Global Tel Link, Inc. v. LA. PUBLIC SERVICE COM'N

Citations: 707 So. 2d 28; 1998 WL 17975Docket: 97-CA-0645

Court: Supreme Court of Louisiana; January 26, 1998; Louisiana; State Supreme Court

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The Supreme Court of Louisiana addressed the case of Global Tel*Link, Inc. v. Louisiana Public Service Commission, No. 97-CA-0645, involving appeals from both parties regarding a trial court's ruling on the enforcement of a 60-day billing requirement for Customer Owned Coin Operated Telephone (COCOT) service providers. The court upheld the Commission's 60-day billing rule and its denial of an exemption for Global, finding these actions were not arbitrary or capricious. However, it ruled that the Commission's orders preventing Global from billing or collecting in violation of the rule, as well as the requirement for refunds on improperly collected amounts, were arbitrary, capricious, and exceeded the Commission's authority. Thus, the trial court's ruling was partially affirmed and partially reversed.

The background reveals that the Commission had established guidelines in 1990 requiring COCOTs to submit customer billings within 60 days. Global, which provided phone services in Louisiana correctional facilities, faced multiple consumer complaints about its billing practices, prompting a formal investigation in February 1994. The investigation identified four main issues leading to overcharges: clock advancements (where calls were timed starting at 15 or 36 seconds instead of 0), unauthorized rates, additional charges after calls were rated, and duplicate billings. The Commission determined that Global's clock advancements were designed to inflate charges, resulting in approximately $60,000 in overcharges, for which Global was ordered to issue refunds plus interest.

The Commission found that until June 1994, Global's tariffs were not aligned with authorized rates, as Global charged rates exceeding both its own tariffs and the Commission's rate caps. The total overcharges amounted to approximately $906,000, excluding interest, which Global was ordered to refund with 10% interest. Additionally, Global employed fraudulent practices, including adding unauthorized charges to calls post-rating and inflating call durations through a computer program, resulting in an estimated $256,000 in overcharges, also subject to a 10% interest refund. A brief period of duplicate billings, where the same call was charged on multiple bills, constituted another fraudulent practice, with overcharges totaling about $16,000, which Global was ordered to refund with interest. Although these fraudulent activities were resolved outside of court, they highlighted Global's problematic business practices in Louisiana. The Commission later discovered further violations during its investigation, revealing that Global's call rating system was malfunctioning. To address this, Global decided to suspend billing until the issue was resolved and subsequently upgraded its billing system to ensure accuracy. However, complaints from customers and inmate organizations arose, alleging violations of the 60-day billing rule mandated by Order No. U-16462-E, which requires COCOT service providers to submit billings within 60 days from the call date.

The Commission confirmed the validity of allegations against Global and issued Order No. U-20784 on November 9, 1994, mandating compliance with Order No. U-16462-E, specifically prohibiting billing for calls made over 60 days prior to the billing date. Following concerns about continued violations, the Commission adopted Order No. U-20784-A in December 1994, reiterating the prohibition and requiring Global to cease collections for such calls. Global subsequently filed a lawsuit in the Nineteenth Judicial District Court to challenge Order No. U-20784-A, seeking a stay and a preliminary injunction against its enforcement. On January 23, 1995, the court denied Global’s requests and remanded the case for a hearing on the 60-day rule exemption. After hearings, the Commission, on April 27, 1995, denied the exemption and upheld the prohibition on collections for calls billed in violation of the rule, ordering Global to refund any collected amounts. Global appealed this decision, and on September 8, 1995, the trial court affirmed the denial of the exemption and the billing prohibition but reversed the refund order as unfair. Both parties appealed various aspects of the ruling, focusing on the Commission's authority regarding the 60-day rule, its power to deny an exemption, the prohibition on collections, and the refund mandate. The Commission's regulatory powers are rooted in Article IV. 21(B) of the Louisiana Constitution, which grants it jurisdiction over public utilities and the authority to enact reasonable regulations.

The Commission possesses extensive plenary powers to regulate public utilities, equivalent to the legislative powers that would exist without specific constitutional provisions. Legislative actions cannot diminish this exclusive authority to oversee common carriers and public utilities. The Commission's role includes exercising regulatory police power, ensuring utilities fulfill their public obligations, and protecting public and utility interests. It is granted both explicit and implicit constitutional authority to implement and enforce reasonable regulations.

Judicial review of the Commission's orders is governed by a standard that grants them significant deference, only overturning them if found arbitrary, capricious, or unsupported by evidence. Courts do not reassess evidence or replace the Commission's expertise. There is a presumption that the Commission's orders are lawful, placing the burden on challengers to demonstrate any defects.

Under Louisiana Revised Statutes (R.S.) 45:1164, the Commission's authority encompasses all matters related to public utility service, with specific exceptions, and it is mandated to establish reasonable regulations regarding telecommunications services. Thus, the Commission has broad regulatory powers over telephone utilities.

The 60-day rule, established by Order No. U-16462-E of the Louisiana Public Service Commission (PSC), aims to regulate customer-owned coin-operated telephone service (COCOTS) by addressing issues related to rates, compensation, and competitive practices. The PSC implemented this rule in response to numerous complaints about billing practices within the telecommunications industry, particularly concerning operator service providers. 

Mr. Arnold Chauviere, a Commission analyst, testified that the 60-day timeframe was deemed reasonable for billing purposes, as it allows customers to verify their calls, especially in cases involving complex billing situations such as double or triple billings from different companies. He emphasized that the longer the delay in billing, the more difficult it becomes for customers to recall specific calls, thereby complicating the verification process.

Commissioner Kathleen Blanco echoed these concerns, noting that the introduction of competition in the COCOT market led to significant abuses, with customers often unaware of excessive charges. She highlighted that the PSC's intent with the 60-day rule was to protect customers from unfair billing practices that arose with the entry of new service providers into the market.

Customers faced excessive delays in discovering high costs associated with pay phones, which the Commission deemed unfair. The Commission undertook a rigorous process to address issues within the COCOT industry, ultimately concluding that adopting a 60-day rule was justified and beneficial for consumers. This decision is supported by the record and is viewed as a reasonable measure to rectify existing problems. An appellate court is not to challenge the Commission's judgment, which is presumed to be lawful. Moreover, the Commission acted within its authority when implementing the 60-day rule.

Following a hearing, the Commission denied Global's request for a waiver of this rule in Order No. U-20784-C. Global contended that the Commission's decision was arbitrary, arguing that it should not be penalized for its genuine efforts to improve its billing system. Global presented five reasons for its exemption request: 1) lack of prior knowledge of the 60-day rule, 2) unexpected delays in establishing a centralized billing system, 3) external issues affecting billing processes, 4) uncertainty regarding billing practices from wire centers versus rate centers, and 5) practices in other jurisdictions allowing for longer billing periods.

The Commission countered Global's first argument by emphasizing that it is the responsibility of all regulated utilities to be aware of applicable rules before commencing operations. The Commission noted that Global's own testimony affirmed the necessity for companies to understand these regulations beforehand, concluding that Global should have known about the rule regardless of its claimed ignorance.

Global was found to be aware of its billing issues as early as January 1994 and had the capability to address them before June billing. By August 9, 1994, Global's billing system was operational, yet it failed to issue numerous bills that would have been timely for July, August, and September. The Commission noted that although Global's witnesses cited various reasons for delayed billing, the company did not substantiate that these reasons caused the cessation of billing between May and September. Global's argument regarding the ambiguity of billing from wire centers versus rate centers was dismissed, as it continued to express uncertainty on the issue. The Commission rejected Global’s assertion that other jurisdictions permit billing beyond 60 days, stating that similar rules apply in Alabama, Georgia, and Minnesota, thus denying Global an exemption from the 60-day rule. The Commission's findings were deemed adequately supported by the record, leading to the trial court's affirmation of this part of the Order.

In examining the Commission's orders for refunds and prohibitions against collection for calls billed in violation of the 60-day rule, the court found the refund order inappropriate and outside the Commission's authority given the specific facts of the case. While the Commission argued that the refund order was necessary for enforcing the 60-day rule, the court distinguished this case from previous instances where refunds were valid, such as when utilities operated without proper licensing or overcharged customers. The circumstances cited in the Commission’s referenced cases did not apply, as they involved clear overcharging scenarios, making the current refund order inapplicable.

Southern Natural Gas Co. v. Federal Energy Regulatory Commission highlights key legal principles regarding rate collection and regulatory authority. Southern collected amounts exceeding its authorized tariff for nearly two years. In a related case, a seller of transmission service failed to meet the Federal Power Act's requirements, leading to the conclusion that collected rates were unlawful and unreasonable, justifying a refund. The overarching theme is that revenues not lawfully earned do not belong to the utility. However, in the current case, the utility operated under a valid license and charged authorized rates, meaning the revenues collected were legally earned and thus legitimate property of the utility.

The Commission's refund order was deemed arbitrary and capricious, akin to prohibited retroactive ratemaking. Consequently, the Commission's orders preventing Global from billing in violation of the 60-day rule and collecting for calls already billed were also considered arbitrary, as they effectively denied Global its legally earned revenues. Although the Commission has the authority to enforce the 60-day rule, its remedy of barring revenue collection was inappropriate. The trial court's ruling was partially affirmed and partially reversed.

Justice Johnson dissented in part, arguing that the Commission has the authority to order refunds for amounts collected in violation of the 60-day rule, opposing the majority's view that the Commission acted arbitrarily in this regard.

Global Tel*Link, Inc. has been found guilty of overcharging Louisiana customers through various means, including incorrect clock advancements, rates above authorized levels, post-call charge additions, time additions to completed calls, and duplicate billings. The Commission's 60-day rule was established to protect consumers, acknowledging that after a long period, customers may struggle to recall call details, putting them at a disadvantage when identifying billing errors. Global Tel*Link upgraded its billing system to ensure calls were billed from its Alabama facility, with the system operational by August 9, 1994, allowing most disputed billings to fall within the 60-day review period. The ordered refund is not deemed a forfeiture of property, and the 60-day rule has been a long-standing requirement for seven years, deemed reasonable for customer billing review. The Commission requires enforcement mechanisms for its orders and has the authority to mandate refunds for amounts collected in violation of the 60-day rule, as supported by La. Const. IV. 21(B), which empowers the Public Service Commission to establish reasonable regulatory rules for public utilities.

The Public Service Commission (PSC) acknowledges the legitimacy of its sixty-day rule as a regulation for public utilities but denies the authority to enforce it by prohibiting the collection of charges billed in violation of this rule. These charges are deemed 'illegal' similar to those violating existing tariffs, and the PSC's refusal to allow their collection or retention is viewed as a proper enforcement action. The PSC's Order No. U-20784-C denies Global's request for an exemption from the sixty-day rule, mandates that Global cannot bill or collect charges contrary to the rule, and requires refunds for any amounts collected in violation. The PSC concluded that Global failed to justify its non-compliance and noted that other similar operators adhere to the rule without issues. The ruling indicated that Global's practices violated both a longstanding Commission Order and its contractual obligations with the Department of Corrections. Furthermore, while the case is not about ratemaking, the refund order is likened to retroactive ratemaking as it reduces the previously authorized operating rate for Global. Customers must receive bills within sixty days of call initiation. Appeals against PSC actions can be filed in district court, with rights extending to the state supreme court.