Northern Ind. Public Serv. V. U.S. Steel

Citation907 N.E.2d 1012
Decision Date23 June 2009
Docket NumberNo. 93S02-0809-EX-00489.,93S02-0809-EX-00489.
PartiesNORTHERN INDIANA PUBLIC SERVICE COMPANY, Appellant (Respondent below), v. UNITED STATES STEEL CORPORATION, Appellee (Complainant below).
CourtSupreme Court of Indiana

Gregory S. Colton, Merrillville, IN, Jon Laramore, Peter L. Hatton, Elizabeth A. Herriman, Robert L. Hartley, Indianapolis, IN, Attorneys for Appellant.

John Wickes, Todd Richardson, Joseph Rompala, Bette Dodd, Steven Griesemer, Karl Mulvaney, Nana Quay-Smith, Indianapolis, IN, Attorneys for Appellee.

Gregory F. Zoeller, Attorney General of Indiana, Thomas M. Fisher, Solicitor General of Indiana, Beth Krogel Roads, Indiana Utility Regulatory Commission Counsel, Indianapolis, IN, Attorneys for Amicus Curiae State of Indiana.

On Petition to Transfer from the Indiana Court of Appeals, No. 93A02-0706-EX-00467.

SHEPARD, Chief Justice.

Northern Indiana Public Service Company and its customer U.S. Steel settled a rate and service dispute in 1999. In this case, U.S. Steel asked the Indiana Utility Regulatory Commission to interpret the order it issued in 1999 approving a settlement between the parties. We affirm the Commission.

Facts and Procedural History

Northern Indiana Public Service Company is a public utility that provides electricity to a steel production facility in Gary, known as the "Gary Works," operated by United States Steel Corporation, a large industrial manufacturer of steel products.

In 1999, NIPSCO and U.S. Steel settled a longstanding electric power dispute involving U.S. Steel's electric generation and transmission facilities in Illinois. They agreed to the preliminary terms of the settlement in a Term Sheet in May 1999. A few weeks later, in June 1999, the parties executed six other documents: a Letter Agreement, a Settlement Agreement, a Contract for Electric Industrial Power Service ("Contract"), an Operation and Control Agreement/Operation Agreement, a Facility/Property Lease, and an Access/Use License Agreement. They submitted the Settlement and Contract to the Indiana Utility Regulatory Commission, which approved it by an order dated July 8, 1999 after notice and an evidentiary hearing. Six years later, when a price adjustment provision in the Contract became effective, the parties disagreed on its application. NIPSCO maintained the price adjustment applied both to the Energy Charge (a fixed number of hours of use each month given by the agreement) and the Demand Charge (for energy use beyond the number of hours given for the Energy Charge's fixed number). U.S. Steel insisted it applied only to the Energy Charge.

On November 17, 2006, U.S. Steel filed a complaint seeking to enforce its interpretation of the Contract. U.S. Steel then filed its motion for summary judgment. After briefing and oral argument, the Commission granted U.S. Steel's motion for summary judgment, an unusual procedure for the Commission, on May 9, 2007, pursuant to 170 Ind. Admin. Code 1-1.1-26(a) (2007). NIPSCO appealed to the Court of Appeals, which reversed. N. Ind. Pub. Serv. Co. v. U.S. Steel Corp., 881 N.E.2d 1065 (Ind.Ct.App.2008). We granted transfer, 898 N.E.2d 1223 (Ind.2008)(table).

I. Standard of Judicial Review

The General Assembly created the Indiana Utility Regulatory Commission primarily as a fact-finding body with the technical expertise to administer the regulatory scheme devised by the legislature. United Rural Elec. Membership Corp. v. Ind. & Mich. Elec. Co., 549 N.E.2d 1019 (Ind.1990); See Ind.Code § 8-1-1-5 (2008). The Commission's assignment is to insure that public utilities provide constant, reliable, and efficient service to the citizens of Indiana. Ind. Bell Tel. Co. v. Ind. Util. Regulatory Comm'n, 715 N.E.2d 351, 354 n. 3 (Ind. 1999). The Commission can exercise only power conferred upon it by statute. United Rural Elec. Membership Corp., 549 N.E.2d at 1021.

The Indiana Code authorizes judicial review of Commission orders as follows:

Any person, firm, association, corporation, limited liability company, city, town, or public utility adversely affected by any final decision, ruling, or order of the commission may, within thirty (30) days from the date of entry of such decision, ruling, or order, appeal to the court of appeals of Indiana for errors of law under the same terms and conditions as govern appeals in ordinary civil actions, except as otherwise provided in this chapter and with the right in the losing party or parties in the court of appeals to apply to the supreme court for a petition to transfer the cause to said supreme court as in other cases. An assignment of errors that the decision, ruling, or order of the commission is contrary to law shall be sufficient to present both the sufficiency of the facts found to sustain the decision, ruling, or order, and the sufficiency of the evidence to sustain the finding of facts upon which it was rendered.

Ind.Code § 8-1-3-1 (2008).

This section includes language almost identical to provisions for judicial review of other administrative agency actions.1 See McClain v. Review Bd. of Ind. Dept. of Workforce Dev., 693 N.E.2d 1314, 1317 n. 1 (Ind.1998).

This amounts to a multiple tiered review. On the first level, it requires a review of whether there is substantial evidence in light of the whole record to support the Commission's findings of basic fact. Citizens Action Coalition of Ind., Inc. v. N. Ind. Pub. Serv. Co., 485 N.E.2d 610, 612 (Ind.1985).2 Such determinations of basic fact are reviewed under a substantial evidence standard, meaning the order will stand unless no substantial evidence supports it. McClain, 693 N.E.2d at 1317-18. In substantial evidence review, "the appellate court neither reweighs the evidence nor assesses the credibility of witnesses and considers only the evidence most favorable to the Board's findings." Id. The Commission's order is conclusive and binding unless (1) the evidence on which the Commission based its findings was devoid of probative value; (2) the quantum of legitimate evidence was so proportionately meager as to lead to the conviction that the finding does not rest upon a rational basis; (3) the result of the hearing before the Commission was substantially influenced by improper considerations; (4) there was not substantial evidence supporting the findings of the Commission; (5) the order of the Commission is fraudulent, unreasonable, or arbitrary. Id. at 1317 n. 2. This list of exceptions is not exclusive. Id.

At the second level, the order must contain specific findings on all the factual determinations material to its ultimate conclusions. Citizens Action Coalition, 485 N.E.2d at 612. McClain described the judicial task on this score as reviewing conclusions of ultimate facts for reasonableness, the deference of which is based on the amount of expertise exercised by the agency. McClain, 693 N.E.2d at 1317-18. Insofar as the order involves a subject within the Commission's special competence, courts should give it greater deference. Id. at 1318. If the subject is outside the Commission's expertise, courts give it less deference. Id. In either case courts may examine the logic of inferences drawn and any rule of law that may drive the result. Id. Additionally, an agency action is always subject to review as contrary to law, but this constitutionally preserved review is limited to whether the Commission stayed within its jurisdiction and conformed to the statutory standards and legal principles involved in producing its decision, ruling, or order. Citizens Action Coalition, 485 N.E.2d at 612-13.

NIPSCO advocates that we apply a de novo standard because the case involves summary judgment and a question of law. (Appellant's Br. at 7-8.) It cites two recent Court of Appeals opinions reviewing decisions of the Commission de novo: Ind. Bell Tel. Co. v. Time Warner Commc'ns of Ind., L.P., 786 N.E.2d 301 (Ind.Ct.App. 2003), and Cowper v. Collier, 720 N.E.2d 1250 (Ind.Ct.App.1999), trans. denied, 735 N.E.2d 238 (Ind.2000). (Opposition to Transfer at 6-7.)

Indiana Bell involved a challenge of the Commission's interpretation of an interconnection agreement between competing carriers. 786 N.E.2d at 303-04. In affirming the Commission's decision, the opinion did not treat the Commission's order granting summary judgment any differently than it would a trial court's decision, nor did it consider doing so, though it noted that it was not a typical contract in light of the Commission's regulatory role in determining whether to approve the contract at issue in the case. Id. at 305. Instead, the Court of Appeals applied the de novo standard as if a trial court had interpreted the contract and gave Ameritech, the party advocating for that low level of deference, "the benefit of the doubt" because AT & T failed to cite authority for its alternative standard. Id.

The decision in Cowper v. Collier arose from a trial court review of a Natural Resource Commission's order upholding its administrative law judge's decision after a trial on the merits. Cowper, 720 N.E.2d at 1254. The opinion in Cowper reviewed the NRC's decision de novo because "the law is the province of the judiciary and the reviewing court is not bound by any agency's conclusions of law," and "the construction of an unambiguous written contract is generally a question of law for the court." Id. at 1255. Applying contract case law, the opinion reversed in part and remanded the NRC order. Id. at 1256.

NIPSCO argues that the current appeal is not the product of a regulatory settlement but rather a dispute between two private parties over interpreting the Contract. (Reply Br. at 11.) Because a court's role in interpreting a contract is "to give effect to the parties' intent at the time the contract was made and as reflected by the language they used," NIPSCO says that interpreting the Contract is a question of law appropriate for de novo review by the judiciary. (Opposition to Rehearing at 3.) NIPSCO asserts that in the...

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