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In a long-running dispute between MCI and Verizon over local telephone rates, a federal judge has refused to follow a decision handed down by the Commonwealth Court in 2000 that upheld the rates set by the Pennsylvania Public Utilities Commission after finding that Congress gave the federal courts exclusive jurisdiction to decide such appeals. In his 18-page opinion in Bell Atlantic v. PUC, Senior U.S. District Judge Marvin Katz found that the Telecommunications Act of 1996 explicitly confers jurisdiction solely with the federal courts to decide appeals from state commissions relating to “interconnection agreements.” In the TCA, Congress opened local telephone service, which was previously operated as a monopoly, to competition. The law imposed duties on local incumbent carriers, like Verizon, to share their networks with competitors. In Pennsylvania, the transition to a competitive market has not been a smooth one. After the PUC adopted Verizon’s cost model for its rate-setting determinations, MCI and AT&T filed suit in federal court. Verizon also filed suit, asking the Commonwealth Court to uphold the PUC’s decision. In federal court, the PUC challenged the court’s jurisdiction, arguing that it was immune from such a suit under the 11th Amendment. Two federal judges — one in Harrisburg and one in Philadelphia — rejected the 11th Amendment argument. Because such immunity rulings are immediately appealable, the PUC took the case to the 3rd U.S. Circuit Court of Appeals. In 2001, the 3rd Circuit also rejected the immunity argument. But in the meantime, the Commonwealth Court reached the merits of the case and upheld the PUC’s decision. The two federal cases were then consolidated before Katz in federal court in Philadelphia. In the latest round of litigation, the PUC argued that Katz lacks jurisdiction over the dispute because a federal court must afford “full faith and credit” to the Commonwealth Court decision. Lawyers for the PUC also argued that even if Katz has jurisdiction under the TCA, he should nonetheless find that the provision of the TCA granting federal jurisdiction is unconstitutional because it exceeds Congress’ authority under the Commerce Clause. The PUC also argued that if Katz found that he does have jurisdiction, his power is limited under the law to issuing an injunction barring enforcement of its order and that he does not have the power to compel the PUC to calculate new rates. Now Katz has rejected all three arguments. The full faith and credit argument “is fatally flawed,” Katz found, “because Congress has vested exclusive jurisdiction in the federal district courts to decide appeals from state commission determinations on interconnection agreements under the Telecommunications Act.” The Commonwealth Court, Katz said, “lacked jurisdiction to decide this controversy from the outset.” As a result, Katz said, “this court is not obligated to lend full faith and credit to its decision.” Although state and federal courts are “presumed to have concurrent jurisdiction over federal law claims,” Katz found, “Congress can affirmatively divest state courts of that presumptively concurrent jurisdiction.” In the TCA, Katz said, “Congress made an explicit statutory directive divesting state courts of jurisdiction to review state commission determinations on interconnection agreements.” Lawyers for the PUC argued that Katz was taking too broad a reading of two provisions of the TCA that ought to be read separately. Sections 252(e)(4) of the TCA says: “No state court shall have jurisdiction to review the action of a state commission in approving or rejecting an agreement under this section.” Section 252(e)(6) says: “In any case in which a state commission makes a determination under this Section, any party aggrieved by such determination may bring an action in an appropriate federal district court to determine whether the agreement or statement meets the requirements of Section 251.” PUC lawyers argued that if read separately, the two provisions show that Congress explicitly provided for exclusive federal review only of state court decisions “approving” or “rejecting” agreements between carriers. But state and federal courts have concurrent jurisdiction, they argued, over appeals from all other state commission determinations regarding whether an agreement complies with the law. MCI, AT&T and the Federal Communications Commission all disagreed, arguing that the two provisions must be read together to mean that federal courts enjoy exclusive jurisdiction over appeals from all state commission determinations on interconnection agreements. Katz found that the 3rd Circuit had already held that the two provisions should be read together, so that “federal jurisdiction for the review of commission decisions on interconnection agreements is exclusive.” Other appellate courts agree, Katz found, citing decisions from the 5th, 6th, 7th, 8th and 10th circuits. Only the 4th Circuit has held otherwise, Katz found, with its 2001 decision in Bell Atl.-Md. Inc. v. MCI, which held that state commission actions administering and enforcing interconnection agreements are reviewable by state courts. Katz followed the weight of authority and found that federal jurisdiction is exclusive for all appeals from state commission decisions relating to interconnection agreements.

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