DATE:	January 27, 2011
TO:	Office of Commission Clerk (Cole)
FROM:	Office of the General Counsel (Tan) Division of Regulatory Analysis (Gowen, Trueblood)
RE:	Docket No. 090538-TP – Complaint of Qwest Communications Company, LLC against MCImetro Access Transmission Services (d/b/a Verizon Access Transmission Services); XO Communications Services, Inc.; tw telecom of florida, l.p.; Granite Telecommunications, LLC; Cox Florida Telcom, L.P.; Broadwing Communications, LLC; and John Does 1 through 50 (CLECs whose true names are currently unknown) for rate discrimination in connection with the provision of intrastate switched access services in alleged violation of Sections 364.08 and 364.10, F.S.
AGENDA:	02/08/11 – Regular Agenda – Motion to Dismiss – Oral Argument Not Requested; Participation is at the Discretion of the Commission
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Edgar
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\GCL\WP\090538.RCM2.DOC

 

 Case Background

Qwest Communications Company, LLC (Qwest) filed a complaint regarding rate discrimination in connection with the provision of intrastate switched access services on December 11, 2009 against MCImetro Access Transmission Services (d/b/a Verizon Access Transmission Services); XO Communications Services, Inc.; tw telecom of florida, l.p.; Granite Telecommunications, LLC; Cox Florida Telcom, L.P.; Broadwing Communications, LLC; and John Does 1 through 50 (CLECs whose true names are currently unknown). 

On October 22, 2010, the Commission granted Qwest leave to file an Amended Complaint, adding Respondents and removing its Part D Prayer for Relief in which the company asked for a “cease and desist” order of the Respondents’ actions.  The additional Respondents are Access Point, Inc.; Birch Communications, Inc.; Bullseye Telecom, Inc.; Deltacom, Inc.; Ernest Communications, Inc.; Flatel, Inc.; Lightyear Network Solutions, LLC; Navigator Telecommunications, LLC; Paetec Communications, Inc.; STS Telecom, LLC; US LEC of Florida, LLC; Wndstream NuVox; and John Does 1 through 50.

 Access Point, Inc; Lightyear Network Solutions, LLC; Navigator Telecommunications, LLC; Paetec Communications, Inc.; and US LEC of Florida, LLC (Movants) filed a Joint Motion to Dismiss Qwest’s First and Second Claims for Relief and Request for Reparations in the Form of Refunds (Joint Motion to Dismiss) on November 16, 2010.  On November 17, 2010, Windstream NuVox, LLC filed a Notice of Joinder to the Joint Motion to Dismiss.  On that same date, Qwest filed a Motion for Extension of Time to Respond to the Joint Motion to Dismiss, which was granted on November 22, 2010.  Qwest’s Response was filed on December 8, 2010. 

This recommendation addresses the Movants’ Joint Motion to Dismiss.  The Florida Public Service Commission has jurisdiction over this matter pursuant to Sections 364.01, 364.04, 364.08, 364.10, 364.337, and Section 120.57, Florida Statutes (F.S.).

 

Discussion of Issues

Issue 1: 

 Should the Joint Motion to Dismiss Qwest's First and Second Claims for Relief and Request for Reparations in the Form of Refunds be granted?

Recommendation: 

 No.  The Commission should deny the Movants’ Motion to Dismiss because Qwest has stated a cause of action for which relief may be granted.  (Tan)

Standard of Review

A motion to dismiss raises as a question of law the sufficiency of the facts alleged to state a cause of action.  Varnes v. Dawkins, 624 So. 2d 349, 350 (Fla. 1st DCA 1993).  In order to sustain a motion to dismiss, the moving party must show that, accepting all allegations as true, the petition still fails to state a cause of action for which relief may be granted. Id. at 350.  The moving party must specify the grounds for the motion to dismiss, and all material allegations must be construed against the moving party in determining if the petitioner has stated the necessary allegations.  Matthews v. Matthews, 122 So. 2d 571 (Fla. 2nd DCA 1960). A sufficiency determination should be confined to the petition and documents incorporated therein, and the grounds asserted in the motion to dismiss.  Barbado v. Green and Murphy, P.A., 758 So. 2d 1173 (Fla. 4th DCA 2000), and Rule 1.130, Florida Rules of Civil Procedure.

To evaluate a motion to dismiss, all allegations in the petition must be viewed as true and in the light most favorable to the petitioner in order to determine whether there is a cause of action upon which relief may be granted. See, e.g. Ralph v. City of Daytona Beach, 471 So.2d 1,2 (Fla. 1983); Orlando Sports Stadium, Inc. v. State of Florida ex rel Powell, 262 So.2d 881, 883 (Fla. 1972); Kest v. Nathanson, 216 So.2d 233, 235 (Fla. 4^th DCA, 1986); Ocala Loan Co. v. Smith, 155 So.2d 711, 715 (Fla. 1^st DCA, 1963).

Qwest’s Amended Complaint: Qwest’s complaint seeks relief from all parties for engaging in unlawful rate discrimination.  Specifically, Qwest alleges that by extending to other IXCs contracts for switched access, advantages were withheld from Qwest.  The complaint further alleges that all parties have failed to abide by their pricelists, and charged Qwest more for switched access than other similarly situated IXCs.  Qwest requests that the Commission find that:

 

A) the parties have violated Florida law by engaging in unlawful rate discrimination to the detriment of Qwest, by extending to other IXC’s advantages of contract or agreement not extended to Qwest, by failing to abide by their price lists and by charging Qwest more for switched access than they charged other IXCs under like circumstances for like or substantially similar service,

B) parties should pay reparations with interest,

C) parties should lower intrastate switched access rates to be consistent with rates offered to other IXCs,

D)  parties should be required to file with the Commission any such contract service agreements.

Position of the Parties

Movants’ Position: 

 As a threshold issue, the Movants contend that Qwest lacks standing to assert the claims in its complaint.  The Movants request dismissal with prejudice of Qwest’s First and Second Claim for Relief and Qwest’s Prayer for Relief B seeking reparations. The Movants assert that Qwest fails to allege an injury resulting from alleged unlawful price discrimination and does not have a prima facie case of unlawful rate discrimination.  The Movants further allege that they have not violated Section 364.04, F.S., arguing that the statute does not apply to the switched access[1] service at issue in this case and that the statute does not prohibit carriers from selling at rates below those in their filed price lists. The Movants further contend that the statute does not provide a remedy to Qwest, which admits that it was charged the rates set forth in the filed price lists. Additionally, the Movants argue that the Commission cannot order refunds to Qwest, stating that Qwest cannot receive a below-price rate that is more favorable than other purchasers. Other points raised by the Movants include: 

·        Qwest is requesting a result that is contrary to public policy. The Movants note that Corporation De Gestion Ste-Foy Inc. v. Florida Power & Light Co. 385 So. 2d 124, 126 (Fla. 3^rd DCA 1980) held that a “business whose rates are governmentally regulated from granting a rebate or other preferential treatment to any particular individual” and that “a public utility or common carrier is not only permitted but required to collect undercharges from established rates, whether they result from its own negligence or even from a specific contractual understanding to charge a lower amount.”

·        If the Commission were to determine that the Movants were unlawfully discriminatory, the Commission is required to collect the undercharges and not pass through the refund to a third-party, such as Qwest. Section 364.08, F.S., states that “a telecommunications company may not extend to any person any advantage of contract or agreement or the benefit of any rule or regulation or any privilege of facility not regularly and uniformly extended to all persons under like circumstances.”  The Movants assert Qwest’s request for a refund would contradict this statute because Qwest would be receiving a benefit that other purchasers did not receive creating unlawful discrimination in favor of Qwest.

·        The Movants argue that the Commission lacks statutory authority to grant retrospective relief for unlawful discrimination for any matter before it.

·        The Movants further assert that under the Filed Rate Doctrine, the only rates that Qwest can be charged are the filed rates.[2]  The Movants argue that Qwest’s claims for a refund based on its unlawful rate discrimination claim are prohibited by the Filed Rate Doctrine and must be dismissed. 

·        The Movants further contend Qwest’s allegation that it was not charged the rates in the price list would prevent Qwest from being eligible for refunds, as the appropriate remedy in Florida would be for the Movants to collect the undercharges. 

Qwest’s Position:  Qwest asserts it has standing, stating that it is a telecommunications company authorized by the Commission to provide interexchange telecommunications in Florida that has been affected by unjust and unreasonable rate discrimination and was precluded from participating in lower rates, terms and conditions made available to telecommunications companies other than Qwest.

Qwest argues that the Movants entered into secret, off price list switched access discount agreements through which they provided lower rates for intrastate access services than the rates charged to Qwest.  Qwest seeks to recover overcharges paid for intrastate access services and requests a level playing field on a going forward basis.  Qwest argues that the Commission must take all factual allegations in the Complaint as true and in the favor of Qwest. Therefore, for the purposes of the Motion to Dismiss, the Commission must accept as true that the Movants entered into secret, off price list switched access discount agreements with a select few favored IXCs and that Qwest was charged and paid a higher rate for the identical service.

Specifically, Qwest argues that it has presented a prima facie case of rate discrimination by alleging the existence of differential rate treatment for “like” services and seeks to recover overcharges it paid for those services and to ensure a level competitive playing field. Other points raised by Qwest include: 

·        Qwest contends that the Commission stated in its previous Order[3] that it has the authority to “award reparatory refunds if Qwest establishes it was discriminatorily overcharged”, “to investigate the allegations in the Complaint”, “to prevent anticompetitive and unlawful discrimination amongst telecommunications service providers”, and “to determine the amount of any refunds and applicable interest, if any.”

·         Qwest further argues that the Movants use of Interstate Commerce Act provisions and cases interpreting provisions of other federal and state programs[4] simply deflect from the authority that the Commission holds pursuant to Chapter 364, F.S.

·        Qwest points out that Florida case law recognizes the Commission’s authority to award refunds where there has been unlawful conduct. Qwest further asserts that the Filed Rate Doctrine and arguments of retroactive ratemaking do not preclude the Commission’s authority to do so.[5]

·        Qwest argues that it has alleged actual injury in fact; citing the Colorado Public Utility Commission’s decision that being charged tariff rates when other companies were charged lower rates that were potentially unlawful is a quantifiable competitive injury.[6]

·        In response to the Movants’ argument that Qwest’s failure to request economic damages precludes it from having a valid point of entry into the case, Qwest asserts that the Commission has previously determined that it does not have the authority to award economic or consequential damages.  Qwest asserts that it seeks to recover overcharges it paid to the CLECs for intrastate switched access.

·        Qwest contends that if the Movants entered into off price lists with other IXCs, the Movants were obligated to make those rates, terms and conditions available to Qwest on a non-discriminatory basis. Qwest further contends that it is entitled to a refund in the amount overcharged, including interest.

Staff Analysis: 

Qwest’s complaint alleges that the Movants were engaged in unlawful price discrimination.  The Movants contend that Qwest’s complaint should be dismissed for its failure to state a cause of action upon which relief can be granted.

Under the motion to dismiss standard, staff believes that with all the factual allegations in the petition taken as true and construed in the light most favorable to Qwest, Qwest has raised sufficient facts to allege that it has received anticompetitive treatment and unlawful discrimination.  If one assumes as true allegations that the Movants have engaged in secret, off price list agreements available to select telecommunication companies, violating Section 364.01, 364.08, and 364.10, F.S., then staff believes Qwest has stated a cause of action for which relief may be granted.

            The Commission has the authority to investigate the allegations in this Complaint, to prevent anticompetitive behavior and unlawful discrimination amongst telecommunications providers pursuant to Section 364.01(g), F.S.  The Commission has the ability to review whether Qwest has suffered competitive harm as a result of the Movants’ actions, pursuant to provisions of Chapter 364, F.S., and to determine the amount of any refunds, overcharges and applicable interest, if any, Qwest might be due.  Staff believes that the Commission retains broad discretion to take remedial actions, such as ordering refunds of overcharges should it be determined necessary and appropriate in keeping with statutory obligations.  The Commission has consistently proceeded with cases in which refunds where requested. Order Denying Motion to Dismiss, Order No. PSC-03-0828-FOF-TP (July 16, 2003), Docket No. 030300-TP; Order Denying Motions to Dismiss, Order No. PSC-04-1204-FOF-TP (December 3, 2004), Docket No. 041144-TP; Order Denying Motion to Dismiss and Holding Docket in Abeyance, Order No. PSC-06-0777-FOF-TP (September 18, 2006), Docket No. 060455-TP. In addition, this Commission has granted refunds where a customer has been overcharged.  In re: Investigation and determination of appropriate method for issuing refunds to affected customers for apparent overcharges by Global Crossing Telecommunications Inc. for homesaver 1+ and calling card plans, Order No. PSC-07-0849-PAA -TI (October 22, 2007), Docket No, 070419-TI; In re: Investigation and determination of appropriate method for refunding overcharges and interest on 0+ calls made from pay telephones by USLD Communications, Inc., Order No. PSC-01-1744-PAA -TI ( August 27, 2001), Docket No. 010937-TI.; In re: Investigation and determination of Method to credit access flow through reductions by MCI WorldCom Communications, Inc. and TTI National Inc., as required by Section 364.163, F.S., Order No. PSC-00-2139-PAA-TI (November 8, 2000), Docket No. 001411-TI.

 

             To have standing, Qwest must meet the two-prong standing test set forth in Agrico Chemical Company v. Department of Environmental Regulation, 406 So. 2d 478, 482 (Fla. 2nd DCA 1981).  The company must show (1) that it will suffer injury in fact which is of sufficient immediacy, and (2) that this substantial injury is of a type or nature which the proceeding is designed to protect.  The first aspect of the test deals with the degree of injury.  The second deals with the nature of the injury.  The "injury in fact" must be both real and immediate and not speculative or conjectural.  International Jai-Alai Players Assn. v. Florida Pari-Mutuel Commission, 561 So. 2d 1224, 1225-26 (Fla. 3rd DCA 1990).  See also, Village Park Mobile Home Assn., Inc. v. State Dept. of Business Regulation, 506 So. 2d 426, 434 (Fla. 1st DCA 1987), rev. den., 513 So. 2d 1063 (Fla. 1987) (speculation on the possible occurrence of injurious events is too remote). It appears that Qwest meets the two-prong standing test in Agrico. Qwest has shown that being subjected to unreasonable rate discrimination, resulting in paying an amount higher for switched access service than was provided to other similarly situated companies causes Qwest to suffer an immediate and ongoing injury in fact which is quantifiable and actual. As discussed earlier, the Commission has the authority to investigate anticompetitive behavior and unlawful discrimination amongst telecommunication providers, such as those alleged by Qwest in this proceeding.  Therefore, staff believes that Qwest has standing to raise the issue of anticompetitive activity and unlawful discrimination pursuant to Agrico. 

 

Upon review of the parties’ arguments and consistent with the previous Commission decision[7], staff recommends that the Movants’ Motion to Dismiss be denied because Qwest’s petition established sufficient factual allegations, which, when taken in the light most favorable to Qwest, state a cause of action which is not subject to dismissal. An evidentiary hearing will allow the Commission to determine whether the Movants engaged in anticompetitive behavior and unlawful rate discrimination.   For the reasons set forth above, staff believes the Commission should deny the Movants’ Motion to Dismiss because Qwest has stated a cause of action for which relief may be granted. 
Issue 2: 

 Should this docket be closed?

Recommendation: 

 No.  If the Commission accepts staff’s recommendation, this docket should not be closed until after an evidentiary hearing has been held and a final order issued. If the Commission denies staff’s recommendation in Issue 1 and grants the Movants’ Motion to Dismiss, the Movants should be removed as parties and the docket should remain open.  (Tan)

Staff Analysis: 

 If the Commission accepts staff’s recommendation, this docket should not be closed until after an evidentiary hearing has been held and a final order issued. If the Commission denies staff’s recommendation in Issue 1 and grants the Movants’ Motion to Dismiss, the Movants should be removed as parties and the docket should remain open.[8]