Hecht Co. v. Chesapeake & Potomac Telephone Co.

COLE, Judge. This case involves a billing dispute between the Chesapeake and Potomac Telephone Company of Maryland (C & P) and one of its customers, The Hecht Company (Hecht). The question presented is whether C & P’s interstate tariff rate filed with the Federal Communications Commission ¹⁵⁰ (FCC) 1 or C & P’s intrastate tariff rate filed with the Public Service Commission of Maryland (PSC) 2 should apply to Hecht’s use of private telephone lines 3 that carry both interstate and intrastate communications. The facts giving rise to this dispute are as follows.

Sometime before May 1978, Hecht began leasing private telephone lines from C & P that ran from Hecht’s headquarters in Silver Spring, Maryland, to its stores in Annapolis, Baltimore, Columbia, Lakeforest, Laurel, and Savage, Maryland. These lines were wholly intrastate. Hecht, however, used equipment located in its Silver Spring offices to switch calls from these intrastate lines to physically connected interstate private lines running to Hecht’s stores in the District of Columbia and Virginia. 4 A traffic study of calls made over Hecht’s private intrastate lines in Maryland showed that 45% of the calls originated or terminated in the District of Columbia or Virginia. Therefore, all of Hecht’s private lines physically located in Maryland were used for both interstate and intrastate communication.

Until May 1980, C & P charged Hecht for the use of the intrastate private lines under C & P’s intrastate tariff rates. At the end of that month, however, C & P began charging Hecht under C & P’s higher interstate tariff rate. 5 Hecht reacted to this rate change by filing a complaint with the ¹⁵¹ PSC in September 1980. In its complaint, Hecht argued that certain sections of Maryland’s Public Service Commission Law, Maryland Code (1957, 1980 Repl.Vol.), Art. 78, § 1-107, required C & P to bill Hecht under its intrastate tariff filed with the PSC. In response to Hecht’s complaint, C & P argued that the FCC’s broad jurisdictional powers over interstate communications required C & P to apply its interstate tariff rates.

On June 15, 1982, the PSC issued an order granting Hecht’s request for relief and ordering C & P to charge Hecht according to C & P’s intrastate tariff. On July 14, 1982, C & P appealed the PSC’s decision to the Circuit Court for Montgomery County. On August 20, 1982, C & P 6 filed a Petition for Declaratory Ruling with the FCC. The petition asked the FCC to rule that it has asserted federal rate regulation jurisdiction over the lines in question and that C & P’s interstate tariff rates should therefore be applied to Hecht’s private lines.

Almost two years passed without the circuit court or the FCC making a decision. Although tempted to wait until the FCC ruled, the circuit court finally rendered a decision on June 20, 1984. The circuit court reversed the PSC’s order and held that Ilecht’s private lines were used for interstate communication and were thus subject to C & P’s interstate tariff rates on file with the FCC. Hecht and the PSC appealed the circuit court’s decision to the Court of Special Appeals.

Prior to consideration by the intermediate appellate court, we issued a writ of certiorari on our own motion and heard oral argument in the case on April 2, 1985. Four and one-half months after the parties presented oral argument to us, the FCC issued a Memorandum Opinion and Order granting C & P’s request for a declaratory ruling. The opinion stated: The presence of different rates for the same service in a state tariff and in an interstate tariff on file with this Commission creates the potential for unlawful rate dis ¹⁵² crimination among customers, which we cannot allow. Accordingly, C & P’s interstate tariff rate takes precedence and must be applied in this and all similar situations, even though the facilities in question are physically intrastate, because these facilities are used for interstate service and because of the impracticality of separately charging for the interstate portion of use.

Thus, the FCC ordered C & P to apply its interstate tariff rates to Hecht’s private lines. Hecht and the PSC promptly filed with the FCC Petitions for Reconsideration. With the consent of the parties, we refrained from rendering a decision in the instant case until the FCC ruled on the Petitions for Reconsideration. Almost two years later, on June 12, 1987, the FCC issued an opinion on the Petitions for Reconsideration and concluded that its prior opinion “properly found that the Communications Act preempts the [PSC’s] attempt to require C & P to