NO. 89-492
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
STATE ex rel. H. R. ROBERTS and
ELIZABETH ROBERTS, d/b/a H. R.
ROBERTS & SONS, INC.,
Relators and Appellants,
PUBLIC SERVICE COMMISSION OF
THE STATE OF MONTANA,
Respondent and Respondent,
and
WATKINS AND SHEPARD TRUCKING, INC.,
Intervenor and Respondent.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis and Clark,
The Honorable Jeffrey M. Sherlock, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
W. William Leaphart argued, Helena, Montana
For Respondents:
C;;
C ., Robin McHugh argued, Helena, Montana
i. -I Stanley T. Kaleczyc argued, Helena, Montana
Submitted: March 13, 1990
Decided: April 13, 1990
9
Chief Justice J. A. Turnage delivered the Opinion of the Court.
H. R. Roberts and Sons appeals from an order of the First
Judicial District Court, Lewis and Clark County, denying the
appellant's petition for declaratory judgment and writ of mandamus.
We affirm.
ISSUES
1. Did the District Court err in holding that B 69-12-
324 (2), MCA, does not provide an exemption for all Class C carriers
operating under government contracts?
2. Did the District Court err in not holding that the Montana
Procurement Act preempts the Public Service Commission public
convenience and necessity hearing requirement for the winner of a
competitive bid, state contract?
3. Did the District Court err in holding that 5 69-12-324,
MCA, does not deny equal protection when it allows state contracted
solid waste carriers to obtain certificates without a public
convenience and necessity hearing while requiring state contracted
commodities carriers to go through the hearing process?
FACTS AND PROCEDURE
Appellant H. R. Roberts and Sons [hereinafter Roberts]
underbid intervenor Watkins & Shepard Trucking, Inc. [hereinafter
Watkins], by $150,000 on a statewide, three-year contract to haul
United States Department of Agriculture surplus commodities forthe
Montana Office of Public Instruction [hereinafter OPI] school lunch
program. Watkins held the contract for the previous nine years and
was the only carrier in Montana with the requisite USDA Commodities
Class C certificate. Roberts held a Class C certificate, but under
Public Service Commission [hereinafter PSC] procedure, could not
obtain a USDA commodities endorsement until it had a commodities
contract.
The OPI awarded Roberts the contract on June 16, 1989, on
condition that Roberts obtain the USDA commodities endorsement by
August 1. Roberts immediately applied to the PSC arguing that
5 69-12-324, MCA, exempted all government contracted Class C
carriers from the requirement of a public convenience and necessity
hearing. The PSC refused to exempt Roberts. The agency inter-
preted § 69-12-324, MCA, as exempting only federally contracted
passenger carriers and state contracted solid waste carriers.
The PSC set a hearing for August 23--the earliest practical date
under its notice and hearing regulations.
On July 14, Roberts filed the action now on appeal and Watkins
intervened. Roberts asked the District Court to issue a writ of
mandamus ordering the Public Service Commission to either issue the
commodities endorsement without a hearing or to hold the hearing
before the August 1 deadline. Roberts also requested a declaratory
judgment that the exemption statute violated equal protection
guarantees by giving preferential treatment to waste carriers over
commodities carriers.
The District Court denied the writ of mandamus and entered
declaratory judgment against Roberts. Following the August 1
deadline, the OPI rejected both Roberts1 and Watkinsl bids and,
under the noncompetitive provisions of 5 18-4-306, MCA, awardedthe
contract to Watkins as the sole source of contract services.
Roberts now appeals the District Courtls decisions.
HEARING EXEMPTION
Montana law requires the PSC to provide public notice and to
hold a hearing on public convenience and necessity whenever a motor
carrier applies for any class of certificate. Section 69-12-321,
MCA. Section 69-12-324, MCA, grants exemptions from the hearing
requirement. Roberts argues that the plain language of the
exemption statute covers all Class C carriers operating under state
or federal contracts. The PSC argues that the plain language of
the statute exempts only federally contracted passenger carriers
and state contracted solid waste carriers.
Subsections (1) and (2) of the statute read as follows:
(1) The presentation of the written contract
to the commission shall be deemed sufficient
proof of public convenience and necessity in
accordance with the terms and conditions
contained within the United States government
or state government contracts. Subject to the
provisions of this section, a transportation
movement is considered to be:
(a) the transportation for hire of persons
between two points within the state by a motor
carrier pursuant to the terms of a written
contract between the carrier and the United
States government or an agency or department
thereof; or
(b) the transportation for hire of solid waste
between two points within the state by a motor
carrier pursuant to the terms of a written
contract between the carrier and the state
government or an agency or department thereof.
(2) The Class C certificate of public con-
venience and necessity issued pursuant to the
terms and conditions of the United States
government or state government contract may be
issued by the commission upon receipt of an
executed copy of the United States government
or state government contract. The certificate
of public convenience and necessity may be
issued thereafter without requiring the com-
mission to fix a time and place for public
hearing.
Section 69-12-324, MCA.
The procedure for interpreting the statute is clear.
The judicial function in construing and apply-
ing statutes is to effect the intention of the
legislature. In determining legislative
intent, the Court looks first to the plain
meaning of the words used in the statute. If
intent cannot be determined from the content
of the statute, we examine the legislative
history.
Thiel v. Taurus Drilling Ltd. (1985), 218 Mont. 201, 205, 710 P.2d
The PSC asserts that the statute is plainly unambiguous. I1[I]t
is not necessary to resort to legislative history to interpret 69-
12-324. The PSC has frankly been astounded by the statutory
exegesis that the Roberts and the District Court have undertaken
in an effort to grasp the meaning of a law that the PSC considers
plain on its face." We disagree with the PSC. Section 69-12-324,
MCA, is so poorly written that its plain language appears to have
no effect whatsoever. Subsections (1) and (2) speak of presenting
I1the1lwritten contract without identifying the contract to which
they refer. Subsections (I)(a) and (1) (b) define I1transportation
m~vement~~--a which cannot be found anywhere else in the Motor
term
Carrier Act. Subsection (2) speaks of issuing a Class C certifi-
cate even though one of the two categories purportedly covered--
solid waste carriers--is statutorily defined as a Class D carrier.
Section 69-12-301(5), MCA. Like the District Court, we find it
necessary to engage in some "statutory exegesisft determine what
to
the legislature intended.
The current confused nature of the exemption statute, and the
present issue, appear to be the direct result of numerous amend-
ments and procedural recodification of the exemption statute and
related provisions of the Montana Motor Carrier Act. The Act
originally defined Class C carriers as including all carriers
operating under contract. Section 3847.2, RCM (1935). Section
3847.10, RCM (1935), required Class C carriers to apply for a
certificate of convenience and necessity which could be issued only
after a public hearing. The 1971 Legislature added a subsection
to the statute, then codified at B 8-110, RCM (1947), exempting
from the hearing requirement Class C carriers operating under
United States government contracts to transport persons or
commodities. Act approved February 27, 1971, ch. 69, 5 1, 1971
Mont. Laws 506, 508-09. The 1975 Legislature amended the new
subsection extending the exemption to carriers operating under
state contracts to haul solid waste. Act approved March 27, 1975,
ch. 179, 5 1, 1975 Mont. Laws, 315, 316. The 1977 Legislature
amended the Act's classification system creating the D classifica-
tion for waste carriers. Act approved March 25, 1977, ch. 138,
5 1 1977 Mont. Laws 466, 467. During the 1979 change from the
Revised Codes of Montana to the Montana Code Annotated, the hearing
exemptions were recodified in 69-12-324, MCA. In 1983, the
Legislative Audit Committee rewrote 5 69-12-324, MCA, and other
statutes as part of a Sunset Audit of the PSC statutes. Act
approved April 19, 1983, ch. 588, 5 15, 1983 Mont. Laws 1394, 1402.
All of this legislative tinkering has produced three underly-
ing problems which obscure the meaning of the exemption statute.
First, the enumeration of the current exemption statute gives the
false impression of an exemption for all government contracted
Class C carriers. The original exemption in 5 8-110(2), RCM
(1947), contained three unnumbered paragraphs. The first paragraph
provided that the transportation of passengers or commodities under
United States government contract was subject to all provisions of
the Montana Motor Carriers Act except that presentation of such a
contract was sufficient proof of convenience and necessity. The
second paragraph provided that a certificate could be issued
without convening a hearing. The third paragraph provided the
duration of the certificate and is not presently at issue. In the
original exemption statute, the second and third paragraphs merely
filled out the procedural details of the exemptions provided in the
first paragraph.
During the 1979 general recodification, the three paragraphs
were enumerated (I), ( 2 ) , and (3). Roberts now contends that
subsection (2) creates an exemption in addition to those set out
in subsection (1). However, as Watkins argues, the supplementary
function of subsection (2) is still apparent in the current version
of the paragraph. Subsection (2) refers twice to Ifthe . . .
government contract.I1 llThell
refers to the contract originally
described in subsection (1).
Second, subsection (2)'s reference to Class C carriers gives
the impression that it creates an exemption in addition to those
granted in the first paragraph. Roberts argues that because
subsection (2) refers to Class C carriers, it creates an exemption
separate from that extended to solid waste carriers who are
statutorily defined as Class D carriers. The PSC argues that, when
they transport under state contract, solid waste carriers change
from Class D to Class C. Regardless of how the PSC categorizes
them, under the plain language of the statutes, contracted solid
waste carriers fall within both classes; Class C covers all
contract carriers, 69-12-3Ol(4), MCA, and Class D covers all
solid waste carriers, 9 69-12-301(5), MCA.
The exemption statute confuses the classifications. It has
always referred only to Class C carriers. When the 1975 Legisla-
ture extended the exemption to state contracted solid waste
carriers, they fell only under Class C. Section 8-102(a), RCM
(1947). However, when the 1977 Legislature created the new D
classification, it failed to provide a corresponding amendment to
the exemption statute. Furthermore, when the 1977 Legislature
created Class D l it passed a companion statute prohibiting Class
A, B, and C carriers from hauling waste. Act approved March 25,
1977, ch. 138, 5 2, 1977 Mont. Laws 466, 467. The result was an
exemption statute which purported to exempt solid waste carriers
but referred to them as Class C carriers--a classification that was
statutorily prohibited from carrying solid waste.
The 1983 Sunset Audit of the PSC statutes produced an obli-
que reference to the exemptions statute which partially corrected
the inconsistencies. It amended the prohibition against waste
hauling by Classes A, B, and C to read:
Except as provided in rthe exemption sta-
-
tute1, no Class A, B, or C carrier will be
authorized or permitted to transport .
. .
waste .. . .
Act approved April 19, 1983, ch. 588, 5 16, 1983 Mont. Laws 1394,
1403 (emphasis indicates amendment). In spite of the plain
language of the classification statutes, the Audit Committee
apparently assumed that Class D carriers become Class C carriers
when operating under government contract.
Third, the Audit Committee also exacerbated the confusion by
defining the term "transportation movement," in subsection (1) of
the exemption statute. Prior to 1983, the statute provided that,
with the exception of the hearing requirement, the transportation
of passengers and commodities under United States government
contract, and the transportation of solid waste under state
government contract, Ifshall be deemed a transportation movement
subject to the provisions of this chapter. l1 Section 69-12-324(1),
MCA (1981). The obvious purpose of the phrase was to ensure that,
even though the carriers were exempted from the hearing require-
ment, they were still subject to all other provisions of the
Montana Motor Carrier Act. In an apparent attempt to simplify the
statute, the Audit Committee turned this phrase on its head. Act
approved April 19, 1983, ch. 588, 5 15, 1983 Mont. Laws 1394, 1402.
It now reads, llSubjectto the provisions of this section, a
transportation movement is considered to be . . . . Instead of
making the designated contract carriers subject to the provisions
of the Motor Carrier Act, it now defines "transportation m ~ v e m e n t ~ ~
as including the designated contract carriers. The definition has
no apparent purpose since I1transportationmovementI1 appears nowhere
else in the current or previous versions of the exemption statute,
the Motor Carrier Act, or the administrative regulations.
The end product of these piece-meal amendments is a set of
statutes which is, in various parts, inconsistent, contradictory,
and superfluous. The meaning of the exemption statute is so
obscure that Roberts can now make a plausible argument that it
exempts fromthe hearing requirement all Class C contract carriers.
The bottom line, however, is that the District Court was correct;
there is no evidence that the legislature ever intended to create
such an exemption. To the contrary, during the 1983 Sunset Audit,
the PSC presented the legislature its uncontested interpretation
of 69-12-324, MCA, as exempting only federally contracted
passenger carriers and state contracted solid waste carriers.
Mont. Public Service Commln. Summary of the Legislative Audit Comm.
Bill: S.B. 436, at 4, House Admin. Comm., March 14, 1983; Mont.
Public Service Commln. Statement in Support of S.B. 436, exhibit
no. 4, Senate Business and Industry Comm., February 19, 1983.
We hold that whatever 9 69-12-324, MCA, does, it does not
create a blanket exemption from the public convenience and neces-
sity hearing for all government contracted Class C carriers.
We invite, with some trepidation, the legislature to again
consider the Motor Carrier Act. Carriers such as Roberts should
be able to determine their rights and responsibilities by reading
the plain language of the statutes. Presently that is not the
case.
PREEMPTION
The Montana Procurement Act [hereinafter MPA] and the PSC1s
public convenience and necessity hearing serve distinct purposes.
The MPA requires state agencies to purchase most supplies and
services through a competitive bid procedure. Section 18-4-
302(1), MCA. The MPA is intended, among other things, to promote
free enterprise competition. Section 18-4-122(7), MCA. In the
PSC1s public convenience and necessity hearing, on the other hand,
competition is not a factor. Section 69-12-323 (2)(a), MCA,
requires the PSCto address three issues before granting additional
operating authority.
a) First, the Commission must determine that
I1public convenience and necessity require the
authorization of the service proposed." This
necessarily will include consideration of the
existing service.
b) Second, the Commission must consider the
ability and dependability of the applicant to
meet any perceived additional public need.
c) Third, the Commission must consider the
impact that the proposed service would have
upon existing transportation services.
In re Application of Sullivan (Deplt.of Public Service Regulation,
July 2, 1985), Docket No. T-8752, Order No. 5388, at 5. Roberts
argues that because the MPA promotes competition whereas the PSC
protects the existing carrier, the MPA preempts the PSC1s hearing
requirement.
We disagree with Roberts. Having a contract to operate is not
equivalent to having a license to operate. The competitive policy
of the MPA and public convenience and necessity hearing are
complementary. The MPA ensures that the carrier will provide the
services at the lowest reasonable price while the PSC hearing
ensures that the carrier is capable of performing the contract and
that a new carrier is in the public's best interests. To be
awarded an MPA contract, the bidder must be a "responsible bidder,I1
with 'Ithe capability in all respects to perform fully the contract
requirements and the integrity and reliability which will assure
good faith performance. I t Sections 18-4-301 (7) and -303 (6), MCA.
By awarding the contract to Roberts subject to issuance of a Class
C commodities endorsement, the OPI implicitly recognized that
Roberts had not yet demonstrated its ability to perform and its
desirability as a replacement carrier. Furthermore, as the more
specific statutes, the Motor Carrier Act governs over the MPA in
the regulation of motor carriers. See 3 1-2-102, MCA.
We hold that award of a contract under the Montana Procurement
Act does not in itself excuse the winning carrier from a public
convenience and necessity hearing under the Motor Carrier Act.
EQUAL PROTECTION
Roberts argues that by exempting state contracted solid waste
carriers but not state contracted commodities carriers from the
PSC hearing requirement, 5 69-12-324, MCA, violates its right to
equal protection. In State v. Jack, this Court identified three
issues that must be considered in determining whether a statute
violates the right to equal protection:
(1) whether the statute is a legitimate and
proper exercise of governmental authority; (2)
the basis of the classification and an iden-
tification of the persons covered thereunder;
and (3) the proper standard of review or scope
of judicial inquiry regarding the relationship
between the classification and the objectives
of the law.
Jack (1975), 167 Mont. 456, 459, 539 P.2d 726, 728. Roberts does
not contend that the regulation of motor carriers is not a
legitimate exercise of state authority.
The parties do disagree on the basis of the classification.
The PSC argues persuasively, and the District Court agreed, that
the legislature has very good reasons for regulating contract
carriers in a distinct manner from common carriers. We agree with
Roberts, however, that that classification is not at issue in the
present case. Here, 5 69-12-324, MCA, distinguishes between
different contract carriers. Specifically, the statute grants an
exemption to state contracted solid waste carriers while denying
an exemption to state contracted commodities carriers.
The third issue is whether this classification has a rational
basis. See Jack, 167 Mont. at 461, 539 P.2d at 729. We hold that
it does. Unlike commodities carriers, solid waste carriers are
subject to oversight by the Department of Health and Environmental
Sciences. The legislature gave that Department broad authority to
establish and administer waste disposal systems, 9 75-10-104, MCA,
including regulation of solid waste transportation, 75-10-
204(3), MCA. The Department has established minimal standards for
solid waste transportation, see 5 16.14.523, ARM, and has the
authority to inspect carriers, 5 16.14.525, ARM, and to enforce
compliance, 3 16.14.526, ARM. When a contract to haul solid waste
is issued, the public's need for a new carrier and the carrier's
ability to perform in compliance with the Department's regulations
should already have been determined.
The OPI has the authority to enter contracts for the distribu-
tion of commodities and, theoretically, to regulate and oversee
their performance. Sections 20-10-201 (3)(a), and -203, MCA.
Issuing transportation contracts, however, is a small adjunct to
the OPI1s primary function of providing educational services. The
OPI is not an agency expected to oversee motor carriers.
We hold that the difference between the agencies' abilities
to evaluate and regulate transportation companies provides a
reasonable basis for granting an exemption to state contracted
solid waste carriers and not to state contracted commodities
carriers. The disparate treatment does not violate Roberts's right
to equal protection.
CONCLUSION
Roberts has been caught in a classic Catch-22 created by
conflicting PSC and OPI requirements. PSC procedures prevented
Roberts from obtaining a commodities endorsement until it had a
contract. OPI requirements made the contract conditional on
Roberts securing the endorsement by August 1--a deadline PSC
procedures made impossible. In this situation, Roberts could never
replace the existing carrier regardless of how capable or cost
effective a carrier it might be.
The solution, however, is not for this Court to rewrite the
regulatory legislation as Roberts suggests. The solution is for
the agencies to consider their overlapping requirements and to
tailor their procedures accordingly. The OPI could have taken bids
on their commodities contract at an earlier date. The PSC could
have initiated its notice and hearing procedure when Roberts
entered a bona fide bid. The agencies' lack of foresight and
flexibility may have harmed the appellant and cost taxpayers an
extra $150,000 by effectively nullifying Roberts's low bid.
Affirmed.
We concur:
#
Hon. L. k. Gulbrandson, Retired
sitting in of
C. Sheehy
Justice John Conway Harrison, specially concurring.
While I concur with the majority opinion in this case, I find
the result appalling to appellant Roberts. He found himself in a
"Catch-22" situation, caught between two departments of State
government whose internal regulations prevented him from getting
the bid to which he was entitled. Had the Office of Public
Instruction possessed the foresight to check with the Public
Service Commission, Roberts would have been able to meet the time
specifications.
As noted in the opinion, this is caused by the piecemeal
amendments of our statutes which are, in various parts,
inconsistent, contradictory and superfluous. In this opinion we
ask that the legislature again try to correct such a holding as
this by amending the Motor Carrier Act so that carriers such as
Roberts can determine their rights and responsibilities, and at the
same time bring some relief to the taxpayers who face the
additional costs resulting from the holding in this case.