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Virgin Islands Hotel Association v. Virgin Islands Water & Power Authority

decided: April 12, 1973.

VIRGIN ISLANDS HOTEL ASSOCIATION, (U.S.), INC., A CORPORATION, APPELLANT
v.
VIRGIN ISLANDS WATER & POWER AUTHORITY



(D.C. Civil No. 499-1971). APPEAL FROM THE DISTRICT COURT OF THE VIRGIN ISLANDS, DIVISION OF ST. CROIX.

Van Dusen and Adams, Circuit Judges, and Barlow, District Judge. Adams, Circuit Judge, concurring.

Author: Van Dusen

Opinion OF THE COURT

VAN DUSEN, Circuit Judge.

This is the second time that these parties, the Virgin Islands Hotel Association (the Hotel Association) and the Virgin Islands Water and Power Authority (the Authority), are before this court. On the first occasion, in Virgin Islands Hotel Ass'n v. Virgin Islands Water & Power Authority, 465 F.2d 1272 (3d Cir. 1972), this court upheld with modification an injunction the district court had issued against the Authority. By order of October 3, 1972, the district court vacated that injunction, and the Hotel Association appeals. We affirm the October 1972 order of the district court.

I. BACKGROUND

It is necessary only to summarize the facts stated in our earlier opinion and in the first opinion of the district court, reported at 54 F.R.D. 377 (D. V.I. 1972).

In the late fall of 1971, the Authority became worried that its revenues would soon fail to provide the coverage over interest required by its outstanding debt instruments, with devastating impact on its ability to procure additional needed financing. On November 10, 1971, it issued a press release indicating its intention to raise electric rates by from about 19% for residential users to about 25% for large power users. Public hearings were held one week later, and on December 3 the Authority put the proposed increases into effect.

The Hotel Association was understandably upset, since its members are classified as "large power" users. It immediately sought an injunction against the rate increase. The district court ruled that the Authority had violated 30 V.I.C. § 105(a)(12) in two ways. First, because the Authority did not have at its disposal information on the cost of providing electricity to its various classes of customers, the Authority had failed "to determine . . . reasonable rates." Second, the public hearings held pursuant to this section 105(a)(12) were altogether inadequate. Among other defects, notice to the public was too short to allow adequate preparation time and the reports the Authority relied on were not made available publicly until the first public hearing. The district court, on February 4, 1972, ordered the Authority to rescind the increases, to have made an appropriate study of costs (called a "rate" study), and to hold proper public hearings on the proposed increases. However, to avoid possible disruption, the court stayed this injunction for ten months.

By decision of June 28, 1972, this court, although ruling that the Authority's determination of rates is not subject to judicial review, held that review is available when the Authority has "ignored a plain statutory duty, exceeded its jurisdiction, or committed constitutional error." 465 F.2d at 1275. "The rate fixing procedure created by 30 V.I.C. § 105(a)(12) contemplates a meaningful public hearing at which interested persons can present their views and present evidence in support thereof. Concomitant with such a hearing are the essential requirements of adequate notice, dissemination to the public of the facts and figures on which the Authority relies, and an opportunity afforded to those attending the hearing to rebut such facts and figures." Id. at 1276. This court agreed with the district court that the Authority's hearings did not comply with these requirements. This court did not, however, agree that § 105(a)(12) imposed any duty "to make rate studies as such," id. at 1276, and modified the district court injunction accordingly.

To comply with this court's mandate, the Authority commissioned new reports from R. W. Beck & Associates and from D.S.S. Engineering, Inc. (hereinafter D.S.S.); it also had Jackson & Moreland prepare an update of the report they had prepared earlier. On July 5, 1972, the Authority issued a press release stating, inter alia, that new hearings would be held and that the earlier Jackson & Moreland study was available to the public. Beginning on August 12, 1972, the Authority had published in the local newspapers notices that new public hearings would be held on September 11, 12 and 13. The Authority made the Beck and the Jackson & Moreland reports available to the public on August 8, the D.S.S. report on August 28.

The Authority held these hearings as scheduled. At each hearing various officials of the Authority commented on the proposed rate increases, and representatives from the three engineering firms summarized and discussed the contents of their reports. In accordance with the procedure announced at the beginning of each meeting, all persons could submit written questions, which would be answered by either an official of the Authority or a representative from one of the firms. In addition, all persons could submit written statements or, at the conclusion of the Authority's presentation, deliver oral statements. According to an affidavit of the Authority's Executive Director, "All questions which were asked were responded to. In addition, any person desiring to make a statement with regard to the proposed subject rate increases were [sic] permitted to do so."*fn1

The Secretary of the Hotel Association's St. Thomas-St. John Chapter testified at the September 12 hearing held on St. Thomas.*fn2 In addition, counsel for the Hotel Association and an expert the Association had hired, Constance W. Bary, attended the September 13 hearing held at Christiansted on St. Croix. Counsel objected to the testimony not being sworn and not being subject to oral cross-examination.*fn3 Counsel had no written questions to submit, but was allowed to give orally an "offer of proof" of what the Hotel Association would have established if an opportunity for cross-examination had been granted.*fn4 Admitting that Mr. Bary had not been contacted until September 7, such counsel also requested that the hearing be adjourned until November 9. This adjournment would give the Authority time to prepare, and for Mr. Bary to review, data which counsel said were necessary to examine the reasonability of rates.*fn5 Counsel and Mr. Bary then stated that without such data the Hotel Association was unable to demonstrate the unreasonableness of the proposed rates.*fn6

Following the hearings, the Authority determined that the rates it had proposed the previous December were reasonable. The Authority then filed a motion in the district court to vacate the injunction. The district court, after considering the Hotel Association's allegations of substantive ...


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