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 (E.D.Mich. 1998);
US West Comms., Inc. v. MFS Intelenet, Inc., 35 F. Supp.2d 1221,
1230 (Or. 1998); US West Comms., Inc. v. TCG Oregon,
35 F. Supp.2d 1237, 1245 (Or. 1998); BellSouth Telecomms., Inc. v.
Tennessee Regulatory Auth., No. 3:97-0523, 1998 WL 1109434, at
*8 (M.D.Tenn. Jan. 27, 1998); US West Comms., Inc. v. Public
Serv. Comm'n of Utah, 991 F. Supp. 1299, 1302 (Utah 1998).
The underlying rationale for each of these opinions is that
the Act does not mandate that a state commission participate in
the arbitration process. If a state chooses not to participate
in the Act, the Federal Communications Commission ("FCC")
assumes the role of the state commission. See
47 U.S.C. § 252(e)(5). However, if a state does choose to participate, the
Act expressly provides that any
aggrieved party to a state commission's determination may bring
suit in an appropriate Federal district court. See
47 U.S.C. § 252(e)(6).
The one circuit to conclude otherwise rested its decision on
the fact that constructive waivers of sovereign immunity are
disfavored and that Congress was not "unmistakably clear and
unequivocal in its intent" to condition a states' participation
in the 1996 Act's regulatory scheme as a waiver of its immunity.
Bell Atlantic Maryland Inc. v. MCI Worldcom, Inc.,
240 F.3d 279, 291 (4th Cir. 2001). The Fourth Circuit's decision ignored
the fact that College Savings Bank did not absolutely prohibit
courts from concluding that a state's voluntary participation in
a regulatory scheme may sometimes effectuate a waiver of that
state's sovereign immunity. Instead, the Fourth Circuit's
opinion reduced the first prong of the three prong waiver test
expressed in College Savings Bank to a cursory examination of
whether the 1996 Act invoked the words "State[s] shall not be
immune under the Eleventh Amendment . . . from suit in Federal
Court." Bell Atlantic Maryland, Inc., 240 F.3d at 291.
Not only does such a reading of College Savings Bank and the
Eleventh Amendment destroy the underlying purpose of the 1996
Act, it creates an untenable distinction whereby the waiver
language contained in 47 U.S.C. § 252(e)(6) stating that an
aggrieved party may challenge a decision of the state commission
"in an appropriate Federal district court" somehow fails to put
States on notice that their choice to arbitrate disputes under
the Act subjects them to suit in federal district court.
47 U.S.C. § 252(e)(6). In comparison, when Congress declares, in a
statute like 42 U.S.C. § 2000d-7(a)(1), that "[a] State shall
not be immune under the Eleventh Amendment of the Constitution
of the United States from suit in Federal court," a state is
placed on notice that its sovereign immunity is waived even
though the waiver language of both 47 U.S.C. § 252(e)(6) and
42 U.S.C. § 2000d-7(a)(1) unambiguously purport to subject states
to suit in federal court. See 42 U.S.C. § 2000d-7(a)(1); see
also Bell Atlantic Maryland, Inc. 240 F.3d at 291.
Resting a sovereign immunity waiver decision on this kind of
technicality without examining the statute in context
eviscerates Congress' ability to cope with the delicate and
complex task of promoting increased competition in the local
telephone service provider market. As Justice Scalia noted when
examining the 1996 Act in AT & T Corp. v. Iowa Utilities Bd.,
"if the federal courts believe a state commission is not
regulating in accordance with federal policy they may bring it
to heel." Iowa Utilities Bd., 525 U.S. at 379 n. 6, 119 S.Ct.
721. This Court's decision to follow the majority of other
Courts that have addressed this issue allows it do just that —
bring the Public Service Commission to heel if it does not
regulate in accordance with the federal policies expressed by
the 1996 Act.
Accordingly, this Court holds that Congress clearly and
unambiguously put the Public Service Commission on notice that
participation in the Act's arbitration scheme subjected it to
federal suit. The Public Service Commission could have refused
to participate in the Act without otherwise excluding itself
from conduct lawfully within its powers.*fn3 Despite this
fact, the Public Service Commission chose to participate in the
arbitration process established under the Act. As a result, the
Public Service Commission waived its Eleventh Amendment immunity
as to arbitration determinations made pursuant to the 1996 Act.
Consequently, the Court denies the Public Service Commission's
cross-motion to dismiss for lack of jurisdiction based upon
2. Public Service Commission's Tenth Amendment Claim
a. Tenth Amendment Generally
The Tenth Amendment provides that "[t]he powers not delegated
to the United States by the Constitution, nor prohibited by it
to the States, are reserved to the state respectively, or to the
people." U.S. Const. amend. X. It assures that the system of
dual sovereignty inherent in the constitutional structure
remains intact "by reserving to the states or the people the
powers not delegated by the Constitution to the United States."
Petersburg Cellular v. Board of Supervisors of Nottoway,
205 F.3d 688, 700 (4th Cir. 2000) (citing Printz v. United States,
521 U.S. 898, 91819, 117 S.Ct. 2365, 138 L.Ed.2d 914 (1997)).
Accordingly, the "Constitution has never been understood to
confer upon Congress the ability to require the States to govern
according to Congress' instructions." New York v. United
States, 505 U.S. 144, 162, 112 S.Ct. 2408, 120 L.Ed.2d 120
b. Tenth Amendment's Application to the Arbitration
Provisions of the 1996 Act
The Public Service Commission's Tenth Amendment argument rests
upon the premise that the 1996 Act compels it to implement a
federal program in violation of its inherent right to remain
independent and sovereign from the federal government. See,
e.g., Printz, 521 U.S. at 92425, 117 S.Ct. 2365. In essence,
the Public Service Commission asserts that the Act requires it
to function as a "bureaucratic
puppet of the Federal Government or to abandon regulation of an
entire field traditionally reserved" to it. Federal Energy
Regulatory Comm'n v. Mississippi, 456 U.S. 742, 783, 102 S.Ct.
2126, 72 L.Ed.2d 532 (1982). The Court disagrees.
Congress simply offered the State, consistent with the Tenth
Amendment, "the choice of regulating the activity according to
federal standards or having state law pre-empted by federal
regulation." New York, 505 U.S. at 167, 112 S.Ct. 2408. As
Congress, pursuant to its inherent powers under the Commerce
Clause, was well within its Constitutional right to preempt the
Public Service Commission from regulating telecommunications
matters that were traditionally reserved to it, the Act's
arbitration provisions could not violate the Tenth Amendment.
See Cellular Phone Taskforce v. Federal Telecommunications
Industry, 205 F.3d 82, 96 (2d Cir. 2000) (citing City of New
York v. Federal Comms. Comm'n, 486 U.S. 57, 63-64, 108 S.Ct.
1637, 100 L.Ed.2d 48 (1988); Capital Cities Cable, Inc. v.
Crisp, 467 U.S. 691, 698700, 104 S.Ct. 2694, 81 L.Ed.2d 580
(1984)). Moreover, the Act's arbitration provisions in no way
commandeer the Public Service Commission, but, as already held,
offers it or the State a voluntary choice to either participate
in the scheme it establishes or reject any such participation.
Under these circumstances, the Court concludes that the Tenth
Amendment does not preclude it from exercising jurisdiction over
MCI's and Bell-Atlantic's claims and now turns to the merits of
those claims. See Michigan Bell Tel. Co., 202 F.3d at 208;
see also MCI Telecomms., 9 F. Supp.2d at 772; AT & T Comms.,
60 F. Supp.2d at 640.
D. Standard and Scope of Review
The 1996 Act does not provide a legal standard that federal
courts should utilize when reviewing the decision of a state
commission. See Bell-Atlantic Delaware, 77 F. Supp.2d at 502.
Under general administrative law principles, a court is usually
confined to the administrative record when Congress does not set
forth the standards or procedures for the Court to use when
reviewing an administrative proceeding. See id; see also United
States v. Carlo Bianchi & Co., 373 U.S. 709, 715, 83 S.Ct.
1409, 10 L.Ed.2d 652 (1963). Following this guideline and the
lead of other courts to address this issue, this Court agrees
that it is limited to the record created by the state utility
commission when reviewing disputes related to interconnection
agreements issued under 47 U.S.C. § 252(e)(6). See
Bell-Atlantic Delaware, 77 F. Supp.2d at 502; Illinois Bell
Telephone Co. v. WorldCom Techs., Inc., No. 98 C 1925, 1998 WL
419493, at *2 (N.D.Ill. July 23, 1998); US West Comms., Inc.,
31 F. Supp.2d at 843.
When evaluating the record, the Court reviews the Public
Service Commission's findings of fact under the arbitrary and
capricious standard. See AT&T Comms. of Southwest Inc.,
86 F. Supp.2d at 944; US West Comms., Inc. v. Hix, 986 F. Supp. 13,
19 (Colo. 1997). When applying the arbitrary and capricious
consider whether the decision was based on a
consideration of the relevant factors and whether
there has been a clear error of judgment. . . .
Although this inquiry into facts is to be searching
and careful, the ultimate standard of review is a
narrow one. The Court is not empowered to substitute
its judgment for that of the agency.
Citizens to Preserve Overton Park, Inc. v. Volpe,