Court Opinion

ID: 4175481
Source: CourtListenerOpinion
Date Created: 2017-06-08 13:15:10.209919+00
Date Added: 2024-06-11T12:44:30.744076
License: Public Domain

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

County of Butler,                          :
                            Appellant      :
                                           :
              v.                           :   No. 1506 C.D. 2016
                                           :   Argued: April 4, 2017
Centurylink Communications, LLC,           :
and all subsidiaries and related entities; :
The United Telephone Company of            :
Pennsylvania LLC, and all subsidiaries :
and related entities; Consolidated         :
Communications of Pennsylvania,            :
LLC, and all subsidiaries and              :
related entities; Consolidated             :
Communications Enterprise Services, :
Inc. and all subsidiaries and related      :
entities; Core Communications, Inc.,       :
and all subsidiaries and related           :
entities; Intermedia Communications        :
of Florida, Inc., and all subsidiaries     :
and related entities; Verizon              :
Pennsylvania, Inc., and all                :
subsidiaries and related entities;         :
Level 3 Communications, LLC, and           :
all subsidiaries and related entities;     :
Telcove of Eastern Pennsylvania,           :
and all subsidiaries and related           :
entities; AT&T Corp., and all              :
subsidiaries and related entities;         :
Teleport Communications America,           :
LLC, and all subsidiaries and related      :
entities; US LEC of Pennsylvania,          :
Inc., and all subsidiaries and related     :
entities; Bandwidth.com CLEC, LLC, :
and all subsidiaries and related           :
entities; Comcast Phone of                 :
Pennsylvania, LLC, and all                 :
subsidiaries and related entities;         :
Peerless Network of Pennsylvania,          :
LLC, and all subsidiaries and related      :
entities; and ABC Companies                :
1 Through 20                               :
BEFORE: HONORABLE P. KEVIN BROBSON, Judge
        HONORABLE PATRICIA A. McCULLOUGH, Judge
        HONORABLE MICHAEL H. WOJCIK, Judge

OPINION BY JUDGE BROBSON                             FILED: June 8, 2017

              This is an appeal from a decision of the Court of Common Pleas of
Butler County (trial court), sustaining Centurylink Communications, LLC and the
remaining captioned appellees’ (collectively, Service Providers) preliminary
objections to the County of Butler’s (County) complaint. The County’s complaint
alleged that the Service Providers did not fulfill their responsibilities under the
statewide 911 emergency communication system. For the reasons set forth below,
we reverse.
              As an initial matter, we note that the underlying dispute in this case
between the County and the Service Providers, namely whether the Service
Providers failed to bill and undercharged subscribers, pertains to what we will refer
to as the 911 Act, 35 Pa. C.S. §§ 5301-5312.1, prior to the General Assembly’s
amendments to the 911 Act that became effective in August 2015. As discussed
further below, however, the instant appeal requires this Court to consider the 911
Act both before and after the effective date of the 2015 amendments.
              Pursuant to the 911 Act, the County is responsible for the
“implementation, operation and maintenance of a 911 system.” Section 5304 of
the 911 Act, 35 Pa. C.S. § 5304. Prior to the 2015 amendments, the statutory
scheme operated in the following manner.        Through the implementation of a
“contribution rate” (911 fees), the 911 Act provided funding to counties to address
the costs associated with each county’s 911 calling and response system. Former
Section 5302 of the 911 Act, 35 Pa. C.S. § 5302.            The 911 Act, prior to
                                          2
the 2015 amendments, also required telecommunication service providers to bill
the 911 fees to subscribers and to remit the amount collected to the counties. See
former Section 5307(a) of the 911 Act, 35 Pa. C.S. § 5307(a) (relating to collection
and disbursement of 911 fees) and former Section 5311.14 of the 911 Act, 35 Pa.
C.S. § 5311.14 (relating to Voice over Internet Protocol (VoIP) service), repealed
by the Act of June 29, 2015, P.L. 36.1 It also required service providers to report
information on “each interconnected VoIP service customer” relating to
the 911 fee for that customer. Former Section 5311.14(b)(2) of the 911 Act.
               On February 11, 2016, the County filed a complaint in the trial court,
alleging that the Service Providers failed to charge customers adequately and to

       1
          Following the 2015 amendments to Section 5307(a) of the 911 Act,
Section 5307(a) continues to require providers to bill and collect the 911 fees, but
Section 5307(a) now requires providers to remit those fees to the State Treasurer for deposit into
what is now known as the “911 Fund.” See Sections 5306.1 and 5307(a) of the 911 Act, 35 Pa.
C.S. §§ 5306.1, 5307(a). Section 5302 of the 911 Act defines “provider” as:
       [a] person that provides service to the public for a fee that includes 911
       communications service, including, but not limited to, a local exchange carrier, a
       wireless provider, a prepaid wireless provider, a VoIP provider or a provider of
       next generation 911 or successor services.
The 2015 amendments, however, limited applicability of Section 5307 such that it does not apply
to “sellers or consumers of prepaid wireless telecommunications service.” Section 5307(c) of the
911 Act, 35 Pa. C.S. § 5307(c). The 2015 amendments also added Section 5307.1 of the
911 Act, 35 Pa. C.S. § 5307.1, relating to payment, collection, and remittance of surcharge by
sellers of prepaid wireless telecommunications service. Section 5307.1 of the 911 Act imposes a
surcharge to be collected by the “seller,” which Section 5302 of the 911 Act defines as:
       [a] person who sells prepaid wireless telecommunications service or a prepaid
       wireless device bundled with prepaid telecommunication service to another
       person.
The Commonwealth distributes money from the 911 Fund to the counties under a statutorily
prescribed formula. Section 5306.1(d) of the 911 Act, 53 Pa. C.S. § 5306.1(d).

                                                3
collect, remit, and report certain fees under the services fee scheme of the 911 Act.
(Reproduced Record (R.R.) at 47a-79a.) The County sets forth its specific legal
claims in four counts. Count I of the complaint alleges that the Service Providers
were fiduciaries of the County, because the Service Providers had custody and
control over all information related to the 911 fees. Count I also alleges that the
Service Providers breached their fiduciary obligations by failing to charge, collect,
and remit 911 fees and by submitting false or inaccurate reports to the County
pertaining to those fees. (R.R. at 74a.) Count II alleges that the Service Providers
committed fraud by intentionally and/or knowingly failing to charge, collect,
report, and remit the 911 fees as required by the 911 Act and by materially
misrepresenting and/or concealing the facts surrounding the 911 fees.
(R.R. at 75a-76a.)    Count III alleges that the Service Providers committed
negligent misrepresentation in that the Service Providers provided false
representations to the County through inaccurate 911 fees and remittance forms,
and the County relied on those representations to its detriment. (R.R. at 76a-78a.)
Count IV alleges that the County is unable to ascertain the extent of the
underpayment of 911 fees and, therefore, requests the trial court to compel an
accounting.    Count IV additionally asks the trial court to enjoin the Service
Providers from continuing to violate the 911 Act and to award monetary damages.
(R.R. at 78a-79a.)
              The Service Providers filed joint preliminary objections to the
County’s complaint.     The Service Providers first object on the ground that
the 911 Act provides the Pennsylvania Emergency Management Agency (PEMA)
exclusive authority to enforce the 911 Act. The Service Providers also object to
Count II, which alleges fraud, on the ground that the complaint lacks particularity

                                         4
and specificity. In their third preliminary objection, the Service Providers contend
that Count I fails to state a claim for breach of fiduciary duty, because the County
fails to allege facts that would establish a fiduciary relationship or confidential
relationship between the County and the Service Providers. Fourth, the Service
Providers object to Count III under the economic loss doctrine, because the County
alleges only money damages as a result of the purported negligent
misrepresentation. In their fifth preliminary objection, the Service Providers object
to Count IV and contend that the County is not entitled to an accounting, because
Count IV does not assert a breach of a promise or contract, which is necessary to
support a request for an accounting. Finally, the Service Providers object to the
complaint on the ground that it fails to develop any claim against unnamed
“Subsidiaries and Related Entities” that are captioned in the complaint.2
                 On August 11, 2016, the trial court issued an opinion and order,
sustaining the Service Providers’ first preliminary objection.                     The trial court
highlighted PEMA’s authority under now-repealed Section 5311.13                                 of
the 911 Act,3 which provided:
                 In addition to any powers expressly enumerated in this
                 chapter, the agency has the power and duty to enforce
                 and execute, by its regulations or otherwise, this chapter.
                 The agency may institute injunction, mandamus[,] or
                 other appropriate legal proceedings to enforce this
                 chapter and regulations promulgated under this chapter.

       2
         Additionally, certain Service Providers moved the trial court to transfer the case to the
Public Utility Commission. (Certified Record (C.R.), Item No. 22.) The trial court determined
the motion was moot in its August 11, 2016 opinion.
       3
           35 Pa. C.S. § 5311.13, repealed by the Act of June 29, 2015, P.L. 36.

                                                 5
Section 5302 of the 911 Act defines “agency” as PEMA. According to the trial
court, given PEMA’s authority under now-repealed Section 5311.13, the County
has no authority to bring its case—either due to Section 1504 of the Statutory
Construction Act of 1972 (Statutory Construction Act), 1 Pa. C.S. § 1504,4 or for
lack of standing. Because the trial court sustained the Service Providers’ first
preliminary objection, it declined to address the remaining preliminary objections.
               Following the trial court’s August 11, 2016 opinion, the County filed
a motion for reconsideration. The County attached to its motion an Affidavit of
Robert Mateff, Deputy Director for PEMA (Mateff Affidavit).                       The Mateff
Affidavit explained that PEMA reviewed the trial court’s August 11, 2016 opinion
and interpreted the 911 Act differently than the trial court. According to the
Affidavit, “PEMA has always interpreted [former] Section 5307(e)(1) [of the 911
Act, 35 Pa. C.S. § 5307(e)(1)] to authorize the counties to police the telephone
companies [sic] collection practices.” (R.R. at 901a.) The County argued that the
trial court should reconsider its decision based on the Mateff Affidavit and afford
deference to PEMA’s interpretation. (R.R. at 890a-97a.) On September 8, 2016,
the trial court denied the County’s motion for reconsideration.

      4
          Section 1504 of the Statutory Construction Act provides:
      In all cases where a remedy is provided or a duty is enjoined or anything is
      directed to be done by any statute, the directions of the statute shall be strictly
      pursued, and no penalty shall be inflicted, or anything done agreeably to the
      common law, in such cases, further than shall be necessary for carrying such
      statute into effect.

                                                6
              On appeal,5 the County first argues that former Section 5307(e)(1) of
the 911 Act authorized the County to pursue its case against the Service Providers.
The County argues, in the alternative, that former Section 5307(e)(1) was at least
ambiguous, and, thus, this Court should afford deference to PEMA’s interpretation
as set forth in the Mateff Affidavit. The County also contends that Section 1504 of
the Statutory Construction Act does not preclude the County’s claims, because
the 911 Act does not provide an adequate statutory remedy. Finally, the County
argues that it has a constitutionally-protected interest in the 911 fees and that the
trial court’s interpretation of the 911 Act violated the County’s procedural due
process rights by depriving the County of an adequate remedy.6
              In     response,     the     Service     Providers      argue     that     former
Section 5307(e)(1) of the 911 Act does not authorize the County’s suit, because
that section pertains to the collection of 911 fees, as opposed to the allegedly
noncompliant billing of 911 fees. The Service Providers then argue that the Mateff
Affidavit should not be given deference first, because it cannot trump the plain

       5
         This Court’s review of a trial court’s order sustaining preliminary objections and
dismissing a complaint is limited to determining whether the trial court abused its discretion or
committed an error of law. Petty v. Hosp. Serv. Ass’n of Ne. Pa., 967 A.2d 439, 443 n.7 (Pa.
Cmwlth. 2009), aff’d, 23 A.3d 1004 (Pa. 2011). When reviewing preliminary objections, the
Court must regard all well pleaded relevant and material facts as true and may sustain
preliminary objections only when they are free and clear from doubt. Id.
       6
          Thirteen other counties—Beaver, Berks, Chester, Clarion, Cumberland, Dauphin,
Delaware, Lebanon, Mercer, Somerset, Washington, Westmoreland, and York (Amici
Counties)—filed similar complaints against various telecommunication service providers in their
respective counties. The Amici Counties filed an amicus curiae brief pursuant to Pennsylvania
Rule of Appellate Procedure 531, and their arguments align closely with those advanced by the
County. Additionally, the Pennsylvania Chamber of Business and Industry and the Chamber of
Commerce of the United States of America filed an amicus curiae brief, aligned with the Service
Providers.

                                               7
language of the statute, and second, because it lacks the formality of
notice-and-comment or any other procedural check on the agency. The Service
Providers argue that the trial court correctly determined that PEMA alone has the
authority to enforce the 911 Act against service providers. The Service Providers
cite to Petty v. Hospital Service Association of Northeastern Pennsylvania,
23 A.3d 1004 (Pa. 2011), in support of their contention that the County’s option to
notify PEMA of the alleged violation of the 911 Act constitutes a sufficient remedy
for the County. The Service Providers further argue that because the 911 Act
provides a sufficient statutory remedy, Section 1504 of the Statutory Construction
Act precludes the County from pursuing common law claims. Finally, the Service
Providers argue that the trial court’s interpretation did not implicate due process
concerns, because the County did not have a constitutionally protected property
interest in the 911 fees.
             In support of its purported statutory authority to bring this suit, the
County points to former Section 5307(e) of the 911 Act.                   Prior to
the 2015 amendments to the 911 Act, former Section 5307(e) provided:
             (e) Collection Enforcement.--
                   (1) The local exchange telephone company shall
                   not be required to take any legal action to enforce
                   the collection of any charge imposed under this
                   chapter. Action may be brought by or on behalf of
                   the public agency imposing the charge.
                   (2) The local exchange telephone company shall
                   annually provide, upon request of the governing
                   body of the county, a list of the names and
                   addresses of those service users which carry a
                   balance that can be determined by the telephone
                   company to be the nonpayment of any charge
                   imposed under this chapter.

                                         8
                      (3) The local exchange telephone company shall
                      not be liable for uncollectible amounts.
(Emphasis added.) The County draws this Court’s attention to the second sentence
in former Section 5307(e)(1) of the 911 Act and argues that the various counties in
the Commonwealth are the “public agenc[ies]” referred to in that sentence, and,
therefore, they may bring suit as the entity imposing the charge. The Service
Providers contend that the trial court was correct in its determination that former
Section 5307(e)(1) merely provided the County with authority to pursue actions
against subscribers that fail to pay the 911 fees.
              We agree with the Service Providers that former Section 5307(e) of
the 911 Act clearly and unambiguously does not provide the County with authority
to bring this suit. Subsections (1) and (2) of former Section 5307(e) both contained
the phrase “charge imposed under this chapter.” Subsection (2) addressed the
“charge imposed” that a subscriber fails to pay after that subscriber had received a
bill. We read former Section 5307(e), therefore, as only having referred to the
collection of the 911 fees after the service provider had billed the subscriber.
Former Section 5307(e) was silent, however, as to billing.                 Stated otherwise,
former Section 5307(e) did not address a situation where a telecommunication
service provider failed to bill the subscriber or undercharged the subscriber.
Because former Section 5307(e) pertained to the collection—as opposed to the
billing—of 911 fees, we agree with the trial court that former Section 5307(e) did
not provide the authority for the County to bring its claims in this case.7

       7
        While we understand former Section 5307 of the 911 Act to have pertained
unambiguously to the collection of 911 fees once a subscriber had been billed, we note that this
Court would not grant deference to the Mateff Affidavit even if former Section 5307 were
ambiguous. The County does not cite to a single case, nor is this Court aware of any, in support
(Footnote continued on next page…)

                                               9
               While      we     agree     with    the    Service     Providers      that    former
Section 5307(e) does not grant the County authority for its suit, we are not
persuaded that PEMA’s authority precludes the County from bringing its suit. In
discussing PEMA’s authority under the 911 Act, both the trial court and now the
parties cite to the now-repealed Section 5311.13 of the 911 Act. We believe that
the applicable provision, however, is from the amended 911 Act, which was in
place when the County brought this action. Under the amended 911 Act, PEMA’s
authority is now found in Section 5303(a) of the 911 Act, 35 Pa. C.S. § 5303(a),
which provides in relevant part:
               (a) Powers and duties of agency.—The agency shall
               have the following powers and duties:
                     ....
                     (17) To enforce this chapter through injunction,
                     mandamus or other appropriate proceeding.
                     (18) To take other actions necessary to implement
                     and enforce this chapter.
PEMA’s authority under the now-repealed Section 5311.13 and the current
Section 5303 are nearly identical for our purposes. This Court believes, and the
parties appear to agree, that PEMA has authority under the 911 Act to enforce the
statutory scheme. The question in the instant appeal, therefore, is whether that
authority is exclusive.
               We disagree with the trial court’s conclusion that PEMA’s authority is
exclusive. PEMA, the counties of the Commonwealth, and the various service

(continued…)

of the position that courts should grant deference to an affidavit by a single employee of an
administrative agency in civil litigation, particularly, litigation in which the agency is not a part.

                                                  10
providers all have different roles and responsibilities under the Commonwealth’s
emergency response statutory scheme. Pertinent to this case, these parties differ in
their understanding of their respective roles and responsibilities under the statutory
scheme. In addition to PEMA’s ability to enforce the 911 Act, the County may
also seek direction from a court as to its role and that of PEMA and the Service
Providers. At the very least, the County is entitled to a court ruling on its legal
dispute.
               Our Supreme Court’s decision in Petty does not compel a different
conclusion. In Petty, a construction company and its owner sued an insurance
company that provided health insurance coverage for its employees.                           The
construction company alleged that the insurance company acquired profits in
excess of the “incidental profit” permitted by Section 5545 of the Pennsylvania
Nonprofit Corporation Law of 1988 (Nonprofit Law), 15 Pa. C.S. § 5545.8 The
Supreme Court held that the construction company and its owner did not have
standing as subscribers to challenge corporate actions of the insurance company,
and it based that determination primarily on the statutory standing restrictions in

      8
          Section 5545 of the Nonprofit Law provides:
      A nonprofit corporation whose lawful activities involve among other things the
      charging of fees or prices for its services or products, shall have the right to
      receive such income and, in so doing, may make an incidental profit. All such
      incidental profits shall be applied to the maintenance and operation of the lawful
      activities of the corporation, and in no case shall be divided or distributed in any
      manner whatsoever among the members, directors, or officers of the corporation.
      As used in this section the terms fees or prices do not include rates of
      contribution, fees or dues levied under an insurance certificate issued by a
      fraternal benefit society, so long as the distribution of profits arising from said
      fees or prices is limited to the purposes set forth in this section and section 5551
      (relating to dividends prohibited; compensation and certain payments authorized).

                                              11
former Section 5793(a) of the Nonprofit Law.9              Former Section 5793 limited
jurisdiction to “members[s], director[s], member[s] of an other body, officer[s] or
otherwise of a nonprofit corporation,” which, as the Supreme Court explained,
required some degree of “authority, rights, and influence over corporate
decision-making.” Petty, 23 A.3d at 1010. The construction company and its
owner, as mere subscribers or policyholders, did not have such a relationship with
the insurance company.
             The Supreme Court also rejected the construction company’s common
law standing argument. In explaining that holding, the Supreme Court reasoned:
             [The construction company] do[es] not seek to prove an
             actual breach of the insurance contract’s terms for
             matters such as failing to provide coverage for treatments
             or for poor settlement practices. Instead they seek to
             attack [the insurance company]’s business-making
             decisions.
Petty, 23 A.3d at 1013. The construction company and owner sued as general
consumers rather than as specifically-harmed grievants and, therefore, did not have
common law standing either. Moreover, the Supreme Court explained, because
former Section 5793(a) of the Nonprofit Law precluded statutory standing,
Section 1504 of the Statutory Construction Act prohibited the construction
company and its owner from “do[ing] under common law what they [were] clearly
prohibited from doing under statute.” Id. at 1014.

      9
         Prior to amendments that the General Assembly made to the Nonprofit Law in 2013,
Section 5793(a) of the Nonprofit Law provided:
      (a) General rule. Upon petition of any person whose status as, or whose rights or
      duties as, a member, director, member of an other body, officer or otherwise of a
      nonprofit corporation are or may be affected by any corporate action, the court
      may hear and determine the validity of such corporate action.

                                             12
             Finally, in Petty, the Supreme Court noted that the construction
company and owner could take their complaint to the Attorney General, who did
have to authority to enforce the Nonprofit Law. The Court reasoned that the
construction company was not without a remedy because it could both shop for
insurance elsewhere and notify the Attorney General.
             According to the Service Providers, Petty demonstrates an instance of
Pennsylvania Courts “apply[ing] [Section] 1504 [of the Statutory Construction
Act] to bar common-law claims where the General Assembly vested enforcement
power in an agency and denied it to the plaintiff.” (Serv. Prov. Br. at 35.) The
Service Providers liken the ability of the Attorney General to enforce the Nonprofit
Law to PEMA’s ability in the current case to enforce the 911 Act, and they argue
that under Petty, Section 1504 bars the County’s suit. We disagree.
             This case is distinguishable for the exact reasons that the Supreme
Court rejected standing for the construction company in Petty. First, there is a
much more direct relationship between the alleged violations of the 911 Act by the
Service Providers and the impact on the County than the relationship between the
construction company and the insurance company’s alleged excess profits in Petty.
Whereas the construction company and owner in Petty sued as general consumers,
with no cognizable harm, the County allegedly suffered a direct harm from the
alleged undercharging and failure to charge by the Service Providers, purportedly
resulting in the loss of millions of dollars in funding. Petty is also distinguishable
because under former Section 5793(a) of the Nonprofit Law, the General
Assembly “did not intend for general consumers to challenge corporate actions in a
court of law.” Petty, 23 A.3d at 1014. There is no analogous standing restriction
under the 911 Act. See also Liss & Marion, P.C. v. Recordex Acquisition Corp.,

                                         13
983 A.2d 652 (Pa. 2009) (rejecting applicability of Section 1504 of the Statutory
Construction Act where statute at issue did not restrict standing or provide
mechanisms for resolution and where plaintiff suffered direct harm). The County
is alleging a specific harm that stems from its direct relationship with the Service
Providers under the 911 Act’s statutory scheme. The County has obligations under
this statutory scheme and its ability to meet those obligations is dependent on the
Service Providers charging consumers in compliance with the 911 Act.
             We conclude, therefore, that the 911 Act does not preclude the County
from bringing its dispute to a court for resolution. We reach no conclusion,
however, as to the merits of the chosen causes of action or forms of relief set forth
in the County’s complaint.
             Accordingly, we reverse the trial court’s order and remand the matter
to the trial court to rule on the Service Providers’ remaining preliminary objections
and any other actions consistent with this opinion.

                                 P. KEVIN BROBSON, Judge

Judge Cohn Jubelirer did not participate in the decision of this case.

                                         14
            IN THE COMMONWEALTH COURT OF PENNSYLVANIA

County of Butler,                          :
                            Appellant      :
                                           :
              v.                           :   No. 1506 C.D. 2016
                                           :
Centurylink Communications, LLC,           :
and all subsidiaries and related entities; :
The United Telephone Company of            :
Pennsylvania LLC, and all subsidiaries :
and related entities; Consolidated         :
Communications of Pennsylvania,            :
LLC, and all subsidiaries and              :
related entities; Consolidated             :
Communications Enterprise Services, :
Inc. and all subsidiaries and related      :
entities; Core Communications, Inc.,       :
and all subsidiaries and related           :
entities; Intermedia Communications        :
of Florida, Inc., and all subsidiaries     :
and related entities; Verizon              :
Pennsylvania, Inc., and all                :
subsidiaries and related entities;         :
Level 3 Communications, LLC, and           :
all subsidiaries and related entities;     :
Telcove of Eastern Pennsylvania,           :
and all subsidiaries and related           :
entities; AT&T Corp., and all              :
subsidiaries and related entities;         :
Teleport Communications America,           :
LLC, and all subsidiaries and related      :
entities; US LEC of Pennsylvania,          :
Inc., and all subsidiaries and related     :
entities; Bandwidth.com CLEC, LLC, :
and all subsidiaries and related           :
entities; Comcast Phone of                 :
Pennsylvania, LLC, and all                 :
subsidiaries and related entities;         :
Peerless Network of Pennsylvania,          :
LLC, and all subsidiaries and related      :
entities; and ABC Companies                :
1 Through 20                               :
                                       ORDER

                AND NOW, this 8th day of June, 2017, the order of the Court of
Common Pleas of Butler County (trial court) is hereby REVERSED, and the
matter is REMANDED to the trial court for further proceedings consistent with
this opinion.
                Jurisdiction relinquished.

                                   P. KEVIN BROBSON, Judge