Stewart v. Utah Public Service Commission
In Stewart v. Utah Public Service Commission, 885 P.2d 759 (Utah 1994), a group of ratepayers challenged an order issued by the Utah Public Service Commission (Commission) increasing the authorized rate of return on equity for U.S. West Communications, Inc. (USWC). USWC was a regulated public entity that was wholly owned by an unregulated industrial company. Ratepayers also challenged the constitutionality of UTAH CODE 54-4-4.1(2), which allowed a public utility to reject incentive rate regulation plans approved by the Commission. The Court first found that the order fixed an unlawful rate of return on equity. See id. at 773.
The Court also found that section 54-4-4.1(2) unconstitutionally delegated legislative powers to a private party. See Stewart, 885 P.2d at 776-77.
Finally, the Court held that the Commission's incentive plan was invalid. See id. at 781.
The Utah Supreme Court concluded that the facts warranted an award of attorneys' fees to the ratepayers' counsel. See id. at 783. The Court noted that Utah followed the American rule but that, absent a statutory or contractual authorization, a "court has inherent equitable power to award reasonable attorney fees when it deems it appropriate in the interest of justice and equity." Id. at 782. The Court outlined instances when courts have exercised their inherent equitable power, including when applying the private attorney general exception. See Stewart, 885 P.2d at 782-83.
The Court invoked its inherent equitable powers to award attorneys' fees in the case. See id. at 783.
The Utah Supreme Court ordered the action remanded to the Commission for a determination of the fees award. See id. at 784. The Court required that, if the Commission found that USWC must disgorge overcharges, the Commission was to award attorneys' fees from that fund. See id. at 783.
If no such fund were created, USWC would be ordered to pay the fees under the private attorney general theory. See id.
The Court supported its award by reasoning: (1) ratepayers "successfully vindicated an important public policy"; (2) the litigation's outcome would "necessarily benefit all USWC ratepayers in the state of Utah"; and (3) without the ratepayers' action, collections under the unlawful rate of return would have remained unchallenged and no ratepayer "would every have had any relief." Id.
In reaching its decision, the Court emphasized the fact that the ratepayers, acting entirely on their own, challenged USWC, the Commission, and the Division of Public Utilities. See id.
However, in a footnote, the Court noted the "exceptional nature" of the case and pointed out that "any future award of attorney fees under the private attorney general doctrine will take an equally extraordinary case." See id. at 783 n.19.