Key Points

  • Before Resolution T-17687 in March 2020, General Order 153 did not give TC Telephone fair notice that it could not seek per-minute reimbursement for untimed LifeLine calls.
  • The portions of Decisions 25-03-011 and 25-08-025 finding improper per-minute reimbursement, and findings arising from that determination, are annulled; all other portions remain valid.
  • The Commission's finding that TC Telephone improperly sought reimbursement for calls above the 60-call threshold stands because the carrier did not carry its burden on that issue.
  • Commission staff's e-mails, a 2019 letter, and the resolution's 'going forward' language showed staff itself did not know the practice was barred, and the Commission's position that staff advice does not bind it was immaterial to fair notice.
  • The Commission may recalculate the repayment amount on remand to the extent allowed by law; the court did not reach the interest award or TC Telephone's retroactivity arguments.

A California appeals court has annulled the state Public Utilities Commission's finding that a now-defunct phone carrier improperly billed a low-income telephone subsidy program by the minute. The court held that the commission's rules never told the carrier the practice was forbidden until the agency barred it in March 2020.

A three-justice panel of the Fourth Appellate District, Division Three, ruled for TC Telephone, which the commission had ordered to repay $8,157,469.39 in reimbursements collected between January 2018 and March 2020, plus $1,631,494 in interest. Justice Moore wrote the published opinion, joined by Presiding Justice Motoike and Justice Servino.

The decision sends the case back to the commission, which may recalculate what the carrier owes. The panel first filed the opinion on Sept. 28, and an Oct. 27 order that left the judgment unchanged narrowed the annulment to the portions of the commission's decisions finding improper per-minute billing "and any other findings that arose from this determination." The commission's separate finding that TC Telephone improperly sought reimbursement for calls above a monthly cap survives. "All other portions of the decisions remain valid," the amended opinion states.

The dispute arose from the Universal LifeLine Telephone Service Program, which the commission runs under the Moore Universal Telephone Service Act of 1987 to offer affordable phone service to low-income households. One former LifeLine plan, called measured rate service, gave customers 60 "untimed" local calls a month, meaning they paid no per-minute charges for those calls.

TC Telephone bought telephone service from other carriers and resold it to LifeLine customers, and it paid those carriers by the minute. The commission's General Order 153, which governed the program, let providers recover "lost revenue from untimed calls associated with . . . LifeLine Measured Rate Service." The order did not say how that lost revenue was to be calculated.

In 2013, the company asked commission staff for guidance. A staff member answered that "the rules are not always clear," said staff could not supply specific rules because "the Commission's decisions do not clearly establish policies for staff to follow," and said claims would be processed if the company followed what other carriers did. TC Telephone then billed by the minute for years, and the commission paid the claims.

In July 2019, after the state Department of Finance questioned the carrier's rising claims, staff told the company its method might be wrong. An August 2019 letter from the commission's Communications Division nonetheless said the division would "process payments to [TC Telephone] on a per-minute basis until the Commission addresses in a public process the question of whether an alternative basis should be used." A staff e-mail days later said, "We will continue to approve this until the Commission has a resolution."

On March 26, 2020, the commission adopted Resolution T-17687, which limited reimbursement to a per-call basis. It told staff to calculate reimbursement per call "on a going forward basis." Responding to the Public Advocates Office, which urged the commission to make TC Telephone return the money, staff noted that the resolution "only affects claims on a 'going-forward basis.'" TC Telephone left the market in November 2020.

The commission opened an enforcement proceeding in October 2022. Decision 25-03-011, issued March 13, 2025, found the pre-resolution claims violated the Moore Act and Order 153, reasoning that per-minute billing did not fit the plain meaning of "untimed." It rejected the company's reliance on staff advice, stating that "[t]he guidance of a staffer cannot bind the Commission." The commission denied rehearing in Decision 25-08-025, and TC Telephone petitioned for a writ of review.

The appeals court decided the case on due process grounds and did not reach the company's retroactivity arguments. Under the vagueness doctrine, which bars punishment under rules too unclear to give fair notice of what is prohibited, the court relied on a 2023 appellate ruling that a failure to give a regulated entity fair notice "justifies vacating the imposed punishment resulting from the alleged violation of a regulation."

The panel rejected the commission's reading of "untimed." That reasoning "improperly conflates the nature of the call from the customer's perspective with the service provider's reimbursement," Justice Moore wrote. The word described what customers received, the court said, not the lost revenue a provider could recover.

The staff communications and the resolution's repeated "going forward" language settled the question, the court held. "Since Commission staff did not know whether per-minute reimbursement was prohibited prior to the resolution, TC Telephone cannot fairly be punished for failing to know that the practice was prohibited," Justice Moore wrote.

The commission argued that it had always barred per-minute billing, citing two 1990s commission decisions arising from an audit of Pacific Bell's LifeLine program. "Neither of these decisions addressed per-minute reimbursement," the court wrote. It called the commission's point that staff advice does not bind it "immaterial to the issue we face here: whether TC Telephone had fair notice that it could not seek per-minute reimbursement."

The opinion did not question the 2020 resolution itself. "We do not mean to say that the Commission could not interpret Order 153 to prohibit per-minute reimbursement," Justice Moore wrote. On the calls above the 60-call cap, the court said TC Telephone appeared not to challenge that finding and, to the extent it did, "it has not met its burden."

Lawyers for TC Telephone included Anita Taff-Rice of iCommLaw. Lawyers for the commission included Christine J. Hammond.

On remand, "to the extent allowed by law, the Commission may recalculate the amount TC Telephone must repay consistent with this opinion," the court directed. The panel declined to rule on the company's challenge to the interest award, saying it could not predict what the commission would do on remand, and awarded TC Telephone its costs in the writ proceeding.