Travelers Ins. Co. v. Detroit Edison Co.

• Decision Date: 27 July 2001
• Docket Number: Docket No. 116610, Calendar No. 1.
• Citation: 631 N.W.2d 733,465 Mich. 185
• Parties: The TRAVELERS INSURANCE COMPANY, Plaintiff-Appellee, v. The DETROIT EDISON COMPANY, Defendant-Appellant, and City of Detroit Water and Sewerage Department, Nonparticipating Defendants.
• Court: Michigan Supreme Court

631 N.W.2d 733

465 Mich. 185

The TRAVELERS INSURANCE COMPANY, Plaintiff-Appellee, v. The DETROIT EDISON COMPANY, Defendant-Appellant, and City of Detroit Water and Sewerage Department, Nonparticipating Defendants.

Docket No. 116610, Calendar No. 1.

Supreme Court of Michigan.

Argued April 3, 2001.

Decided July 27, 2001.

Grotefeld & Denenberg, L.L.C., (by Todd B. Denenberg and Jeffrey R. Learned), Bingham Farms, MI, for plaintiff-appellee.

John P. Jacobs, Southfield, MI, and Jacob M. Abella, Detroit, MI, for defendant-appellant.

Varnum, Riddering, Schmidt & Howlett, L.L.P., (by Jack D. Sage), Grand Rapids, MI, amici curiae for Dominion Reserves, Inc.

Miller, Johnson, Snell & Cummiskey, P.L.C., (by Jon R. Muth and D. Andrew Portinga), Grand Rapids, MI, amici curiae for North Michigan Land & Oil and Savoy Oil & Gas Shareholder Trust.

Foster, Swift, Collins & Smith, P.C., (by Webb A. Smith, William K. Fahey, and Stephen J. Rhodes), Lansing, MI, and Dennis R. O'Connell and Glen W. Johnson, Detroit, MI, amici curiae for Michigan Consolidated Gas Company.

Opinion

MARKMAN, J.

We granted leave to appeal in this case, directing the parties to address: (1) whether the doctrine of primary jurisdiction is properly characterized as a "defense," and, if so, (2) whether such a defense is waived by a party's failure to raise it in the first responsive pleading. 463 Mich. 906, 618 N.W.2d 773 (2000), citing Rinaldo's Construction Corp. v. Michigan Bell Telephone Co., 454 Mich. 65, 70, 559 N.W.2d 647 (1997), and Grand Blanc Landfill Inc. v. Swanson Environmental Inc., 448 Mich. 859, 528 N.W.2d 734 (1995).

For the reasons set forth below, we hold that the doctrine of primary jurisdiction is not a defense, but rather a prudential doctrine of judicial deference and discretion. We further conclude that the doctrine is not waivable, and the circuit court did not err in deferring plaintiff's claim to the Michigan Public Service Commission (MPSC). Therefore, we reverse the judgment of the Court of Appeals and reinstate the decision of the Wayne Circuit Court.

I. FACTUAL BACKGROUND

Endeavoring to service certain customers in downtown Detroit, Detroit Edison Company (Detroit Edison) sent steam power to Heaven on Earth Inn.¹ Because repairs were being performed on one of its steam lines in January of 1994, Detroit Edison shut off steam power to the Inn. As a result, the Inn's water pipes froze, and flood damage resulted. The Inn was insured by appellee, Travelers Insurance Company. After paying on the claim filed by the Inn, Travelers sought subrogation from Detroit Edison. On October 17, 1995, Travelers filed several tort claims and a breach of contract claim before the Wayne Circuit Court. On March 19, 1996, the court granted partial summary disposition on the tort claims in Detroit Edison's favor. The sole remaining claim that survived this disposition was the breach of contract claim.²

Nearly twelve months after the circuit court's grant of partial summary disposition, and seventeen months after the original complaint had been filed, Travelers moved to amend its original complaint. The circuit court granted, in part, Travelers motion. Detroit Edison countered with an answer to Travelers amended complaint and, for the first time, asserted the doctrine of primary jurisdiction. Detroit Edison claimed that the MPSC was the agency with the sole authority to assert jurisdiction over the contract dispute between itself and Travelers.³ After this assertion, Detroit Edison moved for summary disposition under MCR 2.116(C)(4)⁴ on the ground that the court lacked subject-matter jurisdiction.⁵

Entertaining the parties' oral arguments on Detroit Edison's motion, the circuit court ruled that Detroit Edison could rely on the doctrine of primary jurisdiction, even though the doctrine was first asserted in an answer to an amended complaint over eighteen months after the filing of the initial complaint in the case. The circuit court noted a conflict among jurisdictions regarding whether primary jurisdiction can be asserted after judicial proceedings have commenced, or whether the assertion has been waived by a party's failure to raise it. Citing Rinaldo's, supra at 70, 559 N.W.2d 647, the circuit court stated:

Michigan courts recognize the concept of primary jurisdiction as, not so much divesting a court of its subject-matter jurisdiction in favor of the exclusive jurisdiction of an administrative agency, but a "concept of judicial deference and discretion," and that it exists as "recognition of the need for orderly and sensible coordination of the work of agency and of courts."

Concerning the present case, the circuit court held that "while [Detroit] Edison ha[d] defended the case and ha[d] participated in discovery, nonetheless, the case ha[d] not yet come to an adjudicatory phase with respect to the breach of contract claim." The court found that the reasons for not allowing waiver of primary jurisdiction expressed in Dist. of Columbia v. Thompson, 570 A.2d 277 (D.C.App.1990), also applied here.⁶ Further, the court stated that this result was consistent with the direction of the court in White Lake Imp. Ass'n v. City of Whitehall, 22 Mich.App. 262, 284, 177 N.W.2d 473 (1970), to wit, that the primary jurisdiction doctrine should not be applied where "judicial proceedings have advanced to a point where it would be unfair to remit the plaintiff to another and duplicative proceeding" and where "a court of equity might well conclude that the proper administration of justice requires it to retain jurisdiction and itself to decide the matter." The circuit court stated that here there was no danger of duplicative proceedings as the plaintiff's breach of contract claims had not yet been tried.

II. APPELLATE HISTORY

Detroit Edison's victory was short lived. In a published opinion, the Court of Appeals reversed the circuit court's grant of summary disposition holding that Detroit Edison had waived primary jurisdiction by failing to raise the doctrine until eighteen months had passed from the time of the filing of the original complaint.

In the Court of Appeals view, the trial court erred when it ruled that primary jurisdiction was a defense similar to that of subject-matter jurisdiction, and that it could be raised at any time during the proceedings. Id. at 492, 177 N.W.2d 473. Citing LeDuc, Michigan Administrative Law, § 10:43, at 70, the Court of Appeals concluded that "[b]ecause the defense of primary jurisdiction says nothing about the power of the court to resolve a dispute before it, there would appear to be no policy that justifies equating primary jurisdiction with subject-matter jurisdiction for purposes of MCR 2.111(F)(3) and MCR 2.116(C)(4)." Id. at 493, 177 N.W.2d 473.

Also, citing Campbell v. St. John Hosp., 434 Mich. 608, 613-615, 455 N.W.2d 695 (1990), the Court of Appeals drew an analogy between asserting the doctrine of primary jurisdiction as a defense and raising an arbitration agreement as an affirmative defense. The Court of Appeals noted that, in Campbell, this Court "recognized that despite the Malpractice Arbitration Act... and the uniform arbitration act ... the circuit court was not deprived of jurisdiction to decide medical malpractice claims where the complaining party [had] signed a valid arbitration agreement." 237 Mich.App. at 493, 603 N.W.2d 317 (internal citations omitted). The Court of Appeals determined that Campbell held that the failure of a party to assert, as an affirmative defense, the existence of an arbitration agreement in its original responsive pleading constituted a waiver of that defense. Id. at 494, 603 N.W.2d 317, citing Campbell, supra at 615-617, 455 N.W.2d 695. The Court concluded that the "affirmative defense of primary jurisdiction, which does not deprive the trial court of subject-matter jurisdiction, is more closely akin to the affirmative defense of the existence of an arbitration agreement and should be treated similarly." Id. at 494, 603 N.W.2d 317. In contrast, the Court refused to "equate the defenses of primary jurisdiction and subject-matter jurisdiction...." Id. Thus, the Court of Appeals likened the doctrine of primary jurisdiction to those other affirmative defenses noted in MCR 2.116(C)(7) that must be pleaded in response to a complaint in order to be preserved.⁷

The Court of Appeals concluded that the doctrine of primary jurisdiction was an "affirmative defense," and, therefore, pursuant to MCR 2.111(F)(2)⁸ and (3),⁹ Detroit Edison's failure to timely raise the defense constituted a waiver. Id. at 494-95, 603 N.W.2d 317, citing Stanke v. State Farm Mut. Auto. Ins. Co., 200 Mich.App. 307, 312, 503 N.W.2d 758 (1993).¹⁰

III. THE DOCTRINE OF PRIMARY JURISDICTION

The doctrine of primary jurisdiction originated in Texas & Pacific R Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553 (1907). There, the United States Supreme Court examined "the scope and effect of the [Interstate Commerce A]ct to regulate commerce upon the right of a shipper to maintain an action at law against a common carrier to recover damages because of the exaction of an alleged unreasonable rate...." Id. at 436, 27 S.Ct. 350. The Court concluded that the "shipper seeking reparation predicated upon the unreasonableness of the established rate must, under the act to regulate commerce, primarily invoke redress through the Interstate Commerce Commission, which body alone is vested with the power originally to entertain proceedings for the alteration of an established schedule...." Id. at 448, 27 S.Ct. 350. Since the pronouncement of the doctrine in Texas & P R, the Supreme Court has expanded application of the doctrine of primary jurisdiction to other agencies, recognizing their regulatory areas of expertise.¹¹

Following Texas & P R, supra, this Court stated that "the jurisdiction of courts to determine the reasonableness of the tariff published and filed with the Interstate...