F I L E D

United States Court of Appeals

Tenth Circuit

DEC 21 2004

PATRICK FISHER

Clerk

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

E.SPIRE COMMUNICATIONS, INC.;

ACSI LOCAL SWITCHED

SERVICES, INC., doing business as

e.spire Communications, 

Plaintiff - Appellant,

v. No. 03-2161

NEW MEXICO PUBLIC

REGULATION COMMISSION;

LYNDA LOVEJOY; DAVID W.

KING; HERB H. HUGHES; JEROME

D. BLOCK; E. SHIRLEY BACA,

Commissioners of the New Mexico

Public Regulation Commission;

QWEST CORPORATION,

Defendants - Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW MEXICO

(D.C. No. CIV-02-495-LCS/RLP)

David M. Kaufman of David M. Kaufman P.C., Santa Fe, New Mexico, for

Plaintiff-Appellant.

Margaret Caffey-Moquin, Associate General Counsel (James C. Martin, General

Counsel, with her on the brief), Santa Fe, New Mexico, for Defendant-Appellee

New Mexico Public Regulation Commission and its Commissioners.

Mary Rose Hughes of Perkins Coie LLP, Washington, D.C. (Stephen S. Hamilton

of Montgomery & Andrews, P.A., Santa Fe, New Mexico, with her on the brief),

for Defendant-Appellee Qwest Corporation.
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Before HARTZ, McKAY, and O’BRIEN, Circuit Judges.

McKAY, Circuit Judge.

This case arose pursuant to the Telecommunications Act of 1996 (the

“Act”), codified at 47 U.S.C. § 151, et seq. The district court’s opinion provides

a good history of the telecommunications industry and a detailed description of

the instant dispute which will not be repeated at length here. The relevant facts

are as follows. 

In 1996, Appellant e.spire Communications, Inc.’s predecessor, American

Communications Services, Inc., (“ACSI”), requested interconnection, service, and

unbundled network elements from U.S. West, Appellee Qwest’s predecessor. 

When the parties were unable to negotiate all of the terms of the Interconnection

Agreement (“IA”), ACSI petitioned the New Mexico State Corporation

Commission (“NMSCC”), Appellee New Mexico Public Regulation Commission’s

(“NMPRC”) predecessor, to arbitrate the unresolved issues. 

On December 6, 1996, NMSCC issued its findings of fact and conclusions

of law on the arbitration. At paragraph 80, NMSCC stated that “[t]he prices

established in this arbitration are interim prices and will be in effect pending

completion of the Commission’s costing docket.” Aplt. App., Vol. III, at C43. 
1The Cost Docket Order noted that in a number of arbitrations, including

the U.S. West/ACSI arbitration, the Commission had “established interim prices

for interconnection, unbundled network elements, transport and termination.” 

Aplt. App., Vol. III, at C93. It then stated that it was establishing “permanent

prices for interconnection, unbundled network elements, and transport and

termination.” Id. at C93-94.

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On March 3, 1997, NMSCC issued an order resolving a motion for clarification

filed by the parties and ordered the parties to prepare and file an IA consistent

with the Arbitration Order. ACSI and U.S. West filed the IA on March 10, 1997,

which NMSCC approved on April 9, 1997. The IA set the call termination rate at

.0029585 per Minute of Use (“MOU”) for large metropolitan areas but did not

specifically state whether the rate was permanent or interim.

On March 17, 1998, ACSI filed a complaint with NMPRC, f/k/a NMSCC,

alleging that U.S. West had failed to pay reciprocal compensation to ACSI for

terminated calls to Internet Service Providers (“ISPs”) pursuant to the IA at the

IA approved rate of .0029585 per MOU. U.S. West asserted that it was not

obligated to pay reciprocal compensation and, in the alternative, that, if it was so

obligated, any payment should be at the rate established by NMPRC in its Cost

Docket Order1 (.0011083 per MOU) because the IA rates were interim. NMPRC

agreed with ACSI that reciprocal compensation was required but stated that the

rates in the IA were interim. Since the Cost Docket rate was established in

August 1998, NMPRC decided that the lower rate established in the Cost Docket
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Order applied to minutes terminated during and after September 1998. The Final

Order was entered on March 5, 2002.

e.spire, f/k/a ACSI, filed the current complaint in the district court on

May 2, 2002, seeking review of NMPRC’s Final Order pursuant to 47 U.S.C.

§ 252(e)(6) and 28 U.S.C. § 1331. e.spire alleged that NMPRC violated the Act

by failing to enforce the unambiguous language of the IA which allegedly set

permanent rates for call termination. e.spire further claimed that its equal

protection and due process rights were violated and that its property had been

taken without payment of just compensation. e.spire also asserted a claim for

damages against NMPRC pursuant to 42 U.S.C. § 1983 for deprivation of “rights,

privileges and immunities secured to it under the Due Process Clause and the

Equal Protection Clause of the United States Constitution.” Aplt. App., Vol. I, at

A66.

The district court agreed with NMPRC and Qwest, f/k/a U.S. West, and

affirmed NMPRC’s Final Order in the underlying administrative complaint

proceeding. The district court also granted partial summary judgment dismissing

e.spire’s causes of action for deprivation of due process, equal protection,

unlawful taking, and damages pursuant to 42 U.S.C. § 1983. e.spire appeals to

this court.

The issues on appeal are 1) whether the district court correctly decided that
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NMPRC was not arbitrary and capricious in exercising its continuing jurisdiction

to interpret and enforce the IA between e.spire and Qwest; 2) whether the district

court was correct in granting summary judgment to Appellees on e.spire’s

constitutional and 42 U.S.C. § 1983 claims; and 3) whether the district court was

correct in denying e.spire’s request for leave to amend its amended complaint to

include a claim for impairment of contract.

We review de novo the district court’s grant of summary judgment applying

the same legal standards as the district court. Ahrens v. Ford Motor Co., 340 F.3d

1142, 1145 (10th Cir. 2003); Steele v. Thiokol Corp., 241 F.3d 1248, 1252 (10th

Cir. 2001). We review de novo whether the state commission properly interpreted

and applied the Act and its regulations. Southwestern Bell Tel. Co. v. Apple, 309

F.3d 713, 717 (10th Cir. 2002). Once we determine that the state commission

properly interpreted the Act and its regulations, we apply an arbitrary and

capricious standard to review the commission’s application of that law to the facts

of the case. Id.

The parties agree that they are bound by a partially negotiated, partially

arbitrated IA. The crux of the dispute is whether a specific term–the call

termination rate for calls to ISPs–was arbitrated or negotiated. e.spire contends

that the rate was negotiated while Appellees argue that the rate was arbitrated. 

e.spire further argues that NMPRC incorrectly interpreted the IA and decided that
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the (allegedly negotiated) call termination rate set forth therein was interim

instead of permanent. Because this query involves determinations of fact and

because there is no meritorious argument that NMPRC incorrectly interpreted and

applied the Act itself, we apply an arbitrary and capricious standard of review. 

See id. Therefore, the specific question on appeal is whether NMPRC was

arbitrary and capricious in its factual findings and resultant interpretation of the

IA. Based on this deferential standard of review and the record on appeal, we

hold that NMPRC was not arbitrary and capricious in its determination that the

rate set forth in the IA was interim.

Section 252 of the Act expressly gives state commissions the authority to

approve or reject interconnection agreements, but it does not specifically address

the interpretation and enforcement of interconnection agreements after their

initial approval. See 47 U.S.C. §§ 252(a)(2), (b)(1), (e)(1). However, “[t]his

grant to the state commissions to approve or reject and mediate or arbitrate

interconnection agreements necessarily implies the authority to interpret and

enforce specific provisions contained in those agreements.” Southwestern Bell

Tel. Co. v. Brooks Fiber Communications of Okla., Inc., 235 F.3d 493, 497 (10th

Cir. 2000); see also BellSouth Telecomm., Inc. v. MCIMetro Access Transmission

Servs., Inc., 317 F.3d 1270, 1274 (11th Cir. 2003). The Act gives state

commissions the power to arbitrate contested terms. Accordingly, NMPRC had
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the inherent authority to interpret and enforce the IA that it had previously

approved. 

We agree with the district court that “[t]he Interconnection Agreement did

not arise in a vacuum; it was but one step in a complex and on-going regulatory

process.” Aplt. App., Vol I., at A37 (E.spire v. Baca, 269 F. Supp. 2d. 1310,

1329 (D.N.M. 2003)). An interconnection agreement is not an ordinary private

contract. It is a document resulting from arbitration authorized and required by

federal law which cannot be viewed in isolation. An interconnection agreement is

not to be construed as a traditional contract but as an instrument arising within the

context of ongoing federal and state regulation. Verizon Maryland, Inc. v. RCN

Telecom Servs., Inc., 232 F. Supp. 2d 539, 552 n.5 (D. Md. 2002) (“[A]n

interconnection agreement is part and parcel of the federal regulatory scheme and

bears no resemblance to an ordinary, run-of-the-mill private contract.”). It is

counterintuitive to require a state commission to interpret such a document

without the benefit of the circumstances giving rise to the agreement.

e.spire asserts that NMPRC did not merely interpret the IA; instead, it

modified the IA’s terms. e.spire’s argument is basically that NMPRC ignored the

plain unambiguous language of the IA and improperly modified the IA to reflect

its interpretation of extrinsic evidence. This attempt by e.spire to characterize

NMPRC’s ruling as a modification of the IA instead of an interpretation is
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mistaken. NMPRC did not attempt to modify the IA. Instead, NMPRC construed

the IA as consistent with its own Arbitration Order which specified the terms

which were arbitrated. NMPRC gave effect to all of the IA’s terms within the

intent of all of NMPRC’s prior orders. The prior orders are part and parcel of the

IA, and the IA cannot be severed from the circumstances that gave rise to it. 

The IA, the Arbitration Order, and the other documents that were before

NMPRC involving the ISP call termination rate are not a model of clarity. 

NMPRC, acting in its unique area of expertise, sifted through these documents

and other evidence and made a determination that the IA call termination rate for

ISPs was 1) arbitrated, not negotiated, and 2) intended to be interim in effect until

the Cost Docket rate was established. At the heart of these determinations were a

string of factual findings in support of this conclusion. 

NMPRC first found that e.spire had brought the rate-setting issue before the

NMPRC for arbitration which NMPRC resolved by arbitration. Aplt. App., Vol.

III, at 158-59, 187; Aplt. App., Vol. I., at A36 (E.spire v. Baca, 269 F. Supp. 2d.

1310, 1328 (D.N.M. 2003) (“A de novo review of the record and actions of the

NMPRC establishes that e.spire brought the rate-setting issue before the NMPRC

for arbitration and that the NMPRC resolved this issue by arbitration.”)). In

support of this factual finding, NMPRC noted that e.spire’s Petition for

Arbitration showed that it asked for the arbitration of “issues concerning
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compensation for the transport and termination of traffic exchanged between the

parties.” Aplt. App., Vol. IV, at D84-85, 87. The Hearing Examiner noted that

e.spire’s post- (arbitration) hearing brief “made it clear that the Commission

needed to conduct an investigation into cost/price issues, and that there was no

prior negotiated agreement on a specific termination rate.” Aplt. App., Vol. III,

at 187-88. The above record support belies e.spire’s argument that the rates were

negotiated and set before arbitration commenced. 

NMPRC’s second finding was that the IA call termination rate for ISPs was

intended to be interim and only in effect until the Cost Docket rate was

established. In support of this finding, NMPRC noted that the Arbitration Order

directed the parties to set interim rates and told them how to calculate the rates. 

Aplt. App., Vol. III, at C50; Vol. I, at A308-11. It noted that, at paragraph 80,

NMSCC had stated that “[t]he prices established in this arbitration are interim

prices and will be in effect pending completion of the Commission’s costing

docket.” Aplt. App., Vol. III, at C43. The Arbitration Order reserved certain

issues, including the establishment of permanent prices, for resolution in the Cost

Docket proceeding. See id. The Cost Docket Order further noted that in a

number of arbitrations, including the U.S. West/ACSI arbitration, the Commission

had “established interim prices for interconnection, unbundled network elements,

transport and termination.” Aplt. App., Vol. III, at C93-94. It then stated that it
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was establishing “permanent prices for interconnection, unbundled network

elements, and transport and termination.” Id. at C94. Relying on the above

record support, NMPRC was not clearly erroneous in construing the IA to include

the costing docket studies referred to in the Arbitration Order. 

e.spire tries to hang its argument on the absence of a footnote in the IA. 

Specifically, there is a footnote in the IA which states that the rates for unbundled

loops are interim, but no similar footnote appears on the call termination rate

page. However, NMPRC determined that its placement of Finding 80 at the end

of Section B (“[t]he prices established in this arbitration are interim prices and

will be in effect pending completion of the Commission’s costing docket”) was

not intended to limit its effect to unbundled loop rates. Aplt. App., Vol. III, at

C43, C159. An additional footnote would have made the IA more clear. But, the

absence of a footnote does not automatically render it unclear. We are reluctant

to hold that the absence of a footnote renders all of the other record evidence

meaningless. The absence of a footnote cannot control prior relevant language in

the agreement. The Arbitration Order expressly set aside pricing elements in the

IA as being interim and subject to the costing docket. Since by its express terms

the Arbitration Order applies to all prices established in the arbitration, call

termination rates must be similarly treated.

NMPRC was authorized to establish prices for call termination and to make
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those rates interim. The IA’s silence on whether the specific rates were interim or

permanent should not be construed contrary to the intent of NMPRC. Although

the IA does not specify within its four corners that the call termination rates are

interim, it also does not expressly state that they are permanent. It would be

inconsistent with the IA and the circumstances leading up to the agreement to

hold that NMPRC could not construe the IA in a manner consistent with its own

intent because of the lack of a clarifying footnote in the IA itself. 

We hold that the rates for call termination were established in the

arbitration and that NMPRC’s determination that those rates were interim was not

arbitrary and capricious. We are in no way implying that parties cannot negotiate

agreements. We simply hold that the call termination rate for ISPs in this

particular case was arbitrated, not negotiated.

The district court did not err in its grant of summary judgment to Appellees

on e.spire’s constitutional and 42 U.S.C. § 1983 claims. e.spire first argues that

“[t]he imposition of the costing docket rate . . . was arbitrary and capricious

discrimination without rational justification in violation of e.spire’s rights to

equal protection and substantive due process under the United States and New

Mexico Constitutions.” Aplt. App., Vol. I, at A17. The Equal Protection Clause

provides that “[n]o state shall . . . deny to any person within its jurisdiction the

equal protection of the laws. U.S. Const. amend. XIV, § 1. The New Mexico
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Constitution also provides that no “person [shall] be denied equal protection of

the laws.” N.M. Const. art. II, § 18. Equal protection of the laws “is essentially a

direction that all persons similarly situated should be treated alike.” City of

Cleburne v. Cleburne Living Ctr., 473 U.S. 432, 439 (1985). Since e.spire does

not assert that it is a member of a suspect class or was denied a fundamental right,

the state regulation need only be rationally related to a legitimate government

purpose. Save Palisade Fruit Lands v. Todd, 279 F.3d 1204, 1213 (10th Cir.

2002). Therefore, NMPRC’s imposition of the costing docket rate “need only

bear a rational relation to some legitimate end to satisfy the Equal Protection

Clause.” Id. at 1213 (quoting Kinnel v. Graves, 265 F.3d 1125, 1128 (10th Cir.

2001) (internal quotations omitted)).

The imposition of the costing docket rate was rationally related to a

legitimate end. The Act requires that state commissions set just and reasonable

rates that are non-discriminatory and cost-based. See 47 U.S.C. § 252(d). e.spire

has failed to demonstrate that the imposition of the costing docket rate was

discriminatory. The rates set were applied across the board to all of the

interconnection agreements which had been arbitrated prior to the Cost Docket

Order. Aplt. App., Vol. III, at C93-94, ¶¶ 13-14. Additionally, the rates were

based on forward-looking cost studies in which e.spire participated. Id. at C23 ¶

21; Vol. I, at A28. We agree with the district court that “[t]he imposition of the
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rate set by the Costing Docket was rationally related to the legitimate state

interests in setting just and reasonable rates and ensuring greater competition in

the local telephone services market.” Aplt. App., Vol. I, at A28. 

The district court also did not err in its determination that e.spire’s

substantive due process rights were not violated. “The Fourteenth Amendment

proscribes a state from, among other things, depriving a party of ‘property

without due process of law.’” Hyde Park Co. v. Santa Fe City Council, 226 F.3d

1207, 1210 (10th Cir. 2000) (quoting U.S. Const. amend. XIV, § 1). The New

Mexico Constitution similarly provides that “[n]o person shall be deprived of life,

liberty, or property without due process of law.” N.M. Const. art. II, § 18. 

“Property,” as it relates to the Due Process Clause, is a “legitimate claim of

entitlement” to some benefit. Board of Regents of State Colleges v. Roth, 408

U.S. 564, 577 (1972). A unilateral expectation that the rate stated in the IA was

permanent does not constitute a protectable property right. See Hyde Park, 226

F.3d at1210 (“An abstract need for, or unilateral expectation of, a benefit does not

constitute ‘property.’”). e.spire did not establish a protectable property interest

and therefore cannot survive rational basis review. See id. 

Additionally, e.spire’s assertion that its due process rights were violated

when NMPRC refused to enforce the terms of the IA is not supported by the facts. 

As discussed above, NMPRC did enforce the terms of the IA. It determined that
2

“Private property shall not be taken or damaged for public use without just

compensation.” N.M. Const. art. II, § 20. 

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the rate stated in the IA was interim, only in effect until the permanent cost

docketing rate was established. The replacement of the interim rate with the

permanent rate did not change the terms of the IA.

e.spire’s assertion of an unconstitutional taking of property without just

compensation in violation of the Fifth and Fourteenth Amendments and New

Mexico Constitution art. II, §§ 18 and 202

 must similarly fail. In order to prevail

on a takings claim, e.spire must establish 1) that it had a protectable property

interest and 2) that the governmental action is a taking without just compensation. 

Puerto Rico Tel. Co. v. Telecomm. Regulatory Bd. of Puerto Rico, 189 F.3d 1, 16

(1st Cir. 1999). e.spire cannot meet the first requirement thus rendering the

second element moot. A unilateral expectation that the rate stated in the IA was

permanent does not constitute a protectable property right. e.spire voluntarily

submitted the issue of the call termination rate to be determined by NMPRC in

binding arbitration. See Connolly v. Pension Benefit Guarantee Corp., 475 U.S.

211, 227 (1986). Additionally, as discussed above, the ISP call termination rate

that e.spire relied on was interim, not permanent. e.spire could not have had a

protectable property interest in the interim call termination rate remaining

permanent. “e.spire does not have a property right in [the] application of the
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interim rate for an indefinite period, [and therefore] it cannot assert a viable

takings claim under the Fifth Amendment.” Aplt. App., Vol. I, at A30-31 (E.spire

v. Baca, 269 F. Supp. 2d. 1310, 1325 (D.N.M. 2003)).

We need not address whether e.spire is entitled to bring a 42 U.S.C. § 1983

claim for damages based on deprivations under the Act because, as discussed

above, none of e.spire’s Constitutional claims are viable in this case. Since

e.spire has failed to establish the violation of a federally protected right, the §

1983 cause of action must fail. See Crown Point I, LLC v. Intermountain Rural

Elec. Ass’n, 319 F.3d 1211, 1216 (10th Cir. 2003) (“In order to prevail on its 42

U.S.C. § 1983 claim, plaintiff must demonstrate that it suffered a deprivation of a

federally protected right.”).

The district court did not abuse its discretion in denying e.spire’s request

for leave to amend its amended complaint to include a claim for impairment of

contract. “A court properly may deny a motion for leave to amend as futile when

the proposed amended complaint would be subject to dismissal for any reason,

including that the amendment would not survive a motion for summary

judgment.” Bauchman for Bauchman v. West High Sch., 132 F.3d 542, 562 (10th

Cir. 1997); see also Wilson v. American Trans Air, Inc., 874 F.2d 386, 392 (7th

Cir. 1989).

We agree with the district court that “NMPRC’s modification of the call
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termination rate was consistent with the Interconnection Agreement and

authorized by law.” Aplt. App., Vol I., at A38 (E.spire v. Baca, 269 F. Supp. 2d.

1310, 1329 (D.N.M. 2003). Therefore, an impairment of contract claim would not

survive a motion to dismiss or for summary judgment.

AFFIRMED.