IV. Discussion
At a hearing held on July 9, 2002, the parties agreed to cooperate in planning for the transfer of customers from ATG to UST using the options proposed by each of them. Therefore, the issue of Pacific's cooperation in planning is moot.
The remaining dispute between the parties is over the collocation facilities used by ATG. In its complaint, UST said:
"All that TelePacific wants to do is to "move in" to the existing collocation cages at the very same time as ATG "moves out" with no changes in any existing interconnections, facilities, or other equipment. When TelePacific "moves in," it will begin to pay Pacific Bell's recurring charges for the collocation space and arrangements in accordance with the provisions of its interconnection agreement. In addition, TelePacific will pay any appropriate nonrecurring costs that are incurred by Pacific Bell in order to carry out the migration, such as painting over ATG's name on cages, re-tagging cross-connects, and modifying its records to change the name on facilities assignments."
The key issue is what rights, if any, UST has to the collocation facilities currently used by ATG. UST did not acquire ATG's interconnection agreement. In addition, the asset sale agreement does not specifically say that the rights to the specific collocation facilities, used by ATG to serve the acquired customers, are acquired by UST.
In its complaint, UST said that it "did not enter into an agreement with ATG for the assignment or transfer to, or assumption by TelePacific of the Collocation Arrangements, or any leases or other rights" that ATG may have to use Pacific's network facilities or any other property in which Pacific has an ownership interest. This statement appears to mean that UST did not acquire any of ATG's rights to use Pacific's facilities or property through the asset sale agreement. Therefore, since the collocation facilities are Pacific's property, UST did not acquire the right to use them. As a result, there would be no cause of action. However, in a subsequent pleading, UST asserted that it has the exclusive right to use the collocation facilities used by ATG to serve the affected customers under the asset sale agreement, and federal law, without acquiring ATG's interconnection agreement with Pacific. Notwithstanding the statement in the complaint, we will address UST's subsequent contention.
UST advances two arguments in support of its contention that the asset sale agreement grants it such rights. First, UST says that pursuant to the asset sale agreement, it assumed certain liabilities. Among those liabilities are ATG's collocation facility costs beginning June 1, 2002. UST argues that it would make no sense for it to assume these liabilities unless it had acquired the attendant collocation rights. Therefore, the asset sale agreement must have assigned it those rights. We disagree.
There is another logical reason why UST might have assumed those liabilities. It may have assumed them in order to ensure that the acquired customers continue to receive service until the purchase is completed. Such an assumption of liabilities may be a reasonable way to prevent customers from being lost by ATG, thereby reducing the value of the purchased assets. Therefore, UST's argument is not persuasive. In addition, we are not convinced that there is a substantial long-term risk to UST due to the liabilities it alleges it assumed.
If the purchase is completed, the acquired customers will become UST's customers and be served through UST's collocation facilities. Since ATG will have no customers, there will be no ongoing ATG collocation costs for UST to pay. The asset sale agreement does not further define what these costs would be. It is possible that they may include costs for decommissioning ATG's collocation facilities. However, there would be no further costs arising out of service to ATG's customers since it would have none. If the purchase is not completed, the asset sale agreement would be terminated, and UST would have no further obligation regarding the liabilities. It is not clear, however, that UST actually assumed the specified liabilities.
The term "Assumed Liabilities" appears only in sections 1.1(c), 3.1(b), and 3.1(c) of the asset sale agreement.7 It is used only in determining the amount of the purchase price, and the amount of the accounts receivable to be acquired. The term is not used to identify specific ATG obligations to Pacific assumed by UST.8 Therefore, UST has not demonstrated that it actually assumed any liabilities.
For the above reasons, UST's argument that it has acquired ATG's rights to collocation facilities by virtue of its assumption of the "Assumed Liabilities", including an obligation to pay Pacific for ATG's collocation costs, has no merit.
In its second argument in support of its contention that the asset sale agreement grants it ATG's collocation rights, UST says the right to collocate is distinct from and independent of the specific rates, terms, and conditions for collocation in the interconnection agreement. We agree that the right to collocate is independent from the interconnection agreement. However, the right to use specific collocation facilities is not.
Physical collocation is provided to ATG by Pacific pursuant to the collocation appendix to an interconnection agreement. ATG obtained its rights to the specific collocation facilities it uses through its interconnection agreement with Pacific. The parties agree that UST did not purchase the interconnection agreement. If UST had acquired ATG's interconnection agreement, it would also have acquired the right to use the collocation facilities used by ATG. However, since it did not do so, it did not acquire ATG's collocation rights.
An additional reason why we find that UST did not acquire ATG's collocation rights is that they are in the process of being sold to GE. The interconnection agreement is part of the assets approved by the Bankruptcy Court for sale to GE. The sale is pending. In addition, the interconnection agreement provides that it is not severable.9 As a result, ATG can not sell part of it to GE, and keep the rest to dispose of as it sees fit. Therefore, the interconnection agreement, including ATG's rights to use the subject collocation facilities, is still ATG's property, pending its sale to GE. Furthermore, the asset sale agreement is dated June 4, 2002. The bankruptcy court's conditional approval of GE's purchase of ATG's interconnection agreement with Pacific is dated June 25, 2002. It is not reasonable to assume that ATG and GE proposed, or the Bankruptcy Court conditionally approved, a sale to GE of rights previously assigned to UST. For all of the above reasons, we find that ATG did not sell its collocation rights to UST pursuant to the asset sale agreement.
UST has also argued that even if GE assumes the interconnection agreement, it will have no use for the collocation rights used to serve the customers acquired by UST, because GE did not acquire those customers. Whether it has a use for those rights is up to GE. GE could use those rights to initiate service in the same areas UST will serve. Alternatively, GE could sell those rights to another carrier wishing to serve those areas, subject to agreement with Pacific. Even if GE ultimately has no use for the rights, it does not follow that UST has acquired them. Therefore, what GE may choose to do with those rights in the future has no bearing on the issue at hand.
As discussed above, we find that UST did not acquire ATG's rights to use the subject collocation facilities. Therefore, Pacific did not violate such rights. As a result, we conclude that there is no cause of action, and the complaint should be dismissed.
As to the possibility of service interruptions, UST has alternative means of providing service to the acquired customers, as pointed out by Pacific. Therefore, we have no reason to believe that dismissing this complaint will result in service interruptions.10
While ATG is not a party to this proceeding, we are concerned that it continues to provide service to its customers. In A.02-05-020, prior to the proposed sale, ATG requested authority to abandon service to the customers that are the subject of this proceeding. Because of the proposed sale, ATG withdrew the application. Prior to dismissing the application, the assigned administrative law judge (ALJ) issued a ruling reminding ATG of its obligation to provide service to its customers until a sale is completed, or it is authorized to abandon service. By D.02-08-011, A.02-05-020 was dismissed.
Commissioner Wood is the Assigned Commissioner and ALJ O'Donnell is the assigned ALJ in this proceeding.
Findings of Fact
1. ATG occupies and uses collocation facilities at certain of Pacific's wire centers pursuant to its interconnection agreement with Pacific.
2. ATG has installed its equipment to and within the collocation spaces, and has interconnections between its facilities and Pacific's facilities. These facilities are used by ATG to serve its customers.
3. ATG is currently operating under the protection of the Bankruptcy Code.
4. ATG and UST have entered into an asset sale agreement dated June 4, 2002 whereby UST will acquire specified ATG assets including customer accounts and all of the equipment used to serve the acquired customers.
5. The asset sale agreement was approved by the Bankruptcy Court by an order dated June 7, 2002.
6. UST and ATG filed advice letters seeking approval of the sale and transfer of customers on June 6, 2002. The advice letters went into effect on July 16, 2002.
7. At a hearing held on July 9, 2002, the parties agreed to cooperate in planning for the transfer of customers from ATG to UST using the options proposed by each of them.
8. The asset sale agreement does not specifically say that ATG's rights to use collocation facilities are acquired by UST.
9. In its complaint, UST said that it did not enter into an agreement with ATG for UST to get the collocation arrangements, or any leases or other rights that ATG may have to use Pacific's network facilities or any other property in which Pacific has an ownership interest.
10. If the purchase is completed, there will be no ongoing ATG collocation costs to pay because ATG will have no customers.
11. If the purchase is not completed, the asset sale agreement, and any further liability, will be terminated.
12. The term "Assumed Liabilities" is used in the asset sale agreement only in determining the amount of the purchase price, and the amount of the accounts receivable to be acquired. The term is not used to identify specific ATG obligations to Pacific assumed by UST.
13. Physical collocation is provided to ATG by Pacific pursuant to the collocation appendix to an interconnection agreement.
14. ATG obtained its rights to the specific collocation facilities it uses through its interconnection agreement with Pacific.
15. The interconnection agreement is part of the assets approved by the Bankruptcy Court for sale to GE. The Bankruptcy Court's conditional approval of GE's purchase of ATG's interconnection agreement with Pacific is dated June 25, 2002. The sale is pending.
16. Since the interconnection agreement provides that it is not severable, ATG can not sell part of it to GE, and keep the rest to dispose of as it sees fit.
17. The interconnection agreement, including ATG's right to use the collocation facilities it uses to serve its customers, is still ATG's property, pending its sale to GE.
18. UST has alternative means to provide service to the acquired customers.
19. Dismissing this complaint need not result in customer service interruptions.
1. The issue of Pacific's cooperation in planning is moot.
2. UST's argument that it has acquired ATG's rights to use collocation facilities by virtue of its assumption of the "Assumed Liabilities", including an obligation to pay Pacific for ATG's collocation costs, has no merit.
3. It is not reasonable to assume that ATG and GE proposed, or the Bankruptcy Court conditionally approved, a sale to GE of rights previously assigned to UST.
4. UST did not acquire ATG's rights to collocation facilities through the asset sale agreement.
5. Pacific did not violate UST's rights.
6. UST has not stated a cause of action against Pacific.
7. The complaint should be dismissed effective immediately.
IT IS ORDERED that:
1. Case 02-06-032 is dismissed.
2. This proceeding is closed.
This order is effective today.
Dated , at San Francisco, California.
