Rovas v. SBC Michigan

KELLY, J.

(concurring in part and dissenting in part). I concur in Part III of the majority opinion, which upholds the propriety of the remand order of the second Court of Appeals panel. I dissent from the rest of the majority opinion because it is founded on a misunderstanding of the decision of the Public Service Commission (PSC).

The majority holds that, in Michigan, an agency’s construction of a statute is entitled to “respectful consideration” and “should not be overruled without cogent reasons.”1 This standard of review, according to the majority, is different from giving agency interpreta*119tions of statutes deference or great weight. I see no meaningful distinction between the various names the Court has given to the proper standard of review over the years. However, I see a noticeable lowering of the standard in the majority’s actual application of it in this case.

The majority overturns the PSC’s decision for no cogent reason. The agency’s decision was not based on the erroneous statutory construction that the majority attributes to it. This case risks sending the unfortunate message that, from now on, reviewing courts need not afford agency decisions any careful consideration at all. I cannot join the majority in sending this message.

I would uphold the PSC’s decision because it correctly applied MCL 484.2502(l)(a)2 to prohibit statements made with reckless disregard of their truth or falsity or with knowledge of their falsity. It comports with the meaning of the statute. Consequently, it is entitled to great weight, deference, or the most respectful consideration, regardless of the name this Court gives to the proper standard of review of an agency’s statutory interpretation.

The record supports the PSC’s conclusion. Ameritech Michigan, the predecessor of SBC Michigan, charged a $71 service fee for an inside wiring problem without ascertaining that the customers’ loss of service originated inside the home. It billed the fee even after *120learning that the loss of service was due to a problem in its own network. The PSC correctly concluded that the service fee was predicated on false statements. The agency’s conclusions, supported as they are by facts and law, should not be rejected.

I. THE STANDARD OF REVIEW OF STATUTORY INTERPRETATIONS BY ADMINISTRATIVE AGENCIES

The majority borrows its conclusion that an agency’s interpretation of a statute is entitled to “respectful consideration” from this Court’s decision in Boyer-Campbell Co v Fry.3 It suggests that this standard of review cannot exist by any other name. It specifically rejects other decisions of the Court in which the standard of review was to “defer” to agency interpretations, to accord them “great weight,” or to review their “reasonableness. ”4

Yet, the Court in Boyer-Campbell used these very terms interchangeably. It said:

Legislative resolutions are not law, although they axe entitled to respectful consideration,... and “the construction given to a statute by those charged with the duty of executing it is always entitled to the most respectful consideration and ought not to be overruled without cogent reasons.” However, these are not binding on the courts, and “|w]hile not controlling, the practical construction given to doubtful or obscure laws in their administration by public officers and departments with a duty to perform under them is taken note of by the courts as an aiding element to be given weight in construing such laws and is sometimes deferred to when not in conflict with the indicated spirit and purpose of the legislature.”[5]

*121The Court concluded in Boyer-Campbell that the interpretation of the general sales tax act made by the state board of administration was “reasonable and sensible.”6

Boyer-Campbell does not stand for the proposition that the standard of review of agency decisions should be known by one name only. Nor does the fact that, over the years, the Court has used various terms to denote the proper standard of review indicate that it has been inconsistently applied. As the majority acknowledges, regardless of the language used, “this Court’s decisions ... made clear that the plain language of the statute was the controlling legal consideration.”7 The actual name given to the standard of review has “negligible outcome-determinative effect,”8 as long as the standard is properly applied.

There is nothing shocking about the Court deferring to an agency’s interpretation of a statute that the agency administers and that falls within its particularized expertise. “Deference” is simply another name for respectful consideration.9 Under á properly applied standard of review, an agency’s statutory interpretation *122is entitled to deference when it comports with the Legislature’s intent as expressed in the plain language of the statute. Of importance is not what the Court calls the standard of review, but how it applies it.

II. THE PSC’S CONSTRUCTION OF MCL 484.2502(1)(a)

The majority purports to review the PSC’s construction of MCL 484.2502(l)(a) de novo. As it acknowledges, the PSC never specifically interpreted the meaning of the phrase “false, misleading, or deceptive” in its decision.10 But it did apply the statute to the facts of the case, as it is entitled to do in the case of an unambiguous statute.11 The meaning that the PSC accorded to the phrase “false, misleading, or deceptive” can be inferred indirectly from the legal conclusions it drew from the facts.

Although the majority recites the PSC’s legal conclusions, it does not review them independently. Rather, it relies on the review of them made by the first Court of Appeals panel, and, in so doing, it repeats that panel’s mistakes.12 The majority reviews the decision of the first Court of Appeals panel de novo, but it does not directly review the decision of the PSC.

The first Court of Appeals panel concluded that the PSC understood “false” to mean “not true or correct” and, consequently, deemed a “false” statement to mean a simple mistake.13 In essence, the panel assumed that *123the PSC interpreted MCL 484.2502(l)(a) as imposing strict liability for any inaccurate statement, no matter how innocently made. The majority adopts this erroneous interpretation of the agency’s decision.14 It concludes that the PSC’s statutory interpretation is erroneous because, in the phrase “false, misleading, or deceptive,” which is its proper context, the word “false” does not mean “untrue.” The majority concludes that it means “intentionally false” or “intended to deceive.”15 It derives its interpretation of “false” from the dictionary definitions of the words “misleading” and “deceptive.”16

But the majority’s conclusion that the statute refers to untrue statements made with an intent to deceive falls short of the mark. This occurs because it collapses two distinct elements of “deceit” into the phrase “intent to deceive”: (1) knowledge or reckless disregard of the falsity of a statement and (2) intent that the statement cause detrimental reliance.

“Deceit,” also known as “false or fraudulent misrepresentation,” is a legal term of art with a long history in the common law. Legal terms of art are generally accorded their established meaning in the law.17 In addition, statutes are construed so as not to abolish by implication “well-settled common-law principles.”18

*124Black’s Law Dictionary defines “fraudulent misrepresentation” as “[a] false statement that is known to be false or is made recklessly — without knowing or caring whether it is true or false — and that is intended to induce a party to detrimentally rely on it.”19 In Michigan, fraudulent representation requires

“(1) [t]hat defendant made a material representation; (2) that it was false; (3) that when he made it he knew that it was false, or made it recklessly, without any knowledge of its truth and as a positive assertion; (4) that he made it with the intention that it should be acted upon by plaintiff; (5) that plaintiff acted in reliance upon it; and (6) that he thereby suffered injury. ”[20]

As these definitions make clear, the intent element of deceit consists of (1) knowledge of falsity or reckless disregard of the truth or falsity of a statement, and (2) an intent that a person detrimentally rely on the statement.

The PSC’s decision shows that the agency did apply the statute according to the established rules for false representation. The PSC applied the statute to the following facts: (1) the customers were told that the $71 service fee would be applied only if the problem was caused by inside wiring, (2) without so much as entering the home, the technician left a tag stating that the problem was with the inside wiring and the customers owed a $71 service fee, and (3) the customers subsequently received a $71 bill for the service call, even though, in the meantime, SBC had made several repairs to its own network that solved the customers’ problem.

*125The PSC expressly stated that the $71 service fee did not result from a “simple misdiagnosis.” Rather, it concluded that SBC’s “propensity for assuming that the problem is with the inside wiring whenever a service technician finds a dial tone at the network interface, and for assessing the $71 charge without first verifying that the problem actually arises from within the customer’s premises can lead to repeated violations of the MTA.”

Because the PSC expressly declined to characterize the problem as a simple misdiagnosis, it is clear that it did not interpret the statute as imposing strict liability for simple mistakes. It deemed SBC’s statements false because SBC initially imposed the $71 service fee without knowing that the problem the customers had complained of originated inside the customers’ home. And it reimposed the fee after it ascertained that the problem was in its own network, not inside the home. These statements were made with at least a reckless disregard of their truth or falsity. They were made with an intent to cause the customers to pay the $71 service fee in reliance on SBC’s representations that the problem originated inside the home. Thus, they were made with an intent to deceive.

Had the PSC expressly interpreted the statute, or had it stated its conclusions differently, it might have avoided the confusion its decision has engendered. However, it cannot be seriously faulted for not specifically stating that it applied the statute according to the rules of deceit. Those rules are well established and clearly deducible from the agency’s legal conclusion.

The agency concluded that SBC assumes that a problem arises inside a customer’s home without sufficiently testing its own network and without verifying that the problem is inside the home. The underlying premise of this conclusion is that SBC charges the service fee regardless of its lack of knowledge of the true *126origin of the customer’s loss of service. Such a charge is in reckless disregard of the truth or falsity of its assumption that the problem is inside the home.21

The Court misconstrues the agency’s application of the statutory provision, and a misconstruction cannot constitute a “cogent reason” for overturning an agency’s ruling.

III. THE RECORD EVIDENCE SUPPORTING THE PSC’S DECISION

In light of the fact that the PSC applied the statute correctly, the question becomes whether its factual findings are “supported by competent, material and substantial evidence on the whole record.”22 If supported by such evidence, they are entitled to deference, as the majority concedes.23

*127The first Court of Appeals panel disagreed with the PSC’s factual findings. It believed that the service fee was based on a simple diagnostic error.24 The panel was unclear what evidence supported the PSC’s conclusion that the charging of a service fee by SBC presented a systemic problem.25 By contrast, the second Court of Appeals panel found substantial evidence supporting the PSC’s conclusion.26

Indeed, substantial evidence on the whole record does support the conclusion that SBC based its charge of the service fee on an assumption. It assumed that, if its employee detected a dial tone at the network interface, the customer’s problem was located inside the house. This assumption was in conscious disregard of the fact, well known by SBC, that there was a frequent problem of an intermittent signal transmitted by SBC’s own facilities.

The complaining customer, William Rovas,27 an engineer, presented the following evidence: He thoroughly checked his telephone line at the interface of his phone line and the SBC network line. He found that the line went dead after 8 to 15'minutes and diagnosed the problem as an intermittent dial tone. Rovas attempted to apprise SBC of his diagnosis during his initial service telephone call, but the SBC voice-mail system reduced his message to a cryptic “no dial tone.”28 Certain that the problem was in SBC’s network, the technically *128sophisticated Rovas unplugged the telephone equipment inside his home to give the SBC technician a clear outside line.

The SBC technician who made the first service visit left a tag on the door of the Rovases’ home. On the tag, he had marked a box that corresponded to the following preprinted text: “The outside lines were checked. The problem shows to the inside premises. A charge of $71 applies to today’s visit.”

Rovas was understandably baffled. First, his own testing had shown that the SBC network was sending an intermittent signal. Second, the tag did not indicate how the technician could have concluded that the problem was inside without entering the premises. Third, the tag did not identify what problem inside the premises the technician had actually diagnosed and whether that problem was the same one of which Rovas had complained.29

Rovas additionally complained that, although SBC eventually correctly diagnosed the problem as an intermittent dial tone and fixed its own network, the service fee still appeared on the monthly telephone bill. Rovas’s evidence established that SBC charged the fee without ascertaining that the problem was inside the home, then billed Rovas for it, knowing that the problem was outside the home.

*129SBC offered several witnesses. Notably not among them was the technician who had left the tag and charged the service fee. The PSC staff placed a continuing objection to the speculative testimony of Tom Dunning, the dispatch control manager. He testified that the technician must have followed SBC’s procedures. He must have used an intelligent field device (IFD), Dunning stated, capable of checking both the inside and outside wiring at the network interface outside the Rovases’ home. Dunning testified:

If the technician went and tested at the network interface, found the ... network was providing dial tone to the network interface, he would assume that the trouble, because he did have good dial tone, could have been in the customer’s home.
He would look in with his IFD. He would test it both ways. If there was a shorted out [sic], he would have obviously known that, but by looking inside, and he did not see any equipment on the inside, so he would bill the customer.

Dunning also testified that an intermittent dial tone was something the technicians dealt with on a daily basis. However, he did not identify any procedures that SBC followed to distinguish this common problem from a problem inside a home. Rather, according to his testimony, technicians were reprimanded only if they took no corrective action when they found no dial tone at the network interface.

The hearing referee and the first Court of Appeals panel agreed with SBC that the problem of an intermittent dial tone is difficult to diagnose or fix. They reasoned that the technician incorrectly diagnosed the problem because the telephone equipment inside the home had been unplugged. This view of the evidence is both incorrect and one-sided.

*130First, the hearing referee and the Court of Appeals gave the SBC technician the benefit of the doubt, assuming that he tested the inside wires even though the service tag did not indicate it. Nor did the tag identify the problem that the technician diagnosed inside the home. I find it inappropriate to give SBC the benefit of the doubt under the circumstances. Because SBC asserted that the technician made an innocent mistake, it had the burden to prove that assertion. It also controlled its own witnesses. Yet, the technician was not called to testify about the basis for his diagnosis. Instead, SBC relied on Dunning’s speculation that the disconnected equipment inside the home led to the service-fee charge.

Additionally, Dunning did not explain what justified the technician’s assumption that the problem of which the customer had complained stemmed from the disconnected equipment inside the home. The lack of equipment inside may signal a number of things, including, in this case, that the customer intentionally disconnected his phone. Unlike a shorted wire, disconnected equipment does not necessarily qualify as a “problem” with inside wiring. The assumption that disconnected equipment is a malfunction inside the home may lead to repeated charges of a service fee although the malfunction is in the outside network. Such charges are all the more inappropriate when, as in this case, the customer has attempted to help SBC isolate the problem.

Lastly, both the hearing referee and the first Court of Appeals panel assumed that it was difficult to diagnose the Rovases’ problem as an intermittent dial tone. SBC’s witnesses testified that it was difficult to diagnose what causes an intermittent dial tone. Dunning explained that it may be caused by a weatherworn conductor somewhere on the outside line. Indeed, SBC *131never identified the precise cause of the problem in this case and ultimately connected the Rovases to a new telephone line.

But the fact that the cause of an intermittent dial tone is difficult to identify does not mean that it is difficult to identify the problem as an intermittent signal from SBC’s network. In fact, when Rovas first called SBC, he had already concluded that the SBC network was sending an intermittent signal to his home. He attempted to relate his conclusion to SBC. Rovas’s frustration with SBC was in large part due to the company’s apparent incompetence in light of his correct original diagnosis.

No witness testified that SBC’s technicians were trained to check whether a customer’s problem was due to an intermittent signal in SBC’s network. On the contrary, SBC’s procedures allowed technicians to assume that an outside line was functional as long as it sent a signal at the moment of testing. SBC’s procedures were clearly inadequate, considering that an intermittent dial tone is an everyday concern that requires more than a momentary testing of the outside line.

On the entire record before it, the agency was justified in its conclusion that SBC failed to establish that this was a case of a simple misdiagnosis. SBC’s own procedures made it clear that its technicians were permitted to assume without further testing that an outside line was functional if it sent a signal when tested once. The technicians did not attempt to determine whether the customer’s telephone equipment had been disconnected. The technicians charged a service fee after insufficient testing. The tag did not identify the problem that justified the fee, nor did it match the technician’s diagnosis with the problem of which the consumer complained.

*132If an intermittent dial tone occurs daily and SBC does not require its technicians to adequately test for it before charging a service fee, SBC recklessly ignores a known problem. Additionally, SBC neglects to take the improper service fee off the customer’s telephone bill even after it knows that the complained-of problem is in its own network. The fee is refunded only if the customer complains.

As the PSC concluded, these company practices can lead to repeated violations of the MTA. SBC charges a service fee on the pretext that a complained-of problem is inside the customer’s home. In that way, it imposes part of the cost of repair on the customer in cases of an intermittent dial tone caused by problems in the outside lines. SBC does so in violation of its duty to repair its own network without direct charge to its customers.

The PSC’s decision is supported by competent, material, and substantial evidence on the whole record. Despite the first panel’s faulty reasoning, both it and the second Court of Appeals panel correctly affirmed the decision.

IV THE PSC’S ORDER

The PSC has now twice attempted to limit the circumstances under which SBC can charge its $71 service fee. The agency amended its original order to clarify that a technician is not always required to enter a customer’s home in order to verify that the complained-of problem originates inside. The amended order prohibits, among other things, the imposition of a fee for services needed to “exclude SBC’s facilities as a possible cause of service disruptions.” The second Court of Appeals panel took issue with this language and *133remanded the order to the PSC for additional modification to avoid the impression that the PSC impermissibly regulates inside wiring.30

I concur with the majority in affirming this part of the second Court of Appeals decision. I believe that the PSC’s order needs to more accurately address the problem of SBC’s knowing or reckless failure to test for an intermittent dial tone at the network interface.31

v CONCLUSION

The majority holds that a Michigan agency’s interpretation of a statute that is within its area of expertise is not binding on the courts. Also, an agency interpretation cannot conflict with the plain meaning of the statute. There is nothing new or controversial about these holdings.

The majority also holds that an agency’s interpretation of a statute entrusted to it is not entitled to “great weight” or “deference.” It is instead entitled to “respectful consideration.” It is not clear what is distinct about this interpretative rule, and the majority neglects to explain the distinction. It neglects also to explain how to apply its “new” rule.

Noteworthy is the fact that the majority also neglects to include in its rule certain crucial language from Boyer-Campbell, the opinion on which it relies. In *134reciting the correct rule, Boyd mentions giving “most respectful consideration.” But it does not stop there: it goes on to say that the construction accorded to a statute by an administrative agency charged with the duty of executing it “ought not to be overruled without cogent reasons.”32 Boyer-Campbell then cites with approval another Michigan Supreme Court decision, Owosso Bd of Ed v Goodrich.33 Owosso states that courts are to give weight to the practical construction accorded to statutes by agencies and that agencies’ interpretations should sometimes be deferred to.34

Hence, it is not clear what, if any, meaningful change the majority makes in the standard of review applicable to agencies’ interpretations of statutes that they enforce. What is important here is the majority’s erroneous application of the standard of review.

I dissent from the majority’s opinion because it overturns the PSC’s decision on the ground that the PSC incorrectly construed the phrase “false, misleading, or deceptive” to impose strict liability for incorrect statements. The PSC did not impose strict liability. Rather, on the evidence before it, it correctly concluded that SBC assessed a service fee before it knew that the customers’ problem was inside the home. It then billed the customers with knowledge that the problem was in the outside line. SBC’s procedures indicated that the failure to test for an intermittent dial tone at the network interface was a systemic problem rather than a one-time mishap.

I conclude that the first Court of Appeals panel reached the correct result even though the panel mis*135interpreted the agency’s decision and deferred to the agency for the wrong reasons. I would affirm the decision of the second Court of Appeals panel in its entirety. The panel correctly deferred to the PSC after concluding that the agency’s decision was supported by substantial evidence on the record. I would uphold the PSC’s decision and would remand the case to the agency for clarification of its order. The limitations it imposed on SBC’s ability to charge the $71 service fee concern only SBC’s premature imposition of the fee based on insufficient testing for a commonly occurring problem.

Cavanagh and Weaver, JJ., concurred with Kelly, J.

Ante at 108.

The Michigan Telecommunications Act (MTA), MCL 484.2101 et seq., states at MCL 484.2502:

(1) 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.

Boyer-Campbell Co v Fry, 271 Mich 282; 260 NW 165 (1935).

Ante at 103-107.

Boyer-Campbell, 271 Mich at 296-297 (emphasis added; citations omitted).

Id. at 300.

Ante at 106.

Ante at 106.

Random, House Webster’s College Dictionary (2001) defines “deference” as “1. respectful yielding to the opinion... of another.... 2. respectful or courteous regard.” The majority suggests that “yielding” to an agency interpretation of a statute has led to “nearly unfettered deference” by lower courts. Ante at 104 n 38. It is true that the first Court of Appeals panel in this case misunderstood the PSC’s decision and deferred to it for the wrong reasons. However, when lower courts correctly construe an agency decision, as the second panel did, they should defer to the agency’s interpretation of a statute that comports with the Legislature’s intent. Were courts never to defer to agency interpretations, appeals from those interpretations would be encouraged in the hope that courts might he persuaded to ignore the interpretations entirely. That is precisely what happened in this case.

Ante at 113.

“This Court has consistently held that when the statutory wording is unambiguous, it need only be applied.” Ludington Service Corp v Acting Comm’r of Ins, 444 Mich 481, 497 n 22; 511 NW2d 661 (1994) (citations omitted).

Ante at 113-114.

Ameritech Michigan v Pub Service Comm, unpublished opinion per curiam of the Court of Appeals, issued June 17, 2004 (Docket No. 244742), p 2.

Ante at 113. On appeal, SBC argued for the same reading. Surprisingly, the Attorney General’s office, which represented the PSC before this Court, contended that MCL 484.2502(1)(a) imposes strict liability, reaching even innocent mistakes. The strict liability argument that it advanced in this Court was not made before the PSC.

Ante at 113, 115.

Ante at 114-115.

“A legal term of art is a technical word or phrase that has acquired a particular and appropriate meaning in the law. It is, in a statute, to he construed and understood according to such meaning.” People v Law, 459 Mich 419, 425 n 8; 591 NW2d 20 (1999), citing MCL 8.3a.

Marquis v Hartford Accident & Indemnity {After Remand), 444 Mich 638, 652; 513 NW2d 799 (1994).

Black’s Law Dictionary (7th ed).

Hi-Way Motor Co v Int’l Harvester Co, 398 Mich 330, 336; 247 NW2d 813 (1976), quoting Candler v Heigho, 208 Mich 115, 121; 175 NW 141 (1919).

The majority acknowledges that the PSC held that this was not a case of “simple misdiagnosis,” but it claims that the PSC never found that SBC charged the fee in reckless disregard of the truth or falsity of its assumption about the origin of the problem. Ante at 113 n 64. The majority fails to offer any other interpretation of the PSC’s legal conclusions, which were based on SBC’s inadequate diagnostic procedures rather than on the individual technician’s misdiagnosis.

Const 1963, art 6, § 28.

What the drafters of the Constitution intended was a thorough judicial review of administrative decision, a review which considers the whole record — that is, both sides of the record — not just those portions of the record supporting the findings of the administrative agency. Although such a review does not attain the status of de novo review, it necessarily entails a degree of qualitative and quantitative evaluation of evidence considered by an agency. Such review must be undertaken with considerable sensitivity in order that the courts accord due deference to administrative expertise and not invade the province of exclusive administrative fact-finding by displacing an agency’s choice between two reasonably differing views. [Michigan Employment Relations Comm v Detroit Symphony Orchestra, Inc, 393 Mich 116, 124; 223 NW2d 283 (1974).]

Ante at 101.

Ameritech Michigan, supra at 2.

Id. at 3.

In re Complaint of Rovas Against Ameritech Michigan, 276 Mich App 55, 63; 740 NW2d 523 (2007).

The complainants were William ahd Sandra Rovas, but only William Rovas testified at the hearing before the hearing referee.

On the basis of evidence of SBC’s repeated miscommunications with the customer, the agency also concluded that SBC violated administrative rules concerning system maintenance and service quality, Mich Admin *128Code R 484.31 and R 484.51(1)(c), which have since been rescinded. This part of the PSC’s decision is not on appeal.

The service tag message is misleading. It does not make clear whether checking the outside lines includes checking the inside phone wires at the network interface. Rather, it assumes that the problem is inside after a check of the outside lines found them working properly, although only momentarily. The fact that an outside line functions momentarily is not a reliable basis for charging the customer the nonregulated $71 service fee if an intermittent dial tone is a possible problem. The fee should be reserved for problems known to originate inside the home.

In re Rovas Complaint, 276 Mich App at 66.

SBC argued before the agency that the service fee should be prohibited only if SBC determines that its network was the source of the malfunction. However, SBC cannot accurately determine the source until it changes its diagnostic procedures. SBC argued that it had improved its diagnostic technology and extensively trained its technicians. The PSC should consider whether these improvements ensure that SBC can correctly diagnose problems in its own network and does not charge customers for them prematurely.

Boyer-Campbell, 271 Mich at 296 (quotation and citation omitted).

Owosso Bd of Ed v Goodrich, 208 Mich 646, 652; 175 NW 1009 (1920).

Id. (emphasis added).