W. Radio Servs. Co. v. Qwest Corp.

Decision Date15 March 2012
Docket NumberNo. 10–35820.,10–35820.
Citation55 Communications Reg. (P&F) 748,678 F.3d 970,12 Cal. Daily Op. Serv. 3041,2012 Daily Journal D.A.R. 3437
PartiesWESTERN RADIO SERVICES CO., Plaintiff–Appellant, v. QWEST CORPORATION, a Colorado Corporation; Public Utility Commission of Oregon; Lee Beyer, Chairman; Ray Baum, Commissioner; John Savage, Commissioner, Defendants–Appellees.
CourtU.S. Court of Appeals — Ninth Circuit


Marianne Dugan, Eugene, OR, for the plaintiff-appellant.

Gregory Monson, Stoel Rives LLP, Salt Lake City, UT; Judy C. Lucas and Michael T. Weirich, Oregon Department of Justice, Salem, OR, for the defendants-appellees.

Appeal from the United States District Court for the District of Oregon, Ann L. Aiken, District Judge, Presiding. D.C. No. 6:05–cv–00159–AA.

Before: DAVID M. EBEL,*MARSHA S. BERZON, and N. RANDY SMITH, Circuit Judges.


EBEL, Circuit Judge:

This case arises out of a dispute between two telecommunications carriers over their interconnection agreement (“ICA” 1) under the Telecommunications Act of 1996. PlaintiffAppellant Western Radio Services Company (Western) is a commercial mobile radio service (“CMRS”) provider. DefendantAppellee Qwest Corporation (Qwest) is a local exchange carrier (“LEC”). Western appeals two decisions of the district court: first, its decision dismissing Western's claim against Qwest for Qwest's alleged violation of its statutory duty to negotiate the ICA in good faith; and second, its decision affirming the orders of DefendantAppellee the Oregon Public Utility Commission (PUC), which adopted the results of the arbitration leading to the ICA and approved the ICA. This Court has jurisdiction under 28 U.S.C. § 1291.

Regarding the good faith claim, we conclude that Western has failed to exhaust the prudential requirement that it first present that claim to the PUC before bringing that claim in federal court. Accordingly, we AFFIRM the district court's decision dismissing that claim.

Regarding the challenge to the approval of the ICA, we conclude that the ICA's provisions (1) requiring Western to interconnect with Qwest's network via at least one point per Local Access and Transport Area (“LATA”); and (2) providing Western with the signaling systems of its choice only where such systems are available, do not violate the Act. However, we also conclude that the ICA, as approved, does violate the Act insofar as it applies access charges, rather than reciprocal compensation, to calls exchanged between a CMRS provider and a LEC, originating and terminating in the same LATA, when those calls are carried by an interexchange carrier (“IXC”).2 Accordingly, we REVERSE the district court's decision upholding the PUC's approval of the ICA to that extent, and REMAND to the PUC for further proceedings not inconsistent with this opinion.

I. The regulatory regime

Congress enacted the Telecommunications Act of 1996, amending the Communications Act of 1934 (collectively, the “Act”), to promote competition in the provisionof telecommunications services to consumers—services historically provided by state-sanctioned monopolies. See AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). The Act imposes on incumbent LECs (“ILECs”)—carriers that have historically held monopolies in an area—the duty to provide interconnection with the facilities and equipment of competing telecommunications carriers, and, upon request, to negotiate “in good faith” the terms and conditions of agreements governing such interconnection. Id. at 371–73, 119 S.Ct. 721; 47 U.S.C. § 251(a), (c)(1). Where carriers cannot reach an agreement, they may ask the relevant state public utilities commission to mediate their differences or to provide binding arbitration. 47 U.S.C. § 252(a)(2), (b)(1).

In arbitrating the dispute, the state commission must ensure that the resulting ICA meets the requirements of Sections 251 and 252 of the Act, and must establish “just,” “reasonable,” and “nondiscriminatory” rates for services and a schedule for implementation. Id. § 252(c)-(d). Following arbitration, the state commission must then formally approve the resulting ICA, unless the state commission finds, among other things, that it violates Section 251 of the Act, or its implementing regulations, or the pricing standards of Section 252 of the Act. Id. § 252(e)(1), (e)(2)(B). Any party aggrieved by the state commission's action may seek judicial review in an appropriate federal district court “to determine whether the agreement ... meets the requirements of section[s 251 and 252 of the Act].” Id. § 252(e)(6).

In addition, Sections 206 and 207 of the Act provide that a “common carrier” shall be liable for any damages resulting from its violation of the Act, and that such damages may be recovered either by filing a complaint with the Federal Communications Commission (“FCC”) or by filing suit in a district court of competent jurisdiction. See id. §§ 206, 207. A common carrier is “any person engaged as a common carrier for hire, in interstate ... communication by wire or radio.” Id. § 153(11). This court has previously observed that the relationship between the terms “local exchange carrier” and “common carrier” is not clear, but it appears that a LEC may also be a common carrier for purposes of Section 207. See W. Radio Servs. Co. v. Qwest Corp., 530 F.3d 1186, 1204 (9th Cir.2008).

II. The parties and prior proceedings

Western is an Oregon-based wireless communications provider licensed by the FCC to provide CMRS in Oregon. ILEC Qwest is authorized by the state of Oregon to provide wireline services in Oregon. Both are “telecommunications carriers” governed by the Act. See47 U.S.C. §§ 152(a); 153(51). However, Western is not licensed to provide wireline services in Oregon and is thus not a “LEC” within the meaning of the Act. Western has been doing business with Qwest, or Qwest's predecessor, U.S. West Communications, since before the Act was passed.

The instant dispute arises out of an ICA between Qwest and Western, arbitrated by the PUC in 2004 and approved by the PUC in 2005. Western initiated negotiations with Qwest in October 2003. No ICA ensued, and in March 2004 Western petitioned the PUC for arbitration. The PUC arbitrator resolved twelve open issues and filed his decision with the PUC on September 20, 2004. Western filed objections to the arbitrator's decision on October 1, 2004. Rejecting Western's objections, the PUC adopted the arbitrator's decision in its entirety and ordered Qwest and Western to submit for approval, within thirty days, an ICA that complied with the terms of the arbitrator's decision (“the 2004 PUC order”). Qwest timely submitted a proposed agreement to the PUC. Western had not at that point reviewed or signed the proposed agreement, though Qwest had sent Western a copy eight days earlier. However, Qwest represented to the PUC that it believed its proposed agreement was “fully compliant with the Order” and invited the PUC to approve the agreement if appropriate. SER 227. About two weeks later, Western reviewed the proposed ICA and found aspects to which it objected. Western notified Qwest of these problems but did not file any objections with the PUC.

Instead, in February 2005, after the PUC had adopted the arbitrator's findings, but before it had approved Qwest's proposed ICA, Western sued the PUC, its commissioners in their official capacities, and Qwest in the District of Oregon, claiming that (1) Qwest had failed to negotiate in good faith as required by Section 251(c)(1) of the Act, and (2) the PUC had violated its duties under the Act when it adopted the arbitrator's decision.3 The district court dismissed both claims in July 2005 for lack of subject matter jurisdiction, because the PUC had not yet taken any final action to approve or reject the ICA, and because Western had not presented its good faith claim to the PUC for adjudication. Western appealed the dismissal of the good faith claim to this Court (“the first appeal”), which held that the district court would have subject matter jurisdiction to determine whether a private right of action existed for a good faith claim under Section 207 of the Act—but that even if such a private right of action existed, for prudential reasons “the PUC must address Western's good faith claim before that claim may be brought in district court.” W. Radio Servs. Co., 530 F.3d at 1200. This Court emphasized that this requirement was prudential, as opposed to statutory or jurisdictional. Id.

Meanwhile, on October 10, 2005, while the first appeal was pending, the PUC approved Qwest's proposed ICA, finding it complied with the Act's requirements (“the 2005 PUC order”). Five days later Western filed a new petition for arbitration, which the PUC eventually dismissed as improper (“the 2006 PUC order”). Observing that this had transpired, this Court instructed the district court to consider whether the 2005 PUC order satisfied the prudential “requirement that the PUC first address [Western's] ... good faith claim,” and, if so, to determine whether a private right of action existed under the Act for violation of the duty to negotiate in good faith. W. Radio Servs. Co., 530 F.3d at 1193.

On remand from the first appeal, the district court examined the 2005 and 2006 PUC orders. W. Radio Servs. Co. v. Qwest Corp., Civ. No. 05–159–AA, 2009 WL 1312425, at *5–7 (D.Or. May 5, 2009). The district court determined that neither order addressed any type of “good faith” claim. Id. Therefore the district court again dismissed Western's good faith claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Id. at *4, *7. In a second proceeding, after additional briefing on the remaining issue of whether the approved ICA complied with the Act, the district court affirmed the PUC's orders adopting the arbitrator's decision and approving the ICA prepared by Qwest. W. Radio...

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