Reply Brief — Oregon Public Utility Commission v. GTE Northwest Inc.

; Supreme Court, U.S.

2) FiLED

MAR 28 499;

No. 95-1143 a

—-———

Jn the Supreme Court

of the Gnited Statee

OCTOBER TERM, 1995

ERK

LSS,

PUBLIC UTILITY COMMISSION

OF OREGON,

Petitioner,

v.

GTE NORTHWEST INCORPORATED,

Respondent.

On Petition for Writ of Certiorari

to the Supreme Court of the

State of Oregon

REPLY BRIEF FOR PETITIONER

THEODORE R. KULONGOSKI

Attorney General of Oregon

THOMAS A. BALMER

Deputy Attorney General

*VIRGINIA L. LINDER

Solicitor General

ROBERT M. ATKINSON

Assistant Attorney General

400 Justice Building

Salem, Oregon 97310

Phone: (503) 378-4402

Counsel for Petitioner

*Counsel of Record

TABLE OF CONTENTS

Page

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TABLE OF AUTHORITIES

Page

Cases Cited

AFSCME Local 2623 v. Dept. of Corrections, 315 Or.

Fe a 4

Board of Regents v. Roth, 408 U.S. 564 (1972) ....... 4

Duquesne Light Co. v. Barasch, 488 U.S. 299 (1989)... 5,7

First English Evangelical Lutheran Church of Glendale

v. Los Angeles County, 482 U.S. 304 (1987) .... 1

Loretto v. Teleprompter Manhattan CATV Corp., 458

I 3, 4, 5

Ruckelshaus v. Monsanto Co., 467 U.S. 986 A sa 4

San Diego Gas & Elec. Co. v. City of San Diego, 450

a l

Standard Oil Co. v. Johnson, 316 U.S. 481 (1942)...... 3

Three Affiliated Tribes v. Wold Engineering P.C., 467

RE NE ee ae ae 3

Webdb’s Fabulous Pharmacies, Inc. v. Beckwith, 449

ee ie a a sae a oh 4

Statutory Provisions

as 5

ee ee eee 5

Or. Rev. Stat. §§ 759.100 - 759.115 .............. 5

Or. Rev. Stat. §§ 759.300 - 759.360 .............. 5

Other Authorities

a ee l

ill

REPLY BRIEF FOR PETITIONER

Pursuant to Supreme Court Rule 15.6, petitioner submits

this reply to the brief for respondent in opposition to the

petition for certiorari. Three of respondent GTE’s arguments

go beyond matters argued in the petition.

1. The Oregon Supreme Court held that as a matter of

state law, a state agency must have an express delegation of

condemnation authority to enact a valid regulation that

“takes” property in constitutional terms, even where that

taking is compensated. The court further concluded that the

PUC does not have that authority. Thus, the dispositive issue

was whether the PUC’s collocation rules in fact result in a

taking of property. The state court held that they do and

therefore invalidated the regulations.

GTE argues first that a federal question is not presented

because the remedy the Oregon Supreme Court adopted

(invalidation of the collocation rules) was dictated by state

law. In GTE’s view, that fact places the holding on the

underlying constitutional violation (which, for purposes of this

argument, GTE assumes to be federally based) beyond this

Court’s jurisdiction. Br. in Opp., 11.' That position makes

neither legal nor logical sense. The federal issue (whether the

' At one point in its argument, GTE suggests that to find a Fifth Amendment

violation, a state court must reach the question of whether any compensation is

adequate. Br. in Opp., 11. GTE cites no authority for that proposition. To the

contrary, this Court repeatedly has affirmed the prerogative of both state and

federal governments to abandon an offending regulation rather than to be forced

to pay compensation and thus permanently to purchase a “taken” property interest.

See, e.g., First English Evangelical Lutheran Church of Glendale v. Los Angeles

County, 482 U.S. 304 (1987) (majority opinion); id., 482 U.S., at 335 (dissenting

opinion); San Diego Gas & Elec. Co. v. City of San Diego, 450 U.S. 621, 653,

n. 19 (1981) (Brennan, J. dissenting).

2

rules effect a taking) unquestionably is central to the disposi-

tion of the case, even though the particular remedy (invalida-

tion) is dictated by state law. It would be a remarkable

encroachment on this Court’s review of federal issues if a

state court could place its conclusion that the federal constitu-

tion has been violated beyond this Court’s reach simply by

granting a federally adequate remedy as a matter of state law.

Not surprisingly, this Court has never suggested such a

limitation on its authority. In any event, the short answer to

GTE’s position is that, at a minimum, the Oregon Supreme

Court’s disposition of the case is clearly interrelated with or

influenced by federal law principles. This Court therefore has

jurisdiction to review the federal question. See Three Affiliat-

ed Tribes v. Wold Engineering P.C., 467 U.S. 150, 152

(1984).

GTE attempts to cast a second jurisdictional cloud over

this case. GTE points to the Oregon Supreme Court’s

“assumption” that the analysis under the state and federal

constitutions is the same, arguing that the court “was resting

its takings analysis on the Oregon Constitution” and thus on

“adequate and independent state grounds.” Br. in Opp., 12.

What GTE fails to acknowledge is that, after assuming that

the two constitutional guarantees are the same, the state court

explicitly declined to decide the scope of the state guarantee.’

* Specifically, the Oregon Supreme Court stated:

Loretto was decided under the federal constitution. GTE offers no

separate analysis under the state constitution. Accordingly, we assume,

without deciding, that the analysis is the same under Article 1, section

18, of the Oregon Constitution, and the Takings Clause of the Fifth

Amendment of the Constitution of the United States.

Pet. Cert. App-11. n. 6 (emphasis added).

3

The state court then proceeded to examine the issue exclusive-

ly under this Court’s Fifth Amendment takings jurisprudence

and concluded by holding: “The challenged collocation rules

effect a taking under Loretto [v. Teleprompter Manhatian

CATV Corp., 458 U.S. 419 (1982)].” Pet. Cert. App-11 -

App-22.?

That the judgment below turns on the state court’s

interpretation of federal constitutional principles could not be

more explicit. Even if that conclusion were in doubt, howev-

er, the state court’s resolution of the case, as we have already

argued, is so interrelated with and influenced by federal law

principles as to give this Court jurisdiction. See Three

Affiliated Tribes v. Wold Engineering P.C., 467 U.S., at 152.

At a minimum, the Oregon Supreme Court’s opinion must be

understood as finding federal law persuasive and adopting

Fifth Amendment principles into the court’s interpretation of

the state constitution.* In that circumstance, this Court has

authority to pass on the federal question incorporated in the

state law pronouncement, and if necessary, to remand the

case to the state court for reconsideration. Standard Oil Co.

v. Johnson, 316 U.S. 481, 485 (1942). GTE’s efforts to cast

*> GTE also points to a sentence early in the opinion, in which the court

outlined the order in which it would address the issues in the case, and identified

as the first question “whether the PUC has authority to promulgate rules that effect

a taking within the meaning of the Oregon Constitution.” Pet. Cert. App-8. Given

the state court’s later analysis of the merits of the takings question, the court's

reference to the state constitution, rather than the federal, in that introductory

portion of its opinion appears purely inadvertent. In any event, that isolated

statement cannot supersede the court’s actual analysis and holding, which plainly

are dependent on the court’s interpretation of federal law.

* GTE all but concedes as much. Br. in Opp., 11 (“The Oregon Supreme

Court did, of course, look to cases such as Loretto, Florida Power, and Yee,

which interpret the U.S. Constitution * * * ”).

4

the Oregon Supreme Court judgment as one that turns on an

“adequate and independent state ground” is wholly without

merit.

2. In the petition, the PUC has urged that the per se rule

announced in Loretto cannot apply in the public utility context

because GTE lacks significant aspects of the private property

interests at issue in Loretto and its progeny. Pet. Cert. 12-19.

In response, GTE argues that this Court cannot resolve that

question because the factual record is inadequate. More

specifically, GTE asserts that the particular record in this case

contains no factual evidence to establish that, in return for its

monopoly status, GTE agreed to surrender any of the “tradi-

tional incidents of private ownership” of its network. Br. in

Opp., 20.° That answer misses the mark for two interrelated

reasons.

First, GTE’s utility property interests present a question

of law, not of fact. Under the Just Compensation Clause, as

under the Due Process Clause, property rights flow from state

law. Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1001

(1984); Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449

U.S. 155, 161 (1980); Board of Regents v. Roth, 408 U.S.

564, 577 (1972). The PUC does not claim that it entered into

some agreement, formal or informal, with GTE. Rather, the

State of Oregon enacted laws to govern the provision of

* Because of its procedural posture, this case has no factual record. GTE

brought its challenge to the collocation rules under an Oregon law that permits a

facial challenge to an administrative rule to be brought directly in the Oregon

Court of Appeals without creation of a factual record either in the agency enacting

the rule or in a trial court. Or. Rev. Stat. § 183.400; AFSCME Local 2623 v.

Dept. of Corrections, 315 Or. 74, 79, 843 P.2d 409 (1992) (“judicial review under

ORS 183.400 is limited to the face of the rule”).

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5

public utility services. GTE entered the utility business and is

bound by those laws.°

Second, GTE’s argument focuses on the wrong “incidents

of ownership.” GTE claims that it may incur debt upon its

property and must pay taxes upon it. Br. in Opp., 20. Those

assertions are only partly true (see n. 7, infra), and they are

wholly irrelevant. The question here is whether the PUC’s

collocation rules fit within the Loretto analysis. The proper

inquiry is whether, under pre-existing Oregon law, GTE

could claim the incidents of property ownership identified as

significant in that case—the exclusive right to “possess, use

and dispose” of the property. 458 U.S., at 435. The disposi-

tive answer is that GTE may only possess property with the

State’s approval, must use its property as state law directs,

and may only dispose of its property on terms and conditions

dictated by the State.’ These commonplace limitations on

utilities have caused this Court to acknowledge that the

“partly public, partly private status” of utilities creates unique

takings questions, Duquesne Light Co. v. Barasch, 488 U.S.

299, 307 (1989), a uniqueness GTE doggedly ignores. The

question is not one that turns on factual proofs, but rather on

the legal incidents of utility property ownership as established

* Thus, although the PUC disputes GTE’s contention that it no longer

maintains a significant monopoly, that question is ultimately irrelevant.

” Or. Rev. Stat. §§ 759.100 through 759.115 (telecommunications utility must

have PUC approval for expenditures for major contracts for purchase of

equipment); Or. Rev. Stat. §§ 759.300 through 759.360 (PUC has power over

issuance of securities, funds raised may be spent only under the terms of the order

approving issuance); Or. Rev. Stat. § 759.580 (PUC may direct utility to extend

service to unserved areas); Or. Rev. Stat. § 759.375 (telecommunications utility

may not sell, lease, assign, mortgage, encumber, or otherwise dispose of utility

property without PUC approval).

6

by state law. The Court’s review of that question is in no way

hampered by the lack of a factual record in this case.

3. As a final argument, GTE claims that the Telecommu-

nications Act of 1996 renders the Oregon Supreme Court’s

decision “somewhere between totally insignificant and entirely

moot.” Br. in Opp., 25. GTE’s point is less than clear, and

GTE makes little effort to develop it.

GTE’s mootness argument may be related to its effort,

elsewhere in its brief, to shift the Court’s attention away from

the federal issue presented and to obscure it with the state law

question of whether the Oregon legislature has delegated the

PUC the authority necessary to effect a taking through

regulation. GTE’s claim may be: (1) the Oregon Supreme

Court invalidated the collocation rules because it concluded

that they effect a taking and that the PUC lacks authority to

encroach on property interests in that way; (2) the Telecom-

munications Act of 1996 provides the PUC with the authority

it previously lacked; (3) ergo, the collocation rule is no

longer invalid and the case is moot.

The PUC’s authority or lack of authority to order colloca-

tion is not, however, the question presented by the petition.

If the PUC’s only concern were with the invalidation of its

rules, it could seek express eminent domain authority from

the Oregon Legislature, as GTE points out. Br. in Opp., 9.

The existence of the authority to order physical collocation,

whether that authority springs from state or federal law,

merely spares the rules from the particular disposition that the

Oregon Supreme Court ordered. The essential conclusion—

that the rules effect a taking—remains in place. That conclu-

sion is profoundly important to government in its role as

7

utility regulator. GTE carefully reserves a claim that “the

compensation scheme would not assure just compensation, ”

Br. in Opp., 24, thus signalling that it is prepared to insist

that as a condition of collocation, the States and the federal

government are required to individually value and compensate

every access requirement that involves a physical encroach-

ment on utility property. That approach departs radically from

this Court’s unique public utility takings jurisprudence, which

holds that regulatory action takes utility property only when

the overall rate of return authorized by the rates it orders is

unreasonable in terms of the utility’s investment. Duquesne

Light, supra. So long as the Oregon Supreme Court’s

underlying takings conclusion remains in place, the question

remains vital.

Rather than moot this case, the Telecommunications Act

of 1996 serves to elevate its importance. Interconnectivity in

the telecommunications industry generally, and physical

collocation requirements in particular, now stand as a national

mandate adopted not only by the Federal Communications

Commission and individual States, but by Congress itself.

State collocation rules, like Oregon’s, complement that policy

and effectuate access and interconnectivity in those regulatory

areas for which the States retain authority. The issue present-

ed thus is more vital, not less so, in light of the new federal

act. GTE nearly concedes as much, with its recognition that

takings challenges will assuredly be raised in response to the

federal collocation mandate, and that the issue promises to

generate litigation in the federal courts. Br. in Opp., 25. GTE

invites the Court to await that litigation. Jbid. The issue is

squarely presented in this case, however. GTE’s invitation to

8

delay will accomplish nothing more than to chill the regulato-

ry environment in Oregon and perhaps elsewhere, while

assuring that national policy for the technologically fast-paced

field of telecommunications is tied up in litigation for the

indefinite future. That result may be in GTE’s self-interest,

but it is does not serve any sound policy of prudence or

judicial economy.

CONCLUSION

The Court should grant the petition and issue a writ of

certiorari to review the judgment and opinion of the Oregon

Supreme Court.

Respectfully submitted,

THEODORE R. KULONGOSKI

Attorney General of Oregon

THOMAS A. BALMER

Deputy Attorney General

VIRGINIA L. LINDER

Solicitor General

ROBERT M. ATKINSON

Assistant Attorney General

Counsel for Petitioner

March 29, 1996

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