Pacific Telephone Telegraph Co v. Kuykendall, s. 540
| Decision Date | 26 May 1924 |
| Docket Number | 789,Nos. 540,s. 540 |
| Citation | 265 U.S. 196,44 S.Ct. 553,68 L.Ed. 975 |
| Parties | PACIFIC TELEPHONE & TELEGRAPH CO. v. KUYKENDALL, Director of the Public Works, etc., et al |
| Court | U.S. Supreme Court |
Messrs. Otto B. Rupp and W. V. Tanner, both of Seattle, Wash., Frank T. Post, of Spokane, Wash., and H. D. Pillsbury, of San Francisco, Cal., for appellant.
Messrs. John H. Dunbar, of Olympia, Wash., T. J. L. Kennedy, of Seattle, Wash., Alexander M. Winston, of Spokane, Wash., and Raymond W. Clifford, of Olympia, Wash., for appellees.
These are two appeals from the District Court in the same case involving the question of the confiscatory character of rates for telephone service within the state of Washington and in the cities of Seattle and Tacoma, to which rates the appellant company is limited by a refusal of the Department of Public Works to permit an increase thereof. The Pacific Telephone & Telegraph Company is a corporation of California authorized to do business in Washington and owning a plant covering the state. It owns all the stock of the Home Telephone Company, which owns and operates the Spokane Exchange. A similar question as to confiscatory rates has arisen in respect to that company and that exchange, but a separate bill was filed by that company and is considered on appeal in a case reported next after this.
This bill by the Pacific Company seeks an injunction against the Department of Public Works of the state to prevent it from interfering with the maintenance and collection of the increased rates the company proposes in all parts of Washington except Spokane. A court of three judges was organized to hear the application for a temporary order. The suit depended for jurisdiction both on the diverse citizenship of the parties and upon the averment that the order of the Department of Public Works if enforced would deprive the company of its property without due process of law, in violation of the Fourteenth Amendment. The court set aside the temporary restraining order issued by the District Judge on the filing of the bill and denied the application for temporary injunction. Appeal was taken direct to this court under Judicial Code, § 266, Act March 4, 1913 (37 Stat. 1013 [Comp. St. § 1243]). After the denial of the temporary injunction, the District Judge heard the case on a motion to dismiss the bill, and granted the motion, and from this final decree a second appeal was taken.
The bill of complaint shows that on August 8, 1919, the Public Service Commission of the state, the predecessor of the Department of Public Works, made an order prescribing maximum rates and charges to be charged by the Pacific Company on and after that date within the state of Washington which are made an exhibit to the bill; that on September 20, 1922, the company filed a schedule of rates with the Department of Public Works increasing rates to be charged for exchange telephone service in all the exchanges owned by the company in Washington; that the department on September 24, 1922, suspended the rates for 30 days; and that after numerous hearings as to their reasonableness, the department by a majority of two members on March 31, 1923, denied the increase. The bill further averred that the fair and reasonable value of the property of the company in Washington, not including the Spokane plant, was $35,616,896, which includes $20,852,607 for the Seattle plant, and $3,457,290, for that of Tacoma, and that this estimate includes nothing for franchises and nothing for going concern; that the fair annual return which the company was entitled to earn was 8 per cent. on this value, whereas the actual return was as follows:
Fair
Cost Value
Year 1919, state of Washington................ 4.97% 3.67%
Year 1919, city of Seattle.................... 3.97% 2.66%
Year 1919, city of Tacoma...................... .98% .81%
Year 1920, state of Washington................ 4.42% 3.33%
Year 1920, city of Seattle.................... 1.85% 1.29%
Year 1920, city of Tacoma...................... .89% .74%
Year 1921, state of Washington................ 3.30% 2.58%
Year 1921, city of Seattle..................... .69% .52%
Year 1921, city of Tacoma...................... .58% .48%
Year 1922, state of Washington................ 3.17% 2.58%
Year 1922, city of Seattle..................... .19% .15%
Year 1922, city of Tacoma...................... .89% .75%
that such returns were confiscatory and a violation of the rights of the company under the Fourteenth Amendment; that therefore the order of March 31, 1923, was void; that the company had no adequate remedy at law; that if an attempt were made to enforce the rates it proposed to make the Department of Public Works and others in state authority, defendants, would, unless restrained by the court, institute proceedings to compel compliance with the confiscatory schedule, and that the company and its officers and employees would be subjected to a multiplicity of suits, and incur criminal penalties prescribed by the laws of the state.
By the statutes of Washington (section 10428, Remington's Comp. St. 1922), any complainant affected by any order of the commission (now the department) may within 30 days apply to the superior court of the proper county for a writ of review 'for the purpose of having its reasonablenes and lawfulness inquired into and determined.' The commission certifies the record, upon which the court is to enter judgment affirming or setting aside the commission's order. If reversed for failing to receive proper evidence offered, the case is to be referred back to the commission to receive the evidence and enter a new order. The court may remand any case reversed by it to the commission for further action. It is clear that the function to be performed by the superior court under this section is judicial. It does not fix rates or enter a new order as to them. It does not pass on the sufficiency or weight of evidence. It only looks into the reasonableness and lawfulness of the order of the commission, and is to determine whether evidence which should have been received was rejected, and in that case is to send the case back to the commission for a new order. The court does not act legislatively.
Instead of applying to the superior court of the state, therefore, application was made by the bill herein to the federal District Court within the 30 days to restrain the order of the department as violative of the Fourteenth Amendment.
By section 10424, Rem. Comp. Stat. 1922, relating to the filing of tariffs increasing rates and providing for a hearing on such proposed increase and the suspension of the schedule pending the hearing, it is declared that:
'If the commission shall at the conclusion of the hearing refuse to permit such increase, either in whole or in part, no supersedeas shall be granted in any action or proceeding brought to review the order of the commission pending the final determination of such action by the superior court, or, if appealed to the Supreme Court, by such Supreme Court.'
It is apparent from these provisions that after the commission finally denied the increase of rates applied for, the company had exhausted its administrative remedy to avoid the alleged confiscatory rates under which it was compelled to render the service. It had, therefore, no recourse but to a court. Both by reason of diverse citizenship and because of the federal constitutional question the federal court of equity was available to it. The state statute forbidding a stay of proceedings until a final judicial decree was rendered, of course, could not prevent a federal court of equity from affording such temporary relief by injunction as the principles of equity procedure required. The conditions set out in the bill, therefore, seem to have made a case ripe for federal relief. Bacon v. Rutland, R. R. Co., 232 U. S. 134, 34 Sup. Ct. 283, 58 L. Ed. 538; Prendergast v. N. Y. Tel. Co., 262 U. S. 43, 48, 43 Sup. Ct. 466, 67 L. Ed. 853.
But it is urged that such relief is premature because the rates, increase of which was refused, were reasonable, and afforded an adequate return on the value of the property of the company used in the public service as fixed by the commission in accord with the...
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