State ex rel. Johnson v. Public Utilities Com'n of South Dakota, s. 14908

Citation381 N.W.2d 226
Decision Date22 January 1986
Docket Number14919,Nos. 14908,s. 14908
PartiesSTATE of South Dakota, ex rel Corinne JOHNSON, Jeff Johnson, Elmer Olson and Mary Jane Olson, Plaintiffs and Appellants, v. The PUBLIC UTILITIES COMMISSION OF SOUTH DAKOTA: Kenneth Stofferahn, Jeff Solem and Dennis Eisnach, as duly elected members thereof, Defendants and Appellees, and Northwestern Bell Telephone Company, a foreign corporation, Intervenor and Appellee.
CourtSupreme Court of South Dakota

George A. Bangs of Bangs, McCullen, Butler, Foye & Simmons, Rapid City, and Charles Rick Johnson of Johnson, Eklund & Davis, Gregory, for plaintiffs and appellants.

Mary L. Vanderpan, Asst. Atty. Gen., Pierre, for defendants and appellees; Mark V. Meierhenry, Atty. Gen., Pierre, on brief.

James E. McMahon of Boyce, Murphy, McDowell & Greenfield, Sioux Falls, for intervenor and appellee.

HERTZ, Acting Justice.

Appellants appeal from the trial court's denial of a writ of certiorari in which they contended that the Public Utilities Commission (P.U.C.), appellee, exceeded its jurisdiction by entering into a settlement agreement with Northwestern Bell Telephone Company (Northwestern Bell), appellee-intervenor. Additionally, the P.U.C. has filed a notice of review from the trial court's final order which denied it recovery of costs. We affirm in all respects.

Commencing in the early 1970's and prior to November 17, 1980, Northwestern Bell Telephone Company sold decorator telephone housings to between 7,800 and 15,000 South Dakota customers. Most of the people who purchased such telephones were unaware that Northwestern Bell, through tariffs filed with the Public Utilities Commission, retained title to all of the working parts of said telephones. Similarly unknown to these customers, was the fact that Northwestern Bell charged them rentals on such inner working parts. On December 31, 1983, the American Telephone & Telegraph Company ("AT & T") monopoly was broken up by federal court order and title to the inner workings of the telephones passed to another of its subsidiaries, AT & T Information Systems ("AT & TIS"). AT & TIS billed the owners of the decorator housings for lease payments on the inner workings of the telephones. Shortly thereafter, the P.U.C. received between 400 and 500 complaints from customers who were disputing this practice. In response to these complaints, the P.U.C launched an investigation into the matter on April 4, 1984.

On August 17, 1984, appellants-Johnson brought suit in the Sixth Judicial Circuit. This lawsuit sought class action status and made various allegations against Northwestern Bell and AT & TIS in connection with the sale of decorator telephone housings. The trial court denied class action status, but left appellants-Johnson's claim intact.

Northwestern Bell sought to prohibit the P.U.C. from investigating the telephone shell matter by virtue of its application for a writ of prohibition against the Commission dated October 5, 1984. Pursuant to court order entered October 18, 1984, Northwestern Bell's writ of prohibition was quashed which thereby allowed the P.U.C. to proceed with the investigation.

Appellants-Johnson petitioned to intervene in the P.U.C.'s investigation on December 12, 1984. The Commission denied such petition on January 2, 1985, on the ground that appellants had already commenced an action in circuit court and was thus barred by SDCL 49-3-23 from proceeding in both forums. No appeal was taken from the order denying intervention.

On January 2, 1985, the P.U.C. approved a settlement agreement which its staff negotiated with Northwestern Bell in which Northwestern Bell would offer to pay each South Dakota customer to which it sold a decorator telephone shell the sum of $55.00. Pursuant to this settlement, customers have the option to accept or decline the $55.00 payment from Northwestern Bell. As such, the agreement does not force purchasers to accept the settlement and in no way affects their rights should they choose not to accept the offer. Customers who choose to decline the offer are free to pursue any legal remedies available to them. However, those purchasers accepting the offer thereby waive any further claims they may have against Northwestern Bell, AT & TIS and AT & T iin regard to their decorator telephone shells.

Appellants-Olson moved to intervene in the P.U.C.'s investigation on January 2, 1985. The Commission did not receive this motion until after it had accepted the settlement agreement. Appellants' counsel was advised on January 3, 1985 and again on January 10, 1985, that appellants would be precluded from intervening since the proceedings had been concluded on January 2, 1985 due to the Commission's approval of the settlement. Appellants-Olson did not appeal the P.U.C.'s decision.

On January 18, 1985, appellants filed an application with this court for leave to commence original proceedings in order to prevent the P.U.C., Northwestern Bell and AT & TIS from enforcing the settlement reached between the Commission and Northwestern Bell. Appellants' application was denied by this court on January 23, 1985.

Intervenor-appellee Northwestern Bell moved to intervene in the present case by motion dated January 31, 1985. This motion was granted on February 19, 1985.

On February 7, 1985, appellants obtained a writ of certiorari from the Honorable Robert A. Miller which stayed the P.U.C. from implementing the settlement agreement reached with Northwestern Bell.

On February 12, 1985, appellants-Olson along with Sheila Paschke filed an action against Northwestern Bell and AT & TIS in Pennington County. Analogous to the prior class action filed by appellants-Johnson, this lawsuit made allegations of misconduct in relation to the sale of the decorator phone shells as well as its intent to seek certification as a class. Currently, there has been no motion for class certification filed.

On February 26, 1985, Judge Miller entered an order quashing the writ of certiorari previously granted to appellants after a hearing at which all parties appeared. Thereafter, appellants appealed to this court on March 8, 1985. As such, appellants sought review of Judge Miller's order and also requested this court to suspend all communications from the P.U.C. to consumers regarding the settlement agreement. On March 28, 1985, this court denied the appellants motion for a stay and the Commission's request for an expedited briefing schedule.

On April 1, 1985, the appellants and Sheila Paschke by and through their attorneys filed an action for injunctive relief pursuant to 42 U.S.C.A. 1983 in Federal District Court. In their complaint, the appellants sought to enjoin the P.U.C. and Northwestern Bell from implementing the settlement reached in the controversy over the decorator telephone housings. By order dated May 6, 1985, the Honorable Donald J. Porter dismissed the federal court action.

Appellants bring this action by writ of certiorari. They claim that the P.U.C. has operated beyond the scope of its jurisdiction by entering into the settlement agreement with Northwestern Bell despite the fact that the Commission had no authority to settle this claim. Appellants argue that under the Commission's statutory and regulatory laws, any action undertaken by the P.U.C. on behalf of a complainant must be agreed to by the complainant.

The P.U.C. and Northwestern Bell claim that the appellants failed to properly present their claims prior to the negotiation of the settlement. Additionally, they argue that the extraordinary remedy of certiorari is inappropriate in this action given the fact that other legal remedies existed for appellants to pursue.

The issues raised by this appeal will be separately treated under appropriate headings.

I.

WHETHER THE P.U.C. HAD JURISDICTION TO ENTER ITS ORDER APPROVING THE SETTLEMENT AGREEMENT BETWEEN NORTHWESTERN BELL AND THE STAFF OF THE P.U.C.?

Appellants are not disputing the fact that the P.U.C. had jurisdiction over matters concerning the sale of decorator telephone housings by Northwestern Bell to citizens of this state pursuant to General Tariff 36. Rather appellants contend that the P.U.C. has exceeded its statutory powers and acted in excess of its lawful jurisdiction by settling the appellants' claims in class action manner without appellants' approval.

Conversely, the P.U.C. states that it did not treat this matter as a class action case. The Commission argues that it did nothing more than agree that Northwestern Bell could make the $55.00 offer to purchasers of the telephone shells. Inasmuch as the P.U.C. did not "settle" the rights of these purchasers, the Commission established a procedure by which each customer could be contacted and given the opportunity to accept or reject the offer. Therefore, the settlement offer as approved by the P.U.C. was binding only upon those shell telephone consumers who chose to accept the offer. The consumers who elected to reject the offer were free to pursue other remedies at their disposal.

Thus, the P.U.C. asserts that the settlement agreement in which the telephone shell purchasers had the option to accept or reject the $55.00 offer is unlike a class action. Given that the agreement made between the Commission and Northwestern Bell binds only those people who choose to accept the offer, it follows that those purchasers who rejected it as well as the many unidentifiable purchasers who failed to receive notice, are not bound by the settlement and agreement, nor have their rights been affected in any way.

The trial court held that the P.U.C. had the authority to investigate the telephone shell matter which resulted from the 400 complaints it received from dissatisfied purchasers. The P.U.C. commenced its investigation into the sale of shell telephones pursuant to General Tariff 36 by virtue of SDCL Ch. 49-13 which enables the Commission to investigate complaints against common carriers. The...

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