### IN THE SUPREME COURT OF IOWA

No. 08

– 0349
Filed July 31 , 200 9

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 vio lations 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 intervenor s

- appellee s
.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 tel ecommunications companies. OC A 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
fa ct without hearing the evidence or allowing for discovery or cross

examination, 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 a rbitrary 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 pro ceedings 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
vio lations of Iowa Code section 476 .103 (2007). Th is statute, along with the regulations contained in Iowa Administrative Code rule 199

— 22.23, prohibits “unauthorize d changes in telecommunications service.” Iowa
Admin. Code r. 199

— 22.23(2). These unauthorized change s are referred4

to a s “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 order ed , authorized, or
received. Id. r. 199

— 22 .23(1).
Four cases were cons olidated in the district court. OCA ha s since dismissed its appeal in one case as moot . The pertinent facts of the remaining cases are as follows.
A. Katina Costeri s an Case

. The Board received a complaint from
Kat ina Costeri s an , disputing $988.55 in charges on a bill from her local telephone provider, Fro ntier, for long

- distance calls handled by MCI.
Costeri s an’s telephone bill showed that the calls were charged at a rate substantially hi gher 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 th e complaint to Frontier and MCI to give them an opportunity to respond.
MCI responded in a letter stating that Frontier is a resel ler 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 a re 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
Costeri s an’s telephone number. Frontier responded to the Board stating it had incorrectly set

- up Costeri s an’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 Costeri s an’s case and determi ning that the disputed5 charge s were the result of an error in Frontier’s processing of
Costeri s an’s order.
B. Eddie Atkinson Case
. Eddie Atkinson filed a billing complaint

w ith the Board regarding a $95 “trouble c h arge” billed to him by his long

- distance provider McLeodUSA Te lecommu nications 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 dis covered 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 c harge. 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 technic ian 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 expla ined
to him.6 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 becaus e Mellody never asked Qwest to check the wiring inside the house, the trouble charge should not have been billed. Qwest explained th e charge resulted from an error by a technician who had recently transferred into the state from Arizona
where the rules fo r 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 Boa rd denied all three petitions. In denying the request in Costeri s an ’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 wit h 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 reque st in Atkinson ’s case , the Board found : The record shows, at most, that a misunderstanding occu rred between Mr. Atkinson and Mc LeodUSA with regard to the precise terms and conditions as to when the $957 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 esta blish 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 reasonabl e grounds for further proceeding to consider civil penalty. OCA sought judicial review. In Costeri s an’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 te lecommunications 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 follow ing:

. . . . 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 provision8 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 matt er 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 groun ds fo r further investigation.” OCA claims that the Board’s orders denying its petitions for proceedings to consider civil monetary penalties in th ese 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 wi thout 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
wi th 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 constitutional ly required procedural due process. OCA states
that the Board reli es on an informal paper process to resolve material disputes of adjudicative fact. OCA further contends that this procedure give s a false sense of authenticity to the claims the companies make for9

th e veracity of their records and , therefore, deprives con sumers 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 mu st 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 complain t 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 comp any 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 the10 issuance of the proposed resolution. Id. r. 199

— 6.5(1). If a request is made, the Board shall then “co nsider 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 complain t 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 penaltie s 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
infor mation 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 a ddressed the issue of when a party must be11 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
determini ng 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 admi nistrative 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 constit utional due process standards. The private interest implicated in t his case is not t he consumer’s right to a refund; it is OCA’s (or rather the S tate’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 allege dly charging for services not ordered has already been adjudicated by the Board at this point in the proceedings. See Iowa Code § 476.3. T he 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 deprivati on 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 the12

result of unintentional mistakes , and the erroneous charg es 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 gather ing 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 petition s only in cases with reasonable grounds for further investigation
does not violate constitutional due process sta ndards. 2. Prejudicially altered procedures. OCA claims the Board’s procedural change in 2006 , wherein OCA’s petitions for civil penalties

wo uld be denied unless there were “reasonable grounds for further investigation , ” violated Iowa Code section 17A.19(10)( h ). This code13 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 revie wing 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 intende d 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 S tate 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.” Antho n

- Oto Cmty. Sch. Dist. v. Pub. Employment Relations Bd. , 404 N.W.2d 14 0, 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 inconsist encies in agency decisions for individual14 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 i n changing its practice from
routine ly 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.
I owa 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 a nd 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 pro vision 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 compla ints: “ If . . . there

appe ars to be any reasonable ground for investigating the complaint , the board shall pr omptly initiate a formal proceeding .” Iowa Code § 476.3 (emphasis added). It is from this section that the Board took its current standard for g ranting 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. Esta te 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 penalt y 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 conclu de, therefore , that the Board’s procedural change conformed to the statutory scheme.
B. Court’s Refusal to A dmit E xhibits. 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
moti on for the admission of new evidence is derived from Iowa Code section 17A.19(7) which states: “In proceedings f or judicial review of agency action a court may hear and consider such evidenc e as it deems appropriate. ” Iowa Code § 17A.19(7). We review th e 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 Serv s

. , 553 N.W.2d 556, 562 (Iowa 1996). Iowa Code section 17A.19(7) gives a reviewing court the discretio n to receive and consider additional evidence that was not available to the
agency. Id. This discretion, however, is for the limite d purpose of

“ ‘ highlighting what actually occurred in the agency in order to facilitate16

the court’s search for errors of l aw or unreasonable, arbitrary, or capricious action. ’ ” Id. (quoting Krause v. State ex rel. Iowa Dep’t of
Human Serv s

. , 426 N.W.2d 161, 165 (1988)). Th e 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 admitt ed, the district court stated: The vast majority of the material s 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 alread y 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 cl aimed the additional eviden ce 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 cou rt 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 f acts 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

I V. 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, t he
district co urt 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 distric t 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.

1 OCA 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.