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HomeMy WebLinkAbout20070202Vol I.pdfORIGINAL BEFORE THE IDAHO PUBLIC . UTILITIES COMMISSION AT&T COMMUNICATIONS OF THE MOUNTAIN STATES, INC., RESPONDENT. CASE NO. QWE-T-06- COMPLAINANT, vs. QWEST CORPORATION ORAL ARGUMENT BEFORE COMMISSIONER DENNIS HANSEN (Presiding) COMMISSIONER MARSHA H. SMITH COMMISSIONER PAUL KJELLANDER PLACE:Commission Hearing Room 472 West Washington Boise, Idaho DATE:January 24 , 2007 r--..) -j = -..J=io .,-"7;. f"T1m~ 0:'0 0-0 .p :;~~ GC :;:::.. :E ::J: ~~) CJ) !..; VOLUME I - Pages 1 - 33 , ,. . \.D CSB REPORTING Constance S. Bucy, CSR No. 187 17688 Allendale Road * Wilder, Idaho 83676 (208) 890-5198 * (208) 337-4807 Email csb(q)safelink.net For AT&T Communications:RICHARDSON & 0' LEARY by Molly 0 I Leary, Esq. Post Office Box 7218Boise, Idaho 83701 and- MAYER , BROWN, ROWE & MAW by Theodore Livingston , Esq. 71 South Wacker Drive Chicago, Illinois 60606 and- AT&T SERVICES, INC. Dan Foley, Esq. General Attorney Post Office Box 11010Reno, Nevada 89520 For Qwest Corporation:Mary S. Hobson , Esq. Attorney at Law 999 Main Street, Suite 1103Boise, Idaho 83702 and- HOGAN & HARTSON by Douglas Nazarian , Esq. 111 South Calvert Street Suite 1600Baltimore, Maryland 21202 CSB REPORTINGWilder, ID 83676 APPEARANCES BOISE , IDAHO, WEDNESDAY , JANUARY 24, 2007 , 10: 00 A. M. COMMISSIONER HANSEN:Well , good morning, ladies and gentlemen.This is the time and place set by the Idaho Public Utilities Commission for oral arguments in Case No. QWE-T-06-17 with respect to the issues presented by Qwest in its motion to dismiss. Commissioner Dennis Hansen and I'll be Chairman of today s hearing.At my left is Commissioner Marsha Smith.At my right is Commission President Paul Kj ellander.The three of us make up the Commission. d like to begin this morning by taking the appearances of the parties and maybe we can start wi th Qwest. MS. HOBSON:Thank you.Good morning, Mr. Chairman.I I m Mary Hobson representing Qwest Corporation.With me today is Doug Nazarian of the Hogan & Hartson law firm who has been previously admitted Pro Hac Vice and will be presenting the argument today for Qwest. MR. NAZARIAN:Thank you, Commissioners. COMMISSIONER HANSEN:AT&T. MS. 0' LEARY:Good morning, Commissioners. I I m Molly 0' Leary with Richardson & 0' Leary and we are CSB REPORTING Wilder, Idaho COLLOQUY 83676 here representing AT&T Communications of the Mountain States, Inc. and we are the plaintiff in this proceeding, and with me today, to my right, immediate right, is Ted Li vingston and he is with Mayer, Brown, Rowe & Maw LLP and representing AT&T Pro Hac Vice and he will be giving the argument today on behalf of AT&T, and to Mr. Livingston s right is Mr. Foley, Dan Foley, and he is in-house counsel with AT&T and he has also been admitted Pro Hac Vice in this matter. COMMISSIONER HANSEN:Thank you.Well, the order of events today is that we will start with Qwest and allow them to present their argument first and then we ll see if the Commission has questions that they would want to ask, then we ll allow AT&T an opportunity to present their argument, after which we will allow Qwest , if they have desire, to make a closing statement or thoughts that they might want to make. I would like to just mention that we do appreciate the briefs that you filed and today we would encourage that you highlight those points that you wish to draw the Commission s attention to, so if we re ready, then, we would begin with Qwest. MR. NAZARIAN:Thank you, Mr. Chairman and Commissioners, good morning.We appreciate very much the opportuni ty to argue these issues and answer any CSB REPORTING Wilder , Idaho COLLOQUY 83676 questions the Commission may have.I want to be mindful of the questions that the Commission laid out in its oral argument Order and I will not repeat at great length anything in our briefs , but I do think that ultimately the answer to this motion and to the issues before the Commission are really subsumed in the first of the Commission s five questions, which is whether AT&T' claim in this matter is governed by the federal Telecommunications Act of 1996 or Idaho state law. What AT&T has pled, looking past the label of breach of contract, which is a label , but nonetheless, looking to the substance of the claim, what AT&T alleges here and what AT&T has alleged in courts and utility commissions across the region is that Qwest failed in 2000 , 2001 and 2002 to fulfill its obligations under Section 252 of the Telecommunications Act of 1996; that is, Qwest failed to file certain agreements, certain interconnection agreements, it was required to file with this Commission for approval and therefore, those agreements were not available to other carriers such AT&T for them to opt into under Section 252 (i) of the Telecommunications Act. The Commission may remember the unfiled agreements filing that was made here in 2002.It may be familiar with the unfiled agreements of litigation that CSB REPORTING Wilder , Idaho COLLOQUY 83676 took place in a number of commissions across Qwest' s region, but what AT&T brings to this Commission now under the heading of breach of contract is a claim.It says we should get damages from this Commission flowing from Qwest's failure to fulfill its obligations under the federal Telecommunications Act, and the only reason that AT&T is putting a state law label on this federal claim is to avoid the operation of the two-year limitations period that applies to these claims under 47 U. S. C. Section 415. There is no question that AT&T has known about these agreements, the McLeod and Eschelon agreements, into which it seeks to opt since at least the summer of 2002.They don t dispute that.There s no dispute there.There s no explanation for why in the intervening four years AT&T made no effort In any venue or any forum in the State of Idaho to raise these damages claims.The only thing we know is that it has now styled them as a state law claim in this Commission and attempted to get in on the Idaho state law contract statute of limitations which is five years, and we ask this Commission to dismiss these claims because they are at their core federal. Now, if the Commission looks at AT&T' complaint, you ll see that the breach entirely takes the CSB REPORTING Wilder, Idaho COLLOQUY 83676 form of, again , this failure on Qwest I s part to file certain agreements back when they were formed in 2000 and failure to make them available to other carriers to opt into.Those interconnection , the interconnection agreements at issue here of the one between Qwest and AT&T and the interconnection agreements between Qwest and these other carriers, those are all creatures of federal law.There was no such thing as an interconnection agreement before the Telecommunications Act of 1996. There was no obligation by one carrier to interconnect wi th another prior to the Telecommunications Act of 1996. These contracts are created under a structure and by mechanisms that the federal Telecommunications Act creates. If parties, as is the case in many states between Qwest and AT&T, can t agree on terms in these contracts, under the normal law of contracts, there would be no meeting of the minds, there would be no agreement. Under the Telecommunications Act of 1996, they can go to arbi tration and force the agreement or bring the agreement to closure with decisions by other parties, by commissions.Under the Telecommunications Act of 1996, parties can opt into another party s agreement without having to negotiate anything.They can just say I' another carrier , I see that there I s this agreement CSB REPORTING Wilder , Idaho COLLOQUY 83676 between Qwest and AT&T , I'd like to have the same terms and conditions.The federal Act allows you to do that so the agreement that they re saying is breached is a creature of federal law.The conduct that they say breaches it reflects rights and obligations that exist purely under federal law. There is no right other than through Section 252 for another carrier to opt into these Qwest agreements with McLeod or Eschelon, and so what we have -- and how is AT&T damaged?AT&T claims it is damaged because it was deprived of the opportunity to get the same terms and conditions , to opt into the same agreement that Qwest had with McLeod and Eschelon.That is a federal -- that right, to whatever extent it applied to AT&T, arises totally under federal law, and so there is no state law claim here.There is instead a federal claim and part of the bargain that Congress struck , part of the structure in creating this alternative mode of entering into contracts and this new environment in the telecommunications industry, part of that bargain is the two-year limitations period. These claims are stale.There s no reason why AT&T could not and should not have raised them wherever it was appropriate to raise them wi thin the two years prescribed by the federal Act's limitations period CSB REPORTING Wilder, Idaho COLLOQUY 83676 and they don t offer any explanation for why they wai ted this long, so the claims are at their core federal and they re barred by the federal limitations period. We had in our -- Qwest has in its briefs, its original brief , asked this court to invoke the Doctrine of Collateral Estoppel and preclude AT&T from arguing anything contrary to the ruling of the Oregon Commission this summer.In the time since, as the Commission is aware from AT&T's filings , the Washington Transportation Utilities Commission has come to a contrary result.We respectfully believe that commission s analysis is incorrect, but for purposes of today I S proceedings, I think the Washington Commission ruling overtakes by events, in essence , our Collateral Estoppel argument and I don t think I can credibly sit here and tell this Commission that it has to hold AT&T to the Oregon Commission ruling any more than it should hold , hold Qwest, to the Washington Commission decision. That said , I want to point out that the Oregon Commission , the Iowa Utilities Board and the Uni ted States District Court for the District of Wyoming have all in one way or another looked through the state law labels that AT&T has placed on these claims and has found them to be federal.Now , the Oregon Commission decision we attached did exactly what we re asking this CSB REPORTING Wilder , Idaho COLLOQUY 83676 Commission to do.It found that the claims were subj ect to the federal limitations period and it dismissed them. The Iowa Utilities Board , while it had a slightly different situation because it had a docket in 2002, an unfiled agreements docket, as it were, and it found that AT&T's claims now were barred by res adjudicata , by that they could have and should have been brought in the context of that case. m not making that argument here because this Commission didn t have such a proceeding, but one thing that the Iowa Utili ties Board did find, though, was that there would not be -- AT&T would not have the same claims it made there and the same claims it makes here but for the unfiled agreements transactions, but for the same rights and obligations under federal law that were litigated in these dockets back in 2002 and under which they re seeking to recover now , and in the United States District Court for the District of Wyoming, Mr. Livingston and I are going to be there on Monday next week arguing this same motion to dismiss , but that court already has found in denying AT&T's motion to remand that case to state court that there is federal jurisdiction there because despite, again, the state law labels, and there they invoked not only breach of contract but some Wyoming state statutes, that the rights and obligations CSB REPORTING Wilder , Idaho COLLOQUY 83676 that are being contested flowing from AT&T's allegations are federal in nature. Now, that court hasn t dismissed the claims yet.I don t want to suggest that that ruling has come yet , I think it will , but the federal judge in Wyoming already has found that you look past the label, the state law label , on these claims and you look at their substance and when you look at the substance, particularly as AT&T has alleged it , the substance is purely federal. Now , AT&T will almost certainly argue from a series of reciprocal compensation cases in a number of circuits , federal circuits , that those cases stand for the proposition that interpretation and enforcement of interconnection agreements is governed by state law. have two responses to that.First, AT&T is not asking this Commission to interpret its interconnection agreement with Qwest.What it is asking this Commission to do is to find that Qwest' s failure to file agreements In 2000 under 252 , Section 252, and to make those agreements available that that conduct breached the interconnection agreement. That's not an interpretative question. That's not anything that requires this Commission to parse the language of the interconnection agreement, but CSB REPORTING Wilder , Idaho COLLOQUY 83676 secondly, it is not true that interconnection agreements are creatures of state law and governed by state law. They re creatures of federal law.They re created by Section 252 of the Telecommunications Act, and those reciprocal compensation cases , including the Connect case from the Eighth Circuit and the Brooks Fiber case from the Tenth Circuit that are all cited in the briefs, those cases all arise in a context where the FCC faced with that reciprocal compensation dispute said we are going to make a ruling now at a point in time going forward as to how this is going to be handled under federal law , but we also now direct the parties who have this dispute to go back to their state commissions and have the state commissions determine whether the language of the interconnection agreement provided for reciprocal compensation one way or the other. That sort of parsing, meeting of the minds, you know , what did the parties intend when they entered into the contract, that's got a state law component.There s a place where state law can fill in the gaps , as it were , particularly the FCC says so.This dispute doesn t raise any such interpretative question. What AT&T is saying is look at the broad language about parties ' obligations to act consistently with the federal Act, look at the most-favored-nation-clause that refers CSB REPORTING Wilder , Idaho COLLOQUY83676 to Section 252 and find from the fact that Qwest violated certain federal obligations five years ago , six years ago , going on seven years ago, find that we are entitled to damages as a result of Qwest' s violations of federal law.That's not interpretation of the interconnection agreement.That is an attempt to convert a federal claim into a state law claim in order to get in on a different limi tations period. I am happy, Commissioners , to answer any questions.I guess with respect to -- I think the core of our argument answers just about all of the Commission s specific questions and I think they are answered in the briefs and I don t want to get too deeply into it unless there are questions.I guess I would say with respect to the 62-605 (b) code question , as I understand it, Qwest elected to proceed under Title 62 in southern Idaho going back to 1989 and so there isn t any question of Qwest' s services in this state being regulated in that region at least since then. Commissioner Kj ellander is shaking his head.Do I have that wrong? COMMISSIONER KJELLANDER:I believe your timing could be off.That was advanced services, I believe , that began in '89.Ms. Hobson might be able to at least provide some clarification there. CSB REPORTING Wilder , Idaho COLLOQUY83676 MS. HOBSON:That is correct Mr. Commissioner.Qwest deregulated all services except the basic local exchange services in southern Idaho in 1989 , basic local exchange services of Qwest being sort of dial tone and for the small business and residence customers and I think what Mr. Nazarian was stating is the kinds of services purchased by the AT&Ts of the world at that time were not those that remained regulated by the Commission. COMMISSIONER KJELLANDER:That clarification is helpful.Thank you. MR. NAZARIAN:So with that Commissioners that's what we re here to argue and at the core and I' happy to answer any questions the Commission might have. COMMISSIONER HANSEN:And that completes your argument , then? MR. NAZARIAN:It does, subj ect to if could have a brief rebuttal. COMMISSIONER HANSEN:Let's see if we have any questions , then , from the Commission. COMMISSIONER HANSEN:Commissioner Smith? COMMISSIONER SMITH:No. COMMISSIONER HANSEN:I have none ei ther. CSB REPORTING Wilder , Idaho COLLOQUY83676 MR. NAZARIAN:Thank you. COMMISSIONER HANSEN:Let's go to AT&T now. MS. 0' LEARY:Thank you. MR. LIVINGSTON:Thank you , Chairman Hansen , Commissioners.Our claim is a state law breach of contract claim.It isn t a claim for violation of the federal Act masquerading as a state law claim.We aren engaging in artful pleading.A state law breach of contract claim is the only claim we have.We couldn bring a claim for violation of the 1996 Act even if we wanted to.A simple straightforward examination of the language and structure of the Act and a simple straightforward examination of the key contract provision at issue in this case show why that's the case. First, the Act.The local competition provisions , as the Commission knows , are contained in 251 and 252 of the ' 96 Act and they set out some baseline requirements , but those baseline requirements are not directly enforceable.Instead, these provisions are implemented through interconnection agreements and even though the Act contains the baseline requirements , these baseline standards , it doesn t require that interconnection agreements contain any specific provisions. CSB REPORTING Wilder , Idaho COLLOQUY83676 The parties are free to negotiate their interconnection agreements without regard , that's a quote , without regard to the baseline requirements of the Act.The parties can choose to track and incorporate baseline requirements or not , but if they do, it's an act of private negotiation , an act of self-government, not because the Act requires it, so once there s an executed final interconnection agreement , the baseline requirements of 251 and 252 operating by their own force become irrelevant.All that counts is the interconnection agreement.Its terms become the sole source of the parties ' rights and obligations and those terms are binding. That's also a quote right out of the Act, 252(a) (1), and what this means is that the only thing Qwest could violate after there was an agreement was the agreement itself , that Qwest, AT&T had no independent stand-alone rights under the Act and as to AT&T , Qwest had no stand-alone obligations , so the only thing we could bring was a breach of contract claim. Now , Qwest seems fixated on the idea that our contract claim is a thinly-veiled claim for violation of the federal Act.That can t be the case because we have no claim like that.I want to provide an illustration.Assume that AT&T negotiates a deal with CSB REPORTING Wilder, Idaho COLLOQUY83676 Qwest under which AT&T obtains access to fewer unbundled network elements than 251 (c) (3) as construed by the FCC requires , in other words , taking fewer UNI rights than the Act on its own would infer. Now , assume after the interconnection agreement is signed , sealed and delivered AT&T has second thoughts and assume it asks to opt into an agreement between Qwest and McLeod , for instance, so that it can get McLeod's unbundled network element price which correspond to 251 (c) (3) .Now , let's assume that Qwest responds by saying well , a deal is a deal in refusing that request.Now , if AT&T had independent stand-alone rights , it could sue Qwest under 251 (c) (3) and under 252 (i), the opt-in provision , to get those additional unbundled network element rights, but if it could do that , that would gut both the interconnection agreement and the Act. It would make the agreement not binding and that would violate 252 (a) (1) and it would render the parties ' right to negotiate without regard to the requirements of the Act meaningless , so once there s an interconnection agreement, the Act has no stand-alone significance.The Act itself demands that conclusion because that's the only way interconnection agreements can be binding and that's the only way the parties could CSB REPORTING Wilder , Idaho COLLOQUY83676 have a meaningful right to negotiate without regard to the requirements of the Act. I think that the key agreement at issue in this case which is most-favored-nation terms and treatment, provides a perfect example of a provision that stands without regard to the baseline requirements of the Act.It also provides a good example of the mischief that could occur or would occur if AT&T was able to sue for a violation of the Act on a stand-alone basis. of course, this was entered into at a time when U S WEST was the incumbent before Qwest acquired it , U S WEST shall make available to AT&T the terms and conditions of any other agreement for interconnection , unbundled network elements and resale services approved by the Commission under 252 of the Act in that agreement' entirety. At the time the parties were putting this agreement together , the Eighth Circuit had ruled that the FCC's pick and choose rule implementing 252 (i) was unreasonable, but it didn t rule that 252 (i) required that a CLEC take the entire agreement; instead , it vaca ted the pick and choose rule and remanded.Now , the remand , of course, was overtaken by the fact that the Supreme Court in January of 1999 overturned the Eighth Circui t and upheld the pick and choose rule , the rule CSB REPORTING Wilder , Idaho COLLOQUY83676 under which a CLEC like AT&T could take individual terms from an agreement without having to take the entire agreement under 252 (i) . Following the Supreme Court's decision the parties did not amend this agreement, so throughout its life , this agreement provided for fewer 252 (i) rights than the Act standing alone would infer , and that Act -- that Act , that agreement , excuse me , is binding and was binding throughout its life, and if AT&T had really done what Mr. Nazarian claims and sued to enforce 252 (i) as it existed in 2000 and 2001 and 2002 , the agreement would have been nullified.The interconnection agreement would be rendered not binding and the right of Qwest to negotiate without regard to the requirements of the Act would be gutted, but AT&T hasn t done that and didn t do it.The only thing it could do was to bring an action to enforce the deal it struck , and the deal it struck was an obligation on the part of Qwest to make available the terms and conditions of any other agreement for interconnection , unbundled network elements and resale services in those agreements ' entirety. That obligation deviates from 252 (i), but in a way we agreed to and it doesn t rely at all on a failure on the part of Qwest to file its interconnection agreements with McLeod and Eschelon with the Commission. CSB REPORTING Wilder , Idaho COLLOQUY83676 It relied solely on a violation of the terms of the agreement , so at the end of the day, then , the only claim we have and the only claim we ve brought is a breach of contract claim and that's a classic state law claim. presents the Commlssion with the questions what the contract says,what the contract means what the parties intended and what the rights and obligations are that creates, and these are questions that are answered by applying state law contract principles and that's why all the federal courts, save one , that have considered the issue have held that the claims , like AT&T's, are governed by state law contract principles. That's the Ninth Circuit.The Ninth Circuit Court includes Idaho.Its decision is not strictly binding on this Commission , but we think it' persuasi ve authority and the court in the Pacific Bell case in 2000 said that while a state commission has authori ty under 252 to hear and decide claims seeking interpretation and enforcement of an interconnection agreement , the actual interpretation and enforcement is governed by "the agreements themselves and state law principles " and the Fifth Circuit , the Sixth Circuit the Seventh Circuit , the Eighth Circuit and the Tenth Circui t have said exactly the same thing. The only exception is the Verizon Maryland CSB REPORTING Wilder , Idaho COLLOQUY83676 case in the Fourth Circuit and it held the claim is in fact a contract claim , but it's governed by federal law federal common law.It didn t decide what statute of limi tations would apply to such a claim and in any event unli ke all the other circuits , the Fourth Circuit is not a unanimous decision , it's a two-to-one split and we think that the dissent which , of course , agrees with us is well reasoned and compelling and , of course , the Washington Commission , the decision that came out just before Christmas has said just that. Now , Qwest tries to say that these are a special category of cases , reciprocal compensation cases but the rules announced in those cases are not limited. The rules announced in those cases say that all claims no exceptions , all claims seeking interpretation and enforcement of interconnection agreements are governed by state law.Qwest in its briefs talks about state law applying as a gap filler where federal law is silent. Well , the fact is the contract provisions at issue in each of those cases deliberately and precisely tracked and incorporated the requirements of federal law , the requirements of 251 (b) (5), the requirements of the FCC rules implementing 251 (b) (5), including the FCC' defini tion of local traffic. Yet, the courts in these cases had no CSB REPORTING Wilder , Idaho COLLOQUY83676 problem saying that the interpretation and enforcement of the contract was governed by state law contract principles.In fact , the Seventh Circuit went out of its way in the Illinois Bell case , which I'm familiar having been on the losing side , went out of its way to say that the enforcement of a contract provision that precisely tracks the requirements of federal law presents only an issue of state law that can only be heard in a state forum.I think our case presents an even stronger case for applying state law. Our provision is based on 252 (i), no question about that , but it doesn t precisely track it and it deviates in a way, as I've explained earlier , that gives us fewer , lesser 252 (i) rights than the Act would on a stand-alone basis , so looking at the cases that we ci te from all these circuits , if the interpretation and enforcement of provisions that deliberately and precisely track the federal Act is governed by state law principles , then our provision which does deviate from federal law has to be governed by state law. We talked about the Washington decision. We discuss it extensively in our briefs.d be happy to answer any questions.I would say that it's virtually the same case as the case before Your Honors. involved very similar contract provisions , very similar CSB REPORTING Wilder , Idaho COLLOQUY83676 claims and the same defendant.The Washington Commission carefully considered the same cases , the same issues, the same arguments that have been presented here and it concluded that the claim in question was indeed a breach of contract claim governed by state law and that that state law includes the state statute of limitations for contract actions. There was talk about a bargain , there was talk in Mr. Nazarian s remarks about a bargain , some kind of agreement under which the parties to interconnection agreements agree that their claims are going to be governed by a two-year statute of limitations , and so Qwest says in its brief the key question here is whether AT&T can evade application of Section 415 of the ' 34 Communications Act which contains this two-year statute of limitations.Well , the Washington Commission really concluded that really wasn t an issue at all.It said that if the claim was a claim for a violation of the ' 96 Act, 415 wouldn t apply.It's part of the '34 Act , it' not part of the ' 96 Act , and the ' 96 Act claim is governed by the four-year statute of limitations set out in 28 U.C. 1658 , the provision that applies to federal legislation enacted after 1990.Of course , the provision in question here is a contract provision.re not attempting to bring a claim for violation of the federal CSB REPORTING Wilder , Idaho COLLOQUY83676 Act.In fact, we couldn t do that. A quick word about the Wyoming District Court case and the Iowa Utili ties Board Case.As Mr. Nazarian pointed out, the Wyoming District Court just decided the subj ect matter of the jurisdictional question.It basically decided , and I think this is almost a direct quote , that our claim requires resolution of the question of federal law.It didn t decide that our breach of contract claim was governed by federal law didn t decide the state law versus federal law issue on that and didn t decide the applicable statute of limitations.Moreover , it was based on a fundamental error. Wyoming, of course , is in the Tenth Circui t and the court declined to follow the Tenth Circui t 's decision in Brooks Fiber which is one of the cases that said claims of this sort are governed by state law.It decided that the Tenth Circuit was somehow distinguishable and it found that the Fourth Circuit' decision in Verizon Maryland to be on point and persuasive and the court followed that decision.Well the Tenth Circuit, the Brooks Fiber case , and the Fourth Circuit, the Verizon Maryland case, those cases are identical.They involve the same issues and virtually the same contract provisions, contract provisions that CSB REPORTING Wilder , Idaho COLLOQUY83676 track the requirements of the Act with respect to reciprocal compensation , so if the Fourth Circuit was on point , and we agree it was, so too was the Tenth Circuit and the Wyoming District Court was duty bound to follow the Tenth Circuit. The IUB case , the IUB case decided that our claims were barred by state law , Iowa state law res adj udicata principles; didn t decide the issues presented by the motion to dismiss in this case; didn decide that our state contract action is in fact a federal claim; didn t decide the applicable statute of limi tations.We think that even on the res adjudicata point it was incorrectly decided because the commission itself said that it didn t know whether it had jurisdiction over the claims it was barring and , of course, that's an essential element of res adjudicata didn t know whether it had jurisdiction over those claims and it didn t need to decide , because if it didn t have jurisdiction , then our case should be dismissed for one of jurisdiction , so it expressly confirmed that it didn decide the critical element for res adj udicata , but even if that weren t the case , it doesn t decide any issue that is before this Commission. Just a few remaining comments.Mr. Nazarian said our claim is not asking for interpretation CSB REPORTING Wilder , Idaho COLLOQUY83676 and enforcement.The fact is even if it wasn t asking for interpretation , it is asking for enforcement of contract and that's a classic state law matter , but we are as king for interpretation.wi th respect to the key provision in question , we re asking the Commission to interpret because this does not precisely track the language of 252 (i), what's within the ambit of interconnection , what's wi thin the ambit of resale servlces.You re going to look in vain for the term resale in 252 (i) and we know that under Idaho law , resale services include switched access, is that included , and what does it mean to take an agreement in its entirety? Does it mean to take it in its entirety only with respect to certain kinds of products and services or with respect to all products and services in the agreement? And we also seek relief under 24.where it says that each party shall comply with all applicable state and federal and local laws so long as they are applicable to the performance under the agreement.Well re going to have to determine what that means , what is applicable , what state law is applicable to performance. ve cited in our complaint 62-609 , is that applicable? That's going to require an interpretation of the agreement and the parties ' intent and that's classic state contract law , so in fact, we are asking for CSB REPORTING Wilder , Idaho COLLOQUY83676 interpretation and we I re certainly asking for enforcement, and I believe that concludes my argument. d be happy to respond to any questions the Commission may have. COMMISSIONER HANSEN:Thank you very much. Let's see if we have questions from the Commission. Commissioner Smith. COMMISSIONER SMITH:I do.Mr. Li vingston , assume with me that I agree with your argument that this action doesn t rely on the failure to file interconnection agreements and is solely a failure to comply with the terms of the agreement and therefore it's a breach of contract under state law , in your terms a classic state law claim.How does that get you before the Commission instead of the state district court, because we re not the entity usually that hears contract claims, that's handled at the district court and we certainly not an entity that can award damages? MR. LIVINGSTON:Under , I believe it' 62 -- Your Honor raises a very interesting question and it obviously affects me and you can tell that from my hesi tancy.I think the quick answer is this:Under the statutory provisions that have been cited and discussed in the briefs, the Commission unquestionably has the authori ty to implement the 1996 Act and to the extent CSB REPORTING Wilder , Idaho COLLOQUY83676 necessary to do that, it has the authority to regulate Qwest and all the cases that we ve cited, they stand for two propositions:One, that under 252 , state commissions have the authority, included wi thin their authority to implement is the authority to deal with breach of contract claims where the contract is a previously approved interconnection agreement; in other words , under 252 and, therefore, under the state statutes, you do have the ~uthority to interpret and enforce a previously approved interconnection agreement. COMMISSIONER SMITH:But you would agree wouldn t you , that a federal law can t confer upon a state commission any authority that the state legislature hasn t already given it? MR. LIVINGSTON:I would wholeheartedly endorse that. COMMISSIONER SMITH:So your theory is that even empowering the Commission to implement the ' 96 Act , that included the ability to interpret these contractual agreements that are under that? MR. LIVINGSTON:Yes , and I would say the following and this is where we run into some difficulty: I believe that it's clear that the Commission has the authori ty to hear and decide our case to the following extent:It could declare the parties ' rights and CSB REPORTING Wilder , Idaho COLLOQUY83676 obligations under this previously approved interconnection agreement.If it doesn t have the authori ty to award money damages , and I think I agree wi th you , Commissioner Smith , it doesn t appear that this Commission does have the authority to grant the relief requested , we would need to enforce that declaration in the state district court. COMMISSIONER SMITH:Thank you. COMMISSIONER HANSEN:Thank you very much and moving on , then , I would ask Qwest , do you have any closing comments that you would care to make? MR. NAZARIAN:I do , Mr. Chairman , and ll be as brief as I possibly can.I think the colloquy that Mr. Livingston just had with Commissioner Smith actually points out some of what's fundamentally wrong wi th this case.Putting aside AT&T's agreement that the Commission lacks authority to award the relief they asked for , which makes you wonder why the case is even here in the first place , take a look at the two sections the two paragraphs of their complaint that describe how AT&T believes it is harmed here.The heading says Complainants have been damaged by Qwest' s unlawful behavior.This is on page 7 leading into two paragraphs, 1 7 and 18.It says if AT&T had known about Qwest' s secret agreements with Eschelon and McLeodUSA in a timely CSB REPORTING Wilder , Idaho COLLOQUY83676 manner , AT&T would have availed itself of the discounts in the Eschelon and McLeodUSA agreements , and paragraph 18 says the amount that AT&T paid Qwest for services during the time period in which the Eschelon and McLeodUSA agreements were in effect were approximately percent higher than the amounts that Eschelon and McLeodUSA paid Qwest for the same or comparable services pursuant to the secret agreements. Now , if you put yourself back in 2002 when AT&T knew about these agreements , what are AT&T' options?Well , Mr. Livingston would tell you that AT&T' execution of an approved interconnection agreement locks AT&T and Qwest into that interconnection agreement forever , right?His argument was at that point it becomes a binding agreement between these two parties and to the extent that AT&T agreed to something less than its full complement of 252 rights , then that's what AT&T agreed to and it stuck with that. Well , I have a hard time believing that this Commission would endorse the idea that a party who signs an interconnection agreement forfeits its rights to opt into future interconnection agreements down the road right , so to take Mr. Livingston s hypothetical that AT&T enters into an agreement with Qwest for fewer UNI rights than it otherwise might have and then under the operation CSB REPORTING Wilder , Idaho COLLOQUY83676 of 252 in the state a new agreement between Qwest and somebody else is filed , it I S approved, it's made available to opt AT&T says well , now I want to opt into that new agreement , Qwest says no, what should happen?Then AT&T should come to this Commission and say I should have the opportunity, we should have the opportuni ty, to opt into that agreement, right?I mean we have federal law out there that gives carriers rights not out of benevolence of Qwest' s hard negotiation , but out of Congress declaring what parties ' rights are. The interconnection agreement that Qwest and AT&T entered into is binding as far as it goes, but it can be terminated by either party and there seems to be a fair question about whether AT&T would have the right to try and opt into some new agreement providing it did it right and it could assume the range of appropriate related terms and conditions and all that.This Commission , then , would properly be the party or the body that would determine the scope of AT&T's 252 rights, right , but now we seem to have agreement that this Commission is not the body to award damages, if there are any, and the whole analysis flows from the question of what are AT&T's rights or not under this federally-created agreement vis-vis the operation of federal statutory law on their business operations. CSB REPORTING Wilder , Idaho COLLOQUY83676 It I S all federal , so the overlay of federal law here is constant.It drives what -- I mean when you look at what AT&T really is complaining about, they re complaining that they were deprived an opportuni ty to opt into these agreements that Qwest had wi th other parties.Whatever rights they had or didn have to opt into those agreements are federal and so calling it a state law breach of contract claim mischaracterizes what it is they re asking for and now again , we seem to have agreement that they re here asking this Commission to award relief the Commission isn authorized by Idaho state law to award anyone , so it seems to me that means that the Commission should dismiss this case. Now , I don t want to get deeply into arguing the nuances of the reciprocal comp cases, but Mr. Livingston made a point of noting the Brooks Fiber case.I want to read one part of or just point out one part of the Brooks Fiber Tenth Circuit Court's analysis. After these cases , and this one in particular , were sent back to the state commissions , in this case Oklahoma, the Oklahoma Commission was directed by the FCC to determine whether those parties ' interconnection agreement provided for reciprocal compensation as a matter of the parties meeting of the minds , classic first year law school CSB REPORTING Wilder , Idaho COLLOQUY83676 contracts question. The Tenth Circuit , I I m reviewing this ruling of the Oklahoma State Commission , says we first consider whether the OCC properly interpreted the agreement as requiring reciprocal compensation.Why? Because the FCC told them to do that , and then said the agreement itself in state law principles govern the questions of interpretation of the contract and the enforcement of its provisions.Mr. Livingston read that part correctly, but the Tenth Circuit goes on after a short quotation from Oklahoma contract law , says the OCC the Oklahoma Commission , however, has an obligation to interpret the agreement wi thin the bounds of existing federal law. To the extent there is an interstitial role for state law here, it is that , that the law that really drives this bus is federal and so by recharacterizing this deprivation of federal rights as a state law breach of contract claim , it's not as simple as just saying well , Istanbul is Constantinople.I mean they re changing the characterization of the claim from the federal law deprivation that they allege to a state law claim that doesn t make sense anyway and that this Commission lacks the authority to award in terms of damages according to them , so I guess what this all CSB REPORTING Wilder , Idaho COLLOQUY83676 points out more than anything is that this doesn t fit together. The way they ve alleged it , it doesn t fit together , that there may well have been remedies that AT&T could have sought in this Commission in 2002 or thereabouts , but to come now with a breach of contract claim nominally .under state law seeking relief this Commission can t grant for a federal law violation doesn I t make sense and the case should be dismissed and m prepared to answer any further questions the Commission may have. COMMISSIONER HANSEN:Okay, let's see if we have any questions from the Commission.We have none. Thank you very much. MR. NAZARIAN:Thank you. COMMISSIONER HANSEN:Well , this would conclude our hearing today and I would like to thank those that have participated and the Commission will deliberate and notify the parties of our decision as soon as possible and with that said , the oral argument hearing is now adjourned.Thank you. MR. NAZARIAN:Thank you, Mr. Chairman Commissioners. MR. LIVINGSTON:Thank you. (The oral argument concluded at10:55 a. CSB REPORTING Wilder , Idaho COLLOQUY83676 This is to certify that the foregoing oral argument held in the matter of AT&T Communications of the Mountain States, Inc., Complainant, versus Qwest Corporation, Respondent , commencing at 10: 00 a., on Wednesday, January 24 , 2007 , at the Commission Hearing Room, 472 West Washington, Boise , Idaho, is a true and correct transcript of said oral argument and the original thereof for the file of the Commission. Q~~ CONSTANCE S. BUCY Certified Shorthand Reporter -\\\\1\1111111 ,- ..',. '1/""" c " /,,'. r \) ' C? , ",-,.. '~ ':' ~/ - 1 " \) ::0/t(J :: " ~ :: o ~ -: ~ ..o ~ \ ~, \S' " , ,' .... ~ 4 - .."- ,\,'.,.~ (" ", c ~. ,:, CSB REPORTING Wilder , Idaho 83676 COLLOQUY