III. Discussion

A. Dismissal of the Complaint

The County presents two separate grounds upon which this complaint should be dismissed. The first ground involves the question of whether the County may voluntarily withdraw the complaint at this stage of the proceeding because no evidentiary hearings have yet commenced. AT&T's objection involves the question of whether or not a "trial" has commenced at this point in the process.

We recognize that California courts have established a precedent of denying a plaintiff the right to voluntarily dismiss its case where a "trial" has already commenced. In this instance, AT&T argues that the "trial" in this complaint commenced once the ALJ issued a ruling sustaining at least in part, certain objections raised in AT&T's motion to dismiss. AT&T claims that its motion to dismiss was equivalent to a demurrer, and that the ALJ Ruling on its motion was the equivalent of an order sustaining a demurrer since it found a portion of the County's claim barred by the statue of limitations. Since in the Goldtree case, the Supreme Court ruled that an order sustaining a demurrer constituted a "trial," AT&T argues that a similar analogy can be drawn in this case.

We are unpersuaded by AT&T's argument that the County is precluded from voluntarily dismissing its complaint as a matter of law because a "trial" has already commenced by virtue of the ALJ Ruling on AT&T's motion to dismiss. While the AT&T motion to dismiss may be construed as somewhat analogous to a demurrer as provided in the Cal. Civ. Proc. Code § 430.10, it also differed in key respects from a general demurrer as was the case in Goldtree v. Spreckels. In Goldtree, the court sustained a general demurrer without leave to amend. The plaintiff then attempted to have the complaint dismissed, thereby avoiding the effect of the order sustaining the demurrer. The Supreme Court held that the order sustaining the demurrer constituted a "judgment" on the complaint, thus precluding the plaintiff's voluntary dismissal.

The ALJ Ruling on AT&T's motion to dismiss, however, was different from an order sustaining a general demurrer as was the case in Goldtree. The ALJ Ruling did not grant the motion to dismiss, but merely modified the scope of the complaint to exclude disputes relating to time periods barred by the statue of limitations. By contrast, the demurrer granted in Goldtree constituted an admission by the defendant of all of the facts of the plaintiff's case. Accordingly, the court reasoned that a judgment could thereby be rendered on such a basis "as a conclusive determination of the litigation on its merits." (Goldtree v Spreckels, supra, 135 Cal at 672.)

The court contemplated that "If the demurrer is sustained, [the complainant] stands on his pleading and submits to judgment on the demurrer..." (Id, at pp. 672-673.) In this complaint, however, the AT&T motion to dismiss did not admit to all of the facts alleged in the Complainant's pleading. Neither did the ALJ Ruling provide a basis for the submission of parties to any summary judgment of the complaint. Therefore, we find that the situation before us in this complaint is not analogous to an order sustaining a demurrer as contemplated by Goldtree v. Spreckels and Wells. We find that a trial has not yet commenced, and as such, the legal right of the Complainant to have the complaint dismissed has not been foreclosed.

Yet, while the Complainant retains the right to have this matter dismissed, we disagree with the Complainant's claim that the Commission inherently lacks subject matter jurisdiction over this complaint merely because the dispute involves a contract rather than a tariff. The California Supreme Court case cited by Complainant in Hempey v. Public Utilities Commission (1961) 56 C.2d 214 is not relevant as a precedent in this case. In Hempey, the Court ruled that the Commission was not expressly empowered to adjudicate contract rights between a public utility and third parties, for example, general creditors. The Court found that general jurisdiction to determine the respective rights of creditors of a public utility reposes with the superior court. Nothing in the Supreme Court Decision, however, removed jurisdiction from the Commission relating to disputes between a utility and its customer pertaining to utility service. Moreover, Public Utilities Code Section 701 broadly states that the Commission is "empowered to supervise and regulate every public utility in the State and may do all things . . . which are necessary and convenient in the exercise of such power and jurisdiction."

The dispute in this complaint clearly comes under this Commission's jurisdiction since it relates to a contract dispute directly relating to utility service rendered to a utility customer. This dispute does not relate to contract rights of any third parties such as general creditors. The fact that the utility service was rendered to the County under a contract instead of a tariff does not remove the service from Commission jurisdiction. AT&T State Calling Service, to which the County subscribed, is a type of AT&T Custom Network Service, as specified in AT&T's California intrastate tariff which is subject to Commission jurisdiction. AT&T's contract with Orange County expressly incorporates the terms, rate, regulations, and conditions of AT&T's California intrastate tariff. Therefore, we reject the Complainant's argument that we inherently lack subject matter jurisdiction over this complaint. Nonetheless, in view of our finding that a trial has not yet begun in this complaint, the Complainant retains the right to have its case dismissed. On that basis, we grant the motion to dismiss.

B. Disposition of Escrow Funds

The question must be decided as to the disposition of the funds that have been deposited in escrow. There are two questions in dispute: (1) the legal jurisdiction of this Commission to prescribe how the funds are to disbursed between the parties; and (2) the legal and equitable merits of disposition. Unless this Commission were to conduct a trial adjudicate a disposition of the funds between parties, then any legal or equitable argument concerning the disposition is rendered moot. In this particular instance, we have concluded that the complaint shall be dismissed without trial. As such, we have no basis to make a substantive determination as to the merits of the dispute, and what portion of the funds properly belongs to each of the parties. The complainant has failed to provide a precise indication of the amount of escrow funds that are actually in dispute. Complainant claims such quantification cannot presently be made without further assistance from AT&T.

In the absence of any evidentiary basis upon which to identify a prevailing party or to prescribe a division of the escrow funds between the parties, our only recourse is to reverse the transactions that initially established the CPUC escrow account. The reversal of the CPUC escrow deposits, by default, returns the deposited funds to the County, the original payee. The return of these funds in no way constitutes any legal finding that the County has prevailed in the complaint. Neither does return of the funds mean that AT&T will have provided free service to the County for nearly a year. The County remains legally liable to AT&T for all charges that are due and payable under the applicable contract for services rendered. The closure of the CPUC escrow account and the return of deposited funds to the County shall not in any way be construed as judgment on the County's liabilities to AT&T, or the amounts that are properly due and payable to AT&T.

In the event that AT&T ultimately prevails in a subsequent civil court trial, the County will remain liable for any court ordered back charges as well as any interest, penalties, or other sanctions that could be assessed by the court. The dismissal of this complaint in no way prejudges nor limits the rights of AT&T to bring legal action against the County (or to defend itself against action brought against it by the County) in a separate jurisdiction. AT&T retains the legal right to sue (or countersue) the County for nonpayment of its bills, or to seek appropriate interest or penalties for any delay from the date that payments were originally due. Likewise, nothing prevents AT&T from seeking a court order in a separate jurisdiction to establish an independent escrow fund to maintain and preserve disputed billings during the pendancy of any subsequent civil litigation that may ensue. The effect of this order is merely to remove the CPUC from being the custodian of such an escrow account, and to return the funds to the party from which they were received.

We agree with AT&T that the reasoning underlying the Creative Labs case involved somewhat different circumstances than are present here as a basis for disposing of escrow funds. In that case, the Court found that the "escrow account has no relationship to the merits of this case..." In the Creative Labs case, the escrow account in question related to funds from a purchase agreement between Defendant Orchid and a non-party with the funds to be held in escrow until the litigation was resolved by final judgment. Yet, Plaintiff Creative Labs was not a party to the purchase agreement. Therefore, the court held that the defendant's inability to access the escrow account until the end of litigation "would simply be a collateral consequence of the voluntary dismissal that was created by the defendant's own actions" in filing a summary judgment motion.

Yet, while we agree that there is a more direct connection between the escrow deposits and the dispute in question here, we still find that there is nothing to prevent the return of funds to the County. AT&T's legal rights to pursue litigation are not being compromised merely by returning the escrow funds to the party from which they were received. The Creative Labs case went on to conclude that denying the defendant access to the escrow account "has no effect on defendant's ability to defend this action." Likewise, AT&T's ability to defend its legal rights are not compromised by the return of escrow funds to the County, pending further legal action in a separate jurisdiction.

C. Rule 1 Violation

Two issues are raised by AT&T's allegation that the County has committed a Rule 1 violation. The first issue involves the question of whether, in fact, a Rule 1 violation occurred. The second issue involves the question of what form of sanction, if any, may be appropriate in the event that a Rule 1 violation did occur.

Based upon the Declaration of Daniel Shephard, we understand that the County is now taking the position that Mr. Fred Voss, County Manager, required authority from the County Board of Supervisors in order to file the complaint. Accordingly, the prior sworn statement of Mr. Voss that he was "authorized to make this verification [of the complaint] on [the County's] behalf," must be viewed as an erroneous statement. In view of the fact that the County does not regularly appear before this Commission, and that Mr. Voss was not a lawyer, a presumption may be drawn that Mr. Voss was not aware that he lacked authorization to verify the pleading.

Yet, Mr. Shephard further asserts in his Declaration that: "Had the County's legal counsel been aware of the proposed submission of the Complaint to the Commission, it would have strongly argued against it." Given this statement, the question becomes when did the County's legal counsel first become aware of the submission of the complaint. Certainly by the time that County filed its opposition to AT&T' motion to dismiss on July 26, 2000, the County's legal counsel had become aware that the filing had been made by Mr. Voss and that the complaint sought to have the dispute litigated under CPUC jurisdiction. The County's pleading in opposition to AT&T's motion to dismiss bears the signature of the County's legal counsel.

Yet, the County at the time of that filing, made no effort to seek to have the case withdrawn or dismissed. Mr. Shephard fails to explain why the County did not take action to dismiss the case once its legal counsel had discovered that the case had been filed by Mr. Voss without proper authorization, but instead waited until eight months after the filing had occurred to move for dismissal.

If the County's legal counsel "would have strongly argued against [the submission of the complaint before this Commission] at the time it was filed" in June 2000, Mr. Shephard fails to provide an explanation of why the County did not take immediate action to seek a dismissal upon learning it had been filed which certainly had occurred by July 26, 2000. By allowing the case to proceed to this point, the County has required the expenditure of Commission resources to process and review the various pleadings that have been filed in this complaint since June 2000. The delay in filing the motion also forced AT&T to continue to file pleadings to contest the complaint and to provide the County with telephone service without receiving payment pending disposition of escrow funds relating to the complaint.

If the County's legal counsel has known since at least July 2000 that the original complaint was not properly filed and that this is not the proper jurisdiction in which to litigate, yet intentionally withheld this information from the Commission until February 2001, then there appears to be some reasonable basis to probe further as to whether a Rule 1 violation has occurred. We believe a further showing from the County may be warranted to clarify the intent and basis for its actions in connection with the above-referenced alleged Rule 1 violations. As directed below, we will grant the County's motion to dismiss the complaint. We reserve the right to issue a separate order to show cause as to why the County should not be found in violation of Rule 1 and subject to possible sanctions.

Yet, even if we ultimately were to find that a Rule 1 violation had occurred, the sanction proposed by AT&T, namely turning over to AT&T all of the proceeds held in escrow, is not a proper sanction. AT&T's entitlement to the funds deposited in escrow is a separate legal question that can only be decided after proper litigation of the merits of the dispute before a court of proper jurisdiction. Any sanctions that may be warranted for a Rule 1 violation would be determined independent of any disposition of the substantive dispute over billings between the parties.