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Southern Montana Telephone Co. v. Montana Public Service Commission

Supreme Court of Montana

May 30, 2017

SOUTHERN MONTANA TELEPHONE CO., Petitioner and Appellant,
v.
MONTANA PUBLIC SERVICE COMMISSION, DEPARTMENT OF PUBLIC SERVICE REGULATION, an agency of the State of Montana, Respondent and Appellee. LINCOLN TELEPHONE CO., Petitioner and Appellant,
v.
MONTANA PUBLIC SERVICE COMMISSION, DEPARTMENT OF PUBLIC SERVICE REGULATION, an agency of the State of Montana, Respondent and Appellee.

          Submitted on Briefs: March 22, 2017

         APPEAL FROM: District Court of the First Judicial District, In and For the County of Lewis And Clark, Cause Nos. ADV-2015-315 and CDV 2015-314 Honorable Kathy Seeley, Mike Menahan, Presiding Judges

          For Appellant: Elizabeth A. Brennan, Brennan Law & Mediation, PLLC, Missoula, Montana

          For Appellee: Justin W. Kraske, Jeremiah Langston, Special Assistant Attorneys General, Montana Public Service Commission, Helena, Montana, Peter Michael Meloy, Meloy Law Firm, Helena, Montana

          For Amicus Curiae: Jill Gerdrum, Axilon Law Group, PLLC, Missoula, Montana (Attorney for Montana Telecommunications Association)

          OPINION

          BETH BAKER, JUSTICE

         ¶1 The Montana Public Service Commission requires that certain regulated telecommunications companies publicly disclose the compensation of their executive or managerial employees earning more than $100, 000 per year. Southern Montana Telephone Company and Lincoln Telephone Company-both regulated by the Commission-filed motions for protective orders to keep the salary information confidential. The Commission denied the motions, relying in part on a new "rubric" that it developed by which it declared it would judge such motions. Southern and Lincoln each appealed to the First Judicial District Court. In two separate rulings, the District Court affirmed.

         ¶2 Southern and Lincoln appeal, raising several issues. We reverse on the sole ground that the Commission's "rubric" constitutes a de facto rule subject to Montana Administrative Procedure Act (MAPA) rulemaking requirements.

         PROCEDURAL AND FACTUAL BACKGROUND

         ¶3 Southern and Lincoln are privately-owned Montana telecommunications companies. They also qualify as "public utilities" and are therefore subject to regulation by the Commission. Sections 69-1-102, -3-101(1)(f), MCA. The Commission possesses the authority to regulate privately-owned companies that provide a "regulated telecommunications service"-like Southern and Lincoln-but it does not regulate "[r]ural telephone cooperatives." Sections 69-3-101(1)(f), -901(5), MCA.

         ¶4 The Commission certifies certain telecommunications public utilities as "eligible telecommunications carrier[s]" (ETCs) for purposes of the Federal Telecommunications Act of 1996. See 47 C.F.R. § 54.201(b) (2016); § 69-3-840(2), MCA. That Act's purpose is, in part, to provide "universal" telecommunications services to "low-income consumers and those in rural, insular, and high cost areas." 47 U.S.C. § 254(b)(3) (2015). The Act establishes the "universal service" fund (USF)-a series of federal subsidies made available to ETCs for the purpose of providing such services. 47 U.S.C. § 254(e). Federal law provides the requirements for ETC certification. 47 U.S.C. § 214(e). Only a company that receives certification as an ETC may be eligible to receive USF subsidies. 47 U.S.C. § 254(e). The Federal Communications Commission delegates to the Commission the authority to certify annually ETCs in Montana. 47 C.F.R. § 54.314; § 69-3-840(1), MCA. The Commission must base its ETC certification on companies' compliance with federal statute. Section 69-3-840(2), MCA. The Commission has certified Southern and Lincoln as ETCs, and each receives federal USF subsidies.

         ¶5 Pursuant to federal law, the Commission requires all ETCs to apply for recertification annually. Section 69-3-203, MCA. Although all ETCs must submit certain documentation to the Commission for recertification, most are unregulated telephone cooperatives and not public utilities. Only ETCs that are subject to Commission regulation as public utilities-including Southern and Lincoln-must submit "annual reports." Mont. Admin. R. 38.5.2602 (2000). The Commission prescribes the information that ETCs must include in their annual reports.

         ¶6 Recently the Commission began requiring that privately-owned ETCs disclose in their annual reports the names and compensation information for all executives and managers earning more than $100, 000 per year in total compensation. The Commission's purpose in imposing this requirement was to increase transparency by disclosing to the public how ETCs spend the federal USF subsidies that they receive.

         ¶7 Southern and Lincoln each filed motions for protective orders with the Commission. The motions requested that the Commission permit them to not disclose their employees' compensation information publicly. They agreed to provide the compensation information to the Commission but argued that employee salaries constituted trade secret ...


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