Indiana Tel. Corp. v. Indiana Bell Tel. Co., Inc.

• Decision Date: 30 December 1976
• Docket Number: No. 2--475A115,2--475A115
• Citation: 171 Ind.App. 616,358 N.E.2d 218
• Parties: INDIANA TELEPHONE CORPORATION, Appellant (Defendant below), v. INDIANA BELL TELEPHONE COMPANY, INC., Appellee (Plaintiff below).
• Court: Indiana Appellate Court

Page 218

358 N.E.2d 218

171 Ind.App. 616

INDIANA TELEPHONE CORPORATION, Appellant (Defendant below), v. INDIANA BELL TELEPHONE COMPANY, INC., Appellee (Plaintiff below).

No. 2--475A115.

Court of Appeals of Indiana, Second District.

Dec. 30, 1976.

Claude M. Warren, of Warren, Snider, Koeller & Warren, Samuel A. Fuller, of Stewart, Irwin, Gilliom, Fuller & Meyer, Indianapolis, for appellant.

Bruce N. Cracraft and Harold L. Folley, Indianapolis, for appellee.

SULLIVAN, Judge.

The Court below adjudged that money damages were owed the plaintiff, Indiana Bell Telephone Company, Inc. (Bell) by the defendant, Indiana Telephone Corporation (ITC). ITC appeals.

We affirm in part and reverse in part.

The suit was commenced on January 6, 1973 when Bell filed a complaint against ITC for injunctive relief and damages to recover money alleged to be due, plus interest thereon, in connection with a Traffic Agreement for the delivery of long distance (toll) telephone service and in connection with a Special Service Agreement for the delivery of private services. ¹

Although telephone companies in Indiana serve a specified georgaphic area, each is required to provide interconnections of equipment, lines, and services with the others to enable the delivery of services like long distance and special services. I.C. 8--1--2--5 (Burns Code Ed.1973). Each company keeps a record of and collects the revenue from the calls or services it initiates and handles. Then all companies send the appropriate data to Bell. Bell acts as a clearinghouse because of its superior ability to handle the accounting procedures and because of its much larger proportionate share of the equipment, lines and personnel. On a monthly basis, Bell computes the amount each company owes other companies for the use of facilities in rendering the initiated service and issues billings accordingly. These transactions are called 'settlements.'

The method by which settlements are computed is specified by a contractual agreement between Bell and each independent company. In this case, ITC sought a change in the relevant contractual provisions and Bell would not agree. ITC began to delay payment of the settlements and eventually discontinued payment altogether under both the Traffic Agreement and the Special Services Agreement.

There are three basic functions involved in redering toll service, namely, the 'A' function (originating the call which involves the use of the telephone instrument, the local wire or cable and the local switching equipment), the 'B' function (operating the call--either automatically or manually by the long distance operator--and timing and ticketing of the call), and the 'C' function (the use of wire, cable or microwave reaching from the point where the call is placed to the place where the call is received--this function is frequently called 'line haul' and represents the number of miles, or fractions thereof, of wire, cable or microwave that each telephone company furnishes for each toll call). The method for computing the 'C' function is at issue.

Three different methods of computing settlements exist: (1) the 'Nationwide Average Schedules', (2) full cost, and (3) a combination of full cost and the Nationwide Average Schedules.

The Nationwide Average Schedules represent costs developed from a study of 500 to 600 telephone exchanges (not companies) located throughout the United States and owned and operated by independent telephone companies. The study is made by representatives of the Bell System and by representatives of the United States Independent Telephone Association. These nationwide average costs, based on the 'average revenue per message', produce the amount of dollars to which each independent company is entitled in the settlements. The remaining revenue is retained by Bell.

'Full cost' is a method by which a single independent company makes a study of its own costs for each of the three functions involved in rendering service. This study is done in cooperation with Bell and requires the separation and allocation of expenses among (1) interstate toll service; (2) intrastate toll service and (3) local exchange service. Frequently, but not always, the costs of rendering toll service for an individual company are higher than the nationwide average costs and thus a full cost method often produces larger settlements to the independent. Under full cost settlements, the independent company recovers from the toll revenues all of its costs incurred in performing all three functions, ('A', 'B', and 'C') plus a profit. All of the independents in Indiana make settlements on the Nationwide Average Schedules method of computation, except four independent companies which utilize the full cost method.

Bell and ITC entered the Special Services Agreement in 1966, and entered the disputed Traffic Agreement on June 13, 1971. Later, ITC desired to change from the Nationwide Average Schedules, which was the method specified in both contracts, to the combination method using Nationwide Average Schedules on the 'A' and 'B' functions and 'full costs' on the 'C' function. On November 15, 1971, ITC delivered to Bell its 'Separation Study,' which embodied a cost study necessary to switch to the combination method. Bell would not agree to accept the cost study because it employed a method of accounting objectionable to Bell. As hereinbefore noted, ITC began to defer payments and then cease payments on statements issued by Bell under both the Traffic Agreement and Special Services Agreement.

Bell, on January 6, 1973, filed its complaint with the trial court, alleging that ITC had breached the Traffic Agreement and the Special Services Agreement by virtue of its deferred and non-payments.

ITC subsequently filed a motion to dismiss the action in the trial court on the grounds that the matter was within the exclusive jurisdiction of the Public Service Commission. The motion was denied. On June 30, 1973, Bell filed a petition with the Public Service Commission which, in essence, asked the Commission to consider the disputed method of computing settlements. ITC requested the trial court to reconsider its motion to dismiss in light of the pending Commission action, but the motion was again denied. The Commission issued an order on January 11, 1974, that ITC resume payments based on the Nationwide Average Schedules while further investigation was made and that pursuant to an agreement between the parties the contracts stood terminated as of January 1, 1974.

ITC resumed payments, and in the trial court, Bell dropped its request for injunctive relief but proceeded on its claim for damages.

The case went to trial without a jury on October 29, 1974, and on November 22, 1974 a judgment for Bell was rendered in the amount of $2,329,505.49. The trial court determined that the amount due on the Traffic Agreement was $1,717,417.56 together with $194,148.52 pre-judgment interest and $381.65 per diem post-judgment interest accruing until the amount due be paid and determined that the amount due on the Special Services Agreement was $359,150.73 together with $48,200.17 prejudgment interest and $78.72 per diem post-judgment interest. Corresponding credits held by ITC against Bell were acknowledged in the amounts of $20,925.60 and $1,179.01.

I. JURISDICTION OF COURT BELOW

ITC appeals from the judgment premised first on the contention that the trial court lacked jurisdiction over the subject matter of the case. It asserts that the money judgment, ascertained by using the method of settlements specified in the written contracts, was tantamount to a finding that such methods produced 'reasonable compensation', hence the trial court usurped the exclusive jurisdiction of the Public Service Commission of Indiana to determine 'reasonable compensation' as provided by I.C. 8--1--2--5 (Burns Code Ed.1973).

The pertinent parts of the section upon which ITC relies read as follows:

'. . . Every public utility for the conveyance of telephone messages shall permit a physical connection or connections to be made, and telephone service to be furnished, between any telephone system operated by it, and the telephone toll line operated by another such public utility or between its toll line and the telephone system of another such public utility, or between its toll line and the toll line of another such public utility, or between its telephone system and the telephone system of another such public utility, whenever public convenience and necessity require such physical connection or connections and such physical connection or connections will not result in irreparable injury to the owner or other users of the facilities of such public utilities, nor in any substantial detriment to the service to be rendered by such public utilities.

. . . The term 'physical connection' as used in this section, shall mean such number of trunk lines or complete wire circuits and connections as may be required to furnish reasonably adequate telephone service between such public utilities.

'(b) In case of failure to agree upon such use or the conditions or compensation for such use, or in case of failure to agree upon such physical connection or connections, or the terms and conditions upon which the same shall be made, any public utility or any person, association or corporation interested may apply to the commission and if after investigation the commission shall ascertain that public convenience and necessity require such use or such physical connections, and that such use or such physical connection or connections would not result in irreparable injury to the owner or other users of such equipment or of the facilities of such public utilities, nor in any substantial detriment to the service to be rendered by such owner or other public utilities or other users of such equipment or facilities, it shall by order direct that such use be permitted and prescribe reasonable conditions and...