SWB Telephone Co. v. Brooks Fiber Commun. Of Ok.

• Decision Date: 13 December 2000
• Docket Number: No. 99-5222,99-5222
• Citation: 235 F.3d 493
• Parties: (10th Cir. 2000) SOUTHWESTERN BELL TELEPHONE COMPANY, Plaintiff-Appellant, v. BROOKS FIBER COMMUNICATIONS OF OKLAHOMA, INC.; BROOKS FIBER COMMUNICATIONS OF TULSA, INC.; ED APPLE, Chairman; BOB ANTHONY; DENISE BODE (in their official capacities as commissioners of the Oklahoma Corporation Commission); OKLAHOMA CORPORATION COMMISSION, Defendants-Appellees
• Court: U.S. Court of Appeals — Tenth Circuit

Page 493

235 F.3d 493 (10th Cir. 2000)

SOUTHWESTERN BELL TELEPHONE COMPANY, Plaintiff-Appellant, v. BROOKS FIBER COMMUNICATIONS OF OKLAHOMA, INC.; BROOKS FIBER COMMUNICATIONS OF TULSA, INC.; ED APPLE, Chairman; BOB ANTHONY; DENISE BODE (in their official capacities as commissioners of the Oklahoma Corporation Commission); OKLAHOMA CORPORATION COMMISSION, Defendants-Appellees.

No. 99-5222

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

December 13, 2000

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA, (D.C. No. 98-CV-468-K)

Aaron M. Panner of Kellogg Huber, Hansen, Todd & Evans, P.L.L.C. (Richard C. Ford of Crowe & Dunleavy, and Charles J. Scharnberg, Southwestern Bell Telephone Company, Oklahoma City, Oklahoma, with him on the brief), Washington, D.C., for Plaintiff-Appellant.

Darryl M. Bradford of Jenner & Block (John J. Hamill and John R. Harrington of Jenner & Block, Chicago, Illinois, and Adam H. Charnes and Mark B. Ehrlich, MCI WORLDCOM, Inc., Washington, D.C., with him on the brief), Chicago, Illinois, for Defendant-Appellee Brooks Fiber.

Rachel Lawrence Mor, Deputy General Counsel, Oklahoma Corporation Commission (Andrea Johnson, Senior Attorney, with her on the brief),Oklahoma City, Oklahoma, for Defendant-Appellee Oklahoma Corporation Commission.

Before BALDOCK, POLITZ,^* and LUCERO, Circuit Judges.

BALDOCK, Circuit Judge.

The Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56, codified at 47 U.S.C. 151 et seq. (the Act), aims to encourage competition in the telephone services industry. Among other things, the Act requires telephone companies competing within the same area to "interconnect" their networks to ensure that callers who subscribe to one local telephone service can receive calls from, and place calls to, those who subscribe to a different local telephone service. See 47 U.S.C. 251(c)(2)(A). The Federal Communications Commission (FCC) is authorized to establish regulations implementing the requirements of 251. Id. 251(d)(1).

The terms under which the networks are connected are contained in "interconnection agreements." The Act directs telephone companies to attempt to agree upon the terms of interconnection through negotiation. Id. 252(a)(1). If they cannot agree, the Act directs the governing state commission to arbitrate or mediate disputed issues. Id. 252(b)(1). The duties which the Act imposes are only minimum requirements, and telephone companies may enter into interconnection agreements "without regard" to the Act's requirements. Id. 252(a)(1). The state commission must, however, approve the final agreement. Id. 252(e)(1). In this case, Plaintiff Southwestern Bell Telephone Company and Defendant Brooks Fiber Communications agreed upon all the terms of interconnection. The Oklahoma Corporation Commission (OCC) subsequently approved their Interconnection Agreement (Agreement or Interconnection Agreement).

Meanwhile, 251(b)(5) of the Act imposes a duty on local exchange carriers (LEC) to "establish reciprocal compensation arrangements for the transport and termination of telecommunication." Reciprocal compensation is designed to compensate an LEC for completing a local call from another LEC. The Act requires that the originating caller's LEC, in this case Southwestern Bell, compensate the LEC who completed the call, in this case Brooks Fiber. Id. 251(b)(5). In its 1996 Local Competition Order, the FCC ruled that the Act's " 251(b)(5) obligations should apply only to traffic that originates and terminates within a local area." 11 F.C.C.R. 16013, 1034 (1996). Accordingly, the Agreement between Brooks Fiber and Southwestern Bell requires reciprocal compensation only when they exchange "local traffic." The Agreement defines local traffic as follows:

Calls originated by one Party's end users and terminated to the other Party's end users shall be classified as local traffic under this Agreement if the call originates and terminates in the same [Southwestern Bell] exchange area . . . or originates and terminates within different [Southwestern Bell] exchanges which share a common mandatory local calling scope. Calls not classified as local under this Agreement shall be treated as interexchange for intercompany compensation purposes.

Application of the reciprocal compensation provisions of the Agreement between Southwestern Bell and Brooks Fiber is the subject of this lawsuit. In June 1997, after performing under the Agreement for nearly nine months, Southwestern Bell declared it would no longer pay reciprocal compensation for calls to Internet Service Providers ("ISPs") doing business with Brooks Fiber because, according to Southwestern Bell, calls to ISPs are interstate communications which the Agreement's reciprocal compensation provisions do not cover. Brooks Fiber then filed an application with the OCC requesting a determination that calls delivered from Southwestern Bell customers to an ISP located within the same local exchange are "local traffic" and subject to the Act's reciprocal compensation requirements.

A state administrative law judge ruled in favor of Southwestern Bell, determining that calls to ISPs are not subject to reciprocal compensation. Brooks Fiber appealed the ALJ's decision. The OCC reversed the ALJ's decision, reasoning that such traffic is local, terminates at the ISP, and is subject to reciprocal compensation. Southwestern Bell sought review of the OCC's order in federal district court.¹ Southwestern Bell argued that the OCC's order rested on the erroneous conclusion that federal law characterizes calls to ISPs as local traffic. According to Southwestern Bell, this conclusion conflicted with (1) the plain language of the Agreement, (2) state and federal precedent regarding what constitutes local traffic, and (3) the reciprocal compensation provisions of the Act.

The district court concluded that its jurisdiction to review the OCC's order was limited to determining compliance with federal law, and did not extend to review of Oklahoma state contract law issues. Accordingly, the court upheld the OCC's order as consistent with federal law, but declined to review the OCC's application of state contract law to the Agreement. Southwestern Bell appeals the district court's decision. We exercise jurisdiction pursuant to 28 U.S.C. 1291. While we disagree with the district court's conclusion that it had no jurisdiction to review the OCC's application of state contract law, we ultimately affirm the court's judgment in favor of Brooks Fiber as modified because the OCC's interpretation of the Interconnection Agreement is consistent with both federal and state law.

I.

The substantive questions that Southwestern Bell and Brooks Fiber ask us to decide are: (1) whether the OCC properly interpreted the Interconnection Agreement as requiring reciprocal compensation for calls to ISPs, and (2) whether the Interconnection Agreement, as interpreted by the OCC, complies with federal law. At the outset, however, we must address several issues regarding the district court's subject matter jurisdiction over this litigation. See Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986) ("every federal appellate court has a special obligation to satisfy itself not only of its own jurisdiction, but also that of the lower courts in a cause under review"). Specifically, this appeal raises important issues regarding the proper role of state commissions and federal courts in making and reviewing determinations under the Act. As noted, the district court limited its review to whether the OCC's decision complied with federal law. Southwestern Bell argues we have plenary authority to review all aspects of the OCC's decision. Therefore, we are compelled to analyze (1) the OCC's jurisdiction to interpret the Agreement under federal law, (2) the district court's jurisdiction to review the state commission's interpretation, and (3) the proper scope of federal review.

A.

We begin by recognizing that the OCC acted within its jurisdiction in interpreting the previously approved Interconnection Agreement between Southwestern Bell and Brooks Fiber. The Act authorizes state commissions to mediate and arbitrate disputes over interconnection agreements during the parties negotiations. 47 U.S.C. 252(a)(2) & (b)(1). The Act also specifies that the appropriate state commission must approve each interconnection agreement. Id. 252(e)(1). Courts have held that this grant to the state commissions to approve or reject and mediate or arbitrate interconnection agreements necessarily implies the authority to interpret and enforce specific provisions contained in those agreements. Southwestern Bell Tel. Co. v. Public Util. Comm'n, 208 F.3d 475, 479 (5th Cir. 2000); see also Iowa Util. Bd. v. FCC, 120 F.3d 753, 804 n.24 (8th Cir. 1997) ("the enforcement decisions of state commissions would also be subject to federal district court review under subsection 252(e)(6)"), aff'd in part, rev'd in part on other grounds sub nom. AT&T Corp. v. Iowa Util. Bd., 119 S. Ct. 721 (1999).

Moreover, the FCC has concluded that "inherent in state commissions' express authority to mediate, arbitrate, and approve interconnection agreements under 252 is the authority to interpret and enforce previously approved agreements." In The Matter of Starpower Communications, 15 F.C.C.R. 11277, 7 (2000). We must defer to the FCC's view because it is a reasonable interpretation of 252. See Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843 (1984). Accordingly, the OCC properly exercised its jurisdiction in interpreting the Agreement to resolve a dispute between the parties.

B.

We next conclude that the district court had jurisdiction to review the decision of the OCC interpreting the Interconnection Agreement. Section 252(e)(6) of the Act states, "[i]n any case in which a State commission makes a determination under this section, any party aggrieved by such...