98 S. Ct. 1355, 1363, 55 L. Ed. 2d 637 (1978) (antitrust). Even
so, the presumption and modern trend is to the contrary. The Supreme Court, for
example, refused to extend its authority to craft substantive rules of antitrust law in
a way that would also allow it to make post-judgment rules governing contribution
among antitrust defendants. See Tex. Indus., Inc. v. Radcliff Materials, Inc., 451
U.S. 630, 640-41, 101 S. Ct. 2061, 2067, 68 L. Ed. 2d 500 (1981). Commenting
on this case, Professor Chemerinsky concludes, “Texas Industries thus reaffirms
the basic principle: The federal judiciary will formulate a body of common law
rules only pursuant to clear congressional intent for such action.” Chemerinsky,
supra, § 6.3.2, at 376 (emphasis added).
There is no clear congressional intent for courts to craft common law rules in
the context of disputes over interconnection agreements. Indeed, the invocation of
federal common law would be in considerable tension with the reverse-preemption
provision in the 1996 Act and the Act’s scheme of cooperative federalism (both of
49
which are discussed in part III.A, infra) by ceding new authority to the federal
courts where none existed before, while simultaneously displacing state law.
3. Federal element in a state law cause of action: Merrell Dow
A final position BellSouth takes is that (a) the parties intended that their
mutual obligations under the interconnection agreement track evolving standards
of federal law and (b) federal law provides that ISP-bound traffic is “interstate”
rather than “local” and therefore LECs need not pay each other for the termination
of ISP-bound calls. This is the argument that BellSouth has advanced throughout
this litigation, though one is hard pressed to find it in its “petition for judicial
review.” After reciting at length the definitions of various terms under FCC
regulations, BellSouth states in line 31 that “[i]t was in the context of the foregoing
provisions of law that BellSouth and MFS/WorldCom executed the
Interconnection Agreement.” In line 53, BellSouth alleges that “the PSC’s Order
holding that the use of local facilities to connect to an ISP constitutes Local Traffic
under the Interconnection Agreement is inconsistent with the facts and contrary to
the provisions of the 1996 Act.” I will stretch these sentences, respectively, to
mean that (a) the parties intended to track federal law and (b) federal law means X
rather than, as the GSPC held, Y. See Lykins v. Reynolds Metals Co., 725 F.2d
645, 646 (11th Cir. 1984) (holding that a district court could exercise federal tort
50
claim liability jurisdiction, despite the plaintiff’s failure to allege statutory
authority for such jurisdiction, because the requisite facts were alleged).
Resolution of this claim boils down to contractual interpretation – namely, whether
the parties intended to compensate each other for the termination of ISP-bound
calls. It is therefore a state law claim.
This claim, then, squarely confronts this court with the “litigation provoking
problem” of a federal issue embedded in a state law cause of action. In Smith v.
Kansas City Title & Trust Co., 255 U.S. 180, 41 S. Ct. 243, 65 L. Ed. 577 (1921),
the plaintiff sued in federal court under the theory that the defendant-corporation
violated state law when it purchased various bonds. State law delineated
permissible investments to those consistent with state and federal law, and the
bonds, according to the plaintiff, violated the U.S. Constitution. The Court held
that the district court had section 1331 jurisdiction to hear the claim. More
recently, the Court stated in Franchise Tax Board v. Construction Laborers
Vacation Trust, 463 U.S. 1, 103 S. Ct. 2841, 77 L. Ed. 2d 420 (1983), that when “it
appears that some substantial, disputed question of federal law is a necessary
element of one of the well-pleaded claims,” then federal jurisdiction is appropriate.
Id. at 3, 103 S. Ct. at 2847. In Moore v. Chesapeake & Ohio R.R. Co., 291 U.S.
205, 54 S. Ct. 402, 78 L. Ed. 755 (1934), the Court took the opposite turn, holding
51
that “arising under” jurisdiction rarely exists outside of the context of federal
causes of action. The Court attempted to reconcile these cases in Merrell Dow
Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 106 S. Ct. 3229, 92 L. Ed. 2d
650 (1986). There, the Court declined to find jurisdiction over a state tort claim
that alleged a violation of an FDA regulation as an element of the cause of action.
The Court cautioned that “careful judgments” must be made. Id. at 814, 106 S. Ct.
at 3235. It ultimately concluded that since Congress did not create a federal cause
of action for violations of the FDA regulation, its intent would be defeated if the
Court allowed district courts to entertain an identical claim under state law. Id. at
812, 106 S. Ct. at 3234.
In the case at bar, it is unclear whether there would be jurisdiction under the
framework established in Merrell Dow. On one hand, the federal element – a mere
declaratory ruling by the FCC that ISP-bound traffic is “interstate” – is clearly not
a federal cause of action. On the other hand, federal regulatory policy is definitely
intertwined with the state law cause of action and Merrell Dow is therefore easily
distinguishable. I need not undertake a jurisdictional analysis under Merrell Dow,
52
because I think that the district court’s posture below was that of an appellate court
and therefore 28 U.S.C. § 1331 is inapplicable.11
B. Was the proceeding below an “original” proceeding?
1.Are all 47 U.S.C. § 252(e)(6) proceedings, in which LECs seek
review of PSC orders in federal district court, undertaken pursuant to
the original jurisdiction of district courts under 28 U.S.C. § 1331?
At first blush, it may appear strange to call the district court’s posture in the
47 U.S.C. § 252(e)(6) context to be that of a court asserting “original” jurisdiction.
After all, the district court is reviewing the ruling of a lower body, and the district
court’s role therefore seems to be “appellate” in nature. However, there is a
colorable argument that all such proceedings are, in fact, “original.” If this
argument prevails, then the proceeding in the district court below was an “original”
proceeding, and the district court might have had jurisdiction over the state law
claim depending upon how an analysis of the case under Merrell Dow would be
resolved.
a. “Yes”: A potential argument
In Verizon, the Court asserted that section 252(e)(6) may not be a
jurisdictional provision; rather, it might be a provision that confers a private right
11
I ultimately conclude that there is jurisdiction over this state law cause of
action under the supplemental jurisdiction statute, 28 U.S.C. §1367, in part IV,
infra.
53
of action. See Verizon, 122 S. Ct. at 1759 (“Section 252 does not establish a
distinctive review mechanism for the commission actions that it covers . . . and it
does not distinctively limit the substantive relief available. Indeed, it does not even
mention subject-matter jurisdiction, but reads like a private action.”). In the same
passage, the Court went on to cite Steel Co., 523 U.S. at 90-91, 118 S. Ct. at 1010-
11, for the proposition that “even a statutory provision that uses the word
‘jurisdiction’ may not relate to ‘subject matter jurisdiction.’” Thus, if one takes the
Court’s language seriously, then there must be a separate jurisdictional basis for all
§ 252(e)(6) actions in the district courts, because § 252(e)(6) does not have
anything to do with subject-matter jurisdiction and is merely a cause of action.
One must ask, then, what is the jurisdictional basis for district court review
of accept-or-reject determinations that PSCs must make pursuant to § 252(e)(1)?
Since there must be a jurisdictional basis outside of § 252(e)(6), then it is tempting
to look at 28 U.S.C. § 1331. That provision states: “The district courts shall have
original jurisdiction of all civil actions arising under the Constitution, laws, or
treaties of the United States.” The italicized term is striking: section 1331 is about
“original” rather than “appellate” jurisdiction. Suppose, for example, that a PSC
arbitrates an interconnection agreement. Suppose further that a CLEC feels that
the PSC has not required the ILEC to meet all of the obligations that is required of
54
it under 47 U.S.C. § 251, and it seeks review of the PSC’s determination in federal
district court. Is the proceeding before the district court an “original” proceeding?
If it is not, then § 252(e)(6) is without effect; Congress drafted a private cause of
action, but district courts have no jurisdiction to review PSCs because Congress
did not amend 28 U.S.C. § 1331 to provide for appellate jurisdiction in the district
courts.
One option is contend that jurisdiction under section 1331, in the context of
an appellate proceeding to resolve a single federal claim, is not troublesome. That
may be the position of Justice Souter who, in a concurring opinion joined by
Justice Breyer and Justice Ginsburg, stated that the proceeding in Verizon was an
“appellate” proceeding while simultaneously agreeing that jurisdiction existed
pursuant to 28 U.S.C. § 1331. Verizon, 122 S. Ct. at 1763 (Souter, J., concurring)
(“Verizon accordingly seeks not a simple order of relief running against the state
commission, but a different adjudication of a federal question by means of
appellate review in Federal District Court, whose jurisdiction to entertain the
claim of error the Court today has affirmed.”) (emphasis added). But that is not a
55
satisfactory result, because section 1331 clearly says the word “original” and says
nothing about “appellate” jurisdiction in the district courts.12
After Verizon, we are thus left with four possible conclusions: (1) appellate
jurisdiction and 28 U.S.C. § 1331 can coincide with respect to the same claim;13 (2)
47 U.S.C. § 252(e)(6) is surplusage; (3) all proceedings before district courts under
47 U.S.C. § 252(e)(6) are “original” proceedings; or (4) the Court’s private-right-
of-action discussion was dicta and 47 U.S.C. § 252(e)(6) is, in fact, a jurisdictional
provision – a special, closely cabined conference of appellate jurisdiction upon
district courts to review PSC accept-or-reject determinations. The first two are
clearly wrong, leaving only the last two options. If the third option is correct, then
12
The majority of this court, like the Verizon concurrence, evidently believes
that 28 U.S.C. § 1331 encompasses appellate jurisdiction. This is the only
conclusion one can reach from the majority’s holding that “[T]he federal district
court had jurisdiction under 28 U.S.C. § 1331 to review that decision on appeal.”
As the Verizon majority noted, however, “28 U.S.C. § 1331 is a grant of original
jurisdiction, and does not authorize district courts to exercise appellate jurisdiction
over state-court judgments.” Verizon, 122 S. Ct. at 1759 n.3. Since the majority
of this court (correctly, in my view) considers the proceeding before the district
court to be an “appeal,” I do not read the majority opinion as standing for the
opposite proposition – namely, that the proceeding was in fact an “original” action.
The majority thus reads the word “appellate” into 28 U.S.C. § 1331. I contend that
this holding is troubling to say the least.
13
This is an unattractive option not only because it violates the plain
language of 28 U.S.C. § 1331, but also because the Verizon majority expressly
asserted that “28 U.S.C. § 1331 is a grant of original jurisdiction, and does not
authorize district courts to exercise appellate jurisdiction over state-court
judgments.” Verizon, 122 S. Ct. at 1759 n.3.
56
I would be willing to embrace the idea that the proceeding below was an “original”
proceeding and I might therefore find jurisdiction under 28 U.S.C. § 1331 if this
result is in accordance with Merrell Dow.
b. “No”: The Better Argument
A reading of Verizon that would tag the nature of district court review of
PSC orders with the “original” label poses several problems that ultimately force
me to take option four rather than option three. First, anyone familiar with Anglo
jurisprudence would believe that the district court’s posture in the accept-or-reject
setting is that of an appellate court. Compare Black’s Law Dictionary 98 (6th ed.
1990) (defining “appellate jurisdiction” as “jurisdiction to revise or correct the
proceedings in a cause already instituted and acted upon by an inferior court, or by
a tribunal having the attributes of a court”), with id. at 1099 (defining “original
jurisdiction” as “jurisdiction to consider the case in the first instance”). In the
example of the CLEC challenge described above, the PSC considers the case “in
the first instance,” while the district court is being asked to “correct the
proceedings in a cause already instituted and acted upon” by “a tribunal having the
attributes of a court.”
More importantly, 47 U.S.C. § 252(e)(5) provides that the FCC is to make
the accept-or-reject determination if the PSC does not act. As Justice Souter points
57
out in his opinion, see Verizon, 122 S. Ct. at 1763 n.5 (Souter, J., concurring),
there is no special review statute for the FCC in the 1996 Act. Rather, the FCC is
reviewed pursuant to its ordinary review statute. See 28 U.S.C. § 2344. That
provision states that aggrieved parties may file a petition to review the FCC’s order
in the court of appeals where venue lies. Clearly the action taken in the latter case
is an “appeal.” One does not, for example, say that a party aggrieved by an agency
order files an “original” action in a court of appeals. Rather, one would say that
the “original” proceeding takes place within the agency and that the proceeding
before a court of appeals is an “appeal.” I think it would strain logic to call a
proceeding in a court of appeals challenging the FCC’s accept-or-reject
determination an “appeal” while simultaneously contending that an identical
proceeding in a district court challenging a PSC’s accept-or-reject determination is
an “original action.”
Two other considerations inform my conclusion that the proceedings before
district courts on review of PSC orders are appellate proceedings. First, three
Justices of the Supreme Court agreed with an opinion that explicitly called the
district court’s posture to be that of an “appellate” court.14 Second, many courts
14
As will be discussed, Justice Souter could easily have endorsed the notion
that the claim in Verizon entailed a claim of original jurisdiction, whereas judicial
review by district courts of accept-or-reject determinations are appellate in nature.
58
have held that district courts must give deference to certain PSC determinations,15
and deference is a hallmark of appellate review.
Since district court review of PSC accept-or-reject determinations is an
“appellate” rather than “original” proceeding, this leaves me with option four: I
decline to read the Court’s suggestion that 47 U.S.C. § 252(e)(6) is a “private right
of action” as a holding. Since this conclusion is, in fact, the best reading of the
Court’s language, I read the Court’s discussion as dicta and distinguish the present
case from Verizon.
The Verizon Court never analyzed whether the 47 U.S.C. § 252(e)(6) is a
private right of action. It never invoked the factors employed in Cort v. Ash, 422
U.S. 66, 78, 95 S. Ct. 2080, 2088, 45 L. Ed. 2d 26 (1975), for determining whether
a statute creates a private cause of action; nor did it engage in any kind of analysis
whatsoever. Rather, it was merely attempting to reinforce its argument for the
unexceptional proposition that 47 U.S.C. § 252(e)(6) does not cabin the original
federal question jurisdiction of district courts. Indeed, the Court expressly reserved
Since he believed that Verizon entailed an appellate proceeding, he must certainly
believe that district court review of an accept-or-reject determination is an
appellate proceeding.
15
See, e.g., Southwestern Bell Tel. Co. v. Apple, 309 F.3d 713 (10th Cir.
2002) (collecting cases using the arbitrary-and-capricious standard); GTE South,
Inc. v. Morrison, 199 F.3d 733, 745 (4th Cir. 1999) (employing “substantial
evidence” review).
59
the question of whether § 252(e)(6) amounts to a jurisdictional grant, concluding
that “even if § 252(e)(6) does not confer jurisdiction, it at least does not divest the
district courts of their authority under 28 U.S.C. § 1331 to review the
Commission’s order for compliance with federal law.” Verizon, 122 S. Ct. at
1758. My reading is entirely consistent with this principle: it reads § 252(e)(6) as
an expansion of federal jurisdiction because cases “arising under” federal law can
still be brought in federal district court as an original matter under 28 U.S.C. §
1331, and appeals from PSC accept-or-reject determinations can be brought in
federal district court pursuant to § 252(e)(6).
My reading is consistent with the facts in Verizon. In that case, the plaintiff
claimed that federal law precluded the Maryland PSC from ordering the payment
of reciprocal compensation, notwithstanding the PSC’s conclusion that, under
principles of state contract law, the parties agreed to pay each other for the
termination of ISP-bound calls. As the Court put it: “Verizon [sought] relief from
the Commission’s order on the ground that such regulation is pre-empted by a
federal statute which, by virtue of the Supremacy Clause of the Constitution, must
prevail.” Verizon, 122 S. Ct. at 1758 (citing Shaw v. Delta Airlines, Inc., 463 U.S.
85, 96, 103 S. Ct. 2890, 77 L. Ed. 490 n.14 (1983), which held that litigants may
assert a private right of action for preemption under the Supremacy Clause). The
60
claim in Verizon, in short, was one that was brought to the district court as an
original matter. The PSC never passed on the issue; it was precisely the PSC’s
action that was allegedly illegal under federal law. The claim was not merely an
error in legal judgment by a lower body. As will be discussed infra, the latter is
what we have here – a claim of the appellate variety.
2. Was the proceeding below, in which BellSouth sought review of
the PSC Order in federal district court, undertaken pursuant to the
original jurisdiction of the district court under 28 U.S.C. § 1331?
The answer to this question is a resounding “no.” As stated in part II.A.1,
BellSouth abandoned its Verizon-like claim that the GPSC was preempted by
federal law and therefore could not order the payment of reciprocal compensation
fees for ISP-bound traffic. The district court had original jurisdiction over this
claim, because the crux of the claim is that the PSC did something illegal. A
private right of action – whether under the Constitution directly (pursuant to Shaw)
or 42 U.S.C. § 1983 – provides the vehicle for such a claim. The only potential
claim left is the state law claim with a federal element. See supra part II.A.3. In
short, BellSouth argues that (a) the GPSC agreed that the parties intended to track
federal law16 and (b) the GPSC made a legal mistake when it found that, as a matter
16
This is a debatable proposition – both in terms of what the parties intended
and what the GPSC actually held.
61
of federal law, ISP-bound traffic is “local” rather than “interstate.” This is merely
a claim of legal error – a claim fit for an appeal, but not an original action. This is
so even if BellSouth dresses up its claim by seeking declaratory relief.
Indeed, BellSouth itself must have believed that the proceeding below was
an “appellate” proceeding. If it were an original proceeding, BellSouth would have
asked the district court to ignore the PSC’s Order entirely. Instead, it argued
before the district court that (a) the GPSC believed that the parties intended to track
federal law and (b) that this conclusion was correct, but that the GPSC got the law
part wrong. It asked the court, in short, to give vitality to part of the GPSC’s
analysis rather than ignoring it entirely. Moreover, line 57 of BellSouth’s “petition
for judicial review” asks the district court to “reverse” the PSC Order because it
was “erroneous as a matter of law.” That language is typical of appellate
proceedings, not original proceedings.
For all of these reasons, I would hold that the posture of the district court in
this case was that of an appellate court. While district courts are granted appellate
jurisdiction within the narrow confines of 47 U.S.C. § 252(e)(6), they do not have
appellate jurisdiction pursuant to 28 U.S.C. § 1331. The only remaining strategy
for the parties is to argue that this case does, in fact, come within the narrow
62
confines of 47 U.SC. § 252(e)(6), or else supplemental jurisdiction exists under 28
U.S.C. § 1367.
III. Section 252(e)(6) Jurisdiction
A. The source of PSC authority to interpret and enforce interconnection
agreements is not section 252(e)(1), but residual authority reserved to states
under the 1996 Act
Proponents of federal jurisdiction are eager to find that the source of PSC
authority to interpret and enforce voluntary agreements resides in section 252(e)(1)
rather than residual authority under the 1996 Act,17 because the jurisdictional
provision – section 252(e)(6) – restricts federal review only to PSC determinations
made under “this section,” and section 252(e)(1) contains the section’s only
operative list of what “determinations” PSCs may make.
I am convinced that PSC authority does not reside in section 252(e)(1). My
primary reason is that the plain language of the 1996 Act says nothing of the sort. I
have looked long and hard at the provision, and I find only this language: “A State
commission to which an agreement is submitted shall approve or reject the
17
Both parties in this case are, for various reasons, eager to assert federal
jurisdiction. I note that it is incumbent upon the federal courts to assess their own
jurisdiction, even if it does so without the benefit of an adversarial presentation. If
the parties do not raise the question of lack of jurisdiction, it is the duty of the
federal court to determine the matter sua sponte. See Atlas Life Ins. Co. v. W.I.
Southern Inc., 306 U.S. 563, 572-73, 59 S. Ct. 657, 662, 83 L. Ed. 987 (1939).
63
agreement, with written findings as to any deficiencies.” 47 U.S.C. § 252(e)(1)
(emphasis added). BellSouth asks this court to insert by judicial fiat the following
additional language: “State commissions shall also enforce and interpret
interconnection agreements if any post-agreement dispute arises.” It is up to
Congress, not judges, to make this proposed statutory amendment, and I decline to
read into the statute language that does not exist. To the majority, it would not
make sense to grant PSCs authority to ensure that interconnection agreements
comply with the requirements of the 1996 Act on the front end without also
instructing PSCs to engage in post-agreement adjudication on the back end. I will
show in due time why Congress’s choice made perfect sense. For now, it is enough
to say that the authority is not found within the text of 47 U.S.C. § 252(e)(1).
“[O]ur problem is to construe what Congress has written. After all, Congress
expresses its purpose by words. It is for us to ascertain – neither to add nor to
subtract, neither to delete nor to distort.” 62 Cases More or Less, Each Containing
Six Jars of Jam v. U.S., 340 U.S. 595, 596, 71 S. Ct. 515, 518, 95 L. Ed. 566(1951).
Aside from the obvious separation-of-powers concern, there are two
additional problems with judicially manipulating section 252(e)(1) so as to insert
language about post-agreement adjudication. First, since this interpretation would
64
give federal courts jurisdiction to review all interconnection disputes under section
252(e)(6), such as price and performance disputes, all of the problems discussed in
part III.B, infra, apply. Second, this reading would foreclose states from allocating
adjudicative authority to enforce and interpret interconnection agreements to state
trial courts rather than state PSCs, and Congress likely did not intend such a result.
Suppose, for example, that a state wants its trial courts to make the initial decision
to approve or reject an interconnection agreement rather than its PSC. It could not
do this under the clear language of the statute, which says that the authority to
approve or reject an interconnection agreement must rest with a state PSC or, if the
PSC does not act, with the FCC. See 47 U.S.C. § 252(e)(1), (e)(5). This mandatory
scheme makes sense, since the approve-or-reject decision is a policy determination
that ought to rest with an expert agency. Suppose, however, that a state makes the
following conclusion: “We (State X) understand that policy decisions, such as the
decision to approve or reject interconnection agreements, ought to rest with our
PSC. But we do not feel comfortable allowing public service commissioners, many
of whom are untrained in the law,18 to immerse themselves in the business of
18
For example, the 2001 GPSC Chairman, Lauren “Bubba” McDonald, Jr.,
does not have a law degree and was in the hardware business prior to his
appointment to the Commission. In addition to his commission duties, McDonald
is currently involved in the funeral home business. See Commissioner
Biographies, at http://www.psc.state.ga.us/pscinfo/bios/htm (last visited Nov. 6,
65
ascertaining contractual intent and deciding other issues that require skill in
applying contract law. Therefore, we make the decision to allocate this adjudicative
power to state trial courts rather than our PSC.” This sounds like a perfectly
reasonable conclusion, and nothing in the statute explicitly prevents it in my view.
Moreover, the reverse-preemption provision of the 1996 Act, Pub. L. No. 104-104,
110 Stat. 56, 143 (1996) (codified at 47 U.S.C. § 152(c)(1) note),19 would seem to
countenance against a conclusion that federal law preempts states from allocating
judicial power in this fashion if they so desire. Yet under the proposed
interpretation, PSC adjudicative power, like the power to approve or reject
interconnection agreements, stems from section 252(e)(1), which places this
authority exclusively with state PSCs and not with state courts or any other entity
the state deems appropriate. Indeed, under the proposed interpretation, if a state
PSC refrains from adjudicating contract disputes (perhaps because a state law gives
this power only to its trial courts), the FCC would be given the task of interpreting
2002).
19
The provision states: “This Act and the amendments made by this Act
shall not be construed to modify, impair, or supersede Federal, State, or local law
unless expressly so provided in such Act or amendments.”
66
the contract by default20 — likely under principles of state contract law!21 This
bizarre result cannot be what Congress intended.
It is not section 252(e)(1), but rather residual authority left to states under the
1996 Act that gives states (and potentially PSCs, if the state so chooses) authority to
interpret and enforce interconnection agreements.22 By enacting this novel scheme
of cooperative federalism, Congress deliberately preserved state regulatory bodies
as key vehicles for driving the transition to competition. Prior to 1996, intrastate
regulation was left largely in the hands of states.23 The reverse-
20
See 47 U.S.C. § 252(e)(5) (“Commission to act if State will not act”).
21
See infra part III.B.3.
22
I agree with the Fourth Circuit on this point. See Bell Atl. Md. Inc. v. MCI
WorldCom, Inc., 240 F.3d 279, 299-303 (4th Cir. 2001), rev’d on other grounds,
Verizon Md. Inc. v. Pub. Serv. Comm’n of Md., __ U.S. __, 122 S. Ct. 1753, 152
L. Ed. 2d 871 (2002).
23
Professors Benjamin, Lichtman, and Shelanski write:
From its creation in 1934, the FCC has always shared jurisdiction over
telephony with state regulators. The 1934 Act’s limitation of federal
authority is clearly stated, if not so easily implemented in practice: the
Act is not to be construed “to give the Commission jurisdiction with
respect to . . . practices, services, facilities, or regulations for or in
connection with intrastate communication service by wire or radio of
any carrier.” 47 U.S.C. § 152(b) (emphasis added). Indeed, the 1934
Act on its face restricts FCC jurisdiction to “interstate and foreign
communication by wire or radio.” 47 U.S.C. § 152(a) (emphasis
added). The Act thus appears to keep the Commission out of the
business of regulating what, in 1934, accounted for the vast bulk of
telephone usage: local telephony.
67
preemption provision in the 1996 Act, discussed above, makes clear that any pre-
1996 assignment of responsibility remains with states unless the Act explicitly takes
it away.
Suppose that prior to 1996, a Bell Operating Company in State X desired to
let a CLEC interconnect with its system (for a fee, of course). The state, invoking
its exclusive authority over the intrastate arena, would (a) decide whether to permit
the new entry; (b) possibly require (i) certain contractual provisions and/or (ii) state
approval of the final ILEC/CLEC agreement; and (c) adjudicate any post-agreement
dispute. Moreover, the state would have authority to designate the entity charged
with each particular task. The chosen entity might well be a court, regulatory
agency, or even the legislature itself. The 1996 Act altered the scope of state
authority, but this alteration was only partial. For example, states no longer have
the choice to deny new entry altogether, and so state authority to undertake task (a)
has been completely abrogated. See 47 U.S.C. § 253 (“Removal of barriers to
entry”).24 States also have little freedom to choose the entity that undertakes task
Benjamin et al., supra, at 610-11.
24
Section 253 states that “[n]o State or local statute or regulation, or other
State or local legal requirement, may prohibit or have the effect of prohibiting the
ability of any entity to provide any interstate or intrastate telecommunications
service.” This provision put an end to state-sanctioned monopolies, demonstrating
Congress’s new confidence that local competition would not lead to wasteful
duplication of resources, but rather to more consumer choice and lower rates.
68
(b), because section 252 requires that state PSCs (rather than, say, courts or
legislatures) approve or reject voluntary agreements; otherwise, the FCC will
conduct the section 252 tasks itself. The 1996 Act also defines the basic terms of
the agreements, since, even in the “voluntary” setting, compulsory arbitration
always looms in the background. As for task (c), the 1996 Act is silent. Therefore,
the natural conclusion one must reach in light of the reverse-preemption provision
and scheme of cooperative federalism is that states still retain the authority to
decide which entity engages in post-agreement adjudication. This conclusion, then,
is in considerable tension with the proposition that PSC authority to adjudicate post-
agreement disputes stems from section 252(e)(1), because such an interpretation
would foreclose states from choosing a different adjudicative entity. This tension,
in conjunction with the plain language of the statute and host of problems discussed
in part III.B, infra, causes me to believe that the source of the state’s authority (and
ultimately the PSC’s authority, if the state legislature chooses to vest a PSC with
such authority) stems from residual authority under the 1996 Act rather than section
252(e)(1).
B. Why there is no jurisdiction under section 252(e)(6)
1. Plain language
69
Having determined that GPSC’s authority to enforce and interpret
interconnection agreements does not arise from section 252(e)(1), I know that
federal jurisdiction does not exist under section 252(e)(6) to review the GPSC’s
adjudication. This is because the two provisions work in tandem. The judicial
review provision, section 252(e)(6), provides that review of a PSC determination in
federal court is for the purpose of determining “whether the agreement . . . meets
the requirements of . . . this section.”25 The italicized portions of the statute are
instructive, leading me to conclude that the only subject of judicial review in the
federal courts is the agreement’s compliance with the 1996 Act, not other issues
such as post-agreement disputes about the parties’ objective contractual intent. The
scheme, then, is a simple one: under section 252(e)(1), a PSC is empowered to
make one determination – the decision to “approve or reject” an agreement with
25
Section 252(e)(6) reads: “[A]ny party aggrieved by such determination
may bring an action in an appropriate Federal district court to determine whether
the agreement or statement meets the requirements of section 251 of this title and
this section.” The two italicized portions have been removed in the quote found in
the text for the sake of clarity. The “statement” referred to concerns a Bell
Operating Company’s option to file a “Statement of Generally Available Terms”
pursuant to section 252(f). This is not relevant to the voluntary interconnection
agreement setting. Similarly, “section 251 of [title 47]” is irrelevant to the
voluntary agreement context, except for the section 251(a) discussion of the
“general duties” of LECs.
70
“written findings as to any deficiencies.”26 The grounds for rejecting a voluntary
agreement are found in section 252(e)(2)(A), which precludes the PSC from
rejecting an agreement for any reason other than a finding that it is discriminatory
(against, say, a third-party CLEC) or flunks the public interest test. Appellate
review of the approve-or-reject determination rests exclusively with the federal
district court. Section 252(e)(4) makes this clear by precluding state court review
of the PSC decision,27 and section 252(e)(6) provides for federal review of the
26
Such findings are important for judicial review of the PSC’s decision to
approve or reject an interconnection agreement.
27
The provision provides in part: “No State court shall have jurisdiction to
review the action of a State commission in approving or rejecting an agreement
under this section.” 47 U.S.C. § 252(e)(4) (emphasis added). This is the flip side
of section 252(e)(6), which gives federal courts the power of judicial review over
the PSC’s approve-or-reject determination. Together, the provisions make that
power exclusive. The italicized language confirms what should be obvious from
the statute: the only affirmative duty of a state PSC under section 252(e)(1) is to
approve or reject an agreement and nothing more. Indeed, there is no operative
clause prescribing any duty under “this section” besides the duty prescribed in
section 252(e)(1) to approve or reject an agreement. The PSC’s determination to
approve or reject, then, is the key triggering event, and the rest of the statutory
provisions relate back to that determination, filling in procedural details such as
what reasons the PSC must give for its decision, what happens if the PSC chooses
not to make the approve-or-reject determination at all, and how the approve-or-
reject determination is appealed. Section 252(e)(6) is therefore inapposite when it
comes to defining the PSC’s substantive duty, which is found only in section
252(e)(1). Indeed, section 252(e)(6) by its terms covers only “Review of State
commission actions” – a procedural rather than substantive matter. One can
hardly conclude, then, that because the “approve or reject” language is found in
sections 252(e)(1) and 252(e)(4) but not section 252(e)(6), this somehow means
that state commissions must undertake additional responsibilities besides that
71
PSC’s determination that an agreement does not comply with the requirements of
the 1996 Act – namely, the requirements that, in the voluntary agreement setting,
agreements meet the public interest test and not discriminate against other CLECs.
The statute simply has nothing to say about post-agreement adjudication.
2. Cooperative federalism and the presumption against federal
jurisdiction
Clearly, state commission decisions that are not expressly designated for
review in federal court are left for review by state courts, as provided by the
existing law of the state that created the state commission. The reverse-preemption
provision of the 1996 Act stands for the proposition that state jurisdiction should be
retained (to the exclusion of federal jurisdiction) unless there is a clear statement to
the contrary. Another clear statement rule is at play in this case: because federal
courts are courts of limited jurisdiction, when their jurisdiction is created by statute,
the statute is strictly construed. See Turner v. Bank of N. Am., 4 U.S. (4 Dall.) 8,
11, 1 L.Ed. 718 (1799) (stating that because federal courts are of limited
which is expressly enumerated in section 252(e)(1). The fact that this argument is
even made shows the hollow logic of the pro-jurisdiction camp. They realize that
section 252(e)(6) ties judicial review to section 252(e)(1), so they must somehow
conclude that post-agreement adjudication is an affirmative duty under the latter
section. Yet they also realize that section 252(e)(1) says nothing of the sort, so
they strain to find an affirmative duty to engage in post-agreement adjudication
outside of section 252(e)(1). They cannot have it both ways. One need not strain
so mightily under a natural reading of the statute, however.
72
jurisdiction, “the fair presumption is . . . that a cause is without its jurisdiction, until
the contrary appears.”); see also Jackson Transit Auth. v. Local Div. 1285,
Amalgamated Transit Union, 457 U.S. 15, 30, 102 S. Ct. 2202, 2211, 72 L. Ed. 2d
639 (1982) (Powell, J., concurring) (“Because a federal court should exercise
extreme caution before assuming jurisdiction not clearly conferred by Congress, we
should not condone the implication of federal jurisdiction over contract claims in
the absence of an unambiguous expression of congressional intent”). The state-
authority presumption of the federal scheme, combined with this venerable
principle of federal jurisdiction, demands a clear statement that state review is
abolished in lieu of federal review. Both polices stand for one overarching
principle: Federal jurisdiction is not to be presumed or implied. I cannot find a
clear statement; indeed, the plain language forces me to reach the opposite
conclusion.28 “Thus, although the State commission may have had jurisdiction to
administer and enforce interconnection agreements, review of such decisions by the
commission is taken to the State courts as determined by the State review procedure
preserved by the 1996 Act.” Bell Atl. Md. Inc. v. MCI WorldCom, Inc., 240 F.3d
279, 305 (4th Cir. 2001).
28
The district court, for example, concluded that the “literal” interpretation of
the statute would not confer jurisdiction. It went on to adopt the “inherent”
argument (discussed below) without analysis.
73
3. Special problems of deference; protective jurisdiction reconsidered
If the proponents of section 252(e)(6) jurisdiction are correct, what rule of
decision must state PSCs utilize in adjudicating generic contract disputes, such as
whether the parties have performed under the terms of an interconnection
agreement? And what level of deference, if any, must federal courts give to the
PSC’s conclusion? Under my interpretation of the 1996 Act, the answer is easy:
state entities (whether a PSC or trial court) review contracts under state law, and
appeals are taken as provided by state rules of appellate review. Under the
opposing view, these questions become intractable problems which lead to absurd
results, lending further credence to the proposition that federal jurisdiction was
never intended by Congress.
One possible argument is that state PSCs interpret contracts according to a
federal common law of contracts rather than state contract law. I reject this view
for the reasons discussed at part II.A.2.b, supra. I also note that if federal common
law is the rule of decision, and if federal courts review all PSC adjudications of
post-agreement disputes under section 252(e)(6), then this interpretation would
create considerable problems when the issue of deference is considered. Federal
74
courts rarely give deference to state interpretations of federal law.29 Indeed, federal
courts do not give deference to the federal law interpretations of state high courts,
see Martin v. Hunter’s Lessee, 14 U.S. (1 Wheat) 304, 357-58, 4 L. Ed. 97 (1816),
much less to state PSC commissioners, many of whom are untrained in the law.30
Yet if no deference is given, there would be little point in having the PSC
adjudicate the matter in the first instance. The federal district court, giving no
deference, would have the parties relitigate all of the issues again. I cannot interpret
the 1996 Act in a way that would create such a wasteful scheme. To make the most
sense out of the initial state review, one must conclude that congress did not want
there to be de novo review, and that the voluntary agreements are therefore not to be
interpreted under principles of federal common law.
Perhaps anticipating these devastating arguments, BellSouth concedes that
the rule of decision might well be state law.31 But if federal courts have jurisdiction
29
The habeas corpus setting is the only area I am aware of. The
Antiterrorism and Effective Death Penalty Act of 1996 provides that relief is
available only when the state court determination is “contrary to, or involved an
unreasonable application of, clearly established Federal law as determined by the
Supreme Court of the United States.” 28 U.S.C. § 2254(d)(1) (emphasis added).
30
See supra note 18 and accompanying text.
31
The now-FCC Chairman has also implied that state law typically provides
the rule of decision: “[S]tate commissions have a duty to resolve interconnection
disputes by relying on any legitimate bases (including state law bases), so long as
those bases do not conflict with federal law.” Starpower Communications, LLC,
75
to review the PSC’s state law conclusion, then this argument is as ridiculous as the
first because federal courts would be reviewing to see if the state agency correctly
applies state law. Whether deference is given or not,32 I know of no comparable
scenario to this one, in which a federal court sits in judgment of a state agency or
court on a complaint that sounds only in state law. As one court put it, it would be
“surpassing strange to preserve state authority in this fashion and then to put federal
courts in the position of overruling a state agency on a pure issue of state law.”
P.R. Tel. Co. v. Telecomm. Regulatory Bd. of P.R., 189 F.3d 1, 15 (1st Cir. 1999).
The First Circuit concluded that “section 252(e)(6) does not confer authority on
federal courts to review the actions of state commissions for compliance with state
law.” Id. at 13. Indeed, the federal courts might decide to certify a state contract
law question to the state’s high court. Proponents of jurisdiction evidently think
Petition for Preemption of Jurisdiction of the Va. State Corp. Comm’n, 15
F.C.C.R. 11277, 11286 (2000) (memorandum opinion and order) (“Starpower”)
(Powell, Comm’r, concurring).
32
The district court, for example, reviewed the GPSC’s state law conclusion
under an arbitrary-and-capricious standard rather than de novo. As a testament to
how odd it would be for federal courts to review state entities for compliance with
state law, the district court was grasping at straws to give any kind of deference
that it could. After incorrectly asserting jurisdiction, I can hardly fault the district
court for pulling the arbitrary-and-capricious standard out of thin air, giving only a
“Cf.” citation to a Supreme Court case, United States v. Carlo Bianchi & Co., 373
U.S. 715, 83 S. Ct. 1409, 10 L. Ed. 2d 652 (1963), that was about federal
administrative law. BellSouth Telecomms., Inc. v. MCImetro Access
Transmission Servs., Inc., 97 F. Supp. 2d 1363, 1376 n.10 (N.D. Ga. 2000).
76
that Congress did not intend that state trial or intermediate appellate courts33
review the PSC’s application of state contract law – a body ultimately reviewable
by the state high court. Rather, they think that Congress wanted federal district
courts to review the PSC’s application of state contract law, and that federal courts
are nonetheless free to seek guidance from the state high court. This interpretation,
then, would superfluously wedge federal district courts into an appellate-like
scheme (akin to a state intermediate appellate court) that is ultimately resolved by
the state high court on an issue of state law – surely a strange result. These
problems disappear, however, when the scheme is interpreted as the plain language
dictates: under section 252(e)(6), federal courts review only PSC determinations to
approve or reject voluntary interconnection agreements and nothing more.
I also note that if the statutory scheme were interpreted so as to prescribe
federal review of state entities on questions of state law, the scheme would push the
boundaries of Congress’s authority under Article III to define the scope of federal
jurisdiction.34 Without a federal rule of decision, how does such a dispute (centered
33
In Georgia, for example, petitions for review may be filed “in the Superior
Court of Fulton County or in the superior court of the county of residence of the
petitioner.” Ga. Code. Ann. § 50-13-19(b) (2002).
34
“The judicial Power shall extend to all Cases, in Law and Equity, arising
under this Constitution, the Laws of the United States, and Treaties made, or which
shall be made, under their Authority . . . .” U.S. Const. art. III, § 2.
77
around a state law contract issue) “arise under” federal law? The only possible
argument would be based on the theory of “protective jurisdiction” discussed in part
II.A.2.a, supra. Does section 252(e)(6) amount to a special grant of appellate
jurisdiction to entertain state law claims? Although this is a provocative argument,
courts must interpret statutes so as to avoid difficult constitutional questions. See
Mesa v. California, 489 U.S. 121, 136, 109 S. Ct. 959, 968, 103 L. Ed. 2d 99(1989); NLRB v. Catholic Bishop of Chicago, 440 U.S. 490, 499-501, 504, 99 S.
Ct. 1313, 1318-19, 1320, 59 L. Ed. 2d 533 (1979).
4. Other circuits
Against this array of arguments consisting of (1) venerable principles of
federal jurisdiction (i.e., the presumption against federal jurisdiction and the
presumption against federal common law); (2) the reverse-preemption provision
and the 1996 Act’s scheme of cooperative federalism; (3) the constitutional
avoidance canon; and (4) a host of intractable problems that federal jurisdiction
would yield, one would think that proponents of jurisdiction would be able to point
to an ultra-clear statement that Congress intended federal jurisdiction to exist over
all run-of-the-mill disputes regarding compliance with existing interconnection
agreements. As part III.B.1 demonstrates, however, the plain language of the 1996
Act leads to the opposite conclusion, further buttressing the argument against
78
jurisdiction under section 252(e)(6). Instead, proponents of federal jurisdiction
(both litigants and courts) point to amorphous concepts of “inherent” jurisdiction35
and conclusory fluff. The Fourth Circuit’s assessment of other circuits’ reasoning
mirrors mine:
The Seventh circuit stated simply, “Decisions of state agencies implementing the
1996 Act are reviewable in federal district courts,” without providing analysis to
support this broad statement in the context of a suit challenging a commission’s
interpretation or enforcement actions. Illinois Bell, 179 F.3d at 570 (quoting an
earlier order in the same case that was similarly devoid of jurisdictional analysis,
see Illinois Bell Tel. Co. v. WorldCom Techs., Inc., 157 F.3d 500, 501 (7th Cir.
1998)). And the Eight Circuit, in dictum and without analysis, first stated its
“belie[f] that the enforcement decisions of state commissions would . . . be subject
to federal district court review under subsection 252(e)(6).” Iowa Utils. Bd. v.
FCC, 120 F.3d at 804 n.24. This statement appeared in a footnote in a section of
analysis that the Supreme Court held the Eight Circuit should not have reached
because the issue was not ripe for review. See Iowa Utils., 525 U.S. at 386, 119 S.
Ct. 721. Then later, it simply deferred to the FCC in finding jurisdiction. See
Southwestern Bell Tel. Co. v. Connect Communications Corp., 225 F.3d 942, 946
(8th Cir. 2000).
The Fifth Circuit held that “federal court jurisdiction extends to review of
state commission rulings on complaints pertaining to interconnection agreements
and that such jurisdiction is not restricted to mere approval or rejection of such
agreements.” Southwestern Bell Tel. Co. v. Public Util. Comm’n, 208 F.3d 475,
481 (5th Cir. 2000). In reaching this conclusion, the court recognized that §
252(e)(6) could be read literally to limit federal review of State commissions to
decisions “approving or disapproving, or arbitrating, an interconnection
agreement.” Id. at 479. But the court rejected that reading because it concluded,
“We do not think such a narrow construction was intended.” Id. The court then
reasoned that assignment to State commissions “of plenary authority to approve or
disapprove these interconnection agreements necessarily carries with it the
authority to interpret and enforce the provisions of [such] agreements.” Id.
35
Since a conclusion that federal jurisdiction exists demands a clear
statement, use of the word “inherent” should be sufficient evidence that a clear
statement does not exist.
79
Bell Atl. Md., Inc., 240 F.3d at 305-06 (4th Cir. 2001) (alterations in original).
Resort to the ipse dixit simply will not do.
5. Chevron Deference
Sensing that conclusory assertions about “inherent” jurisdiction will not carry
the day, proponents of federal jurisdiction mount one last ditch effort by invoking
Chevron deference. See Chevron, U.S.A., Inc. v. Natural Res. Def. Counsel, 467
U.S. 837, 104 S. Ct. 2778, 80 L. Ed. 2d 694 (1984). In that case, the Court held that
agency determinations are entitled to deference if (1) the statute is silent or
ambiguous and (2) the agency’s answer is based on a reasonable construction of the
statute. See id. at 843-45, 104 S. Ct. at 2781-83. It is argued that we should give
deference to the FCC’s conclusion in Starpower, 15 F.C.C.R. 11277, ¶ 6, at 11279-
80 (2000), that PSC authority to adjudicate post-agreement disputes comes from 47
U.S.C. § 252(e)(1).
I do not think Chevron deference is appropriate in this case. First, section
252(e)(1) lists only two possible PSC “determinations” (i.e., to approve or reject an
agreement); section 252(e)(6) cabins federal jurisdiction to section 252(e)(1)
determinations by its very terms. The statute is clear as a bell, and no deference is
owed when the statute is unambiguous. Second, the clear statement rules and
absurdities discussed above reinforce my conclusion that Congress did not intend
80
section 252(e)(6) to be a broad conferral of federal jurisdiction to review all post-
agreement disputes.36 See Chevron, 467 U.S. at 842-43 & n.10, 104 S. Ct. at 2781-
82 & n.10 (instructing courts to use “traditional tools of statutory construction” in
order to ascertain congressional intent). Third, I do not think deference is owed on
a question that is ultimately about federal jurisdiction — a matter that is uniquely
within the province of the judiciary to decide. Fourth, the constitutional avoidance
cannon, discussed at part III.B.3, supra, trumps Chevron deference. See Edward J.
DeBartolo Corp. v. Fl. Gulf Coast Bldg. & Const. Trades Council, 485 U.S. 568,
574-76, 108 S. Ct. 1392, 1397-98, 99 L. Ed. 2d 645 (1988). Finally, I hesitate to
give deference to an FCC Order that was based not upon the agency’s expertise, but
rather upon the conclusory statements of other circuits that are in no way binding on
this court.37 The Supreme Court made clear that Chevron deference arises out of a
36
As has been discussed at length, a conclusion that PSC authority to
adjudicate post-agreement disputes comes from section 252(e)(1) (rather than
residual authority) would, of course, make such adjudications “determinations”
under “this section” and would therefore give district courts jurisdiction to review
such determinations.
37
The analysis the FCC undertook – if one wishes to call it “analysis” –
comes in the form of the following statement: “These court opinions implicitly
recognize that, due to its role in the approval process, a state commission is well-
suited to address disputes arising from interconnection agreements.” Starpower, 15
F.C.C.R. at 11277, ¶ 6, at 11279-80. Hardly a model of legal reasoning, the FCC’s
observation is inapposite because it has nothing to say about the source of PSC
authority; a state commission is equally “well-suited” whether or not its authority
arises from residual authority or from authority that resides in section 252(e)(1).
81
tradition of court restraint when encountering complex issues that are best suited for
resolution by expert agencies. See Chevron, 467 U.S. at 865, 104 S. Ct. at 2792-93
(grounding Chevron deference in the expertise of agency decisionmakers). I do not
think the Chevron Court intended that litigants be able to “launder” circuit court
opinions through federal agencies and thereby make those opinions binding on
other circuits,38 even if the agency offers no analysis of its own. Any of these five
reasons standing alone would eliminate the requirement of deference. All of them
exist in this case, however.
6. Summary of section 252 (e)(6) argument
The jurisdictional question before this court – whether U.S. district courts
have jurisdiction to review all PSC orders interpreting and enforcing voluntary
interconnection agreements under 47 U.S.C. § 252(e)(6) – could be decided in one
of several ways. First, we might conclude, as the panel did, that the silence of 47
U.S.C. § 252(e)(1) on the subject of PSC adjudication of post-agreement disputes
Moreover, a state legislature might think that due to its role in traditional contract
adjudication and legal expertise, the state trial court is “well-suited” to address
interconnection disputes. Why section 252 prevents states from making this
judgment is left unexplained by the FCC decision.
38
This analogy comes from commercial paper law, which prevents a forger
from “laundering” a forged note through a holder in due course (“HDC”) in order
to attain HDC status. For example, a forger cannot sell a note to a party without
notice of the forgery and then proceed to buy the note back from the HDC so as to
attain HDC status under the shelter rule.
82
is tantamount to a congressional conclusion that PSCs are precluded from
adjudicating interconnection disputes. Second, we might conclude that 47 U.S.C. §
252(e)(1) grants PSCs “inherent” authority to interpret and enforce interconnection
agreements, making this a § 252(e)(1) “determination” subject to federal review
pursuant to 47 U.S.C. § 252(e)(6), even as to state law issues. This is the approach
taken by, among other circuits, the Fifth Circuit. See Southwestern Bell Tel. Co. v.
Pub. Util. Comm’n of Tex., 208 F.3d 475, 479-80 (5th Cir. 2000). This is also the
approach taken by the majority of this court. Third, we might conclude that 47
U.S.C. § 252(e)(1) grants PSCs “inherent” authority, but that the scope of federal
review is limited to whether the state commission, in construing and enforcing the
interconnection agreements, correctly applied federal law. This is the approach
taken by the Seventh Circuit. See Ill. Bell Tel. Co. v. WorldCom Techs., Inc., 179
F.3d 566, 571-72 (“[W]e would not review those actions for compliance with state
law.”).39 Fourth, we might read language out of the statute, judicially deleting the
phrase “this section” from section 252(e)(6), thereby allowing district courts to
review all “determinations” made by PSCs rather than the determinations made
39
One of the many problems with this interpretation is that since all PSC
adjudications would be made pursuant to section 252(e)(1) rather than residual
authority, there is no logical basis for systematically excluding from federal review
those adjudications based solely upon state law. All PSC orders would be
“determinations” under “this section” and thus subject to federal review.
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pursuant to section 252(e)(1) – i.e., the accept-or-reject determination (in the
voluntary agreement context). Fifth, we might conclude that PSC authority resides
not in 47 U.S.C. § 252(e)(1), but rather stems from state residual authority under the
1996 Act; and, moreover, federal courts have no appellate jurisdiction to review
PSC post-agreement adjudications, which traditionally sound in state contract law,
under section 252(e)(6). This is the conclusion I reach.40
The Fourth Circuit recognized that interconnection disputes “may amount to
tens of thousands of cases.” See Bell Atl. Md., Inc. v. MCI WorldCom, Inc., 240
F.3d 279, 305 (4th Cir. 2001); see also Kathleen Wallman, A Birthday Party: The
Terrible or Terrific Two’s? 1996 Federal Telecommunications Act, 51 Fed. Comm.
L.J. 229, 240 (1998) (finding that roughly 2,400 interconnection agreements had
been reached by 1998). One would think that if Congress had wanted this mountain
of interconnection disputes to wind up in federal court, it would have clearly said
so. This potentially enormous increase in the federal docket, in conjunction with
the plain language of the statute, the constitutional avoidance canon, two clear
statement rules, and a host of anomalies that would ensue,41 leads me to the
40
This is also the conclusion the Fourth Circuit may reach on remand from
the Supreme Court’s Verizon decision.
41
Various interpretations of 47 U.S.C. § 251 would, for example, (1) make
the statutory scheme wasteful by allowing for de novo review in federal district
court (if federal common law is the rule of decision) or (2) entail federal court
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conclusion that federal courts do not have jurisdiction to hear all PSC orders that
interpret and enforce interconnection agreements. Rather, appellate review in the
district courts is confined to PSC accept-or-reject determinations. The district court
therefore did not have section 252(e)(6) jurisdiction over BellSouth’s claims.
IV. Section 1367 Jurisdiction
The supplemental jurisdiction statute provides that “in any civil action of
which district courts have original jurisdiction, the district courts shall have
supplemental jurisdiction over all other claims that are so related to claims in the
action within such original jurisdiction that they form part of the same controversy
under Article III of the United States Constitution.” 28 U.S.C. § 1367(a). In this
case, the district court had original jurisdiction over the (now-abandoned) claim of
federal preemption. See part II.A.1, supra. Therefore, the district court had
discretion to assert jurisdiction over the supplemental claim for administrative
review – even though that claim is appellate in nature. See City of Chicago v. Int’l
Coll. of Surgeons, 522 U.S. 156, 118 S. Ct. 523, 139 L. Ed. 525 (1997) (holding
that a district court had supplemental jurisdiction over one claim, a challenge to an
review of state agencies on matters of state law (if state law is the rule of decision).
I have also noted many other problems that section 252 jurisdiction would yield.
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agency action under the state’s administrative procedure statute, because it had
original jurisdiction over a second claim that the ordinance administered by the
agency violated the U.S. Constitution – a claim that was asserted for the first time in
the district court). Therefore, absent my conclusion in part V, infra, the district
court would have been within its discretion to assert jurisdiction over the
supplemental claim.42 In this context, the district court should have assumed the
posture of a Georgia superior court, which would ordinarily entertain administrative
challenges to PSC orders. See Ga. Code. Ann. § 50-13-19(b) (2002). I emphasize
that the decision to assert supplemental jurisdiction was a discretionary call for the
district court to make in the first instance, because the “original” Verizon-like
claim in this case was quickly rejected by the district court, and also because the
U.S. Supreme Court cautioned that principles of comity might warrant abstention in
scenarios like the one in College of Surgeons, 522 U.S. at 174, 118 S. Ct. at 534.
V. Unclear GPSC Order
42
The district court evidently did not understand BellSouth to be claiming
that (a) the parties intended to track federal law and (b) federal law provided that
ISP-bound calls are not subject to the 1996 Act’s reciprocal compensation
requirement. This conclusion is understandable given the cryptic “petition for
judicial review” described in part II.A.3, supra.
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After examining the GPSC’s Order in this case, I am unable to conclude, as
did the district court, that the GPSC in fact determined that the parties agreed to pay
reciprocal compensation fees for ISP-bound traffic even though they were not
required to do so under federal law. Much like BellSouth’s cryptic “petition for
judicial review,” I am unable to make sense of the GPSC’s Order. On one hand, it
claims that the parties “agreed” to deem ISP-bound traffic “local,” in addition to
pointing to factors such as usage of trade and course of dealing. The latter are state
law interpretative tools used to shed light on the parties’ intent at the time of
contracting. See Restatement (Second) of Contracts §§ 219-22 (1981); U.C.C. § 1-
205 (1977). Therefore, BellSouth’s position that the GPSC’s holding was driven
solely by the fact that it determined, as a matter of law, that such traffic is “local” is
incorrect. On the other hand, there is no question that the GPSC’s erroneous
assessment of federal law was a significant factor in its conclusion, occupying most
of the pages in the GPSC Order. The fact issue in this case – whether the parties’
objective intent called for the payment of reciprocal compensation fees for ISP-
bound traffic – was never clearly answered by the GPSC. Did the parties intend to
track federal law? Or did they intend to pay each other for the termination of ISP-
bound calls notwithstanding federal law? These are fact questions that must be
clearly answered in the first instance by the GPSC or a court exercising original
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jurisdiction. The district court’s conclusion that the parties intended to compensate
each other for the termination of ISP-bound traffic notwithstanding federal law was
based on a conclusion that the GPSC had answered the question in the first instance.
I do not believe that the GPSC necessarily arrived at that conclusion, but I am
unsure. I feel that the best course would be to remand the case to the GPSC, which
can consider the FCC’s most recent ISP ruling and clearly articulate the basis for its
conclusion. See Mail Order Ass’n of Am. v. United States Postal Serv., 2 F.3d 408,
434 (D.C. Cir. 1993) (holding that a court must remand unless it is clear that the
agency would have reached the same decision in the absence of the legal mistake);
Cissell Mfg. Co. v. U.S. Dep’t of Labor, 101 F.3d 1132, 1136 (6th Cir. 1996) (“[If
an agency] makes an error of law in its administrative proceedings, a reviewing
court should remand the case to the agency so that the agency may take further
action consistent with the correct legal standards.”).
VI. Conclusion
The crux of BellSouth’s position is that the GPSC made an error of law in its
analysis of BellSouth’s “federal element” state law claim, and that the district court
should have corrected the alleged error. BellSouth cites only two possible grounds
for jurisdiction in this case – section 1331 and section 252(e)(6). Each of these
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positions suffers from a fatal flaw. The district court lacked section 1331
jurisdiction because the proceeding before the court on the “federal element” claim
was an “appellate” rather than an “original” proceeding. Section 252(e)(6) is
equally unavailing because that statute cabins district court appellate jurisdiction to
accept-or-reject determinations that PSCs make pursuant to 47 U.S.C. § 252(e)(1).
The district court did, however, have supplemental jurisdiction over
BellSouth’s “federal element” claim. This is because BellSouth initially brought
another claim in addition to its claim for administrative review – namely, that the
GPSC was federally preempted from ordering the payment of reciprocal
compensation fees for ISP-bound calls. Thus, although the district court did not
have jurisdiction under section 1331 to hear BellSouth’s claim for administrative
review, it had supplemental jurisdiction over that claim (notwithstanding its
appellate nature) because the court had original jurisdiction over the preemption
claim.
Even though the district court had supplemental jurisdiction over the “federal
element” claim, it is unclear what, precisely, the GPSC held with regard to that
claim. I would therefore vacate the decision by the district court and remand the
case to the district court with instructions to remand to the GPSC.
89