Waste Management Partners of Bozeman, Ltd. v. Montana Dept. of Public Service Regulation

• Decision Date: 26 August 1997
• Docket Number: No. 96-525,96-525
• Citation: 944 P.2d 210,284 Mont. 245
• Parties: WASTE MANAGEMENT PARTNERS OF BOZEMAN, LTD., d/b/a Three Rivers Disposal Company, Appellant, v. MONTANA DEPARTMENT OF PUBLIC SERVICE REGULATION, Montana Public Service Commission, and Harry Ellis, d/b/a/ Customized Services, Respondents.
• Court: Montana Supreme Court

Page 210

944 P.2d 210

284 Mont. 245

WASTE MANAGEMENT PARTNERS OF BOZEMAN, LTD., d/b/a Three Rivers Disposal Company, Appellant, v. MONTANA DEPARTMENT OF PUBLIC SERVICE REGULATION, Montana Public Service Commission, and Harry Ellis, d/b/a/ Customized Services, Respondents.

No. 96-525.

Supreme Court of Montana.

Submitted on Briefs May 15, 1997.

Decided Aug. 26, 1997.

William Andrew Wilson, Denver, CO; John Alke, Hughes, Kellner, Sullivan & Alke, Helena, for Appellant.

Denise Peterson, Montana Public Service Commission, Helena, Jerome Anderson, Helena, for Respondents.

HUNT, Justice.

Appellant Three Rivers Disposal Company (Three Rivers), formerly Waste Management Partners of Bozeman, Ltd., appeals from the decision issued by the First Judicial District Court, Lewis and Clark County, affirming upon judicial review the order of the Montana Public Service Commission (PSC) granting Harry Ellis d/b/a Customized Services (Ellis) a Class D certificate to transport garbage in Madison and Gallatin Counties. We affirm the District Court.

The following issues are presented on appeal:

1. Did the PSC apply the correct standard for granting Class D certification?

2. Did the District Court err when it affirmed the PSC's finding that Ellis was a fit applicant?

3. Did the District Court err when it affirmed the PSC's finding that the public convenience and necessity required that it authorize Ellis' service?

4. Did the District Court err when it affirmed the PSC's finding that Three Rivers would not be impaired by granting Ellis' application?

5. Did the PSC err by failing to follow its own precedent, and if so, did it err by failing to provide a reasoned explanation for its departure from that precedent?

FACTUAL BACKGROUND

Three Rivers has hauled the majority of garbage in Gallatin and Madison Counties since 1983. On three occasions, Ellis has filed an application with the PSC for a Class D certificate to transport waste products on routes within those same counties and thereby directly compete with Three Rivers. Each time, Three Rivers has protested Ellis' application on the grounds that granting the certificate would infringe upon its area of operations and harm both it and its customers.

Ellis d/b/a Rozel Corp. filed his first application in 1984. The PSC denied that application, finding that the grant of authority would have a negative impact upon Three Rivers and the public. (Ellis I) It found that the public convenience and necessity for an additional garbage service had not been established, because there was no evidence of unmet demand and few concerns regarding the adequacy of Three Rivers' service or its rates. Additionally, the recent history of the area demonstrated that competition would adversely impact Three Rivers and the consumer. The public's need for stability at that time outweighed any advantages brought by competition. The Montana Supreme Court upheld the PSC's decision in Rozel Corp. v. Dept. of Pub. Serv. Regulation (1987), 226 Mont. 237, 735 P.2d 282.

Ellis filed a second application in 1987. (Ellis II) The PSC rejected his application without a hearing.

The third application, which is the subject of this appeal, was filed on January 20,1994. After conducting hearings in Bozeman, Montana, on April 13 and 14, 1994, and in Ennis, Montana, on May 11, 1994, the PSC granted Ellis' application on December 9, 1994. The PSC found that Ellis was fit to provide service; that there was substantial unmet consumer need for additional service; that Three Rivers would not be harmed by the grant of the application; and that competition Three Rivers petitioned for judicial review of the PSC's decision to the First Judicial District Court, Lewis and Clark County. The District Court affirmed the PSC,holding that the PSC properly considered Ellis' application and that the facts presented in 1994 were vastly different from those in 1984 when the PSC denied Ellis' application. It further held that substantial credible evidence supported the PSC's determinations. Three Rivers appeals from the District Court's decision.

would promote the public interest with improved service. Three Rivers moved the PSC to reconsider its order, which the PSC denied on April 24, 1995.

STANDARD OF REVIEW

Section 2-4-704, MCA, sets forth the standards for judicial review of an administrative agency's decision. Under those statutory standards, conclusions of law will be reversed if they are incorrect. Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603. The Court defers to an agency's interpretation of a statute that it administers. Norfolk Holdings v. Dept. of Revenue (1991), 249 Mont. 40, 44, 813 P.2d 460, 462.

An agency's findings of fact will be reversed only if they are clearly erroneous. Steer, Inc., 803 P.2d at 603. In Interstate Production Credit v. DeSaye (1991), 250 Mont. 320, 820 P.2d 1285, the Court adopted a three-part test to determine if a finding is clearly erroneous. First, the Court will review the record to see if the findings are supported by substantial evidence. If they are, the Court will next determine whether the finder of fact has misapprehended the effect of the evidence. Third, the Court will review the record to determine whether it is left with the 'definite and firm conviction that a mistake has been committed.' DeSaye, 820 P.2d at 1287 (citing U.S. v. U.S. Gypsum Co. (1948), 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746).

ISSUE ONE

Did the PSC apply the correct standard for granting Class D certification?

As stated earlier, the Court reviews an agency's conclusions of law to determine whether its interpretation of the law is correct. Steer, Inc., 803 P.2d at 603.

Section 69-12-323, MCA, sets forth the factors the PSC must consider when rendering a decision on an application for a Class D motor carrier certificate to transport waste materials:

(2)(a) If after hearing upon application for a certificate, the commission finds from the evidence that public convenience and necessity require the authorization of the service proposed or any part thereof, as the commission shall determine, a certificate therefor shall be issued. In determining whether a certificate should be issued, the commission shall give reasonable consideration to the transportation service being furnished or that will be furnished by any railroad or other existing transportation agency and shall give due consideration to the likelihood of the proposed service being permanent and continuous throughout 12 months of the year and the effect which the proposed transportation service may have upon other forms of transportation service which are essential and indispensable to the communities to be affected by such proposed transportation service or that might be affected thereby.

(b) For purposes of Class D certificates, a determination of public convenience and necessity may include a consideration of competition.

The PSC interpreted § 69-12-323, MCA, as requiring it to address five factors when considering Ellis' application. Those factors are:

1. Is the applicant fit and able to perform the proposed service?

2. Does the public convenience and necessity require the authorization of the proposed service?

3. Can and will existing carriers meet the public need for the proposed service?

4. Would the proposed service have an adverse impact on existing transportation services?

5. (discretionary for Class D applications, only) If there is a public need for the service and applicant is fit to provide the service (even if existing carriers could meet the need or might be harmed by granting the application), would competition with the existing carriers promote the public interest? (Emphasis added.)

In summarizing these factors, the PSC concluded that an applicant 'must show that the public convenience and necessity require the proposed service,' and that the PSC 'may consider competition as a factor in determining public convenience and necessity.'

Three Rivers argues that the PSC's interpretation of the factors it must consider is incorrect, and the District Court erred when it implicitly embraced them. Specifically,it takes issue with the emphasized portion of the fifth factor outlined above wherein the PSC stated it had discretionary authority to evaluate whether competition provided by a fit applicant would promote the public interest, even if existing carriers could meet the need or might be harmed. It argues that the PSC can consider the benefits of competition to the public interest only after first finding that the existing services are inadequate, that there will be no economic impairment to the existing services, and that the applicant is fit.

We first note that Three Rivers' concerns are hypothetical only, because in fact, the PSC did find that Three Rivers' service was inadequate; it did find that Three Rivers would not suffer economic impairment by the grant of the additional authority; and it did find that Ellis was a fit applicant. Moreover, before conducting any evaluation of competition, the PSC made the threshold determination that the applicant was fit. Thus, even were this Court to accept Three Rivers' analysis of the PSC's decision and to adopt Three Rivers' arguments, Three Rivers would not prevail.

In any event, we hold that PSC employed the correct standard. The heart of Three Rivers' contentions actually appears to center on the interplay between the consideration of competition as a factor in granting authority and how that consideration affects Three Rivers economically. As Three Rivers itself correctly stated in Rozel Corp., the legislature has chosen to partially regulate the garbage industry in Montana. Rozel Corp., 735 P.2d at 285. By enacting Section 69-12-323(2)(b), MCA, it has given the PSC the discretion to consider competition in order to handle potential harmful monopoly situations. Rozel Corp., 735 P.2d at 285. Consideration of competition may be beneficial in...