Public Utility Commission of Texas Peter Lake, Chairman Will McAdams, Commissioner Lori Cobos, Commissioner And Jimmy Glotfelty, Commissioner Each in His or Her Official Capacity at the Public Utility Commission of Texas v. AMA Communications, LLC D/B/A AMA TechTel Communications ( 2022 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-21-00597-CV
Public Utility Commission of Texas; Peter Lake, Chairman; Will McAdams,
Commissioner; Lori Cobos, Commissioner; and Jimmy Glotfelty, Commissioner,
each in his or her Official Capacity at the Public Utility Commission of Texas, Appellants
v.
AMA Communications, LLC d/b/a AMA TechTel Communications, Appellee
FROM THE 126TH DISTRICT COURT OF TRAVIS COUNTY
NO. D-1-GN-21-004498, THE HONORABLE KARIN CRUMP, JUDGE PRESIDING
MEMORANDUM OPINION
The Public Utility Commission of Texas (the PUC) and Peter Lake, Chairman;
Will McAdams, Commissioner; Lori Cobos, Commissioner; and Jimmy Glotfelty,
Commissioner, in their official capacities (collectively, the PUC Parties), appeal from the trial
court’s orders (1) denying their plea to the jurisdiction and (2) granting the petition of appellee
AMA Communications, LLC d/b/a AMA TechTel Communications (AMA) for a temporary
injunction. For the following reasons, we affirm the trial court’s orders.
BACKGROUND
This case concerns the Texas Universal Service Fund (TUSF),1 which was
established by the legislature to provide universal affordable telecommunications services across
1
The regulatory and historical background of the TUSF has been recounted in detail in a recent
opinion of this Court and will not be repeated here, as the parties are well familiar with it, except
the state, and which the legislature has directed the PUC to fund and administer. See Tex. Util.
Code §§ 52.001(a), 56.021, .022(a). The TUSF includes programs that provide financial support
to assist telecommunications providers with supplying basic local services at reasonable rates
in high-cost and rural areas. See 16 Tex. Admin. Code § 26.420(b)(1)-(2) (2022) (Pub. Util.
Comm’n of Tex., Administration of Texas Universal Service Fund (TUSF)). Among other
duties, the PUC is mandated to “adopt eligibility criteria and review procedures, including a
method for administrative review,” necessary for funding TUSF and making distributions to
eligible providers, Tex. Util. Code § 56.023(a)(1); “determine which telecommunications
providers meet the eligibility criteria,” id. § 56.023(a)(2); and “approve procedures for the
collection and disbursal of the revenue of” TUSF, id. § 56.023(a)(5).
AMA is a telecommunications provider whose coverage area includes more than
25,000 square miles, largely in rural west Texas. It offers phone and internet service to rural
Texas and is a competitive local exchange carrier (CLEC) that competes with incumbent local
exchange carriers (ILECs)2 in the areas it serves, providing customers an alternative to ILECs
and thus a choice in their telecommunications provider. As a CLEC, AMA operates under a
Service Provider Certificate of Operating Authority (SPCOA) and is regulated differently
than ILECs. It is nonetheless qualified to receive funds from TUSF as an “eligible
telecommunications provider” (ETP), having met a lengthy list of obligations designated by
statute and rule. See Tex. Util. Code §§ 52.151–.156 (Public Utility Regulatory Act (PURA)
where necessary to frame the issues. See Texas Tel. Ass’n v. Public Util. Comm’n, No. 03-21-
00294-CV, __ S.W.3d __, 2022 WL 2374875, at *2–3 (Tex. App.—Austin June 30, 2022, no
pet. h.) (TTA); see also Tex. R. App. P. 47.4 (providing for issuance of memorandum opinions).
2
Unlike AMA, the rural providers who filed the lawsuit we addressed in our recent TTA
opinion are ILECs. See TTA, 2022 WL 2374875, at *3.
2
sections applicable to SPCOAs); 16 Tex. Admin. Code § 26.417 (2022) (Pub. Util. Comm’n of
Tex., Designation as Eligible Telecommunications Providers to Receive Texas Universal Service
Funds (TUSF)) (providing requirements for designation as ETP).
ILECs receive a certain amount of monetary support per customer from the
PUC as determined through a final order issued after a contested-case proceeding. See 16 Tex.
Admin. Code § 26.403(e)(1)–(3) (2022) (Pub. Util. Comm’n of Tex., Texas High Cost Universal
Service Plan (THCUSP)). Under the “identical support rule,” if a customer switches from an
ILEC to a qualified CLEC like AMA, the support follows the customer to the CLEC. See id.§ 26.403(e)(4). Accordingly, AMA receives a fixed amount of per-line support when it provides
basic local telecommunications services to customers in supported high-cost rural exchanges.
Thus, the amount AMA receives per telecommunications line is not set through a contested case
but only by a PUC order of support for the ILEC, and AMA has no mechanism to affect the
amount of per-line support available in an area and must incorporate the per-line support
amounts in its business plan when making decisions about where to invest. According to AMA’s
undisputed evidence, it has invested tens of millions of dollars in infrastructure to become an
ETP and in reliance on the per-line support established by PUC order.
In August 2021, AMA filed against the PUC Parties a verified original petition
and application for declaratory judgment, mandamus relief, a temporary restraining order,
temporary and permanent injunctive relief, and compensation. AMA alleged that although
previously it had fully funded its obligations to AMA and similar entities at PUC-ordered levels
and maintained TUSF solvency, the PUC “recently broke from its precedent” and began paying
“pennies on the dollar from what it ordered and the Legislature required—to the tune of millions
of dollars.” AMA alleged that the PUC Parties implemented the underpayment scheme through
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their “behind-the-scenes contract amendment with [their TUSF] administrator, Solix Inc., to
establish a hierarchy of payments that would be made to various program recipients from what
was left of the dwindling Fund.” AMA alleged that the PUC Parties’ actions were ultra vires and
constituted unconstitutional regulatory takings. They sought (1) compensation for the unlawful
takings; (2) a writ of mandamus ordering the PUC Parties to adequately fund all TUSF programs
and make all required disbursements; (3) temporary and permanent injunctive relief ordering the
PUC Parties to desist from operating under the contract amendment, to reinstate full and timely
distribution of support to which AMA is entitled under the PUC’s orders, and to ensure the
TUSF is fully funded; (4) declaratory judgments that the contract amendment is void because it
violates rulemaking requirements of the Administrative Procedure Act (APA), see Tex. Gov’t
Code § 2001.038, and AMA’s due-process rights, see Tex. Util. Code § 56.031 (“The
commission may revise the monthly per line support amounts to be made available from the
Texas High Cost Universal Service Plan after notice and an opportunity for hearing.”); and (5)
attorney’s fees under the Uniform Declaratory Judgments Act (UDJA), see Tex. Civ. Prac. &
Rem. Code § 37.009.
The PUC Parties filed a plea to the jurisdiction, and the trial court conducted a
joint hearing on the plea and AMA’s application for a temporary injunction on November 9,
2021. The trial court issued a temporary injunction on November 17 and denied the PUC
Parties’ plea to the jurisdiction the following day. The temporary injunction recited the trial
court’s findings that (1) without injunctive relief AMA would suffer irreparable harm, (2) AMA
was likely to succeed on the merits of its claims, and (3) injunctive relief would preserve the
“last actual peaceable uncontested status that preceded the controversy before the court.” It
ordered the PUC Parties, beginning December 1, 2021, to pay AMA “the full amount of financial
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support that [it] is owed each month under the [applicable] rate orders [the PUC Parties] have
executed.” The PUC Parties perfected this interlocutory appeal of the trial court’s temporary
injunction and order denying their plea to the jurisdiction. See Tex. Civ. Prac. & Rem. Code
§ 51.014(a)(4), (8).
DISCUSSION
In this Court’s recent TTA case, the plaintiffs (Rural Providers) challenged the
same actions of the PUC Parties that AMA challenges here and brought the same types of claims
that AMA brings here—ultra vires, regulatory takings, and APA rulemaking.3 See Texas Tel.
Ass’n v. Public Util. Comm’n, No. 03-21-00294-CV, __ S.W.3d __, 2022 WL 2374875, at *6
(Tex. App.—Austin June 30, 2022, no pet. h.) (TTA). In that case, the trial court granted the
PUC Parties’ combined plea to the jurisdiction and cross-motion for summary judgment and
implicitly denied the Rural Providers’ summary-judgment motion by dismissing the case. This
Court reversed the trial court’s dismissal of the Rural Providers’ claims and rendered judgment
in their favor in the form of declaratory judgments and a permanent injunction. Id. at *27. We
also directed the trial court to issue a writ of mandamus ordering the Commissioners to “take
immediate action to fulfill their duties imposed by law to fully fund all TUSF programs and to
make all disbursements required by PURA and the Commission’s existing TUSF orders and
commitments.” Id. We remanded the Rural Providers’ claims for attorneys’ fees under the
UDJA and for a determination of their actual damages on their regulatory-takings claims. Id.While the present case appears before us in a different procedural posture from
that in TTA, the application of legal principles to the pleaded and undisputed facts is
3
The TTA case involved one additional claim—violation of the Texas Open Meetings
Act—that AMA has not raised. See TTA, 2022 WL 2374875, at *6, 23 n.20.
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substantively the same and our analysis and holdings are largely dictated by that opinion. We
therefore dispense with a lengthy discussion of the PUC Parties’ arguments except where
necessary because of significant procedural or factual differences. In their first issue, the PUC
Parties contend that the trial court erred in denying their plea to the jurisdiction because AMA
failed to plead valid claims for ultra vires, regulatory takings, and relief under the UDJA and
APA. In their second issue, the PUC Parties argue that the trial court abused its discretion in
issuing the temporary injunction.
Plea to the jurisdiction
A plea to the jurisdiction is a dilatory plea seeking dismissal of a case for lack
of subject-matter jurisdiction. Harris County v. Sykes, 136 S.W.3d 635, 638 (Tex. 2004). We
review the trial court’s ruling on a plea to the jurisdiction de novo. Texas Dep’t of Parks &
Wildlife v. Miranda, 133 S.W.3d 217, 228 (Tex. 2004). The burden is on the plaintiff to
affirmatively demonstrate the trial court’s jurisdiction. Heckman v. Williamson County,
369 S.W.3d 137, 150 (Tex. 2012). When, as here, a plea to the jurisdiction challenges the
pleadings, we determine if the plaintiff has “alleged facts that affirmatively demonstrate the
court’s jurisdiction to hear the cause.” Miranda, 133 S.W.3d at 226; see also Houston Belt &
Terminal Ry. Co. v. City of Houston, 487 S.W.3d 154, 160 (Tex. 2016). When making this
determination, we construe the pleadings liberally in the plaintiff’s favor, taking factual
assertions as true and looking to the plaintiff’s intent. Miranda, 133 S.W.3d at 226. We may
also consider evidence that the parties have submitted that is relevant to the jurisdictional issues,
and we must do so when necessary to resolve those jurisdictional issues. Bland Indep. Sch. Dist.
v. Blue, 34 S.W.3d 547, 555 (Tex. 2000).
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AMA challenges as ultra vires, and seeks declaratory relief for, the same actions
of the PUC Parties that the Rural Providers challenged in the TTA case: amending the Solix
contract to create a payment hierarchy, not fully funding the TUSF, and not following the PUC’s
own orders establishing monthly support amounts. In short, AMA contends that (1) “While the
Commission has discretion to decide how the TUSF should be funded, it has no discretion to
determine whether it will be funded,” and (2) “While the Commission has discretion to establish
rules calculating the support owed to a Fund participant, it has no discretion to determine if it
will then make those payments.” We agree with AMA for the reasons stated in this Court’s
TTA opinion: PURA and the PUC’s own orders and rules preclude the PUC Parties from
underfunding TUSF; the PUC Parties have a ministerial duty to pay the monthly support
amounts established by the PUC’s final orders; and relief is available under the UDJA to require
the PUC Parties to comply with applicable statutes, rules, and orders. We therefore hold that
AMA sufficiently pleaded viable ultra vires claims and a claim for relief under the UDJA. See
TTA, 2022 WL 2374875, at *14–15, 17.
Also as in the TTA case, AMA contends that the Solix contract amendment
constitutes a rule for purposes of the APA, triggering procedural and substantive requirements
with which the PUC did not comply. For the same reasons as stated in the TTA opinion, we
hold that AMA sufficiently pleaded a claim for relief under the APA because the Solix contract
amendment constitutes a rule under the APA, thus invoking the trial court’s jurisdiction over
AMA’s challenges thereto. See id. at *23. We likewise overrule the PUC Parties’ contention
that AMA failed to exhaust administrative remedies before bringing its APA Section
2001.038(a) challenge. See id. at *21 n.17 (concluding there was no merit to PUC Parties’
exhaustion argument because Rural Providers brought “no other APA challenge” besides their
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Subsection 2001.038(a) rule challenge, which does not contain exhaustion requirement); see also
Tex. Gov’t Code § 2001.038(d) (“A court may render a declaratory judgment without regard to
whether the plaintiff requested the state agency to rule on the validity or applicability of the rule
in question.”).
As for AMA’s regulatory-takings claim, we conclude that AMA sufficiently
pleaded a viable claim. As explained in the TTA opinion, when an alleged taking involves
something between physical invasion and depriving the owner of all economically beneficial or
productive use of the property, courts consider the three Penn Central factors in determining
whether the regulatory action has gone “so far” as to require compensation. See TTA,
2022 WL 2374875, at *24 (citing Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124
(1978)). Those factors are (1) the economic impact of the regulation on the claimant, (2) the
extent to which the regulation has interfered with distinct investment-backed expectations, and
(3) the character of the governmental action. Id. (citing Penn Cent., 438 U.S. at 124).
The PUC Parties did not expressly argue in their plea that AMA had not
sufficiently pleaded facts supporting any of those factors but merely cited the Texas Supreme
Court’s opinion in Harris County Flood Control District v. Kerr, 499 S.W.3d 793, 799 (Tex.
2016), for the proposition that governmental “inaction cannot give rise to a taking.” We rejected
that argument in TTA because the Rural Providers, like AMA here, had not alleged mere
“inaction” by the PUC Parties but instead alleged affirmative regulatory action that had a
negative economic impact on them and interfered with their investment-backed expectations.
Id. at *25. In the TTA opinion, we held that the Rural Providers had established that the PUC
Parties took specific affirmative regulatory action—i.e., making a decision not to fund the TUSF
and implementing that decision by amending the Solix contract. Id. For the reasons explained in
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TTA, and because our review of AMA’s petition leads us to conclude that AMA sufficiently
pleaded facts supporting each of the three Penn Central factors, we hold that AMA’s petition
stated a viable regulatory-takings claim.
We overrule the PUC Parties’ first issue.
Temporary injunction
In their second issue, the PUC Parties contend that the trial court abused
its discretion in granting AMA temporary injunctive relief. A temporary injunction is an
extraordinary remedy that does not issue as a matter of right. Walling v. Metcalfe, 863 S.W.2d
56, 57 (Tex. 1993). Although the party seeking an injunction is not required to establish that it
will prevail at trial, see id. at 58, it must plead and prove three elements: (1) a cause of action
against the defendant; (2) a probable right to the relief sought; and (3) a probable, imminent, and
irreparable injury in the interim if the injunction is not granted. Abbott v. Anti-Defamation
League Austin, Sw. & Texoma Regions, 610 S.W.3d 911, 916 (Tex. 2020) (citing Butnaru v.
Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002)). An injury is irreparable if the injured party
cannot be adequately compensated in damages or if the damages cannot be measured by any
certain pecuniary standard. Butnaru, 84 S.W.3d at 204. The purpose of a temporary injunction
is to preserve the status quo of the litigation’s subject matter pending a trial on the merits. Id.
We review an order granting a temporary injunction for a clear abuse of
discretion. Henry v. Cox, 520 S.W.3d 28, 33 (Tex. 2017). “We limit the scope of our review to
the validity of the order, without reviewing or deciding the underlying merits, and will not
disturb the order unless it is ‘so arbitrary that it exceed[s] the bounds of reasonable discretion.’”
Id. at 33–34 (quoting Butnaru, 84 S.W.3d at 204). The trial court does not abuse its discretion if
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some evidence reasonably supports its ruling, even if the evidence is conflicting. Id. at 34;
Khaledi v. H.K. Global Trading, Ltd., 126 S.W.3d 273, 280 (Tex. App.—San Antonio 2003,
no pet.). When reviewing a temporary-injunction order, we view the evidence in the light
most favorable to the order, indulging every reasonable inference in its favor. Fox v. Tropical
Warehouses, Inc., 121 S.W.3d 853, 857 (Tex. App.—Fort Worth 2003, no pet.).
The PUC Parties do not challenge AMA’s evidence under any of the three prongs
of the temporary-injunction standard. Instead, they argue that the trial court abused its discretion
in issuing the temporary injunction because (1) by doing so it “inexplicably disregarded its own
jurisdictional analysis in the TTA case, in which the district court determined it lacked
jurisdiction,” making its temporary injunction arbitrary and unreasonable; (2) it thereby
prioritized payment to “a single fund recipient over similarly situated recipients,” which would
“create a new prioritization scheme for the TUSF” and “deplete the TUSF to the point of
insolvency within four months” and thus “fundamentally alter the status quo”; and (3) “equitable
considerations weigh strongly against” granting the temporary injunction because AMA waited
until two months after the district court issued its decisions in the TTA case before filing suit.
As to the PUC Parties’ first argument, this Court recently determined that the trial
court in the TTA case committed an error of law by dismissing the Rural Providers’ claims. See
TTA, 2022 WL 2374875, at *27. A trial court has no discretion to incorrectly analyze or apply
the law, see Anti-Defamation League, 610 S.W.3d at 916, and thus to the extent that the trial
court in TTA determined that it had no jurisdiction over claims that are substantively analogous
to those here, we have already concluded that it erred and thus its ruling is not determinative of a
ruling in this case.
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We understand the PUC Parties’ second argument to be challenging whether
the trial court’s temporary injunction would, in fact, preserve the “status quo” pending trial on
the merits. In the context of temporary injunctions, the status quo is the “last actual, peaceable,
non-contested status which preceded the pending controversy.” Texas Educ. Agency v. Houston
Indep. Sch. Dist., 609 S.W.3d 569, 572 (Tex. App.—Austin 2020, order) (per curiam) (quotation
omitted), mandamus denied sub nom. In re Texas Educ. Agency, 619 S.W.3d 679 (Tex. 2021)
(orig. proceeding). The PUC Parties argue that their implementation of the prioritization scheme
for disbursements from the TUSF is the relevant “status quo” and that a new prioritization of
AMA over other providers—“giving one TUSF recipient unjustified and inexplicable priority
over other TUSF recipients”—would alter rather than preserve that status quo. However, “[i]f an
act of one party alters the relationship between that party and another, and the latter contests the
action, the status quo cannot be the relationship as it exists after the action.” Universal Health
Servs., Inc. v. Thompson, 24 S.W.3d 570, 577 (Tex. App.—Austin 2000, no pet.) (quoting
Benavides Indep. Sch. Dist. v. Guerra, 681 S.W.2d 246, 249 (Tex. App.—San Antonio 1984,
writ ref’d n.r.e.)). If it were otherwise, the granting of an injunction would be rendered
impossible. Id.It was the PUC Parties’ decision to amend the Solix contract and refuse to fund
the TUSF that altered the parties’ relationship; this dispute arises from those allegedly ultra vires
actions. Therefore, the status quo is the relationship of the parties prior to the PUC Parties’
challenged actions. We reject the premise implicit in the PUC Parties’ contention that a party
may act unlawfully and then claim that the impacts of that unlawful behavior cannot be
remedied or mitigated pending a trial on the merits. We hold that the trial court’s temporary
injunction preserves the status quo by ordering the PUC Parties to continue making the TUSF
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payments that AMA was receiving, and was entitled to receive, before the PUC Parties took
the challenged actions.
And finally, we consider the PUC Parties’ third argument: that the trial court
should not have granted AMA the “extraordinary equitable relief” of a temporary injunction
because AMA “slumbered” on its rights and did not act “diligently” to protect its interests. They
cite Rivercenter Associates v. Rivera, 858 S.W.2d 366, 367 (Tex. 1993) (“Equity aids the diligent
and not those who slumber on their rights.”), as support and contend that AMA “sat on the
sidelines until the trial court ruled in the Commission’s favor in the TTA Case” and “waited
more than two months after” the trial court’s decision in that case to file this lawsuit.
The PUC Parties have cited no authority requiring a party seeking a temporary
injunction to establish more than the three above requirements, and the Rivercenter case it cites
is distinguishable because it concerned not a temporary injunction but the equitable remedy of
mandamus in the context of an untimely motion to quash a jury demand. See id. Moreover, the
trial court heard evidence that AMA (1) waited to file its lawsuit because it was communicating
directly with the PUC in an attempt to remedy the underpayment; (2) was aware that the
TTA parties had filed a petition for rulemaking that might remedy the shortfall; and (3) was
communicating with “dozens” of legislators, “pleading for them to . . . take the reins on this issue
and resolve it.” When it became clear to AMA that no remedy would be forthcoming, and its
financial situation became “desperate,” it filed this lawsuit. We conclude that the trial court did
not abuse its discretion in granting AMA temporary-injunctive relief and overrule the PUC
Parties’ second issue.
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CONCLUSION
We affirm the trial court’s denial of appellants’ plea to the jurisdiction and its
issuance of a temporary injunction in AMA’s favor.
__________________________________________
Thomas J. Baker, Justice
Before Justices Goodwin, Baker, and Triana
Affirmed
Filed: August 10, 2022
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