March 16, 1993
ABSALOM I. JORDAN, JR., PETITIONER
PUBLIC SERVICE COMMISSION, RESPONDENT, POTOMAC ELECTRIC POWER COMPANY, INTERVENOR
On Petition for Review of a Decision of the Public Service Commission.
Before Schwelb, Wagner and King, Associate Judges.
The opinion of the court was delivered by: Schwelb
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.
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). *fn1 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 PEPCO, 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. *fn2
The legal basis for Jordan's submission was D.C. Code § 43-503 (1990), which provides in pertinent part that
the 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 PEPCO 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. *fn3
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. *fn4 PEPCO 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.
THE COMMISSION'S RULINGS
Although Jordan requested an evidentiary 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 *fn5 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 fact that the issue under consideration was compliance by PEPCO with a Federal Act. Despite the protestations of MBELDEF 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. *fn6
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 court shall be limited to questions of law, including constitutional questions . . . ." D.C. Code § 43-906 (1990). We must accept the Commission's findings of fact *fn7 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, 90 S. Ct. 314, 24 L. Ed. 2d 345 (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 § 43-503 *fn8 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 government concerned with discrimination, e.g., the Equal Employment Opportunity Commission , 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 "there 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, 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, *fn9 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, 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, *fn10 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.
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, 97 L. Ed. 1303 (1953); see also United States v. Oregon State Medical Society, 343 U.S. 326, 334, 72 S. Ct. 690, 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 (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 PEPCO 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),
courts are understandably and rightly reluctant to tell an agency when it should institute enforcement proceedings and when it should not, for "the 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, 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, *fn11 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.
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. *fn12
WAGNER, Associate Judge, Dissenting: A principal issue before this court is whether the Public Service Commission (PSC or Commission) properly determined the scope of its authority under D.C. Code § 43-503 (1990). *fn1 Remand is not required to resolve the question. The Commission dismissed petitioner's complaint as moot, having decided that its authority under § 43-503 to compel a public utility to comply with the federal law involved was at an end once the federal agency responsible for enforcing that law, the General Services Administration (GSA), determined that Potomac Electric Power Company (PEPCO) was in compliance with it. In my view, the Commission's determination of the scope of its authority under § 43-503 is a reasonable construction of its regulatory statute, and we should give it considerable weight. See Winchester Van Buren Tenants Ass'n v. District of Columbia Rental Hous. Comm'n, 550 A.2d 51, 55 (D.C. 1988) ("Courts should give great weight to any reasonable construction of a regulatory statute adopted by an agency charged with its enforcement.")
It was entirely reasonable for the Commission to conclude that any action under § 503 to compel PEPCO to negotiate and include in its contract with GSA provisions conforming to federal procurement requirements was moot once GSA executed a contract with PEPCO which, pursuant to its authority under law, GSA determined met the requirements of the Small Business Act, 15 U.S.C. § 637 (d)(4) and (5) (the Act). *fn2 See 15 U.S.C. § 637 (4)(C) and (D). *fn3 As the Commission points out on appeal, if it had not dismissed the complaint, it would have been obliged to accept GSA's Conclusion that the contract conformed to federal requirements, making further action on that issue a useless pursuit. Alternatively, the Commission would have had to resolve the issue anew, perhaps reaching a decision inconsistent with that of the responsible federal agency, a potential fraught with mischievous consequences. Under the circumstances, the Commission properly declined to proceed where the overriding federal interest in overseeing the manner in which it achieves the goals for which the Small Business Act was designed is not the proper subject of local control. *fn4 Nothing in the Commission's charter authorizes it to intrude into these aspects of the federal procurement process after that process has been completed by execution of a contract by the federal government with its supplier (PEPCO).
In its ruling, the Commission recognized not only the limits of its own power under § 503, but also the principles of federal preemption, although the Commission did not so label its restraint. *fn5 Preemption invalidates or precludes state action which interferes with or is contrary to federal law. Hillsborough County v. Automated Medical Labs, Inc., 471 U.S. 707, 712, 105 S. Ct. 2371, 85 L. Ed. 2d 714 (1985) (quoting Gibbons v. Ogden, 9 Wheat. 1, 211 (1824) (Marshall, C.J.)). Federal preemption can be express or implied. Id. ; Norfolk & W. Ry. v. Public Utils. Comm'n, 926 F.2d 567, 569 (6th Cir. 1991). Preemption may be presumed where the statutory and regulatory scheme in the area is so comprehensive that it is reasonable to infer that there is no room for supplementary state regulation. International Paper Co. v. Ouellette, 479 U.S. 481, 491, 107 S. Ct. 805, 93 L. Ed. 2d 883 (1987); Hillsborough, 471 U.S. at 713; Ray v. Atlantic Richfield, 435 U.S. 151, 157, 98 S. Ct. 988, 55 L. Ed. 2d 179 (1978). Local involvement is deemed preempted when it interferes with the methods by which the federal enactment was designed to reach its goal. International Paper, 479 U.S. at 494.
We deal here with such an area of federal interest where intrusions of local authority over the terms of federal contracts specified by statute cannot be countenanced and where the involvement by the individual states or other local governments would be disruptive to the federal scheme. The very nature of the interest involved here raises an inference of local exclusion. That interest is participation of small business concerns and the socially disadvantaged in the federal procurement system through federally mandated and enforced contract provisions. Thus, I cannot agree with the majority that the Commission erred in dismissing that aspect of the petitioner's complaint which sought to compel PEPCO to negotiate a contracting plan with GSA after GSA had already approved PEPCO's plan and executed a contract.
Similar considerations lead me to conclude that the Commission properly dismissed petitioner's related requests for certain remedial relief for claimed past transgressions by PEPCO. As the Commission concluded, the remedies sought by petitioner are not within its statutory powers. See D.C. Code §§ 43-102, -503; *fn6 see also Chesapeake & Potomac Tel. Co. v. Public Serv. Comm'n, 378 A.2d 1085, 1089 (D.C. 1977) (a creature of statute, the Commission may exercise only those powers granted by it). Moreover, as the Commission recognized, issues related to the adequacy of PEPCO's compliance and the diligence with which PEPCO complied with the federal statute "are questions best directed elsewhere." Remedies available to parties actually aggrieved *fn7 by any past noncompliance of the utility with federal law must derive from the federal laws allegedly violated.
The statute provides for inclusion of a liquidated damages provision in federal contracts, "payable upon a finding that a prime contractor has failed to make a good faith effort to comply with the requirements imposed by [§ 637 (d)]." 15 U.S.C. § 637 (d)(4)(F)(i). The Act further provides:
The contractor shall be afforded an opportunity to demonstrate a good faith effort regarding compliance prior to the contracting officer's final decision regarding the imposition of damages and the amount thereof. The final decision regarding the contractor's obligation to pay such damages, or the amounts thereof, shall be subject to the Contract Disputes Act of 1978 (41 U.S.C. 601-603).
15 U.S.C. § 637 (d)(F)(ii). The statute makes clear that only GSA, the procuring agency, can pursue the remedy in the manner specified. Individuals cannot circumvent the procedural provisions of the statute and regulations upon which they rely in seeking redress. Although a private right of action in favor of a protected class has been implied in some circumstances from a statute, see Organization of Minority Vendors v. Illinois Cent. Gulf R.R., 579 F. Supp. 574, 592 (N.D. Ill. 1983), we need not decide whether the Act involved here does so. Whatever private rights of action may be implicit in the Act for any person or class of persons actually aggrieved, as the Commission determined, it is not the appropriate forum for redress for alleged federal rights derived by implication from the federal statute under which petitioner filed his complaint. Therefore, in my opinion, the Commission appropriately determined that its authority under the charter creating it does not allow it to adjudicate such federal rights, if any, and properly deferred to other forums. Accordingly, I respectfully Dissent from the opinion of the court.