Opinion
Case No. 3:02-CV-1082-M
October 16, 2002
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant's Motion to Dismiss, filed May 24, 2002, in which Defendant seeks to dismiss Plaintiffs request for declaratory relief and claims for breach of contract and violations of the Texas Deceptive Trade Practices Act and the Texas Free Enterprise and Antitrust Act. Also before the Court is Plaintiff's Motion to Remand, filed June 21, 2002, in which Plaintiff seeks to remand this case to the 101st Judicial District Court of Dallas County, Texas. Upon consideration of the briefs submitted by the parties and the law applicable to the issues before the Court, the Court is of the opinion that Plaintiffs Motion to Remand should be DENIED, and Defendant's Motion to Dismiss should be GRANTED because the matter is not ripe, and thus the court lacks subject matter jurisdiction.
FACTUAL PREDICATE
Plaintiff is a telecommunications service provider that entered into an interconnection agreement (the "Agreement") with Defendant Southwestern Bell. Pursuant to the Agreement, Plaintiff purchases Defendant at a discounted rate and resells them to its customers. A dispute has arisen between the parties regarding the appropriate charge for certain services, namely service orders that are processed electronically. Defendant contends that the rate should be calculated based on a discounted tariff rate, and Plaintiff maintains that the rate should be much lower under the Agreement because the processing does not require manual input by Defendants' employees. As a result, Plaintiff claims that it has been consistently overcharged for electronically processed orders.
A. Federal Telecommunications Act
The Agreement at issue was formed pursuant to the Federal Telecommunications Act ("FTA"). Pub.L. No. 104-104, 110 Stat. 56 (1996) (codified as amended in scattered sections of 47 U.S.C.). The FTA was promulgated to foster competition in the telecommunications industry by opening the market to competitive telecommunications service providers. The FTA permits Incumbent Local Exchange Companies ("ILECs"), public utility companies in existence at the passage of the FTA, to compete in markets where ILECs are not the commercially dominant carrier. Defendant is an ILEC. The FTA requires ILECs to permit Competitive Local Exchange Carriers ("CLECs"), which are non-dominant carriers, to access certain network facilities in their dominant markets at nondiscriminatory rates. 47 U.S.C. § 251(c)(2). Plaintiff is a CLEC. ILECs are also required to make available to CLECs, at a wholesale rate, any telecommunications service the ILEC provides at retail, so the CLEC may resell such services to its own customers. 47 U.S.C. § 251(c)(3).
The FTA provides that any interconnection agreement adopted by negotiation or arbitration shall be submitted to the state regulatory commission, which will approve or reject the agreement. 47 U.S.C. § 252(e)(1). The FTA further provides:
In any case in which a State commission makes a determination under this section, any party aggrieved by such determination may bring an action in an appropriate Federal district court to determine whether the agreement or statement meets the requirements of section 251 of this title and this section.47 U.S.C. § 252(e)(6).
B. Public Utility Commission of Texas
Implementation of the FTA was left to the individual states. In Texas, the Public Utility Commission ("PUC") governs the telecommunications industry pursuant to its authority under the Texas Public Utility Regulatory Act ("PURA"). TEX. UTIL. CODE ANN. § 52.002 (Vernon 1998). In accordance with section 252(e) of the FTA, the PUC approves or rejects all interconnection agreements in Texas arrived at by negotiation or arbitration. 47 U.S.C. § 252(e)(). The Agreement at issue was approved by the PUC in May 2000. In any case in which a party is aggrieved by the PUC's approval or rejection decision, federal district courts have exclusive jurisdiction to review those decisions. 47 U.S.C. § 252(e)(6).
After the pricing dispute arose between the parties in March 2001, Plaintiff filed a request with the PUC for an informal settlement conference. Plaintiff sought a determination that its interpretation of the Agreement was accurate and demanded recovery of all overcharges and associated fees. When settlement efforts failed, Plaintiff filed a formal complaint with the PUC. That complaint is still pending before the PUC.
C. Jurisdiction
Plaintiff filed the present action in state court in May 2002 before the PUC issued a decision on Plaintiffs complaint. Plaintiff sought a judicial declaration that its interpretation of the Agreement was correct and sought damages for breach of contract and violations of the Texas Deceptive Trade Practices Act and the Texas Free Enterprise and Antitrust Act.
Defendant removed the suit to this Court based on a federal question, asserting that resolution of Plaintiffs claims necessarily depended on the interpretation of federal law, namely the FTA. Defendant subsequently filed its Motion to Dismiss, claiming that the Court lacks jurisdiction because the PUC has not issued a final ruling, and that Plaintiff failed to exhaust its administrative remedies. In response, Plaintiff filed its Motion to Remand, contending that it raised only state law causes of action, and that state courts share concurrent, original jurisdiction with the PUC on issues of interpretation and enforcement of interconnection agreements.
The issue before the Court that will resolve both motions is whether the PUC has exclusive, original jurisdiction to resolve disputes regarding the interpretation and enforcement of interconnection agreements formed pursuant to the FTA, or whether state courts share concurrent, original jurisdiction with the PUC to interpret and enforce such agreements. If the latter is correct, then the case is removable to federal court.
ANALYSIS
A. Failure to Exhaust Administrative Remedies
In its Motion to Dismiss, Defendant argues that Plaintiff has failed to exhaust its administrative remedies. Defendant asserts that the FTA requires that disputes regarding the implementation, interpretation and enforcement of interconnection agreements must first be brought to the appropriate state commission. Defendant maintains that it is only after a final ruling by the PUC that a federal district court has appellate jurisdiction in such disputes.
Plaintiff asserts that its causes of action are based solely on state law, and that resolution of the current dispute simply requires interpretation of an express provision in the Agreement, a task state courts are well equipped to handle. Plaintiff contends that a close reading of Section 252 of the FTA reveals that it grants exclusive jurisdiction to the PUC only to approve or reject interconnection agreements, not to interpret such agreements after they have been approved. Furthermore, Plaintiff argues that exclusive jurisdiction cannot rest with the PUC absent a specific grant of authority by the legislature, and that state courts are better suited to resolve contract disputes based on state law. In light of these contentions, Plaintiff asserts that state courts have concurrent, original jurisdiction with the PUC to interpret interconnection agreements.
Defendant's contentions regarding exhaustion of administrative remedies are based on section 252 of the FTA, which grants to state commissions the authority to approve or reject interconnection agreements adopted by arbitration or negotiation. A literal reading of Section 252(e)(1) grants exclusive authority to the PUC only to approve or reject interconnection agreements. Defendant's contention that the PUC has broader authority finds support in a Fifth Circuit decision that interprets Section 252 of the FTA to grant the PUC authority not only to approve or reject such agreements, but also to interpret and enforce them after they are approved. Southwestern Bell Telephone Co. ("SWBT") v. Public Utility Commission of Texas, 208 F.3d 475, 480 (5th Cir. 2000). In SWBT, an ILEC and a CLEC entered into an interconnection agreement pursuant to the FTA. It was approved by the PUC. A dispute subsequently arose over whether modem calls should be reciprocally compensated pursuant to the agreement. The CLEC filed a complaint with the PUC, alleging that the ILEC, Southwestern Bell, failed to reciprocally compensate the CLEC for those calls in breach of the agreement. The PUC determined that the ILEC was in breach of the agreement. Id at 478. Pursuant to Section 252(e)(6) of the FTA, the ILEC appealed the PUC's decision to a federal district court, which upheld the PUC's decision. Id On appeal, the Fifth Circuit addressed the jurisdiction of the district court. The issue was whether the district court had jurisdiction to review a PUC determination that implicated the interpretation and enforcement of the agreement. SWBT, 208 F.3d at 479.
Any interconnection agreement adopted by negotiation or arbitration shall be submitted for approval to the State commission. A State commission to which an agreement is submitted shall approve or reject the agreement, with written findings as to any deficiencies." 47 U.S.C. § 252(e)(1).
The Fifth Circuit posed two distinct questions to resolve the jurisdictional issue: (1) Whether the PUC had jurisdiction to resolve interpretation and enforcement disputes arising from previously approved interconnection agreements; and (2) Whether the district court had jurisdiction to review such interpretation and enforcement decisions. Id
In analyzing the first question, the court noted that "[t]he Act's reference to "a State commission . . . determination under this section [252],' could, if construed quite narrowly, limit state commission jurisdiction to decisions approving or disapproving, or arbitrating, an interconnection agreement." id Such a narrow interpretation of the FTA would necessarily preclude the PUC's authority to resolve disputes involving the interpretation or enforcement of interconnection agreements. The court concluded that such a narrow interpretation was not intended. Id Instead, the court stated, "[r]ather, we are satisfied that the Act's grant to the state commissions of plenary authority to approve or disapprove these interconnection agreements necessarily carries with it the authority to interpret and enforce the provisions of agreements that state commissions have approved." Id at 479-80.
In answering the second question, the Fifth Circuit construed section 252(e)(6) of the FTA similarly, so as not to "limit its grant of federal district court jurisdiction to review decisions of state commissions only to those decisions that either approve or reject interconnection agreements." Id at 480-81. In other words, the Fifth Circuit interpreted that section to confer upon district courts the jurisdiction to review PUC decisions involving the interpretation and enforcement of interconnection agreements.
The Fifth Circuit's holding in SWBT has been followed by other courts in this district. In Millennium One Communications, Inc. v. Southwestern Bell Telephone Co., the court determined that it lacked jurisdiction to resolve a dispute regarding an interconnection agreement still pending before the PUC. No. 3:02-CV-0527-L, slip op. at 7 (N.D. Tex. 2002). In Millennium One, Plaintiff was a CLEC that entered into an FTA interconnection agreement with Defendant Southwestern Bell. A dispute identical to the present one arose concerning the correct rate for electronically processed orders, and Plaintiff refused to pay the alleged overcharges. In response, Defendant threatened to terminate the agreement. Plaintiff sought and was issued a temporary restraining order in state court to prevent Defendant from terminating the agreement. Defendant removed the cause to federal court. Plaintiff then moved the district court to extend the state court's temporary restraining order or to issue a new one. Id. at 3.
In determining whether it had jurisdiction to hear the action, the court first acknowledged that "[t]he Fifth Circuit has construed this provision [ 47 U.S.C. § 252 (e)(6)] to mean that the PUC has `the authority to interpret and enforce the provisions of agreements. . . .'" Id at 4. Defendant contended that the dispute required interpretation of the interconnection agreement, and was therefore within the exclusive jurisdiction of the PUC. Plaintiff asserted that no interpretation was needed; it was simply requesting the court to enjoin Defendant's activities. Id at 4. The court acknowledged that one prerequisite to the issuance of a temporary restraining order was that Plaintiff had to show a substantial likelihood of success on the merits. For the court to make such a finding, it would necessarily have to interpret the agreement, which wholly governed the parties' relationship. Because no determination had been made by the PUC, the court held that the matter was not ripe, and the court lacked jurisdiction. "This court acts as a reviewing or appellate court of PUC decisions, and if it is to have jurisdiction, the PUC must make a determination concerning that Interconnection Agreement at issue in this case."
Id at 5. ("If the court attempted to resolve this matter, it would begin by deciding whether or to what extent the Agreement prohibits the arguably excessive fees charged by Defendant. Accordingly, to resolve this matter, the court would be required to interpret and apply various provisions of the Agreement.")
Id. at 5. The court addressed Plaintiffs further arguments. First, in response to Plaintiffs contention that the PUC rules do not preclude Plaintiff from seeking injunctive relief in the courts in such circumstances, the court held that its jurisdiction was not dictated by the PUC rules, but rather "the court is constrained by the jurisdictional limitations of 47 U.S.C. § 252, as interpreted by the Fifth Circuit." Id at 5-6. Second, in response to Plaintiffs argument that the PUC rules were inadequate to prevent the harm Plaintiff complained of, the court held that Plaintiffs dissatisfaction with PUC procedures did not affect the court's obligation to adhere to jurisdictional limitations. Id at 6. Finally, in response to Plaintiffs assertion that the PUC could only grant prospective relief rather than monetary damages, the court held that this was a misstatement of the PUC's remedial powers, as expressed in the PUC's internal rules. Id at 7.
The Court is in agreement with the holdings of SWBT and Millennium One that the PUC has the authority to interpret and enforce interconnection agreements.
1. Exclusive Jurisdiction to Interpret
Plaintiff contends that although the Fifth Circuit in SWBT interpreted Section 252 of the FTA to grant jurisdiction to state commissions to interpret interconnection agreements, it did not interpret that section to grant exclusive jurisdiction to state commissions. Therefore, Plaintiff claims, state courts share concurrent, original jurisdiction with the PUC to interpret interconnection agreements.
Plaintiff concedes that Section 252 of the FTA grants to state commissions exclusive jurisdiction to approve or reject interconnection agreements. In its determination as to whether Section 252 includes authority to interpret and enforce such agreements, the Fifth Circuit did not use the word "exclusive," and Plaintiff relies upon that omission to conclude that the Fifth Circuit did not find that the PUC has exclusive jurisdiction of such issues. The Court rejects such reasoning.
It is illogical to conclude that, in a case where the Fifth Circuit broadly interpreted the scope of a provision granting exclusive jurisdiction to the PUC, it was doing so with the implicit but unstated conclusion that this broad authority would not be exclusive. The more logical conclusion is that the court's broader interpretation was exclusive, just as the express language of the provision is. The Court therefore rejects Plaintiffs argument that state courts have concurrent, original jurisdiction with the PUC to interpret interconnection agreements.
2. Improper Removal
Plaintiff next argues that the present case is distinguishable from Millennium One because Millennium One was properly removed to federal court based on federal claims, whereas Plaintiff has only asserted state law claims. To that end, Plaintiff asserts that because this case is not on appeal from a final PUC decision, and no federal question is involved, removal was improper, and the case should be remanded to state court.
This dispute should not be in any court, state or federal, until the PUC has rendered a decision. Because original jurisdiction in the PUC is exclusive, dismissal is the proper disposition.
3. Contract Interpretation
Plaintiff next contends that the present case is distinguishable from Millennium One because Millennium One involved an agreement that did not contain an express provision setting forth the proper charge for electronic orders, an omission which necessitated interpretation of the tariff. However, the present Agreement includes such a pricing provision, and therefore merely requires interpretation of Section 3.0 of the Agreement.
The Court finds Plaintiffs position to be an overly simplistic characterization of the facts. In its Response to Defendant's Motion to Dismiss, Plaintiff maintains that Section 3.0 of the Agreement unambiguously states the price to be charged for electronically processed orders. While that position is accurate, Defendant maintains that Section 3.0 applies only to electronically processed conversion orders. Plaintiff responds that, in the absence of limiting language, Section 3.0 applies to all electronically processed orders. Resolution of that dispute requires an interpretation of the Agreement. Such interpretation is within the purview and expertise of the PUC, not the state courts.
Because the Court holds that the PUC has exclusive, original jurisdiction to interpret and enforce FTA interconnection agreements, and federal district courts have exclusive jurisdiction to review those decisions, jurisdiction of this dispute would never be proper in state court. Therefore, Plaintiffs Motion to Remand is denied. This case must be dismissed in deference to the PUC proceedings, and it is for this Court to dismiss it.
CONCLUSION
For the reasons stated herein, this action is not ripe, and thus the Court is without jurisdiction. This action is therefore DISMISSED, and Plaintiffs Motion to Remand is DENIED.