Southern Bell Tel. & Tel. Co. v. Louisiana Public Service Commission

• Decision Date: 25 February 1957
• Docket Number: No. 43251,43251
• Citation: 94 So.2d 431,232 La. 446
• Parties: , 18 P.U.R.3d 329 SOUTHERN BELL TELEPHONE & TELEGRAPH CO. v. LOUISIANA PUBLIC SERVICE COMMISSION (City of New Orleans, Intervenor).
• Court: Louisiana Supreme Court

Page 431

94 So.2d 431

232 La. 446, 18 P.U.R.3d 329

SOUTHERN BELL TELEPHONE & TELEGRAPH CO. v. LOUISIANA PUBLIC SERVICE COMMISSION (City of New Orleans, Intervenor).

No. 43251.

Supreme Court of Louisiana.

Feb. 25, 1957.

Rehearing Denied April 1, 1957.

Charles Cecil Bird, Jr., Brezeale, Sachse & Wilson, Baton Rouge, Henriques & Mayo, New Orleans, Tucker, Bronson & Martin, Shreveport, Gravel, Humphries, Sheffield & Mansour, Alexandria, Plauche & Plauche, Lake Charles, for plaintiff-appellant.

Jack P. F. Gremillion, Atty. Gen., Theo. F. Cangelosi, Baton Rouge, Raoul Sere, Louis F. Claiborne, New Orleans, Melvin G. Dakin, Baton Rouge, for appellants.

Adair & Goldthwaite, Atlanta, Ga., Donald Martin New Orleans, Cashio, Cashio & Molloy, Maringouin, amicus curiae.

HAMLIN, Justice ad hoc.

Southern Bell Telephone & Telegraph Company instituted this suit, praying that Order No. 6993 of the Louisiana Public Service Commission, issued June 30, 1956, which reduced its rates, be decreed null, void, an of no effect; and, that it be permitted and empowered to immediately increase its Louisiana intrastate tolls, rates and charges. In the alternative, plaintiff asked that the Order be declared null, and that it be empowered to immediately increase its November, 1952 rates prescribed by the Commission in Order No. 6131--2.7%, the increase required to provide the Telephone Company with 6% On gross plant less 5 1/3% Of depreciation.

Plaintiff prayed that a rule issue to the Louisiana Public Service Commission to show cause why an interlocutory injunction should not issue, enjoining the Commission from enforcing its Order No. 6993 of June 30, 1956; from bringing suit to prohibit the Telephone Company from charging the rates fixed by Order No. 6131 of November 1, 1952; from fixing, levying, or imposing any fine or penalty for not obeying the Order of June 30, 1956; and, from authorizing any person to bring suit for the recovery of penalties for failure of the Telephone Company to comply with Order No. 6993 of June 30, 1956.

The Louisiana Public Service Commission filed an exception of no cause or right of action.

The City of New Orleans intervened, alleging that it had an interest in maintaining Order No. 6993 of June 30, 1956.

The trial judge granted the interlocutory injunction, predicated upon the Telephone Company's furnishing adequate bond. His opinion stated, in substance, that he seriously doubted the validity of the Order.

The exceptions were referred to the merits, and upon trial, Order No. 6993 of the Louisiana Public Service Commission, ordering a reduction in intrastate toll and coin rates, was declared null. The Telephone Company was refused an increase in rates. The judgment also prohibited the Commission from bringing suit to prevent the Telephone Company from collecting, for its Louisiana intrastate services, the rates and charges fixed by Order No. 6131 of November 1, 1952; from fixing, levying or imposing any fine or penalty for disobedience to Order No. 6993 of June 30, 1956; and from instituting or authorizing or directing any persons to prosecute any action against Southern Bell Telephone & Telegraph Co. for recovery of any penalties for failure to comply with Order No. 6993 of June 30, 1956.

The defendant and intervenor appealed to this Court, praying that the judgment of the District Court be reversed, insofar as it annulled and set aside the Commission's Order; and that it be affirmed, insofar as it denied the Telephone Company's application for an increase in rates.

Answering the appeal plaintiff prayed that the judgment be affirmed, insofar as it nullified the Commission's Order; but, that judgment be rendered authorizing and empowering the Telephone Company to increase its Louisiana intrastate tolls, rates and charges 8.4%--that is, sufficiently to produce an annual increase in gross revenue of at least $6,581,000. Alternatively, plaintiff prayed that it be authorized and empowered to increase its November, 1952 intrastate toll rates and charges 2.7%--the increase required to provide the Telephone Company with 6% On gross plant less 5 1/3% Of depreciation reserve.

Order No. 6993 resulted from preceedings instituted by the Louisiana Public Service Commission requiring Southern Bell Telephone & Telegraph Co. to show cause why its rates and charges for Louisiana intrastate telephone service should not be reduced. Public hearings were commenced on December 13, 1955 and concluded on May 11, 1956. The Telephone Company's motion to reopen was refused.

Order No. 6993 reads:

'1. That Southern Bell Telephone and Telegraph Company shall reduce its annual gross intrastate operating revenues in the amount of $3,940,000.00.

'2. This reduction shall be accomplished in the following manner:

'Effective September 1, 1956, all public telephone pay station rates shall be reduced from ten cents (10cents) to five cents (5cents) per local call.

'Effective August 1, 1956, all intrastate toll rates and charges shall be subject to a discount of 20% Per call.

'3. This Commission retains jurisdiction in these proceedings to consider and act upon any revision of the amount of the reduction in intrastate toll rates and charges herein ordered, which Southern Bell Telephone and Telegraph Company can prove by competent evidence, based on adequate actual experience, would result in a total reduction in its annual intrastate gross operating revenues (the public telephone pay station reduction being also considered) of more than $3,940,000.00.

'4. The discount method of effecting the reduction in intrastate toll rates and charges shall be utilized until such time as Southern Bell Telephone and Telegraph Company submits revised rate schedules otherwise accomplishing the reduction in such toll rates and charges and such revised rate schedules are approved by this Commission.

'5. Any petition, motion, or objection made in these proceedings which has not otherwise been resolved by this opinion and Order is hereby dismissed.'

Plaintiff alleges in its petition that the Order contains twenty-five errors on the part of the Commission, among which are the following:

1. The ordering of a schedule of rates which are so low that the return therefrom to the company is unreasonable, arbitrary, discriminatory and confiscatory, thereby depriving the company of its property without due process;

2. The refusing to fix reasonable and just rates for the company which would produce earnings commensurate with earnings of other utilities in Louisiana, taking into consideration the risks involved; and in holding that the telephone industry enjoys greater stability than other companies.

3. The basing of its determination of a fair rate of return on an assumed and fictitious capital structure of 45% Debt ratio and 55% Common stock equity, notwithstanding the company's historical average capital structure of 1/3 debt ratio and 2/3 common stock equity.

The Commission steadfastly contends that the Telephone Company has failed to overcome the presumption in favor of the validity of the order under attack, and that, therefore, it must be maintained.

Article VI, Section 4, of the Louisiana Constitution of 1921, LSA, reads as follows:

'The Commission shall have and exercise all necessary power and authority to supervise, govern, regulate and control all common carrier railroads, * * * telephone, telegraph, * * * and other public utilities in the State of Louisiana, and to fix reasonable and just single and joint line rates, fares, tolls or charges for the commodities furnished, or services rendered by such common carriers or public utilities, except as herein otherwise provided.'

In the case of Southern Bell Telephone & Telegraph Co., Inc., v. Louisiana Public Service Commission, 183 La. 741, 164 So. 786, 788, this Court stated:

'The law is clear that the burden is upon the plaintiff to show that the commission reduced the rates to such an extent that it is patent and obvious that the company will be unable to realize a fair and just return upon its investment. The plaintiff must also demonstrate that the trial judge abused his discretion in refusing the interlocutory injunction. Section 5, article 6, Constitution of Louisiana of 1921.

'In the case of Vicksburg, S. & P.R. Co. v. Railroad Commission of La., 153 La. 983, 96 So. 832, 833, it is stated:

"But inasmuch as such functions are by their nature legislative in character, and courts, owing to their methods of procedure, often cannot intelligently pass upon the advisability or propriety of regulations affecting the future as well as the present, it follows that courts should act slowly in substituting their own views and discretion for those of a body peculiarly constituted to act intelligently in such cases, and primarily charged with doing so, and that they ought never to interfere with such bodies except when their action is clearly arbitrary, or unreasonable to an extent which in effect makes them so."

In the case of Gulf States Utilities Co. v. Louisiana Public Service Commission, 222 La. 132, 62 So.2d 250, 252, this Court stated * * * And, to hold that a rate is unjust or unreasonable, it must be found that the action of the Commission was arbitrary or capricious--that is, that the decision was either plainly contrary to the facts or unsupported by evidence, bearing in mind, of course, that the rulings of the Commission, like those of other administrative bodies acting under a delegation of discretionary authority, are entitled to great weight and will not be disturbed in the absence of a clear showing of abuse of power. Burke v. Louisiana Public Service Commission, 215 La. 451, 40 So.2d 916 and cases there cited.'

On Page 7 of its Order, the Commission sets out that although it is authorized to fix 'reasonable and just' rates, there is no prescribed formula for the precise implementation of such authorization, and that it is obliged to explore the authorities for proper...