In the Matter of the Business Automation Technologies, Inc., Etc. v. Verizon New Jersey, Inc.

• Court: New Jersey Superior Court Appellate Division
• Decided: February 7, 2025
• Docket: A-4016-21
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-4016-21

IN THE MATTER OF THE BUSINESS AUTOMATION TECHNOLOGIES, INC., d/b/a DATA NETWORK SOLUTIONS,

Petitioner - Appellant/Cross- Respondent,

v.

VERIZON NEW JERSEY, INC.,

Respondent - Respondent/Cross- Appellant. ________________________________

Submitted January 15, 2025 – Decided February 7, 2025

Before Judges Mayer and DeAlmeida.

On appeal from the New Jersey Board of Public Utilities, Docket No. TC17091015.

Andrew Marc Klein (Klein Law Group PLCC), attorney for appellant/cross-respondent.

Greenberg Traurig, LLP, attorneys for respondent/cross-appellant (Eric Wong, on the brief). Matthew J. Platkin, Attorney General, attorney for respondent New Jersey Board of Public Utilities (Donna Arons, Assistant Attorney General, of counsel; Meliha Arnautovic and Matko Ilic, Deputy Attorneys General, on the brief).

PER CURIAM

Business Automation Technologies, Inc., d/b/a Data Network Solutions

(DNS) appeals from a July 13, 2022 final agency decision issued by the New

Jersey Board of Public Utilities (BPU). Verizon New Jersey, Inc. (Verizon)

cross-appeals from the same BPU decision. We affirm on the appeal and cross-

appeal.

We recite the facts from the hearings held by the administrative law judge

(ALJ). DNS is a competitive local exchange carrier (CLEC). Verizon is an

incumbent local exchange carrier (ILEC). Starting in 2003, Verizon provided

telecommunication services to DNS under a BPU approved Interconnection

Agreement (ICA) and other written agreements, including a "forbearance"

contract, which exempted the contracts from state and federal regulations, and a

Wholesale Advantage agreement for traditional telephone services. DNS

provided basic local exchange services to New Jersey customers using wholesale

services purchased from Verizon.

A-4016-21 2 Throughout their relationship, DNS disputed Verizon's bills for services.

DNS complained Verizon required it to reassert previously reported disputes

monthly, which Verizon denied. DNS claimed it tried to contact Verizon

employees with historic knowledge of the billing disputes to offer documents

and explanations in support of DNS's position. DNS further alleged Verizon's

employees frequently failed to cooperate in resolving the billing disputes.

On the other hand, Verizon asserted DNS failed to supply the requested

data to resolve the billing disputes. Even if DNS supplied the required

information, Verizon claimed DNS failed to submit the data through the

established Verizon protocols for addressing billing disputes.

In 2016, different Verizon personnel were assigned to handle billing

disputes. Verizon's new billing dispute team claimed DNS failed to timely pay

assessed charges under the ICA and other agreements and carried a large past

due balance.

Verizon claimed DNS was required to pay all sums due except charges

subject to a "good faith dispute" under the ICA. To constitute a "good faith

dispute," DNS needed to provide details and documents supporting a claimed

dispute. Verizon requested DNS provide a "specific detailed accounting of any

and all disputed charges, including dates, charges and a description of the

A-4016-21 3 facilities in question." DNS failed to provide the requisite details supporting its

claimed "good faith dispute." As an alternative to providing the detailed billing

dispute information, Verizon advised DNS could pursue dispute resolution

under the ICA, or file a petition to have the matter reviewed before the Office

of Administrative Law (OAL).

By 2017, DNS accrued a past due balance of approximately $298,000. To

limit DNS's ability to receive services while simultaneously amassing a

significant unpaid balance, Verizon embargoed DNS from ordering new

services.

As a result of Verizon's action, in September 2017, DNS filed a petition

with the BPU contesting Verizon's billing for access charges under the ICA. The

petition identified three contractual arrangements governing services provided

by Verizon: the ICA; the Wholesale Advantage agreement, which DNS alleged

included intrastate services within the BPU's jurisdiction; and a "forbearance"

contract for services exempt from federal and state regulation. According to the

petition, DNS claimed Verizon improperly imposed an embargo on service

orders under the ICA and the Wholesale Advantage agreement to "coerce" its

payment of all disputed charges. DNS alleged Verizon breached the ICA;

breached the duty of good faith by failing to negotiate in good faith; engaged in

A-4016-21 4 "illegal self-help actions" and "acts of improper retaliation" designed to force

DNS from the telecommunications market; and violated "[BPU] rules pertaining

to billing, account handling and dispute resolution." DNS requested the BPU

adjudicate the disputed matters in its favor, direct Verizon to lift the embargo

on new service orders, and order Verizon to cease collection efforts pending the

BPU's "final reconciliation of all accounts," including payments, credits, and

late charges.

In a December 29, 2017 order, the BPU directed Verizon to lift the

embargo and continue providing services to DNS under the ICA until final

resolution of the billing disputes. The BPU also transmitted the matter to the

OAL as a contested case.

The OAL assigned the matter to an ALJ, who conducted Zoom hearings

over eleven non-consecutive days between September and December 2020. The

ALJ identified the following issues to be resolved:

• Whether DNS owed a past due balance to Verizon for tariff and/or ICA related charges and, if so, the amount of that balance.

• Whether DNS has continued to pay Verizon for undisputed charges.

• Whether Verizon's imposition of late charges was done properly and consistent with the ICA.

A-4016-21 5 • Whether Verizon properly billed DNS for taxes and regulatory surcharges or whether DNS provided all required tax exemption certificates to Verizon. • Whether Verizon's practice of assessing access charges on tandem transit trunks was proper.

• Whether the parties properly followed the dispute resolution process in the ICA.

• Whether the embargo instituted by Verizon preventing orders by DNS under the ICA was a violation of the ICA and other non-ICA contracts.

The ALJ left the record open to address certain issues, including the need

for an accommodation on behalf of DNS's witness, Isaac Fajerman, due to a

visual impairment.1 The ALJ held a final hearing on April 8, 2021.

After the hearing closed, the parties filed post-hearing written

submissions. The ALJ also requested supplemental filings, addressing "whether

specific credits given by Verizon affected the amounts allegedly in dispute as of

the date of the [p]etition." According to the ALJ, the parties agreed the amount

Verizon claimed to be past due as of August 24, 2017, under the ICA and tariff

was $32,991 and the amount due under the Wholesale Advantage agreement was

$6,395. The ALJ closed the record in December 2021.

1 Fajerman is the president and owner of DNS. A-4016-21 6 The following witnesses testified for DNS: Fajerman; MaryLou Carey, a

telecommunications consultant; and Fred Goldstein, a former

telecommunications expert witness and DNS employee from 2003 to 2004. The

following witnesses testified for Verizon: Peter D'Amico, who worked for

Verizon for thirty-five years, spending the twenty-five years prior to retiring in

2018 as Verizon's product manager of voice services; and Brandon Chase

Bartlett, Verizon's associate director for private sector collections.

The ALJ also considered documentary evidence related to the billing

disputes. Pursuant to these documents, DNS could order services for different

kinds of telephone traffic, routed over different kinds of "trunks," to different

kinds of "interconnection points" (IPs) between DNS and Verizon networks.

The ALJ summarized the documents governing the billing relationship between

DNS and Verizon.

ICA

Under the ICA, Verizon issued a monthly statement of "itemized . . .

charges" to DNS. Payment by DNS was due on the later of the due date in the

bill or twenty days after DNS received the bill. The bills included taxes Verizon

was legally obligated to collect and remit on sales of its services, except where

DNS had a written tax exemption certificate.

A-4016-21 7 If DNS failed to make payment timely, Verizon could request "[a]ssurance

of payment of charges" in the form of a cash security deposit or a letter of credit

equal to two months of anticipated charges. Overdue payment amounts were

subject to a late payment charge (LPC) not to exceed 1.5 percent per month on

the total of such amounts, plus unpaid LPCs.

Section 9 of the ICA contained a dispute resolution provision. Under that

section, DNS could assert "a good faith dispute" regarding "any portion of an

amount billed," provided DNS gave Verizon "notice . . of the amounts it

dispute[d]." The notice required DNS include "the specific details and reasons

for disputing each item." This section also provided DNS could assert a dispute

for "any class of charges" "with a single notice."

Section 12 of the ICA allowed either party to cure any breach of a

"material provision" within thirty days, including the failure to make "any

payment required by Section 9 of undisputed amounts." After thirty days, the

nonbreaching party could issue a written notice to the "Defaulting Party," and

exercise one of two options: (1) "suspend the provision of any or all Services"

under the ICA, or (2) cancel the ICA and terminate all services under the

agreement.

A-4016-21 8 Section 14 of the ICA set forth the procedure for resolving billing

disputes. Section 14.1 stated the dispute would be "addressed by good faith

negotiation." Either DNS or Verizon could "initiate" a negotiation by providing

a "written notice of the dispute that includes . . . a detailed description of the

dispute or alleged nonperformance."

Section 14 required the written notice identify "an individual [to] serve as

the initiating [p]arty's representative in the negotiation." The other party then

had ten business days "to designate its own representative." The parties'

designated representatives were required to "meet at least once" within thirty

days following the written notice "in an attempt to reach a good faith resolution

of the dispute." If the parties were unable to resolve the dispute within the thirty-

day period, either party could "pursue any remedies available to it under this

Agreement, at law, in equity, or otherwise, including, but not limited to,

instituting an appropriate proceeding" before the BPU.

Section 18 of the ICA required the parties to act in good faith and

provided:

The Parties shall act in good faith in their performance of this Agreement. Except as otherwise expressly stated in this Agreement (including, but not limited to, where consent, approval, agreement or a similar action is stated to be within a Party's sole discretion), where consent, approval, mutual agreement or a similar action

A-4016-21 9 is required by any provision of this Agreement, such action shall not be unreasonably withheld, conditioned or delayed.

The ICA included attachments describing the various services DNS could

order and the type of IP necessary. Each service had its own billing rates and

conditions. From DNS's perspective, the billing dispute involved whether DNS

properly ordered the services it believed it requested from Verizon. From

Verizon's perspective, the billing dispute involved whether Verizon correctly

billed for the actual services DNS ordered.

Section 2.1.2 of the Interconnection Attachment to the ICA provided each

party was responsible for the costs of delivering its traffic to the other party's

IP. The various IPs belonging to DNS and Verizon had specific geographic

locations. For certain kinds of traffic, the parties' IPs were the same because the

traffic accessed the same switching equipment. This was known as a "tandem"

arrangement. For other traffic, DNS paid Verizon to carry traffic between IPs—

an "entrance facility and transport" arrangement—unless DNS elected to avoid

the charge by using "collocation." Collocation is the placing of DNS's own

switching equipment for the type of traffic at issue within the Verizon facility

handling that traffic.

A-4016-21 10 For DNS circuits connected to Verizon's network, section 2.2 of the

Interconnection Attachment allowed DNS to order two types of trunks.

"Interconnection trunks" were used for "tandem" traffic, which was traffic

within the local access transport area (LATA). "Access toll connecting" (ATC)

trunks were used for "exchange access traffic" between LATAs (interLATA

traffic), and Verizon's billing included transport of that traffic between DNS's

and Verizon's IPs.

Local Interconnection Service (LIS) Trunk Billing Dispute

During the hearing, Carey testified she helped CLECs, such as DNS,

establish and manage networks pursuant to their ICAs. Carey also trained CLEC

employees how to write service requests, and helped CLECs resolve various

issues, including billing disputes. In 2014, DNS asked Carey to place orders

with Verizon for LIS trunks so DNS customers could initiate and receive local

calls to other carriers' customers.

At the hearing, D'Amico testified he provided services connecting to the

public switch telephone network, including CLECs. D'Amico "handled all

aspects of the product," including contracting, ordering, and network

architecture.

A-4016-21 11 On March 31, 2014, D'Amico emailed Carey regarding local access per

the Newark-area LATA. D'Amico explained the ICA's Interconnection

Attachment required DNS "to get their traffic to the Verizon IP(s) which are

defined as the VZ tandem for tandem trunks and the V[Z] end office for direct

end office trunks."

On April 8, 2014, Fajerman responded to D'Amico's email. Fajerman

wrote, "You left out the fact we are meeting at the collocation." D'Amico

explained collocation would allow the traffic in question to be billed on a

"POVN"2 basis, which would be indicated by the appearance of the "POVNAC"

code when DNS submitted an Access Service Request (ASR). D'Amico replied

to Fajerman as follows:

Since we [are] meeting at the collocation, Verizon is willing to mutually agree to have both parties['] Interconnection Points ("IPs") be at the collocation. If you agree, this will allow [DNS] to have a "POVN–like arrangement" and populate the POVNAC in the SPEC [3] Field of the ASR which will drive the POVN billing arrangement.

Fajerman assented to D'Amico's proposal.

2 "POVN" stands for "point of interconnection on the Verizon network." "POVNAC" stands for "point of interconnection on the Verizon network access transport." 3 "SPEC" stands for "Service and Product Enhancement Code." A-4016-21 12 According to Carey, the purpose of using LIS trunks was to permit DNS

to pay to bring its traffic to the IP or collocation point on Verizon's network.

She testified any dispute regarding the trunks could have been solved by

reviewing the data in the switching equipment as well as the call detail records

(CDR) and placing test calls if employees of Verizon and DNS had worked

together.

D'Amico claimed Carey's March 28, 2014 email to Verizon erroneously

asserted DNS had a POVN contract rather than a POI IP contract.4 D'Amico

explained section 2.1.2 of the ICA's Interconnection Attachment, providing

"[e]ach party . . . at its own expense shall provide the delivery at a relevant

interconnection point of the other party," precluded an interpretation that the IP

would be a collocation point or a tandem interconnection point as in a POVN

contract. D'Amico maintained the ICA was a POI IP contract. Because

Verizon's IP was in West Orange, and DNS did not collocate in West Orange or

use a third party to get its traffic from Newark to West Orange, DNS had to use

4 A "POI IP contract" is a Point of Innerconnection/Interconnection Point contract. According to D'Amico, a POI IP contract involves the CLEC paying the ILEC to get their traffic to the ILEC's interconnection point. Under a POVN contract, the parties "established a point on Verizon's network" whether or not it was an interconnection point, to which the CLEC would pay to bring their traffic. A-4016-21 13 Verizon's "transport services" for that traffic and pay Verizon for the service.

D'Amico explained DNS's ASRs were "failing" because DNS was using a POVN

code unavailable for its POI IP contract.

To resolve the issue, D'Amico proposed moving one party's IP to the other

party's IP to achieve collocation or its equivalent, and creating a "POVN-like

arrangement" even before the ICA could be so modified, or superseded by a

proper POVN contract. D'Amico knew the issue could delay DNS's launch date

as a CLEC and he wanted to avoid any delay. Thus, D'Amico explained he "cut

this . . . side deal." According to his testimony, the "side deal" was implemented

but never sufficiently documented so other Verizon employees could realize the

agreement was intended to supplement the ICA, which precluded a POVN

arrangement.

Verizon employees testified regarding the LIS trunk dispute. During the

hearings, DNS presented a December 5, 2014 email from Verizon's Missy Roper

to Fajerman, with a copy to Verizon's Sharla Denton, admitting DNS's ASR as

"submitted had a PIU of zero, and when the order was processed, it generated a

PIU5 [of] 100." DNS submitted Carey's reply to Roper's email, declaring there

5 PIU means percentage of interstate usage. PLU means percentage of local usage. A-4016-21 14 should be no "trunk core charges" because the trunks in question were local

interconnection trunks. In a March 31, 2015, email, Denton apparently admitted

Verizon's error in billing the LIS trunks. According to this email, Denton stated,

"We have a staff referral attempting to get the error corrected. . . . Credit

definitely due and growing, but is proving difficult to get the correct billing into

the system."

In a May 1, 2015 email, Denton noted ongoing difficulties fixing the

system to bill DNS correctly. The email again acknowledged DNS "ordered

data with [a] PIU [of] zero, and it was entered, a recap was done, and it went in

with PIU100."

On November 22, 2015, Fajerman sent an email to Roper, with a copy to

Denton, claiming the "credits and corrections were never applied"

notwithstanding Denton's purported "adjustments." The next day, Roper

responded that DNS's account was moved to a different manager, and she would

work with that manager to "look into [Fajerman's] concerns."

Brandon Chase Bartlett, who worked in Verizon's wholesale claims and

collection department, took over DNS's billing disputes. From 2013 to 2017,

Bartlett served as a senior manager in that department and was responsible for

A-4016-21 15 managing accounts receivable. In October 2017, Bartlett became associate

director for private sector collections.

Bartlett's team inherited DNS's account at the end of 2015. At trial,

Fajerman conceded Bartlett always provided a reason for denying DNS's claims.

However, Fajerman disagreed with Bartlett's reasons for denying the claims.

Carey sent a September 16, 2016 email to Bartlett and Verizon's Leyla

Redmon, stating she reviewed the ICA's Interconnection Attachment regarding

the LIS trunks. Carey claimed sections 2.1.1 through 2.1.3.3 of the attachment

applied regardless of whether DNS delivered its traffic to Verizon's POI by

collocation, or by using an "entrance facility" leased from Verizon or a third

party. Based on her interpretation of these provisions in the Interconnection

Attachment, Carey demanded "all dedicated transport and trunk port charges for

the LIS trunks" be removed from Verizon's billing statements. Additionally, she

requested Verizon credit DNS for those charges.

The same day, Bartlett sent an email to Fajerman and Carey, with a copy

to Redmon, regarding his understanding of DNS's billing disputes. In the email,

Bartlett explained the ICA was not a POVN contract. As a result, he stated the

ICA could not contain a provision that would prevent a transport or "mileage"

charge by having each party be responsible for its own costs to deliver traffic to

A-4016-21 16 the IP. Regarding port charges on the LIS trunks, Bartlett acknowledged DNS

initially requested trunks with a PIU of zero and a PLU of one hundred, and

recognized the matter remained an "open" dispute.

Bartlett agreed with D'Amico that the ICA "[was] a POI IP, not a POVN

ICA." In order to achieve "zero billing," Bartlett understood D'Amico had to

devise "a POVN like agreement." However, D'Amico either did not, or could

not, revise the ICA. Thus, the ICA remained a POI IP contract, which Verizon's

"audit team" discovered in its September 2016 review.

According to Bartlett's testimony, Verizon believed executing the ICA

with DNS as a POI IP contract meant a POVN arrangement "wasn't available"

at the time. When asked if a POVN contract was available for other similarly

situated CLECs, Bartlett stated he was not aware of any at that time. Bartlett

further stated that "D'Amico, when he agreed to this deal in 2014, was supposed

to have arranged for a POVN ICA."

Bartlett acknowledged DNS ordered the LIS trunks with zero percent PIU

and one hundred percent PLU, and that "the system assigned a PIU of 100 to the

local trunks -- when it should have been zero." When asked "how long [it took]

for Verizon to correct that error?" Bartlett replied the error was "corrected in

late 2016 and the correction was issued in January of 2017."

A-4016-21 17 Bartlett admitted "whoever did the audit, wasn't aware of th[e side]

agreement" D'Amico made with DNS in 2014 to resolve the dispute. Bartlett

testified that if he had been involved at the time, he "probably" or "[m]ost likely"

would have "checked all of [Verizon's] resources," including the ASR and

customer service record. However, Bartlett could not say whether the audit team

checked all of Verizon's resources. Even if the audit team checked other

resources, Bartlett explained this aspect of the billing dispute was resolved and

documented through emails rather than a formal written agreement. Bartlett

surmised the audit team may not have reviewed these emails because the team

began its investigation by reviewing DNS's contracts and determining "there

wasn't a POVN contract on file."

On October 6, 2016, Redmon submitted an internal "Billing Adjustment

Request," recommending Verizon issue a credit to DNS in the amount of

$29,673.35, representing Verizon's overcharges on the LIS trunks since April

2016. Redmon noted DNS ordered the trunks as "Local Interconnection [trunks]

that will not bill a mileage component." According to Redmon, when DNS

ordered the trunks, Verizon determined "the physical arrangement of these

circuits, at the time of the installation," justified such a billing ar rangement.

However, because "the language for this type of billing arrangement" was not

A-4016-21 18 included in the ICA and the audit team was "unaware" of D'Amico's "side deal,"

Redmon explained Verizon began billing DNS for transport charges. Bartlett

and D'Amico told DNS that prospective bills would be "written to remove the

erroneous billing components." While Bartlett "approved" of the solution,

actual approval had to be issued by Verizon's director of wholesale financial

operations.

During an in-house telephone call in August 2017, D'Amico testified that

Bartlett and the collection group agreed to D'Amico's 2014 side arrangement

with DNS. Thus, Verizon credited DNS for improper billing of local mileage

on the LIS trunks.

Local Access Trunk Billing Dispute

DNS also raised disputes concerning billing for local access trunks. DNS

placed orders for four "local access" trunk groups, numbers 102, 104, 114, and

115, to carry its traffic from the Newark collocation facility to a Verizon local

access "end office" in West Orange.

According to Bartlett, in or around August 2017, a review assurance team

conducted a routine audit. The audit reviewed ASRs customers placed. In

August 2017, Redmon told Bartlett that DNS's local access trunks were actually

A-4016-21 19 ATC trunks, meaning DNS's traffic on those trunks should have been billed for

mileage from Newark to West Orange.

Goldstein testified on behalf of DNS. He explained his expertise focused

on "the network architectural level" and "where [CLECs] need an ASR."

Goldstein also worked with Carey regarding DNS's billing disputes because of

her expertise in the "extremely delicate and arcane process" of filing ASRs.

Goldstein testified DNS did not perform test calls in response to Redmon's

August 25, 2017 email because such tests would not have been useful. He

explained DNS's engineers "knew what calls were flowing on their trunks," and

asked Verizon "to show . . . any evidence of CDRs." Goldstein represented

Verizon's switches had the ability to log CDRs, and believed Verizon could

simply activate such recording for this trunk group to verify the type of traffic

it was carrying.

According to the record on appeal, there is no dispute DNS selected

"SDUP" as the "network channel."6 Goldstein stated SDUP and similar codes

are not standardized in the industry as having one specific meaning . Thus, he

6 As D'Amico explained, a customer places a network channel code, like "SDUP," into an ASR "which Verizon's provisioning teams use . . . as a guide . . . to know what kind of trunk's billed." A-4016-21 20 explained Verizon incorrectly assumed SDUP necessarily meant ATCs because

the term SDUP had multiple meanings.

D'Amico disagreed. He testified SDUP related only to ATCs because

SDUN was the code for local interconnection trunks.

Goldstein testified the local access trunks were billed correctly until

Verizon's August 2017 audit. Fajerman explained the incorrect billing ceased

around December 2017, when Verizon issued a credit for the improper charges.

D'Amico believed data collection for ATC trunk groups was unavailable

because he never saw data recording on an ATC trunk group. He presumed call

data would have been recorded by DNS as the originating carrier, or by the

interexchange carrier for calls routed to it. D'Amico explained Verizon did not

act as an interexchange carrier for ATC calls.

Tax Assessment Dispute

DNS also disputed the taxes assessed by Verizon. Fajerman testified

Verizon started billing DNS for taxes in October 2015. In a November 24, 2015

email to Verizon's John Ross Davis, Fajerman advised DNS was being charged

for taxes, notwithstanding its tax exempt status. Fajerman asked that Verizon

cease charging the taxes. Davis agreed to look into the issue.

A-4016-21 21 In his December 28, 2015 email, Davis asked Fajerman for information

necessary "to update the accounts," "provide support to correct the billing," and

determine "the net credit." He sent a copy of this email to Carey and suggested

she request the information needed for Verizon to update the accounts.

Bartlett testified Fajerman sent an email attaching a federal tax exemption

certificate for DNS. The email and the certificate were dated April 29, 2016.

According to Bartlett, this was the first exemption certificate Verizon received

from DNS.

On November 9, 2016, Fajerman emailed Redmon, with a copy to Bartlett

and Davis, stating "the tax dispute" remained unresolved even though he "gave

notice" of the dispute a year earlier and Davis "accepted the dispute." Redmon

replied by email the same day, stating Verizon previously instructed DNS to

submit a new written claim through Verizon's claim submission website or

portal. Redmon stated, "There is no further conversation to be held regarding

these disputes, until we can look into them. I cannot have someone look into

them until I have a claim with specific details to investigate."

Bartlett testified Verizon issued a credit to DNS for all federal excise taxes

"assessed after April 29, 2016." However, Bartlett did not state the date Verizon

issued the credit.

A-4016-21 22 Late Payment Charge Dispute

DNS also disputed Verizon's LPCs. At the hearing, Fajerman proffered

several bills demonstrating Verizon issued LPCs exceeding the 1.5 percent

allowed under the ICA. In some instances, Verizon explained the LPC exceeded

1.5 percent because the minimum LPC charge was five dollars. The bills with

the disputed LPCs referenced by Fajerman in his testimony were not included

in the appellate record. Thus, we are unable to ascertain when Verizon started

charging LPCs above the 1.5 percent rate or when DNS first complained to

Verizon about excessive LPCs. DNS's complaint, transmitted to Verizon on

October 4, 2017, is the earliest document in the record alleging Verizon charged

excessive LPCs.

Goldstein testified late fees on Verizon's bills were not itemized charges.

Thus, it was difficult for DNS to verify excess charges without retracing and

auditing the disputed bills to compute the LPC imposed for each bill.

Additionally, he explained DNS lacked the ability to discern whether Verizon

assessed the correct compounded interest rate for the LPCs.

The October 6, 2016 Billing Adjustment Request for DNS's LIS trunks

also addressed the associated LPCs. In that document, Redmon requested

A-4016-21 23 Verizon's bills as of October 6, 2016 be "written to remove the erroneous billing

components." Verizon approved the request.

Embargo Dispute

DNS also alleged Verizon failed to negotiate in good faith related to the

embargo for services. Bartlett testified the ICA and Verizon's tariff allowed

service embargoes. According to Bartlett, an embargo is "a refusal to accept

new service orders." However, he explained an embargo did not impact the

"repair and maintenance" of existing services. Bartlett called the embargo a

"middle of the road" measure because it would be followed by Verizon's request

for an "assurance of payment" under the ICA. Bartlett testified an assurance of

payment included an escrow deposit, covering two months of billed costs, or a

letter of credit. The final step after an embargo under the ICA was termination

of the agreement and cessation of all Verizon services.

Verizon sent embargo letters to wholesale customers, such as DNS, about

once or twice a week, depending on whether the customer made payments,

whether the past-due balance continued accruing, and the customer's overall

creditworthiness. Bartlett explained Verizon sent embargo letters to wholesale

customers with past due balances as low as $10,000.

A-4016-21 24 According to Bartlett, Fajerman told him an escrow deposit would

bankrupt DNS. However, in the summer of 2017, Fajerman refused to "show

[Bartlett] that [DNS's failure to timely pay was] not a cash flow issue." Despite

DNS's non-payment, Verizon did not formally request an assurance and "never

stopped services due to non-payment."

On April 12, 2017, Bartlett sent an email to Fajerman, stating DNS's

accounts were "seriously delinquent," with an "undisputed past due balance" of

approximately $298,000. Bartlett demanded immediate payment from DNS.

Bartlett's email also stated, "Failure to pay amounts due may result in further

collections activity, including service interruption or refusal to process new

orders for service, as permitted under law."

Three weeks later, Fajerman sent Bartlett a "notice of dispute," invoking

section 14 of the ICA and designating himself as DNS's representative for

dispute negotiations. Bartlett portrayed Fajerman's notice as "a laundry list of

vague generalities, but no specifics, no invoice dates, no amounts, no account

numbers." According to Bartlett, Fajerman's failure to provide supporting

details was typical. Bartlett informed Fajerman that Verizon had no obligation

under section 14 of the ICA without details supporting DNS's asserted disputes.

A-4016-21 25 Notwithstanding this position, Bartlett sent a May 10, 2017 email to

Fajerman advising he was Verizon's "representative" under section 14 of the

ICA. Bartlett stated DNS's "net past due" amount of $295,375 "consist[ed] of

undisputed amounts, and amounts associated with claims . . . repeatedly

addressed and denied by Verizon."

On May 31, 2017, Fajerman stated Bartlett's email communications failed

to comply with the dispute resolution protocol under section 14 of the ICA.

Fajerman contended Bartlett's emails evidenced a lack of good faith by

characterizing the large past due amount as undisputed and demanding

immediate payment. Fajerman requested a meeting with Bartlett to negotiate

the disputes.

On June 16, 2017, William Carnell, Verizon's assistant general counsel,

responded to Fajerman. He replied DNS did not comply with the dispute

resolution process because it failed "to provide a 'detailed description'" of the

disputes it claimed. Verizon's counsel explained Bartlett and Redmon "promptly

responded to any disputes [Fajerman] raised; they analyzed any claims; they met

with [Fajerman] telephonically multiple times; and they negotiated in good

faith." Carnell stated Verizon's actions were consistent with its obligations

under the ICA.

A-4016-21 26 On June 23, 2017, after speaking with DNS's attorney at the time, W. Scott

McCollough, Carnell sent an email stating Verizon was "willing to engage on

the merits of bona fide disputes." In the email to DNS's attorney at the time,

Carnell wrote:

[Y]ou'll document any specific amounts in dispute and the detailed justification for non-payment of those amounts. You'll provide all claims related to the non- forbearance products by Friday June 30, and the remainder by Monday July 10. We in turn will review and get back to you promptly. I look forward to resolving or at least narrowing as many claims as we can.

Bartlett testified nothing in Carnell's email indicated Verizon agreed to delay

the embargo while DNS collected the details to support its disputes.

On July 18, 2017, McCollough forwarded a forbearance account

reconciliation spreadsheet to Carnell. Three weeks later, Carnell responded,

observing DNS's past due amount was $28,618 greater than the total value of

the disputed claims presented by McCollough. Carnell claimed this difference

was an undisputed amount and payable immediately. Further, Carnell advised

most of the disputed claims were previously raised by DNS and rejected by

Verizon. Notwithstanding this position, Verizon again reviewed DNS's claims

and found them "without merit."

A-4016-21 27 However, DNS raised a new claim that it made payments which Verizon

failed to acknowledge. Verizon explained it had no record of DNS's alleged

payments and could not trace the payments without "dates, amounts, check

numbers, the location to which the payments were sent, and other documentary

evidence and remittance details." The only DNS claim Verizon accepted was a

requested credit in the amount of $1,680, representing federal excise taxes

collected after Verizon received DNS's tax exemption certificate.

On November 27, 2017, Sherry Sandoval of Verizon wrote to Shawn

Alexander, also with Verizon, with a copy to Carnell, stating DNS "will likely

be shut down in the near future for non-payment." Sandoval sought advice on

"how best to manage disconnecting services while positioning to minimize the

downside for end customers." She explained DNS "[was] refusing to cooperate,

effectively daring Verizon to terminate service, so we are not able to share any

details with our Retail sales counterparts, with other possible VPS customers

who could take over the services, or even with the end customers."

Bartlett explained Verizon's motive in contemplating such action was to

maintain DNS's business operations and avoid having to write off a $1.6 million

bad debt that Verizon would be unable to collect. According to Bartlett, if a

commercial customer went out of business, Verizon sought to ensure that

A-4016-21 28 whoever that customer served "had a soft landing and their service was

uninterrupted, as best as possible, either with Verizon or with some other

carrier."

The foregoing is a summary of the facts adduced over the thirteen days of

virtual hearings before the ALJ. After the final hearing on April 8, 2021, the

ALJ allowed the parties to submit post-hearing briefs and written supplemental

filings. The ALJ issued her initial decision on January 28, 2022. DNS and

Verizon filed exceptions to the initial decision and replies to the other party's

exceptions. The BPU issued a July 13, 2022 order adopting the ALJ's initial

decision.

DNS filed an appeal and Verizon filed a cross-appeal from the BPU's July

13, 2022 order. In its appeal, DNS argues the BPU erred in awarding damages

to Verizon for breach of contract and requiring DNS's payment to Verizon under

an agreement not subject to the BPU's jurisdiction. DNS further asserts the BPU

improperly addressed a purported counterclaim asserted on behalf of Verizon.

Additionally, DNS claims the BPU overlooked facts admitted by Verizon in its

answer to DNS's petition. Finally, DNS contends the BPU's decision was

arbitrary, capricious, and unreasonable. In its cross-appeal, Verizon argues the

BPU erred in holding Verizon breached its good faith obligations under the

A-4016-21 29 agreements with DNS related to Verizon's imposition of late payment charges

and ATC trunk charges.

I.

We first address DNS's claim the BPU erred in awarding damages to

Verizon based on breach of contract. DNS argues the BPU's authority is limited

to determining whether a regulated contract for services was breached and

awarding damages for breach of contract is beyond the BPU's jurisdiction.

The BPU asserts the dispute presented in DNS's petition involved "the

accuracy of Verizon's charges" and whether DNS met its burden of proving

Verizon's charges were inaccurate. Contrary to DNS's argument, the BPU

contends it awarded no damages to Verizon. Rather, the BPU found DNS failed

to prove Verizon's charges were inaccurate. In adopting the ALJ's initial

decision, the BPU dismissed DNS's petition and stated DNS "remain[ed]

responsible for $39,386 in outstanding charges to be paid to [Verizon]." The

BPU expressly stated "[a]ny action . . . for damages shall proceed in the

appropriate forum."

An agency is bound by an ALJ's "finding of fact as to issues of credibility

of lay witness testimony," and the agency "may not reject or modify" them

unless it "determines from a review of a record that the findings are arbitrary,

A-4016-21 30 capricious or unreasonable, or are not supported by sufficient, competent, and

credible evidence in the record." N.J.A.C. 1:1-18.6(c). However, an ALJ's

"substantive findings" are not binding on the agency. N.J.A.C. 1:1-18.1(d).

Appellate courts have jurisdiction "to review final decisions or actions of

any state administrative agency or office." R. 2:2-3(a)(2); see also N.J.S.A.

48:2-43. The BPU's orders must be upheld unless "it clearly appears that there

was no evidence before the board to support the [order] reasonably." N.J.S.A.

48:2-46.

"[A]n appellate court reviews agency decisions under an arbitrary and

capricious standard." Zimmerman v. Sussex Cnty. Educ. Servs. Comm'n, 237

N.J. 465, 475 (2019). "An agency's determination on the merits 'will be

sustained unless there is a clear showing that it is arbitrary, capricious, or

unreasonable, or that it lacks fair support in the record.'" Saccone v. Bd. of Trs.

of Police & Firemen's Ret. Sys., 219 N.J. 369, 380 (2014) (quoting Russo v. Bd.

of Trs., Police & Firemen's Ret. Sys., 206 N.J. 14, 27 (2011)).

The Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56

(1996) (codified in sections of 47 U.S.C.) [hereinafter the Act], requires "all

local exchange carriers," 47 U.S.C. § 251(b), to offer interconnection to CLECs,

id. § 251(c)(2), and to do so pursuant to an ICA, id. § 252(a)(1), which must be

A-4016-21 31 approved by the relevant state commission, such as the BPU. Id. § 252(e)(1).

The Act also allows an ILEC to provide nonlocal service, or more precisely,

"interLATA services originating in any of [the ILEC's] in region States," on the

condition that the state commission "approves the application" to provide the

services. 47 U.S.C. § 271(b)(1), (d)(1).

Regarding claims for breach of an ICA, as opposed to claims for violations

of the Act, the BPU may review disputes arising under the agreement,

compliance with the agreement's terms, and compliance with the agency's other

rules in the provision of intrastate service to the extent applicable. Core

Commc'ns, Inc. v. Verizon Pa., Inc., 493 F.3d 333, 343 (3d Cir. 2007).7

7 Core held a telecommunications plaintiff must "seek review by [a state utilities commission] . . . of its claim that the approved interconnection agreement had been breached before resorting to the federal courts." Core Commc'ns, Inc., 493 F.3d at 337. In so doing, the Third Circuit applied "Chevron deference" to the Federal Communications Commission's interpretation of the Telecommunications Act of 1996. Id. at 344.

The United States Supreme Court recently overruled Chevron and its deferential standard of review. Loper Bright Enters. v. Raimondo, 603 U.S. 369, 412 (2024), overruling Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842 (1984). However, Loper Bright has no bearing on this matter.

Neither party contested the BPU's initial jurisdiction over the billing disputes. Whether a federal court has subject matter jurisdiction over an ICA dispute is not relevant here. Thus, we need not determine whether the Loper Bright decision conflicts with the holding in Core.

A-4016-21 32 "[I]nterpretation and enforcement actions that arise after a state commission has

approved an interconnection agreement must be litigated in the first instance

before the relevant state commission." Ibid. However, if the state commission

finds breach of the agreement, only a trial court may award money damages

upon the breach. Id. at 344. New Jersey courts have held as a matter of state

law that damages "are beyond [an] agency's authority," Muise v. GPU, Inc., 332

N.J. Super. 140, 163 (App. Div. 2000), and an award of damages must be

pursued in court unless "the Legislature has 'explicitly limited the availability

of that remedy.'" Ibid. (quoting Boldt v. Correspondence Mgmt., Inc., 320 N.J.

Super. 74, 87 (App. Div. 1999)).

Here, the BPU determined the amount DNS owed Verizon for services.

However, the BPU never designated the amount as damages awarded to Verizon.

DNS presents no authority for its position that BPU's calculation of an amount

due under the ICA and other contracts is tantamount to ordering the payment of

damages. Additionally, we reject DNS's argument based on the express

disclaimer in the BPU's order. In its final agency decision, the BPU stated "[a]ny

action by [DNS] for damages shall proceed in the appropriate forum."

A-4016-21 33 II.

We next consider DNS's argument that the BPU erred in requiring

payments pursuant to an agreement not subject to the BPU's jurisdiction. While

acknowledging the BPU had jurisdiction over the ICA, DNS claims the BPU

lacked jurisdiction over the Wholesale Advantage agreement.

The BPU and Verizon argue DNS, in its petition, stated the Wholesale

Advantage agreement had "features, functions and services" federal law placed

within the BPU's jurisdiction to approve contracts. They expressly state the

BPU has jurisdiction to resolve billing disputes under the Wholesale Advantage

agreement. Even if the agreement did not accord jurisdiction to the BPU,

Verizon and the BPU contend DNS is judicially estopped from disclaiming a

position which it advocated before the ALJ and upon which the ALJ and the

BPU relied.

In its petition, DNS alleged Verizon's nonpayment claims related mostly

to the forbearance contract, and Verizon imposed an embargo on new orders

under the ICA and the Wholesale Advantage agreement to force DNS's payment

of past due amounts under the forbearance contract. DNS's petition claimed

Verizon violated its duty under the ICA to act in good faith.

A-4016-21 34 In its petition, DNS also argued the BPU had jurisdiction over the

Wholesale Advantage agreement pursuant to 47 U.S.C. § 271 because that

contract included interLATA aspects, which the Act assigned to state

commission oversight. DNS alleged:

The parties also have other contractual arrangements. There is a "Wholesale Advantage" contract that is governed by 47 U.S.C. §§ 251 and 252 in part but also includes features, functions and services governed by § 271. This contract is subject to Commission adjudication insofar as it involves an agreement for network elements, the combination of network elements and traffic exchange that remain subject to §§ 251 and 252.

The ALJ cited DNS's argument, noting "[e]vidence as to the amounts

involved in non-ICA disputes was permitted only to the extent that those

disputes (and the alleged failure to pay those charges) contributed to the decision

of Verizon to impose the embargo, a decision claimed by DNS to be evidence

of Verizon’s bad faith." The ALJ relied on other allegations in DNS's petition,

stating the precise question was "[w]hether Verizon incorrectly claimed that as

of August 24, 2017, DNS had a past-due balance for tariff and/or ICA-related

charges, including for undisputed charges, of $32,991, and a past -due balance

of $6,395, under the Wholesale Advantage contract."

A-4016-21 35 The BPU agreed with the ALJ that the question presented and evidence

relevant to the amounts owed "in non-ICA disputes" went to the issue of whether

Verizon acted in bad faith by imposing the embargo. At no time during the

hearings, or even before the hearings, did DNS claim the BPU lacked

jurisdiction to determine amounts allegedly due under the Wholesale Advantage

As we previously stated, service contracts requiring state commission

approval remain under the state commission's jurisdiction for enforcing

compliance with contractual and legal requirements and adjudicating disputes.

Core, 493 F.3d at 340-43. On this record, we are satisfied the BPU had

jurisdiction to render a determination on the amounts DNS owed under the

Wholesale Advantage agreement. And the matter was fully litigated without

protest or an assertion of prejudice by the parties.

Further, DNS is judicially estopped from arguing the BPU lacked

jurisdiction over the billing dispute under the Wholesale Advantage agreement.

Under the doctrine of judicial estoppel, a party is prevented from advancing an

opposite position to a previously asserted position on which a court relied.

Tamburelli Props. Ass'n v. Borough of Cresskill, 308 N.J. Super. 326, 335 (App.

Div. 1998); Cummings v. Bahr, 295 N.J. Super. 374, 385 (App. Div. 1996).

A-4016-21 36 DNS never argued the BPU lacked jurisdiction over the Wholesale

Advantage agreement at any point during the proceedings before the ALJ. To

the contrary, DNS's petition expressly asserted the agreement was "subject to

[BPU] adjudication insofar as it involves an agreement for network elements,

the combination of network elements and traffic exchanges that remain subject

to [the Act]." Having taken this position before the ALJ, DNS is judicially

estopped from arguing the BPU lacked jurisdiction over the Wholesale

Advantage agreement.

III.

We next consider DNS's argument the BPU erred in awarding damages to

Verizon absent the filing of a counterclaim. We reject this argument.

DNS's argument fails because counterclaims are not permitted in public

utility cases. The public utility is limited to filing an answer to a petition,

containing admissions, denials, and affirmative defenses. N.J.A.C. 14:1-6.1.

Additionally, as we previously stated, the BPU did not award damages to

Verizon. Rather, before the ALJ and the BPU, the issue was whether DNS met

its burden of proving Verizon's bills as to the amounts owed under the ICA and

Wholesale Advantage agreements were incorrect. Neither the ALJ nor the BPU

referenced a counterclaim asserted by Verizon.

A-4016-21 37 The ALJ explained she had to determine whether DNS was obligated to

pay Verizon for services and whether DNS met its burden of proving Verizon's

bills were erroneous. In finding DNS failed to meet that burden, the ALJ wrote:

I FIND that petitioner did not present adequate documentary evidence of the bills it challenges, the charges on those bills which it disputes and did not pay, and the amounts it did pay. Despite introducing many exhibits, the bills (or the “summary of charges” pages from those bills) showing the amounts Verizon allegedly overcharged or erroneously charged were not introduced.

The BPU agreed with the ALJ's initial decision. Because "[t]he [p]etition

was initiated by DNS based upon monies sought by [Verizon]," the BPU

explained "the burden of proof regarding alleged errors in the amounts sought

rest[ed] with [DNS]." The BPU also adopted the ALJ's credibility

determinations and her finding that DNS failed to meet its burden of proof.

A utility's customer of record "shall be responsible for payment for all

utility service rendered." N.J.A.C. 14:3-7.1(a). The customer may dispute a

charge by notifying the utility, but it still "shall pay all undisputed charges."

N.J.A.C. 14:3-7.6(a). "In proceedings before an administrative agency," matters

are to be proved "by a preponderance of the believable evidence." Atkinson v.

Parsekian, 37 N.J. 143, 149 (1962); accord SSI Med. Servs., Inc. v. State, Dep't

of Hum. Servs., 146 N.J. 614, 622 (1996). On appeal, the agency's factual

A-4016-21 38 determinations "are generally sustained if they are supported by substantial

evidence on the whole record." Atkinson, 37 N.J. at 149.

DNS bore the burden of showing Verizon wrongfully demanded payment

based on erroneous billing. The ALJ required DNS produce the bills evidencing

the claimed errors as primary evidence to support the secondary evidence

presented in DNS's spreadsheets, emails, and other work product related to the

billing disputes. The ALJ's need for the actual bills was based on Verizon's

affirmative defense that its billing was accurate rather than an imaginary

counterclaim.

IV.

We also reject DNS's argument that Verizon's answer failed to deny

specifically and in detail the material allegations in the petition. DNS asserts

Verizon's failure to deny allegations, other than the amount due, should have

been admitted for purposes of any subsequent judicial proceeding.

In DNS's post-hearing brief presented to the ALJ, it first asserted Verizon

failed to deny certain of the petition's material allegations, and that failure

constituted an admission of the allegations under N.J.A.C. 14:1-6.1(b) and Rules

4:5-3 and 4:5-5. As the ALJ aptly explained in rejecting this argument, the cited

Rules did not apply and the BPU's regulations "only provide that an answer must

A-4016-21 39 'apprise the parties and the Board fully and completely of the nature of the

defense and shall admit or deny specifically and in detail all material allegations

of the petition.'"

Further, the ALJ noted the BPU's rules emphasize fairness, accord a fact-

finder discretion in applying the BPU's rules, and permit reference to the New

Jersey Court Rules absent other guidance. Because the ALJ found the

allegations in question were "fully litigated," she concluded declaring Verizon's

answers to the petition to be admitted based on DNS's contrived pleading

deficiency "would result in prejudice to Verizon and in a tremendous waste of

government resources."

"Pleadings before the Board shall be petitions, answers, and replies."

N.J.A.C. 14:1-4.1(a). An answer "shall be so drawn as to apprise the parties and

the Board fully and completely of the nature of the defense and shall admit or

deny specifically and in detail all material allegations of the petition." N.J.A.C.

14:1-6.1(b).

Further, the New Jersey Uniform Administrative Procedural Rules

(UAPR) "govern the procedural aspects pertaining to . . . the conduct of the

hearing and the rendering of the initial and final decisions in all contested cases,"

subject only to "superseding Federal or State law." N.J.A.C. 1:1-1.1(a). The

A-4016-21 40 UAPR "shall be construed to achieve just results, simplicity in procedure,

fairness in administration and the elimination of unjustifiable expense and

delay." N.J.A.C. 1:1-1.3(a). The BPU's own practice and procedural rules under

the Administrative Code, "shall be liberally construed . . . to secure just and

expeditious determination of issues properly presented to the Board." N.J.A.C.

14:1-1.2(a).

Here, the ALJ found that Verizon's answer to DNS's petition provided a

clear picture of Verizon's defenses to DNS's allegations. She noted Verizon

admitted only those allegations when it "specifically" used the term "admit."

During the hearings, DNS presented vigorous arguments in opposition to

Verizon's affirmative defenses. DNS's assertion of strong arguments in response

to Verizon's defenses belies any claim DNS suffered prejudice or lacked notice

regarding Verizon's arguments due to the purported absence of specific denials

to the allegations in the petition.

We discern no abuse of discretion in the ALJ's implicit finding DNS

suffered no prejudice in preparing for, or participating in, the hearings based on

Verizon's answers to the petition. The ALJ liberally construed the BPU's rules

in rejecting DNS's claim that anything not expressly denied by Verizon should

A-4016-21 41 have been deemed admitted. To have decided otherwise would have been

fundamentally unfair to the parties under the circumstances.

We next consider DNS's argument the BPU acted arbitrarily in adopting

the ALJ's initial decision without considering the errors raised by DNS. We

disagree.

The ALJ relied on Brunswick Hills Racquet Club, Inc. v. Route 18

Shopping Center Associates, 182 N.J. 210 (2005), to determine whether Verizon

breached the ICA's covenant of good faith. Under Brunswick Hills, the ALJ

concluded DNS had to "show bad intentions motivated Verizon's actions."

Citing Brunswick Hills, the ALJ explained "[a] party who acts in good faith on

an honest, but mistaken, belief that his or her actions are justified has not

breached the covenant of good faith and fair dealing," but "'[s]ubterfuges and

evasions' in the performance of a contract violate the covenant of good faith and

fair dealing 'even though the actor believes his conduct to be justified .'"

Regarding the tax charges, the ALJ reviewed the ongoing communications

between Fajerman and Verizon, starting with Fajerman's November 2015

complaint to Davis through Verizon's eventual correction of the tax charges in

November 2016. The ALJ found that Verizon credited all of the tax charges

A-4016-21 42 upon DNS's resubmission of the required tax exemption certificates. The ALJ

determined there was "no evidence of malicious intent" on the part of Verizon,

notwithstanding the "evidence of mismanagement at the Verizon staff level,

inconsistent communication with a customer, and inconsistent application of

policy regarding the method of disputing charges." After reviewing the evidence

and testimony, the ALJ concluded Verizon's mishandling of the disputed tax

billings did not constitute bad faith.

Regarding the billing dispute over the LIS trunks, the ALJ found "there

were several billing issues . . . from the time of installation" in 2014 until

Verizon resolved the issue in 2016. The ALJ summarized the history of the LIS

trunk dispute as follows: DNS's ordering of the LIS trunks in POVN terms; the

inconsistency of DNS's ASR for the LIS trunks, as placed, with an ICA that was

limited to a POI IP arrangement; D'Amico's "side agreement" in April 2014

using collocation; and Verizon's issuing a credit to DNS for the erroneous trunk

charges in June 2015. As the ALJ explained, "for some inexplicable reason,"

the side agreement "was never shared with the persons at Verizon in charge of

billing," so the billing error recurred until resolved in September 2016.

The ALJ found DNS "reached an agreement with Verizon’s

representative, D'Amico, for POVN-type billing on LIS trunks and reasonably

A-4016-21 43 expected to obtain the benefits of that agreement." When D'Amico proposed the

side agreement in April 2014, he also proposed modifying the ICA or executing

a new ICA to permit POVN billing arrangements. However, the ALJ noted

neither event occurred. Based on the evidence, the ALJ determined the billing

error and the delay in finally resolving the error was due to Verizon's mistakes.

Nevertheless, the ALJ found "the failure of communication between various

Verizon departments (as was seen with the POVN dispute) and even the failure

of Verizon to respond in a timely fashion was not, however, proof of motive to

impose economic harm on DNS." The ALJ concluded DNS failed to prove that

Verizon acted in bad faith in resolving the LIS trunks dispute.

In analyzing the failure to negotiate or otherwise follow the ICA's dispute

resolution protocols before Verizon imposed the embargo, the ALJ quoted

section 9.3 of the ICA, which required DNS to give Verizon notice of "the

amounts it dispute[d]" and also "the specific details and reasons for disputing

each item." The ALJ also noted that section 9.3 allowed notice by DNS to apply

"prospectively" to "a class of charges it disputes" without need for resubmission .

The ALJ found Verizon did not "specifically" violate section 9.3 by

requiring a new notice if DNS continued to dispute a charge after Verizon denied

a claim. She further determined Verizon did not violate section 9.3 by requiring

A-4016-21 44 a new notice if the initial notice "provided insufficient information." The ALJ

concluded that "DNS failed to provide documents showing that Verizon violated

Section 9.3," notwithstanding their frustration resulting from Verizon

employees inconsistently applying the company's "policies regarding

substantiation of claims."

Reviewing section 14 of the ICA's dispute resolution process, the ALJ

cited certain correspondence from February 2017 through July 2017 regarding

unpaid balances on all accounts, not just under the ICA. The correspondence

started out between Fajerman and Bartlett and later involved counsel for DNS

and Verizon.

The ALJ found DNS did not provide the detailed description of the dispute

required under section 14. Thus, she held Verizon did not violate section 14 of

the ICA. The ALJ also explained Verizon's embargo was justified by undisputed

past due amounts on all accounts, which precluded a finding that Verizon's

embargo constituted bad faith. As the ALJ wrote:

Further, as was explained throughout these proceedings, the Board will not decide the accuracy of the charges DNS claims Verizon imposed in error across other, non-regulated accounts. As was made clear through the testimony of both parties’ witnesses, by September 2017, there were outstanding charges for services across all DNS accounts that were not in dispute. The fact of unpaid balances supports the

A-4016-21 45 decisions of Verizon to take punitive action, including an embargo on future services, and mitigates a finding of bad faith.

The ALJ concluded Verizon's incorrect interpretation of the order limiting the

embargo to services provided under the ICA was merely a mistake regarding the

scope of the order and did not amount to "evidence of bad faith."

"[E]very contract in New Jersey contains an implied covenant of good

faith and fair dealing." Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 420

(1997). The covenant provides "that 'neither party shall do anything which will

have the effect of destroying or injuring the right of the other party to receive

the fruits of the contract.'" Ibid. (quoting Palisades Props., Inc. v. Brunetti, 44

N.J. 117, 130 (1965)). "Although the implied covenant of good faith and fair

dealing cannot override an express term in a contract, a party's performance

under a contract may breach that implied covenant even though that performance

does not violate a pertinent express term." Wilson v. Amerada Hess Corp., 168

N.J. 236, 244 (2001) (citing Sons of Thunder, 148 N.J. at 419). Even if a

contract expressly permits unilateral termination without cause, the terminating

party has "an obligation of good faith performance up until its right of

termination [is] actually effective." Sons of Thunder, 148 N.J. at 421 (emphasis

A-4016-21 46 in original) (quoting United Roasters, Inc. v. Colgate-Palmolive Co., 649 F.2d

988, 990 (4th Cir. 1981)).

In determining whether a party demonstrated good faith in performing its

obligations under a particular contract provision, the court's task "is to identify

in that context the parties' reasonable expectations." Wilson, 168 N.J. at 246.

In Wilson, the Court explained discretion in the exercise of good faith cannot be

used "in a way that intentionally subjects the other party to a risk beyond the

normal business risks that the parties could have contemplated at the time of

contract formation," ibid. (emphasis added), and noted "the importance of

demonstrating bad motive in order to assert successfully a claim of breach of the

implied covenant of good faith and fair dealing." Id. at 249. "Without bad

motive or intention, discretionary decisions that happen to result in economic

disadvantage to the other party are of no legal significance." Id. at 251.

However, the existence of a bad faith motive is a question for the factfinder. Id.

at 253-54.

Bartlett, who the ALJ stated "appeared reasonable, candid and credible,"

testified Verizon was motivated to keep DNS in business to avoid having to

write off an uncollectable debt of nearly $1.6 million at the time of the embargo.

Despite this concern, Bartlett rejected Fajerman's assertion that a request for an

A-4016-21 47 assurance of payment in the form of an escrow deposit would bankrupt DNS .

Fajerman even refused to provide a copy of DNS's financial statement

demonstrating DNS's precarious fiscal circumstances. As the ALJ concluded,

near bankrupt status was needed for DNS to lose the "benefit of the bargain" of

its contracts with Verizon, including the ICA, in support of an inference that

Verizon acted in bad faith and should have recognized the embargo risked DNS's

financial collapse.

The ALJ concluded Verizon's conduct did not constitute bad faith based

on her credibility determinations and fact-findings after hearing the witnesses'

testimony and reviewing the credible and sufficient evidence adduced at the

hearings. We discern nothing arbitrary in the judge's conclusions related to

Verizon's LIS trunk charges, tax charges, and compliance with the ICA.

VI.

We next consider Verizon's cross-appeal. In its cross-appeal, Verizon

argues the ALJ and the BPU erred in finding Verizon lacked good faith related

to the LPCs and ATC trunk charges. We reject Verizon's arguments.

For the LPCs, the ALJ noted the ICA limited such charges to 1.5 percent

per month. Fajerman claimed Verizon's minimum LPC charge of five dollars

exceeded the permissible rate. Fajerman testified credibly and without

A-4016-21 48 contradiction that Verizon's calculation of the LPC was excessive because

Verizon used a constant that always resulted in "a monthly rate above 1.5

percent."

At the hearing, Bartlett admitted "other customers [we]re impacted" by

the LPCs. He stated "Verizon's investigation was continuing," and represented

"the system would be corrected" in the future.

DNS first "provide[d] a written explanation of its argument with respect

to this issue" in its complaint and petition to the BPU, filed in late September

2017, and transmitted to Verizon the following week. Based on Bartlett's

testimony at the December 2020 hearing, the ALJ found it was clear "Verizon

waited more than three years to investigate" the LPC issue.

Although Bartlett may have lacked personal knowledge of the LPC issue

any earlier, the ALJ concluded "[s]omeone at Verizon, however, was responsible

for setting rates for LPCs in excess of that permitted under the ICA ," and there

was no indication the "routine audits" for billing purposes as described by

Bartlett included "audits to ensure billing [was] consistent with contracts."

Thus, the ALJ concluded Verizon violated its contractual good faith obligation

by imposing "LPCs in violation of the terms of the ICA and its failure, once

notified of the potential violation, to promptly investigate."

A-4016-21 49 Regarding the erroneous billing of the four local trunk groups as ATC

trunks instead of the "tandem" trunks DNS intended to order, the ALJ found the

trunks were ordered and installed between late 2014 and 2016, but not billed for

mileage as if they were ATC trunks until August 2017. The issue was

discovered only after Verizon's billing team reviewed DNS's accounts and

concluded the accounts should have been billed as ATC trunks. When Fajerman

objected, Bartlett instructed him to file a formal complaint after the charges

appeared on an invoice. Instead, DNS filed its petition. At some point prior to

the hearing, the ALJ found "Verizon unilaterally credited DNS for all past-due

amounts and changed the billing to zero" mileage on those trunks. Thus, the

ALJ noted there was an open question whether Verizon acted in bad faith

regarding the trunk charges.

The ALJ reviewed the testimony regarding the meaning of the network

channel and SDUP codes used in DNS's ASR for the trunks. She noted the

failure of both parties to perform tests at any time before the hearing to

determine the nature of the trunks and their traffic.

Because the proper manner of billing those trunks was rendered moot prior

to the hearing, the ALJ addressed how the billing changes occurred. She found

Verizon changed the trunk billing days before the billing group consulted

A-4016-21 50 D'Amico and "the technical support staff at Verizon with the most knowledge

of ATC and local trunk programming."

The ALJ concluded Verizon acted in bad faith by "changing billing on

four disputed trunk groups to that charged for ATC trunks without exercising

due diligence to support such a change." As the ALJ wrote:

[W]hile there may be adequate grounds for Verizon's decision to change billing of local trunks from tandem to ATC, all evidence shows that Verizon neglected to conduct the inquiry necessary to support such action prior to changing the billing. I CONCLUDE that Verizon's failure to exercise the same diligence prior to changing the billing that it exercised after the customer complained, particularly given the ongoing disputes with this customer, showed an absence of good faith.

The ALJ properly treated the LPCs and trunk charges differently from

other charges imposed by Verizon. As for the ATC trunks, Verizon found a way

to resolve the dispute and bill for those charges in line with DNS's expectations

only to have Verizon's billing team change the charges after a cursory review.

As for the LPCs, Bartlett admitted the charges were the result of a system error

affecting DNS and other customers. Yet, it took Verizon three years to resolve

the problem. There was no indication in the record that Verizon took any action

to resolve the problem immediately after learning of the issue through DNS's

petition.

A-4016-21 51 Having reviewed the record, consistent with the testimony, the ALJ

concluded Verizon's handling of the LPCs and ATC trunk charges constituted

bad faith. She found Verizon's actions regarding these billing disputes reflected

a higher degree of carelessness and indifference by Verizon and deprived DNS

of its reasonable expectation with respect to Verizon's diligence in performing

its contractual obligations. We discern no abuse of discretion in the BPU's

decision adopting the ALJ's initial decision regarding Verizon's bad faith

conduct related to the LPCs and ATC trunk charges.

Affirmed as to the appeal and cross-appeal.

A-4016-21 52