*1 ex rel. Robert M. Attorney Spire, State of Nebraska Nebraska, appellant, v. General State of Telephone Company al., appellees Bell et . Northwestern 445 N.W.2d284 September Filed No. 87-425. 1989. *2 General, Attorney Thompson, R. John Spire,
Robert M. Comer, Jay appellant, Dale A. and L. Bartel for Schudel, Overcash, Greer, and Paul M. Taylor Bert L. J. Smith, Greer, Harold
Woods, Aitken, Spangler; Overcash and McGrath, Rock, Jacobson, E. and A. Maureen L. David Dickhute, Campbell; Richard A. Nancy of Kutak Rock & L. Holdeman; Peterson, & Nelson Johanns Morris of Peterson appellees. E. Belmont for and Mark C.J., Caporale, Shanahan, White,
Hastings, Boslaugh, J., D. J. J and acott, Grant, End J. Shanahan, relator, Nebraska, Attorney of the State of as The General declaratory judgment in the district court brought action Laws, act), (the L.B. 835 County Neb. to have 1986 Lancaster seq. (Reissue et Stat. 86-801 as Neb. Rev. §§ now codified grounds. The number of on a declared unconstitutional 1987), respondents, Telephone Company (NWB), Bell Northwestern Telephone Company (LT&T), and Telegraph Lincoln Midwest, (AT&T), Inc. which AT&T Communications act, litigable validity challenged have in the interests provisions contended that was constitutional all by Attorney challenged The court General. district declared “valid, constitutional, validly that L.B. 835 enacted lawful force and effect.” Attorney appeals, assigning General as error the district (1) unconstitutionally failure hold
court’s that L.B. 835 (PSC) divests the Public Nebraska Service Commission of its Const, IV, regulatory authority, granted in Neb. art. over companies; (2) erroneous conclusion that legislation” L.B. 835 Const, valid “specific constituted under Neb. IV, 20; (3) art. telephone erroneous conclusion that procedural subscribers are process not entitled to due connection with telephone proceedings rate review conducted 835; pursuant (4) to L.B. erroneous conclusion L.B. 835 adequate process safeguards contains due for telephone *3 subscribers, assuming that subscribers are entitled to such protection; (5) legislatively erroneous conclusion that the expressed goals may of L.B. 835 a be as valid exercise fulfilled police of power. the state’s
STANDARD OF REVIEW declaratory action, A judgment pursuant to Neb. Rev. Stat. 25-21, 149 seq. (Reissue et 1985), appropriate §§ is an method to judicial obtain a construction of a statute or a determination of validity, including statute’s challenge resolution of a to the constitutionality 1, of a statute. Mullendore v. School Dist. No. 28, 388 223 Neb. N.W.2d 93 (1986). declaratory
In a judgment involving action issues, determination may of factual such issues be tried and 25-21, 157; determined as in civil other actions. Millard Rur. Omaha, Fire 1 City 50, Prot. Dist. No. v. Neb. 226 409 of 574 (1987). appellate N.W.2d In review of an action for a declaratory action, judgment in findings a law factual trier of will fact not be set findings clearly aside unless such are Serv., Inc., erroneous. Heimbouch v. Victorio Ins. 220 Neb.
[265] review of an action for
appellate
(1985).
W.2d 620
369 N.
action,
standard of
equity
an
declaratory judgment
Cross, 219
applies. OB-GYN v. Blue
equity
for an
case
review
appeal
from a
In an
(1985).
N.W.2d 550
Neb.
361
court,
questions
regarding
declaratory judgment,
appellate
independent
law,
its
obligation to reach
conclusion
has an
County York
the trial court.
from the conclusion reached
Johnson,
Neb. 403,
A of the injunctive against relief enforcement might be basis for a and, is akin to relief damages, for more act unrelated to claim through a action. than relief law through equity an action rather Bd., 226 Neb. Public Emp. rel. Ret. Spire Cf. State ex v. declaratory judgment (action N. W.2d 463 (1987) against injunction an and for statute was unconstitutional statute). Consequently, enforcement of the unconstitutional equity we for review of present appeal apply standard appeal: action, Supreme Court appeal equity
“In an of an de on the and reaches a questions tries factual novo record court, findings independent of the trial conclusion on a evidence is in conflict provided, where credible fact, Supreme Court considers and material issue of weight judge that the trial heard and give to the fact accepted observed the witnesses and one version facts rather than another.” Taylor, 41, 42, N.W.2d 474-75 v. Neb.
Frenzen (1989). claiming has the burden
One that a statute is unconstitutional Ewing unconstitutional. questioned show that statute 798, 420 v. Bd. Cty. Equal., Scotts Bluff 227 Neb. N.W.2d Comm., 217 Neb. Real Estate Weiner v. State ex rel. (1988); 372, 348 (1984). N.W.2d 879 TELE JARGON
ACRONYMS AND
*4
Co.,
Tel.
Tel.and
States v. American
result of United
As
BACKGROUND FOR L.B. 835 The Federal Communications Commission controls exchange long-distance interstate inter service. Consequently, before L.B. the PSC controlled three types basic service, telecommunications Nebraska: (1) exchange local “POTS”; (2) interexchange (toll intraLATA service calls within exchange LATA from to exchange); (3) intrastate (toll interLATA service calls within the state from LATA to LATA). Before L.B. authority the PSC had approve telephone rates submitted applications from telecommunications companies, entry to control into and exit from the market supplier, and to quality control the provided of service by telecommunications companies. commissioned the Arthur Andersen
Accounting firm to prepare survey of the telecommunications industry in Nebraska. “major Andersen’s observations” were reflected in Summary” “Executive report: of its competition Further
[1.] within the telecommuni inevitable____ industry cations in Nebraska is The main influence behind competition [2.] increased technology....
[267] activity, appears it that further historical Based on [3.] technologies which industry changes in the and the industry rapid as and dramatic will be at least support the decade____ changes in the last as and regulatory framework present the Under [4.] structure, telephone bypass of the traditional pricing may as system likely and accelerate is to continue technology competition and increases---- advances increases, competition industry changes and As
[5.] some shifting may revenues create difficulties for others____ opportunities for providers service undergone pricing telephone services has [6.] changes change. and will continue to recently developing report expressed concern over Andersen’s “bypass,” when a phenomenon known as telecommunications long-distance forgoes current customer service local through facilities of telephone company and obtains service system an illustration of company. another microwave A. customer, If a technology bypass. which be involved in a by economic incentive based on the customer’s motivated service, bypass telephone elects requirements substantial for company’s telephone company, bypassed customer’s higher support pay help customers will rates “to other there are fewer [bypassed] system’s fixed costs” because customers. 835
THE ACT: L.B. report response expressed to the concerns in Andersen’s and'by industry, Legislature, after telecommunications debate, much enacted L.B. 835.
Statutory Objectives L.B. 835 86-801) (§ L.B. 835 Section of to: policy of the state
declares that it is services; (1)Preserve affordable telecommunications availability efficiency (2) Maintain advance services; of telecommunications charges pay only reasonable
(3) Ensure that consumers services; and telecommunications telecommuni- diversity supply of in the (4) Promote throughout the products services and state. cations egulatory PSC’sR Po wer (§ 86-803(1)) L.B. 835 (1), Section subsection concerns regulation scope of PSC over telecommunications companies: act,
Except provided as in sections of this subject companies shall be regulation by the commission Telecommunications [PSC]. *6 not, however, subject companies any be shall to rate regulation by subject the commission and shall not be to prescribed provisions charges Chapter in as rates and 75, shall, 1 companies articles and 6. Telecommunications instead, file rate their lists for telecommunications services days’ which shall be ten effective after notice to the exception monthly with commission the rates for basic exchange local services.
Thus, interexchange service, for intraLATA and interLATA days, and, rates submitted to PSC become effective after 10 835, the result of power as L.B. the PSC has no to review those rates. Authority
PSC Rate over “POTS” Section (2), (§ subsection of L.B. 835 86-803(2)) allows companies change exchange telecommunications local rates only days’ after 60 by notice to subscribers affected the rate change. requisite notice to customers must include:
(a) increase, the reasons for the rate (b) description of the service, affected (c) explanation right of the petition subscriber to public hearing commission for increase, on the rate (d) exchanges a list of which are by proposed increase, affected dates, (e) rate and times, places and public for the meetings informational required by this section.
L.B. 835 substantially changed previous PSC regulatory by scheme restricting the situations in which the PSC was empowered to review charged reasonableness of certain rates by telephone companies. Under L.B. the PSC has review rates for exchange basic local only (1) service when a complaint, signed by specified percentage of subscribers
[269] (from depending number percent percent, to 5 on the by within question), subscribers affected the rate in is filed days subscribers, (2) after notice has been sent to the and on company PSC’s if a has own motion telecommunications exchange by percent increased basic local rates more than any 835, 3(3) 86-803(3) and and period. (7) (§ 12-month L.B. § (7)). procedures, Under both rate review the PSC must hold a hearing days complaint within (1) after the subscribers’ has been (customer-instigated review) (2) filed or to the notice company (PSC-initiated review), telecommunications and “fair, proposed just, determine whether rates are days hearing, may reasonable.” Within 60 after the PSC issue, adjusting charges enter “an order except the rates at may any charge that the not set rate below the actual [PSC] service____” cost of providing such L.B. If the 3(7). PSC days fails hearing, to issue an within 60 after order rates placed company effect the telecommunications are approved. deemed provision L.B. 835’s for customer-initiated 31, 1991. August rate review PSC terminates Company-Initiated Review A company application file an with the PSC request the PSC prescribe fair and reasonable rates for the company. 3(4) (§ 83-803(4)). *7 Quality Service of (6) provides
Subsection of 3 in L.B. 835 that the PSC “shall § retain quality regulation by of service over the provided services all companies____” telecommunications 86-803(6).
Change by Set Rates PSC In L.B. (10) provides: subsection “No may company change telecommunications basic its local exchange ninety days entry rate within after final of a order adjusting pursuant such rate to and (3), (4), (7) subsections this 86-803(10). section.” § PSC;
Monitoring by Report Annual Legislature to (§ 86-804) pertains Section 4 act of the the PSC’s monitoring continued industry: telecommunications provide The commission shall with year January of each on report on or before annual industry. The telecommunications of the Nebraska status quality The of telecommuni- (1) describe: report shall citizens of being provided to the cations services Nebraska; availability and affordable of diverse (2) the people services to all of telecommunications exchange Nebraska; of local (3) the level of rates interexchange telecommunications companies question of address the companies. report shall also purposes legislation further to achieve the need for 1to 11of this act. sections Market; Entry Keeping Record over into the
PSC Control the PSC to issue a (§ 86-805) 5 L.B. 835 authorizes Section of company for interLATA certificate to a telecommunications deny interexchange certification service within Nebraska and any company telecommunications which: by the required the information (a) provide Does not commission; bond, required; if
(b) provide performance Fails to adequate financial resources to (c) possess Does not service; provide proposed or competency (d) possess adequate not technical Does provide proposed service. (§ 86-807)provides: 7 the
Section of act statute, (1) Except requirements established limit, remove, regulatory may or waive commission requirements companies when it for telecommunications competition purposes will determines that serve same public regulation. The revoke as interest commission any grants regulations if waivers it or reinstate such protect public would revocation or reinstatement finding upon interest the telecommunications company restricting output, impairing market customer interest, activity. engaging anticompetitive in unlawful company A shall at a
(2) minimum: according regulations
(a) Keep its accounts to rules and commission; adopted promulgated *8 (b) File reports financial with the commission as required by and in a prescribed by form and at times commission;
(c) Keep on file at price the commission such current lists and may service standards as the require; commission
(d) Cooperate investigations with commission complaints. customer Nonregulated A ctivities “ (§ 86-808)
Section 8 of the act exempts [o]ne-way broadcast or cable television signals,” transmission of television or radio service, service, mobile paging radio radio and cellular services regulation from by the PSC. Against
Actions Companies Telecommunications Section 11 (§ of L.B. 835 86-811) “any allows interested person” to file an concerning action the district court company’s alleged telecommunications violation of L.B. 835. If company act, has may violated the “the court issue an injunction proper or other process to restrain the company . . . continuing from such violation and order additional relief.”
Severability Section 16 of the provides: any act “If section in this act or any part any section shall be declared invalid or unconstitutional, such declaration validity shall not affect the or constitutionality remaining portions of the thereof.”
L.B. 835’S ECONOMIC IMPACT ACCORDING TO
EXPERTS Conflicting testimony from experts two in telecom- munications point economics was the focal declaratory judgment Bolter, action. Dr. Walter public certified engineer, accountant economics, who also holds a Ph.D. in expressing opinion his whether L.B. 835 advanced the four goals statement,” listed in the “policy statute’s testified that the preserve act would neither affordable telecommunications service in Nebraska efficiency availability nor advance telecommunications service. Dr. Bolter opinion based his on the *9 industry the telecommunications
“very monopolistic” state of power Nebraska, which, with PSC’s diminished coupled in entry into the L.B. 835’s barriers for regulate rates and companies an marketplace, accorded telecommunications essence, Dr. ability rates. Bolter to raise unrestricted leaving price market forces control to questioned the wisdom of when, view, insignificant exert were too in his such forces major companies. any influence on the telecommunications that under L.B. consumers Dr. Bolter further testified for their “only by pay reasonable rates happenstance” would again, Dr. Bolter based his telecommunications services. Once opinion of market forces as a substitute on absence regulation prices and control of for telecommunications. Finally, he did believe that L.B. 835 Dr. Bolter testified that not “promote diversity supply would in telecommunications of difficulty products” supplier’s services and in view of a new experienced entering competing which would be in within industry. Dr. Bolter also testified about telecommunications competition telephone the condition of in three areas of the interLATA; interexchange; market: intraLATA and intraLATA exchange, Despite presence local or “POTS.” of other suppliers, prevented interLATA AT&T’s dominance competition in the interLATA market. The intraLATA interexchange market is much more concentrated than the is, therefore, interLATA market and “price more vulnerable to noted, leadership” large, monopolistic supplier. Dr. Bolter however, that the PSC applications had received from new entrants applicants into the intraLATA which could market — provide competition existing some suppliers. Although there applications have been no telephone for local service new entrants which compete existing suppliers, could with some technological developments, systems private such as microwave phones, may provide cellular customers with local exchange Bolter, service. According to Dr. regarding statistics by major revenues lost companies telecommunications as the bypass result of “very sketchy.” are Vondras,
John executive president assistant to the NWB of employee years, a NWB for 16 regarding testified “bypass,” significant most form of competition NWB, occurs when a customer confronting Bypass NWB. complete a AT&T, company’s facilities to LT&Tuses another customers, largest study NWB’s 149 In a telephone call. pattern volume and 140customers had a NWB determined that economically usage bypass which made Vondras, study According NWB’s revealed attractive. $27 NWB. million for
bypass could result in lost revenue technological of a number of Vondras testified that on account years, competition faces during past few NWB advances exchange market. the local Alessio, and is a
Dr. Frank who has a Ph.D. economics University, public program in the utilities at Stanford lecturer analysis performed own of the telecommunications his *10 industry’s in Nebraska. Dr. Alessio focused on condition vulnerability,” telephone company’s “revenue traditional competitor might “pick revenue which a new be able to off.” high-volume customers in Dr. Alessio testified that because relatively in both Omaha and Lincoln were clustered small areas, easily geographic a new entrant into the market could incurring obtain a substantial volume of business without inordinately high entering costs for the market. Based on his analysis, Dr. Alessio concluded that the telecommunications contestable, “technically market in Nebraska was rivalrous and workably competitive.”
Referring Dr. that as a result of to L.B. Alessio testified needs, changes technology public “traditional and customer utility regulation longer workable in the current is no in telecommunications.” Dr. Alessio characterized environment regulator refreshingly L.B. 835 as “a realistic view of what oversight dynamic be in the market time we are needs to statement, seeing.” Regarding policy Dr. Alessio 835’s opinion pay that customers would disagreed with Dr. Bolter’s According only by happenstance. telephone rates reasonable Alessio, telephone rates for preserve affordable Dr. consumers, companies needed existing telecommunications previous unobtainable under freedom which was competitive Dr. Alessio also regulation by the State of Nebraska. telephone diversity in L.B. 835 will foster belief that expressed his service, encourage competitors new market, availability efficiency and will advance to enter the throughout in telecommunications services Nebraska. CONSTITUTIONAL AUTHORITY OF THE PSC Attorney assignments The General’s first two of error relate IV, 20, application of Neb. Const. art. which outlines to the § authority the constitutional of the PSC: The powers and duties of such commission shall [the PSC] rates, regulation general include the service and control Legislature may provide by of common carriers as the law. But, legislation, specific in the absence of the commission powers perform shall exercise the the duties provision. enumerated in this Attorney unconstitutionally General that L.B. 835 claims authority regulate the PSC
divests of its rates because the act “specific legislation” by does not constitute which the Legislature may authority restrict the exercisable the PSC. authority telephone companies
PSC
over
is rooted
legislative, judicial,
during
early
and electoral activities
6, 1906,
1900s. In the election of November
the forerunner of
IV, 20,
Neb.
added
Const. art.
was
amendment to the state
§
Constitution,
Railway
an amendment which created the “State
authority
regulate
Commission” with
“common carriers.”
Comp.
(1909).
Stat.
421a
enacted
“creating
defining
Powers,
statutes
Duties and
Railway
of the State
Qualifications
Commission” and which
telephone companies
included
within the definition of
See, also,
(1913).
“common carriers.” Rev. Stat.
*11
Co.,
County
Neb. 140, 144, 158
Marquis
Telephone
v. Polk
100
927,
6124,
(1916): “[B]y
1913,
N.W.
928
section
Rev. St.
the
expressly
term ‘common carrier’ is
made
telephone
to include
companies.”
telephone
PSC control over rates and service of
companies
repeatedly recognized by
See,
has been
this court.
Co.,
Hooper Telephone
Telephone
Co. v. Nebraska
96 Neb.
245,
(1914); Marquis
County
275 telephone companies carriers”). are common PSC, establishing
Before the constitutional amendment the Legislature repository was the sole for control over telephone company rates. constitutional amendments of regulatory and 1906 1907extended to the PSC the which previously only by Legislature. Marquis was exercisable v. Co., County Telephone supra. Polk stated,
Briefly
railway
commission
is created
[PSC]
20,
IV,
granted
section
article
It
Constitution.
powers
regulation
rates,
and duties which include the
service,
general
and
control of common carriers as
Legislature.
directed
In a field where the
acted,
Legislature has not
the commission is authorized to
powers
exercise
perform
and
duties enumerated
means,
provision.
course,
the constitutional
This
Legislature may properly
specific legislation
enact
limiting
scope
powers.
of the commission’s
Freight,
280,
Union
Co. v. Bee Line Motor
150 Neb.
Transfer
283,
363,
See,
State,
also,
34 N.W.2d
(1948).
365
ex rel.
Co.,
Clarke,
566,
Missouri P. R.
v.
98 Neb.
commission shall and what it regulation general exercise in the and control of common Therefore, specific legislation carriers. when is enacted thereto, upon subject legislation relation such preempts occupied thereby prescribes the field so powers controls duties of the commission.
Chicago Ry. County Dodge County, & N. W. Co. v. Board 648, 653, See, also, (1947). 148 Neb. 28 N.W.2d State Railway Ramsey, ex rel. State Commission v. 151 Neb. (“The (1949) 37 N.W.2d commission is a [PSC]
regulatory body origin of constitutional not amenable legislative interruption powers or limitation of its status or *12 by legislation
except specific Although . . the PSC anis regulatory Constitution, independent body under the Nebraska jurisdiction regulate PSC to common be carriers restricted by Legislature through “specific legislation.” Neb. Const. IV, art. 20. § undoubtedly power.
L.B. 835 restricts the PSC’s For that reason, IV, 20, validity under Neb. Const. art. of L.B. 835 question “general” turns on the whether the act constitutes or “specific” legislation. Railway As noted in State ex State rel. Ramsey, supra: Commission v. right regulate Legislature may “as” the provide right regulate
means the in the manner in which the Legislature provides. . . . “specific” The word in the phrase “in specific legislation” the absence of is synonymous “particular.” with the word implies The term a definite legislation restriction on the kind and extent of permissible over common carriers which by Legislature. J., [specific] It is defined in Specific, p. 58 C. “Definite, definite; 826 as making follows: or limited or precise; restricted; precisely tending formulated or specify particular. Although or make the term is a relative one, definite, it is limited particular, precise to a thing, or very opposite ‘general’.” and hence is the of It was not by intended unlimited, use of these words to authorize broad, general legislation in reference control and regulation of common carriers. 344, 37
Id. at
N.W.2d at 509.
prior
Our
regarding interpretation
decisions
of Neb. Const.
IV, 20,
art.
seem to draw a
distinction between statutes
Legislature
which the
attempted
regulation
to transfer
agency
common carriers to an
distinct from the PSC and
Legislature
statutes which the
“occupies
itself
the field” and
becomes,
effect,
regulatory body
which exercises control
over
common carriers. The
constitutionally
cannot
jurisdiction
divest the PSC of
over a
class
common carriers
by vesting
governmental agency, body
government,
government, except
Legislature,
branch of
with control
over the class of
Railway
common carriers. State
rel. State
ex
Ramsey, supra (unconstitutional
legislative
Commission v.
attempt
Department
to vest the
with
Nebraska
Aeronautics
by air”);
to “control
Rivett
&
common carriers
Lumber
Co.,
Chicago
v.
102 Neb.
N.W.
Coal Co.
& N. W.R.
*13
(1918) (statute designed
produce
reasonable rail service
by
did not authorize the
court to exercise control over service
However,
carrier).
legislative
railroad as a common
act or
may constitutionally
jurisdiction
statute
divest the PSC of
over
through
Legislature,
common carriers to the extent that the
specific legislation,
preempted
has
the PSC in control of
See, Rodgers
Railway
common carriers.
v. Nebraska State
Commission,
832, 844,
800,
(1938)
134 Neb.
N.W.
(“[T]he plenary power
railway
may only
the
commission
be
has,
legislature
by
curtailed or
specific
diminished where the
legislation, occupied
Ry.
field”);
Chicago
the
State v.
& N. W.
Co.,
supra
(“The legislative
at
L.B. 835 does not divest the PSC of over companies, completely preclude telecommunications the PSC’s regulation of companies, telecommunications or transfer regulatory governmental agency, body control to a Legislature. government except
government, branch of or Instead, and manner which L.B. 835 restricts situations may regulatory power over rates of the PSC exercise its Regarding companies. basic local telecommunications service, exchange expressly precisely L.B. 835 and delineates its the situations and manner in which the PSC exercise 3(3) (7) L.B. power in relation to its duties. See § calls, however, Concerning (§ 86-803(3) (7)). intrastate toll completely regulatory of its control L.B. 835 divests PSC constitutionality 3(1) (§ 86-803(1)). over rates. L.B. regulatory power depends on of these restrictions on the PSC’s specific legislation either the characterization of statute as general legislation. authority Although over L.B. 835 restricts the PSC’s companies, rates set telecommunications the act leaves intact quality provided PSC control over the of service suppliers, retains the PSC’s entry marketplace. 3(6) allow into and exit from the *14 835, (§ 86-803(6)); (§§ 86-806). L.B. 5 and 6 86-805 and §§ Thus, “investigate the PSC will and resolve subscriber service, concerning quality complaints of telecommunications 835, deposits, and L.B. subscriber disconnection service.” 3(6) (§ 86-803(6)). complaint If informal resolution of the § may accomplished, petition not the customer file a with the PSC, hearing which will then hold on the customer’s may granting complaint, and enter an order such relief as the necessary. Furthermore, empowered PSC deems the PSC is entry interexchange” control into the “inter LATA market is, through may process, the “certificate” that the PSC company supplied authorize a telecommunications which has requisite interexchange” “inter LATA supply information to 835, (§ 86-805). L.B. The PSC also service. retains § power to determine whether and when a telecommunications may company abandon or discontinue service to a local exchange 6(§ 86-806). area. L.B. § report annually requires L.B. 835 further that the PSC to the legislation, any, if Legislature suggest additional which (§4 accomplish goals 86-804). of the act. L.B. § Legislature The not abandoned or abolished all PSC has Rather, regulation through companies. of telecommunications regulatory L.B. has restricted or limited the concerning provided of the PSC rates and has a means system regulation may which the evaluated of limited rate be Legislature. preserves 4 (§ 86-804). The act regulatory jurisdiction regarding quality the PSC’s of service and, therefore, entry into the telecommunications market regulatory power telephone does not over divest PSC of its companies. provisions concerning The L.B. 835 rate review specific in the various telecommunications markets are legislation general. rather than hold L.B. 835 Wetherefore constitutionally jurisdiction divests the PSC of rate review over interexchange telephone intraLATA and interLATA intrastate service, constitutionally jurisdiction limits PSC rate review exchange over local rates. service IV, 20, by
L.B. 835 does not violate Neb. Const. art. nullifying jurisdiction PSC over Rather,
companies. specific legislation the act constitutes prescribing the method and manner in which the PSC will regulatory concerning telephone exercise its activities concluded, companies. correctly The court and we also district conclude, specific legislation that L.B. 835 is which constitutionally regulatory power pursuant restricts PSC’s to the Nebraska Constitution.
PROCEDURAL DUE PROCESS FOR TELEPHONE
SUBSCRIBERS Attorney General also contends that L.B. 835 unconstitutionally process telephone denies due subscribers regarding proceedings telephone PSC for review of a days company’s (1) rates and maintains that the 60 allotted signatures necessary challenge a gather subscribers to constitutionally (2) insufficient and that proposed rate is *15 ratepayers’ filing 90-day period prescribed between the hearing provide adequate not complaint and the PSC’s does prepare opposition proposal. to the rate time for subscribers to 835, 3(3) (§ 86-803(3)). See L.B. legislative carrier is a act.
Setting a rate for a common Producers Assn. v. All Nebraska Limestone Nebraska 280
Railroads,
786,
Bard v. Cox
(1959);
N.W.2d 331
168 Neb.
97
Omaha,
880,
Inc.,
(1987).
N.W.2d 4
On
226 Neb.
416
Cable of
legislatively determined rate was
ground
“unreasonable,
“confiscatory”
arbitrary
capricious,”
or
Before
courts have invalidated rates set for a common carrier.
1975, only
successfully challenged
had
rates
common carriers
which denied a reasonable return on investment in the carrier.
Co.,
See,
City Sidney,
Nat. Gas
Inc. v.
Kansas-Nebraska
of
Co.,
Myers
(1970);
Neb.
As a
neither should the
permitted
be
the ratepayers’
confiscate
fees without
giving
reasonably adequate
service for which those
permit
rates were set. The commission can no more
utility
confiscatory
to have
for the
it
rates
service
performs
utility
compel
provide
than it can
service
just
equitable
without
As a matter of
compensation.
justice,
utility
elemental
consumers
services are entitled
protection against
to the
property
same
confiscation of
arbitrary
utility
part
action on the
as are the utilities.
Unfortunately,
Myers
Id. at
The Energy, K N gas in Reimer v. extended to natural customers Inc., which gas company, supra, ratepayers when of a natural city gas for the in which supplier the franchised of natural was lived, challenged company’s imposition of a ratepayers the the charge. After the $4 customer service per month minimum (subject gas company’s the demurrer district court sustained the capacity to maintain jurisdiction, plaintiff’s matter lack of the suit, action) and dismissed and failure to state a cause of jurisdiction over action, appealed. upholding ratepayers the and, citing Myers v. Blair reversed after dispute, this court Co., supra, Tel. held power protect supplier
just as the district court has it municipal deprives which of a gas of natural from action so, too, reasonable, rate, fair, does the compensatory and of such protect court have the a consumer district unreasonable, confiscatory arbitrary, gas and from rate. Inc., 145, 388 at 482. K N Energy, supra
Reimer v. at N.W.2d rely Myers did court on a lack In neither nor Reimer this challenge process ratepayer’s for a procedural due as basis rate, against recognize protection but did to a common carrier’s ratepayer has had confiscatory notwithstanding that a rate Thus, to the rate set. opportunity opposition to be heard in against Reimer, Myers protection in Nebraska after and substantive due confiscatory rate more a matter of seemed process. process procedural than due only involving process due concerns Nebraska decision Omaha, rights” v. Cox Cable regarding “ratepayers’ is Bard
Inc., city granted a franchise supra. Cable had been Cox Bard, services. city’sresidents with cable television supply service, brought suit cable television a subscriber of city, by television rates set claimed that the cable Cable, The district charged by were excessive. accordingly Cox filed jurisdiction) (subject demurrers matter court sustained Cable, and, on of the action city after dismissal and Cox demurrers, appealed. We summarized Bard account of the city: by the challenge approved to the rates Bard’s however, alleges, Bard further that Cox Cable’s rates process violate the due clause of the 14th amendment to provisions U.S. Constitution and several Constitution, including process Nebraska the due clause I, contained in article thereof. The constitutional argument she process makes limits itself to those due clauses, we, therefore, analysis likewise limit our process due concerns. *17 setting
Because regulated industry of rates for a is a legislative act, the courts of this state power lack the to set do, rates. however, The courts [Citation have omitted.] legislatively to review set rates to determine they arbitrary whether are so and unreasonable as to be confiscatory and unconstitutionally thus property take process without due law. [Citations omitted.] of Thus, in the absence overriding law, of federal district possesses subject court jurisdiction matter to determine whether Cox arbitrary Cable’s rates are so unreasonable as confiscatory. to be (Emphasis supplied.) Omaha, Inc., Bard v. Cox Cable 226 of 880, 886, Neb. 416 N.W.2d (1987). holding After that federal preclude law did not a state court’s review of Cox rates, Cable’s analyzed this allegations court in Bard’s petition and allegations concluded that the
support an inference that Cox Cable’s subscribers are paying a rate charge which something includes a for that is being not that, delivered them extent, to that arbitrary rate is and unreasonable such as to be confiscatory and therefore violation process of the due clauses of the state and federal Constitutions. 889, 416 N.W.2d at
telephone service belongs property whether the taken just compensation, without decisions As a trio of telephone company or to a subscriber. to a Reimer, do rights,” Myers, and Bard concerning “ratepayers’ regulation. process in rate procedural relate to due not decisions, However, have a ratepayers reason those rates for legitimate claim of entitlement to reasonable ratepayers. See supplied service to the Roth, 564, 577, Ct. Regents Board v. 408 U.S. 92 S. 2d (1972): L. Ed. benefit, clearly property person interest in a a
To have it. He must have more than an abstract need or desire for expectation of it. He must have more than a unilateral must, instead, legitimate entitlement to it. have a claim of property to purpose It is a of the ancient institution of rely daily protect upon people those claims which in their lives, arbitrarily reliance that must not be undermined. It purpose right hearing constitutional *18 provide opportunity person for a to vindicate those claims.
Thus, rate, right right ratepayer’s a to a fair and reasonable a court, emerged properly which has from the decisions of this is “property” protected classified as a entitlement the due process of the U.S. and Nebraska Constitutions. See clauses Roth, Regents supra. Board v. of constitutionally holding ratepayers have a Our that rates, telephone cognizable property entitlement to reasonable government necessary implement those when involvement is to rates, only process whether the due resolves the threshold issue question the facts of this case. The applicable clause is to 835, our decisions process What is due? Before L.B. remains: ratesetting authority legislative clear that the of PSC is made exercised, character, which, effect of a properly in if has the 284 subject
statute on
of reasonable rates. Nebraska Railroads
Nebco, Inc.,
322,
Omaha v.
194 Neb.
Accord, Railway Co., United States v. Florida East Coast U.S. 93 S. Ct. L. Ed. (1973); 2d 223 Bowles v. Willingham, 321 U.S. 64 S. Ct. 88 Ed. 892 (1944). L.
Only governmental adjudicative subject decisions nature are procedural to the process requirement due of notice and legislative hearing; exempt action is from the constitutional protection procedural process. Cty. Ventura, due Horn v. 605, 156 718, 596 Rptr. (1979). Cal. 3d Cal. P.2d 1134 government life, is most
It common for affect the liberty property of great people interest number of through legislative legislature its functions. When passes general persons, a law which affects a class of those persons procedural process have all received *19 due —the
285 challenges to laws must be legislative process. The such compatibility with based on their substantive Similarly, guarantees. an administrative constitutional legislative that are of a or agency make decisions agency general rulemaking character. When promulgates generalized rules there is no constitutional right hearing specific a individual. However when to a might adjudicative agency makes rules that be termed interests, they very then group in that affect a defined granted persons representing those interests should be life, liberty safeguard procedure fair their some property. Rotunda, Nowak, Young,
J.
R.
& J.
Constitutional Law 13.8
LULAC,
See, also,
(3d
1986).
States v.
at 485
ed.
United
(5th
1986) (“When
legislature
F.2d
enacts a
Cir.
law,
agency adopts
regulation,
general
or a state
affects
persons,
persons
procedural
have received
class of
all of those
they
process by
legislative process itself and
have no
due
See, further,
Ramsey,
right
attention”).
individual
Nolan v.
1979).
(5th
Neb. N.W.2d 18-19 after function, ratesetting this court legislative nature of the PSC’s held that required given by the plaintiff
no notice to was to be legislatively permitting commission before it acted [telephone company] to revise and amend its defendant pro regulations permit it to collect rata rate rules and city occupation within the tax from its subscribers city specifically required imposed by the unless a statute notice.
Thus, telephone subscriber had before enactment of L.B. hearing regarding process right due to notice and no setting ratemaking action in rates was because the PSC’s legislative as a function. classified that the PSC’s function Attorney General concedes
The
Attorney
legislative.
was
ratemaking before L.B. 835
contends, however,
changes in PSC review
that the
General
of the PSC’s
altered the nature
L.B. 835 have
effectuated
*20
merely
disagree. L.B. 835
We
regulation process.
role in the rate
perform its
the PSC will
in which
prescribes the situations
modify
function,
the nature of
and does not
ratemaking
in
cases before the commission.
by the PSC rate
inquiry made
835, the PSC’s
of L.B.
and after enactment
Both before
“fair, just,
what rates are
ratemaking
to determine
in
is
function
(4),
835,
(7) (§ 86-803(3),
3(3), (4), and
and reasonable.”
performs
the fact that the PSC
a
of L.B.
(7)).
As result
only
does not
ratemaking
in limited circumstances
function
its
power.
the PSC’s
change
legislative character of
affect or
PSC,
rate,
by
a
affects
determined
Because a reasonable
citizens,
a rather limited
large
Nebraska
and not
number of
individuals,
the PSC’s
identifiable
specifically
number of
Furthermore,
legislative!
activity
properly characterized as
is
a
rate does not resolve
determination of a reasonable
PSC’s
Rather, PSC
parties.
identified
past dispute between
merely
a rate for the
a reasonable rate
sets
determination of
itself, by
by the PSC
a
Whether
activated
future.
subscribers,
by company’s
company, or
ratemaking
legislative under L.B. 835.
the PSC’s
remains
grants
Attorney
next contends that L.B. 835
General
rates,
hearing regarding
right
right
subscribers a
to notice
concept of due
comport with the constitutional
which must
805, 809,
Kelley,
Neb.
255 N.W.2d
process. In State v.
no
although
held that
a criminal defendant has
(1977),
we
right
appeal,
“when the Nebraska
process
due
right,
procedure
grants appeal as a matter of
Constitution
concepts
federal constitutional
must accord with the
afforded
Illinois,
351 U.S.
76 S. Ct.
process.”
due
See
v.
Griffin
state-granted right
be
(1956) (a
must
citizen of a State
form or method of state
procedure.
requirements
Its
are satisfied if he has
notice,
opportunity
reasonable
and reasonable
to be heard
defence,
present
regard being
and to
his claim or
due
had
proceedings
to the nature of the
and the character of the
”
rights
by
which
be affected
it.” ...’
Omaha,
589, 591,
City
Hroch v.
226 Neb.
413 N.W.2d
of
(1987) (quoting
City
Scottsbluff,
Webber v.
155Neb.
of
We procedure provides believe that the outlined in L.B. 835 adequate opportunity for telecommunications customers to protect property their entitlement to a reasonable through telecommunications participation rate subscriber in ratemaking hearings. the PSC largest For the two Nebraska, suppliers namely, telecommunications NWB and LT&T, 60-day petition process the for subscriber initiation of requires daily PSC review signatures that customers obtain 115 petition on the pertaining signatures to NWB and 88 on the petition pertaining availability potential to LT&T. Given the is, signatories, that all the telecommunications subscribers rate, by proposed Attorney affected the General has failed 60-day to demonstrate that the time limit is unreasonable process. due constitutional context of
Also, Attorney General has failed to demonstrate 90-day period inadequate preparation ratepayer for is hearing.
opposition presented be at the PSC Due to to task, ratemaking as a legislative nature of the PSC’s consideration, need not confer on matter of constitutional right at ratepayers present to evidence or relevant information hearing. Notwithstanding complexity the PSC of issues PSC, 90-day frequently involved in a rate case before the period ostensibly gather taxpayers sufficient for challenge telephone company’s proposed information to rate and, therefore, gives opportunity consumers a “reasonable present opposition proposed be heard” and their to the rate. 60-day gather signatures, period Combined with the group prepare consumer could have as much as 5 months to Furthermore, hearing. authority the PSC rate the PSC has require company a telecommunications to submit its financial undoubtedly reports, inquiry which would facilitate into proposed by reasonableness rates company. In view the telecommunications PSC’s role in “fair, protecting public assuring that the interest rates are just, reasonable,” we are unable to conclude that the 90-day period unconstitutionally prescribed L.B. 835 deprives process. subscribers of due Neither the U.S. Constitution nor the Nebraska Constitution requires that granted any telecommunications subscribers be procedural protection beyond additional that embodied in L.B. Attorney 835. The General’s claim that L.B. 835 violates is, telephone rights therefore, process subscribers’ due without merit.
L.B. 835AND THE STATE’SPOLICE POWER Attorney The General’s final contention is L.B. that 835 is unconstitutional because the act real bears no or substantial health, morals, relationship general to the or welfare of the and, therefore, public, is a valid of police not exercise the state’s power. police power sovereignty,
The is an attribute of state and, within the limitations of state and federal Constitutions, exercise, may, the state in its enact laws for safety, health, morals, promotion public the of generally public for the welfare. [Citation omitted.] public Legislature protect the the adopted Measures safety must public the and welfare have health and secure proposed ends. relation those some reasonable [Citation omitted.]
Finocchiaro,
Comm., 217 Neb.
Liq.
Inc. Nebraska
Cont.
v.
Thus,
when a
(1984).
351 N.W.2d
is
involved in
right
suspect classification
not
fundamental
or
police
legislative act is valid exercise of a state’s
legislation, a
a
legitimate
reasonably
to a
the
is
related
power
if
act
Pharr,
(Colo.
People v.
The enactment of through objective to be achieved the manifest indication of Omaha, legislation. City v. 197 Neb. See Schaffer of However, expression or of (1977). N.W.2d 764 with without legislatively duty objective, avowed court has the determine whether the has exercised state’s reasonably power general in a police manner related to health, morals, legislative or If the welfare the state’s citizens. governmental well-being in enactment furthers a interest citizenry, upheld regardless the act must be of whether the Legislature contemplated the exact nature of the benefit legislation. accorded Attorney argument no General has made
endangers right suspect a fundamental results Therefore, police act is a exercise of classification. valid reasonably general legislation if the is related to the people welfare of Nebraska. again setting conflicting forth detail
Without side, testimony experts by each presented of the two economic legitimate reasonably we find related to that L.B. 835 Dr. Alessio’s governmental interests of the State Nebraska. structure before testimony regulatory indicates that Nebraska’s existing telecommunications provide L.B. 835 did not flexibility companies respond to an pricing with the needed flexibility, increasingly market. Without this competitive lose, likely in fact companies would lost, a number of their previously have revenue derived from
larger
Furthermore, L.B.
subscribers.
835 allows
PSC
remove,
“limit,
regulatory requirements
or waive
for
companies
telecommunications
when it
that
determines
competition will serve the
purposes
public
same
as
interest
regulation.”
(§ 86-807).
L.B.
§
legislature
determining
A
has discretion in
what measures are
reasonably necessary
protect public health, safety,
welfare, and,
reviewing
act,
legislative
a court should not
judgment
Legislature merely
substitute its own
for that of the
may
Legislature
because the court
believe that
acted
unwisely
Yu,
or improvidently.
(Fla.
See State v.
CONCLUSION Attorney The General has failed to demonstrate the unconstitutionality legislation of L.B. 835. The not does IV, 20, contravene Neb. Const. art. facially nor does the act deny process due of law for telecommunications customers. Finally, the act is a valid exercise of police power. the state’s Therefore, we conclude that L.B. 835 is constitutional in all challenged respects. Consequently, judgment of the district court is affirmed. Affirmed. J., dissenting.
Grant, I may dissent. Laissez-faire be an acceptable doctrine in some government regulation, theories I but do not think the Nebraska permits Constitution that approach setting rates companies in Nebraska.
I Laws, feel that 1986Neb. codified as Neb. Rev. Stat. seq. (Reissue 1987), 86-801 et §§ violates Neb. Const. art. IV, 20, provides: which
There shall be a Public Service Commission .... powers and duties of such commission shall include the regulation rates, general service and control provide law. as the common carriers But, specific legislation, the commission in the absence of powers perform the duties shall exercise the *24 provision. in enumerated this provides: “Telecommunications portion
A 86-803 § not, however, regulation subject any be to rate companies shall subject provisions not as to by the and shall be to commission 1 and 6.” I charges prescribed Chapter in articles rates and L.B. 835 renders the whole of provision believe that unconstitutional. IV, 20, is history adoption the of Neb. Const. art. §
The
Ramsey,
Railway Commission v.
out in
ex rel. State
set
State
history
Included in that
is
(1949).
Neb.
The
the
[in
positively provides
powers
that
of the
the
Constitution]
regulation of all
the
include the
commission shall
Legislature to
right
with
of the
enumerated matters
the
in which the commission shall
control
the manner
duties, or to enter
perform independent
its
constitutional
“specific legislation.” The
the
to the extent of
field itself
the
logical,
inescapable,
if not
that
conclusion
people
Legislature
and the
proposed,
would not have
the
knowingly
approved,
have
an addition to
would not
only to
creating
power
a commission with
Constitution
for
regulate
to the extent and
and control common carriers
by
provided
permitted
Legislature----
the
the
time
343,
In
the
and
IV, 20,
Ramsey
“It
the
court stated:
used in Neb. Const. art.
to authorize
by
not
the use of these words
was
intended
broad,
unlimited,
general legislation in reference to
control
In free purporting general legislation any regulation. companies from rate State, R. ex Missouri P. rel. Ramsey opinion
The referred to case, In Co., 566, 153 (1915). 623 Clarke, N.W. v. 98 Neb. 292 Legislature, (commonly statute called “Two-cent Act”), per
Fare
fixed a maximum rate
mile
had
cents
then,
later,
passenger
days
railroad
rates and
had
enacted
necessary
granting
power
statute
“to fix all
rates, charges
regulation
govern
regulate
freight
and
passenger
railway companies
tariffs of
...”
Rev. Stat.
(1913).
relator contended the later statute
beyond
authorized the commission to raise the rates
cents.
held
contrary, stating:
general
The Clarke court
to the
“The
railway commission,
applied
state
passenger
as
traffic,
is limited to rates below the maximum
fixed
two-cent fare law.”
at
my
98 Neb.
I construe the and Clarke cases mean that if the Legislature preempts by setting rates, field specific rate it “specific enacted legislation” has *25 IV, referred into article my In judgment, authority 20. specific § to set a rate does authority Legislature not extend say of the “no one shall regulate Constitution, rates.” In their people of the State of expressed Nebraska have their decision that either Legislature regulate or the commission shall the rates of common carriers. I do not believe that constitutional directive be legislative can thwarted abolishing action regulations rate specific as to common carriers. enacting seq., 86-801 et attempted §§ has repeal IV, Neb. Const. art. 20. I do not believe the
Legislature can do that. I judgment would reverse the trial court and hold that 86-801 to 86-811 are §§ Const, IV, unconstitutional as violating Neb. art. 20. Boslaugh J., j oins in this dissent. .
