• Budget Prepay v. AT&T: Federal Statute Provides No Federal Jurisdiction
  • May 21, 2010 | Author: Kendall M. Gray
  • Law Firm: Andrews Kurth LLP - Houston Office
  • Today, in an appeal  by AT&T and similarly situated carries from a preliminary injunction, the Fifth Circuit found that there was no federal question jurisdiction.  Curiously, the non-federal case arises from a regime set up under the federal Telecommunications Act of 1996.  Even more curious, the complaint, at one time, contained federal antitrust claims, dismissed without prejudice for reasons not stated in the Fifth Circuit opinion.

    As Alice would say, "Curiouser and curiouser."  Curiouser still with the addition of the obligatory, alphabet soup of federal acronyms.

    In Budget Prepay v. AT&T, the Court held that the Telecommunications Act of 1966 did not provide for federal jurisdiction because, under the structure of the Act, the construction of interconnection agreements (ICAs) between incumbent carriers (ILECs) and the small, wily, competitive carriers (CLECs) are matters of state law.  The importation, by agreement, of FCC standards into the ICA is still A-OK and does not create an FQ (federal question):

    [W]e held in Southwestern Bell that interpretation of the terms of an ICA, even if the ICA terms are intertwined with federal law, is a claim governed by and arising under state law.

    * * *
    The fact that the ICA at issue here invokes and incorporates federal law is not to the contrary. As noted above, the Act imposes general duties on ILECs and then fills in the details of enforcement and interpretation with regulations promulgated by the FCC. But the parties are free to negotiate around these statutory and regulatory rules. See 47 U.S.C. § 252(a). The invocation of federal law in an ICA does not turn a contract dispute into a federal question case; rather, it accepts the relevant statutory language or regulation as a binding contract provision in lieu of a privately negotiated provision. . . . The fact that this ICA provision was drawn from 47 U.S.C. § 251(c)(4)(A) and not specifically negotiated does not raise a federal question. It raises an issue of state law contract interpretation.

    Judge Clement wrote the opinion.

    To recap: the Federal Telecommunications Act allows ILECs and CLECs to have ICAs with FCC regs from the CFR under authority of 47 USC §§ 251 & 252 without making an FQ under 28 U.S.C. § 1331.