Mci Telecommunications v. Bellsouth Telecommun.

• Decision Date: 29 June 1998
• Docket Number: Civil Action No. 97-76.
• Citation: 9 F.Supp.2d 766
• Parties: MCI TELECOMMUNICATIONS CORPORATION, A Delaware corporation, and MCImetro Access Transmission Services, Inc., A Delaware Corporation, Plaintiffs, v. BELLSOUTH TELECOMMUNICATIONS, INC., A Georgia Corporation; the Kentucky Public Service Commission; and Linda K. Breathitt, Edward J. Holmes, and Dr. B.J. Helton, in their official capacities as Commissioners of the Kentucky Public Service Commission, Defendants.
• Court: U.S. District Court — Eastern District of Kentucky

9 F.Supp.2d 766

MCI TELECOMMUNICATIONS CORPORATION, A Delaware corporation, and MCImetro Access Transmission Services, Inc., A Delaware Corporation, Plaintiffs, v. BELLSOUTH TELECOMMUNICATIONS, INC., A Georgia Corporation; the Kentucky Public Service Commission; and Linda K. Breathitt, Edward J. Holmes, and Dr. B.J. Helton, in their official capacities as Commissioners of the Kentucky Public Service Commission, Defendants.

Civil Action No. 97-76.

United States District Court, E.D. Kentucky.

June 29, 1998.

COPYRIGHT MATERIAL OMITTED

Henry S. Alford, C. Hatfield, Middleton & Reutlinger, Louisville, KY, Thomas F. O'Neil, III, William Single, IV, Matthew B. Pachman, MCI Telecommunication Corporation, Washington, DC, Donald B. Verrilli, Jr., Maureen F. Del Duca, Thomas J. Perrelli, Washington, DC, for MCI Telecommunications Corporation.

C. Hatfield, Middleton & Reutlinger, Louisville, KY, Thomas F. O'Neil, III, William Single, IV, Matthew B. Pachman, MCI Telecommunication Corporation, Washington, DC, Donald B. Verrilli, Jr., Maureen F. Del Duca, Thomas J. Perrelli, Washington, DC, for MCImetro Access Transmission Services.

Mark R. Overstreet, Bruce F. Clark, Stites & Harbison, Frankfort, KY, Dorothy J. Chambers, Creighton E. Mershon, Sr., BellSouth Telecommunications, Inc., Louisville, KY, Sean A. Lev, Kellogg, Huber, Hanse, Todd & Evans, P.L.L.C., Washington, DC, William Barfield, R. Douglas Lackey, Thomas B. Alexander, BellSouth Telecommunications, Atlanta, GA, for Bellsouth Telecommunications, Inc.

Deborah Tully Eversole, Amy E. Dougherty, William L. Willis, Public Service Commission of Kentucky, Frankfort, KY, for Kentucky Public Service Commission.

Deborah Tully Eversole, Amy E. Dougherty, William L. Willis, Public Service of Kentucky, for Linda Breathitt, Edward J. Holmes, and Dr. B.J. Helton.

MEMORANDUM OPINION & ORDER

HOOD, District Judge.

This matter is before the Court on the motion to dismiss [Record No. 8] by the defendants, the Kentucky Public Service Commission, Linda K. Breathitt, Edward J. Holmes, and Dr. B.J. Helton (collectively referred to as the "PSC"). The plaintiff, MCI Telecommunications Corporation and MCImetro Access Transmission Services, Inc. (collectively referred to as "MCI") has responded. The defendant, BellSouth Telecommunications, Inc. ("BellSouth") has also responded.

Being fully briefed, the motion is ripe for consideration. Having reviewed the parties' arguments, the Court finds that this matter need not be dismissed. Consistent with such a determination, the Court makes the following findings of facts and conclusions of law.

FINDINGS OF FACT

MCI brings this action under section 252(e)(6) of the Telecommunications Act of 1996, 47 U.S.C. § 151 et seq. ("Act"). The Act dissolved the monopolies originally regulated by the States and opened up the local telephone market for competition. In so doing, Congress set forth terms under which the existing local telephone companies, known as incumbent local exchange carriers (ILEC), are required to sell parts of their networks to their competitors so as to allow these new telephone companies to get into the business quickly. However, Congress ensured that the ILECs would be compensated for the sharing of their networks. Consequently, Congress set forth a process which would enable the ILEC and the competitor to reach a reasonable and fair agreement on purchases of networks and compensation; the process is set forth in section 252 of the Act. See 47 U.S.C. § 252.

Section 252 sets forth several distinct ways in which an ILEC and a competitor can reach an interconnection agreement. First, the ILEC and the competitor may engage in voluntary negotiations. Second, if after negotiating the parties cannot resolve certain terms within the agreement, then either party may petition the state commission to arbitrate those terms. Third, the parties must then submit an interconnection agreement to the state commission and the state commission must approve or reject the interconnection agreement. Fourth, if either party is not satisfied with the state commission's determinations, a suit may be filed in federal district court, seeking review of the state commission's decision.

Congress has provided these stages in the process to ensure that the terms of the interconnection agreement comply with the Act's provisions. It is this very process which is central to the matter before the Court.

In the case at hand, BellSouth, the ILEC, has engaged in negotiations with MCI, with respect to an interconnection agreement ("agreement"). However, during the negotiations the parties could not resolve certain issues; thus, on September 3, 1996, pursuant to § 252, MCI petitioned the PSC to arbitrate these unresolved issues.

On November 7-8, 1996, a hearing was held before the PSC. On December 20, 1996, the PSC issued its arbitration order, ordering the parties to file a final agreement with the PSC within sixty days. The PSC did not set the final rates for the agreement in its order; instead, it required BellSouth to file additional costs studies on the unbundled network elements so that the final rates could be set.

The parties were unable to execute such agreement within the time frame set by the PSC's order. Instead, MCI moved for reconsideration and clarification of the PSC's order, asking for establishment of a separate, additional docket to consider costs and rates. The PSC, however, refused to establish a separate docket because the Act sets forth the appropriate methodology for determining the rates to be set.

After issuing such order, MCI and BellSouth still could not agree on certain items to be put forth in the agreement. MCI, thus, filed a list of such items with the PSC, and the PSC resolved those issues for the parties, even supplying specific contract language for them. Such did not end the process.

Again, MCI petitioned the PSC to establish a separate docket for the costs and rates issue. The PSC again refused to do so, but did set a hearing to consider such additional costs studies submitted by BellSouth. The hearing was eventually canceled and the PSC "set final rates based on methodologies it had determined pursuant to evidence presented within the statutory timeframe." PSC Memorandum in Support of Motion to Dismiss at p. 4.

On August 13, 1997, MCI and BellSouth finally filed their interconnection agreement based on the rates set forth in the PSC's order. Such agreement was approved by the PSC on August 21, 1997. MCI then brought this suit pursuant to § 252(e)(6), seeking declaratory and injunctive relief.

The PSC now moves the Court to dismiss MCI's complaint on the grounds that this Court does not have jurisdiction to review the PSC's arbitration order. The PSC argues that the suit is barred by the Eleventh Amendment, and thus MCI cannot sue the PSC in federal court. The PSC also argues that this action is barred by the Tenth Amendment and Guarantee Clause of the United States Constitution. Lastly, the PSC submits that MCI has not presented a viable due process claim, and thus even if the Tenth and Eleventh Amendments do not bar this suit, the suit should be dismissed for failure to state a claim.

In opposition, MCI argues that this action is not barred by the Eleventh Amendment, as the PSC has waived its sovereign immunity. Moreover, MCI submits that this action is for declaratory and injunctive relief, and thus under Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908) the Court has jurisdiction to hear this matter. MCI further submits that the Tenth Amendment does not bar this claim because Congress had the power to enact this statute under the Commerce Clause. Lastly, MCI maintains that it has set forth a viable claim for which relief can be granted; MCI has a property interest in the interconnection agreement and the rates set forth in it, and the Commission's act of setting the rates without a hearing on such rates has denied it due process under the law.

Notably, the defendant BellSouth has responded to the PSC's motion to dismiss. BellSouth agrees with MCI that this action is not barred by either the Eleventh Amendment or the Tenth Amendment. However, BellSouth agrees with the PSC that this matter should be dismissed in that MCI has failed to set forth a viable due process claim.

CONCLUSIONS OF LAW

MCI has the burden of proving that the Court has jurisdiction over this matter. Madison-Hughes v. Shalala, 80 F.3d 1121, 1130 (6th Cir.1996). MCI has met that burden.

I. The State Has Waived Its Sovereign Immunity

The U.S. Supreme Court has stated that a state can consent to suit, and thus, effectively nullify the Eleventh Amendment's prohibition to allow a state to be sued in federal court. See Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 237-38, 105 S.Ct. 3142, 3145, 87 L.Ed.2d 171 (1985). Although the Supreme Court has stated that in most instances the waiver of a state's sovereign immunity must be by express language, in limited circumstances the state can waive its sovereign immunity by an "unequivocal indication" that it intends to consent to suit. Id. n. 1 & 3150. Such situation occurs where the state engages in an act which is regulated by a federal law that mandates the state be amenable to suit if it chooses to engage in such activity. See Parden v. Terminal Ry., 377 U.S. 184, 192, 195-196, 84 S.Ct. 1207, 12 L.Ed.2d 233 (1964), overruled on other grounds by, Welch v. Texas Dep't of Highways & Pub. Transp., 483 U.S. 468, 477-78, 107 S.Ct. 2941, 2948, 97 L.Ed.2d 389 (1987) (overruling the Parden Court's determination as to when Congress can abrogate the Eleventh Amendment); see also Atascadero State Hosp., 105 S.Ct. at 3149-50 (stating that even if the act in question did condition participation on the state's consent to waive its immunity, "there was no indication that the State of California consented to federal jurisdiction"); cf. Edelman v. Jordan, 415 U.S. 651, 672-73, 94 S.Ct. 1347, 39...