Daaleman v. Elizabethtown Gas Co.

• Citation: 77 N.J. 267,390 A.2d 566
• Parties: Henry J. DAALEMAN, individually and as a representative of a class of Elizabethtown Gas Company Consumers, Plaintiff-Respondent and Cross-Appellant, v. ELIZABETHTOWN GAS COMPANY, Defendant-Appellant and Cross-Respondent, and The New Jersey Board of Public Utility Commissioners, Defendant-Respondent.
• Decision Date: 29 June 1978
• Court: United States State Supreme Court (New Jersey)

Page 267

77 N.J. 267

390 A.2d 566

Henry J. DAALEMAN, individually and as a representative of a class of Elizabethtown Gas Company Consumers Plaintiff-Respondent and Cross-Appellant, v. ELIZABETHTOWN GAS COMPANY, Defendant-Appellant and Cross-Respondent and The New Jersey Board of Public Utility Commissioners Defendant-Respondent.

Supreme Court of New Jersey.

Argued April 24, 1978.

Decided June 29, 1978.

Russell Fleming, Jr., Elizabeth, for Elizabethtown Gas Co.

Henry J. Daaleman in pro per.

Bertram P. Goltz, Jr., Deputy Atty. Gen., for defendant-respondent (Stephen Skillman, Asst. Atty. Gen., of counsel, John J. Degnan, Atty. Gen., attorney).

The opinion of the court was delivered by

SULLIVAN, J.

The present suit, so far as it is pertinent to this appeal, was filed as a class action against defendant Elizabethtown Gas Company (Elizabethtown), a privately owned public utility corporation operating under the jurisdiction of the Board of Public Utility Commissioners of the State of New Jersey (PUC). Plaintiff alleges that he is a member of a class of 186,000 gas customers of Elizabethtown and that he is maintaining this suit on their behalf under the New Jersey Consumer Fraud Act, N.J.S.A, 56:8-1 Et seq.

Plaintiff charges that Elizabethtown has fraudulently manipulated the Purchased Gas Adjustment Clause which is a part of its filed tariff so as to overstate the actual cost of gas purchased, as well as the quantity thereof, and has reflected this overstatement in the monthly bills sent to its customers. The suit demands treble damages, counsel fees and costs. N.J.S.A. 56:8-19.

The trial judge, in an opinion reported at 142 N.J.Super. 531, 362 A.2d 70 (Law Div.1976), dismissed plaintiff's suit, holding that the Consumer Fraud Act did not apply to a public utility. The dismissal was without prejudice to plaintiff presenting the same complaint to PUC, which the trial judge held was the appropriate forum for granting redress for overcharges by a public utility.

On appeal by plaintiff, the Appellate Division, in a reported opinion, 150 N.J.Super. 78, 374 A.2d 1237 (1977), agreed that the breadth of the PUC's statutorily accorded regulatory control over public utilities virtually mandated adjudication of the merits of plaintiff's complaint by that agency rather than by the court. The Appellate Division held, though, that public utilities were also subject to the provisions of the Consumer Fraud Act and that the court had concurrent jurisdiction to entertain plaintiff's complaint. However, since the basic issue, namely Elizabethtown's alleged fraudulent manipulation of the Purchased Gas Adjustment Clause, was within the PUC's special competence, expertise and statutory jurisdiction, the Appellate Division held that the doctrine of primary jurisdiction should have been invoked and, instead of dismissing the complaint, the court should have stayed the action pending PUC's resolution of the "agency" issues. ¹

Specifically, the Appellate Division held that the only issue raised by plaintiff's complaint which was not initially adjudicable by the PUC, was plaintiff's right to treble damages and counsel fees. In this regard, the Appellate Division held that the Consumer Fraud Act did not mandate an award of treble damages but only authorized such award in the discretion of the trial court. The matter was accordingly remanded for reinstatement of plaintiff's complaint and, dependent upon the outcome of the PUC hearing, consideration of the question of treble damages and counsel fees. Elizabethtown's petition for certification was granted by this Court. 75 N.J. 537, 384 A.2d 516 (1977), as was plaintiff's cross-petition. 75 N.J. 590, 384 A.2d 821 (1977).

As heretofore noted, Elizabethtown is a privately owned public utility corporation operating under the jurisdiction of PUC. It is subject to the provisions of the Public Utilities Act, N.J.S.A. 48:2-1 Et seq. and implementing regulations promulgated by PUC. The rates it charges customers for gas service are fixed by PUC. However, an Administrative Order of PUC, N.J.A.C. 14:11-1.13, allows Elizabethtown to include in its tariff a Purchased Gas Adjustment Clause by virtue of which the utility is permitted to make automatic adjustments in its customer billings for variations in the cost of purchasing and storing gas. The administrative order requires Elizabethtown to submit to PUC detailed statements as to such cost figures and adjustments in billings made thereunder. Elizabethtown's alleged overcharging of customers made under this clause is the basis of plaintiff's suit.

The Consumer Fraud Act, originally enacted in 1960, is aimed basically at unlawful sales and advertising practices designed to induce consumers to purchase merchandise or real estate. It provides in N.J.S.A. 56:8-2,

The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice; * * * .

The act as amended and supplemented is administered by the Division of Consumer Affairs, Department of Law and Public Safety. N.J.S.A. 52:17B-124. Detailed administrative regulations have been adopted, pursuant to the act, controlling selling and advertising practices in the areas of consumer sales which are subject to the act. N.J.A.C. 13:45A-1.1 Et seq.

The act provides for injunctive relief against unlawful practices, N.J.S.A. 56:8-8, monetary penalties for violation of the act, N.J.S.A. 56:8-13, and also permits a person, who suffers a loss due to a method, act or practice declared unlawful under the act, to sue and recover threefold the damages sustained, together with reasonable attorney's fees and costs of suit, N.J.S.A. 56:8-19.

It seems clear that Elizabethtown, by using its Purchased Gas Adjustment Clause in its monthly billings, did not engage in a selling or advertising practice within the meaning of the Consumer Fraud Act. In enacting N.J.S.A. 56:8-1 Et seq., the legislative concern was over sharp practices and dealings in the marketing of merchandise and real estate whereby the consumer could be victimized by being lured into a purchase through fraudulent, deceptive or other similar kind of selling or advertising practices.

This is simply not the present case. Here involved are adjustments in defendant's utility's billings as a result of variations in the costs of it of purchasing and storage gas supplies. As heretofore noted, a Purchased Gas Adjustment Clause is a tariff mechanism, permitted under PUC's administrative order. Application of the clause involves interpretation of the PUC administrative order and regulations. Its use is subject to PUC supervision and control. Misuse of this type of clause, whether intentional or otherwise, and the remedies therefor are matters as to which PUC has been vested with exclusive jurisdiction.

The record shows that as a result of a complaint by plaintiff to PUC regarding Elizabethtown's alleged fraudulent manipulation of the clause in question, the Division of Audits of PUC is presently conducting an investigation of the matter. Upon completion of the audit, the PUC will then afford plaintiff the opportunity to "present his factual contentions and legal arguments." If it should develop that Elizabethtown is making improper use of its Purchased Gas Adjustment Clause, PUC has ample authority to order corrective and remedial action.

It is also to be noted that the Consumer Fraud Act is administered by the Division of Consumer Affairs which has promulgated extensive regulations for those consumer transactions which are subject to the act. Were Elizabethtown held to come under the act in its use of its Purchased Gas Adjustment Clause, a situation would be presented where separate state agencies would have the right to exercise concurrent jurisdiction and control over Elizabethtown's billings, with a real possibility of conflicting determinations, rulings and regulations affecting the identical subject matter.

The Consumer Fraud Act also provides that in a suit under the act by a person who suffers a loss because of a violation of the act, "the court shall * * * award threefold the...