F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
JUN 20 2000
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
MCI TELECOMMUNICATIONS
CORPORATION, a Delaware corporation,
Plaintiff - Appellee,
US WEST COMMUNICATIONS, INC., a
Colorado corporation,
Plaintiff-Counter-Defendant -
Appellee,
v. No. 99-4203
PUBLIC SERVICE COMMISSION OF
UTAH; STEPHEN F. MECHAM;
CONSTANCE B. WHITE; CLARK D.
JONES, Commissioners of the Public Service
Commission of Utah,
Defendants - Appellants,
and
AT&T COMMUNICATIONS OF THE
MOUNTAIN STATES, INC., a New York
corporation,
Defendant,
UNITED STATES OF AMERICA,
Defendant-Intervenor - Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
(D. Ct. No. 98-CV-490)
Sandy J. Mooy, Utah Public Service Commission (Annina Mitchell, Assistant
Attorney General, with her on the briefs), Salt Lake City, Utah, appearing for
Defendants-Appellants.
Mark B. Stern, Attorney (William B. Schultz, Acting Assistant Attorney General,
David J. Schwendiman, United States Attorney, Susan L. Pacholski, Attorney,
Christopher J. Wright, General Counsel, John E. Ingle, Deputy Associate General
Counsel, and Susan L. Launer, Deputy Associate General Counsel, with him on
the brief), Appellate Staff Civil Division, Department of Justice, Washington,
DC, appearing for the Defendant-Intervenor-Appellee.
Paul M. Smith, Jenner & Block, Washington, DC (Thomas F. O'Neil, III and
William Single, IV, MCI Worldcom, Inc., Washington, DC, J. Alex Ward, Jenner
& Block, Washington, DC, counsel for MCI Telecommunications Corp. and
MCImetro Access Transmission Services, Inc.; Phillip L. Douglass, US West Law
Department, Denver, Colorado, and Kara Sacilotto, Perkins, Coie LLP,
Washington, DC, counsel for US West Communications, Inc.; Daniel Waggoner,
Davis, Wright, Tremaine, LLP, Seattle, Washington, Thomas Pelto and Rebecca
DeCook, AT&T Communications, Denver, Colorado, counsel for AT&T
Communications of the Mountain States, Inc., with him on the brief), appearing
for Appellees.
Before TACHA, BALDOCK, and BRORBY, Circuit Judges.
TACHA, Circuit Judge.
Defendants-appellants the Utah Public Service Commission (UPSC) and the
individual commissioners appeal the district court’s denial of their motion to
dismiss on Eleventh Amendment immunity grounds. Defendants also contest the
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district court’s conclusion that it has jurisdiction to consider US West’s takings
claim. We exercise jurisdiction over this interlocutory appeal pursuant to 28
U.S.C. § 1291 and the collateral order doctrine, see Puerto Rico Aqueduct &
Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 147 (1993), and affirm. We
do not reach the merits of defendants’ argument on the takings claim.
I. Telecommunications Act of 1996
A. History
This case arises under the Telecommunications Act of 1996, Pub. L. No.
104-104, 110 Stat. 56 (codified in scattered sections of 47 U.S.C.A. (West Supp.
2000)) (“1996 Act” or “Act”). The 1996 Act amended the Communications Act
of 1934, ch. 652, 48 Stat. 1064 (codified as amended in scattered sections of 47
U.S.C.A. (West 1991 & Supp. 2000)) (“1934 Act”). Congress adopted the 1934
Act “to protect American consumers against AT&T which, through an aggressive
policy of consolidation, had gained a virtual monopoly over all segments of the
telecommunications industry. Telephone service as a whole was viewed as a
natural monopoly which needed to be regulated for the benefit of all users.”
Michael Kerf & Damien Geradin, Controlling Market Power in
Telecommunications: Antitrust vs. Sector-Specific Regulation: An Assessment of
the United States, New Zealand and Australian Experiences, 14 Berkeley Tech.
L.J. 919, 936 (1999). Thus, pursuant to the 1934 Act, Congress created the
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Federal Communications Commission (FCC), and gave that agency jurisdiction to
regulate interstate telephone services. See Communications Act of 1934, ch. 652,
§ 1, 48 Stat. 1064 (codified as amended at 47 U.S.C.A. § 151) (creating the FCC
and giving it authority over “interstate and foreign commerce in communication
by wire and radio”).
The 1934 Act left regulation of intrastate telephone services to the states.
See id. § 2(b) (codified as amended at 47 U.S.C.A. § 152) (denying the FCC
jurisdiction “with respect to (1) charges, classifications, practices, services,
facilities, or regulations for or in connection with intrastate communication
service by wire or radio of any carrier”). In regulating local phone service,
[s]tates typically granted an exclusive franchise in each
local service area to a local exchange carrier (LEC), which
owned, among other things, the local loops (wires connecting
telephones to switches), the switches (equipment directing
calls to their destinations), and the transport trunks (wires
carrying calls between switches) that constitute a local
exchange network.
AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371 (1999). Most of the LECs
were part of AT&T’s Bell System and were known as Bell Operating Companies
(“BOCs”). Kerf & Geradin, 14 Berkeley Tech. L.J. at 937.
“As the telephone industry developed in the 1950s and 1960s, many began
to challenge the basic premise that telephone service was a natural monopoly.”
Id. Eventually, potential competitors and the Department of Justice sued AT&T
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to dismantle its virtual monopoly. Pursuant to a 1982 consent decree, AT&T
agreed to divest the local BOCs and reorganize them into subsidiaries of seven
independent local exchange carriers, known as regional BOCs. See United States
v. Western Elec. Co., 569 F. Supp. 1057, 1061-62 & 1062 n.5 (D.D.C. 1983),
aff’d sub nom. California v. United States, 464 U.S. 1013 (1983). In exchange,
AT&T was permitted, among other things, to compete with virtually no
restrictions in long-distance services. Kerf & Geradin, 14 Berkeley Tech. L.J. at
938.
While the 1982 consent decree fostered competition in the long-distance
market, technological advances occurred that made “competition among multiple
providers of local service seem possible.” AT&T Corp., 952 U.S. at 371. Thus,
by 1994, “[m]any states had already commenced their own efforts to deregulate
the telecommunications industry” by permitting local competition. Deonne L.
Bruning, The Telecommunications Act of 1996: The Challenge of Competition,
30 Creighton L. Rev. 1255, 1258 (1997). In 1996, Congress passed the
Telecommunications Act to further encourage local competition. See Jim Chen,
The Magnificent Seven: American Telephony’s Deregulatory Shootout, 50
Hastings L.J. 1503, 1514 (1999) (“The Act sought to unleash three of the most
deeply entrenched monopolists in the American economy–local exchange carriers,
interexchange carriers, and cable system operators–on each other’s markets in the
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hope that competition among the large would dissolve these industrial giants.”)
In so doing, Congress “fundamentally restructure[d] local telephone markets” and
“ended the longstanding regime of state-sanctioned monopolies.” AT&T Corp.,
952 U.S. at 371.
B. 47 U.S.C.A. §§ 251-252
1. Section 251
To accomplish the goals of the Act, Congress “establish[ed] baseline rules
for every company that want[s] to provide telecommunications service.” Bruning,
30 Creighton L. Rev. at 1258. Specifically, 47 U.S.C.A. § 251 imposes various
duties on incumbent LECs to facilitate market entry. Because incumbents own
the current network, “[f]oremost among these duties is the [incumbent] LEC’s
obligation . . . to share its network with competitors.” AT&T Corp., 952 U.S. at
371; see 47 U.S.C.A. § 251(c). Congress deemed network sharing, or
interconnection, necessary “so that all customers, even those served by a
competitor, can seamlessly and transparently make and receive calls.” Bruning,
30 Creighton L. Rev. at 1259. Section 251 thus requires incumbents to negotiate
interconnection agreements with entrants in good faith. See 47 U.S.C.A. §
251(c)(1).
2. Section 252
Under § 252, an incumbent and a new carrier may privately agree on the
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terms of an interconnection agreement. See id. § 252(a)(1). If private negotiation
fails, then either party can petition the state commission that regulates local phone
service to arbitrate any open issues. Id. § 252(b)(1). Whether an agreement is
adopted by negotiation or arbitration, it must be submitted to the state
commission. Id. § 252(e)(1). The state commission then must approve or reject
the agreement. Id.
A state commission may reject a negotiated agreement only if it
discriminates against non-party carriers or is inconsistent with the public interest,
convenience, and necessity. Id. § 252(e)(2)(A). On the other hand, a state
commission may reject an arbitrated agreement only if the agreement does not
comply with § 251, including the regulations prescribed by the FCC pursuant to §
251, or the pricing standards set forth in § 252(d). Id. § 252(e)(2)(B).
If a state commission does not approve or reject an agreement within
specified time periods, then the agreement is deemed approved. Id. § 252(e)(4).
However, if a state commission “fails to act to carry out its responsibility under [§
252],” then the FCC will preempt the state commission’s jurisdiction over that
proceeding and assume the state commission’s responsibility. Id. § 252(e)(5). 1 If
1
A state commission “fails to act” if it “fails to respond, within a
reasonable time, to a request for mediation . . . or . . . a request for arbitration . . .
or fails to complete an arbitration within the time limits established in section
252(b)(4)(C).” 47 C.F.R. § 51.801(b) (1999). A state commission does not fail to
act “if an agreement is deemed approved under section 252(e)(4).” Id. §
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a state commission does act, any party “aggrieved” by its determination “may
bring an action in an appropriate Federal district court to determine whether the
agreement . . . meets the requirements of section 251 [and section 252].” Id. §
252(e)(6). State courts do not “have jurisdiction to review the action of a State
commission in approving or rejecting an agreement.” Id. § 252(e)(4). If a state
commission fails to act and the FCC asserts jurisdiction, then “the proceeding by
the [FCC] . . . and any judicial review of the [FCC’s] actions shall be the
exclusive remedies.” Id. § 252(e)(6).
Thus, § 252 allows a state to choose whether it will participate in the
federal regulatory scheme. If a state elects to regulate interconnection agreements
through its state commission, then the state is subject to suit in federal court.
II. Facts
On July 26, 1996, AT&T Communications of the Mountain States, Inc.
(“AT&T”), filed a petition with the UPSC for arbitration with US West
Telecommunications, Inc. (“US West”) pursuant to § 252(b) of the Act. On
September 3, 1996, MCI Metro Access Transmission Services, Inc. and MCI
Telecommunications Corp. (collectively MCI) filed a similar petition for
arbitration with US West. After consolidating the AT&T and MCI petitions, the
51.801(c). Thus, if a state commission does not approve or reject an agreement
and it is deemed approved, the FCC cannot preempt the state commission’s
jurisdiction and review the agreement.
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UPSC issued an arbitration order resolving a number of open issues. The order
directed the parties to file fully executed interconnection agreements with the
UPSC that were consistent with the UPSC’s resolution of the parties’ disputes.
The UPSC then reviewed and approved the submitted interconnection agreements
pursuant to 47 U.S.C.A. § 252(e).
US West subsequently filed suit against AT&T, MCI, the individual
commissioners, and the UPSC in federal district court. US West challenged some
provisions in its interconnection agreements with MCI and AT&T, raised a
takings claim and sought declaratory and injunctive relief. On the same day, MCI
filed suit against US West, the individual commissioners and the UPSC. After the
district court consolidated the suits, the individual commissioners and the UPSC
moved to have themselves dismissed from US West’s suit pursuant to Fed. R. Civ.
P. 12(b). 2 Defendants claimed that they were immune from suit under the
Eleventh Amendment and that the district court did not have jurisdiction over US
West’s takings claim. The district court denied the motion, concluding that it had
jurisdiction over defendants and the takings claim.
III. Eleventh Amendment Immunity
“We review de novo a district court’s denial of a state’s claim of Eleventh
Based on a stipulation reached with MCI, defendants did not move to have
2
themselves dismissed from MCI’s suit.
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Amendment immunity from suit in federal court.” Innes v. Kansas State Univ.,
184 F.3d 1275, 1277 (10th Cir. 1999), cert. denied, __ U.S. __, 120 S. Ct. 1530
(2000).
The Eleventh Amendment to the U.S. Constitution provides: “The Judicial
power of the United States shall not be construed to extend to any suit in law or
equity, commenced or prosecuted against one of the United States by Citizens of
another State, or by Citizens or Subjects of any Foreign State.” The Supreme
Court has construed the Eleventh Amendment to mean that “an unconsenting State
is immune from suits brought in federal courts by her own citizens as well as by
citizens of another State.” Edelman v. Jordan, 415 U.S. 651, 662-63 (1974).
However, state sovereign immunity is not absolute. First, a state may not
assert an Eleventh Amendment defense where Congress has properly abrogated its
immunity. See Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 55 (1996).
Second, a state may waive its sovereign immunity by consenting to suit in federal
court. College Sav. Bank v. Florida Prepaid Postsecondary Educ. Expense Bd.,
527 U.S. 666, 119 S. Ct. 2219, 2223 (1999). Third, a private party may sue a
state officer for prospective injunctive or declaratory relief from an ongoing
violation of the Constitution or federal laws. See Ex parte Young, 209 U.S. 123,
159-60 (1908); see also Alden v. Maine, 527 U.S. 706, 119 S. Ct. 2240, 2267
(1999) (affirming the continuing vitality of Ex parte Young).
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IV. Analysis
Defendants contend that none of the limits on sovereign immunity apply to
them, and that therefore they are immune from suit. The district court found that
the UPSC waived its sovereign immunity when it opted to participate in the
statutory scheme set forth in the Act. The district court also found that the
individual commissioners were subject to suit under Ex parte Young. We agree
with both findings. 3
A. Waiver
1. Means of Waiver
Generally, a state may waive its Eleventh Amendment immunity in one of
two ways. First, a state waives its immunity if it voluntarily invokes the
jurisdiction of a federal court. See College Sav. Bank, 119 S. Ct. at 2226.
Second, a state waives its immunity if it “makes a clear declaration that it intends
to submit itself to [a federal court’s] jurisdiction.” Id. (internal quotation marks
3
The district court’s opinion mentions abrogation in passing, and on appeal
defendants’ briefly argue that Congress could not have constitutionally abrogated
state sovereign immunity through passage of the Act. Congress may abrogate the
states’ sovereign immunity in the exercise of its Section 5 power to enforce the
Fourteenth Amendment. College Sav. Bank, 119 S. Ct. at 2224. After Seminole
Tribe, however, “Congress may not abrogate state sovereign immunity pursuant to
its Article I powers.” Florida Prepaid Postsecondary Educ. Expense Bd. v.
College Sav. Bank, 527 U.S. 627, 119 S. Ct. 2199, 2205 (1999). There is no
question that Congress adopted both the 1934 Act and the 1996 Act pursuant to
its Article I commerce power. Thus, we agree with defendants that Congress
could not and did not abrogate the states’ sovereign immunity under the 1996 Act.
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and citation omitted).
A state can make a “clear declaration” of its consent to be sued in federal
court by expressly waiving its immunity through a state statute or constitutional
provision. See Innes, 184 F.3d at 1278. A state can also declare its intent to
submit to suit by impliedly or constructively waiving its immunity if the
declaration is clear and altogether voluntary. See generally College Sav. Bank,
119 S. Ct. 2219 (overruling the constructive waiver doctrine of Parden v.
Terminal Ry. of Ala., 377 U.S. 184 (1964), but recognizing that a state may still
constructively or impliedly waive its immunity in certain circumstances); see also
Innes, 184 F.3d at 1280 (stating that nothing in College Savings Bank forecloses
us from examining the underlying facts of a case to determine whether a state has
unequivocally expressed its intent to waive its immunity).
Here, US West sued the UPSC and the individual commissioners.
Accordingly, Utah did not invoke the jurisdiction of a federal court and thereby
waive its immunity. Furthermore, Utah did not expressly consent to suit through
a state statute or constitutional provision governing this case. See Utah Code
Ann. § 63-30-16(1) (Supp. 1999) (providing that Utah state district courts have
exclusive original jurisdiction over suits brought against the state); Sutton v. Utah
State Sch. for the Deaf & Blind, 173 F.3d 1226, 1233 (10th Cir. 1999) (“Utah has
not waived its Eleventh Amendment immunity by statute.”). Thus, the question is
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whether, under College Savings Bank, Utah constructively waived its immunity
from suit when it arbitrated an interconnection dispute between US West, AT&T
and MCI pursuant to § 252 of the Act.
2. College Savings Bank
Because College Savings Bank overruled Parden’s constructive waiver
doctrine, we begin with a brief discussion of Parden. In Parden, the employees of
a railroad owned and operated by the State of Alabama sued the railroad under the
Federal Employer’s Liability Act (FELA). 377 U.S. at 184-85. Alabama asserted
a sovereign immunity defense. Id. The Supreme Court held that Alabama had
waived its immunity because FELA conditioned a state’s right to operate a
railroad in interstate commerce upon amenability to suit in federal court. Id. at
192. Since Alabama chose to operate a railroad in interstate commerce, it
impliedly accepted the conditions imposed by the act, including the condition that
it consent to suit. Id.
In College Savings Bank, a New Jersey bank sued the Florida Prepaid
Postsecondary Education Expense Board (“Florida Prepaid”), an arm of the State
of Florida. 119 S. Ct. at 2223. Florida Prepaid administers a program designed
to ensure that individuals have sufficient funds to finance a college education. Id.
The bank claimed that Florida Prepaid misrepresented its product in its marketing
brochures and annual reports in violation of the Lanham Act. Id. As amended by
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the Trademark Remedy Clarification Act (TRCA), the Lanham Act provides that
states are not immune from suit in federal court for violations of the Act. Id.
Florida Prepaid claimed, however, that it was immune from suit because the
TRCA was enacted pursuant to Congress’s Article I power and Congress may not
abrogate state sovereign immunity when it legislates under Article I. Id. at 2224.
The bank contended that, under Parden, Florida Prepaid had waived its immunity
when it engaged in the interstate marketing and administration of its program
after the TRCA made it clear that such activity would subject Florida Prepaid to
suit. Id. The Court overruled Parden and concluded that Florida Prepaid had not
waived its immunity. See id. at 2226-28.
The Court reasoned that it could not “square Parden with [its] cases
requiring that a State’s express waiver of sovereign immunity be unequivocal.”
Id. at 2228 (citing Great Northern Life Ins. Co. v. Read, 322 U.S. 47 (1944)).
“The whole point of requiring a ‘clear declaration’ by the State of its waiver is to
be certain that the State in fact consents to suit.” Id. Where Congress clearly
expresses its intention that if a state takes certain action it will waive its
immunity, “the most that can be said with certainty is that the State has been put
on notice that Congress intends to subject it to suits brought by individuals.” Id.
However, this “is very far from concluding that the State made an ‘altogether
voluntary’ decision to waive its immunity.” Id.
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Furthermore, if the Court recognized “a congressional power to exact
constructive waivers of sovereign immunity through the exercise of Article I
powers,” it would thereby “permit Congress to circumvent the antiabrogation
holding of Seminole Tribe.” Id. at 2229 (emphasis added). “Forced waiver and
abrogation are not even different sides of the same coin – they are the same side
of the same coin.” Id. (emphasis added). 4
Thus, for a constructive waiver of sovereign immunity to be valid under
College Savings Bank, it must be altogether voluntary and not forced from a state
by Congress. A constructive waiver is voluntary only where Congress threatens a
state with the denial of a “gift or gratuity” if the state refuses to consent to suit in
federal court. See id. at 2231. Where Congress threatens a state with a
“sanction” if it refuses to consent to suit, then the waiver is no longer freely
given. See id. In addition, it may be that the difference between a gift and a
sanction disappears when the gift Congress threatens to withhold is large enough.
See id.
4
Defendants contend that College Savings Bank precludes Congress from
using its commerce power to obtain a constructive or implied waiver from a state.
They therefore argue that because Congress adopted the 1996 Act pursuant to its
commerce power, § 252 cannot permissibly require states to constructively or
impliedly waive their sovereign immunity. We disagree. The key to constructive
or implied waiver under College Savings Bank is the voluntariness of the state
waiver, not the particular power pursuant to which Congress enacted the statute.
Under College Savings Bank, Congress may not exact or force a waiver from a
state pursuant to any of its Article I powers.
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To illustrate its holding in College Savings Bank, the Court distinguished
the legitimate conditions Congress placed on states in Petty v. Tennessee-
Missouri Bridge Comm’n, 359 U.S. 275 (1959), and South Dakota v. Dole, 483
U.S. 203 (1987), from the forced waivers in Parden and the case at bar. In Petty,
the Court held that a bistate commission created pursuant to an interstate compact
“had consented to suit by reason of a suability provision attached to the
congressional approval of the compact.” College Sav. Bank, 119 S. Ct. at 2231
(citing Petty). In Dole, the Court held “that Congress may, in the exercise of its
spending power, condition its grant of funds to the States upon their taking
certain actions that Congress could not require them to take, and that acceptance
of the funds entails an agreement to the actions.” Id. (citing Dole).
The College Savings Bank court explained that the bistate commission’s
waiver was valid because, under the Compact Clause of the U.S. Constitution,
states may not form an interstate compact without the consent of Congress. Id.
The granting of consent therefore is a gratuity. Id. Similarly, “Congress has no
obligation to disburse funds to the States; such funds are gifts.” Id.
In contrast, in both Parden and the case before the Court, Congress did not
threaten the denial of a gift or gratuity if the states refused to waive their
sovereign immunity. See id. Instead, in both Parden and College Savings Bank,
Congress threatened a sanction: “exclusion of the State from otherwise
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permissible activity.” Id. Specifically, the federal statute in Parden required
Alabama to waive its immunity or give up its ability to own and operate a railroad
in interstate commerce. In College Savings Bank, the TRCA required Florida to
waive its immunity or give up its ability to engage in the business of advertising
and selling a for-profit educational investment vehicle. The voluntariness of a
waiver is destroyed “when what is attached to the refusal to waive is the
exclusion of the State from otherwise lawful activity.” Id.; see also Innes, 184
F.3d at 1284 (holding that a state university “knowingly and voluntarily” waived
the state’s immunity “by agreeing, as a prerequisite to its participation in the
Perkins Loan program, to undertake certain enumerated actions in federal
bankruptcy court in the event of a claim for discharge filed by the student-
borrower”).
3. Application of College Savings Bank
47 U.S.C.A. § 252 invites states to participate in the federal government’s
regulation of local telephone service. Congress has clearly expressed its intention
that if a state elects to approve or reject an interconnection agreement, then it
waives its sovereign immunity. See 47 U.S.C.A. § 252(e)(6) (“In any case in
which a State commission makes a determination under [§ 252], any party
aggrieved by such determination may bring an action in an appropriate Federal
district court . . . .”); see also id. § 252(e)(4) (“No State court shall have
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jurisdiction to review the action of a State commission in approving or rejecting
an agreement under this section.”). 5 Thus, § 252 puts Utah on notice that
Congress intends to subject it to suits brought by individuals if it acts under §
252. See College Sav. Bank, 119 S. Ct. at 2228. College Savings Bank, however,
makes it clear that Congress’s intent to effect a waiver is insufficient, standing
alone, to render a state’s waiver altogether voluntary. Id.
Instead, Utah has voluntarily waived its immunity only if Congress, through
the 1996 Act, threatened it with the denial of a gratuity, rather than the imposition
of a sanction. Prior to 1996, the states were permitted to regulate local phone
service. Indeed, the 1934 Act specifically left regulation of intrastate telephone
services to the states. However, the 1996 Act preempted state regulatory
authority over some aspects of local phone service. See AT&T Corp., 525 U.S. at
730 n.6 (stating that “[w]ith regard to matters addressed by the 1996 Act,”
Congress “unquestionably” has “taken the regulation of local telecommunications
competition away from the States”). Although it did not do so, Congress could
have preempted all state regulation of local phone service. See FERC v.
5
Utah’s Governmental Immunity Act provides that “state” “means the state
of Utah, and includes any . . . commission.” Utah Code Ann. § 60-30-2(9) (Supp.
1999). The UPSC therefore has the authority to act on behalf of Utah and can
waive Utah’s sovereign immunity. See Innes, 184 F.3d at 1284 (stating that even
where a court finds a waiver of state sovereign immunity, it must determine if the
waiver is valid by examining whether the defendant had the authority to waive the
state’s immunity).
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Mississippi, 456 U.S. 742, 764 (1982) (“[T]he commerce power permits Congress
to pre-empt the States entirely in the regulation of private utilities.”); Hodel v.
Virginia Surface Mining & Reclamation Ass’n, 452 U.S. 264, 290-91 (1981).
Thus, with the passage of the 1996 Act, Congress essentially transformed
the regulation of local phone service from an otherwise permissible state activity
into a federal gratuity. As in Petty and Dole, Congress was under no obligation to
allow states to participate in the Act’s regulatory scheme. Accordingly, by
conditioning a state’s ability to regulate local phone service on its consent to suit
in federal court, Congress threatened the state with the denial of a gratuity rather
than exclusion from an otherwise lawful activity. 6 We therefore hold that Utah
6
Defendants contend that Congress has imposed a sanction on them because
if they refuse to consent to suit, Utah will be excluded completely from the
regulation of interconnection agreements. They suggest that in this case, the
difference between the denial of a gratuity and the imposition of a sanction has
disappeared since Congress threatens to withhold such a substantial amount of
regulatory authority. Seizing on language in College Savings Bank, they argue
that the inducement offered by Congress is “so coercive as to pass the point at
which pressure turns into compulsion.” 119 S. Ct. at 2231 (internal quotation
marks and citations omitted). This argument is without merit.
The size of the “gift” was not at issue in College Savings Bank because
“the point of coercion [was] automatically passed” when Congress conditioned
participation in an otherwise lawful activity on a state’s consent to suit. Id.
Thus, the Court’s discussion of the coercion theory was merely dicta. See Kansas
v. United States, __ F.3d __, 2000 WL 710489, at *6 (10th Cir. June 1, 2000)
(“[T]he coercion theory is unclear, suspect, and has little precedent to support its
application.”).
Moreover, § 252 removes only a slice of regulatory authority from a state if
it declines to waive its sovereign immunity. For example, to ensure that barriers
to competition will fall, § 253 prohibits all state statutes and regulations that
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voluntarily waived its sovereign immunity when the UPSC, through its
commissioners, arbitrated the interconnection dispute in this case. 7 Defendants
are subject to suit in federal court, and this case may proceed.
C. Ex Parte Young
impede “the ability of any entity to provide any interstate or intrastate
telecommunications service.” 47 U.S.C.A. § 253(a). Thus, § 253(a) effectively
“strikes down all franchised monopolies that were given by the states to local
exchange companies.” Kerf & Geradin, 14 Berkeley Tech. L.J. at 940. However,
§ 253(b), captioned “State regulatory authority,” contains a broad exception
which provides that nothing in § 253 “shall affect the ability of a State to impose,
on a competitively neutral basis . . . requirements necessary to preserve and
advance universal service, protect the public safety and welfare, ensure the
continued quality of telecommunications services, and safeguard the rights of
consumers.” Thus, state commissions may continue to regulate
telecommunications in the public interest, as long as such regulations are
competitively neutral.
7
The district courts are divided over whether, under College Savings Bank,
a state waives its sovereign immunity when it accepts Congress’s invitation to
participate in the review of interconnection agreements under § 252. See, e.g.,
Bell Atlantic-Del., Inc. v. McMahon, 80 F. Supp.2d 218, 231-33 (D. Del. 2000)
(finding a waiver); Wisconsin Bell, Inc. v. Public Serv. Comm’n of Wis., 57 F.
Supp.2d 710, 714-16 (W.D. Wis. 1999) (finding no waiver). We are unaware of
any circuit court that has decided this issue. See MCI Telecomms. Corp. v.
Illinois Commerce Comm’n, 183 F.3d 558, 564-67 (7th Cir. 1999) (finding a
constructive waiver), vacated and reh’g granted, 183 F.3d 567 (7th Cir. 1999)
(ordering the parties to file supplemental briefs addressing the applicability of
Alden v. Maine, 527 U.S. 706 (1999), College Sav. Bank v. Florida Prepaid
Postsecondary Educ. Expense Bd., 527 U.S. 666 (1999), and Florida Prepaid
Postsecondary Educ. Expense Bd. v. College Sav. Bank, 527 U.S. 627 (1999));
see also GTE North, Inc. v. Strand, 209 F.3d 909, 2000 WL 424028, at *12 n.6
(6th Cir. Apr. 20, 2000) (stating in dicta that “it is virtually certain that a state
utility commission’s decision to accept regulatory authority under the [1996 Act]
cannot legitimately be construed as a valid waiver of sovereign immunity” after
College Savings Bank and Florida Prepaid).
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Even if the Eleventh Amendment barred US West’s suit against the UPSC,
US West still could proceed with its suit against the individual commissioners. In
a suit similar to the one at bar, the Sixth Circuit found that the matter before it
was “a straightforward Ex parte Young case.” Michigan Bell Tel. Co. v. Climax
Tel. Co., 202 F.3d 862, 867 (6th Cir. 2000). We conclude that the instant suit is
also a straightforward Ex parte Young case and adopt the Sixth Circuit’s rationale
and holding:
The Ex parte Young doctrine operates as an
exception to the general rule of sovereign immunity
that states may only be sued with their consent.
Under Ex parte Young, suits against state officials
seeking equitable relief for ongoing violations of
federal law are not barred by the Eleventh Amendment.
Ex parte Young, 209 U.S. at 159-60. The [UPSC] not
only approved the interconnection agreement[s], it is
responsible for ongoing enforcement of the agreement[s].
[US West] alleges that the agreement[s] violate[]
federal law, and is seeking equitable relief [against the
commissioners]. . . . Under Ex parte Young, [US West]
is entitled to proceed.
Seminole Tribe of Florida v. Florida, 517 U.S. 44
(1996) and Idaho v. Coeur d’Alene Tribe, 521 U.S. 261
(1997), do not affect the application of Ex parte Young
to § 252 cases. Recently, the Supreme Court once again
affirmed the vitality of Ex parte Young, even while
strongly reaffirming states’ rights against suit. See
Alden v. Maine, 119 S. Ct. 2240, 2266-68 (1999)
([stating that] sovereign immunity does not bar certain
actions against state officers for injunctive or declaratory
relief).
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Id. at 867-68 (parallel citations omitted). 8 Thus, we hold that under Ex parte
Young, the Eleventh Amendment does not bar US West’s suit against the
individual commissioners.
V. US West’s Takings Claim
In its first amended complaint, US West claimed that the contractual
provisions imposed upon it by the UPSC constitute a taking of its property for
public use without just compensation in violation of the Fifth and Fourteenth
Amendments. US West sought relief under 42 U.S.C. § 1983. Defendants moved
to dismiss US West’s takings claim under Fed. R. Civ. P. 12(b), and the district
court determined that it had jurisdiction over the claim. On appeal, defendants
argue that US West cannot raise its takings claim in federal court until it attempts
to obtain compensation through state procedures or pleads that it would be futile
8
Defendants contend that Seminole Tribe and Coeur d’Alene Tribe
narrowed the Ex parte Young doctrine so as to make it inapplicable to this case.
We have recognized that “Coeur d’Alene Tribe imposes an important additional
requirement” upon the application of Ex parte Young. J.B. ex rel. Hart v. Valdez,
186 F.3d 1280, 1286 (10th Cir. 1999). Now, in an Ex parte Young case, “[w]e
must examine whether the relief Plaintiff[] seek[s] against the state officials
implicates special sovereignty interests, and whether that requested relief is the
functional equivalent to a form of legal relief against the state that would
otherwise be barred by the Eleventh Amendment.” Id. (internal quotation marks
and citations omitted). In this case, US West requests declaratory and injunctive
relief to remedy actions by the commissioners which it claims are violations of
federal law. Such relief would not affect any special sovereignty interests or
otherwise cause offense to Utah’s sovereign authority. Defendants’ argument
therefore is without merit.
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to do so. They claim that because US West has not yet gone through state
channels, the takings claim is not ripe and the district court therefore does not
have jurisdiction over it.
We find no indication in the record that defendants made this argument to
the district court. Moreover, the district court did not discuss ripeness in its
memorandum order denying defendants’ motion to dismiss. The lower court
merely found that US West brought its claim under the Fourteenth Amendment
and 42 U.S.C. § 1983. The district court concluded that “[t]hese are appropriate
channels for such claims and this Court has the proper jurisdiction to hear them.”
Mem. Order at 7. Whether the claim is ripe for judicial review is another
question, one that the district court apparently did not address.
We see no reason to “depart from the general rule that ‘a federal appellate
court does not consider an issue not passed upon below.’” Walker v. Mather (In
re Walker), 959 F.2d 894, 896 (10th Cir. 1992) (quoting Singleton v. Wulff, 428
U.S. 106, 120 (1976)). We therefore decline to consider the merits of defendants’
ripeness argument. The ripeness issue will be before the district court on remand.
AFFIRMED AND REMANDED.
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