In Re Complaint of Rovas Against Sbc

Michigan Supreme Court
Lansing, Michigan
Chief Justice: Justices:

Opinion Clifford W. Taylor Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman

FILED JULY 23, 2008

In re COMPLAINT OF ROVAS AGAINST
SBC MICHIGAN
_______________________________

SBC MICHIGAN,

Plaintiff-Appellant,

v No. 134493

PUBLIC SERVICE COMMISSION,

Defendant-Appellee.
_______________________________

SBC MICHIGAN,

Plaintiff-Appellee,

v No. 134500

PUBLIC SERVICE COMMISSION,

Defendant-Appellant.
_______________________________

BEFORE THE ENTIRE BENCH

YOUNG, J.

This case concerns judicial review of an administrative agency’s

interpretation of a statute. This Court has not always been precise in articulating
the proper standard for reviewing such interpretations. However, in accordance

with longstanding Michigan precedent and basic separation of powers principles,

we hold and reaffirm that an agency’s interpretation of a statute is entitled to

“respectful consideration,” but courts may not abdicate their judicial responsibility

to interpret statutes by giving unfettered deference to an agency’s interpretation.

Courts must respect legislative decisions and interpret statutes according to their

plain language. An agency’s interpretation, to the extent it is persuasive, can aid

in that endeavor.

In this case, the Court of Appeals did not properly review the agency’s

interpretation of the statute. Despite having understandable reservations about the

agency’s interpretation, the Court affirmed the agency’s interpretation merely

because it was “plausible.” However, the plain language of the statute does not

support the agency’s interpretation. Therefore, we reverse the Court of Appeals

decision to uphold the agency’s construction of the statute. Under the proper

interpretation of the statute, SBC Michigan (SBC)1 did not violate the statute as

the Public Service Commission (PSC) had erroneously concluded. However, we

agree with and affirm the conclusion of the Court of Appeals that the PSC had no

jurisdiction over wiring inside a customer’s home. Thus, we remand this case to

1
We will use “SBC” to refer to SBC Michigan and its predecessor,
Ameritech Michigan.

2

the PSC with the instruction that it must modify its August 1, 2005, order to

eliminate any PSC regulation of “inside wiring.”

Accordingly, the Court of Appeals judgment is reversed in part and

affirmed in part and the case is remanded to the PSC for further proceedings

consistent with this opinion.

FACTS AND PROCEDURAL HISTORY

This case began in April 2001, when William J. and Sandra M. Rovas, SBC

customers, called to report an interruption in their service. SBC sent a technician,

who checked the wiring outside their home and erroneously determined that the

problem was inside the customers’ home. Because the technician believed that the

problem was inside the home, he left a note informing the customers that they

would be charged $71 for the service call. Eventually, SBC realized the error and

reversed the charge, but not before sending the customers a bill for the $71.

Despite the fact that SBC reversed the erroneously sent bill, the customers

filed a complaint with the PSC alleging, inter alia, a violation of § 2502(1)(a)2 of

2
MCL 484.2502(1)(a). That section provides:

(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.

(continued…)

3

the Michigan Telecommunications Act, MCL 484.2101 et seq.3 The PSC agreed

with the customers and found that SBC’s statements to the customers that (1) the

problem was inside their home and (2) they owed SBC $71 for the service call

were both “false,” and therefore, constituted violations of § 2502(1)(a). For

erroneously sending a retracted $71 bill, the PSC fined SBC $15,000 for violating

§2502(1)(a).4

The Court of Appeals affirmed the PSC decision in an unpublished opinion

per curiam, noting, however, that given the context of the term “false” in the

statute, “it is plausible this provision is not intended to proscribe a statement that is

simply not true or correct, but is only intended to proscribe those statements

tending to deceive or mislead.”5 Nonetheless, the Court of Appeals affirmed the

PSC because the panel believed it was “charged with giving great deference to the

PSC’s construction of a statute which the Legislature has required the PSC to

(…continued)
The statute was amended by 2005 PA 235, which added a second sentence
to subsection (a). That sentence states, “As used in this subdivision, ‘material
information’ includes, but is not limited to, all applicable fees, taxes, and charges
that will be billed to the end-user, regardless of whether the fees, taxes, or charges
are authorized by state or federal law.” The amendment is not at issue here.
3
The other aspects of the customers’ complaint are not before the Court.
4
The PSC imposed additional penalties for other violations; however, as
noted, those violations are not at issue here.
5
Ameritech Michigan v Pub Service Comm, unpublished opinion per
curiam of the Court of Appeals, issued June 17, 2004 (Docket No. 244742), at 2.
The instant case has been decided under several different names, but the parties
have not changed.

4

enforce, and therefore the mere establishment of an alternative interpretation of a

statute to that given by the PSC will not satisfy [SBC’s] burden of proving the

PSC’s interpretation was unlawful or unreasonable.”6 However, the panel was

concerned that a portion of the PSC order implementing its interpretation was

“ambiguous” and remanded for clarification. Specifically, the panel and SBC

were concerned that the order required SBC to enter each consumer’s home to

verify that the problem originated inside the house. This Court denied SBC’s

interlocutory application for leave to appeal.7

On remand, the PSC clarified its order by noting that “SBC need not enter a

customer’s premises every time that SBC is called upon to make a service trip”;8

however, SBC may not charge for services “if those services are reasonably

necessary to diagnose problems attributable to its own facilities or exclude those

facilities as a possible cause of service disruptions.”9

In a published opinion, the Court of Appeals affirmed in part and remanded

to require the PSC to issue a modified order.10 In doing so, the panel relied on

6
Id. at 3.

7
Ameritech Michigan v Pub Service Comm, 472 Mich 890 (2005).

8
Order of the PSC, August 1, 2005 (Case No. U-13079), p 4 (emphasis in

original).
9
Id.
10
In re Complaint of Rovas Against Ameritech Michigan, 276 Mich App
55; 740 NW2d 523 (2007).

5

federal law and held that “inside wiring services” (services for problems with the

wiring inside the customer’s home) were not subject to regulation by the PSC

because such problems are not within the PSC’s authority. Thus, the panel held

that the PSC could not regulate “correct determination[s] by SBC excluding its

facilities as the cause of service disruption” because a correct determination that

the problem originated inside the customer’s home necessarily involves “inside

wiring.” 11 Both the PSC and SBC have appealed to this Court, and this Court

granted both applications.12

STANDARD OF REVIEW

As a general proposition, this Court reviews de novo questions of law, such

as the proper interpretation of a statute.13 However, the primary issue in this case

is the proper standard of review of an administrative agency’s construction of a

statute. That standard of review is discussed below.

ANALYSIS

This case implicates the powers, and the boundaries of the powers, of all

three branches: the Legislature; the judiciary; and administrative agencies, which

11
Id. at 60.

12
SBC Michigan v Pub Service Comm, 480 Mich 977 (2007).

13
City of Taylor v Detroit Edison Co, 475 Mich 109, 115; 715 NW2d 28

(2006).

6

are part of the executive branch.14 Thus, separation of powers principles will aid in

the analysis of the proper consideration due an administrative agency’s

interpretation of a statute.

The people of the state of Michigan have divided the powers of their

government “into three branches: legislative, executive and judicial.”15

Furthermore, “[n]o person exercising the powers of one branch shall exercise

powers properly belonging to another branch except as expressly provided in this

constitution.”16

“The legislative power of the State of Michigan is vested in a senate and a

house of representatives.”17 Simply put, legislative power is the power to make

laws.18 In accordance with the constitution’s separation of powers, this Court

“cannot revise, amend, deconstruct, or ignore [the Legislature’s] product and still

be true to our responsibilities that give our branch only the judicial power.”19

While administrative agencies have what have been described as “quasi-

14
Straus v Governor, 459 Mich 526, 535; 592 NW2d 53 (1999).

15
Const 1963, art 3, § 2.

16
Id.

17
Const 1963, art 4, § 1.

18
“It is the legislators who establish the statutory law because the

legislative power is exclusively theirs.” Cameron v Auto Club Ins Ass’n, 476
Mich 55, 65; 718 NW2d 784 (2006).
19
Id. at 65-66.

7

legislative” powers, such as rulemaking authority, these agencies cannot exercise

legislative power by creating law or changing the laws enacted by the

Legislature.20

Since the time of Marbury v Madison,21 interpreting the law has been one

of the defining aspects of judicial power. “Although we may not usurp the

lawmaking function of the legislature, the proper construction of a statute is a

judicial function, and we are required to discover the legislative intent.”22

Administrative agencies exercise what have been described as “quasi-judicial”

powers.23 However, such power is limited and is not an exercise of constitutional

“judicial power.” The primary “judicial” function exercised by administrative

agencies is confined to conducting contested cases, like the one at issue here.

These administrative contested cases resemble trials. Constitutionally and

statutorily, these administrative fact finding exercises are entitled to a degree of

20
While rulemaking has legislative qualities, the power must be exercised
pursuant to valid enabling legislation that does not improperly delegate
“legislative” authority. Taylor v Gate Pharmaceuticals, 468 Mich 1, 10 n 9; 658
NW2d 127 (2003).
21
5 US (1 Cranch) 137; 2 L Ed 60 (1803).
22
Webster v Rotary Electric Steel Co, 321 Mich 526, 531; 33 NW2d 69
(1948) (internal citations omitted). See also Kelly v Secretary of State, 293 Mich
530, 533; 292 NW 479 (1940) (“[I]n the final analysis the construction of a statute
still remains in the judicial branch of our government.”).
23
Const 1963, art 6, § 28.

8

deference defined by statute and our constitution.24 However, fact finding in an

administrative contested case, much like in a trial before a circuit court, is a far

different endeavor than construing a statute.

I. REVIEW OF AN ADMINISTRATIVE AGENCY’S INTERPRETATION OF
A STATUTE

With these separation of powers principles in mind, we now turn to the

proper standard, under Michigan law, for reviewing an agency’s construction of a

statute.

A. MICHIGAN JURISPRUDENCE

Unlike the United States Constitution, the Michigan Constitution

specifically recognizes administrative agencies. Furthermore, the constitution

explicitly provides for judicial review of administrative decisions:

All final decisions, findings, rulings and orders of any
administrative officer or agency existing under the constitution or by
law, which are judicial or quasi-judicial and affect private rights or
licenses, shall be subject to direct review by the courts as provided
by law. This review shall include, as a minimum, the determination
whether such final decisions, findings, rulings and orders are
authorized by law; and, in cases in which a hearing is required,
whether the same are supported by competent, material and
substantial evidence on the whole record. Findings of fact in
workmen’s compensation proceedings shall be conclusive in the
absence of fraud unless otherwise provided by law.

In the absence of fraud, error of law or the adoption of wrong
principles, no appeal may be taken to any court from any final

24
Const 1963, art 6, § 28. See also MCL 462.26(8).

9

 agency provided for the administration of property tax laws from
any decision relating to valuation or allocation.[25]

The constitutional provision provides for review to determine: (1) that the decision

is authorized by law, and (2) if a hearing is required, that the decision is supported

by record evidence.26 However, the provision does not stand for the proposition

that agencies can assume this Court’s constitutional role as the final arbiter of the

meaning of a statute.

Before evaluating the standard of review applicable to an agency’s

interpretation of a statute, it is helpful to delineate the agency functions not at

issue in this case. This distinction is important because there are different

standards of review for different agency functions. As noted earlier, agencies

perform both “quasi-legislative” and “quasi-judicial” functions. First, there is the

rulemaking function. A reviewing court must determine whether the Legislature,

25
Const 1963, art 6, § 28.
26
The constitutional convention that drafted our constitution explained the
purpose of this provision in its “Address to the People”:

This is a new section recognizing the increased significance
assumed by administrative law in the legal system of the state in
recent years. It provides that decisions, findings, rulings and orders
of administrative officers or agencies which affect private rights be
subject to judicial review.

Excepted in the section are findings of fact in workmen’s
compensation proceedings. These findings would be conclusive in
the absence of fraud, unless otherwise provided by law. Also
excepted are appeals of certain decision of agencies dealing with
administration of property tax laws. [2 Official Record,
Constitutional Convention 1961, p 3389.]

10

in accordance with the separation of powers principles discussed, properly

delegated authority to the agency to promulgate the rule at issue.27 That question

concerns the constitutionality of the statute, a legal issue that this Court reviews de

novo.28 If the Legislature has properly delegated the rulemaking authority, then

the only question before the court is whether the agency “has exceeded its

authority granted by the statute.”29

The other agency function not at issue in this case is fact finding in

contested cases. The constitution requires that such agency findings be “supported

by competent, material and substantial evidence on the whole record.”30 Review

of an administrative agency’s fact finding is akin to an appellate court’s review of

a trial court’s findings of fact in that an agency’s findings of fact are entitled to

deference by a reviewing court. In its fact finding capacity, the agency has

reviewed evidence, such as witness testimony, and it is in the best position to

evaluate the credibility and weight of that evidence. Similar to the clear error

standard of review for circuit courts, under the constitutional and statutory

standards of review, a reviewing court must ensure that the finding is supported by

record evidence; however, the reviewing court does not conduct a new evidentiary

27
Gate Pharmaceuticals, supra at 10 n 9.

28
Id. at 5.

29
Dep’t of Natural Resources v Seaman, 396 Mich 299, 314; 240 NW2d

206 (1976).
30
Const 1963, art 6, § 28.

11

hearing and reach its own factual conclusions, nor does the reviewing court

subject the evidence to review de novo.31

Keeping these other administrative functions distinct from review of an

agency’s interpretation of a statute during a contested case is very important to

ensure that the appellate court applies the proper standard of review. A review of

our own cases suggests that when courts are unmindful of these differing

functions, they also tend to muddle the distinct standards of review that apply to

each. This Court has uniformly held that statutory interpretation is a question of

law that this Court reviews de novo.32 Thus, concepts such as “abuse of

discretion” or “clear error,” which are similar to the standards of review applicable

to other agency functions, simply do not apply to a court’s review of an agency’s

construction of a statute.

Nonetheless, the Court of Appeals panel in this case did not apply a de

novo standard of review when assessing the PSC’s interpretation of MCL

484.2502(1)(a). While there are some opinions that seem to stand for the

proposition that agency statutory interpretations are reviewed for “reasonableness”

31
Viculin v Dep’t of Civil Service, 386 Mich 375, 392; 192 NW2d 449
(1971).
32
See, e.g., Kaiser v Allen, 480 Mich 31, 35; 746 NW2d 92 (2008); Brown
v Detroit Mayor, 478 Mich 589, 593; 734 NW2d 514 (2007); Coblentz v Novi, 475
Mich 558, 567; 719 NW2d 73 (2006); City of Taylor, supra at 115; and In re MCI
Telecom Complaint, 460 Mich 396, 413; 596 NW2d 164 (1999).

12

or an “abuse of discretion,”33 those standards do not apply to the interpretation of a

statute, and they threaten the separation of powers principles discussed earlier by

allowing the agency to usurp the judiciary’s constitutional authority to construe

the law and infringe on the Legislature’s lawmaking authority.

However, “[w]e acknowledge that our past case law has not been entirely

consistent regarding the subject of the amount of deference to be given when an

administrative agency with expertise in its field construes a statute governing the

area regulated by the agency.”34 We believe that this is due in large part to the

Court’s failure consistently to use the same articulation of the proper standard of

review for an agency’s interpretation of a statute and to carefully apply the correct

standards of review for different types of agency action.

This Court announced the proper standard of review for agency statutory

construction more than 70 years ago in Boyer-Campbell v Fry,35 which dealt with

the proper construction of the General Sales Tax Act. The Boyer-Campbell Court

held that

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

33
See Champions Auto Ferry, Inc v Pub Service Comm, 231 Mich App
699, 707-708; 588 NW2d 153 (1998); In re MCI Telecom Complaint, supra at
427.
34
In re MCI Telecom Complaint, supra at 424 n 4.
35
271 Mich 282; 260 NW 165 (1935).

13

 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.[36]

This standard requires “respectful consideration” and “cogent reasons” for

overruling an agency’s interpretation. Furthermore, when the law is “doubtful or

obscure,” the agency’s interpretation is an aid for discerning the Legislature’s

intent. However, the agency’s interpretation is not binding on the courts, and it

cannot conflict with the Legislature’s intent as expressed in the language of the

statute at issue.

Boyer-Campbell remains good law, and it has been used repeatedly by this

Court.37 However, in some of our later cases, this Court and the Court of Appeals

have employed recitations of standards that do not follow the language of Boyer-

Campbell or apply to review of agency’s statutory construction. While these

recitations do not necessarily substantively conflict with Boyer-Campbell, they

36
Id. at 296-297 (internal citations and quotation marks omitted).
37
See Howard Pore, Inc v State Comm’r of Revenue, 322 Mich 49, 66; 33
NW2d 657 (1948); Gen Motors Corp v Erves, 395 Mich 604, 621; 236 NW2d 432
(1975) (Coleman, J.) (“It is the responsibility of the judiciary to interpret
legislative intent and this responsibility cannot be delegated. We agree with the
Court of Appeals that consideration should be afforded to the [agency]
interpretation of this section. We cannot abdicate our ultimate responsibility.”);
Id. at 639-640 (Williams, J.).

14

add to the confusion discussed earlier.38 For example, in Ludington Service Corp

v Acting Comm’r of Ins, this Court affirmed the Court of Appeals decision to

overturn one portion of the agency’s decision because the agency relied on an

interpretation of a statute that conflicted with the statute’s plain meaning. 39 First,

the Court reversed a number of the agency’s factual determinations because they

were not supported by “competent, material, and substantial evidence.”40 The

Court then turned to the statutory interpretation question and used the following

standard of review in reaching that conclusion:

Finally, while this Court affords deference to an agency’s
findings of fact, we can always review an agency’s legal findings.
Both the Michigan Constitution and the applicable statute permit this
Court to set aside the commissioner’s findings if they are in violation
of the constitution or a statute, or affected by other substantial and
material error of law.[41]

38
Justice Kelly cites this statement for the conclusion that this opinion does
not accomplish anything other than assign a specific name to the standard of
review. However, as discussed later in this opinion, some lower courts, such as
the panel in this case, have relied on one of these varying standards to give nearly
unfettered deference to an agency’s interpretation of a statute. The definitions
cited by Justice Kelly show how such an error could occur. For instance, the first
definition of “deference” is “respectful yielding to the opinion . . . of another . . . .”
Post at 5 n 9 (emphasis added). “Yielding” provides much more weight to an
agency’s interpretation than the “respectful consideration” to which such
interpretations are entitled.
39
444 Mich 481, 497-498 and 498 n 23; 511 NW2d 661 (1994) (emphasis
added).
40
Id. at 493-494, 496-497, and 503.
41
Id. at 503 (quotation marks omitted).

15

To that end, the Court held that “although this Court affords an agency some

statutory deference, the agency’s interpretation is not binding on this Court, and

cannot be used to overcome the statute’s plain meaning.”42 This standard does not

directly conflict with Boyer-Campbell because the plain meaning of the statute

still controlled the outcome; however, by referring to “deference” with regard to

both the agency’s fact finding and its statutory interpretation, the Court sowed the

seeds of confusion.

Another example of a confusing articulation of the standard is illustrated in

Adrian School Dist v Michigan Pub School Employee Retirement Sys,43 where this

Court held that “[t]he agency must interpret the statute it administers, and its

interpretations are entitled to great weight.” The case cited for this proposition,

Magreta v Ambassador Steel Co,44 did not actually use the words “great weight,”

but, rather, quoted the general Boyer-Campbell standard discussed earlier. While

the Adrian School Dist Court independently construed the statute, by employing a

term such as “great weight,” this Court again allowed for the possibility that the

judiciary must defer to the agency’s interpretation of the statute.

42
Id. at 505 (quotation marks and emphasis omitted).
43
458 Mich 326, 336; 582 NW2d 767 (1998).
44
380 Mich 513, 519; 158 NW2d 473 (1968).

16

 A similar blurring of standards occurred in Catalina Marketing Sales Corp

v Dep’t of Treasury,45 in which this Court held that, while it “affords deference to

the construction of statutory provisions by any particular department of the

government and used for a long period, the department’s interpretation is not

binding on this Court and cannot be used to overcome the statute’s plain meaning

. . . .” Catalina adds the concept of deference to longstanding agency

interpretations to the general deference referenced in Ludington.46 Like

Ludington, Catalina recognizes the fundamental requirement that the statute’s

plain meaning controls.47 Furthermore, the Court rejected the agency’s

interpretation because it conflicted with the plain meaning.

Because this Court’s decisions that used imprecise language still made clear

that the plain language of the statute was the controlling legal consideration, the

varying deference standards articulated in them seem to have had negligible

45
470 Mich 13, 23-24; 678 NW2d 619 (2004) (internal quotation marks
omitted).
46
This case does not concern a longstanding interpretation of a statute.
Thus, this aspect of Catalina is not before the Court. We note that the Court’s
reluctance to overrule longstanding agency interpretations may stem from the
prudential concerns, such as reliance interests, discussed in Robinson v Detroit,
462 Mich 439, 463-468; 613 NW2d 307 (2000), with regard to the doctrine of
stare decisis. However, we reserve decision on this issue until we are presented
with a case that requires consideration of a longstanding agency interpretation in
which reliance issues are at stake.
47
See also Czymbor’s Timber, Inc v Saginaw, 478 Mich 348, 356; 733
NW2d 1 (2007) (“[W]hile the DNR’s interpretation of the statute is given some
measure of deference, its construction cannot conflict with the plain language of
the statute . . . .”).

17

outcome determinative effect. However, by employing words such as

“deference,” which can imply that the judiciary must accede to the agency’s

interpretation of a statute, this Court has unmistakably added to the confusion in

this area of the law. 48

Given this Court’s difficulty to hew to the correct standard it set forth in

Boyer-Campbell, the Court of Appeals has understandably relied on some of the

confusing articulations of standards made by this Court and thereby used the

erroneous “deference” or “great weight” standard to allow agencies improperly to

assume the courts’ role as the final arbiter of a statute’s meaning. For instance, the

Court of Appeals panel in this case quoted In re Michigan Cable Telecom Ass’n

Complaint49 for the proposition that

[a]s a general rule, we will defer to the construction placed on a
statute by the governmental agency charged with interpreting it,
unless the agency interpretation is clearly erroneous. An agency’s
initial interpretation of new legislation is not entitled to the same
measure of deference as is a longstanding interpretation. However,
merely establishing that another interpretation of a statute is
plausible does not satisfy a party’s burden of proving by clear and
convincing evidence that the PSC’s interpretation is unlawful or
unreasonable.

48
The order granting leave to appeal in this case is also an example of this
confusion because we asked the parties to address “whether the commission
abused its discretion in applying this statutory provision to a carrier’s diagnostic
mistakes.” SBC Michigan v Pub Service Comm, 480 Mich 977 (emphasis added).
49
239 Mich App 686, 690; 609 NW2d 854 (2000) (emphasis added).

18

This hybrid “standard of review” is a prime example of the mixing and matching

of the standards of review applicable to the different functions of an agency.

Relying on this muddled and unduly deferential “standard,” the panel acceded to

an agency interpretation that the panel believed to be contrary to the plain meaning

of the statute. When considering an agency’s statutory construction, the primary

question presented is whether the interpretation is consistent with or contrary to

the plain language of the statute. While a court must consider an agency’s

interpretation, the court’s ultimate concern is a proper construction of the plain

language of the statute.

By using a deferential standard inconsistent with Boyer-Campbell, the

panel below abdicated its judicial authority to construe statutes. By acceding to the

agency’s interpretation, the panel gave greater consideration to the agency’s

interpretation than it would have given a circuit judge’s construction. Given that

statutory construction is the domain of the judiciary, it is hard to imagine why a

different branch’s interpretation would be entitled to more weight than a lower

court’s interpretation. As established in Boyer-Campbell, the agency’s

interpretation is entitled to respectful consideration and, if persuasive, should not

be overruled without cogent reasons. Furthermore, the agency’s interpretation can

be particularly helpful for “doubtful or obscure” provisions. But, in the end, the

agency’s interpretation cannot conflict with the plain meaning of the statute.

“Respectful consideration” is not equivalent to any normative

understanding of “deference” as the latter term is commonly used in appellate

19

decisions. To avoid further confusion, courts should rely on the Boyer-Campbell

articulation of the standard of review for an agency’s interpretation of a statute

instead of more recent cases, which have erroneously introduced inappropriate

concepts such as “deference.” Furthermore, courts should carefully separate the

different agency functions under consideration and apply the proper standard of

review for each.

B. A NOTE ON THE FEDERAL CHEVRON50 DEFERENCE DOCTRINE

Some have urged that this Court adopt the Chevron deference doctrine,

which federal courts use to review agency interpretations.51 The Chevron test

requires the court to make two inquiries. First, the court must consider “whether

Congress has directly spoken to the precise question at issue.”52 This inquiry may

be dispositive because “[i]f the intent of Congress is clear, that is the end of the

matter; for the court, as well as the agency, must give effect to the unambiguously

expressed intent of Congress.”53 The separation of powers principles discussed

above provide the basis for this inquiry and result because “[t]he judiciary is the

50
Chevron USA Inc v Natural Resources Defense Council, Inc, 467 US
837; 104 S Ct 2778; 81 L Ed 2d 694 (1984).
51
However, there are other standards that may apply in certain
circumstances. See Skidmore v Swift & Co, 323 US 134; 65 S Ct 161; 89 L Ed
124 (1944), and Auer v Robbins, 519 US 452, 461-463; 117 S Ct 905; 137 L Ed 2d
79 (1997).
52
Chevron, supra at 842.
53
Id. at 842-843.

20

final authority on issues of statutory construction and must reject administrative

constructions which are contrary to clear congressional intent.”54

However, “if the statute is silent or ambiguous with respect to the specific

issue, the question for the court is whether the agency’s answer is based on a

permissible construction of the statute.”55 The Chevron test for the permissibility

of the agency’s construction differs slightly depending on whether Congress

explicitly or implicitly delegated authority to the agency “to fill any gap” left by

Congress. “If Congress has explicitly left a gap for the agency to fill, there is an

express delegation of authority to the agency to elucidate a specific provision of

the statute by regulation.”56 An explicit delegation largely refers to the authority

bestowed by Congress upon agencies to promulgate rules to enforce a statute.57

54
Id. at 843 n 9.
55
Id. at 843.
56
Id. at 843-844.
57
See United States v Morton, 467 US 822, 834; 104 S Ct 2769; 81 L Ed 2d
680 (1984) (“Congress authorized the promulgation of ‘regulations for the
implementation of the provisions of section 659,’ 42 U.S.C. § 661(a).”); Schweiker
v Gray Panthers, 453 US 34, 43; 101 S Ct 2633; 69 L Ed 2d 460 (1981)
(“Congress conferred on the Secretary exceptionally broad authority to prescribe
standards for applying certain sections of the Act.”); and Batterton v Francis, 432
US 416, 425; 97 S Ct 2399; 53 L Ed 2d 448 (1977) (“Congress in § 407(a)
expressly delegated to the Secretary the power to prescribe standards for
determining what constitutes “unemployment” for purposes of [Aid to Families
with Dependent Children-Unemployed Fathers] eligibility.”).

21

On the other hand, an implicit delegation arises when the legislation does not

address a specific factual situation or where the statute is ambiguous.58

If Congress has given the agency an explicit delegation, then the

“regulations are given controlling weight unless they are arbitrary, capricious, or

manifestly contrary to the statute.”59 When the delegation is implicit, “a court may

not substitute its own construction of a statutory provision for a reasonable

interpretation made by the administrator of an agency.”60 To that end, the

Supreme Court has “recognized that considerable weight should be accorded to an

executive department’s construction of a statutory scheme it is entrusted to

administer, and the principle of deference to administrative interpretations.”61

58
See Immigation & Naturalization Service v Jong Ha Wang, 450 US 139,
144; 101 S Ct 1027; 67 L Ed 2d 123 (1981) (“The crucial question in this case is
what constitutes ‘extreme hardship.’ These words are not self-explanatory, and
reasonable men could easily differ as to their construction.”), and Train v Natural
Resources Defense Council, Inc, 421 US 60, 87; 95 S Ct 1470; 43 L Ed 2d 731
(1975) (“We therefore conclude that the Agency’s interpretation of §§ 110(a)(3)
and 110(f) was ‘correct,’ to the extent that it can be said with complete assurance
that any particular interpretation of a complex statute such as this is the ‘correct’
one.”).
59
Chevron, supra at 844.
60
Id.
61
Id.

22

 While the Chevron inquiries are comparatively simple to describe, they

have proven very difficult to apply.62 This Court has never adopted Chevron for

review of state administrative agencies’ statutory interpretations, and we decline to

adopt it now.63 The vagaries of Chevron jurisprudence do not provide a clear road

map for courts in this state to apply when reviewing administrative decisions.

Moreover, the unyielding deference to agency statutory construction required by

Chevron conflicts with this state’s administrative law jurisprudence and with the

separation of powers principles discussed above by compelling delegation of the

judiciary’s constitutional authority to construe statutes to another branch of

government. For these reasons, we decline to import the federal regime into

Michigan’s jurisprudence.

II. PROPER INTERPRETATION OF MCL 484.2502(1)(a)

Having determined that agencies’ constructions of statutes are entitled to

respectful consideration, but are not binding on courts and cannot conflict with the

plain language of the statute, we now turn to review § 2502(1)(a), which provides:

(1) A provider of a telecommunication service shall not do
any of the following:

62
Andersen, Against Chevron – a modest proposal, 56 Admin L R 957, 960
(2004) (footnotes omitted) (“The confusions extend to very basic questions, such
as when the doctrine applies, how to distinguish its two steps from each other, and
how to distinguish the test from other commonly used tests of agency action.”).
63
However, this Court has approvingly cited Chevron in the past. See, e.g.,
Empire Iron Mining Partnership v Orhanen, 455 Mich 410, 416; 565 NW2d 844
(1997).

23

 (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.

The critical question here was the meaning of “false” and, thus, whether

this statute penalized merely factually inaccurate statements, as the PSC

concluded, or whether “false” includes a requirement that the inaccuracy be

intentionally communicated. Importantly, the PSC did not actually provide an

analysis for its “construction” of the statutory language. In its February 25, 2002,

order, the PSC discussed the parties’ arguments concerning this section. The

hearing referee had found that the “inaccuracies” at issue stemmed from the

difficulties inherent in diagnosing the problem experienced by the SBC customers.

SBC argued that the “misdiagnosis” in this case was not the type of activity

proscribed by the statute and the hearing referee agreed. The customers and the

PSC staff contrarily argued that any untrue statement was subject to the statutory

sanctions. The PSC agreed with the customers and the PSC staff, rejecting the

hearing referee’s application of the statute. In reaching that conclusion, the PSC

first discussed three facts: (1) when the customers reported the problem, SBC’s

automated system informed them that they would only be charged for problems

with inside wiring; (2) the technician, without entering the customers’ house,

informed the customers that the problem was inside and that the customers owed

$71; and (3) the customers received an invoice for $71 from SBC’s automated

billing process, even though SBC had determined that the problem was with the

24

outside wiring. The PSC then concluded that, “[b]ased on these facts, the

company’s statements to [the customers] on April 3 and 4, 2001 were false,” and

therefore, SBC violated § 2502(1)(a). However, the PSC did not conclude that the

false statements were intended to deceive.64

In reaching this conclusion, the PSC did not analyze the language of the

statute, nor did it provide a rationale for its unexplained conclusion that the

statutory term “false” meant “untrue” or “incorrect.” The PSC’s bald assertion

that SBC violated the statute is not a “construction” of the statute. Therefore,

under the Boyer-Campbell standard, there is little here for any reviewing court to

“respectfully consider.” The PSC, having failed to offer a construction of its own

that would warrant any consideration, requires that we provide, as the panel below

should have provided, an interpretation of the plain language of the statute.

The Court of Appeals acknowledged that “false” has multiple meanings,

and the panel listed the following definitions:

“1. not true or correct; erroneous; wrong: a false statement.
2. uttering or declaring what is untrue; lying: a false witness. 3. not
faithful or loyal; treacherous; hypocritical: a false friend. 4. tending
to deceive or mislead; deceptive: a false impression . . . .”[65]

64
Justice Kelly is correct that the PSC held that this was not a case of
“simple misdiagnosis.” However, the PSC did not rule, as Justice Kelly would,
that “[t]hese statements were made with at least a reckless disregard of their truth
or falsity.” Post at 9.
65
SBC Michigan, supra at 2, quoting Random House Webster’s College
Dictionary (1997), p 469.

25

The panel indicated that it favored the “tending to deceive or mislead” fourth

definition because of the statutory context. Furthermore, the panel stated that it

found insufficient evidence in the record to support an intent by SBC to mislead its

customers. However, relying on an erroneous standard of review, the panel

upheld the decision of the PSC because the agency’s interpretation “was quite

literal and certainly not unlawful or unreasonable.”

By ignoring the statutory context, the PSC’s implicit interpretation of

“false” was erroneous. “As a general matter, words and clauses will not be

divorced from those which precede and those which follow. When construing a

series of terms . . . we are guided by the principle that words grouped in a list

should be given related meaning.”66 In other words, this Court applies the doctrine

of noscitur a sociis, which “stands for the principle that a word or phrase is given

meaning by its context of setting.”67

The statute prohibits telecommunications providers from making “a

statement or representation . . . that is false, misleading, or deceptive.”68 The

context of the word “false” is the key to determining which of the multiple

definitions of that term the Legislature intended, and the other related statutory

66
Griffith v State Farm Mut Auto Ins Co, 472 Mich 521, 533; 697 NW2d
895 (2005) (internal citations and quotation marks omitted).
67
Koontz v Ameritech Services, Inc, 466 Mich 304, 318; 645 NW2d 34
(2002) (citations and quotation marks omitted).
68
MCL 484.2502(1)(a).

26

terms—”misleading” and “deceptive”—provide that context. “Mislead” means

“1. to lead or guide in the wrong direction. 2. to lead into error of conduct,

thought, or judgment; lead astray,”69 and “deceive” means “to mislead by a false

appearance or statement; trick.”70 Thus, both “mislead” and “deceive” require the

perpetrator intentionally to trick or lead astray his or her victim. These definitions

provide insight into which “related meaning” of “false” the Legislature intended.

The definition of “false” that has a related meaning to the other descriptive

statutory terms is the fourth definition cited by the Court of Appeals: “tending to

deceive or mislead; deceptive.” Thus, a mere mistaken communication would be

insufficient to make a “false” statement penalized under this statute. The fact that

the SBC’s technician’s statement was simply “untrue” or that a bill mistakenly

sent in reliance on the technician’s incorrect diagnosis constitute insufficient proof

to establish falsity required by the statute.71

69
Random House Webster’s College Dictionary (1997). “Misleading”
simply means “tending to mislead; deceptive.” Id.
70
Id. The statutory word “deceptive” means “likely to deceive; capable of
deception.” Id.
71
In its brief, the PSC suggests that § 2502(1)(a) is a strict liability
provision. To support its position, the PSC points to MCL 484.2506(3), which
provides for a “bona fide error” exception to MCL 484.2505 and 484.2507, and
reasons that the lack of such an exception in § 2502(1)(a) means that the
Legislature intended to punish mere mistakes under that section. MCL
484.2505(1) provides that “[a]n end user of a telecommunications provider shall
not be switched to another provider without the authorization of the end user.”
MCL 484.2507(1) provides that “[a] telecommunications provider shall not
include or add optional services in an end-user’s telecommunications service
(continued…)

27

 Thus, we conclude that only statements that are intentionally false qualify

as violations of the statute, and the Court of Appeals statutory construction

determination and the PSC’s conclusion that a statutory violation occurred must be

reversed.

III. THE PROPRIETY OF THE COURT OF APPEALS REMAND ORDER

In its first opinion, the Court of Appeals held that the remedy provision of

the PSC’s February 25, 2002, order was ambiguous and remanded for

clarification. The Court was unsure whether the PSC required SBC to enter each

customer’s home to verify that the problem stemmed from wiring inside the

customer’s home. On remand, the PSC ruled:

The Commission should clarify the discussion section of its
February 25, 2002 order to indicate that SBC need not enter a
customer’s premises every time that SBC is called upon to make a
service trip, but that it may not impose charges to recover the cost of
services it provides to inspect, diagnose, and repair malfunctions
covered by its tariff obligation, including the cost of conducting
routine physical checks of its own facilities, in response to
complaints or inquiries, if those services are reasonably necessary to
diagnose problems attributable to its own facilities or exclude those
facilities as a possible cause of service disruptions.[72]

(…continued)

package without the express oral or written authorization of the end-user.” The

problem with the PSC’s analysis is that, as discussed above, the plain language of

§ 2502(1)(a) does not prohibit mere mistakes or “bona fide errors.” Therefore, it

would be unnecessary for the Legislature to provide such an exception to §

2502(1)(a).

72
Order of the PSC, August 1, 2005 (Case No. U-13079), p 4 (emphasis in
original).

28

 In its second opinion, the Court of Appeals cited federal authority73 for the

proposition that states were generally precluded from regulating services provided

by telephone companies for “inside wiring.” However, states are free to regulate

the telephone companies’ networks or “outside wiring.” On the basis of these

principles, the panel took issue with the portion of the order directing “SBC not to

impose charges for services that ‘exclude [SBC’s] facilities as a possible cause of

service disruptions.’”74 The Court held that this sentence violated the federal

regulations because “a correct determination by SBC excluding its facilities as the

cause of service disruption inherently constitutes a correct determination that the

disruption was caused by the customer’s inside wiring.”75 The panel remanded to

the PSC to remove any regulation of “inside wiring,” including fees attributable to

correct determinations that the problem originated with the customer’s inside

wiring.

The parties agree that SBC cannot charge for services performed for

“outside wires” and that the PSC cannot regulate services on “inside wiring.” The

issue is whether the PSC’s August 1, 2005, order is a permissible regulation of

“outside wires” or an impermissible regulation of “inside wires.” We agree with

73
In re Rovas Complaint, supra at 59, citing Detariffing the Installation &
Maintenance of Inside Wiring, 51 Fed Reg 8,498, 8,499 (March 12, 1986), & In re
Detariffing the Installation and Maintenance of Inside Wiring, 7 FCC Rec 1,334,
1,339 (November 21, 1991).
74
In re Rovas Complaint, supra at 60.
75
Id.

29

the Court of Appeals that, to the extent the order prohibits SBC from charging for

services associated with a problem caused by inside wiring, it is improper. While

SBC may have to inspect its outside wires to confirm that a problem is with the

customer’s inside wiring, the fact remains that if the problem is with the inside

wiring, then SBC had to make a service call for an inside wiring problem. The

PSC cannot regulate that service and must amend its order to eliminate that

improper regulation.

CONCLUSION

With today’s decision, we reaffirm the Boyer-Campbell standard of review,

which provides a longstanding and clear standard for appellate courts to apply to

an administrative agency’s interpretation of a statute. In accordance with

separation of powers principles and this Court’s older cases, we hold that agency

interpretations are entitled to respectful consideration, but they are not binding on

courts and cannot conflict with the plain meaning of the statute. While the

agency’s interpretation may be helpful in ascertaining the legislative intent, courts

may not abdicate to administrative agencies the constitutional responsibility to

construe statutes. Giving uncritical deference to an administrative agency would

be such an improper abdication of duty.

Applying the proper standard to the statute at issue in this case, the PSC’s

interpretation is erroneous, as was the panel’s undue deference to that

construction. The Court of Appeals alternative interpretation (which it did not

adopt) represents the proper interpretation of this statute. Under the appropriate

30

interpretation of the statute, merely incorrect statements made with no intent to

deceive are not subject to sanctions. Additionally, the PSC must modify its order

to incorporate a correct construction of the statute and eliminate any regulation of

inside wiring.

Robert P. Young, Jr.
Clifford W. Taylor
Maura D. Corrigan
Stephen J. Markman

31

 STATE OF MICHIGAN

SUPREME COURT

In re COMPLAINT OF ROVAS AGAINST
SBC MICHIGAN
_____________________________________

SBC MICHIGAN,

Plaintiff-Appellant,

v No. 134493

PUBLIC SERVICE COMMISSION,

Defendant-Appellee.

SBC MICHIGAN,

Plaintiff-Appellee,

v No. 134500

PUBLIC SERVICE COMMISSION,

Defendant-Appellant.

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 interpretations 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(1)(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

1
Ante at 19.
2
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.

2

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 learning 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:

3
Boyer-Campbell Co v Fry, 271 Mich 282; 260 NW 165 (1935).
4
Ante at 13-19.

3

 Legislative resolutions are not law, although they are 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]

The 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.

5
Boyer-Campbell, 271 Mich at 296-297 (emphasis added; internal citations
omitted).
6
Id. at 300.
7
Ante at 17.
8
Ante at 17-18.

4

 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 a properly applied standard of review, an agency’s statutory

interpretation is 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(1)(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

9
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 15 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 be persuaded to ignore the interpretations entirely. That is
precisely what happened in this case.
10
Ante at 25.

5

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 the PSC interpreted

MCL 484.2502(1)(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

11
“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).
12
Ante at 25-26.
13
Ameritech Michigan v Pub Service Comm, unpublished opinion per
curiam of the Court of Appeals, issued June 17, 2004 (Docket No. 244742), p 2.
14
Ante at 25. 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
(continued…)

6

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

(…continued)

innocent mistakes. The strict liability argument that it advanced in this Court was

not made before the PSC.

15
Ante at 25, 28.
16
Ante at 27 and nn 69 & 70.
17
“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 be construed
and understood according to such meaning.” People v Law, 459 Mich 419, 425 n
8; 591 NW2d 20 (1999), citing MCL 8.3a.

7

construed so as not to abolish by implication “well-settled common-law

principles.”18

Black’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

18
Marquis v Hartford Accident & Indemnity (After Remand), 444 Mich
638, 652; 513 NW2d 799 (1994).
19
Black’s Law Dictionary (7th ed).
20
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).

8

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.

The 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

9

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 origin 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

21
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 25 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.

10

substantial evidence on the whole record.”22 If supported by such evidence, they

are entitled to deference, as the majority concedes.23

The 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

22
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).]
23
Ante at 11.
24
Ameritech Michigan, supra at 2.
25
Id. at 3.
26
In re Complaint of Rovas Against Ameritech Michigan, 276 Mich App
55, 63; 740 NW2d 523 (2007).

11

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 sophisticated

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

27
The complainants were William and Sandra Rovas, but only William
Rovas testified at the hearing before the hearing referee.
28
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 Code 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.

12

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.

SBC 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

29
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.

13

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.

First, 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

14

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 never

15

identified the precise cause of the problem in this case and ultimately connected

the Rovases to a new telephone line.

But because 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

16

fee, nor did it match the technician’s diagnosis with the problem of which the

consumer complained.

If 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

17

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 remanded 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

30
In re Complaint of Rovas, 276 Mich App at 66.
31
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.

18

“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

reciting 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.

32
Boyer-Campbell, 271 Mich at 296 (quotation and citation omitted).
33
Owosso Bd of Ed v Goodrich, 208 Mich 646, 652; 175 NW 1009 (1920).
34
Id. (emphasis added).

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 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 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 misinterpreted 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.

Marilyn Kelly
Michael F. Cavanagh
Elizabeth A. Weaver

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