IN THE SUPREME COURT OF IOWA

No. 08–0349

Filed July 31, 2009

OFFICE OF CONSUMER ADVOCATE,

Appellant,

vs.

IOWA UTILITIES BOARD,

Appellee,

and

FRONTIER COMMUNICATIONS

OF IOWA, INC., and MCI

COMMUNICATIONS, INC., d/b/a

VERIZON BUSINESS SERVICES,

Intervenors-Appellees.

Appeal from the Iowa District Court for Polk County, Michael D. 

Huppert, Judge.

The Office of Consumer Advocate appeals from a district court 

judgment which affirmed on judicial review the Iowa Utilities Board’s

denial of three petitions filed by the Consumer Advocate seeking civil 

penalties for alleged violations of Iowa Code section 476.103 (2007).

AFFIRMED.

John R. Perkins, Consumer Advocate, and Craig F. Graziano of the 

Office of Consumer Advocate, for appellant.

David Lynch and E.A. “Charlie” Nichols, Des Moines, for appellee.
2

Bret A. Dublinske of Dickinson, Mackaman, Tyler & Hagen, P.C., 

Des Moines, for intervenors-appellees.
3

BAKER, Justice.

The Office of Consumer Advocate (OCA) appeals from a district 

court judgment which affirmed on judicial review the Iowa Utilities 

Board’s (Board) denial of three petitions filed by OCA seeking civil 

penalties based on consumer complaints of unauthorized charges and/or 

changes in service by telecommunications companies. OCA has raised 

three issues on appeal: (1) whether the procedures utilized by the Board,

following a change in its review process, resolve disputed questions of

fact without hearing the evidence or allowing for discovery or crossexamination, resulting in outcomes that are not reliable, in contravention 

of constitutional standards; (2) whether the Board’s orders denying 

OCA’s petitions for proceedings to consider civil monetary penalties in 

these cases are arbitrary and capricious under the standards contained 

in Iowa Code section 17A.19(10)(h); and (3) whether the district court 

abused its discretion in refusing to admit new exhibits on appeal. We 

hold that the Board’s orders denying OCA’s petitions for proceedings to 

consider civil penalties were not in contravention of constitutional 

standards nor arbitrary and capricious under the standards contained in 

Iowa Code section 17A.19(10)(h). We also find that the district court did 

not abuse its discretion in denying OCA’s petition to admit additional 

exhibits.

I. Background Facts and Proceedings.

OCA seeks review of the Board’s decisions denying petitions to 

commence proceedings to consider civil monetary penalties for alleged 

violations of Iowa Code section 476.103 (2007). This statute, along with 

the regulations contained in Iowa Administrative Code rule 199—22.23, 

prohibits “unauthorized changes in telecommunications service.” Iowa 

Admin. Code r. 199—22.23(2). These unauthorized changes are referred 
4

to as “slamming” and “cramming.” Id. Slamming is the practice of 

changing a consumer’s service without permission. Cramming refers to 

charging a consumer for services that were not ordered, authorized, or 

received. Id. r. 199—22.23(1).

Four cases were consolidated in the district court. OCA has since 

dismissed its appeal in one case as moot. The pertinent facts of the 

remaining cases are as follows.

A. Katina Costerisan Case. The Board received a complaint from 

Katina Costerisan, disputing $988.55 in charges on a bill from her local 

telephone provider, Frontier, for long-distance calls handled by MCI. 

Costerisan’s telephone bill showed that the calls were charged at a rate 

substantially higher than the rate for her long-distance plan with 

Frontier. Some of the calls were charged at rates as high as $2.23 per 

minute. After reviewing the complaint, the Board forwarded the 

complaint to Frontier and MCI to give them an opportunity to respond.

MCI responded in a letter stating that Frontier is a reseller of 

services for MCI’s Network Services (MNS). MNS is a division of MCI that 

provides wholesale services for other local long distance companies to sell 

directly to consumers. MCI stated that reseller companies use MCI’s 

network but technically they are selling their own products and services,

and, therefore, they set their own rates and handle their own advertising. 

MCI declared that MNS had not solicited or requested the service for 

Costerisan’s telephone number. Frontier responded to the Board stating

it had incorrectly set-up Costerisan’s account, and it had removed the 

disputed charges from her account.

The Board issued a proposed resolution concluding that slamming

had not occurred in Costerisan’s case and determining that the disputed
5

charges were the result of an error in Frontier’s processing of 

Costerisan’s order.

B. Eddie Atkinson Case. Eddie Atkinson filed a billing complaint 

with the Board regarding a $95 “trouble charge” billed to him by his 

long-distance provider McLeodUSA Telecommunications Services, Inc. 

Atkinson stated that he called McLeod to report that calls were not 

getting through to his home. He stated the McLeod representative told 

him that his lines would be checked up to the house and if a problem 

was found it would be corrected free of charge. If the technician had to 

enter his home, however, he would be charged up to $95. Atkinson was 

contacted the next day and told the outside of his house was fine and the 

trouble must be internal. Atkinson checked his home and discovered he 

had a bad surge protector. He corrected the problem himself. Even 

though a technician never entered his home, Atkinson received a phone 

bill containing a $95 trouble charge.

The Board forwarded Atkinson’s complaint to McLeod. McLeod 

responded that there had been a miscommunication with the customer,

and Atkinson should have been told there would be a charge up to $95 to

have a technician go out to his house unless the technician found a 

problem on McLeod’s equipment outside the home. McLeod refunded the 

disputed charge. The Board issued a proposed resolution finding there 

had been a miscommunication between McLeod and Atkinson regarding 

the trouble charge.

C. Mike Mellody Case. Mike Mellody called Qwest Corporation 

(Qwest) to have his daughter’s phone repaired. He was later charged $85 

for trouble isolation. He claimed that when he called to inquire about 

repairing the phone, the trouble charge was not mentioned or explained 

to him.
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The Board forwarded Mellody’s complaint to Qwest. According to 

Qwest, Mellody placed a repair request, and the next day a technician 

went to his daughter’s residence, tested the outside line, and found no 

problems. Qwest admitted that because Mellody never asked Qwest to 

check the wiring inside the house, the trouble charge should not have 

been billed. Qwest explained the charge resulted from an error by a 

technician who had recently transferred into the state from Arizona 

where the rules for repair charges are different. Qwest credited Mellody’s 

account for the disputed charge. The Board issued a proposed finding 

that the Qwest technician made a mistake, resulting in an incorrect 

charge.

II. Proceedings.

In each of these three cases, OCA filed a petition with the Board 

alleging a violation of Iowa Code section 476.103 and requesting a 

proceeding to consider a civil monetary penalty pursuant to that section. 

The Board denied all three petitions.

In denying the request in Costerisan’s case, the Board found:

[T]he Board does not find reasonable grounds for further 

investigation. The Board finds that any change in service 

providers made in this case was unsolicited, unintentional, 

temporary, and unlikely to recur.

The Board is familiar with Consumer Advocate’s 

position regarding the assessment of civil penalties for 

inadvertent violations. In this case, however, because the 

Board does not believe further investigation would produce 

information that would support a finding of a slamming or 

cramming violation on the part of either MCI or Frontier, 

thus leading to possible civil penalties, the Board will deny 

Consumer Advocate’s petition for proceeding to consider civil 

penalty.

In denying the request in Atkinson’s case, the Board found:

The record shows, at most, that a misunderstanding 

occurred between Mr. Atkinson and McLeodUSA with regard 

to the precise terms and conditions as to when the $95 
7

trouble charge would apply, but he nonetheless authorized a 

service call knowing there could be a charge. . . . It is only 

reasonable to conclude he would have authorized the service 

call even if the McLeodUSA script had been more precise, 

because he needed to determine why his service was 

unsatisfactory. The undisputed facts in this case do not 

establish reasonable grounds for further investigation of this 

case.

In denying the request in Mellody’s case, the Board found:

Board staff has determined in this case, and Qwest has 

confirmed, that the technician working on Mr. Mellody’s 

daughter’s telephone line committed an error. Qwest has 

credited the customer and corrected the mistake. As stated 

above, the Board does not believe that these circumstances 

create any reasonable grounds for further proceeding to 

consider civil penalty.

OCA sought judicial review. In Costerisan’s case, the district court 

granted motions by Frontier and MCI for permissive intervention. The

court consolidated the cases. The district court affirmed the findings of 

the Board on all the issues raised. OCA appealed the district court’s 

decision.

III. Discussion and Analysis.

A. Board Denials. OCA argues that effective August 1, 2006, the 

Board materially changed its procedures regarding the granting of 

hearings to assess civil penalties under Iowa Code section 476.103. The 

pertinent parts of that statute provide:

3. The board shall adopt rules prohibiting an 

unauthorized change in telecommunications service. The 

rules shall be consistent with federal communications 

commission regulations regarding procedures for verification 

of customer authorization of a change in service. The rules, 

at a minimum, shall provide for all of the following:

. . . .

g. Procedures for a customer, service provider, or 

the consumer advocate to submit to the board complaints of 

unauthorized changes in service.

4. a. In addition to any applicable civil penalty set out 

in section 476.51, a service provider who violates a provision 
8

of this section, a rule adopted pursuant to this section, or an 

order lawfully issued by the board pursuant to this section, 

is subject to a civil penalty, which, after notice and 

opportunity for hearing, may be levied by the board, of not 

more than ten thousand dollars per violation. Each violation 

is a separate offense.

Iowa Code § 476.103.

Having docketed OCA petitions for civil penalties under section 

476.103(4) as a matter of course for three years, the Board began to deny 

most of OCA’s petitions after notifying OCA that future petitions would 

be denied unless there were “reasonable grounds for further 

investigation.”

OCA claims that the Board’s orders denying its petitions for 

proceedings to consider civil monetary penalties in these three cases are 

arbitrary and capricious. OCA’s many contentions of error regarding the 

Board’s denials can be summarized into two general claims: (1) the 

procedures utilized by the Board following the change in procedure 

resolve questions of fact without hearing the evidence or allowing for 

discovery or cross-examination in contravention of constitutional 

standards; and (2) the Board prejudicially altered its procedures in cases 

arising under Iowa Code section 476.103 in ways that are inconsistent 

with prior practice and precedent, without a rational reason.

1. Constitutional violation. OCA claims the procedures utilized by 

the Board following the described change in practice resolve disputed 

questions of fact without hearing the evidence, or allowing for discovery 

or cross-examination, resulting in outcomes that are not reliable, in 

violation of constitutionally required procedural due process. OCA states 

that the Board relies on an informal paper process to resolve material 

disputes of adjudicative fact. OCA further contends that this procedure

gives a false sense of authenticity to the claims the companies make for 
9

the veracity of their records and, therefore, deprives consumers of the 

only real evidence they have, their testimony. OCA states these biased 

and unreliable results do not meet constitutional standards.

We first review the procedures utilized by the Board. For every

consumer complaint the Board receives, it must follow the extensive 

procedures required by Iowa Code section 476.3. To implement these 

requirements, the Board promulgated Iowa Administrative Code chapter

199—6. Iowa Code section 476.3 demands that the Board create a file 

for every written complaint submitted by a consumer involving contested 

behavior by a utility company. Iowa Code § 476.3(1). Once the file is 

created, the Board must forward the consumer complaint and any 

additional evidence to the utility company. Iowa Admin. Code r. 199—

6.3(1). A copy of the file is also sent to OCA. Id. r. 199—6.3(2). 

According to the Board’s rules, the utility company has twenty days to 

file a response to the complaint. Id. r. 199—6.3(3). The company is 

required to forward a copy of this response to OCA. Id. The response 

must address each allegation made by the consumer and recite any 

supporting facts, statutes or rules. Id. The utility company must also 

enclose copies of any documents related to the complaint that are not 

confidential or privileged. Id.

After reviewing the utility’s response, the Board may request any 

additional information it deems necessary to resolve the complaint. Id. r. 

199—6.4(1). When the Board is satisfied that all the relevant 

information has been gathered, it issues a proposed resolution to the 

complaint. Id. The copies of the proposed resolution are sent to the 

consumer, the utility company, and OCA. Id. If either of the parties or 

OCA is dissatisfied with the proposed resolution, that party may file a 

request for formal complaint proceedings within fourteen days of the 
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issuance of the proposed resolution. Id. r. 199—6.5(1). If a request is 

made, the Board shall then “consider whether formal complaint 

proceedings should be initiated.” Id. r. 199—6.5(3). These procedures 

apply to all consumer complaints brought under Iowa Code section 

476.103. Id. rs. 199—6.8, 199—22.23(4).

If the Board determines that a formal complaint proceeding is not 

warranted, interested parties, including OCA, may seek judicial review of 

the Board’s decision under the Iowa Administrative Procedure Act, Iowa 

Code chapter 17A. See id. r. 199—6.5(3). Regardless of whether a 

formal hearing is granted on the consumer’s complaint, the Board 

retains discretion on whether to levy a penalty on a provider. See Iowa 

Code § 476.103(4)(a) (providing board may levy, after notice and 

opportunity to be heard, civil penalties for violations of this section).

The function of the Board up to this point in the complaint process 

is primarily the resolution of the consumer’s complaint. With respect to 

the imposition of a civil penalty, however, the Board is simply gathering 

information to determine whether a civil penalty may be appropriate, 

thereby warranting further action by the Board. We do not determine 

whether due process rights attach at this point, as the parties do not 

raise this issue. See generally Citizens’ Aide/Ombudsman v. Rolfes, 454 

N.W.2d 815, 818 (Iowa 1990) (stating procedural due process rights do 

not attach to those agency actions that are purely investigative and do 

not deprive anyone of his life, liberty, or property (citing Hannah v. 

Larche, 363 U.S. 420, 440–41, 80 S. Ct. 1502, 1513–14, 4 L. Ed. 2d 

1307, 1320–21 (1960))).

Assuming that OCA has a protected interest in having the Board 

pursue civil penalties, we consider what process is due. The United 

States Supreme Court addressed the issue of when a party must be 
11

afforded an evidentiary hearing before an agency in Mathews v. Eldridge, 

424 U.S. 319, 335, 96 S. Ct. 893, 903, 47 L. Ed. 2d 18, 33 (1976). In 

determining that prior to the termination of social security benefits the 

party receiving those benefits need not be afforded an opportunity for an 

evidentiary hearing, the Court applied a three part balancing test. Id. 

The court weighed: (1) the private interest implicated; (2) the risk of an 

erroneous deprivation of such interest through the procedures used, and 

the probable value, if any of additional or substitute procedural 

safeguards; and (3) the government’s interest, including the function 

involved and fiscal and administrative burdens that additional or 

substitute procedural requirements would entail. Id.

Applying this test in this case, we determine that the Board’s 

procedures do not violate constitutional due process standards. The 

private interest implicated in this case is not the consumer’s right to a 

refund; it is OCA’s (or rather the State’s) deprivation of the right to a civil 

penalty. The consumer’s right to recourse for a telecommunications 

company allegedly incorrectly changing service providers or allegedly

charging for services not ordered has already been adjudicated by the 

Board at this point in the proceedings. See Iowa Code § 476.3. The 

private interest implicated, therefore, is simply the deterrent effect of a 

civil penalty. That interest, while important, is minimal here where the 

violations resulted from employee error, action less likely than 

intentional misconduct to be avoided in the future by imposition of a 

penalty.

The second part of the balancing test is the risk of an erroneous 

deprivation of OCA’s interest and the probable value of any additional 

procedural safeguards. In these particular cases, the Board has 

determined not to pursue civil penalties because the violations were the 
12

result of unintentional mistakes, and the erroneous charges were 

removed. The potential deprivation of a penalty is, therefore, low 

because given the outcome of the consumer’s complaint, it is unlikely a 

penalty would be imposed. See Mathews, 424 U.S. at 341, 96 S. Ct. at 

906, 47 L. Ed. 2d at 37 (“[T]he degree of potential deprivation that may 

be created by a particular decision is a factor to be considered in 

assessing the validity of any administrative decisionmaking process.”). 

As noted above, the current Board procedure allows for extensive 

evidence gathering from the consumer and the provider. We conclude, 

therefore, the probable value of any additional procedural safeguards is 

minimal.

The last part of the Mathews balancing test is the government’s 

interest, including the function involved and the fiscal and administrative 

burdens that additional or substitute procedural requirements would 

entail. OCA is requesting that the Board provide for formal hearing on 

every petition it files for civil penalties. As the Board noted in its order 

denying OCA’s request for reconsideration in the Atkinson complaint, 

providing a hearing in only those cases that have a reasonable basis for 

further action is “an efficient means of allocating the agency’s limited 

resources in order to serve the public interest and the interests of the 

customer, the public utility and Consumer Advocate.” We agree. We find 

that the Board’s policy of allowing formal hearings for civil penalty 

petitions only in cases with reasonable grounds for further investigation 

does not violate constitutional due process standards.

2. Prejudicially altered procedures. OCA claims the Board’s 

procedural change in 2006, wherein OCA’s petitions for civil penalties 

would be denied unless there were “reasonable grounds for further 

investigation,” violated Iowa Code section 17A.19(10)(h). This code 
13

section authorizes relief from agency action, other than a rule, when that 

action is “inconsistent with the agency’s prior practice or precedents, 

unless the agency has justified that inconsistency by stating credible 

reasons sufficient to indicate a fair and rational basis for the 

inconsistency.” Iowa Code § 17A.19(10)(h).

We elaborated on this section in Finch v. Schneider Specialized 

Carriers, Inc., 700 N.W.2d 328, 332 (Iowa 2005), wherein we stated:

The reporter-draftsman for the 1998 amendments has 

written that paragraph (h) provides a specific example “of 

agency action that any reviewing court should overturn as 

unreasonable, arbitrary, capricious, or an abuse of 

discretion.” The author suggests that this language does not 

really change the law, “but it should result in somewhat 

more structured, informed, and systematic review by the 

courts under the unreasonable, arbitrary, capricious, and 

abuse of discretion standards, and clearer arguments by and 

instructions to litigants with respect to the arguments that 

may be made with respect to such matters.” We agree 

paragraph (h) does not change the law and was intended to 

amplify review under the unreasonable, arbitrary, 

capricious, and abuse-of-discretion standards.

Id. (quoting Arthur Earl Bonfield, Amendments to Iowa Administrative 

Procedure Act, Report on Selected Provisions to Iowa State Bar Association 

and Iowa State Government 69 (1998)).

The intent of paragraph (h) is not to prohibit any change in 

practice or procedure, but rather, the rule requires “consistency in 

reasoning and weighing of factors leading to a decision tailored to fit the 

particular facts of the case.” Anthon-Oto Cmty. Sch. Dist. v. Pub.

Employment Relations Bd., 404 N.W.2d 140, 144 (Iowa 1987). Thus, “an 

agency’s failure to conform to its prior decisions[,] or furnish sufficient 

reasoning from which to distinguish them, may give rise to a reversal 

under [chapter 17A].” Id. at 143. Iowa Code section 17A.19(10)(h) is 

intended to address inconsistencies in agency decisions for individual 
14

cases; it does not provide a vehicle to challenge changes in agency 

procedure that are applicable to all cases that come before the agency.

The 2006 change was not an inconsistency related to a case 

decision; it was a uniform change intended to conform the Board’s 

procedures to the governing statute’s provisions. The Board claims it 

had been incorrectly interpreting and applying the requirements of 

sections 476.3 and 476.103. It asserts that in changing its practice from 

routinely granting formal hearings on OCA’s petitions to granting 

hearings only in those cases showing reasonable grounds for further 

investigation, it was simply conforming its practice to the requirements of 

these statutes.

Iowa Code section 476.103(4) provides that “a service provider who 

violates a provision of this section, a rule adopted pursuant to this 

section, or an order lawfully issued by the board pursuant to this 

section, is subject to a civil penalty, which, after notice and opportunity 

for hearing, may be levied by the board . . . .” According to the plain 

language of the statute, only if a provider violates the section and the 

Board has decided to consider the imposition of a civil penalty must a 

hearing be held. There is, however, nothing in section 476.103 that

requires the Board to levy a penalty, nor is there any provision for OCA 

to commence proceedings on its own. Further, the statute must be read 

in conjunction with Iowa Code section 476.3 which mandates the 

procedures for the Board in investigating complaints: “If . . . there 

appears to be any reasonable ground for investigating the complaint, the 

board shall promptly initiate a formal proceeding.” Iowa Code § 476.3 

(emphasis added). It is from this section that the Board took its current 

standard for granting hearings for purposes of considering civil penalties.
15

Where, as here, “an agency concludes that its application of a 

statute is in error, it is not required to go on indefinitely misapplying the 

statute; it may alter the application.” Bair v. Estate of Biggins, 356 

N.W.2d 551, 555 (Iowa 1984). In each of the three cases at issue, the 

Board specifically found that there was no violation of the statute—only

mistakes or miscommunications. Thus, the Board was neither required 

to assess a civil penalty in these three cases nor provide a formal hearing 

on that issue. Because the Board concluded there were no reasonable 

grounds for further investigation for purposes of imposing a civil penalty, 

it properly refused to provide a formal hearing. We conclude, therefore, 

that the Board’s procedural change conformed to the statutory scheme.

B. Court’s Refusal to Admit Exhibits. OCA alleges that the 

district court abused its discretion in refusing to admit OCA’s exhibits 

submitted for the first time on judicial review. OCA claims these exhibits

were offered to prove what occurred in the agency and to facilitate the 

court’s search for errors of law.

The standard the district court relied upon in denying OCA’s 

motion for the admission of new evidence is derived from Iowa Code 

section 17A.19(7) which states: “In proceedings for judicial review of 

agency action a court may hear and consider such evidence as it deems 

appropriate.” Iowa Code § 17A.19(7). We review the district court’s 

refusal to admit OCA’s new exhibits on appeal for abuse of discretion. 

Medco Behavioral Care Corp. of Iowa v. Iowa Dep’t of Human Servs., 553 

N.W.2d 556, 562 (Iowa 1996).

Iowa Code section 17A.19(7) gives a reviewing court the discretion 

to receive and consider additional evidence that was not available to the 

agency. Id. This discretion, however, is for the limited purpose of 

“ ‘highlighting what actually occurred in the agency in order to facilitate 
16

the court’s search for errors of law or unreasonable, arbitrary, or 

capricious action.’ ” Id. (quoting Krause v. State ex rel. Iowa Dep’t of 

Human Servs., 426 N.W.2d 161, 165 (1988)). The additional evidence is 

for the purpose of determining whether the agency exceeded its legal 

authority or committed legal error. Id. It is not to be used to retry the 

factual issues in district court. Id.

The district court found that the proffered evidence did not pass 

“the basic threshold of relevance—‘having any tendency to make the 

existence of any fact that is of consequence to the determination of the 

action more probable or less probable than it would be without the 

evidence.’ ” Iowa R. Evid. 5.401. In denying admission of most of the 

exhibits OCA requested be admitted, the district court stated:

The vast majority of the materials sought to be included in 

the record by the petitioner pertain to other consumer 

complaints and dispositions not pertinent to the matters at 

hand. The petitioner seeks to expand this already crowded 

field to encompass virtually the entire recent universe of 

complaints involving alleged similar conduct by carriers and 

other unrelated agency action. There is no reason to further 

muddy the waters by including most of this information. 

OCA claimed the additional evidence was offered to “highlight[] 

what actually occurred in the agency in order to facilitate the court’s 

search for errors of law or unreasonable, arbitrary, or capricious action.” 

OCA states that relevance before the district court should not be 

determined solely with reference to the adjudicative facts of the cases. 

Relevancy, it argues, may also relate to the alleged errors for which 

review is sought. OCA contends the errors of which it complains are not 

tied to the specific facts of any one case; they are errors of a general 

nature, repeated from case to case when the decisions under review are 

issued. It is the cumulative impact of these continuous errors that OCA 

asks the court to address.
17

The only issue before the district court was the Board’s refusal to 

grant hearings in these three cases.1

IV. Disposition.

 Because the exhibits would not 

have shed light on the Board’s decision not to grant hearings for the 

assessment of civil penalties in the three cases before the court, the 

district court did not abuse its discretion in denying OCA’s petition to 

admit the additional exhibits.

We find that the Board’s orders denying OCA’s petitions for 

proceedings to consider civil penalties in these three cases were not in 

contravention of constitutional standards, nor arbitrary and capricious 

under the standards contained in Iowa Code section 17A.19(10)(h). We 

also find that the district court did not abuse its discretion in denying 

OCA’s petition to admit additional exhibits. Therefore, we affirm the 

district court’s judgment.

AFFIRMED.

All justices concur except Appel, J., who takes no part.

 1OCA did not separately seek judicial review of the Board’s policy decision to 

change its general practice of granting a hearing on every request by OCA for a civil 

penalty. This issue was raised only insofar as it affected the orders in these particular 

cases.