Reported / Citable
Background
TC Telephone participated in California's Universal LifeLine Telephone Service Program, which offers affordable phone service to low-income households. The company offered a measured rate plan allowing customers 60 untimed local calls per month. TC Telephone purchased telephone service from other carriers and resold it to LifeLine customers, incurring per-minute charges from those carriers even though customers paid no per-minute charge for their first 60 calls. Commission General Order 153 allowed LifeLine providers to seek reimbursement for lost revenues caused by providing subscribers with untimed calls.
In 2013, TC Telephone asked Commission staff for guidance on reimbursement for untimed calls. Staff replied that the rules were not always clear and that Commission decisions did not clearly establish policies to follow. Relying on that guidance and Order 153's text, TC Telephone sought and received per-minute reimbursement for years. In 2019, staff raised concerns but expressly instructed TC Telephone to keep submitting per-minute claims until the Commission resolved the issue. In March 2020, the Commission issued Resolution T-17687, clarifying that reimbursement would be calculated per call only going forward.
Despite that prospective language, the Commission later investigated TC Telephone's pre-resolution claims. Decision 25-03-011 found violations and ordered repayment of $8,157,469.39 plus interest; Decision 25-08-025 denied rehearing. TC Telephone petitioned for a writ of review. On September 28, 2026, the Court of Appeal annulled the decisions and remanded. On October 27, 2026, the court issued an order modifying that opinion, specifying that the portions of both decisions finding that TC Telephone improperly sought per-minute reimbursement, and any findings arising from that determination, are annulled, that all other portions remain valid, and that the modification does not change the judgment.
The Court’s Holding
The October 27, 2026 order makes the scope of relief precise: the per-minute reimbursement findings in Decisions 25-03-011 and 25-08-025 are annulled, other findings survive, and the matter is remanded so the Commission may recalculate any repayment consistent with the opinion. The court's underlying holding is that the Commission's decisions violated due process because the pre-resolution rules were unconstitutionally vague as applied.
Due process requires fair notice before punishment. Prior to the March 2020 resolution, nothing in Order 153 indicated that per-minute reimbursement was improper; the order broadly allowed recovery of lost revenues from untimed calls without specifying which revenues qualified. The court rejected the Commission's reading that 'untimed' barred per-minute reimbursement, explaining that the word describes the customer's call, not the provider's reimbursement basis. Undisputed evidence showed even Commission staff did not know per-minute reimbursement was prohibited: the 2013 e-mail acknowledged unclear rules, and 2019 communications instructed TC Telephone to continue per-minute claims. The resolution's repeated going-forward language confirmed the prohibition was a new interpretation, not fair prior notice.
Because Commission staff did not know the practice was prohibited before the resolution, TC Telephone could not fairly be punished for failing to know it. The court therefore annulled the per-minute findings and remanded, leaving intact the portions of the decisions unrelated to that determination.
Key Takeaways
- A court may modify an opinion to narrow the annulled portions of an agency decision while expressly preserving the judgment and other findings.
- Administrative agencies violate due process when they punish regulated entities under rules so vague that a person of ordinary intelligence would lack fair notice of what was prohibited.
- An agency's own staff uncertainty, and affirmative instructions to continue the challenged practice, are strong evidence that fair notice was lacking.
- Prospective-only language in a later resolution can show that the prior rule was unclear and cannot support retroactive punishment.
- On remand, the agency may recalculate any repayment only to the extent allowed by law and consistent with the court's opinion.
Why It Matters
The modification order confirms that the court's remedy is targeted rather than wholesale: only the per-minute reimbursement findings are annulled, and the Commission retains authority on remand to recalculate any remaining repayment. The decision reinforces due process limits on administrative enforcement in highly regulated industries, especially where the agency's own staff did not understand the rule and told the regulated entity to continue the practice.
For regulated entities, the case underscores the importance of preserving agency guidance and staff communications, since such evidence can establish that a rule was unconstitutionally vague as applied before a penalty is imposed.