******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Kenneth E. Brooten, Jr., ) ) Complainant,) ) v. ) File No. E-96-32 ) AT&T Corp., ) ) Defendant. ) MEMORANDUM OPINION AND ORDER Adopted: August 28, 1997 Released: September 4, 1997 By the Deputy Chief, Common Carrier Bureau: I. INTRODUCTION 1. Before us is a formal complaint ("complaint") filed by Kenneth E. Brooten, Jr. ("Brooten") against AT&T Corp. ("AT&T"), pursuant to Section 208 of the Communications Act of 1934, as amended (the "Act"). Brooten alleges that AT&T violated Section 201(b) of the Act by: (1) "backbilling" up to 160 days after calls were made, and (2) representing that such delayed billing is authorized, for up to two years, by Section 415(a) of the Act. Brooten seeks a ruling declaring AT&T's backbilling unlawful and requiring AT&T to credit his account for the backbilled charges. Additionally, Brooten seeks a declaratory ruling that AT&T's alleged misrepresentation of Section 415(a) was unlawful and that Section 415(a) does not require customers to pay charges backbilled up to two years. For the reasons stated below, we deny the complaint and decline to issue the requested declaratory ruling. II. BACKGROUND 2. Brooten, an attorney, maintains law offices in Winter Park, Florida. AT&T is a communications common carrier that provides domestic and international telecommunications services subject to the Commission's jurisdiction under Title II of the Act. At all times relevant to this proceeding, AT&T provided CustomNet service to three separate locations of Brooten's law offices. Ordinarily, AT&T billed Brooten monthly on a single bill for all calls made during the prior month. Beginning with Brooten's December 1995 invoice, however, and continuing through the March 1996 invoice, AT&T only billed Brooten for the usage at two of his locations. As for the calls made at Brooten's third location between November 1995 and February 1996, AT&T included them on its April 1996 invoice; these backbilled charges totaled $821.07. 3. Brooten disputed the backbilled charges with AT&T beginning on the day he received the latter invoice, April 15, 1996. AT&T responded that the charges were valid but apologized for the delay. Oral and written correspondence between the parties continued during May and June of 1996. In brief, Brooten pressed his claim to AT&T that its late billing had damaged him financially, and AT&T proffered a total of $427.95 in credits to redress any inconvenience associated with its late billing. Dissatisfied, Brooten filed the above-captioned formal complaint with the Commission on June 19, 1996. AT&T filed an answer on August 9, 1996, and Brooten filed a reply on August 26, 1996. The parties also filed other motions, reports, and briefs. III. DISCUSSION A. Backbilling Alleged to Violate Section 201(b) 1. Contentions of the Parties 4. Complainant. Brooten contends that AT&T violated Section 201(b) of the Act by billing him for calls up to 160 days after they were placed. In support, Brooten maintains that billing data are generated "automatically" by the telephone switch and the generation of bills "takes a matter of milliseconds without any appreciable need for human intervention." Brooten adds that AT&T nonetheless concedes that its computer error caused the billing delay, and claims that this delay caused him unrecoverable losses because he is a business customer who "passes through" phone charges to his clients. Moreover, according to Brooten, AT&T knew or should have known that "negligence in the prompt issuance of its bills" would result in unrecoverable losses to him because AT&T has numerous business subscribers who pass through phone charges to clients or customers. In view of these allegations, Brooten avers that AT&T's 160-day billing delay was so far beyond the zone of reasonableness that AT&T's conduct was unjust and unreasonable, per se, under the Bureau's 1989 declaratory ruling that the lawfulness of backbilling is determined pursuant to Section 201(b). Brooten adds that AT&T compounded its unreasonableness by working for several months to correct the problem without warning him that his then-current monthly invoices might be incomplete, and then by merely adding the backbilled calls to his April 1996 invoice without any prior notice. 5. Brooten also maintains that AT&T has the burden of demonstrating that its backbilling was reasonable and failed to do so with "objective" data, i.e., the number of subscribers affected by the defective computer program and a quantitative statement of the resources it devoted to correcting the error. In addition, Brooten contends that AT&T's billing was not reasonable in light of Section 203 of the Act, which requires carriers to collect all lawful, tariffed charges. Brooten avers that the backbilling was unlawful and thus not required by Section 203. Moreover, AT&T's claim that the backbilling was within the scope of Section 203 "must be incorrect," according to Brooten; otherwise AT&T violated Section 203 by issuing him the credits. Brooten also argues at the briefing stage that even if the backbilling was reasonable, it still remains to be determined who should bear the burden of Brooten's loss occasioned by AT&T's conceded error, i.e., "[w]ho pays when a carrier's negligent back-billing causes damages to its customer?" 6. As for damages, Brooten maintains that he had already issued bills to his clients prior to receiving AT&T's April 1996 invoice, which included the delayed billings for some of his November 1995 through February 1996 calls. Thus, according to Brooten, AT&T's backbilling caused him financial harm because he did not "pass through" AT&T's delayed charges when he billed his clients for this time period. Moreover, Brooten states that he cannot backbill his clients and would not do so as a sound business practice. Brooten also requested an award for fees and costs. The record reflects, however, that Brooten declined to further prosecute this request at the briefing stage of this proceeding. 7. Defendant. AT&T concedes that it billed Brooten 150 days after the November 1995 calls were placed, and 120, 90, and 60 days after the December 1995, January 1996, and February 1996 calls were placed, respectively. AT&T states that ordinarily it bills Brooten monthly, i.e., within 30 days of rendering service; as such, AT&T concedes that its April 1996 bill was late: 120 days for the November 1995 calls, 90 days for the December 1995 calls, 60 days for the January 1996 calls, and 30 days for the February 1996 calls. 8. According to AT&T, this late billing resulted from a problem in its billing system that arose from a one-time computer programming error. Specifically, AT&T explains that it became aware in late November 1995 that the usage information associated with certain customer accounts, including the account for one of Brooten's three locations, was not guided to the appropriate billing account. AT&T then determined that this problem was caused by an error in a computer program it ran in October 1995 to migrate certain message processing functions for CustomNet customers from one database to another. 9. AT&T maintains that it first attempted to identify and bill all unmatched usage through a manual, case-by-case process, but initiated a project to correct the problem in December 1995 after it appeared more pervasive than the individual instances initially identified. After reviewing numerous options, AT&T states, it concluded that the most cost- and time-efficient approach to ensure that all affected customers were billed properly was to run a "complex refresh" process. The refresh program was written and tested in January 1996 and, according to AT&T, implemented during February and March 1996 -- in phases to allow for proper testing and quality control. The program was also implemented during times when computers were not running programs necessary to support the day-to-day activities of its billing system. As a result of this effort, AT&T states that it was able to match Brooten's unbilled usage for November 1995 through February 1996 with his account on the billing system for the affected location. Accordingly, AT&T states that it included these unbilled charges, totaling $821.07, in its April 1996 invoice to Brooten. 10. AT&T denies that it acted unreasonably in violation of Section 201(b) of the Act or contrary to the Bureau's AmNet clarification. AT&T also avers that Brooten has offered no evidence that the four-month delay in billing that he experienced for one of his three CustomNet locations was unreasonable. To the contrary, AT&T maintains that the reasonableness of the billing delay is supported by the facts in the record, which demonstrate that: (1) the problem leading up to the late billing was a one-time occurrence triggered by a computer error; (2) AT&T addressed the billing problem in a short period of time during which it developed, tested, and implemented corrections to its billing system; and (3) AT&T promptly thereafter rendered corrected bills to affected customers. AT&T adds that the reasonableness of its actions is underscored by its obligation under Section 203 of the Act to collect its lawful tariffed charges. 11. AT&T also denies Brooten's allegation that it failed to notify him that his then-current bills might be incomplete. Alternatively, AT&T avers that failing to notify Brooten was not unreasonable because, even after it was aware of the problem, it still could not identify which CustomNet customers were affected because the unbilled usage was not identified to specific customer accounts. Moreover, AT&T avers that Brooten's follow-up argument -- that AT&T still could have warned him by notifying every CustomNet customer that then-current invoices might be incomplete -- does not address the significant expenditure of time and resources that such a notice would have required. AT&T adds that Brooten's argument also does not address the confusion that a blanket notice would have generated for the vast proportion of CustomNet customers who were not affected by the billing error. 12. Finally, AT&T states that on the numerous occasions when Brooten asked about the delayed charges upon receiving his April 1996 invoice, it advised him that the charges were valid, i.e., not duplicate billings. Nonetheless, AT&T states that it also apologized to Brooten and issued a total of $427.95 in credits applicable to the late-billed charges as a customer accommodation and to redress any inconvenience associated with the tardy billing. 2. Decision 13. We note initially that the Common Carrier Bureau ("Bureau") has previously addressed the issue of backbilling in the carrier-to-carrier context. In AmNet, the Bureau clarified that the two-year statute of limitation for recovery actions provided in Section 415(a) of the Act does not establish as a matter of law that backbilling of up to two years is reasonable under Section 201(b). More specifically, the Bureau stated that, depending on the specific circumstances, a "delay of much less than 24 months between the rendering of service and the receipt of an initial bill for such service may be an unjust and unreasonable practice" and consequently violative of Section 201(b). In that proceeding, however, the party seeking a declaratory ruling on the backbilling issue failed to provide evidence that adequately established the nature and extent of the alleged backbilling. Accordingly, the Bureau determined that any fixed limit upon all backbilling should be established in a rule-making proceeding and that, absent a rule, the reasonableness of the amount of time it takes a carrier to render a bill should be evaluated in accordance with the standards for what constitutes an unreasonable practice for purposes of Section 201(b) of the Act. Under this case-by-case approach, we review the record of a given proceeding and determine whether the backbilling was unreasonable under the specific circumstances presented. 14. Turning to the above-captioned proceeding, we conclude that AT&T's practices vis-a-vis Brooten were not unlawful under Section 201(b) of the Act. First, based on the detailed information that it provided, we find credible AT&T's explanation that the backbilling that Brooten experienced arose from a one-time computer-programming error. AT&T addressed the resulting billing-system problem in a reasonable period of time, during which it developed, tested, and implemented corrections to its billing system, and then billed Brooten for previously unbilled service that was rendered and subscribed-to pursuant to tariff. Next, the record also reflects that AT&T advised Brooten that the backbilled charges were valid because they: (1) covered service rendered to Brooten; (2) were not duplicative; and (3) were delayed by a computer-programming error. AT&T also told Brooten that it was authorized to bill these charges for up to two-years under the "statute of limitations" it follows for backbilling, Section 415(a). Moreover, AT&T also proffered over half of the amount that Brooten claimed as damages, in the form of account credits, to redress or accommodate any inconvenience associated with the late billing. 15. We also conclude that the backbilling in question was reasonable in part because it was within the scope of AT&T's Section 203 obligation to collect its lawful, tariffed charges. Brooten's contention that this is not so because the charges were unlawful is unavailing because he does not dispute that AT&T rendered the backbilled services; nor does he contend that rates, terms, or conditions of the CustomNet tariff were unlawful. In addition, although it is not a separately plead count in the complaint, we also reject any suggestion that AT&T violated Section 203 of the Act when it attempted to settle Brooten's grievance by proffering credits to his account. The "filed-rate doctrine" generally bars damage awards -- and thus settlement offers -- that are based on common-law theories that a rate, term, or condition contrary to the filed tariff should govern in place of the filed tariff. Section 203 did not, however, bar AT&T from attempting in good faith to settle Brooten's bona-fide grievance, which does not arise under a legal theory contrary to the filed tariff. Put differently, Brooten's Section 201(b) claim is not barred under the filed-rate doctrine because it alleges damages caused by AT&T's delayed billing. It follows thus that AT&T's attempt to settle Brooten's claim was not contrary to the filed tariff or Section 203 of the Act. The Commission's policy, moreover, is to encourage carriers and their customers to settle disputes over rates and practices outside of the often costly and time consuming complaint process. 16. We also disagree with Brooten's averment that it was per se unreasonable for AT&T to: (1) bill him for calls up to 160 days after they were made; or (2) make the computer programming error that caused the billing problem to occur. First, Brooten's call for a "per se" determination is contrary to AmNet's clarification that backbilling liability does not arise after any fixed number of days, i.e., liability is not based on strict liability or negligence per se. Moreover, and as stated in AmNet, Section 201(b) lawfulness is determined based on the specific circumstances presented in each case. Thus, while these supported factual allegations are relevant to our determination they are not dispositive as to whether AT&T's backbilling was unjust and unreasonable under all of the circumstances presented in this case. For example, the record also contains relevant evidence related to AT&T's efforts to redress Brooten's grievance, as well as detailed information as to the cause, duration, and other circumstances surrounding the backbilling at issue. 17. Brooten's contention that the existing record is insufficient to assess the reasonableness vel non of AT&T's actions in identifying and remedying the billing problem is also unavailing. To the contrary, the record reflects that AT&T presented, in detail, the nature of its one-time computer programming error that caused the billing problem at issue, as well as its efforts to correct the problem prospectively and remedy errors in previously-sent bills, including Brooten's. Moreover, information that Brooten contends is necessary but not in the record before us is not relevant, probative, or dispositive. For example, Brooten maintains that the number of subscribers affected by the error is indispensable because it would be "patently unreasonable" for AT&T to take several months to remedy the billing problem if only ten subscribers were affected. We disagree. The record reflects that the duration of the billing delay was not correlated to the specific number of subscribers that AT&T ultimately identified as affected by the error. Thus, the amount of time it took AT&T to correct the problem and bill Brooten accurately for his usage is relevant to our determination but the number of subscribers affected is not relevant, probative, or dispositive. 18. We are also not persuaded that AT&T violated Section 201(b) by not warning Brooten that his then-current bills might be incomplete until it corrected the problem. The record reflects that the very nature of the problem prevented identification of the affected accounts until the problem was corrected; thus, AT&T could not target notices to affected customers, such as Brooten. Brooten also has not shown that AT&T acted unreasonably by failing to warn him by issuing a blanket notice to all CustomNet customers that their bills might be incomplete; we credit AT&T's contention that this allegation does not address the significant expenditure of time and resources that such an activity would entail as well as the confusion (and perhaps expense) that such notification would generate for the vast proportion of CustomNet customers who were not affected by the billing error. 19. Brooten's argument that AT&T separately violated Section 201(b) by unreasonably apportioning the injury for its error to him is defective procedurally. Brooten did not raise this claim in either his complaint or his reply; accordingly, read as a new count it is not properly before us. Moreover, if the claim was properly before us, we would have noted that it does not state a prima facie violation and is in any event, unpersuasive. 20. In summary, we conclude that AT&T's practices vis-a-vis Brooten have not been shown to be unjust or unreasonable, in violation of Section 201(b) of the Act, as alleged in the above-captioned complaint. Our decision regarding the reasonableness of AT&T's backbilling practices in this particular case should not be construed as establishing a rule of general applicability. Our ruling is limited strictly to the facts of this case; in the future, we will continue to consider such matters on a case-by-case basis to determine compliance with the just and reasonable requirements of Section 201(b). We do not foreclose the possibility that backbilling delays of significantly less than 160 days could be found to be unjust and unreasonable under the facts of a particular case. Likewise, billing delays exceeding 160 days may be reasonable in certain instances. As the Bureau stated in AmNet, "any fixed limit upon all backbilling should be established in a Rule Making proceeding." B. Misrepresentation of Section 415(a) 1. Contentions of the Parties 21. Complainant. Brooten also contends that AT&T violated Section 201(b) of the Act by allegedly misrepresenting Section 415(a) of the Act to him as a "statute of limitations" that authorizes backbilling for up to two years after a call is placed. Several months after filing the above-captioned complaint, Brooten essentially restated his misrepresentation allegations against AT&T in a separately captioned motion for an order to show cause ("Show-cause Motion"). 22. Brooten alleges that AT&T misrepresented Section 415(a) to him in oral and written responses to his inquiries about the backbilled charges at issue. Brooten offers copies of letters he received from and sent to AT&T on this subject and states that AT&T also sent him and his counsel copies of Section 415 as "asserted evidence of the legitimacy of its claim." At the briefing stage of this proceeding, Brooten also argues that AT&T misrepresented to him that Section 415(a) "mandated" payment of the backbilled charges. 23. Brooten maintains that Section 415(a) is irrelevant to backbilling and, as such, that AT&T's contrary statements to him were "deceptive" attempts to "gain money under false pretenses." Brooten avers that AT&T's practice was unjust and unreasonable in violation of Section 201(b). Moreover, according to Brooten, AT&T's conduct was particularly egregious in light of the Bureau's specific declarations in AmNet that Section 415 is not a two-year backbilling "statute of limitations" and does not authorize backbilling for any particular period. 24. In his complaint and reply, Brooten did not request any additional or specific relief for himself based on this allegation but opined that it would be consistent with the Commission's public interest mandate "to act sua sponte to cause AT&T to cease and desist misrepresenting to the public that Section 415(a) of the Act justifies back billing for up to a two-year period. . . ." Claiming that AT&T does not deny telling other customers what it told Brooten about Section 415(a), Brooten's Show-cause Motion requests similar Commission action as well as an order requiring AT&T to make reparations to all customers that AT&T allegedly deceived. During briefing, Brooten also requested a declaratory ruling that it is unlawful for carriers to represent to subscribers that Section 415(a) of the Act requires the subscriber to pay back billed charges. 25. Defendant. AT&T does not dispute that, in responding to Brooten's inquiries, it asserted a right to bill and collect the disputed charges and that the "statute of limitations" it follows, Section 415(a), gives AT&T authority to backbill customers for a period of up to two-years. AT&T denies the misrepresentation charge, however, and avers that its statements to Brooten were not inconsistent with the Bureau's AmNet declaration that Section 415(a) does not establish, as a matter of law, that backbilling is reasonable for two years. To the contrary, according to AT&T, Brooten fails to consider that, under AmNet, reasonableness is assessed under the particular circumstances of each case. AT&T maintains, as such, that the context in which it made the statements in question is significant, and includes: (1) Brooten's backbilling was 160 days or less -- not two years; (2) the billing was in accordance with its Section 203 obligation to collect all lawful, tariffed charges; and (3) AT&T also stated to Brooten its view that the backbilling was valid because it accurately reflected Brooten's unbilled usage and the billing delay arose from a computer error. Moreover, apparently conceding that it sent Brooten and his counsel copies of Section 415(a), AT&T maintains that "[i]t is incredible for anyone -- let alone an attorney -- to claim that the furnishing of a copy of a statutory provision, which speaks for itself, amounts to 'misrepresentation' of the statute or the parties' rights under that statute." 26. AT&T also opposes the Show-cause Motion, primarily for the same reasons it opposes Brooten's misrepresentation allegations in the complaint. In addition, AT&T avers that we should deny the Show-cause Motion because the issues raised are identical -- and thus already before us -- in the instant complaint proceeding. According to AT&T, therefore, the Show-cause Motion presents no basis for the Commission to apply its scarce resources to a broad fact-finding proceeding on the same issues. AT&T also moves to strike Brooten's Reply to its Opposition to the Show-cause Motion, averring that replies to motions are prohibited under Section 1.727(f) of the Commission's rules for formal complaint proceedings. The Show-cause Motion, however, was captioned as a proceeding separate from the above- captioned complaint proceeding and, as such, AT&T filed its opposition to Show-cause Motion under Section 1.45 of the rules. Replies to oppositions are permitted under Section 1.45(b); we therefore deny AT&T's motion to strike Brooten's reply. 2. Decision 27. In considering Brooten's charge that AT&T's oral and written statements to him about Section 415(a) of the Act constitute a violation of Section 201(b), we note that there is no significant dispute between the parties as to the literal wording of AT&T's statements to Brooten about Section 415(a). There is also no serious dispute that AT&T sent Brooten and his counsel copies of Section 415(a) of the Act. Each party, however, offers different interpretations and consequent analyses of AT&T's statements, particularly in light of the Bureau's declarations in AmNet that: (1) Section 415(a) does not authorize backbilling for any particular period because it is a two-year statute of limitations for collection actions; and (2) backbilling of much less than 24 months may be an unjust and unreasonable practice for purposes of Section 201(b). It is well established that, in a formal complaint proceeding under Section 208, the complainant has the burden of establishing a violation of the Act or of the Commission's rules or orders. We consider first, therefore, whether the record provides persuasive evidence to support Brooten's interpretations or arguments related to AT&T's statements. 28. Brooten urges us to focus on AT&T's statements to Brooten that: (1) Section 415(a) authorizes backbilling for up to two years; and (2) Section 415(a) is the "statute of limitations" that AT&T follows for backbilling. Reviewed cursorily and isolated from the balance of the record, we agree that these statements are literally inconsistent with AmNet. AT&T argues correctly, however, that we should consider all the relevant evidence before us. In addition to the two statements above, the record includes: the specific context in which the statements were made (AT&T was justifying backbilling of 160 days -- much less than two years); other statements that AT&T made to Brooten (AT&T also stated its view that the billing was valid, i.e., reasonable, and, moreover, sent him a copy of Section 415); and AT&T's obligation under Section 203 to collect its lawful, tariffed charges. 29. We conclude, after considering all of the evidence before us, that the record does not demonstrate persuasively that AT&T misrepresented Section 415(a) to Brooten, as alleged. In particular, we give credit to Brooten's statement that AT&T sent him, and subsequently his counsel, copies of Section 415(a). This established fact, however, appears to render factually improbable Brooten's charge that AT&T misrepresented Section 415(a) to him. 30. Based on the same evidence discussed immediately above, Brooten also urges us to find that AT&T misrepresented to him that: (1) Section 415(a) gives AT&T the unrestricted right to backbill for two years; and (2) Section 415(a) requires payment of the backbilled charges. Without implying any disagreement with Brooten's legal conclusion that such statements -- if made -- would be erroneous, we conclude that the record before us does not establish that AT&T made these statements to Brooten. AT&T certainly characterized Section 415(a) in a way calculated to support its collection of the charges at issue. We find, however, that AT&T's statements were not as unqualified and broad in nature as Brooten suggests and that, in any event, AT&T tempered the effect of its statements by supplying the text of Section 415(a) to Brooten. 31. Brooten's Show-cause Motion offers essentially the same evidence and arguments without presenting any credible evidence beyond Brooten's experiences with AT&T. More specifically, there is no credible evidence before us to support Brooten's general speculation about AT&T misrepresenting Section 415(a) to "its subscribers." The record before us contains evidence and arguments concerning the lawfulness of AT&T's representations to Brooten about Section 415(a) and backbilling, which are considered fully in the above-captioned proceeding pursuant to Section 208 of the Act. As such, we find no persuasive reason for the Commission to either issue a declaratory ruling or commence a new proceeding apart from the above-captioned proceeding. Moreover, it does not appear that a cease-and- desist order should be issued on the basis of the separate record created by the Show-cause Motion and the responsive pleadings. We therefore deny Brooten's Show-cause Motion. IV. CONCLUSION 32. We find that Brooten has not made a persuasive showing that AT&T violated Section 201(b) of the Act, as alleged. We therefore deny Brooten's complaint as well as the separately captioned Show-cause Motion. V. ORDERING CLAUSES 33. ACCORDINGLY IT IS ORDERED, pursuant to Sections 4(i), 4(j), 201-205 and 208 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 201-205, 208, and the authority delegated by Sections 0.91 and 0.291 of the Commission's Rules, 47 C.F.R.  0.91, 0.291, that the above-captioned complaint of Kenneth E. Brooten, Jr., against AT&T Corp., filed on June 19, 1996, IS DENIED. 34. IT IS FURTHER ORDERED that Brooten's Motion to Accept Late-Filed Pleading, filed on August 26, 1996, IS GRANTED. 35. IT IS FURTHER ORDERED that the Motion of Kenneth E. Brooten, Jr. for Order to Show Cause Why AT&T Corp. Should not Cease and Desist from an Unlawful Practice, filed on September 9, 1996, IS DENIED. 36. IT IS FURTHER ORDERED that AT&T's Motion to Strike Complainant's Prohibited Pleading, filed on October 11, 1996, IS DENIED. FEDERAL COMMUNICATIONS COMMISSION Mary Beth Richards Deputy Chief, Common Carrier Bureau