Cincinnati Bell Tel. Co. v. Public Utilities Com'n of Ohio

• Decision Date: 25 July 1984
• Docket Number: 83-733 and 83-1595,Nos. 83-392,s. 83-392
• Citation: 12 Ohio St.3d 280,466 N.E.2d 848
• Parties: , 12 O.B.R. 356 CINCINNATI BELL TELEPHONE COMPANY, Appellant, v. PUBLIC UTILITIES COMMISSION OF OHIO et al., Appellees. (Two Cases.) OFFICE OF CONSUMERS' COUNSEL, Appellant, v. PUBLIC UTILITIES COMMISSION OF OHIO et al., Appellees.
• Court: Ohio Supreme Court

Page 280

12 Ohio St.3d 280

466 N.E.2d 848, 12 O.B.R. 356

CINCINNATI BELL TELEPHONE COMPANY, Appellant, v. PUBLIC UTILITIES COMMISSION OF OHIO et al., Appellees. (Two Cases.)

OFFICE OF CONSUMERS' COUNSEL, Appellant, v. PUBLIC UTILITIES COMMISSION OF OHIO et al., Appellees.

Nos. 83-392, 83-733 and 83-1595.

Supreme Court of Ohio.

July 25, 1984.

Frost & Jacobs, Mark H. Longenecker, Jr., David C. Horn, Earl R. Huffman and William D. Baskett, III, Cincinnati, for Cincinnati Bell Tel. Co.

Anthony J. Celebrezze, Jr., Atty. Gen., Robert S. Tongren, Jonathan L. Heller and Martin J. Marz, Columbus, for Public Utilities Com'n William A. Spratley, Consumers' Counsel, Janine L. Migden, Lawrence F. Barth and Bruce J. Weston, Columbus, for Consumers' Counsel.

Schneider, Prohaska & Sams and J. Raymond Prohaska, Columbus, urging reversal for amicus curiae, Ohio Tel. Assn. in case No. 83-392.

PER CURIAM.

Case No. 83-392

In its first three propositions of law, CBT challenges the validity of the commission's March 9, 1983 entry on rehearing whereby CBT was ordered to establish whole life depreciation schedules. CBT maintains that the right of state public utilities commissions to prescribe their own depreciation rates for intrastate ratemaking purposes was preempted by the FCC on January 6, 1983. On that date, the FCC released a memorandum opinion and order in In re Amendment of Part 31, 92 F.C.C.2d 864, which reads in pertinent part as follows:

"The question presented in the reconsideration petition is a clearly delineated controversy over whether Section 220(b) [, Title 47, U.S.Code,] preempts state depreciation prescriptions that are inconsistent with the rates prescribed for classes of property by this Commission, or, whether Section 2(b)(1) [, Section 152(b)(1), Title 47, U.S.Code,] or Section 221(b)[, Title 47, U.S.Code,] reserve[s] to the states the right to prescribe their own depreciation rates for intrastate regulatory purposes." Id. at 867.

Continuing, the FCC made the following finding of fact in the preemption order:

"It is clear that unless telephone plants, including that portion subject to allocation to the intrastate jurisdiction, is depreciated at a reasonable rate, improperly timed capital recovery will occur. Indeed, in an increasingly competitive environment, it is possible that improper capital recovery could delay or prevent modernization which would add to the costs borne by ratepayers and could, ultimately, threaten carriers' ability to fully recover their invested capital. Moreover, the extent of state action attempting to prevent carriers from utilizing our depreciation prescriptions places substantial burdens on carriers and could well impair their ability to raise the investment capital they will need to fully compete in the continually evolving competitive telecommunications marketplace. Such a result could undermine the achievement of the Commission's objective to develop policies that will engender a dynamic, efficient telecommunications marketplace with services being provided at reasonable prices." Id. at 877.

The FCC then concluded that " * * * the most logical and reasonable interpretation of Section 220(b) of the * * * [Federal Communications Act of 1934] is that where the * * * [FCC] prescribes depreciation rates for classes of property, state commissions are precluded from departing from those rates." Id. at 879.

CBT initially argues that principles of res judicata prohibit the commission from deviating from the FCC's preemption order. CBT predicates this argument on the commission's presence at the FCC proceeding which preceded the issuance of the preemption order and contends that res judicata can attach to an administrative proceeding.

CBT is correct in its assertion that res judicata can apply as a result of a prior administrative proceeding. Superior's Brand Meats, Inc. v. Lindley (1980), 62 Ohio St.2d 133, 403 N.E.2d 996 . However, it is the nature of the administrative proceeding which is determinative of whether the doctrine applies. Generally, there are two types of administrative hearings--adjudicative and legislative. Under adjudicatory actions, res judicata will attach. However, where an administrative proceeding involves legislative or rulemaking functions, res judicata does not apply. State Corp. Comm. of Kansas v. Wichita Gas Co. (1934), 290 U.S. 561, 569, 54 S.Ct. 321, 324, 78 L.Ed. 500.

The record demonstrates that the FCC order was promulgated under the guise of that agency's rulemaking authority. No hearings were conducted and no expert testimony was elicited. Instead, comments were simply filed for consideration by the FCC without cross-examination or confrontation. We conclude that the FCC order was legislative, as opposed to adjudicative, in nature and therefore res judicata is inapplicable.

Alternatively, CBT contends that the commission erred in failing to abide by the FCC's order, and that neither this court nor the commission has jurisdiction to review the order and rule on its validity. The federal circuit courts of appeals have authority to enjoin, set aside, suspend or to determine the validity of any order of the FCC. Section 2342, Title 28, U.S.Code. The commission, however, does not seek to have the subject order enjoined, suspended, set aside, or invalidated. This court does, however, have jurisdiction to review final orders of the Public Utilities Commission. R.C. 4903.13.

In Southwestern Bell Tel. Co. v. Arkansas Pub. Serv. Comm. (Mar. 30, 1984), E.D.Ark. No. LRC 84-247, unreported, the court was presented with facts closely analogous to the case at bar. Therein, Southwestern Bell sued for declaratory judgment and preliminary and permanent injunctive relief for the failure of the Arkansas Public Service Commission to prescribe depreciation rates in conjunction with the FCC preemption order. In granting summary judgment against Southwestern Bell, the court stated:

" * * * The Federal Communications Commission was established by the Communications Act of 1934, 47 U.S.C. § 151 et seq., to regulate interstate and foreign communication. Congress expressly limited its jurisdiction, excluding regulation of intrastate communication. 47 U.S.C. § 152(b)(1). The FCC is authorized to determine depreciation rates for interstate carriers under 47 U.S.C. § 220(b). The FCC is authorized to exempt carriers such as the plaintiff from any of its accounting requirements where they are concurrently regulated by state regulatory commissions. 47 U.S.C. § 220(h). Within a nine month period, the FCC interpreted § 220(b) to deny its jurisdiction over establishing depreciation rates for intrastate ratemaking, and then to grant such jurisdiction. Compare Amendment of Part 31, 89 F.C.C.2d 1094 (1982) with Amendment of Part 31, 92 F.C.C.2d 864 (1983) ('Preemption Order').

"The Court has reviewed the FCC's analysis of the legislative history and is unpersuaded that the FCC has jurisdiction to determine intrastate depreciation methods. Although § 220(b) is not expressly limited to interstate depreciation methods, this must be implied. The 1934 act left the door open for the FCC to ask Congress for additional authority under 47 U.S.C. § 220(j). In light of the express FCC jurisdictional limitations imposed by Congress, the FCC's interpretation of expanding jurisdiction is a non sequitur. The logic of expanding into intrastate jurisdictional matters in the name of 'rapid, efficient, nation-wide, world-wide wire and radio communication service with adequate facilities at reasonable charges' could, theoretically, allow the FCC to bootstrap itself into preempting all intrastate ratemaking determinations. 92 F.C.C.2d at 876 (citing 47 U.S.C. § 151). If the FCC wishes to have this authority, it should seek express congressional approval. The Court finds the FCC preemption of intrastate depreciation methods to be ultra vires and will not enforce it for the plaintiff.

"Some mention has been made that only a court of appeals may invalidate an FCC order pursuant to 28 U.S.C. § 2342. However, 28 U.S.C. § 2342 is inapposite since this proceeding is not 'any proceeding to enjoin, set aside, annul or suspend any order' of the FCC, making 47 U.S.C. § 402(a) applicable. Since the FCC is not a party, it will have not affect [sic ] upon it. Further, determination of the issue is merely incidental to this lawsuit over which this Court has ample jurisdictional basis. If the FCC wishes to enforce its order, then it should take the appropriate steps."

We are in agreement with the court's analysis, and, accordingly, we conclude that the depreciation methodology adopted by the commission in its March 9, 1983 order on rehearing is reasonable and lawful.

CBT next argues that the commission erred when on rehearing it considered additional evidence concerning ENFIA usage when CBT and other parties to the rate case did not have an opportunity to present their positions concerning such additional evidence. Although ENFIA usage is within the jurisdiction of the FCC, this factor is nevertheless considered by the state utilities commissions for purposes of determining the appropriate separation factors to allocate the local exchange carrier's plant between intrastate and interstate jurisdictions. Accordingly, in its initial opinion and order, the commission adopted an ENFIA usage figure of 3,402 minutes. Subsequently, in its application for rehearing, OCC brought to the commission's attention a September 1982 FCC order modifying the ENFIA usage figure deemed appropriate for allocating separation factors from the 3,402 minutes level to 4,474 minutes. On rehearing, the commission took administrative notice of the revised FCC figure relating to ENFIA usage and adopted that figure without providing CBT an opportunity to present its position through additional testimony or cross-examination. As such, CBT contends the ENFIA modification was unlawful because no testimony was taken on the subject at...