GTE North Inc v. Strand

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 Ҥ 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 Ҥ 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