Jordan v. Public Service Commission

622 A.2d 1106, 1993 D.C. App. LEXIS 60, 1993 WL 75987

• Court: District of Columbia Court of Appeals
• Decided: March 16, 1993
• Docket: 91-AA-387
• Status: Published

Opinions

SCHWELB, Associate Judge:

Petitioner Absalom I. Jordan, a customer and shareholder of Potomac Electric Power Co. (PEPCO), has asked this court to review two orders of the Public Service Commission (PSC or the Commission). In Order No. 9540, dated August 24, 1990, the Commission dismissed without a hearing Jordan’s complaint that PEPCO had failed to comply with the federal Small Business Act, 15 U.S.C. §§ 631, 637(c) (1992 Supp.). The Act requires certain contractors who deal with federal agencies to negotiate and implement subcontracting plans which promote the participation of socially and economically disadvantaged individuals, including blacks, Hispanics, and members of other racial and ethnic minority groups. In Order No. 9646, dated February 4, 1991, the Commission denied requests for reconsideration by the Minority Business Enterprise Legal Defense and Education Fund (MBELDEF) and by Kingwood Mining Company, a minority enterprise which had been embroiled in a separate controversy with PEPCO. The Commission held in the first of these orders and reiterated in the second that PEPCO was subject to the Small Business Act, but that no violation of the Act had occurred, that no remedial action was appropriate, and that the controversy was moot.

Before this court, Jordan contends that the complaint against PEPCO should not have been dismissed without a hearing and that the Commission applied incorrect legal standards. We vacate the Commission’s order of dismissal and remand for further proceedings.

I.

THE PROCEEDINGS BEFORE THE COMMISSION

In 1978, Congress passed amendments to the Small Business Act which are now codified in 15 U.S.C. § 637(c).¹ These amendments were predicated on Congressional recognition that members of certain racial and ethnic minorities were socially and economically disadvantaged because they had been subjected to racial or ethnic prejudice or to cultural bias, without regard to their individual qualities. § 637(a)(5) and (6). The category of socially or economically disadvantaged individuals was presumed to include Black Americans and Hispanic Americans, as well as members of other minority groups. § 637(c)(3). Congress declared it to be the policy of the United States that

small business concerns, and small business concerns owned and controlled by socially and economically disadvantaged individuals, shall have the maximum practical opportunity to participate in the performance of contracts let by any Federal agency.

§ 637(c)(1).

To promote this policy, Congress required federal agencies to include in their contracts various provisions designed to improve the opportunities of members of racial and ethnic minorities and other disadvantaged persons to participate as subcontractors. See, e.g., § 637(c)(2) and (3).

Much of the legislation was aimed at the conduct of federal agencies.

The Small Business Act also imposes direct obligations upon prospective prime contractors. Section 637(c)(4)(B) provides that, before a contract is awarded,

the apparent successful offeror shall negotiate with the procurement authority a subcontracting plan which incorporates the information prescribed in paragraph (6). The subcontracting plan shall be included in and made a material part of the contract.

The subcontracting plan must include, among other things, percentage goals for use as subcontractors of small business concerns, including enterprises owned and controlled by socially and economically disadvantaged individuals. See, e.g., § 637(c)(6)(A).

In his complaint to the PSC, filed on May 25, 1989, Jordan claimed that PEPCO, a federal contractor, had violated the Act because it had failed to negotiate and to institute the required subcontracting plan. In his submissions to the Commission, Jordan alleged that, beginning approximately in 1980, the General Services Administration (GSA) had sought compliance by PEP-CO, but that PEPCO had contended that its activities were not covered by the Act and had refused to comply with its provisions. In 1985, according to Jordan, GSA requested an opinion from the Department of Justice (DOJ) regarding PEPCO’s claims of lack of coverage. In March, 1987, DOJ issued an opinion in which it concluded that the Act applies to PEPCO. Jordan alleged that in spite of the DOJ ruling, it was not until August 29, 1989, three months after he had filed his complaint with the Commission, that PEPCO signed a subcontracting plan as required by the Act.²

The legal basis for Jordan’s submission was D.C.Code § 43-503 (1990), which provides in pertinent part that

[t]he Commission shall have power, after hearing and notice by order in writing, to require and compel every public utility to comply with the provisions of Chapters 1-10 of this title, and with all other laws of the United States applicable, and any municipal ordinance or regulation relating to said public utility_

Jordan contends that § 637(c) is a law of the United States applicable to PEPCO, and that the Commission therefore has the authority to compel PEPCO to comply with it.

In his initial complaint, Jordan alleged that PEPCO’s violation of § 637(c) had subjected the utility to potential liabilities, and he asked the Commission to require PEP-CO to disclose these liabilities and to “make appropriate changes to PEPCO’s rate base.” In subsequent submissions, Jordan and MBELDEF requested additional affirmative relief. Specifically, they asked that the Commission require PEPCO, among other things:

1. to comply with § 637(c) by “having an appropriate share of its business with minority contractors;”

2. to fund a study to determine the harm suffered by minority contractors as a result of PEPCO’s noncompliance, and to determine the current availability of minority businesses capable of providing satisfactory services under a valid subcontracting plan;

3. to advertise in local media its intent to comply with the Small Business Act;

4. to hire a minority consulting firm to review PEPCO’s management structure; and

5. to pay Jordan’s counsel fees.³

PEPCO responded to Jordan’s complaint by denying any violation of § 637(c). Initially, PEPCO contested Jordan’s contention that it was covered by the Act.⁴ PEP-CO further represented that, despite the asserted lack of coverage, it had pursued an aggressive program of affirmative outreach to minority subcontractors. PEPCO told the Commission that it had recently presented a proposed subcontracting plan to GSA and was engaged in substantive discussions with that agency. PEPCO therefore requested the Commission to dismiss Jordan’s complaint.

During the pendency of the proceedings before the Commission, PEPCO reached agreement with GSA as to a mutually acceptable areawide subcontracting plan. Based on its acceptance of this plan, GSA represented to the Commission that “no genuine issue exists as to whether PEPCO is currently in violation of [§ 637(c)].” GSA therefore requested the Commission to dismiss the proceeding against PEPCO.

II.

THE COMMISSION’S RULINGS

Although Jordan requested an evidentia-ry hearing on his complaint, the Commission did not hold one. Instead, on August 24, 1990, the Commission issued Order No. 9540, in which it held that PEPCO was covered by the Small Business Act, but that no violation of the Act had occurred and that no remedial action was appropriate. The determination that the Act had not been violated was based on the Commission’s belief that

there was a good faith

[5] legal dispute as to whether PEPCO was covered by the Act, although [the Commission] notes that from 1975 to the present is a long time to refuse to acknowledge coverage and take no action to resolve the issue.

The Commission also concluded that “the question [whether there had been a violation] is moot given the execution of an areawide contract with GSA.”

In Order No. 9646, the Commission further elaborated on its rationale as follows:

The Commission’s conclusion that no violation of the Act has occurred was based upon the uncontrovertible [sic] fact that the issue under consideration was compliance by PEPCO with a Federal Act. Despite the protestations of MBEL-DEF and Kingwood, GSA, the agency charged with enforcing the Act, is satisfied with PEPCO’s compliance. Now it appears the MBELDEF and Kingwood seek an expansion of this Commission’s review. The question of the adequacy of the compliance and the diligence of the agency charged with enforcing the Act are questions best directed elsewhere!⁶!

III.

LEGAL DISCUSSION

A. The Scope of Review.

The scope of this court’s review of the Commission’s orders is narrow. Jackson v. Public Service Comm’n, 590 A.2d 517, 521 (D.C.1991) (per curiam). “In the determination of any appeal from an order or decision of the Commission the review by the [c]ourt shall be limited to questions of law, including constitutional questions. ...” D.C.Code § 43-906 (1990). We must accept the Commission’s findings of fact⁷ unless they are “unreasonable, arbitrary or capricious.” Id.

When reviewing the Commission’s legal determinations with respect to matters within its specialized competence, we must be appropriately deferential. Winchester Van Buren Tenants Ass’n v. District of Columbia Rental Hous. Comm’n, 550 A.2d 51, 55 (D.C.1988). The weight to be accorded to the Commission’s legal views is at its zenith when the inquiry relates to arcane questions regarding proposed rate increases. See, e.g., Office of People’s Counsel v. Public Service Comm’n, 399 A.2d 43 (D.C.1979). The Commission has no intrinsic expertise, on the other hand, in interpreting federal statutes such as § 637(c), which have no special application to public utilities, and which were obviously enacted without any participation by the Commission. See Zuber v. Allen, 396 U.S. 168, 192-93 (1969).

B. The Commission’s Enforcement Authority.

In the present case, the District of Columbia statute which the Commission was called upon to apply was § 43-503, which authorizes it to compel compliance by public utilities with, inter alia, applicable laws of the United States. This court has never construed this broadly phrased provision. The Commission, however, had occasion to consider § 43-503⁸ in In re Potomac Electric Power Co., Formal Case No. 541, Order No. 5429 (April 15, 1970), {PEPCO I) a decision which was forcefully brought to the Commission’s attention during the proceeding in the present case.

In PEPCO I, the Commission confronted the question whether it had the authority to consider allegations that PEPCO had engaged in racially discriminatory employment practices and, if so, whether it should exercise that authority. Citing § 43-503, the Commission stated:

There can be no doubt that the provision of equal employment opportunity is required by the laws of the United States and the District of Columbia.... When it is brought to our attention that the requirements of the law are not being met by a utility subject to our jurisdiction, we are clearly expected to act.

PEPCO I, at 41. Rejecting an argument by PEPCO similar to the one the utility is making in the present case, the Commission continued:

PEPCO suggests that we need take no action and that the matter should simply be referred to other organs of [gjovernment concerned with discrimination, e.g., the Equal Employment Opportunity Commission [EEOC], the U.S. Department of Labor, or the D.C. Human Relations Commission. For the reasons already discussed, we do not agree. We have both the power and the responsibility to take action ourselves.

Id. at 43.

The Commission then turned its attention to the appropriate remedy. After describing the evidence of past noncompliance which it had uncovered, the Commission held that “[t]here must be a program for affirmative action to eliminate employment discrimination.” Id. The Commission directed that PEPCO institute forthwith an affirmative action program which the Commission had “worked out” with the assistance of the EEOC. PEPCO I thus stands for the proposition that, at least with respect to discrimination in employment, the PSC has both the authority and the duty to require a utility to take affirmative steps to correct the effects of past discrimination. See generally Albemarle Paper Co. v. Moody, 422 U.S. 405, 417-18, 95 S.Ct. 2362, 2372, 45 L.Ed.2d 280 (1975).

The Commission did not discuss Order No. 5429 in either of its written decisions in the present case. Rather, it based its ruling on its perception that PEPCO had not violated the Small Business Act, that the proceeding was moot, and that it lacked authority to act in light of GSA’s role. We consider each of these issues in turn.

C. The Commission’s Findings of No Violation and Mootness.

The Commission concluded that PEPCO did not violate the Act because there was a “good faith” legal dispute as to coverage. We do not agree.

A good faith dispute as to coverage, assuming that there was one,⁹ is irrelevant to the question whether PEPCO violated the Act. Section 637(c)(4)(B) directs contractors who are subject to its requirements to negotiate and to carry out a subcontracting plan which will promote the fair utilization of disadvantaged individuals and organizations, including prospective minority contractors. That requirement is applicable irrespective of PEPCO’s state of mind. “It is of no consolation to an individual denied the equal protection of the laws that it was done in good faith.” Burton v. Wilmington Parking Authority, 365 U.S. 715, 725, 81 S.Ct. 856, 861, 6 L.Ed.2d 45 (1961). Similarly, any minority entrepreneurs who may have been precluded or inhibited from learning of opportunities to subcontract because the required plan was not instituted can derive little comfort from the fact, if it was a fact, that PEPCO believed in good faith that it was not covered by the Act.

Counsel have cited us to no authority, and we know of none,¹⁰ holding that a statute designed to eliminate the effects of racial or ethnic discrimination does not apply to a defendant simply because that defendant believes, in good faith or otherwise, that he or she is not subject to its proscriptions. Congress did not intend to make the right to fair and equal treatment contingent upon the victim’s ability to prove mens rea or a specific intent to transgress. See Albemarle Paper Co., supra, 422 U.S. at 422, 95 S.Ct. at 2374.

We are likewise unable to agree with the Commission’s apparent view that the case is now moot and that the Commission therefore lacks authority to act. Assuming, without deciding, that the plan adopted by PEPCO after Jordan had filed his complaint was in compliance with the Act, there remains the question whether there were any consequences flowing to third parties due to PEPCO’s past failure to comply. The authority to grant relief “survives discontinuance of the illegal conduct.” United States v. W.T. Grant Co., 345 U.S. 629, 632, 73 S.Ct. 894, 897, 97 L.Ed. 1303 (1953); see also United States v. Oregon State Medical Society, 343 U.S. 326, 334, 72 S.Ct. 690, 696, 96 L.Ed. 978 (1952).

D. Deferral to GSA.

In Order No. 9540, the Commission held that there was no need for it to take corrective action because it is GSA which “determines compliance in accordance with its statute, rules and regulations.” The Commission viewed its own authority as extending only “to determining whether its statute, rules or regulations have been violated and enforcing certain remedies contained in the D.C.Code.” The Commission did not identify the remedies to which it was referring, and made no mention of PEPCO I, in which it had assumed independent responsibility for enforcing federal and local proscriptions against discrimination, irrespective of the action taken or not taken by the EEOC or other agencies with civil rights responsibilities.

We do not suggest that PEPCO I necessarily controls the present case. There are evident differences between the equal employment opportunity laws and the Small Business Act provisions here at issue. Significantly, the affirmative subcontracting requirements of § 637(c) do not apply to the generality of employers, but only to those who seek to do business with federal agencies and who are otherwise subject to the Act. Section 637(c) essentially governs the relationship between the federal government and its contractors. Many of the Act’s provisions are directed to federal agencies and only indirectly to affected private entrepreneurs.

The primary role of the federal government in monitoring this relationship can hardly be denied. The request by the GSA that the Commission dismiss Jordan’s complaint potentially raises an issue of comity which apparently did not arise in the employment discrimination context. Indeed, in PEPCO I, rather than seeking termination of the Commission’s proceedings against PEPCO, the EEOC assisted the Commission in formulating the appropriate affirmative relief.

Whether, under these circumstances, the case may and should proceed is, in the first instance, a matter for the Commission. That agency should, however, at least consider its own twenty-two-year-old precedent in PEPCO I, and explain whether and to what extent its reasoning in that case applies here. Cf. Potomac Electric Power Co. v. Public Service Comm’n, 457 A.2d 776, 783-84 (D.C.1983). Whatever the limits of our scope of review in this unusual case may be, “our authority — and responsibility — to find out why an agency acts as it does is considerable.” Washington Public Interest Organization v. Public Service Comm’n, 393 A.2d 71, 79 (D.C.1978), cert. denied, 444 U.S. 926, 100 S.Ct. 265, 62 L.Ed.2d 182 (1979). We are not persuaded that the Commission has adequately analyzed its own responsibilities under the applicable District of Columbia statute as construed in PEPCO I.

According to Jordan, the Commission’s all but plenary power under § 43-503 to compel public utilities to comply with all applicable laws applies even in situations generated by PEPCO’s status as a federal contractor. GSA’s failure to require PEP-CO to take affirmative steps to undo the consequences of past noncompliance, says Jordan, does not, under PEPCO I, affect the Commission's independent authority and obligation to enforce the law. PEPCO and the Commission argue, on the other hand, that it is not the Commission’s function to review the rulings of a federal agency, and that GSA’s finding that PEPCO is now in compliance is conclusive. The Commission must pass on these contentions in the light of PEPCO I, and consider any other relevant precedent of which it is aware.

We emphasize that this is not a case in which the Commission recognized that it had the authority to proceed with Jordan’s complaint but elected not to do so as a matter of litigation priorities, or in order to avoid duplication of effort with a federal agency. If the dismissal had been based on the exercise of prosecutorial discretion or on the Commission’s reasoned allocation of limited resources, the issue before us would be quite different. We recognize, for example, that if the Commission were to take the position that it should assume the primary obligation to enforce federal contracting policies, then the ratepayers of the District of Columbia, rather than the federal taxpayers (who fund the General Services Administration) would have to foot the bill. As we recently reiterated in Simpson v. District of Columbia Office of Human Rights, 597 A.2d 392, 398 (D.C.1991),

[cjourts are understandably and rightly reluctant to tell an agency when it should institute' enforcement proceedings and when it should not, for “[t]he agency is far better equipped than the courts to deal with the many variables involved in the proper ordering of its priorities.” Heckler v. Chaney, 470 U.S. 821, 831-32, 105 S.Ct. 1649, 1656, 84 L.Ed.2d 714 (1985).

In the present case, however, the Commission did not purport to be exercising prosecutorial discretion. Rather, it believed that it had no authority to act. It is this dispositive holding that the Commission must reconsider in the light of its own precedents. If the Commission concludes on remand that it has the statutory authority to entertain Jordan’s complaint, then it must determine whether it is obliged to do so, cf. PEPCO I,11 or whether, as appears more plausible, the decision to proceed or not to proceed is discretionary. If the Commission concludes that this determination is a discretionary one, then the Commission must elect whether to defer to GSA or to act independently.

IV.

CONCLUSION

For the foregoing reasons, the decision of the Public Service Commission dismissing Jordan’s complaint is hereby vacated, and the case is remanded for further proceedings consistent with this opinion.¹²

So ordered.

1 . References in this opinion to § 637 are to 15 U.S.C. § 637 (1992 Supp.). At the time of the PSC decisions, what is now § 637(c) was § 637(d). Former § 637(c) ceased by its terms to be effective on September 30, 1991.

2 . Jordan also claimed that the plan to which PEPCO finally agreed was inadequate, in that only three percent of PEPCO’s subcontracts were to go to minority or other disadvantaged enterprises.

3 . Some of the requested relief was, to say the least, controversial. Jordan proposed that the study of harm suffered by minority contractors be conducted by MBELDEF at PEPCO’s expense. He also urged the Commission to order PEPCO to provide a five-year grant to MBEL-DEF for the purpose of monitoring PEPCO’s compliance with the Small Business Act. Finally, he asked that PEPCO be penalized pursuant to D.C.Code § 43-544 (1990), which provides for fines or imprisonment for ”[a]ny wilful or malicious" violations of “this sub-chapter.” The sub-chapter in question deals with “master-metered apartment houses." See §§ 43-541 et seq.

4 . According to PEPCO’s submission to the PSC,

[t]he provisions of the Act are only applicable to negotiated or competitively bid contracts with Federal agencies. However, [PEPCO] provides electric service to Federal agencies pursuant to tariff provisions subject to the jurisdiction of this Commission, not under contracts awarded by those agencies. Because Federal agencies do not award contracts to [PEPCO], the Company is not required to negotiate a subcontracting plan.

The GSA rejected this contention, as did the DOJ and the PSC. PEPCO has not asserted lack of coverage before this court.

5. The PSC's perception of PEPCO’s bona fides was significantly qualified by the following paragraph in its decision:

However, the Commission is distressed by the apparent lack of diligence shown by GSA in pursuing PEPCO’s failure to submit an acceptable plan within a reasonable time period. This inaction served only to encourage recalcitrant behavior and fuel allegations of bad faith, however erroneous. This adds credence to the ongoing suggestions that GSA’s approval of the plan has been almost perfunctory. Notwithstanding the result we reach today, the Commission notes its extreme dissatisfaction with the manner in which PEPCO has conducted itself, such conduct necessitating the commencement of this proceeding. It is obvious that if a complaint had not been filed, PEPCO would not have complied with the federal statute. Notwithstanding PEPCO’s protestations, its failure to resolve its disagreement with GSA gives credence to allegations of bad faith. Moreover, it is interesting to note that no challenge to GSA’s requirements was mounted by PEPCO in any forum despite its insistence that PEPCO was not covered by the Small Business Act requirements.

(Emphasis in original).

6 .In spite of its view on rehearing that the question of GSA’s diligence was "best directed elsewhere," the Commission had discussed that question in some detail in Order No. 9540, and had severely criticized GSA. See note 5, supra.

7 . In the present case, of course, there was no evidentiary hearing, and the Commission had no occasion for making findings as to any disputed facts. The standard of review of its factual findings is therefore essentially irrelevant.

8 . § 43-503 was then codified as § 43-303.

9 . We note, as did the Commission, that "from 1975 [sic] to the present is a long time to refuse to acknowledge coverage and take no action to resolve the issue.” The Commission also characterized PEPCO’s behavior as "recalcitrant." Order No. 9540 at 10.

10 . Section 637(c)(4)(F) provides for liquidated damages in the event of a prime contractor’s failure to make a good faith effort to comply with the requirements of the Act. This provision, however, deals with the showing that must be made to obtain a particular remedy. It does not make or purport to make lack of good faith an element of a violation.

11 . The Commission apparently believed, when it decided PEPCO I, that it had an independent duty to eliminate employment discrimination irrespective of any action or inaction on the part of other federal or local agencies. As we have noted, however, the provisions of the Small Business Act here at issue are narrowly addressed to the federal government’s contracting policies, and it may be more difficult under those circumstances to infer an obligation on the part of the Commission to allocate its finite resources to the enforcement of a federal statute administered by a federal agency, especially when that agency is authorized by law not to do any business with an enterprise which does not comply.

12 . In her dissenting opinion, Judge Wagner suggests that the federal Small Business Act preempts any action by a District of Columbia agency designed to remedy violations of that Act. This argument was not made by the Commission or by PEPCO, at least in recognizable preemption terms, either to this court or in the administrative proceeding. Accordingly, Jordan and his allies have had no opportunity to respond to it. See Ford v. United States, 533 A.2d 617, 624-25 (D.C.1987) (en banc) (appellate courts should not decide difficult issues not presented to them by counsel).

As Judge Wagner points out, "local involvement is deemed preempted when it interferes with the methods by which the federal enactment was designed to reach its goal.” Dissenting opinion, at page 21 (emphasis added). Jordan could reasonably contend that a requirement by the District of Columbia that contractors take affirmative steps to correct the effects of their past noncompliance would enhance, and not impede, the goals of the federal legislation. In general, Congressional enactments designed to vindicate equal opportunity are not viewed as precluding more comprehensive state or local legislation designed to achieve the same purposes; see, e.g. Alexander v. Gardner-Denver Co., 415 U.S. 36, 47, 94 S.Ct. 1011, 1019, 39 L.Ed.2d 147 (1974) ("legislative enactments in this area have long evinced a general intent to accord parallel or overlapping remedies against discrimination’’); Driscoll v. Carpenters Dist. Council of Western Pa., 525 Pa. 205, 213-14, 579 A.2d 863, 867-68 (1990). Arguably, on the other hand, there is more reason to discern a Congressional design to preempt local action where, as here, the federal enactment is aimed at those who do business with the federal government, rather than at the world at large.

To date, counsel have discussed neither the case law addressing the issue of federal preemption nor any language or legislative history of the Small Business Act which might shed light on the question whether or not Congress intended to preempt state or local action. Under these circumstances, we decline to decide the case on the basis of preemption authorities not cited to us or to the Commission or by adopting a legal theory which has not been developed or discussed by counsel at all. On remand, the Commission is free, notwithstanding counsel’s failure to raise preemption issues in the initial proceeding, to entertain argument on the question whether the Small Business Act preempts the kind of local regulatory action by the Commission sought by Jordan and his allies.