HARPER AVENUE LLC V MICHIGAN BELL TELEPHONE CO
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STATE OF MICHIGAN
COURT OF APPEALS
MICHIGAN BELL TELEPHONE CO., d/b/a
AMERITECH MICHIGAN,
UNPUBLISHED
December 28, 2001
Appellant,
v
MICHIGAN PUBLIC SERVICE COMMISSION,
and HARPER AVENUE LLC, d/b/a CUSTOM
VAN ENTERPRISES INC., and CENTRAL
AUTO LEASING,
No. 226087
Public Service Commission
LC No. 00-011983
Appellees.
HARPER AVENUE LLC,
Appellant,
v
MICHIGAN PUBLIC SERVICE COMMISSION,
and MICHIGAN BELL TELEPHONE CO.,
No. 228193
Public Service Commission
LC No. 00-011983
Appellees.
Before: O’Connell, P.J., and Sawyer and Smolenski, JJ.
PER CURIAM.
In this consolidated appeal both Michigan Bell Telephone d/b/a Ameritech Michigan, and
Harper Avenue LLC, d/b/a Custom Van Enterprises Inc., appeal from the Public Service
Commission’s opinion and order finding that Ameritech Michigan committed five violations of
the Michigan Telecommunications Act (MTA), MCL 484.2101 et seq. These violations arose
from Ameritech Michigan’s disconnection of the phone service to Custom Van Enterprises and
subsequent refusal to restore that service. The PSC fined Ameritech Michigan a total of
$100,000 for those violations and ordered it to pay Custom Van Enterprises $16,484.74 for
reimbursement of economic loss and expenses. The PSC further ordered Ameritech Michigan to
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cease and desist from including unregulated charges on its shut-off notices or from further
violations of the MTA. We affirm.
The complainant before the PSC, Harper Avenue LLC, owns and operates Custom Van
Enterprises and Central Auto Leasing, two businesses located in separate parts of the same
building. Custom Van Enterprises (CVE) repairs and modifies vans and other motor vehicles.
Central Auto Leasing (CAL) leases motor vehicles. According to Harper, CVE obtains ninety
percent of its business through telephone referrals and refers a substantial amount of business to
CAL.
In 1999 Ameritech claimed that CVE owed it approximately $14,000 in charges for
yellow pages advertising charges which dated back to 1993. CVE disputed this debt, claiming
that it never ordered any yellow pages advertisements. CVE never paid the yellow pages
charges and Ameritech apparently never pursued legal action to collect this bill. Instead
Ameritech added the amount it claimed due for the yellow pages advertising into the past due
amounts stated on CVE’s monthly telephone bill. Since this advertising debt was for charges not
regulated by the MTA, MCL 484.2314(1) barred Ameritech from disconnecting CVE’s phone
service for failure to pay the yellow pages charge. CVE merely paid the current regulated
charges listed on its monthly bill. CVE’s payment of its monthly phone bills was frequently late.
It also failed to make payments for its January and March 1999 bills before Ameritech cut off its
phone service.
Ameritech shut off CVE’s telephone service on the afternoon of May 11, 1999. Harper
Avenue President John Maniaci testified that CVE did not receive any advance notice of this
pending shut-off; the line simply went dead. Ameritech employee George Scarlett testified that
Ameritech’s automated billing and collection system mailed a notice to CVE on May 3, 1999
which stated that CVE must immediately pay an overdue amount of $12,816.89 or face
disconnection on May 11. This overdue amount included the disputed and unregulated yellow
pages advertising charges.
When CVE employees called Ameritech they were told that the phone service had been
disconnected for nonpayment and that CVE would have to pay $16,367.66 in overdue charges to
have service restored. Maniaci called Ameritech several times himself and explained that most
of the overdue charges were for the disputed yellow pages ad. He offered to pay all of the
regulated phone charges immediately. In response Ameritech’s employees insisted that the
entire amount was past due and had to be repaid to reinstate service. When PSC staff made
inquiries about the overdue amount, Ameritech employees told them that the $16,367 demanded
did not include charges for unregulated services. Maniaci contacted Jim Burns, the head of
Ameritech’s collections department. Burns told him that the collections department records did
not go far back enough to verify CVE’s claims that the overdue amount involved six-year-old
charges for unregulated services. Burns asked Maniaci to present documentation establishing
which amounts were due for unregulated services. On May 20, 1999 Harper Avenue filed its
complaint with the PSC. On May 21, 1999 Ameritech informed CVE that the total past due
regulated charges amounted to $1,233.80. Maniaci immediately paid that amount and Ameritech
restored CVE’s phone service the same day.
Harper Avenue claimed that Ameritech violated MTA §§314, 502(a), 502(b), 503(e), and
305(1)(n) by cutting off CVE’s phone service for nonpayment of unregulated charges,
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demanding payment of those charges as a condition of reinstating service, charging for services
CVE never ordered, and combining regulated and unregulated charges on CVE’s phone bills.
Harper’s witnesses claimed that both CVE and CAL lost revenue due to the loss of CVE’s phone
service between May 11 and 21, 1999. Harper sought approximately $60,000 in lost revenue and
out of pocket expenses. It also sought attorney fees, fines totaling $400,000 and cease and desist
orders against Ameritech. The PSC staff agreed that Ameritech violated the MTA and supported
Harper’s request for relief. In response Ameritech argued that CVE’s phone service had been
legitimately stopped for failing to pay regulated phone charges. Ameritech argued that it had not
violated the MTA and corrected the problem within a reasonable time under the circumstances.
Ameritech blamed its inability to distinguish the regulated and unregulated charges on its
automated bill collection system and the fact that its billing system did not include records over
six months old.
At the evidentiary hearing John Maniaci testified that CVE received ninety percent of its
business over the telephone. Maniaci estimated that CVE lost approximately $11,000 in revenue
based upon documents showing CVE’s earnings for the second quarter of 1999. Maniaci also
estimated that CAL lost $7,400 due to the loss of CVE’s phone service. Harper also claimed
out-of pocket expenses of approximately $31,000 due to the litigation. This figure included fees
for John Maniaci and Cheryl Maniaci’s time at the respective rates of $200 and $75 per hour. In
response Ameritech presented the testimony of CPA David Jones, who testified that there was no
proof of lost sales and no objective data to support CAL’s claim of lost referrals.
The hearing officer’s proposal for decision (PFD) following the evidentiary hearing
recommended that the PSC deny the complaint and all remedies sought. The PFD concluded
that CVE’s telephone service was properly cut off for failing to pay regulated monthly telephone
charges, noting that CVE owed $1,233.80 for unpaid regulated services at the time its phone
service was shut off and that it repeatedly failed to make timely payments for regulated monthly
phone charges. The hearing officer found no violation of MTA §§314(1) or 502, noting that
there was no prohibition against listing unregulated charges on the bill and that the monthly bills
did not state that service would be cut off if unregulated charges went unpaid. The hearing
officer concluded that it was disingenuous for CVE to assert these violations when it had clearly
never been misled to believe that it must pay for unregulated charges for phone service to
continue. The hearing officer found that while Ameritech did misrepresent the amount of the
regulated charge necessary to restore service, this was an inadvertent misstatement due to its
reliance upon its automated collection system. The hearing officer found that the error was
corrected within a reasonable time under the circumstances. The hearing officer concluded that
any error was of minimal significance and recommended no action against Ameritech for an
excusable violation of §502.
Both parties filed exceptions to the proposal for decision. Ameritech challenged some of
the hearing officer’s evidentiary rulings, and Harper challenged the hearing officer’s ultimate
conclusions.
Among other evidentiary rulings, Ameritech challenged the hearing officer’s denial of its
motion to exclude Harper’s exhibit C-12, the final compilation of CVE’s out-of-pocket expenses.
Ameritech sought to exclude this exhibit on the basis that it was untimely. Complainant Harper
was required to submit the list seven days before the start of the hearings, but did not submit the
final version of the exhibit until the last day of the three-day evidentiary hearing. Ameritech
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argued that the exhibit should be stricken from the evidence because CVE’s delay in submitting
all its expenses effectively precluded Ameritech rebutting that evidence. The PSC agreed with
Ameritech’s argument, but found that striking the entire exhibit was too harsh a remedy. Instead
the PSC concluded that it should strike all employee expenses for work performed by John and
Cheryl Maniaci, pointing out that Mr. and Mrs. Maniaci were the ones who prepared and filed
this list of expenses late and that “no reasonable justification was provided in support of their
respective requests for $200 and $75 per hour for their time.”
In response to Harper Avenue’s exceptions, the PSC found that Ameritech had
committed five violations of the MTA, consisting of one violation of §314(1); two violations of
§502(a); one violation of §502(e), and one violation of §305(1)(n).
The PSC agreed with complainant that Ameritech violated MTA §314(1), MCL
484.2314(1) by discontinuing CVE’s phone service for nonpayment of unregulated yellow pages
advertising charges. The Commission explained its finding as follows:
The Commission agrees [that Ameritech violated §314(1)] for the
following 4 reasons. First, uncontroverted evidence shows that Ameritech
Michigan shut off a regulated service, namely CVE’s basic local exchange
service, on May 11, 1999. Second, Ameritech Michigan’s own records indicate
that it demanded payment of between $12,816.89 and $16,367.66 to refrain from
interrupting CVE’s service and to restore that service after interruption. Third,
Ameritech Michigan’s employees subsequently conceded that the LEC [local
exchange carrier] had, in fact, included thousands of dollars of unregulated
charges both in the shut-off notice and the company’s subsequent demands for
payment prior to the reinitiation of CVE’s service. Fourth, the LEC’s dilatory
tactic of depriving its business customer of service for over 10 days is both
inexcusable and unacceptable.
The issue in this case is not, as suggested by Ameritech Michigan, whether
the LEC could have lawfully cut off CVE’s regulated service. Clearly, Custom
Van’s failure to pay the regulated portion of CVE’s total monthly bill provided an
opportunity to discontinue service for nonpayment …. Rather, the salient
question is whether Ameritech Michigan shut off CVE’s basic local exchange
service based in any part on the nonpayment of unregulated charges like those
arising from Ameritech Publishing’s disputed yellow pages charges. The answer
to that question is clearly in the affirmative, as conceded by Mr. Scarlett and
established by the remainder of the record.
In a footnote the PSC further pointed out that it was irrational to conclude that Ameritech
interrupted CVE’s phone service for nonpayment of regulated phone charges when Ameritech
claimed that it was unable to determine the amount of regulated charges until ten days after it
shut off CVE’s phones.
The Commission agreed with Harper that Ameritech committed multiple violations of
MTA §502(a) and (e), MCL 484.4502(a) and (e). The opinion and order concludes that the shutoff notice stating that CVE would face interruption of its phone service unless it paid $12,816
was a direct violation of §502(e) since most of that amount was for unregulated charges. The
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Commission found that statements by Ameritech employees to CVE employees and PSC staff
that CVE must pay $16,367 in regulated charges to reinstate its phone service constituted two
violations of §502(a). The PSC found that misleading its staff in the course of an investigation
was a serious breach of §502(a).
The Commission rejected the hearing officer’s
recommendation that these violations were insignificant and excusable. The PSC found that
while many of the violations could be traced to Ameritech’s automated billing and collection
system, Ameritech remained responsible for that system’s results. The opinion and order notes
that “[i]n this case, those results include making numerous misrepresentations to Custom Van
and the [PSC] Staff, improperly demanding payment of unregulated charges before restoring a
customer’s regulated service, and significantly disrupting CVE’s business operations for over 10
days.”
The Commission’s opinion and order found no proof supporting Harper’s claim that
Ameritech violated MTA §502(b), MCL 484.2502(b):
Custom Van cites no testimony in support of its claim that CVE and CAL were
charged for services that they never requested. In addition, the record indicates
that Custom Van largely ignored this issue throughout the proceedings.
Moreover, the only significant testimony relating to this issue serves to rebut
Custom Van’s contention that bill credits like those identified on Exhibits C-7 and
C-9 support its claim for a violation of Section 502(b). Specifically, Ameritech
Michigan employee Cathleen Marsh noted that her company routinely recourses
disputed charges back to their respective service providers … and that this in no
way constitutes an admission or a determination that those services were not
requested by the end user.
Finally, the Commission found that Ameritech violated §305(1)(n), MCL 484.2305(1)(n),
which forbids any act in violation of the MTA by a local exchange carrier. The PSC found that
since Ameritech was a local exchange carrier its violation of MTA §502(a) was a concurrent
violation of §305(1)(n).
The PSC ordered Ameritech to reimburse CVE the total amount of $16,484.79,
representing $8,800 in lost profit plus $7,684.79 in out-of-pocket expenses. The Commission
agreed with Ameritech that complainant had failed to prove that CAL suffered a compensable
loss, finding that there was no evidence corroborating claims that CAL would have received at
least one additional vehicle lease referral per day but for the interruption of CVE’s phone
service, that each referral was worth between $500 to $600 each, or that CAL missed business
worth $2,000 due to CVE’s use of its telephones. However, the PSC found adequate support to
grant CVE lost profit damages. The Commission noted that financial exhibits showed that CVE
had sales of $100,173 for the second quarter of 1999 and that it could reasonably be assumed that
it would have earned at least $11,000 for the ten-day period its phone was shut off. The PSC
reduced this amount by twenty percent, which they deemed to be a reasonable estimate of CVE’s
costs based on John Maniaci’s testimony. Accordingly, the Commission found that Ameritech
owed CVE $8,800 in lost profits. The PSC found sufficient evidence supporting CVE’s claim
for $31,000 in out-of-pocket expenses for non-law-firm costs. After deducting the expenses for
John and Cheryl Maniaci’s time, the Commission awarded a total of $7,684.79 for CVE’s out-of
pocket expenses.
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The Commission rejected Harper’s request for approximately $40,000 in attorney fees
and legal costs, concluding that it was not authorized to do so under MTA §601 and In re
Complaint of Southfield against Ameritech of Michigan, 235 Mich App 523; 599 NW2d 760
(1999). The PSC found that Ameritech’s arguments were not “so devoid of arguable legal merit”
so as to justify awarding fees under MTA §209, MCL 484.2209.
Harper argued that the PSC should impose fines against Ameritech totaling $400,000 and
should order it to completely overhaul its billing and collection practices and immediately
rescind its billing and collection agreement with Ameritech Publishing, the source of the original
yellow pages charges. The Commission found complainant’s proposals excessive under the
circumstances. The Commission found that a substantial fine should be imposed for each of the
five MTA violations committed by Ameritech, but determined that it was not necessary to fine
Ameritech for each day of each violation. Instead the Commission determined that it was
appropriate to fine Ameritech $20,000 for each violation, the upper end of the range set by MTA
§601. The PSC explained that this decision was based on the harmful effect to CVE and on the
fact that Ameritech’s billing system was a crucial component of the operational support system it
provides to other carriers. The PSC noted that systemic problems with Ameritech’s billing
system would detrimentally affect those other carriers, their customers, and the local competitive
environment. The Commission also ordered Ameritech to “cease and desist from (1) including
on its shut-off notices (except as an amount separate from charges for regulated service) any
charges for unregulated service and (2) committing any further violations of the Act.”
On appeal Ameritech Michigan challenges the PSC’s findings that it violated the MTA,
argues that the PSC exceeded its statutory power by awarding damages to Custom Van
Enterprises, and argues that the fines imposed are excessive and unconstitutional. Harper
Avenue LLC argues that the PSC erred by denying its demands for attorney fees, by reducing its
claimed economic losses and expenses, by limiting the cease and desist directive, and by
rejecting its claim that Ameritech Michigan violated MTA §502(b), MCL 484.2502(b). We
reject these claims of error and affirm.
Our standard of review is provided by MCL 462.26(8), which states that “the burden of
proof shall be upon the appellant to show by clear and satisfactory evidence that the order of the
commission complained of is unlawful or unreasonable.” To prove that the Commission’s order
was unlawful Ameritech must show “that the commission failed to follow some mandatory
provision of the statute or was guilty of an abuse of discretion in the exercise of its judgment.”
In re MCI Telecommunications Complaint, 460 Mich 396, 427; 596 NW2d 164 (1999) [quoting
Giaras v Public Service Comm, 301 Mich 262, 269; 3 NW2d 268 (1942)]. Similarly, “[t]he
hurdle of unreasonableness is equally high. Within the confines of its jurisdiction, there is a
broad range or ‘zone’ of reasonableness within which the PSC may operate.” Id. The
Commission’s findings of fact must be supported by competent, material, and substantial
evidence on the whole record. In re MCI Telecommunications Corp Complaint, 240 Mich App
292, 303; 612 NW2d 826 (2000). A Commission decision is unreasonable when it is
unsupported by the evidence. Id.
I
Ameritech argues that the PSC erred by finding that it violated MTA §314(1), arguing
that the evidence showed that CVE’s telephone service was disconnected for nonpayment of
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regulated charges. Ameritech also argues that the PSC erred by finding that it violated MTA
§§502(a) and (e) or MTA §305(1)(n) since any misstatements were made in good faith, were
attributable to the billing system and CVE’s lack of diligence, did not mislead CVE, and were
promptly corrected. We find that the Commission’s findings were supported by competent,
material, and substantial evidence on the whole record and were neither unreasonable nor
unlawful.
During the relevant time period,1 MTA §502(a) and (e), MCL 484.2502(a) and (e)
provided:
A provider of a telecommunication service shall not do any of the
following:
(a) Make a statement or representation, including the omission of material
information, regarding the rates, terms, or conditions of providing a
telecommunication service that is false, misleading, or deceptive.
***
(e) State to an end-user that their basic local exchange service or other
regulated service will be discontinued unless the end-user pays a charge that is
due for an unregulated service.
The PSC’s conclusion that Ameritech committed two violations of §502(a) was
supported by competent, material, and substantial evidence on the whole record. The testimony
and documents presented at the evidentiary hearing showed that after CVE’s telephone line went
dead, Ameritech employees told CVE employees and John Maniaci that CVE would have to pay
$16,367 in overdue charges to have its phone service reinstated. When PSC staff contacted
Ameritech about the dispute with CVE, Ameritech employees told PSC staff that CVE owed
$16,367 in overdue regulated charges which would have to be paid before it restored CVE’s
telephone service. These statements by Ameritech employees concerned the terms or conditions
of providing CVE’s telephone service and were false, misleading, or deceptive in violation of
§502(a).
The PSC’s conclusion that Ameritech violated §502(e) was supported by competent,
material, and substantial evidence on the whole record. Testimony from Ameritech employee
George Scarlett showed that on May 3, 1999, Ameritech mailed CVE a notice stating that it must
pay $12,816.89 in overdue charges by May 11 or face disconnection. Most of the $12,816.89
demanded was for the unregulated yellow pages advertising charge rather than for regulated
phone service charges.
MTA §305(1)(n), MCL 484.2305(1)(n) states:
1
MTA §502 has since been amended. The present versions of §502(a) and (e) are §502(1)(a)
and (1)(e), MCL 484.2502(1)(a) and (1)(e).
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(1) A provider of basic local exchange service shall not do any of the
following:
***
(n) Perform any act that has been prohibited by this act or an order of the
commission.
As noted above, the PSC’s conclusion that Ameritech violated §502(a) was supported by
competent, material, and substantial evidence on the whole record. Since Ameritech Michigan is
a provider of basic local exchange service, the Commission correctly found that its violation of
§502(a) also violated §305(1)(n).
MTA §314(1), MCL 484.2314(1) expressly states that:
A provider of a regulated service shall not discontinue the regulated
service for failure by a customer to pay a rate or charge imposed for an
unregulated service. For the purposes of this section, the commission may
determine how payments are allocated between regulated and unregulated
services.
The evidence presented shows that Ameritech added the disputed, unregulated yellow
pages advertising charges from 1993 into the “past due” amounts shown on CVE’s monthly
phone bill. Those bills did not separate past due amounts for regulated phone charges from those
for unregulated charges. Testimony established that the shut-off notice sent by Ameritech on
May 3, 1999, demanded that CVE pay $12,816.89 in overdue charges by May 11 or face
disconnection. Evidence established that most of the $12,816.89 demanded was for the
unregulated yellow pages advertising charge rather than for regulated phone service.
Ameritech’s claim that CVE’s service was shut off on May 11, 1999, for failure to pay regulated
services is simply not credible in light of its claims that it could not determine the amount of
overdue regulated charges until May 21, 1999. Based on the competent, material, and substantial
evidence presented on the whole record the Commission reasonably concluded that Ameritech
discontinued CVE’s regulated local telephone service for failure to pay charges for an
unregulated service.
II
Ameritech argues that PSC acted outside its statutory authority by awarding damages to
Harper Avenue and that the Commission’s act of awarding damages denied Ameritech its
constitutional right to a jury trial. We find that MTA §601 authorized the Commission to award
damages for economic loss and out-of-pocket non-legal expenses. Granting this relief did not
deny Ameritech’s right to a jury trial.
MTA §601, MCL 484.2601, states in relevant part that when “the commission finds a
person has violated this act, the commission shall order remedies and penalties to protect and
make whole ratepayers and other persons who have suffered an economic loss as a result of the
violation ….” We read this language as an express grant of the power to order the violator to pay
the ratepayer the money damages suffered as a result of the violation. While §601(a) through (e)
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lists a variety of other remedies which do not involve compensation for economic losses, the
statute expressly states that remedies are not limited to those listed.
This Court has previously rejected Ameritech’s arguments that PSC proceedings resulting
in an award of damages violates its constitutional right to a jury trial, explaining as follows:
An exception to the right to a jury trial exists when the Legislature creates new
public rights and remedies and delegates the enforcement of those rights and
remedies to an administrative tribunal. Id.; see also 47 Am. Jur. 2d, Jury, § 31, p.
736. … [T]he key question is whether the statutory right is so closely integrated
into a public regulatory scheme as to be appropriate for resolution by an
administrative agency. Id.
Here, MCI’s allegations of anticompetitive conduct concerned violations
of orders that the MPSC issued pursuant to its authority under the MTA to
regulate the conditions for telecommunications services in the public interest.
Thus, MCI’s allegations involved matters integral to the administrative scheme
established by the MTA. Moreover, the enactment of the MTA created “new
public rights and remedies,” whose enforcement was delegated to an
administrative tribunal—the MPSC. Accordingly, the instant case fell within the
exception to the right to a jury trial …. [In re MCI Complaint, supra, at 311-312].
By passing the MTA, the Legislature created new public rights and remedies and
delegated the enforcement of those rights and remedies to the PSC, an administrative tribunal.
Complainant Harper filed its complaint with the PSC alleging that Ameritech had committed
several violations of the MTA. The allegations in Harper’s complaint were completely within
the parameters of the MTA’s administrative and regulatory scheme and the PSC’s jurisdiction to
enforce that scheme. Ameritech had no right to a jury trial on those issues.
III
Finally, Ameritech argues that the PSC abused its discretion by assessing the maximum
possible fine for an inadvertent violation of the MTA. We find no abuse of discretion.
MTA §601(a), MCL 484.2601(a), provides that, in addition to other penalties, the
Commission may impose “a fine for the first offense of not less than $1,000.00 nor more than
$20,000.00 per day that the person is in violation of this act ….” Contrary to Ameritech’s
arguments, the fine imposed was nowhere near the maximum amount permitted by statute since
the PSC could have fined Ameritech up to $20,000 per day of each of its five violations of the
MTA. The violations of §§314 and 502(e) alone continued for at least 10 days and so could have
been punished by a total fine of $400,000 under §601(a). Rather than impose fines for each day
of each violation, the PSC assessed a single fine of $20,000 for each violation. These fines were
based on the Commission’s finding that Ameritech illegally shut off CVE’s phone service for
nonpayment of six-year-old unregulated charges and failed to restore CVE’s service for ten days
despite repeated contacts by CVE and the involvement of PSC staff. The Commission also
found that Ameritech employees made false statements to PSC staff regarding the nature of the
overdue charges and made little or no effort to promptly resolve the issue and restore CVE’s
service. The circumstances presented strongly suggest that Ameritech employees cut off CVE’s
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telephone service and deliberately delayed its restoration in order to force CVE to pay the
disputed yellow pages bill. Even if the errors and misstatements were attributable to problems
with Ameritech’s automated billing and collections system, it appears that Ameritech employees
did not bother to promptly resolve the problem. Moreover, Ameritech’s billing system was an
essential part of the operational support it provided to other carriers. Future problems with the
automated billing system would be likely to affect other carriers, their customers, and the local
competitive environment. The Commission did not abuse its discretion by determining that a
substantial fine was necessary to deter similar misconduct and provide Ameritech with the
economic incentive to reform its billing and collection system.
IV
Harper Avenue first argues that the PSC erred by denying it costs and attorney fees under
MTA §209. Harper asserts Ameritech’s position was devoid of arguable legal merit and
therefore frivolous under MCL 484.2209(2)(a)(iii). Harper also argues that it was inequitable for
the PSC to assess large fines in favor of the state while denying its request for legal fees and
costs. We find no error. We review a finding whether a claim or defense is frivolous for clear
error. Meagher v Wayne State Univ, 222 Mich App 700, 727; 565 NW2d 401 (1997).
The fact that Harper prevailed on the merits of several of its claims does not necessarily
demonstrate that Ameritech’s position was “devoid of arguable legal merit.” While the PSC
found that Ameritech had violated MTA §§314, 502(a) and (e), and 305(1)(n), there was
evidence supporting of Ameritech’s position. The evidence showed that CVE was not diligent in
paying its phone bills and owed approximately $1,200 in overdue regulated fees at the time
Ameritech cut off its phone service. Those overdue regulated fees could have been a legitimate
basis for shutting off CVE’s phones. Moreover, the PSC found in Ameritech’s favor with regard
to the alleged violation of §502(b). The PSC agreed with Ameritech’s position on the issue of
CAL’s damages and also ruled in its favor on the admission of Harper’s exhibit asserting
economic damages for loss of employee time. The Commission did not clearly err by
concluding that Ameritech’s defenses were not frivolous under MTA §209(2)(a)(iii).
The fact that the PSC found Ameritech’s violations serious enough to impose substantial
fines is not relevant to the issue of whether Harper should be awarded legal costs and attorney
fees. It is well-established that “[a]ttorney fees may not be awarded in Michigan unless
expressly authorized by statute or court rule.” In re Complaint of Southfield against Ameritech
of Michigan, 235 Mich App 523, 534; 599 NW2d 760 (1999). The provisions of the MTA in
place at the time the PSC issued its orders did not provide for an award of attorney fees merely
based on prevailing before the PSC or on the economic burden litigation presented to the
prevailing party.2 Id.
V
Harper Avenue argues that the Commission erred by significantly reducing its request for
non-legal costs from approximately $42,000 to $7,684.79. We disagree.
2
MTA §601 has since been amended to add subsection (f), which expressly permits an award of
attorney fees and costs, MCL 484.2601(f).
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We review the decision to impose discovery sanctions for abuse of discretion. Bass v
Combs, 238 Mich App 16, 26; 604 NW2d 727 (1999). We conclude that the PSC did not abuse
its discretion by excluding from the evidence that portion of Harper’s cost summary which stated
employee expenses related to work by John and Cheryl Maniaci. Since there was no other
evidence to support these employee expenses, the PSC’s award omitting these expenses was both
reasonable and lawful.
Complainant’s final cost summary, exhibit C-12(R), lists Harper’s total non-law firm
costs at $30,899.79. Of that total amount $23,759.30 is for employee costs, most of which was
for work performed by John and Cheryl Maniaci. John Maniaci’s time was evaluated at $200
per hour, and Cheryl Maniaci’s time at $75 per hour.
Harper was required to submit its complete costs summary seven days before the
hearings. It did not do so. Harper presented an incomplete summary on the first day of the
evidentiary hearing. That summary did not include employee costs attributable to the Maniacis’
work. The final summary which contained this information was not presented until the last day
of the hearing. The late submission of this exhibit effectively prevented Ameritech’s counsel
from being able to prepare or submit evidence rebutting the numbers asserted by the exhibit.
Moreover, there does not appear to be any sound basis for the monetary rates assessed for the
Maniacis’ time. When cross-examined, John Maniaci explained that he rated his time at the
same billing rate used by Ameritech’s counsel and expert witness, but did not explain why his
time should be billed at that rate. He did not explain the basis for billing Cheryl Maniaci’s time
at $75 per hour. Nor did Harper provide evidence from which one could derive reasonable
billing rates for the Maniacis. In light of the prejudice to Ameritech’s ability to effectively rebut
the employee costs listed and Harper’s failure to substantiate the billing rates, excluding costs for
the Maniacis’ time was an appropriate sanction for failing to timely submit the exhibit. With the
exclusion of employee costs attributable to the Maniacis, the evidence at the hearing showed that
Harper sustained total non-legal costs of $7,684.79, which is exactly what the Commission
ordered Ameritech to pay.
VI
Harper argues that the Commission erred by rejecting testimony establishing CAL’s lost
revenues and profits. We disagree. The PSC’s finding that CAL had not proven any business
losses was supported by competent, material, and substantial evidence on the whole record and
was neither unreasonable nor unlawful.
Ameritech’s expert, CPA David Jones, testified that claimed losses by CAL were
unsupported and purely speculative. Harper presented testimony from John Maniaci and others
to the effect that CAL sustained approximately $7,400 in business losses due to lost referrals
from CVE and CVE’s use of CAL’s phone. However, that testimony was never corroborated by
documentation showing that CAL’s revenues for May 11 through 21, 1999, suffered compared to
other periods in the history of that business. In contrast, CVE presented documentary evidence
showing its quarterly earnings in support of its claimed losses. Since Harper presented no
documentary evidence backing up CAL’s claimed business losses, the PSC did not err by
preferring Jones’s testimony over the testimony of Harper’s witnesses.
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VII
Harper Avenue argues that the PSC erred by failing to order Ameritech to change its
billing and collection system to prevent future violations of the MTA. Harper has not met its
burden of showing that the cease and desist order issued by the PSC was unlawful, unreasonable,
or otherwise an abuse of discretion. The PSC ordered Ameritech to cease and desist including
charges for unregulated services in its shut-off notices unless separately listed as charges for
unregulated services. That order and the total $100,000 fine imposed for the violations should
provide Ameritech with sufficient incentive to prevent future problems arising from its
automated billing and collection system. While the PSC had the power to issue a more detailed
cease and desist order there does not appear to be any reason to do so in this case.
VIII
Harper Avenue argues that the PSC erred by rejecting its claim that Ameritech violated
§502(b) by charging CVE for numerous additional services it never ordered, a practice
commonly called “cramming.” We find no error.
MTA §502(b), MCL 484.2502(b) prohibits a provider of telecommunications service
from “[c]harg[ing] an end-user for a subscribed service that the end-user did not make an initial
affirmative order.” There was no clear evidence indicating that Ameritech had violated §502(b),
nor does Harper cite any such evidence in this appeal. While Harper’s John Maniaci testified
that CVE’s telephone bills included charges which CVE never ordered, he did not explain which
services were never ordered or when they appeared on CVE’s bills. The charges CVE claims it
never ordered were apparently provided by companies other than Ameritech and were merely
billed through Ameritech. Ameritech did not insist that CVE pay for those services and in fact
would recourse those charges back to the service provider if they were disputed by the customer.
The Commission’s finding that Ameritech did not violate §502(b) was supported by competent,
material, and substantial evidence on the entire record and was neither unreasonable nor
unlawful.
IX
Finally, Harper Avenue argues that the Commission erred by reversing evidentiary
rulings of the hearing officer. Harper also asserts that these rulings are inconsequential to the
outcome of this appeal. We agree with Harper’s characterization of this issue as inconsequential.
The PSC’s rulings on those evidentiary issues did not affect the outcome of the PSC’s orders and
are irrelevant to the other issues in this case. Accordingly this argument presents moot issues
which will not be considered by this Court. Michigan Nat’l Bank v St Paul Ins Co, 223 Mich
App 19, 21; 566 NW2d 7 (1997). Even if these issues were not moot, Harper has waived them
by failing to adequately argue them on appeal. Severn v Sperry Corp, 212 Mich App 406, 415;
538 NW2d 50 (1995).
Affirmed.
/s/ David H. Sawyer
/s/ Michael R. Smolenski
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