Amicus Curiae Brief — Nixon v. Missouri Municipal League

Nos. 02-1238, 02-1386 and 02-1405

In the Supreme Court of the United States

JEREMIAH W. (JAY) NIXON, ATTORNEY GENERAL OF

MISSOURI, PETITIONER

v.

MISSOURI MUNICIPAL LEAGUE, ET AL.

FEDERAL COMMUNICATIONS COMMISSION

AND THE UNITED STATES OF AMERICA, PETITIONERS

Uv.

MISSOURI MUNICIPAL LEAGUE, ET AL.

SOUTHWESTERN BELL TELEPHONE, L.P., FK¢

SOUTHWESTERN BELL TELPHONE COMPANY,

PETITIONER

v.

MISSOURI MUNICIPAL LEAGUE, ET AL.

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

BRIEF FOR THE FEDERAL PETITIONERS

THEODORE B. OLSON

Solicitor General

Counsel of Record

R. HEWITT PATE

JOHN A. ROGOVIN Assistant Attorney General

General Counsel THOMAS G. HUNGAR

JOHN E. INGLE Deputy Solicitor General

RICHARD K. WELCH JAMES A. FELDMAN

Counsel ss Assistant to the Solicitor

Federal Communications General

Commission . _

. . a CATHERINE G. O’SULLIVAN

Washington, D.C. 20554 ANDREA LIMMER

Attorneys

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

~ =

Wile ee dene ss

QUESTION PRESENTED

Whether 47 U.S.C. 253(a), which provides that “[n]o

State * * * regulation * * * may prohibit * * * the

ability of any entity to provide any interstate or intra-

state telecommunications service,’ preempts a state

law prohibiting political subdivisions of the State from

offering telecommunications service to the public.

II

PARTIES TO THE PROCEEDING

The petitioners are the Federal Communications

Commission and the United States of America. The

State of Missouri, which intervened in the court of

appeals, separately filed a petition. Southwestern Bell

Telephone, L.P., fka Southwestern Bell Telephone

Company, also intervened below and separately filed a

petition. The Missouri Municipal League, Missouri

Association of Municipal Utilities, City Utilities of

Springfield, City of Sikeston, Missouri, Columbia Water

& Light, and the American Public Power Association

were the petitioners in the court of appeals, and are the

respondents here. The National Association of Tele-

communications Officers and Advisors and the United

Telecom Council participated as amici in the court of

appeals.

Opinions belOW ........-sessessseeseeeneesneeneenneenes

Jurisdicti

Statutory provisions involved ............-.ssecneseenesnenssneensensneeneenees

Statement

Summary of argument

Argument:

Conclusion

TABLE OF CONTENTS

COREE T RRR R TREE R ERT E Eee

Tere

Missouri's statute precluding the State’s political

subdivisions from offering telecommunications

service is not preempted under 47 U.S.C. 253(a) ............

A. Section 253(a) does not preempt a state law

allocating authority to the State’s political

subdivisions unless it can be shown that

Congress’s intent to preempt such laws is clear

under the rule of Gregory v. Ashcroft .............0000+

B. Section 253(a) does not manifest a clear intent

to preempt state laws allocating authority

to political subdivisions of a State ..........ssveseeeeee

C. Congress’s use of the term “any entity” in

Section 253(a) does not show that it intended

the statute to regulate a State’s allocation

of authority to its SubdIVISIONS ...............0+seerenenerees

TABLE OF AUTHORITIES

Cases:

AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366

11

15

21

CRED ccccccesecesnsecesezsssssecsssesesnszesecesesecesesesscscocsssssceccecentecess 2, 16,17

Atascadero State Hosp. v. Scanlon, 473 U.S. 234

CDIIID cccccsccssseccszcsesscssesscssssessensressesessessnscecsssssssvsessnsescesoescecesceesee

Cablevision of Boston, Inc. v. Public Improvement

Comm'n, 184 F.3d 88 (Ist Cir. 1999) ........ccccceserensereeeeneeees

(IIT)

IV

Cases—Continued: Page

City of Abilene v. FCC, 164 F.3d 49 (D.C. Cir. 1999)...... 5,

12, 25

City of Auburn v. Qwest Corp., 260 F.3d 1160 (9th Cir.

2001), cert. denied, 534 U.S. 1079 (2002) 17

City of Bristol v. Early, 145 F. Supp. 2d 741 (W.D. Va.

2001) 12

City of Columbus v. Ours Garage & Wrecker

Service, Inc., 536 U.S. 424 (2002) 14, 22, 24

City of Edmonds v. Oxford House, Inc., 514 U.S.

725 (1995) 15

City of Lockhart v. United States, 460 U.S. 125

(1983) 18

Gregory v. Ashcroft, 501 U.S. 452 (1991) ~ 4,9,

12, 13, 14, 15, 20, 23

Hunter v. City of Pittsburgh, 207 U.S. 161 (1907) ........... 14

Iowa Tel. Ass'n v. City of Hawarden, 589 N.W.2d 245

(lowa 1999) 12-13

Lincoln Elec. Sys., In re, 655 N.W.2d 363 (Neb.),

cert. denied, 123 S. Ct. 2620 (2003) 12

Municipal Elec. Auth. v. Georgia Pub. Serv.

Comm'n, 525 S.E.2d 399 (Ga. Ct. App. 1999)... 13

Pennsylvania Dep't of Corrections v. Yeskey,

524 U.S. 206 (1998) . 19

Public Utility Comm'n, In re, 13 F.C.C.R. 3460

(1997) . 3, 4, 5, 13, 16

RT Communications, Inc. v. FCC, 201 F.3d 1264

(10th Cir. 2000) 17

Raygor v. Regents of the Univ. of Minn., 534 U.S. 533

(2002) 11, 15, 18, 20, 23

Reynolds v. Sims, 377 U.S. 533 (1964) 14

Sailors v. Board of Educ., 387 U.S. 105 (1967) ...ccccccccosese- 14

Salinas v. United States, 522 U.S. 52 (1997) ecco... 8, 21, 22

Silver Star Tel. Co., 12 F.C.C.R. 15,639 (1997), recons.

denied, 13 F.C.C.R. 16,356 (1998), aff’d sub nom.

RT Communications, Inc. v. FCC, 201 F.3d

1264 (10th Cir. 2000) 3

ain oniedadie aia aitlieddies oe

—————

Cases—Continued: Page

Southern Co. Servs. v. FCC, 313 F.3d 574 (D.C. Cir.

2002) - 24

Trustees of Darmouth College v. Woodward, 17 U S.

(4 Wheat.) 518 (1819) didn 14

United States v. Gonzalez, 520 U.S. 1 (1997) 24

Verizon Md. Inc. v. Public Serv. Comm'n, 535 U.S.

635 (2002) 7 2

Will v. Michigan Dep't of State Police, 491 U.S.

58 (1989) 15

Wisconsin Pub. Intervenor v. Mortier, 501 U Ss.

597 (1991) 14

Constitution and statutes:

U.S. Const. Amend. XI - 23

Age Discrimination in Employment Act, 29 U.S.C. 621

ean 13

Cb SEG. .eneseceseseseresnsnensnssnsnenenenenensnsnssnsnsnenenenenenenensnns

Americans with Disabilities Act, Tit. II, 42 U.S.C. 12121

Ob SOG. .oececsereeveserssverernensensnssnensenenssnensnsensnssnensnsnensnnanenennanansanensens 19

42 U.S.C. 121B1( 1 KB) .20000000cccsccerecssceccevseressecsersersersnsesssosess 19

Communications Act of 1934, 47 U.S.C. 151:

47 U.S.C. 258 ... - 2, 16, 17,18

47 USC. 253(a) os — escceseosssecessese passim

47 U.S.C. 253(b) secincisiataaeiiamaseabbiasauenpaimmtes 17

47 U.S.C. 253(d) 3

Telecommunications Act of 1996, Pub. L. No. 104-104,

Ee 2

28 U.S.C. 1367(d) " 23

Mo. Ann. Stat. § 392.410(7) (West Supp. 2003) ..........--v-0 2,6

1997 Mo. Legis. Serv. M.B. 620 (West) ......... 6

2002 Mo. Legis. Serv. M.B. 1402 (West) 6

Miscellaneous:

S. Conf. Rep. No. 230, 104th Cong., 2d Sess. (1996) ........... 16

Black's Law Dictionary (7th ed. 1999) 8

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i,

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5

4

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a ae

er ty, Pe ORE a. ee eT gtr eS

on

Jn the Supreme Court of the Gnited States

No. 02-1238 .

JEREMIAH W. (JAY) NIXON, ATTORNEY GENERAL OF

MISSOURI, PETITIONER

Vv

MISSOURI MUNICIPAL LEAGUE, ET AL.

No. 02-1386

FEDERAL COMMUNICATIONS COMMISSION

AND THE UNITED STATES OF AMERICA, PETITIONERS

v.

MISSOURI MUNICIPAL LEAGUE, ET AL.

\

No. 02-1405

SOUTHWESTERN BELL TELEPHONE, L.P., FKA

SOUTHWESTERN BELL TELEPHONE COMPANY,

PETITIONER

Vv

MISSOURI MUNICIPAL LEAGUE, ET AL.

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

BRIEF FOR THE FEDERAL PETITIONERS

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. la-13a)

is reported at 299 F.3d 949. The decision of the Federal

Communications Commission (Pet. App. 14a-45a) is

reported at 16 F.C.C.R. 1157.

(1)

2

JURISDICTION

The judgment of the court of appeals was entered on

August 14, 2002. Petitions for rehearing were denied

on November 20, 2002. Pet. App. 46a. On February 10,

2003, Justice Thomas extended the time within which to

file a petition for a writ of certiorari in Nos. 02-1386 and

02-1405 to and including March 20, 2003. The petition

for a writ of certiorari in No. 02-1238 was filed on Feb-

ruary 18, 2003. The petitions for a writ of certiorari in

Nos. 02-1386 and 02-1405 were filed on March 20, 2008.

The Court granted the petitions for a writ of certiorari

and consolidated the three cases on June 23, 2003. The

jurisdiction of this Court rests on 28 U.S.C. 1254(1).

STATUTORY PROVISIONS INVOLVED

Section 253 of the federal Communications Act of

1934, 47 U.S.C. 253, and Section 392.410(7) of Vernon’s

Annotated Missouri Statutes (West Supp. 2003), are

reprinted at Pet. App. 47a-49a.

STATEMENT

1. For most of the twentieth century, the provision

of local telephone service in the United States “was

thought to be a natural monopoly,” and “States typi-

cally granted an exclusive franchise in each local service

area to a local exchange carrier (LEC).” AT&T Corp.

v. lowa Utils. Bd., 525 U.S. 366, 371 (1999). Congress

sought to end that “longstanding regime of state-sanc-

tioned monopolies,” ibid., when it enacted the Telecom-

munications Act of 1996 (1996 Act), Pub. L. No. 104-104,

110 Stat. 56, and “created a new telecommunications

_ regime designed to foster competition in local telephone

markets.” Verizon Md. Inc. v. Public Serv. Comm’n

535 U.S. 635, 638 (2002),

3

The provision of the 1996 Act at issue in this case, 47

U.S.C. 253(a), furthers the statute’s design of fostering

competition in local markets by abolishing all state

exclusive-franchise laws. Section 253(a) provides that

“(njo State or local statute or regulation, or other State

or local legal requirement, may prohibit or have the

effect of prohibiting the ability of any entity to provide

any interstate or intrastate telecommunications ser-

vice.” The statute further provides that “{iJf * * * the

{Federal Communications] Commission determines that

a State or local government has permitted or imposed

any statute, regulation, or legal requirement that vio-

lates subsection (a) * * *, the Commission shall

preempt the enforcement of such statute, regulation, or

legal requirement to the extent necessary to correct

such violation or inconsistency.” 47 U.S.C. 253(d). The

Federal Communications Commission (FCC or Com-

mission) has executed that directive by, for example,

preempting the enforcement of a state statute that

shielded rural incumbent telephone carriers from com-

petition from other private providers of local telephone

service. See Silver Star Tele. Co., 12 F.C.C.R. 15,639

(1997), recons. denied, 13 F.C.C.R. 16,356 (1998), aff’d

sub nom. RT Communications, Inc. v. FCC, 201 F.3d

1264 (10th Cir. 2000).

2. This case arises on review of an FCC decision

finding that Section 253(a) does not preempt a Missouri

statute that prohibits the State’s political subdivisions

from providing telecommunications services. The

FCC’s decision relied heavily on an earlier decision

involving a similar Texas statute. In Jn re Public Util-

ity Commission, 13 F.C.C.R. 3460 (1997), the FCC

addressed a petition by Texas municipalities (but not

municipally owned utilities) that urged the Commission

to use its authority under Section 253(d) to hold pre-

4

empted a number of provisions of Texas law that were

alleged to violate Section 253(a). One challenged provi-

sion “generally prohibit{ed] municipalities or munici-

pally-owned electric utilities from offering for sale,

directly or indirectly, certain telecommunications ser-

vices.” 13 F.C.C.R. at 3540. Limiting its ruling to the

application of the state statute to municipalities

themselves (rather than municipally owned utilities), id.

at 3544, the Commission found that “preempting the

enforcement of [the challenged provision] would insert

the Commission into the relationship between the state

of Texas and its political subdivisions in a manner that

was not intended by section 253.” Jbid.

The Commission explained that the challenged law

“is an exercise of the Texas legislature’s power to

define the contours of the authority delegated to the

state’s political subdivisions,” and that this Court’s

decision in Gregory v. Ashcroft, 501 U.S. 452 (1991),

held that such “fundamental state decisions” remain

within the State’s authority “absent a clear indication of

intent.” 13 F.C.C.R. at 3545-3546. In reaching that

conclusion, the Commission distinguished “the question

of whether federal standards may be applied to an arm

of a Texas municipality,” which would not be subject to

the Gregory rule, from the question whether the State

may “define the scope of the authority delegated to a

state’s own political subdivisions,” which is subject to

the Gregory rule. Id. at 3546. Applying that rule to

Section 253(a), the Commission was unable to find that

the use of the term “any entity” in Section 253(a) con-

stituted a sufficiently clear statement that Congress

specifically intended to include municipalities within

the scope of Section 253(a) preemption and thereby

intrude into the scope of authority that a State may

5

delegate to its own political subdivisions. Jd. at 3546-

3549. |

Although ruling that the Texas statute was not pre-

empted, the Commission “encourage[d] states to avoid

enacting absolute prohibitions on municipal entry into

telecommunications,” because “[mJunicipal entry can

bring significant benefits by making additional facilities

available for the provision of competitive services.” 13

F.C.C.R. at 3549. The Commission acknowledged “that

entry by municipalities * * * may raise issues

regarding taxpayer protection from the economic risks

of entry, as well as questions concerning possible ve-

gulatory bias.” Jbid. But the Commission stated its

belief “that these issues can be dealt with successfully

through measures that are much less restrictive than

an outright ban on entry.” Jbid.

In City of Abilene v. FCC, 164 F.3d 49 (1999), the

D.C. Circuit affirmed the FCC’s decision concerning the

Texas law. The court agreed with the FCC that

Ҥ 253(a) must be construed in compliance with the pre-

cepts laid down in Gregory v. Ashcroft,” because “inter-

fering with the relationship between a State and its

political subdivisions strikes near the heart of State

sovereignty.” Jd. at 52. The court accordingly held that

it must “be certain that Congress intended § 253(a) to

govern State-local relationships regarding the provision

of telecommunications services” before Section 253(a)

may be applied to do so. Jbid. The D.C. Circuit con-

cluded that “it was not plain to the Commission, and it

is not plain to us, that § 253(a) was meant to include

municipalities in the category ‘any entity.’” Jd. at 54.

Accordingly, the D.C. Circuit agreed with the Com-

mission that Section 253(a) does not preemyi the Texas

statute.

6

3. This case involves a Missouri statute similar to

the statute at issue in City of Abilene. The Missouri

statute provides that “(nJo political subdivision of this

state shall provide or offer for sale * * * a telecom-

munications service,” with exceptions for, inter alia,

“Internet-type services.” Mo. Ann. Stat. § 392.410(7)

(West Supp. 2003).' Like the state law at issue in the

Texas proceedings, the Missouri law does not purport

to prohibit or limit the ability of private companies to

provide telecommunications services on a competitive

basis. A number of Missouri municipalities, municipal

organizations, and municipally owned utilities filed a

petition with the FCC seeking an order declaring that

the Missouri statute is preempted under Section 253(a).

The FCC denied the petition. Pet. App. 14a-45a.

Relying on its own decision in the Texas case and the

D.C. Circuit’s subsequent affirmance in City of Abilene,

the Commission noted that the case presented “a

fundamental issue concerning the relationship between

a state and its political subdivisions.” Jd. at 27a. The

Commission accordingly again applied the Gregory

plain statement rule. Jd. at 19a. As in the Texas pro-

ceeding, the Commission was unable to conclude that

either the use of the term “any entity” in Section 253(a)

or the legislative history of Section 253(a) is sufficient

to make clear Congress’s intent to preempt the State’s

authority to control its political subdivisions. Jd. at 29a-

30a (“any entity”), 35a-37a (legislative history). Ac-

cordingly, the Commission concluded that “the term

‘any entity’ in section 253(a) of the Act was not

' The statute as originally enacted was scheduled to expire in

August 2002. 1997 Mo. Legis. Serv. H.B. 620 (West). The Misso-ri

General Assembly subsequently extended the statute’s effective-

ness until August 2007. 2002 Mo. Legis. Serv. H.B. 1402 (West).

a

7

intended to include political subdivisions of the state,

but rather appears to prohibit restrictions on market

entry that apply to independent entities subject to

state regulation.” Jd. at 22a. The Commission gener-

ally extended that ruling to municipally owned utilities

because it found no evidence “that municipally-owned

utilities are not considered to be political subdivisions in

Missouri.” Jd. at 32a-33a. The Commission noted,

however, that “if a municipally-owned utility sought to

provide telecommunications service or facilities as an

independent corporate entity that is separate from the

state, [the Commission] could reach a different result

under section 253(a).” Jd. at 38a.

Although it held the Missouri statute not preempted,

the Commission again urged, as a policy matter, “that

states refrain from enacting absolute prohibitions on

the ability of municipal entities to provide telecommuni-

cations service,” because “the entry of municipally-

owned utilities can further the goal of the 1996 Act to

bring the benefits of competition to all Americans, par-

ticularly those who live in small or rural communities.”

Pet. App. 23a; see id. at 42a-43a (separate statement of

Chairman William E. Kennard and Commissioner

Gloria Tristani), 43a-44a (separate statement of Com-

missioner Susan Ness).

4. The Eighth Circuit reversed the FCC’s determi-

nation that Section 253(a) does not preempt the Mis-

souri statute. Pet. App. la-13a. The court of appeals,

like the Commission, held that the plain statement rule

of Gregory v. Ashcroft “applies in this case,” and “re-

quires [the court] to determine whether the statutory

language plainly requires preemption.” :/d. at 6a, 7a.

The court disagreed, however, with the Commission’s

application of that rule to the term “any entity” in

Section 253(a).

8

The court held that “the words ‘any entity’ plainly

include municipalities and so satisfy the Gregory plain-

statement rule.” Pet. App. 7a. The court noted that

municipalities fall within the ordinary definition of the

term “entity,” id. at 8a (citing Black’s Law Dictionary

553 (7th ed. 1999)), and asserted that the appearance of

the modifier “any” “signifies [Congress’s] intention to

include within the statute all things that could be

considered entities,” id. at 8a-9a. For that proposition,

the court relied principally on Salinas v. United States,

522 U.S. 52 (1997). In Salinas, this Court held that the

federal bribery statute, which prohibits acceptance of

bribes “in connection with any business transaction” by

an agent of any organization that receives federal

funds, does not require proof that the bribe had an

effect on the federal funds. Jd. at 56-57. In reaching

that conclusion, the Court stated that “{tJhe plain-

statement requirement articulated in Gregory * * *

does not warrant a departure from the statute’s terms,”

because “(t]he text [of the federal bribery statute] is

unambiguous on the point under consideration here.”

Id. at 60. In the Eighth Circuit’s view, “Salinas held

that by using the clearly expansive term ‘any,’

Congress expressed its intent to alter th[e] [federal-

state] relationship.” Pet. App. 12a.

Having concluded that Section 253(a) does operate to

preempt state laws like the one in this case, the court of

appeals vacated the FCC’s decision and remanded the

case to the agency for further proceedings. Pet. App.

13a.

SUMMARY OF ARGUMENT

A. It is common ground that 47 U.S.C. 253(a), which

preempts state laws that “prohibit or have the effect cf

prohibiting the ability of any entity to provide any

9

interstate or intrastate telecommunications service,”

applies to state laws that regulate entry by private

firms into the telecommunications market. The ques-

tion presented is whether it also preempts state laws

that limit or prohibit the State’s own political subdivi-

sions from providing telecommunications service. The

court of appeals in this case, as well as each of the other

courts that has addressed that question, has concluded

that it is governed by the clear statement rule of

Gregory v. Ashcroft, 501 U.S. 452 (1991). That

conclusion is correct.

If Section 253(a) were construed to preempt state

laws that allocate authority to political subdivisions, it

would interfere with a fundamental aspect of state

sovereignty. It is “[t]hrough the structure of its gov-

ernment” that “a State defines itself as a sovereign.” ~

Gregory, 501 U.S. at 460. A State’s ability to structure

its government, and to allocate—or not allocate—

authority to its political subdivisions to perform what-

ever functions it deems appropriate, is therefore a

fundamental feature of state sovereignty. Congress

does not ordinarily intend to interfere with state

authority in areas that are so central to state self-gov-

ernment. Accordingly, Section 253(a) cannot be

construed to have that effect unless it can be concluded

with certainty that Congress so intended.

B. In applying the Gregory rule, the crucial question

is whether it can be concluded, from the terms, struc-

ture, or context of the federal law, not merely that

Congress intended to achieve a general federal policy,

but also that Congress considered the intrusive effect

that application of the general federal policy would

have on state sovereignty and intended that effect. No

such conclusion can be drawn about Section 253(a).

10

Section 253(a) was intended to eliminate the old

system of state regulation of the telecommunications

marketplace by means of exclusive-franchise laws.

Section 253(a) can theréfore be given its intended effect

by applying it to preempt state and local laws limiting

the entry of private firms into that market. Nething in

the terms, structure, or context of Section °53(a) sug-

gests that Congress intended to reach beyond preemp-

tion of such state and local regulatory authority. Ac-

cordingly, nothing in Section 253(a) suggests that

Congress contemplated, or intended to authorize, an

intrusion on the States’ ability to structure their gov-

ernment—including their political subdivisions—as

they desired.

This Court’s cases support that conclusion. Those

cases reveal that, where a federal statute is explicitly

directed at state action that may have an effect on im-

portant sovereign functions, the Gregory rule is satis- ©

fied. By contrast, where Congress’s intent to intrude

into state sovereignty is unclear, the Gregory rule is not

satisfied. This case falls within the latter class, because

Section 253(a) was clearly directed at state regulatory

authority over market entry by private firms, not the

ability of a State to structure its own government and

that of its political subdivisions.

C. The court of appeals recognized that the Gregory

rule applies, but that court held that the Gregory rule is

satisfied because Section 253(a) preempts state laws

prohibiting “any entity” from providing telecommuni-

cation services. The term “any entity,” however, does

not provide the necessary assurance under Gregory

that Congress considered and intended the intrusion on

state sovereignty that would occur if Section 253(a)

were construed to apply to a State’s allocation of

authority to its subdivisions.

me eee

1]

Although this Court has noted in other cases that the

term “any” in other statutes may have an expansive

meaning, most of those cases did not involve a clear

statement rule that governed the statutory interpreta-

tion. And none of those cases involved a federal statute

that threatened the kind of serious inroad on an area

central to state sovereignty that could be caused by

applying Section 253(a) to limit a State’s ability to

decide on the proper allocation of authority to its politi-

cal subdivisions. Indeed, in an analogous context to this

case, the Court in Raygor v. Regents of the University

of Minnesota, 534 U.S. 533 (2002), found that the use of

the term “any” was not sufficient to satisfy a clear-

statement rule and require a broad interpretation of a

federal statute. Similarly, the mere use of the phrase

“any entity” in Section 253(a), a statute primarily di-

rected toward state and local regulation of private

firms, does not make clear that Congress considered or

intended that the statute have effects that would in-

trude deeply on state sovereignty. Accordingly, under

the Gregory rule, Section 253(a) may not be construed

to have such effects.

ARGUMENT

MISSOURI’S STATUTE PRECLUDING THE STATE'S

POLITICAL SUBDIVISIONS FROM OFFERING TELE-

COMMUNICATIONS SERVICE IS NOT PREEMPTED

UNDER 47 U.S.C. 253(a)

A. Section 253(a) Does Not Preempt A State Law Allocat-

ing Authority To The State's Political Subdivisions

Unless It Can Be Shown That Congress's Intent To

Preempt Such Laws Is Clear Under The Rule Of

Gregory v. Ashcroft

Under 47 U.S.C. 253(a), state laws that “prohibit or

have the effect of prohibiting the ability of any entity to

12

provide any interstate or intrastate telecommunications

service” are preempted. 47 U.S.C. 253(a). There is no

dispute that Section 253(a) opens up competition in the

provision of telecommunications service by preempting

state laws that prohibit private firms from providing

telecommunications service and thereby keep new

entrants from participating in the telecommunications

market. The question presented in this case is whether

Section 253(a) should also be construed to preempt

state laws that prohibit a State’s political subdivisions

from providing telecommunications service.

Each of the courts that has addressed the question

whether Section 253(a) preempts state laws that pro-

hibit political subdivisions from providing telecom-

munications service has concluded that that question is

governed by the plain statement rule of Gregory v.

Ashcroft, 501 U.S. 452 (1991). The Eighth Circuit so

concluded in this case. Pet. App. 6a (“A second plain-

language standard also applies in this case. The

Supreme Court requires that Congress make a plain

statement that it intends to preempt state law where

the preemption affects the traditional sovereignty of

the states.”) (citing Gregory). The D.C. Circuit reached

the same conclusion in City of Abilene. See 164 F.3d at

52 (Ҥ 253(a) must be construed in compliance with the

precepts laid down in Gregory v. Ashcroft.”). The other

courts that have addressed the question have agreed.”

2 See City of Bristol v. Early, 145 F. Supp. 2d 741, 747 (W.D.

Va. 2001) (citing Gregory and noting that “(t)he question, then, is

whether § 253(a) demonstrates a ‘clear and manifest’ intention by

Congress to preempt state laws” that prohibit a municipality from

providing a telecommunications service); Jn re Lincoln Elec. Sys.,

655 N.W.2d 363, 371 (Neb.) (stating that “we are persuaded by the

reasoning of the Eighth Circuit” in the instant case), cert. denied,

123 S. Ct. 2620 (2003); Jowa Tel. Ass’n v. City of Hawarden, 589

13

The FCC likewise reached that conclusion. Pet. App.

19a, 26a-27a; see also Jn re Public Util. Comm’n, 13

F.C.C.R. at 3545-3546. Respondents have not dis- |

agreed with that conclusion or argued to the contrary.

See Br. in Opp. 2; see also Resp. C.A. Br. 30 (“{a]ssum-

ing” that Gregory applies and making no argument to

the contrary).

That view is correct. Gregory involved the applica-

tion of the federal Age Discrimination in Employment

Act (ADEA), 29 U.S.C. 621 et seq., to a state constitu-

tional provision setting a retirement age for appointed

state judges. The Court recognized each “State’s con-

stitutional responsibility for the establishment and

operation of its own government,” 501? U.S. at 462, and

explained that “[tJhrough the structure of its govern-

ment, and the character of those who exercise govern-

ment authority, a State defines itself as a sovereign.”

Id. at 460. A State’s ability to define its governmental

structure in that way is “of the most fundamental sort

for a sovereign entity,” and “Congressional interference

with this decision of the people of [the State] * * *

would upset the usual constitutional balance of federal

and state powers.” Jbid. Accordingly, “it is incumbent

upon the federal courts to be certain of Congress’ intent

N.W.2d 245, 251-252 (Iowa 1999) (noting that City of Abilene had

stated that “Congress’s intent to include municipalities in the

category of ‘any entity’ was not plain as required by Gregory” and

stating that “[wJe agree with this interpretation of § 253(a)”)

(internal quotation marks omitted); Municipal Elec. Auth. v.

Georgia Pub. Serv. Comm'n, 525 S.E.2d 399, 403 (Ga. Ct. App. ©

1999) (citing Gregory and stating that “[w]ithout * * * a clear

expression of congressional intent, the Federal Telecommunica-

tions Act does not preempt” a state administrative agency’s order

barring a municipal electric authority from providing telecommuni-

cations service).

14

before finding that federal law overrides this balance.”

Ibid. (internal quotation marks omitted). That clear

statement rule “is nothing more than an acknowledg-

ment that the States retain substantial sovereign

powers under our constitutional scheme, powers with

which Congress does not readily interfere.” Jd. at 461.

That plain statement rule is equally applicable here.

A State’s determination of which political subdivisions

to create and what powers to allocate to them, like its

determination of the qualifications of its judges, is a

matter that goes to “the structure of its government.”

Gregory, 501 U.S. at 460. Political subdivisions are

“created as convenient agencies for exercising such of

the governmental powers of the State as may be en-

trusted to them,” City of Columbus v. Ours Garage &

Wrecker Service, Inc., 536 U.S. 424, 437 (2002), and the

“number, nature and duration of the powers conferred

upon [them] * * * rests in the absolute discretion of

the State,” Sailors v. Board of Education, 387 U.S. 105,

108 (1967). Accord Wisconsin Pub. Intervenor v.

Mortier, 501 U.S. 597, 607-608 (1991); Reynolds v. Sims,

377 U.S. 533, 575 (1964); Hunter v. City of Pittsburgh,

207 U.S. 161, 178-179 (1907) (“The state, therefore, at

its pleasure, may modify or withdraw all such powers,

* * * expand or contract the territorial area, unite the

whole or a part of it with another municipality, repeal

the charter and destroy the corporation. All this may

be done, conditionally or unconditionally, with or with-

out the consent of the citizens, or even against their

protest.”); Trustees of Dartmouth College v. Woodward,

17 U.S. (4 Wheat.) 518, 629-630 (1819).

“Whether and how” a State uses its discretion in

allocating powers to its political subdivisions therefore

“is a question central to state self-government.” City of

Columbus, 536 U.S. at 437. As in Gregory, it “goes

15

beyond an area traditionally regulated by the States.”

Gregory, 501 U.S. at 460 (emphasis added); see City of

Edmonds v. Oxford House, Inc., 514 U.S. 725, 732 n.5

(1995). Instead, it is a part of the way in which “a State

defines itself as a sovereign” and is “a decision of the

most fundamental sort for a sovereign entity.” Gre-

gory, 501 U.S. at 460. Because Congress “does not

readily interfere” with a State’s fundamental determi-

nations of how to organize and allocate its powers,

courts should not lightly construe federal statutes to do

so. Jd. at 461. Rather, “it is incumbent upon the federal

courts to be certain of Congress’ intent before finding

that federal law overrides” such fundamental state de-

terminations. /d. at 460. The Gregory clear statement

rule accordingly must be applied to determine whether

Section 253(a) preempts a state law that denies the

State’s political subdivisions the authority to provide

telecommunications service.

B. Section 253(a) Does Not Manifest A Clear Intent To

Preempt State Laws Allocating Authority To Political

Subdivisions Of A State

The role of the Gregory clear statement principle is to

“assur(e] that the legislature has in fact faced, and

intended to bring into issue, the critical matters in-

volved in the judicial decision.” Raygor v. Regents of

the Univ. of Minn., 534 U.S. 533, 544 (2002) (quoting

Will v. Michigan Dep't of State Police, 491 U.S. 58, 65

(1989)). That does not mean that, when the question

arises whether a federal law applies to a State in an

area fundamental to its sovereignty, the federal law

“must mention” the particular application “explicitly” in

order to apply. Gregory, 501 U.S. at 467. It does mean,

however, that the federal law should not be construed

to apply unless it can be concluded, from the terms,

16

structure, or context of the federal law, that Congress

intended not merely to achieve a general federal policy,

but also to do so even at the cost of a possible effect on

an area central to state self-government. As applied

here, it cannot be concluded from the terms, structure,

or context of Section 253(a) that Congress intended

such an effect. Accordingly, Section 253(a) leaves to the

States the structure of state government and the

allocation of power among state political subdivisions.

1. Section 253(a) can be given its intended effect by

construing it to preempt state and local regulatory

actions that restrict entry by private firms into the

telecommunications marketplace, while leaving unaf-

fected the fundamental sovereign prerogative of the

States to structure state government and allocate

power to political subdivisions as they find appropriate.

Prior to the 1996 Act, “local phone service was thought

to be a natural monopoly,” and States “typically

granted an exclusive franchise in each local service area

to a local exchange carrier.” AT&T Corp. v. lowa Util.

Bd., 525 U.S. 366, 371 (1999). The 1996 Act, however,

“rejected the historic paradigm of telecommunications

services provided by government-sanctioned monopo-

lies in favor of a new paradigm that encourages the

entry of efficient competing service providers into all

telecommunications markets.” Jn re Public Util.

Comm'n, 13 F.C.C.R. 3460, 3461 (1997). Thus, a central

goal of the 1996 Act as a whole was to stimulate

“private sector deployment” of advanced telecommuni-

cations and information technologies and services. S.

Conf. Rep. No. 230, 104th Cong., 2d Sess. 113 (1996)

(emphasis added).

Section 253(a) was enacted to achieve that goal, by

eliminating state and local laws that prohibited “any

entity” from entering the telecommunications market

ee

17

to compete with the incumbent local telephone com-

pany. In light of Congress’s desire to eliminate the

exclusive-franchise system, there was no reason to

permit States to limit new entrants to those with a

particular corporate form or structure or otherwise to

impose unreasonable requirements on entrants into the

marketplace. Cf. 47 U.S.C. 253(b) (preserving “com-

petitively neutral” state laws that, inter alia, “protect

the public safety and welfare”). Section 253(a) was

accordingly worded broadly to accomplish the goal of

ending “the States’ longstanding practice of granting

and maintaining local exchange monopolies.” AT&T,

525 U.S. at 405 (Thomas, J., concurring in part and dis-

senting in part). Regardless of whether it extends to

preempt state laws allocating or withdrawing power

from political subdivisions, Section 253(a) serves its

intended goal by preempting state and local regulations

that preserve the old exclusive-franchise system or

otherwise prohibit private firms from providing tele-

communications service. See, e.g., City of Auburn v.

Qwest Corp., 260 F.3d 1160, 1170 (9th Cir. 2001)

(Section 253 “prohibits state and local governments

from creating ‘barriers to entry,’ legal requirements

that prohibit or have the effect of prohibiting a com-

pany from providing telecommunications service.”),

cert. denied, 534 U.S. 1079 (2002); RT Communica-

tions, Inc. v. FCC, 201 F.3d 1264 (10th Cir. 2000) (up-

holding FCC determination that Section 253(a) pre-

empts state law shielding rural incumbent telecommu-

nications providers from competition by other private

firms); Cablevision of Boston, Inc. v. Public Improve-

ment Comm'n, 184 F.3d 88, 97-98 (1st Cir. 1999) (dis-

cussing purpose of Section 253(a)).

Congress’s decision in Section 253(a) to open up the

telecommunications market to new entrants, however,

18

did not require it to “in fact face[], and * * * bring into

issue, the critical matters involved,” Raygor, 534 U.S.

at 544, in intruding upon a State’s discretionary deter-

minations of how to structure itself and its political

subdivisions. There is no indication in the language or

structure of Section 253(a) or elsewhere in the 1996 Act

that Congress in fact intended to take the unusual step

of interfering in a State’s internal allocation of author-

ity among itself and its political subdivisions. Accord-

ingly, while Section 253(a) is appropriately construed to

preempt a wide array of regulations that would limit

the ability of competing firms to provide telecom-

munications service, the Gregory clear statement rule

precludes an interpretation that would invalidate the

traditional discretion enjoyed by States in allocating

authority among their political subdivisions.*

3 If it were concluded that Section 253(a) preempted state laws

that limited the ability of their subdivisions to provide telecom-

munications service, the application of Section 253(a) would likely

turn on matters of form that have nothing to do with Congress’s

purposes in the 1996 Act. Although there are wide variations in

the ways in which States confer and limit the power of political

subdivisions, an important distinction is between general-law and

home-rule municipalities. As the Court has explained, “[iJn con-

trast to a general-law city, a home-rule city has authority to do

whatever is not specifically prohibited by the State.” City of Lock-

hart v. United States, 460 U.S. 125, 127 (1983). If the municipality

is a general-law jurisdiction, then it would appear that the State

could easily preclude a city from providing telecommunications

service simply by not affirmatively providing it with authority to

do so; a State’s refusal to pass a law could not comfortably be con-

strued as a “statute or regulation” or “requirement,” and it there-

fore would not likely be subject to preemption under Section

253(a), even as construed by the court of appeals in this case. On

the other hand, if the municipality were a home-rule jurisdiction,

an affirmative act by the State could be necessary to preclude the

city from providing telecommunications service, and preemption of

19

2. The conclusion that Section 253(a) does not mani-

fest a clear intent to preempt state laws delineating the

authority of political subdivisions is supported by this

Court’s other cases applying the Gregory rule. The

Court has held that federal laws are sufficiently clear to

satisfy Gregory in cases in which the federal law plainly

indicates that Congress intended it to apply to the

States even if such application would affect core

sovereign concerns. On the other hand, the Court has

held that the Gregory rule is not satisfied where it was

not clear that Congress considered or intended the

intrusions on state sovereignty that would follow from

an expansive application of the federal law.

For example, Pennsylvania Department of Correc-

tions v. Yeskey, 524 U.S. 206 (1998), presented the

question whether Title II of the Americans with Dis-

abilities Act (ADA), 42 U.S.C. 12131 et seg., which

prohibits a “public entity” from discriminating against

individuals with disabilities, applied to discrimination

by state prisons against prisoners. The term “public

entity” was defined to include “any department,

agency, special purpose district, or other instrumental-

ity of a State or States or local government.” Jd. at 210

(quoting 42 U.S.C. 12131(1)(B)). The Court assumed

that the Gregory rule controlled the question whether

the ADA applied to state prisons and prisoners, but

held that the statutory language satisfied that rule and

therefore that the statute “unmistakably includes State

prisons and prisoners within its coverage.” Jd. at 209.

such a law under Section 253(a) would be triggered under the court

of appeals’ interpretation of the statute. There is no reason to

believe that Congress intended the application of Section 253(a) to

turn on differences in the form a State has used in creating a

particular political subdivision.

20

Although Congress had not explicity mentioned state

prisons or prisoners in the ADA, the terms of the ADA

made clear that the statute was specifically intended to

govern state governments in their relations to private

parties. That made clear that Congress had considered

and authorized whatever incursions on state sover-

eignty followed, and the Gregory principle was there-

fore satisfied.

Yeskey may usefully be contrasted with Gregory

itself. In Gregory, the ADEA generally covered state

employees, and it thereby demonstrated Congress’s

intent to that extent to regulate the qualifications of

state employees. But the ADEA contained an excep-

tion excluding from its coverage an elected official, “an

immediate adviser with respect to the exercise of the

constitutional or legal powers of the office,” and an

“appointee on the policymaking level.” See Gregory,

501 U.S. at 465. As the Court explained, “[{iJn the con-

text of a statute that plainly excludes most important

state public officials, ‘appointee on the policymaking

level’ is sufficiently broad that we cannot conclude that

the statute plainly covers appointed state judges.” Jd.

at 467. Although Congress in the ADEA had plainly in-

tended to regulate the qualifications of state employees

generally, it had also indicated that it did not want to

regulate the qualifications of the top rank of state

officials, whose qualifications were of most central

importance to state sovereignty. Thus, examining the

statute as a whole, the Court could not conclude that

Congress had “in fact face[d], and * * * br{ought] into

issue, the critical matters involved” in regulating the

job qualifications of appointed state judges under the

ADEA. Raygor, 534 U.S. at 544. Accordingly, the

Court concluded that the ADEA did not apply to

appointed state judges. Gregory, 501 U.S. at 467.

21

As in Gregory—but unlike in Yeskey—Section 253(a)

does not provide any indication that Congress specifi-

cally considered and intended to authorize any special

intrusion on state sovereignty. Accordingly, Section

253(a) should not be construed to have that effect. The

Commission’s interpretation of Section 253(a) should

instead be upheld, because it avoids trenching upon a

State’s ability to delineate thé scope of authority pos-

sessed by its subdivisions.

C. Congress’s Use Of The Term “Any Entity” In Section

253(a) Does Not Show That It Intended The Statute

To Regulate A State’s Allocation Of Authority To Its

Subdivisions

While recognizing that the Gregory rule applies, the

court of appeals held that “the words ‘any entity’ [in

Section 253(a)] plainly include municipalities and so

satisfy the Gregory plain statement rule.” Pet. App. 7a.

That conclusion is incorrect. As argued above, the

phrase “any entity” indicates only that Congress in-

tended Section 253(a) generally to eliminate state

exclusive-franchise and similar laws. That phrase does

not indicate that Congress gave any attention to the

intrusion on state sovereignty that would result from

preemption of state laws concerning the proper alloca-

tion of authority to political subdivisions. Accordingly,

the use of “any entity” in Section 253(a) does not plainly

show that Congress intended to preempt state laws

such as the one at issue in this case.

1. In holding that the phrase “any entity” is suffi-

cient to constitute a plain statement by Congress that it

intended to preempt state laws that allocate authority

to its political subdivisions, the court of appeals placed

principal weight on this Court’s decision in Salinas v.

United States, 522 U.S. 52 (1997). See Pet. App. 6a-7a,

10a-lla. That case, however, is inapposite.

22

In Salinas, the Court held that a federal bribery

statute precluding the acceptance of a bribe “in con-

nection with any business [or] transaction” of a govern-

ment agency applies to bribes of local government

officials that had no effect on federal funds. 522 U.S. at

57 (emphasis added). In reaching the conclusion that

the scope of the bribery statute was sufficiently clear,

id. at 59-60 (citing Gregory), the Court relied not simply

on the term “any,” but also on the other terms of the

statute, see ibid., and on the enactment of amendments

to the statute that would have made a narrower

construction “incongruous,” id. at 58-59. In Section

253(a), however, Congress used the term “any” in an

entirely different context, surrounded by entirely dif-

ferent statutory language and as the result of a dif-

ferent process of amendment than in Salinas. Con-

clusions about the breadth of the statute at issue in

Salinas therefore are not applicable to the very

different statute at issue here.

Moreover, the bribery statute in Salinas did not

implicate the full scope of the G~egory rule. None of the

proffered interpretations of the federal bribery statute

at issue in Salinas would have placed any limits on a

State’s ability to control the structure of government

for the people of the State—an issue that is “central to

state self-government.” City of Columbus, 536 U.S. at

437. By contrast, if Section 253(a) preempted state

laws that prohibited a State’s political subdivisions

from providing telecommunications service, it would

implicate a State’s basic cecisions about allocation of

governmental power. See pp. 14-15, supra. Accord-

ingly, the Gregory clear statement rule applies with full

force in this case, unlike in Salinas.

2. The court of appeals’ reliance on Salinas was

further undermined by this Court’s recent decision in

23

Raygor, which was not cited or discussed by the court

of appeals. Raygor reinforces the conclusion that the

use of a modifier such as “any” is not sufficient in itself

to satisfy the Gregory plain statement standard. Like

Gregory and this case, Raygor involved a matter that

goes to the heart of state sovereignty—the power to

limit claims brought against the State in the State’s

own courts. Specifically, Raygor concerned a federal

statute, 28 U.S.C. 1367(d), that provides for the tolling

of a state statute of limitations “for any claim” filed

under a federal court’s supplemental jurisdiction that

ultimately is dismissed by the court. The question

presented was whether the tolling provision applies

when the federal court dismisses a claim on Eleventh

Amendment grounds.

Applying Gregory, the Court in Raygor held that the

statute’s reference to “any claim” did not apply to

claims against nonconsenting States that were dis-

missed on Eleventh Amendment grounds. 534 US. at

542-546. Although noting that the language of the

federal statute, including the terms “any claim,” did not

clearly exclude tolling for such claims, the Court

emphasized that “we are looking for a clear statement

of what the rule includes, not a clear statement of what

it excludes.” Id. at 546 (citing Gregory, 501 U.S. at 467).

Raygor thus contradicts the court of appeals’ deter-

mination (Pet. App. 12a) “that * * * the clearly

expansive term ‘any’” in a statute implicating core state

sovereignty interests is sufficient to demonstrate that

Congress intended the statute to apply in areas going

to the heart of state sovereignty. Cf. Atascadero State

Hosp. v. Scanlon, 473 U.S. 234, 245-246 (1985) (applying

a clear statement rule to conclude that a statute pro-

viding remedies against “any recipient of Federal assis-

tance” was insufficient to permit suit against a state

24

agency that received federal funds). Although the

phrase “any entity” in Section 253(a) may not expressly

exclude political subdivisions of a State, the inquiry

under Gregory requires a showing that Congress spe-

cifically intended to include political subdivisions before

the statute could be applied to them. There is nothing

in Section 253(a) that could support such a showing.‘

3. The other cases relied on by the court of appeals

for the proposition that “the modifier ‘any’ prohibits a

narrowing construction of a statute,” Pet. App. 9a, also

do not support its conclusion. It is true that “[rJjead

naturally, the word ‘any’ has an expansive meaning,

that is, ‘one or some indiscriminately of whatever

kind.’” United States v. Gonzalez, 520 U.S. 1, 5 (1997).

The term “any” therefore can be a useful guidepost in

the ordinary process of statutory construction. See Pet.

App. 9a-10a (citing cases). That fact, however, does not

resolve the question in this case.

The premise of the Gregory rule is that “federal-

courts should resist attribution to Congress of a design

to disturb a State’s decision on the division of authority

between the State’s central and local units.” City of

Columbus, 536 U.S. at 440. Accordingly, as the D.C.

4 The term “entity,” too, may “bear[) different meanings de-

pending on the context.” Southern Co. Servs.. v. FCC, 313 F.3d

574, 580 (D.C. Cir. 2002). For example, the court in Southern Ser-

vices concluded that provisions of the 1996 Act involving pole

attachments used the term “entity” at times to include only enti-

ties that make attachments to the poles of others and at times to

include both the pole owner and the attaching entity. /bid. The

use of that term in Section 253(a) accordingly cannot be taken to be

a plain statement that Congress intended to include political sub-

divisions of a State—especially when the effect of such an inclusion

would be to interfere with the State’s determination of what

powers it will confer upon its political subdivisions.

25

Circuit correctly recognized in City of Abilene, it is “not

enough” to satisfy Gregory that Section 253(a) “could”

apply to state laws allocating authority to the State’s

political subdivisions. 164 F.3d at 52-53. The plain

statement rule requires something more to show “that

in using the word ‘entity,’ Congress deliberated over

the effect this would have on State-local government

relationships,” or that “it meant to authorize municipali-

ties, otherwise barred by State law, to enter the

telecommunications business.” Jd. at 53. The mere use

of the terms “any entity” in Section 253(a), a statute

directed toward state and local regulation of private

firms, does not make clear that Congress considered or

intended that the statute have any such effect.

Accordingly, the use of those terms in Section 253(a) is

insufficient to satisfy the Gregory clear statement rule.

CONCLUSION

The judgment of the court of appeals should be

reversed.

Respectfully submitted.

- THEODORE B. OLSON

Solicitor General

R. HEWITT PATE

Assistant Attorney General

JOHN A. a THOMAS G. HUNGAR

: General Deputy Solicitor General

re JAMES A. FELDMAN

. WELCH Assistant to the Solicitor

a General

7 te wo eee CATHERINE G. O’SULLIVAN

a ANDREA LIMMER

Attorneys

SEPTEMBER 2003