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Securus Techs., Inc. v. Illinois Commerce Commission

Court of Appeals of Illinois, First District, Sixth Division

May 16, 2014


Petition for Review of Orders of the Illinois Commerce Commission. ICC Docket No. 12-0413.


The orders entered by the Illinois Commerce Commission granting respondent communication company's petition for a declaratory ruling concerning the special telephone calling services provided for inmates of corrections facilities operated by the Department of Corrections were vacated due to the Commission's lack of jurisdiction, since respondent's petition was related to its loss of a bid for the contract to provide the services, but respondent was not an " affected person" for purposes of being entitled to a declaratory ruling, respondent failed to state that an actual controversy or uncertainty existed, especially when the award of the contract was moot, and the orders were outside the Commission's authority under the Administrative Procedure Act and its implementing regulations.

For Appellant: Michael J. Hayes, Dawn L. Johnson, K& L Gates LLP, Chicago, Illinois.

For Appellee: John E. Stevenson, Freeborn & Peters LLP, Springfield, Illinois.

JUSTICE REYES delivered the judgment of the court, with opinion. Presiding Justice Rochford and Justice Lampkin concurred in the judgment and opinion.


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[¶1] Petitioner Securus Technologies, Inc. (Securus), directly appeals to this court from orders of the respondent Illinois Commerce Commission (Commission) entered upon a verified petition for a declaratory ruling filed with the Commission by respondent Consolidated Communications Enterprise Services (Consolidated),[1] as

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well as an order denying rehearing on the matter. Securus argues: (1) the Commission lacked jurisdiction to enter the orders; (2) the Commission's orders violate Illinois law; (3) the Commission's procedures prior to entry of the orders violated Securus's right to due process of law; and (4) the Commission's findings were against the manifest weight of the evidence. The Commission not only takes the contrary position to all of the arguments raised by Securus, but also argues this court lacks jurisdiction to hear this appeal. For the following reasons, we conclude this court has jurisdiction to hear the appeal, the Commission lacked jurisdiction to enter the orders at issue, and the Commission's orders must be vacated.


[¶3] The record on appeal discloses the following facts. On July 3, 2012, Consolidated filed a verified petition for declaratory ruling from the Commission, pursuant to section 5-150 of the Illinois Administrative Procedure Act (5 ILCS 100/5-150 (West 2012)) and section 200.220(a)(1) of the Commission's Rules of Practice (83 Ill. Adm. Code 200.220 (1996)). In the petition, Consolidated identified itself as a corporation engaged in the provision of telecommunications services and other telecommunications-related businesses in Illinois. The petition alleged Consolidated " provide[d] telephone calling services accessible by inmates of corrections facilities operated by the Illinois Department of Corrections ('IDOC'), so that inmates may communicate with members of the general public." Consolidated provided these services through equipment placed in the restricted areas of the IDOC facilities allowing inmates to place operator-assisted collect calls. The charges for the telephone calls are billed to the members of the public who have accepted responsibility to pay for the calls. IDOC allows only one such service provider at each corrections facility.

[¶4] Consolidated sought a declaratory ruling from the Commission " as to whether a person or entity, such as Consolidated," is providing " operator services" and thus is an " operator services provider[]" under section 13-901 of the Public Utilities Act (220 ILCS 5/13-901 (West 2012)) and section 770.10 of the Commission's regulations (83 Ill. Adm. Code 770.10 (1994)). Consolidated also sought a declaratory ruling that such operator services providers were thus subject to the requirements of not only section 13-901 of the Public Utilities Act, but also sections 770.20(a) and 770.40(c) and (e) of the Commission's regulations (83 Ill. Adm. Code 770.20(a), 770.40(c), (e) (1994)), which set standards of service and maximum rates for telephone calls.

[¶5] Consolidated asserted in its petition that the request for a declaratory ruling was prompted by an actual controversy. In support of the petition's assertion that an actual controversy existed, Consolidated alleged it had recently submitted a bid to the Illinois Department of Central Management Services (CMS) on a contract to provide services described in the petition to certain IDOC corrections facilities. The contract solicitation required bidders to submit the rates they would charge and the percent of revenues they would pay to IDOC as a commission. Consolidated, believing itself to be an operator services provider, specified it would charge no more than the maximum rates established by sections 770.40(c) and (e) of the Commission's regulations. CMS awarded the contract to a bidder (the record establishes this bidder was Securus) that represented it would charge rates above those maximum rates. On May 31, 2012, Consolidated protested the contract award. The chief procurement officer of CMS (CPO)

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denied the protest, based on his review of prior orders issued by the Commission and a review of the Commission's regulations.

[¶6] Consolidated further asserted in the petition that Consolidated needed to know " whether, in the future, it would be acting in violation of a Commission regulation if it were to charge higher rates than those established pursuant to section 770.40(c) and (e) to members of the public in connection with the provision of the inmate telephone calling services described" in the petition.

[¶7] Consolidated attached to its petition a copy of the CPO's June 25, 2012, decision rejecting Consolidated's protest as to the contract awarded to Securus. The CPO determined the key inquiry is whether the services at issue were within the Commission's regulatory jurisdiction and subject to the restrictions of section 770.40, as the award would be required to be rescinded if the services were not exempt. The CPO relied on two prior orders issued by the Commission, Inmate Communications Corporation, Ill. Commerce Comm'n, No. 96-0131 (June 5, 1996) ( Inmate Communications ), and Infinity Networks, Inc., Ill. Commerce Comm'n, No. 05-0429 (Oct. 19, 2005) ( Infinity Networks ), in which the Commission ruled: (1) telecommunications providers that do not locate pay telephones in public areas are not public utilities and are not subject to the Commission's regulation with respect to such services; (2) prisoners are not members of the public and thus pay telephones for inmate-only use are not a public utility or telecommunications carrier under section 13-202 of the Public Utilities Act; and (3) operator services associated with the provision on nonpublic telephones in correctional institutions were exempt from the operator services requirements of Part 770 of Title 83 of the Illinois Administrative Code.

[¶8] The CPO noted the only opposing material Consolidated presented was an email from Kathy Stewart, who was employed by the Commission as an " Engineering Analyst IV." The CPO observed he was not provided the question Consolidated presented to Stewart or any explanation for why Stewart was requested to provide a legal opinion. This " conundrum" prompted the CPO to contact the Commission's general counsel's office, which replied the opinion of any single employee was not the opinion of the Commission, and explained there is a formal mechanism called a declaratory ruling which allows the Commission to issue opinions regarding the applicability of its rules. Thus, the CPO concluded the Commission's prior orders were determinative and the services at issue were not subject to regulation.

[¶9] On July 30, 2012, Securus transmitted a letter regarding Consolidated's petition for a declaratory ruling to an administrative law judge (ALJ) at the Commission. The letter requested the summary dismissal of Consolidated's petition, arguing: (1) after the CPO rejected Consolidated's protest of the contract award, Consolidated filed a lawsuit in the circuit court of Sangamon County regarding the contract bid dispute, which Consolidated failed to disclose in its verified petition; (2) the Commission had already ruled upon the issue raised in Consolidated's petition; and (3) Consolidated was not an " affected person" with standing to request a declaratory ruling from the Commission. Securus attached a copy of Consolidated's July 3, 2012, complaint filed in the circuit court against CMS, the CPO, Securus and other parties, challenging the award of the contract to Securus. The ALJ recorded the letter as an ex parte communication from an interested party.

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[¶10] On July 31, 2012, during a prehearing conference on Consolidated's petition, the ALJ informed counsel for Securus they would be required to file a petition to intervene if they wished to participate in the proceedings on Consolidated's petition.

[¶11] On August 30, 2012, Securus filed a verified petition to intervene and be treated as a party in the proceedings on Consolidated's petition for a declaratory ruling. Securus asserted its interest was based on its then-ongoing negotiation of the terms of the contract Securus was awarded to provide inmate pay telephone services at IDOC facilities. Securus proffered appearances of counsel and attached a copy of its July 30, 2012, letter to the ALJ. On September 14, 2012, the ALJ granted Securus's petition to intervene.

[¶12] On August 31, 2012, the Commission's staff filed a response in support of Consolidated's verified petition for a declaratory ruling. The response, prepared by Stewart, stated it would not respond directly to the points raised by Securus, because Securus had yet to file a petition to intervene when the response was drafted. The response, however, asserted Consolidated's litigation of the contract bid in the circuit court was immaterial to the issues raised by the petition. The Commission's staff also argued the Commission should revisit its prior decision in Inmate Communications Corporation, noting: (1) the Commission's orders are not res judicata on the Commission; (2) the relevant portion of the order was dicta ; and (3) the Commission staff's opinion was that the services at issue should be subject to regulation to protect members of the general public who pay for telephone calls from inmates. The Commission's staff further asserted Consolidated was an " affected person" insofar as the rate regulation affected not only Consolidated's past contract bid, but also future bids.

[¶13] On September 7, 2012, Consolidated filed a verified reply in support of its verified petition for a declaratory ruling. Responding to Securus, Consolidated observed it had filed an amended complaint in the circuit court alleging numerous flaws in the bid proposal submitted by Securus. Consolidated asserted the controversy prompting its petition was the award of the contract to Securus, which Consolidated disclosed in its verified petition. Consolidated also asserted its litigation was not relevant to the Commission's resolution of the question in the petition for a declaratory ruling. Consolidated further argued the Commission should revisit its prior decisions in Inmate Communications and Infinity Networks . Consolidated additionally argued it was an " affected person" for the purpose of seeking a declaratory ruling because the contract award was in litigation and not final, and as the CPO indicated in his decision, the award must be rescinded if the rate regulations applied to the services at issue in the contract. Consolidated reiterated it required further guidance regarding whether it would be violating a Commission regulation in the future if it charged rates higher than those established by sections 770.40(c) and (e) of the Commission's regulations. In addition, Consolidated asserted Securus had failed to challenge any of the underlying facts or policy considerations asserted by Consolidated and the Commission's staff in the proceedings.

[¶14] On October 23, 2012, the ALJ issued a proposed order recommending Consolidated's petition for a declaratory ruling be granted. Securus filed a motion requesting briefing of exceptions to the proposed order be deferred, due to outstanding discovery requests. On November 13, 2012, the ALJ denied Securus's motion to defer ...

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