3. Factual Background

The pleadings relate that on March 29, 2000, just prior to issuance of D.00-04-034, Pacific paid MCI the principal it had withheld pending resolution of the parties' contractual dispute over payment of reciprocal compensation for termination of calls to internet service providers, known as ISPs. Pacific also paid MFS interest in the amount of $3,910,845.00. According to MCI, as of March 29, 2000, Pacific owed $10,899,484.63 in interest on the principal (at 10 percent per annum), and thus, Pacific's payment was short by $6,988,639.63. Pacific had held the principal in an escrow account where it earned interest at a rate of less than 10 percent per annum. According to Pacific, by dispersing to MCI the principal and all interest which had been earned in the escrow account as of March 29, 2000, Pacific fully discharged its obligation.

Pacific had previously filed an action in the San Francisco Superior Court against MFS over the parties' co-carrier agreement dispute, and that proceeding was stayed pending final determination of MFS' complaint at the Commission. When Pacific refused to pay additional interest in the spring of 2000, MCI sought enforcement of the Commission's order by filing a cross-claim to Pacific's original Superior Court claim. Pacific filed a demurrer to the cross-claim and MCI filed a motion for summary judgment. The Superior Court heard both motions on November 20, 2000. While the Superior Court agreed with MCI that 10 percent per annum is the statutory rate for calculating prejudgment interest on breach of contract under Civ. Code §3289, it recommended that MCI seek clarification of D.00-04-034 from the Commission. The Superior Court advised:

. . .  The problem is they [the Commission] didn't specify what the accrued interest is, and what the rate is.

And you know, if it comes from me, its going to be 10 percent, I agree. Because that's, well, I think that's the legal rate of interest. Though, indeed, the Commission might have different perspective on it. And they made the order, they must have in mind what the interest is. And it seems to me that doesn't require very much in the way of effort for you to go to the PUC and say, "Judge Garcia is somewhat reluctant on his own to award 10 percent. He would like you to tell him if that's what you meant." (MCI petition, Ex. 6. [Pacific Bell v. MFS Intelenet, No. 988749, Transcript of Hearing at 4 (Cal. Sup. Ct. Nov. 20, 2000)].)