COALITION OF CITIES FOR AFFORDABLE UTILITY RATES, et al., Petitioners, v. PUBLIC UTILITY COMMISSION OF TEXAS, et al., Respondents.
No. C-9287.
Supreme Court of Texas.
Sept. 12, 1990.
Rehearing Overruled Nov. 28, 1990.
798 S.W.2d 560
The redesignation of the experts in this case was an offensive and unacceptable use of discovery mechanisms intended to defeat the salutary objectives of discovery. Attorneys for Apache and El Paso even admitted to the trial judge that the settlements were “expressly contingent” on these experts not being required to give their testimony, and that there might not be a settlement agreement if the depositions were ordered. One of the settling parties expressly told the trial court that he understood the settlement offer would expire upon the depositions being taken. The legitimate purposes and policies behind the consulting expert privilege do not countenance this conduct. We hold that, as a matter of law, the redesignation of experts under the facts of this case violates the policy underlying the rules of discovery and is therefore ineffective. See Gutierrez, 729 S.W.2d at 693; Jampole, 673 S.W.2d at 573.8 “If we were to hold otherwise, nothing would preclude a party in a multi-party case from in effect auctioning off a witness’ testimony to the highest bidder.” Williamson, 148 Cal.Rptr. at 45, 582 P.2d at 132. Because the redesignation of experts under the facts of this case violates the clear purpose and policy underlying the rulеs of discovery, the trial court abused its discretion in granting the protective order as to these six experts. We are confident Judge McIlhany will vacate his orders denying discovery and will render orders consistent with this opinion. Should he fail to do so, the clerk of the supreme court is directed to issue the writ of mandamus.
Jim Mattox, Mary F. Keller, Larry J. Laurent, Susan D. Bergen, Karen Pettigrew, Barry Bishop, John F. Williams, Mark I. Hefter, Austin, for respondents.
OPINION
DOGGETT, Justice.
In this appeal certain consumers of a public utility urge that it be denied a second opportunity to prove the same facts as justification for an electric rate inсrease. We agree that the public utility regulatory scheme set forth by the legislature provides that once is enough. The doctrines of res judicata and collateral estoppel bar such relitigation before the Public Utility Commission (“PUC“).
Gulf States Utilities Company (“GSU“) sought a rate increase which required the PUC to determine whether the $4.5 billion that GSU spent for completion of the River Bend Nuclear Power Plant was a prudently incurred cost.1 This expense was challenged by the petitioners2 who intervened in the rate case before the PUC. As GSU has noted, “[e]very factual, legal and policy
Finding 164: The preponderance of the evidence in this case establishes that $2.273 billion of River Bend capital costs were prudently and reasonably incurred. The evidence is inadequate to support a finding of either prudence or imprudence with regard to construction costs in excess of $2.273 billion, with the exception of the costs related to the 50-month schedule and TDI, addressed in Findings of Fact Nos. 133 and 145.
Finding 164A: GSU‘s share of all River Bend capital costs in excess of $2.273 billion should be excluded from plant in service at this time for lack of sufficient evidence as to the prudence and reasonableness of those costs. The amount which should be included in plant in service, given GSU‘s 70 percent share of the plant, is $1.5911 billion.
Conclusion of Law 10: Pursuant to PURA Sections 16(a), 38, 39(a), and 41,3 the Commission may reexamine on rehearing or in a subsequent proceeding the prudence and reasonableness of those River Bend construction costs regarding which the evidence is inadequate to support a finding of either prudence or imprudence.
Conclusion of Law 15: Under PURA Section 40 a utility must prove its conduct to have been prudent when decisions or expenditures are reasonably challenged.
Conclusion of Law 18: $1,453,520,982 of GSU‘s share of end-of-test-year River Bend capital costs should not be included from GSU‘s rate base as invested capital used and useful in rendering service to the public pursuant to PURA Sections 38, 39, and 41.
Conclusion of Law 18A: GSU has not met its burden of proving that the capital costs of River Bend above a reasonable Definitive Cost Estimate of $2.273 billion were reasonably and prudently incurred.
In summary, the PUC found that GSU had failed to prove that any expenses in excess of $2.273 billion were prudently incurred. Two of the three commissioners voted to allow GSU further opportunity to prove the prudence of an additional $1.453 billion, which apparently represented GSU‘s share of cost overruns on the project. In taking this aсtion, the PUC rejected its hearing examiner‘s proposed conclusion of law that res judicata would prohibit reexamination of the prudence issue.
GSU appealed the final order and simultaneously initiated a new proceeding before the PUC on the same prudence question.4 The petitioners also appealed and, based on res judicata, obtained from the trial court a permanent injunction preventing further consideration of this issue by the PUC. The court of appeals, however, dissolved the permanent injunction and ruled that the doctrine of res judicata was inapplicable because the PUC had specifically reserved the right to rehear the prudence issue in conclusion of law 10. 777 S.W.2d 814, 816. The court cited no authority to support its res judicata holding, but merely compared the PUC action to a severance authorized by
In Bonniwell v. Beech Aircraft Corp., 663 S.W.2d 816, 818 (Tex.1984), we considered the doctrines of res judicata and collateral estoppel. Res judicata, a matter judicially determined, bars the retrial of claims pertaining to the same cause
Texas has made limited use of res judicata in an administrative context.5 See Sexton v. Mount Olivet Cemetery Ass‘n, 720 S.W.2d 129, 138-142 (Tex. App. - Austin 1986, writ ref‘d n.r.e.). Voicing an awareness of the usefulness of res judicata in administrative proceedings, this court in Westheimer Indep. School Dist. v. Brockette, 567 S.W.2d 780, 787 (Tex.1978), expressed a strong preference that “[c]ontinued litigation of issues or piecemeal litigation should be discouraged” in state regulatory agencies.
Ironically, GSU was the first рarty to urge the applicability of res judicata and collateral estoppel in this proceeding. GSU maintained initially that the doctrines precluded the PUC from considering the prudence of the River Bend construction, which it had previously authorized by granting a certificate of convenience and necessity. Additionally, counsel for the PUC acknowledged during oral arguments before this court that res judicata would prohibit relitigation regarding the $2.273 billion found prudent by the PUC. Petitioners correctly characterize the PUC‘s position as seeking to apply res judicata to the portion of costs that GSU proved and rejecting its application to costs not proved.
Excepting the oral argument of counsel for GSU, everyone involved in these proceedings agrees with the court of appeals that res judicata could apply to PUC ratemaking “[u]nder proper circumstances....” 777 S.W.2d at 815. The more narrow question we confront is whether the doctrine should be rejected because of any aspect of this particular proceeding, the PUC‘s final order, or the statute by which the order was authorized. At issue here is not increased operating expenses or the appropriate rate of return--factors that can change over time. Rather, every fact involved is historical; the amount and wisdom of these construction expenditures will remain constant no matter how many times the PUC рermits relitigation addressing them. All of the same parties participated vigorously in the initial contest with each presenting its own evidence and cross-examining its opponent‘s witnesses. Were this not true, imposition of res judicata principles would be inappropriate.
Given these circumstances, if the PUC‘s final order had been unequivocal, there could be no question that the doctrine applies. But is it precluded by the PUC‘s conclusion of law 10, permitting further proceedings and attempting a deferral rather than a determination of the issue? In answering this question we look first to the terms of the order and the controversy it addresses. A utility has the burden to prove the prudence and reasonableness of its expenditures before a rate increase can be approved.
In this rate case, the PUC declared that GSU failed to meet its burden of proof to show that the entire $4.5 billion expense was prudently incurred. Because of a “lack of sufficient evidence“, the PUC, in its finding 164A, “excluded from plant in service” all “capital costs in excess of $2.273 billion.” A party who fails to meet
More importantly, the PUC order must be considered final unless the PUC has the statutory power to defer and reconsider such critical issues. Such was the holding in Sexton v. Mount Olivet Cemetery Ass‘n, 720 S.W.2d at 146, in which the Banking Commissioner sought to revisit an issue determined in a prior order relating to prepaid funeral plan regulation. As in the instant case, the order had expressly reserved the discretion to make new determinations at a later time. Refusing to permit a reopening of the final order, the court held that an attempted reservation of power is meaningless unless the legislature has specifically delegated such authority to an agency.
The PUC sought to base its attempted reservation of the right to reconsider the cost question presented by GSU on PURA sections 16(a), 38, 39(a), and 41. Nothing contained in sections 38, 39(a) and 41, either directly or indirectly, entitles the PUC to grant a utility multiple chances to prove the prudence of its investment. Section 16(a) does state the PUC‘s power “to do all things, whether specifically designated by this Act or implied herein, necessary and convenient to the exercise of this power and jurisdiction.” It was hardly necessary to initiate a new docket to consider the $1.453 billion since the PUC could have sought additional guidance by remanding to the hearing examiner for further development of the evidence. Moreover, the PUC can only do what is necessary and convenient with regard to powers “specifically designated ... or implied herein ...” by other provisions of PURA. There is no language in this or any other section of PURA that allows the PUC to bifurcate into multiple proceedings the issue of a single investment‘s prudence.
The only legislative authorization for PUC reexamination of an earlier determination concerns the power to revoke or amend a certificate of convenience and necessity under certain circumstances outlined in
The court of appeals was correct in characterizing the ratemaking proceeding as a trial, but incorrect in comparing the PUC action in conclusion of law 10 “to that of the trial court in severing a claim and proceeding separately with it.
Once the order in the initial docket became final, it was not subject to any further PUC review. Public Util. Comm‘n v. Brazos Elec. Power Coop., Inc., 723 S.W.2d 171, 173 (Tex. App. - Austin 1986, writ ref‘d n.r.e.). The prudence of spending the entire $4.5 billion to construct the River Bend Nuclear Power Plant had already been vigorously litigated in hearings that afforded GSU ample opportunity to justify all of its costs. The thrust of the new proceeding was to separate for reconsideration the prudence of $1.453 billion of this expenditure, a part of the total investment. This portion, representing GSU‘s share of cost overruns, had necessarily been previously considered.
All parties were entitled to a straightforward decision from the PUC the first time that this case was presented. Permitting relitigation offends the policy reasons supporting the doctrines of res judicata and collateral estoppel. Both a public utility and consumers benefit from a final decision about whether cost overruns at a power plant have been sufficiently justified. With a complex and controversial project like a nuclear power installation, a utility and its investors need a determination to prevent relitigation of the same previous investment decision on each occasion that a rate increase is requested. The same finality that benefits the utility investors can serve the interests of consumers who know that if a utility is once denied relief because of its failure to prove its case, it may not
return repeatedly on the same facts until the PUC yields. To reject res judicata for historical investment facts in a ratemaking proceeding would allow a public utility to secure victоry not by the strength of its case but simply by outlasting its opponents. Accordingly, we hold that the doctrines of res judicata and collateral estoppel bar a utility from relitigating before the PUC the prudence of its past investment for inclusion in that utility‘s rate base. We reverse the judgment of the court of appeals and affirm that of the trial court.7
GONZALEZ and COOK, JJ., dissent.
GONZALEZ, Justice, dissenting.
I agree with the court that a litigant involved in an administrative hearing is entitled to only one adjudication. I disagree, however, that there has been a valid adjudication in this case.1 I also agree with the court that the Commission is not authorized to defer deciding or to sever part of the issue in question. However, no matter how erroneous this severance or deferral was, we should not penalize a litigant for an error made by the Commission through no fault of the litigant. Since the Commission made only a partial determination of what costs were reasonable and prudent and held in abeyance the balance of the issue, it is inappropriate to apply the principles of res judicata and collateral estoppel to any portion of this case. I would affirm the court of appeals’ dissolution of the permanent injunction.2 However, I
Res judicata makes final a matter which has been finally adjudged on its merits. See Abbott Laboratories v. Gravis, 470 S.W.2d 639, 642 (Tex.1971). Collateral estoppel is a much narrower doctrine pertaining to the preclusion of issues. We have said that a party to a lawsuit may invoke the doctrine by establishing:
(1) the facts sought to be litigated in the second action were fully and fairly litigated in the prior action; (2) those facts were essential to the judgment in the first action; and (3) the parties were cast as adversaries in the first action. Bonniwell v. Beech Aircraft Corp., 663 S.W.2d 816, 818 (Tex.1984). In short, res judicata prevents the relitigation of adjudicated claims (claim preclusion) and collat-
eral estoppel bars the relitigation of adjudicated issues (issuе preclusion). An essential element of both doctrines is that the rendering tribunal actually determined the issue or claim to be precluded on its own merits.
There are several indicators that support the court of appeals’ conclusion that the Commission postponed making a decision on a major portion of GSU‘s claim:
- The Commission argues that it made no decision on the prudence or imprudence of cost in excess of $2.273 billion.
- The record shows as follows:
- The Commission adopted the examiner‘s findings of fact and conclusions of law in large part but modified some of them in very significant ways. The Commission refused to adopt the examiner‘s proposed conclusion of law 10 which would havе provided that the doctrine of res judicata would preclude relitigation of any of the River Bend prudence issues.
Let us end this madness! Since we have settled the issue that the severance was improper, the district court does not have a choice but to follow suit. I would dissolve the injunction but suggest to the parties that they file a plea in abatement in the commission pending remand by the district court of the case now on appeal. Our decision affirming this case would return the entire case to the Commission and allow it to make a single final adjudication regarding the entire $4.5 billion expenditure.
If the Commission should find that some additional costs were prudent, GSU should not be given a windfall. The Commission shоuld adjust the rates keeping in mind the money already collected based on approved rates.
The Commission refused to adopt the examiner‘s proposed finding 164 which recommended a disallowance of $274,015,089. Instead, the Commission made its own finding 164 and 164(a) and conclusion of law 10. - Finding of fact 164 states that “[t]he preponderance of the evidence in this case establishes that 2.273 billion of River Bend capital costs were prudently and reasonable incurred. The evidence is inadequate to support a finding of either prudence or imprudence with regard to construction costs in excess of $2.273 billion ...”
- Finding of fact 164A states “... costs in excess of $2.273 billion should be excluded from plant in service AT THIS TIME for lack of sufficient evidence as to the prudence and reasonableness of those costs.”
- Conclusion of law 10 states that “[P]ursuant to PURA Sections 16(a), 38, 39(a) and 41, the Commission may reexamine on rehearing or in a subsequent proceeding the prudence and reasonableness of those River Bend costs regarding which the evidence is inadequate to support a finding of either prudence or imprudence.”
- Commissioner Thomas in his “concurring” order criticized “the decision of the majority (the two other Commissioners) to hold in abeyance $1.453 billion of the investment in the River Bend Nuclear Plant, to allow the company any opportunity to prove construction prudence on rehearing.”
The court examined the above and concluded that this was a mere effort or attempt by the Commission to defer or reserve adjudicating the question of the prudence or imprudence of cost in excess of $2.273 billion. The court reached this conclusion by selectively reading only portions of findings of fact 164 and 164A and conclusion of law 10, and ignoring the rest. In my opinion, this is improper. It is our duty to decide the effects of the Commission‘s order in light of the literal meaning of the language used by the Commission. We should not pick and choose only those portions of the record that are helpful in reaching a desired result. The court‘s statement that “... the PUC found that GSU had failed to prove that any expenses in excess of $2.273 billion were prudently incurred,” Page 562 (emphasis added) is pure fiction. A reasonable reading of the record just does not support this conclusion. On the contrary, the Commission found that it would not allow a return on the $1.453 billion “AT THIS TIME” and made no express or implied finding of imprudence with respect to this major portion of GSU‘s claim.
Our court concludes that because the Commission was not authorized to defer its ruling, its decision to do so is void, not merely voidable.4 There are numerous decisions by agencies and courts which, though erroneous, are effective until set aside on appeal. In Schieffer v. Patterson, we said:
No matter how erroneous its conclusion and action may have been, it was within the judicial power of the court to determine that the cause was severable
and to sever the same accordingly. The order of severance is subject to being set aside on appeal, but until this is done it effectively separates the controversy into two causes. A judgment which fully adjudicates one of the severed causes is appealable even though the entire controversy as it existed prior to the severance is not determined thereby.
433 S.W.2d 418, 419 (Tex.1968) (quoting Pierce v. Reynolds, 160 Tex. 198, 329 S.W.2d 76, 78-79 (1959)).5 Clearly a matter that has been expressly reserved from an order has not been decided, and “the res judicata effects of an action cannot preсlude litigation of claims that a trial court explicitly separates or severs from that action.” Van Dyke v. Boswell, O‘Toole, Davis & Pickering, 697 S.W.2d 381, 384 (Tex.1985).
Even though the Commission erred in deferring its decision, that is precisely what it did. Thus, the issue is not whether a public utility is entitled to a second opportunity to prove the same facts as justification for a rate increase, (they are not entitled to two bites at the same apple), but, instead, the central issue is what are the legal consequences or effects that flow from the Commission‘s error. The court chooses to make an independent finding that the cost overruns in excess of $2.273 billion were imprudent since the Commission did not find that they were prudent. The effect of this decision is to assess a $1.453 billion penalty (permanent disallowance) on GSU all in the name of res judicata and collateral estoppel. I do not think that this is fair6 nor that we have the power to make this “negative finding” when the Commission expressly stated that it did not find that the costs were prudent or imprudent.7
The court today reaches its result by equating an administrative proceeding to a trial and stating that if a finder of fact determines that a party failed to carry its burden of proof on an issue, adjudication should be against that party. This is the case in a regular trial setting, but it may or may not be applicable in an administrative proceeding depending on some factors that are not present in a conventional trial.
Administrative agencies perform (sometimеs simultaneously) governmental functions of legislating, executing and enforcing their rules and resolving disputes arising under those rules and laws passed by the legislature. “Agencies do not always resolve disputes in the same manner as courts. Courts base decisions on the application of existing law to particular facts. Agencies, however, may use adjudication as a policy-making technique and focus as much on prospective policy goals and considerations as on the particular dispute.” Note, Collateral Estoppel Effects of Administrative Agency Determinations: Where Should Federal Courts Draw the Line? 73 Cornell L.Rev. 817, 836 (1988). They also resolve disputes based on their own expertise in a certain area of the law, (e.g., the Railroad Commission and regulation of oil and gas), so they may resolve disputes based on their own predispositions rather than on purely neutral application of the law to the facts. Unlike judges and juries in conventional trials, administrative tribunals are charged with the responsibility of balancing and protecting public interests. See, e.g.,
All administrative agencies are not created equally. They have differing levels of authority, review powers, and afford varying levels of procedural safeguards. It is not always easy to determine if the administrative agency was acting in a “judicial capacity“. In State v. Thomas, 766 S.W.2d 217, 219 (Tex.1989), we said that rate-making was a quasi-judicial function. In State v. Southwestern Bell Telephone Co., 526 S.W.2d 526, 529-30 (Tex.1975), we said that the fixing or revision of rates is a legislative function. Only those issues that an agency determines while acting in a judicial capacity and when the parties are given a full and fair opportunity to participate in the adjuratory process should be given preclusive effect. Thus, at the very least, we should establish limits or guidelines to the application of collateral estoppel and res judicata to adjudications by administrative agencies.
The United States Supreme Court has set forth additional requirements beforе it will give preclusive effect to an administrative decision. In United States v. Utah Construction & Mining Co., 384 U.S. 394, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966), the Court set forth several requirements:
- the agency must have jurisdiction to resolve the issue;
- the agency must act in a judicial capacity;
- the agency must properly resolve the dispute before it; and
- the parties must have an adequate opportunity to litigate.
Id. at 422, 86 S.Ct. at 1560. Application of collateral estoppel to administrative agency decisions in Texas should also pass the traditional test in addition to the standards articulated in Utah Construction and Mining Co.
Here it is apparent that the Commission did not properly resolve the dispute before it. Therefore, neither res judicata nor collateral estoppel may operate to preclude claims or issues in this case. If we take the court‘s decision to its logical conclusion, the effect of today‘s opinion will be to impart collateral estoppel and res judicata effect on all actions and inactions by administrative agenciеs. As a matter of fundamental fairness, for the reasons expressed above, we should affirm the judgment of the court of appeals dissolving the permanent injunction.
COOK, J., joins in this opinion.
Kurt Wayne TATUM, Appellant, v. The STATE of Texas, Appellee.
No. 821-88.
Court of Criminal Appeals of Texas, En Banc.
Nov. 14, 1990.
On Rehearing Nov. 14, 1990.