Discount Cellular, Inc. v. Public Utilities CommissionDiscount Cellular, Inc. v. Public Utilities Commission
Background
{¶ 1} Thеse are appeals as of right by appellants, Discount Cellular, Inc. (“Discount Cellular” or “Discount”), Richards Ltd., Inc., d.b.a. Advanced Cellular & Paging Services (“Advanced Cellular”), Intermessage Wireless Associates, Ltd. (“Intermessage Wireless”), and Jeff Rand Corporation, d.b.a. Wireless Outlet (‘Wireless Outlet”), from orders of the Public Utilities Commission of Ohio (“commission” or “PUCO”) in case Nos. 04-236-RC-CSS, 05-190-RC-CSS, 05-811-RC-CSS, and 05-812-RC-CSS. Ameritech Mobile Communications, L.L.C., with Cincinnati SMSA Limited Partnership (“Ameritech” or “intervenors”), and Verizon Wireless (“Verizon” or “intervenors”) have intervened as appellees.
{¶ 2} Appellants are cellular telephone service resellers. As such, appellants purchase cellular service on a wholesale basis, rebrand the service, and market it to the general public on a retail basis. Intervenors arе engaged in business as wholesale cellular telephone service providers.
{¶ 3} The backdrop for these appeals is R.C. Chapter 4927, which the General Assembly enacted in 1988 to give the commission broad authority to implement alternative regulatory requirements and other deregulatory actions for the telecommunications industry in Ohio. Am.Sub.H.B. No. 563, 142 Ohio Laws, Part III, 4369. Specific to this matter,
* * *, may, by order, exempt any telephone company or companies, as to any public telecommunications service except basic local exchange service, from any provision of Chapter 4505. or 4909. of the Revised Code or any rule or order issued under those chapters, or establish alternative regulatory requirements
* * *; provided the commission finds that any such measure is in the public interest and either * * * [t]he telephone company or companies are subject to competition with respect to such public telecommunications service * * * [or]
{¶ 4} In 1993, the commission exercised its alternative regulatory authority and issued guidelines for the entire telecommunications industry. See In the Matter of the Commission Investigation into the Implementation of Sections 1927.01 Through 1927.05, Revised Code, as They Relate to Competitive Telecommunication Services, case No. 89-563-TP-COI,
{¶ 5} Under the 563 Guidelines, the commission required that wholesale providers (1) provide access to cellular service on a nondiscriminatory basis to all cellular service resellers, affiliated and nоnaffiliated alike, (2) maintain separate wholesale and retail operations, (3) maintain detailed written records of transactions between themselves and their affiliated cellular service resellers, and (4) maintain comprehensive records of all inquiries from potential resale customers and of transactions between the wholesalers and unaffiliated cellular service resellers. The PUCO also made it clear that
{¶ 6} In 1999, the commission issued an order exempting cellular service providers from a number of existing regulatory requirements. In the Matter of the Commission Investigation into the Alternative Regulаtory Treatment of Commercial Mobile Radio Service Providers, case No. 99-1700-TP-COI (Dec. 16, 1999) (the “1700 Order”).
{¶ 7} On February 24, 2004, Discount Cellular filed a complaint pursuant to
{¶ 8} On August 3, 2005, the commission granted Ameritech’s motion to dismiss Discount’s complaint. The commission’s dismissal was based on its determination in the 1700 Order that it would no longer consider
{¶ 9} Discount filed a timely application for rehearing. On September 28, 2005, the commission denied Discount’s application, again finding that it had relinquished jurisdiction over
{¶ 10} Advanced Cellular, Intermessage Wirеless, and Wireless Outlet also filed complaints against several wholesale cellular service providers, including intervenors, Ameritech and Verizon. These complaints made allegations of discriminatory and anticompetitive conduct similar to those alleged in Discount Cellular’s complaint. On October 12, 2005, the commission dismissed the complaints on the authority of the order and rehearing entry in the Discount Cellular case. On December 7, 2005, the commission denied applications for rehearing.
{¶ 11} Discount Cellular initiated the appeal in case No. 2005-2209 by filing a notice of appeal on November 22, 2005, following the rehearing entry of the commission dated September 28, 2005. On December 19, 2005, Advanced Cellu
{¶ 12} On January 26, 2006, we granted a motion to consolidate all four appeals for briefing, oral argument, and final decision. Appellants’ appeals as of right are now before this court.
Standard of Review
{¶ 13} “
{¶ 14} Although we have “complete and independent power of review as to all questions of law” in appeals from the PUCO, Ohio Edison Co. v. Pub. Util. Comm. (1997),
Propositions of Law No. 3 and No. 4
Administrative Rulemaking Procedures
{¶ 15} In proposition of law No. 3, appellants claim that the 1700 Order cannot form the basis to dismiss its complaints because the PUCO failed to comply with the statutory rulemaking procedures set forth in
{¶ 17} However, the PUCO was not required to follow the traditional administrative rulemaking process in granting the type of exemptions and alternative regulatory requirements authorized in the 1700 Order. At the timе of the order,
{¶ 18} Thus, the General Assembly has expressly granted the PUCO the authority to exempt, by order, telephone companies from the requirements of certain statutes, rules, and orders and from traditional regulatory requirements. Further, the PUCO can do this without a hearing. In enacting
{¶ 19} Nevertheless, appellants contend that the 1700 Order is a rule subject to the requirements of
{¶ 20} However, whether the 563 Guidelines are a rule or an order has no relevance to this issue.
{¶ 21} Accordingly, we find that the PUCO properly exercised its statutory authority under
Proposition of Law No. 2
Alternative Regulation under R.C. k927.03(A) and (D)
{¶ 22} In proposition of law No. 2, appellants argue that the PUCO failed to comply with the notice and hearing requirements in former
{¶ 23}
{¶ 24} “The public utilities commission has jurisdiction over every telephone company providing a public telecommunications service that has received an exemption or for which alternative regulatory requirements have been established pursuant to this section. As to any such company, the commission, after notice and hearing, may abrogate or modify any order so granting an exеmption or establishing alternative requirements if it determines that the findings upon which the order was based are no longer valid and that the abrogation or modification is in the public interest. No such abrogation or modification shall be made more than eight years after the date an order granting an exemption or
{¶ 25} The purpose of
{¶ 26} Moreover, appellants’ construction of the statute would make it more difficult to modify an already existing exemption than it would be to grant it in the first place. Appellants concede that when first issuing a statutory exemption or an alternative regulation under
{¶ 27} The 1700 Order, for the first time, exempted telephone companies from the requirements of
{¶ 28} Appellants also argue under this proposition of law that the 1700 Order is invalid because the PUCO failed to provide public notice, which they claim was required by
{¶ 29} In relation to the 1700 Order, notice was disseminated to a long list of interested parties, including several telephone companies and cellular service resellers, the Ohio Telecommunication Industry Association, the Office of Consumers’ Counsel, and other public representatives. Based on the foregoing, we overrule proposition of law No. 2.
Proposition of Law No. 5
Equal Protection
{¶ 30} Appellants argue in proposition of law No. 5 that the PUCO’s decision to allow Cellnet to litigate its claims against intеrvenors, while preventing all other similarly situated resellers of cellular service from asserting identical claims involving the same legal rights, violated the equal protection guarantees of the United States and Ohio Constitutions.
{¶ 31} “The limitations placed upon governmental action by the federal and state Equal Protection Clauses are essentially the same.” McCrone v. Bank One Corp.,
{¶ 32} Appellants are not a suspect class, nor do they argue that a fundamental right is implicated, entitling them to a higher level of scrutiny for purposes of equal protection analysis. See State v. Williams (2000),
{¶ 33} Under the rational-basis standard, a state has no obligation to produce evidence to sustain the rationality of a statutory classification. Am. Assn. of Univ. Professors, Cent. State Univ. Chapter v. Cent. State Univ. (1999),
{¶ 34} Appellants offer little argument or authority to support their equal protection claim. The PUCO applied
{¶ 35} However, creating a distinction betwеen those resellers who filed complaints before the 1700 Order and those who filed after the order does not, standing alone, deny equal protection. “[D]istinctions are invalidated only where ‘they are based solely on reasons totally unrelated to the pursuit of the State’s goals and only if no grounds can be conceived to justify them.’ ” State v. Williams,
{¶ 36} Appellants have not met their burden of showing that exempting wholesale providers from
Proposition of Law No. 6
Due Process
{¶ 37} Appellants argue in proposition of law No. 6 that the PUCO violated their rights to due process under the United States and Ohio Constitutions when the commission enforced the 1700 Order against them without notice, service, or a hearing. Appellants claim that the PUCO failed to provide them with required notice of the 1700 Order and that they were never given an opportunity to be heard before their rights were extinguished by that order.
{¶ 38} Appellants are merely renewing arguments that we have already addressed in our discussion of propositions of law No. 3 and No. 4 (failure to comply with
Retroactive Application of 1700 Order
{¶ 39} In proposition of law No. 1, appellants contend that the PUCO violated Ohio law by retroactively applying the 1700 Order to eliminate vested rights acquired under prior laws. Appellants argue that they had a statutory right to file a cause of action against wholesale cellular service providers that accrued prior to the 1700 Order’s elimination of
{¶ 40} The PUCO issued the 1700 Order on December 16, 1999. In the 1700 Order, the PUCO, pursuant to
{¶ 41} Section 28, Article II prohibits the General Assembly from passing retroactive laws and protects vested rights from new legislative encroachments. Vogel v. Wells (1991),
{¶ 42}
{¶ 43} Normally, whether a statute is applied prospectively or retroactively in a given case is judged from its effective date. However,
{¶ 44} The PUCO and intervenors contend that the 1700 Order was not applied retroactively, because appellants’ complaints were filed well after the PUCO issued the 1700 Order exempting providers from reseller complaints. We disagree.
{¶ 45} The “words ‘retroactive’ and ‘retrospective’ have been used interchangeably in the constitutional analysis for more than a century.” Bielat v. Bielat (2000),
{¶ 46} Appellants’ complaints center on matters that allegedly occurred before the PUCO issued the 1700 Order on December 16, 1999. Before the issuance of the 1700 Order, laws and regulations in the form of the 563 Guidelines were in effect that prohibited the complained-of conduct. The 563 Guidelines prohibited wholesale providers from engaging in anticompetitive conduct and discriminatory practices. Among other things, providers were required by the 563 Guidelines to (1) offer access to their cellular serviсes at terms, conditions, and prices that were universally available on a nondiscriminatory basis to affiliated and nonaffiliated resellers alike, (2) keep their wholesale and retail operations separate, and (3) maintain separate accounting records between the wholesale provider and its affiliated reseller.
{¶ 47} In their complaints to the PUCO, appellants alleged that intervenors failed to comply with these and other provisions of the 563 Guidelines. Thus, at issue were the practices of the intervenors with respect to their wholesale and retail cellular operations before the PUCO issued the 1700 Order. In essence, appellants’ complaints ask for a declaration of their rights against intervenors on past facts and under lаws existing prior to the 1700 Order. Compare GTE Mobilnet of Ohio v. Johnson (C.A.6, 1997),
{¶ 49} When the PUCO issued its order resolving the Cellnet complaint case, it again emphasized that the statutory exemptions and alternative regulations granted in thе 1700 Order were applicable on a “going forward basis” and that because the 1700 Order was prospective in nature it did not apply to the PUCO’s consideration of the Cellnet complaint case. In the Matter of the Complaint of Westside Cellular, Inc., d.b.a. Cellnet v. New Par Cos. et al, case No. 93-1758-RC-CSS (Jan. 18, 2001) at 36, fn. 55. For instance, the PUCO noted that in considering the allegations raised in the Cellnet complaint, the PUCO “has simply engaged in an analysis of whether the respondents have violated the law * * * and that any determination to be issued in [Cellnet’s] case is retrospective in nature.” Id. at 32. The PUCO stated further that the “563 requirements relative to cellular providers remained in effect until the recent issuance of the [1700 Order] in December 1999” and that the “regulatory framework [i.e., the 563 Guidelines and 944 Order] in еxistence for the time frame covered by” the Cellnet complaint governed the Cellnet proceedings. Id. at 48, 80.
{¶ 50} Finally, the PUCO acknowledged in the Cellnet order that it was not prohibiting all future complaint cases alleging unlawful conduct by cellular wholesale providers. Id. at 93. Similarly, in a brief before the United States Supreme Court in the Cellnet appeal, the PUCO recognized the possibility that a “similar complaint” might be brought raising the same allegations of misconduct occurring before the 1700 Order that formed the basis of Cellnet’s complaint. PUCO brief opposing petition for writ of certiorari in Cincinnati SMSA Ltd. Partnership v. Pub. Util. Comm, of Ohio, case No. 02-1711, certiorari denied (2003),
{¶ 51} In sum, by applying the 1700 Order to dismiss appellants’ complaints, the PUCO altered the legal significance of the intervenors’ past conduct. See E.
Proposition of Law No. 7
Alternative Grounds for Dismissal
{¶ 52} In their seventh proposition of law, appellants contend that the PUCO erred when it dismissed their complaints for failure to state reasonable grounds as
{¶ 53} On August 3, 2005, the PUCO dismissed Discount Cellular’s complaint based in part on findings in the 1700 Order that the development of competition in the cellular market made it unnecessary to further subject wholesale providers to
{¶ 54} On October 12, 2005, the PUCO dismissed the complaints filed by Advanced Cellular, Intermessage Wireless, and Wireless Outlet on the authority of the final order and rehearing entry in the Discount Cellular case. In denying applications for rehearing in these cases, the PUCO explicitly stated, for the first time, that “reasonable grounds do not exist to support further consideration of these complaints. This is especially true, given the age and outdated nature of the allegations * * *. Further, the intervening deregulation of [commercial mobile radio service] in Ohio shows the lack of any regulatory value or consumer relevance in adjudicating such stale claims. Thus, although there is not an explicit statute of limitations applicable to complaints under
{¶ 56} Appellants, however, have waived this issue by not setting forth these specific grounds in any of their applications for rehearing.
{¶ 57} Appellants maintain that they have preserved all “reasonable grounds” claims in the seventh assignment of error in each of their applications for rehearing. Appellants’ seventh assignment of error stated, “The commission erred in dismissing the complaint because the commission is required by
{¶ 58} Contrary to appellants’ assertion, the seventh assignment of error on rehearing did not preserve the issues raised in the seventh proposition of law. In the seventh assignment of error, appellants statе conclusively that the PUCO is required to hold a hearing under
{¶ 59} We have held that when an appellant’s grounds for rehearing fail to specifically allege in what respect the PUCO’s order was unreasonable or unlawful, the requirements of
{¶ 60} Here, appellants’ grounds for rehearing allege nothing more than broad, general claims, and they failed to set forth specifically the same errors alleged in their seventh proposition of law. Thus, we hold that appellants have failed to preserve these issues.
{¶ 61} Appellants also complain under the seventh proposition of law that the PUCO “invent[ed]” its erroneous reasonable-grounds rationale for the first time in its rehearing order in the Discount Cellular case instead of in the order granting the motion to dismiss.
{¶ 62} “Where suсh application for rehearing has been filed, the commission may grant and hold such rehearing on the matter specified in such application, if in its judgment sufficient reason therefor is made to appear. * * *
{¶ 63} “ * * *
{¶ 64} “If, after such rehearing, the commission is of the opinion that the original order or any part thereof is in any respect unjust or unwarranted, or should be changed, the commission may abrogate or modify the same; otherwise such order shall be affirmed. An order made after such rehearing, abrogating or modifying the original order, shall have the same effect as an original order
{¶ 65}
{¶ 66} However, Discount also failed to preserve this issue in an application for rehearing.
{¶ 67} For the foregoing reasons, we reject appellants’ seventh proposition of law.
Conclusion
{¶ 68} Fоr the reasons explained above, we hold that appellants’ propositions of law No. 2 (
Orders affirmed.
Notes
.
. Commercial mobile radio service providers include mobile telephone, cellular telephone, paging, and personal communication service providers.
. Discount also alleged violations of the PUCO’s orders in case Nos. 84-944r-TP-COI and 86-1144-TP-COI. Detailed discussion of those orders is not necessary to resolve the issues before us.
. The quoted language now appears in
. The PUCO incorporated the Discount rehearing entry into the order dismissing the other three complaints. As a result, only the order dismissing Discount’s complaint failed to rely on reasonable grounds as a basis for dismissal.