Court Opinion

ID: 3032515
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:47:58.019339+00
Date Added: 2024-06-11T09:55:04.450732
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

VERIZON CALIFORNIA INC.,                  
                  Plaintiff-Appellant,
                  v.
MICHAEL R. PEEVEY; LORETTA M.
LYNCH; CARL W. WOOD; GEOFFREY
F. BROWN; SUSAN P. KENNEDY, in
their official capacities as
Commissioners of the Public                      No. 04-15155
Utilities Commission of the State
of California, and not as                         D.C. No.
                                               CV-03-02838-THE
individuals,
               Defendants-Appellees,              OPINION
AT&T COMMUNICATIONS OF
CALIFORNIA INC.; MCI WORLDCOM
COMMUNICATIONS, INC.; MCIMETRO
ACCESS TRANSMISSION SERVICES,
LLC,
             Defendants-Intervenors-
                            Appellees.
                                          
        Appeal from the United States District Court
            for the Northern District of California
       Thelton E. Henderson, District Judge, Presiding
                    Argued and Submitted
         January 12, 2005—San Francisco, California
                        Filed July 6, 2005
Before: John T. Noonan, Carlos T. Bea, Circuit Judges, and
             Robert E. Jones, District Judge.*
   *The Honorable Robert E. Jones, Senior United States District Judge
for the District of Oregon, sitting by designation.

                                7833
7834       VERIZON v. PEEVEY
       Opinion by Judge Noonan;
       Concurrence by Judge Bea
7836                  VERIZON v. PEEVEY
                         COUNSEL

Henry Weissmann, Burton A. Gross, John P. Hunt and Rose-
marie T. Ring, Munger, Tolles & Olson LLP, Los Angeles,
California, for plaintiff-appellant Verizon California Inc.

Randolph L. Wu, Mary F. McKenzie and Kimberly J. Lippi,
San Francisco, California, for defendants-appellees Michael
R. Peevey, Loretta M. Lynch, Carl W. Wood, Geoffrey F.
Brown and Susan P. Kennedy in their official capacities as
Commissioners of the Public Utilities Commission of the
State of California.

Catherine M. Barrad and Randolph W. Deutsch, Sidley, Aus-
tin, Brown & Wood LLP, San Francisco, California, and
David J. Miller, AT&T Communications of California, Inc.,
San Francisco, California, for intervenor/defendant-appellee
AT&T Communications of California, Inc.

Donald B. Verrilli, Jr., Michael B. DeSanctis and Daniel
Mach, Jenner & Block LLP, Washington, D.C., and Jeffrey A.
Rackow, MCI, Inc., Washington, D.C., for intervenors/
defendants-appellees MCI WorldCom Communications, Inc.
and MCIMetro Access Transmission Services LLC.

                         OPINION

NOONAN, Circuit Judge:

   We must decide whether an incumbent local exchange car-
rier’s challenge to nominally “interim” rates for access to its
network by competitive local exchange carriers, which rates
are set by a state utilities commission pursuant to the Tele-
communications Act of 1996, is ripe for judicial review, even
though such rates are subject to later adjustment by the state
utilities commission (“a true-up”). When the incumbent local
                       VERIZON v. PEEVEY                   7837
exchange carrier has cognizable claims which cannot and will
not be compensated by the true-up, we hold such challenge is
ripe for judicial review.

                      BACKGROUND

   The Telecommunications Act of 1996 (“the Act”), Pub. L.
No. 104-104, 110 Stat. 56 (codified as amended in scattered
sections of 47 U.S.C.) aims in part to introduce competition
among local exchange carriers. Verizon Communs., Inc. v.
FCC, 535 U.S. 467, 476-77 (2002). A “local exchange” is “a
network connecting terminals like telephones, faxes, and
modems to other terminals within a geographical area like a
city.” 535 U.S. at 489. The Act recognizes two types of local
exchange carriers. An “incumbent local exchange carrier”
(“ILEC”) is a carrier that owns a local exchange. Id. at 490
(citing 47 U.S.C. § 251(h)). A “competitive local exchange
carrier” (“CLEC”) is a carrier new to the market, without a
local exchange of its own. See 535 U.S. at 491-92. Absent
regulation, “[a] newcomer could not compete with the incum-
bent carrier to provide local service without coming close to
replicating the incumbent’s entire existing network [or local
exchange] . . . .” Id. at 490.

   To foster competition, the Act requires that ILECs make
available to CLECs “access” to the ILECs’ “network ele-
ments” “on an unbundled basis.” 47 U.S.C. § 251(c)(3). A
“network element” is “a facility or equipment used in the pro-
vision of a telecommunications service” or those “features,
functions, and capabilities that are provided by means of such
facility or equipment, including subscriber numbers, data-
bases, signaling systems, and information sufficient for billing
and collection or used in the transmission, routing, or other
provision of a telecommunications service.” 47 U.S.C.
§ 153(29). To provide “access” to a network element “on an
unbundled basis” — or, said differently, to provide access to
unbundled network elements (“UNEs”) — “is to lease the ele-
ment, however described, to a requesting carrier at a stated
7838                   VERIZON v. PEEVEY
price specific to that element” without requiring that other
elements also be leased (“bundled”). See Verizon Communs.,
Inc., 535 U.S. at 531.

   Pursuant to the Act, CLECs requesting access to UNEs are
first to attempt to negotiate rates for such access with the
ILEC that owns the network. 47 U.S.C. §§ 251(c)(1),
252(a)(1). If the parties successfully negotiate rates, the rele-
vant state utilities commission is required to accept those rates
unless they discriminate against a carrier not a party to the
contract, or the rates are otherwise shown to be contrary to the
public interest. 47 U.S.C. §§ 252(e)(1), (e)(2)(A). If the par-
ties cannot agree on rates, any party to the negotiations may
request arbitration to be conducted by the relevant state utili-
ties commission. 47 U.S.C. § 252(b)(1).

   The Act assumes that a state utilities commission may
refuse or otherwise fail to conduct the arbitration, in which
case the Act provides that the Federal Communications Com-
mission (“FCC”) shall act in the place and stead of the state
utilities commission. See 47 U.S.C. § 252(e)(5). However,
where, as here, the state utilities commission conducts the
arbitration, such commission is bound by the Act’s provisions
governing how the rates must be set and by the FCC’s related
regulations, 47 U.S.C. § 252(c)(1)-(2), including regulations
that require state utilities commissions to use the total element
long run incremental cost (“TELRIC”) methodology. 47
C.F.R. § 51.505; see also AT&T Corp. v. Iowa Utils. Bd., 525
U.S. 366, 385 (1999) (upholding the FCC’s jurisdiction to
design a pricing methodology to bind state utilities commis-
sions); Verizon Communs., Inc., 535 U.S. at 497-528 (uphold-
ing the TELRIC regulations in particular). It is important to
note that, in setting forth these requirements, neither the Act
nor the FCC regulations distinguishes between “interim” rates
and “final” rates. Cf. AT&T Communs. of Ill., Inc. v. Ill. Bell
Tel. Co., 349 F.3d 402, 411 (7th Cir. 2003) (“[T]he possibility
of repair in the future is no warrant for promulgating today a
rate that deviates from the TELRIC standard. Federal law
                       VERIZON v. PEEVEY                    7839
requires that any rate for unbundled network elements,
adopted by a state commission, comply with TELRIC when
adopted.”) (emphasis added).

   In 1997, the California Public Utilities Commission
(“CPUC”) established nominally interim rates for access by
CLECs to Verizon’s UNEs. We characterize these rates as
interim only in name because, for reasons not relevant here,
the CPUC did not undertake the task of setting permanent
rates until 2002. Even then, it did not set permanent rates, but
rather held expedited proceedings to establish revised interim
rates, which were to remain in effect until permanent rates
could be established. After receiving several interim rate pro-
posals from Verizon and interested CLECs, the CPUC issued
the interim rate order that is at issue in this appeal. 2003 Cal.
PUC LEXIS 168 (Cal. Pub. Util. Mar. 13, 2003). In brief, the
revised interim rates were based on rates approved by the util-
ities commission in New Jersey, where Verizon also is the
ILEC; the rates were adjusted in an effort to reflect Verizon’s
higher costs in California relative to New Jersey. Id. at *109-
10. Verizon alleges both that the methodology used to set the
New Jersey rates does not comply with TELRIC as previously
interpreted both by the FCC and CPUC, Compl. ¶¶ 36, 39, 42,
and that “costs, network requirements, geography, demand
levels, and other unique features [relevant to the setting of
rates] may differ significantly by state . . . .” Verizon Compl.
¶¶ 35, 42-43. However, in an attempt to remedy these admit-
ted problems, the CPUC made the interim rates subject to a
“true-up” when the permanent rates finally were adopted.
2003 Cal. PUC LEXIS at *110. A “true-up” is a determina-
tion by the CPUC which adjusts the interim rates, either up or
down, as of the earlier effective date of the interim rate order,
so that the adjusted interim rates equal the permanent rates as
set later in the permanent rate proceeding.

  The impact of the interim rate order entered March 13,
2003 was immediately to reduce the rates that Verizon could
charge CLECs for access to its UNEs relative to what it had
7840                   VERIZON v. PEEVEY
been able to charge under the earlier rate order. After the
CPUC denied Verizon’s application for rehearing, Verizon
brought an action in federal district court against Michael R.
Peevey and other commissioners of the CPUC in their official
capacities, in which Verizon alleged five claims: (1) that the
interim rate order was arbitrary and capricious and not sup-
ported by substantial evidence; (2) that the interim rate order
was not in compliance with the Act nor with the regulations
implementing the TELRIC methodology; (3) that the interim
rate order was confiscatory; (4) that the interim rate order was
in violation of due process; and (5) that the interim rate order
was in violation of Verizon’s civil rights. Verizon sought to
have the interim rate order declared unlawful and vacated, to
have its enforcement enjoined, and to have the matter returned
to the CPUC for further proceedings. Verizon also sought its
costs and attorneys’ fees incurred in litigating the suit.

   AT&T Communications of California, Inc., MCI World-
Com Communications, Inc., and MCIMetro Access Transmis-
sion Services LLC intervened in the suit, after which Verizon
filed a motion for partial summary judgment as to its first,
second and fourth claims. However, concluding that Veri-
zon’s first and second claims were not ripe for judicial
review, the district court denied Verizon’s motion for partial
summary judgment as to those two claims without reaching
their merits, and sua sponte dismissed the same two claims.
Then, after giving Verizon an opportunity to offer some mate-
rial basis upon which to distinguish its remaining three
claims, the district court dismissed those claims also for lack
of ripeness. Verizon appealed the dismissal of its complaint.
We have jurisdiction pursuant to 47 U.S.C. § 252(e)(6) and 28
U.S.C. § 1291, and vacate and remand with instructions that
the district court consider on the merits whether Verizon is
entitled to the declaratory and injunctive relief.

                STANDARD OF REVIEW

  We review de novo whether claims are ripe for judicial
review. Laub v. United States Dep’t of the Interior, 342 F.3d
1080, 1084 (9th Cir. 2003).
                       VERIZON v. PEEVEY                    7841
                         ANALYSIS

  [1] The Telecommunications Act of 1996 provides a single
methodology for the setting of rates: TELRIC. “Federal law
requires that any rate for unbundled network elements,
adopted by a state commission, comply with TELRIC when
adopted.” AT&T Communs., 349 F.3d at 411. No provision is
made by this law for any rate to be established in a different
way. Verizon alleged that the CPUC had failed to comply.
The issue was ready for judicial decision.

   [2] This obvious result has been clouded by our decision in
US West Communs. v. MFS Intelenet, Inc., 193 F.3d 1112 (9th
Cir. 1999), understandably treated as precedent by the district
court. In US West the contention was made and accepted by
both parties that the rates were “interim only and may be
adjusted by later pricing proceedings.” Id. at 1118. But neither
the legitimacy of interim rates nor possible adjustment by
later pricing proceedings (a so-called true-up) is accepted by
Verizon. As neither interim rates nor a true-up compensating
for such costs as credit insurance are covered by TELRIC, we
see no reason to import into this case the assumptions and
admissions that were decisive in US West.

   [3] Verizon has presented a straightforward challenge to the
basis on which the CPUC set the current rates; namely the
rates set in New Jersey, with alleged inadequate adjustment
for Verizon’s costs in California. Whether this short cut com-
plied with federal law and the constitution is ripe for adjudica-
tion.

 [4] Accordingly, the judgment of the district court is
VACATED and the case is REMANDED.

BEA, Circuit Judge, concurring:

   Although I join in the majority’s holding and its conclusion
that Verizon’s claims are ripe for judicial review, I do not find
7842                  VERIZON v. PEEVEY
its distinction of US West Communications v. MFS Intelenet,
193 F.3d 1112 (9th Cir. 1999), to be compelling. I neverthe-
less find US West to be distinguishable on a different basis,
and take this opportunity to articulate that basis and also to
respond to the many arguments advanced by the CPUC and
intervenors in support of their view that Verizon’s claims are
not ripe for judicial review even independent of US West.

I.   US West Communications v. MFS Intelenet, Inc.

   The majority distinguishes US West on the basis that “nei-
ther the legitimacy of interim rates nor possible adjustment by
later pricing proceedings (a so-called true up) is accepted by
Verizon,” slip op. at 7841, suggesting that, by contrast, US
West did not contest “the legitimacy of interim rates.” I take
this to mean that, according to the majority’s reading, US
West did not contest the legitimacy of rates that, by virtue of
being interim, need not be in compliance with the Act so long
as US West was later made whole.

   With this I do not agree. As we explained there, “US West
challenge[d] several of the pricing provisions as inconsistent
with the pricing standards fixed by the Act.” Id. at 1117-18.
We nevertheless concluded that the claims were not ripe for
judicial review primarily because US West conceded that the
true-up would make it whole and, thus, might moot the
appeal. Id. at 1118-19. This does not mean that US West did
not contest the legitimacy of such interim rates. Indeed, we
expressly said otherwise:

     US West challenges the interim rates, but says its
     concerns would be resolved if TCG and MFS were
     ordered to compensate U.S. West for any differences
     between the interim rates and the permanent prices,
     referred to as an “administrative true-up.”

     . . . . Accordingly, we avoid unnecessary adjudica-
     tion by declining to review the interim prices now.
                      VERIZON v. PEEVEY                   7843
    If a true-up is ordered, this appeal might become
    moot, as U.S. West has indicated it would be satis-
    fied with such an order.

Id. at 1118-19 (emphasis added).

   Thus, I find US West distinguishable from the case here not
because US West did or did not contest the legitimacy of
interim rates that do not comply with the Act and TELRIC
methodology, but because it conceded that a true-up would
make it whole whereas, by contrast, Verizon has made no
similar concession. To the contrary, as I address more fully in
Part II.B.1 below, Verizon has affirmatively alleged that the
true-up will not make it whole in two different respects: (1)
the loss of retail customers suffered during the period until
permanent rates are established, which loss is claimed to be
due to unlawfully low interim rates; and (2) the credit risk of
nonpayment by CLECs of the difference between the rates as
set by the interim rate order and as ultimately adjusted by the
true-up, a risk Verizon has been and is presently forced to
bear. Further, the CPUC agrees that these two elements of
loss claimed by Verizon will not be considered in the true-up.
Thus, to the extent that the district court here was obliged to
accept Verizon’s allegations of uncompensable losses as true,
an issue which I address in Part II.B.3 below, contrary to what
was conceded in US West, any future true-up here cannot
moot this appeal.

   Nor is there any merit in the argument of the CPUC and the
intervenors that our rationale in US West applies here with
even greater force than it did there because the true-up here
is more certain to occur than it was in US West. Presumably
the argument is that even in US West, we denied review where
there was a possibility that US West would suffer losses that
would not be compensated if, ultimately, the state utilities
commission decided not to order a true-up. But here, to the
extent Verizon’s allegations must be taken as true, Verizon
has suffered, is suffering and will continue to suffer losses
7844                   VERIZON v. PEEVEY
uncompensable by a true-up; it is not a mere possibility. At
the procedural phase in which we find ourselves and given
Verizon’s allegations, it must be deemed a certainty.

   Finally, as alluded to above, the possibility that the appeal
would be mooted was not the sole ground on which we relied
in holding that the claims raised in US West were not ripe for
judicial review. Rather, as we stated:

    Even if the appeal does not become moot, either
    because the true-up is denied or because [the
    CLECs] appeal[ ] the award of a true-up, this court
    will benefit from the Commission’s and the district
    court’s legal analysis of whether a true-up is autho-
    rized by the Act and from their assessment of
    whether it should be imposed in these particular
    cases.

Id. at 1119. This rationale is inapplicable here because none
of the parties are contesting whether a true-up is authorized
nor whether it should be imposed here. It is admitted by all:
The CPUC made the interim rates subject to a true-up, 2003
Cal. PUC LEXIS 168, at *110 (Cal. Pub. Util. Mar. 13, 2003);
there will be a true-up.

   In short, absent even the remotest possibility that Verizon’s
claimed losses will be compensated through a true-up (assum-
ing Verizon’s allegations to be true) thereby rendering this
appeal moot, and in the absence of any suggestion that the
parties intend to challenge the propriety of conducting a true-
up either generally or as applied here, US West does not bind
us. See Hart v. Massanari, 266 F.3d 1155, 1170 (9th Cir.
2001) (“In determining whether it is bound by an earlier deci-
sion, a court considers . . . the ‘reason and spirit of cases’
[and] also ‘the letter of particular precedents.’ This includes
not only the rule announced, but also the facts giving rise to
the dispute . . . .”) (citation omitted).
                         VERIZON v. PEEVEY                   7845
II.    Ripeness

   Having so distinguished US West, I would consider
whether the ripeness doctrine nevertheless bars Verizon’s
action. The ripeness doctrine at issue here was first set forth
in Abbott Laboratories v. Gardner, 387 U.S. 136, 153 (1967),
and is a prudential, rather than jurisdictional, doctrine.
National Audubon Society, Inc. v. Davis, 307 F.3d 835, 850
(9th Cir. 2002), as amended by, 312 F.3d 416 (9th Cir. 2002).
It requires that “[i]n considering whether a case [challenging
administrative action] is ripe for review, a court must evaluate
[1] the fitness of the issues for judicial decision and [2] the
hardship to the parties of withholding court consideration.”
US West, 193 F.3d at 1118 (quoting Winter v. California
Medical Review, Inc., 900 F.2d 1322, 1325 (9th Cir. 1990)
(quoting Abbott Laboratories, 387 U.S. at 149)) (internal quo-
tation marks omitted). “A claim is fit for decision if the issues
raised are primarily legal, do not require further factual devel-
opment, and the challenged action is final.” Id. (quoting Stan-
dard Alaska Production Co. v. Schaible, 874 F.2d 624, 627
(9th Cir. 1989)) (internal quotation marks omitted). “To meet
the hardship requirement, a litigant must show that withhold-
ing review would result in direct and immediate hardship and
would entail more than possible financial loss.” Id. (quoting
Winter, 900 F.2d at 1325) (internal quotation marks omitted).

  A.       The Fitness of the Issues for Judicial Decision

      1.    The Issues Raised Here Are Primarily Legal and
            Do Not Require Further Factual Development

  The requirements that the issues raised be primarily legal
and not require further factual development are, in fact, the
same. “[A] controversy is ‘essentially legal in nature’ . . .
when no ‘further factual amplification is necessary.’ ” City of
Auburn v. Qwest Corp., 260 F.3d 1160, 1172 (9th Cir. 2001)
(quoting Western Oil & Gas Association v. Sonoma County,
905 F.2d 1287, 1291 (9th Cir. 1990)). Verizon’s claims
7846                   VERIZON v. PEEVEY
require analysis only of the administrative record so that the
court can determine whether the rates already imposed —
whether interim or final — comply with the Act and relevant
regulations, including the TELRIC methodology. See Fox
Television Stations, Inc. v. Federal Communications Commis-
sion, 280 F.3d 1027, 1039 (D.C. Cir. 2002) (holding that
“whether the Commission’s determination [regarding certain
‘ownership rules’] was arbitrary and capricious or contrary to
law” was a “purely legal” question). Thus, the claims require
no further factual development and are primarily legal.

    2.   The Challenged Action Is Final

   Whether a challenged action is sufficiently “final” for judi-
cial review depends on whether it is the sort of action which
federal courts have jurisdiction to review. Under the Act, “[i]n
any case in which a State commission makes a determination
under [47 U.S.C. § 252], any party aggrieved by such deter-
mination may bring an action in an appropriate Federal dis-
trict court to determine whether the agreement or statement
meets the requirements of [47 U.S.C. § 251] and [47 U.S.C.
§ 252].” 47 U.S.C. § 252(e)(6) (emphases added). We previ-
ously have had occasion to define “a determination” for pur-
poses of 47 U.S.C. § 252(e)(6) in the context of holding that
a utility need not exhaust available state remedies before
seeking judicial review in federal court of a final rate order set
by the CPUC. AT&T Communications Systems v. Pacific Bell,
203 F.3d 1183, 1184 (9th Cir. 2000). In so doing, we
expressly distinguished the judicial review provision in the
Act from that in the Administrative Procedure Act (“APA”),
noting that whereas the APA “authorizes review only of ‘final
agency action,’ 5 U.S.C. § 704, section 252 does not provide
that there must be a ‘final’ determination after exhaustion of
all available remedies.” Id. Rather, we explained, “[i]t
requires only that there be ‘a determination,’ ” and, thus, we
held that “[a] state commission’s decision can be ‘a determi-
nation’ even if it is subject to a request for rehearing so long
                           VERIZON v. PEEVEY                          7847
as the decision is operational or binding on the parties in the
absence of a request for rehearing.” Id. (emphasis added).

   At least to the extent Verizon’s allegations of uncompens-
able harm are accepted as true, the interim rate order here is
both operative and binding on Verizon. The order was entered
on and effective as of March 13, 2003. 2003 Cal. PUC LEXIS
168, at *117. If Verizon refuses to comply, it faces substantial
penalties. Cal. Pub. Util. Code §§ 2107-08 (providing for a
penalty of as much as $20,000 for “each offense” and provid-
ing that “in case of a continuing violation each day’s continu-
ance thereof shall be a separate and distinct offense”). And
although the interim rates may be subject to a true-up, the
losses that are alleged to result from the operation of the rates
today are alleged to be uncompensable by means of the true-
up.

   The CPUC and the intervenors, however, attempt to distin-
guish AT&T Communications Systems on the grounds that the
question there was whether exhaustion of state remedies was
required and that the rates challenged there were final rather
than interim. Admittedly, we faced a different question in
AT&T Communications Systems than we face here. But, as I
began my analysis, whether a challenged action is sufficiently
“final” for judicial review depends on whether it is the sort of
action which federal courts have jurisdiction to review. The
Act authorizes judicial review for “determination[s]” by state
commissions, 47 U.S.C. § 252(e)(6), and I see no reason why
we should define the statutory term differently for purposes of
the ripeness doctrine than we did for purposes of the exhaus-
tion doctrine.1
  1
    Indeed, we recently explained that the ripeness doctrine as it pertains
to “cases involving administrative agencies . . . recognize[s] that judicial
action should be restrained when other political branches have acted or
will act,” Principal Life Insurance Co. v. Robinson, 394 F.3d 665, 670
(9th Cir. 2004), and that “[p]rinciples of federalism lend this doctrine
additional force when a federal court is reviewing a state agency decision
at an interim stage in an evolving process.” US West, 193 F.3d at 1118.
Both of these rationale are not unlike those underlying the exhaustion doc-
trine.
7848                   VERIZON v. PEEVEY
   Further, the CPUC and the intervenors’ emphasis on the
fact that the rates here are nominally interim rather than final
is misplaced for at least three reasons. First, Verizon’s argu-
ment today is not with the final rates. Even if the final rates
fully comply with the TELRIC methodology and even with
the ensuing true-up, Verizon would still mount the same chal-
lenge to the interim rates that it makes today. Thus, neither its
claims, nor the CPUC’s nor the intervenors’ defenses, would
differ if they were to litigate after the final rates are promul-
gated.

   Second, the assumption that interim rates are substantially
more fleeting than final rates and, thus, that there is or should
be something fundamentally different about the way in which
interim rates are or are not reviewed, is belied by the facts.
The interim rates here have already been in effect for more
than two years, and we are informed that although permanent
rates may be set this year, they could be set as late as next
year. By comparison, final rates that “are set by state commis-
sions” are “usually” done so pursuant to “arbitrated agree-
ments with [only] 3- or 4-year terms,” Verizon
Communications Inc. v. Federal Communications Commis-
sion, 535 U.S. 467, 505 (2002) (emphasis added), and likely
change thereafter.

   Third, the CPUC and the intervenors’ position largely boils
down to the indefensible proposition that a state commission
can insulate its “determination[s]” from judicial review by
labeling them “interim.” This would eviscerate the judicial
review provided by statute and cannot be, particularly in light
of the fact that, as the history of this case demonstrates, so-
called interim rates can remain in effect for years, command
immediate compliance on pain of sanctions, and can allegedly
cause losses which are, and will be, uncompensable.

   Recognizing this potential for abuse, the CPUC concedes
that particularly arbitrary rates should be subject to judicial
review even if interim. See, e.g., CPUC Br. at 19-20; Jan. 21,
                           VERIZON v. PEEVEY                          7849
2005 Oral Arg. at 00:37:37 - 00:38:09. Although the degree
of arbitrariness of an interim rate may render it more or less
in need of judicial review, it does not render an interim rate
more or less “a determination” and, thus, fit for judicial
review.

   The CPUC also defends its position by arguing that interim
and unreviewable rates are useful regulatory tools in that they
permit the CPUC to set rates relatively quickly, without the
considerable delay and expense of procuring and reviewing
cost studies and holding full hearings. Hence, argues the
CPUC, such rates better effect the purpose of the Act, which
is to promote competition among local exchange carriers. The
CPUC’s assumption, however, that absent its rate setting there
will be no competition, is in error. To begin, even before the
interim rate order at issue here, Verizon already was making
its network available to competitors under rates set by the
CPUC. Further, even absent such a circumstance, an ILEC
and CLECs are always free to negotiate rates.2 If they cannot
agree on rates, and the CPUC is without the resources to set
rates in a timely fashion, it can defer to the determinant power
of the FCC. See 47 U.S.C. § 252(e)(5) (“If a State commis-
sion fails to act to carry out its responsibility under this sec-
tion in any proceeding or other matter under this section, then
the [FCC] shall issue an order preempting the State commis-
sion’s jurisdiction of that proceeding or matter within 90 days
after being notified (or taking notice) of such failure, and shall
assume the responsibility of the State commission under this
section with respect to the proceeding or matter and act for
the State commission.”). Finally, even if there were no such
provisions for the parties to negotiate rates or for the FCC to
set rates such that the absence of interim rates would mean the
absence of competition among local exchange carriers, the
  2
    Indeed, I note that Verizon alleges that it “proposed a voluntary reduc-
tion of certain of its UNE rates on an interim basis in order to meet the
Commission’s goal of expeditiously reducing rates,” but that this proposal
was rejected. Compl. ¶ 29.
7850                   VERIZON v. PEEVEY
fact remains that Congress did not provide in the Act for rates
— interim or otherwise — that are binding but that neverthe-
less do not comply with federal law and regulations such as
the TELRIC methodology. See AT&T Communications of Illi-
nois, Inc. v. Illinois Bell Telephone Co., 349 F.3d 402, 411
(7th Cir. 2003) (“[T]he possibility of repair in the future is no
warrant for promulgating today a rate that deviates from the
TELRIC standard. Federal law requires that any rate for
unbundled network elements, adopted by a state commission,
comply with TELRIC when adopted.”). We are not a junior
varsity legislature; neither is the CPUC. Cf. Mistretta v.
United States, 488 U.S. 361, 427 (1989) (Scalia, J., dissent-
ing). We both must abide by what Congress has provided and
live without that which it has withheld.

  Thus, I would conclude that the interim rate order here is
sufficiently final for judicial review.

  B.     The Hardship to the Parties of Withholding
         Judicial Consideration

    1.    Verizon’s Alleged Uncompensable Harm

   In its complaint seeking declaratory and injunctive relief,
Verizon alleged that the CPUC’s interim rate order caused
immediate harm to Verizon by requiring Verizon both: (1) to
subsidize CLECs in the form of unlawfully low rates, which
resulted in Verizon’s loss of retail customers; and (2) to bear
the credit risk that the CLECs benefitting from the interim
rates will not exist at the time the true-up takes effect or will
lack the wherewithal to pay the difference between the
interim rates and the permanent rates for the period of time
the interim rates were in effect. Verizon further alleged that
the promised true-up would not compensate Verizon for either
of these harms:

    ILECs would be irreparably harmed if state commis-
    sions could impose artificially low UNE rates sub-
                         VERIZON v. PEEVEY                        7851
      ject to the promise of a later true-up. Even assuming
      that a true-up were actually to occur at some future
      date, the [interim] Rate Order’s below-cost UNE
      rates cause Verizon California irreparable harm
      because they give CLECs an arbitrary competitive
      advantage that allows them to take customers away
      from Verizon California. This harm cannot be cured
      by the prospect of a future true-up of the Commis-
      sion’s erroneous rates. Moreover, any true-up could
      be years away, thus exacerbating the harm. There is,
      moreover, no guarantee that CLECs who have
      received the benefit of below-cost rates will still exist
      and have the resources to pay back their windfall —
      let alone do so willingly without protracted litigation
      — at some future point when the Commission cor-
      rects its erroneous rates.

      ....

      . . . . As a result of the interim UNE rates set by the
      Commission, Verizon California has been aggrieved
      within the meaning of Section 252(e)(6) of the 1996
      Act, 47 U.S.C. § 252(e)(6). California’s “interim”
      UNE rates will enable Verizon California’s competi-
      tors to procure UNEs from Verizon California at
      rates well below Verizon California’s costs of pro-
      viding UNEs. Further, they will enable Verizon Cal-
      ifornia’s competitors to win over Verizon
      California’s customers, not because the competitors
      are more efficient or innovative, but because they
      have won a substantial regulatory windfall in the
      form of below-cost UNE rates.

Compl. ¶¶ 44, 46 (emphasis added).3
  3
    There is, in my view, no merit in the argument by the CPUC and the
intervenors that harm resulting from Verizon’s loss of customers is not
cognizable because the very purpose of the Act is to promote competition
7852                      VERIZON v. PEEVEY
   Nor does the CPUC contest that the future true-up will
afford Verizon no real remedy for the losses Verizon alleged.
Indeed, at oral arguments, the CPUC conceded not only that
the true-up as contemplated will not account for these losses,
but that federal law would not permit the CPUC to set future
rates so as to compensate Verizon for past harms resulting
from artificially low rates. Jan. 12, 2005 Oral Arg. at
00:33:59-00:34:58.

   The CPUC’s stated position at oral arguments is quite cor-
rect. Where any party requests compulsory arbitration by the
state utilities commission, the commission “shall . . . establish
any rates for . . . network elements according to subsection (d)
of this section.” 47 U.S.C. § 252(c)(2). Subsection (d)
requires in relevant part that “[d]eterminations by a State
commission of . . . the just and reasonable rate for network
elements . . . shall be . . . based on the cost . . . of providing
the . . . network element . . . and . . . may include a reasonable
profit.” 47 U.S.C. § 252(d) (emphasis added). The FCC, in
turn, promulgated regulations interpreting this subsection:

     The 1996 Act requires the states to set prices for
     interconnection and unbundled elements that are
     cost-based, nondiscriminatory, and may include a
     reasonable profit. To help the states accomplish this,
     the Commission concludes that the state commis-
     sions should set arbitrated rates for interconnection
     and access to unbundled elements pursuant [to] a
     forward-looking economic cost pricing methodol-
     ogy. The Commission concludes that the prices that
     new entrants pay for interconnection and unbundled

in the intrastate telecommunications markets. Competition does not typi-
cally demand that firms subsidize their competitors, which, according to
Verizon, is precisely what has happened here. Nor does the Act suggest
otherwise. I hasten to add, however, that I express no opinion as to
whether Verizon has proven or, on remand, will be able to prove its alle-
gations that the interim rates here are unlawfully low.
                            VERIZON v. PEEVEY                          7853
       elements should be based on the local telephone
       companies Total Service Long Run Incremental Cost
       of a particular network element, which the Commis-
       sion calls “Total Element Long-Run Incremental
       Cost” (TELRIC), plus a reasonable share of
       forward-looking joint and common costs.

11 F.C.C.R. 15,499, at ¶ 29 (1996) (emphases added), as
amended by 11 F.C.C.R. 22,301 (1996); see also 47 C.F.R.
§ 51.505.4 There is, in short, no provision either in the Act or
in the FCC’s regulations for rates to be based so as to com-
pensate ILECs for past damages of the sort alleged here.

   The CPUC and the intervenors argue, however, that any
such alleged harm is temporary or speculative or is otherwise
not cognizable under the ripeness doctrine either because the
interim rates do not require Verizon to alter its “conduct” or
because the harm is mere financial loss. I address each of
these arguments in turn.
  4
   The Supreme Court has explained the TELRIC methodology as fol-
lows:
      “The TELRIC of an element has three components, the operating
      expenses, the depreciation cost, and the appropriate risk-adjusted
      cost of capital.” A concrete example may help. Assume that it
      would cost $1 a year to operate a most efficient loop element;
      that it would take $10 for interest payments on the capital a car-
      rier would have to invest to build the lowest cost loop centered
      upon an incumbent carrier’s existing wire centers (say $100, at
      10 percent per annum); and that $9 would be reasonable for
      depreciation on that loop (an 11-year useful life); then the annual
      TELRIC for the loop element would be $20.
      The actual TELRIC rate charged to an entrant leasing the element
      would be a fraction of the TELRIC figure, based on a “reasonable
      projection” of the entrant’s use of the element (whether on a flat
      or per-usage basis) as divided by aggregate total use of the ele-
      ment by the entrant, the incumbent, and any other competitor that
      leases it.
Verizon Communications Inc., 535 U.S. at 496 & n.16 (citations omitted).
7854                        VERIZON v. PEEVEY
   First, the CPUC and the intervenors argue that Verizon’s
harm is only temporary or speculative because any retail cus-
tomers that Verizon may lose while the interim rates are in
effect may return once the permanent rates are set, and
because the true-up will compensate Verizon for any differ-
ence in the rates it charges CLECs under the interim rate
order and what it will be able to charge CLECs under the per-
manent rate order. As for the loss of retail customers, even
assuming that every customer who allegedly left Verizon
under the interim rates returns under the permanent rates,5
Verizon will not be compensated for the loss of revenue from
the loss of such retail customers while the interim rates were
in effect. The true-up adjustment will be based on the cost of
the UNEs, and not on the basis of what the competitors’ retail
customers might have paid Verizon had they not changed ser-
vice providers.

   As for the adjusted rates that Verizon may charge pursuant
to the true-up for the interim period, the credit risk that Veri-
zon has been forced to bear exists independently of whether
the intervenors and other CLECs ultimately pay the true-up.
If an investor is forced to accept junk bonds, of equal amount
and maturity, in place of Treasury bonds, he may buy credit
insurance; but the insurance premium will reduce his return.
Similarly here, were Verizon to buy credit insurance on the
intervenors’ payments pursuant to the true-up, the cost of such
credit insurance is not an element of TELRIC.6 Thus, nothing
about Verizon’s alleged present uncompensable harm is con-
  5
     Nor is there reason to so assume. In the parlance of economists, given
the transaction costs that customers bear when they switch service provid-
ers and given the price differentials among service providers under the
interim rates relative to those under the permanent rates, it may not be effi-
cient for customers to return to Verizon even if was efficient for them to
leave in the first place.
   6
     Of course, Verizon — like the junk-bond holder — could choose to run
the risk of nonpayment, with the predictable effect on its financial state-
ments and own creditworthiness, but that is an option some might not
think prudent in these days of vigilance over corporations.
                       VERIZON v. PEEVEY                   7855
tingent upon future events and, thus, as alleged, is either tem-
porary or speculative. Cases in which this court and others
have found claims to be unripe for judicial review on the basis
of the alleged harm being temporary or speculative are there-
fore inapposite.

   Second, the CPUC and the intervenors argue that Verizon’s
alleged harm is not cognizable under the hardship prong of
the ripeness analysis because the interim rate order does not
require Verizon to alter its “conduct” but only its rates. Here,
the CPUC and the intervenors rely on language in cases stat-
ing that claims are ripe for review only when the challenged
agency action requires a change in “conduct.” E.g., Abbot
Laboratories, 387 U.S. at 153 (holding that “where a regula-
tion requires an immediate and significant change in the
plaintiffs’ conduct of their affairs with serious penalties
attached to noncompliance, access to the courts . . . must be
permitted”); Association of American Medical Colleges v.
United States, 217 F.3d 770, 783 (9th Cir. 2000) (“Courts typ-
ically read the Abbott Laboratories rule to apply where regu-
lations require changes in present conduct on threat of future
sanctions.”). I can discern no reason why setting rates should
not be considered “conduct,” nor do the cases support such a
position. Indeed, even the cases on which the CPUC and the
intervenors rely make clear that the references to changes in
“conduct” are meant to distinguish situations where the
agency action has “direct and immediate” impact on plaintiffs
from situations in which the impact may be indirect or specu-
lative. Abbott Laboratories, 387 U.S. at 152-53; Association
of American Medical Colleges, 217 F.3d at 783-84 (distin-
guishing Abbott Laboratories from its companion case, Toilet
Goods Association, Inc. v. Gardner, 387 U.S. 158, 163-65
(1967), wherein the Supreme Court found the challenged
action not ripe for judicial review, on the grounds that “the
impact of the regulation was [there] not ‘felt immediately by
those subject to it in conducting their day-to-day affairs’ ”).
Here, there is no question that the interim rate order had a
direct and immediate effect upon Verizon.
7856                   VERIZON v. PEEVEY
   Third, the CPUC and the intervenors correctly note that we
have often stated that mere financial loss is not a cognizable
harm for purposes of the hardship analysis under the ripeness
doctrine. E.g., Principal Life Insurance Co., 394 F.3d at 670;
US West, 193 F.3d at 1118; Village of Gambell v. Babbitt,
999 F.2d 403, 408 (9th Cir. 1993); Municipality of Anchorage
v. United States, 980 F.2d 1320, 1325-26 (9th Cir. 1992);
Dietary Supplemental Coalition, Inc. v. Sullivan, 978 F.2d
560, 562, 564 (9th Cir. 1992); Western Oil & Gas Associa-
tion, 905 F.2d at 1291; Winter, 900 F.2d at 1325. However,
Verizon has alleged the loss of customers, which is not mere
financial loss. See Midcoast Interstate Transmission, Inc. v.
Federal Energy Regulatory Commission, 198 F.3d 960, 969-
70 (D.C. Cir. 2000) (holding that the petitioners for review of
agency orders were sufficiently aggrieved from the resulting
loss of customers that their claims were ripe for judicial
review).

   Further, to the extent Verizon’s alleged harm can be char-
acterized as mere financial loss, although we have often
repeated the refrain that mere financial loss is insufficient to
establish hardship, none of the cases cited above turn on the
fact that the loss was merely financial. Indeed, I have found
only two cases in which we held that claims were unripe for
judicial review at least in part because the harm was mere
financial loss, both of which are readily distinguishable from
the case here, either because there was no suggestion that the
financial loss was uncompensable or because the challenged
action was otherwise not ripe for judicial review. State of Cal-
ifornia, Department of Education v. Bennett, 833 F.2d 827,
833-34 (9th Cir. 1987) (holding unripe for judicial review the
California Department of Education’s claim that Bennett was
without authority to charge prejudgment interest on misap-
plied Title I funds because “the harm that is presaged is lim-
ited to financial expense,” but there, in the event that the
California Department of Education ultimately prevailed, it
would suffer no harm because it would not be required to pay
the prejudgment interest); Hawaiian Electric Co. v. United
                            VERIZON v. PEEVEY                           7857
States Environmental Protection Agency, 723 F.2d 1440,
1445 (9th Cir. 1984) (“HECO’s alleged financial hardship . . .
is insufficient to outweigh the inappropriateness of the issues
for judicial resolution.”). Moreover, we have held that agency
action that delayed indefinitely “recover[y] in tort” and “reim-
bursement for . . . compensation payments” “creat[ed] a prac-
tical hardship” sufficient to render a claim ripe for judicial
review. Chavez v. Director, Office of Workers Compensation
Programs, 961 F.2d 1409, 1415-16 (9th Cir. 1992).

   Finally, that the alleged harm here is uncompensable by
means of the true-up is significant. The refrain regarding
financial loss repeated in each of these cases was first uttered
by the Supreme Court in Abbott Laboratories. There, the
Supreme Court agreed with an argument advanced by the
government that “ ‘mere financial expense’ is not a justifica-
tion for pre-enforcement judicial review,” holding that “possi-
ble financial loss is not by itself a sufficient interest to sustain
a judicial challenge to governmental action.” Abbott Labora-
tories, 387 U.S. at 153 (emphasis added). That mere financial
loss would not typically justify pre-enforcement judicial
review is not at all surprising because typically “adequate
compensatory or other corrective relief will be available at a
later date, in the ordinary course of litigation.” See Los Ange-
les Memorial Coliseum Commission v. National Football
League, 634 F.2d 1197, 1202 (9th Cir. 1980) (quoting Samp-
son v. Murray, 415 U.S. 61, 90 (1974)); cf. Toilet Goods
Association, 387 U.S. at 164-65 (holding that the challenge to
administrative action was not ripe for judicial review in part
because “no irremediable adverse consequences [would] flow
from requiring a later challenge to this regulation”). There is
no reason to conclude that is the case here.7
  7
    In so concluding, I do not assume that the statutory provisions provid-
ing for federal review of “determination[s]” by state utilities preclude
relief in the form of damages. See Verizon Maryland Inc. v. Public Service
Commission of Maryland, 535 U.S. 635, 643-44, 647-48 (2002) (holding
that the provision for federal review of “determination[s]” by state utilities
7858                        VERIZON v. PEEVEY
     2.    Procedural Context

   The resolution of the appeal, then, must turn on whether
Verizon’s allegations were sufficient to support its claim of
hardship or, rather, whether the district court was correct to
dismiss Verizon’s claims in the absence of evidence of Veri-
zon’s hardship. Before considering this question, however,
three preliminary points must be made regarding the proce-
dural context in which the district court’s orders were ren-
dered.

  First, at no point did the CPUC nor the intervenors file a
cross-motion for summary judgment nor a motion to dismiss.

in 47 U.S.C. § 252(e)(6) neither limits the general grant of jurisdiction in
28 U.S.C. § 1331 nor “places [any] restriction on the relief a court can
award”); BellSouth Telecommunications, Inc. v. Georgia Public Service
Commission, 400 F.3d 1268, 1271 (11th Cir. 2005) (affirming the district
court’s judgment against a state utilities commission for damages that
BellSouth Telecommunications suffered as a result of the commission’s
prior unlawfully established rates). Rather, I note only that the question of
whether sovereign immunity would preclude Verizon from suing the
CPUC for damages is very much unsettled. Compare MCI Telecommuni-
cation Corp. v. Bell Atlantic-Pennsylvania, 271 F.3d 491, 509-13 (3d Cir.
2001) (holding that states waive their sovereign immunity by voluntarily
participating in the scheme established by the Act), AT&T Communica-
tions v. BellSouth Telecommunications Inc., 238 F.3d 636, 643-47 (5th
Cir. 2001) (same), MCI Telecommunications Corp. v. Illinois Bell Tele-
phone Co., 222 F.3d 323, 338-44 (7th Cir. 2000) (same), MCI Telecommu-
nications Corp. v. Public Service Commission of Utah, 216 F.3d 929, 935-
39 (10th Cir. 2000) (same), US West Communications, Inc. v. TCG Seat-
tle, 971 F. Supp. 1365, 1368-70 (W.D. Wash. 1997) (same), with Bell
Atlantic Maryland, Inc. v. MCI WorldCom, Inc., 240 F.3d 279, 290-94
(4th Cir. 2001) (holding that states do not waive their sovereign immunity
by participating in the scheme established by the Act), vacated on other
grounds sub nom. Verizon Maryland Inc. v. Public Service Commission of
Maryland, 535 U.S. 635 (2002), GTE North, Inc. v. Strand, 209 F.3d 909,
922 n.6 (6th Cir. 2000) (“[I]t is virtually certain that a state utility commis-
sion’s decision to accept regulatory authority under the [Act] cannot legiti-
mately be construed as a valid waiver of sovereign immunity.”).
                       VERIZON v. PEEVEY                     7859
  Second, in their brief in opposition to Verizon’s motion for
partial summary judgment, neither the intervenors nor appar-
ently the CPUC presented any evidence contradicting Veri-
zon’s claims of irreparable harm. Further, in its reply brief in
support of its motion, Verizon specifically reserved the oppor-
tunity to make a showing that Verizon had suffered and would
continue to suffer irreparable harm if the district court deemed
such a showing necessary.

   Third, once the district court denied in part Verizon’s
motion for summary judgment and dismissed Verizon’s first
two claims, Verizon had no meaningful opportunity to present
evidence to substantiate its claim of hardship. The district
court’s order dismissing Verizon’s first two claims in no way
invited Verizon to submit evidence that its remaining claims
were ripe. Rather, the district court held that “[i]t appears that
the Court’s ruling on ripeness grounds also forecloses Plain-
tiff’s remaining three causes of action,” but permitted Verizon
to file “a written response demonstrating why its remaining
three claims should not be dismissed following the Court’s
ripeness ruling.” Verizon California, Inc. v. Peevey, No. C03-
2838 THE, slip op. at 6-7 (N.D. Cal. Jan. 13, 2004) (emphasis
added). In other words, the district court was inviting Verizon
to demonstrate why the district court’s reasoning as to the first
two claims was not also applicable to the remaining three
claims. Further, even if Verizon did take the opportunity to
present evidence, that would not have impacted the district
court’s ruling as to the first two claims. The court never sug-
gested that it would reconsider its dismissal of the first two
claims.

   Thus, at the time the district court denied Verizon’s motion
for partial summary judgment and dismissed Verizon’s first
two claims, Verizon had repeatedly alleged irreparable harm,
and neither the CPUC nor the intervenors had filed a disposi-
tive motion nor introduced evidence to the contrary. Further,
once the district court denied Verizon’s motion for partial
7860                   VERIZON v. PEEVEY
summary judgment and dismissed Verizon’s first two claims,
Verizon had no meaningful opportunity to present evidence.

    3.   The District Court’s Order

   In denying Verizon’s motion for partial summary judgment
and dismissing Verizon’s first two claims (and, later, the
remainder of Verizon’s complaint), the district court first held
as a matter of law that Verizon’s allegations of irreparable
harm were irrelevant. As the district court stated: “The only
discernible difference between this case and US West v. MFS
appears to be that US West admitted that its concerns would
be resolved by the pending true-up, whereas Verizon disputes
this issue. The Court is unconvinced that this difference is
material.” The district court then held in the alternative that
even if US West did not control the case, the court would still
hold that Verizon’s claims were not ripe for judicial review
because “possible financial loss is not sufficient to establish
hardship” and Verizon’s arguments regarding loss of custom-
ers “rests on pure speculation, and such speculative harm does
not constitute irreparable injury.” Id. at 4-6.

   The district court’s first holding was error, as explained in
Part I above. Indeed, I can think of no more of a material dif-
ference to ripeness analysis than that US West stipulated it
could recover its claimed damages through a true-up while
Verizon claims it cannot, and the CPUC agrees with Verizon.
The district court’s alternative holding likewise was error. As
detailed in Part II.B.1 above, Verizon has alleged that its harm
is not compensable through the true-up. This harm, as
pleaded, is direct and immediate rather than contingent on
future events and thus potentially temporary or speculative.
Further, as pleaded, it is cognizable as hardship even to the
extent resulting from the setting of rates as opposed to other
conduct, and even to the extent limited to mere financial loss.
This is sufficient to warrant judicial review, given the proce-
dural posture of the case, as detailed in Part II.B.2 above.
“The question of ripeness, like other challenges to a court’s
                          VERIZON v. PEEVEY                          7861
subject matter jurisdiction, is treated as a motion to dismiss
under Rule 12(b)(1),” and, thus, “[i]t is the burden of the com-
plainant to allege facts demonstrating the appropriateness of
invoking judicial resolution of the dispute.” 15 Moore’s Fed-
eral Practice § 101.73[1] (2005) (emphasis added).8

   Thus, in Gardner v. Toilet Goods Association, 387 U.S.
167, 168-70 (1967), a companion case to Abbott Laborato-
ries, Toilet Goods Association challenged regulations promul-
gated by the Secretary of Health, Education and Welfare and
sued for injunctive and declaratory relief. The Secretary
moved to dismiss on ripeness grounds, the district court
denied the motion, and the Second Circuit affirmed. Id. at
170-71 & n.1. The Supreme Court likewise affirmed, id. at
170, holding in relevant part: “We cannot say on this record
that the burden of [compliance with the regulations at issue]
is other than substantial, accepting, as we must on a motion
to dismiss on the pleadings, the allegations of the complaint
and supporting affidavits as true.” Id. at 172 (emphasis
added).

   Likewise, in Midcoast Interstate Transmission, Inc., Mid-
coast petitioned for review of the Federal Energy Regulatory
Commission’s (“FERC”) orders granting Southern Natural
Gas Company’s (“Southern”) application to construct a natu-
ral gas pipeline and, as is relevant here, FERC’s order that
Southern could recover the cost of the new pipeline construc-
tion through “rolled-in” rather than “incremental” pricing.
Midcoast Interstate Transmission, Inc., 198 F.3d at 963-64. In
rolled-in pricing, “the cost of the new facilities are added to
the pipeline’s total rate base and reflected in rates charged to
all customers system-wide,” whereas in incremental pricing,
“an additional charge [is imposed] solely [on those] customers
who are directly served by the expansion facilities.” Id. at
  8
    I emphasize that in reaching these conclusions, I do not rely on any of
the evidence that Verizon submitted in connection with its appeal without
first having submitted it to the district court.
7862                  VERIZON v. PEEVEY
964. Midcoast claimed that FERC’s approval of rolled-in
rates ignored the agency’s own policy and precedent, id., and
contended that “but for that determination, it would not be
faced with the loss of the Cities’ business upon completion of
the North Alabama Pipeline.” Id. at 969. Midcoast reasoned
that had FERC required incremental pricing, Southern’s rates
for users of the North Alabama Pipeline would have been so
high relative to the rates that Midcoast proposed to charge for
a competing project that FERC would not have authorized the
construction of Southern’s North Alabama Pipeline. Id.

   The D.C. Circuit — which, I note, has particular expertise
in administrative law — held:

    If [Midcoast’s] claim survives analysis, there can be
    no question that Midcoast has suffered a certain,
    concrete injury that satisfies both the statutory
    and constitutional requirements for judicial review.

    Whether Midcoast is aggrieved is a question of fact;
    and where they are in dispute, a court must assume
    the correctness of the challenging party’s version of
    the facts. . . .

    . . . . Midcoast has presented facts which, if correct,
    fully support a finding that it has been aggrieved by
    the pricing determination. . . .

    Accepting, as we must for purposes of our analysis,
    the accuracy of Midcoast’s calculation of the incre-
    mental rate Southern would be required to charge,
    we are satisfied that Midcoast has been aggrieved.
    As a direct consequence of the agency’s action and
    irrespective of the outcome of a future rate proceed-
    ing, Midcoast will have lost the Cities’ business
    from the moment the North Alabama Pipeline begins
    deliveries of natural gas until the time that the Cities
                        VERIZON v. PEEVEY                     7863
    are released from their obligations under the South-
    ern contracts. . . .

    It is for this reason that we also find the issue ripe
    for review. . . . Because Midcoast faces an imminent
    loss irrespective of the outcome of a future rate pro-
    ceeding, there can be no question that the Commis-
    sion’s pricing determination is ripe for review under
    the classic test established in Abbott Laboratories v.
    Gardner, 387 U.S. 136, 149, 87 S. Ct. 1507, 18
L. Ed. 2d 681 (1967): the legality of the rolled-in pric-
    ing determination is fit for immediate judicial deci-
    sion, and the hardship faced by Midcoast is
    indisputable.

Id. at 969-70 (emphases added).

   Similarly, in City of New Orleans v. Federal Energy Regu-
latory Commission, 67 F.3d 947, 948 (D.C. Cir. 1995), the
City of New Orleans and Entergy challenged an order by
FERC allowing Entergy to spin-off two electricity generating
plants because the order addressed the “prudence” of the spin-
off only as to its current effect on rates up until such time as
the utility system would need to purchase new capacity.
FERC argued that the petitioners were not yet “aggrieved”
parties, id. at 952, but the D.C. Circuit disagreed:

    The challenging parties assert that the transfer will
    aggrieve them eventually in the form of unreason-
    able rates, and so was not prudently entered into. If
    they are correct, as we must assume them to be for
    purposes of determining their aggrievement, they
    had a right to a review of FERC’s decision on the
    prudence of the transaction in terms of its effect on
    ratepayers.

Id. (emphasis added).
7864                  VERIZON v. PEEVEY
   Verizon indisputably “allege[d] facts demonstrating the
appropriateness of invoking judicial resolution of the dis-
pute,” 15 Moore’s Federal Practice § 101.73[1] (2005), as
detailed in Part II.B.1 above. Nor, as detailed in Part II.B.2
above, did the CPUC nor the intervenors file a cross-motion
for summary judgment nor even proffer evidence in respond-
ing to Verizon’s motion for partial summary judgment that
might have obliged Verizon to substantiate its allegations. In
this procedural context and particularly given Verizon’s spe-
cific reservation of the opportunity to present evidence should
the district court desire, the district court’s sua sponte dis-
missal was error. Accordingly, I join with the majority in
vacating the district court’s orders denying Verizon’s motion
for partial summary judgment and dismissing Verizon’s com-
plaint, and remanding with instructions that the district court
consider on the merits whether Verizon is entitled to the
declaratory and injunctive relief (and the costs and attorneys’
fees) that it seeks.