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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,
V.
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.

I. BACKGROUND

A. Statutory Background

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 Commission

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 market.

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 turn.

II. DISCUSSION

A. Standard for Dismissal for Lack of Subject Matter Jurisdiction

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 1996 Act.

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 immunity 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 ...


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