Reply Brief — Pennsylvania Public Utility Commission v. MCI Telecommunications and Pennsylvania Public Utility Commission v. MCI Worldcom Network Services, Inc.

“pe SwpremeCour,U.s. |

@) FILED

No. 01-1477

IN THE

Supreme Court of the Anited States s

PENNSYLVANIA PUBLIC UTILITY COMMISSION, ef al.,

Petitioners,

V.

MCI TELECOMMUNICATIONS CORPORATION, ef al.,

Respondents.

PENNSYLVANIA PUBLIC UTILITY COMMISSION, et al.,

Petitioners,

V.

MCI WORLDCOM NETWORK SERVICES, INC.,

Respondents.

On Writs of Certiorari to the mee

United States Court of Appeals =

for the Third Circuit

REPLY BRIEF IN SUPPORT OF

PETITION FOR WRITS OF CERTIORARI

BOHDAN R. PANKIW

Chief Counsel

ROBERT J. LONGWELL

Deputy Chief Counsel

MARYANNE REYNOLDS MARTIN *

Assistant Counsel __

PENNSYLVANIA PUBLIC UTILITY

COMMISSION

P.O. Box 3265

Harrisburg, PA 17105-3265

(717) 787-5000

* Counsel of Record Counsel for Petitioners

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

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .........:ceescesseetsseeesreetrentses il

ARGUMENT IN REPLY .......::c:seesrseeseetreesrsesesesseeneenees l

CONCLUSION. .........ccc-csssssssccsssessccscccensesssesrscssccssacasorers 8

(i)

TABLE OF AUTHORITIES

CASES Page

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

(TGGD) voscssnsccnnbicsnnsipiiaisniineeetacebtesnassemienmainaines 3

Ex parte Young, 209 U.S. 123 (1908)........ccsesseee 5

Federal Maritime Comm’n v. South Carolina

Ports Auth., 122 S.Ct. 1864 (2002)..........ccceesee0 7

Hans v. Louisiana, 134 U.S. 1 (1890)........cccceeeeee 2

JPMorgan Chase Bank v. Traffic Stream (BVI)

Infrastructure Ltd., _ S.Ct.__ (2002)......... 2

Lapides v. Board of Regents of Univ. System of

Georgia, 122 S. Ct. 1640 (2002)..........cesseesseees 2

Printz v. U.S., 521 U.S. 898 (1997) .........ccccsscssceee 4,6

Puerto Rico Aqueduct and Sewer Auth. v. Met-

calf & Eddy, Inc., 506 U.S. 139 (1993) .........000 l

Rizzo v. Goode, 423 U.S. 362 (1976)...........csseeeees 4

Verizon Md. Inc. v. Public Serv. Comm'n of Md.,

122 S. Ce. 1753 GIR iiscisiccintviintantiareiaineoenitccie passim

WorldCom, Inc. v. Pennsylvania Pub. Util.

Comm’n, No. 1 EAP 2002 (Pa.).........ccccsesseseeees 7

STATUTES

RI UTS. § B58 ociccivinrsecscencraniosactianiiadematantianeiien x7

GS. PB: SO 2 Die ciivietncenieddinainimeguiecantentn 5

GG PaCS, § SOU incscinisnctsesnetsscsctinsinnnvvessmessanesee 5

CONSTITUTIONAL PROVISIONS

UTS; COIR a FEI a ssciseis sien: cszaacioniicensicnncbiniosoges 2

IN THE

Supreme Court of the Anited States

No. 01-1477

PENNSYLVANIA PUBLIC UTILITY COMMISSION, ef al.,

Petitioners,

Vv.

MCI TELECOMMUNICATIONS CORPORATION, ef al.,

Respondents.

_ PENNSYLVANIA PUBLIC UTILITY COMMISSION, ef al.,

Petitioners,

v.

MCI WORLDCOM NETWORK SERVICES, INC.,

Respondents.

On Writs of Certiorari to the

United States Court of Appeals

for the Third Circuit

REPLY BRIEF IN SUPPORT OF

PETITION FOR WRITS OF CERTIORARI

ARGUMENT IN REPLY

The United States Constitution protects the States and

administrative agencies under their control! from “any suit in

law or equity.” The Eleventh Amendment provides: “The

judicial power of the United States shall not be construed to

extend to any suit in law or equity, commenced or prosecuted

against one of the United States by citizens of another State,

' Puerto Rico Aqueduct and Sewer Auth. v. Metcalf & Eddy, Inc., 506

U.S. 139 (1993).

2

or by citizens or subjects of any foreign State.” U.S. CONST.

amend XI. Contrary to the decision of the United States

Court of Appeals for the Third Circuit, this case is a textbook

example of what is prohibited by the Eleventh Amendment.

Contrary to the position of respondents United States and

WorldCom, nothing about the recent holding in Verizon Md.

Inc. v. Public Serv. Comm’n of Md., 122 S. Ct. 1753 (2002)

(Verizon Maryland), requires a denial of this petition. See

U.S. Br. at 7-9; WorldCom Br. at 12-13. Thus, the petition

should be granted.

In this case, federal district courts have exercised juris-

diction over suits containing federal questions brought by a

Delaware corporation against Petitioner Pennsylvania Public

Utility Commission (PUC), an administrative agency acting

under the control of the Commonwealth of Pennsylvania.

Respondents MCI WorldCom Network Services, Inc (form-

erly MCI Telecommunications Corp.) and MCI Metro Access

Transmission Services, Inc. (collectively “WorldCom”) are

corporations organized under the laws of the State of

Delaware and are wholly owned subsidiaries of World-

Com, Inc., a Georgia corporation. See App. la; WorldCom

Br. at ii. Being non-Pennsylvania corporations, respondents

are “citizens of another State”” vis-a-vis Petitioner PUC.

Thus, the constitution immunizes the PUC from “[this] suit in

law or equity.” U.S. Const. amend XI.

? A corporation is a citizen of the state in which it is incorporated. See,

e.g., JPMorgan Chase Bank v. Traffic Stream (BVI) Infrastructure Ltd.,

__ $8. Ct. ___- (2002)(2002 U.S. LEXIS 4203) (holding that a

“corporation of a foreign State is, for purposes of jurisdiction in the courts

of the United States, to be deemed, constructively a citizen or subject of

such State.”).

> This protection extends to federal suit commenced “by [Penn-

sylvania’s] own citizens as well.” Lapides v. Board of Regents of Univ.

System of Georgia, 122 S. Ct. 1640, 1642 (2002), citing Hans v.

Louisiana, 134 U.S. 1 (1890).

3

The question of jurisdiction over the PUC is relevant

because jurisdiction over the PUC is required in order to grant

relief requested in the Underlying federal complaints arising

from 47 U.S.C. § 252.* The scope of available relief strikes

at the heart of any litigation, including this one where the

private party litigants seek, and a district court has granted, a

remand to the PUC for further proceedings. See Pet. s.a. 5-6

(reproducing district court order “remand[ing] to the PUC to

reform the interconnection agreement” and “remand[ing]

to the PUC to reconsider its decision regarding pricing of

unbundled network elements.”).° The relief requested is

dependent upon the federal district court having the power to

affirm, reverse or modify the challenged order and to remand

for further proceedings.

In order for a federal district court to have jurisdiction, the

PUC’s immunity from “any suit” must have been waived.

Absent waiver, the “appellate” federal district court may be

able to enjoin enforcement of the PUC’s order under

Verizon Maryland, but will be otherwise reduced to an

“advisory” court.

This Court has not yet decided whether Eleventh Amend-

ment immunity is waived when a State commission, like the

PUC, renders an adjudication that approves or rejects an

interconnection agreement, pursuant to 47 U.S.C. § 252.

Verizon Maryland Inc. v. Public Serv. Comm’n of Md., 122 8.

* Verizon Maryland Inc. v. Public Serv. Comm’n of Md., 122 S. Ct. at

1763 (Souter, J., concurring) (noting characterization of §252 actions as a

“means of appellate review.”).

5 The establishment of unbundled network element rates is a matter

particularly reserved to the States. AT&T Corp. v. lowa Util. Bd., 525

U.S. 366, 384 (1999).

© Petitioners do not concede there is such authority. Petitioners submit

that their arguments in opposition to jurisdiction over the individually

named commissioners in this arbitration case continue to have force and

should be accepted by this Honorable Court. See Pet. at 21, 22-26.

ee ee

4

Ct. at 1760. The Verizon Maryland Court was able to avoid

an Eleventh Amendment inquiry because the relief at issue in

that case was narrower in scope than the relief sought in this

case. The relief sought in Verizon Maryland was limited to a

request “that state officials be restrained from enforcing an

order in contravention of controlling federal law.” Jd. It did

not contemplate a remand for further state proceedings.

Any application of the Verizon Maryland decision to avoid

the waiver issue in this case, i.e., where relief is a remand,

would render the Eleventh Amendment itself a fiction and

conflict with established law. A remand would compel state

action in the form of a further adjudication, a greater intrusion

on States than enjoining the State from acting. This Court has

previously recognized that “the Federal Government may not

compel the States to implement, by legislation or executive

action, federal regulatory programs.” Printz v. U.S., 521 U.S.

898, 925 (1997). While Federal courts have the power to

ensure the supremacy of federal law, their power is

concomitant with the duty to give “appropriate consideration

... to principles of federalism in determining the availability

and scope of equitable relief.” Rizzo v. Goode, 423 U.S. 362,

379 (1976). Thus, federal law dictates that federal courts

cannot use their jurisdiction over state officials under Verizon

Maryland to compel the PUC to exercise its state authority to

enforce, execute and carry out regulation on behalf of the

Federal Government.

Petitioners contend jurisdiction over the PUC is lacking

and have respectfully submitted the question for the Court’s

consideration. Pet. 13-22. Respondents oppose Petitioners’

request on the erroneous theory that it is no longer necessary

for the Court to reach the question of waiver. See WorldCom

Br. at 17 (arguing the Court’s decision in Verizon Maryland

makes it “unnecessary for it to decide the waiver issue”); U.S.

Br. at 8 (arguing the Court does “not have to decide whether a

State waives its sovereign immunity”). Indeed, WorldCom

5

suggests that the issue is “purely academic” contending that

“the only impact of reversal on the waiver question would be

to require the ministerial deletion of the Pennsylvania

Commission (as a body) from the caption, and the case still

would proceed against the commissioners in their official

capacities under Ex parte Young.”’ WorldCom Br. at 17.

Respondents’ view of this case is wrong for a number of

related reasons. First, mere jurisdiction over the individual

commissions under the Verizon Maryland decision will not

suffice to do anything more than enjoining enforcement of the

challenged order; it does not authorize the district court to

compel formal proceedings before the PUC.* Second, as

explained, the Verizon Maryland Court did not decide the

scope of relief available, if any, against Petitioner PUC.

Third, state immunity is implicated because any grant of

the relief requested by the private parties in this case will

deplete state resources, a factor not found in Verizon

Maryland. Respondent WorldCom does not seek “money”

from the PUC, but it does seek “time.” The PUC resources

required to satisfy the underlying complaint are not de

minimus nor would the desired PUC action be ministerial.

For example, based on a recent Pennsylvania unbundled

network element rate case, it would be reasonable to budget

300 hours of time for a PUC administrative law judge with

expertise in telecommunications to preside over a proceeding

7209 U.S. 123 (1908).

* Individual PUC commissioners have no authority to take official

action on behalf of the PUC, except for certain emergency situations not

applicable here. Official action of the PUC can only take place in

the context of a public meeting at which a unanimous vote of the major-

ity of sitting commissioners must act to approve such action. 65 P.S.

§§ 271-286, 66 Pa.C.S. § 301(d).

6

to establish generic rates for unbundled network elements and

to draft an initial determination on what the rates should be.

The total amount of time needed would be greater.’

Fourth, the requested relief appears to expose the PUC to

the contempt powers of the court in the event the PUC

decided not to conduct further proceedings.'® Thus, World-

Com’s request for relief renders the question of the

“appellate” court’s jurisdiction over the PUC far from an

academic question.

Petitioners have consistently maintained that the Common-

wealth Court of Pennsylvania is the only legitimate appellate

court of first instance in this case. Pet. at 27; Pet. App. at 62a

(declining to decide whether preclusive effect should be given

to Commonwealth Court decision on identical issues raised

by the same parties); Pet. Supp. App. at sa-43 (noting

Commonwealth Court proceeding) and sa-57-58 (declining to

decide whether federal court review is exclusive).

The Third Circuit and Respondents attempt to avoid the

thorny issue of state court review of state administrative

agency decisions by claiming that the PUC has accepted a

“grant of regulatory power offered by Congress . . . [with]

conditions attached to that grant of power.” Pet. at 25a. One

of those conditions is waiver of immunity and another is

* In addition to the assigned ALJ, other PUC employees also contribute

to the effort, including, but are not limited to, employees in the

Secretary’s Bureau (e.g., receiving, distributing, and filing documents),

the Office of Special Assistants (e.g., reviewing exceptions and reply

exceptions filed to the ALJ’s recommended decision and drafting a

proposed order for the Commission’s approval), and the five individual

commissioners (¢.g., reviewing the record and staff recommendations,

voting on proposed findings of fact and conclusions of law).

'°The PUC is naturally inclined to cooperate with the Federal

Government in this important matter of the development of competitive

local telecommunications markets. Nevertheless, the PUC cannot be

“dragooned.” See Printz v. U.S., 521 U.S. at 928.

ON EE OL EL RT

7

prohibition of state court review. Petitioners have adamantly

opposed the concept that they accepted—or even have the

power to accept—such conditions. Pet. at 19-20, 27.!'!

Petitioners present a legitimate dispute on whether they

have consented to waive the Commonwealth of Pennsyl-

vania’s immunity and power of state court review in order to

“regulat{[e] on behalf of Congress.” See Pet. at 25a.

Petitioners submit they have “not consent[ed] to become mere

appendages of the Federal Government,” Federal Maritime

Comm'n v. South Carolina Ports Auth., 122 S.Ct. 1864, —__

(2002) (slip. op. at 6), when they apply the requirements of 47

U.S.C. §252 to certificated public utilities operating in

Pennsylvania, including Respondent WorldCom and the other .

private party litigants. Moreover, Respondents have not even

advanced any argument to refute the fact that Pennsylvania

statutes carefully preserve immunity, not waive it. This

Honorable Court should resolve the dispute in order to

“accord States the dignity that is consistent with their status

as sovereign entities.” /d. at ___ (slip op. at 14).

'' After invoking the Commonwealth Court’s jurisdiction and obtain-

ing a judgment on federal questions, Respondent WorldCom reversed its

position on the Commonwealth Court’s jurisdiction in a matter now

pending before the Supreme Court of Pennsylvania. WorldCom, Inc. v.

Pennsylvania Pub. Util. Comm'n, No. 1 EAP 2002 (Pa.). Petitioner PUC,

in its official role as respondent in WorldCom’s state court action,

maintains that was lawful for the Commonwealth Court to review the

PUC’s section 252 order (the very same order underlying the instant

petition before this Honorable Court) and that any attempt to sever the

PUC from the state court’s oversight is unconstitutional.

ms

8

CONCLUSION

For all the reasons above, as well as the reasons set forth in

the Petition, Petitioners respectfully submit that the Court

should grant this petition for writs of certiorari to the United

States Court of Appeals for the Third Circuit.

* Counsel of Record

June 24, 2002

Respectfully Submitted,

BOHDAN R. PANKIW

Chief Counsel

ROBERT J. LONGWELL

Deputy Chief Counsel

MARYANNE REYNOLDS MARTIN *

Assistant Counsel

PENNSYLVANIA PUBLIC UTILITY

COMMISSION

P.O. Box 3265

Harrisburg, PA 17105-3265

(717) 787-5000

Counsel for Petitioners