Teleco, Inc. v. Southwestern Bell Tel. Co.

• Decision Date: 24 February 1975
• Docket Number: No. 74--1162,74--1162
• Citation: 511 F.2d 949
• Parties: TELECO, INC., a corporation, Plaintiff-Appellant, v. SOUTHWESTERN BELL TELEPHONE COMPANY, a corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 949

511 F.2d 949

TELECO, INC., a corporation, Plaintiff-Appellant, v. SOUTHWESTERN BELL TELEPHONE COMPANY, a corporation,

Defendant-Appellee.

No. 74--1162.

United States Court of Appeals, Tenth Circuit.

Argued Oct. 23, 1974.

Decided Feb. 24, 1975.

Collier H. Pate, of Eagleton, Nicholson & Pate, Oklahoma City, Okl., for appellant.

Robert D. Allen, Oklahoma City, Okl. (William J. Free, Nancy Batchelor and O. Carey Epps, Oklahoma City, Okl., on the brief), for appellee.

Before LEWIS, Chief Judge, and PICKETT and McWILLIAMS, Circuit Judges.

LEWIS, Chief Judge.

Teleco, Inc., an Oklahoma corporation, appeals from a summary judgment entered in the United States District Court for the Western District of Oklahoma dismissing this diversity action against Southwestern Bell Telephone Company, a Missouri corporation, for breach of contract and tortious conversion of its property. We affirm the judgment of the district court.

Southwestern Bell supplies telephone service to the public in Oklahoma under tariffs filed with the Oklahoma Corporation Commission. Teleco, which is engaged in the business of selling electronic telephone answering and recording equipment, is one of Southwestern Bell's customers. In 1972, Teleco connected its own telephone equipment to Southwestern Bell's telephone network by means of a 'direct electrical connection.' Southwestern Bell advised Teleco that such direct connections with its system violated tariffs that permit private connections other than inductive or acoustic connections only by means of a coupler installed by Southwestern Bell. ¹ The latter requested Teleco to cease its violation of these 'foreign attachment' tariffs, but Teleco refused. Southwestern Bell then gave Teleco ten days' written notice that its telephone service would be cut off unless Teleco complied with the tariffs. Teleco refused to comply. On July 14, 1972, Southwestern Bell suspended service. Five days thereafter the parties resolved their dispute in a written agreement; on July 19, 1972, telephone service was resumed and has not since been interrupted.

Teleco brought two state court actions against Southwestern Bell, the first predicated on a breach of contract theory and the second upon the theory that Southwestern Bell had tortiously converted Teleco's property. Both actions arose from Southwestern Bell's five-day suspension of service; the sole relief sought was monetary damages. Southwestern Bell removed both actions to the United States District Court, which consolidated them for trial. The district, court granted summary judgment for Southwestern Bell as to Teleco's conversion claim for three reasons. First, since telephone service is not personal property, it cannot be the subject of a tortious conversion. Second, since the telephone company never took physical possession of or exercised dominion over Teleco's equipment, it cannot be said to have converted Teleco's property. Third, Southwestern Bell's interruption of service, whether or not characterized as an act of dominion over Teleco's personalty, was not wrongful since the utility acted in accordance with tariffs filed with the Oklahoma Corporation Commission. Teleco does not apparently press the conversion issue in this appeal. Accordingly, we merely note that the district court's conclusions are fully supported by Oklahoma law. See Benton v. Ortenberger, 371 P.2d 715 (Okl.).

Teleco's second claim is that, by interrupting Teleco's telephone service, Southwestern Bell breached its contract for service with Teleco. Southwestern Bell replies that Teleco's compliance with tariffs governing the responsibilities of telephone customers constituted a condition precedent to the utility's continuing obligation to provide service. ² Since Teleco concedes having violated the foreign attachment tariffs, Southwestern Bell argues that it was entitled to discontinue service to Teleco. In this appeal, however, Teleco contends that for reasons discussed below Southwestern Bell cannot offer Teleco's tariff violation as a defense to breach of the service contract.

Teleco first contends that Southwestern Bell deprived Teleco of its fourteenth amendment rights to procedural due process by interrupting its telephone service without a hearing. This argument fails under the rule recently announced in Jackson v. Metropolitan Edison Co., 419 U.S. 345, 95 S.Ct. 449, 42 L.Ed.2d 477. There the Supreme Court held that the state of Pennsylvania was not sufficiently connected with a power company's termination of service to a customer as to entitle the customer to the procedural rights guaranteed against state action by the fourteenth amendment. The Court significantly noted that although the power company may have been required by Pennsylvania law to obtain state approval of the practices that precipitated the customer's termination, the state's regulatory body did not 'put its own weight on the side of the proposed practice by ordering it.'419 U.S. at 357, 95 S.Ct. at 456. In Jackson as in the present case, the challenged tariffs became effective automatically after the utility had filed them with the state regulatory agency for a specified period without objection. See Okla. Const. art. 9, § 18; Okla. Corporation Commission Order No. 68516, Rule 1. Thus, the actual involvement of the state in the promulgation of tariffs is the same as at issue in Jackson. For these reasons we believe that Jackson applies to the present case and that Southwestern Bell's interruption of service to Teleco did not amount to state action as contemplated by the fourteenth amendment.

Teleco next argues that the manner in which Southwestern Bell's foreign attachment tariffs were promulgated violated its rights to due process. Without reference to any authority, Teleco generally asserts that it was entitled to 'extensive' notice of the filed tariffs and that failure to provide it with such notice infringed upon its rights. Rules of the Oklahoma Corporation Commission provide that tariffs become effective thirty days after they are filed with the Commission and absent rejection from the Commission. Order No. 68516, Rule 1. The Commission's rules, however, do not require notice to the public or to interested parties. Teleco concedes that the foreign attachment tariffs were filed in accordance with Commission rules. In adopting rules governing service, the Corporation Commission exercises a delegated legislative function and does not adjudicate factual disputes so as to invoke the due process requirements of notice and hearing. Wood v. Public Utilities Commission, 4 Cal.3d 288, 93 Cal.Rptr. 455, 481 P.2d 823, 825 (Cal.), appeal dismissed, 404 U.S. 931, 92 S.Ct. 293, 30 L.Ed.2d 245. See also Mississippi Fuel Corp. v. F.P.C., 108 U.S.App.D.C. 284, 281 F.2d 919, 927; Sun Oil Co. v. F.P.C., 5 Cir., 256 F.2d 233, 240--41; K. Davis, Administrative Law Treatise § 7.02 et seq. (1958). Accordingly, Teleco was...