Essential Estrogen

In an opinion released today, the Iowa Supreme Court stated that an interpretation of the Iowa Code by the Iowa Utilities Board was "irrational, illogical, or wholly unjustifiable." The high court upheld the decision of the Polk County District Court that telecommunication carriers -- MCI Worldcom Inc., in this particular case -- are required to obtain verification of a change in service and not verification of the terms and conditions of that new service.

The case stemmed from the experiences of Dr. Syam Kilaru. He was contacted by a telemarketer on behalf of MCI during the fall of 2002. The telemarketer offered Kilaru certain international calling rates and promotions before switching the man to a third-party verification company. Kilaru agreed to transfer his phone service to MCI during a recorded conversation that contained only the verification to switch services and not the terms and conditions as outlined by the telemarketer.

Although MCI sent a welcome packet that outlined the new terms of service, Kilaru did not review it. The rates contained in the welcome packet were very different from those described by the telemarketer and additional promotions of free international calls for a certain period of time were not included. Kilaru noticed the changes upon receiving his first bill and he subsequently filed an informal complaint with the Iowa Utilities Board, which was required to forward the complaint to MCI.

MCI agreed at that time to refund a portion of Kilaru's billing, but stated that all future calls would be billed at the higher rate. The Utilities Board submitted this as a proposed resolution to the case. The Office of Consumer Advocate, however, filed a petition with the board to impose civil penalties against MCI for committing an unlawful slam, one of three telecommunications actions prohibited by Iowa law.

In July 2004 the case was heard before an administrative law judge, who ruled that because MCI did not verify the terms of service, there was no valid contract. Kilaru would not have to pay any bills to MCI and MCI would not be penalized for the action because "there was no evidence MCI intended to mislead." Both the Office of Consumer Advocate and MCI appealed this decision.

The Polk County District Court reversed the administrative law judge's ruling, returning the case to the initial partial payment offered by MCI. Both the Iowa Utilities Board and the Office of Consumer Advocate appealed.

The Supreme Court opinion, penned by Justice David S. Wiggins, outlined the key issue in the case as whether or not the verification provisions contained in Iowa law and agency rules require agreement on both the switch to a new carrier and the terms and conditions related to that switch. After an extended review of both the Iowa Code and rules adopted by the Utilities Board to implement the code, the Supreme Court found "none of the permissible verifications require the customer to verify the terms and conditions the customer consented to when agreeing to change service carriers."

"Had the Board wanted to require such a verification it could have done so by writing that requirement into its rules," Wiggins wrote. "After all, one of the purposes of rulemaking is to express the policy of an agency in a rule in order to give any affected persons fair notice of the law before they engage in conduct, which may be governed by those rules."