In re Southwestern Bell Telephone Co., L.P.

• Decision Date: 01 June 2007
• Docket Number: No. 05-0511.,05-0511.
• Citation: 226 S.W.3d 400
• Parties: In re SOUTHWESTERN BELL TELEPHONE COMPANY, L.P., Relator.
• Court: Texas Supreme Court

226 S.W.3d 400

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

No. 05-0511.

Supreme Court of Texas.

Argued March 22, 2006.

Decided June 1, 2007.

James A. Baker, Weston C. Loegering, Stanford Purser, Hughes & Luce, LLP, Kara Lea Altenbaumer-Price, Dallas, Robert Patrick Rodriguez, Eduardo R. Rodriguez, Rodriguez, Colvin, Chaney & Saenz, L.L.P., Brownsville, Cynthia F. Malone, SBC Texas Legal Department, Pamela St. John, Southwestern Bell Telephone, San Antonio, Mike A. Hatchell, Locke Liddell & Sapp, LLP, Austin, Geoffrey M. Klineberg, Kellogg Huber Hansen Todd & Evans, PLLC, Scott H. Angstreich, Kellog, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, DC, for Relator.

Timothy J. Herman, Sean E. Breen, Herman, Howry & Breen, L.L.P., Mark Foster, Foster & Hunter, Christopher Malish, Foster Malish Blair & Cowan, Austin, Gilberto Hinojosa, Magallanes Hinojosa & Mancias, Brownsville, for Real Parties in Interest.

John R. Hulme, Natural Resources Division, Austin, for Amicus Curiae.

Justice JOHNSON delivered the opinion of the Court.

The issue in this case is whether the Public Utility Commission has primary jurisdiction to resolve threshold questions about the meaning and effect of certain telephone interconnection agreements between Southwestern Bell Telephone Company and the plaintiff local exchange telephone service carriers. We conclude that it does, and conditionally grant mandamus relief.

I. Background

In 1996, Congress opened local telephone service to competition by enacting the Federal Telecommunications Act (FTA). Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56. Telephone companies that provide local calling services are referred to as local exchange carriers or LECs. Certain LECs such as relator Southwestern Bell Telephone Company historically held a monopoly in providing the services and are referred to as incumbent LECs or ILECs. Sw. Bell Tel. Co. v. Pub. Util. Comm'n, 208 F.3d 475, 477 (5th Cir.2000). Historically, the ILECs owned extensive telecommunication networks. AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999) (noting that ILECs "owned, among other things, the local loops (wires connecting telephones to switches), the switches (equipment directing calls to their destinations), and the transport trunks (wires carrying calls between switches) that constitute a local exchange network"). LECs such as plaintiffs in the trial court, who are real parties in interest here, compete with ILECs and are called competitive local exchange carriers (CLECs). The FTA requires each ILEC to share its network with competitors. Sw. Bell Tel. Co., 208 F.3d at 477. The FTA allows a CLEC to access an ILEC's network in three ways: by purchasing local telephone services at wholesale rates for resale to end users; by leasing elements of the incumbent's network on an unbundled basis; and by interconnecting its own facilities with the ILEC's network. AT & T Corp., 525 U.S. at 371, 119 S.Ct. 721.

Under the FTA, interconnection agreements must be approved by the Public Utility Commission (PUC). See 47 U.S.C. § 252(e) (2001). CLECs may, but need not, separately negotiate contracts with the ILEC. If a CLEC chooses not to separately negotiate a contract, the FTA also allows it to adopt (1) an existing agreement that any other CLEC has entered into with the ILEC, or (2) a standard-form "T2A" agreement developed by Southwestern Bell and other CLECs. If parties cannot reach an agreement when negotiating the terms of an interconnection agreement, then either party can ask the PUC to arbitrate the unresolved issues. See 47 U.S.C. §§ 252(b), (c).

Each of the CLEC plaintiffs in this case contracted with Southwestern Bell by adopting either the T2A agreement or an existing previously negotiated agreement. The interconnection agreements entered into by the parties provided that Southwestern Bell would charge the plaintiff CLECs between $5.00 and $25.00 for certain services.

After the plaintiffs and Southwestern Bell entered into their interconnection agreements, the PUC conducted two arbitrations to set rates for other CLECs' interconnection agreements when those CLECs were unable to agree on negotiated prices with Southwestern Bell. Those proceedings are referred to as the "Mega-Arb" and "AccuTel"¹ arbitrations. In the Mega-Arb and AccuTel proceedings the PUC set rates for certain services to be supplied by Southwestern Bell at prices between $2.56 and $5.00. The plaintiffs in this case had contracted to pay between $5.00 and $25.00 for the same services.

Following the PUC's decisions in the Mega-Arb and AccuTel proceedings, the plaintiffs brought suit, asserting that Southwestern Bell had been overcharging them because the rates in their contracts were substantially higher than the rates set in the Mega-Arb and AccuTel arbitration proceedings. The causes of action asserted by plaintiffs include (1) Deceptive Trade Practices Act (DTPA)² violations, (2) unjust enrichment/money had and received, (3) violations of Texas anti-trust laws, and (4) fraud.

Southwestern Bell removed the suit to federal court, but the federal court remanded the case. The plaintiffs and Southwestern Bell both moved for summary judgment in state court. In the alternative, Southwestern Bell also sought referral to the PUC on the basis that the PUC had primary jurisdiction to decide threshold issues regarding the interconnection agreements. The motions were denied. Southwestern Bell then sought, but was denied, mandamus relief from the Thirteenth Court of Appeals. Southwestern Bell now requests this Court to issue a writ of mandamus directing the trial court to (1) refer the issues regarding the interconnection agreements to the PUC and (2) abate the case while the PUC reviews the issues referred. The PUC has filed an amicus brief in support of Southwestern Bell's position.

II. Mandamus Standards

In order to obtain mandamus relief a relator must show that the trial court clearly abused its discretion and that the relator has no adequate remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex.2004). A trial court abuses its discretion if it fails to analyze or apply the law correctly. In re Kuntz, 124 S.W.3d 179, 181 (Tex.2003). An adequate remedy by appeal does not exist under circumstances such as those presented by this matter if trial is erroneously permitted to go forward because allowing the trial to proceed would interfere with the important legislatively mandated function and purpose of the PUC. In re Entergy Corp., 142 S.W.3d 316, 321 (Tex. 2004); see also State v. Sewell, 487 S.W.2d 716, 719 (Tex.1972) (noting the importance of administrative agencies and concluding that the judicial system should avoid improper restraints on administrative proceedings).

III. Analysis—Primary Jurisdiction

Southwestern Bell argues that referral to the PUC and abatement of the suit is required because the PUC has primary jurisdiction over questions regarding interpretation and enforceability of the parties' interconnection agreements. We agree.³

Primary jurisdiction "allocate[s] power between courts and agencies when both have authority to make initial determinations in a dispute." Subaru of Am. v. David McDavid Nissan, Inc., 84 S.W.3d 212, 221 (Tex.2002). Trial courts should defer to appropriate administrative agencies when (1) the agency is staffed with experts trained in handling complex problems within the agency's purview, and (2) great benefit is derived from the agency's uniform interpretation of laws within its purview and the agency's rules and regulations when courts and juries might reach differing results under similar fact situations. Id. Both requirements are met in this case.

The PUC is staffed with experts who routinely consider the validity and enforceability of interconnection agreements. In addition to approving the interconnection agreements in the first instance, the PUC also retains authority to interpret and enforce the interconnection agreements when disputes arise about their meaning or effect. Sw. Bell Tel. Co. v. Pub. Util. Comm'n, 208 F.3d 475, 479-80 (5th Cir. 2000) ("[T]he [FTA's] grant to the state commissions of plenary authority to approve or disapprove these interconnection agreements necessarily carries with it the authority to interpret and enforce the provisions of agreements that state commissions have approved."). State commissions have been said to act as "deputized federal regulators" under the FTA and have developed expertise in enforcing and interpreting the requirements of the FTA. MCI Telecomms. Corp. v. Illinois Bell Tel. Co., 222 F.3d 323, 344 (7th Cir.2000).

In addition to the PUC's having expertise in interpreting interconnection agreements its uniform interpretation of the agreements provides great benefit. Conflicting jury verdicts and rulings by different courts in regard to same or similar situations and fact patterns could result in disparate treatment of the CLECs and ILEC. Disparate treatment of companies and lack of uniform decisions regarding contractual obligations could inhibit competition, compromise the PUC's ability to perform its regulatory duties under the FTA, and frustrate Congress's goal of providing opportunity for competition in the local-calling market. See H.R. REP. No. 104-458, at 113 (1996), reprinted in 1996 U.S.C.C.A.N. 124 (noting that Congress enacted the FTA to promote competition in all telecommunications markets, including the local service market). Furthermore, many CLECs have identical interconnection agreements because the FTA allows each CLEC to adopt an...