Penny v. Southwestern Bell Telephone Co.

• Decision Date: 20 July 1990
• Docket Number: No. 89-2661,89-2661
• Citation: 906 F.2d 183
• Parties: Bruce PENNY and James Penny, Plaintiffs-Appellants, v. SOUTHWESTERN BELL TELEPHONE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 183

906 F.2d 183

Bruce PENNY and James Penny, Plaintiffs-Appellants, v. SOUTHWESTERN BELL TELEPHONE COMPANY, Defendant-Appellee.

No. 89-2661.

United States Court of Appeals, Fifth Circuit.

July 20, 1990.

Lynn J. Klement, Gary L. McConnell, McConnell & Klement, Angleton, Tex., for plaintiffs-appellants.

Richard Duffy Billeaud, Houston, Tex., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before POLITZ, KING, and WILLIAMS, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge:

Appellants Bruce Penny and James Penny brought this suit against Southwestern Bell under the Texas Deceptive Trade Practices Act. They alleged that Southwestern Bell was discriminatory in applying certain rates and retaliated against the Pennys for complaining to Bell and the Texas Public Utility Commission (PUC) about the discriminatory rates. The district court concluded that the Pennys were required to take their complaint first to the PUC. The district court dismissed the case without prejudice for failure to exhaust administrative remedies. Disagreeing with the district court's conclusion, we vacate its dismissal. Because we find that the PUC can play a useful role in the adjudication of this claim, however, we apply the doctrine of primary jurisdiction. Accordingly, we remand to the district court to defer to the PUC to make a determination as to whether the rates were discriminatory. The remainder of the case is to be held in abeyance until the PUC has had reasonable time to make this determination.

I. Facts at Your Fingertips

In 1983, Bruce and James Penny began operating a bulletin board service in three Texas cities. Their business provided information exchange services through the use of computer systems, modems, and telephone lines. The Pennys had sixteen telephone access lines for which they were paying the lowest rates available to a business.

According to the Pennys, in 1986 and 1987 the level of use of their service declined significantly. At that time they became aware that their competitors were being charged a lower rate for their telephone access. Southwestern Bell, they claim, was billing the competitors at a residential rate rather than at the business rate charged the Pennys.

In March 1987, Bruce Penny sent a letter to Southwestern Bell complaining of the rates he was being charged. Three months later, he filed an informal complaint with the PUC. He alleged that the disparate rate application was interfering with his ability to compete.

The PUC responded by letter to Penny's claim. The letter answered a number of specific questions posed by Penny and then concluded that "the actions taken by Southwestern Bell are correct and in accordance with its tariffs." Penny filed an opposition to the PUC's action, thereby requesting a hearing. An administrative law judge found that the PUC had jurisdiction in the matter, pursuant to the Public Utility Regulatory Act (PURA), Tex.Rev.Civ.Stat.Ann. art. 1446c (Vernon Supp.1990). The ALJ scheduled a prehearing conference.

Before the conference took place, Bell filed a proposal for new tariffs for the types of lines used in bulletin board services. During the prehearing conference, the ALJ suggested that Penny's complaint could be resolved. The parties reached a tentative settlement under which Bell's General Counsel would write a letter stating that Bell had not properly applied certain tariffs, and Penny would be permitted to intervene in the case involving Bell's recent tariff proposal. The ALJ set a date for the letter to be filed, after which time Penny would withdraw his complaint if satisfied with the letter or request leave to amend his complaint if dissatisfied.

In accordance with the agreement reached during the prehearing conference, Bell's General Counsel began to draft the requested letter. In the meantime, the ALJ scheduled a prehearing conference on Bell's proposed tariffs. Penny was permitted to intervene in that proceeding. On June 10, 1988, the day after that conference was held, Bell filed with the ALJ the final draft of its letter. Penny dismissed his original complaint. The case involving Bell's proposed new tariffs has not come a long distance; it is still pending.

In September 1988, Bruce and James Penny filed the present suit in Texas court, alleging a violation of the Texas Deceptive Trade Practices Act (DTPA), Tex.Bus. & Comm.Code Ann. Sec. 17.01 et seq. (Vernon 1987 Supp.1990). They claim that they were charged at a higher rate than their competitors and that this rate disparity eventually forced them out of business. Additionally, they claim that Southwestern Bell retaliated against them for complaining about the differences in rates. The retaliation, they contend, took the form of charging even higher rates. They also allege that Bell made misrepresentations to the Pennys at the time that they subscribed to the service.

Southwestern Bell removed the case to federal court on diversity grounds. The district court dismissed the suit without prejudice on the ground that the Pennys failed to exhaust administrative remedies, as required by PURA. The Court determined that the case could not be refiled until the PUC issued findings on the discriminatory pricing.

The Pennys urge that the district court wrongly required them to exhaust administrative remedies. They argue that PURA does not grant the PUC exclusive jurisdiction over their case because the PUC has no authority to hear their DTPA claims and because the PUC is powerless to award the damages they claim resulted from the discriminatory rate application. The Pennys' contention that the PUC does not have exclusive jurisdiction over their claim rings true. We acknowledge, however, that the PUC offers expertise and uniformity that could aid in the adjudication of this case. For this reason we apply the doctrine of primary jurisdiction. That doctrine allows a court to put a case on hold, pending a specific administrative decision.

II. Let the Cases Do the Talking

A. Exhaustion of Remedies

The district court held that the Pennys failed to exhaust their administrative remedies. By dismissing their claims on that basis, the court essentially determined that it had no original jurisdiction over the claims and that the PUC had exclusive jurisdiction over them. See Southwestern Bell Tel. v. P.U.C. of Texas, 735 S.W.2d 663, 669 n. 3 (Tex.App.--Austin 1987, no writ) (explaining that the exhaustion requirement comes about when a court only has appellate, not original, jurisdiction to review an agency's determination).

Southwestern Bell argues, and the district court agreed, that under PURA the PUC provides the only forum for adjudication of the Pennys' complaint. PURA sets out and defines the PUC's authority. Tex.Rev.Civ.Stat.Ann. art. 1446c, Sec. 18(b) specifically discusses the PUC's jurisdiction regarding telecommunications utilities and reads in part:

Subject to the limitations imposed in this Act, and for the purpose of carrying out the public policy above stated and of regulating rates, operations, and services so that such rates may be just, fair, and reasonable, and the services adequate and efficient, the commission shall have exclusive original jurisdiction over the business and property of all telecommunications utilities in this state.

Southwestern Bell argues that this provision, combined with other sections of PURA, makes it clear as a bell that PURA has exclusive jurisdiction over the Pennys' case. Sec. 38, for example, requires the PUC to ensure that rates are "just and reasonable" and that they be "sufficient, equitable, and consistent in application to each class of consumers." Other clauses prohibit public utilities from giving preferential treatment to any corporation or person and from discriminating against any person or corporation that sells or leases equipment. See Secs. 45, 47. The district court agreed with Bell, basing its dismissal on these provisions. In light of Texas case law interpreting PURA and the particular nature of the Pennys' claims, we disagree with Bell and the district court that PURA requires dismissal.

We find that this case falls outside the purview of the PUC's exclusive jurisdiction for two reasons. First, the misrepresentation and retaliation claims clearly fall within the Texas DTPA. Even if the proper adjudicatory body were to find that Bell did not discriminate against the Pennys in the rates it charged them, the Pennys could still maintain their other causes of action. Because those claims correctly lie in a court empowered to interpret and apply the DTPA, they are not under the PUC's jurisdiction.

This case is one of a number in which Bell has argued that PURA grants the PUC exclusive jurisdiction over claims not involving the regulation or application of its rates. In fact, this defense has almost become Bell's party line. In response to this argument, though, Texas courts consistently have held that the PUC does not have exclusive jurisdiction over tort claims against Bell. See, e.g., Dolenz v. Southwestern Bell Tel. Co., 730 S.W.2d 44 (Tex.App.--Houston [14th Dist.] 1987, no writ); Calarco v. Southwestern Bell Tel. Co., 725 S.W.2d 304 (Tex.App.--Houston [1st Dist.] 1986, writ ref'd n.r.e.); Southwestern Bell Tel. Co. v. Nash, 586 S.W.2d 647 (Tex.Civ.App.--Austin 1979, no writ); Southwestern Bell Tel. Co. v. Reeves, 578 S.W.2d 795 (Tex.Civ.App.--Houston [1st Dist.] 1979, writ ref'd n.r.e.). ¹ Cf. DFW Metro Line Services v. Southwestern Bell Telephone Co., 901 F.2d 1267 (5th Cir.1990) (rejecting Southwestern Bell's claim that the PUC had exclusive jurisdiction over an antitrust suit against Bell). Accordingly, the district court improperly dismissed the misrepresentation and retaliation claims.

Second, as for the discriminatory rate application claim, the PUC only has the power to regulate rates; it does not have the power to remedy past wrongs. The Pennys seek damages they...