Global Tel*Link, Inc. v. Louisiana Public Service Com'n

• Decision Date: 21 January 1998
• Citation: 707 So.2d 28
• Parties: Page 28 707 So.2d 28 97-0645 La
• Court: Louisiana Supreme Court

Page 28

707 So.2d 28

97-0645 La. 1/21/98

GLOBAL TEL*LINK, INC. v LOUISIANA PUBLIC SERVICE COMMISSION.

No. 97-CA-0645.

Supreme Court of Louisiana.

Jan. 21, 1998.

Dissenting Opinion of

Justice Lemmon, Jan. 27, 1998.

Rehearing Denied March 13, 1998.

Basile J. Uddo, Frank J. Uddo, Paul L. Zimmering, Stone, Pigman, Walther, Wittman & Hutchinson, New Orleans; Brian A. Eddington, Baton Rouge, for Appellant.

T. Michael Twomey, New Orleans, for Appellee.

[97-0645 La. 1] KIMBALL, Justice. ^*

This matter is before the court as a direct appeal from the Nineteenth Judicial District Court pursuant to La. Const. art. IV, § 21(E). The Louisiana Public Service Commission and Global Tel*Link, Inc. appealed portions of the trial court's ruling regarding the imposition and enforcement of the Commission's order that all Customer Owned Coin Operated Telephone service providers, such as Global, bill for calls within 60 days after they are initiated. We hold that neither the Commission's 60-day rule nor its decision to deny Global an exemption from that rule is arbitrary and capricious. We conclude, however, the Commission's orders that Global refrain from billing or collecting in violation of the rule and that Global refund all sums collected in violation of the rule [97-0645 La. 2] are arbitrary and capricious and beyond the Commission's authority. As such, the ruling of the trial court is affirmed in part and reversed in part.

FACTS AND PROCEDURAL HISTORY

In 1990, by Order No. U-16462-E, the Louisiana Public Service Commission ("Commission") established comprehensive guidelines for all Customer Owned Coin Operated Telephone companies ("COCOT") to govern the operation of their businesses. Included in this Order is a requirement that COCOTs submit billings to customers utilizing their services within 60 days from the date the call was initiated. Global Tel*Link, Inc. ("Global"), an appellant herein, is a COCOT operating in Louisiana. ¹

In June, 1993, Global entered into a contract with the Louisiana Department of Public Safety and Corrections to provide inmate phone systems in sixteen state correctional facilities. After Global began administering the inmate phone systems, the Commission received numerous complaints concerning Global's bills. Among the complaints were allegations that Global double-billed the same call, charged exorbitant prices, and added time to a call. Consumer complaints increased through the end of 1993, and, in February, 1994, the Commission instituted a formal investigation into the billing practices of Global.

During the course of the Commission's investigation into the billing practices of Global, four areas in which Global's activities led to overcharges to consumers were identified. These areas included:

(1) Clock Advancements;

(2) Rates Exceeding Authorized Levels;

(3) Addition of Charges to Calls after the Calls were Rated and Addition of Time to Completed Calls; and

(4) Duplicate Billings.

Order No. U-20784-B.

In the area of clock advancements, the Commission found that Global programmed the clocks in its telephones at correctional institutions to add either 15 or 36 seconds to the duration of each call. The Commission explained in Order No. U-20784-B that the timing of a call should begin to run when the connection is made and should start at "0" seconds. The clocks in Global [97-0645 La. 3] telephones, or those telephones programmed by Global, started at 15 or 36 seconds rather than at 0 seconds. This is significant because telephone companies "round up" to the next minute when timing calls for billing purposes. ² The Commission found that Global's practice of advancing the clocks was unauthorized and could have only been designed to artificially inflate charges to its customers. The overcharges associated with time clock advancements were approximately $60,000.00, exclusive of interest. Global was ordered by the Commission to refund the entire amount of overcharges resulting from the illegal clock advancements plus 10% interest.

Regarding unauthorized rates, the Commission found that until June, 1994, Global's tariffs were inconsistent with the rates it was authorized to charge under the Commission's rate caps. The Commission also found that prior to June, 1994, Global programmed its telephones to use rates higher than those permitted by both its own tarriffs and the rate caps established by the Commission. Thus, not only did Global charge in excess of the Commission's authorized rates, but its tarriffs were inconsistent with authorized rates and Global's charges even exceeded its own unauthorized tarriffs. The total amount of overcharges associated with Global's billing at unauthorized rates was approximately $906,000.00, exclusive of interest. In Order No. U-20784-B, the Commission ordered that Global refund this entire amount plus 10% interest.

The Commission found that a third practice engaged in by Global to fraudulently overcharge its customers was to add various amounts of money to charges for calls after the calls were rated. It also found that Global added time to the duration of completed calls. These so-called "add-ons" were made possible by a computer program run by Global against the call records. These programs resulted in the addition of 25cents, 50cents, and/or 85cents to the charges that Global would have otherwise billed. ³ Regarding this practice, the Commission aptly stated:

The use of add-on programs is perhaps the most insidious and problematic of all of Global's activities. It could be designed for no other purpose than to unlawfully overcharge customers and the practice of adding time to cover-up the additional dollar amounts which were added to the calls is evidence of the intentional and purposeful nature of this activity. No excuse could possibly exist for such action.

[97-0645 La. 4] Order No. U-20784-B at p. 9.

The overcharges resulting from the use of these add-on programs amounted to approximately $256,000.00, excluding interest. Global was ordered by the Commission to credit and/or refund this amount with 10% interest to its affected customers.

A fourth fraudulent practice engaged in by Global was duplicate billings. This practice, which lasted only a brief period of time, involved charging for the same call on two different bills. For example, a call might appear on the April, 1994, bill, and then that same call would again appear on the June, 1994, bill. Exclusive of interest, the total amount of overcharges associated with this practice was approximately $16,000.00. Global was ordered to refund this amount plus 10% interest.

Although these fraudulent overcharges are not currently before this court as they have been resolved by the parties, they nevertheless serve to illustrate the way Global conducted its business in Louisiana. Furthermore, they tend to show the ongoing nature of the relationship that existed between the Commission and Global when the Commission became aware of yet another violation of its orders by Global.

This new violation was discovered during the course of the Commission's investigation when Global's management realized that calls continued to be improperly rated because the system used to rate call records which were used to compile customers' bills was malfunctioning. Consequently, Global decided to cease the use of this phone-based rating system and to upgrade the billing system so that all call rating would be done by Global's Alabama facility. As a result of this realization and ensuing decision, combined with its history of billing inaccuracies, Global decided to delay billing for its calls until this rating problem was rectified. Global indicated it withheld these bills to avoid sending out incorrect bills.

Once Global resumed billing, inmate organizations and Global customers filed complaints with the Commission alleging that Global was in violation of the 60-day rule enunciated in Order No. U-16462-E. This Order states in pertinent part:

End User Billing

COCOT service providers and those AOS companies providing operator services for COCOTS must submit billings to end users for calls placed from their instrument within 60 days from the date the [97-0645 La. 5] call was initiated.

The Commission verified that these allegations were true and responded by issuing Order No. U-20784 which was adopted at the Commission's November 9, 1994, Open Session. That Order "directed [Global] to comply with the provisions of Order No. U-16462-E and cease and desist from billing any customer for calls initiated more than sixty days prior to the customer's billing date."

Believing that Global continued to bill for calls that were more than 60 days old, the Commission adopted Order No. U-20784-A at its next meeting in December of 1994. In that Order, the Commission again directed that Global comply with Order Nos. U-16462-E and U-20784 and cease billing for calls made more than 60 days prior to the billing date. The Commission also ordered that Global cease collecting for such calls.

After this Order was issued, Global filed suit in the Nineteenth Judicial District Court challenging Order No. U-20784-A. In this suit, Global requested a stay or a temporary restraining order and a preliminary injunction enjoining the Commission from enforcing Order No. U-20784-A which prohibited Global for collecting for calls billed in violation of Order No. U-16462-E. On January 23, 1995, the trial court denied Global's request for a stay or a temporary restraining order and a preliminary injunction and remanded the case to the Commission for a hearing on the issue of whether Global should be exempt from the 60-day rule.

This hearing was held wherein testimony was presented and both the Commission and Global were represented by counsel. After these hearings, the Commission considered this matter at its April 27, 1995, meeting where it voted to deny Global's request for an exemption from the 60-day rule. ⁴ The Commission reiterated its order...