Opinion ID: 1796249
Heading Depth: 2
Heading Rank: 2

Heading: Did the AHC wrongly apply the integrated plant doctrine?

Text: Director argues that the AHC wrongly applied the integrated plant doctrine to the telephone system because the system performs some functions at the customer's location on the customer's equipment. She contends that the AHC has taken the unprecedented step of permitting one of two unrelated persons operating in two different locations to invoke the [manufacturing] exception without the other and urges this Court to hold the `integrated plant doctrine' within reasonable bounds. In applying the integrated plant doctrine to the multitude of components that make up the entire telephone system, the AHC did not wrongly extend the doctrine's reach to unrelated persons. The doctrine requires examination of location and ownership to the extent that it asks in its second prong, How close, physically and causally, is the disputed item to the finished product? Nothing in this question requires claimed machinery and equipment to be located in the same building or to have common ownership to qualify for the exemption. In Concord , this Court held that the integrated plant doctrine could span two corporate entities as long as both worked together to create a single product and the exchange between them occurred as a coordinated and necessary step in the manufacturing process. 916 S.W.2d at 192-93. The AHC's decision in this case is supported by Concord . The end product of telephone service could not be produced without the conversion of voice-to-signal and signal-to-voice that occurs at customers' premises. As discussed above, however, the manufacture of telephone services occurs throughout the entire telephone system, not only at customers' locations. The multitude of component parts of the telephone system are necessarily spread over far distances, but they are not scattered and unconnected. Instead, the entire system operates continuously along pathways formed by much of the equipment at issue in this case. In this case, like in Concord , two distinct entities are working together to create a single product in an integrated and coordinated process. Given this, the AHC did not err in applying the integrated plant doctrine to Bell's component parts of the telephone system to determine if they are used directly in manufacturing.