1. When the jurisdiction of a state court to review orders of a
Commission fixing rates is confined to determining on the record
certified by the Commission whether the order is lawful and
reasonable and whether evidence was improperly excluded, without
power to pass on the weight or sufficiency of evidence or to enter
any new order in lieu of the one appealed from, the remedy is
purely judicial, and need not be invoked by a party complaining of
the rates fixed as confiscatory, before seeking relief in a federal
court. Remington's Comp. Washington Stat. 1922, § 10428,
considered. P.
265 U. S.
200.
2. A state statute empowering a Commission, after hearing, to
refuse an increase of rates proposed by a public utility cannot, by
forbidding supersedeas until a final judicial decree has been
rendered in the state courts, prevent recourse to a federal court
for temporary relief by injunction. P.
265 U. S.
201.
3. Under the law of Washington, Rem.Comp.Stat. 1922, § 10441,
providing for revision of administrative valuations of the property
of public utilities, the function of the state courts is not merely
judicial, but also legislative, since they can pass upon the weight
of evidence, and can set aside a valuation and make a new one.
Keller v. Potomac Co., 261 U. S. 428.
Id.
4. The fact that a public utility had resorted to the state
courts, acting legislatively, to change a valuation of its
property, would not bar it from seeking relief in the federal court
against rates based on the valuation as approved by the state
courts. P.
265 U. S.
203
Page 265 U. S. 197
5. Comity usually prevents seeking such relief in a federal
court before the legislative remedy in the state courts has been
exhausted.
Prentis v. Atlantic Coast Line Co.,
211 U. S. 210. P.
265 U. S.
203.
6. But when a public utility, by reason of an order reinstating
rates which it sought to increase, is suffering daily from
confiscation, and under the state law (Rem.Comp.Stat. 1922, §
10429) no stay is allowable pending revision by the state courts,
comity does not prevent relief by a federal court. P.
265 U. S.
204.
7. A litigant whose constitutional rights are being invaded and
to whom a statute denies a supersedeas in the state tribunals may
properly base his application for equitable relief on the effect of
the statute and the presumption of its validity, and is not
required to establish that the state statute is not invalid under
the state constitution.
Dawson v. Kentucky Distilleries
Co., 255 U. S. 288. P.
265 U. S.
205.
8. Where appeal from an order refusing an interlocutory
injunction is followed by an appeal from a final decree dismissing
the bill on the same ground, the first appeal should be dismissed
and relief be granted under the second.
Id.
Reversed.
Appeals from decrees of the district court refusing an
interlocutory injunction and dismissing the bill, in a suit to
enjoin interference with increases of telephone rates.
MR. CHIEF JUSTICE TAFT delivered the opinion of the Court.
These are two appeals from the district court in the same case
involving the question of the confiscatory character
Page 265 U. S. 198
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, as amended by Act March 4, 1913, 37 Stat.
1013. 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
Page 265 U. S. 199
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 percent
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
Page 265 U. S. 200
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 (§ 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 reasonableness 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 § 10424, Rem.Comp.Stat. 1922, relating to the filing of
tariffs increasing rates and providing for a
Page 265 U. S. 201
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. Co.,
232 U. S. 134;
Prendergast v. N.Y. Tel. Co., 262 U. S.
43,
262 U. S.
48.
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
statutory procedure for that purpose, and that the company still
has a right to appeal from the valuation of the Commission to the
superior and supreme courts on the legislative question of that
valuation.
Section 10441 of the State of Washington (Remington, Comp.
St.1922) has elaborate provisions for the fixing
Page 265 U. S. 202
of the value of the property and equipment of a public service
company. The company is given 30 days' notice of a hearing, and is
entitled to adduce evidence and to have it transcribed and
certified. The Commission is to render findings of fact in writing
concerning all matters concerning which evidence may be introduced
tending to show the value of the company's property used for the
public convenience. The company, believing the findings to be
unfair, unwarranted, or unjust, may go into the superior court and
have a writ of review of such findings and their correctness,
reasonableness, and lawfulness inquired into and determined, and if
the court finds them to be "unjust, incorrect, unreasonable,
unlawful or not supported by the evidence," it shall make "new and
correct findings," unless it sets them aside for refusing to
receive proper evidence, and returns them for new findings thereon.
The company is given the right of appeal to the supreme court of
the state, which is given the same power as the superior court as
to findings of the Commission. The findings of the Commission as
corrected by the courts are made admissible in evidence in any
action or proceeding except in matters of taxation, and are to be
conclusive evidence of the facts found under conditions then
existing, and can only be controverted by showing a subsequent
change of conditions. Provision is made for further hearings to
ascertain betterments, improvements, extensions, and additions, and
the values of the property used by the company for interstate and
for intrastate business.
It is clear that the function of the courts in fixing the
valuation of the property of the public utility is not confined to
a judicial review of the work of the Commission. The courts are
made part of the valuation tribunal, pass on the weight of the
evidence, and can set aside a valuation and make a new one.
Keller v. Potomac Co., 261 U. S. 428
Page 265 U. S. 203
.
It is thus apparent that the contention of the department and
the state authorities that the company has not exhausted its remedy
to secure a change in the valuation of the property by the superior
and Supreme Courts of the state is correct, and that resort to them
to change the valuation would be no bar to a resort to a federal
court of equity to enjoin the enforcement of rates based upon such
valuation after it had been approved by the state courts. It was on
this ground that the district court held, both on the application
for a temporary injunction before the three judges and upon the
final dismissal, that the bill was premature, and could not be
brought until after the final confirmation of the valuation by the
state supreme court.
The district court relied on the case of
Prentis v. Atlantic
Coast Line, 211 U. S. 210. In
that case, the tribunal which fixed railroad rates that were the
subject of controversy consisted not only of a commission, but of
the supreme court of the state on appeal, and the court, in
reaching its conclusion, acted legislatively, as the commission
did. It was held that, as the complaining company had not exhausted
its legislative remedy by appeal to the supreme court of the state,
for its final action in the fixing of rates, comity, in absence of
a controlling right to the contrary, required that the federal
court delay remedy by injunction against the rates fixed until the
company had invoked the conclusion of the state supreme court in
respect to them. So here it is contended that, until the superior
and supreme courts shall have finally considered the correctness of
the valuation upon which the adequacy of the rates depends, comity
requires that the federal court shall stay its hand.
It is first objected to this view that the Constitution of the
State of Washington does not authorize its legislature to vest its
courts with the legislative power to fix rates, and therefore that,
after the Commission had fixed the
Page 265 U. S. 204
valuation, further procedure in fixing valuation was void, and
there was no reason either of comity or right which should delay
the remedy by a bill in a federal court.
Territory ex rel.
Kelly v. Stewart, 1 Wash. 98, 110;
State ex rel. Seattle
v. Public Service Commission, 76 Wash. 492, 500. It is our
duty to avoid expressing an opinion on such an issue under the
Constitution of Washington in the absence of a clear decision by
its highest court if we can do so, and we think we can.
In the case before us, the company is shown by the averments of
its bill to be suffering daily from confiscation under the rates to
which it is now limited. It has done all it could to get relief,
and cannot get it. The rates here in question were in force for
more than a year, the company advanced them, the old rates were
reinstated by the Department of Public Works. In such a case, then,
there was no chance for a stay. By § 10429, Remington's Comp.
St.1922, the pendency of any writ of review does not, of itself,
stay or suspend the operation of the order of the Commission, but
the superior court may suspend the order, but no order suspending
an order of the Commission relating to rates, etc., can be made
unless the court finds that great or irreparable damage would be
done to the petitioner, and the section contains the following
proviso:
"Provided, however, that, when any rate has been in force for
any length of time exceeding one year, and such rate is advanced by
the public service company, and the order of the Commission
reinstates such prior rate in whole or in part, no supersedeas
shall be allowed in any case from such order pending the final
determination of the cause in the superior court, or if appealed to
the supreme court by such supreme court."
Under such circumstances, comity yields to constitutional right,
and the fact that the procedure on appeal in the legislative fixing
of rates has not been concluded
Page 265 U. S. 205
will not prevent a federal court of equity from suspending the
daily confiscation if it finds the case to justify it.
Oklahoma
Gas Co. v. Russell, 261 U. S. 290,
261 U. S. 293.
In such a case, the
Prentis case has no application.
Love v. Atchison Railway Co., 185 F. 321, 324, 325.
But it is argued that the courts of Washington have inherent
power to grant a supersedeas in such a case, and that §§ 10429 and
10424,
supra, are invalid. As we have declined to look
into the validity of the legislative functions with which the
Washington state courts are vested in the valuation sections, so we
decline to examine the validity of these restraints upon those
courts to grant stays in cases of rates. A litigant whose
constitutional rights are being invaded, and to whom a statute
denies a supersedeas in the state tribunals, may properly base his
application for equitable relief on the effect of the statute and
the presumption of its validity, and is not required to establish
that the state statute is not invalid under the state constitution.
Dawson v. Kentucky Distilleries Co., 255 U.
S. 288,
255 U. S. 296,
presents an analogous case.
Nor does the provision of § 266 of the Judicial Code (37 Stat.
1013, c. 160) that a suit in a state court to enforce the rate
complained of, accompanied by a stay, shall suspend the proceedings
in the federal court prevent the filing and prosecution of this
bill, first because no such suit seems to have been brought, and,
even if it had been, there certainly has been no stay of
proceedings in the state court as provided in that section.
Dawson v. Kentucky Distilleries Co., supra.
We think, therefore, that the district court erred in denying a
temporary injunction under § 266 on the ground that the bill was
premature.
But it is said that the appeal from the interlocutory decree in
No. 540 was merged in the appeal from the final decree in No. 739,
and therefore should be dismissed. A motion was made for this
purpose. We think that, under
Page 265 U. S. 206
Shaffer v. Carter, 252 U. S. 37,
252 U. S. 44,
this motion should be granted; but it does not change the ultimate
result, because the final decree of the district court dismissing
the bill really turned on the same erroneous ruling of its
prematurity as that upon which the temporary injunction was denied,
and must be reversed for the same reason.
After the case was reached in this Court, somewhat extended
argument was made in the later appeal to show that the bill was
defective in stating a case for equitable relief, even if it was
not premature. The argument is based on objections which seem to us
to be rather makeweights or afterthoughts, and are so unsubstantial
that we do not discuss them. The merits of the issue between the
parties can be developed after the case is remanded to the district
court for further proceedings.
Decree reversed, and cause remanded for further proceedings in
conformity with this opinion.