In re Southwestern Bell Telephone Co. L.P.

• Decision Date: 31 August 2007
• Docket Number: No. 05-0951.,05-0951.
• Citation: 235 S.W.3d 619
• Parties: In re SOUTHWESTERN BELL TELEPHONE COMPANY, L.P., Relator.
• Court: Texas Supreme Court

235 S.W.3d 619

In re SOUTHWESTERN BELL TELEPHONE COMPANY, L.P., Relator.

No. 05-0951.

Supreme Court of Texas.

Argued January 24, 2007.

Decided August 31, 2007.

Philip J. John Jr., Baker & Botts L.L.P., Houston, TX, Shira R. Yoshor, Baker & Botts, Dallas, TX, Mitchell C. Chaney, Rodriguez Colvin & Chaney, Brownsville, TX, Maureen Flaherty McNiece, Southwestern Bell Telephone L.P., San Antonio, TX, Mike A. Hatchell, Charles R. Watson Jr., Locke Liddell & Sapp LLP, Thomas R. Phillips, Baker Botts L.L.P., Austin, TX, Neil E. Norquest, Rodriguez, Colvin, Chaney & Saenz, L.L.P., Edinburg, TX, Chris A. Brisack, Norquest & Brisack, L.L.P., McAllen, TX, for Relator.

Ramon Garcia, Law Offices of Ramon Garcia, P.C., Edinburg, TX, Joseph Michael Gourrier, The Gourrier Law Firm, Houston, TX, John R. Griffith, Roy Jesse Elizondo III, Griffith & Garza, LLP, McAllen, TX, for Real Party in Interest.

Don R. Richards, Richards & Elder L.L.P., Lubbock, TX, Brook Bennett Brown, McGinnis, Lochridge & Kilgore, L.L.P., Elizabeth R.B. Sterling, Office of the Attorney General, Austin, TX, for Amicus Curiae.

Chief Justice JEFFERSON delivered the opinion of the Court.

In this original proceeding, we must decide whether the Public Utilities Commission (PUC) has exclusive jurisdiction over claims that Southwestern Bell Telephone (SWBT)¹ improperly collected the Texas Universal Service Fund (TUSF) surcharge from customers. We conclude that the PUC has exclusive jurisdiction and conditionally grant relief.

I Background

This dispute involves the interplay of several facets of telecommunications regulation: universal service, switched access rates, incentive regulation, and the Texas Universal Service Fund surcharge.

A Universal Service

Universal service—that is, "adequate and efficient telecommunications service" available to all citizens at "just, fair, and reasonable rates"—has long been a policy objective of our state and national governments. TEX. UTIL.CODE § 52.001(a); see also 47 U.S.C. § 151 (2000); AT & T Commc'ns of Tex., L.P. v. Sw. Bell Tel. Co., 186 S.W.3d 517, 521-22 n. 18 (Tex. 2006). Achieving this goal requires subsidization of rural and residential service that would otherwise be prohibitively expensive. AT & T, 186 S.W.3d at 521. In the past, switched access rates—rates paid by long-distance carriers to local carriers so that long-distance customers could access local networks—were used to subsidize universal service. Pub. Util. Comm'n of Tex., Scope of Competition in Telecommunications Markets of Texas at 82 (Jan. 1999). These rates were priced higher than their cost, in part so that local carriers could recoup the expense of providing service in high-cost rural areas of the state. Id.

B Incentive Regulation

This system changed, however, in 1995 when the Legislature's amendments to PURA introduced incentive regulation.² See Act of May 16, 1995, 74th Leg., R.S., ch. 231, § 49, 1995 Tex. Gen. Laws 2017, 2045-53 (current version at TEX. UTIL.CODE ch. 58). These amendments permitted local carriers to opt out of the traditional regulatory framework if they agreed to cap rates for basic services, including switched access rates, at 1995 levels for four years. TEX. UTIL.CODE §§ 58.021, 58.051, 58.054; AT & T, 186 S.W.3d at 522-23. In exchange, the carrier could not, "under any circumstances, [be] subject to a complaint, hearing, or determination regarding the reasonableness of the company's: (1) rates; (2) overall revenues; (3) return on invested capital; or (4) net income." TEX. UTIL.CODE § 58.025(a); see Act of May 16, 1995, 74th Leg., R.S., ch. 231, § 49, 1995 Tex. Gen. Laws 2017, 2046, formerly TEX.REV.CIV. STAT. art. 1446c-0, § 3.352(d), recodified by Act of May 8, 1997, 75th Leg., R.S., ch. 166, § 1, 1997 Tex. Gen. Laws 713, 864. Because switched access rates were capped, the funds available to subsidize universal service could not increase and, due to competitive pressures, might decrease. AT & T, 186 S.W.3d at 521-22. SWBT elected incentive regulation.

C TUSF Surcharge

Partially in response to the effects of incentive regulation, the Legislature substantially amended the universal service subchapter of PURA in 1997, see Act of May 8, 1997, 75th Leg., R.S., ch. 166 § 1, 1997 Tex. Gen. Laws 850, directing the PUC to "adopt and enforce rules . . . to establish a universal service fund" that is "funded by a statewide uniform charge payable by each telecommunications provider that has access to the customer base." TEX. UTIL.CODE §§ 56.021, 56.022(a). The PUC promulgated a rule allowing providers to recover their portion of the TUSF from retail customers via a "Texas Universal Service" surcharge, assessed as a percentage of the customer's bill, excluding Lifeline and Link Up services. 16 TEX. ADMIN. CODE § 26.420(f)(6). The TUSF plan includes programs that, in conjunction with the Federal Universal Service Fund, assist telecommunications providers in providing basic local services at reasonable rates in high cost rural areas. Pub. Util. Comm'n of Tex., Scope of Competition in Telecommunications Markets of Texas at 41 (Jan.2007). The PUC approved SWBT's application to add the TUSF surcharge, and SWBT has been collecting it since 1999.

D Procedural History

Plaintiffs Debbie Clara Trevino, Arnoldo Benavides, and Annette Muniz, individually and as representatives of a putative class consisting of all SWBT residential customers in Texas, sued SWBT in Hidalgo County district court. Plaintiffs alleged that SWBT's electing incentive regulation under chapter 58 of the Public Utility Regulatory Act (PURA) violated that chapter's rate cap provisions because it also collected the TUSF under chapter 56. Specifically, plaintiffs alleged:

By applying the [TUSF] charge to the total bills of its residential customers, SWBT effectively increases the rate charged for many of the basic network services listed in TEX. UTIL.CODE § 58.051(a). Since it was not a rate charged for basic network services on June 1, 1995, Plaintiffs allege SWBT's [TUSF] charge violates SWBT's rate freeze agreement under the incentive regulation found in Chapter 58 of the PURA. Plaintiffs allege that SWBT's billing of its [TUSF] charge for basic network services has resulted and continues to result in monthly overcharges to SWBT's residential customers. Plaintiffs are not challenging the reasonableness of SWBT's rates. Plaintiffs are challenging the legality of SWBT's [TUSF] charge for basic network services, in light of its rate freeze agreement under TEX. UTIL.CODE § 58.021.

Plaintiffs sought a declaration that SWBT's TUSF charge was a rate charged for basic network services and that SWBT increased that rate in violation of its rate freeze agreement, as well as an order requiring SWBT to refund the [TUSF] to its customers³ (the "core claims"). Plaintiffs also requested attorney's fees. SWBT filed a plea to the jurisdiction, arguing that the PUC had exclusive jurisdiction over the core claims, and the trial court denied it. The court of appeals denied mandamus relief, 235 S.W.3d 811, and SWBT now seeks a writ of mandamus from this Court.⁴

II Analysis

A Mandamus

Initially, we address whether mandamus is appropriate. Mandamus relief is an extraordinary remedy that issues only if the court clearly abused its discretion and the relator has no adequate remedy by appeal. In re Entergy Corp., 142 S.W.3d 316, 320 (Tex.2004). We recently addressed whether mandamus should lie to correct a trial court's denial of a plea to the jurisdiction based on an agency's exclusive jurisdiction and concluded that:

if the PUC has exclusive jurisdiction in this dispute, the judicial appropriation of state agency authority would be a clear disruption of the `orderly processes of government.' This disruption, coupled with the hardship imposed on [the relator] by a postponed appellate review warrants an exception to our general proscription against using mandamus to correct incidental trial court rulings.

Id. at 321 (quoting State v. Sewell, 487 S.W.2d 716, 719 (Tex.1972)). That analysis applies here. Allowing the trial court to proceed if the PUC has exclusive jurisdiction would disrupt the orderly processes of government. That, coupled with the hardship occasioned by postponed appellate review, makes mandamus an appropriate remedy.⁵

Plaintiffs argue that SWBT's petition for writ of mandamus is untimely because SWBT did not file its mandamus petition with this Court until more than a year after the court of appeals denied relief. Plaintiffs rely on Rivercenter Associates v. Rivera, 858 S.W.2d 366, 367-68 (Tex.1993), in which we denied mandamus relief to a party who waited over four months to file a mandamus petition. We concluded that the defendant had not shown diligent pursuit of its rights and that the record revealed no justification for the delay. Id. In the present case, however, SWBT's delay was justified. After the court of appeals denied mandamus relief, plaintiffs alleged that SWBT violated its tariff with the Federal Communications Commission.⁶ SWBT removed the case to federal district court, and that court remanded the case to state court eleven months later. From the time the case was removed to federal court until it was remanded to state court, the state court was prohibited from taking further action. See 28 U.S.C § 1446(d) (The filing of a notice of removal with the state court "shall effect the removal and the State court shall proceed no further unless and until the case is remanded."). Under these circumstances, SWBT did not waive its right to mandamus relief.

B The PUC's Jurisdiction

Now we must decide whether the core claims fall within the PUC's exclusive jurisdiction. SWBT argues that the PUC should resolve this dispute because chapter 56 creates a comprehensive regulatory scheme for universal service in Texas, giving the PUC exclusive original jurisdiction. Plaintiffs argue that because SWBT elected incentive regulation, section 58.025 prohibits...