Great Northern Utilities Co. v. Public Service Commission

• Decision Date: 18 August 1931
• Docket Number: No. 1060.,1060.
• Parties: GREAT NORTHERN UTILITIES CO. v. PUBLIC SERVICE COMMISSION et al.
• Court: U.S. District Court — District of Montana

52 F.2d 802 (1931)

GREAT NORTHERN UTILITIES CO. v. PUBLIC SERVICE COMMISSION et al.

No. 1060.

District Court, D. Montana.

August 18, 1931.

Gunn, Rasch, Hall & Gunn and E. G. Toomey, all of Helena, Mont., for plaintiff.

L. A. Foot, Atty. Gen., and F. A. Silver, of Helena, Mont., for defendants.

Before SAWTELLE, Circuit Judge, and PRAY and BOURQUIN, District Judges.

BOURQUIN, District Judge.

This case is somewhat unique in that, believe it or not, plaintiff resists defendant's order to raise its rates. But if madness seems, is method in it, the object, cut-throat competition to a finish anticipated of a rival so lost to ethics as to poach upon plaintiff's preserves and underbid it, its attitude that, in a restricted field wherein both cannot survive, if it must perish, it will die fighting rather than by slow starvation; and that it has an inalienable right of self-preservation to lay on until the other first cries, "Hold, enough," and flees the field whether or not damned.

The issues, evidence and that appeal to the Supreme Court is certain, warrant brevity. Amongst other things the complaint is that plaintiff, in exercise of a franchise to purvey natural gas within the sometime famous city of Shelby, has a plant more than sufficient for that limited field; that another like utility has practically duplicated the plant and successfully entices plaintiff's patrons with the lure of lower rates; that the field can support and maintain but one of the utilities and in self-preservation plaintiff necessarily further lowered rates; and that forthwith the other appealed to the commission, which held a hearing and made an order fixing both maximum and minimum rates conforming to those of plaintiff's rival. And contending the power and order are both invalid in that they deprive plaintiff (1) of its common-law right to fix its minimum rates, (2) of its like right of competition in self-preservation of its property, (3) of liberty of contract, and (4) of property without due process of law, by the Fourteenth Amendment guaranteed, plaintiff seeks injunction.

Defendants move to dismiss.

At the hearing the judges understood, and it appeared conceded that the only issues were the power of the commission to fix minimum rates and the reasonableness of its exercise. Thereupon to escape the difficulties attendant upon again assembling three judges, they suggested that the suit be submitted as on final hearing, the answer which it was again assumed, if not conceded, would raise no issue of fact, to be later filed. Counsel agreed, and the hearing proceeded to conclusion.

Subsequently it was observed that the answer thus filed included the formal "without knowledge" of plaintiff's allegation of insufficient field as aforesaid, which suffices to deny and frame the issue. And following conference between the writer and counsel, the latter stipulated the case be submitted "on the record" on "the application for an interlocutory injunction" but "not for final hearing." Without further comment it is observed that the complaint, motion, plaintiff's reports, and the commission's report of its hearing in evidence presented, suffice to maintain the allegation of limited or insufficient field for more than one of the rival utilities occupying it; that reasonable rates will not afford fair returns to both or more than one of them.

It appears that the commission's order was followed by proceedings in the local courts which resulted in determination that the commission was vested with power to fix minimum rates, and therein was no infringement of the guaranties of either the State Constitution or the Fourteenth Amendment. See Great, etc., Co. v. Public Service Commission, 88 Mont. 180, 293 P. 294. The latter alone here involved, plaintiff elaborately argues the fundamentals, in sufficient summary that at common law utilities have power to fix minimum rates, and, however low, is no wrong; that regulation has naught to do with minimum rates or competition save to encourage the latter to reduce rates as low as possible in behalf of that public benefit which is the sole object of regulation; that these common-law rights of utilities to fix minimum rates and to compete involve liberty of contract and are property within the guaranties of the Fourteenth Amendment; that the statute authorizing the commission to fix minimum rates and the order by the commission made in circumstances rendering it unreasonable deprive plaintiff of the right, liberty, and property aforesaid, without due process of law by said amendment guaranteed; and that the fact that the United States fixes minimum rates for interstate carriers, despite the like guaranties of the Fifth Amendment, affords no support to the like power in the states in respect to intrastate utilities, for that the federal power is derived from the Commerce Clause of the Constitution to which the Fifth Amendment yields.

To the last, a sufficient answer might be U. S. v. Ry. Co., 282 U. S. 327, 51 S. Ct. 159, 163, 75 L. Ed. 359, which merely reiterates the doctrine from the beginning maintained that "the power to regulate commerce is not absolute, but is subject to the limitations and guarantees of the Constitution (Const. Amend. 5), among which are those providing that private property shall not be taken for public use without just compensation and that no person shall be deprived of life, liberty or property without due process of law." That is to say, the Commerce Clause yields to the Fifth Amendment, since the latter is the latest expression of the people's will. See Schick v. U. S., 195 U. S. 68, 24 S. Ct. 826, 49 L. Ed. 99, 1 Ann. Cas. 585.

It is very obvious that whatever the United States may lawfully do in respect to rates of interstate carriers, the states may do in respect to rates of intrastate utilities. For both derive the power to like extent, subject to like restrictions, from the common source, the people.

In the beginning the people had all, unlimited and absolute power. To its exercise was no barrier save their will. For purposes of administration, by the Federal Constitution in the United States they vested all power to regulate interstate carriers and therein to fix minimum rates; and by State Constitutions in the states they vested like power in respect to intrastate utilities.

That this power had not been exercised in respect to minimum rates during the reign of the common law imports only that for it was then no occasion. The common law did not create it, nor could it destroy it. It is an inherent right of the people, superior and prior to the common law. Moreover, the common law is not so conservative that it forbids anything should be done for the first time; it does not prevent growth, progress, extension of principles to apply to new subjects and conditions.

"Many things that a man might do at common law that the states may forbid." Noble Bank v. Haskell, 219 U. S. 113, 31 S. Ct. 186, 188, 55 L. Ed. 112, 32 L. R. A. (N. S.) 1062, Ann. Cas. 1912A, 487; German, etc., Bank v. Kansas, 233 U. S. 411, 34 S. Ct. 612, 58 L. Ed. 1011, L. R. A. 1915C, 1189.

And constitutional guaranties in their application likewise. Merrick v. N. W. Halsey & Co., 242 U. S. 587, 37 S. Ct. 227, 61 L. Ed. 498; Euclid v. Ambler Realty Co., 272 U. S. 387, 47 S. Ct. 114, 71 L. Ed. 303, 54 A. L. R. 1016.

All power was the people's before and despite the common law by them ordained, and it is theirs today, though to some extent by Federal and State Constitutions they have limited its exercise by themselves or their legislative bodies until said Constitutions are duly changed. So it is that both federal and state sovereignties, in exercise of these their powers of rate regulation, by the people have been alike limited, viz., by the principle of due process of law in the Fifth and Fourteenth Amendments contained.

And that principle not infringed by minimum rates fixed by the United States equally is not by the like fixed by the states.

It has been so decided wherever the issue was involved. See Great, etc., Co. v. Public Service Commission, 88 Mont. 180, 293 P. 294, and its citations; Egyptian, etc., System v. Louisville & N. Co., 321 Ill. 580, 152 N. E. 510, 512. Liberty of contract yields to the general welfare. See Union, etc., Co. v. Georgia Public Service Corporation, 248 U. S. 375, 39 S. Ct. 117, 63 L. Ed. 309, 9 A. L. R. 1420; Dillingham's Case, 264 U. S. 374, 44 S. Ct. 362, 68 L. Ed. 742; O'Gorman's Case, 282 U. S. 251, 51 S. Ct. 130, 75 L. Ed. 324, 72 A. L. R. 1163.

The power existing, the necessity and purpose of its exercise, is for legislative and not judicial judgment. German, etc., Co. v. Kansas, 233 U. S. 417, 34 S. Ct. 612, 58 L. Ed. 1011, L. R. A. 1915C, 1189.

Always when in issue, however, it is for the courts to determine whether the power has been legally exercised, reasonably in regulation, and not arbitrarily and abused in disregard of its limitations aforesaid. Even as constitutional laws may be administered unconstitutionally, the lawful power to regulate may be abused and result in unlawful orders.

It is believed the latter is the instant case. That a minimum rate may be fixed so high it will repel all patronage, destroy the utility's investment, and deprive it of property without due process of law, is as clear as that a maximum rate may be fixed too low for fair returns to the same unlawful end. Both would be lawful power exercised unreasonably, resulting in illegal orders subject to be judicially annulled.

The power to regulate is not the power to destroy useful and harmless enterprise, but is to protect, foster, promote, preserve, control with due regard to the present and future interests of the utility, its patrons, and the public. See Dayton, etc., Ry. v. U. S., 263 U. S. 478, 44 S. Ct. 169, 68 L. Ed. 388, 33 A. L. R. 472.

Whether regulation is reasonable always depends upon circumstances. There may be, and it is assumed there are, good and valid reasons...