Travelers Ins. Co. v. Detroit Edison Co.

• Decision Date: 21 December 1999
• Docket Number: Docket No. 207110.
• Parties: TRAVELERS INSURANCE COMPANY, Plaintiff-Appellant, v. DETROIT EDISON COMPANY, Defendant-Appellee, and City of Detroit Water and Sewer Department, Stephen F. Gordon, and Kathleen Leavey, Defendants.
• Court: Court of Appeal of Michigan — District of US

603 N.W.2d 317

237 Mich. App. 485

TRAVELERS INSURANCE COMPANY, Plaintiff-Appellant, v. DETROIT EDISON COMPANY, Defendant-Appellee, and City of Detroit Water and Sewer Department, Stephen F. Gordon, and Kathleen Leavey, Defendants.

Docket No. 207110.

Court of Appeals of Michigan.

Submitted May 4, 1999, at Detroit.

Decided September 14, 1999, at 9:10 a.m.

Released for Publication December 21, 1999.

Morrison, Mahoney & Miller (by Charles R. Tuffley and Jeffrey R. Learned), Southfield, for Travelers Insurance Company.

Jack M. Abella, Detroit, for Detroit Edison Company.

Before: MARKEY, P.J., and HOLBROOK, JR., and NEFF, JJ.

PER CURIAM.

Plaintiff Travelers Insurance Company appeals by right the grant of summary disposition in favor of defendant Detroit Edison Company pursuant to MCR 2.116(C)(4) on the grounds that the Michigan Public Service Commission (MPSC) has primary jurisdiction over plaintiff's breach of contract action. We reverse and remand.

The facts are undisputed. In January 1995, defendant Detroit Edison interrupted steam service to the Heaven On Earth Inn (the Inn) for over twenty-four hours after a city of Detroit water tunnel burst and flooded Detroit Edison's steam tunnel. According to plaintiff, the shutdown caused the Inn's water lines to freeze and burst, resulting in extensive damage to the Inn. Plaintiff, pursuant to a property damage insurance policy, paid $1.6 million in insurance benefits to repair the Inn. Afterward, plaintiff commenced this subrogation action to recover the insurance benefits it paid on behalf of the Inn.

Plaintiff filed its complaint on October 17, 1995, against defendants¹ for negligence, nuisance, and trespass. Plaintiff also alleged a breach of contract claim against defendant Detroit Edison for violating General Rule No. 4 of MPSC Tariff No. 4. The rule states:

4. Character of Service

The Company will endeavor, but does not guarantee, to furnish continuous and adequate steam service.... Service is subject to interruption by agreement, by accident, or by necessity of maintenance or system operation or other causes not under the control of the Company.

The Company will not be liable for damages, either direct or consequential, caused by any interruption of service... due to strike, accident, ... storm or flood, or other natural disasters or any cause whatsoever beyond its control except such as may result from failure of the Company to exercise reasonable care and skill in furnishing the service....

Defendant Detroit Edison filed its answer to plaintiff's complaint on October 27, 1995. It did not assert lack of primary jurisdiction as an affirmative defense in its answer.

Defendants filed various motions for summary disposition pursuant to MCR 2.116(C)(8) and (10), and the trial court entered orders granting summary disposition in favor of defendants Detroit Edison, the City of Detroit Water and Sewer Department, Gordon, and Leavey regarding plaintiff's negligence, nuisance, and trespass claims. Plaintiff was permitted, however, to proceed against Detroit Edison (hereafter defendant) on plaintiff's breach of contract theory, in accordance with the court's March 19, 1996, order.

On March 28, 1997, plaintiff filed its first amended complaint, upon stipulation of the parties and pursuant to the trial court's order.² As in count III of plaintiff's original complaint, the first amended complaint alleged that defendant Detroit Edison breached its contract with plaintiff to provide steam service to the Inn, in violation of MPSC Tariff No. 4. This alleged breach caused the Inn's pipes to freeze and burst, which resulted in extensive property damage. The original and amended pleadings are virtually identical.³ On April 4, 1997, defendant Detroit Edison filed its answer to plaintiff's first amended complaint. In its affirmative defenses, defendant argued for the first time, without seeking leave to amend its original answer, that the trial court "lacks jurisdiction of this matter and that proper jurisdiction is with the [MPSC]."

On April 18, 1997, defendant filed its motion for summary disposition pursuant to MCR 2.116(C)(4), arguing that "primary jurisdiction for actions involving claims for breach of contract against public utilities is not in a court of general jurisdiction, but before the [MPSC]." Plaintiff opposed defendant's motion on the bases that (1) this case does not require the expertise of the MPSC, (2) this case presents no threat to the uniform resolution of issues between the MPSC and the courts, (3) resolution of this case will not have an adverse effect on the MPSC's regulatory responsibilities, (4) judicial proceedings have advanced to a point where it would be unfair to dismiss the action,⁴ and (5) defendant waived this defense by failing to raise it in a timely fashion.

The trial court granted defendant's motion for summary disposition upon determining that the doctrine of primary jurisdiction applied and was not waived. Citing Dist. of Columbia v. Thompson, 570 A.2d 277, 288 (D.C.App., 1990), the trial court concluded that while primary jurisdiction did not implicate a court's subject-matter jurisdiction in the strict sense, policy considerations dictated that it not be treated as a waivable defense. The court quoted and relied on the following passage from Thompson, supra at 287-288:

"We have never decided whether the requirement that claimants submit claims to an agency before filing suit— the defense of `primary jurisdiction'— can be waived if not raised before or during trial. A question of `primary jurisdiction' arises when a claim may be cognizable in a court but initial resolution of issues within the special competence of an administrative agency is required....

"`Primary jurisdiction,' like the doctrine of `exhaustion of administrative remedies,' is concerned with `promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties.'... We generally defer to agencies for initial resolution of issues the legislature has put in their special competence.... There are two reasons for this doctrine: uniformity of result and application of the specialized and expert knowledge of the agency....

"Some courts have held that the primary jurisdiction defense cannot be waived.... These courts looked at the reasons behind the doctrine and concluded that the parties cannot waive it `since the doctrine exists for the proper distribution of power between judicial and administrative bodies and not for the convenience of the parties.'"

The court also observed, relying on Rinaldo's Constr. Corp. v. Michigan Bell Telephone Co., 454 Mich. 65, 70, 559 N.W.2d 647 (1997), that

Michigan courts recognize the concept of primary jurisdiction as, not so much as 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 agencies and of courts."... In Rinaldo's, supra at 71, 559 N.W.2d 647 the court noted that primary jurisdiction "applies where a claim is originally cognizable in the court and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed with the special competence of an administrative body."⁵ Apparently, however, MCR 2.116(C)(4) (lack of subject matter jurisdiction) is, at least tacitly, recognized as the appropriate procedural vehicle for raising the issue. Id.⁶

The court concluded that the policy reasons supporting Michigan's recognition of primary jurisdiction mirrored those in Thompson and, thus, supported finding that the defense of primary jurisdiction was not subject to waiver particularly where, as here, the case had not proceeded to trial. Applying the rationale in Thompson, the trial court found that defendant's primary jurisdiction defense was not waived, and dismissed plaintiff's argument that it would be prejudiced by the late assertion of the defense in light of the extensive discovery completed in the civil case. It concluded that these discovery efforts would "only assist in a swifter resolution of the matter by the Commission."

I

Plaintiff appeals on several grounds, the first being that defendant waived the affirmative defense of primary jurisdiction by failing to raise it in a timely matter. We agree, but for different reasons.

At the outset, we reject the trial court's conclusion that primary jurisdiction is a defense like subject-matter jurisdiction that can be raised at any time. MCR 2.111(F)(3); MCR 2.116(D). Whatever similarities exist between these defenses, our Supreme Court has held that primary jurisdiction and subject-matter jurisdiction are not one and the same. As our Supreme Court observed in Rinaldo's, supra at 70-74, 559 N.W.2d 647:

Primary jurisdiction "is a concept of judicial deference and discretion." Le-Duc, Michigan Administrative Law, § 10:43, p. 70.... In White Lake [Improvement Ass'n v. City of Whitehall, 22 Mich.App. 262, 177 N.W.2d 473 (1970) ], 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. at 10:43, p. 70.

* * *

The circuit court has not been ousted of its original jurisdiction under art. 6, § 13 of the Michigan Constitution by the regulatory legislation. Under the telephone act of 1913,

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