Tanner Electric Cooperative v. Puget Sound Power & Light

Talmadge, J.

(concurring) — I concur in the majority’s determination to reverse the summary judgment and the judgment on the verdict of the jury, and to remand the case for further proceedings. However, in the process, the majority expands the regulated industries exception to the Consumer Protection Act (the Act), RCW 19.86.170, beyond recognition. The majority abandons the transactional approach to the regulated industries exception without addressing the plain statutory language and body of precedent underlying that approach. The result is to exempt from the protections of the Act even the most egregiously anticompetitive behavior solely because the party engaging in such behavior is theoretically subject to general regulation by an agency.

A. Breach of Contract Claim

The majority correctly notes the Washington Utilities and Transportation Commission (WUTC) declined to consider a petition filed by Tanner Electric Cooperative (Tanner) in December 1990 seeking a ruling on whether Puget Sound Power & Light Company (Puget) had a statutory obligation to serve Nintendo of America, Inc. (Nintendo). Tanner also sought a ruling that Puget’s service of Nintendo violated the 1966 service area agreement be*686tween Tanner and Puget, which had been approved by the WUTC pursuant to RCW 54.48. The WUTC declined to exercise jurisdiction to interpret or enforce the service area agreement or to determine the parties’ rights thereunder. Neither party appealed the decision of the WUTC. Thus, the WUTC neither authorized, regulated nor prohibited the particular transactions and conduct of Puget that Tanner challenges in this litigation, although in the course of this lawsuit, the WUTC has attempted to intervene to argue the point of use test is the applicable law in Washington for this situation.

None of the parties has briefed nor argued the question of the scope of the authority of the WUTC. The majority spends a considerable portion of its opinion discussing the failure of the WUTC to act and WUTC’s authority and responsibilities under its authorizing statute.8 As none of the parties has addressed the issue, I do not believe we should render what amounts to an advisory opinion on the authority of the WUTC. Walker v. Munro, 124 Wn.2d 402, 414, 879 P.2d 920 (1994) (Washington courts do not render advisory opinions). That is an issue best left for another day.

The majority also determines the point of use test was not applicable as a matter of law. I am not convinced we need to deal with such an abstract issue. We are asked only to construe the terms of the service area agreement, which explicitly states: "Puget agrees that it shall not *687directly or indirectly distribute, wheel, transfer or sell electric energy within the limits of Tanner’s service areas.” Ex. 2 at 2. This language is broad and makes clear Puget may not serve customers, directly or indirectly, within Tanner’s service area. There is no question Nintendo, at least in substantial part, was located within the service area of Tanner. The contractual provision referenced above bars Puget from serving Nintendo, regardless of whether or not the point of use test would be implied in a service area agreement.

The trial court erred in granting summary judgment, however, because there is a fact question whether the parties themselves altered their obligations by their course of conduct. Here, as the majority recounts, there was evidence Tanner and Puget did not always observe the provisions of their own agreement barring direct or indirect service in the other’s area. Summary judgment was inappropriate and Puget should be given the opportunity at trial to prove a course of conduct by the parties altered or obviated the contractual provisions.

Additionally, the 1966 agreement had specific wording which authorized Puget to serve a customer within Tanner’s service area if Tanner failed, or was unable, to do so. Ex. 2 at 3. Plainly, there is a question of fact as to whether Tanner could reasonably serve a customer as large as Nintendo. Consequently, the majority is correct in reversing the summary judgment in favor of Tanner on its breach of contract claim.

B. Consumer Protection Act Claim

I am more troubled by the majority’s handling of the Consumer Protection Act claim. Because the claims for breach of contract and breach of the Consumer Protection Act are factually intertwined, I agree that the jury’s general verdict with respect to the Consumer Protection Act also must be reversed. But the majority’s analysis of RCW 19.86.170 is flawed, curtailing needed private enforcement of our State’s antitrust laws.

*688The majority views the Act as "consumer protection legislation.” Majority op. at 681. But the Act also provides a full range of remedies for situations where a business preys upon another. See RCW 19.86.020 (unfair methods of competition and unfair or deceptive acts or practices in the conduct of trade or commerce), RCW 19.86.030 (restraints of trade), RCW 19.86.040 (monopolies), RCW 19.86.050 (tying arrangements), RCW 19.86.060 (corporate acquisitions that lessen competition). The Act guarantees open and free competition in our economic system.

The majority opinion gives a very broad reading to the regulated industry exemption to the Act. RCW 19.86.170 states:

Nothing in this chapter shall apply to actions or transactions otherwise permitted, prohibited or regulated under laws administered by the insurance commissioner of this state, the Washington utilities and transportation commission, the federal power commission or actions or transactions permitted by any other regulatory body or officer acting under statutory authority of this state or the United States. . . .

(Emphasis supplied.) The majority suggests this exemption must be broadly construed, for, after all, "[a]n exemption from consumer protection legislation either applies or it does not.” Majority op. at 681. I disagree. The statute plainly states the exemption applies to a particular action or transaction "otherwise permitted, prohibited, or regulated” by the WUTC. The exemption is not applicable simply because an entity is generally regulated. The statute mandates a transactional approach and does not confer an exemption on an industry simply because of its regulated status.

Previously, we have consistently held the Act does not exempt a regulated entity generally, but exempts only a particular action or transaction of such entity. Dick v. Attorney General, 83 Wn.2d 684, 688, 521 P.2d 702 (1974); Martha V. Gross, The Scope of the Regulated Industries Exemption Under the Washington Consumer Protection Act, 10 Gonz. L. Rev. 415, 421 (1975). This transactional *689analysis requires the court to identify the particular act or transaction allegedly violative of the competition laws, and then to specifically determine whether that act or transaction is exempt from such law because it was otherwise permitted, prohibited or regulated under the relevant state statute or federal law. "[W]e do not read the statute to exempt a transaction or action merely because the business or trade is regulated generally.” Dick, 83 Wn.2d at 688.

In In re Real Estate Brokerage Antitrust Litig., 95 Wn.2d 297, 622 P.2d 1185 (1980), we held certain transactions of real estate brokers were not exempt from the Act simply because brokers were generally regulated under RCW 18.85, and the relevant licensing agency had acquiesced in the brokers’ conduct for 11 years. We noted "[m]ere non-action” by the agency would not suffice, and said the brokers had to prove the particular challenged activity was statutorily authorized and the relevant agency "took overt affirmative actions specifically to permit” it. Real Estate Brokerage, 95 Wn.2d at 301. We recently reaffirmed mere acquiescence by the relevant agency is not enough, and an overt affirmative act by the agency specifically allowing the challenged action is required for RCW 19.86.170 to apply. Vogt v. Seattle-First Nat’l Bank, 117 Wn.2d 541, 817 P.2d 1364 (1991). We have thus rejected the majority’s approach to RCW 19.86.170 in Dick, Real Estate Brokerage, and Vogt.9

We are directed to liberally construe the remedial provisions of the Act, consistent with federal decisions interpreting the analogous limitations on federal laws *690ensuring fair competition.10 The relevant federal cases repeatedly state mere pervasive regulation or a potential for conflict between the commands of the regulatory agency and the requirements of antitrust law is insufficient to shelter a regulated entity from antitrust liability, and, at a minimum, specific agency action approving the challenged conduct is required. Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S. Ct. 1022, 35 L. Ed. 2d 359 (1973). There, the United States Supreme Court held that "[a]ctivities which come under the jurisdiction of a regulatory agency nevertheless may be subject to scrutiny under the antitrust laws.” Otter Tail, 410 U.S. at 372. The Court held even though the Federal Power Commission was authorized to compel involuntary interconnections of power, an electrical utility that refused to wheel electricity was not exempt from federal antitrust laws. Id. at 374-75. The Court stated antitrust immunity by implication from a regulatory statute is strongly disfavored and only may be found where there is a "plain repugnancy between the antitrust and regulatory provisions.” Id. at 372.11

An analogous analysis is found in the federal courts’ state action exemption to federal antitrust law, which *691provides an exemption from federal antitrust laws for anti-competitive conduct that is regulated by the state or its subdivisions. Parker v. Brown, 317 U.S. 341, 63 S. Ct. 307, 87 L. Ed. 315 (1943). The United States Supreme Court has held the "mere possibility of conflict” between state regulatory policy and federal antitrust policy is not enough to invoke the state action exemption. Cantor v. Detroit Edison Co., 428 U.S. 579, 596, 96 S. Ct. 3110, 49 L. Ed. 2d 1141 (1976). For the state action antitrust exemption to be implied, it must be necessary to make the regulatory scheme work. Cantor, 428 U.S. at 597. An implied exemption will be found only if the regulated entity shows there is a clear and affirmative state policy to allow the anticompetitive conduct, and the relevant state agency actively supervises the challenged conduct. California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 105, 100 S. Ct. 937, 63 L. Ed. 2d 233 (1980); F.T.C. v. Ticor Title Ins. Co., 504 U.S. 621, 112 S. Ct. 2169, 119 L. Ed. 2d 410 (1992).

Active supervision under the Midcal test requires the state agency have and utilize authority to approve or disapprove of the particular conduct. Without this degree of active supervision, there is no assurance the conduct promotes the state regulatory policy at all, rather than the regulated entity’s individual interest. Ticor, 504 U.S. at 634; Patrick v. Burget, 486 U.S. 94, 101, 108 S. Ct. 1658, 100 L. Ed. 2d 83 (1988). Pervasive regulation does not protect an industry from antitrust liability for conduct that is voluntarily initiated. MCI Communications Corp. v. American Tel. & Tel. Co., 708 F.2d 1081, 1103 (7th Cir. 1983), cert. denied, 464 U.S. 891 (1983).

In Ticor, the Third Circuit Court of Appeals found the state supervision requirement of Midcal was satisfied where there was a state regulatory program in place under which the agencies theoretically could reject the rates filed by title insurers. Ticor, 504 U.S. at 631-32, 637. The United States Supreme Court rejected this approach, holding that "[t]he mere potential for state supervision is not an adequate substitute for a decision by the State” actu*692ally reviewing the challenged conduct. Id. at 638. The Court found the state supervision requirement contemplated actual state involvement or participation in the challenged conduct, id. at 633, such that it may be said the anticompetitive scheme is the "State’s own.” Id. at 635. "[W]hile a State may not confer antitrust immunity on private persons by fiat, it may displace competition with active state supervision if the displacement is both intended by the State and implemented in its specific details.” Id. at 633.

The majority does not undertake a transactional analysis or show why sheltering Puget from liability under the Act is necessary to avoid duplication of electric lines and service. RCW 54.48.020. Nor does the majority address how the WUTC’s deliberate decision to refrain from reviewing the challenged conduct here can constitute WUTC involvement making Puget’s behavior the State’s own. Instead, ignoring the relevant state and federal cases, the majority observes WUTC theoretically could regulate some aspects of Puget’s conduct and years ago did approve the 1966 service area agreement (under RCW 54.48), and concludes that is enough to establish an exemption under RCW 19.86.170. Majority op. at 682-83.

The key flaw in the majority’s analysis, however, is its failure to consider whether the WUTC actively and specifically approved the actions of Puget in 1989-90 that Tanner challenges—Puget’s servicing of Nintendo in Tanner’s area, in violation of the agreement; Puget’s refusal to wheel electricity or cooperate in a service plan for the North Bend area; Puget’s termination of the agreement and refusal to properly negotiate a new one; and Puget’s alleged attempt to consolidate monopoly power by buying Tanner. Clearly, the WUTC’s approval in 1974 of the 1966 agreement did not constitute approval of these actions and is far from sufficient to shelter Puget from the obligations and liability imposed under the Act. Gross, supra, at 430-31; Vogt, 117 Wn.2d at 552; Real Estate Brokerage, 95 Wn.2d at 301. The WUTC’s decision that it had no juris*693diction over the dispute precludes a finding it affirmatively approved or actively supervised the acts at issue.

The very broad reading given to RCW 19.86.170 by the majority wraps any regulated industry with a cloak of immunity, allowing it to engage in any anticompetitive behavior, no matter how predatory, just because theoretically the relevant agency could regulate the conduct. The majority’s approach undercuts more than 20 years of Washington precedent in applying RCW 19.86.170 on a transactional basis. It violates the plain language of RCW 19.86.170, and the directive to construe the Act in accordance with federal decisions. The majority effectively allows a blanket immunity from private enforcement of our State antitrust laws for the regulated trades, professions and industries. The ultimate effect of this decision is to diminish private antitrust enforcement and to lessen competition in our economic system.

Johnson, J., and Utter, J. Pro Tern., concur with Talmadge, J.

After modification, further reconsideration denied July 23, 1996.

The majority states the WUTC has authority over cooperatives with respect to service area agreements. Majority op. at 666 n.2. However, RCW 54.48.030 states the WUTC must approve the public utility’s participation in such an agreement, not the participation of the cooperative. Indeed, RCW 54.48.040 expressly states nothing in RCW Chapter 54.48 may be construed to classify a cooperative as a public utility "or to include cooperatives under the authority” of the WUTC.

Moreover, the majority asserts the exercise of WUTC regulatory authority ousts the jurisdiction of the courts. This is not necessarily so. RCW 80.04.440 provides a public service company that violates "any law of this state,” Title 80, or "any order or rule of the commission,” shall be liable for damages (and attorney fees in certain cases) in an action "brought in any court of competent jurisdiction.” Nothing in the statute requires an administrative determination as a predicate to court jurisdiction.

Presumably, if the majority is correct in its interpretation of RCW 19.86.170, our interpretation of RCW 19.86 in other cases is affected as well. For example, this Court and the Washington State Bar Association regulate attorneys. Short v. Demopolis, 103 Wn.2d 52, 62, 691 P.2d 163 (1984); RCW 2.48.060, .220, .230. Our application of RCW 19.86 to the entrepreneurial aspects of the practice of law in Short, 106 Wn.2d at 60, is inconsistent with the majority’s analysis.

RCW 19.86.920 states:

The legislature hereby declares that the purpose of this act is to complement the body of federal law governing restraints of trade, unfair competition and unfair, deceptive, and fraudulent acts or practices in order to protect the public and foster fair and honest competition. It is the intent of the legislature that, in construing this act, the courts be guided by final decisions of the federal courts and final orders of the federal trade commission interpreting the various federal statutes dealing with the same or similar matters. ... To this end this act shall be liberally construed that its beneficial purposes may he served.

Even active agency approval of some part of the challenged conduct may not suffice. In City of Mishawaka, Ind. v. Indiana & Mich. Elec. Co., 560 F.2d 1314 (7th Cir. 1977), cert. denied, 436 U.S. 922 (1978), the court held that despite the Federal Power Commission’s concurrent exercise of jurisdiction to approve the utility’s retail rates, there was no exemption sheltering its dual rate structure (charging higher rates to wholesale customers) from scrutiny in court. The court also noted that an antitrust action in court would provide compensatory and injunctive relief that was not available in agency proceedings concerned with approval of retail rates. Id. at 1321. In Frontier Enters., Inc. v. Amador Stage Lines, Inc., 624 F. Supp. 137, 143 (E.D. Cal. 1985), the court found the agency’s approval of a tariff provided no exemption where the agency did not consider the alleged overall conspiracy and price squeeze involving the tariff rates.