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Courtney v. Washington Utilities and Transportation Commission

Court of Appeals of Washington, Division 3

April 3, 2018

JAMES COURTNEY and CLIFFORD COURTNEY, Appellants,
v.
WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION; DAVID DANNER, chairman and commissioner, ANN RENDAHL, commissioner, and JAY BALASBAS, commissioner, in their official capacities as officers and members of the Washington Utilities and Transportation Commission; and STEVEN KING, in his official capacity as executive director of the Washington Utilities and Transportation Commission, Respondents, ARROW LAUNCH SERVICE, INC., Intervenor.

          LAWRENCE-BERREY, C.J.

         RCW 81.84.010(1) prohibits operating a commercial ferry for the public use over a regular route unless the Washington Utilities and Transportation Commission (WUTC) issues a certificate declaring that public convenience and necessity (PCN) requires such operation. James Courtney and Clifford Courtney sought a declaratory order from the WUTC to determine whether any of their five proposed commercial ferry services on Lake Chelan would require a PCN certificate. They contended that none of their proposed services were "for the public use, " as contemplated by RCW 81.84.010(1). The WUTC disagreed and concluded that all five of the Courtneys' proposed ferry services were for the public use and would require a PCN certificate.

         On appeal, the Courtneys contend that the WUTC erred in too broadly construing "for the public use." They also contend that the WUTC acted arbitrarily or capriciously because it treats surface transportation carriers differently from commercial ferries and because the WUTC refused to apply the charter service exemption for commercial ferries to one of its proposed ferry services.

         We review the legislative intent behind RCW 81.84.010(1), conclude that the phrase "for the public use" should be construed broadly to protect regulated commercial ferries, and affirm the WUTC.

         FACTS

         Lake Chelan Boat Company has operated a year-round commercial ferry service on Lake Chelan since 1918. The WUTC's predecessor issued a PCN certificate to Lake Chelan Boat Company in 1929 and, since that time, Lake Chelan Boat Company has successfully protected its exclusivity.

         The Courtneys are residents of Stehekin, Washington, a small, unincorporated town at the northwest end of Lake Chelan. The Courtneys and their families own several businesses in Stehekin, Washington, including two floating plane companies, Stehekin Valley Ranch, Stehekin Outfitters, Stehekin Log Cabins, and Stehekin Pastry Company. They have attempted to operate their own commercial ferry on Lake Chelan for the past two decades. Stehekin, a popular tourist destination, is accessible only by boat, plane, or foot.

         In 2009, Cliff Courtney sent a letter to his state legislators and the governor urging them to eliminate or relax the commercial ferry PCN requirement. The legislature passed, and the governor signed, a bill directing the WUTC to study and report on the appropriateness of the regulations governing ferry service on Lake Chelan.

         The WUTC published its report in early 2010. The report reviewed the history of ferry service regulation on Lake Chelan from 1911 to 2009 and the legal framework for regulation and its rationale. The report discussed the then-current ferry service on Lake Chelan and the views of stakeholders as to whether existing laws should be relaxed to allow unregulated commercial ferries to compete with regulated commercial ferries. The report concludes with a discussion and recommendation to the legislature:

[T]he ferry services provided by the Lake Chelan Boat Company provide a lifeline to the communities of Stehekin and Holden Village. Faced with the question posed in 1921-would these communities be adequately served by unregulated passenger ferry operators?-the present Commission could not say with confidence that they would.
In the short term, it is conceivable, and perhaps likely, that during the busy summer months customer would enjoy the benefits of competition among boat operators, who would lower fares and improve service to make their offerings more attractive to potential customers. During these periods, tourism may even increase as prices fall.
But we agree with our predecessors that. . . ferry operators would cease all unprofitable activities. With no legal obligation to serve, they would reduce or eliminate services during the winter months, or during times when fuel prices are high, or during times when more attractive business opportunities arise for the use of their boats or docking facilities. Even if revenues during the summer months would allow the operators revenue to serve year-round, they would not be expected to so if such activities were unprofitable and they were under no obligation to provide them. In any event, it is not clear that summer operations would subsidize winter service if the operators were to lose market share during those months to seasonal competitors.
Moreover, the issue of safety must be considered. Because the purchase, maintenance and operation of ferry service is a costly venture ... we doubt that the opportunity to provide ferry service on Lake Chelan will attract more than a few operators that the Commission would deem "fit, willing and able" to provide service under current standards. . . .
For these reasons, the Commission does not recommend at this time any changes to the state laws dealing with commercial ferry regulation as it pertains to Lake Chelan. . . .

Clerk's Papers (CP) at 287.

         In 2011, the Courtneys commenced a federal constitutional challenge to the PCN requirement. The federal district court dismissed the Courtneys' claims, but the Ninth Circuit reversed in part. On remand, the federal district court issued an order "retain[ing] jurisdiction over [the Courtneys'] second constitutional claim pending an authoritative construction of the phrase 'for the public use for hire' by the WUTC or the Washington state courts." CP at 252.

         In furtherance of that order, the Courtneys filed a petition with the WUTC for it to determine the meaning of "for the public use for hire."[1] The WUTC declined to enter an order on the basis that the petition lacked sufficient information and operational details. The Courtneys then filed a second petition setting forth five proposed ferry services so that the WUTC could make its determination as to each proposed service.

         The services share several features in common. The proposed vessel is a 50- to 64-foot climate-controlled boat, and would operate between Memorial Day and early October of each year. Each service would charge a flat rate of $37 per adult passenger for a one-way ticket, or $74 for a round trip.

         Each service would be a scheduled run between Stehekin and the federally-owned dock in either Fields Point Landing or Manson Bay Marina. The boat would leave Stehekin at 10:00 a.m., arrive at either destination at noon, depart at 12:30 p.m., and arrive back at Stehekin at 2:30 p.m. The primary difference among the proposed services are the scope of passengers the boat would carry:

Proposal 1 (Lodging Customers of Stehekin Valley Ranch)-Passengers would be limited to persons with confirmed reservations to stay overnight at Stehekin Valley Ranch, owned by Clifford Courtney and his wife. The boat transportation service would be owned by Clifford Courtney, and make no intermediate stops.
Proposal 2 (Lodging Customers and Customers of Other Activities Offered at Stehekin Valley Ranch)-In addition to persons with reservations to stay at the ranch, passengers would include anyone with reservations to participate in any of the activities the ranch offers, including activities provided by Stehekin Outfitters, run in part by Clifford Courtney's son. Again, the boat transportation service would be owned by Clifford Courtney and would make no intermediate stops.
Proposal 3 (Customers of Courtney Family-owned Businesses)-Passengers would be limited to anyone with reservations at any business owned by Clifford or James Courtney or their extended family, including but not limited to the Stehekin Valley Ranch. The boat would make intermediate stops at, or stand-alone trips to, other points on Lake Chelan as necessary to access the businesses. The boat transportation service would be owned by James and Clifford Courtney.
Proposal 4 (Customers of Stehekin-Based Businesses)-Passengers could be anyone with reservations at any Stehekin-based businesses that want to use the service, including but not limited to Courtney family-owned businesses. The boat would make intermediate stops at, or stand-alone trips to, other points on Lake Chelan as necessary to access the businesses. The boat transportation service would be owned by James and Clifford Courtney.
Proposal 5 (Charter by Stehekin-based Travel Company)-Passengers would be restricted to persons who have purchased a travel package from a Stehekin-based travel agency that is not affiliated with the Courtneys but would charter the boat from the Courtneys. The boat would make intermediate stops at, or stand-alone trips to, other points on Lake Chelan as necessary to access the travel locations. The boat transportation service would be owned by James and Clifford Courtney.

CP at 429-30. In all of the proposed services, the commercial ferry service would be owned independently from the other businesses.

         The WUTC issued notice for all interested persons or entities to submit comments. Lake Chelan Boat Company expressed its opposition to another ferry service on Lake Chelan, claiming its financial viability and ability to operate year-round services for the public would be under threat. Arrow Launch Service, Inc.-a PCN ferry operator not servicing Lake Chelan-also expressed its opinion that the Courtneys' proposed services would create a template for setting up ferries that are public in all but name, which would threaten the viability of all true regulated public ferries in Washington.

         The WUTC heard oral argument and issued its declaratory order a few weeks later. The WUTC noted that the only legal issue was whether the proposed services would operate "for the public use" within the meaning of RCW 81.84.010(1). The order noted that the legislature did not define the phrase and that neither the WUTC nor any Washington court had interpreted the phrase.

         The WUTC then looked to the plain language of the statute to derive the legislature's intent. Relying on a dictionary definition, the WUTC construed "for the public use" as meaning "'accessible to or shared by all members of the community.'" CP at 432-33. Relying on a dictionary definition once again, the WUTC construed "community" as meaning "' a body of individuals organized into a unit'" or "' linked by common interests.'" CP at 433. Combining the dictionary definitions for both terms, the WUTC concluded that a commercial ferry operator must obtain a PCN certificate when the ferry "is accessible to all persons that are part of a group with common interests." CPat433.

         The Courtneys argued to the WUTC that their proposed services were not for the public use because ferry services would be limited to customers of one or more particular Stehekin businesses. The WUTC noted that the United States Supreme Court had rejected a similar argument in Terminal Taxicab Co. v. Kutz, 241 U.S. 252, 36 S.Ct. 583, 60 L.Ed. 984 (1916). The WUTC, in rejecting this argument, concluded that limiting services to persons who are demonstrated customers of specific businesses would not remove the services' essential public character.

         The Courtneys also argued that exemptions applicable to commercial ferries should be as broad as exemptions applicable to surface transportation companies. The WUTC, noting that there are important differences between the commercial ferry statutes and surface transportation statutes, rejected that argument.

         The Courtneys further argued that Proposal 5 was exempt under the ferry charter service exemption. The WUTC disagreed and explained that Proposal 5 was not a true charter service because it would not transport cohesive groups for a single agreed-upon purpose; rather, it would simply be customers of Stehekin businesses aggregated through a ...


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