Qwest v. Minnesota Public Utilities Com'n

• Decision Date: 01 November 2005
• Docket Number: No. 04-3510.,No. 04-3368.,No. 04-3408.,04-3368.,04-3408.,04-3510.
• Citation: 427 F.3d 1061
• Parties: QWEST CORPORATION, a Colorado corporation, Plaintiff-Appellee/Cross-Appellant, v. THE MINNESOTA PUBLIC UTILITIES COMMISSION; R. Marshall Johnson, in his official capacity as a member of the Minnesota Public Utilities Commission; Leroy Koppendrayer, in his official capacity as a member of the Minnesota Public Utilities Commission; Phyllis Reha, in her official capacity as a member of the Minnesota Public Utilities Commission; Gregory Scott, in his official capacity as a member of the Minnesota Public Utilities Commission; Defendants-Appellants/Cross-Appellees, CLEC Coalition; AT & T Communications of the Midwest, Inc., Intervenors Below-Appellants/Cross-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1061

427 F.3d 1061

QWEST CORPORATION, a Colorado corporation, Plaintiff-Appellee/Cross-Appellant, v. THE MINNESOTA PUBLIC UTILITIES COMMISSION; R. Marshall Johnson, in his official capacity as a member of the Minnesota Public Utilities Commission; Leroy Koppendrayer, in his official capacity as a member of the Minnesota Public Utilities Commission; Phyllis Reha, in her official capacity as a member of the Minnesota Public Utilities Commission; Gregory Scott, in his official capacity as a member of the Minnesota Public Utilities Commission; Defendants-Appellants/Cross-Appellees CLEC Coalition; AT & T Communications of the Midwest, Inc., Intervenors Below-Appellants/Cross-Appellees.

No. 04-3368.

No. 04-3408.

No. 04-3510.

United States Court of Appeals, Eighth Circuit.

Submitted: September 12, 2005.

Filed: November 1, 2005.

COPYRIGHT MATERIAL OMITTED

Counsel who presented argument on behalf of appellant CLEC was Dan Lipschultz of Minneapolis, Minnesota. Also appearing on the brief were Mark J. Ayotte and Thomas Erik Bailey.

Counsel who presented argument on behalf of the appellee/cross-appellant was Peter S. Spivack of Washington, D.C. Also appearing on the brief was Robert E. Cattanach.

Before RILEY, LAY, and FAGG, Circuit Judges.

LAY, Circuit Judge.

Minnesota Public Utilities Commission and Intervenors CLEC Coalition and AT & T Communications of the Midwest, Inc. (collectively, "MPUC" or "Commission") appeal the district court's¹ decision that MPUC lacks the authority under Minnesota law to order Qwest Corporation ("Qwest") to comply with restitution for competitive local exchange carriers that were not parties to unfiled interconnection agreements. Qwest cross-appeals, challenging the decision affirming the Liability Order and Penalty Orders' $25.95 million penalty. We conclude that MPUC lacks the authority to order restitution under Minnesota law. However, we find that MPUC properly ordered the $25.95 million penalty. Therefore, we affirm.

I.

MPUC issued a liability order and two penalty orders against Qwest for alleged violations of the 1996 Telecommunications Act ("Act"). The Act was intended to create competition between carriers in local telecommunication service markets, which had been traditionally dominated by a single monopoly carrier. Incumbent local exchange carriers ("ILECs"), such as Qwest, own the network infrastructure necessary to provide local telephone service. The Act allows competitive local exchange carriers ("CLECs") to access this infrastructure by entering into agreements with an ILEC. Interconnection agreements ("ICAs") between an ILEC and CLECs must be submitted to the MPUC for approval. 47 U.S.C. § 252(a), (e). The terms of these ICAs must be made available to other CLECs that are not parties to the original agreement. See id. § 252(i). Non-party CLECs can then opt in and incorporate the provisions of the original agreement in their entirety into their own ICAs. 47 C.F.R. § 51.809(a).

On February 14, 2002, the Minnesota Department of Commerce filed a complaint against Qwest alleging that Qwest had formed secret ICAs with CLECs that were not properly submitted to MPUC. The complaint asserted that Qwest's failure to disclose discriminated against other non-party CLECs because these CLECs were not given access to the terms contained in the secret ICAs. On March 12, 2002, the Commission referred the case for contested case proceedings before an administrative law judge ("ALJ").

On November 1, 2002, MPUC issued a liability order adopting the ALJ's findings that Qwest knowingly and intentionally violated §§ 251 and 252 of the Act by failing to file twelve ICAs. The unfiled ICAs included six agreements with Eschelon Telecom, Inc., three with McLeodUSA Telecommunications Service, Inc., and one each with Covad Communications Company, USLink, Inc., and a group of ten smaller CLECs. MPUC found that Qwest "knowingly and intentionally" violated both federal and state law by failing to file the twelve ICAs, thereby creating discriminatory conditions on resale and infringing state anti-discrimination statutes. The MPUC imposed a $25.95 million penalty against Qwest and granted restitutional relief for the injured CLECs based upon its interpretation of state statutes.

Qwest brought suit in district court, challenging the liability order and the penalty order. The district court vacated the order for restitutional relief, holding that MPUC lacked either the express or implied authority under Minnesota law to grant restitution. However, the district court upheld the $25.95 million penalty, finding that it was valid under Minn.Stat. § 237.462.

Title 47 U.S.C. § 252(e)(6) provides for federal court review of state commission decisions. Our sister circuits have held that federal courts review state commission orders under the Act de novo. Mich. Bell Tel. Co. v. MFS Intelenet of Mich., Inc., 339 F.3d 428, 433 (6th Cir.2003); S.W. Bell Tel. Co. v. Apple, 309 F.3d 713, 717 (10th Cir.2002); MCI Telecomm. Corp. v. Bell Atlantic Pa., 271 F.3d 491, 517 (3d Cir.2001); S.W. Bell Tel. Co. v. Pub. Util. Comm'n, 208 F.3d 475, 482 (5th Cir.2000); GTE S., Inc. v. Morrison, 199 F.3d 733, 742 (4th Cir.1999). Here, we adopt that standard. This court has supplemental jurisdiction over state law claims under 28 U.S.C. § 1367. Although the arbitrary and capricious standard applies when reviewing a state commission's findings of fact, Mich. Bell, 339 F.3d at 433; S.W. Bell, 208 F.3d at 482; US West Communications, Inc. v. Hamilton, 224 F.3d 1049, 1052 (9th Cir.2000), whether an agency acts within its statutory authority is a question of law to be reviewed de novo. In re Qwest's Wholesale Serv. Quality Standards, 702 N.W.2d 246, 259 (Minn.2005) (hereinafter "Qwest's Wholesale").

II.

MPUC asserts that it has statutory authority to order restitution under Minn.Stat. §§ 237.081, 237.461, 237.462, and 237.763. MPUC, "being a creature of statute, has only those powers given to it by the legislature." Peoples Natural Gas Co. v. Minnesota Pub. Util. Comm'n, 369 N.W.2d 530, 534 (Minn.1985) (internal quotation omitted). MPUC may not impose restitutional remedies absent express or implied statutory authority. A review of the statutory language and applicable Minnesota case law shows that MPUC has neither. Nothing in the statutory language expressly grants MPUC the authority to order restitution. Moreover, Minnesota case law supports the conclusion that we should not find implied statutory authority to order restitution, absent a clear grant of authority by the legislature.

MPUC argues that it has express authority to order restitutional relief under Minn.Stat. § 237.081, which authorizes MPUC to "make an order respecting [an unreasonable, insufficient, or unjustly discriminatory] . . . act, omission, practice, or service that is just and reasonable" and to "establish just and reasonable rates and prices." Minn.Stat. § 237.081, subd. 4. MPUC also claims the authority to order restitution is encompassed within Minn.Stat. §§ 237.461 and 237.462.² Section 237.461 is a competitive enforcement statute that permits MPUC to seek criminal prosecution, recover civil penalties, compel performance, or take "other appropriate action." Minn.Stat. § 237.461, subd. 1. Section 237.462 is also an enforcement statute which states that "[t]he imposition of administrative penalties in accordance with this section is in addition to all other remedies available under statutory or common law. The payment of a penalty does not preclude the use of other enforcement provisions . . . ." Minn.Stat. § 237.462, subd. 9. MPUC asserts that this statutory framework supports a finding that MPUC possesses the express or implied authority to order restitution in this case.

While we agree that these statutes give MPUC broad statutory authority to regulate the telecommunications market in Minnesota, none of them vest MPUC with the express authority to order remedial relief. We therefore agree with the district court that because none of these statutes expressly refer to remedial/restitutional relief, the relevant inquiry is whether MPUC has the implied authority to order restitution. We conclude that no such authority exists.

In Peoples Natural Gas, the Minnesota Supreme Court observed that, "[w]hile express statutory authority need not be given a cramped reading, any enlargement of express powers by implication must be fairly drawn and fairly evident from the agency objectives and powers expressly given by the legislature." 369 N.W.2d at 534. The Minnesota court then held that MPUC lacked the implied authority under Minn.Stat. §§ 216B.03 and 216B.08 to order a public utility to refund revenues collected from its customers in violation of a MPUC order, rejecting MPUC's argument that the Commission's duty to assure rates that are "just and reasonable" vested MPUC with the authority to order a refund. Id. at 534-36.

In holding that MPUC lacked this authority, the Minnesota Supreme Court observed that "[i]t is of some significance that the legislature has not seen fit expressly to grant refund powers to the Commission, although it could have done so and in one instance has at least recognized its use." Id. The court was reluctant to interpret the statute as providing implied authority of this kind because "this is not the kind of agency authority that can or should be implied in the absence of more explicit legislative action. It is not enough that the power to order refunds would be useful to the Commission as an enforcement measure." Id. at 535.

The same holds true in this case. MPUC attempts to distinguish Peoples Natural Gas by asserting that the statutory framework has changed significantly since this decision. However, MPUC claims authority under statutory language that is quite similar to that construed by the Minnesota Supreme Court in Peoples Natural Gas. Given the Minnesota court's reluctance to infer authority to grant refund powers in...