Brandenburg Telephone Co. v. Sprint Comm'ns Co., No. 23-5369 (6th Cir. 2024)
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In the case before the United States Court of Appeals for the Sixth Circuit, Brandenburg Telephone Company and Sprint Communications were in disagreement over the interest rate on an award that Sprint Communications conceded it owed to Brandenburg Telephone Company. The $2.2 million award was for unpaid fees that Sprint Communications owed for connecting local telephone calls. The dispute centered on Brandenburg's filed utility tariff which set the interest rate. Sprint argued that the tariff set the rate at 8%, and thus owed $4.3 million in interest, while Brandenburg claimed the tariff imposed a rate of 10.66%, which would result in $7.1 million in interest. The district court ruled in favor of Sprint, and the appeals court affirmed this decision.
The court reasoned that the 8% rate set by the Kentucky usury statute was applicable. The court noted that while Brandenburg's tariff offered two alternatives for late payment penalty: (1) the highest interest rate (in decimal value) which may be levied by law for commercial transactions, or (2) a rate of .000292 per day (which works out to an annualized rate of 10.66%); the court interpreted the phrase "levied by law for commercial transactions" to refer to the default rate that Kentucky permits to be collected by law, which is 8%.
The court rejected Brandenburg's argument that the 10.66% rate was applicable because the tariff could be viewed as an agreement between the parties and Kentucky law allows for parties to agree on higher interest rates. The court pointed out that tariffs are not freely negotiated contracts, but represent the judgment of regulators about what rates and conditions will prove reasonable and uniform for utility customers. Once regulators approve a tariff, the filed-rate doctrine prevents utilities and their customers from contracting around its terms. In this context, the court determined that the tariff's reference to the maximum rate levied by the General Assembly for general commercial transactions aligned with the filed-rate doctrine, and thus, the 8% default rule of interest applied.
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