SUPREME COURT RULES ON STATES RIGHTS ISSUE IN VERIZON CASE
Acting on complex states rights issue, U.S. Supreme Court ruled Mon. that federal courts had right to hear appeals of state PUC decisions, even if those decisions involved enforcement actions. Ruling in Verizon Md. v. Public Service Commission of Md., high court vacated and remanded decision by 4th U.S. Appeals Court, Richmond, Va., that Verizon wasn’t permitted to appeal Md. PSC decision to U.S. Dist. Court. Decision was 8-0, with Justice Sandra O'Connor not participating. Justices Anthony Kennedy and David Souter filed concurring statements. Justices Ruth Ginsburg and Stephen Breyer joined in Souter’s statement.
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High court said Verizon had right to sue state commissions because: (1) Doctrine established in precedent- setting 1908 Ex parte Young case “permits Verizon’s suit to go forward.” (2) Case met requirements of Sec. 1331 of U.S. Code that allowed U.S. Dist. Courts to hear lawsuits arising under federal law. In Dec. 5 oral argument, there wasn’t any dispute over whether initial state PUC decisions approving interconnection agreements could be challenged in federal courts, as called for in Telecom Act. Dispute centered on whether suits could be filed in federal court to challenge state’s follow-up enforcement action. Md. PSC said that wasn’t permitted under 11th Amendment to U.S. Constitution. Case involved Md. PSC’s order that Verizon must pay reciprocal compensation to WorldCom for phone calls to ISPs. Verizon appealed to federal court on ground that PSC’s order violated Telecom Act and FCC ruling.
In decision written by Justice Antonin Scalia, court said 4th Circuit’s “suggestion that the doctrine of Ex parte Young is inapplicable because the Commission’s order was probably not inconsistent with federal law is unavailing. The inquiry into whether the suit lies under Ex parte Young does not include an analysis of the merits of the claim… In determining whether the Ex parte Young doctrine avoids an Eleventh Amendment bar to suit, a court need only conduct a ’straightforward inquiry’ into whether the complaint alleges an ongoing violation of federal law and seeks relief properly characterized as prospective… Here, Verizon’s prayer for injunctive relief -- that state officials be restrained from enforcing an order in contravention of controlling federal law -- clearly satisfies our ’straightforward inquiry.'”
On 2nd point, involving Sec. 1331, court said: “We have no doubt that federal courts have jurisdiction under Sec. 1331 to entertain such a suit… Federal courts have jurisdiction… where the petition’s right to recover will be sustained if federal law is given one construction and will be defeated if it is given another, unless the claim clearly appears to be immaterial… or is wholly insubstantial and frivolous. Here, resolution of Verizon’s claim turns on whether the Act, or an FCC ruling, precludes the Commission from ordering payment of reciprocal compensation and there is no suggestion that the claim is immaterial or insubstantial and frivolous.”
Supreme Court Mon. dismissed related case -- Richard Mathias v. WorldCom -- that had been argued at same time as Verizon case. WorldCom case, involving Ill. Commerce Commission (Mathias is chairman of ICC), questioned whether sovereign immunity provision of Constitution barred parties from challenging PUC enforcement decisions. High court dismissed it for lack of standing, issue that had come up in oral argument. Case had been brought by winning party -- ICC. After ICC ruled that Ameritech had to pay reciprocal compensation, Ameritech sought review in U.S. Dist. Court, Chicago, which refused ICC’s request for dismissal on sovereign immunity grounds but still ruled in ICC’s favor on reciprocal compensation issue. Supreme Court said: “After full briefing and oral argument, it is now clear that petitioners were the prevailing parties… As a general rule, a party may not appeal from a favorable judgment simply to obtain review of findings it deems erroneous.”
AT&T said ruling was “an important step in advancing the implementation of the Telecom Act” because it “makes clear that federal courts have jurisdiction to review the approval and enforcement of interconnection agreements” by state PUCs. NARUC Gen. Counsel Brad Ramsay said he was “not really happy but not really surprised either” about decision.
Kennedy’s concurring statement emphasized importance of careful review to protect states’ sovereign interests “as well as the obligations of state officials to respect the supremacy of federal law” when applying Ex parte Young doctrine. If care isn’t taken, 11th Amendment could become “legal fiction,” he said. Justice Souter questioned whether 11th Amendment even applied to this case. State of Md. was only “nominal” defendant and Verizon wasn’t seeking money damages or injunctive relief or challenging obvious state law, such as rate order, Souter wrote. Instead, he said: “The federal court is reviewing the state’s determination of a question of federal law and it is neither prudent nor natural to see such review as impugning the dignity of the state or implicating the states’ sovereign immunity in the federal system.”