Could a Texas agency select one long-distance carrier for all its offices with a single letter, and did it owe carriers assigned by default?

Texas AG Opinion JM-618: Agency Long-Distance Carrier

Plain-English summary

JM-618 concluded that the Texas Department of Human Services could use one letter of agency to select AT&T as the primary long-distance carrier for all covered offices. The letter had to list the billed telephone numbers or give another unambiguous description of the lines included, but separate election ballots for every location were unnecessary. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

The selection did not violate Texas competitive-purchasing law as discussed in the opinion because the State Purchasing and General Services Act exempted public-utility services, and AT&T was then treated as a public utility. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

The department was not directly liable to other long-distance companies assigned to its locations as default carriers under the FCC process. The offices lacked authority to bind the state, and the department had affirmatively chosen AT&T. The opinion expressly did not decide whether the department might owe Southwestern Bell. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

Currency note

This opinion was issued in 1987. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Who this opinion affected in 1987

State agency telecommunications managers: JM-618 allowed one agency-wide carrier designation if the letter clearly identified the billed numbers or scope. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

Procurement officials: The opinion treated the selected AT&T service as exempt public-utility service under the purchasing statute then in force. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

Carriers receiving default allocations: JM-618 found no direct implied contract with the department where regional offices lacked contracting authority and the agency had chosen another carrier. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

Common questions

Did every agency office have to submit its own carrier ballot?

No. A single letter could cover multiple locations if it listed billed telephone numbers or otherwise described the designation unambiguously. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

Did choosing AT&T violate competitive bidding requirements?

No under the law discussed in JM-618. The opinion relied on the statutory exemption for public-utility services and AT&T's status at the time. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

Was the agency directly liable to a carrier assigned by default?

No. The opinion said no implied contract arose on these facts because local offices lacked authority to bind the state and the agency had affirmatively selected AT&T. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

Did the opinion resolve any bill owed to Southwestern Bell?

No. JM-618 limited its answer to direct liability to the allocated long-distance carriers and did not address possible liability to Southwestern Bell. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

Background and statutory framework

After AT&T's divestiture, FCC equal-access procedures let customers choose an interexchange carrier and allocated customers who did not choose. The department selected AT&T by an appointment-of-agent letter, while Southwestern Bell sought separate elections for department locations. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

The FCC's letter-of-agency procedure operated as an alternative to individual ballots. The opinion quoted the FCC's acceptance of billed telephone numbers or another unambiguous customer description for multi-line customers. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

For contract liability, JM-618 applied the Texas rule that state officers and employees could bind the state only with authority supplied by the Constitution or statutes. It found no delegated authority in the regional offices and no conduct supporting a direct implied contract with the allocated carriers. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

Key source language

JM-618 stated:

"As long as the Texas Department of Human Services included a list of its billed telephone numbers or some other unambiguous description indicating the scope of its designation of a primary long distance carrier in its letter of agency to American Telephone and Telegraph Company, the department need not submit an election ballot for each department location."

"This designation does not violate Texas' competitive purchasing laws."

"The department is not legally liable to long distance carriers allocated to various department locations as 'default' customers under Federal Communications Commission regulations."

Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

Citations and references

• V.T.C.S. article 601b, section 3.01(c)(4)
• V.T.C.S. article 1446c, section 3(c)(2)
• Tex. Const. article III, section 44
• FCC Allocation Plan materials cited in the opinion at 50 Fed. Reg. 25,982 and 38,200

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0618
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0618.pdf

Original opinion text

January 12, 1987

Mr. Marlin W. Johnston
Commissioner
Department of~Euman Services
P. 0. Box 2960
Austin, Texas 78769

Opinion No.

JM-618

Re: Authority of the Department
of Human Services to select a
long-distance telephone carrier
for all of its offices with a
single letter of agency without
violating FCC regulations

Dear Mr. Johnston:
As Commissioner of the Texas Department of Human Services. you inquire about the effect of certain Federal Communications Commission (hereinafter FCC) orders regarding the divestiture of American Telephone and Telegraph Company (hereinafter AT&T) on the purchase of long distance telephone services by your agency. A brief history of the AT&T divestiture decrees must precede discussion of your specific questions. Until recently, AT&T dominated the telecommunications industry. See generally United States v. American Telephone and Telegraph Com~-, 552 F. Supp. 131, 160-65 (D.D.c. 1982) ohdificati0n of ~i-1 Judgment). aff'd, sub nom. Maryland v. United States, 460 U.S. 1001 Through its Bell Operating (1983) (hereinafter U.S. v. AT&T). Companies, AT&T provided most of the country's local telephone service and virtually all intrastate long distance service. Through its Long Lines Division, AT&T also provided most of the country's interstate long distance service. The physical connections between AT&T and local companies are of high quality because the.system was designed to afford accsss to only one carrier AT&T. Soon after the FCC authorized other long distance carriers to compete with AThT in providing long distance service, these competing carriers began demanding that local companies provide them with the same quality of access given to AT&T. The refusal of the local companies to provide this access was one of the factors which lead ultimately to antltru$t actions in federal court. -See U.S. v. AThT. 552 F. Supp~.at 162-63.'

1. Actually, antitrust litigation against ATbT has a long and
   rather curious history which dates back to 1949. See United States v. American Telephone and Telegraph, 552 F. Supp. 131, 135-40 (D.D.C. 1982) (Modification of Final Judgment), aff'd. sub nom. Maryland v. United States, 460 U.S. 1001 (1983).
   -

p. 2782

Mr. Marlin W. Johnston - Page 2

(JM-618)

The main antitrust litigation against AT&T resulted in a Consent Decree. See Modification of Final Judgment, Civil Action No. 82-0192 District Court for the District of Columbia in the United States (hereinafter MFJ or Decree); see also U.S. v. ATM, 552 F. Supp. 131 (interpreting the decree). This Decree was intended to accomplish two (1) structural changes removing AT&T as the dominant basic goals: supplier of local telephone service by requiring AT&T to divest Itself of its Bell Operating Companies, and (2) restrictions to prevent cross-subsidization and to p~revent discrimination against AT&T's competitors. See U.S. v. AThT., 552 F. Supp. at 141-42. With regard to restrictionTto prevent discrimination, the Decree contains a clause requiring local exchange carriers to provide access that is "equal in type. quality, and price to that provided to AThT and its III; U.S. v. ATST, 552 F. Supp. at 171-72. affiliates." See MJ, Although the Decree does not establish specific requirements guaranteeing AThT's competitors access to AT&T's high quality interexchange network, FCC decisions and regulations set forth specific equal access requirements. U.S. v. AThT, 552 F. Supp. at 173. The FCC procedure for obtaining equal access gave rise to the current controversy. In geographic areas where equal access orders are technically feasible, customers have been given the opportunity to choose a long distance carrier. The Decree allowed AT&T to keep customers who did not choose a different long distance carrier. United States v. Western Electric Company, 578 F. Supp. 668.'676 (D.D.C. 1983). At first, the FCC also allowed AT&T to keep "default" customers. Ultimately, however, the FCC reversed its position and required a pro rata allocation of default cust&rs to various long distance carriers according to the percentage each carrier received of choosing customers. See Investigation of Access and Divestiture Related Tarrifs, CC Docket 83-1145. Phase I. FCC 85-69, 50 Fed. Reg. 9,462 (Mar. 8. 1985) (to be codified in 47 C.F.R. Ch. 1); Investigation, CC Docket 83-1145, Phase I. FCC 85-293, 50 Fed. Reg. 25, 982 (June 24, 1985) (to be codified in 47 C.F.R. Part 61); Investigation, CC Docket 83-1145, Phase I, FCC 85-293. 50 Fed. Reg. 38,200 (Sept. 20, 1985). You indicate that the Texas Department of Ruman Services designated AT&T Communications as its long distance carrier with an "Appointment of Agent" letter. You indicate that Southwestern Bell Telephone Company requires independent election by each department location despite this letter of agency. Accordingly, you ask:

1. Do the provisions of the AThT divestiture
   order require Southwestern Bell Telephone Company to obtain an election document for each department location?
2. If the answer to the first question is no,
   does the department legally need to execute any additional document to advise Southwestern Bell

p. 2783

Mr. Marlin W. Johnston - Page 3

(JM-618)

Telephone Company and AT6T of
continue with AT&T?

its election to

3. Does the Department of Human Services have
   any legal responsibility for long distance service from unregulated carriers selected by Southwestern Bell Telephone Company or Its contractors to serve the department (a) before the date and (b) after the date of the department's formal election for AT&T to provide long distance service? You also indicate that the department chose AT&T. a regulated company, in the belief that no competitive bidding was necessary to continue You suggest that an automatic long distance service with AT&T. allocation by Southwestern Bell would violate the state's competitive bidding requirements. As indicated in the foregoing discussion, FCC regulations, rather than the court's divestiture decree, govern the equal access selection process through presubscriptian ballots and the allocation of customers who fail to select a long distance company. Customers may The FCC also return ballots directly to local exchange carriers. authorizes a "Letter of Agency Procedure" which gives customers the option of independently contacting a long distance company ~to make arrangements for long distance service. See Investigation of Access and Divestiture Related Tariffs, (Append- Allocation Plan), 50 Fed. Reg. 25,982, 25,989 (para. 9). Paragraph 12 of the Allocation Plan requires local exchange carriers to accept fram each long distance carrier a list of customers that have made individual arrangements with that long distance carrier. Id. at 25,989 (para. 12). The present controversy arose because theDepartment of Buman Services is a multi-location and multi-line customer of long distance Apparently, Southwestern Bell expects each department service. location to independently choose a long distance carrier. Your question depends on whether the FCC regulations authorize a multi-line customer to designate its primary long distance carrier with a single letter of agency. Paragraph 9 of the Allocation Plan states that "[slince ballots contain all of the customer's lines, the
   [long distance carrier] should encourage its customers to mail the
   [carrier] the ballots or mail them to the [local operating company].” Appendix B, at 25,989 (para. 9) (emphasis added). This suggestion is not couched in mandatory language. Moreover, paragraph 10.4 states that "[tlhe specific telephone number[s] for which the primary [long distance carrier] Is being designated must be listed" in the letter of agency. Appendix B, at 25,989 (para. 10.4). Thus, the letter of agency procedure is intended as an alternative to the individual ballot procedure. The FCC has not interpreted the letter of agency procedure to require that multi-line customers submit an election ballot in addition to a letter of agency - much less to require the submission of multiple ballots.

p. 2784

Mr. Marlin W. Johnston - Page 4

UM-618)

The FCC addressed the subject of your first question when it considered AT&T's petition for an interpretation of the Letter of Agency Procedure: AT&T states that customers presently place presubscription orders on a billed telephone number (BTW) basis. AT&T states that a BTW may have associated with it one or more additional lines or numbers and thus say represent hundreds or even thousands of lines . . . AT&T argues that it is cumbersome and unnecessary for customers to provide individual line detail. Investigation, 50 Fed. Reg. at 38.202 (para. 10). AT&T's assertion:

The FCC agreed with

The Commission did not intend to impose unreasonable burdens on multi-line customers in their selection of an interexchange carrier. We conclude that the requirements set out [at paragraph] 10.4 of Appendix B may be fulfilled either by provision of BTWs or by other unambiguous customer description indicating the scope of the customer's designation of a primary [long distance carrier]. Id. at 38,202 (para. 11). Accordingly, as long as the Department of Human Services included a list of its BTWs or some other unambiguous description indicating the scope of its designation of a primary long distance carrier in its letter of agency to AT&T, the department need not submit an election ballot for each department location. This designation of AT&T as the department's long distance carrier does not violate Texas' competitive bidding requirements. The State Purchasing and General Services Act exempts the services of public utilities from its competitive procurement requirements. V.T.C.S. art. 601b, 53.01(c)(4). At the present time AT&T, as the dominant long distance carrier. is a public utility. See V.T.C.S. art. 1446~. 53(c)(2). In light of the foregoing response topour first question, a response to your second question. regarding additional notification, is unnecessary. You also ask whether the department is liable to long distance carriers assigned to various department locations through the FCC Your request letter expresses concern about allocation process. liability for service provided both before and after the department's formal election of AT&T as its primary long distance carrier through a letter of agency. You indicate, however, that the department elected AT&T within the final time limit prescribed by the FCC. Accordingly, it is not entirely clear how or why Southwestern Bell allocated various department locations to different long distance carriers prior

p. 2785

Mr. Marlin W. Johnston - Page 5

(JM-618)

period allowed for the department's
time
to the end of the
Resolution
of
this
issue involves the scope of the
election.'
In contrast, your
department's contract
with Southwestern Bell.
question requires a determination of whether an implied contract can be imposed directly against the state by the long distance carriers assigned to the state through the allocation process for long distance service. You suggest that the state's competitive bidding statutes preclude an allocation of department locations to different long distance carriers. Briefs submitted in response to your opinion request contend that the FCC's allocation process preempts the state's competitive bidding statutes. As a preliminary matter, it is well-established that no state agency or state employee holds the authority to bind the state by contract unless authorized to do so expressly or by necessary implication in the Texas Constitution or statutes. Tex. Coast. art. III, 144; State v. Ragland Clinic-Hospital, 159 S.W.2d 105, 106 (Tex. 1942); see also Director of the Department of Agriculture and Environment v. Printing Industries Association ,af .Texas, 600 S.W.2d prevents

264. 265-66 (Tax. 1980) (doctrine of sovereign lmmnity
     suit to subject the state to liability 'without express legislative 44, of the Texas Constitution proconsent). Article III, section hibits grants of public funds unless the grants are authorized by preexisting law. In Ragland. an agent of the Texas Liquor Control Board agreed expressly to pay for an injured prisoner's treatment. Rejecting the hospital's claim, the court held that the board's employees lacked the express.or implied authority to enter into the contract in question. 159 S.W.2d at 107. The court rejected the argument that the agent had apparent authority to bind the state: Since the powers of all State officers are fixed by law, all persons dealing with them are charged with notice of the limits of their authority and are bound at their peril to ascertain whether the contemplated contract is within the power conferred. There is no occasion or excuse in such a case for indulging in presumptions or in relying on appearances. (Citations omitted). IL; see also Fasekas v. University of Houston, 565 S.W.Zd 299, 304306 (Tex. Civ. App. - Houston [lst Dist.] 1978, writ ref'd n.r.e.),

265. It should be noted that the FCC's Allocation Plan states
     that, in order to use the letter of agency procedure, "[tlhe [long distance carrier] must also agree to accept responsibility for any billing disputes arising from implementation of its customer list." Appendix B, at 25,989 (para. 11).

p. 2786

Mr. Marlin W. Johnston - Page 6

(JM-618)

appeal dismissed, 440 U.S. 952 (1979); cf. Bathe Halsey Stuart Shields, Inc. v. University of Houston, 638 S.W.2d 920 (Tex. App. Houston [lst Dist.] 1982. writ ref'd n.r.e.). To hold the Department of Human Resources liable directly to the various long distance carriers assigned to different department locations by Southwestern Bell would require a finding that each department location has the independent authority to bind the state to a contract. Carried to its logical conclusion, this line of reasoning could result in potentially unlimited state liability for implied contracts entered Into by state employees. Although the Department of Human Services holds the authority to purchase long distance service. the department has not delegated this authority to the department's various locations. The fact that the head of the agency executed an agreement with AT&T for long distance service affirms that this power was not delegated. This fact also militates against the reasonableness of reliance on the silence of a regional office to constitute an implied contract. In State v. City National Bank of Austin. 578 S.W.Zd 155 (Tex. Civ. App. - Tyler 1979). aff'd;603 S.W.2d 764 (Tex..1980). the court considered the liabilitv of the State Comisslon for the Blind for rent allegedly due for a period during which the commission occupied leased premises as a holdover lessee. The lessor sued for rent for the holdover period. The court noted: The Legislature authorized the Commission to contract for rental space and be the lessee. The written lease provides that the lessor shall have 'the remedies . . . provided by law for recovery of rent.' The Commission is an agency of the State, and the State is bound by its contract as a private citizen is bound by a like contract. (Citations omitted). 578 S.W.Zd at 159. Because the legislature authorized the lease and because the lease authorized suit against the state, the court found no violation of the Texas Constitution article III, section 44, See id. requirement that contracts be authorized by preexisting law. -The court mentioned several cases dealing with the theory of quantum meruit in holding the state liable for the reasonable value of the benefits received. 578 S.W.Zd at 160-61. It is unclear. however, whether guantum meruit constituted the theory of recovery or merely the measure of damages. The Texas Supreme Court, in affirming the court's decision, held the "state liable under the terms of the written agreement for the damages occasioned by the default." State v. City National Bank of Austin, 603 S.W.2d 764. 765 (Tex. 198or (emphasis added). Thus, although the Supreme Court held the commission liable, the court did not rely on the quantum meruit theory or on an implied contract theory.

p. 2787

Mr. Marlin W. Johnston - Page 7

(JM-618)

The City National Bank case clearly differs from the case at hand. The Department of Human Services has not entered into contracts with the different long distance carriers to which Southwestern Bell allocated the various department locations. To hold the department liable directly to these carriers would require holding the state liable for a contract implied from the department's non-action in circumstances beyond the department's practical control. This situation is not the equivalent of a hold-over lessee's situation. Although the department may have actually used long distance service from allocated long distance carriers, it took no action to indicate its desire to change existing service from AT&T to various other long distance carriers. In fact, department employees may have been totally unaware of the point at which long distance service was physically transferred. After executing a letter of agency with AT&T. the department Indicated affirmatively that it did not want primary service from other long distance carriers. Additionally, as indicated above, the individual department locations lack the authority to enter into any contracts, express or implied. Accordingly, although the existence of an Implied contract depends upon factual determinations beyond the scope of the opinion process, an implied contract between the department and allocated long distance carriers cannot exist in the instant case. Consequently, the department Is not legally liable directly to long distance carriers allocated to various department locations as "default" customers under FCC regulations. This opinion does not address whether the department may be liable to Southwestern Bell, it addresses only the department's liability to long distance carriers allocated to the department by Southwestern Bell. SUMMARY As long as the Texas Department of Human Services included a list of its billed telephone numbers or some other unambiguous description indicating the scope of its designation of a primary long distance carrier In its letter of agency to American Telephone and Telegraph Company. the department need not submit an election ballot for each department location. This designation does not violate Texas' competitive purchasing laws. The department is not legally liable to long distance carriers allocated to various department locations as "default" customers under Federal Communications Commission regulations.

Attorney General of Texas
p. 2788

Mr. Marlin W. Johnston - Page 8

(JM-618)

JACK HIGHTOWER
First Assistant Attorney General
MARY KELLER
Executive Assistant Attorney General
RICK GILPIN
Chairman. Opinion Committee
Prepared by Jennifer Riggs
Assistant Attorney General

p. 2789