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Citizens Utilities Co. v. O'connor

OPINION FILED JULY 7, 1983.

CITIZENS UTILITIES COMPANY OF ILLINOIS, PLAINTIFF-APPELLANT,

v.

PHILIP R. O'CONNOR ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Du Page County; the Hon. S. Bruce Scidmore, Judge, presiding.

JUSTICE REINHARD DELIVERED THE OPINION OF THE COURT:

Plaintiff, Citizens Utilities Company of Illinois, appeals from the circuit court's denial of plaintiff's motion for a temporary restraining order (TRO). (Ill. Rev. Stat. 1981, ch. 110, par. 11-101.) Plaintiff sought to restrain defendants, Philip R. O'Connor, Helen Schmid, Charles Stalon, Andrew Barrett and Daniel Rosenblum (the members of the Illinois Commerce Commission) and Attorney General Neil Hartigan from enforcing an April 6, 1983, order of the Illinois Commerce Commission (Commission) which cancelled the proposed rates which plaintiff had filed with the Commission. The village of Bolingbrook (village) was allowed to intervene in the circuit court proceeding and, along with defendants, opposed plaintiff's motion for a TRO.

Plaintiff raises the following issues on appeal: (1) whether the TRO was improperly denied because plaintiff is suffering continuing serious irreparable harm and has no adequate remedy at law; (2) whether the TRO was improperly denied because all criteria for granting a TRO have been satisfied and no basis for denying a TRO exists; (3) whether the TRO was improperly denied because plaintiff's complaint for injunctive relief, which was incorporated in its motion for a TRO, adequately demonstrates that the Commission's order is confiscatory and unauthorized by law. Defendants and the village have moved to dismiss the appeal because plaintiff has filed an application for rehearing with the Commission. Plaintiff has moved to strike this motion.

Section 36 of the Public Utilities Act (Ill. Rev. Stat. 1981, ch. 111 2/3, par. 36) requires a public utility to file with the Commission any proposed changes in its rates 30 days prior to the proposed effective date of these changes. This section also provides that the Commission may prevent the proposed rates from going into effect for a statutorily prescribed suspension period pending a Commission hearing on the propriety of the proposed rates. On May 11, 1982, plaintiff filed a proposed rate increase with the Commission. The Commission suspended these proposed rates until October 7, 1982, and then resuspended them until April 7, 1983. Hearings were held before a Commission hearing examiner at various times during this suspension period. On April 6, 1983, the Commission entered an order canceling the proposed rates. The effect of this order was to leave the existing rates in force.

The Commission's order contained detailed findings. The Commission found, inter alia, that plaintiff's present rates, "as best as [could] be determined from the evidence in this record," provided a 6.5% rate of return on plaintiff's original cost rate base, which the Commission determined to be "the best available evidence of the fair value of [plaintiff's] plant in service." The Commission also found that plaintiff had failed to improve the quality of its service in several respects and had failed to comply with prior directions from the Commission "to record all its deferred income taxes on its books and records."

On April 8, 1983, plaintiff filed its complaint for injunction seeking to enjoin defendants from enforcing the Commission's order. Also, on that date, plaintiff filed a motion for a TRO seeking to restrain the enforcement of the Commission's order. Plaintiff sought this equitable relief prior to applying for a a rehearing before the Commission under section 67 of the Public Utilities Act (Ill. Rev. Stat. 1981, ch. 111 2/3, par. 71). An application for rehearing and its final disposition by the Commission are statutory prerequisites to an appeal to the courts> from a Commission order. Ill. Rev. Stat. 1981, ch. 111 2/3, par. 71.

The circuit court heard arguments on April 8 on the motion for a TRO and found that it had jurisdiction over the matter. The Commission filed no pleadings as it only had been notified the previous day of the motion for a TRO. No evidence was taken. The court then denied the motion. This denial is the subject of this interlocutory appeal pursuant to Supreme Court Rule 307(a)(1) (87 Ill.2d R. 307(a)(1)).

• 1 Defendants and the village moved to dismiss this appeal because plaintiff filed an application for rehearing with the Commission subsequent to the trial court's denial of plaintiff's motion for a TRO. They contend that plaintiff has elected its remedy by applying for rehearing and may not simultaneously maintain this appeal since the application for rehearing and this appeal seek to resolve identical issues. However, we do not believe that plaintiff, if it is determined to have been entitled to equitable relief prior to rehearing, should be required to forfeit that entitlement because it acted to protect its statutory right to appeal. If any right to equitable relief exists, it is independent of plaintiff's statutory right to apply for rehearing. Therefore, the motion to dismiss is denied.

• 2 We must next address whether the circuit court could properly exercise jurisdiction in this matter prior to plaintiff's application for a rehearing before the Commission. Generally, where a claim is cognizable in the first instance by an administrative agency alone, administrative remedies must be exhausted before the case may be considered by the courts>. (People ex rel. Fahner v. American Telephone & Telegraph Co. (1981), 86 Ill.2d 479, 485-86, 427 N.E.2d 1226.) Section 67 of the Public Utilities Act (Ill. Rev. Stat. 1981, ch. 111 2/3, par. 71) requires an application for rehearing before the Commission and its final disposition prior to seeking review in the courts>. The reason for this requirement is to give the Commission an opportunity to correct any mistakes of law or of fact that it has allegedly made before the party claiming error resorts to the courts>. (Scherer Freight Lines, Inc. v. Illinois Commerce Com. (1962), 24 Ill.2d 359, 364, 181 N.E.2d 134; Meinhardt Cartage Co. v. Illinois Commerce Com. (1959), 15 Ill.2d 546, 550, 155 N.E.2d 631.) Therefore, an application for rehearing generally must have been made and finally disposed of by the Commission in order for a party to have exhausted its administrative remedies and thus become eligible to seek judicial review of a Commission order.

• 3 Plaintiff does not dispute that a rehearing must normally be sought before resorting to the courts>. Rather, it maintains that this case falls within one of the recognized exceptions to the exhaustion requirement and that therefore, it was entitled to seek equitable relief in the courts> prior to applying for a rehearing.

Several exceptions to the exhaustion requirement have been recognized. In People ex rel. Fahner v. American Telephone & Telegraph Co. (1981), 86 Ill.2d 479, 427 N.E.2d 1226, the court noted the following exceptions: (1) where an ordinance or statute is attacked as unconstitutional in its entirety; (2) where multiple remedies exist before the same zoning board and at least one has been exhausted; (3) where irreparable harm will result from further pursuit of administrative remedies; (4) where it would be patently useless to exhaust administrative remedies. (86 Ill.2d 479, 487-88, 427 N.E.2d 1226.) A fifth exception, that administrative remedies need not be exhausted where an administrative rule is challenged on its face as not being authorized by the agency's enabling legislation, has also been recognized. (City of Chicago v. Illinois Commerce Com. (1980), 79 Ill.2d 213, 217, 402 N.E.2d 595.) Plaintiff, in its appellate brief, argues that this case falls within the irreparable harm and the unauthorized-by-the-enabling-legislation exceptions. In its reply brief, plaintiff additionally argues that this case falls within the "patently useless" exception.

Plaintiff contends that it is suffering continuing irreparable harm because the rates in force are confiscatory. Plaintiff claims that these rates yield approximately $15,000 per day less revenue than the proposed rates would yield and that this lost revenue can never be recouped because rate-making is only prospective. The leading case on the irreparable harm exception is People Gas Light & Coke Co. v. Slattery (1939), 373 Ill. 31, 25 N.E.2d 482. Slattery has been cited by our supreme court as standing for the proposition that exhaustion is not required where irreparable harm will result from further pursuit of administrative remedies. (E.g., People ex rel. Fahner v. American Telephone & Telegraph Co. (1981), 86 Ill.2d 479, 487, 427 N.E.2d 1226; Illinois Bell Telephone Co. v. Allphin (1975), 60 Ill.2d 350, 358, 326 N.E.2d 737.) In Slattery, the court held that the Commission's denial of a temporary rate increase, pending a hearing on a permanent rate increase, ended the Commission's "legislative function so far as temporary rates were concerned." 373 Ill. 31, 44, 25 N.E.2d 482.) The court stated:

"[W]hen the legislative process of rate-making is ended and the rate in force becomes confiscatory, — that is, results in the taking of property without process of law, — and either adequate means under the administrative provisions or the manner of administering such means is inadequate to prevent confiscation, then a court of equity has jurisdiction to remedy the wrong in an independent equity proceeding." 373 Ill. 31, 44, 25 N.E.2d 482.

Plaintiff contends, based on Slattery, that it is entitled to seek equitable relief in the courts> because the rates in force are confiscatory and the administrative provisions are inadequate to prevent confiscation. However, Slattery is distinguishable because here the rate-making process has not ended. In Slattery, the utility sought to enjoin enforcement of an existing rate schedule. At the time the injunction was sought the utility's proposed rates were under suspension. A hearing had been held on these rates but the Commission had not entered an order disposing of the matter. After the hearing, the utility had petitioned the Commission to install its proposed rates as temporary rates and this petition had been denied. The court held that the legislative action of the Commission on the question of temporary rates had been terminated and that an appeal could be taken from this denial without applying for a rehearing. No application for rehearing was required because the Commission can suspend proposed rates for the statutorily prescribed period without a hearing. The court noted that the only requirement for appeal from an order entered by ...


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