4. Discussion

We agree that Ordering Paragraph 3 of D.00-04-034 should have clearly specified the interest rate owed for termination of ISP traffic. It is immaterial that the parties' underlying pleadings, which did not argue the issue, led us to conclude that they agreed that the statutorily prescribed rate would apply. Under Civ. Code § 3289, unless the terms of a contract provide otherwise, the legal rate of prejudgment interest for breach of contract is 10 percent per annum.¹

The recent pleadings indicate that the parties strongly disagree over the amount of interest MCI is entitled to receive. Unequivocally, the record on which they rely shows that Pacific paid only part of each MFS reciprocal compensation invoice dated June 20, 1996 through March 10, 2000 and placed the remainder in the escrow account on a monthly basis. Pacific opened the escrow account and made the escrow deposits, voluntarily and unilaterally. The terms of the disputed co-carrier agreement do not require such an escrow deposit. The Commission did not order Pacific to open an escrow. Moreover, at a hearing held before Pacific's San Francisco Superior Court action was stayed, the Superior Court denied Pacific's motion for express approval of the escrow. The Superior Court, recognizing that a court-ordered escrow might be perceived as a limitation on the statutory interest rate, stated:

What do we gain by having to put the money in escrow? If it's a breach of contract, you are still going to be - they are still going to be entitled to contract damages and appropriate interest. And I suppose that really is the issue, is what will the measure of interest be if this Court orders that you could put, that you put it into escrow, then I suppose you can make a very good argument at some subsequent point in time that ultimately if the Defendants prevail, that the limit of the measure of interest damages is doing to be the interest that you obtain by having complied with the court order to put it into escrow. (MCI petition, Ex. 2. [Pacific Bell v. MFS Intelenet, No. 988749, Transcript of Hearing at 8 (Cal. Sup. Ct. Sept. 22, 1997)].)

Pacific now argues that MCI is barred from demanding interest at 10 percent per annum because in the underlying proceeding at the Commission it asked for "the interest accrued on any amounts Pacific Bell has paid into escrow". (Pacific opposition at 6, citing C.97-09-032, MCI's Sept. 16, 1999 Motion to Supplement Motion for Summary Judgment, p. 19.) According to Pacific, clearly MCI sought only - and the Commission directed Pacific to pay only -- "the 'accrued interest' from the escrow account". (See Pacific opposition at 6.) According to MCI, clearly it was asking for "interest on that portion of its reciprocal compensation invoices which Pacific Bell had not paid". (See MCI reply at 6.)

Nothing in the record suggests that MFS or MCI determined to forego payment of interest at the statutory rate and accept, instead, interest at the lower rate earned by Pacific's escrow account. While we agree that MCI could have formulated its request more precisely, Pacific's argument remains unpersuasive. We cannot reasonably interpret MCI's request to mean what Pacific argues it must mean. Thus, as set forth in the ordering paragraphs below, we grant MCI's petition and modify Ordering Paragraph 3 of D.00-04-034.