Bullseye Telecom, Inc. v. Cal. Pub. Utilities Comm'n

• Decision Date: 06 July 2021
• Docket Number: A160729, A160908, A160937
• Citation: 281 Cal.Rptr.3d 127,66 Cal.App.5th 301
• Court: California Court of Appeals Court of Appeals
• Parties: BULLSEYE TELECOM, INC., Petitioner, v. CALIFORNIA PUBLIC UTILITIES COMMISSION, Respondent, Qwest Communications Company, LLC, Real Party in Interest. Arrival Communications, Inc., et al., Petitioners, v. California Public Utilities Commission, Respondent, Qwest Communications Company, LLC, Real Party in Interest. Cox California Telcom, LLC, Petitioner, v. California Public Utilities Commission, Respondent, Qwest Communications Company, LLC, Real Party in Interest.

66 Cal.App.5th 301

281 Cal.Rptr.3d 127

BULLSEYE TELECOM, INC., Petitioner,

v.CALIFORNIA PUBLIC UTILITIES COMMISSION, Respondent,Qwest Communications Company, LLC, Real Party in Interest.

Arrival Communications, Inc., et al., Petitioners,

v.California Public Utilities Commission, Respondent,Qwest Communications Company, LLC, Real Party in Interest.

Cox California Telcom, LLC, Petitioner,

v.California Public Utilities Commission, Respondent,Qwest Communications Company, LLC, Real Party in Interest.

A160729, A160908, A160937

Court of Appeal, First District, Division 5, California.

Filed July 6, 2021

Goodin, Macbride, Squeri, and Day, Thomas J. Macbride Jr. and Megan Somogyi, San Francisco; Klein Law Group, Andrew M. Klein, Allen Zoracki, Washington, DC, for Petitioner BullsEye Telecom Inc.

Goodin, Macbride, Squeri, and Day, Thomas J. Macbride Jr. and Megan Somogyi, San Francisco, for Petitioners Arrival Communications, Inc., Mpower Communications Corp, and U.S. TelePacific Corp.

Tobias Law Firm, Margaret L. Tobias ; Coblentz, Patch, Duffy, & Bass, Richard R. Patch, Clifford E. Yin, Laura R. Seegal, San Francisco, for Petitioner Cox California Telecom, LLC.

Arocles Aquilar, Mary McKenzie, and Maria Bondonno for Respondent.

Law Offices of Leon M. Bloomfield and Leon M. Bloomfield ; Perkins Coie, James W. McTarnaghan, Washington, DC, for Real Party in Interest

SIMONS, Acting P.J.

The business context surrounding the disputes in these consolidated cases may be simply stated: Qwest, the Real Party in Interest, AT & T, and Sprint are all long-distance carriers. In order to connect a specific California caller to a specific California recipient, long-distance carriers must purchase access to local exchange services provided by local carriers. The technical term for the services provided for local origination and termination of these long-distance telephone calls is "intrastate tandem-routed switched access services" ("switched access services"). The petitioners¹ in these cases are local carriers, operating local exchanges in California that provided services to Qwest, AT & T, and Sprint.

In its complaint to the Public Utilities Commission ("PUC" or "Commission"), Qwest alleged, among other things, that the petitioners discriminated against it by providing AT & T and Sprint with discounted rates for switched access services. Qwest concedes it was not charged more than the rates set forth in petitioners’ tariffs filed with the Commission. Qwest sought a refund of amounts it paid to petitioners in excess of the rates charged to AT & T and Sprint.

Petitioners seek writ review of the Commission's 2019 decision in Qwest's favor. The Commission concluded Qwest showed that it was similarly situated to AT & T and Sprint and that there was no rational basis for treating Qwest differently with respect to the rates charged for switched access services.

In this writ proceeding, petitioners briefly argue the Commission erred in its legal approach to Qwest's discrimination claims, but they devote most of their briefing to three procedural claims and a claim that the Commission's remedy, an award of reparations to Qwest (in an amount yet to be determined), is unlawful. Petitioners’ claims are described at the outset of the Discussion section below.

The three petitions for writ of review were consolidated in this court, and we issued a writ of review. We now reject petitioners’ claims and affirm the Commission's decision.

BACKGROUND²

As explained by the Commission, "Intrastate switched access is a service provided by the Defendant [local carriers] that allows [long-distance carriers] such as AT & T, Sprint, and Qwest to use ... local exchange network[s] ... to originate and terminate long distance calls to the vast majority of California residential and business customers. Intrastate switched access is necessary for the provision of long-distance service ... in California." (Fn. omitted.) (See also AT & T Corp. v. F.C.C. , supra , 292 F.3d at p. 809 ; United States v. W. Elec. Co. (D.D.C. 1986) 627 F.Supp. 1090, 1095 ; Iowa Network Services v. AT & T Corp. (D.N.J, Oct., 2, 2019, Civ A. No. 3:14-cv-3439), 2019 WL 4861438, 2019 U.S.Dist. LEXIS 170792.) It is undisputed that long-distance carriers have no control over which local carrier will provide switched access services on either end of the call and that, as the Commission stated below, long-distance carriers "have no choice but to use this service provided by the individual [local carriers] since there is no other way ... to reach the retail subscribers who are making the underlying long distance call." Each of the petitioners has an intrastate switched access service tariff on file with the Commission. It is undisputed the petitioners did not file with the Commission the individual agreements with AT & T and Sprint providing for discounted rates.

In April 2009, Qwest filed a First Amended Complaint ("Complaint") with the Commission against 24 California local carriers, including the present petitioners.³ In the first cause of action, Qwest alleged the local carriers engaged in rate discrimination in violation of section 453, subdivision (a), of the Public Utilities Code⁴ by providing AT & T and/or Sprint (the "Contracting Carriers") switched access services at rates lower than those filed with the Commission and charged to Qwest, pursuant to individual agreements with the Contracting Carriers.⁵ In the second and third causes of action, Qwest alleged the local carriers violated section 532 and specified general orders by failing to file the tariffs in the individual agreements with the Commission and by failing to make the rates available to Qwest. Qwest requested that the Commission order the local carriers to pay Qwest reparations, with interest, "in an amount to be proven at hearing."⁶

In 2010, the Commission dismissed the Complaint on the ground that Qwest had failed to state a claim (Decision 10-07-030) (the "2010 Decision"). In 2011, the Commission granted Qwest's request for rehearing (Decision 11-07-058) (the "2011 Decision"). The 2011 Decision stated that a discrimination complainant, like Qwest, would "have to show that it was similarly situated and that there was no rational basis for such different treatment. A showing that rates lack uniformity is by itself insufficient to establish that they are unreasonable and hence unlawful.... [Citation.] Numerous characteristics of a particular customer -- volume, calling patterns, cost of negotiation, etc. -- could be sufficient to distinguish one customer from another." (Id. at 128.) Further, the complainant must have been "willing to enter into a contract with the same terms and conditions of service."

In October 2012, the Commissioner assigned to the matter issued a "scoping memo" for the proceeding pursuant to section 1701.1, subdivision (b) (the "Scoping Memo"), identifying eight core issues to be addressed in the proceeding. Among others, the issues identified included, "Whether different treatment was lawful because Qwest was not similarly situated or there was a rational basis for different treatment;" "Whether Qwest was willing and able to meet all of the substantive rates, terms and conditions of each of the contracts [providing other carriers discounted rates];" and "Has [the local carrier] engaged in unlawful conduct by failing to file its switched access agreement with the Commission or otherwise make the terms and conditions of that service publicly available?" The Scoping Memo stated, "The total reparations sought is approximately $22 million."

Thereafter, following what the Commission described as "extensive discovery," an Administrative Law Judge ("ALJ") conducted evidentiary hearings in 2013 that included testimony and the submission of "approximately 800 exhibits." In 2015, the ALJ issued a decision denying the Complaint. In Decision 16-02-020 (the "2016 Decision"), the Commission agreed and dismissed the Complaint. The 2016 Decision found Qwest was not similarly situated to the Contracting Carriers, there was a rational basis for the discount provided to the Contracting Carriers, and Qwest was not willing to enter into the terms of the individual agreements with those carriers.

Qwest requested rehearing of the 2016 Decision under section 1731. In 2019, in Decision 19-05-023 (the "2019 Decision"), the Commission granted rehearing regarding "(1) the determination as to whether Qwest was similarly situated to the [C]ontracting [C]arriers (... AT & T and Sprint); (2) whether Defendant [local carriers] had a rational basis for treating Qwest differently; (3) whether Defendant [local carriers] violated sections 453 and 532 by discriminating against Qwest; and (4) whether Defendant [local carriers] failed to comply with the Commission's requirement to file (or otherwise make publicly available) off-tariff agreements." The Commission stated, "we will not order further proceedings on these issues." On the basis of the 2013 record, the Commission "superseded" the 2016 Decision in concluding that the defendant local carriers violated sections 453 and 532 by discriminating against Qwest and that the defendants should have filed the discount agreements with the Contracting Carriers. The decision was based in significant part on the Commission's prior characterization of switched access as a "monopoly bottleneck service."⁷ The amount of refunds due Qwest as reparations for the discrimination would be determined in a separate phase of the proceeding.

Petitioners sought rehearing.⁸ ( § 1731, subd. (b)(1).) The Commission denied rehearing but issued Decision No. 20-07-035 (the "2020 Decision"), which made certain modifications to the 2019 Decision. We refer to the 2019 Decision as modified by the 2020 Decision as the "Rehearing Decision."

The present petitions for writ of review under section 1756 followed, filed by BullsEye (A160729); Arrival, Mpower, and TelePacific (A160908); and Cox (A160937).⁹ The Commission and Qwest filed answers,...