GTE North Inc v. Strand

RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 ELECTRONIC CITATION: 2000 FED App. 0141P (6th Cir.) File Name: 00a0141p.06

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT _________________

;  GTE NORTH, INC.,  Plaintiff-Appellant,   No. 98-1851 v.  > JOHN G. STRAND, et al.,  Defendants-Appellees.  1 Appeal from the United States District Court for the Western District of Michigan at Lansing. No. 98-00038—Robert Holmes Bell, District Judge. Argued: December 13, 1999 Decided and Filed: April 20, 2000 Before: BOGGS and NORRIS, Circuit* Judges; and FEIKENS, District Judge. _________________ COUNSEL ARGUED: Patrick F. Philbin, KIRKLAND & ELLIS, Washington, D.C., for Appellant. David A. Voges, OFFICE OF THE ATTORNEY GENERAL, PUBLIC SERVICE

* The Honorable John Feikens, United States District Judge for the Eastern District of Michigan, sitting by designation.

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DIVISION, Lansing, Michigan, for Appellees. Charles W. by affirming state commissions’ statutory role and rejecting Scarborough, UNITED STATES DEPARTMENT OF an unduly expansive interpretation of § 252(e)(6) that would JUSTICE, CIVIL DIVISION, Washington, D.C., for permit state regulatory authorities to insulate from federal Intervenors. ON BRIEF: Patrick F. Philbin, KIRKLAND & review orders alleged to be contrary to, or preempted by, ELLIS, Washington, D.C., for Appellant. David A. Voges, federal law. Henry J. Boynton, OFFICE OF THE ATTORNEY GENERAL, PUBLIC SERVICE DIVISION, Lansing, Michigan, for Appellees. Charles W. Scarborough, UNITED STATES DEPARTMENT OF JUSTICE, CIVIL DIVISION, Washington, D.C., for Intervenors. Stephen F. Smith, David L. Lawson, Peter D. Keisler, SIDLEY & AUSTIN, Washington, D.C., for Amici Curiae. _________________ OPINION _________________ BOGGS, Circuit Judge. GTE North, Inc. (GTE), an incumbent local telecommunications carrier in Michigan, sued the defendants, members of the Michigan Public Service Commission (MPSC or the Commission), under the Federal Telecommunications Act of 1996 (FTA or the Act) after the Commission issued an opinion and order directing GTE to (1) publish tariffs in which GTE would offer to sell elements of its telecommunications network at rates predetermined by the Commission, and (2) allow competitors to purchase pre- assembled platforms of GTE network elements. In its complaint, GTE alleged that the MPSC’s order conflicted with, and was preempted by, the FTA, and that enforcement of the order infringed GTE’s statutory rights in violation of 42 U.S.C. § 1983. where the agency rule or action giving rise to the controversy is final and GTE moved for summary judgment, and the defendants not contingent upon future uncertainties or intervening agency action. Ibid. The hardship prong concerns the extent of the burden imposed on filed a cross-motion to dismiss for lack of subject matter the petitioner who would be compelled to act under threat of enforcement jurisdiction. The district court granted the defendants’ motion of the challenged law. See id. at 153. and dismissed the case without prejudice, holding that it did not have jurisdiction to review the MPSC’s order under In this case, the district court must decide whether the ripeness 42 U.S.C. § 252(e)(6), the FTA provision limiting federal inquiry demands that one of GTE’s competitors actually request access at the tariff rate before deciding the case, or whether the order itself gives judicial review of state commission orders approving or rise to a justiciable claim because it imposes an immediate obligation on rejecting final interconnection agreements, because the GTE to sell network elements at predetermined rates.

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established in the February 25 order against GTE. The challenged directive was merely an interlocutory order. See challenged order was the product not of § 252 proceedings, 42 U.S.C. § 252(e)(6) (1996). GTE timely appealed the but of proceedings initiated by the MPSC under Michigan district court’s decision to this court. law, and as such may be independently enforced by the Michigan courts. The district court therefore erred in Based on the language and legislative history of concluding that § 252(e)(6) provides an adequate opportunity § 252(e)(6), we conclude that the limitations on federal for deferred review under either Califano or Thunder Basin. review set forth in that provision do not apply in this case, and that the district court has general federal question jurisdiction It is presumably because § 252(e)(6) does not provide GTE under 28 U.S.C. § 1331 to hear GTE’s challenge to the with an adequate assurance of federal review that the MPSC February order. does not seriously defend on appeal the district court’s conclusion that §252(e)(6) satisfies Thunder Basin because it I defers, but does not preclude, federal review. Rather, the MPSC argues that “there is neither a need nor a requirement Before addressing the basis for the district court’s for the federal District Court to review [the February 25 jurisdiction over GTE’s claims, it is necessary briefly to order]” because that order is fully reviewable in Michigan describe the administrative context in which the MPSC issued state court. Although this argument may be relevant to the the challenged order. In the spring of 1996, AT&T and Sprint question whether the district court should abstain from attempted to negotiate an interconnection agreement with deciding GTE’s claims at this time, see Romine v. GTE pursuant to § 251 of the FTA. Congress passed the Act CompuServe Corp., 160 F.3d 337, 340–41 (6th Cir. 1998), it in 1996 in an effort to promote competition in local telephone is wholly irrelevant to the question whether the court has markets by ending regulated monopolies previously enjoyed jurisdiction to hear GTE’s federal preemption challenges to a by incumbent local exchange carriers (LECs) such as GTE. state commission order entered in a non-FTA proceeding. Before Congress enacted the FTA, state public utility commissions regulated local telecommunications markets by In upholding jurisdiction over GTE’s claims under § 1331, granting companies that incurred the expense of establishing we emphasize that it is precisely because state utility local networks the exclusive right to provide service in the commissions play such a critical role in administering the areas covered by their systems. In exchange for this privilege, FTA’s regulatory framework that they must operate strictly LECs allowed the state commissions to regulate local service within the confines of the statute. We therefore REVERSE rates. The FTA altered this practice and addressed the the district court’s ruling, uphold its jurisdiction under underlying problem of anti-competitive local § 1331, and remand the case for determination on the merits telecommunications markets in two ways: it preempted state if and when the district court finds GTE’s claims ripe for commissions’ authority to grant service monopolies, and review.7 In so doing, we hope to further the goals of the FTA obligated incumbent LECs to provide competitors with network access.

7 Although the FTA circumscribes state commissions’ power To determine whether a claim is ripe for decision, the reviewing to regulate local markets, it does not exclude state court must consider both the “fitness of the issues for judicial decision commissions from the FTA approval process. To the and the hardship to the parties of withholding court consideration.” contrary, it invests them with authority to approve or reject Abbott Laboratories v. Gardner, 387 U.S. 136, 149 (1967), overruled on other grounds by Califano v. Sanders, 430 U.S. 99 (1977). A case is “fit interconnection agreements negotiated in accordance with the for judicial decision” where the issues raised are purely legal ones and Act, which requires LECs to permit rival carriers to: (1)

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utilize the LEC’s network and facilities; (2) purchase to prospective injunctive relief, waiting to decide this case unbundled network elements from the LEC; and (3) purchase until the Commission approves a final agreement at wholesale rates any telecommunications service that the incorporating the challenged terms may well deny GTE a LEC provides at retail to subscribers who are not timely and adequate remedy by precluding recovery for harm telecommunications carriers. See 47 U.S.C. §251(c)(2)-(4) sustained while the order was in effect.6 (1996); see also id. § 252 (establishing procedures for negotiation, arbitration, and approval of interconnection For the foregoing reasons, abstention is not warranted in agreements). To facilitate new competitors’ entry into local this case. markets, the FTA outlines specific procedures that LECs and new market entrants must follow in negotiating, arbitrating, IV and approving interconnection agreements. See generally id. §252 (1996). LECs and their competitors may negotiate In holding that GTE’s claims fell within the purview of interconnection agreements voluntarily, through mediation, or § 252(e)(6), the district court effectively denied GTE any through compulsory arbitration before a state utility assurance of federal review because under § 252(e)(6), federal commission. See id. § 252(a)-(b) (1996). When a final review is wholly contingent on a state commission’s decision agreement is reached, the telecommunications or public utility to approve or reject a final interconnection agreement commission for the state in which the LEC is located must incorporating the terms of any challenged order, an event that approve or reject the agreement. See id. § 252(e) (1996). need not occur for a competitor to enforce the tariffs

Once a state commission rules on a proposed agreement, Section 252(e)(6), the FTA provision at issue in this case, 6 GTE was prudent to sue the Michigan commissioners under authorizes any aggrieved party to “bring an action in an Ex parte Young because it is virtually certain that a state utility appropriate Federal district court to determine whether the commission’s decision to accept regulatory authority under the FTA agreement . . . meets the requirements of section 251.” Id. cannot legitimately be construed as a valid waiver of sovereign immunity. § 252(e)(6) (1996). If a state commission fails to approve or The Supreme Court’s recent decisions in College Savings Bank v. Florida reject a proposed agreement within a certain time – 30 days Prepaid Postsecondary Education Expense Bd., 119 S. Ct. 2199, and Florida Prepaid Postsecondary Education Expense Bd. v. College from the date of submission if the agreement resulted from Savings Bank, 119 S. Ct. 2219 (1999), undermine earlier circuit court compulsory arbitration, or 90 days from the date submitted if decisions holding that the Eleventh Amendment does not bar suits against the agreement resulted from voluntary negotiation or state utility commissions because such commissions constructively waive mediation – the Federal Communications Commission (FCC) their immunity from suit by participating in the regulatory scheme may preempt the state commission’s jurisdiction and rule on established by the FTA. See, e.g., MCI Telecommunications Corp. v. the validity of the agreement. See id. § 252(e)(4) - (5) (1996). Illinois Commerce Comm’n, 183 F.3d 567, 567-68 (7th Cir. 1999) (granting a petition for rehearing and directing the parties to file supplemental briefs on the impact that the Supreme Court’s decisions in In this case, AT&T and Sprint petitioned the MPSC for Alden v. Maine, 119 S. Ct. 2240 (1999), and the College Savings Bank compulsory arbitration under § 252 when the negotiations cases had on the court’s earlier decision). they began with GTE in 1996 did not produce an agreement. In March 1997, before a final agreement was reached, GTE It is precisely because the waiver doctrine no longer provides a reliable basis for seeking relief against state commissions that we filed a complaint in federal district court alleging that an order disagreed in Michigan Bell Telephone Co. v. Climax Telephone Co., 202 issued by the MPSC on January 15, 1997, concerning GTE’s F.3d 862 (6th Cir. 2000), with the Seventh Circuit’s decision in MCI and interconnection obligations to Sprint and AT&T violated the premised our conclusion that the plaintiff could proceed with its suit against the MPSC solely on Ex parte Young, rather than waiver, grounds.

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the rule that only exceptional circumstances justify FTA. The district court dismissed GTE’s complaint, holding [abstention]”). Because the MPSC’s February order cannot that it did not have subject matter jurisdiction to review the be described as “judicial” in nature, Younger does not require challenged order because it was not an order approving or this court to abstain from ruling on the merits of GTE’s rejecting a final interconnection agreement. See GTE North claims. See id. at 371 (holding that a “judicial inquiry v. Strand, No. 5:97-CV-20 (W.D. Mich. June 2, 1997) (citing investigates, declares and enforces liabilities as they stand on 47 U.S.C. § 252(e)(6)). present or past facts and under laws supposed already to exist,” and concluding that the “establishment of a rate is the Then, while arbitration proceedings between GTE, Sprint, making of a rule for the future, and therefore is an act and AT&T were still pending, the MPSC initiated unrelated legislative and not judicial in kind”). Indeed, Younger state law proceedings against GTE and other incumbent LECs abstention would be especially inappropriate in this case in order to establish terms of interconnection to Michigan because the Michigan Court of Appeals has already local exchange networks generally. These proceedings considered and rejected the merits of GTE’s challenge to the concerned GTE as an LEC, but not specifically as a party to MPSC’s 1997 orders. See GTE North, Inc. v. MPSC, No. the AT&T and Sprint arbitration. In connection with these 198324 (unpublished opinion, December 30, 1997) (affirming general interconnection proceedings, the MPSC required GTE over GTE’s objection the rates established in the MPSC’s and Ameritech, as Michigan LECs, to file with the order in case U-10860 and affirming the MPSC’s directive to Commission “Total Service Long Run Incremental Cost” conduct the cost study proceedings that gave rise to the (TSLRIC) studies for both regulated and non-regulated dispute in this case). telecommunications services. In addition, the MPSC directed GTE to publish tariffs in which GTE would offer to sell its Finally, the district court is not required to abstain from network elements and wholesale services to any interested deciding this case under the Johnson Act, which prohibits party at rates predetermined by the Commission. GTE federal courts from enjoining compliance with state orders responded to the Commission’s order by filing a petition for affecting rates charged by a public utility only when, among rehearing in which GTE challenged the MPSC’s rates for other things, “[j]urisdiction is based solely on diversity of unbundled loops as confiscatory in violation of the FTA. The citizenship or repugnance of the order to the Federal MPSC denied GTE’s petition for rehearing, and GTE Constitution.” 28 U.S.C. § 1342 (1994). The Johnson Act appealed the MPSC’s order to the Michigan Court of does not require abstention in this case because jurisdiction Appeals. On December 30, 1997, the court affirmed the over GTE’s claims is based on alleged violations of its rights MSPC’s order, and the MPSC proceeded to use GTE’s and under the FTA. Ameritech’s TSLRIC studies to determine prices for new entrants’ access to bundled and unbundled network elements In addition to the fact that the requirements for abstention and basic local exchange services throughout Michigan. established by the Supreme Court are not satisfied in this case, abstention is not warranted here because waiting to On February 25, 1998, in the course of the state review the propriety of the February 25 order until it is proceedings against GTE and Ameritech, the MPSC issued incorporated into a final arbitration agreement will deny GTE the order contested in this appeal. In the February 25 order, a timely and adequate remedy at law. GTE, whose suit the MPSC used GTE’s TSLRIC studies to establish the rates against the MPSC is based on Ex parte Young, 209 U.S. 123 at which GTE would be compelled to sell unbundled network (1908), cannot recover damages for injuries sustained under elements to its competitors. In addition, the order stated that the challenged order. Because Young limits GTE’s recovery the FTA requirement that GTE allow competitors to access

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pieces, or unbundled elements, of GTE’s local network did Pullman abstention is similarly inappropriate because not preclude GTE’s competitors from requesting access to Pullman abstention is warranted only when a state law is pre-assembled, fully operational local service platforms. challenged and resolution by the state of certain questions of Upon receiving the order, GTE sued the MPSC in the district state law may obviate the federal claims, or when the court, alleging that the Commission, acting pursuant to challenged law is susceptible of a construction by state courts Michigan law, violated the FTA when it issued the February that would eliminate the need to reach the federal question. 25 order: (1) directing GTE to provide competitors with See, e.g., Babbit v. United Farm Workers National Union, access to pre-assembled, fully operational service platforms; 442 U.S. 289, 306 (1979) (interpreting Pullman). In this case, and (2) requiring GTE to publish tariffs offering to sell to abstain pending state review of GTE’s claims would be elements of its network at rates predetermined by the inappropriate because the dictates of the Michigan Commission. Telecommunications Act (pursuant to which the MPSC issued the challenged order) are clear and the MPSC has In its motion for summary judgment, GTE argued that the already considered GTE’s objections to the February 25 order, Commission’s mandate directing GTE to provide competitors denied them, and denied GTE’s request for rehearing. with access to pre-assembled network platforms violated § 251(c)(3) of the FTA because that provision requires LECs Younger abstention is also inappropriate. In Younger, the to provide competitors with access only to “unbundled Supreme Court held that federal courts should abstain from network elements.” 47 U.S.C. § 251(c)(3) (1996) (emphasis deciding cases within their jurisdiction only when: (1) there added). According to GTE, Congress deliberately limited are ongoing state court proceedings; (2) those proceedings incumbent LECs’ obligation to grant competitors network involve important state interests; and (3) the parties have an access by requiring LECs to provide competitors only with adequate opportunity to raise constitutional issues in the state “unbundled,” or separated, network elements that the new proceedings. See GTE MobileNet of Ohio v. Johnson, 111 carrier would have to assemble before it could provide F.3d 469, 481 (6th Cir. 1997). The MPSC contends that all service. Ibid. In addition, GTE argued that the portion of the three conditions for Younger abstention are met, and February order directing it to offer pre-assembled platforms emphasizes that state proceedings are currently ongoing to all potential competitors violated the FTA because the Act despite the Michigan courts’ rejection of GTE’s claims specifically states that only competitors who request because GTE has a right pursuant to Mich. Comp. Laws unbundled access (“requesting carriers”) are entitled to § 462.26 to seek review of the Commission’s February 25 network access under § 251(c)(3), and then only after order (and the Commission’s May 11, 1998, order denying negotiating individual interconnection agreements. See ibid. rehearing) in the Michigan Court of Appeals. GTE made a similar argument in challenging the MPSC’s second directive, which, according to GTE, violates the FTA That GTE has a right to appeal does not, however, satisfy because it requires LECs to publish tariffs offering to sell the requirement that a federal court may abstain under network elements to all interested competitors at Younger only if the parties are involved in ongoing state predetermined rates even though §§ 251 and 252 of the Act proceedings. The Supreme Court held in NOPSI that the availability, or even the pendency, of state court review of a “legislative or executive action” does not justify Younger abstention. NOPSI, 491 U.S. at 368 (noting that requiring abstention in deference to state judicial proceedings reviewing “legislative or executive action” would “make a mockery of

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express an opinion on the merits of GTE’s claims, but not on specifically require competitors to negotiate individual terms the grounds urged by the defendants. Although the Michigan of access with LECs.1 See 47 U.S.C. § 252(c)(2)-(3) (1996). courts have concurrent jurisdiction over GTE’s § 1983 and preemption claims, we should decline to decide this case only Although GTE’s claims raise interesting questions about if the requirements for abstention established in Burford v. the scope and applicability of certain provisions of the FTA, Sun Oil Co., 319 U.S. 315 (1943), Younger v. Harris, 401 the district court did not address these arguments on the U.S. 37 (1971), or Railroad Comm’n of Texas v. Pullman Co., merits because it determined that it lacked jurisdiction under 312 U.S. 496 (1941), are met, or if abstention is warranted § 252(e)(6) to review the MPSC’s February 25 order. In its under the Johnson Act, 28 U.S.C. § 1342 (1994). July 1998 ruling, the court dismissed GTE’s claims for declaratory and injunctive relief on the basis that § 252(e)(6) Burford abstention is appropriate where “timely and precludes federal review where a state commission has not yet adequate state-court review is available” and: issued a final order approving or rejecting an interconnection agreement. GTE argues on appeal that the district court erred (1) when there are difficult questions of state law bearing in dismissing the case for lack of subject matter jurisdiction on policy problems of substantial public import whose because the district court had general jurisdiction under 28 importance transcends the result in the case then at bar; U.S.C. § 1331 to hear GTE’s claims. In deciding this appeal, or we express no opinion on the merits of GTE’s claims and (2) where the exercise of federal review of the question determine only whether the district court has jurisdiction to in a case and in similar cases would be disruptive of state entertain GTE’s challenge to the February 25 order. efforts to establish a coherent policy with respect to a matter of substantial public concern. New Orleans Public Service, Inc. v. Council of the City of New Orleans, 491 U.S. 350, 361 (1989) (NOPSI). Although 1 the MPSC was arguably trying to establish a “coherent Although GTE claims that it will be disadvantaged if its competitors policy” concerning local interconnection rates, Michigan state are not required to negotiate individual terms of network access, any harm law clearly authorizes the dictates in the Commission’s GTE may suffer on this score will arguably be temporary because February 25 order. Because Congress has invested the federal universal subsidies are due to be phased out under the FTA. Cf. AT&T Corp. v. Iowa Utilities Bd., 119 S. Ct. 721, 737 (1999) (upholding an FCC courts with primary responsibility for adjudicating FTA rule that the plaintiffs said would “eviscerate the distinction between challenges to state telecommunications regulations, and resale and unbundled access” and amount to “government-sanctioned because this case does not concern a disputed issue of state arbitrage” on the grounds that the rule was consistent with the FTA, and law, but rather a potential conflict between state and federal noting that, because “§ 254 requires that universal service subsidies be telecommunications laws, Burford abstention is inappropriate. phased out, . . . whatever possibility of arbitrage remains will be only temporary”). See, e.g., NOPSI, 491 U.S. at 361 (holding Burford abstention inappropriate because the plaintiffs’ case did not “involve a The counter-argument is, of course, that even if the tariffing state-law claim, nor even an assertion that the federal claims requirement established in the February 25 order were struck down once are in any way entangled in a skein of state law that must be the Commission approved an agreement incorporating the terms set forth untangled before the federal case can proceed”) (internal in the tariffs, GTE could not recover damages for harm suffered in the interim, nor could it “turn back the clock and recreate the atmosphere of quotation marks and citation omitted). negotiations that would have prevailed if [its competitors] had not been operating for months under tariffing arrangements.” Appellant’s Br. at 24-25.

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II Court in5 AT&T Corp. v. Iowa Utilities Bd., 119 S. Ct. 721 (1999). This court reviews de novo the district court’s denial of GTE’s motion for summary judgment. See Greene v. Reeves, III 80 F.3d 1101, 1104 (6th Cir. 1996). We also review de novo the district court’s decision to dismiss GTE’s complaint for The MPSC argues that, even if we have jurisdiction over lack of subject matter jurisdiction. See Anderson v. Liberty GTE’s claims, it would be prudent for us to abstain from Lobby Inc., 477 U.S. 242, 249, 252 (1986); Musson ruling on the merits of the case until the rates specified in the Theatrical, Inc. v. Federal Express Corp., 89 F.3d 1244, 1248 February 25 order are incorporated into an interconnection (6th Cir. 1996). Lack of subject matter jurisdiction is an agreement approved by the Commission. We decline to affirmative defense that a defendant may assert in a motion to dismiss. See Fed. R. Civ. P. 12(b)(1); In re DeLorean Motor 5 Co., 991 F.2d 1236, 1240 (6th Cir. 1993) (emphasizing that In Iowa, the Supreme Court reversed the Eighth Circuit’s decision to survive a motion to dismiss, a complaint must contain vacating, as inconsistent with the private negotiation provisions of the “either direct or indirect allegations respecting all material FTA, the FCC’s “pick-and-choose” rule, which required incumbents to elements to sustain a recovery under some viable legal offer network access to any potential competitor on the same terms enjoyed by earlier competitors who negotiated individual agreements with theory”). the incumbent. The Eighth Circuit vacated the rule on the basis that it allowed late market entrants to obtain the benefits of previous The party opposing dismissal has the burden of proving competitors’ agreements without having to accept the trade-offs that the subject matter jurisdiction. See Moir v. Greater Cleveland initial competitors had to make in order to obtain favorable terms of Reg’l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990). access. See id. at 738. In reversing the Eighth Circuit and upholding the Specifically, the non-moving party must show that the rule, the Supreme Court rejected the argument that the rule undercut incumbents’ bargaining power and contravened the purpose of the complaint “alleges a claim under federal law, and that the negotiation provisions of the FTA, and affirmed the FCC’s authority to claim is ‘substantial.’” Musson Theatrical, Inc. v. Federal promulgate the rule on the basis that it tracked the language of a particular Express Corp., 89 F.3d 1244, 1248 (6th Cir. 1996) (holding FTA provision (§ 252(i)) “almost exactly.” that a complaint is “substantial” unless “prior decisions inescapably render [it] frivolous”). That is to say, the non- In the same opinion, the Supreme Court also reversed the Eighth Circuit’s decision vacating FCC Rule 315(b), which prohibits incumbent moving party will survive the motion to dismiss by showing LECs from separating already combined network elements before leasing “any arguable basis in law” for the claims set forth in the them to competitors under the “unbundled access” provisions of the FTA. complaint. Ibid. In conducting our review, we “construe the The Eighth Circuit determined that the rule should be vacated because it complaint in a light most favorable to the plaintiff, accept as required leased access to “bundled” elements, in violation of the FTA. true all of plaintiff’s well-pleaded factual allegations, and The Supreme Court disagreed, finding that, although § 251(c)(3) directs incumbents to grant competitors access to “unbundled” elements that the determine whether the plaintiff can prove no set of facts competitors may then “combine” and thus “forbid[s] incumbents to supporting [his] claims that would entitle him to relief.” sabotage network elements that are provided in discrete pieces,” Ludwig v. Board of Trustees of Ferris State Univ., 123 F.3d § 251(c)(3) “does not say, or even remotely imply, that elements must be 404, 408 (6th Cir. 1997). We review for clear error any provided only in this fashion and never in combined form.” Iowa, 119 S. factual findings the district court made in deciding the motion Ct. at 737. Noting that “§ 251(c)(3) is ambiguous on whether leased network elements may or must be separated,” the Court concluded that the to dismiss. See Gafford v. General Elec. Co., 997 F.2d 150, FCC’s rule, which effectively requires incumbents to lease “bundled” 161 (6th Cir. 1993). elements to competitors under certain circumstances, “is entirely rational” even though the rule “could allow entrants access to an entire preassembled network.” Id. at 737–38.

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preemption challenges to state commission orders issued in Jurisdiction Over the Challenged Order non-FTA proceedings. Based on the scope of the applicable statutory provisions Indeed, to hold to the contrary would have enormous and the nature of the challenged order, we conclude that the negative implications: if only certain actions (final orders district court has general jurisdiction pursuant to 28 U.S.C. approving interconnection agreements) by state commissions § 1331 to hear GTE’s claims. Section 252(e)(6), which are reviewable in federal court, and if, as the district court prohibits federal review of interlocutory orders entered in the held, § 252(e)(6) is the exclusive basis for judicial review of course of FTA proceedings, plainly does not preclude review state commission actions that in any way relate to of the February 25 order, which was entered in an interconnection agreements, state commissions may insulate independent state law proceeding unrelated to the regulatory requirements that violate the FTA from federal, AT&T–Sprint arbitration. Moreover, even if one could and possibly even state, court review. This interpretation of interpret § 252(e)(6) to encompass GTE’s claims, to do so § 252(e)(6) conflicts with Congress’s decision to establish would frustrate Congress’s intent by allowing state federal procedures for negotiating interconnection rights and commissions to insulate from federal review decisions to concentrate judicial review of interconnection agreements allegedly preempted by, or otherwise contrary to, federal in the federal courts. It is also antithetical to the principle that telecommunications law. We therefore reverse the district parties injured by a governmental entity’s failure to adhere to court’s order dismissing GTE’s complaint, but express no the law may seek redress in the courts. Finally, denying opinion on whether the order directing GTE to sell pre- review and forcing GTE either to violate the February 25 assembled platforms and other network2 elements at order, or to comply with the general and immediate predetermined rates is preempted by the FTA. We similarly obligations imposed by the order in the hope that the order express no opinion on whether the portion of the February 25 would one day be incorporated into a reviewable final order directing GTE to sell network elements to any interested agreement, would undermine both the letter and spirit of the competitor at rates predetermined by the Commission is FTA. preempted by the FTA requirement that competitors obtain access to local networks3 by negotiating individual Section 252(e)(6) circumscribes federal review only of interconnection agreements. cases born of § 252 proceedings. Because the MPSC’s February 25 order was not the product of § 252 arbitration, but of an independent state law proceeding, § 252(e)(6) does not preclude jurisdiction over GTE’s claims. We therefore hold that federal review is available under § 1331 to 2 Section 261 of the FTA provides that state commissions can impose determine whether state commission orders violate federal their own rules “in fulfilling requirements of this part, if such regulations law except in cases in which the challenged regulatory action are not inconsistent with the provisions of [the FTA].” 47 U.S.C. § 261 is clearly an interlocutory order arising out of § 252 (1996). State commissions may also impose additional requirements on proceedings. We confine our holding to the jurisdictional LECs if such requirements “are necessary to further competition in the provision of telephone exchange access, so long as the State’s question because it is for the district court to determine on requirements are not inconsistent with the [Federal Communication] remand whether the directives in the February 25 order violate Commission’s regulations to implement this part.” Id. § 261 (b)-(c). § 252 of the FTA as recently interpreted by the Supreme 3 See 47 U.S.C. §§ 251(a)(1), 251(c)(1) (requiring incumbents and their competitors to negotiate in good faith the specific terms and conditions of interconnection agreements).

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To survive a motion to dismiss based on lack of federal state courts to defer to the MPSC].” Id. at 654. Because an question jurisdiction, the non-moving party must show first interested buyer need not incorporate the terms of the that its claims arise under federal law and, second, that § 1331 February 25 order into a final arbitration agreement to enforce jurisdiction is not “preempted by a more specific statutory GTE’s obligations under the order, § 252(e)(6) does not provision conferring exclusive jurisdiction elsewhere.” provide an “adequate procedure” by which GTE may obtain Connors v. Amax Coal Co., 858 F.2d 1226, 1229-30 (7th Cir. review of the MPSC’s directives. That GTE could contest the 1988). GTE asserts that the district court has subject matter validity of the February 25 order in the course of defending a jurisdiction over its 42 U.S.C. § 1983 and federal preemption state court enforcement proceeding does not solve the claims because: (1) such claims arise under the Constitution problem, because leaving resolution of GTE’s claims to the and laws of the United States; and (2) the MPSC’s state courts would clearly frustrate Congress’s goals under the February 25 order, which the parties agree was issued FTA. See, e.g., MFS Intelenet, 16 F. Supp. 2d. at 823–34 pursuant to Michigan law, deprives GTE of its rights under (concluding that review of § 252 “as a whole” demonstrates the FTA, thereby creating a cause of action for prospective that “Congress has created a unique framework which, while injunctive relief against the commissioners under 42 U.S.C. inviting state commissions to arbitrate and approve § 1983 and Ex parte Young, 209 U.S. 123 (1908). We agree. interconnection agreements, retains exclusive jurisdiction within the federal courts to ensure that those agreements meet Because GTE’s claims arise under federal law, the district federal requirements”). court has jurisdiction under § 1331 to decide the case unless GTE’s claims are subject to the limitations on federal review The district court has subject matter jurisdiction under set forth in § 252(e)(6), which we conclude they are not. See § 1331 to review federal preemption claims. See Bibbo v. 47 U.S.C. § 252(e)(6) (1996); Shaw v. Delta Air Lines, Inc., Dean Witter Reynolds, Inc., 151 F.3d 559 (6th Cir. 1998). 463 U.S. 85, 96 n.14 (1983) (holding that a plaintiff who The question in this case is simply whether § 252(e)(6) “seeks injunctive relief from a state [or local] regulation on divests the district court of its jurisdiction over GTE’s the ground that such regulation is preempted by federal law preemption claims because the February 25 order, though . . . presents a federal question which the federal courts have itself a product of state law proceedings, establishes rates that jurisdiction under 28 U.S.C. § 1331 to resolve”). Federal might one day be incorporated into final arbitration question jurisdiction over GTE’s claims is not preempted by agreements approved by the MPSC. There is no evidence that the FTA because § 252(e)(6) only circumscribes federal Congress intended § 252(e)(6), which grants federal courts judicial review of interlocutory orders issued in FTA, not state exclusive jurisdiction to review for FTA compliance state law, proceedings. See Connors, 858 F.2d at 1229–30. commission orders approving or rejecting interconnection agreements, to preclude federal review of state law orders that The text and legislative history of the FTA make clear that permit telecommunications carriers to circumvent the § 252(e)(6) is the exclusive basis for federal judicial review procedures prescribed in the FTA for negotiating network only of orders entered in negotiation or arbitration access. We recognize, of course, that the significance of the proceedings under § 252 of the Act. Section 252(e)(6) challenged order’s state law origins has engendered legitimate provides that, “[i]n any case in which a State commission debate among the parties and in the district court. However, makes a determination under this section, any party aggrieved absent clear evidence that Congress intended to allow state by such determination may bring an action in an appropriate commissions to issue orders that may be enforced without federal district court to determine whether the agreement or being incorporated into final interconnection agreements, we statement meets the requirements of section 251 of this title will not construe § 252(e)(6) to preclude federal review of

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agreement was so strong as to eliminate the contingency and and this section.” 47 U.S.C. § 252(e)(6) (1996) (emphasis virtually guarantee judicial review. added). Because the MPSC initiated the state law proceedings that resulted in the challenged order independent We disagree, and find that in this case § 252(e)(6) cannot of the procedures prescribed in the FTA, § 252(e)(6) does not be relied upon to provide adequate federal review because limit federal judicial review of the February 25 order, and the there is a chance, regardless how small, that GTE’s MPSC’s failure, thus far, to incorporate the terms of the order competitors may obtain service from GTE on the terms set in a final decision approving or rejecting an interconnection forth in the February 25 order without ever executing a final agreement does not bar review of GTE’s claims. agreement. Indeed, we think the appropriate inquiry is not whether, in the court’s estimation, it is more likely than not In holding that GTE’s suit was premature because the that the challenged order will be incorporated into a MPSC had yet to issue a final order reviewable under reviewable agreement, but whether there is any possibility at § 252(e)(6), the district court relied heavily on its prior all that an LEC’s competitors could enforce the terms of the decision in GTE North4 v. Strand, No. 5:97CV01, 1997 WL challenged order by means other than those prescribed in the 811422 (W.D. Mich.), and in so doing failed to recognize the FTA. If there is such a chance, § 252(e)(6) does not provide legal significance of the February 25 order’s state law origins. the party challenging the order with adequate review under As the district court implicitly acknowledged in Michigan Califano, and the federal district courts have general Bell Telephone Co. v. MFS Intelenet of Michigan, Inc., 16 F. jurisdiction to review the order under 28 U.S.C. § 1331. Supp. 2d 817, 823 (W.D. Mich. 1998), Strand stands for the limited proposition that federal district courts have “no Under Michigan law, a buyer interested in purchasing jurisdiction to review MPSC decisions arising during the network elements from GTE at the rates established in the § 252 process until after [an] interconnection agreement ha[s] February order need not execute a final interconnection become final by way of commission approval or rejection.” agreement with GTE to enforce the tariff; it need only petition Ibid. (citing cases) (emphasis added). The court in MFS thus a state court for an injunction enforcing the terms of the tariff distinguished Strand and upheld jurisdiction over the against GTE. See, e.g., Rinaldo’s Construction Corp. v. plaintiff’s challenge to an MPSC order interpreting (rather Michigan Bell Telephone Co., 559 N.W.2d 647, 653–54 than approving or rejecting) an existing interconnection (Mich. 1997). In Rinaldo’s, the Michigan Supreme Court agreement. See id. at 823-24; cf. Michigan Bell Telephone v. held: Strand, 26 F. Supp. 2d 993, 999 (W.D. Mich. 1998) (emphasizing the “Congressionally assigned role of the [W]here a plaintiff seeks relief against a telephone district courts in preventing violations of the company in a [state] court of general jurisdiction, under Telecommunications Act flowing from enforcement decisions Valentine [v. Michigan Bell, 199 N.W.2d 182 (Mich. or other decisions inconsistent with existing interconnection 1972)], the court may entertain (1) a cause of action in agreements”). In this case, as in MFS, the challenged order tort, or (2) a claim that the telephone company has did not arise “during the § 252 process,” and is therefore not violated the regulatory code or tariffs. Id. at 653–54 (emphasis added). As the Michigan Supreme 4 Court went on to explain, “[c]auses of action in tort and those In Strand, the district court noted that an MPSC order is a causes of action alleging that a telephone company has “determination” subject to federal review under section 252(e)(6) only if the order approves or rejects a final interconnection agreement. See violated the tariffs or code are not cases in which the rationale Strand, 1997 WL 811422, at *2 (quoting GTE South v. Morrison, 957 F. underlying the doctrine of primary jurisdiction [requires the Supp. 800, 804 (E.D. Va. 1997)).

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subject to the reasoning in Strand or the many other cases be incorporated into a final arbitration agreement. Standing cited by the lower court in which district judges have refused alone, this admission appears to undercut GTE’s argument to review interlocutory orders issued by state commissions in that the district court has jurisdiction over its claims under the course of § 252 arbitrations. Id. at 823. § 1331. Indeed, when combined with the Commission’s assertion that it has been prevented from ruling on an Although the order at issue in this case is clearly agreement incorporating the challenged terms because GTE distinguishable from an interlocutory order entered in a § 252 has not made certain filings, the parties’ admission virtually proceeding, the commissioners urge us to overlook the order’s guarantees that, if GTE were to execute an agreement, either state law origins because the order establishes rates that the the MPSC or the FCC would approve or reject the terms of parties agree will likely be incorporated in a final agreement the challenged order, at which point GTE could seek federal subject to review under § 252(e)(6). Were we to adopt this review under § 252(e)(6). See 47 U.S.C. § 252(e)(1) (1996) approach, we would simply equate the February 25 order with (stating that a state commission “shall” approve or reject an interlocutory order in a § 252 proceeding that GTE could “any” interconnection agreement between an incumbent and not challenge in federal court until the Commission issued a a requesting carrier, whether the agreement is the product of final decision approving or rejecting an agreement voluntary negotiation or binding arbitration before the state incorporating the terms of the order. Recharacterizing the commission). The problem with this logic, and the reason February 25 order in this manner appears consistent with the § 252(e)(6) does not provide for adequate review of the FTA if one reads § 252(e)(6) broadly to govern not only challenged order under Califano v. Sanders, 430 U.S. 99, 108 claims that a state utility commission erred in approving a (1977), or even under Thunder Basin, 510 U.S. 200 (1994), is final agreement negotiated under § 252, but also claims that that an interested buyer could enforce the tariffs established the commission violated the FTA by approving an agreement in the February order in the Michigan courts without ever that was not the product of a § 252 proceeding. Although this executing a final interconnection agreement with GTE. construction of § 252(e)(6) is superficially appealing, we cannot adopt this approach and assume that GTE would In determining whether the lower court has jurisdiction eventually be able to seek federal review of the challenged over GTE’s claims despite the limitations in § 252(e)(6), this order because any approach that equates a decision arising out court must look “not only [to] the particular statutory of independent state law proceedings with an interlocutory language, but to the design of the [FTA] as a whole and to its order in a § 252 arbitration ignores the critical fact that the object and policy.” Crandon v. United States, 494 U.S. 152, former may be enforced against the parties even if it is never 158 (1990). Citing the Supreme Court’s decision in Califano, incorporated in a final interconnection agreement. the district court correctly observed that, “[w]here Congress has provided an adequate procedure to obtain review of an At first blush, § 252(e)(6) seems to guarantee adequate, agency determination, alternative bases for jurisdiction are albeit deferred, judicial review of the Commission’s inapplicable.” Califano, 430 U.S. at 108. The district court February 25 order. See, e.g., Thunder Basin Coal v. Reich, noted in its opinion that confining federal review of GTE’s 510 U.S. 200 (1994) (holding that a statutory provision that claims to the circumstances outlined in § 252(e)(6) might places temporal restrictions on a party’s ability to bring an theoretically deprive GTE of “adequate” review under action in federal court still provides adequate opportunity for Califano because such review would be contingent upon the review and therefore satisfies due process). As the district MPSC’s approval of a final agreement incorporating the court noted in its opinion, the parties agree that the rates February 25 order. However, the court found that the established in the Commission’s February 25 order will likely probability that the order would be incorporated into a final