The Orloff Case: California Supreme Court Holds that Public Enforcement Agencies Can Bring Action Against CPUC-Regulated Entities

Morrison & Foerster has been monitoring developments in a case recently decided by the California Supreme Court which may have important consequences for companies seeking judicial relief against public utilities regulated by the California Public Utilities Commission ("CPUC"). Public Utilities Code Section 1759 provides that no California court, except the Supreme Court and the Court of Appeal, may "interfere with" the CPUC in the performance of its official duties. In The People, ex rel. Orloff v. Pac. Bell, 2003 Cal. LEXIS 9459 (Dec. 15, 2003) ("Orloff"), the Supreme Court held that Section 1759 did not bar a judicial action brought by public enforcement agencies against utilities that are subject to administrative proceedings at the CPUC. Although the impact of the case is limited by the fact that the judicial action was brought by public enforcement agencies, such as the California Attorney General or District Attorney as opposed to private parties, it nonetheless represents an important development in the law controlling judicial actions against CPUC-regulated entities.

Background

Orloff involved a lawsuit filed by three Bay Area Counties against Pacific Bell under California's Unfair Competition Law ("UCL" Cal. Bus. & Prof. Code 17200 et seq.). The counties of Alameda, San Mateo and Monterey, through their respective District Attorneys' Offices, alleged that Pacific Bell was misleading its customers into ordering "custom calling" option packages (such as call blocking and inside telephone repair insurance) by failing to tell customers of alternative, cheaper packages. The counties sought a permanent injunction to prohibit the alleged misconduct, as well as civil penalties, restitution, and costs of suit. An administrative enforcement proceeding involving some of the same allegations of misconduct by Pacific Bell was pending in the CPUC at the time the civil action was filed. Pacific Bell filed a demurrer seeking to dismiss the case on the basis of Section 1759, alleging that because the same issue was before the CPUC in ongoing administrative hearings, the Superior Court lacked jurisdiction to hear the case.

The Superior Court and subsequently the Court of Appeal concluded that because the UCL action might result in conflicting rulings with the parallel CPUC proceeding, the action would interfere with the CPUC's authority, and thus it was barred by Section 1759. The Court of Appeal reasoned that the circumstance that the action...