Mathias v. WorldCom Technologies, Inc. – Oral Argument – December 05, 2001

Media for Mathias v. WorldCom Technologies, Inc.

Audio Transcription for Opinion Announcement – May 20, 2002 in Mathias v. WorldCom Technologies, Inc.

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William H. Rehnquist:

We’ll hear argument first this morning in Number 00-878, Richard L. Mathias v. WorldCom Technologies.

Mr. Bertocchi.

Am I pronouncing your name correctly?

Joel D. Bertocchi:

Yes, you are, Mr. Chief Justice.

Good morning, Mr. Chief Justice, and may it please the Court: The local telecommunication provisions of the Telecommunications Act of 1996 introduced competition into local telephone markets.

The act did so in sections 251 and 252.

Section 251 imposes the obligation to interconnect, and requires incumbent carriers to enter into agreements that will provide access to their competitors to those incumbents’ networks.

Section 252 prescribes procedures under which those agreements, contracts, as they are, are negotiated, arbitrated, approved, and filed, and the act stops there.

It does not go on to interpret… to discuss interpretation or enforcement of those agreements.

From its title through its text, section 252 demonstrates that Congress was silent regarding interpretation and enforcement.

Nonetheless, interpretation is not unaccounted for, because into that silence, under preexisting law, stepped the States.

That preexisting law, still good under the 1996 act, not preempted or repealed by it, provides that the interpretation of these contracts is a State law process which has been deliberately left by Congress to State regulators, including State judges, who will apply State contract law to those provisions.

Stephen G. Breyer:

Can I ask a very preliminary, quick, I hope… and I hope you’ll have a conclusive answer.

I can’t get an answer.

It’s a procedural matter.

I take it you won below.

Joel D. Bertocchi:

We–

Stephen G. Breyer:

You won on the merits.

Joel D. Bertocchi:

–Yes.

Stephen G. Breyer:

All right.

Now, I’ve always thought that you appeal from a judgment, basically.

The judgment now under the Seventh Circuit says, you win.

But what you’re saying is, their reason was the wrong one.

We should have won because there was no jurisdiction or there was a Fourth Amendment bar.

Joel D. Bertocchi:

Yes, Your Honor.

Stephen G. Breyer:

And the reason they gave for our winning was wrong.

Well, I didn’t think you could appeal that kind of thing.

Judges make mistakes in their reasoning all the time.

I do, too, and if you could appeal from the reasoning of an opinion, as opposed to the judgment, we’d be here 700 days a year, so… and I can’t find a case where that happened, so is that… and I hope there’s a conclusive answer to what I say, because it’s terrible if the case washes out for that reason.

Joel D. Bertocchi:

Your Honor, I believe the conclusive answer is that our assertion that there was no jurisdiction over us and that we… if there was jurisdiction over us and over this cause of action, we are asserting immunity as a claim that we can bring regardless of the result on the merits.

Stephen G. Breyer:

And is there any precedent at all where that’s ever happened before?

Joel D. Bertocchi:

Your Honor, I cannot… I’m afraid I cannot cite you to any.

I believe that these questions are preserved regardless of the merits.

I cannot point you to–

John Paul Stevens:

Does the opinion below cause you some kind of continuing injury?

Joel D. Bertocchi:

–Well, it does, Your Honor, in the sense that it is going to, if it stands, result in our continuing to be brought to Federal court, in spite of the immunity that we assert, and it is going to continue to place these cases in Federal court even though we believe that they are properly State court cases completely, and that our State court should have the opportunity to review these, to review all the matters that are raised, and to fulfill both their duty to apply State law and their obligation to consider whether their State law construction in any way is inconsistent with Federal law.

William H. Rehnquist:

There’s a patent case in 307 U.S. that says… where the lower court ruled both on infringement and on the validity of the patent, and the person who sought to… had won on one of them.

This Court said you could have a decision on the other point.

That might be of some help to you.

Joel D. Bertocchi:

I appreciate that, Your Honor, and I will have a look.

Ruth Bader Ginsburg:

Except, isn’t it the ordinary rule that when… there may be a special consideration in that patent context, and maybe yours is also, but I had thought that reasons that went against the judgment winner do not get any kind of preclusive effect, so that you would not be bound by this jurisdictional holding which was against you.

You prevailed on the merits, you have that judgment, so you don’t… you’re not stopped, precluded from relitigating the case.

In other words, the two go together.

If you can’t appeal it, then you’re not bound by it.

Isn’t that–

Joel D. Bertocchi:

I understand, Your Honor.

I believe, though, that we… that the district courts of the Seventh Circuit would consider themselves bound by the Seventh Circuit’s decision, and we would have to go to court to litigate that, which we believe would be a violation of our immunity, and in addition, we believe that the jurisdiction would not be there, and by doing that we would essentially be being kept out, as we have been kept out of our State courts for at least some period of time, and in that sense I believe that there is a continuing injury that results from this.

David H. Souter:

–Your injury results at least in a formal sense from the fact that, in order to get the review which the companies sought, they made your State regulators defendants in a case, is that correct?

Joel D. Bertocchi:

They subjected them to… the individual commissioners to suit and made them defend their rule, yes, sir.

David H. Souter:

But the essence of what they were… the essence of what the companies were claiming was not some kind of right asserted against the State as a sovereign entity or against these regulators in official or individual capacity.

The essence of what was going on was an attempt to review in effect a regulatory decision.

Why does that implicate immunity in the sense that we usually think of immunity in Eleventh Amendment issues to be implicated?

Joel D. Bertocchi:

Your Honor, I think it does so for two reasons.

First, if you take a look at the complaint that Ameritech filed, Ameritech asserted in its complaint that it had been injured by the actions of the State commissioners.

David H. Souter:

Well, but that’s… anyone who loses a case has been injured by the actions of the judge who made a mistake of law, or by the regulator in a regulatory case, so that in itself doesn’t take it out of the usual attempt simply to get review of a judicial or a quasi-judicial decision that you say is wrong.

Joel D. Bertocchi:

That’s correct, Your Honor, but the result… the other thing that the complaint does is, it names the individual commissioners as defendants.

It subjects them to the jurisdiction of the Federal court, and it raises issues as to whether… which we have argued at great length in all of our briefs, as to whether that violates sovereign immunity.

David H. Souter:

But that’s a formality.

It seems to me that by naming them the… those who are appealing are doing nothing more than saying, look, these people in their adjudicatory capacity made a mistake, we want that mistake reviewed, in the same sense that people work their way up through levels of appeal in the judicial system, and that certainly is not a classic example of the kind of implication of State sovereignty which the immunity doctrines and the Eleventh Amendment have addressed.

I guess I’m saying, is this really a case that implicates Eleventh Amendment immunity?

Joel D. Bertocchi:

Your Honor, we believe it does.

I will admit that as things have turned out, in light of the fact that the district court and the Seventh Circuit did not disagree with the decision of the commission, there have… none of the parade of possible bad things have happened to us.

There has been no injunction entered against us.

There has been no contempt proceeding.

At this point there might not be an award of attorney’s fees, but that’s because of the way the case came out.

William H. Rehnquist:

Is it your position that the private parties could have brought the case to the district court without naming the commission?

Joel D. Bertocchi:

Your Honor, not in this interpretation case, no.

We believe we were necessary parties, but we believe that because we believe these are State actions and that we are… and we are necessary parties under State law to administrative review.

David H. Souter:

But does that, again, put you in any different position from a State commission in a run-of-the-mill utilities case, even within… let’s say just within the State system, to keep it simple?

In some, maybe all States, if there is an appeal from a rate order the regulatory body can be represented by counsel and say, you know, we got it right, don’t reverse us, but they are not regarded as parties to litigation in the classic sense.

So you could have been… I guess what I’m saying is, you could have been heard, which is one of the consequences of the way they went about this procedurally, but you could have been heard without being a party in the usual sense.

Joel D. Bertocchi:

Your Honor, given the fact that this was a Federal court reviewing a State proceeding, we might well have been able to be heard if the district judge had allowed us in, and again, as I indicated… and I believe this is still in response to the question… it has turned out that because the district court agreed with us, nothing has happened to us that doesn’t happen to us in State court when our decisions are affirmed.

But in State appellate proceedings from Illinois Commerce Commission orders, when the appellate court disagrees, it enters a decree that invalidates or in some way amends or remands the order.

That is not the type of relief that is contemplated in the full range of a Federal equity suit in which commissioners are named as individuals or even, I would submit, in a case in which the State commission were named as a party.

In this case, Ameritech did not sue the State commission, for reasons I’m not quite sure I understand, but we’re willing to, because we’re here, assume that the commissions are… commissioners are an acceptable substitute, but even in that instance, the order is entered by the tribunal, by the appellate tribunal on the State side against… an order is entered that simply supervenes the commission’s order.

In this instance, Ameritech filed a complaint asking for the Federal court to enter orders that are specifically directed at the commissioners and, if they had sued the commission, would have been specifically directed at the commission.

That is relief that we don’t believe is contemplated by the statute, but we also think it’s significantly… it could be significantly different.

It hasn’t turned out that way… excuse me.

It hasn’t turned out that way in this case, because the district court and the Seventh Circuit have agreed on the merits, but it could have, and that was our concern, and that is why we are here, because we don’t know how it’s going to turn out in the next case.

Your Honors, these proceedings, interpretive of the contracts as they were, did not take place under section 252.

That qualifier is critical to jurisdiction under section (e)(6) and, indeed, limits any application of (e)(6).

It does not make any difference… respondents have devoted a substantial amount of energy to this, but really it does not make any difference if we are talking about an action, a case, a determination, whatever it is that the commission does still must be done under 252 in order for jurisdiction to attach under 252(e)(6), and in that respect the text and scope of section 252 is plain.

It goes as far as the filing, the formation and filing of the agreement–

William H. Rehnquist:

Where do we find section 252 in the briefs?

Joel D. Bertocchi:

–Your Honor, if you take a look at the blue brief in… we’ve attached both sections 251 and 252 as an appendix, and 252 starts at page 12a of that appendix.

Stephen G. Breyer:

Suppose that you’re in the State court and you’ve won, and they’ve sued you in the State court, and then suppose that their claim is the following, the agreement as interpreted by the commission does not meet the requirements of section 251, including the regulations prescribed in the FCC pursuant to section 251, and then the judge asks you this question: Counsel, where is the law that says it has to meet the requirements of section 251, including the regulations prescribed by the FCC pursuant to section 251?

Where is that law?

What was the answer?

Joel D. Bertocchi:

Your Honor, if we’re talking about an interpretation case, the answer is essentially a combination of State law, which now makes compliance with Federal law, with the act, a requirement, and the general requirement that in any case that a State court hears, it not contravene Federal law.

That law–

Stephen G. Breyer:

It’s not in 252?

Joel D. Bertocchi:

–No, Your Honor, it’s not, if we are talking about an interpretation.

To read that language into 252 is to suggest that an interpretation is really a modification, and I think those things are very distinct concepts of the law.

If it happens during an approval process, that’s different, but that would be my response.

I think in the end the result would be the same, because the State court is clearly required in any case, and certainly in one of these cases, to determine whether it… its decision, its construction of the contract follows Federal law.

That’s what the commission did in this case, and that’s what the Illinois appellate court would do.

John Paul Stevens:

Are you saying that in a post determination interpretation case, that the commission doesn’t look to 251 and 252, it can’t look there?

Joel D. Bertocchi:

It… well, Your Honor, interestingly enough, in this case it can’t, because this was… the provisions that deal with reciprocal compensation in this case were negotiated, and they’re not required to comply with the act, but even in a case where there had been an arbitration, and where there was an issue with respect to that, I believe that certainly the commission… certainly the court could look to Federal law and see if there was anything that didn’t comply with 251 and 252.

John Paul Stevens:

I mean, it’s just a very odd concept that the State commission launches this vehicle having looked at the Federal law, and then subsequent interpretation doesn’t involve Federal law.

It’s just… that’s just hard for me to understand.

Joel D. Bertocchi:

I think the interpretation will involve Federal law in many instances, Your Honor, but the interpretation cases are going to be driven by State law, and this case is another good example of that.

In this case, the way the commission, I think, looked at this case is the proper way.

They construed the contract first and then determined whether their construction violated any Federal law, including FCC rulings, and decided that it did not, so I am not at all suggesting–

David H. Souter:

What if they had decided that it did?

I think that’s the question.

What if they had decided, having construed it, well, you know, this is really what it says, but boy, if we interpret it this way, it violates the act?

Then what do they do?

Joel D. Bertocchi:

–Then I think that they would have to construe it differently.

They would have to–

David H. Souter:

How can you construe it differently?

I mean, it says what it says.

Joel D. Bertocchi:

–Well, they cannot… they are–

David H. Souter:

So then they’re not doing construction any more, they’re doing application of Federal law.

Joel D. Bertocchi:

–I think, Your Honor, in that instance, if they wanted… if the contract could survive, what they would do is, they would say the Federal law superseded whatever State contract principle they applied in construing it in the first place.

William H. Rehnquist:

Well, there isn’t any Federal law of contracts.

There may be a lot of Federal law of telecommunications, but the two could certainly be regarded as separate, I think.

Joel D. Bertocchi:

Exactly, Your Honor.

There is not a law–

David H. Souter:

And if they came to that conclusion, that although they construe the law of contracts to have reading A, nonetheless reading A violates or does not violate the Federal statute, do you still maintain there is no Federal jurisdiction to review that, neither under the provision at issue in this case nor under 1331?

Joel D. Bertocchi:

–We do maintain that, Your Honor.

Antonin Scalia:

Even though it’s no longer an interpretation question?

They are no longer interpreting the contract.

They have interpreted it, but they say, having interpreted it this way, we find that this way violates Federal law, and therefore we disallow it, and there’s still no review of that–

Joel D. Bertocchi:

Yes–

Antonin Scalia:

–under 1331?

William H. Rehnquist:

Well, it seems to me your position on 252 and in response to your question from Justice… is very likely well-taken.

I think your position is 1331 is harder to defend.

How do you defend that?

Joel D. Bertocchi:

–Well, Your Honor, with respect to section 1331, we start our analysis back at section 252.

We believe that… and I think that the case that comes closest to describing the way this would work is the Jackson Transit case.

Jackson Transit… in Jackson Transit, the Court seemed to assume 1331 jurisdiction but went on to say, we have to take a look at congressional intent to determine whether those contracts which are required to be in place by Federal law, whether litigation over whether those contracts are binding and what they mean should take place in Federal or State court, and we believe, again, that the silence regarding interpretation in section 252 and the remedy provided in section 252(e)(6) suggests that that is the remedy that Congress intended to be made available.

Antonin Scalia:

But you’re relying on silence regarding interpretation, and in the hypothesis we were just discussing, it was no longer an interpretive question.

The State court, or the State commission had decided the interpretation.

Having decided it, they moved to another question, does this interpretation violate the Federal statute?

Joel D. Bertocchi:

Yes, Your Honor–

Antonin Scalia:

You say they have to move to that second question, and if they do, they just override their interpretation, but that’s no longer an interpretive question, it seems to me, at that point, so your distinguishing of section 252 doesn’t–

Joel D. Bertocchi:

–Your Honor, I… it is no longer an interpretive question, but the proceeding is still an interpretive proceeding.

We read 252 to cover a certain type of proceeding that leads to approval and ends at a very particular point.

Respondents point out that this is not the end point for disputes under the contract, and that is certainly likely to be true, but it is the end point for how far 252 goes, and the fact that Federal issues may come up afterwards does not change the fact that Congress in 252(e)(6) provided a very specific remedy that was designed to review matters that were decided in the approval process.

We believe that that jurisdictional restriction operates both with respect to 252(e)(6) and suggests that it applies under… that a limitation should be placed on 1331 jurisdiction as well.

William H. Rehnquist:

–But it suggests there’s a large lacuna between the approval process and the interpretation process, which is… you know, I can understand how you can construe 252 that way, but I think you have to read 252 as precluding 1331 jurisdiction, and I think that’s a more difficult question.

Joel D. Bertocchi:

It is more difficult, Your Honor, but I believe that that’s what it does.

We’re talking about–

Stephen G. Breyer:

Isn’t it… isn’t the difficulty this, that… I mean, we don’t lightly imply a negative on 1331 jurisdiction, and it’s perfectly possible to read the sentence in subsection (6) as simply saying, whatever the State commission may do in applying these two sections gets Federal court review, and going no further than simply to make it clear that you do get Federal court review of it, in effect as a regulatory matter.

If you read it that way, which the text certainly allows you to do, 1331 stands.

Joel D. Bertocchi:

–Your Honor, I believe that to read it that way and then… and to include interpretation, enforcement proceedings under it would essentially read the words under 252 under the statute.

Certainly there is a difference between the language, the word determination and the language in the actual preemption provision in (e)(4) that says, approvals or rejections, but… and the respondents argue that that suggests that determinations is a broader term.

Our position is that it doesn’t matter whether it’s a broader term, but our… that if it’s not under 252, it doesn’t matter what kind of action it is, and interpretations and enforcements are not covered by that statute.

It’s a very particular statute that goes only so far and no further.

In addition, it seems that that argument and the use of those words is somewhat inconsistent, because the United States suggests that the more specific terms in (e)(4) suggest that determinations must mean anything that happens in a case related to these contracts, but it seems to me if approvals and agreements in (e)(4) is a narrow term, then approvals and agreements, which is all 252 addresses, is… must be read equally as a narrow term, and it’s inconsistent to say that determinations under 252 goes beyond that.

Stephen G. Breyer:

Well, approvals, agreements and arbitration.

You would agree that would be covered, too?

Joel D. Bertocchi:

Yes.

Stephen G. Breyer:

Yes.

Joel D. Bertocchi:

Yes, Your Honor.

Ruth Bader Ginsburg:

And did you say… did I understand you correctly to say that if this particular issue had come up at the time of approval, then there would be Federal court review, so if something… the character of the issue has nothing to do with it.

It’s just, if it comes up in one proceeding, Federal court, if it doesn’t come up simultaneously, the very same question doesn’t come up simultaneously, then you have this split.

Joel D. Bertocchi:

Exactly, Your Honor.

We believe that that procedural difference is the basis for the distinction, but we believe that that distinction is entirely rational is in accord with what happens in the life of contracts.

In real life, in contracts outside the context of telecommunications, issues will come up in negotiation and maybe there’ll be a contract and maybe there won’t.

If the same issue comes up once the contract is in force and the parties can’t reach an agreement, which they have the opportunity to do in any case, then they have to go to court, someone has to go to court to get it enforced, so the notion that the timing of an issue affects where it’s going to be litigated is not at all surprising, and is entirely consistent with what we believe Congress’ intent was in 252.

Antonin Scalia:

Yes, but in an ordinary private contract, if the State court refuses to enforce the contract, let’s say on the ground that it would be a contract combination or conspiracy in restraint of trade and thus violate the Sherman Act, you would be able to get review of that determination in Federal court, wouldn’t you?

But you’re saying that this contract can be overridden and disallowed by a State court on a Federal ground with no review of that Federal ground by any Federal court, so that you can have different interpretations of the Sherman Act all around the country, with no Federal court being able to review it.

Joel D. Bertocchi:

Your Honor, my belief is that if a State court invalidated a contract on Federal grounds, appeal would be to the State appellate court, and the Federal court that would be able to review that determination if it was wrong is this Court, so there is always going to be a Federal court that can determine that.

What… and the–

David H. Souter:

We can review it because there is a Federal question involved–

Joel D. Bertocchi:

–If that were–

David H. Souter:

–but for purposes of 1331 there’s no Federal question involved?

Joel D. Bertocchi:

–For purposes of 1331, there may be Federal issues involved, but we believe that there is a specific congressional intent, reflected in the specificity of 252… you can look at it as silence, or you can look at it as specificity… in the specificity of 252 to have these matters litigated in State court, and again I would cite Jackson Transit for the proposition that whether there is an arising under question under 1331 does not mean you still don’t look to the question of where the contracts are litigated.

In that case, the contracts had to be there because of Federal law.

They had to be honored because of Federal law, but there was a legislative intent that was discerned by this Court to have those… the binding… to have the litigation concerning those contracts take place in State court.

Stephen G. Breyer:

Why–

Antonin Scalia:

–Let’s assume we can–

Stephen G. Breyer:

–Why would they?

Joel D. Bertocchi:

I’m sorry.

Antonin Scalia:

I mean, you know in order to–

Stephen G. Breyer:

–That’s my question, too.

[Laughter]

Antonin Scalia:

I’m going to ask the same question.

Stephen G. Breyer:

In order to win your 1331 point, you have to show that Congress really wanted this interpretation that you’re giving of 252, right, it really wanted it and had a pretty good reason for it.

Joel D. Bertocchi:

Yes, Your Honor.

Stephen G. Breyer:

What’s the reason?

I mean, it creates a pretty big mess, doesn’t it?

We’re going to get into a new jurisprudence of what’s an interpretation and what’s an approval, and you’re going to start splitting the documents apart and it sounds to me like a mess, and I don’t know why… maybe Congress wrote those words, but why would they want such a thing?

Joel D. Bertocchi:

Your Honor, I think they would want such a thing because the Telecommunications Act represents a change in the way utilities are regulated, and although everybody agrees that that is true, I think that the respondents misapprehend the change.

The change is to reduce regulation over the parties to telecommunications transactions once access is assured.

The interest in this case was access, and once that’s over with, these are to be… these cases are to be treated, I believe, like regular contracts cases.

This case, again, is a good example.

It was driven by State law and the Federal questions came up afterwards in determining whether the construction was proper, and in that instance I think Congress intended to leave the matters to State… to the State commission under State law and to State courts.

David H. Souter:

No, but that still doesn’t explain… I mean, you’ve still got the mess that Justice Breyer referred to.

Why would Congress want to legislate that kind of bifurcation that makes for all of this confusion?

Joel D. Bertocchi:

Your Honor, I think Congress would want to do it because it recognized that most of these cases were going to be like this one.

This is not a case about access, which is–

David H. Souter:

And Congress would have wanted this to happen?

Joel D. Bertocchi:

–Yes, Your Honor.

David H. Souter:

Why?

Joel D. Bertocchi:

Well, Your Honor, I think… this, in the sense of State courts deciding, construing these contracts and then deciding any incidental Federal law questions under their normal obligation to do so.

Yes, we think that’s what they wanted, and we think that’s what they wanted because they would recognize, as in this case, that these cases are State-law driven.

The goal of the act is access.

This case is not about access.

The respondent, the competing telecom companies had had access, they will have access, they have it today, and they will have it tomorrow.

This case is about whether Ameritech owes them money.

That is a contracts case.

It may implicate Federal law, as any State contracts case theoretically could, but we believe that Congress wanted them to be treated as contracts cases.

I’ll reserve the remainder of my time, if I may.

William H. Rehnquist:

Very well, Mr. Bertocchi.

Ms. McDowell, we’ll hear from you.

Barbara B. McDowell:

Thank you, Mr. Chief Justice, and may it please the Court: The Federal district courts have subject matter jurisdiction over cases contending that a State public utility commission has construed and enforced an interconnection agreement in a manner contrary to Federal law.

That’s true whether one looks specifically at section 252(e)(6) of the 1996 act, or more generally at–

William H. Rehnquist:

Well, let’s look specifically at 252, and 252(6), where it says in any case in which a State commission makes a determination under this section, and all the section talks about is approval.

Barbara B. McDowell:

–Well, Your Honor, the section establishes specific procedures to be followed at the arbitration and approval stage.

William H. Rehnquist:

But it talks only about… you agree, don’t you, that it… substantively it deals only with the approval?

Barbara B. McDowell:

That’s correct, but these agreements exist only by virtue of section 252.

The State commissioners have authority to regulate these agreements only by virtue of section 252.

They’re subject to the standards of section 252, and–

William H. Rehnquist:

But all it talks about is approval.

I don’t think you’ve answered my question.

Barbara B. McDowell:

–No, it doesn’t speak specifically about interpretation and enforcement.

William H. Rehnquist:

Speak specifically or any other way about it.

Barbara B. McDowell:

But this Court said in the Ardestani case, for example, that under a statutory provision means subject to or by authority of, and State commissions are acting by authority of section 252 when they’re construing and enforcing interconnection agreements.

They have no other authority under Federal law to do that.

Anthony M. Kennedy:

Well, Ms.– –Do they have authority under State law to do that?

If we asked the Solicitor from Illinois… I didn’t have time to ask him… what is the authority by which the State commission proceeded in this case, what would he have said, do you think, and would you… and is that the same as your position?

[Laughter]

Barbara B. McDowell:

Well, we don’t have to guess, because the State commission specifically said what authority it was proceeding under, and it cited both section 252 and Illinois law, and certainly a State commission, whenever it takes an official act, is acting at least in part under its own State law–

Anthony M. Kennedy:

Absent–

Barbara B. McDowell:

–and here it’s acting also acting under section 252.

Anthony M. Kennedy:

–So you say it… are you saying that necessarily the State commission must be acting under 252?

Barbara B. McDowell:

When it’s regulating an interconnection agreement that’s established by virtue of section 252, yes, Your Honor.

Anthony M. Kennedy:

252–

David H. Souter:

–Ms. McDowell, I… go on, Tony, finish.

Anthony M. Kennedy:

Well, I was just going to say, 252 refers to public interest, convenience, and necessity.

Is that a Federal standard, or does that just incorporate State standards from State to State, or is it a little bit of both, because most States have a formulation something like that.

Barbara B. McDowell:

Well, it’s a Federal standard.

It’s a standard that’s been incorporated in the communications laws for many years.

The States, pursuant to section 252(e)(3), are allowed to also impose consistent State standards in the course of their approval, and interpretation we would say of the interconnection agreements as well, but it’s basically a Federal standard.

It’s one under which the FCC could promulgate regulations to instruct the State commissions and to–

Anthony M. Kennedy:

Ms. McDowell, I have a problem with other language in this (e)(6).

One of the arguments you make is that it doesn’t make any sense to bifurcate these proceedings, that they should all be in the Federal court, the interpretation as well as the approval.

The problem is, the only thing that (e)(6) allows the Federal district court to determine is not the interpretation of the contract.

Anthony M. Kennedy:

It does not give the Federal court authority to determine what the contract says.

It only gives it authority, I quote, to determine whether the agreement or statement meets the requirements of section 25 and this section.

Now, in some cases, there may be a dispute between the parties as to whether a particular interpretation will violate the Federal rules, but there are going to be a lot of other contract disputes that have nothing to do with whether there’s a violation of the Federal rules.

Now, are all of those contract cases going to go to State court, and all of the contract cases that somehow involve the question of whether the agreement or statement meets the requirements of this section, do they go to Federal court, or do you just ignore those words, that limitation?

To determine whether the agreement or statement meets the requirements of section 25 and this section, that’s the only authority the Federal court has.

Barbara B. McDowell:

–I agree with you, Your Honor, and the–

Antonin Scalia:

So you’re still going to have some bifurcation?

You’re still going to have some contract cases that go to the State court, and some that go to the Federal court?

Is that–

Barbara B. McDowell:

–Well, you may have bifurcation, or there are other alternatives.

For example, at the interpretation and enforcement stage the parties would be free to go to State court.

There’s not an exclusive direction of the parties to Federal court, as there is at the approval stage under section (e)(4), and in some of these cases State commissions may waive their sovereign immunity and decide that they would rather have these claims heard entirely in Federal court, and that would be permissible as well under the supplemental–

Antonin Scalia:

–What about under 1331?

Would you say everything gets into court under 1331, whether it deals with deciding whether the agreement meets the requirements of this section or not?

You would say the contract is a Federal contract, so that under 1331 even the interpretation of that contract gets into Federal court, wouldn’t you?

Barbara B. McDowell:

–We’re not pressing that argument, Your Honor, although Ameritech–

Antonin Scalia:

Well, gee, you ought to, because that’s the only thing that will stop this terrible bifurcation that you’re so worried about.

It’s still going to be a mess.

You’re going to have some cases in Federal court and some in State court.

Barbara B. McDowell:

–Well, there may be some such cases, but as I was suggesting, there are alternatives to that.

In addition, there may not be that many cases in which there’s a viable claim that a State commission has interpreted an agreement contrary to Federal law.

These cases have typically come up only with respect to this particular issue of compensation for Internet calls, a very important issue to the carriers, and one that they’ve been willing to litigate extensively, but it’s not clear at this early stage in the implementation of the 1996 act that there are going to be a large number of claims of this sort, so the thought that there are going to be… there’s going to be a bifurcation problem in every case is not clear, at least at this stage.

John Paul Stevens:

I’m still not entirely clear on what your position is if the… if there’s an interpretation dispute that doesn’t raise any Federal question at all.

Do you agree that that has to be resolved only in a State court, or do you think they have a choice of forum?

Barbara B. McDowell:

Unless there was some basis for Federal jurisdiction, they would have to go to State court for that–

John Paul Stevens:

The only question is, do they have to pay on Tuesday instead of Thursday, and that’s governed by some State common law rule or something.

That, you would agree, could not be litigated in Federal court?

Barbara B. McDowell:

–We haven’t yet taken a definitive position on this question, Justice Stevens.

Ameritech is arguing that these contracts, interconnection agreements are pervasively Federal, similar to a Federal tariff, so that every question that arises under them is necessarily Federal.

We think for purposes of this case, and what the court of appeals decided, what’s relevant are only those claims that contend that a State commission has violated the 1996 act in its interpretation of an agreement, so there may be a large category of cases that can come to State court and that would present only issues of State law.

John Paul Stevens:

But, and could not go to Federal court.

That’s the other part of my question.

I didn’t quite get your answer to that.

Barbara B. McDowell:

Well, yes, unless there was a waiver of sovereign immunity by the State commission and diversity or some other basis for jurisdiction.

John Paul Stevens:

Well, even if there’s a waiver, I mean, what is… you have to have Federal jurisdiction before you can sue in Federal court.

Barbara B. McDowell:

That’s correct, and there may be diversity.

Diversity was asserted, for example, in the North Carolina case.

John Paul Stevens:

Well, assume there’s no diversity, just a normal State law.

I’m still not quite clear whether you say yes or no.

Do you agree with the carrier that it is a pervasive… like a tariff, so that anything relating to it raises a Federal question, or do you agree that they are a category of contract issues that could only be regulated at State, or litigated in State court?

Barbara B. McDowell:

We see it as a difficult question on which we haven’t taken a definitive position.

The question ultimately is one of Congress’ intent, and certainly there is much in the statute to suggest that Congress was creating federalized contracts.

These are not simply private party agreements.

They are Federal regulatory instruments.

On the other hand, Congress also left room for States to apply their own consistent standards under section (e)(5), and Congress also expressly preserved existing State and Federal law to the extent that it was not expressly preempted, so it’s a more difficult question whether these contracts are entirely Federal, and we have not take a–

Anthony M. Kennedy:

In all of the instances projected by Justice Stevens, do you think the State would be a necessary party, or would there be any cases in which, a contract dispute where the State isn’t a necessary party?

The State is a necessary party because it goes first through the commission?

Barbara B. McDowell:

–We don’t think they’re necessary parties.

We think they’re valuable parties to have because it makes it easier to enforce the Federal court or, indeed, a State court judgment, but we think that in the ordinary case–

Anthony M. Kennedy:

Well but doesn’t… even in the case Justice Stevens describes about paying Tuesday or Thursday, isn’t the presumption that there would have been a State commission order which is now being set aside?

Barbara B. McDowell:

–Yes, or its enforcement is being enjoined.

Typically, though, a–

Anthony M. Kennedy:

And they’re not a necessary party, then?

Barbara B. McDowell:

–No.

To the extent that there will be two adverse parties to the proceeding, one challenging the State commission’s order and one defending it, the party defending the order can ordinarily be expected adequately to represent the State commission’s interest.

William H. Rehnquist:

District judges aren’t parties to an appeal from their decisions, are they?

Barbara B. McDowell:

That’s correct, and certainly Federal statutes are often challenged in cases in which the United States is not involved.

Ruth Bader Ginsburg:

But if the FCC were performing this role… take Virginia’s statement… and you are appealing the FCC’s order, all those cases are you against the commission.

Isn’t it… isn’t that routine?

Barbara B. McDowell:

That’s correct.

Barbara B. McDowell:

That’s the standard practice in the Federal system, and when the FCC acts in the place of a State commission the FCC’s decisions will be reviewable in a proceeding in the court of appeals under the Hobbs Act, in which the FCC is named as a party.

That’s the standard procedure, as we understand it, and most States as well, that the agency issuing a decision will be a party to proceedings challenging it.

We don’t see that as essential, though, in this particular context.

We see no particular reason to think the parties will not abide by the Federal court’s decision, and that the State commission also will not abide by that.

David H. Souter:

And the… I mean, I take it the reason you assume that is that the commission is not a party in interest in the sense of having a personal stake.

They have the same kind of stake, I suppose, that any judge does when an order of his gets appealed, but that’s their only interest.

Barbara B. McDowell:

That’s correct, Your Honor.

If I could turn briefly to the sovereign immunity questions, as several courts of appeals have recognized, this is a straightforward Ex parte Young case against State officials.

The case is seeking prospective injunctive relief to include their enforcement of orders that are alleged to be contrary to Federal law.

Ex parte Young itself was, the underlying action was one against State regulatory commissioners, and there have been many cases in this Court that have involved Federal challenges to State regulatory decisions of this nature.

We see nothing in section 252(e)(6) or anything else in the 1996 act that suggests a congressional intent to preclude this sort of ex parte Young–

William H. Rehnquist:

Ex parte Young, though… I’m trying to recall the facts.

It was decided even before I was on the Court.

[Laughter]

William H. Rehnquist:

It was enjoining a Minnesota Attorney General, wasn’t it, from doing something in the future?

Barbara B. McDowell:

–From enforcing rate orders issued by the State commission.

The specific case before the Court was contempt sanctions against the Attorney General, but the underlying case was also against the State regulatory commissioner.

Also, in Ex parte Young the Court cited a number of prior decisions as authority, including Reagan v. Farmer’s Loan & Trust, which was another similar type of action against State regulatory commissioners.

We have–

Stephen G. Breyer:

It’s also… would you correct… as long as we’re on Ex parte Young, as I understand it, in Ex parte Young, there was no action brought until the executive branch of the State said, we’re going to take certain action here in accordance with this order.

In other words, they… Ex parte Young was not brought immediately upon the issuance of the State rate order–

Barbara B. McDowell:

–I think it–

Stephen G. Breyer:

–as simply to review the order.

It was brought because a… somebody in a different branch or agency of the Government said, oh, now we are going to take some action under that which is, in effect, going to hurt the person who brought the Ex parte Young action.

Is my understanding correct?

Barbara B. McDowell:

–As I recall, and my understanding may be inaccurate, the case was brought before any enforcement action had actually been threatened or taken.

David H. Souter:

But the Attorney General of the State was going to enforce it, isn’t that right?

Barbara B. McDowell:

Oh, I think the Attorney General was expected to enforce it.

There was a specific Minnesota statute, as I recall, that–

David H. Souter:

He had to.

Barbara B. McDowell:

–required him to enforce the rate orders, but I don’t think that that was critical to the Court’s holding.

There are many, many cases, including several, in fact, against members of the Illinois Commerce Commission, that have involved challenges under Ex parte Young to rate orders and other sorts of regulatory orders.

Anthony M. Kennedy:

Do you think it’s sustainable to say that there has been a waiver because… by participation in the State scheme, so that you don’t need Ex parte Young?

Barbara B. McDowell:

We’ve argued that as well, Your Honor.

That’s dependent on whether the statute was sufficiently clear to put the State commissioners on notice that by exercising Federal regulatory authority under the act they would thereby be subject to suit in Federal court.

William H. Rehnquist:

Thank you, Ms. McDowell.

Mr. Smith, we’ll hear from you.

Paul M. Smith:

Mr. Chief Justice, and may it please the Court: The complaint that Ameritech filed in this case in Federal court specifically alleged not only that the ICC had misinterpreted the interconnection agreements at issue, but also that its order requiring payment of reciprocal compensation for a particular category of calls violated several specific sections of the Telecommunications Act as well as several allegedly applicable FCC rulings.

For that reason, our position, and I’m arguing today for WorldCom and several other companies who had signed interconnection agreements with Ameritech and also were sued as codefendants along with the ICC, our position is that the complaint stated straightforward preemption claims alleging ongoing violations of Federal law by State officials and therefore those claims were within Federal jurisdiction and also actionable notwithstanding the Eleventh Amendment.

Where we differ with Ameritech and actually with the final respondent AT&T is on the question that was being discussed earlier, which is the scope of valid Federal claims in enforcement cases, and specifically whether a claim of mere misinterpretation of an interconnection agreement raises any Federal issue or not.

Our position is that in most cases, at least, a claim of misinterpretation of an interconnection agreement would raise claims only under State common law contracts and therefore has to be treated as a State law claim, but in terms of this case, since the contract… the complaint did allege violations of the statute and FCC rulings, there certainly was jurisdiction, we believe.

Now, let me turn first to the jurisdiction issue, and then I want to get to–

Antonin Scalia:

Before you get into that, you’re separating interpretation of the contract from violation of the Federal law.

Paul M. Smith:

–Yes, sir.

Antonin Scalia:

Does that mean the State still has control over what the contract means?

It’s still a State contract, and the ultimate determiner of what the contract means ought to be the State, if it’s State law, right?

Paul M. Smith:

Certainly it ought to be done by virtue of some analysis of the intent of the parties, if it’s a negotiated agreement.

There also are agreements which are imposed through arbitration, and then the commission is essentially analyzing its own intent in imposing–

Antonin Scalia:

Yes, but different States have different approaches.

They may even have different rules of evidence and so forth.

What’s going… I don’t see how the Federal Government gets into this business without taking on itself the burden of interpreting these contracts.

Paul M. Smith:

–Well, Congress, Your Honor, very specifically turns over responsibility for developing these contracts, reviewing them, to State commissions, and in the process of doing that says that while the State commissions have to follow various substantive standards in 251, they also are authorized in more than one place in the act to impose their own policies that are not inconsistent with the Federal policies, and it also said the parties can negotiate agreements notwithstanding the substantive provisions of the act, and that the State commission can’t overturn them unless they find that they violate the public interest and necessity.

So what you have here is a very clear recognition by Congress that they want these to be real contracts, not merely orders applying Federal standards, and that there will be lots of issues which under this Court’s ruling should be viewed as State law contract issues that will come up in the enforcement proceedings, so we don’t see any basis under Jackson Transit and this Court’s other cases dealing with the development of Federal common law for saying that the contract interpretation rules, the rules for determining how the contract ought to be read, ought to be elaborated as a matter of Federal common law in the Federal courts rather than through analysis of State common law which already exists.

Now, these cases will be sometimes in Federal court and sometimes in State court, because there will be some times when there are Federal claims that are brought that can sustain a motion to dismiss.

I don’t happen to think these claims would have sustained a motion to dismiss, but–

Anthony M. Kennedy:

What if you have a case in which one of the arguments made by one of the parties is that if you interpret the contract this way, it will violate the Federal act?

Does that stay in the State court, or is that a Federal question?

Paul M. Smith:

–I see that as a Federal question, Your Honor.

I don’t think there’s any question about that.

That is essentially what Ameritech claimed here.

Paul M. Smith:

The district court and the court of appeals, of course, rejected that on the merits, but their claim was that this interpretation was barred by the FCC’s interpretation of the act.

Antonin Scalia:

Well, I mean, interpretation is barred?

I mean, if a contract says something, it very plainly on its face says something that violates the Federal act, there’s only one way to interpret it.

Paul M. Smith:

Their claim was that even if that is what the parties intended, that Federal law had evolved to the point where that was preempted by Congress, or by the FCC.

Antonin Scalia:

I just don’t understand how you play that game.

I mean, you’re assuming that it’s always ambiguous whether you can interpret in a… so that you can interpret it in a way that violates Federal law or in a way that doesn’t, and that somehow therefore that interpretation becomes a Federal question.

Even if that’s correct, it’s certainly not always true that there is the possibility of interpreting it in a way that does not violate Federal law, and I guess you’re saying that nonetheless, in that case, the case becomes a Federal case.

Paul M. Smith:

I’m not sure I really meant to say that every case becomes a Federal case.

I think there are lots of situations in which the interpretation as done by the commission is then a matter… whether that’s correct or not is a State law issue.

What I meant to answer in response to your question was then, if a party says that interpretation of what the parties really intended has somehow brought the contract into some inconsistency with applicable FCC regulations, that’s a Federal claim.

At the same time, if the commission says, we think they probably intended this, but we’re not going to do that because we think Federal law requires us to do Y instead of X, that also raises a Federal question.

Antonin Scalia:

Okay.

Paul M. Smith:

But if they’re merely looking at the intent, there will be lots of situations where there isn’t any Federal preemption because the law, after all, says if you negotiate it, the substantive provisions of 251 don’t apply.

In most of those situations, you’re going to have State law contract issues which will be then analyzed by the State commission and, absent some additional Federal issue that comes along, the place where that would be appealed would be the State court, in my understanding.

David H. Souter:

And it could not be appealed in the Federal court?

Paul M. Smith:

Unless there was some odd situation involving diversity, my sense is… my understanding is–

Antonin Scalia:

Well, I guess the claim would be, look, the very contract that you’re interpreting is a contract which is authorized, and authorized only by Federal law, and that’s enough to get us into Federal court, and you reject that position.

Paul M. Smith:

–Our position, Your Honor, is that under Jackson Transit, that the fact that the Federal statute requires that a contract exists but doesn’t specify the terms of the contract, in that situation the contract itself remains a matter of State law.

David H. Souter:

Well, aren’t we slightly outside of that situation, because there are some Federal standards here, aren’t there?

Paul M. Smith:

Well, actually, as to negotiated contracts, the Federal standards–

David H. Souter:

They can be–

Paul M. Smith:

–are very, very loose.

David H. Souter:

–I see.

Paul M. Smith:

It has to either be discriminatory or a violation of public interest, which is… and the specific rules of 251 don’t apply.

David H. Souter:

Is public interest a State concept or a Federal concept?

Paul M. Smith:

I would view that as something that is authorizing the State commission to–

David H. Souter:

It has to be State on your–

Paul M. Smith:

–to apply its… no, obviously, they can look at Federal policies if they want to, but I wouldn’t suggest that it’s inherently Federal in the way that the Solicitor General does.

Now, there are other situations that could come up.

A contract could expressly incorporate Federal law, and that might or might not create a Federal claim.

Paul M. Smith:

This Court has wrestled for 100 years with the issue of when Federal law incorporated into State law causes of action do or don’t create Federal question jurisdiction.

In other situations, the State commission might have imposed the terms of the contract in an area where the parties didn’t agree, and in that situation, if they are imposing it by virtue of their interpretation of the Federal regulations, and then that particular clause is later interpreted in some way that deviates from the Federal regulations, that might well be a Federal claim as well.

Anthony M. Kennedy:

–That issue we’ve been wrestling with for 100 years exists in one of these cases, doesn’t it?

I mean, don’t one of these contracts refer to Federal law?

Paul M. Smith:

Well, there have been assertions, Your Honor, that that’s the case.

My reading of these contracts is that they make… that they… and certainly in this case, the Illinois case, it specifically gives a definition of when reciprocal compensation will be paid, and both the commission and the two lower courts all said that this is not a case where there has been an incorporation of Federal regulations.

This is a case where we can divine the actual intent of the parties, that these calls should be treated as calls where this compensation would be paid.

And so what they said was, this is not an incorporation case, and I believe the contract in the Verizon case, to come next, is the same, that there was an intent at the time that was… that the State commissions have said we’re going to hold you to… even though Federal law may have moved on, every time it moves on they say, if you agreed to something else, you’re still stuck with it, and that’s what the courts in both of these cases have said as well as the commissions.

Maybe if I could turn, then, to the Eleventh Amendment issues, it is certainly our view that the five circuits that have said these cases present straightforward Ex parte Young cases, those circuits are correct, because they do involve, in situations where there is a Federal claim being asserted against an action of a State commission, either an enforcement case or an approval case, a claim seeking an order bringing the State commission into compliance with Federal law, and it is, I think, an ongoing violation of Federal law, because when they approve and enforce an interconnection agreement, or they enforce it in some way, interpret it in some way, they are then telling the parties that they have to live by that interpretation during the term of the agreement.

William H. Rehnquist:

You think the commission is a necessary party, then?

Paul M. Smith:

It’s our position that they are a necessary party, but to use the technical term under the Federal rules, if there was a reason why they can’t be sued and that the case can’t go forward, then they may not be an indispensable party.

The distinction is drawn in Rule 19 between those two.

Certainly, they’ve–

David H. Souter:

If that’s the case, then, it says we’ve got an unusual action here, because we’re talking about parties who have no personal or even official interest except as interpreters of law.

Paul M. Smith:

–That’s true, Your Honor, but what makes them a necessary party is that the private parties have an interest in having the administrative body that has told them to do X be bound by a ruling from the Federal court which they’re trying to get which says don’t do X, do Y, and that–

David H. Souter:

You’re in effect saying that they might dispute the application of the Supremacy Clause.

That’s–

Paul M. Smith:

–And the reason why a Federal district court is not named as a defendant in the court of appeals is because the court of appeals has the power in a unitary system to direct the district court to do something.

When a Federal court, though, is–

David H. Souter:

–Yes, but the State court is not named as a party when a case gets from a State supreme court on a Federal question here.

Paul M. Smith:

–Right, but I think–

David H. Souter:

It’s assumed that they will respect the Supremacy Clause if there is a Federal declaration of law, and why shouldn’t the same assumption govern if there is Federal review of a State order on, in effect, a Federal question jurisdiction basis?

Paul M. Smith:

–It may be factually true that most of the time State commissions will obey Federal courts, but 100 years of jurisprudence under Ex parte Young and before all follow the Federal administrative model and say that as to Federal… State executive officials, when they violate Federal law, that you name them as a defendant.

David H. Souter:

Oh, I agree.

The only thing that I have been suggesting takes this out of that simple case is that you don’t have, I think, here the classic case of the State executive official.

You have a State regulator that is acting in a kind of a quasi-judicial capacity, and it seems that one way to look at it would be to think of it more as a court than as an executive office.

Paul M. Smith:

Well, Your Honor, though, the… a large number of these Ex parte Young cases, going back to the Reagan v. Farmer’s Loan case that Ms. McDowell mentioned, an Ex parte Young, cases involving rate-making commissions, railroad commissions and others that are… have always been named as the defendants.

In their official capacity the individuals are named, and that Reagan case in 1894 said that’s not an Eleventh Amendment problem.

You’re not really suing the State, you’re suing them to bring them into compliance with the Federal statute.

Ex parte Young, the defendants included not just the Attorney General but also the rate-making commissioners, and that is just the way it’s done, and I don’t think it has any, as you have suggested, any great intrusion on the sovereign interests of the State to have them named.

Paul M. Smith:

In fact, that’s the essence of Ex parte Young, that it’s not an intrusion on their interests to have them brought into compliance under the Supremacy Clause, and it would be, I think, an odd rule to say, well, we’re going to start having review of State actions, or some category of State actions in Federal court for compliance with Federal law where we don’t name the defendants as… the State as… State individuals as defendants.

Well–

Paul M. Smith:

Now, there’s been a number of other arguments raised against the application of Ex parte Young here.

I don’t think any of them is very substantial.

There’s a notion that somehow there’s an elaborate remedial scheme here comparable to the one in Seminole Tribe, but in fact there isn’t any elaborate remedial scheme in the statute.

It just says you can sue State commissions in Federal court, or to the extent we’re relying on 1331, there’s no scheme at all.

We also have an… the invocation of the Larson case which was discussed by this Court in detail in Pennhurst.

Larson, I believe, is the case that you apply in a situation where you don’t have Supremacy Clause considerations at stake.

Essentially, what the Court said in Pennhurst is, when the Supremacy Clause is at issue, we basically allow lawsuits to proceed against all prospective ongoing violations of Federal law by State officials, but Larson provides a test that says where you’re suing without Supremacy Clause considerations to enforce State law against State officials or Federal law against Federal officials, in that situation you try to differentiate between mere violations of Federal law and violations that are so serious that we won’t treat the State official or the Federal official as an agent of the State any more.

That is not the test that ought to be applied under Ex parte Young, and certainly has not been applied in the past.

We also have the Fourth Circuit’s analysis in which it undertook an entire sort of ad hoc balancing test trying to weigh State interests against Federal interests.

I think this Court is clearly on record as saying that in the Ex parte Young context we’re not going to get into that kind of balancing test.

The balancing test of the Fourth Circuit I thought was particularly unfortunate, because basically what that Court did is, it looked at the merits of the case and said, well, we don’t think that the Federal claims are very strong here, so therefore we’re going to say there’s no ability to sue the State under Ex parte Young, and that doesn’t seem like a very helpful way to go about… thank you, Your Honor.

William H. Rehnquist:

–Thank you, Mr. Smith.

Mr. Bertocchi, you have 3 minutes remaining.

Joel D. Bertocchi:

Thank you, Mr. Chief Justice.

In response to questions from Justice Souter, adjudicative context really provides the reasoning that Ex parte Young doesn’t apply here.

Contrary to what Mr. Smith said, the statute doesn’t say you can sue State commissioners in Federal court.

(e)(6) doesn’t reference State commissioners at all.

This case is in a sense more like Larson than Larson.

Larson was not about whether the case… whether the authority for the contracting official came from Federal or the State law.

It was about the characterization of what he was doing, and the Court assumed he was wrong in what he did in that instance, and in this instance, in the adjudicative context, it makes even more sense.

Certainly with respect to, I believe, Mr. Smith’s remark about a… Mr. Smith referred to the fact, or there was a question about the fact that the commission might dispute the application of the Supremacy Clause, and certainly, if a commission did that, if a commission declined to follow Federal law, that would be a different story, and undoubtedly there would be some ability to correct that action.

But the Illinois commission isn’t doing that.

As a matter of fact, the Illinois Commerce Commission has never tried.

This is, I think, correctly characterized as a quasi-judicial proceeding, not executive or legislative.

It is not accurately compared to rate-making cases, which are much more legislative.

This is adjudication of a contract issue regarding a particular contract, and in that respect I would go back… that would lead me to the last point I want to make, which is that this is a case about a contract to which the act does not apply.

It’s interesting, Mr. Smith said he didn’t think the complaint in this case would survive a motion to dismiss, and yet he’s here arguing that it belongs in Federal court.

I’m assuming that… and I may be wrong.

Joel D. Bertocchi:

I don’t want to speak for him.

I’m assuming that the motion to dismiss would be an attempt to throw it out of Federal court.

These cases, this case is a contract case regarding a contract to which the act does not apply, and section 252(a), which allows the courts to negotiate… allows the parties to negotiate contracts any way they want clearly suggests that they have the right to do so without regard to Federal law.

In this instance, Ameritech has put Federal allegations in the complaint.

One of them is that this contract violates the act, but if you look in their brief, they’ll see… you’ll see that they say that this can’t be restricted to violations of Federal law because in negotiated cases that would allow jurisdiction to move on to the… to move to what they call the vanishing point.

We agree with that entirely.

Jurisdiction over interpretation does go to the vanishing point.

The only way Federal issues are going to come up in these cases is if State courts construe a contract in a certain way and then disregard Federal law.

That is not what the Illinois Commerce Commission is going to do.

Thank you, Your Honor.

William H. Rehnquist:

Thank you, Mr. Bertocchi.

The case is submitted.