Micronet, Inc. v. Utility Regulatory Com'n

• Decision Date: 10 May 2007
• Docket Number: No. 93A02-0603-EX-237.,93A02-0603-EX-237.
• Parties: MICRONET, INC., Appellant-Defendant, v. INDIANA UTILITY REGULATORY COMMISSION, Appellee-Plaintiff.
• Court: Indiana Appellate Court

866 N.E.2d 278

MICRONET, INC., Appellant-Defendant, v. INDIANA UTILITY REGULATORY COMMISSION, Appellee-Plaintiff.

No. 93A02-0603-EX-237.

Court of Appeals of Indiana.

May 10, 2007.

Richard E. Aikman, Jr., Trenton F. Hahn, Stewart & Irwin, Indianapolis, IN, Attorneys for Appellant.

Susan L. Macey, Randall C. Helmen, J. David Agnew, Indiana Office of Utility Consumer Counselor, Steve Carter, Attorney General, David Lee Steiner, Deputy Attorney General, Beth Krogel Roads, Indiana Utility Regulatory Commission, Indianapolis, IN, Attorneys for Appellee.

OPINION

SHARPNACK, Judge.

Micronet, Inc. ("Micronet") appeals the order of the Indiana Utility Regulatory Commission ("Commission"). Micronet raises two issues, which we revise and restate as:

I. Whether the Commission had subject matter jurisdiction over Micronet's directory assistance service; and

II. Whether the Commission erred by imposing penalties against Micronet for billing for telecommunications services without customers' authorization.

We affirm.

The relevant facts follow. On March 16, 2004, the Commission granted Micronet a certificate of territorial authority to provide wide area telephone service and/or interexchange, intrastate telecommunications services within the State of Indiana.¹ Micronet alleges that it offered a directory assistance service. On May 25, 2004, Micronet and HT Teleservices ("HTT") entered into a services agreement in which HTT was to provide billing and information management services for Micronet.

On February 4, 2005, the Indiana Office of Utility Consumer Counselor ("IOUCC") filed two complaints with the Commission against Micronet. The complaints alleged that Micronet billed customers² for directory assistance services that they did not authorize. On June 21, 2005, the IOUCC filed a third complaint, which alleged that Micronet billed other customers³ for services that they did not authorize. The three complaints were later consolidated.

In discovery, Micronet stated that it only provided directory assistance and did not provide any other services. The IOUCC asked Micronet a series of discovery questions about the details of the services Micronet provided and scheduled depositions. Micronet did not attend the depositions and ceased cooperating with discovery.

On July 14, 2005, Micronet filed a motion to dismiss and argued, in part, that the Commission lacked subject matter jurisdiction over Micronet's directory assistance service. On September 14, 2005, the presiding officers denied Micronet's motion to dismiss. On October 19, 2005, the Commission unanimously upheld the presiding officers' decision denying Micronet's motion to dismiss.

On December 14, 2005, the Commission held an evidentiary hearing, which Micronet did not attend. On February 22, 2006, the Commission issued an order, which stated, in pertinent part:

* * * * *

2. Notice and Jurisdiction.

Due, legal and timely notice of the public evidentiary hearing conducted herein was caused to be published by the Commission. Micronet is a "public utility" within the meaning of I.C. 8-1-2-1. Micronet's CTA No. 0403-3 was granted by the Commission on March 16, 2004 for authority to provide resold "[WATS] service and/or interexchange, intrastate telecommunications services within the State of Indiana." As determined in the Presiding Officers' September 14, 2005 docket entry, upheld upon appeal to the full Commission, the Commission has jurisdiction over HTT as a billing agent for Micronet. We therefore have jurisdiction over the parties and subject matter in this cause.

3. Applicable Statutory Provisions.

The complaints in these consolidated causes assert that Micronet and HTT committed acts of cramming. Cramming is defined as "[a] practice in which customers are billed for unexpected and unauthorized telephone charges or telephone services, which the [customer] didn't order, authorize or use." Newton's Telecom Dictionary, 19th ed. (2003.) Pursuant to 170 IAC 7-1.1-19(p) and I.C. 8-1-29-5, no billing agent acting for a primary interexchange carrier ("PIC") shall bill a customer for any service unless the PIC or local exchange carrier ("LEC") or billing agent possesses authorization from a customer. If the Commission determines that a cramming violation has occurred, it can refer the violation to the attorney general as a deceptive act. I.C. 8-1-29-8. If the Commission finds that a telecommunications provider has violated rules adopted for the protection of customers, or has switched or billed a customer without proper authorization, the Commission may impose a penalty of not more than two thousand five hundred dollars ($2,500) per offense. I.C. 8-1-29-7.5.

Pursuant to I.C. 8-1-2-48(a), we may "inquire into the management of the business of all public utilities, and [the Commission] shall keep itself informed as to the manner and method in which the same is conducted and shall have the right to obtain from any public utility all necessary information to enable the commission to perform its duties." Therefore, "every public utility is required to keep and render its books, accounts, papers and records accurately and faithfully in the manner and form prescribed by the commission and to comply with all directions of the commission relating to such books, accounts, papers, and records." I.C. 8-1-2-12. Under I.C. 8-1-2-50, the commission has the power to compel the production of "any books, accounts, papers, or records kept by" utilities. There is no exemption from testifying or producing documentary evidence on the grounds that such testimony or production might subject the party to penalty, forfeiture, or incrimination. I.C. 8-1-2-74.

We may compel production of discovery if a party to whom discovery is directed does not satisfy the discovery within ten (10) days of receipt. 170 IAC 1-1.1-16(b). If the Commission grants the motion to compel, "the party against whom discovery is sought shall allow discovery as specified in the commission's order." Id. A public utility, its officers, agents, or employees who fail to answer questions or who fail to produce records upon proper demand by the Commission commits a Class B infraction (I.C. 8-1-2-108), and every day that the failure or lack of compliance occurs is a separate and distinct violation. I.C. 8-1-2-112.

4. The Commission's Authority to Enter a Default Judgment.

a. Procedural and due process requirements for entry of default judgment.

The OUCC requests default judgments against both Micronet and HTT for discovery violations, pursuant to T.R. 37. Upon review of the record, we have two grounds upon which a default judgment might be entered: a failure to appear at the scheduled hearing, leaving Respondents open to a default judgment, and/or as a sanction for discovery violations. We also refer to T.R. 55, which requires that a hearing must be held before a default judgment is entered; due process requires that a Respondent be given notice and an opportunity to be heard before such a judgment is entered. Hatfield v. Edward J. [DeBartolo] Corp., 676 N.E.2d 395 (Ind.App.1997).

Respondents were aware of the December 14, 2005 hearing and that sanctions had been requested. The OUCC filed its request for sanctions, including the penalties for cramming, discovery violations, and revocation of Micronet's CTA, on August 30, 2005, and the Presiding Officers took the sanctions under advisement upon the granting of the OUCC's Motion to Compel on September 30, 2005. In that same docket entry, the Presiding Officers set the evidentiary hearing for December 14, 2005. Respondents were thus given notice of the requested relief and an opportunity to be heard, and chose not to avail themselves of that opportunity. J.C. Marlow Milking Mach. Co. v. Reichert, 464 N.E.2d 364, 366 (Ind.App.1984), [reh'g denied, trans. denied]. The December 14, 2005 hearing satisfies the requirement under T.R. 55 that a hearing be held before entry of a default judgment. Therefore, the due process requirements for a default judgment have been met.

We find that we may, in our discretion, enter a default judgment against Respondents based on their failure to appear at the December 14, 2005 hearing. Nonetheless, as a result of the procedural history of this matter, we will go on to review the arguments in favor of discovery sanctions and the evidence of record.

b. Entry of default judgment for discovery violations.

We may respond to discovery violations with such sanctions "as are just which may include ... rendering judgment by default against a disobedient party." Gribben v. Wal-Mart Stores, Inc., 824 N.E.2d 349, 351 (Ind.2005). We examine "whether the breach was intentional or in bad faith ... to prevent elevating form over substance[,] it is necessary that the [Commission] determine more than the existence of a violation."⁴ Smith v. Archer, 812 N.E.2d 218, 221 (Ind.App.2004).

The Commission:

need not find that [Respondents'] conduct has or threatens to so delay and obstruct the rights of the opposing party that any other relief would be inadequate before granting default or dismissal. Rather, such conduct ... serves to tip the scales of discretion even more heavily in favor of default or dismissal than does disobedience without such conduct.

Nesses v. Specialty Connectors Co., Inc., 564 N.E.2d 322, 327 n. 2 (Ind.App.1990).

When a party who has not complied with a discovery order is given an additional reasonable period of time within which to respond, has been warned in advance that a default judgment is the possible penalty for non-compliance, has not timely responded and has not requested additional time, and has not demonstrated a reason for the non-compliance, there is no abuse of discretion in the granting of dismissal or default. Pfaffenberger v. Jackson Co. Regional Sewer Dist., 785 N.E.2d 1180, 1185 (Ind. App.2003). These elements closely match the procedural history and facts at bar.

The original prehearing conference order on ...