Office of Cons. Advo. v. Utilities Bd.

• Decision Date: 31 July 2009
• Docket Number: No. 08-0349.,08-0349.
• Citation: 770 N.W.2d 334
• Parties: OFFICE OF CONSUMER ADVOCATE, Appellant, v. IOWA UTILITIES BOARD, Appellee, and Frontier Communications of Iowa, Inc., and MCI Communications, Inc., d/b/a Verizon Business Services, Intervenors-Appellees.
• Court: Iowa Supreme Court

770 N.W.2d 334

OFFICE OF CONSUMER ADVOCATE, Appellant, v. IOWA UTILITIES BOARD, Appellee, and Frontier Communications of Iowa, Inc., and MCI Communications, Inc., d/b/a Verizon Business Services, Intervenors-Appellees.

No. 08-0349.

Supreme Court of Iowa.

July 31, 2009.

John R. Perkins, Consumer Advocate, and Craig F. Graziano of the Office of Consumer Advocate, for appellant.

David Lynch and E.A. "Charlie" Nichols, Des Moines, for appellee.

Bret A. Dublinske of Dickinson, Mackaman, Tyler & Hagen, P.C., Des Moines, for intervenors-appellees.

BAKER, Justice.

The Office of Consumer Advocate (OCA) appeals from a district court judgment which affirmed on judicial review the Iowa Utilities Board's (Board) denial of three petitions filed by OCA seeking civil penalties based on consumer complaints of unauthorized charges and/or changes in service by telecommunications companies. OCA has raised three issues on appeal: (1) whether the procedures utilized by the Board, following a change in its review process, resolve disputed questions of fact without hearing the evidence or allowing for discovery or cross-examination, resulting in outcomes that are not reliable, in contravention of constitutional standards; (2) whether the Board's orders denying OCA's petitions for proceedings to consider civil monetary penalties in these cases are arbitrary and capricious under the standards contained in Iowa Code section 17A.19(10)(h); and (3) whether the district court abused its discretion in refusing to admit new exhibits on appeal. We hold that the Board's orders denying OCA's petitions for proceedings to consider civil penalties were not in contravention of constitutional standards nor arbitrary and capricious under the standards contained in Iowa Code section 17A.19(10)(h). We also find that the district court did not abuse its discretion in denying OCA's petition to admit additional exhibits.

I. Background Facts and Proceedings.

OCA seeks review of the Board's decisions denying petitions to commence proceedings to consider civil monetary penalties for alleged violations of Iowa Code section 476.103 (2007). This statute, along with the regulations contained in Iowa Administrative Code rule 199-22.23, prohibits "unauthorized changes in telecommunications service." Iowa Admin. Code r. 199-22.23(2). These unauthorized changes are referred to as "slamming" and "cramming." Id. Slamming is the practice of changing a consumer's service without permission. Cramming refers to charging a consumer for services that were not ordered, authorized, or received. Id. r. 199-22.23(1).

Four cases were consolidated in the district court. OCA has since dismissed its appeal in one case as moot. The pertinent facts of the remaining cases are as follows.

A. Katina Costerian Case. The Board received a complaint from Katina Costerian, disputing $988.55 in charges on a bill from her local telephone provider, Frontier, for long-distance calls handled by MCI. Costerian's telephone bill showed that the calls were charged at a rate substantially higher than the rate for her long-distance plan with Frontier. Some of the calls were charged at rates as high as $2.23 per minute. After reviewing the complaint, the Board forwarded the complaint to Frontier and MCI to give them an opportunity to respond.

MCI responded in a letter stating that Frontier is a reseller of services for MCI's Network Services (MNS). MNS is a division of MCI that provides wholesale services for other local long distance companies to sell directly to consumers. MCI stated that reseller companies use MCI's network but technically they are selling their own products and services, and, therefore, they set their own rates and handle their own advertising. MCI declared that MNS had not solicited or requested the service for Costerian's telephone number. Frontier responded to the Board stating it had incorrectly set-up Costerian's account, and it had removed the disputed charges from her account.

The Board issued a proposed resolution concluding that slamming had not occurred in Costerian's case and determining that the disputed charges were the result of an error in Frontier's processing of Costerian's order.

B. Eddie Atkinson Case. Eddie Atkinson filed a billing complaint with the Board regarding a $95 "trouble charge" billed to him by his long-distance provider McLeodUSA Telecommunications Services, Inc. Atkinson stated that he called McLeod to report that calls were not getting through to his home. He stated the McLeod representative told him that his lines would be checked up to the house and if a problem was found it would be corrected free of charge. If the technician had to enter his home, however, he would be charged up to $95. Atkinson was contacted the next day and told the outside of his house was fine and the trouble must be internal. Atkinson checked his home and discovered he had a bad surge protector. He corrected the problem himself. Even though a technician never entered his home, Atkinson received a phone bill containing a $95 trouble charge.

The Board forwarded Atkinson's complaint to McLeod. McLeod responded that there had been a miscommunication with the customer, and Atkinson should have been told there would be a charge up to $95 to have a technician go out to his house unless the technician found a problem on McLeod's equipment outside the home. McLeod refunded the disputed charge. The Board issued a proposed resolution finding there had been a miscommunication between McLeod and Atkinson regarding the trouble charge.

B. Mike Mellody Case. Mike Mellody called Qwest Corporation (Qwest) to have his daughter's phone repaired. He was later charged $85 for trouble isolation. He claimed that when he called to inquire about repairing the phone, the trouble charge was not mentioned or explained to him.

The Board forwarded Mellody's complaint to Qwest. According to Qwest, Mellody placed a repair request, and the next day a technician went to his daughter's residence, tested the outside line, and found no problems. Qwest admitted that because Mellody never asked Qwest to check the wiring inside the house, the trouble charge should not have been billed. Qwest explained the charge resulted from an error by a technician who had recently transferred into the state from Arizona where the rules for repair charges are different. Qwest credited Mellody's account for the disputed charge. The Board issued a proposed finding that the Qwest technician made a mistake, resulting in an incorrect charge.

II. Proceedings.

In each of these three cases, OCA filed a petition with the Board alleging a violation of Iowa Code section 476.103 and requesting a proceeding to consider a civil monetary penalty pursuant to that section. The Board denied all three petitions.

In denying the request in Costerian's case, the Board found:

[T]he Board does not find reasonable grounds for further investigation. The Board finds that any change in service providers made in this case was unsolicited, unintentional, temporary, and unlikely to recur.

The Board is familiar with Consumer Advocate's position regarding the assessment of civil penalties for inadvertent violations. In this case, however, because the Board does not believe further investigation would produce information that would support a finding of a slamming or cramming violation on the part of either MCI or Frontier, thus leading to possible civil penalties, the Board will deny Consumer Advocate's petition for proceeding to consider civil penalty.

In denying the request in Atkinson's case, the Board found:

The record shows, at most, that a misunderstanding occurred between Mr. Atkinson and McLeodUSA with regard to the precise terms and conditions as to when the $95 trouble charge would apply, but he nonetheless authorized a service call knowing there could be a charge.... It is only reasonable to conclude he would have authorized the service call even if the McLeodUSA script had been more precise, because he needed to determine why his service was unsatisfactory. The undisputed facts in this case do not establish reasonable grounds for further investigation of this case.

In denying the request in Mellody's case, the Board found:

Board staff has determined in this case, and Qwest has confirmed, that the technician working on Mr. Mellody's daughter's telephone line committed an error. Qwest has credited the customer and corrected the mistake. As stated above, the Board does not believe that these circumstances create any reasonable grounds for further proceeding to consider civil penalty.

OCA sought judicial review. In Costerian's case, the district court granted motions by Frontier and MCI for permissive intervention. The court consolidated the cases. The district court affirmed the findings of the Board on all the issues raised. OCA appealed the district court's decision.

III. Discussion and Analysis.

A. Board Denials. OCA argues that effective August 1, 2006, the Board materially changed its procedures regarding the granting of hearings to assess civil penalties under Iowa Code section 476.103. The pertinent parts of that statute provide:

3. The board shall adopt rules prohibiting an unauthorized change in telecommunications service. The rules shall be consistent with federal communications commission regulations regarding procedures for verification of customer authorization of a change in service. The rules, at a minimum, shall provide for all of the following:

....

g. Procedures for a customer, service provider, or the consumer advocate to submit to the board complaints of unauthorized changes in service.

4. a. In addition to any applicable civil penalty set out in section 476.51, a service provider who violates a provision of this section, a rule adopted pursuant to this section, or an order lawfully issued by the board pursuant to this section, is subject to a civil penalty, which, after notice and opportunity...