Court Opinion

ID: 8953059
Source: CourtListenerOpinion
Date Created: 2022-11-27 09:03:13.853682+00
Date Added: 2024-06-11T17:10:01.749188
License: Public Domain

FERGUSON, Circuit Judge,
dissenting:
I dissent. The majority opinion misconstrues and misapplies the Supreme Court’s recent decision in Louisiana Public Service Commission v. FCC, 474 U.S. 1002, 106 S.Ct. 519, 88 L.Ed.2d 453 (1985), and in so doing pays scant heed to the important federalism concerns that lie at the heart of this case. As the Supreme Court has pointed out in a different context, “the essence of federalism is that States must be free to develop a variety of solutions to problems and not be forced into a common uniform mold.” Addington v. Texas, 441 U.S. 418, 99 S.Ct. 1804, 60 L.Ed.2d 323 (1979). The Supremacy Clause of Art. VI of the Constitution does, of course, give Congress the power to preempt state law. See Louisiana, 106 S.Ct. at 1898. Absent a congressional mandate, however, it is not appropriate for either the FCC or this court to abridge the authority of the Hawaii Public Utilities Commission (“PUC”) to set intrastate rates for telephone services. The Court's decision in Louisiana makes clear that 47 U.S.C. § 152(b) constitutes a congressional denial of power to the FCC to regulate intrastate rate-making. For this reason, I would reverse the decision of the district court.
The threshold issue is, as the majority points out, the question of whether the district court had jurisdiction to require the PUC to obey an FCC order raising the intrastate rates for Hawaii Telephone (“HawTel”). Whether the district court had jurisdiction depends on whether there was an enforceable FCC order under 47 U.S.C. § 401(b). Whether there was an enforceable order under section 401(b) depends, in turn, on whether intrastate rate-making is preempted by the uniform separations process.
It is undisputed that the Communications Act empowers the FCC to prescribe uniform separations procedures for apportioning the property and expenses of telephone companies between the interstate jurisdiction, governed by the FCC, and the intrastate jurisdiction, governed by state regulatory authorities. See 47 U.S.C. §§ 221(c), 410(c). The issue, however, is whether, once that apportionment is made according to FCC procedures, the FCC can require the state to follow the uniform procedures when establishing intrastate rates. Simply stated, the question is whether state regulatory authorities are preempted by 47 U.S.C. §§ 221(c) and 410(c) from making adjustments in setting intrastate rates. The Supreme Court’s decision in Louisiana leaves no doubt that there is no federal preemption in the area of intrastate regulation, even where intrastate regulation has an impact on interstate communications. Under Louisiana, therefore, this court should find that the district court had no jurisdiction to enforce the FCC’s order.
The issue in Louisiana was whether state regulation of depreciation methods and rates for telephone companies was preempted by rulings of the FCC. The Court held that 47 U.S.C. § 152(b) bars federal preemption of state regulation of depreciation of “dual jurisdiction” property for intrastate rate-making purposes, notwithstanding 47 U.S.C. § 220, which expressly directs the FCC to prescribe depreciation practices. The FCC argued in Louisiana that section 220 operates to preempt inconsistent state depreciation regulations even for intrastate rate-making purposes, and that such federal displacement of state regulation was justified as necessary to avoid frustration of valid federal policies. The Supreme Court rejected this argument, noting the “express jurisdictional limitations” of section 152(b) and stating that “by its terms this provision fences off from FCC reach or regulation intrastate matters — indeed including matters ‘in connection with’ intrastate service.” 106 S.Ct. at *12791899. The Court noted that the Act itself establishes a process for resolving jurisdictional separations issues, 47 U.S.C. § 410(c), and stated that “it is possible to apply different rates and methods of depreciation to plant once the correct allocation between the interstate and intrastate use has been made.” Id. at 1902.
Applying the reasoning of Louisiana, it is clear that once jurisdictional separations were made, the PUC was not preempted from making an adjustment to intrastate rates alone. Section 152(b) expressly denies the FCC jurisdiction over “charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service.” 106 S.Ct. at 1899. The Supreme Court noted that this section contains not only a substantive jurisdictional limitation on the FCC’s power, but also a rule of statutory construction (“... nothing in this chapter shall be construed to apply or to give the Commission jurisdiction with respect to ... intrastate communication service”). Thus, in Louisiana, the FCC could not rely on the specific grant of authority to prescribe depreciation procedures contained in section 220 to defeat the express limitations of section 152(b). Similarly, here, once apportionment between State and Federal jurisdictions is made under section 410(c), the FCC may not further rely on that section to invade the authority specifically denied the agency under section 152(b). As the Court points out, the separations process itself “facilitates the creation or recognition of distinct spheres of regulation.” Id. at 1902.
Nor, under Louisiana, may the FCC compel a different result by arguing that the PUC’s adjustment of intrastate rates was preempted as an evasion of the separations procedure. The Supreme Court makes clear in the Louisiana decision that arguments about the effect or impact of state regulation will not confer preemptive authority on the FCC if the agency is acting outside the scope of its congressionally delegated authority. In Louisiana, the FCC argued that the express limitations on federal authority contained in section 152(b) should not bar the FCC from requiring state commissions to follow FCC depreciation practices for intrastate ratemaking purposes, because the plant involved was used interchangeably to provide both intrastate and interstate service; and that any authority reserved to the states under section 152(b) should be confined to intrastate matters which are separable from and do not substantially affect interstate commerce.
The Supreme Court rejected this argument, noting:
While it is certainly true, and a basic underpinning of our federal system, that state regulation will be displaced to the extent that it stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress, it is also true that a federal agency may preempt state law only when and if it is acting within the scope of its congressionally delegated authority.
Id. at 1901 (citation omitted).
The Court went on to explain that an agency literally has no power to act, let alone preempt state law, until Congress confers authority on it; and that the best way of determining whether Congress intended the agency’s regulations to displace state law is to examine the scope of the authority granted to the agency by the legislature. Id. Applying these principles, the Court reiterated that section 152(b) constitutes a congressional denial of power to the FCC, and concluded therefore that “we simply cannot accept an argument that the FCC may nevertheless take action which it thinks will best effectuate a federal policy.” Id.
The argument that HawTel made, and the district court accepted, that the Hawaii PUC’s actions constituted an evasion of the federal separations procedures, is essentially the same kind of argument that the Court rejected in Louisiana. Louisiana stands for the proposition that an agency may not expand its jurisdiction beyond that granted by Congress, regardless of the policy arguments that the agency may make in support of greater preemptive power. Thus, under the principles of Louisiana the first question to ask is whether there is a congressional grant of authority to the *1280agency. It is clear from the statute that Congress has authorized the FCC to establish separation procedures. However, error arises if it is concluded that this grant of authority extends to intrastate rate-making, as the authority of the FCC in this area is clearly limited by the express provisions of section 152(b). According to Louisiana, HawTel cannot bypass that express limitation by reference to the impact or effect of the state’s exercise of authority on interstate communications. The Court explicitly holds that the authority reserved to the state regulatory authorities under section 152(b) is not limited to those areas where the matter to be regulated is “purely local” and where interstate communications are not affected by the state regulation. Dismissing this approach, the Court states “the short answer to this argument is that it misrepresents the statutory scheme and the basis and test for preemption.” 106 S.Ct. at 1901.
I conclude therefore that the FCC order was not enforceable under 47 U.S.C. § 401(b), as the federal agency had no authority to intervene in the purely intrastate rate-making of the PUC. The PUC accepted the FCC order in the initial separations process and allocated property and expenses between the intrastate and interstate jurisdictions accordingly. Once that process was complete, the authority of the FCC terminated, as, under section 152(b), the FCC may not require compliance with federal standards in intrastate ratemaking, arguments about the effect of such rate-making on interstate communications notwithstanding. Thus, the district court was without jurisdiction to issue the injunction.
To hold otherwise subverts the operation of the federalism that Congress has mandated. The FCC regulates interstate rates. The state PUCs regulate intrastate rates. That rule may not work as the telephone companies would like, but that is a problem that Congress must solve.1 Only Congress can extend the jurisdiction of a federal agency, not the courts. Were proposals before Congress to confer jurisdiction on the FCC over intrastate rates, they would doubtless engender a considerable political controversy. However, Congress has not acted, and the Supreme Court has said in no uncertain terms that the FCC may not assume jurisdiction merely because it thinks to do so would make for a more efficient system.2
I have set forth in detail my reasons for dissenting from the majority’s analysis of the impact of Louisiana because the majority ignores the important federalism concerns which must be addressed when federal regulatory agencies attempt to assert authority over intrastate decision-making absent a clear mandate from Congress. I believe, however, that this court does not need to reach the preemption issue as Haw-Tel’s suit here is collaterally estopped by the decision of the Hawaii Supreme Court in In re Hawaii Telephone Co., 689 P.2d 741 (Haw.1984).
The majority concludes that collateral estoppel does not apply because of the factual differences between the two actions. The majority concedes that both actions concerned HawTel’s appeal of essentially the same downward adjustment in intrastate rates, but argues that because the adjustment was applied in different rate periods, with different revenues, different expenses, and different investments, the second suit is not a collateral appeal of the first.
The principle of collateral estoppel “is designed to prevent repetitious lawsuits over matters which have once been decided and which have remained substantially static, factually and legally.” Commis*1281sioner v. Sunnen, 333 U.S. 591, 599, 68 S.Ct. 715, 720, 92 L.Ed. 898 (1948). In the context of claims involving tax liability in different tax years, the Supreme Court noted that “the prior judgment acts as collateral estoppel only as to those matters in the second proceeding which were actually presented and determined in the first suit,” id. at 598, 68 S.Ct. at 720, cautioning that “a subsequent modification of the significant facts or a change in the controlling legal principles may make that determination obsolete or erroneous, at least for future purposes,” id. at 599, 68 S.Ct. at 720.
The central issue in the instant case is whether the PUC may independently adjust its intrastate rate basis or is preempted from so doing by PCC orders governing the separations process. In Hawaiian Telephone Co., the Hawaii Supreme Court squarely confronted and decided this issue. The court stated: “We have examined the claim that the State agencies invaded a federally preempted area by varying a jurisdictional separation approved by the FCC, but find the claim to be without merit.” 689 P.2d at 741. Thus, the two rate increase requests, one pursued in state court and one subsequently raised in federal court, raise the same legal issue: Did the PUC invade a federally preempted area in setting its intrastate rates? The state court found that it did not, because it neither “varied a formula, method of procedure decreed by the federal agency nor tampered with interstate rates in any way.” Id. at 751.
In this suit, HawTel seeks to relitigate the propriety of that conclusion as to PUC’s intrastate rate-making procedures. In the period between the first and second suit, there has been no “subsequent modification of the significant facts,’’ Sunnen, 333 U.S. at 591, 68 S.Ct. at 715 (emphasis added). That the transition period had expired and that the two suits involved different rate periods are not significant changes for the determination of whether or not the state’s authority to set intrastate rates, after following the prescribed separations procedures, is preempted under the federal statute. Collateral estoppel should therefore bar HawTel’s attempt to relitigate in federal court the very issue decided against it by the Supreme Court of Hawaii. To decide otherwise is not only to commit the resources of this court to redundant litigation; it is also a contravention of those principles of comity which underlie the federal system.

. It is hard to escape the conclusion that, as in Louisiana, "what is really troubling [the appellees] is their sense that state regulations will not allow them sufficient revenues." 106 S.Ct. at 1902. While recognizing that concern, as the Court pointed out, "only Congress can rewrite the statute." Id.

. It should be emphasized that a decision by this panel that there was no enforceable order under 47 U.S.C. § 401(b) would not leave the telephone companies without any means of challenging the rate-setting of state rate-setting commissions. Apart from any federal constitutional claims, there are also a number of state grounds on which decisions or orders of state regulatory agencies may be challenged in state courts. See, e.g., Haw.Rev.Stat. § 91-14(g) (1976).