Lowell Gas Co. v. Attorney General

Decision Date08 January 1979
Citation385 N.E.2d 240,377 Mass. 37
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court

Reginald H. Howe, Boston (George I. Mulhern, Jr., Boston, with him), for Lowell Gas Company and another.

Paula W. Gold, Asst. Atty. Gen. (James C. McManus and Catharine W. Hantzis, Asst. Attys. Gen., with her), for Attorney General.


LIACOS, Justice.

The Attorney General brought complaints against Lowell Gas Company and Cape Cod Gas Company (companies), pursuant to G.L. c. 93A, § 4, G.L. c. 12, § 10, G.L. c. 164, § 78, and G.L. c. 231A. The amended complaints allege that the companies, by allocating short-term debt interest expense to the inventory cost of gas charged to consumers, have committed unfair and deceptive practices under G.L. c. 93A (count 1) and common law fraud (count 2). The Attorney General seeks injunctive relief, restitution, and damages for the alleged illegal acts of the companies.

Originally, in September, 1977, the Attorney General brought separate actions in the Superior Court against each of the companies under G.L. c. 93A, § 4. The companies filed a motion to dismiss in each action. Shortly thereafter they filed a petition under G.L. c. 211, § 4A, in the county court to transfer both actions to this court for hearing and determination of the motions to dismiss. In January, 1978, the single justice ordered that the actions be transferred to the county court and consolidated.

Both the companies and the Attorney General filed requests for admissions of fact in the county court. The Attorney General also filed amended complaints, which are essentially alike, in both actions, on April 27, 1978, adding to each the count alleging common law fraud. The companies filed a consolidated motion to dismiss both amended complaints, and the single justice reserved and reported the motion to dismiss without decision to the full court on the amended complaints, the motion to dismiss, and the admissions of fact. 1 We hold that the motion to dismiss the actions on the pleadings should be denied.

The allegations of the complaints, as well as those inferences favorable to the plaintiff which may be drawn therefrom, are to be taken as true for the purpose of ruling on a motion to dismiss. Nader v. Citron, 371 Mass. ---, --- A, 360 N.E.2d 870 (1977). A summary of the facts as alleged in the Attorney General's complaints is as follows. Lowell Gas Company (Lowell) and Cape Cod Gas Company (Cape Cod) are privately owned gas utility companies, subject to the jurisdiction of the Department of Public Utilities of the Commonwealth (department). 2 Both companies sell gas to consumers pursuant to rates and schedules filed with the department. Lowell and Cape Cod, beginning in 1972 and 1973, respectively, have engaged in the practice of allocating interest expense for short-term debt to the inventory cost of fuel sold to customers. This practice is contrary to the accounting procedures prescribed by the department 3 through an order which has been in effect since 1961. 4 Further, department accounting regulations provide for the submission of questions of doubtful interpretation to the department for consideration and decision. 5

In spite of these required procedures, the companies allocated interest on short-term debt to the cost of fuel sold to consumers, without submitting the question of the propriety of this practice to the department. On August 1, 1977, the department made clear that it had neither permitted nor ever approved the companies' inclusion of short-term interest in the cost of fuel, and that such practice was unacceptable. 6 As a result of this practice, it is alleged that customers of the companies have paid an inflated price for gas. It is further alleged that the overpayments were $1,175,000 to Lowell and $500,000 to Cape Cod.

The Attorney General also alleges in count 2 that the companies' practice of adding interest expense to the cost of gas charged to consumers was done knowingly or without ascertaining easily verifiable facts; that the companies fully intended to deceive both their customers and the department as to the correct cost of gas; that the department and the customers relied on the companies' misrepresentations as to cost of gas; and that the customers of the companies were damaged as a result of that reliance.

The companies' motion to dismiss asserts lack of subject matter jurisdiction, lack of standing, and failure to state a claim on which relief can be granted, as grounds for dismissal of the actions. We address these contentions seriatim.

Lack of subject matter jurisdiction. The companies characterize the suit as an impermissible collateral attack on rates lawfully promulgated by the Department of Public Utilities. They claim that, since rates and related accounting and reporting practices of gas companies are subject to regulation by the department under G.L. c. 164, that statutory scheme is exclusive and precludes the courts from taking jurisdiction over such a complaint.

While it is undisputed that suits directly challenging public utility rates as determined by the department may not be brought in the Superior Court, Boston v. Edison Elec. Illuminating Co., 242 Mass. 305, 136 N.E. 113 (1922), 7 we find this principle inapposite here. Indeed, our view of the essential character of this case differs markedly from that propounded by the companies. The Attorney General in his complaints does not attack the validity of rates as set forth by the department. Rather, he challenges what he alleges to be unfair, deceptive (count 1), and fraudulent (count 2) practices by the companies vis-a-vis both their customers and the department. He alleges further that such practices were neither permitted nor approved by the department. 8

Proceeding from this perspective, we note that nothing in G.L. c. 164, either explicitly or implicitly, excludes application of c. 93A to unfair or deceptive acts or practices of gas utility companies. Indeed, the language of c. 164, § 78, 9 clearly implies an expectation that the Attorney General take appropriate action once notified of violations of law or department orders. 10 We have previously held, in finding c. 93A applicable to deceptive insurance practices when c. 176D covered much of the same domain, that the mere existence of one regulatory statute does not affect the applicability of a broader, nonconflicting statute, particularly when both statutes provide for concurrent coverage of their common subject matter. Dodd v. Commercial Union Ins. Co., 372 Mass. ---, --- B, 365 N.E.2d 802 (1977). Cf. SDK Medical Computer Servs. Corp. v. Professional Operating Management Group, Inc., 371 Mass. 117, --- C, 354 N.E.2d 852 (1976) (plaintiff can bring c. 93A action for unfair competition even though the Commissioner of Insurance may have administrative authority under c. 176D to correct the allegedly unfair practices). No provision in either c. 164 or c. 93A requires a contrary result here.

The companies claim also that the courts lack jurisdiction as to the common law count alleging fraud. It is true that the cases relied on by them, such as Sullivan v. Boston Consol. Gas Co., 327 Mass. 163, 97 N.E.2d 535 (1951), Boston Consol. Gas Co. v. Department of Pub. Utils., 321 Mass. 259, 72 N.E.2d 543 (1947), Boston v. Edison Elec. Illuminating Co., supra, and others make it clear that the reasonableness of rates set by the department or the validity of collections made under them cannot be challenged directly in the courts by private parties or consumers. See Haverhill Gas Co. v. Findlen, 357 Mass. 417, 258 N.E.2d 294 (1970). We agree with the companies' claim that rate determinations by the department are subject to judicial review only under the provisions of G.L. c. 25, § 5. However, both the cases cited and the statute are inapposite for the reason that, as we have stated, these complaints are not an attack on the reasonableness or validity of rates fixed by the department. Count 2 alleges fraud by the companies committed on the department. None of the cases cited by the companies involves claims of fraud. Further, none of those cases involves actions brought by the Attorney General.

We need not venture an opinion as to whether the enactment of G.L. c. 164, placing companies such as these within the regulatory purview of the department, precludes any common law action by any party against such companies, as the companies claim. The power of private parties to institute legal proceedings is not necessarily coextensive with that of the Attorney General. Thus, even if it be assumed that the companies are correct that the enactment of G.L. c. 164 so modified the common law as to preempt the jurisdiction of the courts, as well as to defeat the right of private parties to initiate legal action against regulated companies directly in the courts, it does not follow that the same principles apply to a proceeding commenced by the Attorney General. An action by the Attorney General need not violate the principle of equality among customers on which such cases as Haverhill Gas Co. v. Findlen, supra, rest. There is sufficient basis in statutes other than G.L. c. 93A to permit a common law count for fraud to be brought in the Superior Court by the Attorney General against a company which is part of a regulated industry. See, e. g., G.L. c. 164, § 78, and G.L. c. 12, § 10. 11 The provision of G.L. c. 164, § 78, that the department shall give written notice to the Attorney General when a regulated company under c. 164 "violates or fails to comply with the provisions of law," read together with the provisions of G.L. c. 12, § 10 (quoted below), is ample authority to sustain a common law count in fraud which, as here, alleges a fraudulent intent to violate the law. That the Superior Court has...

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