Qwest Corp. v. Montana Department of Public Service Regulation , 340 Mont. 309 ( 2007 )

December 19 2007
05-035
IN THE SUPREME COURT OF THE STATE OF MONTANA
2007 MT 350QWEST CORPORATION,
Petitioner and Appellee,
v.
MONTANA DEPARTMENT OF PUBLIC SERVICE
REGULATION, MONTANA PUBLIC SERVICE
COMMISSION,
Respondent and Appellant.
APPEAL FROM: District Court of the First Judicial District,
In and For the County of Lewis and Clark, Cause No. CDV 2003-464
Honorable Thomas C. Honzel, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Monica Tranel, Robin A. McHugh, Special Assistant Attorneys General,
Helena, Montana
For Appellee:
John Alke, Hughes, Kellner, Sullivan & Alke, Helena, Montana
Submitted on Briefs: December 29, 2005
Decided: December 19, 2007
Filed:
__________________________________________
Clerk
Justice James C. Nelson delivered the Opinion of the Court.
¶1 Qwest Corporation (Qwest) petitioned the District Court for the First Judicial
District, Lewis and Clark County, to review two orders issued by the Montana Public
Service Commission (the PSC) requiring Qwest to file information substantiating the
accuracy of its rates. The District Court found in Qwest’s favor, vacated the PSC’s
orders and remanded the matter to the PSC. The PSC appeals. We reverse.
¶2 The PSC presents the following issues on appeal:
¶3 1. Whether the PSC’s actions were ripe for review by the District Court.
¶4 2. Whether the investigation undertaken by the PSC in this case was subject to
review under § 2-4-701, MCA.
¶5 3. Whether the PSC may investigate utilities in any manner necessary to
effectuate its statutory duties.
¶6 4. Whether the PSC’s investigation of Qwest violated the PSC’s administrative
rules.
¶7 Because we reverse the decision of the District Court and hold that this case is not
ripe for judicial review, we do not address Issue 4 as it is now moot.
Factual and Procedural Background
¶8 Qwest is a regulated public utility pursuant to § 69-3-101, MCA. It offers
regulated telecommunications services as defined at § 69-3-803, MCA. The PSC is the
state agency that administers Montana laws governing rates and services of public
utilities operating in Montana, such as Qwest. Pursuant to § 69-3-203, MCA, Qwest
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must file an annual report with the PSC containing information about Qwest’s annual
revenues and earnings.
¶9 On March 14, 2003, PSC issued a “Notice of Investigation” to determine whether
the rates charged by Qwest are “reasonable and just” pursuant to § 69-3-201, MCA. The
PSC indicated in the notice that revenues earned by Qwest since 2001 may be in excess
of its authorized rate of return. Qwest did not respond to the notice. The PSC issued its
“Second Notice of Investigation and Request for Information” on April 24, 2003,
directing Qwest to state whether its 2001 annual report contained accurate information,
and if it did not, directing Qwest to demonstrate why by providing information in a form
that would meet the minimum filing requirements contained in Admin. R. M. 38.5.2803
through 38.5.2820.
¶10 Qwest responded to the second notice on May 22, 2003, stating that it could not
represent to the PSC that the information contained in its 2001 Annual Report was
accurate because Qwest was currently undergoing an external audit. Qwest pointed out
that the PSC “seems to seek a specific correlation between [the information in its annual
report] and the detailed cost of service information which a party seeking a rate change
would file in compliance with the [PSC’s] minimum filing standards.” Qwest also
pointed out that using 2001 financial data to prepare a rate case filing for 2003 violated
the PSC’s own administrative rules establishing rate case filing requirements.
¶11 On June 16, 2003, the PSC issued its Order No. 6493 directing Qwest to submit
the information requested for the PSC’s investigation. In response, Qwest filed a Motion
for Reconsideration stating that the PSC’s order was unlawful because Qwest’s current
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rates were established by previous orders of the PSC and were, therefore, prima facie
lawful; because the PSC had the burden to prove that Qwest’s rates were unjust and
unreasonable and the investigation attempted to shift that burden to Qwest; and because
ordering Qwest to use 2001 financial data in a 2003 rate case violated the PSC’s own
administrative rules. The PSC denied Qwest’s Motion for Reconsideration in its Order
No. 6493a issued July 10, 2003.
¶12 On August 6, 2003, Qwest petitioned for judicial review under § 2-4-701, MCA
(Cause No. CDV 2003-464). In its petition, Qwest asserted that its current rates had
previously been approved by the PSC and that the PSC’s orders unlawfully required
Qwest to file a rate case reproving the reasonableness of its existing rates. Qwest also
asserted that the PSC’s investigation was an unlawful attempt to shift the burden of proof
in the rate case to Qwest. That same day, the PSC filed a complaint in the District Court
seeking to compel Qwest’s compliance and requesting that the court assess civil fines and
penalties against Qwest for failing to comply with the PSC’s orders (Cause No. BDV
2003-465).
¶13 The PSC moved to consolidate the actions and Qwest moved to stay BDV 2003-
465 (the PSC’s complaint proceeding) pending the outcome of CDV 2003-464 (the
proceeding on Qwest’s petition for judicial review). The District Court denied the PSC’s
motion to consolidate and granted Qwest’s motion for a stay of the PSC’s complaint
proceeding pending resolution of Qwest’s petition for judicial review.
¶14 In a Memorandum and Order issued October 14, 2004, the District Court
determined that the issues presented were ripe for review. The court also determined that
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the PSC’s orders unlawfully imposed a rate case filing requirement upon Qwest in
violation of Montana statute and the PSC’s own administrative rules. The District Court
remanded to the PSC and the PSC appeals.
Standard of Review
¶15 When reviewing an agency decision, we apply the same standard as did the district
court. Montana Power Co. v. Public Service Com’n, 2001 MT 102, ¶ 18, 305 Mont. 260,
¶ 18, 26 P.3d 91, ¶ 18 (citing Synek v. State Compensation Ins. Fund, 272 Mont. 246,
250, 900 P.2d 884, 886 (1995)). Under § 2-4-704(2), MCA, a reviewing court:
may not substitute its judgment for that of the agency as to the weight of
the evidence on questions of fact. The court may affirm the decision of the
agency or remand the case for further proceedings. The court may reverse
or modify the decision if substantial rights of the appellant have been
prejudiced because:
(a) the administrative findings, inferences, conclusions, or decisions
are:
(i) in violation of constitutional or statutory provisions;
(ii) in excess of the statutory authority of the agency;
(iii) made upon unlawful procedure;
(iv) affected by other error of law;
(v) clearly erroneous in view of the reliable, probative, and
substantial evidence on the whole record;
(vi) arbitrary or capricious or characterized by abuse of discretion or
clearly unwarranted exercise of discretion . . . .
In addition, questions of law are reviewed to determine if the agency’s interpretation of
the law is correct. Ruby Mountain Trust v. DOR, 2000 MT 166, ¶ 13, 300 Mont. 297,
¶ 13, 3 P.3d 654, ¶ 13 (citing Steer, Inc. v. Department. of Revenue, 245 Mont. 470, 474,
803 P.2d 601, 603 (1990)).
Issue 1.
¶16 Whether the PSC’s actions were ripe for review by the District Court.
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¶17 The PSC asserts that the District Court adjudicated issues that the PSC neither
decided at the agency level nor argued to the District Court. Hence, the PSC argues that
the issues adjudicated by the court were not ripe for review.
¶18 Qwest argues on the other hand that the PSC’s orders are orders of compulsion,
issued in a contested case proceeding which the District Court determined violated
Montana law. Qwest asserts that the legal issues raised by the orders are not hypothetical
or abstract as the PSC has already filed an original action in the District Court against
Qwest seeking to enforce the challenged orders through mandatory injunction and the
imposition of civil fines. Consequently, Qwest argues that because it has no other
adequate remedy, the PSC’s orders are ripe for review.
¶19 The ripeness doctrine is “a principle of law, grounded in the federal constitution as
well as in judicial prudence, that requires an actual, present controversy, and therefore a
court will not act when the legal issue raised is only hypothetical or the existence of a
controversy merely speculative.” Montana Power Co., ¶ 32 (citing Pearson v. Virginia
City Ranches Ass’n, 2000 MT 12, ¶ 30, 298 Mont. 52, ¶ 30, 993 P.2d 688, ¶ 30; Portman
v. County of Santa Clara, 995 F.2d 898, 902-03 (9th Cir. 1993)). “[T]he ripeness
requirement is designed ‘to prevent the courts, through avoidance of premature
adjudication, from entangling themselves in abstract disagreements over administrative
policies, and also to protect the agencies from judicial interference until an administrative
decision has been formalized and its effects felt in a concrete way by the challenging
parties.’ ” Ohio Forestry Association v. Sierra Club, 523 U.S. 726, 732-33, 118 S. Ct.
61665, 1670 (1998) (quoting Abbott Laboratories v. Gardner, 387 U.S. 136, 148-49, 87
S. Ct. 1507, 1515 (1967)).
¶20 Furthermore, in deciding whether an agency’s decision is ripe for judicial review,
it is necessary to examine “both the ‘fitness of the issues for judicial decision’ and the
‘hardship to the parties of withholding court consideration.’ ” Ohio Forestry, 523 U.S. at
733, 118 S. Ct. at 1670. Thus, a reviewing court “must consider: (1) whether delayed
review would cause hardship to the plaintiffs; (2) whether judicial intervention would
inappropriately interfere with further administrative action; and (3) whether the courts
would benefit from further factual development of the issues presented.” Ohio Forestry,
523 U.S. at 733, 118 S. Ct. at 1670.
¶21 Applying these three factors from Ohio Forestry to the present case, we conclude
that the PSC’s actions are not ripe for review. First, Qwest would not suffer any hardship
if judicial review is not taken at this juncture. Contrary to Qwest’s assertions, the PSC
did not demand that a rate case be initiated. The PSC was simply seeking information as
to the accuracy of Qwest’s 2001 annual report. Qwest is obligated to provide the
information requested and nothing more. What the PSC might do with the information
requested from Qwest is not an appropriate matter for review. An agency’s decision is
not ripe for review if no legal consequences, rights or duties flow from an agency’s
actions because those actions are merely a step that could lead to a recommended change
of the status quo. Ecology Center v. United States Forest Service, 192 F.3d 922, 925 (9th
Cir. 1999); see also Western Seafood Co. v. City of Freeport, 346 F. Supp. 2d 892,
902-03 (S.D. Tex. 2004) (holding that administrative agency’s application for a permit to
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develop a marina not ripe for review because claim of harm was only speculative that
permit might be used in the future to accomplish an unlawful purpose).
¶22 Moreover, judicial review of a preliminary step that has no binding legal
consequences is not available even where the initiation of proceedings is serious and may
have severe consequences. Ewing v. Mytinger & Casselberry, Inc., 339 U.S. 594, 600,
70 S. Ct. 870, 873 (1950). In order to be final and thereby subject to review, agency
action must mark “the consummation” of the agency’s decision making process.
Whitman v. American Trucking Associations, 531 U.S. 457, 478, 121 S. Ct. 903, 915
(2001) (citing Bennett v. Spear, 520 U.S. 154, 177-78, 117 S. Ct. 1154, 1168 (1997)).
¶23 In the present case, there are no irremediable adverse consequences that flow from
the PSC’s investigation, thus we conclude that delayed judicial review will not cause a
hardship to Qwest.
¶24 Second, judicial intervention at this juncture would inappropriately interfere with
further administrative action by the PSC. One of the basic purposes of the PSC is to
investigate public utilities, however, an investigation is not a final agency action. While
the PSC could do several things with the information it requested, including negotiating
with Qwest to reach a mutually agreeable solution; initiating a contested case proceeding;
or simply doing nothing, it is not appropriate for courts to speculate on future actions or
to interfere with the process of obtaining the information. When premature review would
deny an agency the opportunity to apply its expertise, courts should decline review. Ohio
Forestry, 523 U.S. at 735, 118 S. Ct. at 1671. Thus, we conclude that judicial
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interference at this investigatory stage would frustrate the PSC’s ability to review the
information and to make decisions about the best possible course of action.
¶25 Third, there is no specific factual record before this Court. The only action taken
by the PSC was an initiation of an investigation, yet the District Court reviewed issues on
which the PSC had not rendered any decision. Judicial appraisal of agency action stands
on surer footing when it takes place in the context of a specific factual record. Toilet
Goods Association v. Gardner, 387 U.S 158, 164, 87 S. Ct. 1520, 1524 (1967).
Moreover, depending on the PSC’s actions, review in this case may turn out to be
unnecessary. Certainly both the District Court and this Court would benefit from further
factual development of the issues presented.
¶26 Accordingly, we hold that the PSC’s actions were not ripe for review by the
District Court.
Issue 2.
¶27 Whether the investigation undertaken by the PSC in this case was subject to
review under § 2-4-701, MCA.
¶28 Section 2-4-701, MCA, provides:
Immediate review of agency action. A preliminary, procedural, or
intermediate agency action or ruling is immediately reviewable if review of
the final agency decision would not provide an adequate remedy.
¶29 The PSC argues on appeal that the District Court’s review of this action under
§ 2-4-701, MCA, was erroneous because the PSC’s request for information was not
necessarily a prelude to further action by the PSC. In addition, the PSC contends that,
even if a final agency action were pending, the District Court erred by not making any
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findings that review of a final decision would not provide Qwest with an adequate
remedy.
¶30 Review under § 2-4-701, MCA, is available when a determination is made that a
final agency decision will not provide an adequate remedy justifying immediate review.
Shoemaker v. Denke, 2004 MT 11, ¶ 30, 319 Mont. 238, ¶ 30, 84 P.3d 4, ¶ 30 (citing
Gilpin v. State, 249 Mont. 37, 39, 812 P.2d 1265, 1266-67 (1991)). When an agency has
not adjudicated the issues raised on appeal, there is no final agency action upon which a
district court can assume jurisdiction. Marble v. Dept. of Health & Human Serv., 2000
MT 240, ¶ 28, 301 Mont. 373, ¶ 28, 9 P.3d 617, ¶ 28.
¶31 Qwest’s justification for seeking intermediate review under § 2-4-701, MCA, was
that if it did not challenge the lawfulness of the PSC’s orders, Qwest would eventually
suffer harm. However, Qwest did not allege any concrete harm. Instead, Qwest’s
allegation of harm presumes a rate case that would reduce Qwest’s rates. According to
the PSC, this potential financial harm would actually correct a situation in which Qwest
is collecting revenues above what it is authorized to collect and would not actually
“harm” Qwest.
¶32 Judicial review under § 2-4-701, MCA, is not justified where the only allegation
of harm is speculation that further agency action may take place, and if it takes place, it
may have legal consequences. Courts may intervene in agency process only when a
specific final agency action has an actual or immediately threatened effect. Lujan v.
National Wildlife Federation, 497 U.S. 871, 894, 110 S. Ct. 3177, 3191 (1990) (citing
Toilet Goods, 387 U.S. at 164-66, 87 S. Ct. at 1524-26).
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¶33 Accordingly, we hold that the investigation undertaken by the PSC in this case
was not subject to review under § 2-4-701, MCA.
Issue 3.
¶34 Whether the PSC may investigate utilities in any manner necessary to effectuate its
statutory duties.
¶35 The District Court concluded that although the PSC possesses the power to request
information from Qwest, it may not force Qwest to do so “in this manner,” i.e., by
requiring Qwest to provide information “in the form that would meet the minimum filing
requirements contained in ARM 38.5.2803 through 38.5.2820.” The court determined
that § 69-3-110(2), MCA, establishes that Qwest’s rates are prima facie lawful and any
party that wishes to challenge the existing rates must carry the burden of proof. Here, the
court concluded that the PSC’s orders were unlawful because they attempted to reverse
the burden of proof. The District Court stated that “[i]f the PSC desires to show Qwest’s
rates are unjust and unreasonable, the PSC may collect the information it needs and carry
its burden forward” (emphasis added). However, that is precisely what the PSC is trying
to do in this case, “collect the information it needs.”
¶36 The PSC argues that the District Court’s conclusions that the PSC may not ask for
information from Qwest “in this manner” is premised on the court’s acceptance of
Qwest’s argument that by requiring Qwest to provide the information in the form that
would meet the minimum filing requirements contained in Admin. R. M. 38.5.2803
through 38.5.2820, the PSC was forcing Qwest to file a rate case, and that the PSC
intended to use the information in a manner that would be unlawful.
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¶37 Qwest is reading too much into the PSC’s request. While the cited rules are
entitled “Minimum Rate Case Filing Requirements for Telephone Utilities,” that does not
mean that because the PSC ordered Qwest to file information in conformity with those
rules, the PSC was forcing Qwest to file a rate case. On the contrary, the PSC’s enabling
statutes authorize the PSC to obtain information from utilities in any manner necessary to
perform its duties. To that end, § 69-3-106(1), MCA, provides:
The [PSC] shall have authority to inquire into the management of the
business of all public utilities, shall keep itself informed as to the manner
and method in which the same is conducted, and shall have the right to
obtain from any public utility all necessary information to enable the [PSC]
to perform its duties. [Emphasis added.]
And, § 69-3-203(2), MCA, provides:
The [annual] reports must be in the form prescribed by the [PSC]
and must contain all the information that the [PSC] considers necessary for
the proper performance of its duties. The [PSC] may at any time request
information omitted from the reports or not provided for in the reports
whenever, in the judgment of the [PSC], the information is necessary.
[Emphasis added.]
¶38 Moreover, t h i s Court has stated that administrative agencies have broad
investigatory power in Montana and an agency should not be denied access to
information necessary to perform its statutory investigative duties. Montana Human
Rights Div. v. City of Billings, 199 Mont. 434, 444-45, 649 P.2d 1283, 1288-89 (1982).
¶39 Accordingly, we hold that the PSC’s statutory duty to investigate utilities may not
be hindered by limiting its ability to obtain information in a specific manner.
¶40 Reversed.
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/S/ JAMES C. NELSON
We Concur:
/S/ W. WILLIAM LEAPHART
/S/ PATRICIA COTTER
/S/ JOHN WARNER
/S/ JIM RICE
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