NOTICE ************************************************************************* NOTICE ************************************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file pnmc5021. File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) The Western Union Telegraph Company, ) ) Complainant, ) ) v. )File Nos. E-87-141, E-87-142 ) TRT Telecommunications Corporation, and) ) FTC Communications, Inc.,) ) Defendants.) MEMORANDUM OPINION AND ORDER Adopted: October 10, 1996; Released: October 15, 1996 By the Commission: I. INTRODUCTION 1. In this Order, we direct IDB Worldcom Services, Inc., the successor in interest to TRT Telecommunications Corporation ("TRT") and FTC Communications, Inc. ("FTCC"), the defendants in the above-captioned proceedings, to pay New Valley Corporation (formerly Western Union Telegraph Company (hereinafter "Western Union") certain amounts, insofar as undisputed, for which the Commission previously determined they were liable. To the extent that the parties are unable to resolve their dispute as to any remaining balance due Western Union from TRT stemming from Phase II of CC Docket No. 78-97 within 30 days of the release of this Memorandum Opinion and Order, we direct IDB Worldcom Services, Inc. ("IDB Worldcom") to deposit such balance into an interest-bearing escrow account, pending final adjudication or resolution of these proceedings. II. BACKGROUND 2. This case arises from two related Commission proceedings (CC Docket No. 78-97 and CC Docket No. 82-122). Those proceedings involved unjustified discounts given to certain interconnected carriers ("ICs") during two separate periods (Phase I and Phase II) when those carriers were interconnected with Western Union's telex and TWX networks for the domestic portion of originating or terminating international traffic. On May 2, 1986, the Commission released its Reimbursement Order, requiring the ICs to reimburse Western Union for the amount of such unjustified discounts taken on interconnected domestic telex/TWX traffic and on the domestic haul of inbound international traffic between June 1982 and August 1984. On May 21, 1987, the Commission denied the IC's petitions for reconsideration. The current, above-captioned proceedings were initiated as the result of the Commission's direction that Western Union file a formal complaint to serve as the procedural forum for determining the precise amounts that the ICs were required to reimburse Western Union for the unwarranted discounts they had taken. Western Union thereupon filed a formal complaint on July 9, l987, directed against TRT and FTCC, among other ICs. Certain defendants, including TRT, subsequently filed cross-complaints or claims against Western Union seeking offsets for certain overcharges. Thereafter, at the staff's encouragement, Western Union and each of the defendant ICs engaged in efforts, including failed conciliation before an independent federal mediator, to reach settlements with regard to the disputed amounts required to be paid with interest to Western Union. To date, Western Union has reached settlement agreements with all defendants, except IDB Worldcom and Graphnet, Inc. ("Graphnet"). 3. On November 15, 1991, while TRT's cross-complaint remained pending at the Commission, an involuntary petition in bankruptcy was filed against Western Union in the United States Bankruptcy Court for the District of New Jersey ("the Bankruptcy Court"). On March 31, 1993, the proceeding was converted to one seeking reorganization pursuant to Chapter 11 of the Bankruptcy Code. On November 1, 1994, the Bankruptcy Court held that the treatment of claims against Western Union according to an amended plan of reorganization was "in full and final satisfaction, settlement, release and discharge as against [Western Union], of any debt that arose before [November 1, 1994] . . . ." Western Union subsequently sought dismissal of TRT's cross- complaint, contending that all debts owed or asserted to be owed by Western Union here were discharged as the result of the Chapter 11 proceeding in the Bankruptcy Court. According to Western Union, all creditors had notice of the proceedings before the Bankruptcy Court, and TRT is therefore barred from asserting any right of setoff or recoupment for admitted Western Union overcharges. On the other hand, TRT denies that it is foreclosed from prosecuting its cross- complaint because, inter alia, Western Union failed to provide it with actual notice, which it states was required under the Bankruptcy Code, related precedent, and the Bankruptcy Court's orders. 4. In our Order on Remand, we affirmed our previous conclusions that Western Union was entitled to recover the full public rate for outbound telex and TWX services from the ICs for the period from January 1978 to August 1979, when neither a carrier agreement nor a Commission prescription existed that established telex and TWX rates among the parties. We also found that Western Union was entitled to reimbursement plus interest from the ICs for their use of Western Union's telex and TWX services during that time period. We ordered Western Union to recompute the entire amount of its claim and to file supporting data. Western Union then filed a report of the amounts owed it by each of the ICs, updated to calculate interest through February 6, l995. According to Western Union, the total amounts then due it from TRT and FTCC were $4,614,557.16 and $578,510.63, respectively. TRT disputes the accuracy of these figures because, among other reasons, Western Union included charges for some transit traffic destined to Canada and Mexico that was not subject to the unauthorized discount taken by the ICs. Western Union previously acknowledged that its data contained "a few minor imperfections," which it said cut both for and against it, and sought the assistance of the ICs to determine a reasonable means of adjustment. The parties subsequently were unable to agree on how to proceed. 5. On September 8, 1995, Western Union updated its February 6, 1995 report of the amounts claimed to be due from defendants. According to Western Union, as of August 31, 1995, TRT and FTCC owed it $4,711,936 and $591,348.10, respectively, or a total of $5,303,284.10. Western Union sought a Commission order directing payment of such amount, or alternatively, that the amount in dispute be placed in escrow pending a final resolution of this proceeding. 6. On April 18, 1996, a week after the U.S. Court of Appeals for the District of Columbia Circuit denied rehearing of its decision that denied review of our Order on Remand, Western Union filed a motion asking the Commission to establish the final amount owed by each of the remaining ICs and to order them to pay Western Union within 30 days. According to Western Union, as of March 31, 1996, the amounts due, including interest, from TRT, FTCC, and Graphnet were $4,761,238.85, $604,033.09, and $1,129,350.24, respectively. Alternatively, Western Union sought an order requiring all amounts not contested with specificity to be paid immediately and the disputed portion to be placed in escrow pending final resolution of the proceedings. According to Western Union, "[e]scrow is the only way, at this late date, to protect the interests of all parties while the proceeding remains pending." IDB Worldcom filed no response to that motion. Graphnet filed an opposition to Western Union's motion and a petition for a "Flow-Through" order on May 6, 1996. With reference to "Commission Taking Tough Measures Against Frivolous Pleadings," we authorize the Common Carrier Bureau and its Enforcement Division to address such pleadings (which Western Union has characterized as "totally without merit" and "frivolous") in the consolidated proceedings involving those parties. III. DISCUSSION 7. Initially, we address Western Union's motion to dismiss the cross-complaint filed by TRT. It appears that Western Union may have been required, but failed, to provide TRT with actual notice of the potential bar to TRT prosecuting its claim because of then-pending Chapter 11 proceedings before the Bankruptcy Court. Western Union's claim that under bankruptcy law TRT is barred from prosecuting its cross-complaint should properly have been raised with and decided by the Bankruptcy Court under the Bankruptcy Code, and is not properly raised with this Commission to resolve under the Communications Act. In any event, the issue appears moot in light of Western Union's advice that it would not object to use of TRT's estimate of the offset amount involved in its cross-complaint. While admitting neither that the amount of traffic routed to Canada during Phase II of CC Docket No. 78-97 was as TRT alleged, nor that Western Union is obligated to refund any alleged overcharges for Canadian traffic, Western Union nevertheless advised that, in order to ensure prompt resolution of this proceeding, it would not object to use of the estimate provided by TRT in calculating its repayment obligation. Accordingly, Western Union's calculation of the $4,761,288.85 sum owed it by TRT reflects a $46,116.09 credit for the amount of the Canadian traffic claimed by TRT. 8. We turn next to Western Union's Motion for Final Order. On February 6, 1996, the U.S. Court of Appeals, in a two-page unpublished order, denied IDB Worldcom's and Graphnet's petitions for review of our Order on Remand. In light of the court's unanimous denial also of their joint petition for hearing and suggestion for rehearing en banc, and the issuance of the court's mandate, we conclude that further delay in payment of sums due in these long-protracted proceedings can no longer be justified. Accordingly, we are directing IDB Worldcom to pay Western Union, within 30 days of release of this order, that portion of all sums due from TRT and FTCC, pursuant to the Commission's Order on Remand, that it has not contested with specificity and which, accordingly, is deemed undisputed. 9. Further, we instruct IDB Worldcom to place such sums that it has disputed with specificity in an interest-bearing escrow account pending final resolution of the proceedings. Placing the sum in escrow will: (1) ensure that the successor in interest to TRT and FTCC will be in a position to discharge its obligations pursuant to our Reconsideration Order and Order on Remand; (2) protect the rights of all parties; (3) eliminate the possibility of irretrievable financial losses to shareholders and ratepayers; and (4) lessen incentives to impede and delay a negotiated resolution of these long-protracted proceedings. IDB Worldcom must provide the Commission, within 34 days of the release of this Order, written documentation that it has deposited these funds in such interest- bearing escrow account. We also direct IDB Worldcom to add simple interest, accrued from August 31, 1995 to the date of deposit in escrow, using the current Internal Revenue Service rate, to the amount stated above. The Internal Revenue Service rate shall then be used to compute interest on a daily compounded basis from the date of deposit in escrow to the date amounts owed are finally paid. The cost of administering this escrow account shall be borne by IDB Worldcom. 10. This Order does not constitute a finding as to the specific amount that may finally be determined to be due to Western Union. In light of, inter alia, such factors as the decision in the Order on Remand to require interest to be computed on the basis of simple rather than daily compounded interest, the relative amounts owed to Western Union by IDB Worldcom compared to that owed to IDB Worldcom by Western Union, and the Commission's decision to do equity in this matter, we conclude this action is a reasonable interim measure until the parties either finally settle their dispute, or the matter is adjudicated. We believe that the parties, with good faith, can and should be able to promptly resolve any remaining differences. If this does not prove to be the case, we direct the Common Carrier Bureau to designate formally the matter for an evidentiary hearing to determine how the sums placed in escrow should be disbursed. IV. CONCLUSION 11. We conclude that IDB Worldcom, as the successor in interest to defendants, should promptly pay Western Union the amounts for which we found IDB Worldcom liable in our Order on Remand, to the extent that such amounts are undisputed. We direct IDB Worldcom to place the balance that Western Union claims is due in an interest-bearing escrow account pending the final resolution of these proceedings. V. ORDERING CLAUSES 12. Accordingly, IT IS ORDERED, pursuant to Sections 4(i) and (j), 208 and 411 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i),(j), 208, 411, that, within thirty days of the release of this Order, IDB Worldcom shall pay Western Union that portion of all sums due from TRT and FTCC, pursuant to the Commission's Order on Remand, that is undisputed. 13. IT IS FURTHER ORDERED that, within thirty days of the release of this Order, IDB Worldcom shall deposit the balance of all sums Western Union claims TRT and FTCC owe it, pursuant to the Order on Remand, into an interest-bearing escrow account pending final resolution of these proceedings. 14. IT IS FURTHER ORDERED that IDB Worldcom shall also place in said escrow account simple interest accrued from August 31, 1995 to the date of deposit in escrow, using the relevant Internal Revenue Service rates for that period. 15. IT IS FURTHER ORDERED that IDB Worldcom shall also be liable to Western Union for interest, compounded daily, on the amount owed from the date of deposit in escrow to the date the amount owed is finally paid. 16. IT IS FURTHER ORDERED that IDB Worldcom shall bear the cost of administering the escrow account ordered herein. 17. IT IS FURTHER ORDERED that IDB Worldcom shall provide written documentation to the Commission within 34 days of the release of this Order that the amounts required under paragraphs 13 and 14, above, have been deposited in such interest-bearing escrow account. 18. IT IS FURTHER ORDERED that the Motion for Final Order, filed April 18, 1996 by Western Union, IS GRANTED insofar as indicated herein and otherwise IS DISMISSED as moot with regard to the above-captioned proceedings. 19. IT IS FURTHER ORDERED that the Common Carrier Bureau is authorized to act on Western Union's Motion for Final Order with regard to the proceedings involving Graphnet that are referenced in note 23 herein. 20. IT IS FURTHER ORDERED that the Common Carrier Bureau shall serve a copy of this Order on counsel for Graphnet. 21. IT IS FURTHER ORDERED that, if within 34 days of the release of this Order, the parties have not advised that they have reached a settlement, or agreed to binding arbitration, with regard to the balance due to Western Union from IDB Worldcom in these proceedings, the Common Carrier Bureau shall designate the matter for hearing before an Administrative Law Judge to determine final disposition of the amounts ordered herein to be placed in escrow. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary