Oklahoma Operating Company v. Love/Opinion of the Court

This suit was brought in the District Court of the United States for the Western District of Oklahoma by the Oklahoma Operating Company against the Corporation Commission of that state to enjoin it from entertaining complaints against the company for the violation of orders limiting the rates for laundry work in Oklahoma City theretofore entered by the Commission, under section 8235 of the Revised Laws of Oklahoma (1910); and from doing any other acts or things to enforce said orders. The case comes here under section 266 of the Judicial Code (Comp. St. § 1243) by direct appeal from an order denying a motion for a preliminary injunction heard before three judges. The appellant presents to this court the question whether section 8235 is void under the Fourteenth Amendment, contending that under the laws of the state there was no opportunity of reviewing judicially a legislative rate fixed pursuant to that section except by way of defense to proceedings for contempt which might be instituted for violating the order, and that the possible penalties for such violation were so heavy as to prohibit resort to that remedy.

The bill as amended makes the following allegations: In 1913 the Commission entered an order declaring the Oklahoma Operating Company a monopoly and its business a public one, and directed it not to increase the rates then being charged except upon application to and permission of the Commission. Since that time operating costs have risen greatly and rates for laundry work prevailing in 1913 have become noncompensatory. Accordingly in January, 1918, the company moved the Commission to set aside its order of 1913 on the ground that the laundry business was not within the purview of section 8235, that the company was not a monopoly within the meaning of that section, and that the section was void. The Commission denied this motion, and thereafter the company established rates higher than those prevailing in 1913. On account of this it is now threatened with proceedings for contempt. Since the establishment of these higher rates the company has been summoned before the Commission to give information as to the cost of performing laundry service in Oklahoma City and information in general to determine what may be reasonable rates for laundry service in that city. Upon these allegations a preliminary injunction was sought below to restrain the Commission from entertaining complaints for violation of its order fixing rates and to enjoin it from proceeding with the investigation regarding the cost of the service.

The scope of section 8235 and the prescribed course of proceedings thereunder, as construed by the Supreme Court of the state (Harriss-Irby Cotton Co. v. State, 31 Okl. 603, 122 Pac. 163; Shawnee Gas & Electric Co. v. State, 31 Okl. 505, 122 Pac. 222; Oklahoma Gin Co. v. State [Okl.] 158 Pac. 629), in connection with other legislation (sections 1192 to 1207 of the Revised Code of 1910) and provisions of the state Constitution (article 9, sections 18 to 23), are, so far as here material, these: Whenever any business, by reason of its nature, extent, or the exercise of a virtual monopoly therein, is such that the public must use the same or its services, it is deemed a public business, and as such is subject to the duty to render its services upon reasonable terms without discrimination. If any public business violates such duty the Corporation Commission has power to regulate its rates and practices. Disobedience to an order establishing rates may be punished as a contempt and the Commission has power, sitting as a court, to impose a penalty therefor not exceeding $500 a day. Each day's continuance of failure or refusal to obey the order constitutes a separate offense. The original order may not be made nor any penalty imposed except upon due notice and hearing. No court of the state, except the Supreme Court by was of appeal, may review, correct o annul any action of the Commission within the scope of its authority or suspend the execution thereof; and the Supreme Court may not review an order fixing rates by direct appeal from such order. But in the proceedings for contempt the validity of the original order may be assailed; and for that purpose, among others, new evidence may be introduced. When a penalty for failure to obey an order has been imposed an appeal lies to the Supreme Court. On this appeal the validity of the original order may be reviewed; the appeal is allowed as of right upon filing a bond with sureties in double the amount of the fine imposed; the filing of the bond suspends the find; and the period of suspension may not be computed against a concern in fixing the amount of liability for fines.

The order of the Commission prohibiting the company from charging, without its permission, rates higher than those prevailing in 1913, in effect prescribed maximum rates for the service. It was, therefore, a legislative order; and under the Fourteenth Amendment plaintiff was entitled to an opportunity for a review in the courts of its contention that the rates were not compensatory. Chicago, etc., Railway Co. v. Minnesota, 134 U.S. 418, 456-458, 10 Sup. Ct. 462, 33 L. Ed. 970; Ex parte Young, 209 U.S. 123, 165, 166, 28 Sup. Ct. 441, 52 L. Ed. 714, 13 L. R. A. (N. S.) 932, 14 Ann. Cas. 764. The Constitution of the state prohibited any of its courts from reviewing any action of the Commission within its authority except by way of appeal to the Supreme Court (article 9, section 20); and the Supreme Court had construed the Constitution and applicable provisions of the statutes as not permitting a direct appeal from orders fixing rates. Harriss-Irby Cotton Co. v. State, supra. On behalf of the Commission it was urged at the oral argument that a judicial review of the order fixing rates might have been had also by writ of mandamus or of prohibition issuing out of the Supreme Court of the state. But, in view of the provision of the state Constitution just referred to, it must be assumed, in the absence of a decision of a state court to the contrary, that neither remedy, even if otherwise available, could be used to review an order alleged to be void because confiscatory. The proviso 'that the writs of mandamus and prohibition shall lie from the Supreme Court to the Commission in all cases where such writs, respectively, would lie to any inferior court or officer,' appears to have no application here. The challenge of a prescribed rate as being confiscatory raises a question, not as to the scope of the Commission's authority, but of the correctness of the exercise of its judgment. Compare Hirsh v. Twyford, 40 Okl. 220, 230, 139 Pac. 313.

So it appears that the only judicial review of an order fixing rates possible under the laws of the state was that arising in proceedings to punish for contempt. The Constitution endows the Commission with the powers of a court to enforce its orders by such proceedings. Article 9, sections 18, 19. By boldly violating an order a party against whom it was directed may provoke a complaint; and if the complaint results in a citation to show cause why he should not be punished for contempt, he may justify before the Commission by showing that the order violated was invalid, unjust or unreasonable. If he fails to satisfy the Commission that it erred in this respect, a judicial review is opened to him by way of appeal on the whole record to the Supreme Court. But the penalties, which may possibly be imposed, if he pursues this course without success, are such as might well deter even the boldest and most confident. The penalty for refusal to obey an order may be $500; and each day's continuance of the refusal after service of the order it is declared 'shall be a separate offense.' The penalty may apparently be imposed for each instance of violation of the order. In Oklahoma Gin Co. v. State, 252 U.S. 339, 40 Sup. Ct. 341, 64 L. Ed. --, decided this day, ita ppears that the full penalty of $500, with the provision for the like penalty for each subsequent day's violation of the order, was imposed in each of three complaints there involved, although they were merely different instances of charges in excess of a single prescribed rate. Obviously a judicial review beset by such deterrents does not satisfy the constitutional requirements, even if otherwise adequate, and therefore the provisions of the acts relating to the enforcement of the rates by penalties are unconstitutional without regard to the question of the insufficiency of those rates. Ex parte Young, 209 U.S. 123, 147, 28 Sup. Ct. 441, 52 L. Ed. 714, 13 L. R. A. (N. S.) 932, 14 Ann. Cas. 764; Missouri Pacific Railway Co. v. Tucker, 230 U.S. 340, 349, 33 Sup. Ct. 961, 57 L. Ed. 1507; Wadley Southern Railway v. Georgia, 235 U.S. 651, 662, 35 Sup. Ct. 214, 59 L. Ed. 405.

The plaintiff is entitled to a temporary injunction restraining the Corporation Commission from enforcing the penalties. Since this suit was commenced, the Legislature has provided by chapter 52, section 3, of the Laws of 1919 (Sess. Laws Oklahoma 1919, p. 87) that in actions arising before the Commission under section 8235 there shall be the same right of direct appeal to the Supreme Court of the state as had theretofore existed in the case of transportation and transmission companies under article 9, section 20, of the Constitution. But as plaintiff was obliged to resort to a federal court of equity for relief it ought to retain jurisdiction of the cause in order to make that relief as full and complete as the circumstances of the case and the nature of the proofs may require. The suit should, therefore, proceed for the purpose of determining whether the maximum rates fixed by the Commission are, under present conditions, confiscatory. If they are found to be so, a permanent injunction should issue to restrain their enforcement either by means of penalties or otherwise, as through an assertion by customers of alleged rights arising out of the Commission's orders. Missouri v. Chicago, Burlington & Quincy R. R., 241 U.S. 533, 538, 36 Sup. Ct. 715, 60 L. Ed. 1148. If upon final hearing the maximum rates fixed should be found not to be confiscatory, a permanent injunction should, nevertheless, issue to restrain enforcement of penalties accrued pendente lite, provided that it also be found that the plaintiff had reasonable ground to contest them as being confiscatory.

It does not follow that the Commission need be restrained from proceeding with an investigation of plaintiff's rates and practices, so long as its findings and conclusions are subjected to the review of the District Court herein. Indeed, such investigation and the results of it might with appropriateness be made a part of the final proofs in the cause.

These conclusions require that the decree of the District Court be reversed and that the case be remanded for further proceedings in conformity with this opinion.

Reversed.