Bridgeport Hydraulic Co. v. Council on Water Company lands of Connecticut

No. B-75-212 (453 F. Supp. 942, 12 ERC 1928) (D. Conn. December 29, 1977, affirmed, December 4, 1978)

ELR Digest

A three-judge court upholds the validity of certain Connecticut statutes and regulations placing restrictions on state-regulated water companies' management practices and authority to dispose of real property. The Moratorium Act, Public Act 75-405, as extended by Public Act 77-606, places a limited moratorium on the disposition of surplus lands by water companies. The court finds the law reasonable in that it carefully limits agency regulations implementing it and furthers the important state objective of maintaining the quality of water supplies. Secondly, the statute does not impose a flat prohibition but sets up an administrative procedure by which water companies may obtain exemptions from state and local agencies. The statute is therefore a permissible exercise of the police power. Berman v. Parker, 348 U.S. 520 (1954).

The Option Statute, CONN. GEN. STAT. § 16-50d, gives municipalities and the state an option to purchase land being offered for sale by a utility under the following procedure:

1. The state has five months after a utility's announcement ofthe sale to approve it.

2. If there is an approval, the state or municipality has three months to indicate a desire to exercise its option.

3. After the eight-month period covering 1 and 2, the state or municipality has 18 months in which to obtain the property or forfeit the option.

4. After the eight-month period in 1 and 2, the state or municipality has three months in which to acquire the property or forfeit the option.

The court finds that the last two provisions are inconsistent and subject to varying constructions which would alter the constitutional question of the statute's validity. Since there is at present no pending sale of property which would be subject to the statute, the court abstains from considering its constitutionality, leaving to the state legislature or judiciary the task of better defining it.

The Public Utilities Control Authority Act, CONN. GEN. STAT. §§ 16-8(a), 16-8(b), and 16-32a, empowers state authorities, inter alia, to order the upgrading of utility management practices found to be "inefficient, improvident, unreasonable, negligent or in abuse of discretion." Contrary to plaintiffs' claim that these provisions constitute an unconstitutional seizure of plaintiffs' enterprises, the court determines that they amount to a permissible exercise of the states' power to protect the public welfare through supervision of its public service corporations. Similarly the court upholds the validity of the Uniform System of Accounts, which requires water companies to treat gains on the sale of real property as general revenues rather than as a separate source of profits to be channeled solely to the companies' shareholders. The shareholders are entitled to no more than a fair return on their investment. In addition, the court is prevented from overturning this aspect of the state law by the Johnson Act, 28 U.S.C. § 1342, which bars federal courts from restraining the operation of any state "order affecting rates" charged by utilities.

Finally, the court rejects plaintiffs' claim that the cumulative effect of the above statutes is to effect an unreasonable confiscation of their property in violation of the Contract Clause of the United States Constitution. Since only two of the challenged provisions have been considered on their merits, the argument is unavailing.

[The court's opinion was summarily affirmed by the Supreme Court, 99 S. Ct. 606 (1978)-Ed.]

The full text of this opinion is available from ELR (12 pp., $1.50), ELR Order No. C-1163.

Counsel for Plaintiffs
Clifford R. Oviatt, Gary A. Macmillan, Warren W. Eginton
Cummings & Lockwood
One Atlantic St., Stamford CT 06904
(203) 327-1700

Counsel for Defendents
Carl A. Ajello, Attorney General; Frederick D. Neusner, William B. Gundling, Robert S. Golden, Jr., Ass't Attorneys General
30 Trinity St., Hartford CT 06115
(203) 566-3579

Counsel for Intervenor-Defendents
Haynes N. Johnson
Parmalee, Johnson, Bollinger & Bramblett
460 Summer St., Stamford CT 06901
(203) 327-2650

Counsel for Amici Curiae Environmental Organizations
James T. B. Tripp
Environmental Defense Fund, Inc.
475 Park Ave. S., New York NY 10016
(212) 686-4191

Peter B. Cooper
35 Elm St., New Haven CT 06510
(203) 787-5821

Zampano J.

[OPINION OMITTED BY PUBLISHER IN ORIGINAL SOURCE]