Appellants Brief — Pub. Serv. Comm'n v. Wis. Tel. Co.

i

INDEX

Pag

NATURE OF CASE AND RESULT BELOW....... |

ASSIGNMENT OF ERRORS ...................05. 2

STATEMENT OF JURISDICTION ................ 3

ABUSE OF DISCRETION ........................ 3

SUMMARY OF ARGUMENT ...................... 4

ARGUMENT

I. The court abused its discretion when it vio-

lated Rule 70% and allowed the interlocutory

injunction without making even a prima facie

determination of the facts and/or law which

constitute COnfiscation 0.0.0... 6. cee eee eee D

II. The court abused its discretion by arbitrarily

granting the injunction without the **hearing

and determination’

of the Judicial Code .... 2... cc cc cc ccc cccanes, 14

required by Section 266

Ill. The court abused its discretion when it issued

the mterlocutory decree without reserving to

the Public Service Commission any power to

make the rate reduction, herein enjoined, by

way of a permanent order after completion of

its investigation and after the temporary order,

herein enjoined, shall have expired by its own

terms

A&A Dak DA AME BIS LEI CRIN I, a

P

_— POISE RRR CREED OH Renap ease ont I

Page

IV. The court abused its discretion in holding that

the rates prescribed by the Commisston’s order

WETE CONPISCALOTY «2... eee r ere c eee eeeeeeees 18

V. The court abused its discretion in granting the

interlocutory injunction ....6eee eee cece eeees 21

CONCLUGION 2.2.0.0 cece cence cess rene cceetednsees 22

CASES CITED

Page

Alabama v. United States, 279 U. S. 229, 231........... 3

Allied Stamping Company v. Standard Electrie Cor-

poration, G7 F. (2a) 296, 905... ........ 22. eee eee. 13

American Can Company v. M. J. B. Company, 52 F.

eC cha luu ah da rame x cn wsn awed css 13

Arkansas Railroad Commission v. United States, 274

Eo creatine kh etew ace aWha sas ko dae tae. 12

Automatic Company v. A. O. Smith Corp., 60 F. (2d)

te eau acieh dae thh heen sees eeea wee 13

B. & O. Railroad Company v. United States, 279 U.S.

I RE tier Ml ERS pee en oP ea a 12

Board of Public Utility Commissioners v. Elizabeth-

town Water Company, 43 F. (2d) 478, 481......... 10

Briggs v. United States, 45 F. (2d) 479, 480............ 13

C.C. C. & St. L. Railway Company v. United States,

eels dawsceeee 12

Cumberland Telephone and Telegraph Company v.

Louisiana Public Service Commission, 260 U. S.

ee Pre ee GU AK chen aww nts ness 15

Gates Rubber Company v. Goodrich Rubber Company,

EE ics cuenta ak kwehannon sane ces 13

. dilianliatinetebiaaie ‘ Ande ce ios cd Be

|

|

BER ae

Sem Tit EN Sed Lae tah day Lest

= ah

iv

Page

General Electric Company v. United States Electric

Company, 56 F’. (2d) 630, 634 ............cccseeee 13

Graniteville Manufacturing Company v. Query, 44 F.

Se We iain ene k ki oat uae acu bameiens esas 6

Harris v. Morse, 54 F. (2d) 109, 116..............0000. 13

Hazeltine Corp. v. Radio Corporation of America,

— § ee BS peers rer re yee meme 13

Hutchings v. Caledonian Insurance Company, 52 F.

Cee PON Ae eek cee aa Bene Caen Oe ea ee a ees 13

Indiana General Service Company v. McCardle, 1 F.

I SU ENE hare cn ok Sch Peer e LOTUS ete 6

Indianapolis Water Company v. McCardle, Dist. C't.,

So. Dist., Indiana, Equity No. 1403................ 5

Interstate Commerce Commission v. Piedmont Rail-

WT Ca BED Ce PTE cas rein ceases 13

Kaufman v. Tames, 56 F. (2d) 193, 196................ 13

Lewys v. O’Neill, 49 F. (2d) 603, 618.................. 13

Meadows v. Cheshire, 58 F. (2d) 628................5. 10

Metropolitan Device Corp. v. American Casting Cor-

poration, 46 F. (24) BOD, B11... 6. ei cies eee 13

Mitchell v. Penny Stores, 284 U. S. 576................ 9

Panama v. Vargas, 281 U. S. 670, 671, 672............. 12

Vv

Page

Parker v. St. Sure, 53 F. (2d) 706, 709................ 13

Posselius v. City of Detroit, 44 F. (2d) 395, 399........ 13

Prendergast v. New York Telephone Company, 262

Sr A eed cases ns 6 Ra eee Cl eree eas 2]

Queen Insurance Company v. Citro, 58 F. (2d) 107,110. .13

Railroad Commission of Wisconsin v. Maxcy, 281 U.S.

Oh MA BB I i he cc necks chev ck 10

State Board of Commissioners v. Jackson, 283 U. S.

Cans ES RESNa hee are wena cece hele: 1]

Stratton v. St. Louis Southwestern Railway Company,

ee MN ek cen en Fe eee aes 15

Traitel Marble Co. v. Manhattan Company, 56 F. (2d)

ee ain ee 13

Ullman vy. Sobel, 47 F. (2d) 612, 615................... 13

Virginian Railroad Company v. United States, 272

eS. Lee rire ng We hme ieee ier 12

Western Electric Company v. Kersten Radio Equip-

Om, 08. CORY GO, iF ei ose cok esa eens 13

STATUTES CITED

Page

Section 266, Judicial Code ........-.02 +e eee 2, 3, 15, 16

RULES OF COURT CITED

Equity Rule 70% ......... eee seer ee eee 5, 6, 8, 10, 11, 12

SG |. RP e eee nes ete rly rr ree att ae ee 3

TEXTS AND ARTICLES CITED

Frankfurter and Landis, 45 Harvard Law Review, 271,

IETS cn ee CaO eee eee ee ee ee 13

Hughes, Federal Practice ........-+++ sees rere oe 7, 8

Nichols, Cyclopedia of Federal Procedure.........-.. 6,7

Alby et Bae eh ES Mia Os 6

IN THE

Supreme Court of the United States

October Term, 1932

No. 517

PUBLIC SERVICE COMMISSION OF WISCONSIN,

THEODORE KRONSHAGE, JR., individually and

as a Commissioner of said Public Service Commis-

sion of Wisconsin, A. R. McDONALD, individually

and as a Commissioner of said Public Service Com-

mission of Wisconsin, DAVID E. LILIENTHAL,

individually and as a Commissioner of said Public

Service Commission of Wisconsin, WILLIAM M.

DINNEEN, individually and as Secretary of said

Public Service Commission of Wisconsin, and

JOHN W. REYNOLDS, individually and as the At-

torney General of Wisconsin,

Appellants,

vs.

WISCONSIN TELEPHONE COMPANY, a Wisconsin

corporation,

Appellee.

BRIEF OF APPELLANTS

NATURE OF CASE AND RESULT BELOW

On June 30, 1932, the Public Service Commission of

Wisconsin issued an order reducing ‘‘exchange’’ rates of

W-sconsin Telephone Company by 12%%. The order was

a temporary order, pending completion of the Commis-

sion’s investigation, and was to be effective for one year

unless sooner modified or revoked. (R. 155)

oe eatatemeeees —

On July 30, 1932, the District Judge issued a tempor.

ary restraining order. (R. 256) On September 21, 1932, q

statutory court in the Western District of Wisconsin, on ap-

plication for interlocutory injunction, issued the injunction,

(R. 628) On October 18, 1932, decree for interlocutory in-

juction was filed. (R. 629-632)

On October 21, 1932, appeal was allowed from the de-

cree for interlocutory injunction. (R. 636) The appeal is

brought directly to this Court, pursuant to Section 266 of

the Judicial Code.

THERE WAS NO OPINION BELOW—u findings

of fact or conclusions of law filed.

ASSIGNMENT OF ERRORS

We assigned and shall urge the following errors:

(R. 635) *

1. The court erred in not finding any facts or stating

any legal conclusions which show confiscation.

2. The court erred by abusing its discretion and arbi-

trarily granting the interlocutory injunction.

3. The court erred in not reserving to the defendant

Public Service Commission of Wisconsin any power to

make the rate reduction, herein enjoined, by way of a per-

manent order after the completion of its investigation and

after the temporary order, herein enjoined, shall have ex-

pired by its own terms on July 31, 1933.

4. The court erred in holding that the rates pre-

seribed by the order of defendant Public Service Commis-

*References are to the printed transcript. References in our Brief in

Opposition to Motion to Affirm were to the original transcript.

ee ARUN ONE NAT oUNY SRO rie

3

sion, dated June 30, 1932, would result in confiscation of

complainant’s property.

5. The court erred in granting the interlocutory in-

junction enjoining defendants from attempting to compel

complainant to observe or put in force the rates for tele-

phone service prescribed by the order of the Public Service

Commission, dated June 30, 1932, or to comply with said

order, and also enjoining said defendants from taking any

steps or proceedings to enforce said order.

STATEMENT OF JURISDICTION

Statement of Jurisdiction has been filed by appellants,

Appellee does not dispute that the appeal comes within

Section 266 of the Judicial Code.

ABUSE OF DISCRETION

There is one question before this Court on appeal from

the decree for an interlocutory injunction, That question

is: Abuse of Discretion.

Prendergast v. New York Telephone Company,

262 U. S. 43, 51;

Alabama v. United States, 279 U.S, 229, 231.

We have made the showing of ** Abuse of Discretion”’

in our Statement of Jurisdiction, pursuant to Rule 12, ef-

fective September 1, 1932. We urge the court to consider

our Statement of Jurisdiction as part of this Brief on

Appeal. We also request that the court refer to our Brief

in Opposition to Motion to Affirm.

We shall cover our Assignment of Errors in the pres.

ent argument on Abuse of Discretion.

:

%

|

pagel

ve

‘

| Rae Saas SATE OI RATNER OE TINT Se

SUMMARY OF ARGUMENT

I,

The court abused its discretion when it violated Rule 7\',

and allowed the interlocutory injunction without mak-

ing even a prima facie determination of the facts

and/or law which constitute confiscation.

II.

The court abused its discretion by arbitrarily granting the

injunction without the ‘‘hearing and determination”

required by section 266 of the Judicial Code.

III.

The court abused its discretion when it issued the inter-

locutory decree without reserving to the Public Service

Commission any power to make the rate reduction,

herein enjoined, by way of a permanent order after

completion of its investigation and after the temporary

order, herein enjoined, shall have expired by its own

terms,

IV.

The court abused its discretion in holding that the rates

g

prescribed by the Commission’s order were coufisct

tory.

V.

The court abused its discretion in granting the interlocu-

tory injunction,

7 Net ae Rew Lome des

5

ARGUMENT

ie

Tik COURT ABUSED ITS DISCRETION WHEN IT

VIOLATED RULE To! AND ALLOWED THE IN-

TERLOCUTORY INJUNCTION WITHOUT MAK-

ING EVEN A PRIMA FACIE DETERMINATION

OF THE FACTS AND OR LAW WHICH CON-

STITUTE CONFISCATION,

The Supreme Court can promptly dispose of this case

by reversing and remanding to the District Court for find-

ings and conclusions pursuant to Equity Rule 70%,

The lower court granted the injunction from the beuch

without even a prima facie determination, then or after-

wards, of the findings of fact or conelusions of law which

establish confiscation,

The statutory court had no discretion not to make

findings of fact and conclusions of law. Equity Rule 70%

is specific:

‘*In deciding suits in equity, including those re-

quired to be heard before three judges, the court of

first instance shall find the facts specially and state

separately its conclusions of law thereon; and its find.

ings and conclusions shall be entered of record

and, if an appeal is taken from the decree, shall be in-

cluded by the clerk in the record which is certified to

the appellate court under rules 75 and 76."°

In Indianapolis Water Company v. McCardle, United

States District Court, Southern District of Indiana, decided

July 21, 1932, Equity No. 1403, the statutory court, in deny-

ing the interlocutory injunction, said (Evans, Cirenit

Judge): ‘In all matters of this kind, in view of Rule 70'4,

we have to make findings of fact upon the determinative

issues,’’

T esa

Tatas

In Indiana General Service Company v. McCardle,

United States Distriet Court, Southern Distriet of Indiana,

| F. Supp. 113, 114, the statutory court, in granting the in

terlocutory injunction, said: “Special findings of fact and

conclusions of law were filed in compliance with Equity

Rule 70%.”’

In Graniteville Manufacturing Company v. Query, 44

F, (2d) 64, 85, the statutory court, in denying the interlocu-

tory injunction, made findings of fact pursuant to Rule 70!

even though the parties had stipulated to the facts.

es

.

. . The matter comes up upon an application

for an interlocutory injunction, made before three

judges, under the provisions of section 266 of the Ju

dicial Code, as amended, . . .

“The parties have entered into a written stipula-

tion as to the facts of the case, which has been filed as

a part of the record in the cause. The new Equity Rule

70%, recently promulgated by the Supreme Court, re-

quires the courts of first instance, in deciding suits in

equity, to find the facts and state the conelusions of law

thereon, separately. Where all of the facts have been

stipulated by the parties and made a part of the ree-

ord, it would seem unnecessary to recite the facts in

any opinion or deeree made by the court, or make any

special finding thereon. However, to avoid any wicer-

tainty, we find all the facts as set forth in the stipula-

tion, but do not deem it necessary to restate them in de-

tail in this opinion but will make only such brief state-

ment as may be necessary for a proper understanding

of the grounds of our decision,”

Two of the leading and most recent text writers on

Federal Practice emphasize that Rule 70% changes the

pre-existing law and practice,

Nichols, Cyclopedia of Federal Procedure, Volume

&, Section 5547a, (July, 1930)

|

Breen sero eres a

‘No, 5547a—NEW 1930 RULE. <A new Equity

Rule numbered 70%, to become effective October 1,

1930, provides that ‘in deciding suits in equity, inelud-

ing those required to be heard before three judges, the

court of first instance shall find the facts specially and

state separately its conclusions of law thereon; and its

findings and conclusions shall be entered of record’ and

included in the record if an appeal is taken from the

decree. THIS CHANGES THE PRE-ENISTING

LAW AND PRACTICE.”’ (Our caps)

Nichols, Cyc., See. 5552.

“5552, MATTERS WHICH SHOULD, OR

MAY, BE OMITTED IN DECREE, These include

the following:

. . . . a . * * .

‘9. Findings of fact and conclusions of law, ex-

cept where necessary to make the decree clear and spe-

cific, and except where required by Equity Rule 70%

”

Hughes, Federal Practice, See. 10962:

10962. FINDINGS AND CONCLUSIONS

‘*A court of three judges is required to find the

facts specially and state separately its conclusions of

law thereon; and its findings and conclusions must be

entered of record, and, if an appeal is taken from the

decree, must be included by the clerk in the reeord

which is certified to the appellate court under Equity

Rules 75 and 76.”’

Hughes, Fed. Prac., See. 114388

"114388 CONTENTS

‘**The decree should point out precisely:

oa . * * . * * .

& Sees

‘““(f) Find facts specially, and state separately

conclusions of law thereon.’’

8

Footnote No. 3, Hughes, 11438

‘*Prior to Rule 70%.

‘*Prior to the promulgation of equity rule 70%, it

was proper to include findings of fact only when neces-

sary to make the decree more clear and specific. U.S.

v. Goldstein (C.C.A. Mo. 1921) 271 F. 828... . .”

In our Brief in Opposition to Motion to Affirm, we

have cited twenty-four cases wherein Federal courts have

applied Equity Rule 70%. Some of those cases involved

permanent injunctions. Several applied the rule to inter-

locutory injunctions. We have not found a single author-

ity which holds or even intimates that the rule does not

apply to interlocutory injunctions.

Indeed, the rule expressly includes appeals in cases

‘required to be heard before three judges.’’ The court of

three judges is designed primarily for interlocutory injunc-

tions. Those are the only injunctions required to be heard

before three judges. A single judge may hear the case

where only a permanent injunction is applied for. The

records of the Supreme Court will show that an overwhelm.

ing number of the appeals from three-judge courts are on

interlocutory, not permanent, injunctions.

It seems rather paradoxical for appellee to contend,

as it does in its reply brief to our brief opposing motion

to affirm, that, although 70% expressly includes appeals

from three-judge courts, and although the injunctions re-

quired to be heard by three-judge courts are interlocutory

injunctions, nevertheless 70% does not apply to interlocu-

tory injunctions coming from three-judge courts.

We are not concerned with cases arising prior to the

9

effective date of the rule, e.g., Mitchell v. Penny Stores,

284 U. S. 576, relied upon by appellee in its brief on Mo-

tion to Affirm, a case where the interlocutory injunction

was filed September 9, 1930, the rule not going into effect

until October 1, 1930. (See Appellants’ brief opposing

motion to affirm, page 6.)

This Court, of course, is the sole judge of its own rule,

The rule is plain enough to us. It applies to cases arising

from three-judge courts and is intended to include ap-

peals from temporary injunctions. We suggest, however,

that even if the court should hold that the rule does not

apply by its express intendment to all cases of tempor-

ary injunctions, nevertheless this Wisconsin Telephone

case is one where the Supreme Court, even in the absence

of a rule, should reverse and remand for findings.

The Wisconsin Telephone case deals with a rate re-

duction of $1,500,000 between August 1, 1932, and July 31,

1933. (R. 150.) The printed record is 640 pages long,

packed almost solid with pleadings and affidavits. The

case was not before the lower court on simply a bill plus

cursory affidavits. The ease was before the court on bill

and on an answer of twenty-three printed pages, which

answers specifically every allegation of the complaint. (R.

261-283) The affidavits, and exhibits attached, cover from

page 289 to page 627 of the printed record, exclusive of

the affidavits on application for restraining order,

To expect this Court to sift and winnow the 640 page

record, without findings or conclusions to assist it. is an

imposition on this Court.

The Supreme Court admonished the very District

Court herein involved, namely, for the Western District of

Wisconsin, that in cases of such a nature it would expect

puted +e tenis =~"

10

findings of fact and conclusions of law. This Court said in

the Maacy case—Railroad Commission of Wisconsin v.

Mazcy, 281 U.S. 82, 83, 84:

“This court has repeatedly adverted to the im-

portance in a suit of this character of a statement by

the district court of the grounds of its decision . . . .

“© «The importance is even greater where the

decree enjoins the enforcement of a state law or the

action of state officials thereunder, For then the re-

spect due to the state demands that the need for nulli-

fying the action of its legislature or of its executive

officials be persuasively shown.’ .. . -

“‘The decree is set aside, and the cause is re-

manded to the district court, specially constituted as

provided by the statute, to state its findings of fact and

conclusions of law and enter a decree thereon, . . . .”

The Maacy case was decided March 12, 1930. Rule

70% was promulgated June 2, 1930, effective October |,

1930.

The Circuit Court of Appeals for the Third Circuit

in Board of Public Utility Commissioners v. Elizabethtown

Water Company, 43 F. (2d) 478, 481, said:

‘We have before us the new Equity Rule No. 70%

(28 U.S.C.A. No. 723), not yet effective, requiring the

‘three judges’ of a ‘court of first instance’ ‘to find

facts specially and state separately its conclusions of

law thereon’ in cases of this kind, and we have in mind

the insistence of the Supreme Court, last made in Rail-

road Commission of Wisconsin v. Maxcy, 281 U.S. 82,

50 S. Ct. 228, 74 L. Ed. 717, that in cases of this char-

acter district courts shall state the grounds for their

decisions... .”’

The Cireuit Court of Appeals for the Fourth Cireuit

said in Meadows v. Cheshire, 58 F. (2d) 628:

11

‘*. . . . The district judge did not find the facts

with regard to the claim of Meadows nor state his

conclusions of law with regard thereto, as required by

equity rule 70%; and it is impossible for this court

to review the order with any understanding of the

grounds upon which the court acted. The ease will be

remanded, therefore, in order that the judge may, in

compliance with the rule, find the facts and set forth

his conelusions of law.’’

In the only adjudication by the Supreme Court direct-

ly affecting 70% that we can find, the court made its posi-

tion clear when it said—State Board of Commissioners v.

Jackson, 283 U.S. 527, 535:

‘The district court failed to make findings of fact

and law as now required by Equity Rule 70%, but eon-

tented itself with a partial summary of the facts and

certain general conclusions of law. Had the rule been

in force at the time of the trial, we should feel con-

strained to remand the case with directions to make

such findings . _T

This is not a hollow matter of technical compliance

with a rule. The right to adequate review is denied.

This is a confiscation case and the lower court. in

a fiat of fifteen words, announces confiscation. (R. 630)

Yet all parties, and this court on review, are at a

loss to conjecture as to what facts, if any, in the 640 page

record, the lower court rests upon to substantiate this pro-

nunciamento of confiseation—whether the court has any

findings in mind on amount of return, rate of return, and

the other elements which are ordinarily regarded as the

essence of a confiscation make-up, or whether the court has

gone off on a tangent as to some legal defect appearing to

it in the Commission’s order.

Gps ciceaicbeae |

12

The district court has left nothing as a guide, except

one printed line in this record of thousands of lines and

that line is its bare statement that the rates ‘‘would re-

sult in the confiscation of the property of said complain-

ant devoted to telephone service.’’ (R. 630)

The clerk’s journal shows simply the fact of the in-

junction issuing upon giving bond. (R. 628)

This injunction should not have been granted, witliout

an indication of findings of fact and conclusions of law

to back it up. The case should be reversed and remanded.

Virginian Railroad Company v. United States, 272

U.S. 658, 675:

‘‘Unless an opinion indicating the grounds of the

decision is delivered, a defeated party may often be

unable to determine whether the case presents a ques-

tion worthy of consideration by the appellate court.

This is particularly true, where the case is in equity

and the decree is entered upon a hearing involving

complicated facts.’’

C.C. C. & St. L. Railway Company v. United States,

275 U.S. 404, 414:

‘*. . . . Where the trial court omits to state the

grounds of its decision, the appellate court is denied

an important aid in the consideration of the case

9

B. & O. Railroad Company v. United States, 219

U.S. 781, 787;

Arkansas Railroad Commission v. United States,

274 U.S. 596, 603;

Panama v. Vargas, 281 U.S. 670, 671, 672.

We repeat below the list of Federal cases, not included

above, which apply Rule 70%:

13

Posselius v. City of Detroit, 44 F. (2d) 395, 399;

Western Electric Company v. Kersten Radio

Equipment, 44 F. (2d) 644, 647;

Briggs v. United States, 45 F. (2d) 479, 480;

Gates Rubber Company v. Goodrich Rubber Com-

pany, 45 F. (2d) 652, 657;

Metropolitan Device Corp. v. American Casting

Corporation, 46 F. (2d) 509, 511;

Ullman v. Sobel, 47 F. (2d) 612, 615;

Lewys v. O'Neill, 49 F. (2d) 603, 618;

Interstate Commerce Commission v. Piedmont

Railway Co., 51 F. (2d) 766, 777;

Hazeltine Corp. v. Radio Corporation of America,

02 F. (2d) 504, 512;

Hutchings v. Caledonian Insurance Company, 52

F.. (2d) 744, 745;

American Can Company v. M. J. B. Company, 52

F, (2d) 904;

Parker v. St. Sure, 53 F. (2d) 706, 709;

Harris v. Morse, 54 F. (2d) 109, 116;

Kaufman v. Tames, 56 F. (2d) 193, 196;

General Electric Company v. United States Elec-

tric Company, 56 F. (2d) 630, 634;

Traitel Marble Co. v. Manhattan Company, 56 F.

(2d) 1039, 1046;

Allied Stamping Company v. Standard Electric

Corporation, 57 F. (2d) 296, 305;

Queen Insurance Company v. Citro, 58 F. (2d)

107, 110;

Automatic Company v. A. O. Smith Corp., 60 ¥.

(2d) 740, 742;

Frankfurter and Landis, 45 Harvard Law Review,

271, 299-300, (December, 1931).

14

I.

THE COURT ABUSED ITS DISCRETION BY ARBI-

TRARILY GRANTING THE INJUNCTION WITH

OUT THE ‘“‘HEARING AND DETERMINATION”

REQUIRED BY SECTION 266 OF THE JUDICIAL

CODE.

We have very little to add on this subject to point II in

our Statement of Matters Showing Abuse of Discretion in

the ‘‘Statement of Jurisdiction’’ (pp. 12-14), as supple-

mented by point II of our Brief in Opposition to Motion to

Affirm (pp. 12-18).

We did not get a square deal in the United States

District Court, to speak bluntly. We received from the

court not even a superficial treatment of the evidenee. The

court record shows 640 pages of compact data and an order

of the Public Service Commission upon which the Com-

mission had worked eleven months (R. 42), an order based

en almost 4,000 pages of testimony and approximately 25!)

exhibits before the Commission which are itemized but

not included in the court record (R. 436-451), culminating

in a decision of the Commission which covers 156 printed

pages, with a synopsis and glossary. (R. 38-212)

This case was taken up, ‘‘heard,’’ dealt with, ‘*deliber-

ated’’ and disposed of, by the court, in the space of three

hours in one day. The injunction issued from the bench.

No human trial court could do that with intelligence and

equity. This trial court did not. The best evidence that

the court could not pass a reasoning judgment, is its

utter inability to make intelligent findings. It made none

at all.

This is not merely a question of rights between liti-

gants. This is a matter of respect between governments.

15

After a state commission (one of national reputation) has

had a trained staff at work for a year, and that commission

_has issued a decision of 156 pages, which decision shows

great care and thought—is a lower Federal court to be al-

lowed to nullify their labors in a few hours, between trains?

Is this the ‘‘adequate and full deliberation’’ guaran-

teed by Section 266 of the Judicial Code?

The record in this case, comprising 156 pages of Com-

mission analysis and over 400 pages of pleadings and affi-

davits, speaks for itself that the injunction was issued sum-

marily, arbitrarily, and in defiance of Section 266 of the

Judicial Code and of this Supreme Court when it says that

266 is intended to guarantee ‘‘adequate and full delibera-

tion.”’

Stratton v. St. Louis Southwestern Railway Com-

pany, 282 U.S. 10, 14;

Cumberland Telephone and Telegraph Company

v. Louisiana Public Service Commission, 260

U. S. 212, 216.

Furthermore, we have pointed out in III in our State-

ment of Jurisdiction (p. 14) and in our Brief in Opposi-

tion to Motion to Affirm (III, p. 19) that the Wisconsin

Telephone case does not represent the case of an ordinary

interlocutory injunction and that what the court granted

was in effect a permanent injunction.

The order of the Commission, which was enjoined,

goes out of existence July 31, 1933. It is a one year order.

The court was really issuing a permanent injunction,

for the interlocutory injunction will be the final

injunction in fact. By the time that we reach the theoreti-

cal stage of permanent injunction, the Commission’s order

will be a dead letter by its own terms.

16

This fact magnifies the abuse of discretion in granting

the injunction precipitously.

For the reason that the court did not give the case

the consideration which even a temporary injunction re-

quires, and for the further reason that the court was in

reality dealing with a final injunction, and failed to exer-

cise the sound, judicial discretion demanded by equity and

by Section 266 of the Judicial Code expressly, the decree

should be reversed.

III.

THE COURT ABUSED ITS DISCRETION WHEN IT

ISSUED THE INTERLOCUTORY DECREE WITH-

OUT RESERVING TO THE PUBLIC SERVICE

COMMISSION ANY POWER TO MAKE TIE

RATE REDUCTION, HEREIN ENJOINED, BY

WAY OF A PERMANENT ORDER AFTER COM-

PLETION OF ITS INVESTIGATION AND AFTER

THE TEMPORARY ORDER, HEREIN ENJOINED,

SHALL HAVE EXPIRED BY ITS OWN TERMS.

We quote verbatim point IV from our Brief in Oppo-

sition to Motion to Affirm (pp. 21-22).

av.

“THE COURT PARALYZED THE POWER OF

THE PUBLIC SERVICE COMMISSION TO ISSUE A

PERMANENT RATE ORDER AFTER THE TEM.

PORARY ORDER, ENJOINED, SHALL HAVE EX-

PIRED BY ITS OWN TERMS.

‘‘The statutory court not only enjoined the (Commis-

sion’s order which expires July 31, 1933. The court also

17

enjoined the rates, i.e., the 122% rate reduction, as such.

(444) **

‘‘The Wisconsin Commission’s order, enjoined, is an

interim order. Investigation of the Wisconsin Telephone

Company by the Commission began in August, 1931. At

the expiration of eleven months of study by the Commis-

sion’s staff, a temporary rate reduction was ordered, ef-

fective for a year.

‘The investigation is in constant progress, (R.232)***

At the end of a further twelve or thirteen months

—that is, when the temporary order has expired—the Com-

mission may be possessed of a record which indisputably

calls for a 122% rate reduction by a permanent order.

‘*The Commission could not issue such order without

being in contempt of court, assuming the interlocutory in-

junction still in effect, which we do as.ume, (III, supra).

‘Reservation to the Commission of power to issue a

permanent order under such circunistances, should have

been made in the decree. There is no such reservation.

(R. 443-446) ****

‘“‘We hope that appellee is right in saying in its State-

ment in support of motion to affirm that ‘at the end of the

year designated in the Commission’s order, the force of the

injunction is spent.’ (Separate Record, 20) We question,

however, the soundness of appellee’s construction. We do

not want to risk our rights to interpretation.

‘As to appellee’s argument that we can always ask

modification of the interlocutory injunction, if it appears

proper for the Commission to issue a permanent order, we

have this to say:

**This is page 630 in the printed record.

***This is page 431 in the printed record.

****This is pp. 629-632 in the printed record.

—

18

‘The right of the Public Service Commission of Wis-

consin to issue a permanent order after its temporary order

has expired, should not be made dependent upon consent

by the three members of the present statutory court to a

modification of their own injunction.

‘“‘This right of the regulatory authorities of the State

of Wisconsin to initiate a new order when the enjoined

order has expired, should exist as a right and not at the

discretion of the specially constituted District Court in

the Western District of Wisconsin.’’

We submit that it was absolutely arbitrary and an im.

provident use of discretion to deny this Commission the

power to issue a 12%% permanent rate reduction order

after the enjoined interim order expires.

On this ground alone, the decree should be sent back.

IV.

THE COURT ABUSED ITS DISCRETION IN HOuD-

ING THAT THE RATES PRESCRIBED BY THE

COMMISSION’S ORDER WERE CONFISCATORY,

The Commission said, under the heading ‘* FINDING

ON RETURN”: (R. 203)

“The Public Service Commission of Wisconsin

therefore finds the fact to be that the rates fixed by

this order will produce a fair and reasonable return to

the Wisconsin Telephone Company. This finding of

fact represents an exercise of judgment in the light

of the particular facts which are of record in this pro-

ceeding, and of which judicial notice can be taken. In

reaching this finding of fact the Commission has given

effect to present day conditions, to general conditions

affecting all business, to the fact that the return al-

lowed exceeds the returns of other business having

comparable risks in the same part of the country at

Ue ee ee $

19

this time, that the return will permit the utility to at-

tract capial such as may reasonably be expected to be

required and that the return is such that it will main-

tain the credit of the utility in the light of present con-

ditions and opportunities for capital in other enter-

prises.’’

The Commission found a net return to the company of

$3,812,227 from the ‘‘exchange”’’ rates, before the rate re-

duction, and $2,445,777, after the reduction ordered, on an

annual basis figured for 1931. (See Opinion and Order

of the Commission, pp. 89, 96, 100. R. 139, 146, 150. Synop-

sis of Opinion and Order, p. ix. R. 50.)

We must accept this finding of the Commission. There

is no finding of the lower court to the contrary.

The Commission further found that this sum of

$2,445,777 would enable the Telephone Company—after

paying all its operating expenses, including depreciation—

to meet interest, preferred stock dividends, pay a common

stock dividend of 6%, and leave $288,000 for surplus—as

the return from ‘‘exchange’’ rates expressed in relation

to local business, (See Opinion and Order of the Commis-

sion, pp. 100, 139. R. pp. 150, 189.)

According to the Commission's accountants, the re-

turn on common stock amounts to $13.35 per share (par

$100) before the rate reduction and $7.41 thereafter and

to 10.88% on common stock equity (par value of stock plus

surplus) before the rate reduction and 6.04% thereafter.

(R. 465, 466.)

The Commission considered this a reasonable earning

during the period of its temporary or ‘‘emergency’’ order,

pending completion of its investigation. (See Opinion and

Order of Commission, pp. 139-153. R. 189-203.)

ay

20

The Commission said, under the heading ‘‘F AIR RE-

TURN”’: (R. 189)

‘“‘The rates we have ordered into effect for ey-

change service will pay all reasonable operating ex-

penses attributable to the local business, will cover

an adequate provision for depreciation, taxes, all in-

terest costs, dividends on preferred stock attributable

to the local portion of exchange property, and then,

over and above all these charges will provide a return

on the investment in this property which when ex-

pressed in the language used in attracting capital to

the Bell System, including the Wisconsin Telephone

Company, is equal to 6% on the common stock; and

in addition thereto provides a ‘cushion’ of some

$288,000.

‘‘Such a return as is above described, in an eco-

nomic crisis of the gravest proportions, we find to be

reasonable and indeed liberal... . .”’

The question before the District Court was: Js this

return permitted by the Commission, CONFISCATORY?

The court, having made no findings whatever as to

any of the factors which go into confiscation, is forced to

the position that such a return as above outlined, is con-

fiscatory on its face.

The court, in the exercise of legal discretion, could

not reach such a conclusion.

The court can not determine confiscation, which meats

inadequate return on value, without at least a prima facie

determination of :

1. What the actual return in dollars is,

2. What, as a matter of law, the rate of return should

be, and,

3. What the value is.

ee ee e _ ne

21

The court determined none of these things and did not

offer even a presumptive showing thereof. Making no de-

termination of any of these elements upon which con-

fiscation is necessarily predicated, it was wholly arbitrary

and capricious to grant the injunction upon the purported

ground of confiscation.

. 2

THE COURT ABUSED ITS DISCRETION IN GRANT-

ING THE INTERLOCUTORY INJUNCTION,

This, our last Assignment of Error, is a summation of

our foregoing assignments argued as indicia of the Abuse

of Discretion.

We desire to emphasize a further consideration: The

lower court, under the Prendergast ease, should have econ-

sidered that it was dealing with a temporary order, where

the investigation by the Commission was in steady prog-

ress, and where hearings were resumed promptly after

the issuance of the temporary order, (R. 431)

Prendergast v. New York Telephone Company,

262 U.S. 43, 50,

We are not saying that the challenge of confiseation

can not be made against a temporary order. It can. That

is the Prendergast case. We are saying that, in exereis-

ing its discretion, the court paid no attention to the fact

that the ‘legislative’? process was still going on and was

being expedited,

Furthermore, as to the order issued, provision was in-

cluded therein for modification of the order upon applica-

tion by the company. (See Opinion and Order of the

22

Commission, pp. 154, 156. R. pp. 204, 206.) But the com.

pany did not apply. (R. 431)

We are not saying that this clause on modification in

the order, is a bar to Federal jurisdiction. We do say that

in exercising its discretion, the court should have paid

attention to the fact that the complainant had not exhaust-

ed its remedy before the Commission.

These additional factors serve only to accentuate the

abuse of discretion in issuing the interlocutory injunction.

CONCLUSION

We submit:

1. The decree should be reversed and this Court

should hold that the injunction should not have been is-

sued (II, II], IV, V, supra).

2. This Court should at least set aside the decree and

remand for findings of fact and conclusions of law. (I,

supra. )

Respectfully submitted,

JAMES E. FINNEGAN,

Attorney General of Wisconsin,

ALVIN C. REIS,

Special Counsel,

Counsel for Appellants.

January 23, 1933.