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MCI TELECOMMUNICATIONS CORP. v. NEW YORK TELEPHONE
March 7, 2001
MCI TELECOMMUNICATIONS CORPORATION, A DELAWARE CORPORATION, AND MCIMETRO ACCESS TRANSMISSION SERVICES, INC., A DELAWARE CORPORATION, PLAINTIFFS,
NEW YORK TELEPHONE COMPANY D/B/A BELL ATLANTIC-NEW YORK, A NEW YORK CORPORATION; THE NEW YORK PUBLIC SERVICE COMMISSION; AND JOHN F. O'MARA, THOMAS J. DUNLEAVY, MAUREEN 0. HELMER, AND JAMES D. BENNETT IN THEIR OFFICIAL CAPACITIES AS MEMBERS OF THE NEW YORK PUBLIC SERVICE COMMISSION, DEFENDANTS. UNITED STATES OF AMERICA, INTERVENOR.
The opinion of the court was delivered by: Kahn, District Judge.
MEMORANDUM — DECISION AND ORDER
Presently before the Court is a motion for summary judgment by
plaintiffs MCI Telecommunications Corporation and MCIMetro
Access Transmission Services, Inc. (collectively "MCI"), a
motion for summary judgment by defendant New York Telephone
Company d/b/a Bell Atlantic-New York ("Bell-Atlantic"), a motion
for summary judgment by defendants the New York State Public
Service Commission, John F. O'Mara, Thomas J. Dunleavy, Maureen
o. Helmer, and James D. Bennett (collectively "Public Service
Commission"), and a cross-motion for summary judgment by
defendant Public Service Commission based upon its affirmative
defenses. For the following reasons MCI's motion is DENIED in
part and held in ABEYANCE in part, Bell-Atlantic's cross motion
is DENIED, and the Public Service Commission's motion is GRANTED
in part and held in ABEYANCE in part, and its cross motion based
upon its affirmative defenses is DENIED.
The current set of summary judgment motions arise out of
Congress' enactment of the Telecommunications Act of 1996 ("the
Act" or "the 1996 Act"). See 47 U.S.C. § 251-261. Congress
enacted the 1996 Act, in part, to stimulate competition in the
market for local telephone service. See H.R.Rep. No. 104-204
at 89 (1995); AT & T Corp. v. Iowa Utilities Bd.,
525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). Prior to the
1996 Act, local telephone service throughout the country was
typically considered a natural monopoly. See AT & T Corp., 525
U.S. at 371, 119 S.Ct. 721.
This natural monopoly existed because states typically granted
exclusive franchises in each local service area to local
exchange carriers ("LECs" or "LEC"), which owned, among other
things, the local loops (wires connecting telephones to
switches), the switches (equipment directing calls to their
destinations), and the transport trunks (wires carrying calls
between switches) that make up a local exchange network. See
id. To end this monopoly, the Act prohibited states from
enforcing laws that impede competition in the local phone
service market and placed a variety of duties on incumbent LECs
designed to induce new entrants to enter the local phone service
market. See id. Among other things, the Act required LECs to
share their network with competitor local exchange carriers
("CLECs or CLEC"). See 47 U.S.C. § 251(c)(2).
When a CLEC seeks to gain access to the LEC's existing
network, the LEC and CLEC have the option of negotiating access
without regard to the duties imposed on the LEC by the Act.
See 47 U.S.C. § 252(a)(1); AT & T Corp., 525 U.S. at 371-72,
119 S.Ct. 721. If, however, negotiations between the LEC and
CLEC fail, either party can petition the state commission that
regulates local phone service, in this case the New York State
Public Service Commission, to arbitrate disputed matters and
issue an agreement between the LEC and CLEC that incorporates
both the parties' negotiated terms and the commission's
adjudicated terms. See 47 U.S.C. § 252(c). In any case where a
state commission makes a determination regarding disputed issues
between an LEC and CLEC, either party may challenge that
decision "in an appropriate Federal district court to determine
whether the agreement [issued] meets the requirements" of the
1996 Act. 47 U.S.C. § 252(e)(6).
In the instant suit, MCI, the CLEC, and Bell-Atlantic, the
LEC, conducted lengthy voluntary negotiations designed to allow
MCI competitive access to Bell-Atlantic's network. After these
negotiations failed, MCI filed a compulsory arbitration petition
pursuant to 47 U.S.C. § 252(b) and a petition for mediation of
various technical issues with the New York State Public Service
Commission. Upon the New York State Public Service Commission's
resolution of the various outstanding matters between MCI and
Bell-Atlantic and issuance of an interconnection agreement (the
"Interconnection Agreement") incorporating its arbitration and
mediation decisions, both parties appealed to this Court
pursuant to 47 U.S.C § 252(e)(6).
B. Proceedings Before the New York State Public Service
MCI and Bell-Atlantic-specific arbitration proceedings were
conducted before Administrative Law Judge Eleanor Stein from
August 26, 1996, the date of MCI's petitions, until October 1,
1997, the date that the New York State Public Service Commission
approved the executed Interconnection Agreement between MCI and
Bell-Atlantic incorporating Judge Stein's
rulings.*fn1 While the MCI and Bell-Atlantic-specific
arbitration proceedings were proceeding before Judge Stein, the
New York State Public Service Commission also conducted
proceedings before Administrative Law Judge Joel A. Linsider
(the "Linsider Proceedings") designed to set permanent rates for
all new entrants into the local telephone service provider
Judge Linsider's findings were ultimately incorporated into
Judge Stein's rulings. MCI's and Bell-Atlantic's summary
judgment papers challenge portions of both Judge Stein's and
Judge Linsider's rulings and argue that they violate various
provisions of the 1996 Act. The Public Service Commission's
motion and cross motion both argue that MCI's and
Bell-Atlantic's challenges to its rulings have no merit and, in
any event, that the Eleventh and Tenth Amendment of the United
States Constitution divest this Court of jurisdiction from
adjudicating the merits of MCI's and Bell-Atlantic's
claims.*fn2 The Court will address each of these arguments in
A. Standard for Dismissal for Lack of Subject Matter
A court may dismiss a case for lack of subject matter
jurisdiction under Fed.R.Civ.P. 12(b)(1) when it lacks the
constitutional or statutory power to adjudicate the case. See
Fed R. Civ. P. 12(b)(1). In fact, because federal courts are
courts of limited jurisdiction and can adjudicate "only those
cases within the bounds of Article III of the United States
Constitution and Congressional enactments stemming therefrom,"
Walsh v. McGee, 899 F. Supp. 1232, 1236 (S.D.N.Y. 1995),
whenever "it appears by suggestion of the parties or otherwise"
that this Court lacks jurisdiction of the subject matter it must
affirmatively dismiss the action, Fed.R.Civ.P. 12(h)(3).
As such, the burden of proving that a federal court has
subject matter jurisdiction over an action rests upon the party
attempting to invoke the court's jurisdiction, see Thomson v.
Gaskill, 315 U.S. 442, 446, 62 S.Ct. 673, 86 L.Ed. 951 (1942),
and no presumption of truth attaches to the non-moving party's
allegations, see Brown v. American Legion Cortland City Post,
64 F. Supp.2d 96, 97 (N.D.N.Y. 1999). Moreover, because a
dismissal under Fed R. Civ. P. 12(b)(1) is not a dismissal on
the merits and is without res judicata effect on the underlying
merits of the claims, when a court dismisses a case pursuant to
12(b)(1) it is precluded from exercising supplemental
jurisdiction over related state claims. See Gushing v. Moore,
970 F.2d 1103, 1106 (2d Cir. 1992).
1. Public Service Commission's Eleventh Amendment Claim
a. State Sovereign Immunity Generally
The Eleventh Amendment to the United States Constitution
declares that "[t]he judicial power of the United States shall
not be construed to extend to any suit in law or equity
commenced or prosecuted against one of the United States by
Citizens of another State, or by Citizens or Subjects of any
Foreign State." U.S. Const. amend. XI. It has been interpreted
to prevent federal courts from exercising jurisdiction over
suits brought by citizens of a state against the state or the
state's agencies. See Puerto Rico Aqueduct & Sewer Auth. v.
Metcalf & Eddy, 506 U.S. 139, 144, 113 S.Ct. 684, 121 L.Ed.2d
605 (1993); Edelman v. Jordan, 415 U.S. 651, 652-53, 94 S.Ct.
1347, 39 L.Ed.2d 662 (1974); Hans v. Louisiana, 134 U.S. 1,
1011, 10 S.Ct. 504, 33 L.Ed. 842 (1890). Additionally, when a
state is not named explicitly in a suit but is the real party in
interest, the Eleventh Amendment bars a federal court from
exercising jurisdiction over the suit. See Pennhurst State Sch.
& Hosp. v. Halderman, 465 U.S. 89, 101, 104 S.Ct. 900, 79
L.Ed.2d 67 (1984). Finally, the Eleventh Amendment bars Congress
from utilizing its Article I powers, and in particular the
Commerce Clause, to abrogate a state's sovereign immunity. See
Seminole Tribe v. Florida, 517 U.S. 44, 72, 116 S.Ct. 1114, 134
L.Ed.2d 252 (1996).
Eleventh Amendment immunity is, however, subject to
limitations. See College Savings Bank v. Florida Prepaid
Postsecondary Educ. Expense Bd., 527 U.S. 666, 670, 119 S.Ct.
2219, 144 L.Ed.2d 605 (1999). For example, Congress may
authorize a private party to sue a nonconsenting state in
federal court pursuant to its powers to enforce the Fourteenth
Amendment. See Kimel v. Florida Bd. of Regents, 528 U.S. 62,
80, 120 S.Ct. 631, 145 L.Ed.2d 522 (2000); College Savings
Bank, 527 U.S. at 670, 119 S.Ct. 2219. A state may also consent
to suit and thereby subject itself to the jurisdiction of a
federal court. See Clark v. Barnard, 108 U.S. 436, 447-48, 2
S.Ct. 878, 27 L.Ed. 780 (1883). Additionally, a party may sue
state officials in their individual capacity in federal court
for prospective injunctive relief to stop the state official
from violating federal law. See Ex parte Young, 209 U.S. 123,
156, 28 S.Ct. 441, 52 L.Ed. 714 (1908)
b. Waiver of Sovereign Immunity
The Public Service Commission argues that the Eleventh
Amendment bars a telecommunications carrier from utilizing
47 U.S.C. § 252(e)(6) to bring suit against it in federal district
court. Specifically, the Public Service Commission argues that,
because the Telecommunications Act of 1996 was passed pursuant
to Congress' powers under the Commerce Clause, Congress lacked
the power to abrogate its sovereign immunity. See U.S. Const.
art I, § 8, cl. 3; see also U.S. Const. amend XI. Moreover,
the Public Service Commission asserts that it did not voluntary
waive its sovereign immunity. In response, the United States of
America, MCI, and Bell-Atlantic argue that the Public Service
Commission waived its Eleventh Amendment immunity because it
voluntarily accepted and performed its assigned role under the
The Court disagrees with the Public Service Commission's
argument that it did not waive its sovereign immunity by
arbitrating the MCI and Bell-Atlantic dispute. Supreme Court
jurisprudence has "long recognized that a State's sovereign
immunity is a personal privilege which it may waive at [its]
pleasure." College Sav. Bank, 527 U.S. at 675, 119 S.Ct. 2219
(quoting Clark, 108 U.S. at 447,, 2 S.Ct. 878). Generally, a
court will conclude that a state has waived its sovereign
if the state voluntarily invokes its jurisdiction, See Gunter
v. Atlantic Coast Line R.R. Co., 200 U.S. 273, 284, 26 S.Ct.
252, 50 L.Ed. 477 (1906). Alternatively, waiver will be found if
the state clearly declares that it intends to submit itself to
the court's jurisdiction. See College Sav. Bank, 527 U.S. at
675-76, 119 S.Ct. 2219 (quoting Great Northern Life Ins. Co. v.
Read, 322 U.S. 47, 54, 64 S.Ct. 873, 88 L.Ed. 1121 (1944)).
Recently, the Supreme Court overruled as "ill conceived" the
notion that a state can constructively waive its sovereign
immunity by its "mere presence in a field subject to
congressional regulation." See College Sav. Bank, 527 U.S. at
680, 119 S.Ct. 2219. Ruling that such participation is "very far
from concluding that the State made an `altogether voluntary'
decision to waive its immunity" the Court concluded that a state
waives its sovereign immunity by engaging in activity subject to
congressional regulation if (1) Congress clearly and
unambiguously puts the state on notice that the state's conduct
subjects it to federal suits brought by individuals; (2) the
state may refuse from participating in the particular activity
without otherwise excluding itself from conduct that is lawfully
within its powers; and (3) the state elects to engage in the
conduct after it receives notice that such conduct subjects it
to suit. Id. at 675-87, 119 S.Ct. 2219; see also, AT&T Comms.
v. BellSouth Telecomms., 238 F.3d 636, 644 (5th Cir. 2001).
Although no court in this Circuit has addressed the issue of
whether a state commission waives its sovereign immunity by
arbitrating disputes under the 1996 Act, at least 14 district
courts and three of the four circuit courts to address this
issue have concluded that a state commission's participation in
the arbitration scheme established under the Act effectuates a
nonverbal voluntary waiver of the state commission's Eleventh
Amendment immunity under College Savings Bank. See AT & T
Comms., 238 F.3d at 645; MCI Telecomms. Corp. v. Illinois Bell
Tel. Co., 222 F.3d 323, 344 (7th Cir. 2000); MCI Telecomms.
Corp. v. Public Serv. Comm'n, 216 F.3d 929, 939 (10th Cir.
2000); Bell Atlantic-Pennsylvania, Inc. v. Pennsylvania Pub.
Util. Comm'n, 107 F. Supp.2d 653, 662 (E.D.Pa. 2000); Bell
Atlantic-Delaware, Inc. v. McMahon, 80 F. Supp.2d 218, 233 (Del.
2000); Bell Atlantic-Delaware, Inc. v. Global Naps South,
77 F. Supp.2d 492, 500 (Del. 1999); AT&T Comms. of Southwest, Inc.
v. Southwestern Bell Tel. Co., 86 F. Supp.2d 932, 947 (W.D.Mo.
1999) (rev'd, in part, on other grounds); Indiana Bell Tel. Co.
v. Smithville Tel. Co., Inc., 31 F. Supp.2d 628, 637 (S.D.Ind.
1998); Michigan Bell Tel. Co., 16 F. Supp.2d at 825; MCI
Telecomms. Corp. v. BellSouth Telecomms., Inc., 9 F. Supp.2d 766,
770 (E.D.Ky. 1998); Indiana Bell Tel. Co., Inc. v.
McCarty, 30 F. Supp.2d 1100, 1106 (S.D.Ind. 1998); MCI
Telecomms. Corp. v. Illinois Bel Tel. Co., No. 97 CV 2225, 1998
WL 156678, at *7 (N.D.Ill. Mar. 31, 1998); AT&T Comms., Inc. v.
Michigan Bell Tel. Co., 60 F. Supp.2d 636, 641 ...