Big Bend Tel. Co. v. Halo Wireless, Inc. (In re Halo Wireless, Inc.), Cause No. A–11–CV–721–LY.

Decision Date15 February 2012
Docket NumberCause No. A–11–CV–721–LY.
PartiesIn re HALO WIRELESS, INC. Big Bend Telephone Company, Brazoria Telephone Company, Electra Telephone Company, Ganado Telephone Company, Inc., Hill Country Telephone Cooperative, Inc., Industry Telephone Company, La Ward Telephone Exchange, Inc., Mid–Plains Rural Telephone Cooperative, Inc., Riviera Telephone Company, Southwest Texas Telephone Company, Tatum Telephone Company, and Valley Telephone Cooperative, Inc., Plaintiffs. v. Halo Wireless, Inc., Defendant.
CourtU.S. District Court — Western District of Texas

OPINION TEXT STARTS HERE

Richard D. Milvenan, Brook Bennett Brown, McGinnis Lochridge and Kilgore, L.L.P., Austin, TX, for Plaintiffs.

Edwin Paul Keiffer, Kim E. Moses, Wright Ginsberg Brusilow P.C., Steven H. Thomas, McGuire, Craddock, Strother PC, Dallas, TX, W. Scott McCollough, Attorney at Law, West Lake Hills, TX, for Defendant.

ORDER OF REMAND

LEE YEAKEL, District Judge.

Before the Court is the above styled cause, which was removed to this Court by Defendant Halo Wireless, Inc. (Halo) from the Public Utility Commission of Texas under Docket No. 39409, on August 19, 2011 (Clerk's Document No. 1). Pending in the action are Plaintiffs Big Bend Telephone Company, Brazoria Telephone Company, Electra Telephone Company, Ganado Telephone Company, Inc., Hill Country Telephone Cooperative, Inc., Industry Telephone Company, La Ward Telephone Exchange, Inc., Mid–Plains Rural Telephone Cooperative, Inc., Riviera Telephone Company, Southwest Texas Telephone Company, Tatum Telephone Company, and Valley Telephone Cooperative, Inc.'s (collectively the Texas Carriers) Motion To Remand filed September 2, 2011 (Clerk's Document No. 3), Halo's response filed September 13, 2011 (Clerk's Document No. 7), the Texas Carriers' reply filed September 20, 2011 (Clerk's Document No. 9), Halo's supplement to Halo's response filed October 28, 2011 (Clerk's Document No. 12), and the Texas Carriers' response to Halo's supplement filed October 31, 2011 (Clerk's Document No. 13). Also before the Court are Halo's Motion to Transfer filed September 7, 2011 (Clerk's Document No. 4), the Texas Carriers' response filed September 14, 2011 (Clerk's Document No. 8), and Halo's reply filed September 26, 2011 (Clerk's Document No. 10). Having considered the motions, the responses, the replies, the case file, and the applicable law, the Court will grant the Motion to Remand and will remand the cause to the Public Utility Commission of Texas. The Court will dismiss the Motion to Transfer.

I. Background
A. Factual and Procedural Background

This case arises from a dispute regarding interconnection agreements pending before the Public Utility Commission of Texas (the “PUC”) under Docket No. 39409 (the PUC proceeding).1 The Texas Carriers are telecommunications carriers designated as incumbent local exchange carriers by the Federal Telecommunications Act of 1996 (the “Act”).2 Under the Act, incumbent local exchange carriers (“ILECs”) are obligated to interconnect with commercial-mobile-radio-service carriers and other competitive carriers, but ILECs are entitled to just and reasonable compensation for making the mandated connections. 47 U.S.C. §§ 201(a), 251(a), (d), 332. Halo claims to be a commercial-radio-service carrier entitled to interconnection with the Texas Carriers and has utilized the Texas Carriers' networks without first entering into interconnection agreements with the Texas Carriers. A complicated regulatory scheme governs interconnection agreements under the Act. This dispute grows from Halo's alleged failure to follow the procedures set forth for entering into an interconnection agreement under the Act, including Halo's alleged failure to provide just compensation for its use of the Texas Carriers' networks.

In the PUC proceeding, the Texas Carriers seek an order requiring Halo to submit to arbitration under the Act's scheme, establishing the rates and amounts of compensation allegedly owed by Halo, and requiring Halo to produce call-detail records for call traffic transmitted to the Texas Carriers in order to establish compensation owed by Halo. On June 15, 2011, Halo filed suit in the United States District Court for the Eastern District of Texas, Sherman Division, styled Halo Wireless, Inc. v. The Livingston Tel. Co., Cause No. 4:1 l–CV–00359–MHS–ALM, against the Texas Carriers and other similarly situated parties. In that action, Halo seeks declaratory and injunctive relief from the PUC proceeding and similar proceedings before other state administrative agencies.

On August 8, 2011, Halo filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Texas, Sherman Division, styled In Re: Halo Wireless, Inc., Case No. 11–42464–BTR–ll. Halo then filed a Suggestion of Bankruptcy with the PUC on August 15, 2011. At that time, an automatic stay of the PUC proceeding was initiated, although it is no longer in force. See11 U.S.C. § 362.3 Halo removed the PUC proceeding to this Court on August 19, 2011 (Clerk's Document No. 1).4 On September 1, 2011, Halo filed an adversary proceeding in the bankruptcy court asserting claims against the Texas Carriers and the other similarly situated parties in these disputes concerning the interconnection agreements. Halo Wireless, Inc. v. The Livingston Tel. Co., Case No. 11–04160 (Bankr.E.D.Tx.).

In this Court, Halo contends that the Federal Communications Commission (“FCC”) has exclusive original jurisdiction over the claims asserted in the PUC proceeding and that the PUC thus lacks jurisdiction over the claims. Halo also contends that the PUC lacks jurisdiction over Halo, because the Texas Carriers, in filing their petition before the PUC, failed to comply with required procedures for establishing interconnection agreements. See47 C.F.R. § 20.11(e).

Halo removed this case under the bankruptcy removal statute, which provides for removal of claims related to bankruptcy cases wherein the district court has jurisdiction of the claim or cause of action under bankruptcy law. See28 U.S.C. §§ 1452, 1334. The Texas Carriers moved to remand the case to the PUC. See28 U.S.C. §§ 1452, 1334; Fed. R. Bankr.P. 9027(e) (Advisory Committee Notes).

Further, Halo seeks to have this case transferred to bankruptcy court, with the desire that all related cases will be so transferred, thus allowing all related proceedings to be consolidated and considered at once before the bankruptcy court. The Texas Carriers oppose the motion, arguing both that the action could not have been brought in bankruptcy court initially and that transferring the case would not be in the interest of justice. See28 U.S.C. §§ 1404(a), 1412.

B. Regulatory Background

Congress enacted the Act in order to open local telecommunications markets to competition. See AT & T v. Iowa Utils. Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). The Act fundamentally restructured local telephone markets by subjecting ILECs to several duties intended to facilitate competition in the telecommunications market, particularly the obligation to share their networks with competitors. Id. Under the Act, ILECs must allow new competitors, called competitive local exchange carriers (“CLECs”), to resell “at wholesale rates any telecommunications service that the [ILEC] provides at retail.” 47 U.S.C. § 251(c)(4). This allows CLECs to offer telecommunication services to customers without having to build their own telephone networks, instead interconnecting directly or indirectly with existing networks of other telecommunications carriers, which allows a customer of one carrier to call a customer from another carrier. Id. § 251(a)(1). ILECs and would-be CLECs are required to negotiate in good faith to achieve interconnection agreements setting forth the terms under which the carriers operate. Id. § 251(c)(1). If the parties are unable to agree within 135 days of an ILEC receiving a request for negotiation, either party may petition the state utility commission to arbitrate any open issues in accordance with the requirements of federal law. See id. § 252(b)-(c). If the state commission declines to perform that role, the parties may seek resolution by the FCC. See id. § 252(e)(5).

Both negotiated and arbitrated agreements must be submitted for approval to the state commission, and the commission may reject an agreement that discriminates against a nonparty carrier, is inconsistent with “the public interest, convenience, and necessity,” or does not meet the requirements of the Act. Verizon Md., Inc. v. Pub. Serv. Comm'n of Md., 535 U.S. 635, 638, 122 S.Ct. 1753, 152 L.Ed.2d 871 (2002) (citing 47 U.S.C. § 252(e)(1)-(2)(A)). The Act's model purposefully divides authoritybetween the FCC and state commissions, such that state commissions are free to “reflect the policy choices made by their states.” Budget Prepay, Inc. v. AT & T Corp., 605 F.3d 273, 275 (5th Cir.2010) (quoting Global NAPs, Inc. v. Mass. Dep't of Telecomms. & Energy, 427 F.3d 34, 46 (1st Cir.2005)). “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, 427 F.3d at 34 (quoting Peter W. Huber et al., Federal Telecommunications Law § 3.3.4 (2d ed.1999)) (internal quotation omitted). Texas state law assigns this regulatory power to the PUC. Tex. Util.Code § 52.002.

A party aggrieved by a state-commission decision approving or rejecting an agreement may seek review of that determination in federal court. See47 U.S.C. § 252(e)(6) (“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...

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