Court Opinion

ID: 2969364
Source: CourtListenerOpinion
Date Created: 2015-09-22 15:47:22.945868+00
Date Added: 2024-06-11T11:43:19.597361
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                Pursuant to Sixth Circuit Rule 206
        ELECTRONIC CITATION: 2000 FED App. 0141P (6th Cir.)
                    File Name: 00a0141p.06

UNITED STATES COURT OF APPEALS
                  FOR THE SIXTH CIRCUIT
                    _________________

                                  ;
                                   
 GTE NORTH, INC.,
                                   
         Plaintiff-Appellant,
                                   
                                   
                                      No. 98-1851
            v.
                                   
                                    >
 JOHN G. STRAND, et al.,           
         Defendants-Appellees. 
                                  1
       Appeal from the United States District Court
     for the Western District of Michigan at Lansing.
   No. 98-00038—Robert Holmes Bell, District Judge.
                  Argued: December 13, 1999
               Decided and Filed: April 20, 2000
    Before: BOGGS and NORRIS, Circuit* Judges; and
              FEIKENS, District Judge.
                      _________________
                           COUNSEL
ARGUED: Patrick F. Philbin, KIRKLAND & ELLIS,
Washington, D.C., for Appellant. David A. Voges, OFFICE
OF THE ATTORNEY GENERAL, PUBLIC SERVICE

    *
     The Honorable John Feikens, United States District Judge for the
Eastern District of Michigan, sitting by designation.

                                 1
2    GTE North, Inc. v. Strand, et al.            No. 98-1851      No. 98-1851                GTE North, Inc. v. Strand, et al.           23

DIVISION, Lansing, Michigan, for Appellees. Charles W.             by affirming state commissions’ statutory role and rejecting
Scarborough, UNITED STATES DEPARTMENT OF                           an unduly expansive interpretation of § 252(e)(6) that would
JUSTICE, CIVIL DIVISION, Washington, D.C., for                     permit state regulatory authorities to insulate from federal
Intervenors. ON BRIEF: Patrick F. Philbin, KIRKLAND &              review orders alleged to be contrary to, or preempted by,
ELLIS, Washington, D.C., for Appellant. David A. Voges,            federal law.
Henry J. Boynton, OFFICE OF THE ATTORNEY
GENERAL, PUBLIC SERVICE DIVISION, Lansing,
Michigan, for Appellees. Charles W. Scarborough, UNITED
STATES DEPARTMENT OF JUSTICE, CIVIL DIVISION,
Washington, D.C., for Intervenors. Stephen F. Smith, David
L. Lawson, Peter D. Keisler, SIDLEY & AUSTIN,
Washington, D.C., for Amici Curiae.
                    _________________
                        OPINION
                    _________________
   BOGGS, Circuit Judge. GTE North, Inc. (GTE), an
incumbent local telecommunications carrier in Michigan,
sued the defendants, members of the Michigan Public Service
Commission (MPSC or the Commission), under the Federal
Telecommunications Act of 1996 (FTA or the Act) after the
Commission issued an opinion and order directing GTE to (1)
publish tariffs in which GTE would offer to sell elements of
its telecommunications network at rates predetermined by the
Commission, and (2) allow competitors to purchase pre-
assembled platforms of GTE network elements. In its
complaint, GTE alleged that the MPSC’s order conflicted
with, and was preempted by, the FTA, and that enforcement
of the order infringed GTE’s statutory rights in violation of 42
U.S.C. § 1983.
                                                                   where the agency rule or action giving rise to the controversy is final and
   GTE moved for summary judgment, and the defendants              not contingent upon future uncertainties or intervening agency action.
                                                                   Ibid. The hardship prong concerns the extent of the burden imposed on
filed a cross-motion to dismiss for lack of subject matter         the petitioner who would be compelled to act under threat of enforcement
jurisdiction. The district court granted the defendants’ motion    of the challenged law. See id. at 153.
and dismissed the case without prejudice, holding that it did
not have jurisdiction to review the MPSC’s order under                  In this case, the district court must decide whether the ripeness
42 U.S.C. § 252(e)(6), the FTA provision limiting federal          inquiry demands that one of GTE’s competitors actually request access at
                                                                   the tariff rate before deciding the case, or whether the order itself gives
judicial review of state commission orders approving or            rise to a justiciable claim because it imposes an immediate obligation on
rejecting final interconnection agreements, because the            GTE to sell network elements at predetermined rates.
22       GTE North, Inc. v. Strand, et al.               No. 98-1851        No. 98-1851             GTE North, Inc. v. Strand, et al.      3

established in the February 25 order against GTE. The                       challenged directive was merely an interlocutory order. See
challenged order was the product not of § 252 proceedings,                  42 U.S.C. § 252(e)(6) (1996). GTE timely appealed the
but of proceedings initiated by the MPSC under Michigan                     district court’s decision to this court.
law, and as such may be independently enforced by the
Michigan courts. The district court therefore erred in                        Based on the language and legislative history of
concluding that § 252(e)(6) provides an adequate opportunity                § 252(e)(6), we conclude that the limitations on federal
for deferred review under either Califano or Thunder Basin.                 review set forth in that provision do not apply in this case, and
                                                                            that the district court has general federal question jurisdiction
   It is presumably because § 252(e)(6) does not provide GTE                under 28 U.S.C. § 1331 to hear GTE’s challenge to the
with an adequate assurance of federal review that the MPSC                  February order.
does not seriously defend on appeal the district court’s
conclusion that §252(e)(6) satisfies Thunder Basin because it                                              I
defers, but does not preclude, federal review. Rather, the
MPSC argues that “there is neither a need nor a requirement                    Before addressing the basis for the district court’s
for the federal District Court to review [the February 25                   jurisdiction over GTE’s claims, it is necessary briefly to
order]” because that order is fully reviewable in Michigan                  describe the administrative context in which the MPSC issued
state court. Although this argument may be relevant to the                  the challenged order. In the spring of 1996, AT&T and Sprint
question whether the district court should abstain from                     attempted to negotiate an interconnection agreement with
deciding GTE’s claims at this time, see Romine v.                           GTE pursuant to § 251 of the FTA. Congress passed the Act
CompuServe Corp., 160 F.3d 337, 340–41 (6th Cir. 1998), it                  in 1996 in an effort to promote competition in local telephone
is wholly irrelevant to the question whether the court has                  markets by ending regulated monopolies previously enjoyed
jurisdiction to hear GTE’s federal preemption challenges to a               by incumbent local exchange carriers (LECs) such as GTE.
state commission order entered in a non-FTA proceeding.                     Before Congress enacted the FTA, state public utility
                                                                            commissions regulated local telecommunications markets by
   In upholding jurisdiction over GTE’s claims under § 1331,                granting companies that incurred the expense of establishing
we emphasize that it is precisely because state utility                     local networks the exclusive right to provide service in the
commissions play such a critical role in administering the                  areas covered by their systems. In exchange for this privilege,
FTA’s regulatory framework that they must operate strictly                  LECs allowed the state commissions to regulate local service
within the confines of the statute. We therefore REVERSE                    rates. The FTA altered this practice and addressed the
the district court’s ruling, uphold its jurisdiction under                  underlying problem of anti-competitive local
§ 1331, and remand the case for determination on the merits                 telecommunications markets in two ways: it preempted state
if and when   the district court finds GTE’s claims ripe for                commissions’ authority to grant service monopolies, and
review.7 In so doing, we hope to further the goals of the FTA               obligated incumbent LECs to provide competitors with
                                                                            network access.

     7
                                                                              Although the FTA circumscribes state commissions’ power
      To determine whether a claim is ripe for decision, the reviewing      to regulate local markets, it does not exclude state
court must consider both the “fitness of the issues for judicial decision   commissions from the FTA approval process. To the
and the hardship to the parties of withholding court consideration.”        contrary, it invests them with authority to approve or reject
Abbott Laboratories v. Gardner, 387 U.S. 136, 149 (1967), overruled on
other grounds by Califano v. Sanders, 430 U.S. 99 (1977). A case is “fit    interconnection agreements negotiated in accordance with the
for judicial decision” where the issues raised are purely legal ones and    Act, which requires LECs to permit rival carriers to: (1)
4     GTE North, Inc. v. Strand, et al.             No. 98-1851      No. 98-1851                GTE North, Inc. v. Strand, et al.         21

utilize the LEC’s network and facilities; (2) purchase               to prospective injunctive relief, waiting to decide this case
unbundled network elements from the LEC; and (3) purchase            until the Commission approves a final agreement
at wholesale rates any telecommunications service that the           incorporating the challenged terms may well deny GTE a
LEC provides at retail to subscribers who are not                    timely and adequate remedy by precluding   recovery for harm
telecommunications carriers. See 47 U.S.C. §251(c)(2)-(4)            sustained while the order was in effect.6
(1996); see also id. § 252 (establishing procedures for
negotiation, arbitration, and approval of interconnection              For the foregoing reasons, abstention is not warranted in
agreements). To facilitate new competitors’ entry into local         this case.
markets, the FTA outlines specific procedures that LECs and
new market entrants must follow in negotiating, arbitrating,                                           IV
and approving interconnection agreements. See generally id.
§252 (1996). LECs and their competitors may negotiate                  In holding that GTE’s claims fell within the purview of
interconnection agreements voluntarily, through mediation, or        § 252(e)(6), the district court effectively denied GTE any
through compulsory arbitration before a state utility                assurance of federal review because under § 252(e)(6), federal
commission. See id. § 252(a)-(b) (1996). When a final                review is wholly contingent on a state commission’s decision
agreement is reached, the telecommunications or public utility       to approve or reject a final interconnection agreement
commission for the state in which the LEC is located must            incorporating the terms of any challenged order, an event that
approve or reject the agreement. See id. § 252(e) (1996).            need not occur for a competitor to enforce the tariffs

  Once a state commission rules on a proposed agreement,
Section 252(e)(6), the FTA provision at issue in this case,              6
                                                                            GTE was prudent to sue the Michigan commissioners under
authorizes any aggrieved party to “bring an action in an             Ex parte Young because it is virtually certain that a state utility
appropriate Federal district court to determine whether the          commission’s decision to accept regulatory authority under the FTA
agreement . . . meets the requirements of section 251.” Id.          cannot legitimately be construed as a valid waiver of sovereign immunity.
§ 252(e)(6) (1996). If a state commission fails to approve or        The Supreme Court’s recent decisions in College Savings Bank v. Florida
reject a proposed agreement within a certain time – 30 days          Prepaid Postsecondary Education Expense Bd., 119 S. Ct. 2199, and
                                                                     Florida Prepaid Postsecondary Education Expense Bd. v. College
from the date of submission if the agreement resulted from           Savings Bank, 119 S. Ct. 2219 (1999), undermine earlier circuit court
compulsory arbitration, or 90 days from the date submitted if        decisions holding that the Eleventh Amendment does not bar suits against
the agreement resulted from voluntary negotiation or                 state utility commissions because such commissions constructively waive
mediation – the Federal Communications Commission (FCC)              their immunity from suit by participating in the regulatory scheme
may preempt the state commission’s jurisdiction and rule on          established by the FTA. See, e.g., MCI Telecommunications Corp. v.
the validity of the agreement. See id. § 252(e)(4) - (5) (1996).     Illinois Commerce Comm’n, 183 F.3d 567, 567-68 (7th Cir. 1999)
                                                                     (granting a petition for rehearing and directing the parties to file
                                                                     supplemental briefs on the impact that the Supreme Court’s decisions in
   In this case, AT&T and Sprint petitioned the MPSC for             Alden v. Maine, 119 S. Ct. 2240 (1999), and the College Savings Bank
compulsory arbitration under § 252 when the negotiations             cases had on the court’s earlier decision).
they began with GTE in 1996 did not produce an agreement.
In March 1997, before a final agreement was reached, GTE                  It is precisely because the waiver doctrine no longer provides a
                                                                     reliable basis for seeking relief against state commissions that we
filed a complaint in federal district court alleging that an order   disagreed in Michigan Bell Telephone Co. v. Climax Telephone Co., 202
issued by the MPSC on January 15, 1997, concerning GTE’s             F.3d 862 (6th Cir. 2000), with the Seventh Circuit’s decision in MCI and
interconnection obligations to Sprint and AT&T violated the          premised our conclusion that the plaintiff could proceed with its suit
                                                                     against the MPSC solely on Ex parte Young, rather than waiver, grounds.
20   GTE North, Inc. v. Strand, et al.            No. 98-1851      No. 98-1851            GTE North, Inc. v. Strand, et al.     5

the rule that only exceptional circumstances justify               FTA. The district court dismissed GTE’s complaint, holding
[abstention]”). Because the MPSC’s February order cannot           that it did not have subject matter jurisdiction to review the
be described as “judicial” in nature, Younger does not require     challenged order because it was not an order approving or
this court to abstain from ruling on the merits of GTE’s           rejecting a final interconnection agreement. See GTE North
claims. See id. at 371 (holding that a “judicial inquiry           v. Strand, No. 5:97-CV-20 (W.D. Mich. June 2, 1997) (citing
investigates, declares and enforces liabilities as they stand on   47 U.S.C. § 252(e)(6)).
present or past facts and under laws supposed already to
exist,” and concluding that the “establishment of a rate is the       Then, while arbitration proceedings between GTE, Sprint,
making of a rule for the future, and therefore is an act           and AT&T were still pending, the MPSC initiated unrelated
legislative and not judicial in kind”). Indeed, Younger            state law proceedings against GTE and other incumbent LECs
abstention would be especially inappropriate in this case          in order to establish terms of interconnection to Michigan
because the Michigan Court of Appeals has already                  local exchange networks generally. These proceedings
considered and rejected the merits of GTE’s challenge to the       concerned GTE as an LEC, but not specifically as a party to
MPSC’s 1997 orders. See GTE North, Inc. v. MPSC, No.               the AT&T and Sprint arbitration. In connection with these
198324 (unpublished opinion, December 30, 1997) (affirming         general interconnection proceedings, the MPSC required GTE
over GTE’s objection the rates established in the MPSC’s           and Ameritech, as Michigan LECs, to file with the
order in case U-10860 and affirming the MPSC’s directive to        Commission “Total Service Long Run Incremental Cost”
conduct the cost study proceedings that gave rise to the           (TSLRIC) studies for both regulated and non-regulated
dispute in this case).                                             telecommunications services. In addition, the MPSC directed
                                                                   GTE to publish tariffs in which GTE would offer to sell its
   Finally, the district court is not required to abstain from     network elements and wholesale services to any interested
deciding this case under the Johnson Act, which prohibits          party at rates predetermined by the Commission. GTE
federal courts from enjoining compliance with state orders         responded to the Commission’s order by filing a petition for
affecting rates charged by a public utility only when, among       rehearing in which GTE challenged the MPSC’s rates for
other things, “[j]urisdiction is based solely on diversity of      unbundled loops as confiscatory in violation of the FTA. The
citizenship or repugnance of the order to the Federal              MPSC denied GTE’s petition for rehearing, and GTE
Constitution.” 28 U.S.C. § 1342 (1994). The Johnson Act            appealed the MPSC’s order to the Michigan Court of
does not require abstention in this case because jurisdiction      Appeals. On December 30, 1997, the court affirmed the
over GTE’s claims is based on alleged violations of its rights     MSPC’s order, and the MPSC proceeded to use GTE’s and
under the FTA.                                                     Ameritech’s TSLRIC studies to determine prices for new
                                                                   entrants’ access to bundled and unbundled network elements
  In addition to the fact that the requirements for abstention     and basic local exchange services throughout Michigan.
established by the Supreme Court are not satisfied in this
case, abstention is not warranted here because waiting to             On February 25, 1998, in the course of the state
review the propriety of the February 25 order until it is          proceedings against GTE and Ameritech, the MPSC issued
incorporated into a final arbitration agreement will deny GTE      the order contested in this appeal. In the February 25 order,
a timely and adequate remedy at law. GTE, whose suit               the MPSC used GTE’s TSLRIC studies to establish the rates
against the MPSC is based on Ex parte Young, 209 U.S. 123          at which GTE would be compelled to sell unbundled network
(1908), cannot recover damages for injuries sustained under        elements to its competitors. In addition, the order stated that
the challenged order. Because Young limits GTE’s recovery          the FTA requirement that GTE allow competitors to access
6    GTE North, Inc. v. Strand, et al.          No. 98-1851      No. 98-1851            GTE North, Inc. v. Strand, et al.     19

pieces, or unbundled elements, of GTE’s local network did           Pullman abstention is similarly inappropriate because
not preclude GTE’s competitors from requesting access to         Pullman abstention is warranted only when a state law is
pre-assembled, fully operational local service platforms.        challenged and resolution by the state of certain questions of
Upon receiving the order, GTE sued the MPSC in the district      state law may obviate the federal claims, or when the
court, alleging that the Commission, acting pursuant to          challenged law is susceptible of a construction by state courts
Michigan law, violated the FTA when it issued the February       that would eliminate the need to reach the federal question.
25 order: (1) directing GTE to provide competitors with          See, e.g., Babbit v. United Farm Workers National Union,
access to pre-assembled, fully operational service platforms;    442 U.S. 289, 306 (1979) (interpreting Pullman). In this case,
and (2) requiring GTE to publish tariffs offering to sell        to abstain pending state review of GTE’s claims would be
elements of its network at rates predetermined by the            inappropriate because the dictates of the Michigan
Commission.                                                      Telecommunications Act (pursuant to which the MPSC
                                                                 issued the challenged order) are clear and the MPSC has
   In its motion for summary judgment, GTE argued that the       already considered GTE’s objections to the February 25 order,
Commission’s mandate directing GTE to provide competitors        denied them, and denied GTE’s request for rehearing.
with access to pre-assembled network platforms violated
§ 251(c)(3) of the FTA because that provision requires LECs        Younger abstention is also inappropriate. In Younger, the
to provide competitors with access only to “unbundled            Supreme Court held that federal courts should abstain from
network elements.” 47 U.S.C. § 251(c)(3) (1996) (emphasis        deciding cases within their jurisdiction only when: (1) there
added). According to GTE, Congress deliberately limited          are ongoing state court proceedings; (2) those proceedings
incumbent LECs’ obligation to grant competitors network          involve important state interests; and (3) the parties have an
access by requiring LECs to provide competitors only with        adequate opportunity to raise constitutional issues in the state
“unbundled,” or separated, network elements that the new         proceedings. See GTE MobileNet of Ohio v. Johnson, 111
carrier would have to assemble before it could provide           F.3d 469, 481 (6th Cir. 1997). The MPSC contends that all
service. Ibid. In addition, GTE argued that the portion of the   three conditions for Younger abstention are met, and
February order directing it to offer pre-assembled platforms     emphasizes that state proceedings are currently ongoing
to all potential competitors violated the FTA because the Act    despite the Michigan courts’ rejection of GTE’s claims
specifically states that only competitors who request            because GTE has a right pursuant to Mich. Comp. Laws
unbundled access (“requesting carriers”) are entitled to         § 462.26 to seek review of the Commission’s February 25
network access under § 251(c)(3), and then only after            order (and the Commission’s May 11, 1998, order denying
negotiating individual interconnection agreements. See ibid.     rehearing) in the Michigan Court of Appeals.
GTE made a similar argument in challenging the MPSC’s
second directive, which, according to GTE, violates the FTA        That GTE has a right to appeal does not, however, satisfy
because it requires LECs to publish tariffs offering to sell     the requirement that a federal court may abstain under
network elements to all interested competitors at                Younger only if the parties are involved in ongoing state
predetermined rates even though §§ 251 and 252 of the Act        proceedings. The Supreme Court held in NOPSI that the
                                                                 availability, or even the pendency, of state court review of a
                                                                 “legislative or executive action” does not justify Younger
                                                                 abstention. NOPSI, 491 U.S. at 368 (noting that requiring
                                                                 abstention in deference to state judicial proceedings reviewing
                                                                 “legislative or executive action” would “make a mockery of
18   GTE North, Inc. v. Strand, et al.           No. 98-1851     No. 98-1851                GTE North, Inc. v. Strand, et al.            7

express an opinion on the merits of GTE’s claims, but not on     specifically require competitors to negotiate individual terms
the grounds urged by the defendants. Although the Michigan       of access with LECs.1 See 47 U.S.C. § 252(c)(2)-(3) (1996).
courts have concurrent jurisdiction over GTE’s § 1983 and
preemption claims, we should decline to decide this case only       Although GTE’s claims raise interesting questions about
if the requirements for abstention established in Burford v.     the scope and applicability of certain provisions of the FTA,
Sun Oil Co., 319 U.S. 315 (1943), Younger v. Harris, 401         the district court did not address these arguments on the
U.S. 37 (1971), or Railroad Comm’n of Texas v. Pullman Co.,      merits because it determined that it lacked jurisdiction under
312 U.S. 496 (1941), are met, or if abstention is warranted      § 252(e)(6) to review the MPSC’s February 25 order. In its
under the Johnson Act, 28 U.S.C. § 1342 (1994).                  July 1998 ruling, the court dismissed GTE’s claims for
                                                                 declaratory and injunctive relief on the basis that § 252(e)(6)
  Burford abstention is appropriate where “timely and            precludes federal review where a state commission has not yet
adequate state-court review is available” and:                   issued a final order approving or rejecting an interconnection
                                                                 agreement. GTE argues on appeal that the district court erred
  (1) when there are difficult questions of state law bearing    in dismissing the case for lack of subject matter jurisdiction
  on policy problems of substantial public import whose          because the district court had general jurisdiction under 28
  importance transcends the result in the case then at bar;      U.S.C. § 1331 to hear GTE’s claims. In deciding this appeal,
  or                                                             we express no opinion on the merits of GTE’s claims and
  (2) where the exercise of federal review of the question       determine only whether the district court has jurisdiction to
  in a case and in similar cases would be disruptive of state    entertain GTE’s challenge to the February 25 order.
  efforts to establish a coherent policy with respect to a
  matter of substantial public concern.
New Orleans Public Service, Inc. v. Council of the City of
New Orleans, 491 U.S. 350, 361 (1989) (NOPSI). Although
                                                                     1
the MPSC was arguably trying to establish a “coherent                  Although GTE claims that it will be disadvantaged if its competitors
policy” concerning local interconnection rates, Michigan state   are not required to negotiate individual terms of network access, any harm
law clearly authorizes the dictates in the Commission’s          GTE may suffer on this score will arguably be temporary because
February 25 order. Because Congress has invested the federal     universal subsidies are due to be phased out under the FTA. Cf. AT&T
                                                                 Corp. v. Iowa Utilities Bd., 119 S. Ct. 721, 737 (1999) (upholding an FCC
courts with primary responsibility for adjudicating FTA          rule that the plaintiffs said would “eviscerate the distinction between
challenges to state telecommunications regulations, and          resale and unbundled access” and amount to “government-sanctioned
because this case does not concern a disputed issue of state     arbitrage” on the grounds that the rule was consistent with the FTA, and
law, but rather a potential conflict between state and federal   noting that, because “§ 254 requires that universal service subsidies be
telecommunications laws, Burford abstention is inappropriate.    phased out, . . . whatever possibility of arbitrage remains will be only
                                                                 temporary”).
See, e.g., NOPSI, 491 U.S. at 361 (holding Burford abstention
inappropriate because the plaintiffs’ case did not “involve a         The counter-argument is, of course, that even if the tariffing
state-law claim, nor even an assertion that the federal claims   requirement established in the February 25 order were struck down once
are in any way entangled in a skein of state law that must be    the Commission approved an agreement incorporating the terms set forth
untangled before the federal case can proceed”) (internal        in the tariffs, GTE could not recover damages for harm suffered in the
                                                                 interim, nor could it “turn back the clock and recreate the atmosphere of
quotation marks and citation omitted).                           negotiations that would have prevailed if [its competitors] had not been
                                                                 operating for months under tariffing arrangements.” Appellant’s Br. at
                                                                 24-25.
8    GTE North, Inc. v. Strand, et al.           No. 98-1851      No. 98-1851                 GTE North, Inc. v. Strand, et al.            17

                              II                                  Court in5 AT&T Corp. v. Iowa Utilities Bd., 119 S. Ct. 721
                                                                  (1999).
  This court reviews de novo the district court’s denial of
GTE’s motion for summary judgment. See Greene v. Reeves,                                              III
80 F.3d 1101, 1104 (6th Cir. 1996). We also review de novo
the district court’s decision to dismiss GTE’s complaint for        The MPSC argues that, even if we have jurisdiction over
lack of subject matter jurisdiction. See Anderson v. Liberty      GTE’s claims, it would be prudent for us to abstain from
Lobby Inc., 477 U.S. 242, 249, 252 (1986); Musson                 ruling on the merits of the case until the rates specified in the
Theatrical, Inc. v. Federal Express Corp., 89 F.3d 1244, 1248     February 25 order are incorporated into an interconnection
(6th Cir. 1996). Lack of subject matter jurisdiction is an        agreement approved by the Commission. We decline to
affirmative defense that a defendant may assert in a motion to
dismiss. See Fed. R. Civ. P. 12(b)(1); In re DeLorean Motor
                                                                      5
Co., 991 F.2d 1236, 1240 (6th Cir. 1993) (emphasizing that               In Iowa, the Supreme Court reversed the Eighth Circuit’s decision
to survive a motion to dismiss, a complaint must contain          vacating, as inconsistent with the private negotiation provisions of the
“either direct or indirect allegations respecting all material    FTA, the FCC’s “pick-and-choose” rule, which required incumbents to
elements to sustain a recovery under some viable legal            offer network access to any potential competitor on the same terms
                                                                  enjoyed by earlier competitors who negotiated individual agreements with
theory”).                                                         the incumbent. The Eighth Circuit vacated the rule on the basis that it
                                                                  allowed late market entrants to obtain the benefits of previous
   The party opposing dismissal has the burden of proving         competitors’ agreements without having to accept the trade-offs that the
subject matter jurisdiction. See Moir v. Greater Cleveland        initial competitors had to make in order to obtain favorable terms of
Reg’l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990).           access. See id. at 738. In reversing the Eighth Circuit and upholding the
Specifically, the non-moving party must show that the             rule, the Supreme Court rejected the argument that the rule undercut
                                                                  incumbents’ bargaining power and contravened the purpose of the
complaint “alleges a claim under federal law, and that the        negotiation provisions of the FTA, and affirmed the FCC’s authority to
claim is ‘substantial.’” Musson Theatrical, Inc. v. Federal       promulgate the rule on the basis that it tracked the language of a particular
Express Corp., 89 F.3d 1244, 1248 (6th Cir. 1996) (holding        FTA provision (§ 252(i)) “almost exactly.”
that a complaint is “substantial” unless “prior decisions
inescapably render [it] frivolous”). That is to say, the non-          In the same opinion, the Supreme Court also reversed the Eighth
                                                                  Circuit’s decision vacating FCC Rule 315(b), which prohibits incumbent
moving party will survive the motion to dismiss by showing        LECs from separating already combined network elements before leasing
“any arguable basis in law” for the claims set forth in the       them to competitors under the “unbundled access” provisions of the FTA.
complaint. Ibid. In conducting our review, we “construe the       The Eighth Circuit determined that the rule should be vacated because it
complaint in a light most favorable to the plaintiff, accept as   required leased access to “bundled” elements, in violation of the FTA.
true all of plaintiff’s well-pleaded factual allegations, and     The Supreme Court disagreed, finding that, although § 251(c)(3) directs
                                                                  incumbents to grant competitors access to “unbundled” elements that the
determine whether the plaintiff can prove no set of facts         competitors may then “combine” and thus “forbid[s] incumbents to
supporting [his] claims that would entitle him to relief.”        sabotage network elements that are provided in discrete pieces,”
Ludwig v. Board of Trustees of Ferris State Univ., 123 F.3d       § 251(c)(3) “does not say, or even remotely imply, that elements must be
404, 408 (6th Cir. 1997). We review for clear error any           provided only in this fashion and never in combined form.” Iowa, 119 S.
factual findings the district court made in deciding the motion   Ct. at 737. Noting that “§ 251(c)(3) is ambiguous on whether leased
                                                                  network elements may or must be separated,” the Court concluded that the
to dismiss. See Gafford v. General Elec. Co., 997 F.2d 150,       FCC’s rule, which effectively requires incumbents to lease “bundled”
161 (6th Cir. 1993).                                              elements to competitors under certain circumstances, “is entirely rational”
                                                                  even though the rule “could allow entrants access to an entire
                                                                  preassembled network.” Id. at 737–38.
16    GTE North, Inc. v. Strand, et al.              No. 98-1851       No. 98-1851                 GTE North, Inc. v. Strand, et al.              9

preemption challenges to state commission orders issued in                         Jurisdiction Over the Challenged Order
non-FTA proceedings.
                                                                          Based on the scope of the applicable statutory provisions
   Indeed, to hold to the contrary would have enormous                 and the nature of the challenged order, we conclude that the
negative implications: if only certain actions (final orders           district court has general jurisdiction pursuant to 28 U.S.C.
approving interconnection agreements) by state commissions             § 1331 to hear GTE’s claims. Section 252(e)(6), which
are reviewable in federal court, and if, as the district court         prohibits federal review of interlocutory orders entered in the
held, § 252(e)(6) is the exclusive basis for judicial review of        course of FTA proceedings, plainly does not preclude review
state commission actions that in any way relate to                     of the February 25 order, which was entered in an
interconnection agreements, state commissions may insulate             independent state law proceeding unrelated to the
regulatory requirements that violate the FTA from federal,             AT&T–Sprint arbitration. Moreover, even if one could
and possibly even state, court review. This interpretation of          interpret § 252(e)(6) to encompass GTE’s claims, to do so
§ 252(e)(6) conflicts with Congress’s decision to establish            would frustrate Congress’s intent by allowing state
federal procedures for negotiating interconnection rights and          commissions to insulate from federal review decisions
to concentrate judicial review of interconnection agreements           allegedly preempted by, or otherwise contrary to, federal
in the federal courts. It is also antithetical to the principle that   telecommunications law. We therefore reverse the district
parties injured by a governmental entity’s failure to adhere to        court’s order dismissing GTE’s complaint, but express no
the law may seek redress in the courts. Finally, denying               opinion on whether the order directing GTE to sell pre-
review and forcing GTE either to violate the February 25               assembled platforms and other network2 elements at
order, or to comply with the general and immediate                     predetermined rates is preempted by the FTA. We similarly
obligations imposed by the order in the hope that the order            express no opinion on whether the portion of the February 25
would one day be incorporated into a reviewable final                  order directing GTE to sell network elements to any interested
agreement, would undermine both the letter and spirit of the           competitor at rates predetermined by the Commission is
FTA.                                                                   preempted by the FTA requirement that competitors obtain
                                                                       access to local networks3 by negotiating individual
  Section 252(e)(6) circumscribes federal review only of               interconnection agreements.
cases born of § 252 proceedings. Because the MPSC’s
February 25 order was not the product of § 252 arbitration,
but of an independent state law proceeding, § 252(e)(6) does
not preclude jurisdiction over GTE’s claims. We therefore
hold that federal review is available under § 1331 to                      2
                                                                             Section 261 of the FTA provides that state commissions can impose
determine whether state commission orders violate federal              their own rules “in fulfilling requirements of this part, if such regulations
law except in cases in which the challenged regulatory action          are not inconsistent with the provisions of [the FTA].” 47 U.S.C. § 261
is clearly an interlocutory order arising out of § 252                 (1996). State commissions may also impose additional requirements on
proceedings. We confine our holding to the jurisdictional              LECs if such requirements “are necessary to further competition in the
                                                                       provision of telephone exchange access, so long as the State’s
question because it is for the district court to determine on          requirements are not inconsistent with the [Federal Communication]
remand whether the directives in the February 25 order violate         Commission’s regulations to implement this part.” Id. § 261 (b)-(c).
§ 252 of the FTA as recently interpreted by the Supreme
                                                                           3
                                                                             See 47 U.S.C. §§ 251(a)(1), 251(c)(1) (requiring incumbents and
                                                                       their competitors to negotiate in good faith the specific terms and
                                                                       conditions of interconnection agreements).
10   GTE North, Inc. v. Strand, et al.            No. 98-1851      No. 98-1851             GTE North, Inc. v. Strand, et al.     15

  To survive a motion to dismiss based on lack of federal          state courts to defer to the MPSC].” Id. at 654. Because an
question jurisdiction, the non-moving party must show first        interested buyer need not incorporate the terms of the
that its claims arise under federal law and, second, that § 1331   February 25 order into a final arbitration agreement to enforce
jurisdiction is not “preempted by a more specific statutory        GTE’s obligations under the order, § 252(e)(6) does not
provision conferring exclusive jurisdiction elsewhere.”            provide an “adequate procedure” by which GTE may obtain
Connors v. Amax Coal Co., 858 F.2d 1226, 1229-30 (7th Cir.         review of the MPSC’s directives. That GTE could contest the
1988). GTE asserts that the district court has subject matter      validity of the February 25 order in the course of defending a
jurisdiction over its 42 U.S.C. § 1983 and federal preemption      state court enforcement proceeding does not solve the
claims because: (1) such claims arise under the Constitution       problem, because leaving resolution of GTE’s claims to the
and laws of the United States; and (2) the MPSC’s                  state courts would clearly frustrate Congress’s goals under the
February 25 order, which the parties agree was issued              FTA. See, e.g., MFS Intelenet, 16 F. Supp. 2d. at 823–34
pursuant to Michigan law, deprives GTE of its rights under         (concluding that review of § 252 “as a whole” demonstrates
the FTA, thereby creating a cause of action for prospective        that “Congress has created a unique framework which, while
injunctive relief against the commissioners under 42 U.S.C.        inviting state commissions to arbitrate and approve
§ 1983 and Ex parte Young, 209 U.S. 123 (1908). We agree.          interconnection agreements, retains exclusive jurisdiction
                                                                   within the federal courts to ensure that those agreements meet
    Because GTE’s claims arise under federal law, the district     federal requirements”).
court has jurisdiction under § 1331 to decide the case unless
GTE’s claims are subject to the limitations on federal review         The district court has subject matter jurisdiction under
set forth in § 252(e)(6), which we conclude they are not. See      § 1331 to review federal preemption claims. See Bibbo v.
47 U.S.C. § 252(e)(6) (1996); Shaw v. Delta Air Lines, Inc.,       Dean Witter Reynolds, Inc., 151 F.3d 559 (6th Cir. 1998).
463 U.S. 85, 96 n.14 (1983) (holding that a plaintiff who          The question in this case is simply whether § 252(e)(6)
“seeks injunctive relief from a state [or local] regulation on     divests the district court of its jurisdiction over GTE’s
the ground that such regulation is preempted by federal law        preemption claims because the February 25 order, though
. . . presents a federal question which the federal courts have    itself a product of state law proceedings, establishes rates that
jurisdiction under 28 U.S.C. § 1331 to resolve”). Federal          might one day be incorporated into final arbitration
question jurisdiction over GTE’s claims is not preempted by        agreements approved by the MPSC. There is no evidence that
the FTA because § 252(e)(6) only circumscribes federal             Congress intended § 252(e)(6), which grants federal courts
judicial review of interlocutory orders issued in FTA, not state   exclusive jurisdiction to review for FTA compliance state
law, proceedings. See Connors, 858 F.2d at 1229–30.                commission orders approving or rejecting interconnection
                                                                   agreements, to preclude federal review of state law orders that
   The text and legislative history of the FTA make clear that     permit telecommunications carriers to circumvent the
§ 252(e)(6) is the exclusive basis for federal judicial review     procedures prescribed in the FTA for negotiating network
only of orders entered in negotiation or arbitration               access. We recognize, of course, that the significance of the
proceedings under § 252 of the Act. Section 252(e)(6)              challenged order’s state law origins has engendered legitimate
provides that, “[i]n any case in which a State commission          debate among the parties and in the district court. However,
makes a determination under this section, any party aggrieved      absent clear evidence that Congress intended to allow state
by such determination may bring an action in an appropriate        commissions to issue orders that may be enforced without
federal district court to determine whether the agreement or       being incorporated into final interconnection agreements, we
statement meets the requirements of section 251 of this title      will not construe § 252(e)(6) to preclude federal review of
14    GTE North, Inc. v. Strand, et al.            No. 98-1851      No. 98-1851                GTE North, Inc. v. Strand, et al.         11

agreement was so strong as to eliminate the contingency and         and this section.” 47 U.S.C. § 252(e)(6) (1996) (emphasis
virtually guarantee judicial review.                                added).     Because the MPSC initiated the state law
                                                                    proceedings that resulted in the challenged order independent
   We disagree, and find that in this case § 252(e)(6) cannot       of the procedures prescribed in the FTA, § 252(e)(6) does not
be relied upon to provide adequate federal review because           limit federal judicial review of the February 25 order, and the
there is a chance, regardless how small, that GTE’s                 MPSC’s failure, thus far, to incorporate the terms of the order
competitors may obtain service from GTE on the terms set            in a final decision approving or rejecting an interconnection
forth in the February 25 order without ever executing a final       agreement does not bar review of GTE’s claims.
agreement. Indeed, we think the appropriate inquiry is not
whether, in the court’s estimation, it is more likely than not        In holding that GTE’s suit was premature because the
that the challenged order will be incorporated into a               MPSC had yet to issue a final order reviewable under
reviewable agreement, but whether there is any possibility at       § 252(e)(6), the district court relied heavily on its prior
all that an LEC’s competitors could enforce the terms of the        decision in GTE North4 v. Strand, No. 5:97CV01, 1997 WL
challenged order by means other than those prescribed in the        811422 (W.D. Mich.), and in so doing failed to recognize the
FTA. If there is such a chance, § 252(e)(6) does not provide        legal significance of the February 25 order’s state law origins.
the party challenging the order with adequate review under          As the district court implicitly acknowledged in Michigan
Califano, and the federal district courts have general              Bell Telephone Co. v. MFS Intelenet of Michigan, Inc., 16 F.
jurisdiction to review the order under 28 U.S.C. § 1331.            Supp. 2d 817, 823 (W.D. Mich. 1998), Strand stands for the
                                                                    limited proposition that federal district courts have “no
   Under Michigan law, a buyer interested in purchasing             jurisdiction to review MPSC decisions arising during the
network elements from GTE at the rates established in the           § 252 process until after [an] interconnection agreement ha[s]
February order need not execute a final interconnection             become final by way of commission approval or rejection.”
agreement with GTE to enforce the tariff; it need only petition     Ibid. (citing cases) (emphasis added). The court in MFS thus
a state court for an injunction enforcing the terms of the tariff   distinguished Strand and upheld jurisdiction over the
against GTE. See, e.g., Rinaldo’s Construction Corp. v.             plaintiff’s challenge to an MPSC order interpreting (rather
Michigan Bell Telephone Co., 559 N.W.2d 647, 653–54                 than approving or rejecting) an existing interconnection
(Mich. 1997). In Rinaldo’s, the Michigan Supreme Court              agreement. See id. at 823-24; cf. Michigan Bell Telephone v.
held:                                                               Strand, 26 F. Supp. 2d 993, 999 (W.D. Mich. 1998)
                                                                    (emphasizing the “Congressionally assigned role of the
  [W]here a plaintiff seeks relief against a telephone              district courts in preventing violations of the
  company in a [state] court of general jurisdiction, under         Telecommunications Act flowing from enforcement decisions
  Valentine [v. Michigan Bell, 199 N.W.2d 182 (Mich.                or other decisions inconsistent with existing interconnection
  1972)], the court may entertain (1) a cause of action in          agreements”). In this case, as in MFS, the challenged order
  tort, or (2) a claim that the telephone company has               did not arise “during the § 252 process,” and is therefore not
  violated the regulatory code or tariffs.
Id. at 653–54 (emphasis added). As the Michigan Supreme                 4
Court went on to explain, “[c]auses of action in tort and those          In Strand, the district court noted that an MPSC order is a
causes of action alleging that a telephone company has              “determination” subject to federal review under section 252(e)(6) only if
                                                                    the order approves or rejects a final interconnection agreement. See
violated the tariffs or code are not cases in which the rationale   Strand, 1997 WL 811422, at *2 (quoting GTE South v. Morrison, 957 F.
underlying the doctrine of primary jurisdiction [requires the       Supp. 800, 804 (E.D. Va. 1997)).
12   GTE North, Inc. v. Strand, et al.           No. 98-1851      No. 98-1851           GTE North, Inc. v. Strand, et al.    13

subject to the reasoning in Strand or the many other cases        be incorporated into a final arbitration agreement. Standing
cited by the lower court in which district judges have refused    alone, this admission appears to undercut GTE’s argument
to review interlocutory orders issued by state commissions in     that the district court has jurisdiction over its claims under
the course of § 252 arbitrations. Id. at 823.                     § 1331. Indeed, when combined with the Commission’s
                                                                  assertion that it has been prevented from ruling on an
   Although the order at issue in this case is clearly            agreement incorporating the challenged terms because GTE
distinguishable from an interlocutory order entered in a § 252    has not made certain filings, the parties’ admission virtually
proceeding, the commissioners urge us to overlook the order’s     guarantees that, if GTE were to execute an agreement, either
state law origins because the order establishes rates that the    the MPSC or the FCC would approve or reject the terms of
parties agree will likely be incorporated in a final agreement    the challenged order, at which point GTE could seek federal
subject to review under § 252(e)(6). Were we to adopt this        review under § 252(e)(6). See 47 U.S.C. § 252(e)(1) (1996)
approach, we would simply equate the February 25 order with       (stating that a state commission “shall” approve or reject
an interlocutory order in a § 252 proceeding that GTE could       “any” interconnection agreement between an incumbent and
not challenge in federal court until the Commission issued a      a requesting carrier, whether the agreement is the product of
final decision approving or rejecting an agreement                voluntary negotiation or binding arbitration before the state
incorporating the terms of the order. Recharacterizing the        commission). The problem with this logic, and the reason
February 25 order in this manner appears consistent with the      § 252(e)(6) does not provide for adequate review of the
FTA if one reads § 252(e)(6) broadly to govern not only           challenged order under Califano v. Sanders, 430 U.S. 99, 108
claims that a state utility commission erred in approving a       (1977), or even under Thunder Basin, 510 U.S. 200 (1994), is
final agreement negotiated under § 252, but also claims that      that an interested buyer could enforce the tariffs established
the commission violated the FTA by approving an agreement         in the February order in the Michigan courts without ever
that was not the product of a § 252 proceeding. Although this     executing a final interconnection agreement with GTE.
construction of § 252(e)(6) is superficially appealing, we
cannot adopt this approach and assume that GTE would                In determining whether the lower court has jurisdiction
eventually be able to seek federal review of the challenged       over GTE’s claims despite the limitations in § 252(e)(6), this
order because any approach that equates a decision arising out    court must look “not only [to] the particular statutory
of independent state law proceedings with an interlocutory        language, but to the design of the [FTA] as a whole and to its
order in a § 252 arbitration ignores the critical fact that the   object and policy.” Crandon v. United States, 494 U.S. 152,
former may be enforced against the parties even if it is never    158 (1990). Citing the Supreme Court’s decision in Califano,
incorporated in a final interconnection agreement.                the district court correctly observed that, “[w]here Congress
                                                                  has provided an adequate procedure to obtain review of an
  At first blush, § 252(e)(6) seems to guarantee adequate,        agency determination, alternative bases for jurisdiction are
albeit deferred, judicial review of the Commission’s              inapplicable.” Califano, 430 U.S. at 108. The district court
February 25 order. See, e.g., Thunder Basin Coal v. Reich,        noted in its opinion that confining federal review of GTE’s
510 U.S. 200 (1994) (holding that a statutory provision that      claims to the circumstances outlined in § 252(e)(6) might
places temporal restrictions on a party’s ability to bring an     theoretically deprive GTE of “adequate” review under
action in federal court still provides adequate opportunity for   Califano because such review would be contingent upon the
review and therefore satisfies due process). As the district      MPSC’s approval of a final agreement incorporating the
court noted in its opinion, the parties agree that the rates      February 25 order. However, the court found that the
established in the Commission’s February 25 order will likely     probability that the order would be incorporated into a final