US. W. Communications v. MFS Intelent

• Decision Date: 02 November 1998
• Docket Number: No. 98-35203,No. 98-35146,98-35146,98-35203
• Citation: 193 F.3d 1112
• Parties: (9th Cir. 1999) US WEST COMMUNICATIONS, Plaintiff-Appellant, v. MFS INTELENET, INC.; SHARON L. NELSON, Chairman; RICHARD HEMSTAD, Commissioner; WILLIAM P. GILLIS, Commissioner, in their official capacities as Commissioners of the Washington Utilities and Transportation Commission; and WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION, (WUTC), Defendants-Appellees. US WEST COMMUNICATIONS, Plaintiff-Appellant, v. TCG SEATTLE, a limited partnership; ANNE LEVINSON, Chairperson; RICHARD HEMSTAD, Commissioner; WILLIAM P. GILLIS, Commissioner, in their official capacities as Commissioners of the Washington Utilities and Transportation Commission; and WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION, Defendants-Appellees
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1112

193 F.3d 1112 (9th Cir. 1999)

US WEST COMMUNICATIONS, Plaintiff-Appellant, v. MFS INTELENET, INC.; SHARON L. NELSON, Chairman; RICHARD HEMSTAD, Commissioner; WILLIAM P. GILLIS, Commissioner, in their official capacities as Commissioners of the Washington Utilities and Transportation Commission; and WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION, (WUTC), Defendants-Appellees.

US WEST COMMUNICATIONS, Plaintiff-Appellant, v. TCG SEATTLE, a limited partnership; ANNE LEVINSON, Chairperson; RICHARD HEMSTAD, Commissioner; WILLIAM P. GILLIS, Commissioner, in their official capacities as Commissioners of the Washington Utilities and Transportation Commission; and WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION, Defendants-Appellees.

No. 98-35146 No. 98-35203

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted November 2, 1998--Seattle, Washington

Decided October 8, 1999

[Copyrighted Material Omitted] Sherilyn Peterson and Kirstin S. Dodge, Perkins Coie, Bellevue, Washington, Norton Cutler, U.S. West Law Department, Denver, Colorado, for the plaintiff-appellant.

Daniel M. Waggoner, Seattle, Washington, Shannon E. Smith, Assistant Attorney General, Olympia Washington, for the defendants-appellees.

Joel VanOver and Douglas G. Bonner, Swidler & Berlin, Washington, D.C., for the defendant-appellee.

Paul M. Gordon, Gordon & Goddard, Oakland, California, for the defendant-appellee.

Susan L. Pacholski, United States Department of Justice, Washington, D.C., for the amicus.

Appeals from the United States District Court for the Western District of Washington; William L. Dwyer, District Judge, Presiding. D.C. No. CV-97-00222-WLD, D.C. No. CV-97-00354-WLD.

Before: James R. Browning and Michael Daly Hawkins, Circuit Judges, and Milton I. Shadur,¹ District Judge.

BROWNING, Circuit Judge:

The Telecommunications Act of 1996 (Act) is designed to foster competition in local and long distance telephone markets. The local competition provisions of the Act require incumbent local exchange carriers (defined in 47 U.S.C. S 251(h)(1)) to allow other local exchange carriers access to the incumbent carrier's networks or services to enable them to compete in providing local telephone services: (1) incumbent carriers must interconnect their networks with new entrants "at any technically feasible point," and the interconnection must be "at least equal in quality" to the interconnection the incumbent carrier provides for itself, 47 U.S.C. S 251(c)(2); (2) incumbents must provide nondiscriminatory, unbundled access to network elements² in a manner that allows new entrants to combine the elements to provide telecommunications services, see 47 U.S.C. S 251(c)(3); and (3) incumbents must offer for resale, at wholesale rates, any telecommunications service an incumbent offers at retail, and permit new entrants to resell those services to end-users. See 47 U.S.C. S 251(c)(4). The Act prohibits incumbent carriers from imposing unreasonable or discriminatory conditions or limitations on the resale of the services. See id.

Incumbent carriers must negotiate in good faith agreements (commonly referred to as interconnection agreements) with competing carriers setting forth particular terms and conditions upon which incumbent carriers will satisfy their duties under the Act. See 47 U.S.C. S 251(c)(1). If the parties are unable to reach agreement through good faith negotiations, a party to the negotiation may request that the state utilities commission arbitrate unresolved issues. See 47 U.S.C. S 252(b)(1). A state commission may impose terms by arbitration only if the terms meet the substantive requirements of section 251, including regulations implementing that section, and the pricing standards of section 252. See 47 U.S.C. S 252(c). After the state commission approves an interconnection agreement, a party to the agreement may bring an action in district court "to determine whether the agreement or statement meets the requirements" of the Act. 47 U.S.C. S 252(e)(6).

The Federal Communications Commission (FCC) issued rules implementing the local competition provisions of the Act. See In re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, 11 F.C.C.R. 15499 (Aug. 8, 1996) (Local Competition Order ). Suits challenging the rules were consolidated in the Eighth Circuit. The Eighth Circuit vacated the pricing rules on the ground that the Act authorized state utility commissions, not the FCC, to set rates. See Iowa Utilities Bd. v. FCC, 120 F.3d 753, 793-800 (8th Cir. 1997). The court expressly declined to review the pricing rules on the merits. See id. at 800. The court also vacated non-pricing rules that required incumbent carriers to combine unbundled network elements for competing carriers, and prohibited incumbent carriers from separating already combined network elements before leasing them to competing carriers.

In relevant part, the Supreme Court reversed the Eighth Circuit's ruling that the FCC did not have jurisdiction to promulgate pricing rules, holding the FCC had jurisdiction to "prescribe such rules and regulations as may be necessary in the public's interest to carry out the provisions of the Act," including the "jurisdiction to design a pricing methodology." See AT & T Corp. v. Iowa Utilities Bd., 525 U.S. 366, 119 S. Ct. 721, 729, 733 (1999). The Supreme Court also reinstated the rule prohibiting incumbent carriers from separating already combined network elements. See id. at 737-38.

Procedural Background

MFS Intelenet, Inc. (MFS) and TCG Seattle (TCG), competing local exchange carriers, asked US West Communications (US West), the incumbent local exchange carrier, to negotiate an interconnection agreement. The parties were unable to resolve all issues by negotiation, and MFS and TCG requested arbitration by the Washington Utilities and Transportation Commission (Commission). The Commission appointed an arbitrator in each case, and arbitration hearings were held. Arbitrators' reports and decisions were filed and comments and objections received. The Commission concluded the agreements met the requirements of sections 251 and 252 of the Act, and approved them. US West challenged the Commission's decisions and asserted takings claims in district court. The district court held that the agreements complied with the Act and dismissed the taking claims as unripe. US West appealed.

Standard of Review

We review the district court's grant of summary judgment de novo. See San Diego Gas & Elec. Co. v. Canadian Hunter Mktg., 132 F.3d 1303, 1306 (9th Cir. 1997). The Act confers jurisdiction upon district courts to review interconnection agreements for compliance with the Act:

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 an appropriate Federal district court to determine whether the agreement or statement meets the requirements of section 251 of this title and this section.

47 U.S.C. S 252(e)(6) (emphasis added). We apply the same standard the district court should apply, considering de novo³ whether the agreements are in compliance with the Act and the implementing regulations, see Orthopaedic Hosp. v. Belshe, 103 F.3d 1491, 1495 (9th Cir. 1997) (a state agency's interpretation of a federal statute is considered de novo), and considering all other issues under an arbitrary and capricious standard. See, e.g., US West Communications, Inc. v. Hix, 986 F. Supp. 13, 19 (D. Colo. 1997) (holding that courts should apply the de novo standard to all issues involving a "determination of the [state commission's] procedural or substantive compliance `with the requirements of the [Telecommunications Act] and its implementing regulations,' " and an arbitrary and capricious standard to all other issues). We agree with the district court that the agreements complied with the Act and the FCC regulations, and that other decisions of the Commission challenged by US West were not arbitrary and capricious. Although the district court applied the wrong standard in its review of some of the issues,⁴ the errors were harmless.⁵

Discussion

1. Ripeness of Challenge to Interim Rates

US West challenges several of the pricing provisions as inconsistent with pricing standards fixed by the Act. Because the challenged provisions are interim only and may be adjusted by later pricing proceedings, we conclude that these prices are therefore not ripe for review.

Federal courts must refrain from premature adjudication of agency action to avoid "entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties." Abbott Lab. v. Gardner, 387 U.S. 136, 148 (1967). Principles of federalism lend this doctrine additional force when a federal court is reviewing a state agency decision at an interim stage in an evolving process. See Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction S3532.1 n.16 & accompanying text (2d ed. 1984 & Supp. 1998).

The D.C. Circuit, which decides most petitions for review of federal agency actions, explained:

The primary focus of the ripeness doctrine as applied to judicial review of agency action has been a prudential attempt to time review in a way that balances the petitioner's interest in prompt consideration of allegedly unlawful agency action against the agency's interest in crystallizing its policy before that policy is subjected to judicial review and the court's interests in avoiding unnecessary adjudication and in deciding issues in a concrete setting.

Mississippi Valley Gas Co. v. Federal Energy Regulatory Comm'n (MVGC), 68 F.3d 503, 508 (D.C. Cir. 1995) (quoting Eagle-Picher Indus. v. EPA, 759 F.2d 905, 915 (D.C. Cir. 1985)) (internal quotation marks...