The opinion of the court was delivered by: KIRKPATRICK
These petitions come at the end of protracted litigation which began with an investigation by the Public Utilities Commission (the Public Service Commission) of Pennsylvania to determine the reasonableness of rates for electric power charged by the Edison Light and Power Company of York, Pennsylvania, and finally reached the Supreme Court of the United States on injunction proceedings in the Federal Courts to restrain an order of the Commission reducing the rates. The petitions are presented by a small group of consumers, under the name of Utility Consumers League of York, Pennsylvania. They pray for orders respectively (1) directing the Power Company to pay overcharges accumulated during the pendency of the injunction proceedings, together with interest from the date of the order, and (2) allowing expenses and counsel fees and directing these items to be deducted from the accumulated overcharges due the general body of consumers of electric power and paid to the petitioners and their attorneys.
The first petition is not resisted either by the Power Company or by the Utility Commission, and the prayer will be granted without further discussion.
The second petition is contested by the Utility Commission and by the City of York, the largest individual consumer of power. Testimony was taken upon the petitions and answers, and the facts are found to be as follows:
Prior to April, 1935, the Power Company had been operating in the City of York. It was a wholly owned subsidiary of the York Railways Company, which operated a street railway in the same city.The Power Company had been making money and the Railway Company losing. On June 17, 1935, the Power Company filed application with the Pennsylvania Public Service Commission for permission to merge with the Railway Company. Mr. Willis E. Ramsey and several other citizens of York had, prior to that time, employed Herbert B. Cohen, Esq. (and later the other attorneys, Mr. Liverant, Mr. Anderson and Mr. Lawyer), to determine whether the facts would warrant opposing the application, and, after Mr. Cohen reported, they formed the group known as Utility Consumers League, who directed the attorneys to file a protest, which was done on July 9, 1935.
The terms upon which the attorneys accepted the employment were somewhat vague. It was distinctly understood that the small group which employed them was not to pay counsel fees. There was a general belief that the Power Company's rates were too high and could be brought down. Previous reductions had been ordered by the Commission, and rather complete data as to the rate base of the Power Company were on file with the Commission. Mr. Ramsey testified: "Well, there was nothing -- we didn't make a distinction there, we just took it for granted, I presume, that it would -- that if we succeeded in getting a rate reduction that there would be -- then there would be counsel fees from the consuming public in general." Mr. Cohen said:
"I suggested at that time, in the discussion of fees, that I felt that during the course of the litigation events would so materialize that if we were successful in effectuating a material reduction in the rates of the Edison Light and Power Company that we would be able to receive our fees out of the general mass of consumers for our efforts expended in that direction, so we were --
"Q. Well, did you have any specific agreement with the Utility Consumers League at that time, or at any subsequent time, for the fee to be paid by it or its members? A. There were no agreements with the Utility Consumers League, other than our compensation was to be contingent upon the successful outcome of the litigation."
At the time attorneys were employed, the Consumers League had 25 or 30 members. Efforts were made to increase its membership, but not more than 60 members were ever obtained. The total number of consumers affected by the Power Company's rates was about 30,000.
The attorneys actively represented the Consumers League at the hearings upon the merger application. In the brief filed by them it was pointed out that the proposed merger would result in a new and expanded rate base, and that, as a result, it would become much more difficult to revise the Power Company's rate schedule, which, it was asserted, was already unreasonable and excessive, and should be revised by the Commission on its own motion.
The Commission, on January 27, 1936, handed down orders (1) denying the merger application and (2) instituting an investigation of its own motion into the reasonableness of the Power Company's rates.
The Commission's rate investigation lasted until July 13, 1936, on which date it issued a temporary order directing the filing of new rate schedules effecting a reduction to consumers of approximately $435,000 annually. In this proceeding, apparently upon the request of a member of the Commission, the Consumers League did not intervene. Mr. Cohen was, however, present on more than half of the twelve days of hearings, he had numerous conferences with members of the Commission, and at one stage undertook, at the Commission's request, to negotiate with the Power Company for a voluntary reduction -- an effort which resulted in an offer on the part of the Power Company of a $250,000 reduction, which was turned down by the Commission.
The Commission's order (revised, but not as to amount, on July 27, 1937) was immediately attacked by the Power Company before a three-judge Statutory Court for the Middle District of Pennsylvania, principally upon the ground that the Pennsylvania Public Utility Law, 66 P.S.Pa. § 1101 et seq., under which it had been entered, was unconstitutional. The Consumers League, through their attorneys, intervened in these proceedings. The Court had suspended the operation of the new rate schedule by a temporary injunction, and, after final hearing, issued a permanent injunction on October 15, 1937. Edison Light & Power Co. v. Driscoll, D.C., 21 F.Supp. 1.
One of the three judges held the Act unconstitutional; the other two held it constitutional, but held the order as issued defective and invalid. Neither side appealed from the Court's decree, but on November 30, 1937, the Commission issued a new order revised to comply with ...