STATE OF NORTH CAROLINA ex rel. UTILITIES COMMISSION; BELLSOUTH
TELECOMMUNICATIONS, INC.,
Complainant-Appellees,
v
.
THRIFTY CALL, INC.,
Respondent-Appellant.
Kilpatrick Stockton LLP, by M. Gray Styers, Jr., for
complainant-appellee.
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by
Marcus W. Trathen and David Kushner, for respondent-appellant.
McGEE, Judge.
BellSouth Telecommunications, Inc. (BellSouth) filed a
complaint against Thrifty Call, Inc. (Thrifty Call) on 11 May 2000
alleging that Thrifty Call intentionally and unlawfully reported
erroneous Percent Interstate Usage (PIU) factors to BellSouth in
violation of BellSouth's North Carolina Access Services Tariff
(intrastate tariff).
The evidence presented before the North Carolina Utilities
Commission (the Commission) tended to show that Thrifty Call is a
long-distance, interexchange carrier that has operated in North
Carolina and has been a BellSouth customer since 1996. Thrifty
Call purchased access to BellSouth's local exchange network under
BellSouth's Tariff FCC No. 1 (FCC tariff) and BellSouth'sintrastate tariff in order to carry long distance calls to and from
customers of North Carolina BellSouth. BellSouth charged Thrifty
Call either interstate or intrastate access charges, depending upon
the originating and terminating points of the call. The billing
rates for these charges were calculated using the PIU reporting
method with the data provided by Thrifty Call. Interstate access
rates, which are lower than intrastate rates, are established by
the FCC tariff, while intrastate access rates are established by
the Commission.
Thrifty Call routed all of the long distance calls in its
network destined for North Carolina through its physical facilities
in Atlanta, Georgia, including long distance calls that originated
and terminated in North Carolina. Thrifty Call calculated its PIU
based on the Federal Communications Commission's (FCC) entry/exit
surrogate (EES) methodology and reported that ninety-eight percent
of its calls in North Carolina were interstate. These calls were
billed under the FCC interstate tariff rate.
The Commission referred the matter to a three-member panel to
hear the case as provided under N.C. Gen. Stat. 62-76(a). The case
was heard on 5 December 2000 by Commissioners Sam J. Ervin, IV,
William R. Pittman, and J. Richard Conder. Commissioner Pittman
resigned from the panel on 24 January 2001 and did not participate
in the recommended order. The remaining panel issued a recommended
order ruling on complaint (recommended order) dated 11 April 2001
ordering Thrifty Call to pay BellSouth $1,898,685 for Thrifty
Call's underreported intrastate calls. Thrifty Call filedexceptions to the recommended order on 3 May 2001 and requested
oral argument, which was scheduled for 21 May 2001. The Commission
issued a final order dated 14 June 2001 denying Thrifty Call's
exceptions and affirming the recommended order. Thrifty Call moved
for reconsideration of the final order and moved to hold the
proceeding in abeyance on 10 August 2001. The Commission denied
both of these motions on 27 August 2001. Thrifty Call appeals.
Thrifty Call first argues the Commission's order contravenes
N.C.G.S. § 62-76 because the recommended order was decided by a
panel of two commissioners after one of the panel members resigned.
N.C. Gen. Stat. § 62-76(a) (2001) states that a case may be heard
by "a panel of three commissioners, hearing commissioner or
examiner to whom a hearing has been referred by order of the
chairman." Pursuant to N.C.G.S. § 62-76(a), the matter was
referred to a three-member panel which had "all the rights, duties,
powers and jurisdiction conferred by [the statute] upon the
Commission." The panel issued a recommended order to which Thrifty
Call filed exceptions and requested oral argument before the full
Commission.
Thrifty Call contends that Commissioner Ervin should not have
participated in the oral argument and the Commission's decision
because he acted as a hearing commissioner in the initial decision.
N.C.G.S. § 62-76(c) states:
In all cases in which a pending
proceeding shall be assigned to a hearing
commissioner, such commissioner shall hear and
determine the proceedings and submit his
recommended order, but, in the event of a
petition to the full Commission to review suchrecommended order, the hearing commissioner
shall take no part in such review, either in
hearing oral argument or in consideration of
the Commission's decision, but his vote shall
be counted in such decision to affirm his
original order.
In interpreting statutory language, we must give effect to the
intent of the General Assembly. Clark v. Sanger Clinic, P.A., 142
N.C. App. 350, 354, 542 S.E.2d 668, 671, disc. review denied, 353
N.C. 450, 548 S.E.2d 524 (2001). We primarily rely on the language
of the statute itself and refrain from judicial construction in the
absence of ambiguity in the express terms of the statute. Id. at
354, 542 S.E.2d at 671-72.
In the case before us, Commissioner Ervin was a member of a
panel of three commissioners to which the case was assigned; he was
not serving as an individual hearing commissioner. Furthermore,
Commissioner Pittman's resignation from the panel did not
recharacterize the two remaining members as hearing commissioners
or deprive the panel of jurisdiction to enter an order. The two
remaining commissioners had the authority to issue recommended or
final orders in accordance with the statute. The statute does not
prohibit members of a Commission panel from participating in a
decision appealed to the full Commission. The statute only limits
a commissioner's involvement when he has issued a recommended order
in the capacity of a hearing commissioner. Commissioners Conder
and Ervin were acting as panel members and not individual hearing
commissioners in this case. This assignment of error is without
merit.
Thrifty Call next argues the Commission erred by failing torequire BellSouth to conduct an audit that was required by
BellSouth's intrastate tariff. Thrifty Call argues that the word
"may" in BellSouth's intrastate tariff requires, rather than
permits, BellSouth to conduct an audit of Thrifty Call's records
before filing a complaint. The relevant section of BellSouth's
North Carolina tariff states:
When an IC provides a projected interstate
usage percent as set for in A. preceding, or
when a billing dispute arises or a regulator
commission questions the projected interstate
percentage for BellSouth SWA, the Company may,
by written request, require the IC to provide
the data the IC used to determine the
projected interstate percentage. This written
request will be considered the initiation of
the audit.
BellSouth Access Services Tariff § E2.3.14(B)(1) (April 26, 2000).
This Court finds no authority governing the interpretation or
construction of tariffs and must choose a method for analyzing and
interpreting the tariff. We believe utility tariffs are
sufficiently similar to contracts to avail themselves to the rules
of contractual interpretation.
If the language of a contract "is clear
and only one reasonable interpretation exists,
the courts must enforce the contract as
written" and cannot, under the guise of
interpretation, "rewrite the contract or
impose [terms] on the parties not bargained
for and found" within the contract. Woods v.
Nationwide Mut. Ins. Co., 295 N.C. 500, 506,
246 S.E.2d 773, 777 (1978). If the contract
is ambiguous, however, interpretation is a
question of fact, Barrett Kays & Assoc., P.A.
v. Colonial Bldg. Co., Inc. of Raleigh, 129
N.C. App. 525, 528, 500 S.E.2d 108, 111
(1998), and resort to extrinsic evidence is
necessary, Holshouser v. Shaner Hotel Grp.
Props. One, 134 N.C. App. 391, 397, 518 S.E.2d
17, 23, disc. review denied, 351 N.C. 104, 540S.E.2d 362 (1999), aff'd per curiam, 351 N.C.
330, 524 S.E.2d 568 (2000). "An ambiguity
exists in a contract if the 'language of a
contract is fairly and reasonably susceptible
to either of the constructions asserted by the
parties.'" Barrett, 129 N.C. App. at 528, 500
S.E.2d at 111 (citations omitted). Thus, if
there is any uncertainty as to what the
agreement is between the parties, a contract
is ambiguous. Id. This Court's "review of a
trial court's determination of whether a
contract is ambiguous is de novo." Id.
Crider v. Jones Island Club, Inc., 147 N.C. App. 262, 266-67, 554
S.E.2d 863, 866-67 (2001).
Absent evidence of a contrary intent by the tariff drafters in
the record or tariff, this Court will apply the plain meaning of
the word. Black's Law Dictionary defines the word "may" as (1) "Is
permitted to," (2) "Has a possibility," and (3) "Loosely, is
required to; shall; must." Black's Law Dictionary 993 (7th ed.
1999). The definition states that the first entry is the primary
legal use of the word while the third entry is used "usually in an
effort to effectuate legislative intent." Id. Similarly, The
American Heritage Dictionary defines "may" as "[t]o be allowed or
permitted to" and "[t]o be obliged; must. Used in deeds and other
legal documents." The American Heritage Dictionary 839 (3rd ed.
1991).
While this Court agrees that the word "may" can be used to
mean "shall" or "must," we do not agree that the word is so used in
the case before us. We choose to apply the plain meaning of the
word "may" in light of the absence of evidence that a contrary
definition was intended. There is no language in this tariff
provision that requires BellSouth to audit Thrifty Call beforefiling a complaint to enforce its tariff. Furthermore, reading the
word "may" to mean "shall" would require an audit to be conducted
any time there was a billing dispute rather than resolution through
different means. Nothing in the record demonstrates it was the
intent of the parties to require BellSouth to conduct an audit
before seeking to enforce its rights under the tariff.
Additionally, the tariff only allows for one audit to be conducted
by BellSouth each year and limits the scope of the audit to the
previous quarter. Reading the word "may" to mean "shall" would
allow BellSouth to enforce its rights only once a year, after
conducting its one, limited audit. We find no evidence that the
drafters of the tariff intended such a limitation on BellSouth's
ability to enforce its rights. A plain reading of this section of
the tariff compels a conclusion that the right to seek an audit is
permissive and not required. This assignment of error is without
merit.
Thrifty Call next contends the Commission erred in concluding
that Thrifty Call misreported its PIU. Thrifty Call argues the
Commission ignored the plain meaning of BellSouth's FCC tariff
language concerning interstate usage, which resulted in an
erroneous and arbitrary and capricious order.
A reviewing court may reverse or modify the
Commission decision if substantial rights of
an appellant have been prejudiced because the
Commission's findings, inferences, conclusions
or decisions are: (1) violative of
constitutional provisions; (2) beyond the
statutory authority or jurisdiction of the
Commission; (3) based upon unlawful
proceedings; (4) affected by other errors of
law; (5) unsupported by competent, materialand substantial evidence in view of the entire
record as submitted; or (6) arbitrary or
capricious.
State ex rel. Utilities Comm'n v. N.C. Gas Service, 128 N.C. App.
288, 291, 494 S.E.2d 621, 624 (1998); see N.C. Gen. Stat. § 62-94
(2001). The standard of review requires this Court, after
reviewing the entire record, to determine if "the Commission's
findings and conclusions are supported by substantial, competent,
and material evidence." N.C. Gas Service, 128 N.C. App. at 291,
494 S.E.2d at 624. Substantial evidence is defined as any relevant
evidence that would permit a reasonable mind to support a
conclusion. Utilities Comm. v. Coach Co., 19 N.C. App. 597, 601,
199 S.E.2d 731, 733 (1973), cert. denied, 284 N.C. 623, 201 S.E.2d
693 (1974). The presumption is that the Commission gave proper
consideration to all competent evidence and reached a just and
reasonable conclusion. State ex rel Utilities Comm. v. Piedmont
Nat. Gas Co., 346 N.C. 558, 569, 573, 488 S.E.2d 591, 598, 601
(1997).
Thrifty Call argues that the FCC tariff requires that the
classification of the call be determined by where the call enters
the subcontractor's network under the EES methodology rather than
the point from which the call originated. See In re Amendments of
Part 69 of the Commission's Rules Relating to the Creation of
Access Charge Subelements for Open Network Architecture, Report and
Order & Order on Further Reconsideration & Supplemental Notice of
Proposed Rule Making, 6 F.C.C.R. 4524, 4535-36, ¶ 66 (1991).
Thrifty Call argues that if its switch is located in a differentstate than where the call exits the network, it is classified as
interstate. Under this methodology, virtually all of Thrifty
Call's business would be classified as interstate. Id. It would
also permit carriers to convert their intrastate minutes into
interstate minutes whenever profitable simply by changing the
routing of the call once it has been placed.
Thrifty Call cites several sources of authority in support of
its argument. First, Thrifty Call cites to FCC decisions
describing the EES methodology. The FCC has stated that
interstate usage generally ought to be
estimated as though every call that enters an
OCC network at a point within the same state
as that in which the station designated by
dialing is situated were an intrastate
communication and every call for which the
point of entry is in a state other than that
where the called station is situated were an
interstate communication.
In re MCI Telecommunications Corp. Determination of Interstate and
Intrastate Usage of Feature Group A and Feature Group B Access
Service, Memorandum Opinion and Order, FCC 85-145, 57 Rad. Reg. 2d
(P&F) 1573, 1582, ¶ 25 (1985), recon. denied, 59 Rad. Reg. 2d (P&F)
631 (1985); In re Determination of Interstate and Intrastate Usage
of Feature Group A and Feature Group B Access Service, Supplemental
Notice of Proposed Rule Making, 1 F.C.C.R. 1042, 1045, ¶ 5 n.6
(1986).
Thrifty Call also cites Western Union Tel. Co. v. Speight, 254
U.S. 17, 18, 65 L. Ed. 104, 105 (1920), reversing, 178 N.C. 146,
100 S.E. 351 (1919), and argues it is controlling in the case
before us. In Speight, the United States Supreme Court held thata telegraph that originated in Greenville, North Carolina and
terminated in Rosemary, North Carolina, was considered interstate
because it was routed through Richmond, Norfolk, and Roanoke
Rapids, Virginia. Id. The Court stated that "[t]he transmission
of a message through two States is interstate commerce as a matter
of fact. The fact must be tested by the actual transaction." Id.
(citations omitted).
While Speight appears similar to the facts at hand, the facts
are distinguishable and this Court does not find it controlling.
Speight was decided in 1919 and has been cited only once in
subsequent cases. See Ward v. Western Union Telegraph Co., 22
S.W.2d 81 (Mo. Ct. App. 1929). In Speight, the message was
telegraphed to Richmond, Virginia and then subsequently telegraphed
to Weldon, North Carolina as it made its way to Rosemary. Id. at
19, 65 L. Ed. at 105. The telegraph did not simply travel along
telegraph lines across the Virginia line and back after its initial
transmission; the telegraph had to be independently transmitted by
operators from each relay point. Id. The actual telegram was a
series of communications.
In the case before this Court, there was only one telephone
call made during the transmission of the call. The call switched
networks and was routed through Atlanta before the transmission
terminated in North Carolina, but the transmission consisted of
only one call. The transmission was not divided into a series of
individual transmissions as the telegraph in Speight was. Since
the transmission originated and terminated in North Carolina andconsisted of only one actual call, this case is distinguishable
from Speight.
Additionally, federal courts and the FCC have declined to
characterize calls of this nature as a series of multiple calls.
The FCC "has focused on the 'end points of the communication and
consistently has rejected attempts to divide communications at any
intermediate points of switching or exchanges between carriers.'"
Bell Atlantic Telephone Companies v. FCC, 206 F.3d 1, 4 (D.C. Cir.
2000) (quoting In re Implementation of the Local Competition
Provisions in the Telecommunications Act of 1996, Intracarrier
Compensation for ISP-Bound Traffic, 14 F.C.C.R. 3689, 3695, ¶ 10
(1999)).
The dividing line between the regulatory
jurisdictions of the FCC and states depends on
"the nature of the communications which pass
through the facilities [and not on] the
physical location of the lines." Every court
that has considered the matter has emphasized
that the nature of the communications is
determinative rather than the physical
location of the facilities used.
National Association of Regulatory Utility Commissioners, 746 F.2d
1492 (D.C. Cir. 1984) (quoting California v. FCC, 567 F.2d 84, 86
(D.C. Cir. 1977) (per curiam), cert. denied, 434 U.S. 1010 (1978);
citing United States v. Southwestern Cable Co., 392 U.S. 157, 20 L.
Ed. 2d 1001 (1968)).
FCC opinions have also discussed the fact that "court and
Commission decisions have considered the end-to-end nature of the
communications more significant than the facilities used to
complete such communications." Teleconnect Company v. The BellTelephone Company of Pennsylvania, File Nos. E-88-83 et seq,
Memorandum Opinion and Order, 10 F.C.C.R. 1626, 1629, ¶ 12 (1995).
The FCC has found that "a debit card call that originates and ends
in the same state is an intrastate call, even if it is processed
through an 800 switch located in another state." In the Matter of
The Time Machine, Inc., Request for a Declaratory Ruling Concerning
Preemption of State Regulation of Interstate 800-Access Debit Card
Telecommunications Services, Memorandum Opinion and Order, 11
F.C.C.R. 1186, 1190, ¶ 30 (1995).
Similarly, other states have examined the characterization of
long distance calls that originate and terminate in the same state
after being routed through other states. The Idaho Public
Utilities Commission found these calls to be intrastate, stating
that
the simple rule adopted by the Federal
Communications Commission and by this
Commission is that when a call has an end user
origination and termination in the same state
it is jurisdictionally an intrastate call for
regulatory purposes. The intermediate
transport or switching does not alter the
jurisdictional nature of the call even if it
occurs outside the state's boundaries.
Northwest Telco, Inc. v. Mountain States Telephone and Telegraph
Co., 88 Pub. Util. Rep. 4th 462, 464 (Idaho Pub. Util. Comm'n
1987). The Florida Public Utilities Commission has stated that
"long distance telephone calls which originate and terminate within
the State of Florida are intrastate calls subject to [the Florida
Public Utilities Commission's] jurisdiction even though they may be
routed through a switch located in another state." In re: ShowCause Action Against Southland Systems, Inc., Order No. 11342, 82
FPSC 179 (1982); see also In re Cease and Desist Order to Hart
Industries of Intrastate Wide Area Toll Service, Order No. 10256,
81 FPSC 73 (1981).
Thrifty Call has cited no controlling authority that compels
us to reverse the decision of the Commission. Evidence in the
record demonstrates that over ninety percent of the calls originate
and terminate in North Carolina. It also shows that Thrifty Call
is acting as a subcontractor for another long distance carrier for
the minutes in question. Furthermore, Thrifty Call admitted that
it uses the originating and terminating points of telephone calls
in Georgia to determine whether the call was interstate or
intrastate. Testimony presented before the Commission provided a
sufficient basis for determining that a called station refers to
the end-user being called, not a switch within the network. The
Commission concluded that telephone traffic originating in North
Carolina, routed through a switch in Atlanta, Georgia, and
delivered to an end-user in North Carolina was intrastate in
nature.
The Commission reviewed the FCC and intrastate tariffs and
determined they were substantially similar. It found that both
tariffs classified calls based on the point where they originated
and were placed in the customer network by callers. Testimony
indicated that Thrifty Call ordered feature group access that did
not utilize the EES methodology. After an examination of the
record, this Court concludes there is substantial evidence tosupport the conclusions of the Commission. We hold that the
Commission correctly characterized these calls as intrastate in
nature and did not abuse its discretion or err as a matter of law.
This assignment of error is without merit.
Thrifty Call argues the Commission erred by concluding that
Thrifty Call is obligated to pay BellSouth for back-billed charges.
Thrifty Call first contends there is no competent evidence that
BellSouth is owed the amount alleged in the complaint. As
previously stated, the standard of review requires this Court,
after reviewing the entire record, to determine if "the
Commission's findings and conclusions are supported by substantial,
competent, and material evidence." N.C. Gas Service, 128 N.C. App.
at 291, 494 S.E.2d at 624. Substantial evidence is defined as any
relevant evidence that would permit a reasonable mind to support a
conclusion. Coach Co., 19 N.C. App. at 601, 199 S.E.2d at 733.
The complainant bears the burden of proving the facts that entitle
it to relief. Utilities Commission v. Teer Co., 266 N.C. 366, 372-
73 146 S.E.2d 511, 516 (1966).
Mike Harper (Harper) of BellSouth testified before the
Commission detailing the calculations used in determining the
alleged damages. Harper testified that these records demonstrated
that ninety-nine percent of Thrifty Call's traffic terminating in
North Carolina was intrastate. Harper also testified that Thrifty
Call's records showed the difference between the application of the
interstate rate and the intrastate rate totaled $1,898,685 between
January 1998 and April 2000. The Commission subsequently foundthis determination to be "well-supported" by the testimony before
entering the order.
[T]he Commission may agree with a single
witness_if the evidence supports his position-
no matter how many opposing witnesses might
come forward. This Court is then required to
determine whether the Commission's decision is
supported by "competent, material and
substantial evidence in view of the entire
record as submitted."
State ex. rel. Utilities Comm. v. Eddleman, 320 N.C. 344, 352, 358
S.E.2d 339, 346 (1987) (quoting N.C. Gen. Stat. § 62-94(b)(5)
(1982)). This Court finds substantial evidence in the record
supporting the amount of damages alleged by BellSouth.
Thrifty Call contends BellSouth's claim for back-billing
should have been barred under the doctrine of laches.
Laches is an affirmative defense that must be
pled, and the burden of proof is upon the
party who pleads it. The defense of laches
will bar a claim when the plaintiff's delay in
seeking a known remedy or right has resulted
in a change of condition which would make it
unjust to allow the plaintiff to prosecute the
claim.
Cieszko v. Clark, 92 N.C. App. 290, 297, 374 S.E.2d 456, 460 (1988)
(citations omitted). The record fails to demonstrate that Thrifty
Call pled the defense of laches in its answer to BellSouth's
complaint. Additionally, Thrifty Call has failed to demonstrate a
change in conditions that makes the prosecution of BellSouth's
claim unjust.
Thrifty Call also argues the Commission erred because the
back-billed time period exceeds that permitted under BellSouth's
tariff. Thrifty Call contends that the tariff allows BellSouth toconduct an audit once a year and limits any back-billing to one
quarter preceding the audit. We have already stated that BellSouth
is not required to seek an audit before seeking to enforce its
rights before the Commission. The back-billing provision applies
solely to when an audit has been undertaken by BellSouth, which is
not the case before us. Additionally, we do not believe the
language of the tariff prohibits the Commission from ordering back-
billing because to do so would deny BellSouth nearly complete
relief from the misreporting of access traffic.
Finally, Thrifty Call argues the Commission exceeded its
statutory and jurisdictional authority in ordering money damages.
The Commission may "exercise such general power and authority to
supervise and control the public utilities of the State as may be
necessary to carry out the laws providing for their regulation, and
all such other powers and duties as may be necessary or incident to
the proper discharge of its duties." N.C. Gen. Stat. § 62-30
(2001). Additionally, "the Commission shall be deemed to exercise
functions judicial in nature and shall have all the powers and
jurisdiction of a court of general jurisdiction as to all subjects
over which the Commission has or may hereafter be given
jurisdiction by law." N.C. Gen. Stat. § 62-60 (2001).
In State ex. rel. Utilities Comm. v. Southern Bell, 88 N.C.
App. 153, 363 S.E.2d 73 (1987), this Court held that a Commission-
ordered compensation plan did not constitute money damages or a
penalty in contravention of N.C.G.S. § 62-94(b)(2). In Southern
Bell, we stated that a "plan requiring compensation to the LECs forlost revenues . . . is reasonably calculated to provide protection
for the local exchanges who provide needed services to local
exchange customers . . . . The plan is therefore statutorily
authorized." Southern Bell, 88 N.C. App. at 169-70, 363 S.E.2d at
83.
In the case before us, the Commission's order requiring
Thrifty Call to pay the amount owed does not constitute the award
of money damages in excess of its statutory authority. The
Commission's order is simply the remedy afforded BellSouth to
collect the unpaid access fees required under its North Carolina
tariff. Denying the Commission the authority to order back-billing
in this case would prevent it from enforcing the BellSouth tariff
and protecting customers. This assignment of error is without
merit.
We affirm the order of the North Carolina Utilities
Commission.
Affirmed.
Judges WALKER and HUNTER concur.
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