U.S. West Communications, Inc. v. Hix, Civil Action No. 97-D-152.

• Decision Date: 05 December 1997
• Docket Number: Civil Action No. 97-D-152.,Civil Action No. 97-D-2047.,Civil Action No. 97-D-2096.,Civil Action No. 97-D-387.
• Citation: 986 F.Supp. 13
• Parties: U.S. WEST COMMUNICATIONS, INC., Plaintiff, v. Robert J. HIX, Brent Alderfer, and Vincent Majkowski, MFS Communications, Co., Inc., MFS Intelenet of Colorado, Inc., TCG Colorado, Teleport Communications Group, Inc. And ICG Telecom Group, Inc., Defendants.
• Court: U.S. District Court — District of Colorado

986 F.Supp. 13

U.S. WEST COMMUNICATIONS, INC., Plaintiff, v. Robert J. HIX, Brent Alderfer, and Vincent Majkowski, MFS Communications, Co., Inc., MFS Intelenet of Colorado, Inc., TCG Colorado, Teleport Communications Group, Inc. And ICG Telecom Group, Inc., Defendants.

Civil Action No. 97-D-152.

Civil Action No. 97-D-387.

Civil Action No. 97-D-2047.

Civil Action No. 97-D-2096.

United States District Court, D. Colorado.

December 5, 1997.

B. Lawrence Theis, Bobbee J. Musgrave, Perkins Coie, Denver, CO, for Plaintiff.

Craig Joyce, Walters & Joyce, Denver, CO, Anthony M. Marquez, Asst. Atty. Gen., Denver, CO, Paul M. Gordon, Oakland, CA, Charles B. Hecht, Nichols & Hecht, LLC, Denver, CO, Richard L. Fanyo, Dufford & Brown, P.C., Denver, CO, Robert Pomeroy, Joseph Halpern, Holland & Hart, Englewood, CO, for Defendants.

MEMORANDUM OPINION AND ORDER

DANIEL, District Judge.

I. INTRODUCTION AND BACKGROUND

The passage by Congress of the landmark Telecommunications Act of 1996 ("the Act") marks the beginning of a new era in the local telephone market. The Act, at its core, is designed, among other things, to end monopolies in the local telephone market and open the market to competition. Incumbent local exchange carriers ("ILECs") such as U.S. West Communications, Inc. ("USWC"), the plaintiff herein, are required to "interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers" and to negotiate in good faith to open their local telephone network to competition and interconnect with other carriers in accordance with the duties set forth in the Act. See 47 U.S.C. § 251. The Act delegates authority to state utilities commissions to (i) arbitrate disputes regarding interconnection agreements; (ii) determine whether the agreements are in compliance with the Act; and (iii) approve or reject the final agreements. Id., §§ 251-252.

The specific issue that is before the Court is the appropriate standard of review to be applied to the Colorado Public Utilities Commission's decision approving certain interconnection agreements pursuant to 47 U.S.C. § 252(e)(1).¹ This Court has jurisdiction over the consolidated cases pursuant to 47 U.S.C. § 252(e)(6) which states that "[i]n any case in which a State commission makes a determination under this section, any party aggrieved by such determination may bring an action in an appropriate Federal district court to determine whether the agreement or statement meets the requirements of section 251 of this title and this section." Further, Section 252(e)(4) provides that "[n]o State court shall have jurisdiction to review the action of a State commission in approving or rejecting an agreement under this section."

The Act does not elucidate either the scope of review or the standard of review that should apply to consideration of the issues before me. Further, it does not appear that, to date, any other federal court has determined the appropriate standard of review. In my Order on Intervention, Discovery and Scope of Review Matters dated August 5, 1997, I previously decided that the scope of review in this case is limited to the administrative record. See United States v. Carlo Bianchi and Co., 373 U.S. 709, 714, 83 S.Ct. 1409, 1413, 10 L.Ed.2d 652 (1963) ("where Congress has simply provided for review, without setting forth the standards to be used or the procedures to be followed, ... consideration is to be confined to the administrative record"); Franklin Savings Ass'n v. Director, Office of Thrift Supervision, 934 F.2d 1127, 1137 (10th Cir.1991), cert. denied, 503 U.S. 937, 112 S.Ct. 1475, 117 L.Ed.2d 619 (1992) (same). The scope of review is different than the standard of review. Franklin Savings Ass'n, 934 F.2d at 1136. As the Tenth Circuit explained in Franklin:

The scope of judicial review refers merely to the evidence the reviewing court will examine in reviewing an agency decision. The standard of judicial review refers to how the reviewing court will examine that evidence.

Id.

In determining the standard of review, it is necessary to understand the Act's statutory scheme as it applies to the state commissions, in this instance, the Colorado Public Utilities Commission ("PUC"). Pursuant to § 252(c)(1) of the Act, codified at 47 U.S.C. § 252(c)(1), the ILEC is required to negotiate with other telecommunications carriers for interconnection, access to unbundled elements or resale of services. If an agreement on all outstanding issues cannot be reached, a party may request that the state commission conduct arbitration pursuant to § 252(b)(1) of the Act. The state commission is required to limit its consideration of any petition for arbitration to the issues set forth in the petition and response thereto. 47 U.S.C. § 252(b)(4)(A). The commission may require the parties to provide additional information necessary to reach a decision on the unresolved issues. Id., § 252(b)(4)(B). However, if any party fails or refuses to provide such additional information, the state commission may proceed on the basis of the best information available to it. Id.

§ 252(e)(1) of the Act provides that any agreement reached through negotiation or arbitration must then be submitted to the state commission for its approval. In determining whether to approve or reject the agreement, there are two different standards depending on whether the agreement is negotiated or arbitrated. In reviewing negotiated agreements, the state commission may only reject the agreement if "(i) if the agreement (or portion thereof) discriminates against a telecommunications carrier not a party to the agreement; or (ii) the implementation of such agreement or portion is not consistent with the public interest, convenience and necessity." 47 U.S.C. § 252(e)(2)(A). By contrast, in reviewing arbitrated agreements, the state commission is directed to reject such agreements (or a portion thereof) only upon a finding that "the agreement does not meet the requirements of section 251 of this title, including the regulations prescribed by the Commission pursuant to section 251 of this title, or the standards set forth in subsection (d) of this section." Id., § 252(e)(2)(B).

As to either type of agreement, the state commission must approve or reject the agreement, but is required to make written findings only as to any deficiencies in the agreement. Id., § 252(e)(1). The Act contains no requirement that a hearing be held. If the state commission fails to act within the timetables provided in the Act, the Federal Communications Commission ("FCC") assumes the state commission's responsibilities under the Act. Id., § 252(e)(5).

II. THE PARTIES' RESPECTIVE POSITIONS AS TO THE STANDARD OF REVIEW

The parties to these consolidated actions do not agree on the appropriate standard of review. USWC asserts that the proper standard of review is de novo as to all issues. USWC argues that the issue as framed by Congress is a legal one — whether the agreements imposed upon USWC by the PUC meet the requirements of the Act. Accordingly, USWC asserts that the Court should apply a de novo standard of review and accord no deference to the PUC's determinations. In support thereof, USWC argues that had Congress intended that deference be accorded to the state commissions, it would have left review of their decisions to state courts where state agencies are given deference. In contrast, federal courts do not defer to state agencies on questions of federal law since such agencies are not subject to Congressional oversight and they lack expertise in interpreting and implementing federal law. Amisub (PSL), Inc. v. State of Colorado Dept. of Social Services, 879 F.2d 789 (10th Cir.1989), cert. denied, 496 U.S. 935, 110 S.Ct. 3212, 110 L.Ed.2d 660 (1990).

Sprint Communications Company L.P. ("Sprint"), MCIMetro Access Transmissions Services, Inc. ("MCI"), and Intervenor AT & T of the Mountain States, Inc. ("AT & T") assert that the standard of review is de novo as to questions of law. They agree with USWC that a state agency's interpretation of federal law is not entitled to the deference generally accorded a federal agency based on the Supreme Court's decision in Chevron, U.S.A., Inc. v. Nat. Resources Defense Council, 467 U.S. 837, 843-44, 104 S.Ct. 2778, 2781-83, 81 L.Ed.2d 694 (1984). However, as to questions of fact and mixed questions of fact and law, Sprint, MCI and AT & T urge the Court to apply the arbitrary and capricious standard. They assert that deference in connection with such issues is appropriate because of the unique role Congress assigned to state commissions and the considerable expertise of the state commissions with respect to the highly technical issues involved in their arbitration and review of interconnection agreements.

TCG Colorado and Teleport Communications Group, Inc. ("TCG"), ICG Telecom Group, Inc. ("ICG"), and MFS Communications, Inc. and MFS Intelenet of Colorado ("MFS") assert that the appropriate standard of review is one modeled after the Administrative Procedure Act ("APA"); namely, the arbitrary and capricious standard of review.² See 5 U.S.C. § 706(2)(A). They argue that this standard best fits the mandate that Congress gave to the state commissions in interpreting the Act and implementing regulations, and the substantial expertise that state commissions possess in regulating intrastate telecommunications. However, TCG, ICG and MFS acknowledge that even under the APA model, the standard of review as to questions of law is de novo. Thus, it appears that the parties differ primarily in their views as to what constitutes a question of law.

III. ANALYSIS

The Act sets out a unique framework which permits state commissions to arbitrate and approve interconnection agreements. This framework obviously recognizes the various state commissions' expertise in technical matters related to intrastate telecommunications where state commissions have the authority both to conduct...