20061221Response to notice of oral argument.pdf

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Mary S. Hobson
Attorney & Counselor
999 Main, Suite 1103
Boise, ID 83702
208-385-8666
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December 21 , 2006
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington
Boise, ID 83702-5983
RE:Docket No. QWE-O6-
Dear Ms. Jewell:
Enclosed for filing with this Commission are an original and seven (7) copies of Qwest
Corporation s Response to the Commission s Notice of Oral Argument. If you have any
questions, please contact me. Thank you for your cooperation in this matter.
Very truly yours
Enclosurescc: Service List
Boise-193000.10061273-00018
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Douglas R. M. Nazarian
Hogan & Hartson
111 South Calvert Street
Baltimore, MD 21202
Tel: [phone]
drmnazarian~hh1aw .com
2006 DEC 2 I PH 3: 20
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Mary S. Hobson (ISB. No. 2142)
999 Main, Suite 1103
Boise, ID 83702
Tel: [phone]
mary.hobson~qwest.com
Attorneys for Qwest Corporation
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
AT&T COMMUNICATIONS OF THE
MOUNTAIN STATES, INc.,
Complainant Case No. QWE-O6-
QWEST CORPORATION,
QWEST CORPORATION'
RESPONSE TO THE COMMISSION'
NOTICE OF ORAL ARGUMENT
Respondent.
Qwest Corporation ("Qwest") respectfully submits this Response to the questions posed
by the Commission in Order No. 30195. For the reasons set forth in Qwest's prior pleadings and
below, federal law governs and requires dismissal of the Complaint of AT&T Communications
ofthe Mountain States, Inc. ("AT&T"). Nothing in the Interconnection Agreement or in Idaho
Code ~ 61-642 or ~ 62-605 leads to a different result.
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The Commission s questions all revolve around the same threshold issue: may AT&T
evade Section 415 of the Federal Telecommunications Act, which clearly applies to these
matters, by purporting to plead its case under state law. In 2002, Qwest terminated the two
interconnection agreements at issue here, addressing AT&T's claim at the time that operation
under the two agreements violated Section 252 of the Act. Although AT&T pursued this matter
at the FCC and elsewhere, seeking to deny Qwest Section 271 long distance authority on the
basis of the prior Section 252 violation, AT&T chose not to file any claim that it suffered
damage from the violation during the limited period that the agreements were in effect. The two
year statute oflimitations for violations of Section 252 came and went.
Now, over four years later, AT&T attempts to avoid the consequences of its decision by
purporting to plead its claims under state law. The Commission is correct to examine that
strategy, a strategy that was rejected by the Oregon Public Utility Commission on these same
facts before AT&T filed its claim here, and that more recently has been rejected by the United
States District Court for the District of Wyoming 1 and the Iowa Utilities Board.2 Nothing in the
Interconnection Agreement or in Idaho Code ~ 61-642 or ~ 62-605 allows AT&T to preempt
Section 415 and revive its stale claims.3 For the reasons set forth below and in Qwest's Motion
See Order Denying Motion to Remand AT&T Commc 'ns. of the Mountain States, Inc. v. Qwest Corp.
Case No. 06-CV-232-D (D. Wyo. Dec. 12, 2006) (hereinafter "Wyoming Order Denying Motion to Remand"
attached as Exhibit 1.
See Order Granting Motion to Dismiss AT&T Commc 'ns. of the Midwest, lnG, and TCG, lnc.. v. Qwest
Corp.Docket No. FCU-06-51 (10. D.B. December 4, 2006) (hereinafter "Iowa Board Order Granting Motion to
Dismiss ), attached as Exhibit 2.
Nor should the Commission be led astray by AT&T's erroneous interpretations of an Oregon state court
proceeding or the Washington Utilities and Transportation Commission s order, both of which Qwest has addressed
in its Reply to AT&T's Opposition to the Motion to Dismiss. See Qwest's Reply at 12 n.29 and 13-15.
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to Dismiss and its Reply, which Qwest incorporates here by reference, the Commission should
find that federal law governs AT&T's Complaint and order that it be dismissed with prejudice.
1. Is AT&T's claim in this matter governed by the federal Telecommunications Act of
1996 or Idaho state law?
Qwest has discussed this issue in its pending Motion to Dismiss, although that Motion
was written before the recent orders of the Iowa Board and the Wyoming Federal District Court.
There is no question that federal law establishes the scope of the rights and obligations of the
parties in this case, and the federal statute oflimitations found in 47 U.C. ~ 415 therefore
governs - and bars - AT&T's claims arising from those matters. The reasons can be
summarized as follows:
The relevant agreements that contain the provisions of which AT&T seeks the
benefit were formed pursuant to the Federal Telecommunications Act (the "Federal Act
Interconnection agreements are not ordinary contracts.4 Interconnection agreements exist solely
by virtue of the Federal ACt.5 Interconnection agreements set forth the "terms and conditions. . .
to fulfill the duties" mandated by 47 U.C. ~~ 251(b) and 251(c),6 and many of the provisions of
interconnection agreements "represent nothing more than an attempt to comply with the
Verizon Md, Inc. v. RCN Telecom Servs., Inc.232 F.Supp.2d 539, 552 n. 5 (D. Md. 2002) ("(A)n
interconnection agreement is part and parcel of the federal regulatory scheme and bears no resemblance to an
ordinary, run-of-the-mill private contract"
);
Petition ofSBC Tex. For Post-Interconnection Dispute Resolution with
Tex-Link Commc ns., Inc., under the FTA Relating to lntercarrier Comp.Ruling on Motion to Dismiss, 2005 WL
2834183 , at 7-9 (Tex. P.u.C. Oct 26, 2005) ("An interconnection agreement is not an ordinary private contract"
(hereinafter "SBC Tex.
);
Spire Commc , Inc. v. NM. Pub. Regulation Comm '392 F.3d 1204, 1207 (10th Cir.
2004) (noting that interconnection agreements are "instrument(s) arising within the context of ongoing federal and
state regulation
OPUC Complaint Order at 4, attached as Exhibit A to Qwest's Motion to Dismiss.
47 u.S.C. g 25l(c)(1).
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requirements ofthe 1996 Act.,,7 Agreements are "cabined by the obvious recognition that the
parties to the agreement had to agree within the parameters fixed by the federal standards set out
in 47 U.c. ~~ 251 and 252.
The Federal Act gives rise to all of the questions underlying AT&T's claims.
its most basic level, this case involves AT&T's claim that it had the right , through its own
interconnection agreement, to opt into provisions in terminated and expired agreements, and that
it was damaged by its failure to have this opportunity. AT&T's rights , and any resulting
recovery, are completely dependent upon and inextricably bound up with questions of federal
law. For example, federal law establishes what agreements constitute "interconnection
agreements, and how such agreements must be publicly disclosed to third parties like AT&T.
Similarly, the Federal Act and related FCC policies and rules establish when, and under what
circumstances, a third party like AT&T may (or may not) be eligible to request the same terms as
a competitor. to Moreover, the date by which AT&T must assert a claim based on the terms of an
interconnection agreement is governed by the Federal Act. II
AT&T Commc ns of the S. States, Inc. v. BellSouth Telecom., Inc.229 F.3d457, 465 (4th Cir. 2000).
BellSouth Telecom., Inc. v. MClmetro Access Transmission Servs., Inc.317 F.3d 1270, 1281 (11th Cir.
2003).
See 47 US.C. ~ 252(a) and (e). The FCC establishes policies to implement Sections 252(a) and (e),
deciding which kind of agreements qualify as interconnection agreements that must be filed. See Memorandum
Opinion and Order, Petition for Declaratory Ruling on the Scope of the Duty to File and Obtain Prior Approval of
Negotiated Contractual Arrangements Under Section 252(a), WC 02-, 17 FCC Rcd 19337 (2002).
10 See id. ~ 252(i). For example, the federal Act requires that a "requesting" carrier must be willing and able
to accept all legitimately related terms in an existing interconnection agreement to be entitled to claim the same
treatment as the original parties to that agreement under Section 25l(i). See, e., 47 C.R. ~ 51.809.
47 US.C. ~ 415 (Section 415).
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Congress sought to assure national uniformity in the Federal Act 's application, a
goal that would be undermined by the patchwork application of state law that AT&T seeks.
Section 415' s limitations period applies to proceedings in federal court, the FCC, or before any
state commission.13 To permit varying periods of limitation from state to state would contravene
Congress s intent to create uniformity and would discriminate against carriers that happen to be
sued in states with more generous statutes oflimitation.
Federal courts in the Ninth Circuit and in other circuits have ruled that
interconnection agreements are subject to the federallaw, including the federal statute of
limitations. Courts in the Ninth Circuit and in other circuits have applied Section 415 in actions
involving telecommunications carriers, whether the claims were state or federal.
The Wyoming Federal District Court has rejected AT&T's arguments thatfederal
law does not apply on these same facts. Just two weeks ago, the United States District Court for
the District of Wyoming, in a case materially identical to this one, rejected AT&T's argument
that federal jurisdiction does not apply because AT&T had pled its claims as alleged breaches of
12
See Swarthout v. Mich. Bell Tel. Co.504 F.2d 748 748 (6th Cir. 1974).
13 See, e., Pavlak v. Church 727 F.2d 1425 , 1426-27 (9th Cir. 1984) (holding that 47 u.S.C. ~ 415 applies
to claims filed in district court as well as to complaints filed with the FCC); SBC Tex.at 7-9 (fIDding that the two-
year limitation applies to claims that a state commission is authorized to hear).
14 See A.J. Phillips Co.v. Grand Trunk W. Ry. Co.236 u.S. 662, 667 (1915).
15 See, e., Pavlak 727 F.2d at 1426-27; Cole v. Kelley, 438 F.Supp. 129 (C.D. Cal. 1977); see also Pac. Bell
v. Pac-West Telecomm, Inc.325 F.3d 1114, 1127 (9th Cir. 2003); Verizon Md., Inc. v. Global Naps, Inc.377 F.3d
355 , 363-65 (4th Cir. 2004) (fIDding substantial questions of federal law because the agreement was federally
mandated, the key disputed provisions incorporated federal law, and the contractual duty was imposed by federal
law); Southwestern Bell Tel. Co. v. Connect Comm 'cns Corp.225 F.3d 942, 947-48 (8th Cir. 2000) (fmding
substantial federal-law questions underlying the dispute in this case" and that the "Commission s argument now
that this case is simply a matter of state contract law does not ring true
);
MCI Telecomm 'cns Corp. v. Ill. Bell Tel.
Co.222 F.3d 323, 343-44 (7th Cir. 2000) ("the state commissions have conducted arbitrations for interconnection
agreements, have approved and enforced those agreements, and have acted on an SGAT under a federal grant of
power. Their authority to act was derived from provisions of the Act and not from their own sovereign authority.
MFS lnt , Inc.v. lnt l Telecom Ltd.50 F. Supp. 2d 517 520 (E.Va. 1999).
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state law. 16 The Wyoming court saw through AT&T's claims and agreed with Qwest that
federal question jurisdiction exists because "AT&T)' s Complaint clearly asserts violations of
(Qwest)'s obligations under the Telecommunications ACt.,,17 The court held that "(a)lthough
Plaintiff characterizes its claims as state law claims and insists that it is merely seeking to
enforce the terms of its agreement with Qwest " the underlying predicate acts "all arise out of
purported violations of Qwest's obligations under the Act.,,!8 The Wyoming court further found
that "Plaintiff's right to relief necessarily depends on the resolution of a substantial question of
federallaw.
Other state commissions have rejected AT&T's argument that its claims arise
under state law. The Texas Public Utility Commission has found that the Federal Act grants a
commission its authority to interpret and enforce interconnection agreements, and therefore the
commission must look to Section 415 as a limitation on its jurisdiction.20 As discussed in
Qwest's pending Motion , the Oregon Public Utility Commission reached the same result on the
same facts present here. The Oregon Commission rejected AT&T's attempt to "masquerade" its
federal law claims as state law allegations, and dismissed AT&T's complaint regarding these two
long-terminated interconnection agreements as time barred under Section 415.
See Wyoming Order Denying Motion to Remand.
See id.at 8.
ld. at 8-
Id. at 9-10 (citing Global Naps, Inc.377 F.3d at 364)..
SBC Tex.at 2.
See Motion to Dismiss at 6-, 18-24.
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The Iowa Board decision post-dates the prior pleadings here and warrants more
discussion.22 On December 4 2006, the Iowa Board dismissed AT&T's action before the Board
based on the same two interconnection agreements because AT &T could have brought the
claims in 2002. There too AT&T attempted to argue that it could artfully plead a state law claim
and avoid the implications of federal law. The Iowa Board had no difficulty rej ecting that point
of view. Consistent with Qwest's position before both the Iowa Board and this Commission, the
Iowa Board expressly found that "this action clearly arise(sJ out ofthe same transaction that was
at issue in Docket No. FCU-02-2: Qwest's failure to file with the Iowa Board certain
interconnection agreements as required by law.23 The Iowa Board emphasized that butfor
that transaction, Complainants have no claim for breach of contract, no claim for violation of
Board rules, and no claimfor common law fraud.
In that case the Board did not even need to reach Section 415. The Board found that
AT&T should have raised any complaints regarding the two unfi1ed agreements in connection
with the Board's own proceeding on this matter in 2002. It therefore found that AT&T's new
complaint, seeking damages for the first time, was barred by res judicata principles. This
Commission could reach the same result given AT&T's failure to raise its allegations in previous
proceedings before this Commission. But for present purposes, the relevant point is that the
Iowa Board had no difficulty finding that AT&T's complaint arose under federal law
notwithstanding AT&T's attempt to side-step that law through its pleading.
See Iowa Board Order Granting Motion to Dismiss.
ld. at 18.
!d. (emphasis added).
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AT&T's complaint depends on and is replete with references to federal law.
reality, AT&T knows full well that federal law governs this matter. To begin with, AT&T'
Complaint itself discusses the Federal Act at length, setting forth the duties imposed on
incumbent carriers to make available any interconnection, service, or network element provided
under any agreement to any other requesting carrier at the same rates and on the same terms and
conditions as those provided in the approved interconnection agreement. 25 These federal duties
provide the basis for AT&T's claim for relief that the Commission award it damages equal
to "the aggregate amount of the price differential between what it paid Qwest and what it should
have paid Qwest had it been permitted to opt into the Eschelon and McLeodUSA
Agreements. . . .26 AT&T's repeated references to federal law is an acknowledgement and an
admission that federal law governs this case.
AT&T has acknowledged repeatedly that these claims arise under federal law.
AT&T repeatedly acknowledges that the facts underlying these claims relate directly to rights
and duties created by Section 252 ofthe Federal Act.27 In particular, AT&T expressly contends
that Qwest violated Section 252(a)(1) and (e) ofthe Act when it failed to file interconnection
25 Complaint AT&T Comm 'cns of the Mountain States, Inc. v. Qwest Corp.Case No. QWE-06-, ~~ 1, 9
, 11 , 12, 13, 16.
26 !d. at page 8. Qwest does not agree that AT&T is correctly stating the measure of any damages it may be
able to show from the violation of Section 252, but the Commission will never need to reach this issue given
AT&T's failure to make a timely claim.
27 See, e.Comments of AT&T Corp.In re Qwest Commc ns lnt l Inc., Consol. Application for Auth. to
Provide In-Region, InterLATA Servs. in Colo., Idaho, Iowa, Neb. and ND.WC Docket No. 02-148 (July 3 2002),
at 120-22 ("Qwest has undertaken a deliberate, region-wide scheme to violate its nondiscrimination obligations
under the Act by violating Section 252 and conspiring to confer secret, favorable interconnection "deals" on selected
CLECs.) , discussed in Motion to Dismiss at 3-5; see also Complaint ~~ 1
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agreements with McLeod and Eschelon and denied AT&T the benefit of requesting terms in
those agreements by virtue of its federal "opt-" rights under Section 252(i).
Qwest discussed in its previous pleadings the history of the unfiled agreements here in
Idaho, and that history is worth repeating briefly. Qwest made a compliance filing of six
negotiated agreements with this Commission on August 21 , 2002 29 and filed an additional
amendment to its interconnection agreement with McLeodUSA on September 19 2002. The
Commission determined that a formal hearing in the matter was not required, but provided notice
of the filings and an opportunity to intervene within twenty-one days of the service date of the
order. 30
AT&T neither sought to intervene nor filed any comments concerning Qwest's
submission of the six interconnection agreements or the September 19, 2002 amendment.
Instead, AT&T chose to go to the FCC and make the "unfiled agreements" issue one of its
central grounds for urging the FCC to deny Qwest Section 271 authority, including such
authority in Idaho.31 AT&T's FCC comments raised arguments similar to those that AT&T had
made to state commissions: that Qwest had violated Section 252 of the Federal Act by not filing
these and other agreements, and that consequently Qwest should not be granted 271 authority.
ld.
29 See In re Application of Qwest Corp., and McLeodUSA Telecommc 'ns Servs., Inc. for Approval of An
Amendment to An Interconnection Agreementfor the State of Idaho Pursuant to 47 USe. !i 252(e), at 1 , Case No.
QWE-02-, Order No. 29116 (Idaho Public Utils. Comm n Sept. 19 2002).
30 Id. at 2-
3 t See Comments of AT&T Corp.In re Qwest Commc 'ns In! 'I Inc., Consolo Application for Auth. to Provide
In-Region, InterLATA Servs. in Colo., Idaho, Iowa, Neb. and ND.WC Docket No. 02-148 (July 3 2002).
32 See e.Order Establishing Time for Responses In re: US WE T Commc ', Inc., n/k/a Qwest Corp.
Docket Nos. INU-00-, SPU-OO-ll (May 17, 2002).
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The FCC rejected these arguments, but not without first considering them.33 The FCC found that
Qwest had cured any past violation insofar as it had terminated the agreements, and thus was
eligible for Section 271 authority.34 And the FCC invited AT&T to file a complaint if it felt that
it was harmed by these past Section 252 violations. AT&T failed to do so.
AT&T also raised its "unfiled agreements" allegations directly in a complaint it filed with
this Commission on August 6, 2004. In that case, AT&T alleged that Qwest overcharged AT&T
for use of conduit facilities in Idaho under its interconnection agreement. 36 AT&T asserted that
its injuries resulted from "a pattern ofthe deceptive and anti-competitive practices that Qwest
had engaged in across the multi-state service areas, including, specifically, Idaho.37 AT&T
pointed to actions related to the unfiled interconnection agreements before the FCC and in
numerous states, including one decision dating back to at least June 2002 in Iowa where AT&T
was the p1aintiff.38 AT&T did not pursue its breach of contract claim in that complaint even
though its claims related to the same interconnection agreements. On July 12, 2005, AT&T and
Qwest filed a Stipulation and Joint Motion to Dismiss the Complaint with Prejudice, and the
33 See In re Application by Qwest Communications International lnc for Authorization to Provide In-Region
InterLATA Services in the States of Colorado, Idaho, Montana, Nebraska, North Dakota, Utah, Washington and
Wyoming, 17 FCC Rcd 26 303, at 26 570 ~~ 466- 491 (2002).
34 ld. ~ 477.
35 ld. ~~ 453 492.
2004).
Complaint AT&T Corp. v. Qwest Corp.Case No. ATT-04-1 (Idaho Public Utils. Comm , filed Aug. 6
!d. at~ 22.
See id. at~ 22 n. 1.
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Commission summarily accepted the settlement and granted the Motion to Dismiss.39 As in
Iowa and in Oregon, then, AT&T simply sat on whatever rights it seeks to assert here.
In short, Federal law governs this dispute, and, as a number of commissions and courts
have found, AT&T cannot escape the application of federal law (and the federal statute of
limitations) simply by trying to cast its claims under the cloak of state law pleading. Federallaw
thus bars AT&T's attempts to resuscitate those stale , expired claims.
2. What is the effect and meaning ofthe Governing Law provision (Section 21.1) ofthe
Interconnection Agreement with respect to the Complaint?
This Commission has no jurisdiction or authority to grant AT&T's request that it revive
claims that the Federal Act extinguished long ago under Section 415. Furthermore, nothing in
the Interconnection Agreement even suggests this possibility. It is axiomatic that existing law is
part of every contract 40 and the Governing Law provision of the Interconnection Agreement
Section 21.1 , simply reflects Qwest's position that the "Agreement shall be governed by and
construed in accordance with the Act and the FCC's rules and regulations.
" "
(TJhe domestic
laws of the State of Idaho" come into play in the relatively rare instances, as in the reciprocal
compensation cases AT&T cites, where federal law and/or FCC rulings leave a role for state law.
As Qwest has demonstrated in its Motion to Dismiss and in response above to the Commission
first question, AT&T's claims in this case do not require the Commission to interpret or enforce
any provisions of the interconnection agreements or to undertake any other analysis that requires
the application of state law. To the contrary, the dispositive issues here arise under and are
39 See AT&T Corp. v. Qwest Corp.Case No. ATT-04-, Order No. 29832 (Idaho Public Utils. Comm
July 22, 2005).
40 Robinson v. Joint Sch. Dist. No. 150 100 Idaho 263, 265 (1979).
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governed entirely by federal law. The Eschelon and McLeod agreements were terminated in
2002, as the FCC found in dealing with AT&T's arguments on the point. The time to raise
complaints arising from the prior existence of those agreements tolled long ago.
3. The "dispute" regarding the Interconnection Agreement.
a. What actions have been taken by either party to resolve this dispute under Section
27 of the Interconnection Agreement?
Prior to receiving AT&T's Complaint in this matter, Qwest had not been aware of any
continuing dispute. The statute oflimitations for disputes related to these long-terminated
agreements expired years ago. The history of AT&T's pursuit of the unfiled agreements issue in
Idaho, as discussed above and in Qwest's motion to dismiss , demonstrates that AT&T made no
attempt to treat it as an ICA dispute issue, but instead used it as a means to oppose granting
Qwest 271 authority or as window dressing in its complaint for alleged specific overcharges for
its conduit use. AT&T did not provide notice of any continuing dispute or otherwise seek to
avail itself of the provisions found in Section 27. Having no basis to know that any dispute
continued to exist, Qwest also did not make any attempt to resolve an unknown dispute pursuant
to Section 27. As the Iowa Board and Oregon Commission found, AT&T failed to assert its
rights when given the opportunity in 2002 and therefore should be precluded from attempting to
resurrect this matter more than four years later.
b. What effect and meaning does Section 27.have with respect to the present
dispute?
41 Indeed, even the Interconnection Agreement under which AT&T is purportedly proceeding has been
superseded. See Order No. 29530 In the Matter of the Joint Application of Qwest Corporation and AT&T
Communications of the Mountain States, Inc. for Approval of an Interconnection Agreement pursuant to 47 Us.
Ii 252(e) (Idaho Public Utils. Comm n June 22, 2004).
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As Qwest has discussed above in response to the Commission s first question, AT&T'
claims in this case do not require the Commission to interpret or enforce any provisions of the
interconnection agreements or to undertake any other analysis that requires the application of
state law. Even if this were a question of interpreting the terms of AT&T's ICA, AT&T cannot
rely on Section 27.1 because Section 27.1 is not relevant to this dispute. This is true even if the
Complaint were not other-wise time-barred. The provision provides a dispute resolution
mechanism that may be pursued by one or both parties. Section 27.1 is not the exclusive means
of resolving any or all disputes. If a dispute cannot be settled through negotiation, Section 27.
provides that "it may be resolved by arbitration." Neither party has sought arbitration pursuant
to Section 27.1. Rather, by filing the Complaint with the Commission, AT&T waived its rights
to arbitration under Section 27.
Even if this matter were in arbitration, federal law would still establish the applicable
statute of limitations. Section 27.1 states that "(t)he laws of Idaho shall govern the construction
and interpretation of this Agreement" but this does not mean that federal law is preempted. As a
basic matter of contract interpretation this provision must be read consistently with Section 21.
the Governing Law provision. Ambiguous or conflicting provisions should be construed, if
possible, to give effect to each provision.43 If two provisions conflict, the more specific
provision governs over the more general provision.44 Section 21.1 is specifically intended to
42 Waiver occurs through the voluntary, intentional relinquishment of a known right or advantage, upon
which the party asserting waiver reasonably relied and altered its position to its detriment. Margaret H Wayne Tr.
v. Lipsky, 123 Idaho 253, 256 (1993) (citations omitted).
43 Twin Lakes Village Property Ass , Inc. v. Crowley, 124 Idaho 132, 137 (1993) (citations omitted).44 "It is well established that specific provisions in a contract control over general provisions where both
relate to the same thing.ld. at 138 (1993) (citing Morgan v. Firestone Tire Rubber Co.68 Idaho 506, 518-
(1949)).
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address the applicable governing law and is thus the more specific and relevant provision.
Consistent with the requirements of the Act, Section 21.1 provides that federal law establishes
the applicable principles except where state law may apply. To do otherwise would disregard
applicable principles of contract interpretation and binding precedent concerning the
Commission s authority under the Act to interpret and enforce interconnection agreements. The
law is clear that the Commission must act consistently with federal law when regulating
interconnection agreements. 45
c. What effect and meaning does Section 27.have?
Section 27.2 has no effect in this matter, least of all to revive claims already time-barred
by the Federal Act. As with Section 27., Section 27.2 provides an alternative dispute-resolution
mechanism, which either or both parties may have opted to use. The dispute resolution
provisions are not mandatory and do not preclude the parties from pursuing their rights through
other enforcement mechanisms. By filing the Complaint with the Commission, AT&T selected
its forum and waived its rights under Section 27.2. Qwest also did not seek to pursue arbitration
pursuant to Section 27.2. Consequently, Section 27.2 has no applicability to the present
proceedings.
4. What is the effect, if any, of Idaho Code ~ 61-642 on AT&T's claim in this matter?
Idaho Code ~ 61-642 is not applicable to this case. Section 61-642 provides:
Ifthe public utility does not comply with the order for the payment
or reparation within the time specified in such order, suit may be
instituted in any court of competent jurisdiction to recover the
same. All complaints concerning excessive or discriminatory
charges shall be filed with the commission within three (3) years
Pac-West Telecomm 325 F.3d at 1130.
QWEST CORPORATION'S RESPONSE
TO THE COMMISSION'S NOTICE OF ORAL ARGUMENT
Case No. QWE-06-17 --Page 14 of
\\\DC - 066983/000055 - 2409538 v4
from the time the cause of action accrues, and the petition for the
enforcement of the order shall be filed in the court within one (1)
year from the date of the order of the commission. The remedy in
this section provided shall be cumulative and in addition to any
other remedy or remedies in this act provided in case of failure of a
public utility to obey an order or decision of the commission.
This section arises in Title 61 Idaho Code and relates to claims by retail customers of charges
deemed by the Commission, in the exercise of statutory authority to set public utility rates, to be
excessive or discriminatory." 46 Pursuant to
Idaho Code ~ 62-604 Qwest has elected to remove
all of its services from regulation under Title 61.47 Moreover, none ofthe charges paid by
AT&T in the present case were established by the Commission under regulatory authority
granted by the Idaho Legislature in Title 61 Idaho Code.
Although in some instances state law may provide an independent cause of action for
overcharges subject to a three-year limitations period, such state claims may not be predicated on
violations of federal obligations. As discussed in Qwest's pleadings and reflected in the Iowa
Board, Oregon Commission, and Wyoming District Court decisions, violations of federal
obligations, even if cloaked in state law, are determined under federal law.
In any event, even if Section 415 of the Federal Act did not govern here, this provision
would not support AT&T's complaint. To the extent that any state claim may have been
maintained under sections 61-641 and 642, the time for bringing suit expired three years after the
Commission provided AT&T with an opportunity to respond to Qwest's compliance filings in
2002. Indeed, any such time period would have expired prior to Qwest's compliance filings
given that AT&T was well aware of this issue and was pursuing complaints elsewhere before the
See Idaho Code gg 61-502; 61-641.
See Docket Nos. QWE-05-12 and QWE-05-13.
QWEST CORPORATION'S RESPONSE
TO THE COMMISSION'S NOTICE OF ORAL ARGUMENT
Case No. QWE-06-17 --Page 15 of18
\\\DC - 066983/000055 - 2409538 v4
Commission acted. AT&T did not file its Complaint until August 21 , 2006, more than four years
after Qwest's initial compliance filings and thus its claims would be barred under federal or state
law.
5. How does Idaho Code ~ 62-605(b) confer either jurisdiction or venue on this
Commission?
Here again, nothing in the Idaho Code revives AT&T claims that are time-barred under
the Federal Act. That said Idaho Code ~ 62-605(b) does not provide a basis for jurisdiction or
venue in any event. AT&T alleged in its Complaint that it brought "this Complaint pursuant to
Sections 62-609(3), 62-605(b) and 62-615(1).48 Although Qwest has moved to dismiss
AT&T's Complaint, and therefore has not answered each allegation contained in the Complaint
Qwest believes that AT&T cited section 62-605(b) erroneously. For purposes of this Motion
Qwest assumes that AT&T intended to refer to section 62-605(5)(b). Even so, section 62-
605(5)(b) does not apply here.
Section 62-605(5)(b) provides that "(t)he commission shall have the continuing authority
to determine the noneconomic regulatory requirements relating to basic local exchange service
for all telephone corporations providing basic local exchange service. . . .49 AT&T's Complaint
does not ask the Commission to "determine the noneconomic regulatory requirements" relating
to Qwest's provision of "basic local exchange service so but rather to adjudge its rights (if any)
to opt into certain terms in long-expired interconnection agreements between Qwest and two
other carriers. Moreover, as AT&T's complaint makes clear, AT&T is seeking economic
See Compl. at ~ 8.
Idaho Code ~ 62-605(5)(b) (emphasis added).
The term "basic local exchange service" is defmed in Idaho Code ~ 62-603 (1).
QWEST CORPORATION'S RESPONSE
TO THE COMMISSION'S NOTICE OF ORAL ARGUMENT
Case No. QWE-06-17-Page 16 of18
\\\DC - 066983/000055 - 2409538 v4
damages.51 Although section 62-605(5)(b) does not define "noneconomic " the Idaho Code
defines economic damage, in other contexts, as "objectively verifiable monetary 10SS.52 Thus
section 62-605( 5)(b), by its very terms, does not vest jurisdiction or venue in the Commission to
resolve the claims AT&T presses here.
The Commission is a tribunal of limited jurisdiction whose authority flows entirely from
the enabling statutes. 53 Generally, the interpretation and enforcement of contracts does not fall
within the Commission s jurisdiction. 54 Given the statutory definition of "economic damages
and the limitation of the Commission s authority to "noneconomic regulatory requirements
relating to "basic local exchange service " any expansion of the Commission s authority beyond
non-price regulation for basic local service would be inconsistent with the plain language of the
statute.
Here, the Commission s authority to entertain disputes dealing with interconnection
agreements or other issues arising under the Federal Act depends on federal jurisdictional grants
of authority. 55 Idaho s enablingprovision,Idaho Code ~ 62-615(1) gives "(t)he
commission. . .full power and authority to implement the federal telecommunications act of
1996 , including, but not limited to, the power to establish unbundled network element charges in
accordance with the act." Section 62-615(3) allows "(t)he commission (to) promulgate rules
51 See Compl. at ~ 23.52 Idaho Code ~ 6-1601(3) (defmitions governing periodic payments of judgments on tort liabilities); see also
Idaho Code ~ 19-5304 (defming "economic loss" for purposes of restitution for crime victims as "the value of
property taken, destroyed, broken, or otherwise harmed"
53 Afton Energy, Inc. v. Idaho Power Co.729 P.2d 400 403 (1986); Idaho Power Co. v. Cogeneration, Inc.
129 Idaho 46, 50 (1996).
Afton Energy, 729 P.2d at 403.
See e., Pac. Bel 325 F.3d at 1126.
QWEST CORPORATION'S RESPONSE
TO THE COMMISSION'S NOTICE OF ORAL ARGUMENT
Case No. QWE-06-17-Page17ofI8
\\\DC - 066983/000055 - 2409538 v4
and/or procedures necessary to carry out the duties authorized or required by the federal
telecommunications act of 1996." For these reasons, section 62-615 serves as the Commission
only source of authority to address AT&T's claims - claims that, as federal courts and other
commissions have found, arise under the Federal Act, not under Idaho or any other state s law.
DATED this'zi st day of December, 2006.
Respectfully submitted
Mary S. bson (ISB. No. 2142)
999 Mai . Suite 1103
Boise, ill 83702
Douglas R. M. Nazarian
Hogan & Hartson
111 South Calvert Street
Baltimore, MD 21202
Attorneys for Qwest Corporation
QWEST CORPORATION'S RESPONSE
TO THE COMMISSION'S NOTICE OF ORAL ARGUMENT
Case No. QWE-06-17
--
Page 18 of
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CERTIFICATE OF SERVICE
I do hereby certify that a true and correct copy of the foregoing Response to the
Commission s Notice of Oral Argument was served on the 21st day of December, 2006 on the
following individuals:
Jean D. Jewell
Idaho Public Utilities Commission
472 West Washington Street
O. Box 83720
Boise, ill 83702
Telephone [phone]
Facsimile: [phone]
i iewell(tp,puc.state.id.
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
Theodore A. Livingston
Dennis G. Friedman
Mayer, Brown, Rowe & Maw LLP
71 South Wacker Drive
Chicago, IL 60606-4637
dfri edman~ma yer bro wn. com
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email
Hand Delivery
---K-u. S. Mail
Overnight Delivery
Facsimile
---K-Email
Molly O'Leary
Richardson & O'Leary
515 North 2ih Street
O. Box 7218
Boise, Idaho 83707
mo llv(tp,richardsonando leary. com
Dan Foley
General Attorney & Assistant General Counsel
AT&T West
O. Box 11010
Reno, Nevada
df6929(tp,att.com
Hand Delivery
U. S. Mail
Overnight Delivery
Facsimile
Email---K-
~~?z
Mary S. Ho
Attorney for Qwest Corporation
EXHIBIT A
Case 2:06-cv-00232-WFD Document 33 Filed 12/13/2006 Page 1 of 10
United States District Court
For The District of Wyoming
AT&T COMMUNICATIONS OF THE
MOUNTAIN STATES, INC.
Defendant(s).
Case No. 06-CV-232-
Plaintiff( s),
vs.
QWEST CORPORATION
ORDER DENYING MOTION TO REMAND
This matter comes before the Court on Plaintiff's Motion to Remand. The Court
having considered the briefs and materials submitted in support of the motion and
Defendant's opposition thereto , having heard oral argument of counsel and being
otherwise fully advised , FINDS and ORDERS as follows:
Background
Plaintiff AT&T filed this action on August 28 2006, in the District Court for the
First Judicial District , State of Wyoming. AT&T alleges claims for breach of contract
breach of covenant of good faith and fair dealing, violation of Wyo. Stat. 937-15-404
(prohibiting telecommunications corporations from discriminating as to different
customers), and fraud. As discussed in the Complaint, the impetus behind the
agreements between AT&T and Qwest is the federal Telecommunications Act of 1996
Case 2:06-cv-00232-WFD Document 33 Filed 12/13/2006 Page 2 of 10
47 U.C. ~ 151 et seq.which requires incumbent telecommunications carriers such as
Qwest to enter into contracts with other telecommunications carriers that request
access to the incumbent carrier s network, facilities and services. These contracts
called "interconnection agreements," set out the incumbent carrier s obligations to
provide interconnection , services, and/or network, elements to competing carriers and
the rates at which they are to be provided. All agreements must be filed with the
appropriate State public utilities commission for approval. Once approved , the
incumbent carrier must make available any interconnection , service , or network element
provided under the agreement to any other requesting carrier at the same rates and on
the same terms and conditions as those provided in the approved interconnection
agreement. To effectuate this requirement, the agreements must be available for public
inspection.
AT&T alleges that Qwest violated federal law by entering into secret
interconnection agreements with two telecommunications providers in Wyoming,
whereby those two providers were allowed to purchase certain products and services at
discounted rates not offered to other carriers. Because the agreements were not filed
as required by law, AT&T alleges, it did not have an opportunity to make a timely
demand for the same discounted rates.
AT&T contends that in addition to violating federal law, Qwest's concealment of
the secret agreements also constituted a breach of its interconnection agreements with
Case 2:06-cv-00232-WFD Document 33 Filed 12/13/2006 Page 3 of 10
AT&T, which required Qwest to "act in good faith and consistently with the intent of the
(1996) Act" AT&T further contends that Qwest's conduct constitutes a breach of the
covenant of good faith and fair dealing, fraud , and violation of Wyoming law.
Defendant removed the case to federal court, asserting that the Plaintiffs claims
are premised upon allegations arising under the federal Telecommunications Act, thus
raising federal questions that fall within the jurisdiction of this Court.
Discussion
In moving for remand , Plaintiff argues that its claims for breach of contract and
implied covenant of good faith and fair dealing require the interpretation and
enforcement of contracts which involves the application of state contract law. AT&T
insists that its complaint simply seeks enforcement of the terms of its contracts with
Qwest
Plaintiff argues that courts must interpret the removal statute narrowly and
presume that the plaintiff may choose his or her forum. Plaintiff asserts that there is no
federal claim stated on the face of its well-pleaded complaint, arguing that, even though
the agreement was mandated by federal law and implements a federal scheme, the
interconnection agreement itself and state law principles govern the questions of
interpretation of the contract and enforcement of its provisions. See Southwestern Bell
Telephone Co. v. Brooks Fiber Communications of Okla., Inc.235 F.3d 493, 499 (10th
Case 2:06-cv-00232-WFD Document 33 Filed 12/13/2006 Page 4 of 10
Cir. 2000).
Plaintiff contends that reference to or incorporation of a federal standard in a
contract does not transform a state law claim based on that contract into a federal
question. Plaintiff argues that the contract at issue in Brooks Fiber likewise tracked the
language of an FCC rule setting forth the scope of the parties reciprocal compensation
obligations under Section 251 (b )(5) of the 1996 Act. Plaintiff also cites to Empire
HealthChoice Assurance, Inc. v. McVeigh 126 S.Ct. 2121 (2006), wherein the Court
held that a complaint seeking to "vindicate a contractual right contemplated by a federal
statute" was not necessarily a claim arising under federal law for which the federal
courts have original federal question jurisdiction. Id. at 2131-34.
Finally, in its Notice of Removal, Defendant referenced a decision by the Oregon
Public Utility Commission that the breach of contract claims asserted by AT&T are
properly characterized as arising under federal law. Plaintiff argues that this Court is
not bound by the classification of a claim by a state administrative body for purposes of
assessing the Court's own subject matter jurisdiction under 28 U.C. ~ 1331.
In opposition , Defendant contends that this case was properly removed because
federal law creates the cause of action and the Plaintiffs right to relief necessarily
depends on resolution of a substantial question of federal law.
By way of introduction , Defendant points out that in 2002, AT&T first raised its
complaints against Owest to state utility commissions and the FCC , arguing, among
Case 2:06-cv-00232-WFD Document 33 Filed 12/13/2006 Page 5 of 10
other things , that Qwest had violated Sections 252(a)(1) and (e) of the Act by failing to
file the two agreements at issue with state commissions. Qwest subsequently
terminated the two "secret" interconnection agreements over four years ago. AT&T
chose not to file suit prior to the expiration of the express two-year statute of limitations
under Section 415 of the Federal Act. Defendant argues that AT&T is attempting to
recast its Section 252 arguments in the "masquerade" of state law claims but cannot
revive stale federal claims by recasting them as state law contract or tort violations.
Pursuant to 28 U.C. ~ 1331 , district courts have "original jurisdiction of all civil
actions arising under the Constitution , laws, or treaties of the United States." A case
arises under federal law if its "well-pleaded complaint establishes either that federal law
creates the cause of action or that the plaintiff's right to relief necessarily depends on
resolution of a substantial question of federal law.Empire Healthchoice 126 S.Ct. at
2131.
Defendant asserts that any obligation by Qwest to file the two interconnection
agreements arose under Sections 252(a) and (e) of the Federal Act. Once the
agreements were no longer in effect, federal law extinguished the duty for them to be on
file. Similarly, any right AT&T may have had to the terms in a competitor
interconnection agreement arose from - and were bounded by - Section 252(i) and
related policies of the FCC carefully circumscribing that "opt-" right. Defendant
contends that federal , not state , law creates the cause of action. Clearly, AT&T's right
Case 2:06-cv-00232-WFD Document 33 Filed 12/13/2006 Page 6 of 10
to relief necessarily depends on resolution of substantial questions of federal law.
Defendant argues that Plaintiff cannot evade federal question jurisdiction by artful
pleading. Citing to Contact Communications v. Qwest Corp.246 F.Supp.2d 1184, 1190
(D. Wyo. 2003), Defendant contends that this Court has jurisdiction where the predicate
acts underlying state breach of contract claims arise out of alleged violations of the
Telecommunications Act. Defendant asserts that AT&T's claims all depend on the
same core proof concerning Qwest's compliance with the federal Act and AT&T's ability
to opt into its competitors' interconnection agreements pursuant to Section 252(i) and
FCC regulations.
Defendant further argues that AT&T misreads the McVeigh case which is not
relevant here. This is not a case where the Plaintiff simply references federal law in a
contract. Rather, the federal Act itself governs not only the establishment of the
agreements at issue , but in particular: (1) when such agreements must be made public
to other competitors through filing; and (2) when competitors mayor may not have
access to the same terms. Defendant first argues that, unlike here , the contract at issue
in McVeigh was an ordinary health insurance contract. Second, the jurisdictional statute
under FEHBA is far more circumscribed than the Telecommunications Act. Those
contracts were not compulsory and did not contain federally-mandated provisions that
were binding between the parties. Defendant contends that the Telecommunications
Case 2:06-cv-00232-WFD Document 33 Filed 12/13/2006 Page 7 of 10
Act is more closely analogous to the statutory scheme embodied in the Federal Tort
Claims Act than to FEHBA. While the FTCA looks to state law for the applicable
substantive tort law, federal law defines the applicable limitations period.
Finally, Defendant asserts that the decisions of the Oregon Commission are
further persuasive precedent in support of federal question jurisdiction here. The
Oregon Public Utility Commission dismissed materially identical AT&T claims as barred
under the two-year statute of limitations in Section 415 of the Act, finding that AT&T's
claims were based on the allegations that Owest violated section 252(i) which squarely
fall under federal law.
The Court agrees with Defendant that subject matter jurisdiction is present here.
The cases cited by Plaintiff are distinguishable from the circumstances now before this
Court. In Brooks Fiber, supra the FCC had ruled that the Act's ~ 251 (b)(5) obligations
should apply only to traffic that originates and terminates within a local area. 235 F.
at 495. Accordingly, the agreement between the parties defined "local traffic" for
purposes of the reciprocal compensation requirement. Although the parties' agreement
incorporated statutory obligations, it further defined the terms that were subsequently at
issue in the lawsuit. The state commission ultimately required reciprocal compensation
for calls to Internet Service Providers "not because federal law requires such
compensation, but because the Agreement, as construed under Oklahoma state law
requires it." 'd. at 499.
Case 2:06-cv-00232-WFD Document 33 Filed 12/13/2006 Page 8 of 10
Likewise in Empire Healthchoice, supra, the provisions of the health insurance
contract at issue, regarding reimbursement and subrogation , were dependent upon a
recovery from a third party, under terms and conditions ordinarily governed by state law.
126 S.Ct. at 2132. Although federal law authorized the contracts, the contract
provisions at issue were separate and apart from the obligations imposed or matters
addressed by the Federal Employees Health Benefits Act. Id. at 2128 , 2134.
Here, Plaintiff's Complaint clearly asserts violations of Defendant's obligations
under the Telecommunications Act. See Compl. at ~ 18 ("Owest did not file these
agreements with the PSC as required by law.); ~~ 19, 20 (interconnection agreement
required Owest to abide by the terms of the 1996 Act");~ 30 ("Owest violated its duty of
good faith and fair dealing by failing to act consistently with the intent of the 1996 Act
, . .
. by intentionally failing to comply with the filing requirements of federal. . . law ); ~ 38
("Owest had an affirmative duty to apprise AT&T of the existence of the secret
agreements by filing them as required by law.). Other than a single, brief reference to
a clause in the agreement that might arguably be distinct from Owest's statutory
obligations, see Compl. Ex. 1 , Section 2., Plaintiff has not alleged a breach of any
contractual provision separate and apart from the requirements imposed by the
Telecommunications Act. Although Plaintiff characterizes its claims as state law claims
and insists it is merely seeking to enforce the terms of its agreements with Owest
, "
the
predicate acts underlying the state breach of contract claims all arise out of purported
Case 2:06-cv-00232-WFD Document 33 Filed 12/13/2006 Page 9 of 10
violations of Qwest's obligations under the (Act).Contact Comm.246 F.Supp.2d at
1190. "The jurisdiction of this Court under the (Act) does not change whether (Plaintiff)
casts its claims under federal law as violations of the 1996 Act or characterizes them as
state law claims.Id.
The Court finds that Plaintiff's right to relief necessarily depends on resolution of
a substantial question of federal law. In Verizon Maryland, Inc. v. Global Naps, Inc.
377 F.3d 355 , 364 (4th Cir. 2004), the Fourth Circuit Court of Appeals found that the
contract interpretation claims involving the interconnection agreements there arose
under federal law because they involve duties that are creations of federal law. The
Court is persuaded by the Fourth Circuit's reasoning which is applicable here.
Interconnection agreements are thus the vehicles chosen by Congress to implement
the duties imposed (by the Act). They are, in short, federally mandated agreements
and (t)o the extent an agreement imposes a duty consistent with the Act. . . that duty is
a federal requirement'" Id. (quoting Int'I Assoc. of Machinists v. Central Airlines, Inc.
372 U.S. 682 , 695 (1963)). Federal question jurisdiction exists where, as here , a
complaint calls for interpretation of a federally mandated interconnection agreement
which incorporates federal law and the provision at issue implements a duty imposed by
the Act See id. at 366. "(The Court) is not saying that every dispute about a term in an
interconnection agreement belongs in federal court, but when the contractual dispute
(like the one here) involves one of the 1996 Act's essential duties, there is a federal
Case 2:06-cv-00232-WFD Document 33 Filed 12/13/2006 Page 10 of 10
question.Id. THEREFORE , it is hereby
ORDERED that the Plaintiff's Motion to Remand is DENIED.
DATED this 12th day of December, 2006.
~7~
UNITED STATES DISTRICT JUDGE
10-
EXHIB IT B
STATE OF IOWA
DEPARTMENT OF COMMERCE
UTILITIES BOARD
IN RE:
AT&T COMMUNICATIONS OF THE
MIDWEST, INC., AND TCG IOWA, INC.
Complainants,DOCKET NO. FCU-06-
OWEST CORPORATION
Respondent.
ORDER GRANTING MOTION TO DISMISS
(Issued December 4 , 2006)
INTRODUCTION AND SUMMARY
On August 28 2006, AT&T Communications of the Midwest, Inc., and TCG
Iowa, Inc. (collectively, Complainants), filed a complaint against Owest Corporation
(Owest). Complainants allege that Owest entered into interconnection agreements
prior to 2002 that should have been filed with the Board and made available to all
competitive local exchange carriers (CLECs), but were not. Complainants allege that
Owest's actions were a breach of the contracts (interconnection agreements)
between Complainants and Owest; that the failure to file the agreements was a
violation of the Board's rules, specifically 199 lAC 38.7(4); and that Owest's actions
amounted to common law fraud. Complainants allege jurisdiction based on various
DOCKET NO. FCU-06-
PAGE 2
state statutes and ask the Board to set the matter for hearing; find that Qwest'
interconnection rates charged to Complainants were unlawful and discriminatory;
order Qwest to pay damages to Complainants; order Qwest to refund all overcharges
to Complainants, plus interest; and for such other relief as the Board may find
appropriate.
On September 18 , 2006, Qwest filed a motion to dismiss the complaint
arguing the complaint is grounded in federal law and therefore the two-year federal
statute of limitations (47 U.C. 9415) applies. Qwest also argues that collateral
estoppel (based on a decision by the Oregon Public Utility Commission (PUC)) and
res judicata (based on the Board's actions in 2002 with respect to these same
agreements) both require that the complaint be dismissed.
On October 16 , 2006 , Complainants filed a pleading suggesting that this
matter should be stayed because they have filed the same claims and issues in state
court (removed by Qwest to federal court) and there is no need for the Board to
expend resources on this docket at this time. In the alternative, Complainants
opposed Qwest's motion to dismiss , arguing that 9 415 does not apply to the state
law claims presented in the complaint, that the Oregon PUC's decision is not entitled
to preclusive effect, and that res judicata does not apply because the scope of the
Board's 2002 investigation was narrow and AT&T could not have presented its
current claims in that docket.
DOCKET NO. FCU-06-
PAGE 3
On October 30 2006, Qwest filed an opposition to the suggested stay and a
reply to the response to its motion to dismiss. With respect to the stay, Qwest argues
that it is entitled to dismissal at this time. Qwest also points out that AT&T can
dismiss the Board proceedings on its own if it does not want to proceed with the
case.
In its reply in support of the motion to dismiss , Qwest argues that the federal
statute of limitations applies because the operative facts in this matter are governed
by federal law. Qwest repeats its arguments that the Oregon PUC decision is
preclusive and that res judicata applies, noting that AT&T could have raised these
issues in the Board's 2002 proceeding, but did not.
On November 7 2006 , Complainants filed a response to Qwest's reply,
including new authority in the form of a decision issued October 27 , 2006, by the
Eighth Circuit Court of Appeals. Complainants argue the new authority supports their
position that the federal statute of limitations does not apply.
The various arguments and authorities will be described in greater detail
below. The Board will grant the motion to dismiss on the basis of res judicata. There
is nothing in this case that could not have been presented in the Board's 2002 docket
dealing with the same facts. AT&T should not be permitted to split its claim in this
manner.
DOCKET NO. FCU-06-
PAGE 4
BACKGROUND FACTS FROM 2002 PROCEEDING
On February 27, 2002, AT&T Corporation (AT&T) filed a letter with the Board
alleging that Qwest had entered into a series of secret agreements granting
preferential treatment to some CLECs , specifically Covad Communications Company
(Covad) and McLeod USA Incorporated (McLeod USA). After considering various
filings by Qwest, on April 1 , 2002 , the Board issued an order docketing AT&T's
complaint as AT&T Corporation vs. Qwest Corporation , Docket No. FCU-02-2. The
Board found it would be most efficient to address the legal issues first, before
investigating any fact issues , and established a briefing schedule to let the parties
address the scope of the obligation to file interconnection agreements pursuant to
federal law.
On May 29 2002 , the Board issued an order defining the scope of the filing
obligations. The Board tentatively found that Qwest had violated 47 U.C. 99251 (c)
and 252(a) through, (i) and 199 lAC 38.7(4) by failing to file certain interconnection
agreements with the Board. The Board gave the parties 20 days to file a request for
hearing if any party disagreed with the Board's tentative findings; if no request for
hearing was filed, the tentative findings would become the final , binding decision of
the Board.
No request for hearing was filed and the tentative findings became final.
The unfiled agreements were separate agreements that Qwest entered into
with Covad and McLeod USA. In each case, Qwest offered the CLEC certain terms
DOCKET NO. FCU-06-
PAGE 5
and conditions that were more favorable than it offered to other CLECs. In return for
its special agreement, Covad agreed to withdraw its opposition to the proposed
merger between US WEST Communications, Inc., and Qwest. The Board's order
does not say what McLeodUSA exchanged in return for favorable treatment in two
separate unfiled agreements.
AT&T's status in Docket No. FCU-02-2 was different in some respects. AT&T
did not file a normal complaint against Qwest, but instead filed a letter asking the
Board to initiate a complaint. While the docket was pending, it appears AT&T may
not have conducted any discovery of its own; instead, it filed a motion asking the
Board to issue subpoenas to Qwest in the Board's own name, rather than a
subpoena that would permit AT&T to conduct its own discovery. In other words
AT&T tried to participate in the docket in an indirect manner, although it did file a brief
and other pleadings as a party and it was named as a party in the caption of the
docket.
THE 2006 COMPLAINT
As noted above, Complainants filed a new complaint on August 28 2006
seeking refunds and damages associated with the unfiled agreements. Briefly,
Complainants say they had a contractual right to opt into the same terms and
conditions that Qwest was offering to Covad and McLeod USA, but because the
agreements were not filed with the Board as required , they were unable to opt into
the more favorable terms. Complainants say the difference between what they paid
DOCKET NO. FCU-06-
PAGE 6
to Qwest and what they would have paid Qwest under the more favorable terms is in
excess of $1 ,675 000.
The first count of the complaint is for breach of contract. At least one of
Complainants' contracts with Qwest included a clause that required Qwest to make
available to TCG the rates , terms, and conditions of any other interconnection
agreements to which Qwest was a party. Both agreements included a warranty from
Qwest that it would provide Complainants with nondiscriminatory access to
unbundled network elements. Complainants allege Qwest has violated these clauses
and others.
The second count of the complaint is for a violation of 199 lAC 38.7(4), which
requires that all interconnection agreements be filed with the Board. The Board has
already found that Qwest violated this rule. Complainants allege that as a result of
Qwest's violations they were injured in their ability to compete profitably in Iowa
markets , so they have lost profits in addition to increased costs.
Count three of the complaint alleges common law fraud. Complainants assert
Qwest had an affirmative duty to apprise them of the existence of the unfiled
agreements by filing them as required by law and that the existence and content of
the agreements were material facts.
Complainants ask that the Board grant them the following relief:
Initiate a formal proceeding;
Investigate the complaint;
DOCKET NO. FCU-06-
PAGE 7
Set the case for hearing;
Give notice as appropriate;
5. Find Qwest's rates and charges to Complainants to be
discriminatory and in violation of law;
6. Award Complainants damages no less then the difference
between what they paid and what they should have paid to Qwest;
7. Order a refund plus interest of all of Qwest's overcharges to
Complainants; and
For such other relief as the Board deems just.
QWEST'S MOTION TO DISMISS
On September 18, 2006, Qwest filed a motion to dismiss the complaint.
Qwest says the complaint is barred by the federal statute of limitations, collateral
estoppel , and res judicata.
According to Qwest, the relevant federal statute of limitations is 47 U.
9 415, which sets a two-year limit. Here , the issue was first raised by AT&T in its
February 27 2002 , letter to the Board. That resulted in an order on May 29,2002
defining the interconnection agreements that must be filed with the Board, notifying
Qwest that it had violated state and federal law, and giving Qwest 60 days to file any
additional unfiled agreements. The parties, including AT&T, were also given 20 days
to request a hearing if they thought one was required for any reason.
On July 29 2002, Qwest filed 11 agreements that it believed fit within the new
definition, along with 19 more agreements that Qwest thought were not within the
DOCKET NO. FCU-06-
PAGE 8
new definition, but arguably could be. Comments on the filing were due August 19
2002; AT&T filed a statement indicating it did not have time to review the agreements
but had no objection to the filing. On August 26,2002 , the Board found the 19 extra
agreements were not interconnection agreements and did not have to be filed with
the Board.
Now , over four years later, Complainants seek to pursue claims arising from
the same facts as the Board considered in Docket No. FCU-02-2 in 2002. Owest
claims this action is barred by 9 415.
In support of its collateral estoppel claim , Owest points out that the Oregon
PUC recently issued an order (May 11 , 2006) in a similar matter finding that
Complainant's claims rested on alleged violations of federal law and are therefore
barred by 9 415. This order was affirmed on rehearing on August 16, 2006. Owest
says the Complainants chose to file in Oregon first , received an adverse ruling there
and are now forum-shopping in hopes of receiving a more favorable ruling.
In support of its res judicata claim , Owest argues that AT&T initiated the
Board's review of the unfiled agreements in 2002 , based on the same operative facts
as are presented in the 2006 complaint. Claim preclusion under the doctrine of res
judicata prohibits parties from splitting or trying claims in a piecemeal fashion.
party must litigate all matters arising out of a single transaction at one time and not in
separate actions. Tiqqes v. City of Ames, 356 N.2d 503 , 509 (Iowa 1984). In
order to invoke claim preclusion, Owest must show that (1) the parties in the first and
DOCKET NO. FCU-06-
PAGE 9
second action are the same, (2) the claim in the second suit could have been fully
and fairly adjudicated in the first action, and (3) there was a final judgment on the
merits in the first action. Iowa Elec. Liqht & Power Co. v. Laqle, 430 N.2d 393
397 (Iowa 1987); Penn v. Iowa State Bd. of Reqents 577 N.2d 393 , 398 (Iowa
1998) (claim preclusion bars all matters actually determined in the first action and all
relevant matters that could have been determined).
Here, Qwest says that all three elements are satisfied. AT&T and Qwest were
parties to the first action; the Complainants' current claims could have been fully and
fairly adjudicated in the first docket; and the Board issued a final order on the merits.
AT&T'S SUGGESTION THAT MATTER BE STAYED AND ALTERNATIVE
RESISTANCE TO MOTION TO DISMISS
On October 16, 2006, Complainants filed a "suggestion" that the Board should
stay this proceeding because they have filed the same claims and issues in a parallel
court case. Specifically, Complainants state that they have filed the same complaint
in state district court. Qwest subsequently had the case removed to federal court on
the basis of diversity of citizenship and alleged federal question jurisdiction.
Complainants did not contest removal based on diversity, but they dispute the claim
of federal question jurisdiction.
Complainants say they sued in court because they can be awarded damages
there
, "
but it is unclear whether the Board has the authority to adjudicate AT&T's
claims and award such damages." (Suggestion at page 1.) They say they filed the
DOCKET NO. FCU-06-
PAGE 10
complaint only as a protective measure , in case the court were to require that some
of the claims to be presented to the Board in the first instance. They argue that the
Board should stay this docket to see what action the court takes.
In the alternative , Complainants filed their opposition to the motion to dismiss.
They argue that each count of the complaint (for breach of contract, violation of
Board rule , and fraud) clearly arises under state law, not federal law, so the federal
statute of limitations does not apply. They argue collateral estoppel does not apply to
the Oregon PUC decision because it is only an unreviewed decision by another
state s public utility commission. Moreover, they note that the Washington Utilities
and Transportation Commission recently ruled the opposite way. Finally, they argue
Qwest's res judicata argument fails because the Board limited the scope of the
investigation in Docket No. FCU-02-
The state-vs.federallaw and collateral estoppel issues will be discussed in
greater detail below, in connection with some more recent authority included in a
subsequent filing. At this point, the Board will focus on the res judicata issue.
Complainants argue that they could not have brought their current claims in
Docket No. FCU-02-2 because that docket "was a Board-initiated investigation.
(Suggestion at page 20.) As such
, "
it was therefore the Board, not AT&T, that
determined the scope of the proceeding. And that scope was narrow." (lQ.
Complainants say the earlier docket was "confined to the legal issue of what type of
agreement is required to be filed , and did not consider, or leave room for considering,
DOCKET NO. FCU-06-
PAGE 11
the anticompetitive harms or discrimination against other carriers resulting from
Qwest's actions , much less whether those actions violated the terms of Qwest'
contracts with other carriers." (Suggestion at pp. 20-21.
Complainants say that the Board has the authority to limit the scope of an
investigation, pursuant to 199 lAC 6.5(3), and that the Board exercised that authority
when it limited the investigation to the legal question of what types of contracts must
be filed. Accordingly, Complainants argue they did not have a full and fair
opportunity to litigate the breach of contract claim in 2002.
Complainants also allege the Board "expressly deferred any consideration of
specific carrier-to-carrier disputes" (Suggestion at page 21), but they provide no
citation to any Board order as support for this statement and the Board is unable to
confirm it. The closest statement appears to be in the April 1 , 2002, docketing order
when the Board said it would consider the legal issue first "and will consider a more
complete procedural schedule at a later date." (Order at page 3.) In the Board's final
order issued on May 29 2002, the Board made it clear that it was making tentative
findings based upon adjudicative facts that appeared to be undisputed. The Board
further stated that "any party" could request a hearing to further explore the facts if it
so desired and gave 20 days for parties to file such a request. Finally, the Board
made it clear that "if no request for hearing is filed within 20 days of the date of this
order, then the tentative findings set forth above will become the final , binding
decision of the Board.
" ("
Order Making Tentative Findings, Giving Notice for
DOCKET NO. FCU-06-
PAGE 12
Purposes of Civil Penalties, and Granting Opportunity to Request Hearing," issued in
Docket No. FCU-02-2 on May 29,2002.) The Board is unable to find an express
deferral of carrier-to-carrier disputes in any of these Board statements.
Finally, Complainants argue that res judicata could apply in this case only if
the Board first determined that it now has , and had in 2002 , the authority to address
Complainants' claims and to award the monetary damages they seek. Complainants
say their "research has not revealed a definitive answer regarding whether the
Commission (sic) has such authority." (Suggestion at page 23.
QWEST'S OPPOSITION TO STAY AND REPLY
On October 30 2006, Qwest filed an opposition to the suggestion that this
matter should be stayed and a reply in support of its motion to dismiss.
With regard to the proposed stay, Qwest points out that the Board reviewed
this matter four years ago in Docket No. FCU-02-2; AT&T raised these issues again
in proceedings that year in 9 271 proceedings before the Board and the FCC; and it
is time to bring this matter to a conclusion. Qwest also points out that the
Complainants are free to dismiss their complaint if they do not wish to pursue the
matter before the Board.
In its reply to the resistance to its motion to dismiss, Qwest says that the
operative facts underlying the complaint are governed by federal law and the specific
claims being asserted are based on federal law, so the federal statute of limitations
should apply. Qwest asserts that Complainants should not be permitted to sidestep
DOCKET NO. FCU-06-
PAGE 13
9 415 by disguising a complaint based on federal law as a state law breach of
contract claim. Complainants also assert that Count II of the complaint, alleging a
violation of a Board rule , is also federal at heart, because the rule in question was
adopted in order to implement federal law. Finally, Qwest says Count III , the fraud
count, is based on an alleged duty to file the interconnection agreements "as required
by law " and the relevant law is federal (specifically, 9 252( a)( 1) and (e)).
Next, Qwest argues that the Oregon PUC's decision is preclusive , relying on
its earlier arguments to that effect.
Finally, Qwest argues that res judicata applies, noting that AT&T prompted the
Board's 2002 docket with a letter and AT&T participated actively in that docket.
AT&T could have sought the relief it now seeks in the 2002 docket, but it did not even
ask, according to Qwest. Thus, Qwest says , Complainants cannot credibly argue
that the Board limited the 2002 proceedings in a manner that precluded consideration
of these issues. Qwest says that AT&T sought similar damages in a proceeding
pending before the Minnesota Commission at the same time, so it was AT&T's
choice not to pursue the issue in the Iowa proceedings.
COMPLAINANTS' RESPONSE TO QWEST'S REPLY
On November 7 2006, Complainants filed a response to Qwest's reply. The
filing included a copy of a very recent decision that is relevant to this matter Connect
Comms. Corp. v. Southwestern Bell TeL. loP.No. 05-3698 , 2006 WL 3040611 (8th
Cir., October 27 2006). In that decision, according to Complainants, the Eighth
DOCKET NO. FCU-06-
PAGE 14
Circuit found that disputes over the interpretation and enforcement of interconnection
agreements are governed by state law, even if the contract dispute otherwise may
implicate or require consideration of federal law. Thus, Complainants argue , it is
clear that Count I of the complaint is a state law claim that is not barred by the federal
statute of limitations.
Complainants also assert that the new decision forecloses Owest's collateral
estoppel theory, as the Court expressly held that "state commissions are not bound
by decisions reached by other state commissions, even in construing similar or
identical terms.Connect, 2006 WL 3040611 , at *
Complainants also provided a copy of a recent Oregon state court decision
denying a motion to dismiss filed in that case by Owest. AT&T Communications of
the Pacific Northwest. Inc.. v. Owest Corp.No. 0607-07247 (Or. Cir. Ct. Nov. 2
2006). The order does not include much discussion, but Complainants assert that by
denying Owest's motion in its entirety, the court necessarily rejected all of Owest'
arguments.
Finally, Complainants reiterate their earlier arguments regarding res judicata.
ANALYSIS AND DECISION
The Board will dismiss the complaint on the basis of res judicata. All of the
issues related to the unfiled agreements could have been , and should have been
litigated in 2002; it would be an inefficient use of the Board's and the parties
DOCKET NO. FCU-06-
PAGE 15
resources to open another docket now to resolve matters that could have, and
should have , been raised in 2002.
Because it is ruling on the basis of res judicata, the Board will not address
the claims regarding the federal statute of limitations and the legal effect of the
Oregon PUC's decision.
It is clear that AT&T could have brought the claims it is bringing now as a
part of the Board proceedings in 2002. At the very least, AT&T could have tried to
pursue them in that docket, but for whatever reason it chose not to. There is simply
no reason to let AT&T bring its case twice.
It is true that AT&T took an unusually reticent approach to the 2002 case.
The company started the case with a letter to the Board asking the agency to
initiate an investigation , rather than a standard complaint. The company sought to
have the Board conduct discovery from Qwest, rather than doing it for itself. In
these ways , AT&T apparently tried to limit its involvement in Docket No. FCU-02-
to an indirect mode. However, the fact remains that it was AT&T's letter that
initiated the proceeding, and the Board docketed the matter as Re: AT&T
Corporation vs. Qwest Corporation, so there can be no doubt that AT&T was aware
of the matter and was a party to the case. Moreover, AT&T participated vigorously
and effectively in the proceedings.
Res judicata, or claim preclusion , requires that four factors be shown before
the doctrine will apply to preclude an action. First, the parties in the first and
DOCKET NO. FCU-06-
PAGE 16
second actions must be the same. Second , the claim in the second suit must be
something that could have been fully and fairly adjudicated in the prior case. Third
there must have been a final judgment on the merits in the first case. Finally, the
two claims must arise from the same transaction. Arnevik v. Univ. of Minn. Bd. of
Reqents , 642 N.2d 315, 319 (Iowa 2002); Tiqqes v. City of Ames , 356 N.
503 508-09 (Iowa 1984); Riley v. Maloney, 499 N.2d 18,20 (Iowa 1993) ("
second claim is likely to be considered precluded if the acts complained of, and the
recovery demanded, are the same or when the same evidence will support both
actions.
Each of these factors is present in this case. Clearly, AT&T and Qwest were
parties to the 2002 action and they are parties to this docket. The Complainants
have not argued that the presence of TCG Iowa , Inc., a corporate affiliate of AT&T
makes any difference , and the Board cannot see any reason why it should. The
first factor is not disputed.
The second factor requires that the claims in this docket could have been
fully and fairly adjudicated in the prior proceeding. Complainants claim that they
were foreclosed from bringing their claims in 2002 because the Board initiated the
docket and chose to limit the scope of the proceeding. However, the Board initiated
the docket at the request of AT&T and included AT&T as a named party, so AT&T's
claim that "Docket No. FCU-02-2 was a Board-initiated investigation" is not strictly
correct; the Board acted in response to AT&T's letter. (Quote taken from page 20
DOCKET NO. FCU-06-
PAGE 17
of the Complainants
' "
Suggestion That This Matter Be Stayed , And, In The
Alternative , Opposition to Qwest's Motion to Dismiss" at page 20.
The Board did not limit the scope of the proceeding in the manner described
by Complainants , either. They state "that (2002) Docket was confined to the legal
issue of what type of agreement is required to be filed, and did not in any way
consider, or leave room for considering, the anticompetitive harms to or
discrimination against other carriers resulting from Qwest's actions, much less
whether those actions violated the terms of Qwest's contracts with other carriers.
, emphasis added.) This is not an accurate description of Docket No. FCU-02-
The Board addressed the legal issue (that is, the definition of the interconnection
agreements that have to be filed with the Board) first, but it then offered both of the
parties the opportunity to ask for a hearing if they believed there were any material
issues of adjudicative fact to be decided. AT&T had the opportunity to raise any
and all claims at that time. It chose not to. It should not be permitted to change its
corporate mind and initiate a new docket four years later to re-hash matters that
could have been raised when they were already before the Board and fresh.
Complainants argue that the second element may not be satisfied because it
is not clear that the Board has the authority to grant them the relief they seek.
Thus, they argue, the Board could not have fully and fairly adjudicated their claims
in 2002. (Suggestion at page 23.) This argument is without merit. If the Board
could not have awarded damages in 2002 , then it cannot award damages now.
DOCKET NO. FCU-06-
PAGE 18
The idea that the Board should hear this case now because it may not be able to
award the requested relief is rejected.
Third , the Board issued a final order on the merits. The May 29 2002 , order
made tentative findings of fact, but it also gave the parties 20 days to file a request
for hearing if they wanted one , and then provided that "if no request for hearing is
filed within 20 days of the date of this order, then the tentative findings set forth
above will become the final, binding decision of the Board." (Order at page 21
Ordering Clause No.) There can be no doubt that this was a final order on the
merits.
Finally, the claims in this action clearly arise out of the same transaction that
was at issue in Docket No. FCU-02-2: Qwest's failure to file with the Board certain
interconnection agreements as required by law. In the absence of that transaction
Complainants have no claim for breach of contract, no claim for violation of Board
rules , and no claim for common law fraud. The fourth element is satisfied.
For all of these reasons, the Board finds that res judicata bars the
Complainants from bringing this action before the Board. The motion to dismiss will
be granted.
DOCKET NO. FCU-06-
PAGE 19
ORDERING CLAUSE
IT IS THEREFORE ORDERED:
The motion to dismiss filed in this docket on September 18, 2006, by Owest
Corporation is granted on the basis of res judicata, as described in the body of this
order.
UTILITIES BOARD
/s/ John R. Norris
/s/ Diane Munns
ATTEST:
/s/ Judi K. Cooper
Executive Secretary
/s/ Curtis W. Stamp
Dated at Des Moines, Iowa, this 4th day of December, 2006.