MCI TELECOMMUNICATIONS v. MICHIGAN BELL TELEPHONE, (E.D.Mich. 1999)

NANCY G. EDMUNDS, U.S. District Judge.

This case came before the Court on two motions for reconsideration: 1) Ameritech's motion to amend the judgment or, in the alternative, for reconsideration of one aspect of the Court's September 29, 1999 Opinion and Order and 2) MCI's motion to alter or amend the Court's September 29, 1999 Opinion and Order. The Court treats both motions as motions for reconsideration. For the reasons set forth below, Ameritech's motion for reconsideration is DENIED, and MCI's motion for reconsideration is GRANTED.

I. Facts

MCI Telecommunications Corporation and MCImetro Access Transmission Services, Inc. (collectively "MCI") and Michigan Bell Telephone Company d/b/a Ameritech Michigan, Inc. ("Ameritech") appealed Michigan Public Service Commission ("MPSC") Case No. U-11168, each claiming that certain terms of their Interconnection Agreement, as arbitrated by the MPSC, violated the Telecommunications Act of 1996. MCI alleged that tthe Interconnection Agreement violated the Act by improperly limiting Ameritech's liability for misconduct (MCI's Amended Complaint, Count II). MCI also alleged that the Interconnection Agreement failed to required Ameritech to provide MCI with access to Ameritech's yellow pages (MCI's Amended Complaint, Count IV). On September 29, 1999, this Court issued an Opinion and Order finding that the Commission erred by adopting the limited liability provisions. The Court reversed the Commission's order requiring that the limited liability provisions be included in the Agreement and remanded for reformation of the Agreement to delete such provisions. In the same Opinion, the Court affirmed the Commission's decision that Ameritech is not required to list MCI's customers in its yellow pages. Pursuant to Federal Rule of Civil Procedure 59(e) and Local Rule 7.1, Ameritech filed a motion for reconsideration of the Court's decision regarding the limited liability provisions, and MCI filed a motion for reconsideration of the Court's decision regarding the yellow pages listing.

The Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56 (1996) is codified in scattered sections of the United States Code, Title 47.

While Ameritech and MCI titled their motions "motion to alter or amend the judgment," the Court has since clarified that the September 29, 1999 Opinion and Order does not constitute a final judgment. Order Granting Ameritech's Motion for Clarification, filed October 25, 1999. Thus, the Court treats the motions as motions for reconsideration.

II. Standard of Review

Pursuant to Rule 7.1(g) of the Local Rules for the Eastern District of Michigan, a motion for reconsideration may be filed within ten days after the order to which it objects is issued. It should be granted if the movant demonstrates that the Court and the parties have been misled by a palpable defect and that a different disposition of the case must result from a correction of such palpable defect. A motion that merely presents the same issues already ruled upon by the Court shall not be granted. In reviewing the MPSC decisions at issue here, the Court reviews questions of law de novo, and issues of fact under an arbitrary and capricious standard. U.S. West, Inc. v. Hix, 986 F. Supp. 13, 19 (D.Colo. 1997).

Similarly, a motion to alter or amend a judgment under Fed.R.Civ.P. 59 may be granted: 1) due to an intervening change in controlling law; 2) because evidence previously unavailable has become available; or 3) to correct a clear error or prevent manifest injustice. Nagle Indus., Inc. v. Ford Motor Co., 175 F.R.D. 251, 254 (E.D.Mich. 1997), aff'd, ___ F.3d ___, 1999 WL 44780 (Fed. Cir. June 22, 1999).

III. Analysis

A. Limitation of Liability Provisions

In the September 29, 1999 Opinion and Order, the Court held that the Commission lacked authority to adopt the limited liability provisions at the late stage of the process when they were adopted. The parties did not raise the issue of limitation of liability during the arbitration process, and the provisions were not adopted until after the Interconnection Agreement was first approved. The Commission ruled that the interconnection agreement as adopted by the arbitration panel and as modified by the First Approval Order was approved, and the Commission ordered the parties to file a completed agreement. First Approval Order at 8 (JA20). The parties discussed contract language incorporating the Commission's rulings on issues that had been arbitrated. It was at this time that Ameritech first proposed that the agreement include limitation of liability provisions. MCI objected to the inclusion of the provisions, claiming as it does here that the provisions were not arbitrated and that they were not just and reasonable. The issue was not sent to arbitration.

The Agreement's limited liability provisions prohibit the parties from recovering any indirect or consequential damages. Agreement ¶ 26.5 (JA1). The Agreement also caps liability in tort or contract to the greater of 1) the amount charged for the service not performed or performed improperly; or 2) the amount the negligent or breaching party would have been liable to its customer if the service was provided directly to the customer.

The Commission then ordered MCI to accept the limitation of liability provisions. Commission Order, June 5, 1997 (JA 27). The Commission did not address MCI's procedural argument nor did it address MCI's claim that the limited liability provisions were not just or reasonable. Instead, the Commission emphasized that the limitation of liability provisions proposed by Ameritech did not represent Ameritech's original position, but instead were provisions negotiated between Ameritech and ATT. The Commission went on to explain that it adopted the provisions because they were common:

The Commission is aware that MCI was not a party to the negotiations that led to the development of that language. However, the Commission notes that MCI's objection fails to articulate any substantive reason for rejection of that language. Because limitation of liability provisions are common in agreements of this nature, the Commission is persuaded that the limitation of liability provision suggested by Ameritech Michigan should be incorporated into its interconnection agreement with MCI.

Id. at 6 (JA 27).

The Act provides that the parties must set forth the issues to be arbitrated, 47 U.S.C. § 252(b)(2) (3), and that the state commission must limit its consideration to those issues set forth in the petition and response. 47 U.S.C. § 252(b)(4)(A). Then, the commission has the authority to approve of an interconnection agreement as negotiated and arbitrated by the parties. Id. § 252(e)(1) (2). It is undisputed that the limitation of liability provisions in the Ameritech/MCI Interconnection Agreement were not negotiated nor were they arbitrated; thus, the MPSC did not have the authority to impose those provisions. Ameritech contends in its motion for reconsideration that the MPSC was authorized to incorporate the liability provisions in the Agreement under section 252(e)(3). Section 252(e)(3) provides, "[N]othing in this section [252] shall prohibit a State commission from establishing or enforcing other requirements of State law in its review of an agreement." 47 U.S.C. § 252(e)(3) (emphasis added). Ameritech claims that the limitation of liability provisions were required by Michigan law, relying on Rinaldo's Constr. Corp. v. Michigan Bell Tel. Co., 454 Mich. 65, 559 N.W.2d 647 (1997), and if not already required, were newly "established" by the MPSC as state law requirements.

Ameritech merely reiterates an argument previously rejected by the Court as meritless. Ameritech did not make the section 252(e)(3) argument to the Commission, and the Commission did not address MCI's contention that it lacked authority to adopt the limited liability provisions at that late stage of the proceedings. Further, the Commission did not indicate in any way that it was acting under section 252(e)(3) to enforce or to create and establish a state law provision. The Commission did not make any reference to state law whatsoever. Instead, it merely indicated that "limitation of liability provisions are common in agreements of this nature." Commission Order, June 5, 1997 *6 (JA 27).

Moreover, Michigan law does not require interconnection agreements to contain limited liability provisions. In Rinaldo's, the Michigan Supreme Court held that the MPSC had primary jurisdiction to hear customers' claims that are covered by liability limitations in Ameritech's retail tariffs. The court explained that the Commission should have primary jurisdiction in order to establish uniform limitations of liability which were "essential to prevent the telephone company from being exposed to unanticipated liabilities that [would] hinder its ability to provide affordable phone service." 454 Mich. at 76, 559 N.W.2d at 655. While the Michigan Supreme Court in Rinaldo's noted that limitation of liability provisions in retail tariffs were "essential" it did not establish that such provisions were necessary in the context of an interconnection agreement.

Ameritech fails to demonstrate that the Court and the parties were misled by a palpable defect and that a different disposition of the case must result. Accordingly, Ameritech's motion for reconsideration of the Court's September 29, 1999 Opinion and Order is denied.

B. Yellow Pages Listing

In the September 29, 1999 Opinion and Order, the Court affirmed the decision of the MPSC, holding that Ameritech is not required to list MCI's customers in its yellow pages. MCI moves to reconsider, based on the FCC's ruling clarifying that the law does in fact require incumbents who provide directory listings to their own customers to provide such listings to their competitors' customers.

In the September 29, 1999 Opinion, the Court held that the Act and regulations require only that incumbents provide competitors with "access to directory listings," not that they include competitors' customers in their directories. The Court explained as follows:

The Telecommunications Act provides that incumbent local exchange carriers provide "nondiscriminatory access to telephone numbers, operator services, directory assistance, and directory listing. . . ." 47 U.S.C. § 251(b)(3). The regulations provide that the local exchange carrier (LEC) must provide access to directory listings as follows:

A LEC shall provide access to directory listings to competing providers in readily accessible magnetic tape or electronic formats in a timely fashion upon request. A LEC also must permit competing providers to have access to and read the information in the LEC's directory assistance databases.

47 C.F.R. § 51.217(c)(3)(ii). "Directory listing" as used in section 251(b)(3) is synonymous with "subscriber list information" in section 222(f)(3), which means any information identifying a carrier's customers, including their names, addresses, phone numbers, and primary advertising classification that a carrier or affiliate has published or caused to be published. Second Report and Order, Implementation of the Local Competition Provisions of the Telecommunication Act of 1996, CC Docket No. 96-98, 11 FCC Rcd. 19392 ¶¶ 137 n. 315 (JA 47); 47 C.F.R. § 51. ("directory listings" are defined as those published by an LEC or its affiliate). "Primary advertising classifications" are yellow pages listings.

MCI filed a Notice of Supplemental Authority citing the Directories Order on September 29, 1999, the same day that the Court issued its Opinion and Order.

The Arbitration Panel ruled in favor of MCI on this issue, holding that Ameritech must provide access to directory listings and that such listings included yellow pages. Arbitration Decision at 58 (JA 17). The Panel presumed, without analysis, that "access to directory listings" meant that Ameritech must actually list MCI's business customers in the Ameritech yellow pages.

The MPSC reversed the Panel's decision. The Commission reasoned that the incumbent cannot be required to list a competitor's customers in its yellow pages because in another section of the Act, the incumbent is only required to list a competitor's customers in its white pages. First Approval Order at 6 (JA 20). Section 271 of the Act sets forth certain requirements that an incumbent must meet in order to be permitted to provide long distance services. These requirements are called the "competitive checklist." The checklist provides that the incumbent must provide "White pages directory listings for customers of the other carrier's telephone exchange service." 47 U.S.C. § 271(c)(2)(B)(viii). The checklist does not state that the incumbent provide "access to" white pages listings; it requires that the incumbent provide listings. In contrast, another item on the checklist requires the incumbent to provide "nondiscriminatory access to directory assistance services to allow the other carrier's customers to obtain telephone numbers." Id. § 271(c)(2)(B)(vii)(II). Providing "access to" listings is not the same as providing the listing itself. If Congress intended section 251 to require incumbents to provide directory listings to competitors, Congress would have drafted section 251 like section 271(c)(2)(B)(viii), which requires that incumbents provide directory listings. Instead, Congress provided in section 251 that incumbents merely provide access to directory listings. Accordingly, the MPSC decision is AFFIRMED, Ameritech is not required to list MCI's customers in its yellow pages. September 29, 1999 Opinion and Order. pp. 43-45 (footnotes omitted).

At the time it issued its Opinion, the Court was not aware that the FCC had just clarified the meaning of "directory listing" in section 251(b)(3). See In re Implementation of the Telecommunications Act of 1996, Third Report and Order in CC Docket No. 96-115, Second Order on Reconsideration of the Second Report and Order in CC Docket No. 96-98, and Notice of Proposed Rulemaking in CC Docket No. 99-273 (rel. Sept. 9, 1999) (MCI's Motion to Alter or Amend, Exhibit 1) [hereinafter cited as the "Directories Order"].5 The FCC explained that the reference to "directory listing" in section 251(b)(3) refers to the act of listing a customer in a directory. The FCC's Directories Order provides:

MFS [now MCI WorldCom, Inc.] states that "directory listing" refers to the act of placing a customer's listing information in a published directory compilation, such as in white pages or an Internet directory. MFS asserts, therefore, that nondiscriminatory access to directory listing should mean that "a carrier publishing a telephone directory has a duty to incorporate a listing supplied by its competitor with the same level of accuracy, in the same manner, and in the same time frame that it would list its own customer's information." It states that access to listings suggests a duty to provide a carrier with access to a compilation of information in a directory, while access to directory listing involves listing a particular subscriber in a directory.

. . . .

We agree with those petitioners who contend that our rules should be modified to recognize the difference between directory "listing" and directory "listings," and that our rules should recognize that these terms are distinct from directory assistance under the 1996 Act. We conclude that the section 251(b)(3) requirement of non-discriminatory access to directory listing is most accurately reflected by the suggestion of MFS and Bell Atlantic that directory listing be defined as a verb that refers to the act of placing a customer's listing information in a directory assistance database or in a directory compilation for external use (such as a white pages). Directories Order ¶¶ 158 160 (emphasis added).

The Directories Order is now binding on this Court. "Unless and until an FCC regulation is stayed or overturned by a court of competent jurisdiction, the FCC regulations have the force of law and are binding upon state [commissions] and federal district courts. . . . [R]eview of FCC rulings is committed to the exclusive jurisdiction of the United States Courts of Appeal; as such, this Court may not inquire into the validity of an FCC regulation." ATT Comm. of Calif., Inc. v. Pacific Bell, No. C97-0080 SI, 1998 WL 246652 at *2 (N.D.Cal. May 11, 1998) (citations omitted) (MCI's Motion to Alter or Amend, Exhibit 4).

In light of the Directories Order, MCI requests that the Court alter or amend its Opinion and Order, reverse the MPSC's ruling, and direct the MPSC to require Ameritech to list MCI's customers in its yellow pages directories on a nondiscriminatory basis. Ameritech contends that the Court should not amend its Order and reverse the MPSC because those rulings were correct when decided, under the law as it then stood. Further, Ameritech argues, the Interconnection Agreement provides that in the event of a change in the law, the parties may renegotiate and amend their Agreement. Ameritech insists that renegotiation is the proper procedure in this case.

Section 29.3 of the Interconnection Agreement (JA 1) provides:

In the event of any amendment to the Act, or any final and nonappealable legislative, regulatory, judicial order, rule or regulation or other legal action that revises or reverses the Act, the FCC's First Report and Order in CC Docket Nos. 96-98 and 95-185 or any applicable Commission order or arbitration award purporting to apply the provision of the Act, either Party may by providing written notice to the other Party require that the affected provisions be renegotiated in good faith and this Agreement be amended accordingly to reflect the pricing, terms and conditions of each such Amendment to the Act relating to any of the provisions of this Agreement. . . . (Emphasis added).

MCI cannot be compelled to renegotiate this issue. First, the Directories Order merely clarified existing law. "A rule clarifying an unsettled or confusing area of the law does not change the law, but restates what the law according to the agency is and has always been. . . ." Orr v. Hawk, 156 F.3d 651, 654 (6th Cir. 1998) (quotations omitted). The FCC has clarified what the law was, as it stood at the time the MPSC ruled. Accordingly, the MPSC's yellow pages ruling was in error, as was this Court's September 29 yellow pages ruling. The FCC ruling does not constitute a "change in the law" covered by the Interconnection Agreement's renegotiation provision.

Second, the renegotiation provision is not a mandatory exhaustion requirement. It is optional, as it uses the word "may." Further, it does not deprive the parties of their right to bring an action under the Telecommunications Act nor does it deprive the Court of the power to hear such an action. "[T]he Act provides that "any party aggrieved" by a state commission's determination may bring a federal court action to determine whether an agreement contradicts the Act. The agreement's dispute resolution clause does not purport to deprive the court of this power, or purport to be a mandatory first step." MCI Telecomm. Corp. v. US West Comm., Inc., No C97-1508R, 1998 U.S. Dist. Lexis 21585 at *8 (W.D.Wash. July 21, 1998) (MCI's Reply, Exhibit 2). See also Wisconsin Bell, Inc. v. Public Serv. Comm'n of Wis., Nos. 97-C-566-C, 98-C-11-C, 98-C-153-C, 98-C-366-C, Tr. at 36-37 (W.D.Wis. June 24, 1999) (MCI's Reply, Exhibit 1) (renegotiation provision is optional vehicle for modifying contract due to change in law, not a mandatory procedure).

Ameritech further argues that it cannot be required to publish MCI's customers in its yellow pages because Ameritech does not publish a yellow pages directory. The Ameritech PagesPlus Yellow Pages, which lists Ameritech's business customers, are published by a separate company called Ameritech Publishing, Inc., also known as Ameritech Advertising Services. Ameritech points out that paragraph 158 of the Directories Order provides that "a LEC publishing a telephone directory has a duty to incorporate a listing supplied by its competitor." Further, Ameritech relies on U.S. West Communications, Inc. v. Garvey, No. 98-1295 *19-22 (D.Minn. Mar. 30, 1999) (JA 70), which held that the state commission had no authority to regulate the publisher of a phone directory, which was a wholly owned subsidiary of the ILEC, where there was no evidence that ILEC controlled the publisher. Ameritech reasons that because it does not publish a yellow pages directory, it has no duty to publish MCI's listings in such a directory.

This argument is specious. Paragraph 158 of the Directories Order simply explains the competing LEC's argument that the term "directory listing" should be defined as a verb, the act of placing customer's listing in a directory. The FCC's ruling is found in paragraph 160, which provides, "We conclude that the section 251(b)(3) requirement of non-discriminatory access to directory listing is most accurately reflected by the suggestion of MFS and Bell Atlantic that directory listing be defined as a verb that refers to the act of placing a customer's listing information in a directory assistance database or in a directory compilation for external use (such as a white pages)." The FCC did not indicate that "the act of placing a customer's listing" must be performed directly by the incumbent carrier itself. To the contrary, the regulations define "directory listings" more broadly as any information "that the telecommunications carrier or an affiliate has published, caused to be published, or accepted for publication in any directory format. 47 C.F.R. § 51.5. Thus, the duty to publish competitors' business customers in a yellow pages directory on a nondiscriminatory basis extends to incumbent carriers who have caused their own customers listings to be published in a yellow pages directory.

Ameritech argues that Ameritech Publishing, Inc., a/k/a Ameritech Advertising Services, is not owned or controlled by Ameritech and thus is not an affiliate governed by the Telecommunications Act and its regulations. Ameritech asserts that Ameritech Publishing is an independent company which provides directory listings by contract to Ameritech and to other carriers.

There is evidence to the contrary. Ameritech Services division vice president Gregory Dunny repeatedly referred to Ameritech Publishing as Ameritech's directory "affiliate." Testimony of Dunny, Docket No. U-11168, Oct. 17, 1996 at 75-77 (JA 12). Furthermore, Ameritech exercises some control over Ameritech Publishing, as the Interconnection Agreement provides that "Ameritech shall cause the Publisher to include Primary Customer Listings of MCIm's Customers in its White Pages Directories. . . ." Agreement ¶ 15.1 (JA 1). "`Publisher' means Ameritech White Pages Directories publisher," Id. Schedule 1.2-10, which currently is Ameritech Publishing. Thus, Ameritech agreed to cause Ameritech Publishing to publish both its own customers and MCI's customers in the white pages directory. Moreover, the issue of whether Ameritech Publishing is an affiliate of Ameritech is not relevant because the regulation is drafted more broadly. "Directory listings" include those that an incumbent carrier has "caused to be published." 47 C.F.R. § 51.5. Ameritech causes its own customers to be published in the Ameritech PagesPlus Yellow Pages. Therefore, Ameritech has the duty to provide nondiscriminatory access to such yellow pages publication to MCI's customers.

Due to the FCC's September 9, 1999 clarification of the law, the Court finds that its September 29, 1999 Opinion and Order with respect to the issue of yellow pages publication was in error. Accordingly, MCI's motion for reconsideration of the Court's September 29, 1999 Opinion and Order is granted. The September 29, 1999 Opinion and Order is amended to provide as follows: The MPSC's decision that Ameritech is not required to list MCI's customers in its yellow pages is reversed and the issue is remanded to the Commission for reformation of the Interconnection Agreement. The Agreement shall be reformed by including provisions which require Ameritech to provide nondiscriminatory access to yellow pages directory listing to MCI's business customers.

IV. Conclusion

For the foregoing reasons, the Court hereby orders as follows:

1. Ameritech's motion to amend the judgment or, in the alternative, for reconsideration of one aspect of the Court's September 29, 1999 Opinion and Order is DENIED. As the Court explained in its September 29 Opinion, the MPSC's order requiring that the limited liability provisions be included in the Agreement is REVERSED, and the issue is REMANDED to the Commission for reformation of the Interconnection Agreement. The Agreement shall be reformed by striking the limited liability provisions.

2. MCI's motion to alter or amend the Court's September 29, 1999 Opinion and Order is GRANTED. The September 29, 1999 Opinion and Order is AMENDED to provide as follows: The MPSC's decision that Ameritech is not required to list MCI's customers in its yellow pages is REVERSED. The issue is REMANDED to the Commission for reformation of the Interconnection Agreement. The Agreement shall be reformed by including provisions which require Ameritech to provide nondiscriminatory access to yellow pages directory listing to MCI's business customers.

SO ORDERED.