McTighe v. New England Telephone and Telegraph Co.

• Decision Date: 21 September 1954
• Docket Number: No. 174,Docket 22920.,174
• Citation: 216 F.2d 26
• Parties: Hazel B. McTIGHE, Appellee, v. NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY, Appellant.
• Court: U.S. Court of Appeals — Second Circuit

216 F.2d 26 (1954)

Hazel B. McTIGHE, Appellee, v. NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY, Appellant.

No. 174, Docket 22920.

United States Court of Appeals Second Circuit.

Argued June 14, 1954.

Decided September 21, 1954.

Guy M. Page, Burlington, Vt., for appellant; Guy M. Page, Jr., and Phyllis W. Page, Burlington, Vt., of counsel.

Gannett & Oakes and John G. Kristensen, Brattlesboro, Vt., for appellee. James L. Oakes, Brattlesboro, Vt., of counsel.

Before SWAN, MEDINA and HARLAN, Circuit Judges.

MEDINA, Circuit Judge.

We are concerned on this appeal only with questions of the validity of two clauses of separate contracts limiting the liability of the telephone company for omission to include the name of a service subscriber in its alphabetical and classified directories. These questions are presented by exceptions to refusals by the court to charge the jury that their verdict in the case of each alleged breach of contract must be limited to the amount specified in these clauses.

As the publication of the alphabetical directory is an essential feature of the service rendered by the telephone company, regulations and requirements relative thereto appear together with the tariffs as filed with the Vermont Public Service Commission. Upon the approval by the Public Service Commission of the rates and collateral requirements such as those affecting the publication of the alphabetical directory such rates and requirements become effective and not otherwise. The limitation of liability clause thus in effect here, on approval of the Public Service Commission, follows:

"The Telephone Company\'s liability arising from errors or omissions in directory listings * * * shall be limited to the amount of actual impairment to the customer\'s service in no event shall exceed one-half the amount of the exchange service charges for main telephones, extension telephones, and private branch exchange telephones, auxiliary lines, private branch exchange trunks, and private branch exchange switchboards involved during the period covered by the directory in which the error or omission occurs."

The publication of the classified directory, however, is wholly a matter of private contract and contracts relating thereto are not required to be filed with the Public Service Commission which has no jurisdiction except over matters relating to the public utility services rendered by the company and the rates relative thereto. The clause applicable to the classified directory is:

"The directory service described on the reverse side of this application is for insertion in the next directory issue and each subsequent directory issue until it is cancelled in full or in part by either party by notice in writing not less than fifteen days prior to the closing date of the issue from which the directory service is to be removed. The applicant agrees that the company shall not be liable for errors or omissions (including total omissions) in such directory service beyond the amount paid for the item or items in which errors or omissions occur for the issue life of the directory involved. The said Company reserves the right at all times to reject or discontinue any or all advertising matter."

Notwithstanding these clauses the trial court charged that, in the event that the jury found that plaintiff's name had been negligently omitted, the damages to be assessed might exceed the amounts prescribed by the terms of the contracts.

The instructions as given were erroneous on both counts. True it is that the courts will scrutinize with care clauses exonerating public utility companies, such as railroads, telegraph and telephone companies and others, from liability for the consequences of their own negligence, with reference to the public services rendered by them. The fact that the member of the public patronizing such public utility companies must take the contract proffered by the company or forego using the service has enabled the courts to inquire into the reasonableness of the type of clause now under discussion and by this test the clause applicable to the alphabetical directory would as a matter of contract law be considered unreasonable and unenforceable. But the principle which enables courts to strike down and condemn clauses affecting the performance by the company of its functions as a public utility is limited to the area in which the public services are rendered and has no application whatever to the domain in which the public utility may freely contract in its private capacity. The obtaining of the services of the public utility by way of transportation or communications or providing gas or electricity is quite apart from the leases, advertising contracts and a host of other miscellaneous agreements commonly made by members of the public with public utility companies. If there be some disparity in the bargaining power of the contracting parties it is no more than may be found generally to exist; and the courts follow the general rule that the parties are free to contract according to their own judgment and the reasonableness of their engagements will not be entered into.

But legislation by a state may change the law. The fixing of rates is a legislative function, and the power to fix rates and regulate matters affecting rates is commonly delegated to state administrative bodies such as Public Service Commissions. For example in Vermont the Act of 1908, Laws 1908, No. 116, gave the Vermont Public Service Commission jurisdiction over the conduct of the public telephone business together with broad powers for its effective and complete supervision. Among other things the statute requires supervised companies to file rate schedules and "as a part thereof * * * the rules and regulations that in any manner affect the tolls or rates". The alphabetical directory, "as an aid to the use of the telephone system," was under the control of the Public Service Commission and subject to the rules and regulations for directory listings. The reasonableness of these rules and regulations is determined by the Public Service Commission in the exercise of the power delegated to it by the legislature. Accordingly, the "contract" with reference to the alphabetical directory, having been sanctioned as reasonable by the Public Service Commission in the exercise of its regulatory functions, is no longer one in connection with which the courts have the power to examine into the question of reasonableness on a collateral attack. Thus, for different reasons, each of the two clauses under attack here would, by the application of sound general principles, be considered valid and enforceable.

But this diversity case is governed by the law of Vermont; and we must now examine the course of judicial decisions in Vermont and...