VYVX of Virginia, Inc. v. Cassell, Record No. 990285.

• Decision Date: 17 September 1999
• Docket Number: Record No. 990285.
• Citation: 519 S.E.2d 124,258 Va. 276
• Parties: VYVX OF VIRGINIA, INC. v. John W. CASSELL, et al.
• Court: Virginia Supreme Court

519 S.E.2d 124

258 Va. 276

VYVX OF VIRGINIA, INC. v. John W. CASSELL, et al.

Record No. 990285.

Supreme Court of Virginia.

September 17, 1999.

Guy T. Tripp, III (Francine B. Mathews; Hunton & Williams, on briefs), Richmond, for appellant.

William H. Chambliss (Stewart E. Farrar; James C. Dimitri; C. Meade Browder, Jr., on brief), Richmond, for appellee State Corporation Commission.

(Mark E. Decot, Pro se.)

Janete Cassell, Pro se (John W. Cassell, on brief.)

Present: All the Justices.

HASSELL, Justice.

I.

In this appeal of an order entered by the State Corporation Commission ("Commission"), we consider the validity of a fine that the Commission imposed upon VYVX of Virginia, Inc. ("VYVX"), and whether the Commission erred in denying VYVX's application for authority to construct and acquire fiber optic telecommunications facilities for intrastate purposes.

II.

Williams Communication, Inc. ("Williams") is a Delaware corporation which is licensed to conduct business in Virginia. Williams, through its subsidiaries, conducts a telecommunications business throughout the United States and internationally. In 1997, Williams began to construct a new fiber optic cable system that would extend from Houston, Texas, to Manassas, Virginia. The cable system would be capable of transmitting 34,000,000 simultaneous long-distance telephone calls and would be installed between existing gas pipelines owned by Williams' subsidiary, Transcontinental Gas Pipeline Corporation.

The Federal Communications Commission granted Williams authority to operate its interstate and international telecommunications systems. Even though Williams intended to provide interstate service on its cable system, Williams also desired to utilize the system to provide intrastate service within Virginia. In furtherance of its goal to provide intrastate service within Virginia, Williams created a subsidiary, VYVX, which was incorporated in Virginia as a public service corporation.

On April 23, 1997, VYVX filed with the Commission an application for a certificate of public convenience and necessity to provide interLATA telecommunication services within Virginia and to have rates established based on competitive factors.¹ VYVX stated in its application that it "proposes to offer services to the public within Virginia over its own facilities and through resale of services provided by other carriers." VYVX requested authority to construct, acquire, extend, and operate equipment and facilities to be used in the operation of an intrastate telecommunications public facility.

VYVX also stated in its application that it would own the facilities to be constructed in Virginia. VYVX sought "authority to offer a full range of intrastate interLATA telecommunications services to the public on a statewide basis within the Commonwealth of Virginia as a non-dominant inter-exchange carrier." VYVX further stated in its application that: "[VYVX] will build and operate its fiber optic telecommunications facilities in Virginia as a public service company.

[VYVX] plans to complete construction of the facilities in Virginia by December 31, 1997, and intends to begin construction as soon as it has obtained all necessary governmental authorizations." Finally, VYVX stated that Williams "and [VYVX] have authorization to construct interstate telecommunications facilities and to provide interstate services pursuant to rules adopted by the Federal Communications Commission. 47 C.F.R. 63.07 (1996). [VYVX] is filing the instant application to ensure that it has the ability to offer intrastate interLATA services as well."

VYVX attached a copy of its amended and restated articles of incorporation to its application. Article II of the amended and restated articles of incorporation states: "The purpose for which the Corporation is formed is to construct, own and operate telecommunications facilities, including fiber optic lines, for the purposes of providing audio, video and data telecommunications transmission services and other telephone services as a public service corporation, public utility and communications common carrier."

As required by an order issued by the Commission, VYVX caused notice of its application to be published in newspapers having general circulation throughout Virginia and mailed notices to certain public officials. On January 14, 1998, the Commission issued an order granting VYVX authority to provide intrastate, interexchange services subject to certain restrictions contained in the Commission's rules governing the certification of interexchange carriers and certain applicable statutes. The Commission's January 14, 1998 order stated that the Commission would consider separately VYVX's requested certification to construct its proposed facilities. The Commission directed VYVX to publish notice of its request to construct facilities throughout the localities in which it proposed to construct those facilities. VYVX requested an amendment to its application to reflect its desire to construct a lateral fiber optic telecommunications line. The Commission granted VYVX's request and ordered that the public notice include the areas affected by the construction of the additional lateral line.

In response to the notice, the Commission received several comments and complaints. Certain landowners complained to the Commission because VYVX and its agent, Coates Field Service, Inc., had threatened the property owners. VYVX and its agents told the property owners that VYVX would condemn their properties if the property owners did not consent to give VYVX easements necessary for the installation of its cable fiber. For example, Mark E. Decot, a property owner whose land was affected by the installation of the cable, testified at a hearing before the Commission that VYVX threatened to condemn a portion of his land if he refused to convey an easement to it. Diana Orr, who was employed with Coates Field Service, told Decot that if he did not sign a document that she had mailed to him, then his property would be "condemned and ... taken anyway, so what [he] should do is go ahead and sign it and get as much, money as [he] can get out of it right now." VYVX filed a condemnation proceeding against Decot in the Circuit Court of Orange County. Decot eventually signed a document with VYVX which gave VYVX the requested easement.

John and Janete Cassell also testified that they were told by VYVX's agents that VYVX would condemn their property if they failed to convey a requested easement. A stipulation of undisputed facts reveals that VYVX had filed four condemnation proceedings in various circuit courts to acquire easements of right-of-way from property owners.

David R. Clossin, an employee of Coates Field Service, testified that Coates entered into a contract with VYVX to assist it with the acquisition of easements in Virginia. Clossin testified: "I work for Coates Field Service, with a business card that we represent VYVX of Virginia."

In September 1997, the Commission, which was of the opinion "that the allegations raised by the complaints constitute `substantive objections' to [VYVX's application]," ordered VYVX to respond to the landowners' complaints and directed that VYVX "clarify what certification(s) it seeks from the Commission and explain whether ... since its application seeks authority to construct, acquire, extend, or operate equipment or facilities for use in public utility service, certification pursuant to [Code] § 56-265.2 ... should be required." The Commission ordered that VYVX "demonstrate why it should not be ordered to cease condemnation activities until it receives all necessary certificates of public convenience and necessity from the Commission."

VYVX responded to the Commission's order and stated that VYVX proposed to install a fiber optic cable system in Virginia and asserted that it did not need any certification before exercising the right of eminent domain. Continuing, VYVX requested that the Commission issue a certificate of public convenience and necessity under Code § 56-265.2 which would authorize VYVX to provide intrastate interLATA telecommunications services as a non-dominant interexchange carrier.

On October 17, 1997, the Commission staff asked the Commission to order VYVX to cease its condemnation activities because, as of that date, VYVX had filed four condemnation actions to obtain easements for the installation of its fiber optic cable, and those proceedings were pending in various circuit courts. On October 21, 1997, VYVX informed the Commission that VYVX would not initiate any further condemnation proceedings until the Commission had acted upon VYVX's application. Unbeknownst to the Commission and its staff, VYVX and its parent corporation, Williams, were constructing the proposed cable system that was the subject of VYVX's application.

The Commission, in an order dated November 25, 1997, held that "VYVX is not yet `lawfully authorized to operate' anywhere in the Commonwealth and. . . . its proposed construction is not an ordinary extension or improvement of its facilities, and therefore [VYVX] requires certification," pursuant to Code § 56-265.2. The Commission held that VYVX did not have the right to exercise the power of eminent domain and directed VYVX to "cease acquisition of property or rights therein, by exercise of, or by implying its right to exercise, eminent domain authority, until such time as the Commission has acted upon its application."

On February 9 and 11, 1998, contractors who were installing the optic fiber cable system severed telephone cable owned by Bell-Atlantic Corporation. Bell-Atlantic reported these incidents to the Commission which learned, for the first time, that construction had already begun on the facilities that were the subject of the certification proceeding. The Commission staff filed "a motion for a rule to show cause and a temporary injunction."

VYVX responded to the motion and...