HL & P v. Auchan USA, Inc.

• Decision Date: 10 September 1998
• Citation: 995 S.W.2d 668
• Parties: (Tex. 1999) HOUSTON LIGHTING & POWER COMPANY, PETITIONER v. AUCHAN USA, INC., SUCCESSOR IN INTEREST TO TEXFIELD, INC., D/B/A AUCHAN HYPERMARKET, RESPONDENT NO. 97-1052
• Court: Texas Supreme Court

Page 668

995 S.W.2d 668 (Tex. 1999)

HOUSTON LIGHTING & POWER COMPANY, PETITIONER v. AUCHAN USA, INC., SUCCESSOR IN INTEREST TO TEXFIELD, INC., D/B/A AUCHAN HYPERMARKET, RESPONDENT

NO. 97-1052

IN THE SUPREME COURT OF TEXAS

Argued September 10, 1998

Decided: June 10, 1999

ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE FIRST DISTRICT OF TEXAS

JUSTICE OWEN delivered the opinion of the Court.

In this case, we determine whether a tariff provision approved by the Public Utility Commission that limits liability for economic damages caused by a utility's negligence may be found unreasonable when applied to a particular outage. We conclude that the tariff at issue is effective to limit damages to necessary repairs and physical damages caused by the utility's negligence. Because the tariff provision is not unreasonable on its face, the trial court did not err in granting summary judgment for the utility on claims for economic damages beyond those set forth in the tariff. Accordingly, we reverse the court of appeals' judgment and render judgment for the utility.

I

Auchan USA, Inc. is a large retail grocer in the Houston area. When Auchan lost electrical power at one of its stores, it notified its provider, Houston Lighting & Power (HL&P), a publicly-held electrical utility, of the problem within twenty minutes. An HL&P service crew arrived approximately an hour later and informed Auchan that the service would be restored in four to six hours. The crew determined that the interruption of service was caused by a transformer failure. Service was not restored until approximately fifteen hours after the power outage. Auchan's refrigerator units were inoperative during that time, and the food contained in those units spoiled. Auchan suffered lost profits and disposal costs of $258,755.29. Auchan was insured against some of those losses by Travelers Insurance Company, which paid Auchan $227,497.69. Travelers brought this subrogation claim, and Auchan joined in the suit seeking recovery of its uninsured losses. Because the interests of Travelers and Auchan are thesame for the purposes of this appeal, we refer to them jointly as Auchan. Auchan also sued General Electric Company (GE), the manufacturer of the failed transformer, for breach of warranty.

Auchan asserted in the trial court that HL&P was negligent, grossly negligent, that the clause in HL&P's tariff that purports to limit its liability was unreasonable as applied to Auchan's loss, and that the tariff was a product of disparate bargaining power. HL&P moved for summary judgment, arguing that its tariff was on file with and approved by the Public Utility Commission of Texas (PUC or the Commission) and that the tariff was not unreasonable. HL&P contended that its tariff should be given full effect to limit liability to the cost of necessary repairs of physical damage to electrical facilities caused by the service interruption.

HL&P's tariff provides, in part:

Company [HL&P] will make reasonable provisions to supply steady and continuous electric service, but does not guarantee the electric service against fluctuations or interruptions. Company will not be liable for any damages, whether direct or consequential, including, without limitation, loss of profits, loss of revenue, or loss of production capacity, occasioned by fluctuations or interruptions unless it be shown that Company has not made reasonable provisions to supply steady and continuous electric service, consistent with the Customer's class of service, and in the event of a failure to make such reasonable provisions (whether as a result of negligence or otherwise), Company's liability shall be limited to the cost of necessary repairs of physical damage proximately caused by the service failure to those electrical facilities of Customer which were then equipped with the protective safeguards recommended or required by the then current edition of the National Electrical Code.

(emphasis added). This same language was incorporated in the service contract between Auchan and HL&P.

The trial court granted partial summary judgment for HL&P on Auchan's negligence claim. Auchan then nonsuited all its other claims against HL&P and its claim against GE, thereby making the partial summary judgment final. On appeal, the court of appeals concluded that Auchan had raised a fact question by presenting summary judgment evidence that its damages substantially exceeded the compensation available under HL&P's tariff and that HL&P unreasonably delayed in repairing the outage. Accordingly, the court of appeals reversed the trial court's judgment and remanded the case for further proceedings. 961 S.W.2d at 203.

We granted HL&P's petition for review to consider the effect of its PUC-approved tariff provision.

II

Although the effect of a utility's tariff that purports to limit liability is a question of first impression for this Court, the issue has been considered by many other courts, including the United States Supreme Court. Before the turn of the century, the Supreme Court had occasion to pass upon the validity of a rate charged by a telegraph company that limited its liability for erroneously transmitted messages. See Primrose v. Western Union Telegraph Co., 154 U.S. 1 (1894). In Primrose, the rate was not approved by any regulatory authority. But the Supreme Court held that the limitation should be given effect, if there were no willful misconduct or gross negligence, as a common-law, contractual limitation of liability. See generally id.

Subsequently, in Western Union Telegraph Co. v. Esteve Bros. & Co., 256 U.S. 566 (1921), the same class of rate charged by the same telegraph company was again under consideration, but by this time, the rates charged had been subjected to regulation by federal statutes. Id. at 570. The Supreme Court recognized that the limitation of liability was part of the telegraph company's filed rate. The Court held that because the Act to Regulate Commerce prohibited undue preferences or advantages and required uniformity in rates, the telegraph company was precluded from compensating an injured customer for more than the filed tariff allowed. See id. at 571. The Supreme Court reasoned that the telegraph company "could no more depart from [the limitations of liability] than it could depart from the amount charged for the service rendered." Id. The Court recognized, however, that in other contexts and under other statutory schemes, such as those involving common carriers, particular attempts at limiting liability were unreasonable. See id. at 574 (citing Union Pac. R.R. v. Burke, 255 U.S. 317 (1921)).

In Southwestern Sugar & Molasses Co. v. River Terminals Corp., 360 U.S. 411 (1959), the Supreme Court refused to strike down summarily an exculpatory provision in a tariff approved by the Interstate Commerce Commission (ICC) that relieved a towboat owner of liability for its own negligence in towing barges. Id. at 421. The Court observed that because tariff provisions that limit liability are part and parcel of the rates charged, regulatory bodies may have a sound basis for approving an exculpatory clause:

For all we know, it may be that the rate specified in the relevant tariff is computed on the understanding that the exculpatory clause shall apply to relieve the towboat owner of the expense of insuring itself against liability from damage caused tows by the negligence of its servants, and is a reasonable rate so computed. Id. at 417-18.

In the case before us today, the rates charged by HL&P to Auchan and HL&P's conditions of service are regulated by the PUC. Under the Public Utilities Regulatory Act (PURA), the Legislature has conferred jurisdiction upon the PUC to regulate utility rates, operations, and services. See TEX. UTIL. CODE 14.001. The PURA requires each utility to file a tariff with the PUC. Id. 32.101. HL&P's tariff contains a schedule of its rates and the rules and regulations governing service.

Auchan does not challenge the PUC's authority to approve the provision that purports to limit HL&P's liability for damages. Nor does Auchan take issue with HL&P's position that the PUC validly approved the limits on the types of damages recoverable and that the tariff provision is not unreasonable on its face. Rather, Auchan argues only that when applied to any particular loss by a customer, the reasonableness of this provision should be determined on a case-by-case basis. Auchan contends that a fact question on reasonableness is presented if there is evidence (1) that a disparity exists between the amount of damages the customer sustained and the recovery allowed by the tariff, and (2) that the utility could have remedied the outage sooner than it did. The court of appeals agreed with Auchan. See 961 S.W.2d at 202.

In rejecting HL&P's argument that its tariff was reasonable as a matter of law and validly limited the types of damages for which HL&P was liable to Auchan, the court of appeals relied on its earlier decisions in Southwestern Bell Telephone Co. v. Reeves, 578 S.W.2d 795 (Tex. Civ. App.-Houston [1st Dist.] 1979, writ ref'd n.r.e.), and Calarco v. Southwestern Bell Telephone Co., 725 S.W.2d 304 (Tex. App.-Houston [1st Dist.] 1986, writ ref'd n.r.e.). The court of appeals concluded in this case, as it had done in Reeves and Calarco, that a tariff is reviewable for reasonableness by a trier of fact. See 961 S.W.2d at 201. At least one other court of appeals has agreed that the reasonableness of a tariff is a fact question, but that court did not necessarily adopt the two-pronged test used by the court of appeals in this case. See Southwestern Bell Tel. Co. v. Vollmer, 805 S.W.2d 825, 829-30 (Tex. App.-Corpus Christi 1991, writ denied).

We agree with HL&P that the analysis employed in Reeves and Calarco and applied by the court of appeals in this case is inconsistent with the majority view throughout this country. Neither Reeves nor Calarco cited any precedent for...