NO. 82-340
I N THE SUPREME COURT O THE STATE O F MONTANA
F
1983
THE MONTANA P W R COMPANY,
O E
a Mont. c o r p . ,
P l a i n t i f f and A p p e l l a n t ,
THE PUBLIC SERVICE COMMISSION,
a s a n a g e n c y o f t h e S t a t e o f Elontana,
D e f e n d a n t and R e s p o n d e n t .
APPEAL FROM: D i s t r i c t C o u r t of t h e F i r s t J u d i c i a l D i s t r i c t ,
I n a n d f o r t h e County o f Lewis & C l a r k ,
The H o n o r a b l e P e t e r G . Meloy, J u d g e p r e s i d i n g .
COUNSEL O F RECORD:
For Appellant:
Gough, S h a n a h a n , J o h n s o n & Waterman; Ronald Waterman
a r g u e d , H e l e n a , Montana
For Respondent:
E i l e e n S h o r e a r g u e d , H e l e n a , Montana
F o r Amicus C u r i a e :
Bon. Mike G r e e l y , A t t o r n e y G e n e r a l , H e l e n a , Montana
W i l l i a m H . M e l l o r , 111 a n d C o n s t a n c e F . B r o o k s ,
(Mountain S t a t e s L e g a l F o u n d a t i o n ) , D e n v e r , C o l o r a d o
Submitted: May 1 2 , 1983
Decided : October 2 7 , 1983
Filed:
OGI 2 7 1983
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
Montana Power Company (Montana Power) appeals from an
order of the District Court of the First Judicial District,
Lewis and Clark County. The District Court order denied
Montana Power's application for a writ of prohibition and
affirmed in part an order of the Public Service Commission
(Commission), which prohibited Montana Power from proceeding
with a proposed corporate reorganization. We reverse the
order of the District Court.
The issues presented on appeal are:
1. Can the Commission act summarily without notice or
hearing in prohibiting Montana Power from proceeding with the
establishment of a holding company while the Commission
investiga.tes the proposed reorganization?
2. Does the Commission have the power to prohibit
establishment of a holding company by Montana Power during
the investigation by the Commission?
3. Does the Commission have subject matter jurisdiction
to approve or disapprove the proposed reorganization?
Montana Power has proposed the formation of a new
corporation, Montana Energy Company, and the reorganization
of Montana Power to be accomplished by a reverse triangular
merger. Upon completion of the merger, Montana Energy
Company would become the sole shareholder of the common stock
of Montana Power. The common shareholders of Montana Power
would become shareholders of Montana Energy Company through a
share-for-share exchange. Following merger, Montana Power
would become a direct subsidiary of Montana Energy Company.
On February 23, 1982, the Boa.rd of Directors of Montana
Power voted to present the reorganiza.tion plan to the
shareholders at the annual meeting in May. On the following
day, February 24, 1982, Montana Power explained the proposed
reorganization to the Commission and advised the Commission
that shareholder a.pprova1 would be sought on May 4, 1982.
On March 1, 1982, the Commission instituted an
investigation of the reorganization plan and issued an order
prohibiting Montana Power from implementing the plan until
the investigation was completed. The order provided:
"1. The Commission staff shall hold a prehearing
conference at a time and place to be previously
noticed to the public through legal advertisements.
"2. The staff shall, at the prehearing conference
review with interested persons, the issues set out in
this order. Interested persons may propose additions
or deletions to those issues, as we11 as suggest
procedures to be followed in this Docket.
.
113 The Commission staff shall propose to the
Commission, following the prehearing conference, the
procedures to be followed and any issues not set out
in this Order to be considered in this Docket.
"4. The Commission staff shall schedule and notice a
public hearing to allow this Commission to take
testimony and receive public comments concerning
issues raised in this Docket.
"5. The Montana Power Company - prohibited from
is
taking any further steps preparing - -
for or
advancing the establishment of a holdinq compan
except for those actions thatTigEt be necessary tg
address the issues raised in this Docket, such as
preparation of testimony.
"6. A copy of this order shall be mailed to the
Montana Power Company, the Montana Consumer Counsel
and all intervening parties in Docket Nos. 80.4.2 and
81.6.57." (emphasis added)
The Commission issued this order without notice or hearing,
and without any opportunity for appearance by Montana Power.
No deadline was specified for the completion of the
investigation. No termination date was prescribed for the
order prohibiting action by Montana Power.
Following its unsuccessful attempt to invoke the
jurisdiction of this Court, Montana Power filed a complaint
in District Court on April 19, 1982, seeking a writ of
prohibition or injunction on the grounds that the
Commission's stay order was issued absent subject matter
jurisdiction and absent power to enjoin. The District Court
issued a preliminary order allowing the shareholder vote on
the reorganization plan. However, the court enjoined
implementation of the plan until "ten (10) days after entry
of an appropriate judgment." The shareholders voted and
approved the reorganization plan at the May 1982
shareholders' meeting.
The Commission refused to participate at the subsequent
show cause hearing. Commission counsel chose not to present
evidence or to cross-examine the three Montana Power
witnesses, who testified as to the possible effects of the
proposed reorganization. The Commission explained to the
District Court that it refused to participate because the
question of the Commission's subject matter jurisdiction over
the proposed reorganization was still pending before the
Commission. The Commission also argued that testimony was not
required because the issues raised by Montana Power involved
questions of law to be resolved by statutory interpretation.
As a result, the evidence submitted for consideration by the
District Court and this Court is limited to the
uncontradicted testimony of the witnesses for Montana Power.
Can the Commission act summarily without notice or
hearing in prohibiting Montana Power from proceeding with the
establishment of a holding company while the Commission
investigates the proposed reorganization?
The Montana Constitution guarantees equal protection of
the laws and due process to all persons. MONT. CONST. art.
11, 55 4 & 17. Al.1 persons found within the State of Montana
are subject to the jurisdiction of the courts; and
corporations are included in the definition of "person."
Rules 4A & 4B(1), M0nt.R.Civ.P. "A corporation is a 'person'
within the due process and equal protection clauses of the
Fourteenth Amendment to the U.S. Constitution." Mt. States,
Etc. v. Dept. of Pub. Serv. Reg. (Mont. 1981), 634 P.2d 181,
188, 38 St.Rep. 1479, 1487.
The power to act summarily by issuing an order
prohibiting action by a utility without a hearing is a
- 4 -
drastic power to be implied only where required for the
protection of the public. As noted by James 0 . Freedman,
Professor of Law, University of Pennsylvania:
" . . .- power - - summarily - - drastic -
The to act is a and
sensitive - - -to the injunctive power - -a court;
one, akin - of
it is granted to agencies, usually those having the
confidence of the legislature, only for the performance
of a limited number of tasks. Given the political
process by which administrative agencies are brought to
birth and the drastic nature of the power to act
summaril.y, it is justifiable to assume that a
legislature's failure to delegate summary authority was
not inadvertent. Whatever arguments - - - - in
can be made
favor of implying the existence in an agency of
articuEr powers n ~ t ~ ~ r e s splr~~ i s ~ y
or delegated,
2--
:
he are not appropriate - - power - - summarily.
to the to act
"Moreover, any assertion of authority to act summarily
potentially presents questions of constitutional
dimension, particularly with respect to the limitations
summary action may impose in the right to a hearing. By
enforcing a requirement of statutory authorization,
courts insure that they will confront these questions
only when the legislature has focused upon them as a
matter of policy and has unambiguously elected to
present them. " J. Freedman, Summary Action 2
Administrative Agencies, 40 University of Chicago Law
Review at 5-6 (1972) (emphasis added).
When a summary power is expressly granted, it is
ordinarily limited to situations where the public risks
avoided by the summary action outweigh the intrusions upon
legal rights which would normally follow. Even in cases
where a statute expressly grants the power of summary action,
constitutional rights still must be protected.
Here the Commission acted without notice and without an
opportunity for hearing on the part of Montana Power. That
type of procedure is in striking contrast to the notice and
hearing procedures required in the district courts when
restraining orders, preliminary injunctions and permanent
injunctions are sought under Title 27, Chapter 19, MCA.
Section 69-3-110(5), MCA specifies:
"In addition to the other remedies provided by this
chapter for the prevention and punishment of any
violation of the provisions thereof and all orders
of the commission, the commission may compel
compliance with the provisions of this chapter and
of the orders of the commission by proceedings in
mandamus, by injunction, or by other civil
remedies."
This section shows the clear legislative intent that the
Commission use the court system to seek enforcement by
injunction, as distinguished from issuing any injunctive type
order on its own part. Procedures to protect constitutional
rights to notice and hearing are manda-ted by Title 27,
Chapter 19, MCA, which governs issuance of injunctive orders
by the courts.
Our review of the public utility law discloses that the
legislature has not specifically addressed the topic with
which we are here involved, i.e. corporate reorganization.
Chapter 3 of Title 69, covering the regulation of utilities,
does not contain any specific procedural requirements
regarding notice or hearing. Neither do we find any provision
in the Administrative Rules of Montana which authorizes the
Commission to make a summary order without notice and
opportunity for a hearing.
We have also reviewed Title 27, Chapter 19, MCA,
entitled "Injunctions." Chapter 19 does not contain any
legislative provision specifically applying to corporate
reorganizations. By analogy, however, section 27-19-203, MCA
is of assistance. That section applies to an adjudicatory
proceeding or formal investigation by the Commission relating
to continuation or interruption of service. It authorizes the
district court to enter a restraining order prohibiting the
parties from acting in the manner complained of until the
Commission has rendered its decision. Thus, the legislature
has provided for issuance of a restraining order, during the
pendency of an investigation, without requiring proof on the
merits of the entire case prior to the granting of the order.
This is comparable to the present case where the Commission
concluded that Montana Power must be restrained for the
protection of the ratepayers pending its investigation.
While section 27-19-201, MCA pertains to injunctions
during the course of litigation, subsection (3) allows an
injunction when it appears that the adverse party threatens
to do some act which will tend to render the judgment
ineffectual. This indicates legislative intent that an
injunction might be issued in a fact situation comparable to
the present case, where the Commission has contended that
permitting Montana Power to reorganize would render the
Commission's final determination ineffective.
In this case, a conference was conducted by the
Commissioners on their own motion without notice to Montana
Power. The order initiating the investigation of the extent
of the Commission's jurisdiction and the ramifications of the
proposed reorganization was issued on March 1, 1982. The
order contained provisions as to a prehearing conference,
procedures during investigation, and a public hearing.
Montana Power was ordered not to take any steps in advancing
its reorganization plan. The duration of this prohibition
was not specified in the order. Counsel informed this Court
during oral argument that the Commission's investigation had
not been completed and no date had been set by the Commission
for its final decision. The restraint on Montana Power has
been in effect for over a year and a half. The response of
the Commission to questioning regarding the restraint was to
challenge Montana Power to show that damages had resulted
from the restraint. Apparently the Commission does not feel
any constitutional rights of Montana Power have been
infringed.
Having found no authority in either the Montana Code
Annotated or the Administrative Rules of Montana in support
of the Commission's power to issue, without notice or
hearing, an order prohibiting certain conduct for an
indefinite period, we look to case law. This is an issue of
first impression in Montana.
As Justice Frankfurter observed, fairness of procedure
is "due process" in the primary sense.
"Due process is not a mechanical instrument. It is
not a yardstick. It is a process. It is a
delicate process of adjustment inescapably
involving the exercise of judgment by those whom
the Constitution entrusted with the unfolding of
the process.
". .. The precise nature of the interest that has
been adversely affected, the manner in which this
was done, the reasons for doing it, the available
alternatives to the procedure that was followed,
the protection implicit in the office of the
functionary whose conduct is chall-enged, the
balance of hurt complained of and good accomplished
- these are some of the considerations that must
enter into the judicial judgment." Anti-Fascist
Committee v. McGrath (1951), 341 U.S. 123, 163, 71
S.Ct. 624, 644, 95 L.Ed. 817, 849 (Frankfurter, J.,
concurring) .
"The fundamental requirement of due process is the
opportunity to be heard 'at a meaningful time and in a
meaningful manner."' Mathews v. Eldridge (1976), 424 u.S,
319, 333, 96 S.Ct. 893, 902, 47 L.Ed.2d 18, 32, citing
Armstrong v. Manzo, (1965) 380 U.S. 545, 552, 85 S.Ct. 1187,
1190, 14 L.Ed.2d 62, 65. The notice must be reasonably
calculated to inform parties of proceedings which may
directly and adversely affect their legally protected
interests. Walker v. Hutchinson City (1956), 352 U.S. 112,
Administrative agencies are not exempt from the
constitutional restraints of due process requirements. Long
ago the United States Supreme Court recognized that due
process protections cannot be compromised based on an
assertion that expediency was necessary.
"Regulatory commissions have been invested with
broad powers within the sphere of duty assigned to
them by law. Even in quasi-judicial proceedings
their informed and expert judgment exacts and
receives a proper deference from courts when it has
been reached with due submission to constitutional
restraints. Indeed, much that they do within the
realm of administrative discretion is exempt from
supervision if those restraints have been obeyed.
All the more insistent is the need, when power has
been bestowed so freely, that the 'inexorable
safeguard' of a fair and open hearing be maintained
in its integrity. The right to such a hearing is
one of 'the rudiments of fair play' assured to
every litigant by the Fourteenth Amendment as a
minimal requirement. There can be no compromise on
the footing of convenience or expediency, or
because of a natural desire to be rid of harassing
delay, when that minimal requirement has been
neglected or ignored. " Ohio Bell Tel. Co. v.
Comm'n. (1937), 301 U.S. 292, 304-05, 57 S.Ct. 724,
730-31, 81 L.Ed 1093, 1101-02 (citations omitted).
Due process rights in an action involving a public
utility commission were considered in Southwest. Bell Tel.
Co. v. Public Util. Com'n (Tex.Civ.App. 1981), 618 S.W.2d
130. The Texas Public Utility Commission issued a summary
order, without hearing, ordering a utility company to cease
conducting a certain experiment pending an evidentiary
hearing on whether the Commission had jurisdiction to
prohibit the experiment. In preparation for the experiment,
the utility had notified the Commission of its plan, expended
large amounts of money and transfered employees.
As is the case here, the Commission's summary order was
challenged when the utility filed an action for injunctive
relief and declaratory judgment on the ground that the
Commission lacked authority to issue the summary order. On
appeal, the appellate court reversed the trial court and held
that the legislature had not given the Commission power by
implication to enter, without prior hearing, orders that
prohibit any conduct by a public utility. The Court noted
that the entire tenor of the Texas Administrative Procedure
Act was antithetical to any power in the Commission to issue
summary orders that substantially affect legal rights or
duties.
"The grant of such power is ordinarily limited to
situations where the public risks avoided by
summary action outweigh the unconstitutional
invasions that would normally follow. Even when
such a justification exists, the power to act
summarily and without prior hearing and
adjudication must be directly, expressly and
clearly given by the Legislature to the agency."
Southwest. Bell, 618 S.W.2d at 134.
We note that the Utility Commission appealed to the Texas
Supreme Court, which dismissed the case upon being advised
that the cause had become moot. We cite the appellate
court's decision for its factual similarity to the instant
case and its legal analysis. We note that the Texas Supreme
Court vacated both the trial court's and the lower appellate
court's opinions "without regard to the merits of the cause
or the views expressed in the opinion of the court of civil
appeals." Public Util. Com'n v. Southwest. Bell el. Co.
(1981), 623 S.W.2d 316.
The grant of summary power should be limited to
situations where the public risk to be avoided by the summary
action outweighs the limitation placed on the constitutional
rights of the parties. Here there was no time problem. The
order of the Commission was dated March 1, 1982. Protection,
if any, was needed against the next step in the
reorganization process, the stockholders' vote of approval
scheduled for May 4. The Commission had more than sufficient
time to proceed to court had it chosen to do so. Other than
the claimed need for protective action, the Commission has
advanced no justification to explain its disregard of the due
process rights of the utility.
As pointed out by Justice Frankfurter in McGrath, due
process is not a yardstick but a delicate process involving
the exercise of judgment, which requires a balancing of the
hurt complained of and the good accomplished. The Commission
has completely failed to demonstrate a hurt which requires
summary action on its part without regard to the
constitutional due process rights of the Montana Power
Company. We have found no statute, regulation,
administrative rule or case from which to conclude that the
Commission may suspend due process protections where, in the
opinion of the Commission, doing so would be in the public
interest.
We hold that under the facts of this case the Commission
disregarded the due process rights of Montana Power in
issuing its summary order without notice or hearing.
11.
Does the Commission have the power to prohibit establishment
of a holding company by Montana Power during the
investigation by the Commission?
In general, property devoted to public use or to a use
in which the public has an interest ca.n be controlled by the
public for the common good. State ex rel. Mt. States T. & T.
Co. v. District Court (1972), 160 Mont. 443, 447, 503 P.2d
526, 529. In Montana, public utilities are regulated by the
Public Service Commission through the exercise of powers
granted by the Legislature. "[Tlhe Commission is a creature
of, owes its being to, and is clothed with such powers as are
clearly conferred upon it by statute." Great Northern
Utilities Co. v. Public Service Com'n. (1930), 88 Mont. 180,
203, 293 P. 294, 298. The Commission has no inherent common
law powers. City of Polson v. Public Service Commission
(1970), 155 Mont. 464, 473 P.2d 508.
"It has only limited powers, to be ascertained by
reference to the statute creating it, and
reasonable doubt - - - grant - - particular
as to the of a
power - -be resolved against the existence - -
will of the
power. Collier on Publ-ic Service Companies,
404-405." State v. Boyle (1921), 62 Mont. 97, 102,
204 P. 378, 379 (emphasis added).
Section 69-I--102, MCA defines the role of the
Commission:
"A public service commission is hereby created,
whose duty it is to supervise and regulate the
operations of public utilities Such. ..
supervision and regulation shall be in conformity
with this title."
Legislative intent that the Commission supervise and regulate
public utilites in conformity with Title 69 is reiterated in
section 69-3-102, MCA:
"The commission is hereby invested with full power
of supervision, regulation, and control of such
public utilities, subject to the provisions of this
chapter . . .."
While full power of supervision, regulation and control of
utilities is granted to the Commission, the legislature has
provided that this power does not include judicial powers.
Section 69-3-103(1), MCA, provides:
"In addition to the modes of procedure hereinafter
prescribed in particular cases and classes of
cases, sa.id commission shall have power to
prescribe rules of procedure and to do all thinqs
necessary and c ~ n v ~ n i e n t the exercise of the
in
powers conferred by this chapter upon the
commission; provided that nothing - - in this chapter
shall be construed - vesting judicial powers -
as on
. . ."
said c o ~ i s s i o n (emphasis added).
The Commission claims implied power to enjoin the
reorganization of Montana Power, pending investigation, under
the legislative grant of "full power of supervision,
regulation, and control" in section 69-3-102, MCA. The Power
Company argues that the Commission exceeded its authority by
issuing an order, on its own motion without notice or
hearing, enjoining Montana Power from implementing its
decision to reorganize.
The Commission's right to regulate rates and to
supervise services is undisputed. See sections 69-3-108 and
69-3-301 through -330, MCA. The scope of the Commission's
jurisdiction over corporate reorganization and the existence
of Commission power to enjoin sua sponte are at issue here.
Since no statutory provision expressly authorizes
Commission involvement in corporate reorganization or in the
formation of new corporations, we look to Title 69, Chapter
3, MCA as a whole, to determine the scope of the Commission's
powers. Part 1 of Chapter 3 defines "public utility" and the
Commission's general powers; Part 2 specifies the
requirements under which public utilities must function; Part
3 sets forth the Commission's ratema.king procedures; and Part
4 defines procedures for review of Commission actions.
Section 69-3-106 (1), MCA, entitled "Supervision of
Management of Public Utilities," defines the legislature's
grant of general investigatory powers to the Commission:
"The commission shall have authority to inquire
into the management of the business of all public
utilities, shall keep itself informed as to the
manner and method in which the same is conducted,
and shall have the right to obtain from any public
utility all necessary information to enable the
commission to perform its duties."
Subsection (2) of this statute permits the Commission to
inspect books and records and to examine officers, agents and
employees of the utility. Subsection (3) authorizes the
Commission to order production of records. Both parties here
agree that section 69-3-106, MCA a.uthorizes the Commission to
investigate Montana Power's proposed reorganization and
determine how the reorganization might affect future rates
and services.
Section 69-3-110, MCA is significant in that it
specifies the manner in which public utility law is to be
enforced by the Commission:
"(1) The commission shall inquire into any neglect
or violation of the 1a.ws of this state by any
public utility . . ..
The commission shall enforce
the provisions of this chapter and report all
violations thereof to the attorney general.
"(2) All rates, fares, charges, classifications,
and joint rates fixed by the commission shall be
enforced and are prima facie lawful from the date
of the order until changed or modified by the
cornmi-ssion or in pursuance of part 4. All rules,
practices, and services prescribed by the
commission shall be enforced and enforcement
actions shall be brought pursuant to the provisions
of part 4 until the rules, practices, or services
are changed or modified by the commission upon a
satisfactory showing being ma.de.
"(3) Upon the request of the commission, it is the
duty of the attorney general or the prosecuting
attorney of any county to aid in any investigation,
prosecution, hearing, or trial had under the
provisions of this chapter a.nd to institute and
prosecute all actions or proceedings necesary for
the enforcement of this chapter.
" (4) Any forfeiture or penalty herein provided
shall be recovered and suit thereon shall be
brought in the name of the state in the district
court of any county having jurisdiction of the
defendant. The attorney general shall be the
counsel in any proceeding, investigation, hearing,
or trial prosecuted or defended by the commission,
as also shall any prosecuting attorney selected by
the commission or other special counsel furnished
the commission in any county where such action is
pending.
"(5) In addition to the other remedies provided by
this chapter for the prevention and punishment of
any violation of the provisions thereof and all
orders of the commission, the commission may compel
compliance with the provisions of this chapter and
of the orders of the commission & proceedings in
mandamus, injunction, or 5 other c i v z
remedies." (emphasis added)
Legislative intent that the Commission use the court system
is clear.
Refusal to comply with a commission order, issued
pursuant to section 69-3-106, MCA, subjects the utility to
liability for a fine. The fine is to "be recovered in a
civil action" in which the Commission would be the
complaining party. Section 69-3-206 (2), MCA. Here
legislative intent that the Commission utilize the court
system is again obvious, since a civil action can only be
commenced by filing a complaint with the court. Rule 3,
M0nt.R.Civ.P.
Other remedies provided for in Part 2 ("Requirements of
the Public Utilities") of Chapter 3 include: (1) a civil
action to recover penalty payments for failure to make
reports or permit examination of utility records (section
69-3-208, MCA) ; (2) a civil action to recover penalty
payments for violation of safety regulations (section
- 14 -
69-3-207, MCA) ; and (3) court enforcement of penalties for
violations of "any lawful requirement or order made by the
commission or any court" (section 69-3-209, MCA) .
Legislative intent that the Commission use the court system
to enforce its requirements, regulations and orders is
evident from the language of sections 69-3-206 (2) and
-207(2), both of which provide:
"Such fine sha.11 be recovered in a civil action
upon the complaint of the commission in any court
of competent jurisdiction."
It is anomalous to suggest that the Legislature granted to
the Commission implied power to enjoin a corporate
reorganization while requiring the same Commission to go to
court in order to collect a $100 fine.
The enforcement provisions (sections 69-3-110, 69-3-206,
-207 and -209, MCA) do not specifically extend the
Commission's power to inquire into management, as defined in
section 69-3-106, MCA. None of these provisions authorizes
or suggests that the Commission should enforce its orders by
temporary restraining order or
' injunction issued by the
Commission itself.
Part 3 ("Ratemaking Procedures") of Chapter 3 provides
for the filing of schedules of rates, tolls and charges,
review by the Commission, and processing of complaints from
the public. Section 69-3-321 (1), MCA permits the Commission
to investigate any complai-ntmade against a public utility by
a person or entity that is "directly affected" by the
utility's rates, tolls, charges, schedules, regulations,
measurements, practices, acts or service. Section 69-3-324,
MCA authorizes the Commission to initiate an investigation
without a formal complaint by an affected party:
"The commission may at any time, upon its own
motion, investigate any of the rates, tolls,
charges, rules, practices, and services and after a
full hearing as provided in this part may make by
order such changes as may be just and reasonable,
the same as if a formal complaint had been made."
Again, this initiation of investigation is limited to rates,
tolls, charges, rules, practices and services.
In Part 4 ("Review of Commission Actions") I the
legislature authorized district courts to issue injunctive
relief from commission orders and to review the
reasonableness and lawfulness of such orders. Like the
enforcement provisions in Parts 1 and 2, the review
provisions of Part 4 refer the parties to the court system.
Section 69-3-402, MCA specifies who may seek relief from
commission orders. Section 69-3-403 (1), MCA authorizes the
district courts to review such orders and to issue injunctive
relief upon a proper showing:
"Any party in interest, being dissatisfied with the
order of the commission fixing any rate, fare,
charge, classification, or joint rate or any order
fixing or prescribing any rule, practice, or
service, may apply to the district court for an
injunction, staying and suspending the operation of
the order of the commission pending the final
determination of the reasonableness and lawfulness
of said order in the courts. Upon proper showing
- injunction shall - issued
an be such court."
(empha.~ added)
is
Sections 69-3-110(5) and 69-3-403(1), MCA are the only
statutes in the "Regulation of Utilities" chapter of Title 69
that deal with the subject of injunctions. As noted above,
neither of these statutes grants a.uthority to the Commission
to enjoin utilities. Both statutes direct the parties to the
district court. The Commission's standing to seek civil
remedies and its ratemaking authority are the only tools
specifically provided by sta.tute as methods by which the
Commission may supervise, regulate and control utilities.
Section 69-3-102, MCA invests the Commission with "full
power of supervision, regulation, and control" of public
utilities. The Commission, therefore, has discretion in
choosing the means by which it will accomplish its functions.
It does not, however, have limitless power or legislative
prerogative. Having analyzed the scope of the powers
statutorily granted to the Commission, we find no basis for
respondent's contention that the legislature, by implication,
has given the Commission power to prohibit corporate
reorganization by its own order.
The legislature's intent that the Commission, public
utilities and affected parties use the courts is expressed in
all four parts of Chapter 3 of the Public Utilities Act. Use
of the court system provides a necessary check and balance.
The legislature has provided a procedural framework that
should not be abandoned merely because the matter to be
investigated by the Commission was not specifically addressed
by the legislature.
Excepting orders prohibiting termination of service
pending hearing on a consumer complaint, nothing in Chapter 3
indicates legislative intent to grant to the Commission broad
power to issue injunctions or orders of that type. On the
contrary, those sections that d-eal specifically with the
subject of injunctions expressly direct the Commission to
the district courts.
In addition, the legislature has specified that, upon
motion of the Consumer Counsel, interested persons or their
legal representatives, a district court may enter a
restraining order prohibiting a utility from engaging in a
certain course of conduct pending a. formal investigation.
Such a restraining order may become an injunction for the
duration of the proceeding before the Commission. Section
27-19-203, MCA. Although this section applies to
"continuation or interruption of service," it illustrates
clear legislature intent that the Commission apply to the
court for restraining orders and injunctions, rather than
issue such orders itself.
In summary, the legislature has concluded that the
Commission does not have judicial powers and has consistent1.y
set forth its view that enforcement of the Public Utilities
Act by the Commission is to be sought through court
injunctions or other court process. The Commission argues
that the possibility of irreversible or irreparable harm to
ratepayers warranted its conduct in prohibiting further
action by Montana Power and that it is reasonable to infer
such apower in order to protect the ratepayers. That
argument disregards the remedies which are granted to the
Commission. As previously mentioned, section 6 9 - 3 - 1 1 0 ( 5 ) ,
MCA provides that the Commission may compel compliance with
the provisions of the chapter by injunction from the district
court.
On March 1, 1982, the Commission was advised of the
reorganization plan. The next step in that reorganization
plan was to submit the question to the Montana Power
stockholders on May 4, 1982. This left ample time for the
Commission to proceed to seek an injunctive order. Following
appropriate notice to Montana Power and a hearing at which
the Commission could present evidence showing the possibility
of irreversible and irreparable harm from the corporate
reorganization, the District Court could properly have issued
an injunction, if the evidence were sufficient to move the
discretion of the court to restrain further steps in the
reorganization.
We conclude that the statutes of Montana do not
expressly or by implication confer upon the Commission the
power to restrain or enjoin the establishment of a utility
holding company during investigation. The Commission has
failed to show any need for its exercise of such a summary
power. Adequate means for prohibition and restraint are
provided in the court system. We further conclude that the
- 18 -
reasonable doubt as to the grant of the summary power to the
Commission will be resolved against the existence of the
power. We hold that the Commission does not have the summary
power by its own order to prohibit or restrain reorganization
during its investigation.
111.
In the hearing before the District Court, no evidence
was submitted in behalf of the Commission, or otherwise,
showing any factual need for the prohibition or restraint.
The only evidence submitted was that in behalf of Montana
Power. Had the Commission chosen to submit evidence to
substantiate its contentions, it might have been appropriate
for the District Court to enter an order restraining the
implementation of the reorganization. In the absence of a
factual basis for such a conclusion, the order of the
District Court cannot be sustained. Ironically, the District
Court ruled that it had no factual basis on which to exercise
its own injunctive powers; yet, it concluded that the
Commission had power to enjoin without a demonstrated fa.ctual
basis and affirmed the Commission's stay of the
reorganization. We hold that the District Court should have
granted the writ of prohibition against the Commission.
IV.
The last issue is whether the Commission has subject
matter jurisdiction to approve or disapprove the proposed
reorganization. We recognize that this question is the
central issue in the proceeding taking place before the
Commission pursuant to its order of March 1, 1982. We
therefore conclude that it would be premature for this Court
to attempt to rule on that issue. That issue will not be
ripe for our consideration until the decision by the
Commission in its own proceeding and subsequent proceedings
in the District Court. We therefore do not rule on Issue 3.
- 19 -
The judgment of the District Court is reversed and the
cause is remanded for the entry of an appropriate writ of
prohibition against the Public S
We concur:
3 ~dL@*&j
4
Chief Justice
Mr. Justice Frank B. Morrison, Jr. dissents as follows:
I respectfully dissent from all aspects of the
majority's opinion. It is abundantly clear to me that if the
Public Service Commission's statutory powers are to be at all
meaningful, the Commission must have the authority to issue
orders deemed essential for exercising those powers. The
March 1, 1.982, order by the Commission, which prohibits
Montana Power from implementing its proposed reorganizational
plan pending an investigation by the Commission of the plan
and its effects, is such an order.
Granted, there is no express statutory provision giving
the Commission the power to issue, without notice or hearing,
that order. But we should not strictly limit the
Commission's powers to those expressly granted. The
legislature can not possibly foresee every circumstance under
which the Commission will exercise its express powers.
Therefore, we have previously, and should continue to
recognize that the legislature has also, by implication,
given the Commission the powers required to carry out its
express powers.
"But the powers which an officer, commission or
department may exercise are not confined to those
expressly granted by the Constitution or statutes
of the state. 'In addition to powers expressly
conferred upon him by law, an officer has by
implication such powers as are necessary for the
due and efficient exercise of those expressly
granted, or such as may be fairly implied
therefrom. But no power will be implied other than
those which are necessary for the effective
exercise and discha.rge of the powers and duties
expressly conferred.' (46 C.J. 1032.)" ~uillot*
v. State Highway Commission (1936), 102 Mont. 149,
153-154, 56 P.2d 1072, 1074.
To reaffirm this holding would not be contra to any case
wherein we have held the Commission to be granted only those
powers expressly conferred upon it by the legislature. See
for example City of Polson v. Public Service Commission
(1970), 155 Mont. 464, 473 P . 2 d 508. We would not be giving
the Commission new powers, as such. Rather, we would be
giving it the tools needed to implement the powers expressly
conferred upon it. " .. . no powers will be implied other
than those necessary for the effective exercise and discharge
of the powers and duties expressly conferred." State ex Rel.
Dra-gstedt v. State Board of Education (1936), 103 Mont. 336,
338, 62 P.2d 330, 331-332.
The powers expressly conferred upon the Commi.ssion are
broad. Section 69-3-102, MCA, gives the Commission the power
to supervise, regulate and control public utilities. Section
69-3-108, MCA, and Part 3 of Chapter 3, Title 69, MCA, give
the Commission the specific authority to supervise, regulate
and control the services provided and the rates implemented
by public utilities. Section 69-3-324, MCA, permits the
Commission to initiate its own investigation of "any of the
rates, tolls, charges, practices, and services" of a public
utility. And finally, section 69-3-106 (1), MCA states:
"Supervision of management of public utilities.
(1) The commission shall have authority to inquire
into the management of the business of all public
utilities, shall keep itself informed as to the
manner and method in which the same is conducted,
and shall have the right to obtain from any public
utility all necessary information to enable the
commission to perform its duties."
The Commission wishes to investigate, pursuant to
section 69-3-324, MCA, the effects of Montana Power's
proposed reorganiza.tion on its rates and services. It is
undisputed that the Commission is expressly granted the
authority to do so. It should also be undisputed that in
order for such an investigation to be meaningful, any
reorganization by Montana Power must be stayed, pending
completion of the investigation. Otherwise, the results of
the investigation might very well be moot, and the powers
expressly bestowed upon the Commission rendered useless.
For example, an investigation without such an order may
disclose that the reorganization will adversely affect
Montana Power's rates and services, but that the
reorganization has already resulted in a holding company
which insulates the individual companies from the
Commission's control. The people of Montana would then lack
any recourse against the adverse rates and services. Surely
the legislature did not intend such a consequence.
"When 'one devotes his property to a use in which
the public has an interest, he in effect grants to
the public an interest in that use, and must submit
to be controll..ed by the public for the common good
to the extent of the interest he has thus
created.'" Great Northern Utilities Co. v. Public
Service Commission (1930), 88 Mont. 180, 205, 293
P. 294, 298, quoting Lord Chief Justice Hale, and
approved by the Supreme Court in German Alliance
Ins. Co. v. Lewis (1914), 233 U.S. 389, 34 S.Ct.
612, 58 L.Ed. 1011.
The majority considers the proper recourse for the
Commission to be the judicial system. Again, I cannot agree.
Section 69-3-110(5), MCA, sets forth when the Cornmrnission may
seek judicial action:
"(5) In addition to the other remedies provided by
this chapter for the prevention a.nd punishment of
any violation of the provisions thereof and all
orders of the commission, the commission may compel
compliance with the provisions of this chapter and
of the orders of the commission by proceedings in
mandamus, by injunction, or by other civil
remedies."
The Commission has no standing to seek judicial action here
because, unlike the examples cited in the majority opinion,
the purpose of this order is not to compel compliance with
any provision of Chapter 3, Title 69, MCA, nor is it to
compel compliance with any order issued by the Commission.
Its purpose is merely to stay Montana Power's reorganization,
pending an authorized investigation by the Commission.
Even if the Commission did have standing to seek a
judicial remedy, none of the judicia.1 remedies would be
appropriate. In order to obtain a preliminary injunction or
a restraining order, the Commission would have to present
evidence showing the possibility of irreversible or
irrepara-ble harm due to the reorganization. Section
27-19-201(2), MCA. If the Commission could have done that,
there would have been no need for the freeze order because
the investigation would have been practically complete. In
addition, a temporary restraining order would be of no
benefit to the Commission because it would last only ten
days.
I must also take exception with the majority's statement
that the Commission's order is actually a judicial order and
therefore inappropriately issued by an administrative agency.
A four-part test has been adopted by the state of
Washington to distinguish legislative-type activities from
judicial actions.
(1) Whether the court could have been charged in
the first instance with the responsibility of
making the decision the administrative body must
make;
(2) Whether the function the administrative agency
performs is one that courts have historically been
accustomed to performing and had performed prior to
the creation of the administrative body;
(3) Whether the action involves the application of
existing law to past or present facts for the
purpose of declaring or enforcing liability rather
than reflecting a response to changing conditions
through the enactment of a new law of prospective
application.
(4 Whether the action resembles the ordinary
business of courts as opposed to that of
legislators or administrators.
Francisco v. Board of Directors (1975), 85 Wash.2d 575, 537
P.2d 789; reaffirmed in Standow v. City of Spokane (1977), 88
Wash.2d 624, 564 P.2d 1145, appeal dismissed 434 U.S. 992, 98
S.Ct. 626, 54 L.Ed.2d 487.
Under this test, the order of the Commission is clearly
not judicial and the Commission did not exceed the limits of
its powers in issuing it. I find:
1. The Commission has the initial responsibility for
determining whether actions by public utilities affect their
rates or services.
2. The courts have never performed that function,
except to review any initial administrative decision by the
Commission.
3. There has been no declaration or enforcement of
liabilitv. This is an order which would be applied
prospectively. Therefore, it is more a legislative action
than a judicial action. Strumsky v. San Diego County
Employees Retirement Ass'n (1974), 112 Cal.Rptr. 805, 520
P.2d 29.
4. The action clearly resembles that of administrators.
The foregoing responds to that which is set forth in the
majority opinion for the guidance of counsel in these
proceedings, or, in other words, to the dictum. The holding
of the majority is that the Commission disregarded the
constitutional due process rights of Montana Power when it
issued its summary order without notice or hearing.
Due process rights attach when any person is deprived of
life, liberty or property. A corporation is included in the
term "person". "The right to carry on a lawful business is a
property right; due process requires that it not be
unreasonably or unnecessarily restricted. U.S. Const.,
Amend. XIV, Sec. 1; 1972 Mont. Const. Art. 11, Sec. 17."
(emphasis supplied) Billings Assoc. Plumbing, Heating &
Cooling Contractors v. State Board of Plumbers (1979), 602
P.2d 597, 600, 36 St.Rep. 1996, 1998-1999.
Montana Power has failed to show that its right to carry
on a lawful business has been unreasonably or unnecessarily
restricted. That right has not been restricted. Montana
Power remains free to carry on its business as it has for
years, pending completion of the Commission's investigation.
Further, there has, as yet, been no determination that
Montana Power's proposed reorganization is legal. Therefore,
Montana Power could not possibly have proved that the
temporary stay of its reorganization restricted its right to
"carry on a lawful business." Since the Commission's order
does not restrict a protectible interest, no notice or
hearing was required prior to the issuance of the order.
Finally, with respect to the due process issue, I
reemphasize that the order merely requires Montana Power to
maintain its management system "a.s is", pending completion of
the Commission's investigation. The purpose of the
investigation is to determine whether the Commission has
jurisdiction over Montana Power's proposed reorganization.
Exercise by an agency of its power to determine its
lurisdiction does not require a hearing. Marshall v. Able
Contractors, Inc. (9th Cir. 1978), 573 F.2d 1055.
The opinion of the majority, with inadequate legal
bases, essentially strips the Commission of any ability to
effectively exercise the powers expressly granted it by the
legislature. The majority opinion reserves to another day
the issue of whether the Public Service Commission can
ultimately stop the reorganization. I predict that issue
will become moot by reason of fact accomplished. If
reorganization prevents the P.S.C. from examining the price
Montana Power Company pays its subsidiary for coal then the
Montana ratepayer will be the loser and the court system will
have sanctioned the victimization. I will not be a party to
this result.
. 9 -
iono or able
1 . 1 .
hich.a&'l H: ~ e k d' ~ ,
~istrictJudge, sitting in
place of Mr. Justice John C\. Sheehy, disse~ting:
I would affirm the decision of the District Court. The
March 1, 1982 order of the Public Service Commission prohibited
Montana Power Company from implementing its reorganization
plan pending an investigation by the Commission to determine
whether it would have jurisdiction over the plan.. under these
circumstances, the order was a proper exercise of the Commission's
regulatory authority.
The Plontana legislature has invested the Commission "with
full power of supervision, regulation, and control of (Montana
Power), subject to th.e provisionsof (Chapter 3 of Title 69,
PICA) ...I. Section 69-3-102, MCA. Provisions of Chapter 3
give the Commission specific powers of regulation and control
over services provided and rates imposed by PZontana Power. See
sections 69-3-108 and Part 3 of Chapter 3, Title 69, MCA. On
the other hand, it may not have the power to correct or to
neutralize a util.itylsabuses of its corporate, managerial rights
if the reorganization proposed has already taken place. Because
this corporate plan has the potential to irreparably impair
Montana Power's services, or to insulate decisions bearing
upon power rates from the control and supervision of the Comnis-
sion, and because these potential effects are clearly within
the Conmission's regulatory authority, an investigation before
the fact is proper, warranted, and also within the Commission's
authority.
The Commission by its order has not substituted or attempted
to substitute its own judgment for that of Montana Power's
3oard of Directors, as no decision regarding corporate reorgani-
zation has been made by the Commission. When such a decision
is made, if it is, Montana Power can then seek judicial relief
from any claimed harm. In the meantime, however, the Commission
must be allowed. to exercise its regulatory authority in the first
instance to determine the nature and extent of any adverse im-
pact which the reorganization as proposed would have upon rates
or services, and the scope of its own jurisdiction in regulating,
controlling, or even prohibiting corporate endeavors if harmful
effects can fairly be anticipated, and are determined to be
material.
As indicated, the investigation would result only in a
determination of whether the Commission has jurisdiction over
Montana Power's reorganization plan. it is a well-established
principle of law that an administrative agency has the right
and duty, in the first instance, to determine the extent of
its own jurisdiction over actions by companies which cone under
its reach. Marshall v. Burlington Northern, Inc. (9th Cir.
19731, 595 F.2d 511; Marshall v. Able Coctractors, Inc. (9th
Cir. 1978), 573 F.2d 1055.
Allowing Montana Power to proceed with its reorganization
while the Commission investigates to determine its jurisdiction
could result in a holding company structure which would insulate
the utility's rates and services from further review by the
Commission. The Coriunission's statutorily-granted regulatory
powers would thereby be rendered totally useless. Without
the autlnority to stay the reorganization pending its "jurisdic-
tion" investigation, the Commission is stripped of any ability
it night otherwise have to control Montana Power for the
common good.
"Public service 'commissions are generally em-
powered to, and are created with the intention
that they should, regulate public utilities
insofar as the powers and operations of such
utilities affect the public interest and welfare.'
64 &i.Jur.2dr Public UtilitiesrS232, p. 740."
Northwestern Bell Telephone Co. v. Hagen
(N.D. 1975), 234 N.W.2d 841, 845.
To reiterate, the Commission's order assists in the
implementation of its right to determine whether it has juris-
diction over Montana Power's reorganization. The Commission
has not sought unlimited authority over Montana Power's manage-
rial decisions, nor does the District Court's decision confer
any such authority upon the Commission. Rather, the Commission
is merely attempting to effectively exercise its authority,
under section 69-3-1Cg6(1), MCA, to inquire into the rmnagenent
of the business of Montana Power.
The exercise of that authority would be an empty ceremony
if, while such an inquiry were being conducted, the Commission
could not prohibit execution of the proposed management d-ecision.
This is particularly true where the decision, once made, may
become incapable of being reversed by the Commission and may
have permanent and deleterious effects upon the utility's rates
and services.
Finally, Montana Power has neither alleged nor demonstrated
any irreparable harm as a result of the Commission's order.
No actual changes in the reorganization plan can be mandated
by the Commission without a full hearing, after which Montana
Power could seek judicial relief from any claimed harm.
Sections 69-3-324 through 69-3-326, P I A
IC. Thus, Montana Power's
due process rights were not violated by the Commission's order
and will be fully protected in the future.
The March 1, 1982 order by the Public Service Commission
was in furtherance of the Commission's responsibility to pro-
tect "future, as well as present, consumer interests." In re
Permian Basin Area Rate Cases, 390 U.S. 747, 798, 88 S.Ct. 1344,
1376, 20 L.Ed.2d 312, 353-354; reh. den. 392 U.S. 917, 88 S.Ct.
2050, 20 L.Ed.2d 1379 (1968). It should be upheld.
Mr. Justice Daniel J. Shea, dissenting:
I agree generally with the views of Justice Morrison
expressed in his dissent, and also in general with the views
of Judge Keedy. I also add my own views in dissenting from
the majority opinion stripping the Public Service Commission
of its implied powers to maintain the status quo until a
decision on the question of subject matter jurisdiction has
been made.
The majority decision on the issues raised is baffling.
In deciding issue 1, the contention that the Commission could
not issue the restraint without notice and hearing to the
power company, the majority impliedly holds that the
Commission does have the power to issue an order of restraint
if it complied with the procedural safeguards of notice and
hearing. For if the Commission could not issue a temporary
order of restraint, notice and hearing would be an idle act.
But then the majority decides just the opposite on issue 2,
the question of whether the Commission does have authority to
issue a temporary order of restraint. Here the majority
holds that the Commission has no such authority. If that is
the case then any notice or hearing given pursuant to an
assumption that the Commission had the authority would be an
idle act indeed. The majority's ruling on issue 2 means that
the Commission, once it gave notice and had a hearing, could
not follow through with an order of restraint. And to
further confuse the issues, on issue 3 the question of
whether the Commission had subject matter jurisdiction to
approve or disapprove the proposed reorganization, the
majority has, by invoking the rule that an administrative
agency should first be given the opportunity to rule on its
own juri-sdiction, has declined to rule. The result is
administrative chaos.
The majority decision leaves the Public: Service
Commission stripped of authority to maintain the status quo
pending its decision of whether it has subject matter
iurisdiction. The horse may well be out of the barn if the
Commission later rules it has subject matter jurisdiction and
enters an order prohibiting the reorganization. The majority
suggests that the proper avenue for the Commission is to go
to court and obtain a temporary restraining order. But, as
Justice Morrison points out, the Commission can go to court
to obtain a restraining order only if one of the parties
under its jurisdiction refuses to obey its order. Here the
Montana Power Company obeyed the order of restraint but at
the same time challenged that order in court. Had the
Montana Power Company proceeded with its reorganization
efforts in violation of the Commission's order, then the
Commission could have gone to court to obtain a temporary
restraining order.
If this Court refuses to rule on the primary question of
whether the Public Service Commission has subject matter
jurisdiction, but instead leaves the matter initially for the
decision of the Public Service Commission, then the
Commission should not at the same time be stripped of the
means for maintaining the status quo before it reaches its
decision. But that is precisely what has happened here.
The Public Service Commission has at least temporarily
assumed jurisdiction over the question of whether it has the
authority to approve of or disapprove the proposed
reorganization. To effectuate this temporary assumption of
jurisdiction it has told the Montana Power Company not to
reorganize until the Commission has investigated the effect
of the reorganization on the rate making and regulatory
process. Because this Court has refused to rule on the
question of subject matter jurisdiction, we must at this
point assume that the Public Service Commission does have
that jurisdiction and that it has simply taken the steps to
maintain the status quo pending its investigation. This
Court should not at this juncture, strip the Public Service
Commission of the means of maintaining the status quo pending
the outcome of its investigation. The powers of the
Commission to maintain the status quo must of necessity he
implied if the Commission is to have meaningful regulatory
powers.
Because the Commi-ssion's order is simply one of
maintaining the status quo pending its investigation and
final determination, which includes a question of whether the
Commission will hold that it has subject matter jurisdiction,
I fail to see how the Montana Power Company had a right to
notice and hearinq before the order maintaining the status
quo was issued. The Commission does not have jurisdiction
over the Montana Power Company on a case by case basis.
Rather, it has continuing jurisdiction over the Montana Power
Company in administering the regulatory process, and this act
was simply one of continuing this jurisdiction. Furthermore,
I fail to see any harm to the Montana Power Company because
of this claimed failure to give notice and an opportunity to
be heard. It has participated fully in all proceedings
before the Commission.
From the time the Commission issued the order
maintaining the status quo until the present time, the
Montana Power Company has been fully participating in the
Commission's investigation, and has apparently been fully
cooperating with the Commission. Surely the Montana Power
Company has availed itself of every opportunity to let its
views be known to the Commission.
Based on these views, I wou1.d affirm the order of the
trial court and let the Public Service Commission's order
remain in effect at least until it has decided for itself the
question of whether it has subject matter jurisdiction. If
the Commission rules it does have subject matter
jurisdiction, and if the Commission further rules that the
Montana Power Company cannot reorganize, I have no doubt that
the case will once again thread its way through the court
system. But I would wait for that to happen and not in the
meantime deprive the Commission of its implied authority to
maintain the status quo before it reaches a decision on the
question of subject matter jurisdiction.
Despite mv views on the issues, it appears now that by
the majority opinion, the Public Service Commission w 11 be
i
compelled to file an action in District Court asking for a
temporary restraining order to remain in effect pending the
Commission's ruling. This approach, however, will only bog
down the process for any aggrieved party could appeal to this
Court from any action that the District Court might take.