Bell Atl.-Penn. v. Pennsylvania Pub. Util. Com'n

Decision Date12 December 2003
Docket NumberNo. Civ.A. 99-5391.,No. Civ.A. 03-685.,Civ.A. 99-5391.,Civ.A. 03-685.
PartiesBELL ATLANTIC — PENNSYLVANIA, INC., Plaintiff, v. THE PENNSYLVANIA PUBLIC UTILITY COMMISSION, et al., Defendants. MCI Telecommunications Corp., et al., Plaintiffs, v. Bell-Atlantic-Pennsylvania, et al., Defendants.
CourtU.S. District Court — Eastern District of Pennsylvania

Conover, Philadelphia, PA, Lydia R. Pulley, Arlington, VA, Mark L. Evans, Kellogg Huber Hansen Todd & Evans, Washington, DC, Michael D. Lowe, Arlington, VA, Samuel L. Feder, Kellogg Huber Hansen Todd & Evans, Washington, DC, Stuart D. Lurie, Pepper Hamilton LLP, Suzan Debusk Paiva, Philadelphia, PA, Thomas B. Schmidt, III, Pepper Hamilton LLP, Harrisburg, PA, for Bell Atlantic-Pennsylvania, Inc.

Bohdan R. Pankiw, Harrisburg, PA, Elisabeth H. Ross, Harvey A. Levin, Birch, Horton, Bittner and Cherot, Washington, DC, Maryanne R. Martin, Pa. Public Utility Commission, Harrisburg, PA, for Pennsylvania Public Utility Com'n.

Elisabeth H. Ross, Harvey A. Levin, Birch, Horton, Bittner and Cherot, Washington, DC, Maryanne R. Martin, Pa. Public Utility Commission, Harrisburg, PA, for John M. Quain, Robert K. Bloom, Nora Mead Brownell, Aaron Wilson, Jr.

Stuart D. Lurie, Pepper Hamilton LLP, Philadelphia, PA, for Verizon Pennsylvania Inc.

Jeffrey A. Rackow, Worldcom, Inc., Matthew B. Pachman, Michael B. Desanctis, Jenner & Block, LLC, Washington, DC, Thomas E. Groshens, Virginia Hinrichs Mc Michael, Dilworth, Paxson, LLP, Virginia I. Miller, Anderson Kill & Olick PC, Philadelphia, PA, for MCI WorldCom Network Services, Inc., MCIMetro Access Transmission Services, LLC.

David L. Lawson, David M. Levy, Sidley Austin Brown & Wood LLP, Washington, DC, John J. Langhauser, AT & T Communications of Pennsylvania, Inc., Oakton, VA, Joseph C. Crawford, Wolf Block Schorr & Solis-Cohen, Philadelphia, PA, Stephen B. Kinnaird, Sidley & Austin, Washington, DC, Michael B. Desanctis, Jenner & Block, LLC, Washington, DC, for AT & T Communications of Pennsylvania, Inc.

Joseph C. Crawford, Wolf Block Schorr & Solis-Cohen, Philadelphia, PA, Stephen B. Kinnaird, Sidley & Austin, Washington, DC, for TCG Pittsburgh, TCG Delaware Valley, Inc.

Zsuzsanna E. Benedek, Sprint Communications Co., LP, Harrisburg, PA, for United Telephone Company of Pennsylvania.

David T. Zaring, U.S. Dept. of Justice, Federal Programs Branch, Rachel J. Hines, Federal Programs Branch, Washington, DC, for United States.

MEMORANDUM & ORDER

KATZ, Senior District Judge.

These consolidated actions arise from two challenges to decisions of the Pennsylvania Public Utilities Commission ("PUC") evaluating an interconnection agreement reached by Verizon Pennsylvania, Inc. ("Verizon," known then as Bell Atlantic-Pennsylvania) and MCI Worldcom ("Worldcom") for compliance with the Telecommunications Act of 1996, 47 U.S.C. § 251 et seq.1 Each action was brought pursuant to 47 U.S.C. § 252(e)(6), which grants federal district court jurisdiction over suits filed by parties aggrieved by state commission determinations under the Act.

The first action, filed by Verizon and Worldcom in the Middle District of Pennsylvania, posed challenges to the PUC's 1997 Final Order in its MFS III proceeding ("MFS III"2), approving an interconnection agreement between the parties. Worldcom, joined by party plaintiff AT & T, argued that the rates set by the PUC for Verizon's unbundled network elements ("UNE's"), which were incorporated into the interconnection agreement, violated the Telecommunications Act3 and the FCC's implementing regulations.4 The court agreed, holding that the rates Verizon sought to charge for its UNE's were at odds with the FCC's total element long run incremental cost ("TELRIC") methodology5 for calculating such rates. The Middle District reached the merits only after first deciding that the PUC, despite its urging, was not entitled to Eleventh Amendment immunity from suit.

On appeal, the Third Circuit upheld the Eleventh Amendment decision but reversed in part on the merits, concluding that the trial court had not sufficiently analyzed the substance of the PUC's cost model in order to properly determine its lawfulness. It then remanded the case to the district court with instructions "to review the substance and merits of the PUC methodology and its pricing decision ... to determine whether the prices for unbundled network elements established in the interconnection agreement comport with the Act." Bell Atl.-Pa., 271 F.3d at 522-23.

The second action, instituted by Verizon in this court, with cross-claims filed by Worldcom and AT & T, challenged the PUC's 1999 decision in its global proceedings ("Global Order"6), which, as in 1997, set UNE rates that Verizon's prospective competitors believed were inconsistent with the Act. This court, like the Middle District, found that the PUC was not entitled to Eleventh Amendment immunity but certified that question for appeal. It declined to reach the merits of the parties' claims. Bell Atl.-Pa. v. Pa. Pub. Util. Comm'n, 107 F.Supp.2d 653 (E.D.Pa.2000), aff'd Bell Atl.-Pa., Inc. v. Pa. Pub. Util. Comm'n, 273 F.3d 337 (3d Cir.2001), cert. denied, 537 U.S. 941, 123 S.Ct. 340, 154 L.Ed.2d 247 (2002). On appeal, in a companion opinion released on the same day as the Middle District appeal, the Third Circuit affirmed that the Eleventh Amendment was not a bar to suit. On remand, the first action was consolidated with the second and transferred to this court.

In addition to the parties' challenge of the Global Order in this court, they also sought redress by filing petitions for review in the Pennsylvania Commonwealth Court. Bell Atl.-Pa., Inc. v. Pa. Pub. Util. Comm'n, 763 A.2d 440 (Pa.Cmwlth.2000). Unlike this court, the Commonwealth Court reached the merits of the dispute and affirmed all aspects of the Global Order as consistent with both state and federal law. Id. at 514. The state court action was still pending when this court handed down its initial decision in 2000.

Approximately three months before the Court of Appeals rendered its companion decisions, the PUC began its third generation UNE rate case. The purpose of this proceeding ("Generic Investigation"), initiated on August 31, 2001, was to determine whether the rates set in the 1997 MFS-III Final Order and the 1999 Global Order were just and reasonable. The PUC issued a Tentative Order in this third proceeding on October 24, 2003, in which it indicated that it might change certain assumptions upon which it relied to arrive at the 1997 and 1999 rates. On November 13, the PUC voted unanimously to issue a Final Order in the Generic Investigation. It has represented that such Order would be issued on or about December 1, 2003.

Now before this court is a Motion for Summary Judgment filed by the PUC, in which it raises three distinct claims. First, it argues that this court lacks jurisdiction over the dispute because it must afford full faith and credit to the decision of the Pennsylvania Commonwealth Court, which upheld all aspects of the Global Order. Second, the PUC maintains that even if this court has jurisdiction under the 1996 Act, it must find that the provision of the Act granting such jurisdiction is unconstitutional because it exceeds Congress' authority under the Commerce Clause. Finally, the PUC asserts that even if this court has jurisdiction under the 1996 Act to enjoin it from continuing to enforce the Global Order rates, that jurisdiction does not include the power to compel the PUC to calculate new rates. This court finds each argument unavailing for the reasons set forth below.

A. Res Judicata

The PUC's primary contention is that, pursuant to the principles of res judicata and full faith and credit, this court lacks subject matter jurisdiction in the instant case because the claims at issue have already been decided by a state court of competent jurisdiction, the Pennsylvania Commonwealth Court. See Pa. PUC, 763 A.2d at 513 (affirming all aspects of the PUC Global Order). This argument, however, is fatally flawed because Congress has vested exclusive jurisdiction in the federal district courts to decide appeals from state commission determinations on inter-connection agreements under the Telecommunications Act. 47 U.S.C. §§ 252(e)(4), 252(e)(6). As such, because the Commonwealth Court lacked jurisdiction to decide this controversy from the outset, this court is not obligated to lend full faith and credit to its decision.

According to the Full Faith and Credit Act, a federal court must give the same preclusive effect to a state court judgment as would be given under the law of that state. 28 U.S.C. § 1738. To determine the contours of the preclusive effect in a given case, a federal court is required to look first to state preclusion law. Marrese v. Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373, 381, 105 S.Ct. 1327, 84 L.Ed.2d 274 (1985). This requirement even applies when the claim that might be precluded is within exclusive federal jurisdiction. Nanavati v. Burdette Tomlin Mem'l Hosp., 857 F.2d 96, 111 (3d Cir. 1988) (citing Marrese, 470 U.S. at 379-86, 105 S.Ct. 1327).

In Pennsylvania, any final judgment on the merits entered by a court of competent jurisdiction operates as a bar to any identical future action between the parties. Urrutia v. Harrisburg County Police Dep't, 91 F.3d 451, 461 (3d Cir.1996) (citing Hopewell Estates, Inc. v. Kent, 435 Pa.Super. 471, 646 A.2d 1192, 1194 (1994)). It is also true, however, that "under Pennsylvania law, if federal jurisdiction is exclusive, the state decision cannot act as a bar to litigation in the federal court." McCarter v. Mitcham, 883 F.2d 196, 197 (3d Cir.1989).

As the Court of Appeals has explained,...

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