Sunday, June 17, 2012

ICA has no Problem with Increase 3 Times Higher than Present Rate

In re: Application of Wai'ola O Moloka'i, Inc. (ICA June 14, 2012)

Background. Waiola O Moloka'i, Inc. is a wholly owned subsidiary of Moloka'i Properties Limited and provides water services for residents, businesses, churches, and Maui County parks for most of western and central Moloka'i. The water comes from mountain sources on the island and is purchased from the Moloka'i Public Utilities--another subsidiary of MPL and the Department of Hawaiian Home Lands. In 1993, Waiola got a Certificate of Public Convenience and Necessity to provide water to residential, commercial, and agricultural customers on the island. In 2008, MLP announced that all business operations were coming to an end. The Consumer Advocate requested to the PUC that MPL keep the water on. The PUC granted the request and ordered Waiola to continue providing water to the island until it transferred its certificate or returned it back to the PUC.

In 2009, Waiola applied for a rate increase. The proposed increase was nearly 383% higher than the present rate. A public hearing was held and Maui County intervened. The Consumer Advocate announced a settlement on the rate increase. The Consumer Advocate and Waiola agreed to a rate increase of 328.69%. The County was not part of the agreement, and objected. The PUC approved of the rate increase. The County appealed.

Public Utilities: Age-old Regulation. "All rates, fares, charges, classifications, schedules, rules, and practices made, charged, or observed by any public utility or by two or more public utilities jointly shall be just and reasonable and shall be filed with the public utilities commission." HRS § 269-16(a). The just-and-reasonable standard was borrowed from the standard established long ago by the federal regulations. Maui County argued that when establishing a "just and reasonable" rate, the PUC "clearly has the duty to prevent its regulatees from charging rates based upon illegal, duplicative, or unnecessary labor costs." NAACP v. Fed. Power Com'n, 425 U.S. 662, 668 (1976).

Unlawful Conduct in Itself Bears Nothing on the Issue of a "Just and Reasonable" Rate Increase. Maui County pointed out that Waiola was not authorized to provide water to the Kualapu'u area on the island. This, according to the ICA, was not enough. According to the ICA, "in order for a charge to be considered unjust and unreasonable, the charge must be based on expenses unnecessarily incurred as a result of the illegal activity." The ICA held that Maui County failed to demonstrate a nexus between the unlawful activity and the rate increase. "Simply alleging Wai'ola does not have the proper permit to service the Kualapu'u is not enough to prove the rate was unjust and unreasonable."

Nexus Between Unlawful Conduct and the Rate Increase. It appears that the ICA does not dispute the proposition that unlawful activity cannot be considered in evaluating a rate increase pursuant to courts outside our jurisdiction. It even looks like the ICA does not dispute that providing water to Kualapu'u was unlawful. The ICA departs from Maui County because Maui County failed to link the unlawful activity to the rate increase. This may be true. Merely alleging that a corporation broke the law--viewed in isolation--would not seem to be enough in finding an unjust and unreasonable rate increase. But the ICA did not really flesh out what was or what was not on the record. It's unclear from the opinion if there is no evidentiary link between the unlawful service and the rate increase. It's also unclear what exactly Maui County argued. Perhaps it argued that unlawfully providing water to Kualapu'u could not be made part of its proposed calculation for a rate increase more than 300% the present rate. But that's just speculation. If that was the case, then the problem still remains: is there any evidence that the Kualapu'u service contributed to the rate increase? If so, then perhaps there is a problem. If not, then there's no nexus.

Impact, not Theory. The ICA next addressed Maui County's contention that relying on the settlement between the Consumer Advocate and Waiola was error. PUC decisions "are not presumptively valid . . . [but] an agency's discretionary determinations are entitled to deference, and an appellant has a high burden to surmount that deference." Paul's Electric Service, Inc. v. Befitel, 104 Hawai'i 412, 419, 91 P.3d 494, 501 (2004). Reliance on the settlement, according to the County, was improper because it imposed an unreasonable burden on the people of Molokai.

The ICA disagreed. "The methodology employed by the PUC in its rate-making determination lies within its expertise and discretion." In re Hawaii Elec. Light Co., 67 Haw. 425, 431, 690 P.2d 274, 279 (1984).

It is not theory but the impact of the rate order which counts. If the total effect of the rate order cannot be said to be unjust and unreasonable, judicial inquiry is at an end. The fact that the method employed to reach that result may contain infirmities is not then important.

In re Hawaiian Tel. Co., 67 Haw. 370, 381, 689 P.2d 741, 749 (1984) (quoting Fed. Power Comm'n. v. Hope Natural Gas Co., 320 U.S. 591, 602 (1944)).

Impact, not Theory? What exactly did the ICA hold? It seems that the ICA held that reliance on a settlement is perfectly fine so long as the rate is just and reasonable. That's because it's "not theory but impact of the rate order which counts." But then again, was that Maui County's argument? It's unclear. Did Maui County really challenge reliance on the settlement or did it challenge the justness and reasonableness of the agreement (and ultimately the rate change order)?

The Other Issues: the Impact. The ICA addressed the impact. Although the rate increase was quite high, it was ultimately just and reasonable. The other issues raised by the County--the failure to review Waiola's projections supporting the rate increase and the PUC's approval of Waiola's costs for sales and attorney's fees--did not arise to reversible error. The rate increase was affirmed.

No Summary Judgment for Simply Failing to Answer Interrog Before the Discovery Cutoff

Ralston v. Yim (ICA May 31, 2012)

Background. Rick Ralston sued Dr. Errol Yim for dental malpractice. Before the discovery cut-off date, Dr. Yim filed a motion to dismiss and/or for summary judgment. Dr. Yim argued that Ralston could not prove his malpractice claim because he had not disclosed any expert witnesses. Ralston responded by arguing that Dr. Yim had not met its initial burden of showing no genuine issue of fact, particularly the fact that Dr. Yim's orthodontic care comported with accepted standards of care and that Dr. Yim adequately obtained Ralston's informed consent. Ralston also pointed out that the discovery cutoff had not occurred. At the first hearing, the circuit court permitted supplemental briefing on the issue. Ralston attached a report from an expert, Dr. Harry Aronowitz, and Dr. Aronowitz's c.v. The affidavit stated that in his expert opinion, Dr. Yim's orthodontic care fell below the standard of care. Dr. Yim did not supplement its motions, but instead argued that because Dr. Aronowitz's opinion was inadmissible because it was not contained in an affidavit or other affirmed statement. The day before the hearing, Ralston filed another supplemental pleading, this time with Dr. Aronowitz's affidavit. At the hearing, the circuit court struck the 2d supplemental pleading before being filed too late and concluded that the initial report from Dr. Aronowitz was inadmissible. It granted Dr. Yim's motion and awarded him $3,878.63 in costs. Ralston appealed.

The Summary Judgment Standard. The summary judgment standard is well-known:

Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. A fact is material if proof of the fact would have the effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties. The evidence must be viewed in the light most favorable to the non-moving party. In other words, we must view all of the evidence and the inference drawn therefrom in the light most favorable to the party opposing the motion.

Tri-S World Corp. v. W. World Ins. Co., 110 Hawai'i 473, 487, 135 P.3d 82, 96 (2006); Haw. R. of Civ. Pro. Rule 56.

The Burden Improperly Shifted to the Non-Moving Party. In medical negligence actions, the plaintiff must show at trial that the physician fell below the standard of care "through expert medical testimony." Craft v. Peebles, 78 Hawai'i 287, 298, 893 P.2d 138, 149 (1995). Thus, Ralston must ultimately show negligence through expert testimony at trial. But according to the ICA, that is not the issue here. The question is whether Ralston had to respond to the motion for summary judgment by presenting expert testimony when the moving party failed to show any evidence as to the standard of care.

The ICA agreed with Ralston that the circuit court erred. "Although . . . under certain circumstances a summary judgment movant may carry its burden without presenting evidence negating an element of the other party's claim, merely asserting that the non-moving party has not come forward with evidence to support its claim is not enough. . . . [T]he movant must first demonstrate that the non-moving party cannot carry its burden of proof at trial." French v. Hawai'i Pizza Hut, Inc., 105 Hawai'i 462, 471-72, 99 P.3d 1046, 1055-56 (2004). The ICA pointed out that the circuit court granted summary judgment before the discovery cutoff date. Ralston did not have adequate time to conduct discovery, find his experts, and then respond to Dr. Yim's interrogatories. Simply pointing out that none of the interrogs had been answered did not discharge Dr. Yim of his burden as the movant in proving no genuine issue of material fact existed. The ICA thus held that the award of costs was improper and vacated the summary judgment.

Distinguishing Eddins. In Eddins v. Morrison, 105 Hawai'i 376, 98 P.3d 247 (App. 2004), the ICA upheld a summary judgment when the plaintiff had no admissible evidence of an expert's testimony. However, in that case, the defendant doctor met his initial burden of proof when he submitted affidavits showing that his performance had met the standard of care. Id. at 377, 98 P.3d at 248. The summary judgment was proper because the plaintiff failed to present admissible evidence rebutting the defendant's evidence. Id. Here, however, Dr. Yim did not present any evidence and he had the burden of proof.

Saturday, June 16, 2012

One Constitutional Provision: Three Political Questions, One non-Political

Background. A group of people brought a lawsuit against the State's Director of Finance, the State, the Hawaiian Homes Commission, the Department of Hawaiian Home Lands, and other related officials. The lawsuit alleged a constitutional violation of the duty to sufficiently fund the Department of Hawaiian Home Lands. The complaint prayed for injunctive relief by ordering sufficient funds. The State filed a motion for summary judgment on the grounds that the complaint raised a political question and the issue could not be resolved by the courts. The circuit court granted the motion and the ICA affirmed. The HSC granted certiorari.

The Political Question Doctrine. Hawai'i adopted the political question doctrine from Baker v. Carr, 369 U.S. 186 (1962):

Prominent on the surface of any case held to involve a political question is found (1) a textually demonstrable constitutional commitment of the issue to a coordinate political department; or (2) a lack of judicially discoverable and manageable standards for resolving it; or (3) the impossibility of deciding without an initial policy determination of a kind clearly for nonjudicial discretion; or (4) the impossibility of a court's undertaking independent resolution without expressing lack of respect due coordinate branches of government; or (5) an unusual need for unquestioning adherence to a political decision already made; or (6) the potentiality of embarrassment from multifarious pronouncements by various departments on one question.

Trustees of the Office of Hawaiian Affairs v. Yamasaki, 69 Haw. 154, 170, 737 P.2d 446, 455 (1987).

The Constitutional Question Raised by the Plaintiffs. The Hawai'i Constitution mandates a duty for the legislature to fund Hawaiian Home Lands:

The legislature shall make sufficient sums available for the following purposes: (1) development of home, agriculture, farm and ranch lots; (2) home, agriculture, aquaculture, farm and ranch loans; (3) rehabilitation projects to include, but not limited to, educational, economic, political, social and cultural processes by which the general welfare and conditions of native Hawaiians are thereby improved; (4) the administration and operating budget of the department of Hawaiian home lands; in furtherance of (1), (2), (3), and (4) herein, by appropriating the same in the manner provided by law.

Art. XII, Sec. 1. The question is whether that duty could be enforced through injunctive relief.

How to Interpret the Constitution. The HSC examined the words "sufficient" and "sum" in Art. XIII, Sec. 1. "The general rule is that, if the words used in a constitutional provision . . . are clear and unambiguous, they are to be construed as they are written[.]" Spears v. Honda, 51 Haw. 1, 6, 449 P.2d 130, 134 (1968). Words in the constitutional are "presumed to be used in their natural sense." Employees' Retirement Sys. v. Ho, 44 Haw. 154, 159, 352 P.2d 861, 864 (1960). The term "sufficient" means "marked by quantity, scope, power, or quantity to meet with the demands, wants, or needs of a situation or of a proposed use or end," and the word "sum" is simply an amount of money. Webster's Third New International Dictionary, 2284, 2289 (1967). This, according to the HSC, did not really resolve the issue so it delved deeply into the history underlying the constitutional provision.

When the plain language does not shed any light on the issue, the court can examine "the history of the times and the state of being when the constitutional provision was adopted." State v. Kahlbaun, 64 Haw. 197, 202, 638 P.2d 309, 315 (1981). When reviewing the historical backdrop, "the object sought to be accomplished and the evils sought to be remedied should be kept in mind by the courts." Hawai'i Gov't Employees' Ass'n v. County of Maui, 59 Haw. 65, 81, 576 P.2d 1029, 1039 (1978).

No Legislative Discretion, but Perhaps some Judicial . . . The HSC examined the debates of the Constitutional Convention of 1978. The committee reports and floor debates showed that the Constitutional Convention did not want legislative discretion in this particular area. The delegates noted that the legislature should not be given the option to leave these areas unfunded. However, the delegates could not agree exactly how much funding the Department of Hawaiian Homelands should get; hence, the term "sufficient sum."

Half a Question . . . In the end, the HSC held that the language and history of Art. XIII, Sec. 1 created measurable and justiciable standards to determine "sufficient sums" only for administrative and operating expenses of the Department of Hawaiian Home Lands. The other three purposes--the first three in the provision--are too vague and unclear for any real judicial involvement. And so, the HSC remanded the case to determine that narrow question and affirmed the dismissal in all other respects.

A Very Heavy Reliance on History. The HSC examined this issue by looking at the language of the constitutional provision, determined that that in itself did not address the issue, and plunged ahead on the constitutional history. This analysis, in itself, is nothing new. Interpreting rules, statutes, and constitutional language is usually done this way. But in the end, the HSC held that there was only enough judicial review to examine whether there was "sufficient sums" for purposes of funding the DHHL and no other purpose. How can it be that only one of the three purposes from the same constitutional provision is not a political question, but the rest of them are nonjusticiable? The HSC relied on reports and a proposed general plan by delegates and legislators from the late '70s. That's what makes this interpretation so odd. The answer is the heavy reliance on legislative history. What was at work here appears to be the legislative reports, the plan, and just about everything other than the language of the constitution itself.