DA 13-0830

IN THE SUPREME COURT OF THE STATE OF MONTANA

2014 MT 275

BILLINGS YELLOW CAB, LLC, a

Montana Limited Liability Company,

 Petitioner and Appellant,

 v.

STATE OF MONTANA, on behalf of the

Department of Public Service Regulation

before the Public Service Commission, an

Administrative and Regulatory Agency of

the State of Montana,

 Defendant and Appellee.

APPEAL FROM: District Court of the Thirteenth Judicial District,

In and For the County of Yellowstone, Cause No. DV 12-1123

Honorable Susan P. Watters, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Robert L. Stephens, Jr.; Southside Law Center; Billings, Montana

For Appellee:

Justin W. Kraske, Laura J. Farkas; Montana Public Service Commission; 

Helena, Montana

Submitted on Briefs: August 27, 2014

 Decided: October 14, 2014

Filed:

Clerk

October 14 2014
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Justice Jim Rice delivered the Opinion of the Court. 

¶1 Billings Yellow Cab, LLC (Yellow Cab) appeals from the order of the Thirteenth 

Judicial District Court, Yellowstone County, denying its constitutional claims for relief,

affirming the Public Service Commission’s (PSC) denial of its application for a

certificate of public convenience and necessity, and affirming the PSC’s decision to 

exclude its proposed Exhibit 2. We affirm, restating Yellow Cab’s issues as follows:

¶2 1. Did the District Court err by concluding that the PSC’s denial of a PCN 

certificate did not constitute an unconstitutional taking of Yellow Cab’s property or 

violate equal protection?

¶3 2. Did the District Court err by affirming the denial of Yellow Cab’s application 

for a certificate of public convenience and necessity?

¶4 3. Did the District Court err by affirming the PSC’s exclusion of Yellow Cab’s 

Exhibit 2? 

FACTUAL AND PROCEDURAL BACKGROUND

¶5 In 2011, Legislature enacted Senate Bill 140 (SB 140), codified as § 69-12-328, 

MCA, which directed the PSC to issue a certificate of public convenience and necessity 

(PCN certificate) to any carrier who, during the one-year period prior to January 1, 2011, 

had provided charter passenger service, utilized vehicles designed to carry more than 10 

passengers, and had obtained a U.S. Department of Transportation (DOT) number as 

provided in 49 CFR 390.19. This statutory mechanism effectively “grandfathered”

qualifying carriers already operating a charter service, allowing them to continue 

conducting their business. A carrier not grandfathered under SB 140 was instead

required to apply to the PSC and demonstrate that public convenience and necessity 
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required authorization of the proposed service under governing statutes. Sections

69-12-321 et seq., MCA.

¶6 Beginning in 2009, Yellow Cab had provided charter services as an unregulated 

business from its offices in Billings to locations statewide. To conduct this portion of its 

business, Yellow Cab purchased several passenger vehicles capable of transporting 10 to 

26 passengers. The charter service generated approximately 25% of Yellow Cab’s 

revenue. After SB 140 was enacted, Yellow Cab applied to the PSC for issuance of a 

PCN certificate as a grandfathered entity. However, because Yellow Cab had not been 

issued a DOT number during the year prior to January 1, 2011, its application was denied 

by the PSC as failing to satisfy the requirements of the statute. 

¶7 Yellow Cab did not petition for judicial review of the PSC’s denial of its 

application, but instead filed a second application for a PCN certificate as a Class B 

carrier pursuant to §§ 69-12-321 et seq., MCA. Other carriers protested the application, 

and the PSC conducted a public hearing on May 2, 2012, during which Yellow Cab 

offered witness testimony in support of its application. Five businesses engaged in 

passenger charter service appeared to oppose the application. On June 27, 2012, in a 3-2 

vote, the PSC issued a Final Order denying the application, reasoning that Yellow Cab 

had failed to meet its burden of establishing public need for an additional statewide 

charter service carrier and that existing carriers were unable or unwilling to meet that 

need. Commissioner Travis Kavulla authored a concurring opinion, stating that public 

convenience and necessity regulation “has the practical effect of conferring a veto power 
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to the very persons who would face competition,” and suggesting the law was 

unconstitutional as unrelated to a legitimate government interest. Yellow Cab filed a 

Petition for Judicial Review in the Thirteenth Judicial Court, challenging the PSC’s 

denial and the constitutionality of the grandfather provisions of SB 140. The District 

Court affirmed the ruling of the PSC. Yellow Cab appeals. 

STANDARD OF REVIEW

¶8 This Court exercises plenary review over questions of constitutional law. City of 

Billings v. Albert, 2009 MT 63, ¶ 11, 349 Mont. 400, 203 P.3d 828. Statutes are 

presumed to be constitutional, and any person challenging the constitutionality of a 

statute bears the burden of proving it unconstitutional. Albert, ¶ 11. When reviewing a 

district court’s decision regarding the review of an agency action, the Montana 

Administrative Procedure Act governs this Court’s review, and the scope of review is 

limited. Citizens Awareness Network v. Mont. Bd. of Envtl. Rev., 2010 MT 10, ¶ 13, 355 

Mont. 60, 227 P.3d 583. The same standards used by the district court are applied when 

reviewing a district court order affirming or reversing an agency decision. Ostergren v. 

Dep’t of Revenue, 2004 MT 30, ¶ 11, 319 Mont. 405, 85 P.3d 738.

¶9 In contested cases, district courts review administrative decisions to determine 

whether the findings of fact are clearly erroneous and whether the agency determined the 

law correctly, and a district court’s decision is reviewed the same way. Ray v. Mont. 

Tech of the Univ. of Mont., 2007 MT 21, ¶ 24, 335 Mont. 367, 152 P.3d 122; Cenex 

Pipeline LLC v. Fly Creek Angus, Inc., 1998 MT 334, ¶ 22, 292 Mont. 300, 971 P.2d 781. 
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If a finding is not supported by substantial evidence, the court misapprehended the effect 

of evidence, or if this Court’s review of the record convinces us a mistake has been made, 

a finding is deemed clearly erroneous. Montanans v. State, 2006 MT 277, ¶ 19, 334 

Mont. 237, 146 P.3d 759. This Court reviews the record to determine if an agency has 

acted arbitrarily, capriciously, or unlawfully. N. Fork Pres. Ass’n v. Dep’t. of State 

Lands, 238 Mont. 451, 458-59, 778 P.2d 862, 867 (1989).

¶10 Under § 2-4-612(2), MCA, agencies are bound by common law and statutory rules 

of evidence. This Court reviews evidentiary rulings for abuse of discretion. Glacier 

Tennis Club at the Summit, LLC v. Treweek Constr. Co., 2004 MT 70, ¶ 47, 320 Mont. 

351, 87 P.3d 431. An abuse of discretion occurs when a decision is made arbitrarily and 

without employment of conscientious judgment so that it exceeds the bounds of reason 

resulting in substantial injustice. State v. Riggs, 2005 MT 124, ¶ 18, 327 Mont. 196, 113 

P.3d 281.

DISCUSSION

¶11 1. Did the District Court err by concluding that the PSC’s denial of a PCN 

certificate did not constitute an unconstitutional taking of Yellow Cab’s property or 

violate equal protection?

¶12 Yellow Cab makes several arguments that challenge the PSC’s denial of a PCN 

certificate on constitutional grounds, as it did in the lower court. Yellow Cab argues the 

PSC’s application of § 69-12-328, MCA, the grandfather statute, violated due process 

protections by imposing a retroactive requirement that Yellow Cab could not satisfy and 

thus deprived it of the ability to continue providing its charter service. Yellow Cab also
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argues that the grandfather statute violated equal protection by distinguishing between

those businesses in possession of a DOT number and those without.

¶13 Noting that these arguments were related to the PSC’s initial denial of a PCN 

certificate, the District Court concluded that they were procedurally barred. Yellow Cab 

did not seek judicial review of the PSC’s initial denial, appealing only after the PSC had 

conducted the PCN proceeding and denied Yellow Cab’s second application. Because 

Yellow Cab had failed to file a petition for review within 30 days following the initial 

denial under the grandfather statute, the District Court concluded the claims were 

untimely. Conceding that the timelines for appeal from an agency decision were not 

jurisdictional in nature, citing BNSF Ry. Co. v. Cringle, 2012 MT 143, 365 Mont. 304, 

281 P.3d 203, the District Court nonetheless determined that Yellow Cab had not 

demonstrated a “legally sufficient reason” for disregarding these “firm deadlines.” 

Cringle, ¶ 21. Noting that Yellow Cab had raised a regulatory takings claim and “an 

interesting substantive due process claim” regarding SB 140, the court offered that “a 

separate action could resolve Yellow Cab’s remaining claims.”

¶14 The District Court properly resolved the claims in this proceeding. 

Section 2-4-702(1)(a), MCA, provides that a dissatisfied party may request judicial 

review of an agency’s final decision after exhausting all administrative remedies if the 

request is made within thirty days of the decision. Section 2-4-702(2)(a), MCA. Yellow 

Cab did not petition for judicial review of the PSC’s initial denial under the grandfather 

statute, instead raising those issues after the PSC’s second denial under §§ 69-12-321 et
7

seq., MCA. We agree with the District Court that Yellow Cab’s claims are not properly 

subject to review in this proceeding. 

¶15 Yellow Cab also asserts that the ultimate denial of a PCN certificate, following the 

second application, also resulted in a taking. The District Court reasoned that the PSC’s 

denial did not result in a taking because, without a PCN certificate, Yellow Cab never 

had a compensable property interest to be taken. On appeal, Yellow Cab reframes its 

position and states it is not claiming a property interest in the PCN certificate, but in the 

revenue generated from its charter service prior to the enactment of the grandfather 

statute. However, this argument is again primarily related to the original denial of its 

application. SB 140 instituted regulation of charter services. Any compensable interest 

Yellow Cab may have had in its pre-existing business was impacted by the original denial 

under the grandfather statute, by which Yellow Cab lost the ability to operate, rather than

the second denial at issue here. Section 69-12-328, MCA, the grandfather provision, 

required the PSC to grant a PCN certificate to applicants who satisfied the statutory 

requirements. In contrast, §§ 69-12-321 et seq., MCA, provide that the PSC has 

discretion in determining whether to grant a PCN certificate. Thus, Yellow Cab’s claims 

are improperly raised here.

¶16 2. Did the District Court err by affirming the denial of Yellow Cab’s application 

for a PCN?

¶17 A district court reviews an agency decision under the standards set forth in the 

Montana Administrative Rules of Procedure Act, as follows:
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(2) The 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; or

(b) findings of fact, upon issues essential to the decision, were not made although 

requested.

Section 2-4-704, MCA. 

¶18 Section 69-12-312(1), MCA, provides that a Class B motor carrier may not 

transport persons on a public highway without receiving a PCN certificate. 

Section 69-12-323(2)(a), MCA, authorizes issuance of a PCN certificate if the PSC finds 

that public convenience and necessity require it. In making that decision, the PSC is to 

conduct a hearing and give consideration to the transportation services being furnished 

by other existing businesses. Finally, the PSC must consider the effect the proposed 

transportation service may have upon other forms of transportation service which 
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have been deemed essential and indispensable to the communities likely to be affected 

by the new service. Section 69-12-323(2)(a), MCA.

¶19 Because Yellow Cab applied for a PCN certificate authorizing it to provide charter 

services across the entirety of Montana, it carried the burden of demonstrating there was

a statewide need for its services. At the hearing, Yellow Cab owner Robert Young 

(Young) and four other witnesses offered testimony in support of the application. 

Young’s testimony was concerned less about unmet need than about speculative growth 

in economic activity resulting from Bakken oil operations. Witness Rodney Gustafson 

had used Yellow Cab only once and did not testify about other carriers he had used or 

attempted to use, or why alternative carriers could not meet his needs. David Gonzales 

testified that his decision to use Yellow Cab’s services was based on reasons unrelated to 

the ability of alternative carriers to meet his transportation needs. Robert Young’s son,

Dan, testified he had never contacted alternative passenger charter services to see if they

could fulfill his needs. Jessica Guillaume had only used Yellow Cab once and had not

sought service from other carriers. 

¶20 The protestants offered the testimony of Rodney Wilson, owner of three 

Billings-based transportation companies operating under a current PCN certificate. 

Wilson testified that his company has a 24-hour dispatcher handling multiple phones and 

an answering machine to ensure service to those callers unable to reach the dispatcher 

when lines are busy. Wilson also testified his company would be able to accommodate 

the trips Yellow Cab indicated it had been providing since 2010.
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¶21 In light of the testimony provided by the owner of the business and four prior 

customers—some of them only one-time customers—Yellow Cab has failed to establish 

that the PSC erred by concluding there was insufficient evidence to demonstrate a 

statewide need for its charter services. When Young’s testimony is considered alongside

Ronald Wilson’s attestation that his company could accommodate the needs of Yellow 

Cab’s customers, it is clear the PSC’s determination that Yellow Cab had failed to meet 

the burden needed to secure a PCN certificate was supported by substantial evidence and 

not erroneous in any way. The District Court properly affirmed the PSC’s denial.

¶22 3. Did the District Court err by affirming the PSC’s exclusion of Yellow Cab’s 

Exhibit 2? 

¶23 Under M. R. Evid. 801(c), hearsay is a statement, other than one made by the 

declarant while testifying at the trial or hearing, offered in evidence to prove the truth of 

the matter asserted. M. R. Evid. 802 further provides that hearsay is generally not 

admissible unless covered by a hearsay exception. At the outset of the hearing, Young 

attempted to demonstrate the need for his charter service by referencing the oil boom in 

Eastern Montana and its potential effects on transportation and tourism. To support 

Young’s testimony, Yellow Cab sought to introduce Exhibit 2, a loose-leaf binder 

containing about 200 pages of documents regarding oil field information, newspaper 

articles, published studies, and tourism data. The protestants objected to the admission of 

Exhibit 2, arguing the information included inside lacked foundation and should be 

excluded as hearsay. The PSC took the objection under advisement and ultimately 

excluded Exhibit 2.
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¶24 The District Court affirmed the PSC ruling excluding the proffered material based 

on Yellow Cab’s failure to offer specific hearsay exceptions that would permit 

introduction of all the materials within Exhibit 2. The court stated it was unlikely a 

single hearsay exception would apply to all the documents contained in Exhibit 2 and it

would be impossible to conclude that the decision was incorrect without specific hearsay 

arguments. Yellow Cab now argues the documents, reports, and compilations referenced 

in Exhibit 2 were admissible under the M. R. Evid. 803(8) public records hearsay 

exception, and cites M. R. Evid. 902 for self-authenticating documents as the mechanism 

by which the appendix may have satisfied evidentiary foundation rules.

¶25 This Court reviews evidentiary rulings for abuse of discretion. The PSC denied 

admission of the documents after Yellow Cab failed to offer a proper foundation and 

sufficiently describe the evidentiary rules under which the material was admissible.

Appendix 2 was a voluminous exhibit, filled with a wide array of topics from many 

sources. The PSC did not abuse its discretion in denying its admission.

¶26 Affirmed. 

/S/ JIM RICE

We concur: 

/S/ MIKE McGRATH

/S/ BETH BAKER

/S/ MICHAEL E WHEAT

/S/ JAMES JEREMIAH SHEA