Opinion ID: 769864
Heading Depth: 2
Heading Rank: 3

Heading: The Wisconsin Litigation

Text: 33
34 Appeals 99-2805, 99-2873 and 99-2992 are the result of a dispute over an interconnection agreement entered into by Ameritech Wisconsin and MCI and approved by the PSCW. Ameritech Wisconsin and MCI had entered into interconnection negotiations as provided under subsection 252(a) of the Act, but because the parties failed to reach an agreement on some issues, MCI petitioned the PSCW under subsection 252(b)(1) to arbitrate the remaining issues. The PSCW held arbitration hearings and ultimately approved a final interconnection agreement between Ameritech Wisconsin and MCI. 35 The final agreement satisfied neither party. Thus, Ameritech Wisconsin filed suit against MCI, the PSCW, and the PSCW Commissioners in their official capacities to challenge portions of the final agreement approved by the PSCW. In its complaint, Ameritech Wisconsin alleged that certain provisions of the final agreement were contrary to the 1996 Telecommunications Act. The complaint sought declaratory and injunctive relief to enjoin the enforcement of the challenged provisions. Thereafter, MCI filed its own suit against Ameritech Wisconsin, the PSCW, and the PSCW Commissioners in their official capacities to challenge other portions of the same agreement. Like Ameritech Wisconsin, MCI alleged in its complaint that various provisions of the final agreement violated the 1996 Telecommunications Act. MCI also sought declaratory and injunctive relief. The district court consolidated the two cases, and the United States later intervened. After the district court issued its decision in this case, each party filed its own notice of appeal. 36
37 Appeal 99-2806 involves the PSCW's interpretation and enforcement of previously approved interconnection agreements between Ameritech Wisconsin and TCG of Milwaukee, Inc. (TCG) and between Ameritech Wisconsin and Time Warner Communications of Milwaukee L.P. (Time Warner). Ameritech Wisconsin and TCG entered into their agreement, which was approved by the PSCW, following negotiations and arbitration; Ameritech Wisconsin and Time Warner arrived at their final agreement, which the PSCW also approved, after negotiations only. 38 Ameritech Wisconsin's interconnection agreements with TCG and Time Warner require reciprocal compensation only for local traffic calls (calls beginning and terminating within the local calling area). After the PSCW had approved these agreements, a dispute arose over whether Ameritech Wisconsin was required, under its respective interconnection agreements with TCG and Time Warner, to pay reciprocal compensation for calls placed by Ameritech Wisconsin customers to the Internet via Internet service providers who were, in turn, customers of TCG or Time Warner. Because Ameritech Wisconsin believed that the disputed Internet calls did not terminate within the local calling area, it deemed these calls not to be local traffic and therefore refused to pay reciprocal compensation for them. 39 TCG and Time Warner, however, understood their respective interconnection agreements to entitle them to reciprocal compensation for the disputed Internet calls. Thus, they filed separate complaints with the PSCW. The companies alleged that Ameritech Wisconsin was not complying with the reciprocal compensation provisions of their respective interconnection agreements, and they asked the PSCW to enforce those provisions. The PSCW adopted the interpretation proffered by TCG and Time Warner and later entered separate enforcement orders against Ameritech Wisconsin ordering it to pay the requested reciprocal compensation. Ameritech Wisconsin then filed suit in the district court and named as defendants TCG, Time Warner, the PSCW, and the PSCW Commissioners in their official capacities. In its complaint, Ameritech Wisconsin alleged that the PSCW's enforcement orders were contrary to the 1996 Telecommunications Act, FCC regulations, and Wisconsin law. The complaint sought declaratory and other equitable relief. 40
41 The final appeal, 99-2811, stems from the PSCW's rejection of an SGAT filed with the PSCW by Ameritech Wisconsin. In proceedings before the PSCW, a number of new entrants opposed portions of the SGAT filed by Ameritech Wisconsin. The PSCW adopted the views of those that opposed Ameritech Wisconsin's SGAT, and the PSCW eventually rejected the SGAT. Ameritech Wisconsin filed suit in the district court against the PSCW and the PSCW Commissioners in their official capacities to obtain judicial review of that decision. Ameritech Wisconsin's complaint alleged violations of the 1996 Telecommunications Act, and, to the extent that the PSCW had purported to rely on state law to make its decision, the complaint further alleged that the Act preempted the state laws. Ameritech Wisconsin sought declaratory and other equitable relief. 4
42 Like their Illinois counterparts, the PSCW and the PSCW Commissioners filed motions to dismiss each of these cases. They argued that the Eleventh Amendment provided them with immunity from suit in federal court. 43 Ameritech Wisconsin and MCI argued that Wisconsin had waived its immunity by choosing to regulate interconnection agreements in accordance with the 1996 Telecommunications Act. By exercising the power granted by the Act, according to Ameritech Wisconsin and MCI, the PSCW and the PSCW Commissioners had consented implicitly to being sued in federal court under subsection 252(e)(6). Alternatively, Ameritech Wisconsin and MCI argued that the PSCW Commissioners could be sued under the Ex parte Young doctrine.
44 The district court issued two decisions relevant to our discussion. In both opinions, the district court held that Eleventh Amendment immunity barred the suits against the PSCW and the PSCW Commissioners. 45
46 In its first opinion, reported at Wisconsin Bell, Inc. v. Public Serv. Comm'n, 27 F. Supp.2d 1149 (W.D. Wis. 1998), the district court granted the motions to dismiss. According to the court, the PSCW had not waived its immunity by performing its role under sec. 252 of the 1996 Telecommunications Act. Furthermore, the district court concluded that the suits against the PSCW Commissioners could not proceed under the Ex parte Young doctrine. 47 The district court first analyzed whether the PSCW and the PSCW Commissioners could have waived their immunity by acting on the interconnection agreements and SGAT at issue in the cases before it. In the court's estimation, Congress had made its intention sufficiently clear in the 1996 Telecommunications Act that state commissions would be subject to suit in federal court to defend their rulings. Nevertheless, the district court concluded, the Act did not obtain a valid, voluntary waiver of immunity from states. The court reached this conclusion after evaluating the Supreme Court's decisions in Parden v. Terminal Railway of the Alabama State Docks Department, 377 U.S. 184 (1964), and Employees of the Department of Public Health & Welfare v. Department of Public Health & Welfare, 411 U.S. 279 (1973), both of which concerned the so-called constructive waiver doctrine. 48 According to the district court, under these cases the constructive waiver doctrine could not apply to the 1996 Telecommunications Act for several reasons. First, the court noted that, despite the many changes in telecommunications regulation wrought by the Act, the Act preserved the states' role as the primary regulators of local telephone service; the district court understood the Supreme Court's holding in Employees to preclude the application of the constructive waiver doctrine when the federal government amends or enacts a law making a state subject to suit merely by continuing in existing activities to protect its citizens. 27 F. Supp.2d at 1158 (citing Employees, 411 U.S. at 296 (Marshall, J., concurring)). The district court next observed that when state commissions are asked to review voluntarily negotiated interconnection agreements, state commissions must review that agreement or accept the consequence that the agreement will go into effect without any form of government oversight. Id. Finally, the district court explained its view that staying out of the interconnection process cannot be said to be a realistic option for a state commission because the commission cannot be expected to abandon its mandate to protect the public interest. Id. For these reasons, the district court explained, any waiver obtained from Wisconsin under the Act could not have been voluntary. 49 The district court also determined that the Ex parte Young doctrine was inapplicable to these cases. The court reached this conclusion based on its reading of the Supreme Court's decision in Seminole Tribe. According to the district court, in order for it to determine whether application of the Ex parte Young doctrine was appropriate here, Seminole Tribe required the court to engage in a two-step inquiry. Thus, it analyzed (1) whether Congress created a remedy for the rights created in the 1996 Telecommunications Act and (2) whether the remedy created by Congress contemplated a suit against a state official. The district court never reached the second aspect of this inquiry because it concluded that, with the Act, Congress had created an adequate remedy to secure federal rights such that Seminole Tribe precluded the application of the Ex parte Young doctrine in these cases. The district court explained that, although the remedy created in subsection 252(e)(6) was much less 'detailed' than the statutory remedy at issue in Seminole Tribe, the court believed that it would be improper simply to compare the two statutory schemes to see which one was more detailed. Id. at 1161. Rather, the court stated, a 'simple' remedy may be all that is necessary to secure federal rights. Id. The district court concluded that Congress made a choice in the Act to limit the available remedy under sec. 252 to having a commission's ruling tested in federal court. Id. This limited review scheme, said the court, allowed federal courts to cure errors in federal law without subjecting state commissioners to the full remedial powers of a federal district court. Id. Under Seminole Tribe, the court concluded, the Ex parte Young doctrine could not be used here because the remedy Congress chose secures federal rights adequately. Id. That Congress had chosen, as it turns out, an unconstitutional remedy did not change the result here, the district court explained, because under Seminole Tribe it was prevented from 'rewriting the statutory scheme in order to approximate what [it thought] Congress might have wanted.' Id. (quoting Seminole Tribe, 517 U.S. at 76). 50
51 Although the district court had ruled that the suits against the PSCW and the PSCW Commissioners should be dismissed, the court stayed the enforcement of its ruling pending further briefing and argument by the parties on whether the PSCW and the PSCW Commissioners were necessary parties under Rule 19(b) of the Federal Rules of Civil Procedure. The district court also allowed the PSCW and the PSCW Commissioners to amend their answers to include a Tenth Amendment defense. 52 Before the district court issued an opinion addressing the remaining Rule 19(b) issues, however, we issued our initial decision in 98- 2127. See MCI Telecomms. Corp. v. Illinois Commerce Comm'n, 168 F.3d 315, amended by 183 F.3d 558 (7th Cir. 1999). The district court ordered further briefing and argument from the parties on the effect our opinion had on the cases before the district court. Then, the Supreme Court issued its rulings in Alden, College Savings and Florida Prepaid. After hearing argument from the parties, the district court issued a final opinion, reported at Wisconsin Bell, Inc. v. Public Serv. Comm'n, 57 F. Supp.2d 710 (W.D. Wis. 1999), dismissing the suits. 53 In this second ruling, the district court explained that our initial decision in 98-2127 was no longer controlling in light of the Supreme Court's intervening decision in College Savings. According to the district court, it was obligated to follow the most recent Supreme Court precedent, and College Savings, the court believed, compelled the dismissal of the suits against the PSCW and the PSCW Commissioners. The district court recognized that College Savings preserved some apparent constructive waivers, such as when Congress provides a gift to a state in return for the state's waiver of immunity, but it concluded that the Supreme Court's decision precluded the finding of such a waiver in the context of the 1996 Telecommunications Act. Id. at 715. Instead, the court explained, [t]here is no arguable basis to a claim that equates a gift with a state's participation in the act's cooperative federalism (supervising the regulation of local telephone carriers in the state). Id. Within the context of the 1996 Telecommunications Act, the district court explained, a state's acceptance of the gift of being able to participate in the interconnection process could not be equated with the kind of gifts found acceptable by the Supreme Court in College Savings. A state's continued regulation of local enterprise (local telephone carriers), the district court reasoned, is an 'otherwise permissible activity' that can yield no inference as to a state's motivation for doing it. Id. 54 The district court also reaffirmed its prior ruling on the applicability of the Ex parte Young doctrine. In addition to the points it had raised in its first decision, the court further noted two other problems with proceeding under the Ex parte Young doctrine in these cases. First, the court noted that one must acknowledge the conceptual difference between a state official performing state functions in a way that violates federal law and a state official who is performing federally authorized functions but is alleged to have performed those functions improperly. Id. at 713. Second, the court noted the oddity of allowing an Ex parte Young suit to proceed against individual commissioners, some of whom may have dissented from the decision being challenged in court. Id. In the end, however, the district court explained that, even if these hurdles to applying the Ex parte Young doctrine could be overcome, Seminole Tribe precluded the application of the doctrine to these cases because the 1996 Telecommunications Act provided a limited remedy for violations of the Act. 5 II