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North County Communications Corporation v. Qwest Corporation

United States District Court, Ninth Circuit

December 23, 2013

North County Communications Corporation of Arizona, a California Corporation, Plaintiff,
v.
Qwest Corporation dba Century Link QC, a Colorado corporation, et al., Defendants.

ORDER

DAVID G. CAMPBELL, District Judge.

Plaintiff North County Communications Corporation ("North County") has filed a complaint seeking declaratory judgment and injunctive relief. Doc. 1. North County has moved for summary judgment. Doc. 35. Defendants Qwest Corporation ("Qwest") and the Arizona Corporation Commission (the "ACC") have filed cross-motions for summary judgment. Docs. 37, 46. The motions are fully briefed and oral argument was held on December 6, 2013. For the reasons that follow, the Court will enter summary judgment for Defendants.

I. Background.

Congress enacted the Federal Telecommunications Act of 1996 (the "Act") "to deregulate the telecommunications industry and spur competition." Quick Commc'ns, Inc. v. Mich. Bell Tel. Co., 515 F.3d 581, 583 (6th Cir. 2008); see Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996) ("An Act to promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers[.]"). The Act "requires telephone companies competing within the same area to interconnect' their networks" so that customers can receive calls from and place calls to customers using different telephone service providers. Sw. Bell Tel. Co. v. Brooks Fiber Commc'ns of Okla., Inc., 235 F.3d 493, 495 (10th Cir. 2000). The Act distinguishes between two types of service providers: Incumbent Local Exchange Carriers ("ILECs") and Competitive Local Exchange Carriers ("CLECs"). ILECs are entities such as Qwest that previously "held a monopoly on local telephone service" in a particular area. Quick Commc'ns, 515 F.3d at 583. CLECs are entities such as North County that seek to interconnect with ILECs. ILECs and CLECs interconnect by entering into an interconnection agreement ("ICA"), which governs the terms under which their networks are connected. Sw. Bell, 235 F.3d at 495.

Section 252(a)(1) of the Act directs telephone carriers to negotiate ICAs. If negotiations are not successful, the parties may ask the local state utility commission "to participate in the negotiation and to mediate any differences arising in the course of negotiation." 47 U.S.C. § 252(a)(2). Alternatively, either party "may petition a State commission to arbitrate any open issues." Id. § 252(b)(1). All ICAs, whether adopted by negotiation, mediation, or arbitration, must be "submitted for approval to the State commission, " which "shall approve or reject the agreement." 47 U.S.C. § 252(e)(1).

North County and Qwest entered into an ICA in 1997. Doc. 35 at 1. The 1997 ICA has been amended several times to reflect changes in telecommunications laws. Id. at 2. Section XXXIV, ¶ V of the 1997 ICA provides that the ICA will be effective for a period of 2.5 years, and thereafter "shall continue in force and effect unless and until a new agreement... becomes effective between the Parties." Pursuant to this clause, Qwest requested to negotiate a new agreement with North County in 2008. Doc. 1-1, ¶ 35. On August 3, 2009, after more than a year of negotiations, Qwest filed a petition for arbitration with the ACC. Id., ¶ 1. The parties engaged in a lengthy arbitration process ( id., ¶¶ 2-31), which culminated with the ACC issuing a decision on July 25, 2011 (Doc. 35 at 4). The decision approved a new ICA (the "2011 ICA") based on the results of an arbitration hearing. See Doc. 23-3.

North County challenges the validity of the 2011 ICA. North County argues that the ACC did not have authority to arbitrate the parties' dispute ( id. at 5-6) and that several provisions of the 2011 ICA are contrary to law (Doc. 35 at 6-14). Defendants counter that the ACC had full authority to arbitrate the 2011 ICA and that all challenged provisions are consistent with law and supported by substantial evidence. Docs. 37, 46.

The Court reviews de novo whether the ACC's decision is consistent with the Act and implementing regulations, and reviews all other issues under an arbitrary and capricious standard. Pacific West v. Pac West Telecomm, Inc., 325 F.3d 1114, 1123 n.8 (9th Cir. 2003).

II. Validity of the Arbitration.

North County asks the Court to declare the 2011 ICA "void ab initio " because "it was achieved in a manner that flatly contradicts the Act." Doc. 35 at 6. North County argues that the Act "neither contemplates nor permits" the situation that occurred here, namely an ILEC requesting negotiation with a CLEC. Id. at 5. North County argues that the Act's negotiation and arbitration provisions - sections 252(a)(1) and (b)(1) - apply only to situations where a CLEC like North County has requested interconnection with an ILEC like Qwest. Because the opposite occurred here - Qwest requested renegotiation of the 1997 ICA - North County contends that the Act does not apply and arbitration by the ACC was invalid. Id. at 5. No court has directly considered whether the language of sections 252(a)(1) and (b)(1) applies to requests to negotiate made by ILECs to CLECs. The Court must therefore look to the statute for guidance.

The Court's task in construing the Act is to determine Congress's intent, beginning with the language of the statute. Chubb Custom Ins. Co. v. Space Systems/ Loral, Inc., 710 F.3d 946, 958 (9th Cir. 2013) (internal citation omitted). The Court will not, however, follow "a literal interpretation of a statute that would thwart the overall statutory scheme or lead to an absurd result." Id.

A. Language of the Act.

Section 252 of the Act is titled "Procedures for negotiation, arbitration, and approval of agreements." 47 U.S.C. § 252. No other section of the Act purports to establish procedures for negotiating and arbitrating ICAs. Section 252(a)(1), which concerns negotiations, provides that " [u]pon receiving a request for interconnection, services or network elements pursuant to section 251 of this title, an [ILEC] may negotiate and enter into a binding agreement with the requesting telecommunications carrier or carriers[.]" 47 U.S.C. § 252(a)(1) (emphasis added). Section 252(b)(1), which concerns arbitration of ICA disputes by state commissions, provides that "[d]uring the period from the 135th to the 160th day (inclusive) after the date on which an [ILEC] receives a request for negotiation under this section, the carrier or any other party to the negotiation may petition a State commission to arbitrate any open issues." 47 U.S.C. § 252(b)(1) (emphasis added). The emphasized language in both sections refers only to situations where an ILEC receives a request for interconnection or negotiation. The language does not mention requests for negotiations initiated by an ILEC or mutually agreed upon by an ILEC and CLEC. North County relies on this language to argue that the Qwest-initiated negotiations in this case did not trigger section 252, and that the ACC's arbitration of the 2011 ICA was therefore invalid.

Dicta in several cases reflect the limited nature of the language emphasized above. See, e.g., AT&T v. Pac-West Telecomm, Inc., 651 F.3d 980, 983 n.3 (9th Cir. 2011) ("[a]lthough all carriers have the duty to interconnect and the duty to establish reciprocal compensation arrangements, only ILECs have the statutory duty to negotiate an interconnection agreement in good faith, ..., and only ILECs can be required to arbitrate an interconnection agreement if good-faith negotiations do not result in an agreement[.]"); Qwest Corp. v. Ariz. Corp. Comm'n, 567 F.3d 1109, 1117 (9th Cir. 2009) (noting that "[a] state commission may only arbitrate issues after an ILEC receives a request for negotiation pursuant to section 251, '" and that "all state commission arbitration authority under Section 252 is inextricably tied to the duties imposed under Section 251[.]"); W. Radio Servs. Co. v. Qwest Corp., 530 F.3d 1186, 1190-91 (9th Cir. 2008) ("The 1996 Act sets out a procedural framework for these negotiations: First, a requesting carrier must make a request for interconnection to an incumbent carrier, which may negotiate and enter into a binding agreement with the requesting... carrier... without regard' to the substantive standards of § 251."); Core Commc'ns, Inc. v. Verizon Pa., Inc., 493 F.3d 333, 336 (3d Cir. 2007) ("The process commences when an ILEC receives a request for interconnection' from another telecommunications company.... The Act then requires the ILEC to negotiate in good faith in accordance with section 252[.]'"); Qwest Corp. v. Public Utilities Comm'n of Colo., 479 F.3d 1184, 1187 (10th Cir. 2007) (stating that section 252 "provides that an ILEC faced with a request for interconnection may either negotiate an agreement with the requesting party or submit to arbitration[.]"); Indiana Bell Tel. Co. v. McCarty, 362 F.3d 378 (7th Cir. 2004) (stating that the Act "requires incumbents to negotiate an agreement... with new entrants at their request"); Coserv. Ltd. Liability Corp. v. Sw. Bell Tel. Co., 350 F.3d 482, 487 (5th Cir. 2003) ("[C]ompulsory arbitration under § 252 begins with a request by a CLEC to negotiate with an ILEC regarding its obligations under § 251."); AT & T Corp. v. Iowa Utilities Bd., 525 U.S. 366, 726-27 (1999) ("When an entrant seeks access through any of these routes, the incumbent can negotiate an agreement[.]").

Although the language in these cases reflects the literal wording of sections 252(a)(1) and (b)(1), none of the cases considers whether the mediation and arbitration provisions in section 252 are limited to negotiations that commence with a request directed to an ILEC. To resolve this question, the Court must consider whether a literal reading of 252(a)(1) and ...


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