Department of Human Resources v. Citibank

• Decision Date: 11 April 2000
• Docket Number: No. A00A0675, No. A00A0676.
• Citation: 534 S.E.2d 422,243 Ga. App. 433
• Parties: DEPARTMENT OF HUMAN RESOURCES v. CITIBANK F.S.B. et al. Citibank F.S.B. et al. v. Department of Human Resources.
• Court: Georgia Court of Appeals

534 S.E.2d 422

243 Ga. App. 433

DEPARTMENT OF HUMAN RESOURCES v. CITIBANK F.S.B. et al.

Citibank F.S.B. et al. v. Department of Human Resources.

Nos. A00A0675, A00A0676.

Court of Appeals of Georgia.

April 11, 2000.

Thurbert E. Baker, Attorney General, Daniel M. Formby, Deputy Attorney General, William C. Joy, R.O. Lerer, Senior Assistant Attorneys General, Michelle C. Egan, Assistant Attorney General, for appellant.

Alston & Bird, John E. Stephenson, Jr., Charles E. Young, Jr., James W. Hagan, Jeffrey J. Swart, Atlanta, for appellees.

ELDRIDGE, Judge.

This case involves a complex national contract between Citibank F.S.B. and Citicorp Services, Inc. ("Citibank") as performing parties and Georgia Department of Human Resources ("DHR") for the electronic benefits transfer ("EBT") for delivery of government benefits, state and federal, to recipients of Social Security, Temporary Aid to Needy Families, food stamps, Aid to Families with Dependent Children, unemployment benefits, and other financial benefits by automated teller machine-like means and other electronic means. Citibank had similar contracts with the U.S. Department of the Treasury and other southern states. The numerous documents comprising the Contract in its entirety provided for a "renegotiation clause" in which the parties agreed to renegotiate the Contract "if federal and/or state revisions of applicable law or regulations make changes in the contract necessary." As part of the customer service for the benefit recipients, Citibank had to provide toll-free long distance telephone access, i.e., a 1-800 number.

However, passage of the Telecommunications Act of 1996, 47 USC § 276 ("Act") after the Contract was entered into changed the fixed costs imposed on Citibank for calls made by recipients of government benefits from pay telephones as local access fees to the toll-free number. The Act caused holders of "toll-free" numbers, i.e., Citibank, to choose between (1) providing access to those toll-free numbers from pay telephones by paying local access fees, or (2) avoiding the local access fees by declining to provide access to pay telephones. The Contract obligated Citibank only to provide a "toll-free" telephone number that benefit recipients could call for customer service; this was not an obligation to pay the cost of or otherwise provide access to a pay telephone used to dial the toll-free number. DHR's refusal to renegotiate the Contract with Citibank breached the Contract, and Citibank had the right to terminate access from pay phones.

Case No. A00A0675

1. The trial court, on grant of partial summary judgment to Citibank, determined that, under the terms of the Contract, (a) the Act allowed local access fees to be imposed by pay telephone owners for pay telephone calls to the toll-free numbers and that Citibank had to provide for benefit recipient service; (b) the Act and the subsequent regulations constituted the condition requiring renegotiation of the Contract; and (c) DHR's refusal to renegotiate the fixed price to reflect the additional cost for local access fees constituted a breach of the Contract. We agree with each such legal conclusion reached by the trial court to grant summary judgment to Citibank.

The Contract comprises five critical documents: (1) the "Invitation for Expressions of Interest to Acquire EBT Services for the Southern Alliance of States" ("IEI") issued on March 9, 1995, by the Treasury; (2) Citibank's Technical Response dated August 24, 1995; (3) Citibank's Best and Final Offer ("BAFO") pricing proposal dated September 26, 1995; (4) a Financial Agency Agreement between the Treasury and Citibank dated January 24, 1996; and (5) a separate contract dated July 1, 1996, between Citibank and DHR ("Georgia Contract"), which incorporates a set of "EBT Standard Terms and Conditions" that was developed by the participating states as basic terms shared in the respective individual state and Treasury contracts with Citibank.¹

Each separate Contract was for a fixed price and term. While providing a fixed price contract at the most competitive terms, Citibank required that the Contract be renegotiated as to fixed price upon change in the applicable laws that necessitated such renegotiation, because the EBT environment had risks of change in the law and regulations unforeseen by any party that could harm Citibank unforeseen by any party in additional basic costs.

Under the customer service obligation in the IEI, Citibank, as financial agent for the Treasury, would provide a toll-free long distance telephone number for benefit recipients to call for current account and benefit access information by a 1-800 number, twenty-four hours a day, seven days per week. Toll-free means no long distance toll charge by the carrier to the benefit recipient for long distance calls. See 26 CFR § 49.4252-2(a) (1995) (defining toll charges); 47 CFR § 52.101(f) (1995) (defining toll-free charges). However, Citibank had no contract obligation to pay local access fees for pay telephone access for benefit recipients. Thus, local access fees did not constitute a core expense or service under the Contract.

Now, under the new regulations local access fees are the compensation paid to pay telephone owners for the cost of moving calls from a pay telephone to other local telephone carriers. Illinois Pub. Telecommunications Assn. v. Fed. Communications Comm., 117 F.3d 555, 559, clarified, 123 F.3d 693 (D.C.Cir.1997); see also 47 CFR § 276(b)(1)(A). As such, local access fees are not part of the toll-free cost.

Finally, on July 1, 1996, the Contract between DHR and Citibank was executed and incorporated by reference an addendum entitled "EBT Standard Terms and Conditions." In Paragraph III.C.1, the Contract contained the renegotiation provision.

In performance, Citibank provided the toll-free number at its cost through both automated and live customer service functions to respond to benefit recipients. However, IEI does not obligate Citibank to pay local access charges for pay telephones, so that benefit recipients may have access to the toll-free number at no cost to them. Under the former federal communications law and regulations, there had been no local access fee to connect to a toll-free number from pay telephones. Therefore, the Contract did not mention local access fees for pay phones to toll-free numbers nor did the Contract contemplate such costs, because local access fees from pay telephones to toll-free numbers did not exist when the Contract became final.

In 1997, the Federal Communications Commission ("FCC"), under the Act, promulgated new rules and regulations for the pay telephone industry that created local access fees. The FCC authorized owners of local pay telephones to charge a per-call local access fee for using a pay phone to call a toll-free number. Long after the Contract was being performed, this new regulation was promulgated on October 9, 1997. The Georgia Contract was formulated after the IEI was issued in early 1995, and Citibank's BAFO was submitted on September 26, 1995. Thus, Citibank had no way to protect itself except through the renegotiation provision which DHR agreed to include in the Contract or to terminate access to pay telephones.

Thus, in 1997, Citibank faced increased costs resulting from both a law and regulation change, requiring the Contract renegotiation under the Contract's clear and express terms. Therefore, DHR breached the Contract in refusing to renegotiate the cost for local access fees for pay telephone usage. See OCGA § 13-2-2(4). DHR had a contractual duty to negotiate an increase in Citibank's compensation to reimburse the amount of the local access fees incurred. Upon DHR's refusal to negotiate an increase in Citibank's compensation, Citibank can decline to accept calls placed from pay telephones to the toll-free number without breaching the contract.

The parties reached a definite and final agreement that was legal and enforceable, and which had a provision for renegotiation of cost in the event of a contingency condition occurring, i.e., a change in law or regulations affecting the Contract, which was a condition subsequent. See Roberson v. Eichholz, 218 Ga.App. 511, 513(1), 462 S.E.2d 382 (1995); Cole v. Shoffner, 205 Ga.App. 65, 67(3)(b), 421 S.E.2d 322 (1992). The existence of a condition subsequent does not make the Contract vague or unenforceable where there existed mutuality of obligation at the time of performance. Where a contract is definite in terms, a condition precedent or a condition subsequent will not void the contract. See OCGA § 13-3-4; Moore v. Buiso, 235 Ga. 730, 731-732, 221 S.E.2d 414 (1975); Fulton County v. Collum Properties, 193 Ga.App. 774, 775(1), 388 S.E.2d 916 (1989); Rothberg v. Charles H. Hardin Constr. Co., 111 Ga.App. 41, 45-46, 140 S.E.2d 520 (1965). Where a contract has a condition subsequent, the occurrence may excuse performance or otherwise allow the contract to be modified. See generally Winn v. Tabernacle Infirmary, 135 Ga. 380, 383, 69 S.E. 557 (1910); King Indus. Realty, Inc. v. Rich, 224 Ga.App. 629, 631-632(4), 481 S.E.2d 861 (1997). The new consideration for the modification in the Contract would be a higher fixed fee by DHR and acceptance of calls from pay telephones by Citibank. The general rule regarding an agreement to agree in the future has no application here, because there was a complete agreement in all terms at the time of performance, i.e., a meeting of the minds and full performance by both parties in the first two years of the Contract, before the new regulations under the Act necessitated a change in the Contract. See, e.g., Poulos v. Home Fed. Sav. &c. Assn., 192 Ga.App. 501, 503(2), 385 S.E.2d 135 (1989); Hartrampf v. C & S Realty &c., 157 Ga.App. 879, 881(1), 278 S.E.2d 750 (1981); Nuclear Assurance Corp. v. Dames & Moore, 137 Ga.App. 688, 689, 225 S.E.2d 97 (1976). The terms of the Contract,...