SUPREME COURT MULLS STATES RIGHTS ISSUE IN TELECOM CASES

Some telecom experts in audience said court didn’t appear likely to agree on broad sovereign immunity issue because there was precedent for allowing such suits. Concerns expressed by ICC about naming individual commissioners in such suits also seemed to get little interest from justices. But outcome was less clear on 2nd question of whether there should be “bifurcated” approach to reviewing PUC rulings, as several justices termed it. They expressed concern about creating “confusing” approach in which challenges to some PUC decisions could be heard in federal courts and others in state courts. Several asked attorneys how many cases generally stemmed from state participation in interconnection agreements, indicating concern that such cases could end up flooding Supreme Court because of jurisdictional questions. Richard Metzger, Focal Communications attorney who viewed argument from audience, said competitors main interest here was to gain “clarity.”

At issue is Telecom Act’s provision for U.S. Dist. Court review of disputes over interconnection agreements negotiated, and sometimes arbitrated, under state PUC authority. Two cases heard Wed. are based on somewhat different legal premises: (1) ICC case says sovereign immunity provision of Constitution and Sec. 252 of Telecom Act bar parties from challenging PUC enforcement decisions. (2) Md. case centers on interpretation of Sec. 1331 of U.S. Code, which allows U.S. Dist. Courts to hear all lawsuits arising under federal law, including those involving state actions. U.S. said that section was very broad and allowed federal court review of all suits stemming from federal laws. Md. PSC argued that section applied only to federal laws that specifically called for federal judicial review. Agency said Telecom Act mentioned judicial review only in context of “approvals” and not enforcement, so “approvals” were only actions on which states can be sued, issue that state of Ill. agreed with.

Neither state appeared to challenge idea of federal lawsuits over approvals, limiting their opposition to suits over enforcement actions. However, idea of different treatment for different types of state actions seemed to make justices uncomfortable. After Ill. Solicitor Gen. Joel Bertocchi said enforcement of interconnection agreements should be done by state courts, Justice Anthony Kennedy said that was “odd concept, a state court looking at federal law.” Bertocchi explained that enforcement of interconnection agreements fell under state contract law. “It sounds like a mess,” said Justice Stephen Breyer, asking why Congress would want different jurisdictions for different types of proceedings, question seconded by Justice David Souter. Bertocchi answered that Congress wanted dual jurisdiction because it would “recognize that these [enforcement] cases are state law driven.”

Bertocchi said this case wasn’t about basic federal issue of competitive access but rather “it’s about whether Ameritech owed money” to competitors, “a contract case.” Barbara McDowell, asst. U.S. Solicitor Gen., responded that “there have been many cases before this court involving federal [review] of state actions,” including precedent- setting 1908 Ex Parte Young case in which railroad companies were permitted to sue Minn. attorney gen. She also agreed with Justice Kennedy that it could be argued that regulators had waived their immunity when they chose to participate in federal interconnection program. Justice Antonin Scalia said he couldn’t “see how the federal government would get into this without being able to [participate in enforcement.]” Confusion cited by justices “all the more argues for uniformity” through federal court review, McDowell said.

In Md. case, Verizon attorney Mark Evans countered that all parts of interconnection agreements should be viewed as federal and every action, “every interpretation” had federal implications. In fact, he said, every provision of an interconnection agreement “is like a tariff” that other carriers can adopt: “It belongs in federal court.” Bifurcation would be impractical, he said. Testifying in Ill. case, WorldCom attorney Paul Smith said there was one area where WorldCom disagreed with Verizon on that point -- WorldCom thought it should have option of state or federal court review, depending on issue. “Every case is not a federal case,” he said, and enforcement cases often are seen as state contract law cases.

Adding to confusion is possibility that one of cases could be dropped for lack of standing because it was brought by winning party, Ill. Commerce Commission. After ICC ruled that Ameritech had to pay reciprocal compensation, Ameritech sought review in U.S. Dist. Court, Chicago, which refused ICC’s request for dismissal on sovereign immunity ground but still ruled in ICC’s favor on reciprocal compensation issue. “You won,” Breyer said during presentation by Ill. Solicitor Gen. Bertocchi. “I wouldn’t think you could appeal,” Breyer said, joining several justices in questioning whether Ill. had standing. Bertocchi replied that state was appealing court’s refusal to dismiss case, not its eventual ruling in favor of ICC. Md. case also involved dispute over reciprocal compensation payments to competitors, this time by Verizon.

Two separate oral arguments were heard, one for each case, by 8 justices. Justice Sandra O'Connor recused herself as she often does because of personal investments.