Opposition Brief — Mathias v. WorldCom Technologies, Inc.

)

Nos. 00-878 and 00-9

RAN ral Y

IN THE aioe

Supreme Court of the States

ILLINOIS BELL TELEPHONE COMPANY, et al.,

Petitioners,

Vv

WORLDCOM TECHNOLOGIES, INC., et al.,

| Respondents.

RICHARD L. MATHIAS, et al.,

Petitioners,

v.

WORLDCOM TECHNOLOGIES, INC., et al.,

Respondents.

On Petitions for a Writ of Certiorari to the

United States Court of Appeals for the Seventh Circuit

BRIEF IN OPPOSITION OF RESPONDENTS

WORLDCOM TECHNOLOGIES, INC., MCI WORLDCOM

NETWORK SERVICES, INC., MCIMETRO ACCESS

TRANSMISSION SERVICES LLC, AND FOCAL

COMMUNICATIONS CORP.

RICHARD M. RINDLER PAUL M. SMITH*

SWIDLER BERLIN SHEREFF DARRYL M. BRADFORD

FRIEDMAN, LLP JOHN J. HAMILL

3000 K Street, N.W. JENNER & BLOCK, LLC

Washington, D.C. 20007 601 13th Street, N.W.

(202) 424-7500 Washington, D.C. 20005

(202) 639-6000

Counsel for Respondent Counsel for Respondents

Focal Communications Corp. WorldCom Technologies, Inc.,

MCI WORLDCOM Network Services,

Inc. and MCImetro Access

Transmission Services LLC

*Counsel of Record

(additional counsel listed on

inside cover)

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 -— WASHINGTON, D. C. 20001

RICHARD METZGER

MATTHEW BERNS

FOCAL COMMUNICATIONS CORP.

7799 Leesburg Pike

Falls Church, VA. 22043

(703) 637-8700

Counsel for Respondent

Focal Communications Corp.

THOMAS F. O' Net III

WILLIAM SINGLE, IV

MARK B. EHRLICH

WoORLDCom, INC.

1133 19th Street, N.W.

Washington, D.C. 20036

(202) 736-6096

Counsel for Respondents

WorldCom Technologies, Inc.,

MCI WORLDCOM Network

Services, Inc. and MCI metro Access

Transmission Services LLC

Rule 29.6 STATEMENTS

Pursuant to Rule 29.6 of the Rules of this Court,

respondents WorldCom Technologies, Inc., MCI

WORLDCOM Network Services, Inc., and MCImetro Access

Transmission Services LLC state as follows:

WorldCom Technologies, Inc. MCI WORLDCOM

Network Services, Inc. (formerly known as MCI

Telecommunications Corp.), and MCImetro Access

Transmission Services LLC are all wholly owned subsidiaries,

directly or indirectly, of WorldCom, Inc. WorldCom, Inc. is a

Georgia corporation that is publicly traded on the NASDAQ

National Market under the symbol WCOM. No publicly held

company owns 10 percent or more of WorldCom, Inc. stock.

Pursuant to Rule 29.6 of the Rules of this Court,

respondent Focal Communications Corp. states as follows:

Focal Communications Corporation, through its operating

subsidiaries, provides local exchange telecommunications

services, including telecommunications services to Internet

service providers. Focal Communications Corporation is a

Delaware corporation that is publicly traded on the NASDAQ

National Market under the symbol FCOM. No publicly held

company Owns 10 percent or more of the stock of Focal

Communications Corporation. There are no subsidiaries or

affiliates of Focal Communications Corporation that have

issued equity or debt securities to the public.

TABLE OF CONTENTS

PAGE

SD GD SD 6 cc wccctsds écvbbdencesages i

Ce GORE cocéciccdbcdecesecoecesa v

POSE on obeceuecndesswennneennass 4aneseans l

Be FED ocnncccscccccenteducdéenes l

I Cc ben ccocecccccsoscesss 3

3. District Court Proceedings .................. a

4. The Seventh Circuit’s Decision .............. 4

REASONS FOR DENYING THE PETITIONS ......... 6

I. There Is No Genuine Circuit Split on Any of the

Issues the Petitioners Raise ................. 8

A. The circuits agree that section 252(e)(6)

applies to review of “enforcement

SES cccbconcdennccisechccenace 8

B. The circuits agree that interpretation of an

interconnection agreement is primarily a

question of state law .................. 9

iV

The circuits agree that state commission

defendants are not immune from section

252(e)(6) actions under the Eleventh

II. The Issues Presented by the Petitions Are Still

Developing in Other Circuits, the FCC, and

GREED cccocccccovctcnevesecssosesees 16

Il. The Seventh Circuit’s Decision Is Correct .... 18

A.

Section 252(e)(6) applies to review of

state commission “enforcement”

SEs coccccccesecesacscess 18

Section 252(e)(6) does not authorize review

SURGE ncccccesessescccss 20

The Seventh Circuit correctly denied

Ameritech’s challenge to the ICC’s

SEED cocccccnncancuneuseenceéseoves 22

The ICC does not have Eleventh

Amendment immunity as to Ameritech’s

PED .nccecaccccsesédh senses 24

1. Ex parte Young applies here ....... 25

2. Astate’s waiver of immunity obtained

through its voluntary participation in

the Act’s regulatory scheme is

consistent with College Savings ... 28

GED ccccccccbonsascoscocecesscceesees 30

TABLE OF AUTHORITIES

CASES

AT&T Communications of the Southern States,

Inc. v. BellSouth Telecommunications, Inc..,

60 F. Supp. 2d 1279 (N.D. Fla. 1997) ............. 14

AT&T Communications of the Southern States,

Inc. v. BellSouth Telecommunications, Inc.,

229 F.3d 457 (4th Cir. 2000)... 0... cece eee 12

AT&T Communications of the Southern States,

Inc. v. BellSouth Telecommunications, Inc.,

7 F. Supp. 2d 661 (E.D.N.C. 1998) ............... 12

AT&T Corp. v. lowa Utilities Board,

PE écceeccceséececevecesse 1,2, 19

Alden v. Maine, 527 U.S. 706 (1999) ............... 25

Atascadero State Hospital v. Scanlon,

SPEED écececéucedsdcasescenss 11, 28

Bell Atlantic-Delaware, Inc. v. Global NAPS

South, Inc., 77 F. Supp. 2d 492 (D. Del. 1999) ... 14, 15

Bell Atlantic-Delaware, Inc. v. McMahon,

80 F. Supp. 2d 218 (D. Del. 2000) ............ 14, 15

Bell Atlantic-Pennsylvania, Inc. v. Pennsylvania

Public Utility Commission, 107 F. Supp. 2d 653

TD 0626060006660 600K6800000000% 14, 15

Bell Atlantic Telephone Cos. v. FCC, 206 F.3d 1

DL Mn -s20ebtstensdeeenensogeecoees 17

City of Chicago v. International College of

Surgeons, 522 U.S. 156 (1997) ..............44.. 20

vi

College Savings Bank v. Florida Prepaid

Postsecondary Education Expense Board,

527 U.S. 666 (1999) ...... cece cece cence ee eees

——£delman v. Jordan, 415 U.S. 651 (1974) .........-.

Franklin v. Gwinnett County Public Schools,

SEB UD. COCHISE oc ccccccccccccscccccccccs

GTE California, Inc. v. California

Telecommunications Coalition,

Nos. C 99-03973 CW et al., (N.D. Cal.

Aug. 31,2000) ....... cere ccccecececcvceees

GTE Florida, Inc. v. Clark, 60 F. Supp. 2d 1277

GED. Fie. BGGFD nv cccccccccecccccccvccccees

GTE North, Inc. v. Strand, 209 F.3d 909

(6th Cir. 2000), cert. denied, 121 S. Ct. 380

GREED cvcccvcccccccccsovcceccccescoccoes 15, 20

GTE South, Inc. v. Morrison, 199 F.3d 733

(Ot Cle, 1999) wc cccccccvcccccccccccsccees

Idaho v. Coeur d'Alene Tribe of Idaho,

S31 UD. SBR CIGGTD coc cccccvccccsccccccccce

Illinois Bell Telephone Co. v. Illinois Commerce

Commission, 3-98-0393, Order Granting

(Ill. App. Ct. June 17, 1998) .. 2... 6 ee eee eee

Jackson Transit Authority v. Local Division

1285, Amalgamated Transit Union, 457 U.S. 15

(. PPPerrrriviriri ry

MCI Telecommunications Corp. v. BellSouth

Telecommunications, Inc., 9 F. Supp, 2d 766

See TAGE ic Fs Gh cuncekedendtdoustela

vii

MCI Telecommunications Corp. v. Illinois

Commerce Commission, 168 F.3d 315

(7th Cir. 1999), modified on reh'g,

222 F.3d 323 (7th Cir. 2000), petition for

certiorari filed, 69 U.S.L.W. 3297 (U.S.

Oct. 23, 2000) (Nos. 00-653, 00-744) ............ 4,7

MCI Telecommunications Corp. v. Illinois

Bell Telephone Co., 222 F.3d 323

(7th Cir. 2000), petition for certiorari filed,

69 U.S.L.W. 3297 (U.S. Oct. 23, 2000)

(Nos. 00-653, 00-744)... 0... ec eee passim

MCI Telecommunications Corp. v. Public

Service Commission of Utah, 216 F.3d 929

(10th Cir. 2000), petition for cert. filed,

69 U.S.L.W. 3282 (U.S. Sept. 18, 2000)

EE tin DbuR Obs oon beeen 0660006. 14, 15

Michigan Bell Telephone Co. v. Climax

Telephone Co., 2000 U.S. Dist. LEXIS 15195

DED Saccbeteesbenebeescssocense 15

Michigan Bell Telephone Co. v. Climax

Telephone Co., 202 F.3d 862 (6th Cir. 2000),

cert. denied, 121 S. Ct. 54 (Oct. 2, 2000) .......... 14

Nicor Exploration Co. v. FERC, 50 F.3d 1341

ee Ce ee eel Seed Oe ls 13, 14

O'Melveny & Myers v. FDIC, 512 U.S. 79 (1994) ..... 22

Pennhurst State School & Hospital v. Halderman,

GRP Ws GPCR cc ccccccccccsesess 10, 11, 21, 26

Petty v. Tennessee-Missouri Bridge Commission,

Pe NS 6 cab cdinecd asad ceeded ovis 29

Vill

Puerto Rico Telephone Co. v. Telecommunications

Regulatory Board of Puerto Rico, 189 F.3d |

GRIPE GOED oc ccncccasencccteescetesecens 9, 20

Seminole Tribe of Florida v. Florida, 517 U.S. 44

SD oanks0c6undeeesecebbeeedcanaven? 25, 26, 27

South Dakota v. Dole, 483 U.S. 203 (1987) .......... 29

Southwestern Bell Telephone Co. v. Brooks

Fiber Communications of Oklahoma, Inc.,

No. 99-5222, _ F.3d ___, 2000 WL 1827576

(10th Cir. Dec. 13, 2000) ............. 000, 8,9, 10

Southwestern Bell Telephone Co. v. Connect

Committees Corp., 225 F.3d 942 (8th Cir.

BED occcncccensceseevecccqucescaceces 8, 11,12

Southwestern Bell Telephone Co. v. Public

Utilities Commission of Texas, 208 F.3d 475

CG SED « cc cece cncceesnseceesevecenss 8,9

Stanfford v. Briggs, 444 U.S. 527 (1980) ............ 19

Strand v. Michigan Bell Telephone, 121 S. Ct. 54

PED cc eececcdieescdéeundueceanee cesses cast ee 15

Strand v. Verizon North, Inc., 121 S. Ct. 380

GED oH0-0 owes nnbsedhecseRsbeneesccese ose 15

Texas Industries, Inc. v. Radcliff Materials, Inc.,

Ce Se ED 056. 6:6 0006s 6 deantecccccceses 22

U S West Communications, Inc. v. MFS Intelenet,

Inc. 193 F.3d 1112 (9th Cir. 1999), cert. denied,

oo) Re ee eee Q

U S West Communications, Inc. v. MFS Intelenet,

Inc., 35 F. Supp. 2d 1221 (D. Or. 1998) ........... 14

ix

U S West Communications, Inc. v. Serna, No.

Civ 97-124, 1998 U.S. Dist. LEXIS 23024

(D.N.M. Mar, 31, 1998) ............eeeccceeeee 14

Ex parte Young, 209 U.S. 123 (1908) .......... passim

STATUTES

EEE ane in cay tee 20

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se A 20

a 27, 28

FE i iices cxsendnendscosavansccncesk 2

aN 3

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dr 1, 2,23

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a sk 2

a eh 2

WAI BI ins viscid kdcscncccccccees 23

aa 7

Ea ene ns 2,13

Ce are passim

ne mucunenaus 23

PE itd ck dtddeuceiacucacebesabace 3

x

LEGISLATIVE MATERIAL

Pub. L. No. 104-104, Title V, § 601(c), 110 Stat. 43 ... 23

Reciprocal Compensation Adjustment Act of 2000,

H.R. 4445, 106" Cong. (2000) ..........-.-0005e 17

ADMINISTRATIVE RULINGS

In re Implementation of the Local Competition

Provisions in the Telecommunications Act of

1996, Inter-Carrier Compensation for ISP Bound

Traffic, 14 F.C.C.R. 3689 (1999) .. 0.2... eee eee 24

In re Starpower Communications, LLC, Petition

for Preemption of Jurisdiction of the Virginia

State Corporation Commission Pursuant to

Section 252(e)(5) of the Telecommunications

Act of 1996, 15 F.C.C.R. 11277 (2000) .......... 13, 24

MISCELLANEOUS

Stephen Labaton, Communications Lobby Puts

Full-Court Press on Congress, N.Y. Times,

FR c cc cccccssesensdvssesesecoeseces 17

~ STATEMENT

Respondents WorldCom Technologies, Inc.

(“WorldCom”), MCI WORLDCOM Network Services, Inc.,

MCImetro Access Transmission Services, Inc., and Focal

Communications Corporation (collectively the “Carriers”)

submit this brief in opposition to the petitions for certiorari

filed by the members of the Illinois Commerce Commission

(referred to collectively with the Commission as “ICC”) and

Illinois Bell Telephone Company (“Ameritech”). Those

petitions attack the same Seventh Circuit ruling from

diametrically opposed points of view. As we show, the

Seventh Circuit adopted a correct intermediate position that is

not in conflict with any decision of any other circuit and does

not warrant review by this Court.

1. Statutory Scheme

Ameritech filed this case in federal court seeking review of

the ICC’s order enforcing “interconnection agreements” that

the Carriers and Ameritech had entered into as provided in the

Telecommunications Act of 1996 (the “Act” or “1996 Act’). /

Such agreements are a key feature of the system set up by the

1996 Act to promote competition in the local telephone market

by requiring each incumbent local telephone company, such as

Ameritech, to interconnect and “share its network with

competitors.” AT&T Corp. v. lowa Utils. Bd., 525 U.S. 366,

371 (1999); see 47 U.S.C. § 251(c)(2)(A). Under the Act, new

entrants and incumbents first attempt to negotiate the terms of

interconnection. See 47 U.S.C. § 252(a)(1). If they cannot

At the same time it filed in the district court, Ameritech also filed

a parallel action in the Illinois Appellate Court. The Illinois Appellate

Court stayed that action at Ameritech’s request pending resolution of this

case. Illinois Bell Tel. Co. v. Illinois Commerce Comm'n, 3-98-0393, Order

Granting Stay (Ill. App. Ct. June 17, 1998). The stay remains in effect.

2

agree, the governing state commission is authorized, but not

required, to conduct an “arbitration” to resolve disputed issues.

Id. § 252(b)(1). The results of the negotiation and arbitration

process are memorialized in an interconnection agreement,

which must be submitted for approval to the state commission.

Id. § 252(e).

Although the Act supplies minimum requirements that

govern arbitrated provisions, parties may negotiate terms

“without regard” to them. Jd. § 252(a)(1). When parties

voluntarily agree to terms, a state commission may reject the

agreement only if it is discriminatory or against the public

interest, convenience, or necessity. Id. § 252(e)(2)(A); see also

AT&T Corp., 525 U.S. at 371-73.

Through this statutory scheme, Congress altered the

balance between federal and state authority in the area of local

telecommunications competition. The 1996 Act partially

supplants the existing system of exclusive state regulation, and

imposes a new set of federal standards and procedures

governing interconnection between incumbent local companies

and potential competitors. See 525 U.S. at 371-73. Congress

vested the Federal Communications Commission (“FCC”) with

authority to implement the federal standards created by the Act.

Id. at 377-84 & n.5; 47 U.S.C. § 201(b). But Congress also

carved out a new, voluntary role for state commissions that

choose to oversee interconnection agreements. If a state

commission declines to participate, the FCC will assume that

function. 47 U.S.C. § 252(e)(5).

Whether rendered by a state commission or the FCC,

agency determinations regarding the terms of interconnection

agreements are subject to review in federal court for

compliance with the Act. If a state commission elects to

3

participate in the Act’s implementation, “any party aggrieved

. .. May bring an action in an appropriate Federal district court

to determine whether the agreement or statement meets the

requirements of section(s] 251 . . . and [252].” 47 U.S.C. §

252(e)(6). If the FCC has acted in lieu of a state commission,

its determinations are reviewed by a federal court of appeals

under the Hobbs Act. Id.; see 28 U.S.C. § 2342(1).

2. Nature of the Dispute

This case concerns “reciprocal compensation,” which is

the payment that a local carrier receives for completing a call

for another local carrier. With local competition, customers of

one local carrier will call customers of another. Carriers must

therefore assist each other in delivering calls. When acustomer

of one carrier makes a local call to a customer of another, only

the caller pays its carrier for the telephone services, leaving the

other carrier uncompensated. The caller’s local carrier

therefore must compensate the other carrier whose facilities are

used to complete the call. See 47 U.S.C. § 251(b)(5); 47 C.ER.

§ 51.701; Am. Pet. App. 3a.

The specific issue in this case is the proper treatment of

calls by customers of the Carriers and Ameritech to other local

customers operating as “Internet Service Providers” (ISPs).

These calls are treated for purposes of billing customers like

any other local call. Am. Pet. App. 4a. Ameritech and the

Carriers also routinely charged each other reciprocal

compensation for terminating ISP calls placed by each others’

customers. /d. at 82a-83a. In July 1997, however, Ameritech

announced that it was unilaterally stopping reciprocal

compensation payments for calls to local ISPs, claiming for the

first time that such calls are not “Local Traffic.” Jd. at 4a. In

response, the Carriers asked the ICC to enforce the agreements

4

by requiring Ameritech to resume payments of reciprocal

compensation for ISP calls. Jd. at 4a-Sa. The ICC held an

evidentiary hearing on November 21, 1997. Id. at 65a. On

March 11, 1998, the ICC ruled that the plain language of the

agreements, industry custom and practice, and Ameritech’s

own conduct mandated payment of reciprocal compensation for

calls to ISPs. Id. at 5a, 76a-83a. e

3. District Court Proceedings

On March 27, 1998, Ameritech filed suit in the district

court under section 252(e)(6) against the Carriers and the ICC

challenging the ICC’s determination. Ameritech alleged that -

the ICC’s interpretation of the interconnection agreements

violated federal law, arguing that the FCC had determined as a

matter of federal law that calls to ISPs are not local. After

briefing by the parties, the court rejected the ICC’s arguments

that the court lacked jurisdiction and that the ICC was immune

from suit under the Eleventh Amendment. /d. at 52a. But the

court ruled against Ameritech on the merits, holding that the

ICC’s interpretation of the agreements did not violate federal

law. Id. at 49a, 50a.

4. The Seventh Circuit’s Decision

Ameritech and the ICC appealed to the Seventh Circuit.

The court of appeals rejected the ICC’s immunity claim based

on its prior decision in MCI Telecommunications Corp. v.

Illinois Commerce Comm'n, 168 F.3d 315 (7th Cir. 1999)

(“MCI-I’), modified on reh’g, 222 F.3d 323 (7th Cir. 2000)

(“MCI-IT’), petition for certiorari filed, 69 wee

(U.S. Oct. 23, 2000) (Nos. 00-653, 00-744). Am. Pet. . 6a.

Reviewing the text of section 252(e)(6), the court also rejected

the ICC’s jurisdictional argument and found that “Congress

5

envisioned suits reviewing ‘actions’ by state commissions” for

compliance with sections 251 and 252 of the Act. Jd. at 8a.

But the Seventh Circuit also determined that a federal

court’s scope of review under section 252(e)(6) is limited.

Because the plain text of section 252(e)(6) confines review to

the question of compliance with sections 251 and 252, the court

held that a court’s task under section 252(e)(6) is “to examine

the [state commission’s] order, not to determine whether the

[commission] correctly applied principles of state contract law,

but to see whether its decision violates federal law, as set out in

the Act or in the FCC’s interpretation.” Jd. at lla. Thus, the

Seventh Circuit explained, section 252(e)(6) provided no basis

for the court to “review [the ICC’s] actions for compliance with

state law.” Id. at 8a. Accordingly, the Seventh Circuit found

that Ameritech’s appeal presented a “narrow issue on the

merits: whether a decision of the [ICC] regarding reciprocal

compensation for telephone connections to [ISPs] violates

federal law.” Id. at 2a. Reviewing the Act and the relevant

FCC precedent, the Seventh Circuit concluded that “nothing in

what the ICC said violates federal law in existence at this

time.” /d. at 15a.

Both Ameritech and the ICC filed rehearing petitions,

raising essentiall , the same issues they raise here. In an initial

response to Ameritech’s petition, the Seventh Circuit amended

its decision on August 18, 1999. It added language stating that

“[sJection 252(e)(6) authorizes a federal court to determine

whether the agency’s decision departs from federal law. A

decision ‘interpreting’ an agreement contrary to its terms

creates a different kind of problem — one under the law of

contracts, and therefore one for which a state forum can supply

a remedy.” /d. at 17a.

6

The rehearing petitions were held in abeyance for about a

year, pending the Seventh Circuit’s reconsideration of its

Eleventh Amendment ruling in MCI-J. The Seventh Circuit

ultimately issued a revised opinion in MCI-// reaffirming its

ruling that state commissions do wot have Eleventh

Amendment immunity in actions broughi wader section 252 of

the Act. It then denied the rehearing petitions in the instant

case on August 9, 2000. /d. at 18a-19a.

REASONS FOR DENYING THE PETITIONS

The issues raised by the petitioners do not warrant this

Court’s review for three reasons.

First, there is no genuine division among the circuits as to

any of the issues raised by the petitioners. Four circuits (the

Fifth, Seventh, Eighth, and Tenth) have all held that a federal

court does have jurisdiction under section 252(e)(6) to consider

whether a state commission violated federal law in a ruling

enforcing a previously approved interconnection agreement.

At least three (the Fifth, Seventh, and Tenth) have agreed that

a claim like Ameritech’s in this case — that a state

commission’s enforcement order was based on a

misinterpretation of the language of an interconnection

agreement — raises issues of state law. Contrary to Ameritech’s

argument, no other circuit disagrees. Finally, as to the Eleventh

Amendment issue raised by the ICC, all three circuits to have

addressed the issue (the Sixth, Seventh, and Tenth) have held

that state commissions are not immune from federal lawsuits

brought under section 252(e)(6) claiming that the state

commission violated federal law.

Second, even if there were “disarray” in the decisions of

the circuits in this area, it would still make sense to defer

7

addressing the issues raised by the petitions. Those same issues

are presented in cases currently pending in the Fourth, Sixth,

and Eleventh Circuits. At the same time, relevant issues

concerning reciprocal compensation for calls to ISPs are

reportedly the subject of impending federal agency and

potential legislative action, either of which could substantially

limit the precedential value of any decision this Court might

issue. There is no compelling reason for this Court to grant

certiorari now when these issues are still making their way

through all three branches of government. Ameritech will

suffer no prejudice from having to pursue its existing contract

claim in state court.

Third, the Seventh Circuit correctly resolved each of the

issues raised by petitioners. There is no reason to think that

Congress gave the federal courts exclusive jurisdiction over

cases challenging state commission decisions to approve or

reject interconnection agreements, see 47 U.S.C. § 252(e)(4),

but denied the same courts the authority to review state

law. On the other hand, the Seventh Circuit appropriately

recognized that a challenge to a state commission’s

interpretation of the language of an interconnection agreement

raises issues of state law. Indeed, this Court’s decision in

Jackson Transit Authority v. Local Division 1285,

Amalgamated Transit Union, 457 U.S. 15, 22-23 (1982),

compels that conclusion. Finally, the Seventh Circuit broke no

new ground in applying the doctrines of waiver and Ex parte

Young to preclude the ICC from invoking Eleventh

Amendment immunity as to the purely federal claims

Ameritech raised, and the Seventh Circuit resolved.

I. There Is No Genuine Circuit Split on Any of the Issues

the Petitioners Raise. )

A. Thecircuits agree that section 252(e)(6) applies to

review of “enforcement decisions.”

The ICC asserts that this Court’s review is necessary to

correct the Seventh Circuit's purportedly incorrect conclusion

that section 252(e)(6) of the 1996 Act extends to review of state

commission decisions interpreting or enforcing interconnection

agreements. ICC Pet. at 12-18. The ICC argues that section

252(e(6) only confers federal jurisdiction to review state

commission determinations approving or rejecting

interconnection agreements. /d.

No circuit split exists on this issue. Three other circuits

have considered this very issue in practically identical cases

and have agreed with the Seventh Circuit’s conclusion that

section 252(e)(6) confers jurisdiction to review state

commission determinations in the “enforcement” stage as well

as the “approval” stage. Southwestern Bell Tel. Co. v. Brooks

Fiber Communications of Oklahoma, Inc., No. 99-5222, ___

F.3d ___, 2000 WL 1827576, at *3 (10th Cir. Dec. 13, 2000);

Southwestern Bell Tel. Co. v. Connect Communications Corp.,

225 F.3d 942, 947 (8th Cir. 2000); Southwestern Bell Tel. Co.

v. Pub. Utils. Comm'n of Tex., 208 F.3d 475, 480 (Sth Cir.

2000). No circuit has ruled to the contrary.

B. The circuits agree that interpretation of an

interconnection agreement is primarily a question

of state law.

Taking a view directly opposite that of the ICC, Ameritech

contends that all questions relating to the interpretation and

enforcement of an interconnection agreement are federal

9

questions cognizable in federal court pursuant to section

252(e)(6). But here again there is no circuit split on this issue.

Ameritech’s fundamental claim is that federal law governs all

aspects of the question of “[w]hether a . . . state commission

determination concerning the rights and obligations of the

parties to a section 252 agreement deviated from the plain

terms of the agreement.” Am. Pet. at i. In addition to the

Seventh Circuit, both the Tenth and the Fifth Circuits have

rejected that argument in nearly identical cases. Brooks Fiber,

2000 WL 1827576, at *4; Southwestern Bell, 208 F.3d at 485;

see also Puerto Rico Tel. Co. v. Telecommunications

Regulatory Board of Puerto Rico, 189 F.3d 13 (1* Cir. 1999).

No circuit has ruled otherwise.

Ameritech attempts to establish a circuit split by pointing

to a different aspect of the Fifth Circuit’s ruling — its

authorization of federal court review of state law claims. Am.

Pet. at 13, 17-19.” But even if that purported circuit split

existed, it would have no relevance to this case, where

Ameritech has consistently argued that it can pursue its claim

of misinterpretation of the agreement in federal court because

it is a federal claim. The Fifth Circuit itself expressly rejected

that argument. Southwestern Bell, 208 F.3d at 484.

Nor is there a genuine conflict among the circuits even as

to the question whether a federal court can entertain state law

2 The Fifth Circuit mistakenly read two cases, US West

Communications, inc. v. MFS Intelenet, Inc., 193 F.3d 1112 (9th Cir. 1999),

and GTE South, Inc. v. Morrison, 199 F.3d 733 (4th Cir. 1999), to support

its conclusion that federal courts may review questions of state law. In fact,

neither case considered any issue of state law, but held only that federal

courts should consider questions of federal law de novo and factual

determinations under an arbitrary and capricious standard. US West, 193

F.3d at 1117; GTE South, 199 F.3d at 745.

10

challenges to a commission’s order enforcing an

interconnection agreement. As the Tenth Circuit recently

explained, the Fifth Circuit is properly understood as having

endorsed the exercise of supplemental jurisdiction under 28

U.S.C. § 1367 to reach the state law claims. Brooks Fiber,

2000 WL 1827576, at * 4 (citing Southwestern Bell, 208 F.3d

at 482). The Tenth Circuit itself took the same approach. /d.

Nothing in the Seventh Circuit’s decision in this case would

preclude reliance on supplemental jurisdiction to reach state

law claims in appropriate cases.

To the contrary, while the Seventh Circuit did seem to

contemplate that in the usual case federal issues would be

litigated in federal court and state issues would be litigated in

state court, Am. Pet. App. 17a, it did not discuss supplemental

jurisdiction. Nor was there any reason to do so, since

Ameritech never invoked the court’s supplemental jurisdiction

— insisting instead that it was presenting only federal claims

cognizable under section 252(e)(6).

Moreover, the Seventh Circuit’s conception of how review

would usually proceed was obviously influenced by a factor not

present in the Fifth and Tenth Circuit cases — an assertion of

Eleventh Amendment immunity by the defendant state

commission. While state commissions do not have Eleventh

Amendment immunity from federal claims brought under

section 252(e)(6), see pp. 24-29 infra, they still may invoke

Eleventh Amendment immunity as to state law claims. As to

the latter, the Ex parte Young doctrine does not apply, see

Pennhurst State School & Hospital v. Halderman, 465 U.S. 89,

106 (1984), and the argument for a finding of waiver of

!

11

immunity is also much more problematic.” Given these

realities, in a case where a state chooses to assert its immunity,

it is very likely that state claims will have to be brought in state

court, as the Seventh Circuit noted. But the Seventh Circuit’s

acceptance of this forced bifurcation of the case does not

conflict with anything in the Fifth or Tenth Circuit decisions.

Nor should it be a surprise to this Court, which recognized in

Pennhurst that bifurcation of a case involving both state and

federal issues may be a necessary consequence of the Eleventh

Amendment. /d. at 121-23.

In another attempt to manufacture a circuit conflict,

Ameritech contends that the Eighth and Fourth Circuits and the

FCC also have reached conclusions that diverge from the

Seventh Circuit’s analysis. See Am. Pet. at 13-23. These

arguments are equally unavailing.

The Eighth Circuit in Southwestern Bell Telephone Co. v.

Connect Communications Corp. simply held that Southwestern

Bell’s claim that a state commission determination “violated

federal law” was sufficient to confer subject matter jurisdiction

to consider “that claim on the merits.” 225 F.3d at 948. The

Eighth Circuit determined that the claims in that case raised a

number of federal issues over which the court could assert

jurisdiction. Id. But the Eighth Circuit did not agree with

Ameritech that interpretation of an interconnection agreement

is an inherently federal question, nor did it dispute the other

> The clear and unequivocal notice to states that their actions will

be subject to federal court review under section 252(e)(6) does not appear

to extend to state law issues, because that section only.refers to actions in

federal court to determine whether the state commission's determination

“meets the requirements” of sections 251 and 252. A lack of clear notice

would preclude a finding of waiver of immunity as to state law issues. See

Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 239-40 (1985).

12

courts’ view of the role of state law in this area. Rather, the

Eighth Circuit agreed that federal courts are to ensure only

“compliance with federal law” and “[w]ith regard to purely

state law issues, the state commissions may have the final say.”

Id.

The Fourth Circuit’s decision in AT&T Communications

of the Southern States, Inc. v. BellSouth Telecommunications,

Inc., 229 F.3d 457 (4th Cir. 2000), likewise fails to provide

grounds for certiorari. That case was factually distinct from

this one in that it did not involve a challenge to a state

commission decision interpreting or enforcing an

interconnection agreement. Rather, it was a challenge at the

approval stage. Further, the court did not purport to examine

the appropriate scope of review under section 252(e)(6).

Instead, it relied on the “inherent power of the court” to order

a district court to consider reforming a negotiated

interconnection agreement provision that was intimately related

to an arbitrated provision after FCC and court decisions

established the invalidity of that arbitrated provision. Id. at 466

n.4. The court cited equitable considerations for its actions:

the provision at issue was negotiated at a time when applicable

federal regulations specifically required such a provision, but

those regulations were later invalidated, and an arbitrated

provision intimately related to the negotiated provision at issue

had been invalidated based on a separate change in federal law.

Id. at 464-65; see also AT&T Communications of the S. States,

Inc. v. BellSouth Telecommunications, Inc., 7 F. Supp. 2d 661,

670 & n.4 (E.D.N.C. 1998). None of those considerations

13

apply here. The Fourth Circuit did not even consider — much

less disagree with — the Seventh Circuit’s decision.Y

Ameritech’s reliance on the FCC’s decision in In re

Starpower Communications, LLC, Petition for Preemption of

Jurisdiction of the Virginia State Corporation Commission

Pursuant to Section 252(e)(5) of the Telecommunications Act

of 1996, 15 F.C.C.R. 11227 (2000) (“Starpower’”), is also

misplaced. Ameritech claims that the FCC determined in

Starpower that “any regulatory determination under section

252, whether by a state commission or by the FCC, interpreting

an interconnection agreement presents a question of federal law

that is reviewable in federal court.” Am. Pet. 20. But the FCC

in Starpower found that if state commissions refuse to interpret

and enforce interconnection agreements, the FCC would

undertake that duty pursuant to section 252(e)(5). Starpower

says nothing about judicial review of state commission

determinations or the law that governs interpretation of

interconnection agreements. The order’s only sentence

regarding judicial review concerns review of FCC proceedings,

and provides that “findings made by the [FCC] . . . and any

judicial review of such findings shall be the exclusive remedies

available to the parties.” Starpower ¥ 9. That is a simple

restatement of part of section 252(e)(6) that provides for review

of FCC decisions, which must be in the Hobbs Act court. 47

U.S.C. § 252(e)(6). An entirely separate portion of section

252(e)(6) governs state commission review, and that is the

provision at issue in this case. Jd. Further, that the FCC is

considering the contract issues in Starpower does not federalize

them. Federal agencies routinely apply state law, subject to

federal court review. See, e.g., Nicor Exploration Co. v. FERC,

* As noted infra, the Fourth Circuit currently has under advisement

two cases that much more closely resemble the instant case.

14

50 F.3d 1341, 1347-49 (Sth Cir. 1995). While review of state

commission decisions is limited to ensuring that any

determination “meets the requirements of [sJections 251 and

[252],” that limitation does not apply to review of FCC

decisions. 47 U.S.C. § 252(e)(6).

C. The circuits agree that state commission

defendants are not immune from section 252(e)(6)

actions under the Eleventh Amendment.

As for the Eleventh Amendment issues raised by the ICC,

there is again no circuit conflict. Three circuits, including the

Seventh, now have held that a case like this one is a

“straightforward Ex parte Young case” that may be brought in

federal court against the members of a state commission.

Michigan Bell Tel. Co. v. Climax Tel. Co., 202 F.3d 862, 867

(6th Cir. 2000), cert. denied, 121 S. Ct. 54 (2000); see MCI-II,

supra; MCI Telecommunication Corp. v. Public Serv. Comm'n

of Utah, 216 F.3d 929, 939-40 (10th Cir. 2000), petition for

cert. filed, 69 U.S.L.W. 3282 (U.S. Sept. 18, 2000) (No. 00-

593).* This prevailing consensus is reflected in the fact that the

> In addition, the vast majority of district courts — over two dozen

— that have ruled on this question have found that the Eleventh Amendment

is not a bar to an Ex parte Young action commenced pursuant to section

252(e)(6). See, e.g., Bell Atlantic-Pennsylvania, Inc. v. Pennsylvania Public

Util. Comm'n, 107 F. Supp. 2d 653 (E.D. Pa. 2000); Bell Atlantic-

Delaware, Inc. v. McMahon, 80 F. Supp. 2d 218 (D. Del. 2000); Bell

Atlantic-Delaware, Inc. v. Global NAPS South, Inc., 77 F. Supp. 2d 492 (D.

Del. 1999); US West Communications, Inc. v. Serna, No. Civ 97-124, 1998

U.S. Dist. LEXIS 23024 (D.N.M. Mar. 31, 1998); AT&T Communications

of the S. States, Inc. v. BellSouth Telecommunications, Inc., 60 F. Supp. 2d.

1279 (N.D. Fla. 1997); GTE Fla., Inc. v. Clark, 60 F. Supp. 2d 1277 (N.D.

Fla. 1997); US West Communications, Inc. v. MFS Intelenet, Inc., 35 F.

Supp. 2d 1221 (D. Or. 1998).

15

Court has twice denied review on this very question during this

Term.®

The ICC claims that there is a circuit conflict as to one of

the alternate bases for rejecting the Eleventh Amendment

defense that the Seventh Circuit has also embracéd — waiver.

But here again, the Tenth Circuit — the only other court of

appeals to have addressed the question — is in full agreement

with the Seventh Circuit. See MCI Telecommunications Corp.,

216 F.3d at 938.7 The ICC cites GTE North, Inc. v. Strand,

209 F.3d 909 (6th Cir. 2000), cert. denied, 121 S. Ct. 380

(2000), as supporting its position on waiver. ICC Pet. at 20.

But the only reference to waiver of Eleventh Amendment

immunity in that case is pure dicta in a footnote. 209 F.3d 922,

n.6. The state commission, as a corporate entity, was not even

a defendant in the case and the Sixth Circuit did not reach

waiver because Ex parte Young applied.

® See Strand v. Michigan Bell Tel., 121 S. Ct. 54 (2000); Strand

v. Verizon North, Inc., 121 S. Ct. 380 (2000).

” As with Ex parte Young, the vast majority of district courts that

have ruled on the waiver question have held that states voluntarily waive

their sovereign immunity when they willfully participate in the Act's

regulatory scheme. See, e.g., Michigan Bell Tel. Co. v. Climax Tel. Co.,

2000 U.S. Dist. LEXIS 15195 (W.D. Mich. Oct. 12, 2000); GTE California,

Inc. v. California Telecommunications Coalition, Nos. C 99-03973 CW et

al., slip op. at 28-35 (N.D. Cal. Aug. 31, 2000); Bell Atlantic-Pennsylvania,

Inc., v. Pennsylvania Pub. Util. Comm'n, 107 F. Supp. 2d 653 (E.D. Pa.

2000); Bell Atlantic-Delaware, Inc. v. McMahon, 80 F. Supp. 2d 218 (D.

Del. 2000); Bell Atlantic-Delaware, Inc. v. Global NAPS South, Inc., 77 F.

Supp. 2d 492 (D. Del. 1999); US West Communications, Inc. v. MFS

Intelenet, Inc., 35 F. Supp. 2d 1221 (D. Or. 1998); MCI

Telecommunications Corp. v. BellSouth Telecommunications, Inc., 9 F.

Supp. 2d 766 (E.D. Ky. 1998).

16

II. The Issues Presented by the Petitions Are Still

Developing in Other Circuits, the FCC, and Congress.

The Court should not grant review for the additional reason

that the issues petitioners raise are pending and soon to be

addressed in several additional circuits. Further, the FCC and

Congress may act soon on issues pertaining to reciprocal

compensation and those actions may severely limit the

importance of any decision this Court might issue. It therefore

makes sense for the Court to stay its hand at this time.

Cases closely resembling the Seventh Circuit’s ruling at

issue here are pending in the Fourth, Sixth, and Eleventh

Circuits. See BellSouth Telecommunications, Inc. v. North

Carolina Utils. Comm'n, No. 99-1845(L) (4th Cir.); Bell

Atlantic-Maryland, Inc. v. Pub. Serv. Comm'n of Maryland,

No. 99-2459 (4th Cir.); Michigan Bell Tel. Co. v. MFS

Intelenet, No. 99-1996 (6th Cir.); BellSouth

Telecommunications, Inc. v. WorldCom Techs., Nos. 00-12809

(1ith Cir.); BellSouth Telecommunications, Inc. v. ITC

DeltaCom, No. 99-14728 (11th Cir.). Similar cases are

pending in district courts within the First, Eighth and Ninth

Circuits.

Especially given the absence of a circuit conflict, there is

every reason to allow the questions presented here to be

addressed in the first instance by these other circuits. Doing so

would allow the relevant arguments and considerations to be

further elaborated, and if no significant disagreement among

the circuits emerges, there may never be need for this Court to

undertake a review.

In addition, at the heart of Ameritech’s claims is its

assertion that federal law does not affirmatively require

17

reciprocal compensation for calls to ISPs. While the Carriers

submit that this question is irrelevant, impending action by the

FCC may moot Ameritech’s claims altogether. The FCC is

currently addressing whether the Act requires reciprocal

compensation for calls to ISPs in remand proceedings resulting

from Bell Atlantic Telephone Cos. v. FCC, 206 F.3d 1 (D.C.

Cir. 2000). There, the D.C. Circuit vacated for want of

reasoned decision making a prior FCC order concluding that

the Act does not mandate reciprocal compensation for calls to

ISPs. Id. at 3,9. Should the FCC conclude that the Act does

mandate this compensation, as the D.C. Circuit strongly

suggested, Ameritech’s claims would be moot. At a minimum,

it makes little sense for this Court to grant review before the

FCC and the D.C. Circuit have settled on the federal rule

regarding reciprocal compensation for calls to ISPs.”

Finally, Ameritech’s claim of urgency is unfounded.

See Am. Pet. at 28-30. Ameritech will suffer no prejudice

should the Court agree that this issue should work its way

through the courts before granting certiorari. At the same time

as it instituted this case in 1998, Ameritech separately filed a

state court appeal in Illinois to challenge the ICC’s order. See

note | supra. That case has been stayed pending resolution of

Ameritech’s petition and will be returned to active status upon

close of these federal proceedings. Thus, should this Court

deny Ameritech’s petition, proceedings in that state court action

will commence and Ameritech will have a full opportunity to

* Moreover, legislation proposed at the end of the last session

would have addressed the question whether federal law should mandate or

prohibit reciprocal compensation for calls to ISPs. See Reciprocal

Compensation Adjustment Act of 2000, H.R. 4445, 106" Cong. (2000);

Stephen Labaton, Communications Lobby Puts Full-Court Press on

Congress, N.Y. Times, Oct. 24, 2000, at Al. This Court should not enter

the fray when legislative initiatives are impending.

18

voice again any state law claim that the ICC misinterpreted the

contracts.

III. The Seventh Circuit’s Decision Is Correct.

Petitioners’ arguments for review are also unpersuasive

because the Seventh Circuit's ruling is correct.

A. Section 252(e)(6) applies to review of state

commission “enforcement” determinations.

The Seventh Circuit did not err in holding that section

252(e)(6) provides federal jurisdiction to review a state

commission order interpreting and enforcing an existing

interconnection agreement. That provision states:

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 [sections 251 and 252 of the Act.]

47 U.S.C. § 252(e)(6). As four circuits have recognized, see p.

8 supra, it would make no sense to read this language as

applying only to commission orders approving or rejecting

interconnection agreements. To the contrary, when read in

context and in light of the Act’s structure and purpose, section

252(e)(6) is properly understood as providing that “[i)n any

case in which a State commission makes a determination”

about the meaning of an existing (i.e., previously approved)

interconnection agreement, a “party aggrieved by such

determination may bring an action in an appropriate Federal

district court to determine whether the agreement,” as now

19

construed by the commission, “meets the requirements of

section 251 [and 252].” 47 U.S.C. § 252(e)(6).

In attempting to ascertain legislative intent, courts do not

“look merely to a particular clause in which general words may

be used, but will take in connection with it the whole statute

... and the objects and policy of the law.” Stafford v. Briggs,

444 U.S. 527, 535 (1980) (quoting Brown v. Duchesne, 60 U.S.

(19 How.) 183, 194 (1856) (internal quotation marks omitted)).

Here, that means that section 252(e)(6) should be read in light

of Congress’s creation of a “new federal regime” that

“fundamentally restructures local telephone markets.” AT&T

Corp., 525 U.S. at 371, 378 n.6. This jurisdictional provision

is an essential component of the new federal regime because it

assures that state commission compliance with the Act will be

assessed by federal courts, which can elaborate a uniform

federal interpretation. As this Court has emphasized in

discussing the Act: “The appeals . . . to what might loosely be

called ‘States’ rights’ are most peculiar, since there is no doubt

. . . that if the federal courts believe a state commission is not

regulating in accordance with federal policy they may bring it

to heel.” Jd. at 378 n.6.

It would have been particularly anomalous for Congress to

have provided that federal courts have exclusive jurisdiction to

review state commission orders approving interconnection

agreements, while simultaneously not intending that federal

courts entertain challenges to enforcement orders as violative

of the Act. The ICC argues that the phrase “under this section”

limits section 252(e)(6) to approval determinations, because

those are the only determinations a commission makes “under”

section 252. ICC Pet. at 12. But the ICC expressly invoked

jurisdiction under the 1996 Act in adjudicating this dispute.

Am. Pet. App. 77a, 84a. Thus, approval and later

20

enforcement/interpretation determinations are, in every

practical sense, made “under” section 252, which is the key

provision authorizing state commissions to play a role in this

field.

In any event, this debate is largely academic. Even if the

Court were to disagree with the circuit courts and interpret

section 252(e)(6) not to confer jurisdiction on federal courts,

then jurisdiction under 28 U.S.C. § 1331, in combination with

42 U.S.C. § 1983, would authorize parties to bring to federal

court claims that state commission enforcement decisions had

violated federal law. See Strand, 209 F.3d at 915-19; Puerto

Rico Tel. Co., 189 F.3d at 16; see also City of Chicago v.

International Coll. of Surgeons, 522 U.S. 156, 166-68 (1997)

(recognizing that there is federal jurisdiction to review state

administrative agency decisions where the party formulates an

appropriate federal claim).

B. Section 252(e)(6) does not authorize review of

state law claims.

The Seventh Circuit similarly was correct in concluding

that section 252(e)(6) provides solely for review of federal

claims. The statute’s plain language compels that conclusion.

Section 252(e)(6) authorizes a federal court to assess only

whether a state commission’s determination “meets the

requirements of section 251 . . . and this section [252]” of the

1996 Act. 47 U.S.C. § 252(e)(6). As the First Circuit

explained, “[i}f Congress intended federal courts’ review to

encompass any kind of alleged flaw in a state commission’s

determination, then there would have been little need to include

the language ‘meets the requirements of section 251 and...

[section 252].’” Puerto Rico Tel. Co., 189 F.3d at 14.

21

Amenitech insists that the bifurcated system resulting from

the Seventh Circuit’s view of section 252(e)(6) “make[s] no

sense” because Congress should have “requirfed] at least as

much federal oversight” of state commission decisions as FCC

decisions in order to “secure national uniformity”. Am. Pet.

21-22. But section 252(e)(6) does provide federal court review

for all questions of federal law arising from the determinations

of state commissions and the FCC. For questions of state law

contract interpretation, Ameritech’s uniformity concern does

not apply. Moreover, as noted above, this Court recognized in

Pennhurst that the need to accommodate both federal and state

interests could lead to bifurcated systems of review. 465 U.S.

at 121-23. _

Finally, Ameritech raises the specter of “grave Article II

concerns.” Am. Pet. at 16. It argues that if its state law

challenge to the ICC’s contract interpretation is successful, the

Seventh Circuit’s previous analysis of whether the ICC’s

determination violates federal law would be moot. But under

section 252(e)(6), the test is whether the state commission's

determination violated federal law, as the Seventh Circuit

recognized. The answer to that question depends on the state

commission’s ruling, not hypothetical subsequent state court

proceedings.

C. TheSeventh Circuit correctly denied Ameritech’s

challenge to the ICC’s orders.

The Seventh Circuit also was correct in rejecting

Ameritech’s argument that the ICC’s alleged misinterpretation

of the interconnection agreements as requiring reciprocal

compensation for ISP calls was itself a violation of federal law.

Ameritech raises two basic arguments in its attempt to

federalize a breach of contract claim. First, it argues that

22

because interconnection agreements are required by the Act,

and the Act imposes minimum requirements that apply unless

the parties agree otherwise, the interpretation and enforcement

of the agreements is inherently a federal issue.

This argument fails under the well-established rule that

merely because Congress requires a contract by statute does not

mean that every question regarding the interpretation of such a

contract is a question of federal law. Jackson Transit Auth.,

457 U.S. at 22-23. The interpretation of contractual terms

raises a question of federal law only if the provision at issue

demonstrates that Congress plainly intended that “the nights and

duties contained in [such a] contract [are] federal in nature.”

Id. at 23.

Ameritech’s theory ignores Jackson and would require

federal courts to fashion a federal common law of

interconnection agreement interpretation. But federal courts

may not create federal common law except in the most “narrow

areas.” Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S.

630, 641 (1981). Only in a “few and restricted” cases, “where

there is a significant conflict between some federal policy or

interest and the use of state law” should a court contemplate

creating federal common law. O'Melveny & Myers v. FDIC,

512 U.S. 79, 87 (1994) (internal quotations and citations

omitted). Even when dealing with a comprehensive federal

statutory scheme, “matters left unaddressed in such a scheme

are presumably left subject to the disposition provided by state

law.” Id. at 85.

Nothing in the 1996 Act suggests that Congress intended

to transform every question regarding the meaning of an

interconnection agreement term into a federal question. To the

contrary, Congress expressly provided that “this Act. . . shall

23

not be construed to modify, impair, or supersede Federal, State,

or local law unless expressly so provided in such Act or

amendments.” Pub. L. No. 104-104, Title V, § 601(c), 110

Stat. 43. Congress also expressly authorized states to impose

in interconnection agreements pro-competitive state-law

requirements that are consistent with the Act. 47 U.S.C. §§

251(d)(3), 252(e(3), 261(c). Obviously, Congress did not

intend to preempt all state law.

Second, Ameritech argues that interconnection agreements

are not “agreements” at all, but instead constitute “regulatory

vehicles” that merely incorporate federal law requirements.

Am Pet. at 23. If this were so, however, there would be no

need for these elaborate interconnection agreements at all.

Congress could have simply provided that incumbents must

comply with the minimum requirements of federal law. As the

Seventh and Fifth Circuits have recognized, it did not do so.

“The Act clearly does not set out specific conditions which one

party could enforce against the other. The details are left to the

parties, or the commissions, to work out.” Am. Pet. App. 12a

(quoted in Southwestern Bell, 208 F.3d at 484-85).

Moreover, as Ameritech acknowledges, the Act itself

provides that parties may “enter into a binding agreement .. .

without regard to the standards set forth in” the Act. 47 U.S.C.

§ 252(a)(1) (emphasis added). Had Congress intended

negotiated agreements to be governed exclusively by federal

law, it would not have allowed parties to enter into them

“without regard” to the Act’s requirements.

In any event, even if the contract interpretation issue could

be reached in this federal action, the ICC correctly interpreted

the agreements’ terms to require reciprocal compensation for

calls to ISPs. Am. Pet. App. 10a-15a. Considered in light of

24

the custom and practice of the telecommunications industry, the

agreements’ terms demonstrate that Ameritech agreed to pay

reciprocal compensation for calls to ISPs. Id. The ICC even

applied factors .that directly parallel those that the FCC

suggested state commissions may consider when determining

whether parties agreed to pay reciprocal compensation for calls

to ISPs. Jd. at 14a; see In re Implementation of the Local

Competition Provisions in the Telecommunications Act of

1996, Inter-Carrier Compensation for ISP Bound Traffic, 14

F.C.C.R. 3689, | 24 (1999); Starpower 4 9. The ICC’s

decision is consistent with the decisions of four circuit courts,

six federal district courts and over thirty state commissions. No

court has held to the contrary.

D. The ICC does not have Eleventh Amendment

immunity as to Ameritech’s federal claims.

The Seventh Circuit's holding that the ICC defendants are

not immune from a federal suit brought pursuant to section

252(e)(6) is firmly grounded in this Court’s Eleventh

Amendment jurisprudence. Consistent with Ex parte Young,

the Act permits aggrieved parties to seek review of state

commission determinations in federal court. The Act erects no

limits on the equitable powers that federal courts have at their

disposal to ensure that the state commissioners’ actions comply

with the Act’s requirements. Moreover, in the spirit of

cooperative federalism, Congress intended to encourage the

participation of states in the regulation of interconnection

matters addressed in the Act. Accordingly, the Act subjects

any determination regarding interconnection agreements made

by a state commission to review in federal court for compliance

with federal law. Illinois’ decision to accept Congress’

invitation to regulate pursuant to the Act — a responsibility it

25

does not have to assume — constitutes a waiver of its Eleventh

Amendment immunity within the meaning of College Savings.

1. Ex parte Young applies here.

This Court has recently recognized that Ex parte Young is

an “essential part of our sovereign immunity doctrine.” Alden

v. Maine, 527 U.S. 706, 748 (1999). Under the Ex parte Young

rule, a lawsuit in federal court against state officials seeking

prospective relief from ongoing violations of federal law is not

treated as implicating a state’s immunity under the Eleventh

Amendment. See Idaho v. Coeur d'Alene Tribe of Idaho, 521

U.S. 261, 294 (1997) (O’Connor, J., concurring); id. at 298

(Souter, J., dissenting).

Although the ICC argues otherwise, ICC Pet. at 28-29,

these requirements are plainly satisfied here. As the Seventh

Circuit put it in MCI-II, the “challenged determinations are still

in place, and the carriers seek to have the commissioners

conform their future actions, including their continuing

enforcement of the challenged determinations, with federal law.

... Such relief is precisely the type contemplated by the Ex

parte Young doctrine.” 222 F.3d at 345.

The ICC petitioners also argue that Ex parte Young applies

only in constitutional cases. ICC Pet. at 24-28. But that

argument completely misapprehends the Ex parte Young

doctrine and this Court’s holdings. See, e.g. Coeur d'Alene,

521 U.S. at 270 (Ex parte Young actions exist “to ensure the

supremacy of federal statutory and constitutional law”);

Seminole Tribe of Florida v. Florida, 517 U.S. 44, 73-74

(1996) (reaffirming that a proper Ex parte Young suit is one

that seeks to challenge the “continuing violation of federal

law”); Edelman v. Jordan, 415 U.S. 651, 677 (1974) (barring

suit in statutory case only to the extent plaintiffs sought

26

retrospective relief). The Court has never limited the doctrine

in the manner petitioners imagine. Indeed, the Court has

repeated that the Ex parte Young doctrine is “necessary to

permit the federal courts to vindicate federal rights and hold

state officials responsible to ‘the supreme authority of the

United States.’ Pennhurst State School & Hosp., 465 U.S. at

105 (quoting Ex parte Young, 209 U.S. at 160).

Finally, the ICC petitioners attempt to rely on Seminole

Tribe, where the Court held that the inclusion of an express and

very limited set of judicial remedies in a statute impliedly

precluded reliance on Ex parte Young. ICC Pet. at 21-24. But

there is nothing in the 1996 Act that would suggest that reliance

on Ex parte Young is somehow precluded. Section 252(e)(6)

simply authorizes an aggrieved party to bring an action in

federal court to “determine whether [an interconnection]

agreement or statement [approved or rejected by a state

commission or the FCC] meets the requirements of section{s]-

251” and 252. 47 U.S.C. § 252(e)(6). That section raises none

of the concerns presented in Seminole Tribe.

In Seminole Tribe, the Court reviewed the “carefully

crafted and intricate remedial scheme” of the Indian Gaming

Regulatory Act (“IGRA”) in which “Congress intended . . . not

only to define, but also to limit significantly, the duty imposed”

on federal courts by the statute. 517 U.S. at 73-74. The Court

held that the IGRA was unique insofar as it prescribed a very

formal and intricate mediation scheme in which federal district

courts play an extremely limited part. Jd. at 75. For example,

although the IGRA authorized federal courts to order a state to

negotiate in good faith, it barred enforcement of those orders

through contempt sanctions. /d. at 74-75. Thus, the Seminole

Tribe Court saw a clear inconsistency between the limited

remedies available under IGRA and an Ex parte Young action,

where the typical remedy is an enforceable injunction.

27

There is nothing in section 252 that would limit federal

court review in a remotely comparable manner. In fact,

allowing Ex parte Young suits to proceed pursuant to

section 252(e) realizes Congress’ intent to allow federal courts

to address ongoing violations of federal law by state officials.

Unlike the IGRA, for example, the Act does not prohibit courts

from ordering any equitable remedies. Absent an express

limitation, federal courts “presume the availability of all

appropriate remedies” under a federal statute. Franklin v.

Gwinnett County Pub. Schs., 503 U.S. 60, 66 (1992).?

In sum, it is hard to imagine a statutory remedy more

synonymous with Ex parte Young than that provided by

Congress here. Certainly the fact that the statute refers

° Seminole Tribe also held that IGRA specifically requires that

“the state” be named as the defendant in any lawsuit under that s.atute, and

that no individual state officer or group of officers, if sued in their official

capacities under Ex parte Young, would be functionally equivalent to “the

state” for purposes of carrying out its duties under IGRA. 517 U.S. at 75

n.17. The Court saw this as further confirmation that Congress

contemplated suits against states and not Ex parte Young actions against

individual state officers. Id. at 75-76 & n.17.

Here, by contrast, nothing in the Act requires that actions be

brought against “the state.” Section 252 does not specify who must be a

party in federal court, but simply provides for “Review Of State

Commission Actions.” Because Ex parte Young is the traditional

mechanism for such review in federal court, the natural inference from the

statutory text is that Congress intended such suits to be brought on that

basis. Moreover, the term “state commission” is defined in the Act to

include any “commission, board, or official (by whatever name

designated)” exercising jurisdiction over intrastate operations of carriers. 47

U.S.C. § 153(41). Contrary to petitioners’ claims, see ICC Pet. at 22-23,

that definition is certainly broad enough to include the Commissioners, sued

in their official capacity, who are the proper defendants in an Ex parte

Young action.

28

expressly to a federal cause of action cannot, without more,

preclude reliance on Ex parte Young. That would flout, rather

than vindicate, the intent of Congress.

2. A state’s waiver of immunity obtained

through its voluntary participation in the

Act’s regulatory scheme is consistent with

College Savings.

In College Savings Bank v. Florida Prepaid Postsecondary

Education Expense Board, the Court recognized that Eleventh

Amendment immunity may be waived, but it emphasized that

such a waiver must be clear and voluntary. 527 U.S. 666, 679

(1999); see also Atascadero State Hosp. v. Scanlon, 473 U.S.

234, 238 n.1 (1985) (there must be an “unequivocal indication

that the State intends to consent to federal jurisdiction that

otherwise would be barred by the Eleventh Amendment”). The

Court’s particular concern was a form of “constructive waiver”

that is effectively indistinguishable from abrogation — i.e.,

where Congress simply “deems” some ongoing state conduct

to be a waiver. 527 U.S. at 681-83 (discussing Parden v.

Terminal Ry. Co. of Ala. State Docks Dept., 377 U.S. 184

(1964)). To allay that concern, the Court held that a federal law

requiring states to waive immunity in order to be allowed to

continue engaging in some “otherwise lawful activity” does not

lead to a clear and voluntary waiver. Id. at 687 (“[W]e think .

. . the point of coercion is automatically passed — and the

voluntariness of waiver destroyed — when what is attached to

the refusal to waive is the exclusion of the State from otherwise

lawful activity.”)

But the Court did not bar all waivers effected through

voluntary conduct. To the contrary, it stated that states do

validly waive immunity when they knowingly accept a

29

gratuitous federal benefit expressly tied to a waiver. The Court

illustrated this point by distinguishing two important cases in

which statutory conditions placed on states by Congress were

upheld although waiver was not formally declared by the states.

Id. at 686-87. The Court recognized that Petty v. Tennessee-

Missouri Bridge Commission, 359 U.S. 275 (1959), “held that

a bistate commission which had been created pursuant to an

interstate compact (and which [it] assumed partook of state

sovereign immunity) had consented to suit by reason of a

suability provision attached to the congressional approval of the

compact.” 527 U.S. at 686. It also noted that South Dakota v.

Dole, 483 U.S. 203 (1987), held “that Congress may, in the

exercise of its spending power, condition its grant of funds to

the States upon their taking certain actions that Congress could

not require them to take, and that acceptance of the funds

entails an agreement to the actions.” 527 U.S. at 686. The

College Savings Court explained that, pursuant to the Article I

provisions at play in Petty and Dole, Congress was under no

“obligation” to give states the “gratuity” or “gift” obtained, id.

at 686-87, and that the states, in those cases, were not coerced

into waiving their Eleventh Amendment immunity in order to

engage in “otherwise lawful activity.” The cases thus

illustrated how valid waivers could occur through acceptance

of conditional benefits. Jd. at 687.

These principles were appropriately applied by the Seventh

Circuit here, where Congress created a set of federal standards

and procedures applicable to local interconnection of

competing carriers, and then offered states the “gratuitous”

opportunity to participate in the new federal scheme,

conditioned on the quite reasonable requirement that the state

commissions’ actions be reviewable for compliance with

federal law in federal court. Thus, even if Ex parte Young were

not available as a vehicle to allow federal court review of state

commission actions, the Eleventh Amendment would not apply

because it is waived when states choose to participate in the

review and enforcement of interconnection agreements.

CONCLUSION

For the reasons set forth above, both petitions should be

denied.

RICHARD M. RINDLER

SWIDLER BERLIN SHEREFF

FRIEDMAN, LLP

3000 K Street, N.W.

Washington, D.C. 20007

(202) 424-7500

RICHARD METZGER

MATTHEW BERNS

FOCAL COMMUNICATIONS CorP.

7799 Leesburg Pike

Falls Church, VA. 22043

(703) 637-8700

Counsel for Respondent

Focal Communications Corp.

January 16, 2001

Respectfully submitted,

PAUL M. SMITH*

DARRYL M. BRADFORD

JOHN J. HAMILL

JENNER & BLOCK, LLC

601 13th Street, N.W.

Washington, D.C. 20005

(202) 639-6000

THOMAS F. O’ Netz III

WILLIAM SINGLE, IV

MARK B. EHRLICH

WorldCom, Inc.

1133 19th Street, N.W.

Washington, D.C. 20036

(202) 736-6096

Counsel for Respondents

Worldcom Technologies, Inc.,

MCI WORLDCOM Network Services,

Inc. and MCImetro Access

Transmission Services LLC