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GRASSROOTS ACTION, INC. v. NEW YORK TEL. CO.

March 1, 1972

GRASSROOTS ACTION, INC., and John B. O'Sullivan, individually and on behalf of all others similarly situated, Plaintiffs,
v.
NEW YORK TELEPHONE COMPANY, Defendant. The CITY OF NEW YORK, Plaintiff, v. The NEW YORK TELEPHONE COMPANY, Defendant


MacMahon, District Judge.


The opinion of the court was delivered by: MACMAHON

MacMAHON, District Judge.

Asserting violation of the Economic Stabilization Act of 1970, *fn1" as amended in 1971, *fn2" each of the plaintiffs moves for a preliminary injunction enjoining defendant New York Telephone Company from putting rate increases into effect.

 In their underlying actions, plaintiffs seek a final judgment declaring that the price increases instituted by defendant are subject to, and governed by, the Economic Stabilization Act of 1970, as amended in 1971, and regulations promulgated thereunder; that an order of the New York State Public Service Commission ("P.S.C."), made on February 1, 1972, constitutes the final regulatory agency approval, which defendant was required to file with the Price Commission by its regulations before instituting rate increases; and that the rate increases instituted by defendant on February 3, 1972 violate the Act and regulations. Plaintiffs also seek a permanent injunction restraining defendant from instituting price increases specified in its revised tariffs and approved by an order of the P.S.C. on February 1, 1972. In addition, the Grass Roots plaintiffs seek an order compelling defendant to roll back its charges to those in effect prior to July 9, 1971.

 The Economic Stabilization Act of 1970, as amended in 1971, authorized the President to issue such orders and regulations as he deems appropriate to stabilize prices, rents, wages, and salaries, and expressly states that "the adjustments necessary to carry out this program require prompt judgments and actions by the executive branch of the Government. The President is in a position to implement promptly and effectively the program authorized by this title." *fn3" The President delegated the administration of the Act to the Price Commission which was given rule-making power. The original regulation applicable to defendant provided in pertinent part that:

 
"§ 300.16 Regulated public utilities.
 
(a) . . . [A] regulated public utility . . . may charge a price, rate, or tariff in excess of the base price if that increase has been approved by a regulatory agency . . . A public utility which had revenues of $100 million or more . . . shall inform the Price Commission of all requests for rate increases and immediately notify the Commission in writing of any agency order granting an increase. . . ." *fn4"

 We think it plain, therefore, that since its inception, rate increases by large public utilities, like defendant, are governed by the Economic Stabilization Act of 1970, as amended, and the regulations of the Price Commission, specifically, § 300.16. Significantly, the legislative history of the Act shows that Congress specifically refused to exempt public utilities from the Act. *fn5"

 The regulations upon which plaintiffs base their contentions are complex and convoluted and do not lend themselves to easy and precise condensation. *fn6" Nevertheless, an attempt is necessary to an understanding of plaintiffs' contentions.

 The recent amendments to § 300.16 of the Price Commission's regulations, which became effective on January 17, 1972, require any large public utility to report within five days any revenue increase in excess of 1% of its annual revenues, and direct that the report be accompanied by a certification by the appropriate agency, here, the P.S.C., setting forth "the former price, the new price, and the percentage increase," along with other economic data relevant to whether the increase is inflationary, the minimum adequate to assure safe service, to provide for necessary expansion, and to attract capital at reasonable cost. The amendments also require that the report be accompanied by a certificate of the regulatory agency certifying to detailed data customarily employed by regulatory bodies in fixing the rates of public utilities.

 Under the amendments, upon filing the required report and certification, a public utility may charge a price in excess of the price in effect on January 16, 1972, unless, within a specified period of review, the Price Commission finds that the increase is inconsistent with the Price Commission's overall goal of holding average price increases across the economy to a rate of not more than 2 1/2% per year. *fn7"

 The amended regulations also require public utilities, like defendant, to report an approved increase to the Price Commission, together with the above-described certification, within five days after receiving final regulatory agency approval of a rate increase. During the ten-day period following receipt of the report, the Price Commission may require the public utility to furnish additional information, delay the effective date of the increase, suspend all or part of the increase pending further action, or limit, refuse, rescind, reduce, or modify the increase. *fn8"

 Relying on these reporting and certification requirements, plaintiffs claim that an order of the P.S.C., made on February 1, 1972 (which approved defendant's detailed tariff revisions), rather than an order of the P.S.C., made on January 17, 1972 (which authorized defendant's overall increase in revenues), was "the final agency order approving the increase which was required to be filed with the Price Commission by amended § 300.16(j)."

 The Grass Roots plaintiffs claim, in addition, that a certification of the P.S.C., contained in its January 17, 1972 order failed to state "the former price, the new price, and the percentage increase," as required by amended § 300.16(e)(1), as to each of the thousands of individual new rates contained in the detailed tariffs approved by the P.S.C.'s order of February 1, 1972.

 Defendant contends that the January 17, 1972 order of the P.S.C. fixing its overall price increase is the order which has the impact on the national economy, rather than the details of its tariffs set forth in the P.S.C.'s order of February 1, 1972, and is, therefore, the final order required to be filed with the Price Commission within the meaning of the regulations. In any event, defendant asserts it has complied with the Price Commission's regulations regardless of whether the original or amended § 300.16 applies to its rate increases.

 Finally, defendant contends that the issues raised here are the subject of pending action by the Price Commission and are, therefore, within its direct and continuing primary jurisdiction. The relief sought here, defendant argues, is therefore barred because plaintiffs have failed to exhaust their administrative remedies and because the granting of such relief would conflict with the broad discretion lodged by the Congress and the executive in the Price Commission to determine the proper disposition of cases before it. Plaintiffs assert, however, that no administrative remedy before the Price Commission is open to them.

 It cannot be gainsaid that the issues raised by the parties respecting the validity of defendant's rate increases are important and substantial, and require prompt decision in the public interest. It is too plain for argument, however, that those issues all require the interpretation and application of regulations and procedures of the Price Commission, as well as resort to administrative expertise in determining whether the challenged rate increases are consistent with the anti-inflationary purposes and policies of the Economic Stabilization Act. Such questions, at least in the first instance, are singularly appropriate for administrative decision by the Price Commission, the agency charged with administration of the national regulatory scheme. This is particularly so in cases, like this, where the Price Commission is in fact exercising its jurisdiction over defendant's rates.

 Whatever the situation at the time these actions and motions were filed, on the day before argument, the Price Commission made an order directed to defendant exercising its primary jurisdiction over the rate increases which are the subject of these actions in no uncertain terms. That order recites that the Price Commission "is in the process of reviewing" the rate increases which plaintiffs challenge by these motions and "will also conduct public hearings on the development of new policies and procedures for the regulation of price increases by utilities." It then recites that the purpose of the order is "to allow time to consider the rate increase of your company and, at the same time, maintain the status quo and insure that your customers and the public will be protected" in the event "your rate increase should be limited, rescinded, reversed or modified." In order to accomplish these purposes, the order directs defendant to do two things:

 
(1) Deposit the difference between the amounts collected by defendant under the tariffs which became effective on February 3, 1972 and the amounts which would have been collected under the pre-February 3, 1972 tariffs in an escrow account for possible refund to subscribers with 7% interest or for such other disposition as the Price Commission may order; and
 
(2) Reduce the rates for coin telephone calls and hotel guest calls to the pre-February 3, 1972 levels as soon as the necessary rearrangements can be made, but not later than February 23, 1972, because such calls "are not readily subject to refund in case a refund should be found necessary." *fn9"

 Plaintiffs, thus, seek injunctions against rate increases by defendant which are the subject of pending action by the Price Commission.

 Obviously, the complaints and affidavits submitted on these motions present underlying issues of fact in the complex field of public utility rates not within the conventional expertise of judges and requiring the interpretation of a maze of administrative regulations, the exercise of administrative discretion, and specialized competence. The threshold question for our decision, therefore, is whether the relief sought by these actions and motions is barred by the doctrines of primary jurisdiction and exhaustion of administrative remedies. We hold that it is.

 At least since Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51, 58 S. Ct. 459, 463, 82 L. Ed. 638 (1938), "no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted." Later the Supreme Court taught, in McKart v. United States, 395 U.S. 185, 193-194, 89 S. Ct. 1657, 1662-1663, 23 L. Ed. 2d 194 (1969), that the policy underlying the doctrine is

 
"the avoidance of premature interruption of the administrative process. The agency, like a trial court, is created for the purpose of applying a statute in the first instance. Accordingly, it is normally desirable to let the agency develop the necessary factual background upon which decisions should be based. And since agency decisions are frequently of a discretionary nature or frequently require expertise, the agency should be given the first chance to exercise that discretion or to apply that expertise. And of course it is generally more efficient for the administrative process to go forward without interruption than it is to permit the parties to seek aid from the courts at various intermediate stages."

 All of the reasons set forth in McKart apply here with special force. Congress stressed, in the amendments to the Economic Stabilization Act, that "the adjustments necessary to carry out this program require prompt judgments and actions." Premature interruption of the Price Commission's actions would plainly be at odds with that congressional purpose. Clearly, the Price Commission's decisions "are frequently of a discretionary nature or frequently require expertise." Finally, the autonomy of the Price Commission and promptness, regularity and consistency of its price control policies are essential to the administration of a nationwide program of price control.

 These considerations prompted the Supreme Court to require exhaustion of administrative remedies before judicial relief could be obtained under the Emergency Price Control Act of 1942. In Yakus v. United States, 321 U.S. 414, 432, 64 S. Ct. 660, 671, 88 L. Ed. 834 (1944), the Supreme Court emphasized that:

 
"The harm resulting from delayed or unequal price control is beyond repair. And one of the problems involved in the prevention of inflation by establishment of a nation-wide system of price control is the disorganization which would result if enforcement of price orders were delayed or sporadic or were unequal or conflicting in different parts of the country. These evils might well arise if regulations with respect to which there was full opportunity for administrative revision were to be made ineffective by injunction or stay of their enforcement in advance of such revision or of final determination of their validity.
 
Congress, in enacting the Emergency Price Control Act, was familiar with the consistent history of delay in utility rate cases. It had in mind the dangers to price control as a preventive of inflation if the validity and effectiveness of prescribed maximum prices were to be subject to the exigencies and delays of litigation originating in eighty-five district courts and continued by separate appeals through eleven separate courts of appeals to this Court, to say nothing of litigation conducted in state courts."

 The Economic Stabilization Act, as amended, does give "exclusive and original" jurisdiction to federal district courts over controversies arising under the Act or regulations or orders issued thereunder. *fn10" Nevertheless, the Act specifically prohibits district courts from granting an "interlocutory or permanent injunction restraining the enforcement, operation, or execution" of the Act "or any regulation or order issued thereunder," *fn11" "unless a final judgment determines that such order is in excess of the agency's authority, or is based upon findings which are not supported by substantial evidence," *fn12" or "unless a final judgment determines that . . . such regulation was in excess of the agency's authority, was arbitrary or capricious, or was otherwise unlawful under the criteria set forth in" the Administrative Procedures Act. *fn13"

 Clearly, these provisions of the Act stay the hand of the court from enjoining the Price Commission until it is presented with a concrete final order of the Price Commission supported by a definitive and solid factual basis.

 None of the prerequisites to the exercise of our injunctive power have been shown by these plaintiffs. Patently, it cannot be asserted or found that the Price Commission has exceeded its authority, made findings not supported by substantial evidence or issued an order arbitrarily or capriciously until the Commission issues a final order. No final order, valid or otherwise, has been issued by the Price Commission here. On the contrary, it still has the matter of defendant's rate increases under review. Surely, we are not to waste our labors on speculation as to what the Price Commission may or may not do respecting defendant's rate increases.

 We think it clear, therefore, that initial submission to the Price Commission of all issues respecting defendant's rate increases is required, that these actions are premature, and that these motions should be denied for failure to exhaust available administrative remedies, unless there is merit to plaintiffs' contention that they have no administrative remedy.

 The 1971 amendments to the Economic Stabilization Act require the Price Commission to

 
"establish procedures . . . available to any person for the purpose of seeking an interpretation, modification, or rescission of . . . [its] rules, regulations, and orders." Pub. L. No. 92-210, § 207(b).

 The amendments also provide that:

 
"If [any] such person is aggrieved by the denial of a request for such action . . . he may request a review of such denial by the agency. The agency shall, in regulations prescribed by it, establish appropriate procedures, including hearings where deemed advisable, for considering such requests for action under this section." Id.

 The Price Commission has promulgated the regulations mandated by Congress. *fn14" Thus, § 207(b) requires that "any person" be permitted to request modification or rescission of any order of the Price Commission. The regulations, thus, permit plaintiffs to contest any order of the Price Commission with respect to defendant's rate increases, and to request interpretation of any of its regulations, including the contentions made as to the interpretation and application of old or new § 300.16 of the Price Commission's regulations upon upon which plaintiffs mount this collateral attack.

 In addition to their administrative remedies under § 207(b), plaintiffs may proceed under § 300.506(a)(d) of the Price Commission's regulations, *fn15" which is entitled "Submissions on price increase filings by person not a party to filing." That regulation provides that: "any person who shows that he has a direct interest in any application for a price increase" may submit "written data, information or views to the Price Commission with respect to that application." *fn16" This section plainly authorizes plaintiffs, upon showing a direct interest in defendant's application for rate increases, to submit their views to the Price Commission. This is so even though plaintiffs seek reexamination of a prior order. Thus, § 300.506(d) provides:

 
"A submission that is not received within the time prescribed in paragraph (c) of this section will be treated by the Commission as a request to reexamine the matters involved in ...

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