Opinion ID: 565147
Heading Depth: 1
Heading Rank: 4

Heading: the policy question

Text: 51 The Communications Act confers upon the Commission broad authority to prescribe the forms of any and all accounts, records, and memoranda to be kept by carriers subject to [its jurisdiction], including the accounts, records, and memoranda of ... the receipts and expenditures of moneys. 110 Even so, this power cannot be exercised arbitrarily, capriciously, or in contravention of law. 111 We find ourselves unable to make a determination on that score because the Commission has not adequately explained the reasoning underlying its new policy toward accounting and ratemaking treatment of antitrust litigation expenses. 52 In its Litton Order, the Commission did not mention regulatory policy at all; it rested solely upon its expansive interpretation of NAACP v. FPC. 112 In its order on reconsideration, the Commission reduced but still maintained some of its reliance upon that decision, but added that its approach [struck] the proper balance between ratepayers from having to bear the financial consequences of carriers' unlawful actions and permitting carriers to include such costs in rates when properly justified on equity or other public interest grounds. 113 So, even though the accounting treatment of litigation expenses in the Litton Order is not compelled by NAACP v. FPC, the Commission said, we affirm that treatment on the policy grounds discussed. 114 These statements raise more questions than they purport to answer. 53 Is the Commission saying that the new procedure, with below-the-line movement of antitrust litigation expenses and an adverse presumption, better strikes the proper balance between utility and consumer than does the time-tested traditional procedure featuring above-the-line accounting and a burden of justification only upon challenge, which only two years previously the Commission had probed deeply and found adequate? 115 If the new procedure is superior, how so; if not, why the change? We are left equally in the dark by the Commission's reference to justification on equity or other public interest grounds. 116 This terminology is much too general to provide any real insight, and the Commission does not elucidate. 54 Surveyed in its broader perspective, the Commission's reasoning becomes even more obscure. The Commission has not told us what it is about violations of the federal antitrust statutes that relegates associated litigation expenses to especially unfavorable treatment. We might say the same about breaches of state antitrust statutes, and of common-law strictures, federal and nonfederal. Every lawsuit involves some claimed infraction of the law, and just why the Commission drew the line where it did remains a mystery. 55 Perhaps the most puzzling aspect of the Commission's policy is just how regulatees can abide by it and still operate efficiently. It has long been the conventional rule that utility expenses prudently incurred are allowable in ratemaking. 117 Good faith is to be presumed on the part of the managers of a business, 118 the Supreme Court has declared, and [i]n the absence of a showing of inefficiency or improvidence, a court will not substitute its judgment for theirs as to the measure of a prudent outlay. 119 We agree that lawsuits are a recurring fact of life in operating a business 120 --and in that even the Commission concurs 121 --and litigation strategies undoubtedly are a recurring if indeed not a constant business challenge. Antitrust suits frequently present a multitude of complex issues, many of which may be intertwined with esoteric economic concepts in a legal context where precedents and clear standards may be hard to come by. 122 Serious strategy planning may at best be difficult, and under the Commission's regimen may be well-nigh impossible. Planning for any given antitrust case must be done in total ignorance of the factor the Commission deems critical--the final outcome of the case--and in the ominous shadow of the looming adverse presumption. Petitioners hardly exaggerate when they declare that no one could possibly predict that defense of a lawsuit as difficult as Litton would be ultimately successful. We believe the tension between longstanding judicial and newly devised administrative procedures could hardly be more severe. 56 To be sure, the formulation of procedures [is] basically to be left within the discretion of the agencies to which Congress has confided the responsibility for substantive judgments. 123 But while an agency is free to alter its past rulings and practices ... [it] must provide a reasoned explanation for any failure to adhere to its own precedents. 124 That explanation must establish a  'rational connection between the facts found and the choice made,'  125 and must be articulated with sufficient clarity or specificity to permit [a court] to engage in meaningful review. 126 57 The Commission's decision to presume the illegitimacy of antitrust litigation expenses and cast them below the line was undeniably a radical departure from its past practice. We find the Commission's expositions of its underlying reasoning intolerably mute, 127 lacking enough clarity and detail to blaze an analytical trial enabling judicial review under applicable legal standards. We accordingly vacate the challenged orders and remand the case for further consideration. We do not suggest that the Commission cannot provide an acceptable rationale for application of the challenged orders in the precise form in which they are, or that it is powerless to bind carriers to the strictures of those orders in some situations. We do say that before the Commission may do either in any instance, it first must come forth with what the law demands. 58 So ordered.