Summary
In San Pablo Bay Pipeline Co., LLC v. Public Utilities Com. (2015) 243 Cal.App.4th 295, this court stated: "The three elements of equitable tolling are (1) timely notice of the claim to the defendant, (2) lack of prejudice to the defendant, and (3) reasonable and good faith conduct by the claimant."
Summary of this case from Wright v. Robinson Oil Corp.Opinion
F069796
12-22-2015
SAN PABLO BAY PIPELINE COMPANY, LLC et al., Petitioners, v. PUBLIC UTILITIES COMMISSION, Respondent; Tesoro Refining & Marketing Company et al., Real Parties in Interest.
Goodin, MacBride, Squeri, Day & Lamprey, James D. Squeri, Megan Somogyi, San Francisco; Munger, Tolles & Olson, Fred A. Rowley, Jr., Los Angeles, and Joshua Patashnik, San Francisco, for Petitioners. Karen Clopton, Helen W. Yee, Paul Angelopulo and Jonathan C. Koltz, San Francisco, for Respondent. Manatt, Phelps & Phillips, David L. Huard and Benjamin G. Shatz, San Francisco, for Real Party in Interest Tesoro Refining & Marketing Company. Orrick, Herrington & Sutcliffe, Joseph M. Malkin and Eric M. Hairston, San Francisco, for Real Party in Interest Chevron Products Company. Pillsbury Winthrop Shaw Pittman, Kevin M. Fong and Michael S. Hindus, San Francisco, for Real Party in Interest Valero Marketing and Supply Company.
Goodin, MacBride, Squeri, Day & Lamprey, James D. Squeri, Megan Somogyi, San Francisco; Munger, Tolles & Olson, Fred A. Rowley, Jr., Los Angeles, and Joshua Patashnik, San Francisco, for Petitioners.
Karen Clopton, Helen W. Yee, Paul Angelopulo and Jonathan C. Koltz, San Francisco, for Respondent.
Manatt, Phelps & Phillips, David L. Huard and Benjamin G. Shatz, San Francisco, for Real Party in Interest Tesoro Refining & Marketing Company.
Orrick, Herrington & Sutcliffe, Joseph M. Malkin and Eric M. Hairston, San Francisco, for Real Party in Interest Chevron Products Company.
Pillsbury Winthrop Shaw Pittman, Kevin M. Fong and Michael S. Hindus, San Francisco, for Real Party in Interest Valero Marketing and Supply Company.
OPINION
KANE, J.
In San Pablo Bay Pipeline Co. LLC v. Public Utilities Com. (2013) 221 Cal.App.4th 1436, 165 Cal.Rptr.3d 389, this court confirmed a decision of the California Public Utilities Commission (the Commission or PUC) that certain truck racks and storage tanks were part of a pipeline subject to its jurisdiction as a public utility. At the time, we deferred consideration of statute of limitations issues until the Commission filed a final decision on those issues and the related issue of the amount of money to be refunded to shippers that had used the pipeline. (Id. at p. 1442, 165 Cal.Rptr.3d 389.)
The Commission has rendered its decision and petitioner San Pablo Bay Pipeline Company, LLC (Pipeline Company) filed this writ proceeding to challenge the refund of approximately $104.3 million. Pipeline Company contends the refund is too large because the Commission (1) erred in applying the statute of limitations and thus awarded refunds for too long of a period and (2) undervalued the costs Pipeline Company incurred for “line fill” oil used to help transport oil shipments through the pipeline.
The Commission argues that it has the authority to toll the two-year statute of limitations in Public Utilities Code section 735 and that section should not be interpreted as an absolute bar to every type of tolling. We conclude that in the peculiar facts of this case, which was processed in a jurisdictional phase followed by a ratemaking and reparations phase, the Commission had the authority to bifurcate the matter into two phases and to conclude the limitations period did not run during the first phase.
All unlabeled statutory references are to the Public Utilities Code.
As to the Commission's decision to treat line fill as a capital asset valued at its original cost, we conclude Pipeline Company has failed to clearly establish the unreasonableness of the Commission's method of valuation.
Therefore, the Commission's decision is confirmed.
FACTS AND PROCEEDINGS
The Parties
Pipeline Company, a wholly owned subsidiary of Shell Oil Products US, owns and operates the pipeline in question and is the sole petitioner in this writ proceeding. Pipeline Company, as used in this opinion, includes the prior owner of the pipeline and other Shell affiliates.
The Commission is the only respondent. The three real parties in interest are (1) Chevron Products Company (Chevron); (2) Tesoro Refining & Marketing Company (Tesoro); and (3) Valero Marketing and Supply Company (Valero; collectively, “shippers”). The shippers paid Pipeline Company to transport crude oil by pipeline from Chevron's oil production fields to refineries operated by Tesoro and Valero.
The Pipeline
The pipeline is a 20–inch heated crude oil pipeline that runs approximately 265 miles from oil fields in Kern County to the San Francisco Bay Area (SJV Pipeline). SJV Pipeline transports crude oil to (1) the Shell refinery in Martinez, California; (2) the Tesoro Golden Eagle refinery in Martinez, California; and (3) and the Valero refinery in Benicia, California. In 2011, the SJV Pipeline transported an average of 150,000 to 160,000 barrels per 24–hour period of continuous operations (i.e., per stream day). Approximately 50,000 barrels of this amount was delivered to shipper's Bay Area refineries, while the balance was delivered to the Shell refinery in Martinez. Further details regarding SJV Pipeline's characteristics and history are described in San Pablo Bay Pipeline Co. LLC v. Public Utilities Com., supra, 221 Cal.App.4th at pages 1439 to 1440, 165 Cal.Rptr.3d 389 and are not repeated here.
Phase One of Proceedings
Chevron's Complaint
On December 5, 2005, Chevron filed its initial complaint with the Commission. The complaint was designated C.05–12–004. Chevron alleged that (1) the SJV Pipeline had been operated as a public utility since before 2005; (2) effective April 1, 2005, Pipeline Company increased the rates charged on Chevron's shipments from $1.08 to $1.686 per barrel; and (3) Pipeline Company overcharged and discriminated against nonaffiliated shippers in violation of California law.
Chevron alleged that it was obligated contractually to deliver crude oil to Tesoro at the Golden Eagle refinery and to Valero at its Benicia refinery. Chevron alleged that the SJV Pipeline, which is heated, was the only practical way to transport approximately 44,000 barrels per day of San Joaquin Valley heavy crude needed to meet its contractual obligations with Tesoro and Valero. This lack of practical alternatives meant that Pipeline Company was in a position to impose monopoly prices for the transportation services provided by the SJV Pipeline.
Chevron's complaint asked the Commission (1) to declare that the SJV Pipeline was a public utility subject to the Commission's jurisdiction and (2) to find that Pipeline Company had violated the Public Utilities Code by (a) failing to file tariffs for its pipeline services, (b) discriminating between its affiliates and other shippers in the rates charged, (c) charging unreasonable rates to nonaffiliated shippers, and (d) illegally changing its rates. Chevron's request for relief also asked the Commission to determine just and reasonable rates effective April 1, 2005, and to order Pipeline Company “to refund to Chevron the difference between the rates paid by Chevron from April 1, 2005 and the reasonable rates determined by the Commission.”
Tesoro's Intervention
On December 13, 2005, Tesoro filed a petition to intervene in case C.05–12–004. Tesoro's petition alleged that it was dependent upon the SJV Pipeline because it was the only heated crude oil line from Bakersfield to its Golden Eagle refinery at Martinez and the only pipeline that could efficiently ship heavy viscous San Joaquin crude oil. Tesoro also alleged it had a substantial interest in the remedies sought by Chevron as the impact of the Pipeline Company's charges fell on it because the amount Tesoro paid to Chevron for the crude oil included those transportation charges. Tesoro supported the relief sought by Chevron and stated it did “not seek a broadening of the issues presented in the Complaint.”
The addition of Tesoro to the proceeding did not change the volume of oil for which a refund was sought and Pipeline Company did not oppose Tesoro's petition to intervene. Consequently, the Commission granted Tesoro's request to intervene.
Prehearing Procedures
In March 2006, after a prehearing conference, the Commission bifurcated the proceeding, with the first phase limited to whether the SJV Pipeline was a public utility subject to the Commission's jurisdiction and the second phase, if necessary, to address all ratemaking and remedies. The scoping memo and ruling that established the two phases did not specify the precise procedural steps that would be used if a second phase was necessary.
Subsequently, the parties filed various motions designed to resolve the first phase of the proceeding. Pipeline Company filed a motion to dismiss and both sides filed motions for summary adjudication.
2007 Decision
In July 2007, the Commission resolved the pending motions by issuing Decision 07–07–040. The Commission denied Pipeline Company's motions and granted Chevron's motion for summary adjudication, concluding that the SJV Pipeline had been dedicated to public service and, thus, was subject to regulation by the Commission. The Commission also concluded that “this proceeding should be closed, effectively immediately.” This conclusion may explain what was intended by the March 2006 scoping memo and ruling when it bifurcated the proceeding.
Pipeline Company requested a rehearing and, in response, the Commission issued Decision 07–12–021, which modified its prior decision. Among other things, Decision 07–12–021 expanded the earlier order by including a paragraph that directed Pipeline Company “to file tariffs for its third party contracts.” The new decision also stated, “This proceeding, Case (C.) 05–12–004, is closed.”
Judicial Review of 2007 Decision
Pipeline Company's attempts to have the decision, as modified, overturned in court were unsuccessful. The Second Appellate District of the Court of Appeal denied its petition for writ of review in June 2008 and, two months later, the California Supreme Court denied a petition for review. Consequently, the Commission's decision that the SJV Pipeline had been dedicated to public use and its order directing Pipeline Company to file a tariff became a final decision no longer subject to challenge in administrative or judicial proceedings.
Phase Two of Proceedings
New Pleadings—Complaint and Tariff Application
On March 26, 2008, well before Pipeline Company's judicial challenges to the Commission's modified decision were rejected by the California Supreme Court in August 2008, Chevron initiated the second phase of the proceedings by filing another complaint with the Commission, Case C.08–03–021.
Chevron's complaint alleged the Commission's modified decision held Pipeline Company was operating the SJV Pipeline as a public utility and, since at least April 1, 2005, Pipeline Company had not filed tariffs setting rates for services on the SJV Pipeline as required by law. The second complaint repeated verbatim Chevron's request in its prior complaint for the Commission to determine just and reasonable rates for transportation of crude oil on the SJV Pipeline effective April 1, 2005, and to order Pipeline Company “to refund to Chevron the difference between the rates paid by Chevron from April 1, 2005 and the reasonable rates determined by the Commission.”
About six months later, in September 2008, Pipeline Company filed an application proposing a tariff for the SJV Pipeline, which the Commission designated Application 08–09–024.
Consolidation of Complaints and Tariff Application
On February 13, 2009, Chevron and Pipeline Company filed a joint motion to consolidate Pipeline Company's tariff application with Case C.08–03–021. Pipeline Company's tariff application sought to establish forward-looking just and reasonable rates, while Chevron's refund claim was backward-looking in that it addressed charges paid during the period from April 1, 2005, until the effective date of the approved tariff. The joint motion stated that “the just and reasonable rate for the past period may very well be different from the just and reasonable tariff rate,” but asserted the cases involved similar legal issues and much of the same evidence. The joint motion also stated that Chevron's amended complaint eliminated Chevron's request for penalties and, therefore, “both cases will be categorized as ratesetting.”
Also on February 13, 2009, Tesoro filed a complaint with the Commission that was similar to Chevron's March 2008 complaint in that it sought a refund equal to the difference between what Tesoro paid to ship crude oil and the reasonable rates determined by the Commission.
On March 23, 2009, Valero also filed a complaint seeking a refund of overcharges. The Commission designated the proceedings relating to the complaints filed by Chevron, Tesoro and Valero as Case 08–03–021, Case 09–02–007 and Case 09–03–027, respectively.
Prehearing Procedures
In April 2009, the Commission filed a scoping memo and ruling that addressed the motion to consolidate Pipeline Company's pending tariff application with the three refund complaints. The Commission directed that the four matters be consolidated as a ratesetting proceeding, stating:
“This proposal [to consolidate as a ratesetting proceeding] was received positively by counsel for all parties. In order to facilitate this global approach, Chevron and Tesoro have refiled their complaint cases as refund claims and Valero has filed a similar refund claim. All three of these cases are preliminarily classified as adjudicatory.”
Over five years later, in Decision 14–06–052, the Commission stated the consolidation of the four matters was “in conformance with the intent behind our bifurcation ruling.”
The scoping memo enumerated 10 issues that were appropriate for resolution in the consolidated proceeding, including (1) the just and reasonable rates, terms and conditions for public utility service on the SJV Pipeline during the period from April 1, 2005, through the effective date of the approved tariffs and (2) the refunds, if any, to the shippers for unjust and unreasonable rates imposed during that period.
The scoping memo also established a schedule for (1) the submission of written evidence by the parties, (2) an evidentiary hearing, (3) the filing of concurrent opening and reply briefs, (4) the issuance of a proposed decision, and (5) the parties' comments and replies to comments on the proposed decision. The schedule left open the date for the final decision.
2011 Decision
In June 2011, after the scheduled steps were completed, the Commission issued Decision 11–05–026. The decision (1) set rates at $1.34 per barrel, (2) adopted tariff provisions to govern the sale of transportation services on the SJV Pipeline, and (3) ordered the payment of refunds to the shippers for overcharges made from April 1, 2005, to the effective date of the decision.
The Commission found the just and reasonable rate for transportation of crude oil on the SJV Pipeline from April 1, 2005, through December 31, 2005, to be $1.23 per barrel. The Commission also found the just and reasonable rate for the period from January 1, 2006, through the effective date of the tariff to be $1.246 per barrel. These rates were the rates Pipeline Company charged to a Shell affiliate during those periods.
Decision 11–05–026 addressed the appropriate refund period by noting that at the time of consolidation of the refund cases with the rate setting case, “all parties including [Pipeline Company] treated April 1, 2005 as the earliest date from which refunds could be sought.” Rejecting Pipeline Company's position that the refund period began on August 1, 2007 (the effective date of Decision 07–07–040), the Commission found the refund period started on April 1, 2005, and ran until the approved tariff when into effect.
Application for Rehearing
In July 2011, Pipeline Company filed an application for a rehearing of Decision 11–05–026 that asserted a “myriad [of] legal errors” occurred in the Commission's decision setting rates, approving the tariff, and awarding refunds. Pipeline Company argued that the Commission exceeded its jurisdiction and failed to proceed as required by law by awarding refunds (1) for a period prior to its July 2007 finding the SJV Pipeline was subject to its jurisdiction and (2) for a period before the two-year statute of limitations set forth in section 735.
2012 Decision
In February 2012, the Commission issued Decision 12–02–038, which modified its prior decision and granted a rehearing on the sole issue of how to calculate the refunds. Decision 12–02–038 stated that the Commission correctly found the refund period commenced on April 1, 2005, because (1) the three-year statute of limitations in section 736 applied, (2) Pipeline Company waived its right to object to the start date of April 1, 2005, and (3) the statute of limitations was equitably tolled by the filing and pendency of Chevron's original complaint.
Petition for Judicial Review and Application to PUC for a Rehearing
In March 2012, Pipeline Company filed a petition for writ of review in this court to challenge Decision 11–05–026 and the modification implemented by Decision 12–02–038.
Three days later, the shippers challenged the Commission's grant of a limited rehearing as to the refund calculation by filing an application for rehearing of Decision 12–02–038. As a result of Pipeline Company's petition for writ review and the shippers' application for rehearing, Decision 21–02–038 was subject to an administrative challenge and a judicial proceeding at the same time.
In April 2012, the Commission granted a limited rehearing of Decision 12–02–038 on all issues related to the refund calculations. Because the issues related to the statute of limitations were intertwined with the calculation of the refund, the Commission vacated its earlier determinations regarding the statute of limitations, stating its belief that “all matters related to the refund should be considered together.”
In May 2012, the Commission requested this court to dismiss the issues in Pipeline Company's petition involving the statute of limitations. The Commission, having vacated its analysis and conclusions regarding the statute of limitations issues, believed it should not be required to defend the vacated portions of its decisions in the writ proceeding before this court. We granted the Commission's motion to dismiss in an order dated October 31, 2013, and explicitly stated that the order was without prejudice to the right of any party to challenge the Commission's final determination of the refund and statute of limitations issues.
In accordance with the Commission's grant of a limited rehearing, the Commission received written evidence, testimony and further briefing during 2012.
2013 Decision
In May 2013, the Commission issued Decision 13–05–017, reiterating its conclusion that refunds were owed back to April 1, 2005. In support of this conclusion, the Commission found that Pipeline Company was an advocate, benefactor and cause of the delay in considering the shippers' refund claims and also found:
“21. All the complaints raised the same material factual and legal issues, and asked for the same relief, as Chevron's 2005 complaint. There is no significant factual distinction, and no legal distinction between the refund claims of Tesoro, Valero and Chevron. All three shippers were subject to the same illegal and discriminatory transportation overcharges for the same period of years.”
“22. Our bifurcation ruling temporarily deprived [shippers] of a forum in which to pursue their refund claims until [Pipeline Company] filed its ratesetting application.”
The Commission's conclusions of law referenced the Commission's broad authority under the California Constitution and Public Utilities Code and then addressed the bifurcation ruling:
“For reasons of administrative practicality, responding to the parties' requests, and to ensure due process, the Commission lawfully bifurcated the complaint proceeding into two phases, and properly ordered the filing of a ratemaking application. [¶] ... Our constitutional and statutory authority permitted us to bifurcate the proceedings, and thus, toll the statute of limitations during the period in which the Commission and the appellate courts investigated whether the pipeline was subject to Commission jurisdiction, from December 5, 2005 through August 20, 2008.”
As to the calculation of the refund, the Commission determined it appropriate to apply a single refund rate to the entire refund period based on the 2006 cost of service and 2006 throughput. The Commission also determined that “[t]he refund rate should be calculated using 2006 actual historical data” and found the just and reasonable refund rate was $1.2450 per barrel. The Commission rejected Pipeline Company's “proposal to adjust the base rate for actual volumes and the variable value of line fill based on fluctuating oil prices.” The Commission found the accepted methodology for valuing line fill, like “line pack” and “cushion gas” in natural gas cases, was to use its original cost as part of the rate base on which the pipeline earns a rate of return.
The refund period began on April 1, 2005, and ended on June 30, 2011, the effective date of Pipeline Company's initial tariff.
Based on these determinations, the Commission concluded that Pipeline Company owed “refunds to Chevron, Tesoro and Valero in the sum of $104,291,585, plus interest.” In addition, the Commission adopted $1.34 per barrel as the going-forward rate.
2014 Decision—Final Administrative Decision
Pipeline Company filed an application for rehearing of Decision 13–05–017 and, in June 2014, the Commission issued Decision 14–06–052, which modified the earlier decision and denied the application for a rehearing. As to the statute of limitations issue, Decision 14–06–052 added the following finding of fact: “The Commission limited the scope of the Phase 1 proceeding to the issue of our jurisdiction over the Pipeline, and all parties agreed that the refund claims should be part of Phase 2, and not Phase 1.” In addition, the Commission concluded the closing of C.05–12–004 without addressing the refund claim “had no effect on the continuing relevance of the 2005 refund claims in Phase 2.”
Petition for Writ of Review
The issuance of Decision 14–06–052 meant that the Commission's order regarding the amount of the refund became final for administrative purposes (i.e., there were no more administrative remedies to exhaust) and could be challenged in court by way of a petition for writ of review.
In July 2014, Pipeline Company filed such a petition for writ of review, asserting errors in the Commission's (1) statute of limitations analysis and (2) treatment of “line fill” costs bearing on the amount of the refunds.
DISCUSSION
I. THE COMMISSION AND ITS DECISIONS
A. The Nature of the Commission and Its Authority
The Commission is a state agency of constitutional origin with far-reaching duties, functions and powers. (Cal. Const., art. XII, §§ 1–6.) The California Constitution granted broad authority to the Commission to regulate utilities, including the power to fix rates for the transportation of passengers and property, establish rules, hold hearings, and award reparations. (Cal. Const., art. XII, §§ 4, 6; see Hartwell Corp. v. Superior Court (2002) 27 Cal.4th 256, 264, 115 Cal.Rptr.2d 874, 38 P.3d 1098 (Hartwell).) In addition, “[s]ubject to statute and due process, the commission may establish its own procedures.” (Cal. Const., art. XII, § 2.)
The California Constitution also grants the Legislature broad power to regulate public utilities and to delegate regulatory functions to the Commission. (Cal. Const., art. XII, §§ 3, 5; see Hartwell, supra, 27 Cal.4th at pp. 264–265, 115 Cal.Rptr.2d 874, 38 P.3d 1098.) Pursuant to these constitutional provisions, “the Legislature has granted the [Commission] comprehensive jurisdiction to regulate the operation and safety of public utilities. (§§ 701, 761, 768, 770, subd. (a).)” (Hartwell, supra, 27 Cal.4th at p. 265, 115 Cal.Rptr.2d 874, 38 P.3d 1098.) The most fundamental of these legislative grants of authority is section 701, which provides:
“The Commission may supervise and regulate every public utility in the State and may do all things, whether specifically designated in this part or in addition thereto, which are necessary and convenient in the exercise of such power and jurisdiction.”
This legislative grant of authority is “expansive” and has been liberally construed. (Consumers Lobby Against Monopolies v. Public Utilities Com. (1979) 25 Cal.3d 891, 905, 160 Cal.Rptr. 124, 603 P.2d 41, disagreed with on another point in Kowis v. Howard (1992) 3 Cal.4th 888, 897, fn. 2, 12 Cal.Rptr.2d 728, 838 P.2d 250.)
B. Judicial Review by Writ
The California Constitution provides plenary power to the Legislature “to establish the manner and scope of review of commission action in a court of record....” (Cal. Const., art. XII, § 5.) Pursuant to this provision, the Legislature has authorized only the California Supreme Court and the Court of Appeal to review orders and decisions of the Commission. (§ 1759, subd. (a).)
The procedural mechanism by which a party may challenge a decision by the Commission is a petition for writ of review filed in the Court of Appeal. (§ 1756, subd. (a).) Certain procedural requirements must be satisfied before an aggrieved party may file its petition for writ of review. (See §§ 1756, subd. (a) [application for rehearing], 1732 [specification of grounds].) Here, Pipeline Company had satisfied the procedural requirements and, therefore, the merits of its writ petition are properly before this court.
Petitions for a writ of review function as appeals from the administrative decisions of the Commission and are the exclusive means of judicial review of such decisions. Consequently, an appellate court should not deny the petition on policy grounds unrelated to the merits. (The Ponderosa Telephone Co. v. Public Utilities Com. (2011) 197 Cal.App.4th 48, 56, 127 Cal.Rptr.3d 844.) Based on this principle, we will address the merits of Pipeline Company's petition for writ of review.
C. Scope and Standards of Review
1. Basic Principles
Judicial review of Commission decisions is relatively narrow. For instance, the appellate court may not consider new or additional evidence and may not exercise independent judgment on the evidence. (§ 1757, subds. (a) & (b).) Also, reviewable issues are limited to whether the Commission (1) acted without, or in excess of, its jurisdiction; (2) proceeded in the manner required by law; (3) issued a decision not supported by the findings; (4) made findings not supported by substantial evidence in light of the whole record; (5) abused its discretion; or (6) violated a constitutional right. (§ 1757, subd. (a).)
The foregoing constitutional and statutory provisions are the foundation for the well-established principle that there is a strong presumption of validity of the Commission's decisions. (Greyhound Lines, Inc. v. Public Utilities Com. (1968) 68 Cal.2d 406, 410, 67 Cal.Rptr. 97, 438 P.2d 801 (Greyhound); Clean Energy Fuels Corp. v. Public Utilities Com. (2014) 227 Cal.App.4th 641, 649, 174 Cal.Rptr.3d 297.)
2. Statutory Interpretation
Another aspect of the deference given to the Commission's decision is the principle that the Commission's interpretation of the Public Utility Code should be accepted “unless it fails to bear a reasonable relation to statutory purposes and language....” (Greyhound, supra, 68 Cal.2d at pp. 410–411, 67 Cal.Rptr. 97, 438 P.2d 801.) This deference is based on the idea that the Commission has a special familiarity and expertise with the satellite legal and regulatory issues that informs its interpretation of the statutory provision in question. (Southern California Edison Co. v. Public Utilities Com. (2014) 227 Cal.App.4th 172, 185, 173 Cal.Rptr.3d 120.) An exception to the general rule of deference to the Commission's statutory interpretations applies when the issue is the scope of the Commission's jurisdiction. (Ibid.)
3. Prejudice
A final aspect of judicial review relates to the element of prejudice. Courts will annul a decision by the Commission only if the error demonstrated by the aggrieved party was prejudicial. (The Utility Reform Network v. Public Utilities Com. (2014) 223 Cal.App.4th 945, 958, 167 Cal.Rptr.3d 747.)
II. PHASED PROCEEDINGS AND THE STATUTE OF LIMITATIONS
Pipeline Company's challenge to the Commission's analysis of the statute of limitations issue is based on (1) the text of section 735 and (2) the application of that provision's two-year limitations period to the complaints filed in the second phase of the proceedings before the Commission.
In contrast, the Commission takes a much broader view of the issues presented, arguing that (1) the first phase of the proceedings is relevant because it was started less than nine months after April 1, 2005; (2) it had the authority to adopt the two-phase procedure used in this matter; and (3) it had the authority to consider the statute of limitations tolled during the first phase of the proceedings. The Commission asserts: “There is no legitimate dispute that Phase 2 was a continuation of Phase 1, as both the rate case and the complaint cases could only move forward after jurisdiction was established in Phase 1.”
A. Section 735
We assume for purposes of discussion that section 735 is the statute of limitations that applies to the refund claims presented by the shippers. Section 735 provides in relevant part:
“All complaints for damages resulting from a violation of any of the provisions of the Public Utilities Act, except Sections 494 and 532, shall ... be filed with the commission, ... within two years from the time the cause of action accrues, and not after.”
We have assumed that section 735 (and not the exception) applies because no tariff schedules were in place during the period for which refund is sought. The exception in section 735 for violations of sections 494 and 532, which are covered by the three-year limitations period set forth in section 736, the statute of limitations that the shippers contend applies in this case. Section 494 prohibits common carriers from assessing charges not specified in its schedules filed and in effect at the time. Section 532 states that no public utility shall charge rates, tolls or rentals other than those in its schedules on file and in effect at the time.
Pipeline Company contends the Legislature's use of phrase “shall ... be filed” in conjunction with “and not after” demonstrates a clear legislative intent to prohibit any extension of the two-year period, whether by tolling or other means. This argument about legislative intent is based on cases that existed at the time the statute's predecessors were enacted and the principle that the Legislature is deemed aware of existing decisions and to have adopted the meaning of statutory terms already construed. (People v. Scott (2014) 58 Cal.4th 1415, 1424, 171 Cal.Rptr.3d 638, 324 P.3d 827.)
1. Cases Addressing Similar Text
Pipeline Company cites Phillips v. Grand Trunk Ry. (1915) 236 U.S. 662, 35 S.Ct. 444, 59 L.Ed. 774 (Phillips), which addresses the meaning of a federal statute that provided “ ‘all complaints for the recovery of damages shall be filed with the [Interstate Commerce] Commission within two years from the time the cause of action accrues, and not after....’ ” (Id. at p. 666, 35 S.Ct. 444.) The court stated that the statute indicated “its purpose to prevent suits on delayed claims, by the provision that all complaints for damages should be filed within two years and not after. Under such a statute the lapse of time not only bars the remedy but destroys the liability [citation]....” (Id. at p. 667, 35 S.Ct. 444; see Cunningham v. Hawkins (1864) 24 Cal. 403, 410–411 (Cunningham).) The court adopted this construction and rejected any implied or express waiver of the limitations period by the carrier because of the uniformity required by the statute in question and allowing a carrier to waive the statute as to some shippers and assert it against others would result in discrimination among shippers of the type forbidden by the statute. (Phillips, supra, at p. 667, 35 S.Ct. 444.)
Pipeline Company also cites a decision by the California Railroad Commission (predecessor of the PUC) that interpreted a predecessor to section 735 that provided a suit “ ‘shall be filed’ ” within two years of accrual of the cause of action. (James Mills Sacramento Valley Orchard & Citrus Fruit Co. v. Southern Pacific Co. (1916) 9 C.R.C. 80, 82 (James Mills).) The California Railroad Commission relied on Phillips, even though the predecessor to section 735 did not contain the phrase “and not after.” ( James Mills, supra, at pp. 82–83.) It construed the statute to mean that all complaints concerning excessive or discriminatory charges must be filed with it within two years from the time the cause of action accrues. The California Railroad Commission stated that the statute made no exception and no provision allowing further time in the case of fraud. (Id. at p. 83.) It also concluded the carrier could not waive the statute of limitations defense. (Ibid.)
Based on this decision and the fact that the Legislature added the phrase “and not after” to a predecessor of section 735 in 1931, Pipeline Company argues the Legislature clearly intended that (1) there be no exceptions or other delays in the running of the two-year period and (2) liability be destroyed after the lapse of two years. (See Stats. 1931, ch. 806, § 1, p. 1687.)
The Commission cites Toward Utility Rate Normalization, Inc. v. Pacific Bell (1994) 54 CPUC 2d 122, 1994 WL 209824 1994 Cal.P.U.C. Lexis 313, 8 as an example of a case in which the Commission interpreted the statute of limitations in section 736 to be tolled until the plaintiff discovers the facts essential to the cause of action. As section 736 also uses the phrases “shall ... be filed” along with “and not after,” the Commission argues those two phrases do not create an absolute prohibition against tolling.
2. Application of Prior Decisions
The foregoing cases are useful in normal situations where only one complaint is filed. However, none of the cases cited by the parties involved facts similar to those presented in this case. The facts of legal significance that render the instant case unique are (1) the timely filing of an initial complaint seeking the same refund sought in the second phase, (2) the bifurcation of the proceedings with the agreement of the parties, (3) the unusual procedural device of an administratively final decision to conclude the first (i.e., jurisdictional) phase, and (4) the equally unusual procedural device of initiating the second phase (i.e., restarting the proceedings) by the filing of new complaints and a ratemaking application. We regard these facts as legally significant because they affect the public policies underlying the statute of limitations applicable to complaints filed with the Commission—namely, giving timely notice of claims to the defendant, giving stability to transactions, protecting settled expectations, promoting diligence, and preventing the statute of limitations from becoming a tool for discrimination among users of a public utility. (See generally Stockton Citizens for Sensible Planning v. City of Stockton (2010) 48 Cal.4th 481, 499, 106 Cal.Rptr.3d 858, 227 P.3d 416; Phillips, supra, 236 U.S. at p. 667, 35 S.Ct. 444.)
Based on the unique facts of this case and the policies underlying the statute of limitations, we conclude that cases such as Phillips, Cunningham, and James Mills are not controlling. The facts of this case put it into a category by itself.
B. Authority for the Two–Phased Proceedings
We conclude the proper analysis in this case is to consider the proceedings in their entirety and determine whether the Commission had the authority to (1) conduct the proceedings in two phases and (2) apply the statute of limitations as though there was a single proceeding initiated in December 2005. We conclude the Commission had the authority to do both.
1. Authority to Bifurcate
The authority to divide a proceeding into a jurisdictional phase and a ratemaking and reparations phase is not expressly granted to the Commission by the constitution or statute and has not been recognized in a published decision. Consequently, we consider whether the general grants of authority to the Commission are broad enough to authorize such a procedure.
The Commission relies on both constitutional and statutory provisions addressing its authority and notes the parties agreed to the bifurcation of the jurisdictional issues. Article XII, section 2 of the California Constitution provides that “[s]ubject to statute and due process, the commission may establish its own procedures.” Section 701 states the Commission may do all things necessary and convenient in the exercise of its power to regulate public utilities.
First, the constitutional provision allowing the Commission to “establish its own procedures” does not require those procedures to be adopted pursuant to the Administrative Procedure Act (Gov.Code, § 11340 et seq.) or even to be adopted in writing. (Cal. Const., art. XII, § 2.) Therefore, we interpret the Commission's constitutional authority to “establish its own procedures” to mean the Commission is authorized to employ unwritten procedures on a case-by-case basis provided that those procedures do not contradict a statute and are consistent with the requirements of due process.
Second, we interpret the Commission's constitutional authority to “establish its own procedures” to encompass the bifurcation of the initial case because bifurcation (i.e., the use of two phases) is a procedural mechanism. (Cf. Fam.Code, § 2337 [early and separate trial for certain issues in dissolution of marriage proceeding]; Cal. Rules of Court, rule 5.390 bifurcation of issues; see Fam.Code, § 2025 [certification of bifurcated issue for appeal].)
Third, the Commission's use of bifurcation in this case did not offend the constitutional limitations relating to statutes and due process. Pipeline Company has cited, and we have located, no statute that prevents the bifurcation of a case into two phases. Also, the requirements of procedural due process were met in this case because (1) the parties agreed to the bifurcation of the proceeding and (2) the Commission explicitly found Pipeline Company advocated and benefited from the bifurcation of the proceedings. Thus, the parties had notice and an opportunity to be heard on the question of bifurcation. (Traverso v. People ex rel. Dept. of Transportation (1993) 6 Cal.4th 1152, 1169, 26 Cal.Rptr.2d 217, 864 P.2d 488 [“procedural due process requires, at a minimum, notice and an opportunity to be heard”].)
It appears the benefit to Pipeline Company was the opportunity to seek judicial review of the vigorously contested jurisdictional issue before investing time and money in the second phase of the proceedings. Pipeline Company took advantage of this opportunity, though it was unsuccessful when, on August 20, 2008, the Supreme Court declined to review the Second Appellate District's denial of Pipeline Company's writ petition.
In summary, we conclude the Commission correctly decided it had “lawfully bifurcated the complaint proceeding into two phases” and its “constitutional and statutory authority permitted [it] to bifurcate the proceedings....”
2. Legal Authority to Toll the Statute of Limitations
The Commission also concluded its constitutional and statutory authority permitted it to “toll the statute of limitations during the period in which the Commission and the appellate courts investigated whether the pipeline was subject to Commission jurisdiction, from December 5, 2005 through August 20, 2008.”
The first step of our analysis is to frame the question presented. Framing the question is a significant step because it defines the specific power exercised by the Commission and, thus, our inquiry into the source of that power.
We will assume for purposes of discussion that section 735 applies and should be interpreted so that the lapse of the two-year period “destroys the liability” for unreasonable rates charged more than two years before the filing of the complaint. (See Phillips, supra, 236 U.S. at p. 667, 35 S.Ct. 444.) These two assumptions narrow the issue presented in this case and are consistent with the Commission's view that its power to toll the statute of limitations does not require the resurrection of liability previously destroyed. Therefore, we conclude the limited question presented in this case relates to the Commission's authority over how the statute of limitations should be applied after the bifurcation order. The specific issue presented is whether the Commission has the authority to bifurcate the proceedings and prevent the restarting of the statute of limitations during the remainder of the proceedings that occurred after the bifurcation.
This narrow framing of the issue is appropriate under the facts of this case because the timely filing of the December 2005 complaint gave the Commission jurisdiction over the cause of action for refunds on shipments made after April 1, 2005, and, at the time of filing, none of the liability for the post-March 2005 shipments had been destroyed by the lapse of time. We regard the distinction between (1) the power to resurrect destroyed liability and (2) the power to treat the bifurcation mechanism as preventing the restarting of the statute of limitations as critical to the proper framing of the issue presented in this case. (See pt. II.A.2., ante.)
The Commission's power to halt the restarting of the statutory period after the filing of a timely complaint can also be described as (1) the power to toll the statutory period during bifurcated proceedings conducted after the filing of a timely complaint or (2) the power to determine when and how the statutory period runs or lapses during a bifurcated proceeding.
Our examination of the Commission's authority to prevent the restarting of the statute of limitations takes the same basic steps as our analysis of its authority to bifurcate a proceeding into two phases. (See pt. II.B.1., ante.) First, the parties have not cited, and we have not located, any constitutional provision, statute or published authority that explicitly addresses the power of the Commission to control the statute of limitations during the course of a bifurcated proceeding. Second, in the absence of specific authority, we turn to the sources of the Commission's general authority. The California Constitution provides the Commission with the authority to establish its own procedure and section 701 states the Commission “may do all things ... necessary and convenient in the exercise of [its] power” to supervise and regulate public utilities. This statutory authority is expansive and should be liberally construed. (See pt. I.A., ante.)
Based on the expansive nature of the Commission's authority under section 701, we conclude the Commission has the authority to control the running of the statute of limitations during the course of a bifurcated proceeding, provided that the first phase was initiated by a timely filed complaint and the parties agreed to the bifurcation of the proceedings. Therefore, the Commission had the power to prevent the restarting or lapsing of the statute of limitations during the first phase of a bifurcated proceeding.
Pipeline Company's reliance on cases stating that claims based on pre-limitations conduct are barred and extinguished is misplaced. Those cases did not involve a timely filed complaint that was timely as to all claims and the bifurcation of proceedings relating to those claims into two phases.
3. Equitable Power Authority to Toll the Statute of Limitations
The Commission also concluded that its equitable powers allowed it to apply equitable principles to toll the statute of limitations and section 735 did not prohibit the exercise of its equitable powers under the facts of this case.
Section 701 and the constitutional provisions do not expressly state that the Commission has equitable powers. The California Supreme Court has recognized that the Commission “possesses equitable power to award attorney fees under the common fund doctrine in quasi-judicial reparation actions.” (Consumers Lobby Against Monopolies v. Public Utilities Com., supra, 25 Cal.3d at p. 908, 160 Cal.Rptr. 124, 603 P.2d 41.) From this holding relating to attorney fees, we infer that, in general, the Commission has equitable power when it is performing judicial functions.
Based on this general authority relating to equitable power, the Commission's constitutional authority to establish its own procedures, and the unique facts presented by the bifurcation of the proceeding into two phases, we conclude that the Commission has the equitable power to apply equitable tolling or equitable estoppel in the limited circumstances of this case. (See Hopkins v. Kedzierski (2014) 225 Cal.App.4th 736, 755, 170 Cal.Rptr.3d 551 [doctrines of equitable tolling and equitable estoppel are distinct].) We do not address the question whether the Commission's authority to apply the doctrine of equitable tolling or estoppel extends beyond the context of a bifurcated proceeding initiated with a timely complaint.
The three elements of equitable tolling are (1) timely notice of the claim to the defendant, (2) lack of prejudice to the defendant, and (3) reasonable and good faith conduct by the claimant. (McDonald v. Antelope Valley Community College Dist. (2008) 45 Cal.4th 88, 102, 84 Cal.Rptr.3d 734, 194 P.3d 1026.) These three elements have been satisfied in this case. First, the initial complaint filed in December 2005 timely notified Pipeline Company that a refund of overcharges was being sought for the period beginning April 1, 2005. Second, there was no prejudice to Pipeline Company because the claims in the second phase are identical to those raised in the initial complaint and, as a result, Pipeline Company was alerted to the need to begin investigating the facts that formed the basis of the refund claim. (Id. at p. 102, fn. 2, 84 Cal.Rptr.3d 734, 194 P.3d 1026.) Third, shippers acted in accordance with the bifurcation or two-phase procedure ordered by the Commission and, therefore, demonstrated the requisite reasonableness and subjective good faith. Therefore, the three general elements of equitable tolling were satisfied in this case.
As with our discussion of the Commission's legal authority to toll or prevent the lapse of the limitations period during bifurcated proceedings, we note that the equitable tolling applied in this case is extremely narrow because the December 2005 complaint that gave Pipeline Company timely notice of the claim initiated the proceedings that ultimately resulted in the refunds being ordered. Therefore, this is not a situation where equitable tolling was applied to resurrect liability that was destroyed by the lapse of two years before the filing of any complaint. Instead, this is a case where the means adopted to allow judicial review of the jurisdictional question could have been accomplished by other procedural devices that would have avoided the statute of limitations question and the choice of procedures should not be used to truncate the shipper's refund period when the policies underlying the statute of limitations were satisfied by the initial complaint.
The Commission chose to analyze the statute of limitations issue using the concept of tolling. Alternatively, the Commission could have focused on section 735's use of the word “complaints” and interpreted it so that the complaints filed in the second phase were deemed to be subsumed by the initial complaint filed in December 2005. This approach is suggested by the Commission's answer, which asserts “that Phase 2 was a continuation of Phase 1.” In other words, the documents labeled “complaints” that were filed to initiate Phase 2 were not “complaints” for purposes of section 735 and, as a result, the two phases should be treated as a single case initiated for statute of limitations purposes by the filing of the December 2005 complaint.
Given the deference that courts give to the Commission's interpretation of the Public Utilities Act, the foregoing approach to identifying the relevant complaint may have justified the Commission's conclusion that the claims for refunds on shipments going back to April 1, 2005, were timely under section 735.
In summary, we conclude the Commission did not act in excess of its jurisdiction or authority or contrary to law when it awarded refunds for shipments made on or after April 1, 2005.
III. LINE FILL AND COST OF SERVICE
See footnote *, ante.
DISPOSITION
The petition for a writ is denied. Respondent and real parties in interest shall recover their costs in this proceeding. (Cal. Rules of Court, rule 8.493(a)(1)(A).)
WE CONCUR:
HILL, P.J.
SMITH, J.