Public Utility Commission of Texas Peter Lake, Chairman Will McAdams, Commissioner Lori Cobos, Commissioner And Jimmy Glotfelty, Commissioner Each in His or Her Official Capacity at the Public Utility Commission of Texas v. AMA Communications, LLC D/B/A AMA TechTel Communications

Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-21-00597-CV

Public Utility Commission of Texas; Peter Lake, Chairman; Will McAdams, Commissioner; Lori Cobos, Commissioner; and Jimmy Glotfelty, Commissioner, each in his or her Official Capacity at the Public Utility Commission of Texas, Appellants

v.

AMA Communications, LLC d/b/a AMA TechTel Communications, Appellee

FROM THE 126TH DISTRICT COURT OF TRAVIS COUNTY NO. D-1-GN-21-004498, THE HONORABLE KARIN CRUMP, JUDGE PRESIDING

MEMORANDUM OPINION

The Public Utility Commission of Texas (the PUC) and Peter Lake, Chairman;

Will McAdams, Commissioner; Lori Cobos, Commissioner; and Jimmy Glotfelty,

Commissioner, in their official capacities (collectively, the PUC Parties), appeal from the trial

court’s orders (1) denying their plea to the jurisdiction and (2) granting the petition of appellee

AMA Communications, LLC d/b/a AMA TechTel Communications (AMA) for a temporary

injunction. For the following reasons, we affirm the trial court’s orders.

BACKGROUND

This case concerns the Texas Universal Service Fund (TUSF),1 which was

established by the legislature to provide universal affordable telecommunications services across

1 The regulatory and historical background of the TUSF has been recounted in detail in a recent opinion of this Court and will not be repeated here, as the parties are well familiar with it, except the state, and which the legislature has directed the PUC to fund and administer. See Tex. Util.

Code §§ 52.001(a), 56.021, .022(a). The TUSF includes programs that provide financial support

to assist telecommunications providers with supplying basic local services at reasonable rates

in high-cost and rural areas. See 16 Tex. Admin. Code § 26.420(b)(1)-(2) (2022) (Pub. Util.

Comm’n of Tex., Administration of Texas Universal Service Fund (TUSF)). Among other

duties, the PUC is mandated to “adopt eligibility criteria and review procedures, including a

method for administrative review,” necessary for funding TUSF and making distributions to

eligible providers, Tex. Util. Code § 56.023(a)(1); “determine which telecommunications

providers meet the eligibility criteria,” id. § 56.023(a)(2); and “approve procedures for the

collection and disbursal of the revenue of” TUSF, id. § 56.023(a)(5).

AMA is a telecommunications provider whose coverage area includes more than

25,000 square miles, largely in rural west Texas. It offers phone and internet service to rural

Texas and is a competitive local exchange carrier (CLEC) that competes with incumbent local

exchange carriers (ILECs)2 in the areas it serves, providing customers an alternative to ILECs

and thus a choice in their telecommunications provider. As a CLEC, AMA operates under a

Service Provider Certificate of Operating Authority (SPCOA) and is regulated differently

than ILECs. It is nonetheless qualified to receive funds from TUSF as an “eligible

telecommunications provider” (ETP), having met a lengthy list of obligations designated by

statute and rule. See Tex. Util. Code §§ 52.151–.156 (Public Utility Regulatory Act (PURA)

where necessary to frame the issues. See Texas Tel. Ass’n v. Public Util. Comm’n, No. 03-21- 00294-CV, __ S.W.3d __, 2022 WL 2374875, at *2–3 (Tex. App.—Austin June 30, 2022, no pet. h.) (TTA); see also Tex. R. App. P. 47.4 (providing for issuance of memorandum opinions). 2 Unlike AMA, the rural providers who filed the lawsuit we addressed in our recent TTA opinion are ILECs. See TTA, 2022 WL 2374875, at *3. 2 sections applicable to SPCOAs); 16 Tex. Admin. Code § 26.417 (2022) (Pub. Util. Comm’n of

Tex., Designation as Eligible Telecommunications Providers to Receive Texas Universal Service

Funds (TUSF)) (providing requirements for designation as ETP).

ILECs receive a certain amount of monetary support per customer from the

PUC as determined through a final order issued after a contested-case proceeding. See 16 Tex.

Admin. Code § 26.403(e)(1)–(3) (2022) (Pub. Util. Comm’n of Tex., Texas High Cost Universal

Service Plan (THCUSP)). Under the “identical support rule,” if a customer switches from an

ILEC to a qualified CLEC like AMA, the support follows the customer to the CLEC. See id.

§ 26.403(e)(4). Accordingly, AMA receives a fixed amount of per-line support when it provides

basic local telecommunications services to customers in supported high-cost rural exchanges.

Thus, the amount AMA receives per telecommunications line is not set through a contested case

but only by a PUC order of support for the ILEC, and AMA has no mechanism to affect the

amount of per-line support available in an area and must incorporate the per-line support

amounts in its business plan when making decisions about where to invest. According to AMA’s

undisputed evidence, it has invested tens of millions of dollars in infrastructure to become an

ETP and in reliance on the per-line support established by PUC order.

In August 2021, AMA filed against the PUC Parties a verified original petition

and application for declaratory judgment, mandamus relief, a temporary restraining order,

temporary and permanent injunctive relief, and compensation. AMA alleged that although

previously it had fully funded its obligations to AMA and similar entities at PUC-ordered levels

and maintained TUSF solvency, the PUC “recently broke from its precedent” and began paying

“pennies on the dollar from what it ordered and the Legislature required—to the tune of millions

of dollars.” AMA alleged that the PUC Parties implemented the underpayment scheme through

3 their “behind-the-scenes contract amendment with [their TUSF] administrator, Solix Inc., to

establish a hierarchy of payments that would be made to various program recipients from what

was left of the dwindling Fund.” AMA alleged that the PUC Parties’ actions were ultra vires and

constituted unconstitutional regulatory takings. They sought (1) compensation for the unlawful

takings; (2) a writ of mandamus ordering the PUC Parties to adequately fund all TUSF programs

and make all required disbursements; (3) temporary and permanent injunctive relief ordering the

PUC Parties to desist from operating under the contract amendment, to reinstate full and timely

distribution of support to which AMA is entitled under the PUC’s orders, and to ensure the

TUSF is fully funded; (4) declaratory judgments that the contract amendment is void because it

violates rulemaking requirements of the Administrative Procedure Act (APA), see Tex. Gov’t

Code § 2001.038, and AMA’s due-process rights, see Tex. Util. Code § 56.031 (“The

commission may revise the monthly per line support amounts to be made available from the

Texas High Cost Universal Service Plan after notice and an opportunity for hearing.”); and (5)

attorney’s fees under the Uniform Declaratory Judgments Act (UDJA), see Tex. Civ. Prac. &

Rem. Code § 37.009.

The PUC Parties filed a plea to the jurisdiction, and the trial court conducted a

joint hearing on the plea and AMA’s application for a temporary injunction on November 9,

2021. The trial court issued a temporary injunction on November 17 and denied the PUC

Parties’ plea to the jurisdiction the following day. The temporary injunction recited the trial

court’s findings that (1) without injunctive relief AMA would suffer irreparable harm, (2) AMA

was likely to succeed on the merits of its claims, and (3) injunctive relief would preserve the

“last actual peaceable uncontested status that preceded the controversy before the court.” It

ordered the PUC Parties, beginning December 1, 2021, to pay AMA “the full amount of financial

4 support that [it] is owed each month under the [applicable] rate orders [the PUC Parties] have

executed.” The PUC Parties perfected this interlocutory appeal of the trial court’s temporary

injunction and order denying their plea to the jurisdiction. See Tex. Civ. Prac. & Rem. Code

§ 51.014(a)(4), (8).

DISCUSSION

In this Court’s recent TTA case, the plaintiffs (Rural Providers) challenged the

same actions of the PUC Parties that AMA challenges here and brought the same types of claims

that AMA brings here—ultra vires, regulatory takings, and APA rulemaking.3 See Texas Tel.

Ass’n v. Public Util. Comm’n, No. 03-21-00294-CV, __ S.W.3d __, 2022 WL 2374875, at *6

(Tex. App.—Austin June 30, 2022, no pet. h.) (TTA). In that case, the trial court granted the

PUC Parties’ combined plea to the jurisdiction and cross-motion for summary judgment and

implicitly denied the Rural Providers’ summary-judgment motion by dismissing the case. This

Court reversed the trial court’s dismissal of the Rural Providers’ claims and rendered judgment

in their favor in the form of declaratory judgments and a permanent injunction. Id. at *27. We

also directed the trial court to issue a writ of mandamus ordering the Commissioners to “take

immediate action to fulfill their duties imposed by law to fully fund all TUSF programs and to

make all disbursements required by PURA and the Commission’s existing TUSF orders and

commitments.” Id. We remanded the Rural Providers’ claims for attorneys’ fees under the

UDJA and for a determination of their actual damages on their regulatory-takings claims. Id.

While the present case appears before us in a different procedural posture from

that in TTA, the application of legal principles to the pleaded and undisputed facts is

3 The TTA case involved one additional claim—violation of the Texas Open Meetings Act—that AMA has not raised. See TTA, 2022 WL 2374875, at *6, 23 n.20. 5 substantively the same and our analysis and holdings are largely dictated by that opinion. We

therefore dispense with a lengthy discussion of the PUC Parties’ arguments except where

necessary because of significant procedural or factual differences. In their first issue, the PUC

Parties contend that the trial court erred in denying their plea to the jurisdiction because AMA

failed to plead valid claims for ultra vires, regulatory takings, and relief under the UDJA and

APA. In their second issue, the PUC Parties argue that the trial court abused its discretion in

issuing the temporary injunction.

Plea to the jurisdiction

A plea to the jurisdiction is a dilatory plea seeking dismissal of a case for lack

of subject-matter jurisdiction. Harris County v. Sykes, 136 S.W.3d 635, 638 (Tex. 2004). We

review the trial court’s ruling on a plea to the jurisdiction de novo. Texas Dep’t of Parks &

Wildlife v. Miranda, 133 S.W.3d 217, 228 (Tex. 2004). The burden is on the plaintiff to

affirmatively demonstrate the trial court’s jurisdiction. Heckman v. Williamson County,

369 S.W.3d 137, 150 (Tex. 2012). When, as here, a plea to the jurisdiction challenges the

pleadings, we determine if the plaintiff has “alleged facts that affirmatively demonstrate the

court’s jurisdiction to hear the cause.” Miranda, 133 S.W.3d at 226; see also Houston Belt &

Terminal Ry. Co. v. City of Houston, 487 S.W.3d 154, 160 (Tex. 2016). When making this

determination, we construe the pleadings liberally in the plaintiff’s favor, taking factual

assertions as true and looking to the plaintiff’s intent. Miranda, 133 S.W.3d at 226. We may

also consider evidence that the parties have submitted that is relevant to the jurisdictional issues,

and we must do so when necessary to resolve those jurisdictional issues. Bland Indep. Sch. Dist.

v. Blue, 34 S.W.3d 547, 555 (Tex. 2000).

6 AMA challenges as ultra vires, and seeks declaratory relief for, the same actions

of the PUC Parties that the Rural Providers challenged in the TTA case: amending the Solix

contract to create a payment hierarchy, not fully funding the TUSF, and not following the PUC’s

own orders establishing monthly support amounts. In short, AMA contends that (1) “While the

Commission has discretion to decide how the TUSF should be funded, it has no discretion to

determine whether it will be funded,” and (2) “While the Commission has discretion to establish

rules calculating the support owed to a Fund participant, it has no discretion to determine if it

will then make those payments.” We agree with AMA for the reasons stated in this Court’s

TTA opinion: PURA and the PUC’s own orders and rules preclude the PUC Parties from

underfunding TUSF; the PUC Parties have a ministerial duty to pay the monthly support

amounts established by the PUC’s final orders; and relief is available under the UDJA to require

the PUC Parties to comply with applicable statutes, rules, and orders. We therefore hold that

AMA sufficiently pleaded viable ultra vires claims and a claim for relief under the UDJA. See

TTA, 2022 WL 2374875, at *14–15, 17.

Also as in the TTA case, AMA contends that the Solix contract amendment

constitutes a rule for purposes of the APA, triggering procedural and substantive requirements

with which the PUC did not comply. For the same reasons as stated in the TTA opinion, we

hold that AMA sufficiently pleaded a claim for relief under the APA because the Solix contract

amendment constitutes a rule under the APA, thus invoking the trial court’s jurisdiction over

AMA’s challenges thereto. See id. at *23. We likewise overrule the PUC Parties’ contention

that AMA failed to exhaust administrative remedies before bringing its APA Section

2001.038(a) challenge. See id. at *21 n.17 (concluding there was no merit to PUC Parties’

exhaustion argument because Rural Providers brought “no other APA challenge” besides their

7 Subsection 2001.038(a) rule challenge, which does not contain exhaustion requirement); see also

Tex. Gov’t Code § 2001.038(d) (“A court may render a declaratory judgment without regard to

whether the plaintiff requested the state agency to rule on the validity or applicability of the rule

in question.”).

As for AMA’s regulatory-takings claim, we conclude that AMA sufficiently

pleaded a viable claim. As explained in the TTA opinion, when an alleged taking involves

something between physical invasion and depriving the owner of all economically beneficial or

productive use of the property, courts consider the three Penn Central factors in determining

whether the regulatory action has gone “so far” as to require compensation. See TTA,

2022 WL 2374875, at *24 (citing Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124

(1978)). Those factors are (1) the economic impact of the regulation on the claimant, (2) the

extent to which the regulation has interfered with distinct investment-backed expectations, and

(3) the character of the governmental action. Id. (citing Penn Cent., 438 U.S. at 124).

The PUC Parties did not expressly argue in their plea that AMA had not

sufficiently pleaded facts supporting any of those factors but merely cited the Texas Supreme

Court’s opinion in Harris County Flood Control District v. Kerr, 499 S.W.3d 793, 799 (Tex.

2016), for the proposition that governmental “inaction cannot give rise to a taking.” We rejected

that argument in TTA because the Rural Providers, like AMA here, had not alleged mere

“inaction” by the PUC Parties but instead alleged affirmative regulatory action that had a

negative economic impact on them and interfered with their investment-backed expectations.

Id. at *25. In the TTA opinion, we held that the Rural Providers had established that the PUC

Parties took specific affirmative regulatory action—i.e., making a decision not to fund the TUSF

and implementing that decision by amending the Solix contract. Id. For the reasons explained in

8 TTA, and because our review of AMA’s petition leads us to conclude that AMA sufficiently

pleaded facts supporting each of the three Penn Central factors, we hold that AMA’s petition

stated a viable regulatory-takings claim.

We overrule the PUC Parties’ first issue.

Temporary injunction

In their second issue, the PUC Parties contend that the trial court abused

its discretion in granting AMA temporary injunctive relief. A temporary injunction is an

extraordinary remedy that does not issue as a matter of right. Walling v. Metcalfe, 863 S.W.2d

56, 57 (Tex. 1993). Although the party seeking an injunction is not required to establish that it

will prevail at trial, see id. at 58, it must plead and prove three elements: (1) a cause of action

against the defendant; (2) a probable right to the relief sought; and (3) a probable, imminent, and

irreparable injury in the interim if the injunction is not granted. Abbott v. Anti-Defamation

League Austin, Sw. & Texoma Regions, 610 S.W.3d 911, 916 (Tex. 2020) (citing Butnaru v.

Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002)). An injury is irreparable if the injured party

cannot be adequately compensated in damages or if the damages cannot be measured by any

certain pecuniary standard. Butnaru, 84 S.W.3d at 204. The purpose of a temporary injunction

is to preserve the status quo of the litigation’s subject matter pending a trial on the merits. Id.

We review an order granting a temporary injunction for a clear abuse of

discretion. Henry v. Cox, 520 S.W.3d 28, 33 (Tex. 2017). “We limit the scope of our review to

the validity of the order, without reviewing or deciding the underlying merits, and will not

disturb the order unless it is ‘so arbitrary that it exceed[s] the bounds of reasonable discretion.’”

Id. at 33–34 (quoting Butnaru, 84 S.W.3d at 204). The trial court does not abuse its discretion if

9 some evidence reasonably supports its ruling, even if the evidence is conflicting. Id. at 34;

Khaledi v. H.K. Global Trading, Ltd., 126 S.W.3d 273, 280 (Tex. App.—San Antonio 2003,

no pet.). When reviewing a temporary-injunction order, we view the evidence in the light

most favorable to the order, indulging every reasonable inference in its favor. Fox v. Tropical

Warehouses, Inc., 121 S.W.3d 853, 857 (Tex. App.—Fort Worth 2003, no pet.).

The PUC Parties do not challenge AMA’s evidence under any of the three prongs

of the temporary-injunction standard. Instead, they argue that the trial court abused its discretion

in issuing the temporary injunction because (1) by doing so it “inexplicably disregarded its own

jurisdictional analysis in the TTA case, in which the district court determined it lacked

jurisdiction,” making its temporary injunction arbitrary and unreasonable; (2) it thereby

prioritized payment to “a single fund recipient over similarly situated recipients,” which would

“create a new prioritization scheme for the TUSF” and “deplete the TUSF to the point of

insolvency within four months” and thus “fundamentally alter the status quo”; and (3) “equitable

considerations weigh strongly against” granting the temporary injunction because AMA waited

until two months after the district court issued its decisions in the TTA case before filing suit.

As to the PUC Parties’ first argument, this Court recently determined that the trial

court in the TTA case committed an error of law by dismissing the Rural Providers’ claims. See

TTA, 2022 WL 2374875, at *27. A trial court has no discretion to incorrectly analyze or apply

the law, see Anti-Defamation League, 610 S.W.3d at 916, and thus to the extent that the trial

court in TTA determined that it had no jurisdiction over claims that are substantively analogous

to those here, we have already concluded that it erred and thus its ruling is not determinative of a

ruling in this case.

10 We understand the PUC Parties’ second argument to be challenging whether

the trial court’s temporary injunction would, in fact, preserve the “status quo” pending trial on

the merits. In the context of temporary injunctions, the status quo is the “last actual, peaceable,

non-contested status which preceded the pending controversy.” Texas Educ. Agency v. Houston

Indep. Sch. Dist., 609 S.W.3d 569, 572 (Tex. App.—Austin 2020, order) (per curiam) (quotation

omitted), mandamus denied sub nom. In re Texas Educ. Agency, 619 S.W.3d 679 (Tex. 2021)

(orig. proceeding). The PUC Parties argue that their implementation of the prioritization scheme

for disbursements from the TUSF is the relevant “status quo” and that a new prioritization of

AMA over other providers—“giving one TUSF recipient unjustified and inexplicable priority

over other TUSF recipients”—would alter rather than preserve that status quo. However, “[i]f an

act of one party alters the relationship between that party and another, and the latter contests the

action, the status quo cannot be the relationship as it exists after the action.” Universal Health

Servs., Inc. v. Thompson, 24 S.W.3d 570, 577 (Tex. App.—Austin 2000, no pet.) (quoting

Benavides Indep. Sch. Dist. v. Guerra, 681 S.W.2d 246, 249 (Tex. App.—San Antonio 1984,

writ ref’d n.r.e.)). If it were otherwise, the granting of an injunction would be rendered

impossible. Id.

It was the PUC Parties’ decision to amend the Solix contract and refuse to fund

the TUSF that altered the parties’ relationship; this dispute arises from those allegedly ultra vires

actions. Therefore, the status quo is the relationship of the parties prior to the PUC Parties’

challenged actions. We reject the premise implicit in the PUC Parties’ contention that a party

may act unlawfully and then claim that the impacts of that unlawful behavior cannot be

remedied or mitigated pending a trial on the merits. We hold that the trial court’s temporary

injunction preserves the status quo by ordering the PUC Parties to continue making the TUSF

11 payments that AMA was receiving, and was entitled to receive, before the PUC Parties took

the challenged actions.

And finally, we consider the PUC Parties’ third argument: that the trial court

should not have granted AMA the “extraordinary equitable relief” of a temporary injunction

because AMA “slumbered” on its rights and did not act “diligently” to protect its interests. They

cite Rivercenter Associates v. Rivera, 858 S.W.2d 366, 367 (Tex. 1993) (“Equity aids the diligent

and not those who slumber on their rights.”), as support and contend that AMA “sat on the

sidelines until the trial court ruled in the Commission’s favor in the TTA Case” and “waited

more than two months after” the trial court’s decision in that case to file this lawsuit.

The PUC Parties have cited no authority requiring a party seeking a temporary

injunction to establish more than the three above requirements, and the Rivercenter case it cites

is distinguishable because it concerned not a temporary injunction but the equitable remedy of

mandamus in the context of an untimely motion to quash a jury demand. See id. Moreover, the

trial court heard evidence that AMA (1) waited to file its lawsuit because it was communicating

directly with the PUC in an attempt to remedy the underpayment; (2) was aware that the

TTA parties had filed a petition for rulemaking that might remedy the shortfall; and (3) was

communicating with “dozens” of legislators, “pleading for them to . . . take the reins on this issue

and resolve it.” When it became clear to AMA that no remedy would be forthcoming, and its

financial situation became “desperate,” it filed this lawsuit. We conclude that the trial court did

not abuse its discretion in granting AMA temporary-injunctive relief and overrule the PUC

Parties’ second issue.

12 CONCLUSION

We affirm the trial court’s denial of appellants’ plea to the jurisdiction and its

issuance of a temporary injunction in AMA’s favor.

__________________________________________ Thomas J. Baker, Justice

Before Justices Goodwin, Baker, and Triana

Affirmed

Filed: August 10, 2022