Court Opinion

ID: 9527323
Source: CourtListenerOpinion
Date Created: 2023-08-07 03:29:37.802469+00
Date Added: 2024-06-11T13:25:43.209345
License: Public Domain

SUMMERS, Justice
(dissenting).
The Louisiana Public Service Commission fixed rates applicable to the operations of South Central Bell Telephone Company for basic intrastate telephone service on May 5, 1960. These rates were based upon conditions, wage levels, interest rates and other costs for telephone service *507which existed in the late 1950’s. Except for minor changes, the Company has operated on these rates since. On December 27, 1968 the Company filed an application with the Commission for revision of these rates and charges, setting forth that expanded communication facilities were needed to meet the needs of a marked growth in the State’s economy; the accelerated inflationary trends in 1967 and 1968 had brought about severe increases in its cost of doing business; and the drastic increase in the cost of capital had reduced the Company’s rate of earnings. The situation, the Company alleged, also created an emergency requiring an interim increase in rates pending full investigation by the Commission of the need for the rate increase.
The interim increase is sought under the Commission’s Rules of Practice, which, under Sub-Section N(1) (b) provides in part that
Whenever the Commission in its discretion deems it advisable in the interest of the public to grant an application or petition for such a change in rates or service it may issue authority for such change to become effective at such time as is specified by the Commission subject to review on complaint of any interested party.
No action was taken by the Commission on this application. The Company requested a hearing in July.
On July. 29, 1969, the Commission ordered that a hearing to be held on the application on September 16 and 17, 1969.
Early in September 1969 the application was amended to allege that to provide the company with a fair rate of return, about 8/2 percent, its revenues should be increased annually to about 13 percent of the revenues for the six months ending June 30, 1969, annualized.
Then, on September 16 and 17, 1969, the Company presented its case in chief; and, by agreement, the matter was held over for cross-examination of the Company’s witnesses.
A second supplemental application was filed by the Company on October 14, 1969, setting forth that since the filing of the .application on December 27, 1968, its earnings had continued to deteriorate at an accelerated rate. And, since it was then apparent that it would not be possible to obtain a final decision on its request for rate increases until 1970, conditions warranted an immediate increase on an interim basis to provide a 7 percent rate of return on the Company’s Louisiana investment. It was also alleged that the public interest could not be served by the Company or the Commission unless the Company maintained its credit and ability to attract capital which was being seriously impaired by the reduced rate of return resulting from inflation, increased costs and accelerated cost *509of capital. No action was taken by the Commission.
A third supplemental application was filed by the Company on December 15, 1969 in which it was alleged that since its October supplement, the Company was required to borrow money in November 1969 by sale of $125,000,000 bonds, the cost of which was 8.53 percent, and on December 2, 1969 Pacific Telephone & Telegraph Company, a Bell System Company, paid 9.-20 percent for a $150,000,000 bond issue making it evident that a substantial increase in its rates and charges was essential to prevent continuing confiscation of its property. Accordingly, the Company attached a schedule increasing rates and charges by $5,000,000 on an interim basis subject to review. This increase was calculated to bring an 8j/¿ percent rate of return on the Company’s investment. The increased charges were to be refunded if found to be excessive by the Commission after further study. A bond was proposed to secure the refund if required.
Again no action was taken by the Commission, and the Company, on January 22, 1970, instituted this suit for injunction in the Nineteenth Judicial District Court in East Baton Rouge Parish. The petition. set forth the facts already recited in the applications filed with the Commission and alleged that the additional costs of doing business reduced the Company’s rate of return on its investment which amounted to a confiscation of its property. It alleged also that the loss it suffered day by day by the confiscation was irreparable for the Commission could not, under the law, malee any future rate increase retroactive in order to restore the loss. Accordingly, the Company sought an order enjoining the Commission from enforcing the tariff established in 1960 or from interfering with imposition or collection of tariffs proposed by the Company pending lawful determination by the Commission of reasonable and just rates and charges.
To this petition for injunction the Commission filed exceptions of prescription, improper use of summary procedure, lis pendens and prematurity. In its exceptions of lis pendens filed on February 1, 1970 the Commission referred to the fact that a hearing had been held in September and additional hearings would be held on February 12 and 13, 1970 on the request for the interim rate increase.
A hearing was held on the exceptions and the Company’s petition in the District Court on February 2, 1970. It was stipulated at this hearing that the Company’s testimony would be introduced subject to objection of the Commission, and the testimony would be confined to that of two Company witnesses before the Commission on September 16 and 17, 1969 together with the affidavits attached to the Company’s petition. The Commission offered no evidence.
*511In the meantime, according to the briefs on file, the Commission held a hearing on the application for interim relief on February 12, 1970. Though the Commission’s consultant was present at this hearing, the Commission again offered no evidence in opposition to the Company’s application. By its order dated February 13, 1970 the Commission denied the interim rate increase.
Then, on February 17, 1970, the Court issued its judgment denying the Company’s petition for injunction. In reasons for judgment, the Court found the exceptions of prescription and unauthorized use of summary procedure to be “clearly without merit.” The exceptions of lis pendens and prematurity were considered with the merits, and the injunction and interim rate were denied. Certiorari was granted on the Company’s application in order that we might ascertain the validity of these proceedings. The majority denies the relief sought by the Company.
In my view the trial court correctly overruled the exceptions of prescription and unauthorized use of summary process. However, error was committed when the injunction was denied and the interim rate increase was disallowed. The majority perpetuates that error in its decision today.
All of the exceptions present one salient issue: Was it error to resort to injunctive process here when a procedure is prescribed by law for such cases? This is true because the exceptions are based upon the failure of the Company to observe the procedure the law prescribes for redress from Public Service Commission action. La.R.S. 45:1191 et seq.
Though not denying the jurisdiction of courts to grant injunctions in such cases, the Commission asserts that orderly procedure required the Company to appeal the Commission’s order of February 13, 1970 denying an interim rate increase to the District Court in keeping with authorized procedure instead of pursuing this injunction proceeding. The argument is not impressive. The Court is not asked in these proceedings to supersede the Commission ill its constitutionally imposed duty to fix reasonable and just rates (La.Const. art. 6, § 5). This resort to the Courts asks only that confiscation be enjoined — that the res be preserved — while the rate making proceeds, for the rate making process as constituted by law and as applied in this case is not protecting the Company from the confiscation which occurs pending a determination of just and adequate rates. Courts are open to give this relief. Banton v. Belt Line Railway, 268 U.S. 413, 45 S.Ct. 534, 69 L.Ed. 1020 (1924); Oklahoma Natural Gas Co. v. Russell, 261 U.S. 290, 43 S.Ct. 353, 67 L.Ed. 659 (1923); Newton v. Consolidated Gas Co., 258 U.S. 165, 42 S.Ct. 264, 66 L.Ed. 538 (1922). In West v. Town of Winnsboro, 252 La. 605, *513211 So.2d 665 (1968), we said “a district court always has jurisdiction in a civil action to grant an equitable remedy.”
Authority of courts to issue injunctions in these matters depends upon a showing of irreparable injury and the Company must bear the burden of this showing. Southern Bell Tel. & Tel. Co. v. Louisiana Public Service Commission, 183 La. 741, 164 So. 786 (1935).
Property may be as effectively taken by long-continued and unreasonable delay in putting an end to confiscatory rates as by an express affirmance of them; and where, in that respect, such a state of facts is disclosed as we have here, the injured public service company is not required indefinitely to await a decision of the rate-making tribunal before applying to a federal court for equitable relief. Smith v. Illinois Bell Telephone Co., 270 U.S. 587, 591, 46 S.Ct. 408, 410, 70 L.Ed. 747 (1925).
See also Banton v. Belt Line Ry., 268 U.S. 413, 45 S.Ct. 534, 69 L.Ed. 1020 (1925); Oklahoma Natural Gas Co. v. Russell, 261 U.S. 290, 43 S.Ct. 353, 67 L.Ed. 659 (1923); Northwestern Bell Tel. Co. v. Hilton, 274 F. 384 (D.C.Minn.1921).
Irreparable injury will result here, the Company argues, for there is no means provided by law for the Commission to give retroactive rate increases. Thus all losses resulting from a rate of return below the 6 percent, which this Court considered to be reasonable and necessary to prevent confiscation in its decision in 1960, will result in irreparable injury. See Southern Bell Telephone and Telegraph Company v. Louisiana Public Service Commission, 239 La. 175, 118 So.2d 372 (1960). In order to avoid confiscation, according to our decision in that case,
* * * (T)he return to the equity' owner should be commensurate with returns on investments in other enterprises having corresponding risks. That return, moreover, should be sufficient to assure confidence in the financial integrity of the enterprise, so as to maintain its credit and to attract capital. Federal Power Commission v. Hope Natural Gas Company, 320 U.S. 591 at 603, 64 S.Ct. 281, 88 L.Ed. 333 (1944).
Confiscation, of course, involves a taking of property without the payment of adequate compensation; it is a violation of Article I, Section 2, of the Constitution providing that property may not be taken except after just and adequate compensation is paid. The protection of the Due Process Clauses of the State and Federal Constitutions are also violated by confiscation for a state is without power to require the Company to provide telephone service without compensation which will provide a fair return on its investment. Stock in the Company is privately owned and when the State undertakes to regulate private invest*515ments it brings about an obligation under the law not to deny a reasonable return to the investor.
To enforce these rights, courts may, in the exercise of their jurisdiction, issue all “needful writs.” La.Const. art. 7, § 2. The Constitution also provides in Article VI, Section 5, for the issuance of interlocutory injunctions against the orders of the Commission in instances where the trial court is of the opinion “that irreparable loss or damage would result to plaintiff” through the enforcement of the order. Southern Bell Tel. & Tel. Co. v. Louisiana Public Service Commission, 185 La. 729, 170 So. 548 (1936). The Company’s position, then, is that the continued enforcement of the order of 1960 has caused and will continue to cause irreparable damage so long as the Commission does not grant an increase in those rates.
By affidavits and exhibits attached to their petition and by the testimony of witnesses before the Commission the Company established' the history of the extraordinary growth in the economy of the Nation and the State during the 1960’s. As a result there has been an unusual demand for telecommunication services. These demands persist from business and industry in both rural and urban areas. Large outlays for construction of needed facilities are urgently required and capital funds must be obtained for this purpose.
In 1960 the cost of capital was approximately 4.9 percent. In contrast, the cost in late 1969 was above 8 percent and as high as 9.20 percent. This, together with increased operating expense and inflation and the need for expanded facilities, has brought about a decline in the Company’s rate of return for the first half of 1969 to a level of 5.87 percent on an average net investment of $401,316,224, the lowest level in 10 years, a rate of return significantly below the current cost of capital, and significantly below the 6 percent deemed to be necessary to prevent confiscation in our 1960 decision. 239 La. 175, 118 So.2d 372.
The situation has worsened since the first half of 1969. There is danger, therefore, if the rate of return is not increased immediately investors will turn to other investment opportunities; and, more importantly, the Company’s inability to provide the needed improvements will deprive the public of the service to which it is entitled. Present earnings of the Company will not justify the expenditure of the vast sums required to meet the needs in this State.
Witnesses familiar with utility financing testified that a rate of return of 8 to 9 percent is required to remedy the situation. This would amount to a $24,000,000 increase in revenues which the Company is requesting, which will provide an 8.5 percent rate of return on average net investment. The proposed schedule of rates *517filed with the Commission and the Court on December 15, 1969 will produce this additional revenue.
No effort has been made by the Commission thus far in these proceedings or in the proceedings being carried on before that body to contradict these findings. Indeed, it would be difficult to do so. Rates of interest on borrowed money, according to information obtained by the experts, is the highest since 1697. In Louisiana total personal income was up 80 percent during the period 1960-1968; whereas it was up 69 percent in the Nation as a whole. Wages for nonagricultural employees in the same period were up 32 percent in Louisiana. A total increase of 51 percent occurred in the number of phones the Company owned and serviced in the same period in this State. Average daily local calls on all phones increased 39 percent for the same eight year period.
These eight years saw a 92 percent increase of long distance messages in Louisiana. The U.S. consumer price index rose 19 percent in the period and construction costs were up 29 percent. All of the data accumulated in the record is to the same effect, illustrating graphically the dramatic upturn of costs, expenditures, taxes and wages since the rates established in 1960. The facts are, of course, common knowledge among well informed average citizens.
Recognizing this marked transition in our national economy, the regulatory bodies of other states have allowed a rate increase which would permit the companies affected to adjust to the change. New York allowed an 8.15 percent rate of return on net average investment on February 11, 1970 (Proceedings as to Rates, Charges, etc. of the New York Telephone Co., Case 25155, N.Y.P.S.C. Order Adopted February 11, 1970). Rhode Island granted a 7.4 to 7.65 percent rate of return on original cost of plant on February 10, 1970 (In Re Tariff Filing by New England Telephone and Telegraph Co., Docket No. 1024, R.I.P.U.C. Order entered February 10, 1970). Rates designed to yield a rate of return on average net original cost of 7.6 percent were approved by the Public Utility Commission of Oregon on December 22, 1969 (See Order No. 46501 In the Matter of Suspension of Tariffs, filed under Advice No. 250, of Pacific Northwest Bell Telephone Company).
A 7.65 percent rate of return on the fair value of the company property was allowed by Maryland on November 19, 1969. (In the matter of the Application of the Chesapeake and Potomac Telephone Company of Maryland, etc., Case No. 6233). Rates which would not in themselves prevent earning on net average investment in the range of 8 to 8.5 percent were approved by the Federal Communications Commission on November 5, 1969 on Bell System Inter*519state Rates. Rates which would produce returns varying from 7.4 to 8 percent on cost were approved in five other states since July 1969.
All factors considered, I am convinced that an adjustment in the 1960 rates are imperative.
Granting this injunction upon proper bond will neither infringe the Commission’s statutory authority nor cause injury to the users of the Company’s intrastate telephone service. The Commission will still be free to proceed and perform its duty of fixing just and reasonable rates; and the bond will fully protect users and insure proper refund to them in the event the Commission should finally fix a rate which is lower than the rate approved on an interim basis. Southern Bell Telephone and Telegraph Co. v. Railroad and Public Utilities Commission, 76 P.U.R.(N.S.) 101.
On the basis of the affidavits, testimony and exhibits, we would not undertake to decide what the Company will eventually be entitled to, only what it will collect temporarily until the rates are determined. Since there is nothing from the Commission to the contrary, the Court must be guided almost entirely by the Company’s offerings. They have succeeded in making a prima facie case for an increase, and the majority overturns that showing on no evidence.
Hearing was not held before the Commission on the interim rate increase until after this suit for injunction was filed on January 22, 1970 and after a hearing on the injunction before the District Court on February 2, 1970. It is not required, therefore, as the Commission contends, that the Company abandon its suit in order to appeal the Commission order issued on February 13, 1970. This would only involve additional delay in a proceeding in which the Company had already charged that the Commission is “dragging its feet”.
Nor do I think it necessary, as the Commission contends, that the Company should first apply to the Court of Appeal, First Circuit before applying here for writs.
The Courts of Appeal are not involved in matters which concern orders of the Public Service Commission. The Constitution provides that in matters involving Commission orders appeals from decisions of the trial court shall be direct to the Supreme Court. La.Const. art. 7 § 10(3). It follows that if the Court of Appeal has no appellate jurisdiction it has no supervisory jurisdiction for the Constitution limits the supervisory jurisdiction of the Courts of Appeal to matters over which it has appellate jurisdiction; viz.,
Each court of appeal has supervisory jurisdiction, subject to the general supervisory jurisdiction of the Supreme Court, over all inferior courts in all cases in which an appeal would lie to the court of appeal. La.Const. art. 7 § 29.
*521In addition to the provision of the Constitution conferring appellate jurisdiction on the Supreme Court in all “Cases in which orders of the Public Service Commission are in contest, as is provided in Article VI, Section 5 of this Constitution * * La.Const. art. 7 § 10, the Supreme Court has "general supervisory jurisdiction over all inferior courts.” La. Const, art. 7 § 10. I entertain no doubt that the application for writs was properly lodged here.
On the basis of the data available, I am of the opinion that a schedule of rates may be imposed effective immediately which will assure to the Company a rate of return not exceeding 7.5 percent on the Company’s net average investment in Louisiana; with a bond in the sum of $20,-000,000 conditioned in the form and manner -proposed by the Company with a good and solvent surety authorized to do business in the State of Louisiana; and that the Commission should be enjoined from enforcing the 1960 rates or from interfering with imposition of the revised schedule.
Since injunctive process is permissible under these circumstances, the exceptions filed by the Commission, based upon the contention that the Company was not observing the procedure prescribed by statute in these cases, are without merit, and the majority commits error when it denies this; relief and refuses to answer the issues; presented,
I respectfully dissent.
HAMLIN, J., also dissents for the reasons assigned by SUMMERS, J.