Core Comm Inc v. Verizon PA Inc

Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit
7-18-2007
Core Comm Inc v. Verizon PA Inc
Precedential or Non-Precedential: Precedential
Docket No. 06-2419
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 06-2419
CORE COMMUNICATIONS, INC.,
Appellant
v.
VERIZON PENNSYLVANIA, INC.
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 04-cv-04513)
District Judge: Honorable Timothy J. Savage
Argued February 13, 2007
Opinion Issued: May 9, 2007
Panel Rehearing Granted: June 13, 2007
Before: SCIRICA,* Chief Judge, and FISHER,
Circuit Judges, and DIAMOND,** District Judge.
(Filed: July 18, 2007 )
Barry W. Krengel
Dolchin, Slotkin & Todd
2005 Market Street, 24th Floor
Philadelphia, PA 19103
Deborah J. Israel
Louis J. Rouleau
Michael B. Hazzard (Argued)
Womble, Carlyle, Sandridge & Rice
1401 Eye Street, N.W., 7th Floor
Washington, DC 20005
Attorneys for Appellant
*
This appeal was originally argued before the panel of
Judges Smith, Fisher and Diamond. The coram was
reconstituted to include Chief Judge Scirica after the recusal of
Judge Smith.
**
The Honorable Gustave Diamond, United States
District Judge for the Western District of Pennsylvania, sitting
by designation.
2
Thomas A. Leonard
Richard P. Limburg
H. David Seidman
Obermayer, Rebmann, Maxwell & Hippel
1617 John F. Kennedy Boulevard
One Penn Center, 19th Floor
Philadelphia, PA 19103
Austin C. Schlick (Argued)
Kellogg, Huber, Hansen, Todd, Evans & Figel
1615 M Street, N.W., Suite 400
Washington, DC 20036
Joseph M. Ruggiero
Verizon Communications
1515 North Courthouse Road, Suite 500
Arlington, VA 22201
Cynthia L. Randall
Verizon Communications
1717 Arch Street, 10th Floor
Philadelphia, PA 19103
Attorneys for Appellee
OPINION OF THE COURT
3
FISHER, Circuit Judge.
This appeal involves the question of whether a federal
district court, in the first instance, may hear disputes concerning
the breach of an interconnection agreement formed and
approved pursuant to the Federal Telecommunications Act of
1996, Pub. L. No. 104-404, 110 Stat. 56 (1996)
(“Telecommunications Act” or “Act”). The United States
District Court for the Eastern District of Pennsylvania held that
the Act prevents parties from taking such claims to federal court
until they have been litigated before a state commission. Core
Communications, Inc. (“Core”), argues that the District Court
erred by misapplying Chevron deference to graft onto the Act an
exhaustion requirement for enforcement actions when Congress
did not provide for one. For the reasons that follow, we will
affirm the judgment of the District Court dismissing Count III
of Core’s complaint without prejudice, vacate the dismissal of
the remaining counts, and remand for further proceedings
consistent with this opinion.
I.
The dispute in this case centers on the duties an
incumbent provider of telecommunications services owes with
respect to new entrants who wish to compete with the incumbent
in a particular local market, and how those duties are enforced.
Such questions are governed by the Telecommunications Act of
1996, which was enacted “to promote competition and reduce
regulation in order to secure lower prices and higher quality
service for American telecommunications consumers and
encourage the rapid deployment of new telecommunications
4
technologies.” Preamble, Telecommunications Act of 1996,
Pub. L. No. 104-404, 110 Stat. 56 (1996). “As the legislative
history explains, the Act creates ‘a pro-competitive,
de-regulatory national policy framework designed to accelerate
rapidly private sector deployment of advanced
telecommunications and information technologies and services
to all Americans by opening all telecommunications markets to
competition.’” Puerto Rico Tel. Co. v. Telecomms. Regulatory
Bd., 189 F.3d 1, 7-8 (1st Cir. 1999) (quoting H.R. Conf. Rep.
No. 104-458, at 113 (1996)).
To achieve these goals, the Act provides that various
responsibilities are to be divided between the state and federal
governments, making it “an exercise in what has been termed
cooperative federalism.” Id. at 8. That is, “Congress enlisted
the aid of state public utility commissions to ensure that local
competition was implemented fairly and with due regard to the
local conditions and the particular historical circumstances of
local regulation under the prior regime.” Global Naps, Inc. v.
Mass. Dept. of Telecomm. and Energy, 427 F.3d 34, 46 (1st Cir.
2005) (quoting Peter W. Huber et al., Federal
Telecommunications Law § 3.3.4 (2d ed. 1999)) (internal
quotation marks omitted). The “intended effect” of such a
regime was to “leav[e] state commissions free, where warranted,
to reflect the policy choices made by their states.” Id.
There are two sections of the Act that are at issue in this
case: §§ 251 and 252. Section 251 requires companies that
traditionally provide local phone service – known as incumbent
local exchange carriers (“ILECs”) – to interconnect their
networks with the networks of competitors – known as
5
competing local exchange carriers (“CLECs”). 47 U.S.C.
§ 251(c)(2). Specifically, the Act charges ILECs with:
The duty to provide, for the facilities and
equipment of any requesting telecommunications
carrier, interconnection with the local exchange
carrier’s network--
(A) for the transmission and routing of telephone
exchange service and exchange access;
(B) at any technically feasible point within the
carrier’s network;
(C) that is at least equal in quality to that provided
by the local exchange carrier to itself or to any
subsidiary, affiliate, or any other party to which
the carrier provides interconnection; and
(D) on rates, terms, and conditions that are just,
reasonable, and nondiscriminatory, in accordance
with the terms and conditions of the agreement
and the requirements of this section and section
252 of this title.
Id. § 251(c)(2). It also requires ILECs to lease portions of their
existing networks to their competitors and to permit the
“physical collocation of [CLEC] equipment necessary for
interconnection or access to unbundled network elements” at the
ILEC’s premises. Id. § 251(c)(3), (6). Without these
requirements, new entrants could not afford to build the large
6
and expensive communications grids that incumbents have
developed through years in the market.
To implement these new duties, the Act relies on a
system of private negotiations, followed by arbitration, if
necessary, both under the supervision of state commissions. All
of these steps to attain an interconnection agreement may be
followed by federal court review, if it is sought by the parties.
The process commences when an ILEC receives a “request for
interconnection” from another telecommunications company.
Id. § 252(a)(1). The Act then requires the ILEC to “negotiate in
good faith in accordance with section 252 . . . the particular
terms and conditions of agreements to fulfill” its substantive
duties under the Act. Id. § 252(c)(1). A requesting carrier may
also choose to adopt all of the terms and conditions of an
existing state commission-approved agreement that the
incumbent has with another carrier. Id. § 252(i).
To deal with problems that may arise during the
negotiation period, the Act provides that, if the parties are
unable to agree, either party may petition the state commission
to arbitrate “open issues.” Id. § 252(b)(1). As a final procedural
safeguard, all interconnection agreements must be submitted to
the state commission for approval. Id. § 252(e)(1). The
commission’s “determinations” with respect to the agreements
are subject to review in federal court. Id. § 252(e)(6).
Pursuant to the Act, Core entered into an interconnection
agreement with Verizon Pennsylvania, Inc.’s (“Verizon”)
predecessor in interest on March 31, 2000. Rather than
negotiating from scratch, Core opted into the existing agreement
7
between Verizon’s predecessor (Bell Atlantic-Pennsylvania,
Inc.) and MCImetro Access Transmission Services, Inc.
Between the fall of 2000 and October 2002, Core
requested interconnection to various markets in Pennsylvania.
Core alleges that Verizon deliberately and unjustifiably refused
to interconnect with Core at technically feasible points in a
timely manner. Rather than using existing facilities with spare
capacity to interconnect, Verizon cited its internal policy of
requiring the construction of new, dedicated facilities to
interconnect with Core. No technical or business justification
was given explaining the need for this requirement. Core claims
that Verizon intentionally took these steps in order to maintain
its competitive advantage in Pennsylvania markets and to
intimidate and financially harm Core.
On September 24, 2004, Core filed the complaint
underlying this action in the United States District Court for the
Eastern District of Pennsylvania. It alleged that Verizon’s
conduct violated the Telecommunications Act, as amended,
including §§ 201 and 202 (Count I), and § 251 (Count II),
constituted a material breach of the interconnection agreement
(Count III), and was tortious under Pennsylvania’s common law
for intentional non-disclosure and fraudulent concealment
(Count IV).
On November 4, 2004, Verizon filed a motion to dismiss,
seeking the dismissal of Counts I, II, and IV for failure to state
a claim upon which relief can be granted under Federal Rule of
Civil Procedure 12(b)(6), and Count III for lack of jurisdiction
under Federal Rule of Civil Procedure 12(b)(1). On March 21,
8
2006, the District Court dismissed Core’s complaint in its
entirety without prejudice. It reasoned that, although it had
federal question and diversity jurisdiction over the action under
28 U.S.C. §§ 1331 and 1332, Chevron deference required that
it adhere to the FCC’s ruling in In re Starpower
Communications, LLC, 15 F.C.C.R. 11277 (2000). Under that
decision, the District Court concluded that § 252 of the Act
imposed “an intermediate step before getting to federal court,
not unlike an exhaustion of remedies requirement,” with respect
to interconnection agreement-related claims. See Core
Commc’ns, Inc. v. Verizon Pa., Inc., 423 F. Supp. 2d 493, 500
(E.D. Pa. 2006). That is, it concluded that Core must seek
review by the Pennsylvania Public Utility Commission (“PA
PUC”) of its claim that the approved interconnection agreement
had been breached before resorting to the federal courts.
On April 5, 2006, Core filed a motion for reconsideration
or amended judgment. Following this motion, Core and Verizon
entered into a tolling agreement that tolled the statute of
limitations on Core’s claims until forty-five days after the entry
of an order resolving or otherwise disposing of an appeal to this
Court from the District Court’s decision. In accordance with
that agreement, Core filed a praecipe to withdraw its motion for
reconsideration or amended judgment on April 19, 2006. In the
wake of this agreement, Core filed a notice of appeal on
April 20, 2006. On April 26, 2006, this Court issued a stay
pending the District Court’s disposition of Core’s motion for
reconsideration, which was dismissed as moot on May 3, 2006.
This appeal followed.
9
II.
Before moving to any of the claims raised by Core, we
must first determine whether or not we have jurisdiction to hear
this case. Verizon argues that there is no appellate jurisdiction
under 28 U.S.C. § 1291 because a district court’s dismissal
without prejudice is not ordinarily a final order unless the
applicable statute of limitations would not permit the re-filing of
the claims. Core, on the other hand, contends that we do have
appellate jurisdiction because the District Court did not take an
action equivalent to a stay, but rather dismissed this case from
its docket. It also disputes Verizon’s claim that there are no
statute of limitations issues.
“A party generally may not take an appeal under § 1291
until there has been a decision by the District Court that ‘ends
litigation on the merits and leaves nothing for the court to do but
execute the judgment.’” Richman Bros. Records, Inc. v. U.S.
Sprint Comm’ns Co., 953 F.2d 1431, 1441 (3d Cir. 1991)
(quoting Van Cauwenberge v. Baird, 486 U.S. 517, 521-22
(1988)). Ordinarily, an order dismissing a complaint without
prejudice is not a final order unless the applicable statute of
limitations would not permit the re-filing of the claims. Ahmed
v. Dragovich, 297 F.3d 201, 207 (3d Cir. 2002).
Under this standard, Verizon argues that because the
applicable statute of limitations for each claim is tolled pursuant
to an agreement of the parties, Core retains the right to re-plead
its claims, and thus the District Court’s order is not final under
§ 1291. However, Core argues that the agreement does not in
fact cure prospective statute of limitations problems. Verizon
10
agreed only to toll the applicable statutes of limitations through
this appeal. Under the agreement, it appears that the statutory
periods would resume running forty-five days after we enter a
judgment. They would not continue to toll during the PA PUC
proceeding. In addition, Verizon specifically reserved the right
in the agreement to assert a limitations defense against Core
based on lapses occurring after this appeal.1
Thus, it is far from clear that Core could simply re-plead
its claims. To the contrary, it seems certain that at least some of
the claims will be time barred if Core is forced to litigate its
claim for breach of the interconnection agreement before the PA
PUC. Count I of the complaint, for example, contains a
limitations period of two years that began to run in October
2002, when Verizon failed to interconnect in Wilkes-Barre. See
47 U.S.C. § 415. Core filed its original complaint on
September 24, 2004. It would be essentially impossible for the
time lapse from the end of this appeal to the re-filing of the
complaint, including time for the PA PUC to make its
determination, to be less than one month. Similarly, Core’s
1
During oral argument, counsel for Verizon agreed that
it would interpret the tolling agreement as extending through the
proceedings before the PA PUC. However, we will not premise
a refusal to exercise jurisdiction on the representations of one
attorney when the intent of the parties is so clearly expressed in
the agreement, and both parties had all of the relevant
information before them when the agreement was made. That
is, both Core and Verizon were aware of the possibility of a PA
PUC proceeding, and chose not to toll the applicable statutes of
limitations for that event.
11
claim advanced in Count II was based on Verizon’s failure to
interconnect in Philadelphia in November 2000 and in
Pittsburgh in May 2001. As such, there are eight months
remaining in the applicable limitations period. See 28 U.S.C.
§ 1658. In this case, since “the plaintiff cannot cure the
deficiency, an order dismissing a complaint without prejudice is
a final and appealable order.” Ahmed, 297 F.3d at 207 (citing
Newark Branch, NAACP v. Harrison, N.J., 907 F.2d 1408, 1416
(3d Cir. 1990)). Because the statutes of limitations controlling
the claims that Core was not instructed to present to the PA PUC
will certainly limit its ability to re-file, we will treat that order
as final for the purpose of this appeal.
III.
Moving to the merits, the essence of Core’s argument is
that it was not required to litigate its claim for breach of the
interconnection agreement in front of the PA PUC as an
intermediate step before the District Court could hear the case.
The District Court held, and Verizon argues, that the statutory
scheme under the Telecommunications Act requires that Core
first present this claim to the state commission before
proceeding in a federal district court. It reached this conclusion
by applying Chevron deference to the FCC’s decision in In re
Starpower Communications. We exercise plenary review over
such claims, which implicate the District Court’s conclusions of
law. See, e.g., Epstein Family P’ship v. Kmart Corp., 13 F.3d
762, 766 (3d Cir. 1994).
Under Chevron U.S.A., Inc. v. Natural Resources Defense
Council, 467 U.S. 837 (1984), federal courts must defer to an
12
implementing agency’s interpretation of a statute within its
jurisdiction if (1) “the statute is silent or ambiguous with respect
to the specific issue” at hand, and (2) “the agency’s answer is
based on a permissible construction of the statute.” Id. at 843.
As the Supreme Court explained, “[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. “Chevron requires a federal court to accept the agency’s
construction of the statute, even if the agency’s reading differs
from what the court believes is the best statutory interpretation.”
Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545
U.S. 967, 980 (2005). The Supreme Court has emphasized that
“[s]uch deference is justified because ‘[t]he responsibilities for
assessing the wisdom of such policy choices and resolving the
struggle between competing views of the public interest are not
judicial ones,’ and because of the agency’s greater familiarity
with the ever-changing facts and circumstances surrounding the
subjects regulated.” FDA v. Brown & Williamson Tobacco
Corp., 529 U.S. 120, 132 (2000) (quoting Chevron, 467 U.S. at
866) (internal citations omitted).
A.
Under this framework, the first question we must answer
is “whether Congress has directly spoken to the precise question
at issue.” Chevron, 467 U.S. at 842. In making this
determination, the Supreme Court has instructed that “a
reviewing court should not confine itself to examining a
particular statutory provision in isolation.” Brown &
Williamson Tobacco Corp., 529 U.S. at 133. Instead, we must
interpret the statute “‘as a symmetrical and coherent regulatory
13
scheme,’ and ‘fit, if possible, all parts into an harmonious
whole.’” Id. (quoting Gustafson v. Alloyd Co., 513 U.S. 561,
569 (1995); FTC v. Mandel Brothers, Inc., 359 U.S. 385, 389
(1959)). “In addition, we must be guided to a degree by
common sense as to the manner in which Congress is likely to
delegate a policy decision of such economic and political
magnitude to an administrative agency.” Id.In this case, the “precise question at issue” involves the
proper procedure for the interpretation and enforcement of
previously approved interconnection agreements. Specifically,
we must determine whether a party may proceed directly to
federal court to litigate such claims, or if it must first present
them to the state commission that originally approved the
agreement. We turn to the Telecommunications Act to
determine whether or not Congress has spoken on this question.
The “[p]rocedures for negotiation, arbitration, and
approval of [interconnection] agreements” are discussed in
§ 252 of the Act. Subsection (e), titled “Approval by state
commission,” explains the role of state commissions like the PA
PUC. It provides that “[a]ny 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.” 47 U.S.C.
§ 252(e)(1). Subsections (e)(2) through (e)(5) list the grounds
for rejecting an interconnection agreement submitted to the
commission, preserve state authority to establish or enforce
requirements of state law in reviewing agreements, set a
calendar for state commission decisions, and give the FCC
14
authority to act if the state commission fails to carry out its
responsibilities. Finally, § 252(e)(6) describes the extent of
judicial review relating to actions under § 252:
In a case in which a State fails to act as described
in paragraph (5),[2] 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
2
Paragraph (5) provides that
[i]f 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.
47 U.S.C. § 252(e)(5).
15
requirements of section 251 of this title and this
section.
Id. § 252(e)(6). Beyond this, there is no real indication of what
role the state commissions are to play, and the Act is simply
silent as to the procedure for post-formation disputes.
Core, however, argues that Act provides a procedure for
post-formation disputes in §§ 206 and 207. Section 206 is
entitled “Carriers’ liability for damages” and provides that
[i]n case any common carrier shall do, or cause or
permit to be done, any act, matter, or thing in this
chapter prohibited or declared to be unlawful, or
shall omit to do any act, matter, or thing in this
chapter required to be done, such common carrier
shall be liable to the person or persons injured
thereby for the full amount of damages sustained
in consequence of any such violation of the
provisions of this chapter, together with a
reasonable counsel or attorney’s fee, to be fixed
by the court in every case of recovery, which
attorney’s fee shall be taxed and collected as part
of the costs in the case.
47 U.S.C. § 206 (emphasis added). Section 207 is the “recovery
of damages” provision related to § 206. It provides that
[a]ny person claiming to be damaged by any
common carrier subject to the provisions of this
chapter may either make complaint to the
16
Commission as hereinafter provided for, or may
bring suit for the recovery of the damages for
which such common carrier may be liable under
the provisions of this chapter, in any district court
of the United States of competent jurisdiction; but
such person shall not have the right to pursue both
such remedies.
Id. § 207 (emphasis added). Core argues that these two
provisions allow it to bring a suit for damages against Verizon
in federal court, notwithstanding any authority that may be
vested with the state commissions.
The precise claim at issue in this appeal, however, is
Core’s claim for breach of the interconnection agreement, not its
claims under §§ 201, 202, and 251 of the Act. Divorced from
any provision of the Act, it appears that §§ 206 and 207, which
make common carriers liable for damages “under the provisions
of this chapter,” do not apply. Although these sections might
allow Core to bring a claim for damages against Verizon for
violations of §§ 201, 202, and 251,3 they do not set out an
3
We do not reach Verizon’s argument that §§ 206 and
207 do not apply because it can only be considered a “common
carrier” under those sections when providing
telecommunications services, not when providing
interconnection. Also, to the extent that the Supreme Court’s
decision in Global Crossing Telecommunications, Inc. v.
Metrophones Telecommunications, Inc., 127 S. Ct. 1513 (2007),
impacts that argument, we conclude that it has no bearing on our
holding as it relates to the precise claim at issue here – the claim
17
enforcement scheme for a pure claim for breach of an
interconnection agreement. Accordingly, given the lack of any
guidance as to the proper interpretation and enforcement
procedure in this case,4 we conclude that Congress has not
spoken on the precise question at issue here.
B.
Faced with a gap in the relevant statutory scheme, we
turn to step two of Chevron, which instructs that “if Congress
has not specifically addressed the question, a reviewing court
must respect the agency’s construction of the statute so long as
for breach of the interconnection agreement.
4
We emphasize that our conclusion that the Act is silent
on the question at issue here is based on our view of the unusual
nature of the statutory scheme. Had we limited ourselves to
considering portions of the statutory text in isolation, we could
conclude that Congress meant its statement that “[a]ny
interconnection agreement adopted by negotiation or arbitration
shall be submitted for approval to the State commission,” 47
U.S.C. § 252(e)(1), to also imply the contrapositive: that state
commissions do not have authority over any issue other than
whether to approve or reject interconnection agreements.
However, viewing the statute “as a symmetrical and coherent
regulatory scheme,” Brown & Williamson Tobacco Corp., 529
U.S. at 133 (quoting Gustafson, 513 U.S. at 569), we are
reluctant to conclude that Congress would have preserved state
authority to such an extent and then cut it off without a more
explicit statement.
18
it is permissible.” Brown & Williamson Tobacco Corp., 529
U.S. at 132. In this case, both the District Court and Verizon
looked to the FCC’s decision in In re Starpower
Communications.5 That case involved a dispute between
Starpower Communications and Bell Atlantic Virginia and GTE
South about whether calls to Internet Service Providers were
“local calls” under an approved interconnection agreement. See
15 F.C.C.R. at 11278. Starpower had asked the Virginia State
Corporation Commission, the relevant state commission in that
case, to issue a declaratory ruling on this point and to order GTE
to pay reciprocal compensation, but the commission refused. Id.Starpower then asked the FCC to step in and hold that such
determinations were ones that the state commission was required
to make under § 252(e)(5).6 Id. at 11277-78. Thus, the FCC
explained that it must “determine whether a dispute arising from
interconnection agreements and seeking interpretation and
5
Neither party in this case challenges the FCC’s position
as the agency charged with implementing the
Telecommunications Act. See Nat’l Cable & Telecomms. Ass’n,
545 U.S. at 980-81 (“Congress has delegated to the Commission
the authority to ‘execute and enforce’ the Communications Act,
§ 151, and to ‘prescribe such rules and regulations as may be
necessary in the public interest to carry out the provisions’ of the
Act, § 201(b).” (citing AT&T Corp. v. Iowa Utils. Bd., 525 U.S.
366, 377-378 (1999))).
6
Section 252(e)(5) requires the FCC to preempt the
jurisdiction of a state commission in any proceeding or matter
in which the state commission “fails to act to carry out its
responsibility” under § 252. See 47 U.S.C. § 252(e)(5).
19
enforcement of those agreements is within the states’
‘responsibility’ under section 252.” Id. at 11279. After posing
this question, the FCC provided the answer: “We conclude that
it is.” Id.
Arguing that the District Court’s deference to the FCC’s
determination in Starpower was an error, Core first contends
that the decision is irrelevant to the current case. Although the
FCC’s decision is susceptible to both narrow and broad
readings, under either view it is clearly relevant to the question
we must answer here. Under the narrowest interpretation,
Starpower stands for the proposition that state commissions
have, at a minimum, the non-exclusive authority to hear post-
formation disputes involving approved interconnection
agreements, despite the Act’s silence on the issue.7 That is,
7
Indeed, every federal appellate court to consider the
issue has determined or assumed that state commissions have
the authority to hear interpretation and enforcement actions
regarding approved interconnection agreements, despite the
Act’s silence on that point. See P.R. Tel. Co. v. Telecomms.
Regulatory Bd., 189 F.3d 1, 10-13 (1st Cir. 1999); Bell Atl. Md.,
Inc. v. MCI WorldCom, 240 F.3d 279, 304 (4th Cir. 2001),
vacated on other grounds in Verizon Md., Inc. v. Pub. Serv.
Comm’n of Md., 535 U.S. 635 (2002); Sw. Bell Tel. Co. v. Pub.
Util. Comm’n of Tx., 208 F.3d 475, 479-80 (5th Cir. 2000); Ill.
Bell Tel. Co. v. Worldcom Techs., Inc., 179 F.3d 566, 573 (7th
Cir. 1999); Iowa Utils. Bd. v. FCC, 120 F.3d 753, 804 (8th Cir.
1997), reversed in part on other grounds, Iowa Utils. Bd., 525
U.S. at 385; Sw. Bell Tel. Co. v. Brooks Fiber Commc’ns of
Okla., Inc., 235 F.3d 493, 497 (10th Cir. 2000); BellSouth
20
because the case came to the FCC after Starpower had
voluntarily attempted to litigate its claim before the Virginia
commission, id. at 11278, the FCC’s decision did not actually
force a party to bring its post-formation dispute to a state
commission before proceeding in federal court.
However, given the FCC’s behavior and the structure of
the statutory scheme as a whole, we believe that more can be
drawn from the FCC’s conclusion “that dispute[s] arising from
interconnection agreements and seeking interpretation and
enforcement of those agreements [are] within the states’
‘responsibility’ under section 252.” Id. at 11279. As an initial
matter, the FCC’s language – calling interpretation and
enforcement disputes part of the states’ “responsibility” under
§ 252 – suggests that there is not a shared role for the federal
courts in the first instance. To be fair, the FCC was echoing the
language in § 252(e)(5), but in reaching its conclusion it did not
rely at all on the fact that Starpower had chosen to litigate before
the state commission. Rather, it concluded that such a
delegation of responsibility best fit the statutory scheme created
by Congress. In addition, we can find no indication in other
FCC decisions that the state commissions’ jurisdiction over
post-formation disputes is shared with the federal courts. To the
contrary, every indication is that “the FCC plainly expects state
commissions to decide intermediation and enforcement disputes
that arise after the approval procedures are complete.” Sw. Bell
Tel. Co. v. Pub. Util. Comm’n of Tx., 208 F.3d 475, 480 (5th Cir.
2000) (citing In re Implementation of the Local Competition
Telecomms., Inc. v. MCIMetro Access Transmission Servs., Inc.,
317 F.3d 1270, 1278 (11th Cir. 2003) (en banc).
21
Provisions in the Telecommunications Act of 1996, 14 F.C.C.R.
3689, 3703-04 (1999), vacated on other grounds in Bell Atl. Tel.
Cos. v. FCC, 206 F.3d 1 (D.C. Cir. 2000) (noting that parties are
bound by their interconnection agreements “as interpreted and
enforced by the state commissions,” and discussing factors state
commissions should consider when “construing the parties’
agreements”).
In following this broader reading of Starpower, we are
mindful of the Supreme Court’s admonition that we must
interpret the statute “‘as a symmetrical and coherent regulatory
scheme,’ and ‘fit, if possible, all parts into an harmonious
whole.’” Brown & Williamson Tobacco Corp., 529 U.S. at 133(quoting Gustafson, 513 U.S. at 569; Mandel Brothers, Inc., 359
U.S. at 389). In the context of the Telecommunications Act, we
believe that a “symmetrical and coherent regulatory scheme” is
one where the bodies that considered formation problems also
resolve interpretation difficulties. As with formation problems,
federal court jurisdiction over state commission interpretation
and enforcement decisions should be limited to appellate review.
See 47 U.S.C. § 252(e)(6) (granting district courts authority to
review “determinations” made by the state commissions under
§ 252). As the United States Court of Appeals for the Eleventh
Circuit has emphasized,
[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
22
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.
BellSouth Telecomms., Inc. v. MCIMetro Access Transmission
Servs., Inc., 317 F.3d 1270, 1278 n.9 (11th Cir. 2003) (en banc).
Indeed, as the Eleventh Circuit recognized, to allow parties to
circumvent the state commissions in post-formation disputes
would undermine the Act’s sense of cooperative federalism,
under which the states were given primary responsibility over
interconnection agreements. “Rather than placing the entire
scope of regulatory authority in the federal government,
‘Congress enlisted the aid of state public utility commissions to
ensure that local competition was implemented fairly and with
due regard to the local conditions and the particular historical
circumstances of local regulation under the prior regime.’”
Global Naps, Inc., 427 F.3d at 46 (quoting Peter W. Huber et al.,
Federal Telecommunications Law § 3.3.4 (2d ed. 1999)). The
FCC’s interpretation wisely recognizes this fact to fill the gap
left by Congress.
Notwithstanding this analysis, Core argues that
Starpower is not entitled to Chevron deference because
Congress merely delegated authority to the FCC to preempt
affirmative refusals by state commissions to carry out their
responsibilities under § 252 of the Act, not to “mandate an
23
‘interim step’ to federal district court review.” This argument
misses the point. Chevron deference is premised on the idea
that where Congress has left a gap or ambiguity in a statute
within an agency’s jurisdiction, that agency has the power to fill
in or clarify the relevant provisions. Chevron, 467 U.S. at 843-
44. As we explained above, the Telecommunications Act is
silent on the procedure for post-formation disputes. Under
Chevron, this silence coupled with a permissible interpretation
from the Act’s implementing agency is all that is needed for
deference. Id. at 843 (“[I]f the statute is silent or ambiguous
with respect to the specific issue, the question for the court is
whether the agency’s answer is based on a permissible
construction of the statute.”). Chevron does not require that the
Act explicitly delegate the authority to the FCC. Rather, it is the
Act’s silence that is the source of the delegation in this context.
Core’s next argument is that Starpower is not owed
deference because the FCC’s decision was guided by two
“instructive” federal appellate court cases, rather than by the
agency’s expertise. However, a primary source of an agency’s
power under Chevron deference is delegation, not simply
expertise. By not speaking on the subject, Chevron instructs
that Congress was implicitly delegating responsibility to the
FCC to determine the procedure for post-formation disputes.
See Chevron, 467 U.S. at 843-44. Facing the same objection in
BellSouth, Judge Black of the United States Court of Appeals
for the Eleventh Circuit explained,
By virtue of that Congressional delegation, an
administrative agency need not cite any cases in
reaching its interpretation; its interpretation is
24
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,” [United States v.] Mead Corp., 533
U.S. [218,] 227 [(2001)], 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.
317 F.3d at 1284 (Black, J., concurring). In addition, it is not
clear that the FCC was making its decision based only on the
cases it cited. It also noted in its analysis 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 11280. Thus, the force of Starpower
is not undermined by any reliance on federal cases.
Finally, Core invokes the United States Court of Appeals
for the District of Columbia Circuit’s decision in Murphy
Exploration & Production Co. v. U.S. Department of the
Interior, 252 F.3d 473 (D.C. Cir. 2001), to argue that Starpower
is not entitled to Chevron deference because an agency is owed
no deference when limiting federal jurisdiction. However, this
argument misconstrues the holding in Murphy. There, the court
concluded that “Chevron does not apply to statutes that . . .
confer jurisdiction on the federal courts.” Id. at 478 (emphasis
added). As it explained, “when Congress has ‘established an
enforcement scheme’ that gives a party ‘direct recourse to
federal court,’ it is ‘inappropriate to consult executive
interpretations of [the jurisdiction-conferring statute] to resolve
25
ambiguities surrounding the scope of [the party’s] judicially
enforceable remedy.’” Id. (quoting Adams Fruit Co., Inc. v.
Barrett, 494 U.S. 638, 650 (1990)). We are not faced with such
a situation in this case. The FCC in Starpower did not interpret
a statute that conferred jurisdiction on the federal courts, but
rather one that defined the procedures related to the formation
of interconnection agreements, and the very reason Chevron
deference is an issue in this case is the Act’s silence regarding
an enforcement scheme. Thus, we see no reason why Chevron
deference would be inappropriate here.
Accordingly, we conclude that the FCC has offered a
reasonable solution to fill a gap that currently exists in the
Telecommunications Act. Pursuant to the FCC’s guidance, we
hold that interpretation and enforcement actions that arise after
a state commission has approved an interconnection agreement
must be litigated in the first instance before the relevant state
commission. A party may then proceed to federal court to seek
review of the commission’s decision or move on to the
appropriate trial court to seek damages for a breach, if the
commission finds one.
C.
Having concluded that Core’s claim for breach of the
interconnection agreement must be presented to the PA PUC in
the first instance, we now turn to the remainder of its claims.
Without discussing anything other than Core’s breach of
contract claim, the District Court dismissed Core’s entire
complaint without prejudice. Given our conclusion that the
relevant statutes of limitations will certainly limit Core’s ability
26
to refile these claims after the PA PUC proceeding, see supra
Section II, we must consider whether such a step was proper.
We conclude that it was not.
The District Court did not find, and Verizon does not
argue, that any of Core’s other claims must be presented to the
PA PUC, or that the PA PUC even has the authority to hear
them. In addition, no party argues that these claims must be
presented together. As such, the District Court’s action was
tantamount to dismissing viable claims without any justification.
Cf. Ahmed, 297 F.3d at 207 (“[I]f the plaintiff cannot cure the
deficiency, an order dismissing a complaint without prejudice is
a final and appealable order.”). We conclude that this was an
error. Certainly, as Verizon points out, Core’s claims are all
related, and judicial efficiency would be served by hearing them
at the same time. To that end, the District Court is free to
consider on remand whether or not a stay would be appropriate
here. But given the record before us, we conclude that the
District Court erred by dismissing Core’s claims other than its
action for breach of the interconnection agreement.
IV.
“It would be gross understatement to say that the
[Telecommunications] Act is not a model of clarity. It is in
many important respects a model of ambiguity or indeed even
self-contradiction.” AT&T Corp. v. Iowa Utils. Bd., 525 U.S.
366, 397 (1999). Nevertheless, we are charged with piecing
together what Congress and the FCC have given us. Until we
have more guidance on the matter, the most sensible
harmonization of the Act’s structure and the FCC’s declarations
27
is a solution under which the bodies that are responsible for
overseeing the formation of interconnection agreements are
given the first crack at interpreting and enforcing them. The
imperfections of this procedure are not lost on us, but it appears
to be the solution most faithful to the FCC’s gap-filling
authority and the Act’s assignment to the state commissions of
responsibilities related to interconnection agreements.
Accordingly, we will affirm the judgment of the District Court
dismissing Count III of Core’s complaint without prejudice,
vacate the dismissal of the remaining counts, and remand for
further proceedings consistent with this opinion.
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