Southern Bell Telephone & Telegraph Co. v. Louisiana Public Service Commission , 15 F. Supp. 1057 ( 1936 )

BORAH, District Judge.

Plaintiff, a New York corporation, conducting a general telephone business in the state of Louisiana, brings this its bill of complaint against the Louisiana Public Service Commission and the individual members thereof to enjoin the defendants from enforcing or attempting to enforce tile provisions of Act No. 20 of the Second Extraordinary Session of the Legislature of Louisiana for the year 1934 and to enjoin the enforcement of two certain orders entered in the cause entitled “Louisiana Public Service Commission v. Southern Bell Telephone and Telegraph Company, Inc., No. 2428 of the docket of the Louisiana Public Service Commission,” which orders direct plaintiff to pay to the commission the sums of $9,128.63 and $4,097.66, and which orders it is alleged were issued under color of authority claimed to be granted by the provisions of the aforesaid act authorizing the imposition of the cost of investigation upon the utility being investigated.

Upon the filing of the hill a temporary restraining order was issued without notice restraining the enforcement of the slat ule and orders against the plaintiff because of the danger of irreparable injury being'done to plaintiff before the matter could be heard on notice. The cause is now pending before a District Court of three judges which was organized and convened to hear plaintiff’s application for an interlocutory injunction.

The verified pleadings and affidavits filed herein show that • plaintiff owns and operates a telephone system in the state of Louisiana furnishing intrastate and interstate telephone service, both' toll and exchange, to the general public; that in order to properly conduct its business it has acquired and does own and use real estate and personal property in the state valued at more than $20,000,000, which property consists of buildings, poles, wires, cables, conduits, manholes, switchboards, and other telephone equipment, the vast majority of which could not be moved out of the state, and if required to be moved would be practically worthless except for its junk value.

In addition, plaintiff has connecting company contracts with forty-two individuals, copartnerships, and/or corporations operating telephone' plants and furnishing telephone service, both toll and exchange, in the state of Louisiana. Of these forty-two contracts, twenty-seven are with individuals and/or copartnerships; the remaining fifteen cover telephone companies operated by corporations. Of the twenty-seven individuals or copartnerships, eleven own toll lines of their own and the balance connect directly with plaintiff’s toll lines; and the character and kind of telephone service, exchange and toll, furnished by the individuals and co-partnerships, is the same character and kind of telephone service, both toll and exchange, as is furnished by plaintiff in the state of Louisiana.

A history of the facts which gave rise to this controversy reveals that during the latter part of the year 1934 the Louisiana Public Service Commission issued an order "requiring plaintiff to show cause why the telephone exchange rates in various towns and cities in the state of Louisiana should not be reduced; hearings were had in this proceeding which is known as case No. 2331 of the docket of the commission; and on March 2, 1935, an order was entered reducing the telephone exchange rates. Plaintiff promptly filed a suit in the state court contesting the order, and the cause was set down for hearing on May 25, 1935, and thereafter continued .to August 8, 1935, at the request of the commission in order that it might be afforded an opportunity to offer certain evidence to rebut the evidence of plaintiff. In due course judgment was rendered annulling and setting aside the order, whereupon an appeal was taken by defendants to the Supreme Court of Louisiana where the matter is now pending.

Prior to the date of the' filing of its suit in the state court contesting, the order of March 2, 1935, plaintiff without admitting the constitutionality of Act No. 20 of the Second Extraordinary Session of 1934 or the legality of the orders rendered under said act paid to the commission the sum of $30,000 for the alleged purpose of being used in payment of expert fees and other matters. These payments were made before the decision of the case as a matter of policy on account of the insistent demands made upon plaintiff by the commission and its then attorney, and not because plaintiff believed they were due or collectible or that the act or the orders were constitutional, and upon making the last payment the defendants were duly informed that its orders directing plaintiff to pay money to it were null and void and that in the future plaintiff would make no more payments to the commission.

After its suit was filed in the state court and after the first hearing was had and the plaintiff had been put to its proof .to show that the order reducing the rates was null, void, and confiscatory, the commission issued a citation directed to plaintiff ordering it to appear before the commission at such time and place as may hereafter be designated, and then and there show cause why its rates, charges, and practices for telephone service within the state should not be further investigated to determine the latest operating, results within the state of Louisiana, etc. This order was issued on May 31, 1935, in proceeding No. 2428 of the docket of the commission, and the unchallenged, proof shows that it was issued for the purpose of obtaining information "which defendant thought would be helpful to it in defending its rate order, and that it then proceeded to employ experts and accountants and .has subsequently sought to make plaintiff pay for these services as evidenced by the hereinafter referred to orders, though no services were ever had before the commission in this proceeding.

On September 14, 1935, without any notice or hearing being afforded to plaintiff, the commission rendered the following order:

“The Louisiana Public Service Commission having instituted and now being engaged in the above-styled investigation of the rates, charges and practices of the Southern Bell Telephone and Telegraph Company within the State of Louisiana, and the said investigation requiring the services of counsel, engineers, accountants and technical advisers, and Act No. 20 of the Second Extraordinary Session of the Legislature of Louisiana for 1934 requiring public utilities to pay the costs incurred in such investigations, it is

“Ordered, that the said Southern Bell Telephone and Telegraph Company, inc., be and it is hereby directed to immediately pay to the Louisiana Public Service Commission the sum of nine thousand, one hundred and twenty-eight dollars and sixty-tliree cents ($9,128.63) covering balance due in connection with said expenses incurred during the months of June, July and August, 1935, as per detailed statement attached hereto, properly certified.”

Divers amendatory orders thereafter issued from time to time extending the effective date of the order to June 25, 1936. On May 28, 1936, the commission again without notice or hearing 1:o plaintiff rendered order No. 1725, which is couched in language identical with that found in order No. 1654, save as to the mandatory provision thereof, and which provides:

“Ordered, that the said Southern Bell Telephone and Telegraph Company, Inc., be and it is hereby directed to pay on or before June 25, 1936, to the Louisiana Public Service Commission the sum of four thousand and ninety-seven dollars and sixty-six cents ($4,097.66) covering assessments due in connection with said expenses incurred during the period from September 1, 1935 to May 1, 1936, as per detailed statements attached hereto, properly certified, said sums being in addition to amount covered by the Commission’s Order No. 1654 of September 14, 1935.”

The bill charges that these two orders directing plaintiff to pay to it the sums of $9,128.63 and $4,097.66 were issued under color of authority claimed to be granted by the provisions of Act No. 20 of the Second Extraordinary Session of the Legislature of Louisiana for the year 1934, and asserts that said act as well as the orders are respectively violative of the equal protection and due process clauses of the Fourteenth Amendment. It is further claimed that the statute is violative of section 16, article 3 of the Constitution of Louisiana for the year 1921.

Plaintiff contends that the statute here under review imposes a burden oh corporations that is not imposed on individuals or copartnerships doing a like business, and to thus place a different and more onerous burden upon plaintiff because it is a corporation for the privilege of doing business in Louisiana is a denial to it of the equal protection of the laws guaranteed to it by the Fourteenth Amendment.

Act No. 20 of the Second Extraordinary Session of the Legislature of Louisiana for the year 1934 is set forth in its entirety in article 17 of the petition. The object of the act, as expressed by the title, is to impose upon “public service and public utilities corporations” the burden of paying the expenses incurred by the Louisiana ■ Public Service Commission in examining the affairs of such corporations to enable the commission to fix and regulate the rates of such corporations; to provide for the employment and fees of engineers, consultants, etc., necessary to conduct such examinations, and payment thereof by the corporation examined; to provide the “kind of corporations which shall be governed by this Act.” Section 1 provides that whenever the commission shall make an examination of the affairs of any “public service or public utilities corporation” for the purpose of fixing and regulating rates or services, all expenses incurred by the commission shall be paid by “the corporation” so examined. Section 2 provides that it is the duty of the commission “to certify to the corporation” being examined the amount of expenses incurred, whereupon “the corporation” shall pay the amount so certified to such person or persons thus employed. Section 3 provides that should “any company” fail or refuse to pay the amount of expenses certified after fifteen days or after final judgment where a rule has been taken to test the reasonableness and legality of the amount of expenses certified, then the commission “may revoke the certificate of authority of such company to do business until the full amount of, same is paid.” Section 4 provides: “That the provisions of this Act shall apply to all kinds of public service and public utilities corporations doing business in this State, or applying for admission to do business, whose rates or service is, in whole or in part, subject to the regulation of the Louisiana Public Service Commission.”

It would violate every principle of statutory construction to hold that this plain language really means that natural persons are within the intendment of the act. To attribute siich a secret, hidden, and indirect purpose to those who passed the statute is, in effect, to charge the lawmakers with saying one thing and meaning another. Nothing said in Van Dyke v. Geary, 244 U.S. 39, 37 S.Ct. 483, 61 L.Ed. 973, justifies such a pronouncement. .Nor would a construction that the act applies to natural persons save the act from unconstitutionality. There would still be a penalty enforceable against corporations and no penalty enforceable against natural persons because the latter possess no certificate of authority that could be revoked. Furthermore, a construction that this act applies to natural persons as well as corporations would be to construe the act to include a' subj ect not in the title in violation of section 16 of article 3 of the Constitution of Louisiana for the year 1921. Harman & Stringfellow v. Legrande, 151 La. 253, 260, 91 So. 726; Verrett v. Savoie, 174 La. 844, 141 So. 854.

Holding as we do that the act applies solely to public service and public utility corporations, it follows that an unjust burden is placed upon plaintiff because it is a corporation, which burden is not placed upon natural persons engaged in the same identical business. As thus construed and applied, the statute violates the equal protection clause of the Fourteenth Amendment.

Even if the statute was constitutional, there is no power granted by said act to the commission to render any orders directing plaintiff to pay to it any sum of money whatsoever nor is any such power conferred upon it by the constitution and statutes of the state, consequently their enforcement would deprive plaintiff of property without due process of law. Louisiana Public Service Commission v. Morgan’s Louisiana & Texas Railroad & Steamship Co., 264 U.S. 393, 44 S.Ct. 358, 68 L.Ed. 756.

The constitutional invalidity of the orders in controversy should be decreed for the further reason that the uncontroverted facts show that said demand for payment is for work which was not done for the purpose of being used in any investigation being made by the commission in proceedings pending before it, but was in fact done, if done at all, for the purpose of aiding the commission in sustaining in court an order already entered after investigation reducing the rates of plaintiff; that the amount demanded is unreasonable and excessive and includes sums to be paid for the benefit of others than the accountants and experts employed by the commission and includes Sums greater than are to be actually received by- the accountants and experts who have done the actual work involved.

In view of the foregoing, we deem it- unnecessary to consider the further grounds of attack.

Let a decree be prepared and presented in accordance herewith.