Opinion ID: 781586
Heading Depth: 2
Heading Rank: 5

Heading: the pac-west order

Text: 56 In the third appeal, Pacific Bell challenges the results of an arbitration proceeding before the CPUC, the Pac-West Order, in which the CPUC determined that ISP-bound traffic should be included in the interconnection agreement between Pacific Bell and Pac-West. Pacific Bell argues that this conclusion is inconsistent with the Act and was arbitrary and capricious, both for substantive reasons and because it claims that the CPUC was improperly influenced by extra-record evidence and ex parte communications. Because we conclude that the CPUC's order is consistent with the Act and that Pacific Bell failed to demonstrate that any alleged improper influence created a triable issue of fact whether the order was arbitrary and capricious, we affirm the district court's judgment upholding the Pac-West Order.
57 Pacific Bell argues that the CPUC's decision approving the arbitrated interconnection agreement between Pacific Bell and Pac-West, Decision No. 99-06-088 (June 24, 1999), is inconsistent with federal law 14 because (1) ISP-bound traffic is not local traffic under federal law, and therefore not subject to the mandatory reciprocal compensation requirements of § 251, and (2) the CPUC has no authority to impose reciprocal compensation payments on non-local traffic in the course of arbitrating a new contract. 58 Because the FCC has yet to resolve whether ISP-bound traffic is local within the scope of § 251, the CPUC's decision to enforce an arbitration agreement that subjects ISP-bound traffic to reciprocal compensation was not inconsistent with § 251. We therefore reject Appellants' argument that the CPUC exceeded its statutory authority by approving the payment of reciprocal compensation for ISP calls. 15 Indeed, following the D.C. Circuit's vacatur of its Declaratory Ruling, the FCC itself abandoned the distinction between local and interstate traffic as the basis for determining whether reciprocal compensation provisions in interconnection agreements apply to ISP-bound traffic. See FCC Remand Order, 16 F.C.C.R. at 9155-57. 59 Pacific Bell also points to the same exceptions listed in § 251(g) that the FCC pointed to in its Remand Order to support its argument that the reciprocal compensation requirements of § 251(b)(5) do not apply to ISP calls. This argument, however, was explicitly rejected by the D.C. Circuit. See WorldCom, Inc., 288 F.3d at 430. Although the D.C. Circuit did not vacate the FCC Remand Order when it found that the FCC's reliance on § 251(g) [was] precluded[,] its explicit rejection of the FCC's use of § 251(g) as a justification for excluding ISP calls from reciprocal compensation provisions defeats Pacific Bell's arguments that rely on § 251(g). WorldCom, Inc., 288 F.3d at 430. Furthermore, the interim alternative payment scheme for ISP-bound traffic established in the Remand Order applies only prospectively, when existing interconnection agreements expire. FCC Remand Order, 16 F.C.C.R. at 9189; see also WorldCom, Inc., 288 F.3d at 431.
60 Pacific Bell alleges that the district court erred in granting summary judgment to Pac-West because Pacific Bell's evidence raises a triable issue of fact that the CPUC was improperly influenced and that it relied on extra-record evidence. Pacific Bell must show, however, that there is a triable issue of fact that the improper influence was such that it rendered the Pac-West Order arbitrary and capricious. See MFS Intelenet, 193 F.3d at 1117 (stating that consistency with federal law is evaluated de novo and all other issues are evaluated under an arbitrary and capricious standard). Pacific Bell fails to make this showing, and therefore we reject this claim. 61 Most courts have interpreted the arbitrary and capricious standard to grant broad deference to agency decisions. Cf. Global NAPs, Inc. v. FCC, 247 F.3d 252, 257 (D.C.Cir.2001) (presumes the validity of [federal] agency action under the arbitrary and capricious standard (quoting Southwestern Bell Tel. Co. v. FCC, 168 F.3d 1344, 1352 (D.C.Cir.1999))). Thus, to prevail on its claim, Pacific Bell must show that the CPUC's order was not supported by substantial evidence, MCI Worldcom Communications, Inc. v. Pac. Bell Tel. Co., 2002 WL 449662 (N.D.Cal. Mar.15, 2002), or that the Commission made `a clear error of judgment,' US W. v. Hamilton, 224 F.3d 1049, 1056 (9th Cir.2000) (quoting Morongo Band of Mission Indians v. FAA, 161 F.3d 569, 573 (9th Cir.1998)). 62 Pacific Bell points to several factors that allegedly indicate that the CPUC relied on matters outside the record. First, in his dissent to the CPUC's Order denying Pacific Bell's application for rehearing challenging its decision approving the Pac-West Order, Decision 99-12-025 (Dec. 2, 1999), Commissioner Josiah L. Neeper stated that the CPUC had received extra-record information about the effect of their decision on rural and Internet users, and that both the arbitrator and the CPUC mistakenly relied upon it. Second, the CPUC adopted the findings of the final arbitrator's report, which stated that changing existing relationships could be harmful to rural customers of ISPs. 63 In addition to these statements in the Order, Pacific Bell points to four other events: (1) a series of e-mail communications directed at the CPUC and launched in May 1999, before the CPUC voted, which claimed that Pacific Bell wanted ISP calls to be considered long-distance, increasing the charges to ISPs, (2) letters written by the Chairperson of the California Senate Energy, Utilities and Communications Committee and three other State Senators urging the CPUC to delay its vote, (3) press releases and a San Francisco Chronicle article that highlighted the possibility of political corruption in the Governor's appointments to the CPUC, and (4) more press releases and articles that described how the CPUC was inundated with e-mails and letters complaining about alleged increased ISP prices. 64 Although Pacific Bell has presented some evidence that improper communications were sent to the CPUC, this evidence does not create a triable issue that the CPUC's order was not supported by substantial evidence or that the Commission made a clear error of judgment. The CPUC's decision was well-reasoned; it found that Pacific Bell's proposed definition of local calls was inconsistent with CPUC and industry practice, and it also cited the FCC's long history of treating ISP-bound traffic as local traffic. See Pac-West Order, Decision No. 99-06-088 at 7-10. The evidence of improper communications does not undermine this reasoning. 65 Indeed, Pacific Bell offers little evidence to show that the CPUC was actually influenced. It points to the CPUC's adoption of the arbitrator's report, which stated that changing relationships could be harmful to rural customers of ISPs. 16 The CPUC's decision, however, contains no discussion of the arbitrator's observation, nor does it express concern about alleged increases in ISP costs resulting from a denial of reciprocal compensation. The CPUC's own press release announcing its June 24 decision, pointing out that if ISP calls are deemed interstate then Pac-West would lose its reciprocal payments and might pass on the costs to ISPs and ISPs in turn might increase fees to their customers, raises more questions than does the other evidence, but ultimately does little to undermine the reasoning of the Pac-West Order, because it does not contradict the Order's valid reasoning and because it carries no legal significance of its own. 66 In addition, the fact that the CPUC commented on the possible impact of its decision after-the-fact in a non-binding press release does not tend to show that the Pac-West Order itself was a clear error in judgment. The numerous e-mails, letters, articles, and press releases also fail to demonstrate legal error in the Commission's decision. Pacific Bell thus has failed to provide sufficient evidence to create a triable issue, under our deferential standard of review, that the CPUC was improperly influenced by public and political opinion.