Montana Solid Waste Contractors, Inc. v. Montana Department of Public Service Regulation

No. DA 06-0175

IN THE SUPREME COURT OF THE STATE OF MONTANA

2007 MT 154

MONTANA SOLID WASTE CONTRACTORS, INC.
and ALLIED WASTE SERVICES OF NORTH
AMERICA, LLC (formerly BFI Waste Systems
of North America, Inc.),

Petitioners and Appellants,

v.

MONTANA DEPARTMENT OF PUBLIC
SERVICE REGULATION; THE MONTANA
PUBLIC SERVICE COMMISSION; and
MACKENZIE DISPOSAL, INC.,

Respondents and Respondents.

APPEAL FROM: The District Court of the First Judicial District,
In and For the County of Lewis and Clark, Cause No. BDV 2001-252,
Honorable Jeffrey M. Sherlock, Presiding Judge

COUNSEL OF RECORD:

For Appellant Montana Solid Waste Contractors:

G. Steven Brown, Attorney at Law, Helena, Montana

For Appellant Allied Waste Services of North America, LLC:

Frank C. Crowley, Doney Crowley Bloomquist Payne Uda, PC,
Helena, Montana

For Respondent Montana Public Service Commission:

Al Brogan, Staff Attorney, Montana Public Service Commission,
Helena, Montana

For Respondent MacKenzie Disposal, Inc.:

Tom Singer, Axilon Law Group, PLLC, Billings, Montana

Jerome Anderson, Attorney at Law, Helena, Montana
 Submitted on Briefs: December 20, 2006

Decided: June 26, 2007

Filed:

__________________________________________
Clerk

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Justice Patricia O. Cotter delivered the Opinion of the Court.

¶1 The genesis of this dispute is a solid waste transportation certificate issued by the

Montana Public Service Commission (PSC, the Commission or Agency) in 1977 to Suhr

Transportation. 1 Suhr sold the certificate to Jim’s Excavating in 1992 and Jim’s

transferred it to WWSS Inc. in 1993. MacKenzie Disposal bought it from WWSS in

1999. The PSC approved each transfer. Montana Solid Waste Contractors (MSWC) and

Allied Waste Services 2 (Allied), alleged that Suhr, Jim’s and WWSS failed to comply

with the applicable rules and the PSC failed to enforce those rules. While they argued

that all three previous owners violated the rules, they emphasized the alleged failings of

WWSS. As a result of these violations MSWC and Allied posited that MacKenzie’s

certificate was invalid at the time it was transferred to MacKenzie and should be revoked.

¶2 After a contested hearing proceeding before the PSC, the PSC determined, among

other things, that MacKenzie’s certificate is valid, that MacKenzie was, and had been,

operating within the scope of authority granted by Certificate 9265, and that it could not

revoke the certificate based on any alleged or actual violations by previous holders of the

certificate. MSWC and Allied appealed the PSC’s Final Order to the First Judicial

District Court, Lewis and Clark County. The District Court affirmed the PSC’s Order.

1
The certificate has had several numerical identities since its inception (e.g., Certificate 541,
Certificate 9135) but is currently designated Certificate 9265 and will be referred to as such in
this Opinion.
2
The original petitioner in this case was Browning-Ferris Industries Waste Systems, or BFI.
During the pendency of these proceedings Allied Waste Industries, Inc. purchased BFI and
changed the name. For ease of reference, we will refer to both BFI and Allied as Allied.

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MSWC and Allied appeal the District Court’s Order on Petition for Judicial Review. We

affirm.

ISSUE

¶3 MSWC and Allied present several issues on appeal. We conclude, however, that

the dispositive issue is whether the PSC has the authority to revoke MacKenzie’s

certificate under the circumstances presented in this case.

FACTUAL AND PROCEDURAL BACKGROUND

¶4 Montana motor carriers are divided into four classes—A, B, C and D. Class D

motor carriers operate motor vehicles transporting garbage, or solid waste. Under

§ 69-12-314, MCA, Class D carriers must conduct their commercial operations pursuant

to a “certificate of public convenience and necessity” issued by the PSC. Certificate

9265 is such a certificate.

¶5 Montana Solid Waste Contractors is a Montana non-profit corporation and trade

association established in 1972 and located in Helena, Montana. Its members are private

solid waste transportation businesses who operate throughout Montana under Class D

certificates issued by the Montana Public Service Commission. Allied Waste Services, a

Delaware corporation authorized to do business in Montana, owns and operates solid

waste transportation businesses in Montana, including Billings. It conducts its business

under Class D certificates issued by the PSC. The PSC is the head of the Montana

Department of Public Service Regulation (Department). Section 2-15-2601, MCA. The

Department administers the laws, rules and orders regulating motor carriers, including

Class D motor carriers which transport solid waste. The PSC supervises, monitors, and

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regulates Class D motor carriers. It has original jurisdiction over complaints lodged by

members of the regulated community. MacKenzie Disposal, Inc. is a Montana

corporation presently transporting solid waste in and around Billings, Montana, under

Class D Certificate 9265.

¶6 Certificate 9265 was originally issued to Suhr Transportation in 1977. In 1992 the

PSC authorized transfer of the certificate to Jim’s Excavating. Jim’s Excavating, in turn

and with PSC approval, sold the certificate to WWSS in 1993. In August 1999 WWSS

and MacKenzie applied for PSC approval allowing WWSS to sell the certificate to

MacKenzie. Allied filed a protest to the proposed transfer. MacKenzie moved to dismiss

the protest and in November 1999 the PSC approved the transfer over Allied’s protest.

¶7 On January 14, 2000, MSWC and Allied jointly filed an initial complaint with the

PSC which was subsequently amended on January 31, 2000. MSWC/Allied sought an

order from the PSC revoking MacKenzie’s Class D permit arguing, among other things,

that the original permit was issued to WWSS in violation of law and the permit should

have been voided for dormancy prior to being transferred to MacKenzie. The PSC did

not serve MacKenzie with the joint complaint. In March 2001 the PSC sua sponte

dismissed MSWC’s and Allied’s complaint. It ruled in part that the Class D permit was

properly issued to WWSS and was not invalidated by WWSS inactivity. It also ruled that

successor MacKenzie was operating in full compliance with the certificate.

¶8 In April 2001 MSWC/Allied filed their initial petition for judicial review in the

District Court asserting, among other things, that the PSC (1) denied them their

constitutional and statutory right to a contested case hearing, (2) refused to enforce

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applicable statutes and rules by failing to serve their joint complaint on MacKenzie, (3)

wrongfully dismissed their complaint sua sponte, and (4) denied MSWC/Allied their

right to due process.

¶9 In February 2002 the parties stipulated to remand the matter to the PSC for a

contested case hearing. The District Court issued an order remanding the case. The

order specified that the following issues, among others, would be addressed in the

contested case hearing: (1) whether Certificate 9265 should be deemed lapsed for non-use

because WWSS and possibly other predecessor owners allegedly failed to comply with

applicable hauling laws and regulations, (2) whether predecessor owners and the PSC

complied with applicable statutory and regulatory provisions governing temporary

suspensions of Class D hauling certificates and filing of annual reports, as such

requirements impact a determination of whether a certificate is used on a “regular” basis,

and (3) what MacKenzie, the previous owners and the PSC believed as of October 1999

was the territorial scope of service authorized by Certificate 9265 as it pertained to a

determination of compliance with the “regular use” requirements.

¶10 Upon remand, MSWC/Allied filed their second amended complaint before the

PSC. This complaint was served on MacKenzie and MacKenzie filed an answer. In its

answer it asserted numerous affirmative defenses, one of which was the applicability of a

two-year statute of limitations. MSWC and Allied filed a consolidated brief arguing that

MacKenzie was bound by the issues defined in the Stipulation Order and could not

circumvent the Stipulation Order by invoking a statute of limitations defense.

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¶11 A contested case hearing was held in January 2003 and continued in September

and October 2003. During the hearing, the hearing officer received evidence of events

that occurred outside of the argued statute of limitations with the caveat that the statute of

limitations issue was still under advisement and could be used to subsequently eliminate

consideration of earlier events.

¶12 In October 2004 the PSC again dismissed MSWC/Allied’s complaint. In its order,

the Commission concluded that a three-year statute of limitations applied to the

proceeding and therefore excluded actions by the parties that occurred before January 14,

1997. It specifically held that WWSS did not violate any applicable statutes or

Commission rules and orders between January 1997 and 1999 when it sold the certificate

to MacKenzie. It also held that it did not have the authority to revoke MacKenzie’s

permit based on the conduct or activities of a prior certificate holder when no complaint

or revocation proceeding was pending against the prior owner at the time of the transfer.

Lastly, the PSC determined that MacKenzie’s certificate was valid because MacKenzie

was operating within the scope of authority granted under the certificate.

¶13 In November 2004 MSWC/Allied filed another petition for judicial review with

the First Judicial District Court. They argued numerous errors by the PSC including, but

not limited to, the Commission’s (1) refusal to revoke the certificate based on WWSS’s

inactivity at the time WWSS held the certificate, (2) reliance on unwritten policies to

justify declining to revoke the certificate, (3) failure to monitor and enforce applicable

statutes and regulations pertaining to Class D certificate holder compliance, (4)

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application of a three-year statute of limitations to the scope of the contested case

hearing, and (5) failure to make requested findings of fact.

¶14 The District Court concluded that the PSC (1) appropriately applied a three-year

statute of limitations, (2) did not abuse its discretion in concluding that WWSS did not

violate any applicable statute, rule or commission order, (3) did not err in deciding that

WWSS’s use of the certificate was not “incidental,” and (4) did not err in determining

that Certificate 9265 could be used to transport Class D material from outside of Billings

through the city and to the Billings landfill. The District Court also held that MSWC and

Allied were not denied their right to due process. Having expressly found that WWSS

did not violate any applicable law or orders, the court declined to address the PSC’s

determination that the Commission could not void the certificate based on alleged

violations by prior owners.

¶15 MSWC and Allied filed a timely appeal, once again seeking revocation of

MacKenzie’s certificate.

STANDARD OF REVIEW

¶16 Pursuant to the Montana Administrative Procedure Act (MAPA), a district court

reviews an administrative agency’s decision in a contested case to determine whether the

findings of fact are clearly erroneous and whether the agency correctly interpreted the

law. Baldwin v. Board Of Chiropractors, 2003 MT 306, ¶ 10, 318 Mont. 188, ¶ 10, 79

P.3d 810, ¶ 10 (citation omitted). The standard of review for an agency decision is set

forth in § 2-4-704(2), MCA, which provides:

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 The court may not substitute its judgment 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 substantial rights of the
appellant have been prejudiced because:
(a) the administrative findings, inferences, conclusions, or decisions are:
(i) in violation of constitutional or statutory provisions;
(ii) in excess of the statutory authority of the agency;
(iii) made upon unlawful procedure;
(iv) affected by other error of law;
(v) clearly erroneous in view of the reliable, probative, and substantial
evidence on the whole record;
(vi) arbitrary or capricious or characterized by abuse of discretion or clearly
unwarranted exercise of discretion; or
(b) findings of fact, upon issues essential to the decision, were not made
although requested.

¶17 A finding is clearly erroneous if it is not supported by substantial evidence or, if it

is supported by substantial evidence, because the agency misapprehended the effect of

the evidence. Moreover, even if substantial evidence exists and the effect of the evidence

has not been misapprehended, the court may still decide that a finding is clearly

erroneous when “a review of the record leaves the court with the definite and firm

conviction that a mistake has been committed.” Weitz v. Dept. of Nat. Resources &

Conserv., 284 Mont. 130, 943 P.2d 990 (1997). We in turn employ the same standards

when reviewing the district court’s decision, and must accordingly determine whether an

agency’s findings of fact are clearly erroneous and whether its conclusions of law were

correct. Roos v. Kircher Public School Bd., 2004 MT 48, ¶ 7, 320 Mont. 128, ¶ 7, 86

P.3d 39, ¶ 7.

DISCUSSION

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¶18 As noted above, MSWC and Allied raised numerous issues on appeal and argued a

multitude of errors on the part of the PSC and the District Court. Our review of the

record indicates that some of these issues and allegations of error may be justified. Of

particular concern is the allegation that the PSC failed to diligently execute the

Commission’s obligations to oversee the activities of the owners of Certificate 9265

throughout its existence. Troubling, too, is the assertion that the PSC engaged in

surreptitious negotiations or revisions to certificate terms and elevated unwritten policy

over written law resulting in Agency decisions that were detrimental to members of the

regulated community. However, for the reasons discussed below we conclude that most

of the raised issues are moot. While we do not therefore substantively address these

allegations of misconduct on the part of the PSC, we, nonetheless, caution that in the

future the Commission must vigilantly comply with its own rules and regulations as

failure to do so will undermine the integrity of the PSC and the certification process, and

potentially result in unfair and prejudicial treatment of certificate holders or certificate

applicants.

¶19 The dispositive issue is whether the PSC has the authority to revoke MacKenzie’s

certificate under the circumstances presented in this case. MSWC and Allied argue that

revocation is justified based on (1) the conduct of a previous owner, (2) the failure of the

PSC to comply with its own rules and regulations, and (3) MacKenzie’s “knowledge”

that WWSS did not comply with the Commission’s rules. We note initially that it is

undisputed that MacKenzie, since its purchase of the certificate, has fully complied with

the terms of the certificate and all applicable laws and orders. We therefore turn to the

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question of whether the PSC has authority to revoke the certificate for failure of a

previous owner to comply with applicable laws.

¶20 Just as the statutes set forth the process under which the PSC can issue a Class D

certificate, the statutes provide the method by which it can suspend or revoke a

certificate.

¶21 Section 69-12-210, MCA, states:

(1) The commission has jurisdiction to conduct investigations and hear
complaints to determine whether a motor carrier has violated any of the
commission’s rules or orders or any provision of this chapter.
(2) Following an opportunity for hearing and upon a finding that a motor
carrier has violated any of the commission’s rules or orders or any
provision of this chapter, the commission may suspend or revoke the motor
carrier’s certificate of operating authority or impose any penalty provided
for under 69-12-108.

Section 69-12-108, MCA, subjects a motor carrier regulated under Title 69 of the

Montana Code Annotated to fines and civil penalties if found to be in violation of

applicable rules, statutes or Commission orders. The statutes grant a right of

review to a certificate holder accused of violating or refusing to observe the

applicable statutes or PSC rules or orders. Section 69-12-327, MCA, states:

(1) If it appears that a certificate holder is violating or refusing to observe
any of the commission’s orders or rules or any provision of Title 69, as
amended, the commission may issue an order to the certificate holder to
show cause why the certificate should not be revoked. If the certificate
holder fails to appear to show cause as ordered by the commission, the
certificate may be revoked without a hearing. If the holder does appear to
show cause, the commission may:
(a) dismiss the proceeding, notifying the holder that the certificate is not
revoked; or
(b) hold a hearing on the question of revocation, notifying the holder of the
time and place for the hearing.

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 (2) The holder of any such certificate or privilege shall have all rights of
rehearing and review as to such order of the commission as is provided in
this chapter.

¶22 The PSC’s decision was two-fold. It first determined whether the applicable

statutes were “self-executing.” In other words, assuming WWSS was non-compliant

with the applicable rules, did its non-compliance result in the “death” of the certificate

and an automatic forfeiture. Second, and in the event the rules were not self-executing,

the Agency considered whether it had the authority to suspend or revoke MacKenzie’s

certificate based on WWSS’s conduct.

¶23 The PSC analyzed the above-referenced statutes as well as others and concluded

that the statutes were not “self-executing.” Sections 69-12-108, 210, and 327, MCA, all

of which impose penalties on Class D carriers, require the PSC to take some action to

implement these penalties—the penalties do not take effect automatically upon some

proscribed act of the carrier. As a result of this conclusion, the PSC determined that even

if WWSS had violated the applicable statutes the certificate would not have

automatically, and without PSC action, been forfeited, suspended, or revoked; therefore,

the certificate would not have been “dead” at the time it was transferred to MacKenzie.

The PSC noted that this interpretation was consistent with the Interstate Commerce

Commission’s (ICC) treatment of similar certificates as held in Smith Brothers,

Revocation of Certificate, 33 M.C.C. 465 (1942). In Smith Brothers, the ICC was

considering the revocation of a certificate. Certain complainants contended that Smith

Brothers had abandoned certain of their operations, and that, due to a provision in the

certificate which required that the carrier continue to perform service in conformity with

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the certificate, the rights of Smith Brothers were automatically forfeited for dormancy

when they ceased to perform such services. The ICC determined that a certificate, once

issued, could be terminated only by a formal proceeding and action by the issuing

agency. Hergott v. Nebraska State Ry. Commission, 15 N.W. 2d 418 (Neb. 1944).

¶24 We agree with the PSC’s interpretation. “Self-executing” simply means “taking

effect immediately without the need of any type of implementing action.” Black’s Law

Dictionary 1364 (7th ed., West 1999). The statutes above expressly provide for agency

action before any penalty can be imposed; therefore they are not self-executing. See, e.g.,

Crane v. State, 200 Mont. 280, 650 P.2d 794 (1982); Kraebel v. Michetti, (Not Reported

in F. Supp.), 1994 WL 455468, 1994 U.S. Dist. LEXIS 11796. Under the applicable

statutes, even assuming prior holders of the certificate did not comply with the applicable

laws, Certificate 9265 continued to be a viable certificate and was not forfeited. As such,

it could be lawfully transferred to a subsequent buyer. Moreover, not only are the

statutes not self-executing, but the language of the statutes requires a conclusion that

revocation of MacKenzie’s certificate would have to be premised upon MacKenzie’s

failure to comply with relevant statutes, rules or orders, not any alleged or actual failings

of a previous certificate holder. See, e.g., § 69-12-327, MCA.

¶25 Having determined that the penalty statutes are not self-executing and that

revocation of a certificate can occur only through PSC action, we next address whether

the PSC’s alleged misconduct or failure to take enforcement action justifies revocation of

MacKenzie’s certificate. We conclude this is a non-justiciable and, thereby, moot issue.

A justiciable controversy is one upon which a court’s judgment will effectively operate,

13
as distinguished from a dispute invoking a purely political, administrative, philosophical

or academic conclusion. Where a court’s judgment will not effectively operate to grant

relief, the matter is moot. Clark v. Roosevelt County, 2007 MT 44, ¶ 11, 336 Mont. 118,

¶ 11, 154 P.3d 48, ¶ 11 (citation omitted). As indicated above, the applicable statutes

allow the PSC to revoke a certificate based solely on the certificate holder’s non-

compliance. Therefore, even if MSWC’s and Allied’s allegations of PSC misconduct

were correct, neither we nor any other court could lawfully revoke a compliant certificate

holder’s certificate based on such misconduct. Simply put, there is no relief that can be

granted for these allegations within the circumstances of this case.

¶26 MSWC and Allied also assert that the PSC incorrectly expanded the limits of the

permit to include transporting waste that originated from outside of Billings to the

Billings’ landfill. Again, the misconduct being alleged is that of the PSC which, as

explained above, even if assumed to be true is not justification for revoking MacKenzie’s

permit. It is undisputed that the scope of MacKenzie’s certificate currently authorizes

MacKenzie to transport waste originating from outside of Billings to the Billings’

landfill. Therefore, we cannot revoke the certificate on this ground.

¶27 Lastly, we are unpersuaded by MSWC’s and Allied’s argument that MacKenzie

knew, or should have known, that WWSS’s certificate was “dormant” at the time it

purchased the certificate. As explained above, even actual misconduct or non-

compliance by a certificate holder does not automatically render a certificate dormant,

suspended or revoked. Restrictions on the use of a certificate or penalties for failure to

comply with rules must be affirmatively imposed by the Commission. As such,

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MacKenzie’s knowledge of WWSS’s conduct or activity during the time WWSS held the

certificate is irrelevant. The PSC had oversight authority over WWSS, not MacKenzie.

At the time MacKenzie purchased the certificate, it was assured by the PSC that it was a

viable certificate that would allow MacKenzie to conduct its desired business. Therefore,

MacKenzie’s alleged knowledge of WWSS’s conduct is not ground for revocation of its

certificate.

¶28 Having determined that the PSC does not have the authority to revoke a compliant

certificate holder’s certificate for a past holder’s non-compliance or for PSC misconduct,

we need not reach the correctness of the PSC’s application of a three-year statute of

limitations.

¶29 While the District Court declined to address the issue that we find dispositive, the

court nonetheless correctly affirmed the PSC’s order. We will uphold a district court that

reached the right result even if for a different reason. Bitterroot Inter. Sys. v. West. Star

Trucks, Inc., 2007 MT 48, ¶ 43, 336 Mont. 145, ¶ 43, 153 P.3d 627, ¶ 43 (citation

omitted).

CONCLUSION

¶48 For the foregoing reasons, we affirm the District Court’s and the PSC’s Orders.

/S/ PATRICIA COTTER

We Concur:

/S/ KARLA M. GRAY
/S/ W. WILLIAM LEAPHART

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/S/ JIM RICE
/S/ BRIAN MORRIS
/S/ JAMES C. NELSON
/S/ JOHN WARNER

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