Opinion ID: 1970117
Heading Depth: 1
Heading Rank: 4

Heading: Certificate of Public Good

Text: In its second order, the Board denied QSC a CPG to operate the Quechee sewer system. See 30 V.S.A. § 231(a) (applicant desiring to own or operate business within Board's jurisdiction shall first petition Board to determine whether operation of such business will promote general good; if Board finds favorably, it shall award applicant CPG). The Board considered the past management practices of QSC, including insufficient maintenance, excessive dividends, unexplained cash transfers to NECO, QSC's parent company, and salary guarantees in QSC's name for persons working for NECO. The Board also noted QSC's history of poor customer relations, including one instance where LaRoche materially misrepresented the cost of the sewer facilities in an attempt to justify a rate increase to the customers. Finally, the Board found that QSC was financially unstable and unable to raise capital, based in part on liabilities that QSC incurred on behalf of NECO. In light of QSC's financial instability and the irresponsible past behavior of QSC's management, the Board concluded that issuing a CPG would not promote the general good of the state. [3] QSC does not contest these findings, but instead makes a number of convoluted statutory and constitutional claims, essentially arguing: (1) that QSC was automatically granted a CPG when 30 V.S.A. § 203(6) went into effect, and the Board could not revoke that CPG based on acts occurring prior to the effective date; and (2) that requiring QSC to petition for a CPG and permitting the Board to consider past acts in ruling on that petition violates several constitutional provisions, including the Due Process and Equal Protection clauses of the Fourteenth Amendment and the prohibition on bills of attainder. We first consider the statutory claim and then turn to the constitutional arguments.
QSC maintains that 30 V.S.A. § 126, the saving clause for corporations formed prior to April 2, 1915 that conduct business subject to Board regulation, entitles QSC to a grandfathered CPG. The most obvious flaw in this argument is that § 126 on its face does not apply to a company formed in the late 1960s or early 1970s. Moreover, § 126 predates 30 V.S.A. § 231, which establishes the CPG requirement. QSC's suggestion that § 126 should apply by analogy is also unavailing. Even if we were to accept the proposition that corporations governed by § 126 automatically received CPGs when § 231 was enacted years later, QSC has shown only that the Legislature knows how to draft grandfather provisions. See 30 V.S.A. § 503(a)(1) (Board shall issue CPG, without requiring proof that business will promote general good, to any company that owned or operated cable television system as of February 10, 1970). The Legislature made no such provision in § 203(6), and we see no reason to infer an intent to do so from an eighty-year-old statute of questionable relevance.
QSC's first constitutional claim is that the Board violated its due process rights by denying a CPG based on acts occurring prior to regulation. According to QSC, the Board unconstitutionally applied § 203(6) retroactively, depriving QSC of its vested property right to operate the Quechee sewer facilities. In making this argument, QSC mischaracterizes the Board's decision. The Board did not deny a CPG merely because QSC's past behavior fell below the standard expected of a regulated utility. The Board considered QSC's current financial condition and ability to provide services in the future. But the Board could not evaluate the company in a vacuum. QSC's current financial instability is the result of past financial mismanagement, [4] and past management decisions are obviously relevant in attempting to predict future behavior. [5] We are not persuaded that the Board applied § 203(6) retroactively. Cf. Carpenter v. Department of Motor Vehicles, 143 Vt. 329, 333, 465 A.2d 1379, 1382 (1983) (retroactive laws defined as those that take away or impair vested rights acquired under existing laws, or create new obligation, impose new duty, or attach new disability with respect to past transactions). The Board did not punish QSC for its preregulatory acts, nor did it set artificially low rates to compensate customers for past abuses. QSC has not been required to repay its customers for excess profits earned during the years the company operated free of regulation. The Board simply judged QSC's present fitness to operate a regulated utility, and in so doing had no choice but to consider QSC's past conduct as a guide to its likely future behavior. [6] See In re Telesystems, Corp., 143 Vt. 504, 507 n. , 509, 469 A.2d 1169, 1170 n. , 1171-72 (1983) (applicant's business experience considered in evaluating cable company's petition for CPG). Any CPG applicant must expect the Board to consider past incidents of mismanagement in making its decision. At any rate, QSC has no vested property right to conduct a sewer business that could be affected by the Board's decision. QSC holds no franchise or other grant of authority from the state to operate the Quechee facilities. See State v. Gibbs, 82 Vt. 526, 527-28, 74 A. 229, 229 (1909) (franchise is grant by or under authority of government; it has legal character of property or estate in which holder has vested right and is entitled to same constitutional protection as other property). As we have already rejected QSC's grandfathering claim, the only basis for this claimed right is the company's twenty-year operating history. Not surprisingly, however, QSC can point to no case that holds that a company's history of operating a particular business or providing a particular service gives the company a vested right to continue doing so. Cf. id. at 528, 74 A. at 230 (license to sell liquor is not franchise that gives holder vested rights). QSC's claim that § 203(6) is an unconstitutional bill of attainder, see U.S. Const. art. I, § 9, is similarly without merit. A bill of attainder is a law that legislatively determines guilt and inflicts punishment upon an identifiable individual without provision of the protections of a judicial trial. Nixon v. Administrator of Gen. Servs., 433 U.S. 425, 468, 97 S.Ct. 2777, 2802, 53 L.Ed.2d 867 (1977). Although § 203(6) did impose a burden on QSC by subjecting it to regulation, the United States Supreme Court has recognized that [f]orbidden legislative punishment is not involved merely because [a statute] imposes burdensome consequences. Id. at 472, 97 S.Ct. at 2805. Rather, the proper inquiry is whether the statute fairly can be characterized as a form of punishment leveled against QSC. Id. at 473, 97 S.Ct. at 2805. Based upon the Supreme Court's analysis in Nixon, we conclude that the Legislature did not enact § 203(6) as a form of punishment. The statute further[ed] non-punitive legislative purposes, id. at 475-76, 97 S.Ct. at 2807, by subjecting a company operating a monopoly utility [7] to regulation by the Board. See United States v. Patzer, 15 F.3d 934, 942 (10th Cir.1993) (statute defining outfitter to include hunting clubs, thereby subjecting hunting clubs to licensing requirement, was not bill of attainder). The Legislature did not confiscate QSC's property [8] nor bar it from the sewer business. See Nixon, 433 U.S. at 473-74, 97 S.Ct. at 2805-06 (discussing legislative punishments traditionally considered bills of attainder). The question of whether QSC would receive a CPG was properly left to the Board, which applied the same standards to QSC as to any applicant. Indeed, QSC directs its bill of attainder claim more at the Board's construction of § 203(6) than at the statute itself. Here, however, QSC relies on arguments that we have already rejected, namely that the Board confiscated its rate base and improperly revoked its CPG. Assuming that a nonpunitive statute can be transformed into a bill of attainder by the actions of a regulatory body, but see Walmer v. United States Dep't of Defense, 52 F.3d 851, 855 (10th Cir.1995) (constitutional prohibition against bills of attainder applies to legislative acts, not to regulatory actions of administrative agencies), that did not occur in this case. The Board made the regulatory decisions that are entrusted to its expertise, and did so in a fair and reasonable manner. QSC may be unhappy with the result, but it nonetheless has not been punished. QSC's claim that § 203(6) violates the Equal Protection Clause has even less merit. The statute is an economic regulation that impinges no fundamental right and involves no suspect classification. It is therefore presumed to be constitutional, and must stand if it is reasonably related to a legitimate public purpose. See Choquette v. Perrault, 153 Vt. 45, 51-52, 569 A.2d 455, 458-59 (1989). A statute subjecting a private sewage company that serves 750 or more households or dwelling units to regulation by the Board benefits the public by preventing abusive monopoly sewage rates and promoting public health. The so-called rational basis test is therefore easily met. Cf. Town of Sandgate v. Colehamer, 156 Vt. 77, 88, 589 A.2d 1205, 1211 (1990) (zoning ordinance not unconstitutional, even though it applied to only one person at time of passage; ordinance was neutral on its face and its purposes were reasonably related to public interest).