Opinion ID: 3011524
Heading Depth: 2
Heading Rank: 2

Heading: The Eleventh Amendment and S 252(e)(6)

Text: With this overview of the Eleventh Amendment in mind, we turn to the question whether S 252(e)(6), providing for federal court review of an interconnection agreement approved by a state utility commission, violates the PUC's and the Commissioners' Eleventh Amendment sovereign immunity. We are not the first court of appeals to address this question. The Fifth, Seventh, and Tenth Circuits have all concluded that S 252(e)(6) does not violate the Eleventh Amendment, both because the state utility commissions knowingly and voluntarily waived immunity by accepting 22 the congressionally bestowed gratuity of participating in the process of approving interconnection agreements, fully aware that they would be subject to suit under S 252(e)(6), and because Young permits suits for prospective relief against individual commissioners. See Bellsouth , supra, 238 F.3d 636 (5th Cir.); MCI, supra, 222 F.3d 323 (7th Cir.); Public Serv. Comm'n, supra, 216 F.3d 929 (10th Cir.). The Sixth Circuit also held that a S 252(e)(6) action was not barred, relying solely on Young. See Michigan Bell Tel. v. Climax Tel. Co., 202 F.3d 862 (6th Cir.), cert. denied, 121 S. Ct. 54 (2000). Only the Fourth Circuit, over a dissent, has reached a different conclusion, holding that actions against state commissions and commissioners are barred by the Eleventh Amendment. See Bell Atl. Md., 240 F.3d 279 (4th Cir.); see also Bellsouth Telecomm., Inc. v. North Carolina Util. Comm'n, 240 F.3d 270 (4th Cir. 2001) (same result in companion case).4
We will first consider whether the Telecommunications Act of 1996, by taking control of local telephone companies away from the states and then giving back to them the option of participating in local telecommunications regulation, has established the type of gratuity or gift waiver of Eleventh Amendment immunity that the College Savings Court recognized as permitted under Commerce Clause powers. We must answer two questions: 1) whether _________________________________________________________________ 4. The Supreme Court has granted certiorari on both parts of the sovereign immunity question in Bell Atl. Md. and also in a case from the Seventh Circuit, Mathias v. Worldcom Tech., Inc. , 121 S. Ct. 1224 (2001). The cases have been consolidated for oral argument. We have determined, however, that we should resolve the legal issues before us and not await the Supreme Court's decision on sovereign immunity. The reason we do so is consistent with the purpose of the 1996 Act -- to establish competition in local telephone service as quickly and expeditiously as possible. We cannot reach the merits of our appeals until we have resolved the issue of sovereign immunity. If we do resolve that issue, even if our conclusion is ultimately overturned, our decision on the merits will still assist the parties in their efforts to establish interconnection agreements. For that reason, and because we have persuasive precedent to follow, we have decided to move forward. 23 the authority to participate in the regulatory scheme is in fact a gift or gratuity to which Congress may attach as a condition the state's agreement to waive sovereign immunity and be sued in federal court and 2) whether Congress in the statute made clear, explicit, and unambiguous its intent that state utility commissions participating in the regulatory process would subject themselves to suit in federal court, so that the states can be said to have knowingly and voluntarily waived sovereign immunity by participating in that process.
We conclude that under the Act the authority to regulate local telecommunications is a gratuity to which Congress may attach conditions, including a waiver of immunity to suit in federal court. Thus, the submission to suit in federal court, provided for in S 252(e)(6), is valid as a waiver, conditioned on the acceptance of a gratuity or gift, as permitted by College Savings. We find a gratuity because, with the 1996 Act, Congress federalized the regulation of competition for local telecommunications service. The Act preempted the regulation of interconnection agreements and of the terms on which a CLEC can provide competitive local service. Local telephone service had previously been a monopoly service within the exclusive regulatory province of the states. See Iowa Utils. I, 525 U.S. at 370. The 1996 Act fundamentally restructured local service by requiring competition and establishing the mechanisms by which competing carriers may enter the market. See id. The Act, passed pursuant to Congress's power over interstate commerce (which is plenary, see Oregon Waste Sys., Inc. v. Department of Envtl. Quality of State of Or., 511 U.S. 93, 98 (1994)), validly preempted state regulation over competition to provide local telecommunications service. See Iowa Utils. I, 525 U.S. at 378 n.6 (stating that Congress unquestionably took the regulation of local telecommunications competition away from the states); see also Bellsouth, 238 F.3d at 646; MCI, 222 F.3d at 343; Public Serv. Comm'n, 216 F.3d at 938. 24 Congress could have made that preemption complete. It could have entirely eliminated any state role in regulating local competition and in conducting arbitration, review and approval of interconnection agreements, and it could have reserved to the FCC all such review and regulation. See Bellsouth, 238 F.3d at 646; MCI, 222 F.3d at 342; Bell Atl. Md., 240 F.3d at 316 (King, J., dissenting); see also FERC v. Mississippi, 456 U.S. 742, 764 (1982) ([T]he commerce power permits Congress to preempt the States entirely in the regulation of private utilities.). Congress instead preserved a role for state utility commissions in the federal regulatory scheme, giving them back some regulatory power by allowing them the first opportunity to conduct arbitrations and to approve or reject interconnection agreements. See 47 U.S.C. S 252(b)(1); 47 U.S.C. S 252(e)(1), (e)(2), (e)(4). Because Congress validly terminated the states' role in regulating local telephone competition and, having done so, then permitted the states to resume a role in that process, the resumption of that role by a state is a congressionally bestowed gratuity. The state commission's authority to regulate comes from S 252(b) and (e), not from its own sovereign authority. See MCI, 222 F.3d at 343. Regulating local telecommunications competition under the 1996 Act no longer is, in the words of College Savings , an otherwise lawful or otherwise permissible activity for a state. Rather, it is an activity in which states and state commissions are not entitled to engage except by the express leave of Congress. Indeed, the states are not merely acting in an area regulated by Congress; they are now voluntarily regulating on behalf of Congress. MCI, 222 F.3d at 343; see Bellsouth, 238 F.3d at 647 (stating that the state accepted Congress's offer under the 1996 Act to delegate federal authority to the state commission); Public Serv. Comm'n, 216 F.3d at 938 (stating that the Act invites states to participate in the federal government's regulation of local telephone service). Because this opportunity for the states to exercise federal power is a gratuity from Congress, Congress may then attach to that grant of regulatory power any conditions it chooses. The condition which it did attach was the 25 submission to suit in federal court. Thus, when a state accepts that grant of regulatory power, it does so under the condition that it be subject to suit in federal court. See MCI, 222 F.3d at 344 n.10 (By accepting the grant of regulatory power offered by Congress, and by allowing the state commission to exercise that power, [the states] cannot contend now that they are not bound by the conditions attached to that grant of power.). The PUC contends, however, that the power to regulate local telephone service is not a congressional gratuity but a primary aspect of core state sovereignty, a power the states have exercised exclusively for decades. This argument ignores the fundamental restructuring of telecommunications markets worked by the 1996 Act, see Iowa Utils. I, 525 U.S. at 370. Through the Act's restructuring, the federal government has unquestionably taken the regulation of local telecommunications competition away from the states. See id. at 378 n.6. Whatever the power of the states in the area of local telephone regulation prior to 1996, that power did not survive passage of the Act. State commissions now exercise power over local competition only pursuant to S 252(e) and only to the extent and in the manner provided by Congress. The fact that the PUC was required under pre-1996 state law to regulate local telephone service and that the pre1996 law has not been repealed by the Pennsylvania legislature does not mean that the present participation by the PUC in regulation is not voluntary. The relationship between the state and the state utility commission under state law is irrelevant to the Eleventh Amendment analysis. If the state's participation in the federal scheme is voluntary, then its delegated commission's participation is also voluntary. And, as a result of the federal preemption, resulting from the Act, the decision by a state to regulate competition in the provision of local telecommunications service is a voluntary one. When, therefore, the state directs the state commission to participate in regulation under the Act, the commission's participation is also voluntary. Moreover, a state's participation in telecommunications regulation is not mandatory. If a state commission declines or fails to participate in arbitration or review of 26 interconnection agreements, responsibility for regulation falls to the FCC. See 47 C.F.R. SS 51.803-807. There is no requirement or obligation in federal law that a state participate in this regulation.5 A state or state commission's decision not to act is not subject to review. See 47 U.S.C. S 252(e)(6) (providing that an aggrieved party's only remedy if the state commission fails to act is to pursue its challenge to the agreement with the FCC). The state commission is free to accept or reject such participation as a gratuity without abstaining from any lawful activity within its power. See Bellsouth, 238 F.3d at 647. A state or state commission wishing to preserve its Eleventh Amendment immunity may simply decline the invitation to regulate local competition on behalf of the federal government and allow that power to return to the FCC. Indeed, the state commission in Virginia has declined to resolve petitions to interpret and enforce interconnection agreements and the FCC has stepped in to exercise regulatory responsibility in Virginia. See FCC Order, In the Matter of Starpower Communications, LLC Petition for Preemption of Jurisdiction of the Virginia State Corporation Commission Pursuant to Section 252(3)(5) of the 1996 Act, CC Docket No. 00-52 (June 14, 2000). If the Commonwealth of Pennsylvania continues to direct the PUC to perform these regulatory functions, however, this decision by the Commonwealth, as delegated to the PUC, is a voluntary decision. See MCI, 222 F.3d at 344 n.10.
Even though we have concluded that the right to participate in the regulation of local telecommunications competition is a gratuity or benefit bestowed on the states by Congress, we must still determine whether Congress was unmistakably explicit, clear, and unambiguous inS 252(e) _________________________________________________________________ 5. This voluntariness is critical. Because the state commissions are given a choice whether to participate in federal regulation, the Act cannot be said impermissibly to commandeer state regulatory agencies to enforce federal law. See MCI, 222 F.3d at 343 (citing Printz v. United States, 521 U.S. 898, 935 (1997)). 27 in providing that a state utility commission's determination, approving interconnection agreements affecting local telecommunications competition, would be subject to review in federal court. In considering whether S 252(e) is explicit, clear, and unambiguous, we look to its language and to the language of the Act as a whole. The regulatory process begins with negotiations by an ILEC and a CLEC to form an interconnection agreement. The Act provides that such an agreement, whether adopted through negotiation or arbitration, is submitted to the state utility commission, which reviews the agreement for consistency with the Act and the public interest and which approves or rejects the agreement. See 47 U.S.C. S 252(e)(1). The commission is also the first body to which carriers turn for arbitration if negotiations are unsuccessful or if issues remain unresolved. See 47 U.S.C. S 252(b)(1). The Act then provides that, when the state commission has made a determination on the agreement, any party aggrieved by such determination may bring an action in an appropriate Federal district court, challenging whether the agreement meets the requirements of SS 251 and 252. See 47 U.S.C. S 252(e)(6). In other words, S 252(e)(6) specifically provides for actions in federal court brought byaggrieved parties to review agreements and statements approved by state utility commissions. Moreover, S 252(e)(4) provides that [n]o State court shall have jurisdiction to review the action of a State commission in approving or rejecting an agreement under this section. See 47 U.S.C. S 252(e)(4). Federal jurisdiction for the review of commission decisions on interconnection agreements is exclusive. Consequently, a state commission that decides to participate in this statutory scheme is on notice from the outset that it will be subject to suit, brought only in federal court, by any party aggrieved by its decision. See MCI, 222 F.3d at 337 (stating that SS 252(e)(4) and 252(e)(6), read together, indicate that Congress envisioned suits reviewing `actions' by state commissions and that Congress intended that such suits be brought exclusively in federal court.). The statutory language places the state utility commission on notice that, by choosing to act on an 28 interconnection agreement and to make a decision as to its legality, it submits itself to the jurisdiction of the federal courts. We agree with our sister circuits that this language constitutes a sufficiently clear congressional statement that a state will and must waive its sovereign immunity when it acts to regulate local competition agreements. See Bellsouth, 238 F.3d at 646; MCI, 222 F.3d at 341 ([T]he 1996 Telecommunications Act satisfies the requirement that Congress clearly state that participation by the state in the regulatory scheme entails a waiver of immunity from suit in federal court.); Public Serv. Comm'n , 216 F.3d at 938 ([Section] 252 puts Utah on notice that Congress intends to subject it to suits brought by individuals if it acts under S 252.); see also Bell Atl. Md., 240 F.3d at 314 (King, J., dissenting) (arguing that the provisions of the Act clearly show Congress's intent to subject participating states to suits in federal court); but see Bell Atl. Md., 240 F.3d at 292 (holding that Congress did not clearly manifest an intent to condition state commissions' participation in the regulatory scheme on a waiver of sovereign immunity). Moreover, a state commission is not obligated to waive sovereign immunity by participating in the regulatory process. The Act clearly provides that, if a state does not respond to a request to mediate or to arbitrate an interconnection agreement, the FCC is to assume that responsibility. For that reason, state participation in the regulation of local telecommunications competition is a choice, not a mandate. It is true that the Act does not include magic words such as waiver or immunity or suit. The Act became effective in 1996, prior to the Supreme Court's decision in Seminole Tribe that Congress may not abrogate Eleventh Amendment immunity under the Commerce Clause and prior to the decision in College Savings overturning the constructive waiver doctrine of Parden. Perhaps, were Congress drafting the statute in 2001 with Seminole Tribe and College Savings in the mix, it would have been more explicit than it was. We believe, however, that the language that Congress did use is sufficiently clear to establish that a state commission's decision will be subject to review in an 29 action brought in federal court by an aggrieved party and sufficiently clear that the commission may be made a party to that federal court action. The argument is made in Bell Atl. Md. that the statute merely puts states on notice that their decisions will be subject to judicial review in federal court but thatit is a leap of logic to infer from this consent to federal-court review a consent by a State commission itself to be made a party to that federal review. 240 F.3d at 293; id. at 290. However, as the dissent in Bell Atl. Md. aptly states, consent to federal court review of a decision necessarily entails being made a party to the action. There is in fact no leap of logic from consent by a state commission to having its decision reviewed to consent by a state commission to being a party to that review. See id. at 314 (King, J., dissenting). We agree that by allowing State commissions to substitute as regulators for the FCC, Congress obviously intended that State commissions, just like the FCC, be made parties to federal court actions challenging their decisions. Id. at 315 (King, J., dissenting); see MCI, 222 F.3d at 337 (holding that the language of S 252(e) shows Congress's intent that state commissions be parties to the federal-court suits reviewing their decisions in the same way that the FCC is a party to the federal-court suits reviewing its actions). We hold therefore, along with the Fifth, Seventh, and Tenth Circuits, that the PUC is subject to suit in federal court under the 1996 Act because the PUC knowingly waived its Eleventh Amendment immunity by voluntarily accepting the congressional gift or gratuity of the power to regulate local telecommunications competition under the Act. The District Court had jurisdiction over the PUC and we affirm the court's rejection of the PUC's Eleventh Amendment arguments.
In the alternative, we hold that the action against the individual PUC Commissioners is not barred by the Eleventh Amendment because the case presents, in the Sixth Circuit's terms, a straightforward Ex Parte Young 30 case. Michigan Bell, 202 F.3d at 867. The Fifth, Seventh, and Tenth Circuit have all agreed. See Bellsouth , 238 F.3d at 647 (5th Cir.) (stating that the Act presents a straightforward application of Young); MCI, 222 F.3d at 345 (7th Cir.) (holding that Eleventh Amendment does not bar telecommunications carriers from pursuing injunctive relief against individual members of state utility commissions); Public Serv. Comm'n, 216 F.3d at 939 (10th Cir.) (holding that telephone carrier could proceed against individual Commissioners); see also Bell Atl. Md., 240 F.3d at 317 (King, J., dissenting) (agreeing with other circuits that suit under S 252(e)(6) was straightforward Young case); but see Bell Atl. Md., 240 F.3d at 294-95 (4th Cir.) (holding that Young did not permit suit against individual Commissioners). Application of Young here is, indeed, straightforward. As discussed in Part III A supra, we continue to view Young as generally applicable any time a plaintiff seeks prospective relief against individual state officers from an ongoing violation of federal law. See Coeur d'Alene, 521 U.S. at 296 (O'Connor, J., concurring in part and concurring in the judgment); see also Bellsouth, 238 F.3d at 648-49. Worldcom, AT&T, and Verizon all allege that various terms, rates, and conditions contained in the interconnection agreement established and approved by the PUC are inconsistent with and violative of the requirements of SS 251 and 252. Those terms and conditions govern and will continue to govern the current and future relations among the telephone carriers and the establishment of local competition in Pennsylvania by the parties to the agreement. The PUC (acting through the individual commissioners) is charged not only with establishing those original terms but also with overseeing the implementation and enforcement of the interconnection agreement against the parties. If the terms of the approved interconnection agreement do violate the Act, that violation constitutes an ongoing violation of federal law. The Commissioners individually are parties to the suit. The carriers seek prospective relief in a declaration that certain provisions of the approved interconnection agreement violate the Act and in an 31 injunction prohibiting enforcement of the agreement and requiring the PUC to establish different, more appropriate rates, terms, and conditions. This is the paradigmatic Young framework. See Bellsouth, 238 F.3d at 647; MCI, 222 F.3d at 345; Public Serv. Comm'n, 216 F.3d at 939; Michigan Bell, 202 F.3d at 867. The Fourth Circuit is the only court of appeals to reach a different conclusion on the application of Young to the 1996 Act. The majority there relied on Justice Kennedy's case-by-case balancing theory, set out by him in Coeur d'Alene, by which the federal interests served by permitting the suit against the Commissioners are balanced against the important values of state sovereignty. See Bell Atl. Md., 240 F.3d at 295. The Fourth Circuit concluded that the federal interest in federal review could not overcome the affront to the sovereignty of the state in being brought before a federal court to defend a decision made when acting within the scope of its regulatory authority. See id. at 295, 298. As stated in Part III A, however, we have rejected the use of such a balancing approach to Young. We therefore decline to follow the decision in Bell Atl. Md. Moreover, we conclude that neither of the two recognized exceptions to Young bars the instant action. First, the special sovereignty interests exception, acknowledged by the majority of justices in Coeur d'Alene, is not implicated. The ability of a state to make and carry out its regulatory decisions, which would be interrupted by a federal court injunction and declaration that the decision of the PUC Commissioners violated federal law, cannot be viewed as a core or fundamental matter of state sovereignty comparable to the ability of a state to maintain ownership of and title to its submerged lands. See MCI, 222 F.3d at 348. Any sovereign interest that the Commonwealth might have in regulating local telephone competition exists solely by virtue of the role that Congress bestowed upon the states in S 252(e); the state interest in regulating in this area no longer derives from its general sovereign powers. See id. Thus, an action against the individual Commissioners no longer affects these general sovereign powers. Second, the Seminole Tribe exception for a detailed and limited remedial scheme is inapplicable. An aggrieved party 32 may bring an action in an appropriate Federal district court to determine whether the agreement or statement meets the requirements of the Act. See 47 U.S.C. S 252(e)(6). The Act places no restrictions on the scope of the court's review or on the remedies it may impose. It places no restrictions on the form and nature of prospective relief that an aggrieved party may obtain. The relief available in an action under S 252(e)(6) is precisely the relief that would be available through a Young action -- the full panoply of declaratory and injunctive remedies. See Bell Atl. Md., 240 F.3d at 318 (King, J., dissenting) (quoting Bell-Atl.- Delaware, Inc. v. Global Naps South, Inc., 77 F. Supp. 2d 492, 501 (D. Del. 1999)). We hold, consistent with the Fifth, Sixth, Seventh, and Tenth Circuits, that this action may go forward against the individual PUC Commissioners under Ex Parte Young because the carriers seek prospective relief against the individual Commissioners to stop an ongoing violation of federal law. We will affirm the District Court on this alternative ground.