Public Utility Commission of Texas and the City of McKinney, Texas v. Southwestern Bell Telephone Company

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

ON MOTION FOR REHEARING

NO. 03-96-00717-CV

Public Utility Commission of Texas and The City of McKinney, Texas, Appellants

Southwestern Bell Telephone Company, Appellee

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 250TH JUDICIAL DISTRICT

NO. 95-09358, HONORABLE PAUL DAVIS, JUDGE PRESIDING

The district-court judgment dismissing the City of McKinney's cause of action rests upon a single theory--that the Commission was without subject-matter jurisdiction in Docket 11027; consequently the district court lacked such jurisdiction.⁽¹⁾ We decide, to the contrary, that the Commission possessed authority to hear and determine the dispute decided in Docket 11027. We decide no other issue. We should, in that connection, refer to several matters raised by SWBT in its motion for rehearing.

We do not, as SWBT suggests, conclude that SWBT agreed to pay the City of McKinney's "appellate" attorneys' fees. The Commission made that decision. We cannot and have not. Nor do we examine the correctness of the Commission decision. We decide simply that the Commission had jurisdiction to make a decision resolving the dispute. We believe the power was delegated to the Commission in PURA section 16 as a power incidental and necessary to the agency's exercise of its expressly delegated power and duty to adjudicate contested cases. We believe the power was also delegated to the Commission in Texas Government Code section 2001.056, authorizing agencies subject to the statute to dispose of an entire contested case by agreed settlement or stipulation; a fortiori they are authorized to dispose in like manner of a subsidiary issue of fact or law within a particular case, such as the disputed issue of attorneys' fees in this instance.⁽²⁾ We conclude the foregoing authority extends even to agreed settlements and stipulations made in rate cases; the relevant statutes do not distinguish rate cases from any other kind of contested case. And if disputes arise from such agreements and stipulations, after a final order has been issued in the contested case in which they were made, we believe the Commission may, depending on the nature of the dispute, decide the dispute as a regulatory matter under the cited statutes and under the agency's general power "to insure compliance with the obligations of public utilities." PURA § 37. This necessarily includes a power to decide what those obligations are in particular circumstances. We believe the present dispute comes within the Commission's power. As stated previously, however, there is before us at the present time no issue of how the Commission may enforce its decision if it is held ultimately to be free of error.⁽³⁾

We need not decide in this appeal the meaning and applicability of PURA sections 24 and 70.⁽⁴⁾ The parties' dispute as to the City of McKinney's claim for attorneys' fees in Docket 8585 undoubtedly arose from their different views as to the correct meaning of those statutes. As noted previously, however, the litigants in Docket 8585 may well have removed the dispute from Commission adjudication in that contested case because they wished to substitute the rights and obligations of their agreed settlement for any inferrable from PURA sections 24 and 70, avoiding thereby, for purposes of Docket 8585 at least, the Commission's authoritative decision construing the two statutes. In all events, the agreed settlement rendered irrelevant sections 24 and 70 insofar as the question of subject-matter jurisdiction is concerned.

In Docket 11027 the Commission expressly decided the question of subject-matter jurisdiction based upon the agency's interpretation of PURA sections 24 and 42. Insofar as subject-matter jurisdiction is concerned, we sustain the Commission's final order in Docket 11027 on a different basis--the authority delegated to the agency in PURA section 16 and Texas Government Code section 2001.056. Because the Commission possessed subject-matter jurisdiction under those statutes, it is immaterial if the agency misconstrued PURA sections 24 and 42 as SWBT contends. SWBT complains, however, that we erroneously uphold the Commission's final order on a basis other than that relied upon by the agency. As explained previously in our opinion, we must sustain the agency order on any legal basis shown in the record. The legal basis, in this instance, is PURA section 16 and Texas Government Code section 2001.056. We have not decided the question of subject-matter jurisdiction on any disputed factual basis not passed upon by the Commission.

SWBT suggests we erroneously conclude an administrative agency may adjudicate private contract rights. We recognize the long-standing doctrine reflected in such cases as Railroad Commission v. City of Austin, 524 S.W.2d 262, 281 (Tex. 1975). The agency record in the present case reveals, however, that the attorneys' fee agreement was more than a private agreement. It affected directly the public interest. The Commission's acceptance of the agreement, as a basis for excluding the issue of attorneys' fees from adjudication in Docket 8585, was necessary to give the agreement the administrative effect requested by the litigants. Based upon the Commission's acceptance of the agreement, the agency formulated and issued a final order in Docket 8585 fixing public utility rates. We have held PURA section 16 and Texas Government Code section 2001.056 vested authority in the Commission to take this administrative action. These statutes also placed in the Commission a power to decide as a regulatory matter the dispute that arose subsequently regarding the agreement, and to award an administrative remedy to rectify any administrative wrong and any resulting administrative consequences. We are not called upon now to decide the reasonableness of the Commission's chosen remedy or the lawfulness or sufficiency of the legal and factual conclusions stated by the agency in support of its order requiring SWBT to pay the City of McKinney $183,546.50. Nor do we decide how such an order may be enforced if it is ultimately sustained. See PURA § 71. These issues are for the district court to decide in the first instance. The district court could not reach them because it held, erroneously in our view, that the Commission lacked subject-matter jurisdiction.

SWBT suggests we erroneously conclude private parties may, by their agreement, confer subject-matter jurisdiction upon an administrative agency. It is a sufficient response to note that we have discussed at length the statutory grounds for our conclusion regarding subject-matter jurisdiction. The parties' agreement and any dispute arising therefrom are proper objects but not the source of the Commission's jurisdiction.

We overrule the motion for rehearing.

John Powers, Justice

Before Justices Powers, Jones and Kidd

Appellee's Motion for Rehearing Overruled

Filed: December 18, 1997

Publish

1. The district-court judgment states as follows:

It is the decision of this Court that the Commission has jurisdiction over expenses in a rate case so long as that case is pending, but when the [rate] case becomes final the jurisdiction over the matter of fees in that case ceases, just as the jurisdiction of the Commission ceases over any other matter pending before the Commission in that case.

2. It is difficult to imagine how an agency might conduct to a conclusion a complex contested case, such as a rate case, without any stipulations or agreed settlement as to some subsidiary issue of fact or law. And the agency's power to accept and act upon such stipulations or agreed settlement is meaningless, as a practical matter, if the agency is powerless to enforce them in some manner. The best discussion of the topic is found in 4 Stein, Mitchell and Mezines, Administrative Law § 23.01 (1991).

3. See PURA § 71 (attorney general, on Commission's request, shall bring a claim in court of competent jurisdiction to require public utility's compliance with agency order).

PURA section 24 requires a public utility to reimburse a municipality "for the reasonable costs of" its attorneys' fees "to the extent found reasonable by the commission." This implies, of course, that the Commission possesses at minimum the power to determine what is in fact a reasonable amount and the utility's obligation does not depend upon the municipality being a prevailing party in the "ratemaking proceedings before the commission or in court." PURA section 70, on the other hand, authorizes recovery of attorneys' fees by any party (a municipality or another) who prevails in a suit for judicial review on his claim that existing rates or those prescribed by the Commission are excessive. The prevailing party may, "in the same action," recover reasonable attorneys' fees for services furnished "before the commission and the court," in an amount "fixed by the [reviewing] court."

c interest. The Commission's acceptance of the agreement, as a basis for excluding the issue of attorneys' fees from adjudication in Docket 8585, was necessary to give the agreement the administrative effect requested by the litigants. Based upon the Commission's acceptance of the agreement, the agency formulated and issued a final order in Docket 8585 fixing public utility rates. We have held PURA section 16 and Texas Government Code section 2001.056 vested authority in the Commission to take this administrative action. These statutes also placed in the Commission a power to decide as a regulatory matter the dispute that arose subsequently regarding the agreement, and to award an administrative remedy to rectify any administrative wrong and any resulting administrative consequences. We are not called upon now to decide the reasonableness of the Commission's chosen remedy or the lawfulness or sufficiency of the legal and factual conclusions stated by the agency in support of its order requiring SWBT to pay the City of McKinney $183,546.50. Nor do we decide how such an order may be enforced if it is ultimately sustained. See PURA § 71. These issues are for the district court to decide in the first instance. The district court could not reach them because it held, erroneously in our view, that the Commission lacked subject-matter jurisdiction.