Rozel Corp. v. Department of Public Service Regulation

No. 8 6 - 4 0 4

IN THE SUPREME COURT OF THE STATE OF MOPTANA
1987

ROZEL CORPORATION, a Montana
corporation,
Pet,itionerand Appellant,
-vs-
DEPARTMENT OF PUBLIC SERVICE REGULATION,
PUBLIC SERVICE COMMISSION, an agency of
the State of Montana, and THREE RIVERS
DISPOSAL, a Montana partnership,
Respondents and Respondents.

APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Joseph B. Gary, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Bryan, Atkins, Anacker; John P. Atkins argued, Pozeman,
Montana
For Respondents:
Robin McHugh argued for Public Service Commission,
Helena, Montana
Joseph W. Sabol argued for Three Rivers, Rozeman,
Montana

Submitted: January 16, 1 9 5 7
Decided: March 31, 1 9 5 7
Filed: MAR 3 11987

*, Clerk
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
Rozel Corporation appeals a May 6, 1986, order of the
Eighteenth Judicial District Court, Gallatin County, which
upheld a final order of the Public Service Commission (PSC) .
The PSC final order denied Rozel's application to begin a
garbage service in the Bozeman area. We affirm the District
Court.
Rozel presents two issues for our review:
1. Did the District Court err in holding that the
PSC's regulation of entry into the garbage-hauling business,
without regulation of rates, did. not violate the "Unfair
Trade Practices" statutes, Title 30, Chap. 14, Parts 1 and 2,
MCA?
2. As applied to the denial of Rozel's application,
does S 30-14-105(1), MCA, which exempts the PSC from the
purview of the Unfair Trade Practices and Consumer Protection
Act, violate Article XIII, Section l(2) , of the Montana
Constitution?
In August 1984, appellant Rozel applied to the PSC for
a Class D Certificate of Public Convenience and Necessity, so
that he could begin a garbage-hauling service in Gallatin
County and Big Sky, Montana. Respondent Three Rivers Dispos-
al is currently the only private garbage service in the area.
Three Rivers filed a protest to Rozel's application. The PSC
held a public hearing on the matter on November 15 and 16,
1984.
On March 11, 1985, the PSC issued a 23-page final order
denying Rozel's application. The order cited the satisfacto-
ry service of Three Rivers, the lack of demand for Rozel's
additional service, and the potential adverse effect of
Rozel's service upon Three Rivers' service. The heart of the
PSC's reasoning is contained in Findings 52 and 53, where it
states a preference for service stability over competition:
52. Some witnesses did contend that.
competition in the area would tend to
decrease garbage rates. This may very
well be true in the short run. However,
history indicates that in the past it
also led to severe financial difficul-
ties for the companies involved and
resulted in the ultimate failure of each
of those companies. Customers in the
area have benefited from periods of
competition and relatively low rates;
perhaps even below cost at times.
However, - - - - subjected
they have also been
to a very unstable - unhealthy
- and
industry.
53. Given that there does not appear to
be any unmet demand and that service
appears to be adequate and prices rea-
sonable, it seems that - -area
what the -
really needs - - this time is a period of
at - - -
stability. This is not to say that t G
public should be prepared to tolerate
unmet demand or inadequate service or
unreasonable rates should they occur in
the future. The existing carrier re-
mains on notice tha.t the commission
retains the power to reexamine the
situation and grant a new authority
should the circumstances merit it.
[Emphasis added.]
The PSC did not consider the fitness and ability of
Rozel to meet any perceived additional need. Based upon the
"public convenience and necessity" and the "impact to exist-
ing transportation services," the PSC concluded that Gallatin
County and Big Sky did not require another garbage carrier.
On April 26, 1985, pursuant to the Montana Administra-
tive Procedure Act, Rozel petitioned the District Court for a
review of the PSC order. The District Court heard the case
on April 21., 1986. On May 6, 1986, the District Court found
no violation of federal antitrust laws or the Montana Unfair
Trade Practices and Consumer Protection Act. The District
Court also found that the PSC order did not violate due
process or equal protection, and that the decision of the PSC
was not arbitrary or capricious. On July 15, 1986, the
District Court denied Rozel's motion for reconsideration,
because forty-five days had passed since the District Court
had filed its order. Rozel appeals the District Court's May
6, 1986, order.

Issue 1:
Did the District Court err in holding that the PSC's
regulation of entry into the garbage-hauling business, with-
out regulation of rates, did not violate the "Unfair Trade
Practices" statutes, Title 30, Chap. 14, Parts I and 2, MCA?
Our standard of review of PSC determinations is defined
in S 2-4-704 ( 2 ) , MCA:
The court may not substitute its judg-
ment for that of the agency as to the
weight of the evidence on questions of
fact. The court may affirm the decision
of the agency or remand the case for
further proceedings. The court may
reverse or modify the decision if sub-
stantial rights of the appellant have
been prejudiced because the administra-
tive findings, inferences, conclusions,
or decisions are:
(a) in violation of constitutional or
statutory provisions;
(b) in excess of the statutory authority
of the agency;

(el clearly erroneous in view of the
reliable, probative, and substantial
evidence on the whole record;
 (f) arbitrary or capricious or charac-
terized by abuse of discretion or clear-
ly unwarranted exercise of discretion;
or

On this issue, Rozel's argument can be reduced to three
sentences: The PSC - - have the authority to regulate
does not
rates of garbage-haulers. Therefore, the PSC should not have
the authority to regulate entry into the garbage-hauling
business. Conversely, if the PSC regulates entry, it should
also regulate rates. Rozel blends the partial language of
several statutes to reach this summary conclusion. Rozel
argues that without rate regulation, the public is subject to
monopolistic garbage-haulers. Rozel generally asserts that
the PSC acted in excess of its statutory authority, in viola-
tion of § 30-14-101 et seq., and 30-14-201, et seq., MCA.
However, Rozel fails to cite any specific instance of excess
or statutory violation.
The PSC contends that the regulation of entry into the
garbage-hauling business by the PSC does not violate the
Consumer Protection Act, 30-14-101 et seq., MCA, because
the Act does not cover actions of the PSC. The PSC asserts
that S 30-14-105 (1), MCA, specifically exempts the PSC from
the scope of the Consumer Protection Act, by stating: "Exemp-
tions. Nothing in this part shall apply to: actions or
transactions permitted under laws administered by the Montana
public service commission acting under statutory authority of
this part or the United States."
The PSC argues that the word "part" in S 30-14-105(1)
actually means "state" in order to avoid an absurd result;
for if S 30-14-105(1) is read literally, then the actions of
the PSC are exempt from the Consumer Protection Act only when
those actions are taken pursuant to the authority of the
Consumer Protection Act. However, the Act grants no such
authority to the PSC. Therefore, the plain meaning of
(S 30-14-105(1) is that the actions and transactions of the

PSC, acting under its statutory authority of Title 69, "Pub-
lic Utilities and Carriers," are exempt from the Consumer
Protection Act. This interpretation accords with the federal
model act from which the Consumer Protection Act was drafted,
where the word "state" is used in place of "part."
Respondent Three Rivers contends that the new enactment
of (S 69-12-323 (2)(b), MCA, "Decision on application," con-
taining the phrase "may include a consideration of competi-
tion," provides the PSC with the necessary tool to handle
potentially harmful monopoly situations. The language is
permissive, but not mandatory, thereby indicating that
competition may be beneficial in some cases, but - - not all
cases. The legislature chose to partially regulate the
garbage industry in Montana. It has thereby certified a
policy of limited entry into the garbage transportation
business and recognized that open competition, under some
circumstances, may be harmful to the existing carrier and the
consuming public. Three Rivers adds that B 30-14-201 et
seq., "Unfair Trade Practices Generally", deals with and is
applicable to any person, partnership, firm, corporation,
joint stock company or other association engaged in business
within this state, but it is not applicable to the State of
Montana itself or any agency of state government.
In analyzing this issue, we note that $ 69-12-301 (51,
MCA, would classify Rozel as a Class D motor carrier: "Class
D motor carriers embraces all motor carriers operating motor
vehicles transporting (including pickup and disposal) ashes,
trash, waste, refuse, rubbish, garbage, and organic and
inorganic matter." Through the authority bestowed upon it in
Title 69, the PSC controls entry into the garbage-hauling
business. However, the PSC does not regulate the rates
charged by Class D carriers and does not regulate the quality
of the service provided. We find that the express authority
to regulate entry is not concomitant with the implied re-
quirements to regulate rates. The only function that the PSC
is authorized to perform is the granting or denial of the
Class D certificate to do business.
Section 69-12-323(2), MCA, outlines the factors the PSC
must use when considering an application for a Class D
certificate:
(a) In determining whether a certificate
should be issued, the commission shall
give reasonable consideration to the
transportation service being furnished
... and shall give due consideration
to the likelihood of the proposed ser-
vice being permanent and continuous
throughout 12 months of the year .. .
(b) For purposes of Class D certifi-
cates, - -determination - public conve-
a of
nience - necessity may include -
. and a
consideration - competition. [~mphasis
- .
of
added. ]
The PSC interpreted S 69-12-323 (2)(a) as requiring it
to address three factors when considering Rozel's
garbage-hauling application. These three factors were: 1)
public convenience and necessity, 2) applicant fitness, and
3) existing competition.
The PSC observed that garbage-hauling competition would
be against the public interest, in its final order finding
no. 49:
... In each instance [competition]
required that a consolidation occur in
order to continue the provision of
service; only to see a new competitor
rise and the cycle repeat itself. . .
The Commission is concerned that a grant
of this application would -cause
- - only -
 that cycle to repeat itself - -
once more.
[Emphasis added. 1
The evidence offered to the PSC in this case estab-
lished the devastating impact which past garbage company
competitors brought upon each other, and consequently the
consumer. The consumer reaped the initial benefits of the
competition price war by an immediate reduction in garbage
rates. However, the consumer ultimately paid for this fleet-
ing benefit with an unstable garbage carrier attempting to
provide services to the community without proper maintenance
and inventory. The PSC properly concluded that renewing this
situation by granting Rozel's application was not in the
public interest.
Although the action of the PSC can be deemed
anti-competitive in nature, its authority to take such action
was conferred upon it by the legislature in Title 69. The
state has the power to engage in economic regulation, even if
such regulation is adverse to competition. New Motor Vehicle
Board of California v. Orrin W. Fox Co. (1978), 439 U.S. 96,
111, 99 S.Ct. 403, 412, 58 L.Ed.2d 361.
Our scope of judicial review is limited by
§ 2-4-704 (2), MCA, to matters of law, not fact. This Court
may not consider the weight of the evidence. We hold that
the PSC acted within its discretionary and statutory authori-
ty. Because the PSC procedure was proper, we affirm the
District Court.

Issue 2
As applied to the denial of Rozel's application, does
S 30-14-105 (I), MCA, which exempts the PSC from the purview
of the Unfair Trade Practices and Consumer Protection Act,
violate Article XIII, Section l(2) of the Montana Constitu-
tion, which states: "The legislature shall provide protection
and education for the people against unfair practices by
either foreign or domestic corporations, individuals, or
association^^^?
This issue is not properly before this Court. This
issue was first raised in Rozel's motion for reconsideration,
which was denied because forty-five days had elapsed. As we
have often held, a party may not change its theory on appeal
from the theory advanced in the trial court. Chamberlain v.
Evans (1979), 180 Mont. 511, 517, 591 P.2d 237, 240. In
addition, we have repeatedly stated that: "This Court will
not review a matter raised for the first time on appeal."
Peter v. Newkirk (Mont. 1981), 633 P.2d 1210, 1212, 38
St.Rep. 1526, 1528.
We affirm the order of the District Court.

We,concur :

v
J
Justices