Global NAPs, Inc. v. Massachusetts Department of Telecommunications & Energy

United States Court of Appeals
For the First Circuit

Nos. 04-2313; 04-2334; 04-2397

GLOBAL NAPS, INC.,

Plaintiff, Appellee/Cross-Appellant,

v.

MASSACHUSETTS DEPARTMENT OF TELECOMMUNICATIONS AND ENERGY;
PAUL B. VASINGTON, in his capacity as Commissioner; JAMES
CONNELLY, in his capacity as Commissioner; W. ROBERT KEATING, in
his capacity as Commissioner; DEIRDRE K. MANNING, in her capacity
as Commissioner; EUGENE J. SULLIVAN, in his capacity as
Commissioner; and VERIZON NEW ENGLAND, INC.,

Defendants, Appellants/Cross-Appellees.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Mark L. Wolf, U.S. District Judge]

Before

Lynch and Howard, Circuit Judges,
and Restani,* Judge.

Daniel J. Hammond, Assistant Attorney General, with whom
Thomas F. Reilly, Attorney General, was on brief, for Massachusetts
Department of Telecommunications and Energy and Paul B. Vasington,
James Connelly, W. Robert Keating, Deirdre K. Manning, and Eugene
J. Sullivan, in their official capacities as Commissioners.

*
Chief Judge of the United States Court of International
Trade, sitting by designation.
 Scott H. Angstreich, with whom Bruce P. Beausejour, Keefe B.
Clemons, Sean A. Lev, and Kellogg, Huber, Hansen, Todd, Evans &
Figel, P.L.L.C., were on brief, for Verizon New England, Inc.
William J. Rooney, Jr., with whom Jeffrey C. Melick was on
brief, for Global NAPs, Inc.

October 18, 2005
 LYNCH, Circuit Judge. This case raises a new issue of

importance under the Telecommunications Act of 1996 (TCA), Pub. L.

No. 104-104, 110 Stat. 56 (codified as amended in scattered

sections of 47 U.S.C.). The question is whether the doctrine of

issue preclusion applies so as to bind one state's commission to

apply the findings and conclusions of another state's commission in

disputes between the same parties about the interpretation of

identical contract language contained in different state

interconnection agreements.

The district court concluded that the Full Faith and

Credit Clause compelled application of the doctrine. Its order

bound the Massachusetts Department of Telecommunications and Energy

(DTE), which was interpreting a Massachusetts interconnection

agreement between Global NAPs, Inc. (Global) and Verizon New

England, Inc. (Verizon), to follow the earlier decision of the

Rhode Island Public Utility Commission (RIPUC) as to the effect of

a prior order by the Federal Communications Commission (FCC) on the

parties' Rhode Island interconnection agreement. On de novo

review, we reverse. The district court's reasoning is contrary to

the language of and policies behind the TCA.

Underlying this legal issue is the question of whether

Verizon owes an estimated $30 to $50 million in payments to Global

as "reciprocal compensation" for calls placed by Verizon's

customers to Global's customers connected through an internet

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service provider (ISP) in Massachusetts during the period from July

24, 2000 to June 14, 2001.

The DTE ruled on June 24, 2002 that Verizon did not owe

the reciprocal compensation sought. On Global's federal court

challenge to the DTE order, the court vacated and remanded the DTE

order, ruling that the DTE could not base its decision on an

interpretation of the interconnection agreement that was contrary

to the interpretation reached by the RIPUC on that point; its

remand, however, also allowed that differences between

Massachusetts and Rhode Island law might lead the DTE to a

different ultimate outcome as to payment of reciprocal

compensation. Global NAPs, Inc. v. Verizon New Eng., Inc. (Global

NAPs II), 332 F. Supp. 2d 341, 374-75 (D. Mass. 2004). Verizon and

the DTE took this interlocutory appeal. We reverse and remand to

the district court for further proceedings consistent with this

opinion.1

I.

The TCA was enacted to "promote competition and reduce

regulation in order to secure lower prices and higher quality

1
This case raises different issues than those raised in
Global NAPs, Inc. v. Verizon New England, Inc., 396 F.3d 16 (1st
Cir. 2005); that case revolved around the parties' attempts to
negotiate a new interconnection agreement to replace the one at
issue here. A separate district court case involving an earlier
interconnection agreement between Global and Verizon is
tangentially related for reasons that will become apparent below.
See Global NAPs, Inc. v. New Eng. Tel. & Tel. Co. (Global NAPs I),
226 F. Supp. 2d 279 (D. Mass. 2002).

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services for American telecommunications consumers." 110 Stat. at

56. One of the overriding aims of the TCA was to introduce

competition into the market for local telephone service, which

previously had been monopolized by state-regulated entities created

after the break up of the American Telephone and Telegraph Company

(AT&T). See Verizon Commc'ns. Inc. v. FCC, 535 U.S. 467, 475-76

(2002). Under the TCA, incumbent local exchange carriers (ILECs)

-- that is, the former local phone monopolies -- must allow

competitive local exchange carriers (CLECs) to interconnect with

their phone networks. See 47 U.S.C. § 251(c). Interconnection

allows customers of CLECs to receive calls from, and place calls

to, customers of ILECs.

The TCA imposes a number of duties on local exchange

carriers. See id. §§ 251-52. Most important, for present

purposes, is the duty of all local exchange carriers, whether

incumbent or competitive, "to establish reciprocal compensation

arrangements for the transport and termination of

telecommunications." Id. § 251(b)(5). As between two local

exchange carriers, a "reciprocal compensation arrangement" is "one

in which each of the two carriers receives compensation from the

other carrier for the transport and termination on each carrier's

network facilities of telecommunications traffic that originates on

the network facilities of the other carrier." 47 C.F.R. § 51.701.

For example, generally when a customer of local exchange carrier A

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calls a customer of local exchange carrier B -- so that B must

complete the call -- A must share with B some of the revenues it

receives from its customer to compensate B for use of its

facilities. See Ill. Bell Tel. Co. v. WorldCom Techs., Inc., 157

F.3d 500, 501 (7th Cir. 1998). The FCC has ruled that the

reciprocal compensation obligations under § 251(b)(5) only extend

to traffic that begins and terminates within a local area. See

Local Competition Provisions in the Telecomms. Act of 1996, 11

F.C.C.R. 15499, 16012-13, 16015-16 (1996) (subsequent history

omitted); Pac. Bell v. Pac-West Telecomm Inc., 325 F.3d 1114, 1120

(9th Cir. 2003).

The TCA requires ILECs to negotiate interconnection

agreements with CLECs to provide the terms of interconnection and

"fulfill the duties" enumerated in § 251, including the duty to

establish reciprocal compensation arrangements. 47 U.S.C.

§ 251(c)(1). These agreements can be concluded through voluntary

negotiation or mediation, id. § 252(a), or if these methods fail,

through compulsory arbitration, id. § 252(b). Alternatively, a

CLEC has the option of adopting one of the ILEC's interconnection

agreements that had been previously approved within that state.

Id. § 252(i). Once the parties finalize their interconnection

agreement, it must be submitted to the relevant state's commission

for approval. Id. § 252(e).

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 A long-running battle has ensued over whether ISP-bound

traffic is "local telecommunications traffic" subject to reciprocal

compensation within the meaning of the TCA. See, e.g., Bell Atl.

Tel. Cos. v. FCC, 206 F.3d 1, 2-3 (D.C. Cir. 2000). The debate

centers around the question of whether ISP traffic "terminates" at

an ISP when a user in one state dials into a local ISP and visits

a website hosted on a server in another state. The issue could be

argued both ways. One could consider such calls to terminate at

the ISP, with communications between the ISP and the out-of-state

website considered a separate transaction unrelated to the call.

Alternatively, one might consider the call to have terminated in

the state where the web server is located. See id. at 5.

Generally, CLECs like Global tend to have more ISP customers than

do ILECs like Verizon. Since ISPs receive calls that are generally

much longer than voice calls, and do not place calls of their own,

carriers with more ISP customers will be net beneficiaries of a

reciprocal compensation scheme that includes ISP traffic. CLECs

and ILECs, then, have opposing interests. See id. at 3.

In 1998, Global and Verizon began negotiations for an

interconnection agreement in Rhode Island. Global NAPs II, 332 F.

Supp. 2d at 350. Rather than submitting their dispute over

reciprocal compensation for ISP traffic to arbitration, Verizon and

Global agreed to the following compromise provision, § 5.7.2.3, the

language of which is at the heart of the present dispute:

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 The Parties . . . disagree as to whether . . . "ISP
Traffic" . . . constitutes Local Traffic as defined
herein, and the charges to be assessed in connection with
such traffic. The issue of whether such traffic
constitutes Local Traffic on which reciprocal
compensation mus[t] be paid pursuant to the [TCA] is
presently before the FCC in CCB/CPD 97-30 and may be
before a court of competent jurisdiction. The Parties
agree that the decision of the FCC in that proceeding, or
[of] such court, shall determine whether such traffic is
Local Traffic (as defined herein) and the charges to be
assessed in connection with ISP Traffic. If the FCC or
such court determines that ISP Traffic is Local Traffic,
as defined herein, or otherwise determines that ISP
Traffic is subject to reciprocal compensation, it shall
be compensated as Local Traffic under this Agreement
unless another compensation scheme is required under such
FCC or court determination. Until resolution of this
issue, [Verizon] agrees to pay GNAPS Reciprocal
Compensation for ISP traffic . . . . (emphasis added)

Contemporaneous interconnection agreements between Global and

Verizon in New York, Maine, New Hampshire, and Vermont contained an

identical provision. The Massachusetts interconnection agreement

in effect between the parties at this time did not contain this

provision.

On February 26, 1999, the FCC issued its ruling in Docket

No. CCB/CPD 97-30, the proceeding specifically referred to in

§ 5.7.2.3.2 In this decision, the FCC concluded that ISP-bound

traffic is "largely interstate" and thus did not fall under the

reciprocal compensation duties imposed by 47 U.S.C. § 251. Local

Competition Provisions in the Telecomms. Act (Internet Traffic

Order), 14 F.C.C.R. 3689, 3705-06 (1999). The FCC suggested that

2
The FCC consolidated Docket No. CCB/CPD 97-30 into Docket
No. 96-98. Global NAPs II, 332 F. Supp. 2d at 350-51.

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its decision "might cause some state commissions to re-examine"

their decisions "to the extent that [they] are based on a finding

that [ISP] traffic terminates at an ISP server." Id. at 3706. But

the FCC also stated that it did not intend to "preclude[] state

commissions from determining, pursuant to contractual principles or

other legal or equitable considerations, that reciprocal

compensation is an appropriate interim inter-carrier compensation

rule" pending final rulemaking by the FCC on such compensation for

ISP-traffic. Id.

Soon after the FCC issued the Internet Traffic Order,

Verizon stopped making reciprocal compensation payments to Global

under the Rhode Island interconnection agreement and other

agreements containing § 5.7.2.3. Global filed a complaint with the

RIPUC under the Rhode Island agreement, contending that it was

entitled to continued payments because the condition for non-

payment -- "resolution of [the] issue" -- had not been met: it

argued that the Internet Traffic Order had left to state

commissions the ability to determine whether reciprocal

compensation payments were required under "contractual principles

or other legal or equitable considerations." Verizon argued to the

contrary: that the FCC had effectively resolved the issue in

deciding that ISP traffic was non-local interstate traffic not

subject to the reciprocal compensation duties imposed by 47 U.S.C.

§ 251. The RIPUC agreed with Global and found that the Internet

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Traffic Order did not resolve the issue of whether "ISP Traffic

constitutes 'local traffic' for which reciprocal compensation must

be paid under the [interconnection agreement]." It relied in part

on a prior order in which it had held that "in the absence of a

federal rule establishing an appropriate interstate mechanism," it

had "the authority to resolve disputes concerning reciprocal

compensation provisions contained in [interconnection agreements]."

It appears that at the time, the RIPUC had not yet come to any

conclusion on "whether ISP Traffic is subject to reciprocal

compensation"; it had only just "opened a general inquiry into the

issue." The RIPUC remarkably concluded "the undisputed fact that

[Global] has filed a complaint against [Verizon] . . . creates a

presumption that the 'issue' has not been resolved." Since Verizon

could not rebut this presumption, RIPUC found that § 5.7.2.3

"clearly and unambiguously requires [Verizon] to make reciprocal

payments to [Global]." Verizon did not contest this ruling, and

resumed reciprocal compensation payments to Global for ISP traffic

in Rhode Island.

Meanwhile, in Massachusetts, the story developed quite

differently. Global NAPs and Verizon's first interconnection

agreement in Massachusetts was signed in 1997.3 Global NAPs II,

332 F. Supp. 2d at 350. In October 1998, the DTE ruled that FCC

3
In Global NAPs I, the court dealt with the issue of
reciprocal compensation under this earlier agreement. 226 F. Supp.
2d at 289-90.

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precedent bound it to conclude that ISP traffic was subject to

reciprocal compensation. Id. But after the FCC issued its

Internet Traffic Order, the DTE revisited its October 1998

decision. In May 1999, the DTE held that as of February 26, 1999,

the date of the Internet Traffic Order, local exchange carriers in

Massachusetts were no longer required to pay reciprocal

compensation for ISP-bound traffic. Id. at 352. In this order,

the DTE referred to the Internet Traffic Order as "liberating,"

since it had previously felt bound by FCC precedent to treat ISP

traffic as local traffic subject to reciprocal compensation under

the TCA.4 Id.

On March 24, 2000, in the first appeal of the Internet

Traffic Order, the D.C. Circuit vacated the Internet Traffic Order

and remanded to the FCC, finding that the FCC's rationale for

treating ISP-bound traffic as interstate traffic for the purposes

of reciprocal compensation was inadequate. See Bell Atl. Tel. Cos.

206 F.3d at 9. The D.C. Circuit was to revisit this issue later.

In the interim, on June 16, 2000, the FCC approved the

merger of Verizon's predecessors into Verizon. See Application of

GTE Corp., Transferor, and Bell Atl. Corp., Transferee (Merger

Order), 15 F.C.C.R. 14032 (2000). As one of the conditions for

4
This May 1999 order was vacated in Global NAPs I, because
the DTE had failed to consider whether reciprocal compensation
might be required under contract law or other legal or equitable
principles, as the Internet Traffic Order allowed it to do. Global
NAPs I, 226 F. Supp. 2d at 288-89, 294-95.

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approval of the merger, the FCC required Verizon to allow a CLEC in

any one state to adopt any of Verizon's interconnection agreements

previously approved by a different state commission. Id. app. D at

14310; see also 47 U.S.C. § 252(i); 47 C.F.R. § 51.809 (allowing a

CLEC to adopt one of an ILEC's interconnection agreements

previously approved within that state). The provision containing

this condition is referred to by the parties and the district court

as "Paragraph 32." Paragraph 32 included the following language:

"[Verizon] shall not be obligated to provide pursuant to this

Paragraph any interconnection arrangement . . . unless it . . . is

consistent with the laws and regulatory requirements of . . . the

state for which the request is made." Merger Order, 15 F.C.C.R. at

14310.

On July 24, 2000, Global notified Verizon that, pursuant

to Paragraph 32, it wished to adopt the Rhode Island

interconnection agreement for the parties' dealings in

Massachusetts. However, Verizon and Global disagreed as to whether

§ 5.7.2.3 could be adopted under Paragraph 32. On November 15,

2000, the parties agreed that, effective back to July 24, 2000,

Global could adopt in Massachusetts all provisions of the Rhode

Island agreement that were consistent with Paragraph 32, thus

reserving Verizon's right to contest the adoption of § 5.7.2.3.

During pendency of negotiations between the parties, Verizon did

not pay Global reciprocal compensation for ISP-bound traffic.

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 On April 27, 2001, Global filed a complaint with the FCC,

claiming it was entitled to adopt § 5.7.2.3 and seeking damages

based on its interpretation of that section. On February 21, 2002,

the FCC held that Verizon was required to offer the entire Rhode

Island agreement, including § 5.7.2.3, to Global in Massachusetts.

See Global NAPs, Inc. (Paragraph 32 Order), 17 F.C.C.R. 4031, 4039

(2002). Importantly, it also noted that under the terms of

Paragraph 32, "only the relevant state commission may ultimately

decide whether particular terms of the agreement should be adopted

in that state, and if so, what those terms mean." Id. at 2039

(emphasis added). The FCC also held that Global's damages claim

was "premature" because the DTE had yet to approve an

interconnection agreement between the parties that contained the

contested provision. Id. at 2040.

In the meantime, the FCC issued an order in response to

the D.C. Circuit's remand of the Internet Traffic Order. See Local

Competition Provisions in the Telecomms. Act of 1996 (Order on

Remand), 16 F.C.C.R. 9151 (2001). In the Order on Remand, the FCC

held once again that the "provisions of section 251(b)(5) do not

extend to ISP-bound traffic" but rested its decision on different

legal grounds. Id. at 9153. In addition, the FCC set up a new

compensation scheme for ISP-bound traffic, which would become

effective starting June 14, 2001. The FCC also made clear that it

had exclusive regulatory authority to address the issue, so that

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state commissions no longer have the power to do the same. Id. at

9168-69, 9189. In its consideration of the Order on Remand, the

D.C. Circuit held that the FCC could not validly base its actions

on the new legal grounds. See WorldCom, Inc. v. FCC, 288 F.3d 429,

433-34 (D.C. Cir. 2002). It did not vacate the FCC order, but

found the agency needed to provide a different rationale. Id. at

434. The result is that the Order on Remand still remains in

force. See Verizon Md. Inc. v. Global NAPs, Inc., 377 F.3d 355,

367 (4th Cir. 2004).

Thus, the parties here agree that the Order on Remand

"resolved" the question of reciprocal compensation for ISP traffic

by setting up a new compensation scheme from June 14, 2001 going

forward.5 But in Massachusetts there remains the question of

reciprocal compensation for ISP-bound traffic between July 24, 2000

(when the language of the Rhode Island agreement went into effect

in Massachusetts through the Massachusetts interconnection

agreement) and June 14, 2001 (when the alternative compensation

scheme in the Order on Remand went into effect). See Global NAPs

II, 332 F. Supp. 2d at 355.

In March 2002, Verizon submitted the Massachusetts

interconnection agreement containing terms identical to those in

the Rhode Island agreement for retrospective approval by the DTE.

5
There is no dispute in Rhode Island that this is the effect
of the Order on Remand.

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Before the DTE, Global argued that since it and Verizon had fully

litigated the issue of whether the Internet Traffic Order was

"resolution of this issue" under the identically worded Rhode

Island agreement before the RIPUC, the DTE was collaterally

estopped from relitigating the same. The DTE rejected Global's

argument. The DTE approved the Massachusetts agreement in its

entirety on June 24, 2002, but held that it was not bound by

RIPUC's interpretation and reached its own interpretation. It

noted that Paragraph 32 allowed the DTE to ensure that the

agreement was "consistent with the laws and regulatory requirements

of . . . the state for which the request is made." The DTE made

note of its prior precedent -- in particular, its May 1999 order

finding that the Internet Traffic Order had held that ISP traffic

was interstate traffic and thus not subject to reciprocal

compensation under the TCA. The DTE concluded that based on this

precedent it was required to find that the Internet Traffic Order

was resolution of the issue under the meaning of § 5.7.2.3.

Therefore, Global was not entitled to reciprocal compensation for

ISP-bound traffic during the relevant time period, between July 14,

2000 and June 14, 2001.

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 Global filed suit challenging the DTE ruling.6 Global

asserted a number of claims in its complaint, including, most

importantly for our review, a claim that the DTE's decision not to

be bound by the RIPUC decision on the issue violated the Full Faith

and Credit Clause of the U.S. Constitution. See Global NAPs II,

332 F. Supp. 2d at 359. The district court issued a lengthy and

thoughtful decision on August 26, 2004, granting in part Global's

motion for summary judgment. Id. at 375. The court found the

RIPUC conclusion regarding the effect of the Internet Traffic Order

on § 5.7.2.3 could not be relitigated before the DTE. Id. at 345.

The court noted, however, that it was "possible that, in view of

the state of the law in Rhode Island in 1999, the issue was not

resolved, but, in view of the state of the law in Massachusetts,

the issue was resolved." Id. at 374. Thus, the court remanded the

case to the DTE to determine "whether and when Massachusetts state

legal or equitable principles that might serve as the foundation of

any obligation to pay reciprocal compensation were so well-settled

that the issue was resolved within the meaning of the parties'

6
Global also petitioned the DTE for reconsideration of its
order since the court in Global NAPs I had subsequently vacated the
DTE's May 1999 order, which the DTE had relied on heavily when
interpreting the interconnection agreement here. The DTE denied
this petition, and Global filed a second suit seeking review of
this denial. The district court in this case allowed the joint
motion of all parties to consolidate the two cases. See Global
NAPs II, 332 F. Supp. 2d at 343.

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agreement through a combination of the [Internet Traffic Order] and

Massachusetts state law." Id. at 345-46.

Verizon and the DTE each appealed, arguing that the

district court incorrectly applied the Full Faith and Credit

Clause. Global cross-appealed, claiming that the district court

erred in remanding the case to the DTE rather than reversing the

DTE decision outright.

We first address the question of appellate jurisdiction.

II.

While neither party challenges jurisdiction, "[w]e have

an obligation to inquire sua sponte into our jurisdiction over the

matter." Doyle v. Huntress, Inc., 419 F.3d 3, 6 (1st Cir. 2005)

(citing Florio v. Olson, 129 F.3d 678, 680 (1st Cir. 1997)).7 It

is clear that "the federal courts have subject matter jurisdiction

to review state agency determinations under the TCA for compliance

with federal law, pursuant to 28 U.S.C. § 1331." Global NAPs,

Inc. v. Verizon New Eng., Inc., 396 F.3d 16, 21-22 (1st Cir. 2005).

However, subject to a few exceptions not applicable here, we have

appellate jurisdiction only over "final decisions" of the district

courts under 28 U.S.C. § 1291. Generally, a district court order

7
Shortly after Verizon and the DTE filed this appeal, we
issued an Order to Show Cause directing the parties to address the
issue of our appellate jurisdiction in light of the district
court's remand order. In a later order, we referred the issue of
appellate jurisdiction to the panel, and asked the parties to
address certain jurisdictional questions in their opening briefs.
Verizon and DTE responded to our request, while Global did not.

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that remands to an administrative agency for further proceedings is

not considered a "final decision" within the meaning of § 1291.

See Mall Props., Inc. v. Marsh, 841 F.2d 440, 441-42 (1st Cir.

1988). Here we are faced with a remand order.

Verizon and the DTE argue that we nonetheless have

jurisdiction over this appeal because it falls in the "category of

cases in which an immediate appeal by a governmental agency is

allowed . . . , because otherwise the [agency] would be unlikely to

obtain review." Colon v. Sec'y of Health & Human Servs., 877 F.2d

148, 151 (1st Cir. 1989); see also Marsh, 841 F.2d at 443

(suggesting jurisdiction would be appropriate in cases where

"unless review [is] accorded immediately, the agency likely would

not be able to obtain review").

This court has recognized our ability to review orders

remanding agency proceedings in situations similar to this one.

See Colon, 877 F.2d at 151-52; United States v. Alcon Labs., 636

F.2d 876, 884-85 (1st Cir. 1981); Lopez Lopez v. Sec'y of Health,

Educ. & Welfare, 512 F.2d 1155, 1156 (1st Cir. 1975).

For example, in Colon, the district court had remanded a

social security disability insurance benefits case to the Secretary

of Health and Human Services, ordering him to reopen an earlier

decision that had denied benefits. Colon, 877 F.2d at 151. The

Secretary appealed that order. We found that we had appellate

jurisdiction because otherwise "the Secretary [was] unlikely to

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obtain review of this important issue which is distinct from the

underlying merits of the claim of disability." Id. We noted that

if the Secretary decided to grant benefits on remand, it would be

"doubtful whether the Secretary could then appeal from his own

decision to grant benefits." Id. Even if the Secretary decided to

deny benefits, "[a]rguing that the district court has no

jurisdiction to order the Secretary to reopen a previous final

decision after that decision, in fact, has been reopened is largely

an academic exercise." Id. at 152.

Similarly, the Eleventh Circuit, in considering a TCA

case, held that it had jurisdiction to consider the appeal by the

Florida Public Service Commission and BellSouth of a district

court's order remanding the case to the state commission:

[T]here is a widely recognized distinction between
remands where a district court simply orders the agency
to proceed under a 'certain legal standard,' and in
situations where a district court remands for further
consideration of evidence. A remand order generally is
found appealable in the former cases because the agency,
forced to conform its decision to the district court's
mandate, cannot appeal its own subsequent order.

MCI Telecomms. Corp. v. BellSouth Telecomms. Inc., 298 F.3d 1269,

1271 (11th Cir. 2002) (internal citation omitted) (citing

Occidental Petroleum Corp. v. SEC, 873 F.2d 325, 329–30 (D.C. Cir.

1989)). Other circuits considering an appeal under the TCA

challenging a district court order that had remanded to a state

commission seem to have assumed they had jurisdiction sub silentio.

See, e.g., Ind. Bell Tel. Co. v. McCarty, 362 F.3d 378, 382, 395

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(7th Cir. 2004); Sw. Bell Tel. Co. v. Pub. Util. Comm'n, 348 F.3d

482, 485, 487 (5th Cir. 2003); US W. Commc'ns, Inc. v. Jennings,

304 F.3d 950, 959 (9th Cir. 2002); MCI Telecomm. Corp. v. Bell

Atl.-Pa., 271 F.3d 491, 498, 521 (3d Cir. 2001); AT&T Commc'ns of

the S. States, Inc. v. BellSouth Telecomms. Inc., 229 F.3d 457, 459

(4th Cir. 2000).

For reasons similar to those given in Colon, we hold we

have appellate jurisdiction over this matter. The circumstances of

this case make clear that if review is denied at this stage, the

DTE will be unable to "obtain review of this important issue

distinct from the underlying merits of the claim of disability,"

see Colon, 877 F.2d at 150, because the district court has "simply

order[ed] the agency to proceed under a certain legal standard,"

MCI Telecomms., 298 F.3d at 1271 (internal quotation marks

omitted). If on remand from the district court, the DTE were to

reverse course and find that Global was due reciprocal

compensation, the DTE would be unable to appeal its own order for

the purpose of raising the issue raised here. Even if one of the

parties appealed this hypothetical later decision, the DTE would be

placed in the awkward position of challenging the district court's

original decision, while simultaneously defending its subsequent

order applying the district court's legal standards.

Alternatively, if the DTE once again denies Global's claim for

reciprocal compensation, and Global were to once again appeal this

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determination, the DTE's appeal of the district court's original

ruling would be "largely an academic exercise of little practical

significance." See Colon, 877 F.2d at 152. In this scenario, the

most salient issue on appeal would instead be whether the DTE's

alternative grounds were sufficient to support its decision.

Since we have jurisdiction over DTE's appeal, we may also

hear Verizon's appeal raising the same issue. See MCI Telecomms.,

298 F.3d at 1271 (hearing appeal of both the state commission and

a private party); NAACP v. U.S. Sugar Corp., 84 F.3d 1432, 1436

(D.C. Cir. 1996) ("[W]hat matters for the purposes of our appellate

jurisdiction is whether the district court's decision -- and not

any particular party challenging it -- is properly before us . . .

.").

Global's cross-appeal is a different matter. Global

argues that the district court erred in ordering a remand to the

DTE rather than reversing the DTE's decision outright. In a

nutshell, Global's argument is that the DTE is constrained by its

own administrative precedent from finding that reciprocal

compensation cannot be paid. These arguments go to the heart of

the underlying debate between Global and Verizon, and in making

these arguments Global asks us to reach issues not decided by the

district court. We decline to do so, and find that Global's cross-

appeal is not properly before us.

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 III.

We turn now to the merits of the appeal. The district

court held:

[A] state public utility commission's conclusions of
state law relating to an interconnection agreement are
entitled to preclusive effect in subsequent proceedings
before other states' public utility commissions to the
same extent that they would receive preclusive effect in
the first state's courts.

Global NAPs II, 332 F. Supp. 2d at 366. It implicitly held that

Rhode Island law would require the DTE to be bound by the RIPUC's

decision. The district court based its decision on its view that

principles of collateral estoppel, or "issue preclusion," rooted in

the Full Faith and Credit Clause required such a holding. See AVX

Corp. v. Cabot Corp., No. 04-2656, slip op. at 6 (1st Cir. Sept.

13, 2005) (describing the difference between issue and claim

preclusion). We review this conclusion of federal law de novo.

The Full Faith and Credit Clause provides: "Full Faith

and Credit shall be given in each State to the public Acts,

Records, and judicial Proceedings of every other State. And the

Congress may by general Laws prescribe the Manner in which such

Acts, Records, and Proceedings shall be proved, and the Effect

thereof." U.S. Const. art IV, § 1. Congress, exercising its power

under this provision, passed 28 U.S.C. § 1738, which provides that

the "Acts, records and judicial proceedings . . . [of any State]

shall have the same full faith and credit in every court within the

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United States . . . as they have by law or usage in the courts of

[the] State . . . from which they are taken."

There is no claim that the Full Faith and Credit Clause

compels full faith and credit be given to the unreviewed decisions

of state administrative agencies. And, under University of

Tennessee v. Elliott, 478 U.S. 788 (1986), the statute, § 1738,

does not apply to unreviewed decisions of state administrative

agencies. However, Supreme Court precedent makes clear that we

must determine whether application of a federal common law rule of

issue preclusion is appropriate here.

To set the scene, we describe briefly the requirements of

federal issue preclusion law, but do not rest on that ground. We

also assume arguendo that issue preclusion applies to an unreviewed

administrative agency proceeding.8 See Bath Iron Works Corp. v.

Dir., Office of Workers' Comp., 125 F.3d 18, 21 (1st Cir. 1997)

("[T]he subject [of preclusion in administrative contexts] is a

8
The courts generally "favor[] application of the common-law
doctrines of collateral estoppel (as to issues) and res judicata
(as to claims) to those determinations of administrative bodies
that have attained finality." Astoria Fed. Sav. & Loan Ass'n v.
Solimino, 501 U.S. 104, 107 (1991). This is true even "when the
issue has been decided by an administrative agency, be it state or
federal, which acts in a judicial capacity." Id. at 108 (citation
omitted) (citing Elliott, 478 U.S. at 798); see also United States
v. Utah Constr. & Mining Co., 384 U.S. 394, 422 (1996) ("When an
administrative agency is acting in a judicial capacity and
resolve[s] disputed issues of fact properly before it which the
parties have had an adequate opportunity to litigate, the courts
have not hesitated to apply res judicata to enforce repose.").

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complex one, with many variations; and it is perhaps well not to

generalize too broadly.").9

In Monarch Life Insurance Co. v. Ropes & Gray, 65 F.3d

973 (1st Cir. 1995) this court set forth the following "federal

preclusion principles": "(1) both the . . . proceedings involved

the same issue of law or fact; (2) the parties actually litigated

the issue in the [prior] proceeding[]; (3) the [first] court

actually resolved the issue in a final and binding judgment . . .

; and (4) its resolution of that issue of law or fact was essential

to its judgment (i.e., necessary to its holding)." Id. at 978

(emphases in original); see also In re Bankvest Capital Corp., 375

F.3d 51, 70 (1st Cir. 2004). We have serious doubts about whether

this test could be met on the facts presented here, because it is

not at all clear that the RIPUC and the DTE decided "the same issue

of law or fact."10 The RIPUC here came to the conclusion that

9
See also 18B C. Wright, A. Miller & E. Cooper, Federal
Practice and Procedure § 4475, at 474-75 (2d ed. 2002) ("Preclusion
is much less likely to attach when a proceeding in one agency is
followed by a proceeding in another agency. . . . When the agencies
are creatures of different governments, all of the principles that
generally prevent one government from precluding another are at
work.").
10
There is considerable debate among the parties as to whether
the "issue" decided by the RIPUC was one of fact, law, or a mixed
question of fact or law. Verizon and the DTE argue that issue
preclusion is inappropriate when the issue decided by the first
state administrative agency was one of law rather than fact. See
Edmunson v. Borough of Kennett Square, 4 F.3d 186, 193 (3d Cir.
1993). Global argues that the issue is one of fact and so Edmunson
is inapposite, and in the alternative, that even if the issue were
one of law, issue preclusion should apply. The district court came

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federal law (viz, the Internet Traffic Order) did not "resolve" the

issue within the meaning of the parties' Rhode Island agreement,

relying at least in part on the fact that the question of

reciprocal compensation was still open in Rhode Island. The DTE,

in contrast, found that the Internet Traffic Order did resolve the

issue, but based its finding on its "well established position on

the issue of reciprocal compensation." Indeed, as of May 1999,

after the Internet Traffic Order had "liberat[ed]" it from its

earlier assumption that federal law required reciprocal

compensation, the DTE had come to a settled conclusion that

reciprocal compensation was not required.11

It is against the backdrop of its May 1999 order that the

DTE decided the present question of whether the FCC's Internet

Traffic Order "resolved" the issue of reciprocal compensation for

ISP-bound traffic. No similar "well-established position" guided

to the conclusion that the RIPUC decided an issue of law, but held
that issue preclusion was required. Global NAPs II, 332 F. Supp.
2d at 366 (citing Miller v. County of Santa Cruz, 39 F.3d 1030,
1037 & n.7 (9th Cir. 1994)). We do not resolve the parties'
disagreement about whether the DTE ruling is one of law or of fact
or of mixed law and fact.
11
The fact that the DTE's May 1999 order was subsequently
vacated and remanded in Global NAPs I, is of no import. The
district court in Global NAPs I simply remanded to the agency to
consider whether reciprocal compensation would be required under
state contractual or equitable principles. The DTE concluded that
compensation would not be required, and this decision was upheld
upon review by the Supreme Judicial Court of Massachusetts.
See MCI WorldCom Commc'ns, Inc. v. Dep't of Telecomms. and Energy,
810 N.E.2d 802, 812 (Mass. 2004).

-24-
the RIPUC in making its decision. It is difficult, then, to see

for preclusion purposes why the DTE and RIPUC decided the "same

issue of law or fact." See 18C C. Wright, A. Miller & E. Cooper,

Federal Practice and Procedure § 4425, at 659 (2d ed. 2002)

("Preclusion . . . may be defeated by showing . . . that there has

been a substantial change in the legal climate suggesting a new

understanding of the governing legal rules that may require a

different application.").12

Nonetheless, we do not rest on this ground because there

is of necessity a prior analysis. As the Supreme Court made clear

in Elliott, we must first answer the preliminary question of

whether application of a federal common law rule of issue

preclusion would be consistent with Congress's intent in enacting

the TCA. Elliott, 478 U.S. at 796; see also Astoria Fed. Sav. &

Loan Ass'n v. Solimino, 501 U.S. 104, 110 (1991). We find that, on

the facts of this case, it would not.

Elliott controls the structure of analysis. In Elliott,

a discharged employee of the university had filed a complaint with

a state administrative agency, claiming his discharge was racially

12
Courts should be particularly cautious about enforcing issue
preclusion rules across state lines because in contrast to the
rules of claim preclusion, "[m]any issue preclusion rules fall far
outside the central role of judicial finality." 18B C. Wright, A.
Miller & E. Cooper, supra, § 4467, at 42. There are many
situations where full faith and credit does not compel issue
preclusion rules to be applied in the second state. Id. § 4467, at
42-43.

-25-
motivated. 478 U.S. at 790. When his claims were denied by the

state agency, rather than seeking review in the state courts, the

employee went to federal district court with claims under Title VII

of the Civil Rights Act of 1964, the Constitution, and the

Reconstruction-era civil rights statutes. Id. The district court

granted summary judgment for the university on the ground that the

state administrative decision was entitled to preclusive effect.

Id. at 792. The Supreme Court noted first that the full faith and

credit statute, 28 U.S.C. § 1738, did not apply to unreviewed

administrative factfinding. Id. at 794. As a result, the Court

had to "fashion federal common-law rules of preclusion in the

absence of a governing statute." Id. It determined that, with

respect to the employee's Title VII claim, the question of whether

the state administrative decision was entitled to preclusive effect

depended on "whether a common-law rule of preclusion would be

consistent with Congress'[s] intent in enacting Title VII." Id. at

796. The Court concluded based on the language and legislative

history of Title VII that "Congress did not intend unreviewed state

administrative proceedings to have preclusive effect on Title VII

claims." Id.; see also Solimino, 501 U.S. at 112-13 (holding that

unreviewed findings of a state administrative agency with respect

to an age discrimination claim had no preclusive effect on federal

proceedings under the Age Discrimination in Employment Act). In

-26-
resolving the present dispute, we ask the same question as to

congressional intent in enacting the TCA.

The district court distinguished Elliott and Solimino

because "[a]s they involved decisions to be made by the federal

government, rather than a state, they were governed by the common

law of issue preclusion rather than the Full Faith and Credit

Clause." Id. at 366. However, there is nothing in those cases to

suggest that their holdings on the preclusive reach of judicially

unreviewed decisions of state agencies were limited to situations

where the subsequent case was in federal court.

In order to find that issue preclusion applies, the

district court held that "there is nothing explicit or implicit in

the [TCA] that indicates that Congress intended to depart from the

traditional rules of preclusion." Id. We disagree. Our

examination of the TCA leads us to conclude that to apply

principles of issue preclusion, at least in the situation presented

here, would contravene the intent of Congress.

In a sense, issue preclusion rules are about allocation

of authority to decide a question. General application of the

federal common law of issue preclusion would threaten two different

allocations of power under the TCA: the allocation among the

commissions of each state as to the effectuation of their state's

policies and the allocation of power between the FCC and the

states.

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 The model under the TCA is to divide authority among the

FCC and the state commissions in an unusual regime of "cooperative

federalism," see P.R. Tel. Co. v. Telecomms. Regulatory Bd., 189

F.3d 1, 8 (1st Cir. 1999), with the intended effect of leaving

state commissions free, where warranted, to reflect the policy

choices made by their states. See P. Huber et al., Federal

Telecommunications Law §§ 3.3.3-3.3.4 (2d ed. 1999). Rather than

placing the entire scope of regulatory authority in the federal

government, "Congress enlisted the aid of state public utility

commissions to ensure that local competition was implemented fairly

and with due regard to the local conditions and the particular

historical circumstances of local regulation under the prior

regime." Id. § 3.3.4, at 227. We see little indication that

Congress intended its explicit allocation of authority between

state commissions to be generally displaced by common law rules

that themselves allocate authority.

The goal of preserving a role for the state regulatory

commissions is reflected in a number of provisions in the TCA.

Congress expressly left with the states the power to enforce "any

regulation, order, or policy of a State commission that . . .

establishes access and interconnection obligations of local

exchange carriers; . . . is consistent with the requirements of

this section; and . . . does not substantially prevent

implementation of the requirements of this section and the purposes

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of this part." 47 U.S.C. § 251(d)(3). While the TCA prevents

states and localities from passing laws "hav[ing] the effect of

prohibiting the ability of any entity to provide interstate or

intrastate telecommunications service," id. § 253(a), it allows "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," id. § 253(b).

The role played by state commissions is especially

important with respect to interconnection agreements. State

commissions are given the authority to resolve though arbitration

or mediation any open issues in ongoing negotiations for

interconnection agreements. Id. § 252(a)(2). Before an

interconnection agreement goes into effect, it must be approved by

a state commission, which may reject the agreement if it "is not

consistent with the public interest, convenience, and necessity" or

it "discriminates against a telecommunications carrier not a party

to the agreement." Id. § 252(e)(2). Congress expressly preserved

each state's authority to "establish[] or enforc[e] other

requirements of State law in [a State commission's] review of an

agreement, including requiring compliance with intrastate

telecommunications service quality standards or requirements" as

-29-
long as those requirements do not serve as barriers to entry. Id.

§ 252(e)(3).

In addition to threatening the allocation of authority

under the TCA among the states as to protection of their own state

interests, general implementation of default common law issue

preclusion rules could threaten the authority allocated to the FCC.

Congress gave the federal government an extensive oversight role.

Under the TCA, the FCC has authority to preempt state jurisdiction

over regulation of intrastate communications in a number of

specific situations. For example, if a state commission fails to

carry out the duties required of it with respect to its

consideration of a particular interconnection agreement, the FCC is

given authority to preempt the state commission's jurisdiction and

assume direct responsibility for that agreement. Id. § 252(e)(5).

Direct review of the state commission's failure to act is

foreclosed; the FCC's actions in response to an alleged failure to

act, and judicial review of those actions, are the "exclusive

remedies." Id. § 252(e)(6). In addition, the FCC may preempt the

enforcement of a state or local law if it finds, after notice and

an opportunity for comment, that the law acts as a barrier to

entry. Id. § 253(e). In addition to these specific grants of

authority, the FCC has broad regulatory authority over the TCA.

See id. § 201(b) ("The Commission may prescribe such rules and

regulations as may be necessary in the public interest to carry out

-30-
the provisions of this chapter."); AT&T Corp. v. Iowa Utils. Bd.,

525 U.S. 366, 378 (1999) (interpreting § 201 to extend to the local

competition provisions of the TCA).

Indeed, the FCC has issued its own orders and regulations

that have made clear that, at times, individual state commissions

are to decide matters and that, at other times, one state

commission's determination is owed some deference. The FCC, in

exercising the power granted to it under the TCA, has indicated

that the DTE is the decision-making authority as to the issue here.

In Paragraph 32, the FCC noted that the adoption of an

interconnection agreement from another state was subject to the

proviso that the agreement had to be "consistent with the laws and

regulatory requirements of . . . the state for which the request is

made." Merger Order, 15 F.C.C.R. 14032 app. D at 14310. In

considering the agreement here, the FCC reiterated that under the

terms of Paragraph 32 "only the relevant state commission may

ultimately decide whether particular terms of the agreement should

be adopted in that state, and if so, what those terms mean."

Paragraph 32 Order, 17 F.C.C.R. at 4039.

As a result of these orders, the FCC has essentially done

three things. It has said that nothing in the TCA itself requires

as a matter of federal law that Verizon pay the reciprocal

compensation charges. It has also said that each state commission

may make its own determination on the issue under state law. And

-31-
although the FCC required Verizon to enter an agreement with Global

using the same language as the Rhode Island agreement, it also

recognized that there was a dispute about that language and that

the relevant state commission (the DTE) should decide the issue.

For a court to step in and shift the state-by-state

decision-making authority from the Massachusetts DTE to the RIPUC

on this issue would upset the allocations of authority made out

under the TCA. A judicially imposed rule of preclusion here would

also set up an opportunity for regulatory arbitrage contrary to the

purposes of the TCA. It is common in the telecommunications world

for ILECs and CLECs to negotiate multiple interconnection

agreements across multiple states simultaneously, and these

agreements often contain identical terms. Given this fact, a rule

granting preclusive effect to the decision of the first state

commission on a particular issue creates the risk of perverse

incentives. Carriers looking to lock in a friendly interpretation

will race to the state commission with the most amenable views, and

perhaps leverage that decision to their advantage in other states.

The state commissions themselves would be encouraged to decide an

issue as quickly as possible, to preserve their independence and to

avoid being bound by another state agency's interpretations of

contractual terms. These results cut directly against Congress's

desire, as evinced by the text and structure of the TCA, "to ensure

that local competition [be] implemented fairly and with due regard

-32-
to the local conditions and the particular historical circumstances

of local regulation under the prior regime." P. Huber et al.,

supra, § 3.3.4, at 227.

To be sure, in some other circumstances, deference by one

state commission to another state's conclusions may be appropriate.

For example, the FCC has chosen to give presumptive effect to

certain findings regarding technical feasibility by one state

commission. See 47 C.F.R. § 51.319(b)(3)(ii) ("Once one state

commission has determined that it is technically feasible to

unbundle subloops at a designated point, an incumbent LEC in any

state shall have the burden of demonstrating to the state

commission . . . that it is not technically feasible . . . to

unbundle its own loops at such a point."); id. § 51.230(c) ("Upon

a successful demonstration by [a competing] carrier before a

particular state commission [that 'deployment of a technology falls

within the presumption under paragraph (a)(3) of this section'],

the deployed technology shall be presumed acceptable for deployment

in other areas."). This presumption operates not because of the

law of issue preclusion but because the FCC has chosen this as an

appropriate method of achieving uniformity. The FCC has not

created any similar presumptions as to the issues presented here.

In part because of the complications of the TCA's scheme

of cooperative federalism, we do not think it wise to decide this

case in the broad terms urged by the parties. We do not address

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whether the enactment of the TCA itself displaced all aspects of

the federal common law of issue preclusion in the area. Nor do we

address the extent to which the TCA assigns the task of

displacement or adoption of rules of issue preclusion to the FCC.

We also do not resolve the dispute as to whether interconnection

agreements are creatures of state law or federal law. Rather, we

simply find that under the circumstances presented here,

application of common law principles of issue preclusion would

contravene the intent of Congress. The district court was in error

when it held otherwise.

IV.

We reverse the district court's judgment and vacate the

order remanding the matter to the DTE; we remand to the district

court for further proceedings consistent with this opinion. Costs

are awarded to Verizon and the DTE.

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