Opinion
Case No. 01-4135-RDR
August 28, 2003
MEMORANDUM AND ORDER
This is an action to review certain orders of defendant State of Kansas Corporation Commission ("KCC"). The orders in question interpret the provisions of an interconnection agreement between plaintiff Southwestern Bell Telephone Company and defendant Ionex Communications, Inc. Plaintiff alleges that the orders unreasonably, erroneously and arbitrarily interpret the interconnection agreement and should be declared unlawful and reversed or vacated. This case is now before the court upon plaintiff's motion for summary judgment.
Summary judgment should be granted if the record shows that there is no genuine issue of material fact and that judgment is warranted as a matter of law. FED.R.CIV.P. 56.
The following facts appear uncontroverted. In September 1996, Sprint Communications Company filed a petition for arbitration of an interconnection agreement with plaintiff. One of the issues for arbitration was whether there should be a "true up" of rates for unbundled network elements ("UNE"). "True up" is compensation for the difference between permanent and interim rates once permanent rates have replaced interim rates. The arbitrators determined that the interim rates would not be subject to true up except to the extent the rates involved interim number portability. In January 1997, the KCC upheld the arbitrators' determination that a true up should not be required once permanent prices replaced interim ones. In November 1996, the KCC initiated a proceeding known as the UNE generic cost docket to establish permanent prices for interconnection and UNE access.
Almost two years later, in February 1999, the KCC issued an order in the UNE generic cost docket setting rates for interconnection and unbundled access to plaintiff's network elements. This order established rates for a host of recurring and non-recurring charges applicable to elements and services that plaintiff provides under its interconnection agreements with competitive local exchange companies.
In March 1999, the KCC approved an interconnection agreement between plaintiff and Advanced Communications Group ("ACG"). This was an opt-in agreement. In other words, the ACG agreement incorporated terms, conditions and rates, including the UNE pricing attachment from the 1996 Sprint interconnection agreement and the Sprint arbitration order and award.
ACG was succeeded by Feist Long Distance Service, Inc. Feist was succeeded by defendant Ionex. All three operated under the ACG agreement from March 23, 1999 through October 25, 2000.
This case arises from a complaint Ionex filed with the KCC in October 2000 objecting to the prices and rates from the Sprint agreement's UNE pricing attachment as incorporated in the ACG agreement. Ionex asserted that the UNE rates contained in the February 1999 generic cost docket order should have been applied by plaintiff for UNEs ordered by Ionex from plaintiff.
Under the Sprint agreement, some rates were considered interim rates. Those rates were to be replaced with subsequent rates as determined by the KCC. The ACG agreement provided that the interim rates were to be subject to true up "only where specifically required by the arbitration award." Sec. 4.3.2. of General Terms and Conditions. The Sprint arbitration order only required the true up of interim rates with permanent rates in the instance of interim number portability, not all UNEs generally. Otherwise, interim rates, when replaced with KCC determined permanent UNE rates, were not subject to true up. However, as stated, defendant Ionex contends that certain rates were made permanent by the KCC in the February 1999 generic cost docket and, therefore, were not interim in March 1999 when ACG, the predecessor of Ionex, opted into the Sprint interconnection agreement.
Section 60 of the ACG interconnection agreement states:
60. Appended to this agreement and incorporated herein are the attachments listed below [including Attachment 6: Unbundled Network Elements]. To the extent that any definition, terms or conditions in any given attachment differ from those contained in the main body of this Agreement, those definitions, terms or conditions will supercede those contained in the main body of this Agreement with the exception of Section 3.0 (Payment of Rates and Charges), but only in regard to the services or activities listed in that particular attachment.
The ACG agreement's Attachment 6 in Section 13.1, which is labeled "Interim Provisioning of Unbundled Network Elements", states that: "Appendix Pricing — UNE is a schedule which reflects the Arbitration award interim prices applicable to the specific Unbundled Network Elements which SWBT [plaintiff herein] will provide to Advanced Communications Group, Inc." Section 13.2, which is labeled "Permanent Provisioning of Unbundled Network Elements", states that the elements shall be at the prices determined by the Commission in the plaintiff's generic cost docket. "[A]ny Unbundled Network Elements for which prices are determined in such docket shall also be made available to Advanced Communications Group, Inc. at the price identified in such docket."
An amendment to the ACG interconnection agreement, changing the name of the agreement to reflect Ionex's certificate of convenience and authority, was filed and approved in September 2000. At the same time plaintiff and Ionex filed an application before the KCC for approval of a new Ionex interconnection agreement, wherein Ionex sought to opt into the interconnection agreement of plaintiff and ATT Communications of the Southwest, Inc.
On October 25, 2000, the KCC approved the new Ionex interconnection agreement which replaced and superceded the ACG Agreement.
On July 6, 2001, the KCC issued an order deciding the complaint of Ionex. The KCC held that under the provisions of Section 13.2 of Attachment 6 (as cited above), the parties to the ACG agreement decided to incorporate the UNE rates established by the KCC in the SWBT generic cost docket. Although section 19 of the general terms and conditions of the interconnection agreement provides that amendments must be offered and consented to in writing, the KCC rejected plaintiff's contention that a written amendment signed by Ionex was required to adopt the rates established in the UNE generic cost docket rates. The KCC found that plaintiff had "an affirmative duty to charge Ionex prices for provisioning UNEs no higher than the rates established by the KCC in the generic cost docket, consistent with the clear intent and language of the [ACG] interconnection agreement."
Specifically, the order stated:
17. An amendment to the Ionex interconnection agreement was never strictly necessary. The language of Section 13.2, Attachment 6, is abundantly clear — UNEs would be priced in accordance with the `prices determined by the Commission in SWBT Generic Cost Docket.' There is no doubt that UNE prices were determined by the Commission on February 19, 1999 with its Final Order Establishing SWBT's Prices for Interconnection and UNEs. Therefore, in accordance with the terms of the agreement, UNEs provisioned by SWBT to Ionex would be priced at the rate established by the Commission in its Order.
18. Furthermore, the Commission concludes that SWBT did have an affirmative duty to charge Ionex prices for provisioning UNEs no higher than the rates established by the Commission in the Generic Cost Docket, consistent with the clear intent and language of the Ionex interconnection agreement. It was SWBT which provisioned the UNEs and it was SWBT which billed Ionex for that provisioning. It was SWBT's duty, pursuant to the terms of the interconnection agreement, to bill Ionex in a manner and in an amount that was consistent with the Commission's Order.
19. The Commission further concludes that SWBT is liable to Ionex for any charges in excess of those established by the Commission from the date of the Final Order i.e. February 19, 1999, to the date on which successor Ionex/SWBT negotiated inter-connection agreement was approved by the Commission i.e. October 25, 2000.
20. SWBT insists that Ionex is not entitled to a true-up of any rates in this proceeding based upon the Commission's pronouncement in its December 20, 1999 order:
The parties were free to negotiate with SWBT or petition for arbitration. The terms of the negotiated agreement are controlling. The Commission has not been provided a legal basis to reform any grievance that does not contain a true-up provision. On the other hand, if the agreement contains a true-up provision, SWBT's obligation extends back to the effective date of February 19, 1999.
Contrary to SWBT's assertions, the terms of the negotiated agreement are clear — UNE prices established by the Commission in the Generic Cost Docket would be the prevailing prices. As stated in the December 20th Order, the provisions of the Interconnection Agreement are controlling. Therefore, SWBT's obligation extends back to the effective date of February 19, 1999.
The KCC denied a petition for reconsideration filed by plaintiff.
Standard of review
It is agreed that this court considers de novo whether an interconnection agreement as interpreted by a state commission complies with the Telecommunications Act of 1996, and that all other issues are to be reviewed under an arbitrary and capricious standard. Southwestern Bell Telephone v. Brooks Fiber Communications, 235 F.3d 493, 497-98 (10th Cir. 2000). "The duty of a court reviewing agency action under the arbitrary or capricious standard is to determine whether the agency examined the relevant evidence and articulated a rational connection between the facts found and the decision made." Payton v. U.S. Department of Agriculture, 2003 WL 21750799 (10th Cir. 2003) citing, Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983); Olenhouse v. Commodity Credit Corp., 42 F.3d 1560, 1574 (10th Cir. 1994).
Plaintiff's Arguments
To reiterate, the KCC's orders stated that during the life of the ACG agreement, plaintiff could charge Ionex UNE rates no higher than the rates established in the KCC's UNE generic cost docket. Consequently, plaintiff was found liable to Ionex for any charges in excess of those established by the KCC from the date of the final order establishing the UNE generic cost docket, February 19, 1999, to the date on which the successor Ionex/SWBT negotiated interconnection agreement was approved by the KCC. Plaintiff contends that this in effect directed plaintiff to true up the difference between interim prices contained in the ACG agreement and the KCC determined permanent prices for all UNE rates, when a true up was not required by the language or intent of the ACG agreement.
Defendants contend that the KCC did not read a true up provision into the ACG agreement. Defendants contend that under the provisions of Section 13.2 the rates provided for in the generic cost docket were the permanent rates which should always have been applied in this situation. This construction of the interconnection agreement does not appear unreasonable to the court. Section 13.1, titled "Interim Provisioning of Unbundled Network Elements", provides that interim prices are set forth in the "Appendix Pricing — UNE" schedule. Section 13.2, titled "Permanent Provisioning of Unbundled Network Elements" provides that the "provisioning for the elements identified on Appendix Pricing — UNE shall be at the prices determined by the Commission in the SWBT generic cost docket." At the time of the ACG interconnection agreement, the KCC had determined the UNE rates in the SWBT generic cost docket. It was reasonable to interpret the agreement as mandating the application of those rates instead of the interim rates published in the appendix to the interconnection agreement. Although the appendix pricing provision states that the "prices are interim and will apply until further action by the Kansas Corporation Commission," in this instance the "further action" had already been taken. This language is consistent with the context of the Sprint interconnection agreement which ACG and plaintiff opted into and which was in effect prior to the decision in the SWBT generic cost docket.
Plaintiff also argues that the KCC orders are contrary to the Sprint arbitration award and order which were made a part of the ACG interconnection agreement by reference. Specifically, plaintiff asserts that the KCC orders are contrary to the limited true up provisions in the Sprint arbitration award and order. Again, the court disagrees. It is correct that the Sprint documents did not require a true up under most circumstances. Here, however, the KCC orders applied a permanent rate which was established prior to the approval of the ACG interconnection agreement. Therefore, no true up was directed by the KCC orders. Consequently, the KCC orders did not conflict with the Sprint arbitration award and order.
Plaintiff argues that the KCC amended or in effect allowed an amendment of the ACG agreement without requiring that the process for amending the agreement take place as set forth in section 19 of the general terms and conditions of the interconnection agreement. The court disagrees. The KCC's construction of the ACG agreement did not find that the agreement had been amended; the KCC said no amendment was necessary. The KCC found that the rates it enforced were the rates required by the express terms of the interconnection agreement.
Plaintiff contends that the KCC orders violated 47 U.S.C. § 252(i) because they require plaintiff to provide a network element upon different terms to different local exchange carriers operating under the same interconnection agreement. Again, we disagree. The KCC orders require interim rates for the provision of UNEs prior to February 19, 1999, with no true up; the orders require permanent rates as dictated by the SWBT generic cost docket after February 19, 1999 pursuant to the express terms in attachment 6 of the parties' interconnection agreement. This is a uniform approach.
Finally, plaintiff makes what appears to be a new argument in its reply brief regarding a KCC order dated November 3, 2000 in which permanent prices were established for non-recurring UNE's and which plaintiff admitted related back to February 19, 1999. This contention should not be considered because it is raised first in a reply brief. Kansas Wastewater, Inc. v. Alliant Techsystems, 257 F. Supp.2d 1344, 1351 n. 7 (D.Kan. 2003); see also, Wagher v. Guy's Foods, Inc., 765 F. Supp. 667, 671 (D.Kan. 1991). In any event, it is unpersuasive to the court.
Conclusion
In conclusion, the court shall deny plaintiff's motion for summary judgment. Furthermore, the court shall direct that summary judgment be entered sua sponte in favor of defendants. We acknowledge that this practice is discouraged without prior notice. However, it appears that all the pertinent issues in this case have been raised in the plaintiff's motion and that no further factfinding or discovery is needed. Under these circumstances, we believe a sua sponte entry of summary judgment for defendants is not unfairly prejudicial to plaintiff. See Hand v. Matchett, 957 F.2d 791, 794 n. 2 (10th Cir. 1992) (sua sponte ruling on summary judgment motion was proper when the parties had adequate opportunity to address all pertinent issues); see also, Bridgeway Corporation v. Citibank, 201 F.3d 134 (2nd Cir. 2000).
IT IS SO ORDERED.