U.S. WEST INC. v. Tristani

• Decision Date: 08 July 1999
• Docket Number: No. 98-2053,98-2053
• Citation: 182 F.3d 1202
• Parties: (10th Cir. 1999) U.S. WEST INC., a Delaware corporation; U.S. WEST COMMUNICATIONS, INC., a Colorado corporation; U.S. WEST MARKETING RESOURCES GROUP, INC., a Colorado corporation, Plaintiffs-Appellants, v. GLORIA TRISTANI, in her official capacity as Chairman of the New Mexico State Corporation Commission; ERIC P. SERNA, in his official capacity as Commissioner of the New Mexico State Corporation Commission; JEROME BLOCK, in his official capacity as Commissioner of the New Mexico State Corporation Commission, Defendants-Appellees, AT&T COMMUNICATIONS OF THE MOUNTAIN STATES, INC., Intervenor, and MCI TELECOMMUNICATIONS CORPORATION, Amicus Curiae
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1202

182 F.3d 1202 (10th Cir. 1999)

U.S. WEST INC., a Delaware corporation; U.S. WEST COMMUNICATIONS, INC., a Colorado corporation; U.S. WEST MARKETING RESOURCES GROUP, INC., a Colorado corporation, Plaintiffs-Appellants, v. GLORIA TRISTANI, in her official capacity as Chairman of the New Mexico State Corporation Commission; ERIC P. SERNA, in his official capacity as Commissioner of the New Mexico State Corporation Commission; JEROME BLOCK, in his official capacity as Commissioner of the New Mexico State Corporation Commission, Defendants-Appellees, AT&T COMMUNICATIONS OF THE MOUNTAIN STATES, INC., Intervenor, and MCI TELECOMMUNICATIONS CORPORATION, Amicus Curiae.

No. 98-2053

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

July 8, 1999

Appeal from United States District Court for the District of New Mexico (D.C. No. CIV-96-1366-MV) [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Laurence H. Tribe, Cambridge, Massachusetts, (Jonathan S. Massey, Cambridge, Massachusetts; Victor R. Ortega and Bruce Herr of Montgomery & Andrews, P.A., Santa Fe, New Mexico; Robert L. Connelly, Jr., Raymond C. Fitzsimons, Norton Cutler, and Blair A. Rosenthal of U.S. West, Inc., Denver, Colorado, with him on the briefs), for the appellants.

James C. Martin, General Counsel, New Mexico Public Regulation Commission (Tom Udall, New Mexico Attorney General; David M. Kaufman, Assistant Attorney General; Deborah Dorman-Rodriguez, Special Assistant Attorney General; Michael Dickman, Special Assistant Attorney General, on the brief), Santa Fe, New Mexico, for the appellees.

Before ANDERSON, BARRETT, and HENRY Circuit Judges.

BARRETT, Senior Circuit Judge.

U S West, Inc., U S West Communications, Inc., and U S West Marketing Resources Group, Inc., now U S West Dex, Inc., (collectively "U S West"), appeal from the district court's Fed. R. Civ. P. 12(b)(1) dismissal of the case pursuant to the Johnson Act, 28 U.S.C. 1342, in favor of Defendants' Gloria Tristani, Eric P. Serna, and Jerome Block, in their official capacities as Commissioners of the New Mexico State Corporation Commission (collectively "the Commissioners").

Background

U S West Communications, Inc., and U S West Dex, Inc., are independent wholly owned subsidiaries of U S West, Inc. U S West Communications provides regulated telecommunications services in New Mexico and U S West Dex publishes White and Yellow Pages directories for New Mexico. The Commissioners regulate the operation of U S West Communications in New Mexico, including basic and intrastate long distance telephone services and pay telephones.

On August 28, 1992, U S West Communications filed an application with the Commissioners, asking for a $29,600,000 rate increase for its local telephone and intrastate long distance services within New Mexico. Pursuant to Article XI, 7 of the New Mexico Constitution, the Commissioners imputed $12,647,000 of U S West Dex's gross revenue ($7,712,000 in net revenue) from its Yellow Pages publications to U S West Communications in calculating rates for the April 8, 1993, rate order (the rate order). (Appellants' App. at 356 22.) The Commissioners adopted the imputation methodology proposed by U S West Communications and rejected the methods and amounts proposed by its staff and the New Mexico Attorney General. Id. at 356-57 25.

The New Mexico Attorney General appealed the rate order, claiming the Commissioners failed to correctly calculate the imputation of directory advertising revenues from U S West Dex to U S West Communications. The New Mexico Supreme Court rejected the Attorney General's arguments and decided that the Commissioners properly exercised their discretion in selecting the method for calculating the directory advertising imputation amount. U S West Communications Inc. v. New Mexico State Corp. Comm'n, 909 P.2d 716, 721-22 (N.M. 1995).

On October 3, 1996, U S West initiated this action in federal district court, alleging that imputation of U S West Dex's directory advertising Yellow Pages revenue to U S West Communications violated its First Amendment right to freedom of expression, and worked an unconstitutional taking of its property for public use without just compensation. (Appellants' App. at 3 6; 8-13.) U S West sought a declaration that any imputation was unconstitutional under the First, Fifth, and Fourteenth Amendments to the United States Constitution and that New Mexico law was unconstitutional and void insofar as it authorizes such imputations. Further, U S West sought an injunction to bar the imputation of directory revenues in future rate orders. Id. at 13 1-3. On January 13, 1997, the Commissioners filed a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) and the Johnson Act, 28 U.S.C. 1342. Id. at 15.

On January 28, 1998, the district court granted the Commissioners' motion to dismiss. Id. at 361-78. The district court concluded that the Johnson Act barred jurisdiction. Id. at 377. The district court did not consider U S West's February 18, 1997, motion for summary judgment. Id. at 362.

On appeal, U S West contends that the Johnson Act does not bar subject matter jurisdiction in this case and imputing U S West Dex's Yellow Pages revenue to U S West Communication is unconstitutional.¹ U S West argues that: (1) the district court erred in finding that the Johnson Act should be broadly construed to prohibit federal court jurisdiction when the court's actions indirectly affect a rate order, and (2) the court erred in finding that the four enumerated conditions of the Johnson Act were satisfied. We review the district court's dismissal for lack of subject matter jurisdiction de novo. Bryan v. Office of Personnel Management, 165 F.3d 1315, 1318 (10th Cir. 1999).

Discussion

U S West contends that the district court erred in dismissing its complaint for lack of subject matter jurisdiction pursuant to the Johnson Act, 28 U.S.C. 1342. U S West asserts that: the Johnson Act does not bar federal jurisdiction to consider a constitutional challenge to a state statute or a state constitutional provision; the Johnson Act is inapplicable because U S West does not seek to enjoin any "order affecting rates;" the Johnson Act does not bar federal jurisdiction because the interstate commerce exception applies; and, the Johnson Act does not bar federal jurisdiction because imputation interferes with the Congressional scheme of telecommunications regulation.²

The Johnson Act sought to remedy the evils of federal court interference with state control of its intrastate public utility rates. Tennyson v. Gas Serv. Co., 506 F.2d 1135, 1137 (10th Cir. 1974). In Tennyson, we observed that "by its broad wording it is clear that [the Johnson Act] was intended to keep constitutional challenges to orders affecting rates out of the federal courts 'lock, stock and barrel,' or, as Professor Moore succinctly puts it, to effect a 'general hands-off policy relative to state rate making.'" Tennyson, 506 F.2d at 1138 (quoting 1A J. Moore, Federal Practice 0.206, at 2282 (1974)). See also Miller v. NYS Pub. Serv. Comm'n, 807 F.2d 28, 33 (2nd Cir. 1986) ("Congressman Lewis of Colorado expressed the sense of those supporting the Johnson bill when he commented: 'The Johnson bill absolutely abolishes the jurisdiction of the United States courts in rate cases, and in rate cases only.'") (citing 78 Cong. Rec. at 8328 (1934)); Hanna Mining Co. v. Minnesota Power and Light Co., 739 F.2d 1368, 1370 (8th Cir. 1984) ("The [Johnson] Act is to be broadly applied to keep challenges to orders affecting rates out of the federal courts.").

The Johnson Act provides,

The district courts shall not enjoin, suspend or restrain the operation of, or compliance with, any order affecting rates chargeable by a public utility and made by a State administrative agency or a rate-making body of a State political subdivision, where:

(1) Jurisdiction is based solely on diversity of citizenship or repugnance of the order to the Federal Constitution; and,

(2) The order does not interfere with interstate commerce; and,

(3) The order has been made after reasonable notice and hearing; and,

(4) A plain, speedy and efficient remedy may be had in the courts of such State.

28 U.S.C. 1342.

The Johnson Act does not deprive a federal court of jurisdiction unless the challenge is to an "order affecting rates" and each of the four enumerated conditions is present. US West Inc. v. Nelson, 146 F.3d 718, 722 (9th Cir. 1998); Hawaiin Tele. v. Public Util. Comm'n of Haw., 827 F.2d 1264, 1273 (9th Cir. 1987), cert. denied, 487 U.S. 1218 (1988). The burden of showing that the conditions are present is on the party invoking the act. Nelson, 146 F.3d at 722. Additionally, the Johnson Act precludes federal court jurisdiction in actions seeking both declaratory and injunctive relief, see Tennyson, 506 F.2d at 1139 (declaratory relief not available); General Inv. & Serv. Corp. v. Wichita Water Co., 236 F.2d 464, 466 (10th Cir. 1956) (declaratory and injunctive relief not available pursuant to Johnson Act), and a plaintiff cannot plead violations of 42 U.S.C. 1983 to avoid the Johnson Act, see Peoples Nat'l Util. Co. v. City of Houston, 837 F.2d 1366, 1368 (5th Cir. 1988) (one cannot "use 1983 as an 'end run' around the Johnson Act"); Tennyson, 506 F.2d at 1135 (plaintiffs' 1983 action dismissed pursuant to Johnson Act).

I. Any Order Affecting Rates

U S West contends that: (1) the Johnson Act does not bar federal jurisdiction to consider a constitutional challenge to a state statute or a state constitutional provision, and (2) the Johnson Act is inapplicable because it does not seek to enjoin "any order affecting rates." However, the manner in which U S West characterizes its claim is not dispositive of whether the Johnson Act applies to bar federal jurisdiction. See Nelson, 146 F.3d at 722 ("[T]he way that the U S West companies have chosen to describe their grievance...