Rinaldo's Const. Corp. v. Michigan Bell Telephone Co., Docket No. 102409

• Decision Date: 04 March 1997
• Docket Number: Docket No. 102409,No. 10,10
• Citation: 454 Mich. 65,559 N.W.2d 647
• Parties: RINALDO'S CONSTRUCTION CORPORATION, a Michigan Corporation, Plaintiff-Appellant, v. MICHIGAN BELL TELEPHONE COMPANY, Defendant-Appellee. Calendar
• Court: Michigan Supreme Court

Page 647

559 N.W.2d 647

454 Mich. 65

RINALDO'S CONSTRUCTION CORPORATION, a Michigan Corporation Plaintiff-Appellant, v. MICHIGAN BELL TELEPHONE COMPANY, Defendant-Appellee.

Docket No. 102409.

Calendar No. 10.

Supreme Court of Michigan.

Argued Nov. 13, 1996.

Decided March 4, 1997.

Fieger, Fieger & Schwartz, P.C. by Michael Alan Schwartz, Southfield, for Plaintiff-Appellant.

Albert Calille and Brian J. Jordan, Detroit, for Defendant-Appellee.

Before the Entire Bench.

Opinion

BOYLE, Justice.

We granted leave to appeal to examine the relationship between courts of general jurisdiction and the primary jurisdiction of the Michigan Public Service Commission (MPSC). Specifically, we address the question whether a circuit court may entertain a cause of action against a telephone company alleging negligence, despite the MPSC's primary jurisdiction over customer claims arising under MPSC tariffs. ¹ We also address the applicability of MPSC Tariff 7 to the plaintiff's case.

For the reasons that follow, we hold that, although a cause of action in tort against a telephone company or a claim that the company has violated the regulatory code or tariff may proceed in a court of general jurisdiction, the doctrine of primary jurisdiction requires dismissal of plaintiff's claim because it arises solely out of the contractual relationship between the telephone company and the plaintiff, its customer, and is limited by Tariff 7.

I. Facts and Proceedings

Plaintiff is a commercial and residential construction company located in Clinton Township. In May, 1991, plaintiff moved its place of business to a new address and requested that defendant Michigan Bell Telephone Company transfer its telephone service to the new address. Upon moving to the new address, plaintiff experienced various problems with its telephone service. ² Michigan Bell attempted to correct these problems by testing the line for trouble and by sending out repair personnel. Michigan Bell's records indicate that among the causes for these problems were unauthorized drop lines, underground cable damage, and problems with the plaintiff's own equipment. ³

In January, 1992, plaintiff filed a complaint in Macomb Circuit Court alleging negligence on the part of the defendant in installing and maintaining plaintiff's telephone service, proximately causing a great number of calls from customers and others not to be connected to plaintiff, and resulting in loss of business revenue in excess of $362,000. The complaint was later amended to add a res ipsa loquitur count and a wilful misrepresentation count based on a June, 1991, statement by the defendant that the problems had been corrected.

The defendant filed a motion for summary disposition pursuant to MCR 2.116(C)(4), arguing that the MPSC had "primary jurisdiction" over the plaintiff's claim, and that plaintiff had not exhausted its administrative remedies. Macomb Circuit Judge George C. Steeh granted the motion, concluding that the plaintiff's claims were within the jurisdiction of the MPSC, despite the allegations of negligence. The judge reasoned that there was no cause of action in tort where "the parties' relationship was purely contractual in nature since any alleged duties owed to plaintiff by defendant were governed by the MPSC tariffs."

The Court of Appeals affirmed in an unpublished per curiam opinion. Like the trial court, the Court of Appeals reasoned that the defendant's only duty to the plaintiff arose "as a result of a contractual agreement between defendant and a specific individual or entity." Unpublished opinion per curiam, issued February 27, 1995 (Docket No. 164509), slip op at 1. Thus, the Court concluded, plaintiff had no cognizable cause of action in tort and was required to assert its breach of contract claim before the MPSC. Id.

Plaintiff appealed to this Court, and we now affirm the Court of Appeals decision.

II. Primary Jurisdiction ⁴

A

Examination of the jurisdictional issue begins with this Court's decision in Valentine v. Michigan Bell, 388 Mich. 19, 25-26, 199 N.W.2d 182 (1972). In Valentine, we affirmed the dismissal of the plaintiff's claims in the context of a circuit court complaint seeking a declaration that the MPSC regulations limiting liability were "null and void as against public policy," and alleging "breach of contract, gross negligence, fraud and misrepresentation, malicious and fraudulent failure to provide reasonably adequate equipment and facilities and service, and willful and wanton negligence." Id. at 21-22, 199 N.W.2d 182. ⁵

Although the issue of primary jurisdiction was raised, we did not explicitly address the doctrine. Thereafter, panels of the Court of Appeals expressed uncertainty regarding the affect of the Valentine decision on the doctrine of primary jurisdiction in the context of suits against public utilities. ⁶

Primary jurisdiction "is a concept of judicial deference and discretion." LeDuc, Michigan Administrative Law, § 10:43, p 70. The doctrine exists as a "recognition of the need for orderly and sensible coordination of the work of agencies and of courts." White Lake Improvement Ass'n v. City of Whitehall, 22 Mich.App. 262, 282, 177 N.W.2d 473 (1970). In White Lake, the Court of Appeals correctly noted that "[t]he doctrine of primary jurisdiction does not preclude civil litigation; it merely suspends court action." Id. at 271, 177 N.W.2d 473. Thus, LeDuc notes, "[p]rimary jurisdiction is not a matter of whether there will be judicial involvement in resolving issues, but rather of when it will occur and where the process will start." Id. at § 10:44, p 73. A court of general jurisdiction considers the doctrine of primary jurisdiction "whenever there is concurrent original subject matter jurisdiction regarding a disputed issue in both a court and an administrative agency." Id., § 10:43 at 70.

In Attorney General v. Diamond Mortgage Co., 414 Mich. 603, 613, 327 N.W.2d 805 (1982), we applied the United States Supreme Court's definition of the doctrine from United States v. Western Pac. R. Co., 352 U.S. 59, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956):

" 'Primary jurisdiction' ... applies where a claim is originally cognizable in the courts and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body." [ ⁷]

The Court observed, "No fixed formula exists for applying the doctrine of primary jurisdiction. In every case the question is whether the reasons for the existence of the doctrine are present and whether the purposes it serves will be aided by its application in the particular litigation." Id. at 64, 77 S.Ct. at 165.

Professors Davis and Pierce identify three major purposes that usually govern the analysis when a court is deciding whether to defer to an administrative agency under this doctrine. First, a court should consider "the extent to which the agency's specialized expertise makes it a preferable forum for resolving the issue...." ⁸ Second, it should consider "the need for uniform resolution of the issue...." Third, it should consider "the potential that judicial resolution of the issue will have an adverse impact on the agency's performance of its regulatory responsibilities." Davis & Pierce, 2 Administrative Law (3d ed), § 14.1, p 272. Where applicable, courts of general jurisdiction weigh these considerations and defer to administrative agencies where the case is more appropriately decided before the administrative body.

In Diamond, for example, we rejected application of the doctrine because "[t]he rationales underlying the ... doctrine [did] not support its application...." Id. at 615, 327 N.W.2d 805. ⁹ Speaking for the Court, Justice Coleman declined to apply the doctrine of primary jurisdiction because "the real estate brokerage business is not a heavily regulated industry of the type to which the doctrine has typically been held to apply." Id. at 614, 327 N.W.2d 805. Additionally, she explained that the courts, "without interfering with the responsibilities of the Department of Licensing and Regulation ... can determine what the obligations of real estate brokers are under our consumer protection, usury, and corporation laws." Id. at 615, 327 N.W.2d 805. Finally, she observed that the nature of the factual questions in the case, whether defendant made misrepresentations in violation of the Michigan Consumer Protection Act, ¹⁰ were not of a type to require agency expertise to evaluate. Id.

In Valentine, we held that claims by utility customers proceed in the circuit court where the "cause of action is based upon a claim that the utility has violated Public Service Commission promulgated tariffs or codes, or if the claim covers some action by the utility outside the regulations of the Public Service Commission...." Id. at 25, 199 N.W.2d 182. While noting that where a plaintiff pleads a cause of action in tort, "the proper forum ... is a court of general jurisdiction of this State," id. at 26, 199 N.W.2d 182, we observed with regard to contractual liability:

[T]he code or tariff is part of the contract between the parties and limits of liability therein contained are presumptively valid. Any claim based upon the contractual obligation of the parties is limited to validly promulgated provisions of the tariff or code within the authority of the Public Service Commission. Ordinarily, a party aggrieved by the provisions of a tariff or code should seek relief by an attack upon those provisions before the Public Service Commission.... [Id. (emphasis added).]

In disposing of the case by affirming the lower courts' dismissals, the Court concluded:

No count sets forth acts or conduct of defendant that would constitute negligence, gross negligence, fraud, misrepresentation, or some other tort. As for any claim in contract, no violation of the code or tariff is pleaded. [Id. at 30, 199 N.W.2d 182.]

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