TruConnect Communications v. Maximus

Filed 5/11/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION ONE
TRUCONNECT
COMMUNICATIONS, INC.,
Plaintiff and Appellant, A163562
v. (San Francisco County
MAXIMUS, INC., et al., Super. Ct. No. CGC-21-589607)
Defendants and Respondents.
Appellant TruConnect Communications, Inc. provides telephone service
to lower-income Californians under a program administered by the California
Public Utilities Commission (CPUC or Commission) called “LifeLine.”
TruConnect sued two companies hired by the CPUC, respondents Maximus
Inc. and Solix, Inc., claiming they botched the rollout of a new software
platform used to enroll people in Lifeline, causing TruConnect to lose millions
of dollars. The trial court ruled that it lacked jurisdiction and dismissed the
action. We reverse this ruling, but we remand to the trial court to decide
whether the lawsuit is nonetheless barred because the Commission is an
indispensable party or for other reasons.
I.
FACTUAL AND PROCEDURAL
BACKGROUND
Lifeline provides discounted telecommunications services to eligible
low-income Californians. The CPUC is authorized to administer the program
1
under the Moore Universal Telephone Service Act (Act). (Pub. Util. Code,
§ 871 et seq.1) The Act declares that furnishing LifeLine telephone service
“should be supported fairly and equitably by every telephone corporation, and
the [C]ommission, in administering the lifeline telephone service program,
should implement the program in a way that is equitable, nondiscriminatory,
and without competitive consequences for the telecommunications industry in
California.” (§ 871.5, subd. (d).)
To implement the Act, the CPUC in 1983 adopted General Order 153,
which establishes administrative procedures for LifeLine. The order spans a
little over 35 pages and provides information about tariff filings, provider
notices, enrollment procedures, service requirements, rates, audits, and other
procedures. The order sets forth customer eligibility criteria, and it explains
the role of a “third-party administrator,” an entity hired by the CPUC to
qualify applicants and verify their initial and continued eligibility for the
program. Section 9 of the order explains the procedure for service providers
to seek reimbursement from the CPUC for “LifeLine-related costs and lost
revenues.” The section describes what types of costs and lost revenues may
be recovered from the California “LifeLine Fund,” a repository of LifeLine
surcharge money. Lost revenues apparently refers to the difference between
a provider’s normal rates and the discount rates charged to LifeLine
subscribers.
TruConnect provides free wireless telephone service to eligible
Californians through LifeLine. It is a regulated public utility. (§ 216,
subd. (a) [“telephone corporation” is a public utility].) The CPUC in late 2018
announced that it planned to switch the third-party administrator managing
1All statutory references are to the Public Utilities Code unless
otherwise specified.
2
LifeLine enrollment. It selected respondent Maximus. Although the role of
Maximus, as a third-party administrator, is described in General Order 153,
the company itself apparently is not a regulated utility. According to the
operative complaint, TruConnect realized Maximus was “woefully
unequipped to take over” as administrator, and TruConnect asked the CPUC
to delay the rollout of new software “until . . . major issues were worked out
to avoid substantial losses.” The launch nonetheless went forward on April 1,
2019. Maximus ultimately “recruited TruConnect and its team of software
engineers and operational and technical staff to assist with the failed
software launch.” The complaint alleges that “TruConnect invested hundreds
of thousands of man-hours into salvaging the Maximus platform rollout.”
The launch of Maximus’s platform “was a failure from the start, with
thousands of applicants blocked from enrollment because the new system
prevented the necessary CPUC decisions required by [General Order 153]
. . . , including payment to LifeLine providers.” After Maximus “proved it was
recklessly unequipped to fix the errors it caused and that TruConnect
foresaw, Maximus subcontracted work to [respondent] Solix.” TruConnect
claims it incurred losses of more than $14 million in lost revenue and
expenses in connection with the launch.
TruConnect first sought reimbursement from the CPUC for losses
allegedly incurred when customers were mistakenly deemed ineligible for the
program. The Commission initially paid some of these claims, but it
eventually questioned TruConnect about reimbursing a category of costs
TruConnect called “lost opportunities.” TruConnect explained that it sought
reimbursement for customers who wanted TruConnect’s services but were
unable to enroll because of the third-party administrator’s flawed rollout. In
September 2020, the CPUC issued Resolution T-17707, which denied
3
reimbursement for these types of losses. The Commission concluded that
although section 9 of General Order 153 allows recovery of costs and lost
revenues for carriers that provide LifeLine service to eligible subscribers, the
order does not provide recovery for such costs when they are associated with
customers who never received LifeLine service. The resolution stated that
General Order 153 “expressly forbids ‘lost opportunities’ or ‘missed
opportunities’ costs” relating to potential customers who were never found to
be eligible for LifeLine. According to the resolution, reimbursement for such
costs and lost revenues would “jeopardize[] the ongoing health of the
[LifeLine fund].” The CPUC thus denied TruConnect’s reimbursement claims
for costs and lost revenues for customers who were never deemed eligible for
LifeLine, and it sought to recover the money it had previously paid to
reimburse such claims. The CPUC later denied TruConnect’s requests for a
rehearing and stay of Resolution T-17707.
Also in September 2020, TruConnect sued the CPUC, Maximus, and
Solix. TruConnect soon acknowledged there were “jurisdictional
considerations” implicated by the inclusion of the CPUC in its lawsuit and
requested dismissal of the case less than two months after it was filed.
In February 2021 TruConnect initiated this lawsuit against Maximus
and Solix only. Although TruConnect’s initial complaint was filed against
only those two companies, it included several allegations regarding the
CPUC’s alleged conduct. For example, the complaint included a heading
stating, “The CPUC Mismanaged the Rollout of a New TPA [Third-Party
Administrator] in California.” (Formatting omitted.) It alleged that “the
CPUC initiated a chain of events that, through actions by Maximus and
Solix, has cost TruConnect millions of dollars.” It also alleged that “the
CPUC and Maximus recklessly and intentionally decided to push ahead with
4
launching the new Maximus platform.” And it alleged that TruConnect’s
concerns about the launch of the new system were ignored “due to the
internal pressures at the CPUC and the desire to avoid financial penalties.”2
In June 2021, TruConnect filed a first amended complaint, omitting
most of its previous allegations concerning the CPUC. For example, the
heading stating that the CPUC mismanaged the rollout of a new third-party
administrator was changed to state, “The Rollout of a New TPA in California
Is Mismanaged.” (Formatting omitted.) The amended complaint alleged
causes of action for negligence, intentional interference with prospective
economic relations, negligent interference with prospective economic
relations, aiding and abetting interference with prospective economic
relations, violations of California’s Unfair Competition Law (Bus. & Prof.
Code, § 17200 et seq.), quantum meruit, and unjust enrichment.
Maximus and Solix demurred to the complaint. They argued that the
trial court lacked jurisdiction under section 1759 and that the trial court
should exercise judicial abstention in any event. They also argued that the
lawsuit was barred because the CPUC was an indispensable party that had
not and could not be joined. Finally, they argued that each claim failed to
state a cause of action.
The trial court sustained both respondents’ demurrers without leave to
amend. It concluded that section 1759 barred the complaint because
TruConnect’s claims were preempted, and the court did not address
2 After TruConnect filed this case, it filed a writ of review in the Second
District challenging the CPUC’s denial of its reimbursement request. That
court summarily denied the petition. (TruConnect Communications, Inc. v.
Public Utilities Commission (B310492, petn. den. May 6, 2021).)
5
respondents’ other arguments. TruConnect appealed.3 The CPUC has filed
an amicus curiae brief in support of Maximus and Solix.
II.
DISCUSSION
A. The Standard of Review.
“In reviewing the sufficiency of a complaint against a general
demurrer, we are guided by long-settled rules. ‘We treat the demurrer as
admitting all material facts properly pleaded, but not contentions, deductions
or conclusions of fact or law. [Citation.] We also consider matters which may
be judicially noticed.’[4] [Citation.] Further, we give the complaint a
reasonable interpretation, reading it as a whole and its parts in their context.
[Citation.] When a demurrer is sustained, we determine whether the
complaint states facts sufficient to constitute a cause of action. [Citation.]
3 As TruConnect seems to acknowledge, no formal judgment of
dismissal appears in the record. “The general rule is that an order sustaining
a demurrer without leave to amend is not appealable, but a party may appeal
from the entry of dismissal after such order.” (Bullock v. City of Antioch
(2022) 78 Cal.App.5th 407, 411, fn. 1.) But we agree with TruConnect that it
is appropriate here to treat the orders as a judgment of dismissal since the
court sustained respondents’ demurrers without leave to amend. (Ibid.; see
also Swain v. California Casualty Inc. Co. (2002) 99 Cal.App.4th 1, 6 [where
trial court, in ruling on summary judgment motion, “clearly intended to
finally dispose of plaintiffs’ complaint,” appellate court may treat it as an
effective judgment].)
4 The trial court granted respondents’ request to take judicial notice of
TruConnect’s original complaint in this action, the company’s previous
complaint against the CPUC and its request to dismiss that complaint, the
CPUC’s General Order 153, the Commission’s Resolution T-17707 and its
denial of rehearing, and the pleadings in TruConnect’s writ of review in the
Second Appellate District. Although TruConnect challenged the request for
judicial notice of some of these documents in the trial court, it does not
challenge the court’s ruling on appeal. This court takes judicial notice of the
documents as well. (Evid. Code, § 459, subd. (a).)
6
And when it is sustained without leave to amend, we decide whether there is
a reasonable possibility that the defect can be cured by amendment: if it can
be, the trial court has abused its discretion and we reverse; if not, there has
been no abuse of discretion and we affirm. [Citations.] The burden of
proving such reasonable possibility is squarely on the plaintiff.” (Blank v.
Kirwan (1985) 39 Cal.3d 311, 318.) We likewise review de novo whether the
trial court has subject matter jurisdiction over an action. (PegaStaff v. Public
Utilities Com. (2015) 236 Cal.App.4th 374, 380.)
B. Section 1759 Does Not Bar TruConnect’s Lawsuit Since Recovery
Would Not Conflict with a CPUC Order or Interfere with Its
Oversight of LifeLine.
The CPUC “ ‘is a state agency of constitutional origin with far-reaching
duties, functions and powers. (Cal. Const., art. XII, § 1–6.) The Constitution
confers broad authority on the commission to regulate utilities, including the
power to fix rates, establish rules, hold various types of hearings, award
reparation, and establish its own procedures. (Id., § 2, 4, 6.) The
commission’s powers, however, are not restricted to those expressly
mentioned in the Constitution: “The Legislature has plenary power,
unlimited by the other provisions of this constitution but consistent with this
article, to confer additional authority and jurisdiction upon the commission
. . . .” (Cal. Const., art. XII, § 5.)’ [Citation.]” (San Diego Gas & Electric
Co. v. Superior Court (1996) 13 Cal.4th 893, 914–915. (Covalt).) Under this
constitutional provision the Legislature has enacted the Public Utilities Act
(§ 201 et seq.), which grants the CPUC broad supervisory and regulatory
authority over all public utilities in the state. (Covalt at p. 915.) But the
CPUC’s powers are not limited to those expressly conferred to it, because the
Legislature has authorized the Commission to do all things that are
7
necessary and convenient in the exercise of its jurisdiction over public
utilities. (Ibid.)
The Constitution also confers power on the Legislature to “establish the
manner and scope of review of commission action in a court of record.” (Cal.
Const., art. XII, § 5; see Covalt, supra, 13 Cal.4th at p. 915.) Under this
authority the Legislature enacted section 1759, subdivision (a), which
provides that “[n]o court of this state, except the Supreme Court and the
court of appeal, . . . shall have jurisdiction to review, reverse, correct, or
annul any order or decision of the [CPUC] or to suspend or delay the
execution or operation thereof, or to enjoin, restrain, or interfere with the
commission in the performance of its official duties.” (Italics added.) The
statute thus bars trial court jurisdiction in two situations: where a trial court
action would conflict with a specific CPUC decision or where such an action
would interfere with the CPUC’s ongoing regulatory duties. In other words,
section 1759 bars an action against a public utility “not only when an award
of damages would directly contravene a specific order or decision of the
commission, i.e., when it would ‘reverse, correct, or annul’ that order or
decision, but also when an award of damages would simply have the effect of
undermining a general supervisory or regulatory policy of the commission,
i.e., when it would ‘hinder’ or ‘frustrate’ or ‘interfere with’ or ‘obstruct’ that
policy.” (Covalt, at p. 918.) To determine whether section 1759 bars a
superior court action for damages, courts look to whether an action “would
impermissibly interfere with a broad regulatory policy of the commission on
this subject.” (Covalt, at p. 903.) It considers three factors: (1) whether the
CPUC has authority to adopt policy regarding the subject matter of the
litigation, (2) whether the Commission has exercised the foregoing authority,
8
and (3) whether the present action would hinder or interfere with the
foregoing CPUC policy. (Id. at pp. 923, 926, 935.)
In sustaining respondents’ demurrers, the trial court concluded that
the Covalt factors applied to bar TruConnect’s complaint: (1) the CPUC has
authority to adopt policy regarding the LifeLine program; (2) the Commission
exercised that authority when it determined that a new platform should be
launched despite TruConnect’s reservations, refused to reimburse
TruConnect for certain alleged lost revenue, and demanded the return of
previously reimbursed losses; and (3) prosecution of the action would hinder
or interfere with the CPUC’s exercise of regulatory judgment. Regarding the
third factor, the court found that allowing the case to proceed against
respondents would undermine the CPUC’s decision to launch the new
software when it did, infringe on the Commission’s judgment about
applicants’ eligibility for enrollment in the program, and encroach on the
Commission’s determination that TruConnect was ineligible for
reimbursement.
On appeal, TruConnect apparently does not challenge the first two
Covalt factors. That is, it does not argue that the CPUC lacked or failed to
exercise authority over LifeLine. As for whether allowing the lawsuit to
proceed here would interfere with the CPUC’s authority, though, TruConnect
9
argues that under Hartwell Corp. v. Superior Court (2002) 27 Cal.4th 256(Hartwell) the Covalt test does not apply.5
Hartwell involved a lawsuit brought by residents against various water
companies alleging that they had provided unsafe water. (Hartwell, supra,27 Cal.4th at p. 260.) Some of the companies were subject to CPUC
regulation, and some were not. (Ibid.) Our Supreme Court held that
section 1759 did not preempt claims against the nonregulated water
companies because nothing in the statute meant “ ‘that trial courts may not
decide issues between parties not subject to PUC regulation simply because
the same or similar issues are pending before the PUC or because the PUC
regulates the same subject matter in its supervision over public utilities.’ ”
(Hartwell, at p. 280.) The court noted that the nonregulated defendants
“fail[ed] to cite case law to support their view that the jurisdictional bar of
section 1759 applies to nonregulated parties.” (Id. at p. 281.) It concluded
that “section 1759 must be read to bar superior court jurisdiction that
interferes with the PUC’s performance of its regulatory duties, duties which
by constitutional mandate apply only to regulated utilities.” (Id. at pp. 280–
281.)
5Maximus claims that TruConnect is barred from making this
argument since it is “an entirely new theory raised for the first time on
appeal.” First, we question whether this is truly a new legal theory, as
opposed to a different way of arguing that the trial court has jurisdiction to
proceed. In any event, “[w]hen a demurrer is sustained without leave to
amend the [appellant] may advance on appeal a new legal theory why the
allegations of the [complaint] state a cause of action.” (20th Century Ins.
Co. v. Quackenbush (1998) 64 Cal.App.4th 135, 139, fn. 3; see also Eisenberg
et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2022)
¶ 8:242, p. 8-182 [“The rule barring new theories on appeal normally is
limited to appeals after trial; it rarely applies to trial court dispositions at the
pleading stage.”].)
10
TruConnect interprets Hartwell broadly to mean that section 1759
never applies to “private parties that are not regulated public utilities.” We
do not read the case so expansively. Unlike here, the CPUC in Hartwell had
no authority over either the plaintiffs or the nonregulated defendants. It is
thus hard to conceive of any situation where the CPUC would have had, let
alone exercised, authority over any of the parties as contemplated by Covalt.
The parties’ litigation could not be considered to be barred by section 1759
because the CPUC had no jurisdiction to hear complaints or claims against
the nonregulated entities. (Hartwell, supra, 27 Cal.4th at p. 282.) Here, by
contrast, TruConnect—a regulated utility—already has sought
reimbursement from the CPUC but was denied relief.
It does not follow, however, that TruConnect is precluded under
section 1759 from bringing its claims against Maximus and Solix. In
evaluating whether the lawsuit here would conflict with a specific CPUC
order, the trial court concluded that it would need to determine whether
rejected applicants were in fact qualified for LifeLine, eligibility
determinations exclusively within the CPUC’s regulatory judgment. But as
TruConnect points out, there is no risk of conflicting determinations because
the CPUC has never made any determinations about the qualifications of
rejected applicants. And although the CPUC made the regulatory
determination to proceed with the launch of the new platform despite
TruConnect’s concerns, this was a forward-looking decision, made before the
time when respondents are alleged to have harmed TruConnect. No decision
about that alleged conduct will interfere with the CPUC’s past decision to
proceed.
True, the CPUC has determined that TruConnect is not eligible for
reimbursement from the CPUC’s LifeLine fund. It found that General
11
Order 153 does not permit reimbursement for “lost opportunity” costs but
only for costs associated with providing service to customers found to be
eligible for LifeLine service. Again, section 9 of the order provides a detailed
procedure for service providers to obtain reimbursement from the LifeLine
fund, consisting of surcharge money, as directed by the CPUC. The
Commission did not, as Maximus suggests,6 determine whether TruConnect
lost potential customers who were eligible for LifeLine; it determined only
whether such loss qualified for reimbursement under the order.7 Nor did the
Commission find “that there was never an enforceable promise” by
respondents to compensate TruConnect, only that CPUC staff members did
not bind the CPUC with any such promise.
We recognize that Resolution T-17707 states that even if the costs were
not prohibited under General Order 153, they would be “too vague and
uncertain to calculate with any precision.” But this comment was made in
the context of a company seeking money through a routine reimbursement
procedure, as opposed to seeking damages through a court’s fact-finding
process. We disagree with Maximus that any factfinding in the trial court
would “overturn” the CPUC’s resolution. We likewise disagree with the
CPUC’s argument in its amicus brief that TruConnect’s claims “were
definitively and properly denied,” insofar as the Commission contends they
were denied for all purposes. Whether TruConnect was entitled to
reimbursement under General Order 153 is a narrow question that does not
Solix joins in Maximus’s argument that section 1759 bars
6
TruConnect’s action. (Cal. Rules of Court, rule 8.200(a)(5).)
Maximus also faults TruConnect for failing to exhaust its
7
administrative remedies. Again, though, pursuing such remedies against the
CPUC for money from the LifeLine fund would not resolve or even touch on
whether TruConnect is entitled to damages from third parties.
12
affect whether it is potentially entitled to damages from respondents under
tort and related theories.
In its amicus brief, the CPUC points to various allegations in
TruConnect’s operative complaint regarding General Order 153 and argues
that they amount to a collateral attack on the denial of TruConnect’s
previous claim for lost revenues. The complaint alleges that the order
contemplates reimbursement for costs and lost revenue and requires the
third-party administrator to provide an eligibility determination within one
business day. It also alleges that the “bugs and errors” in Maximus’s
“irresponsible [platform] rollout” had the effect of “conceal[ing] the
submission of thousands of qualified applicants by TruConnect, in violation of
[the order].” Those “bugs and errors” meant the platform failed to provide
“the necessary CPUC decisions required by [the order].” The complaint
further alleges that the CPUC denied reimbursement even though the order
“specifically provides for reimbursement of lost revenue,” that the intent of
the order to provide a needed service was thwarted by the flawed rollout, and
that the order’s requirement for the third-party administrator to qualify
LifeLine applicants created a duty that Maximus and Solix owed to
TruConnect.
The CPUC characterize these allegations as claiming that the
Commission incorrectly interpreted its general order, and it argues that the
suit amounts to a challenge of its implementation of LifeLine program rules.
We are not persuaded. To prevail in this action, TruConnect will have to
establish that Maximus and Solix’s rollout of the platform was wrongful,
causing it to lose out on subscribed customers. But it will not have to
establish that the CPUC erred when it declined to reimburse the company
under its interpretation of General Order 153. And if TruConnect were to
13
establish liability, obtaining damages from Maximus and Solix would not
conflict with any CPUC order since the Commission has never determined
whether those companies owe TruConnect. As TruConnect puts it, its claims
“are based on tort law, not [General Order] 153, and any recovery against
[Maximus and Solix] would come directly from [them]—not from LifeLine
funds.” Maximus’s counsel stressed at oral argument that it is irrelevant
whether the CPUC is named in the complaint, and that we should focus
instead on the underlying allegations. We agree with Maximus insofar as
nothing in this opinion should be construed as permitting a finder of fact to
undo any CPUC decision or action. But although the complaint includes
allegations that the CPUC erred when it denied the company reimbursement,
it does not seek in this action to set aside that decision.
Having concluded that this court action would not be inconsistent with
any CPUC order or decision (§ 1759, subd. (a)), the question remains whether
the action would “enjoin, restrain, or interfere with the commission in the
performance of [the CPUC’s] official duties.” (Ibid.) In Hartwell, the
plaintiffs challenged both the CPUC’s standards for water quality and
whether the regulated defendants had complied with them. (Hartwell, supra,
27 Cal.4th at p. 276.) The court concluded that a challenge to the standards
would interfere with the CPUC’s ongoing regulatory supervision, but a
challenge that the utilities violated those standards would not. (Ibid.)
“Although a PUC factual finding of past compliance or noncompliance may be
part of a future remedial program, a lawsuit for damages based on past
violations of water quality standards would not interfere with such a
prospective regulatory program.” (Id. at p. 277.) CPUC actions to redress
violations of law involve “remedies [that] are essentially prospective in
nature. They are designed to stop the utilities from engaging in current and
14
ongoing violations and do not redress injuries for past wrongs.” (Ibid.)
TruConnect argues that because it seeks relief only for past injuries,
Hartwell permits its lawsuit. While this again may be an overly broad
reading of Hartwell, we agree with TruConnect to the extent it argues that a
court action focusing on respondents’ alleged wrongdoing would not interfere
with the Commission’s ongoing regulatory obligations.
Maximus contends that an award of damages to TruConnect would
“require[] the Superior Court to create precedent that could be used by
current and future Service Providers, consumers, and third parties to obtain
results contrary to the CPUC’s rules, policies, and judgment.” Maximus
claims that service providers and consumers could use a decision favorable to
TruConnect to “demand that the CPUC approve applications based on the
Superior Court’s interpretation of the enrollment criteria in [General
Order] 153” or “demand reimbursements from the CPUC for any lost
opportunity costs and expenses they may incur whenever there are ‘bugs and
errors’ in any type of technology used by the CPUC.” Service providers are of
course always free to submit to the CPUC reimbursement requests they
believe are appropriate. But a court order requiring a third party to pay
damages to TruConnect would not require the CPUC to take any different
action in the future.
Maximus further contends that allowing this lawsuit to proceed would
mean that “Service Providers and consumers could go to the Superior Court
whenever they are unhappy with the CPUC’s response to their demands and
use the Superior Court’s decision in Appellant’s case as precedent.” And it
claims that service providers “could use the decision in Appellant’s case to
demand that the [third-party administrator] (and other CPUC agents) refuse
to follow CPUC decisions with which they disagree.” These contentions are
15
exaggerated and speculative. By bringing this lawsuit, TruConnect is not
“refus[ing] to follow” Resolution T-17707, and the suit’s disposition would set
no precedent encouraging service providers to ignore CPUC decisions.
TruConnect is simply seeking money from respondents under various tort
and related theories. Assuming these theories are cognizable, we do not see
how recovery would interfere with the CPUC’s ongoing regulation of the
LifeLine program. We find support for this conclusion in People ex rel.
Orloff v. Pacific Bell (2003) 31 Cal.4th 1132 (Orloff). There, the Supreme
Court concluded that section 1759 did not preclude a lawsuit brought by
several district attorneys against a public utility for allegedly engaging in
false advertising and unfair business practices, even though the CPUC had
initiated an administrative enforcement action involving some of the same
allegations. (Orloff at p. 1137.) The court noted that “the mere possibility of,
or potential for, conflict with the PUC is, in general, insufficient in itself to
establish that a civil action against a public utility is precluded by
section 1759.” (Id. at p. 1138, italics added.) Here, any potential conflicting
ruling is even more speculative since TruConnect is not asking for relief that
would conflict with any CPUC decision or enforcement action.
At oral argument, Maximus’s counsel argued that the tentative
decision we issued construed Covalt too narrowly, and he directed us to two
cases he contended direct the outcome here. In Goncharov v. Uber
Technologies, Inc. (2018) 19 Cal.App.5th 1157, 1161 (Goncharov), the
plaintiffs sued Uber for allegedly failing to comply with CPUC licensing
requirements for charter-party carriers. This court concluded that
section 1759 barred the complaint because Uber’s status had been the subject
of a CPUC rulemaking, and thus “[a]ny determination [by the trial court]
regarding Uber’s status would strike at the heart of this process.”
16
(Goncharov at p. 1171.) This court focused on the “ ‘[t]he crux of [the
plaintiff’s] CPUC-based claims.’ ” (Id. at p. 1172.) The plaintiffs were asking
for a determination of whether Uber qualified as a charter-party charrier and
what regulations should apply to its operations—questions “the CPUC ha[d]
been attempting to resolve . . . for over four years.” (Id. at p. 1173.)
In Lefebvre v. Southern California Edison (2016) 244 Cal.App.4th 143,
145 (Lefebvre), the other case Maximus’s counsel raised at oral argument, a
plaintiff filed a putative class action against a regulated utility claiming it
had fraudulently enrolled ineligible customers in an assistance program for
low-income electricity and gas customers, causing the surcharge imposed on
other ratepayers to be higher than it should be. The court concluded that
section 1759, subdivision (a) barred the complaint “because a judgment in
[the plaintiff’s] favor would have the effect of undermining a general
supervisory or regulatory policy of the Public Utilities Commission.”
(Lefebvre at pp. 145–146.) The court looked at “[t]he ‘gist’ of the suit,” which
was that tariffed surcharges approved by the CPUC were too high. (Id. at
p. 158.) Providing a refund of such a charge “would hinder and frustrate the
PUC’s exercise of its regulatory authority, and would penalize [the utility] for
assessing surcharges expressly authorized by the PUC.” (Id. at p. 157.)
Here, the “crux” or “gist” of TruConnect’s suit is to recover damages for
respondents’ allegedly botched rollout of a new software platform. Although
TruConnect’s complaint contains allegations about the CPUC, the action is
not trying to constrain any CPUC findings, as was the case in Goncharov, or
to interfere with the CPUC’s oversight of a program, as was the case in
Lefebvre. Maximus’s counsel at oral argument contended that the company
was acting at the direction of the CPUC when it rolled out the software and
thus is being sued for complying with its contract. While we accept that
17
Maximus was generally acting under its contractual relationship with the
CPUC, we do not agree that the CPUC, by virtue of that relationship,
authorized or directed Maximus to injure third parties with software
malfunctions and errors, thereby immunizing Maximus from any and all
claims by those parties.
Nothing in our holding conflicts with PG&E Corp. v. Public Utilities
Com. (2004) 118 Cal.App.4th 1174 (PG&E), upon which Maximus also relies.
That case involved a CPUC investigation into the electricity energy crisis of
2000 and 2001. (Id. at p. 1181.) The CPUC named as parties both regulated
energy companies and their holding companies that previously had been
formed with Commission permission under certain conditions. (Ibid.) The
holding companies argued that the CPUC lacked jurisdiction over them since
they were not themselves regulated utilities. (Id. at pp. 1182, 1197.)
Division Five of this court rejected this argument for several reasons. (Id. at
pp. 1197–1215.) The court stressed that the Commission did not seek to
assert general regulatory control over the holding companies; instead, the
CPUC sought limited jurisdiction over them to enforce the conditions for the
formation of holding companies. (Id. at p. 1201.) This was consistent with
section 701, which provides that the Commission may “do all things . . . which
are necessary and convenient” in the exercise of jurisdiction over public
utilities. (See PG&E, at p. 1198.) The court further held that were the
Commission forced to pursue an action against the holding companies in
court under contract principles, any remedy might conflict with a CPUC
decision over the underlying utilities, in violation of section 1759. (PG&E at
p. 1211.) In this regard, the court rejected the holding companies’ argument
that under Hartwell the Commission could assert jurisdiction only over
regulated utilities. (PG&E at p. 1211.)
18
Maximus argues that under PG&E, the Commission has jurisdiction
over respondents in their capacities as third-party administrator and
subcontractor. We already have rejected TruConnect’s sweeping argument
that section 1759 applies only to actions involving regulated utilities. But
while it may be true that the CPUC could exercise jurisdiction over
respondents in connection with LifeLine, Maximus does not explain how this
potential jurisdiction would interfere with the Commission’s ongoing
regulatory duties. The CPUC, for its part, claims that a trial court action
would interfere with its policy to deny subsidies for lost-revenue claims.
Again, though, ordering respondents to pay tort damages to TruConnect
would have no bearing on the Commission’s reimbursement policies under
General Order 153.
We agree with the CPUC that the trial court “lacks authority to
determine whether LifeLine claims should be granted or denied.” But again,
TruConnect’s complaint is not asking the trial court to overturn the
Commission’s decision to reject its reimbursement requests. The CPUC also
argues that an action against its contractors might interfere with its efforts
to secure qualified contractors. The same might be said about its ability to
secure wireless providers if such providers are not able to seek compensation
for damages they allege were caused by third-party administrators.
We also disagree with Maximus’s brief argument that we should apply
the doctrine of judicial abstention to bar TruConnect’s action. True,
“ ‘[j]udicial abstention is appropriate when granting the requested relief
would require a trial court to assume the functions of an administrative
agency, or to interfere with the functions of an administrative agency.’ ”
(Center for Biological Diversity, Inc. v. FPL Group, Inc. (2008)
166 Cal.App.4th 1349, 1371–1372 [allowing plaintiffs to sue private owners of
19
wind turbines for breach of the public trust would interfere with county’s
ongoing efforts to achieve policy objectives].) This is another way of arguing
that TruConnect’s action would interfere with the CPUC’s ongoing regulation
of LifeLine, an argument we have rejected.
In short, we conclude that section 1759 does not bar TruConnect’s
lawsuit since any recovery by TruConnect would not conflict with a previous
CPUC order and would not interfere with the Commission’s ongoing
regulation of the LifeLine program. We stress, as did the court in Orloff, that
nothing in this present action “inevitably [will] lead to conflicting rulings that
[will] interfere with or undermine the regulatory authority of the PUC.”
(Orloff, supra, 31 Cal.4th at p. 1138, italics added.) Our opinion should not
be interpreted to mean that the trial court has authority to enter orders or
make findings inconsistent with a prior CPUC order or to interfere with the
Commission’s authority. We have no doubt there will be “efforts by the
superior court” to ensure that does not happen. (Id. at p. 1154.)
C. The Trial Court Should Determine in the First Instance Whether the
CPUC Is a Necessary or Indispensable Party and Whether
TruConnect’s Causes of Action Are Otherwise Cognizable.
Maximus and Solix also argued below that the CPUC was a necessary
and indispensable party to this lawsuit and the lawsuit could not proceed
since section 1759 barred the Commission’s inclusion in it. Although the trial
court did not address the argument in its orders sustaining respondents’
demurrers, the parties address the issue in their appellate briefs.8 We
conclude that the issue is better addressed by the trial court in the first
instance.
8Maximus joins in Solix’s argument that TruConnect’s claims are
barred by the necessary-and-indispensable-party doctrine. (Cal. Rules of
Court, rule 8.200(a)(5).)
20
Code of Civil Procedure section 389 governs joinder of parties. The
statute provides that “[a] person who is subject to service of process and
whose joinder will not deprive the court of jurisdiction over the subject matter
of the action shall be joined as a party in the action if (1) in his absence
complete relief cannot be accorded among those already parties or (2) he
claims an interest relating to the subject of the action and is so situated that
the disposition of the action in his absence may (i) as a practical matter
impair or impede his ability to protect that interest or (ii) leave any of the
persons already parties subject to a substantial risk of incurring double,
multiple, or otherwise inconsistent obligations by reason of his claimed
interest. If he has not been so joined, the court shall order that he be made a
party.” (Code Civ. Proc., § 389, subd. (a).) If a court were to determine that
the Commission was a necessary party under the statute, it is apparently
undisputed that the trial court lacks jurisdiction over the CPUC. Since the
trial court thus would not be able to join the Commission in the action, it
would then be required to “determine whether in equity and good conscience
the action should proceed among the parties before it, or should be dismissed
without prejudice, the absent person being thus regarded as indispensable,”
based on the consideration of enumerated factors. (Code Civ. Proc., § 389,
subd. (b).)
It is settled that a determination of whether a party is necessary or
indispensable is reviewed for abuse of discretion. (Dreamweaver
Andalusians, LLC v. Prudential Ins. Co. of America (2015) 234 Cal.App.4th
1168, 1173; Kaczorowski v. Mendocino County Bd. of Supervisors (2001)
88 Cal.App.4th 564, 568; County of San Joaquin v. State Water Resources
Control Bd. (1997) 54 Cal.App.4th 1144, 1149.) That is because “[w]hether a
party qualifies as indispensable is ordinarily treated as a matter where the
21
trial court has a large measure of discretion in weighing factors of practical
realities and other considerations.” (Kaczorowski, at p. 568.)
Here, the trial court never reached the indispensable-party issue, and it
therefore never weighed the relevant factors or made any findings. Under
these circumstances, we conclude it is appropriate to remand the matter to
the trial court to consider the issue in the first instance. If the court
concludes that the CPUC is an indispensable party and that the lawsuit
should not proceed, it will be unnecessary to decide whether TruConnect has
alleged sufficient facts to state causes of action. We thus also decline to
address the parties’ arguments as to the sufficiency of TruConnect’s
allegations. TruConnect’s June 30, 2022 request for judicial notice—seeking
the introduction of items in support of its argument that it could amend its
complaint—is denied.
III.
DISPOSITION
TruConnect’s June 30, 2022 request for judicial notice is denied.
The judgment is reversed, and the matter is remanded to the trial court
for further proceedings consistent with this opinion. TruConnect shall
recover its costs on appeal.
22
_________________________
Humes, P.J.
WE CONCUR:
_________________________
Margulies, J.
_________________________
Swope, J. *
*Judge of the Superior Court of the County of San Mateo, assigned by
the Chief Justice pursuant to article VI, section 6 of the California
Constitution.
TruConnect Communications, Inc. v. Maximus, Inc. A163562
23
Trial Court:
Superior Court of the City and County of San Francisco
Trial Judge:
Hon. Ethan P. Schulman
Counsel:
Bird, Marella, Boxer, Wolpert, Nessim, Drooks, Lincenberg & Rhow,
P.C., Thomas R. Freeman; KJC Law Group, A.P.C., Kevin J. Cole for Plaintiff
and Appellant
Gibson, Dunn & Crutcher LLP, Maurice Suh, Zathrina Perez, Kahn
Scolnick for Defendants and Respondents
Orrick, Harrington & Sutcliff LLP, Cynthia J. Larson, Justin
Giovannettone for Respondent Solix, Inc.
California Public Utilities Commission, Christine Hammond, Jonathan
Koltz, Travis T. Foss as Amicus Curiae on behalf of Defendants and
Respondents
TruConnect Communications, Inc. v. Maximus, Inc. A163562
24