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Special Energy/Telecommunications Edition
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Morrison & Foerster has been monitoring developments in a case recently decided by the California Supreme Court which may have important consequences for companies seeking judicial relief against public utilities regulated by the California Public Utilities Commission (“CPUC”). Public Utilities Code Section 1759 provides that no California court, except the Supreme Court and the Court of Appeal, may “interfere with” the CPUC in the performance of its official duties. In
The People, ex rel. Orloff v. Pac. Bell, 2003 Cal. LEXIS 9459 (Dec. 15, 2003) (“
Orloff”), the Supreme Court held that Section 1759 did not bar a judicial action brought by public enforcement agencies against utilities that are subject to administrative proceedings at the CPUC. Although the impact of the case is limited by the fact that the judicial action was brought by public enforcement agencies, such as the California Attorney General or District Attorney as opposed to private parties, it nonetheless represents an important development in the law controlling judicial actions against CPUC-regulated entities.
Background
Orloff involved a lawsuit filed by three Bay Area Counties against Pacific Bell under California’s Unfair Competition Law (“UCL” Cal. Bus. & Prof. Code § 17200 et seq.). The counties of Alameda, San Mateo and Monterey, through their respective District Attorneys’ Offices, alleged that Pacific Bell was misleading its customers into ordering “custom calling” option packages (such as call blocking and inside telephone repair insurance) by failing to tell customers of alternative, cheaper packages. The counties sought a permanent injunction to prohibit the alleged misconduct, as well as civil penalties, restitution, and costs of suit. An administrative enforcement proceeding involving some of the same allegations of misconduct by Pacific Bell was pending in the CPUC at the time the civil action was filed. Pacific Bell filed a demurrer seeking to dismiss the case on the basis of Section 1759, alleging that because the same issue was before the CPUC in ongoing administrative hearings, the Superior Court lacked jurisdiction to hear the case.
The Superior Court and subsequently the Court of Appeal concluded that because the UCL action might result in conflicting rulings with the parallel CPUC proceeding, the action would interfere with the CPUC’s authority, and thus it was barred by Section 1759. The Court of Appeal reasoned that the circumstance that the action was instituted by public officials was insufficient to overcome the preemption of such actions pursuant to Section 1759. The Supreme Court granted the Counties’ petition for review, and concluded that the lower courts had erred in determining that the action was barred by Section 1759.
The California Supreme Court’s Rationale
The Supreme Court noted that it had recently decided two cases where it prohibited civil actions by private individuals in Superior Court against public utilities from going forward on the basis of Section 1759 preemption. See San Diego Gas & Electric Co. v. Superior Court, 13 Cal. 4th 893 (1996) (“Covalt”); Hartwell Corp. v. Superior Court, 27 Cal. 4th 256 (2002) (“Hartwell”). Unlike the civil actions in Covalt and Hartwell, however, the Orloff suit was “instituted by district attorneys on behalf of the People,” and the Supreme Court held that this factor was “significant in determining whether a civil action impermissibly will interfere with the PUC in the performance of its official duties” within the meaning of Section 1759.
The Supreme Court pointed out that the legislature afforded public prosecutors specific grants of authority to prosecute entities regulated by the CPUC for civil law violations. First, Public Utilities Code 2101 authorizes district attorneys, at the request of the PUC, to prosecute civil actions against regulated utilities for violations of California law. Even without a request from the CPUC, the Court reasoned that Public Utilities Code Sections 2101 and 2105 appeared to authorize district attorneys to prosecute actions in the name of the People against public utilities. The Supreme Court also noted that Government Code 26509 implicitly authorized district attorneys to initiate civil actions against public utilities, because that provision conferred a right on district attorneys to examine PUC materials as part of the district attorney’s investigation of consumer fraud. This provision made no sense, the Court reasoned, if district attorneys could not seek to remedy consumer fraud in judicial proceedings.
The Court reasoned that these and other statutory grants of authority to district attorneys “significantly influence the inquiry whether a general regulatory policy of the PUC would be interfered with or undermined by the filing and maintenance of the civil action.” The Court held that “where a civil action brought by public prosecutors in the name of the People against a public utility does not usurp any exclusive power of the PUC and is authorized expressly by statute, we properly may discern a legislative intent that the superior court and the PUC possess concurrent subject matter jurisdiction, and that public prosecutors and PUC officials share the authority and responsibility to prosecute violations of these laws.”
Applying these principles to the facts of the case before it, the Supreme Court held that Section 1759 did not bar the counties’ civil action from proceeding. Given the overlapping authority conferred by the legislature, there was “nothing in the present action” to undermine or otherwise “interfere with,” the CPUC proceedings. The Court noted that the CPUC had filed an amicus curiae brief, arguing that the relief the district attorneys sought would in fact “complement” rather than interfere with, the CPUC proceedings. The Court emphasized that, even if there was a potential for conflicting factual findings or legal conclusions, the CPUC and counties could avoid an actual conflict by simply coordinating their efforts. Because there was no interference with the CPUC proceedings, Section 1759 was not a bar to the counties’ civil action.
Finally, in an intriguing footnote, the Court emphasized that it had “no occasion” to consider the circumstances in which a civil action under the UCL brought “by a private party” acting as a private attorney general could proceed when a parallel enforcement proceeding is pending in the CPUC. The Court noted that when such a case is brought, “there may be more of a risk of a lack of coordination with PUC officials,” and hence, a “greater danger that the civil action might undermine an ongoing regulatory program or policy of the PUC.” In such a circumstance, the lower court “may deem it appropriate to solicit the views of the PUC regarding whether the action is likely to interfere with the PUC’s performance of its duties.”
Future Implications
For private entities seeking judicial relief against public utilities, the decision in Orloff may raise more questions than it answers. On the one hand, the Supreme Court emphasized the fact that the civil action was brought by public officers, acting on behalf of the Public, and that such officials had been granted specific statutory authority to do so. On the other hand, the Supreme Court threw a life-line to private entities: While it warned that there may be a greater danger of “a lack of coordination with PUC officials,” when private individuals seek judicial relief against public utilities, it nonetheless did not foreclose the possibility of such suits, and advised the superior courts to “solicit the views of the PUC” on whether the civil action is likely to interfere with the PUC proceedings. Given the Supreme Court’s emphasis on the public status of the plaintiffs in Orloff, however, it seems likely that utilities will continue to attempt to raise Section 1759 as a threshold jurisdictional bar to any judicial action brought by private entities against a public as a utility.