Driscoll v. Edison Light Power Co 1939

• Decision Date: 17 April 1939
• Docket Number: No. 509,509
• Parties: DRISCOLL et al. v. EDISON LIGHT & POWER CO. Argued Feb. 7-8, 1939
• Court: U.S. Supreme Court

307 U.S. 104 59 S.Ct. 715 83 L.Ed. 1134 DRISCOLL et al.

v.

EDISON LIGHT & POWER CO.

No. 509. Argued Feb. 7-8, 1939. Decided April 17, 1939. Rehearing Denied May 15, 1939.

See 307 U.S. —-, 59 S.Ct. 831, 83 L.Ed. —-.

[Syllabus from pages 104-106 intentionally omitted]

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Messrs. Guy K. Bard, of Washington, D.C., Edward Knuff and Samuel G. Miller, both of Harrisburg, Pa., and Herbert B. Cohen, of York, Pa., for appellants.

Mr. Clarence W. Miles, of Baltimore, Md., for appellee.

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Mr. Justice REED, delivered the opinion of the Court.

This is an appeal from the decree of a three-judge district court granting a permanent injunction against the enforcement of temporary rates. Sec. 266, Jud.Code, 28 U.S.C.A. § 380.

The appellants are five named persons, individually and as members of the Pennsylvania Public Utility Commission, and the Utility Consumers League of York, Pennsylvania, intervening defendant below, an unincorporated association of consumers of electric current in the territory served by the appellee. The latter is a public utility corporation organized under the laws of Pennsylvania, which generates, transmits, distributes and sells electric energy approximately 30,000 customers in and about York, Pennsylvania.

An investigation to determine the reasonableness of appellee's rates was instituted on January 27, 1936. During its progress the state legislature recodified the utility law of Pennsylvania. Act of May 28, 1937, P.L. 1053, Title 66, P.S.Pa. § 1101 et seq. It enacted a temporary rate section, 310, which is the source of this controversy.

Acting under Sec. 310, the commission, after notice and argument, issued a temporary rate order on July 13, 1937, requiring the utility to file rate schedules which would effect a reduction of approximately $435,000 in annual gross operating revenues. This order was replaced by another on July 27, 1937, which commanded an identical reduction. This time the commission itself prescribed a

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schedule of rates. The utility filed a bill in equity in a statutory court in the Middle District of Pennsylvania. On October 15, 1937, a permanent injunction issued.¹ The Commission did not appeal. On November 30, 1937, another order was issued seeking to establish the same temporary rates and to secure the same reduction in gross revenues as the orders of July 13 and 27.

On December 14, 1937, the utility filed a bill in the United States District Court for the Eastern District of Pennsylvania to enjoin this order. A three-judge court was convened under Sec. 266 of the Judicial Code. By stipulation of the parties the application for an interlocutory injunction brought to hearing on January 17, 1938, was treated as an application for a permanent injunction. On October 14, 1938, a permanent injunction issued.

The court concluded as a matter of law that the utility had no plain, speedy and adequate remedy in the state courts; that the order is void because the 'commission acted in direct violation of the mandatory provisions of the Public Utility Act which requires rates for (the company) to be fixed under paragraph (b) of section 310'; that the order is unconstitutional because (1) it violates the procedural requirements of due process, (2) it fails to permit the utility to earn a fair return on the fair value of its property used and useful in the public service, (3) it confiscates the company's property, and (4) it is not supported by substantial evidence.²

Jurisdiction of the Statutory Court.—Except as modified by the Johnson Act, ³ jurisdiction exists in a statutory court, called pursuant to Sec. 266 of the Judicial Code, to hear and finally determine bills in equity seeking tem-

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porary and permanent injunctions against the order of a state administrative commission on the ground of irreparable injury.⁴ By this amendatory act, where the order attacked as violative of the Federal Constitution affects the rates of a public utility, does not interfere with interstate commerce and has been made after notice and hearing, the jurisdiction of the district court to enjoin its enforcement is withdrawn, unless no 'plain, speedy and efficient remedy may be had, at law or in equity, in the courts of such State.' No challenge to the jurisdiction was made in the statutory court or on appeal. In response to questions from the bench, counsel for the commission conceded that there was no remedy in the state courts which would satisfy the Johnson Act.

The reason for this concession lies, so far as a remedy in equity is concerned, in the provision of the Pennsylvania statute forbidding an injunction against an order, 'except in a proceeding questioning the jurisdiction of the commission.'⁵ The bill in certain allegations attacks the section of the Public Utility Law under which this order issued as violative of the Fourteenth Amendment, U.S.C.A.Const., in that it empowered the commission to fix non-compensatory and discriminatory temporary rates, in an arbitrary manner. In one sense this questions the ju-

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risdiction of the commission. If Sec. 310 is invalid, there is no other provision to authorize temporary rates. Jurisdiction is a word of uncertain meaning. As used in Sec. 1111, supra, it apparently refers to proceedings by the commission under the terms of the statute. In this use it would permit an injunction, equitable grounds being shown, where the public utility is not covered by the act. Otherwise, action in excess of the powers of the commission, such as a confiscatory rate, might be deemed beyond its jurisdiction. At any rate, without an authoritative determination by the state courts, we cannot say, for this character of proceeding, that the remedy in the state courts is plain, speedy and efficient. ⁶ The remedy at law by appeal is ineffective to protect the utility's position pendente lite. The supersedeas does not postpone the application of the temporary rates.⁷ The statutory court had jurisdiction of the bill.

Statutory Basis for the Order.—Sec. 310⁸ contains several subsections. The commission fixed the temporary rates under subsection (a). The district court concluded as a matter of law that this action was invalid because they could only be fixed under subsection (b). The two subsections are set out below.⁹ In its opinion, without

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discussing Sec. 310(b), the court declared Sec. 310(a) unconstitutional because it permitted the commission to fix a temporary rate based upon the single factor of original cost less depreciation. ¹⁰ The commission, however, did not confine itself to that one element in setting the fair value of the appellee's property, for the purpose of temporary rates, at $5,250,000. It gave weight to reproduction cost, original cost, going concern value and the necessity for working capital, and it allowed on this rate base a return of more than six per cent. This, of course,

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satisfies the requirement of Sec. 310(a) that the temporary rates shall produce not less than 5% On the 'original cost, less accrued depreciation.'

Appellee's first contention is that the decree may be sustained for the sole reason that the commission should have proceeded under subsection (b) because the appellee does not have continuing property records. As the conclusion of the lower court on this point is not supported by a state decision, we analyze for ourselves the provisions of the sections. It is clear from the language of Sec. 310(a) that it is applicable not only to public utilities whose reports to the commission show the original cost of their physical property but also to those whose original cost is not so shown. The last clause of the section authorizes the commission to estimate such cost. There is no provision in 310(a) which limits its application to those utilities which maintain the continuing property records of Sec. 502.¹¹ Section 310(b), see note 9, furnishes a partial alternative for Sec. 310(a). Where there are no continuing property records, as provided by Sec. 502, the commission must in fixing the temporary rate arrange for an least a five per cent return on original cost under (a) or the return of an operating income under (b) equal to that for the year 1935 or a subsequent year, as determined by the commission.

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Appellee urges next that the section permits the commission to disregard present cost, depreciate original cost, omit indirect and overhead items of construction, and exclude allowances for working capital or going concern value. Although these items were considered by the commission, the appellee contends that the order is invalid because Sec. 310(a) might have been complied with by providing a return of 5% On the original cost depreciated. The argument seems to be that a statute which permits an unconstitutional determination is invalid, even though it is actually applied in a constitutional manner.¹²

The commission drew the order in accord with the prior ruling of the Middle District Court on a former order in this rate proceeding.¹³ The former order had also fixed temporary rates but had not set out the findings of value deemed essential by the court. Although the reversal of the commission's order had actually turned on the failure to show the factual basis for the rates, as the district court had stated that compliance with Smyth v. Ames¹⁴ was necessary in temporary rate making, the commission based the order now under review on evidence requisite under that rule. By taking this position, it interprets the...