U.S. Airways, Inc. v. Qwest Corp.

• Decision Date: 01 October 2015
• Docket Number: No. 1 CA–CV 14–0226.,1 CA–CV 14–0226.
• Citation: 238 Ariz. 413,722 Ariz. Adv. Rep. 12,361 P.3d 942
• Parties: US AIRWAYS, INC., Plaintiff/Appellant–Cross Appellee, v. QWEST CORPORATION, a Colorado corporation, Defendant/Appellee–Cross Appellant, Skyline Steel, Inc., an Arizona corporation; One Call Locators, Ltd., d/b/a Elm Locating & Utility Services, a Montana corporation, Defendants–Appellees.
• Court: Arizona Court of Appeals

238 Ariz. 413

361 P.3d 942

722 Ariz. Adv. Rep. 12

US AIRWAYS, INC., Plaintiff/Appellant–Cross Appellee,

v. QWEST CORPORATION, a Colorado corporation, Defendant/Appellee–Cross Appellant,Skyline Steel, Inc., an Arizona corporation; One Call Locators, Ltd., d/b/a Elm Locating & Utility Services, a Montana corporation, Defendants–Appellees.

No. 1 CA–CV 14–0226.

Court of Appeals of Arizona, Division 1.

Oct. 1, 2015.

Gallagher & Kennedy, P.A. By Kevin D. Neal, Jennifer A. Cranston, Liana J. Garcia, Phoenix, Counsel for Plaintiff/Appellant–Cross Appellee.

Ryley Carlock & Applewhite, PA By Rodolfo Parga, Jr., Andrea G. Lovell, Phoenix, Counsel for Defendant/Appellee–Cross Appellant Qwest Corporation.

Audilett Kastner, PC By John J. Kastner, Jr., Tucson, Counsel for Defendant/Appellee One Call Locators, Ltd.

OPINION

PORTLEY, Judge:

¶ 1 In this case we address whether a provision in a public utility's tariff,¹which limits the utility's liability for negligence, may limit a non-customer's damages for negligent telecommunication service interruption. US Airways, Inc. (“US Airways”) claims that the superior court erred by granting Qwest Corporation's (“Qwest”) motion for summary judgment to limit the amount of damages US Airways could recover for a four-hour telecommunication service interruption. US Airways also appeals the summary judgment granted to One Call Locators, Ltd. dba ELM Locating & Utility Services (“ELM”), the contractor that failed to properly find and mark underground cables. Finally, Qwest cross-appeals the determination that it owed a duty of care to US Airways. For the following reasons, we affirm the judgments.

FACTS AND PROCEDURAL BACKGROUND

¶ 2 US Airways operates a data center in Tempe. In January 2009, the owner of a nearby building entered into a contract with Skyline Steel, Inc. (“Skyline”) to build carports in the parking lot adjacent to the data center. Skyline hired Arizona Blue Stake to locate and mark underground cables and power sources. Blue Stake notified Qwest, the owner of underground cable in the construction area, and Qwest hired ELM to search for and locate the cable.

¶ 3 ELM, however, was unable to locate Qwest's cable because Qwest's maps were inaccurate. Under its contract with Qwest, ELM was supposed to contact Qwest for further instructions, but did not. Instead, ELM marked the ground with a “no conflict” mark, which inaccurately indicated that the Qwest cable had been located and was outside the excavation site. Skyline saw the marking, began construction and promptly severed the cable serving the US Airways data center, causing a four-hour telecommunication service interruption at the center. The interruption was not to any services Qwest provided to the data center, but only from the telecommunication services of AT & T and Electronic Data Systems.

¶ 4 US Airways sued ELM, then added Qwest and Skyline as defendants. US Airways alleged the defendants were negligent by failing to use reasonable care to locate, identify, mark, or supervise the excavation around its underground cable; claimed Qwest was vicariously liable for ELM's work; and sought nearly two million dollars in damages resulting from the service interruption. Skyline subsequently settled with US Airways.

¶ 5 Qwest moved to dismiss for failure to state a claim pursuant to Arizona Rules of Civil Procedure (“Rule”) 12(b)(6), arguing that Section 2.1.3(B) of its Federal Communications Commission (“FCC”) tariff and Section 2.4.1(A) of its Arizona Corporation Commission (“ACC”) tariff barred or significantly limited any liability to US Airways. After briefing and argument, the court granted Qwest's motion in part, finding that the FCC tariff applied and limited Qwest's liability for its negligence to the proportionate service charge as defined in the federal tariff. US Airways filed an unsuccessful motion for reconsideration.

¶ 6 ELM subsequently filed a motion for summary judgment arguing it owed no duty to US Airways and that it was entitled to protection under Qwest's tariffs. US Airways responded by filing a cross-motion for partial summary judgment against Qwest and ELM on the issue of negligence. After briefing, the court found that ELM did not owe US Airways a duty, granted ELM's motion for summary judgment, and denied US Airways' partial cross-motion as to ELM. The court also denied the partial cross-motion as to Qwest, but found that as a matter of law Qwest owed a duty to US Airways.

¶ 7 At the request of US Airways and Qwest, the court entered a judgment in favor of US Airways against Qwest for $586.40, which represented the limited damages US Airways could receive under the federal tariff. The court entered a judgment in favor of ELM. US. Airways appealed both judgments and Qwest filed a cross-appeal.

DISCUSSION

I

¶ 8 US Airways challenges the rulings leading to both judgments. US Airways argues that the court erred by finding that Qwest's FCC tariff limited its liability to the $586.40. Specifically, US Airways contends that the tariff provision does not govern claims by non-customers, and its enforcement in this case is unconstitutional and violates public policy. US Airways also claims that the court erred in granting ELM's motion for summary judgment and finding that ELM's contractual duty to Qwest did not extend to US Airways because ELM voluntarily assumed Qwest's duty to identify and properly mark the underground facilities.

A. Motion to Dismiss

¶ 9 We independently review the grant of a motion to dismiss pursuant to Rule 12(b)(6). Coleman v. City of Mesa,230 Ariz. 352, 355, ¶ 7, 284 P.3d 863, 866 (2012); N. Peak Constr., LLC v. Architecture Plus, Ltd.,227 Ariz. 165, 167, ¶ 13, 254 P.3d 404, 406 (App.2011). “[W]e assume the truth of the allegations set forth in the complaint and uphold dismissal only if the plaintiff[ ] would not be entitled to relief under any facts susceptible of proof in the statement of the claim.” ELM Ret. Ctr., LP v. Callaway,226 Ariz. 287, 289, ¶ 5, 246 P.3d 938, 940 (App.2010)(quoting Mohave Disposal, Inc. v. City of Kingman,186 Ariz. 343, 346, 922 P.2d 308, 311 (1996)).

1.

¶ 10 US Airways contends that the tariff does not apply to its negligence claim because it is not a direct customer of Qwest. We disagree.

¶ 11 As a regulated public utility, Qwest's rates, rules, fees and responsibilities are governed by tariffs enacted and enforced by the FCC and the ACC.²See47 U.S.C. § 203 (2012); Ariz. Rev. Stat. (“A.R.S.”) § 40–365; Sommer v. Mountain States Tel. & Tel. Co.,21 Ariz.App. 385, 387, 519 P.2d 874, 876 (1974); Olson v. Mountain States Tel. & Tel. Co.,119 Ariz. 321, 323, 580 P.2d 782, 784 (App.1978); see also Re U.S. West Comm's, Inc.,131 P.U.R.4th 486, 1992 WL 486416 (Ariz. Corp. Comm'n Mar. 27, 1992). Federal courts examining federal tariffs have held that those tariffs have the force of law and “conclusively and exclusively control the rights and liabilities between a carrier and its customer.” MCI Telecomms. Corp. v. Graham,7 F.3d 477, 479 (6th Cir.1993); see also MCI Telecomms. Corp. v. Garden State Inv. Corp.,981 F.2d 385, 387 (8th Cir.1992). Likewise, we have held that state public utility tariffs are binding on all customers. See Sommer,21 Ariz.App. at 387, 519 P.2d at 876(“It is well established that where a telephone company files rules and regulations with the Public Utilities Commission, such rules and regulations are binding upon all customers w[he]ther or not they agree to or have knowledge of their existence.”); Olson,119 Ariz. at 323, 580 P.2d at 784(upholding tariff limitation of liability).

¶ 12 Generally, Arizona, and other states, have held that a provision in a tariff that limits a public utility's liability for ordinary negligence in the delivery of its services is reasonable and will be upheld. See Sommer,21 Ariz.App. at 387, 519 P.2d at 876; Olson,119 Ariz. at 324, 580 P.2d at 785; see also Pilot Indus. v. S. Bell Tel. & Tel. Co.,495 F.Supp. 356, 361–62 (D.S.C.1979)(upholding tariff provision limiting telephone company's liability for service interruptions absent gross negligence or willful or wanton conduct); Warner v. Sw. Bell Tel. Co.,428 S.W.2d 596, 603 (Mo.1968)(noting that “such limitation provisions are generally valid and enforceable”); Bulbman, Inc. v. Nev. Bell,108 Nev. 105, 825 P.2d 588, 590 (1992)(adopting position held by most jurisdictions; namely, “upholding validly promulgated provisions of Public Service Commission tariffs and holding that the liability limitations contained in such tariffs apply to claims for simple negligence and breach of contract”); Landrum v. Fla. Power & Light Co.,505 So.2d 552, 554 (Fla.Dist.Ct.App.1987)(same); S. Bell Tel. & Tel. Co. v. Invenchek, Inc.,130 Ga.App. 798, 204 S.E.2d 457, 460 (1974)(same); Computer Tool & Eng'g v. N. States Power Co.,453 N.W.2d 569, 573 (Minn.Ct.App.1990)(same); Garrison v. Pac. Nw. Bell,45 Or.App. 523, 608 P.2d 1206, 1211 (1980)(same); Sw. Bell Tel. Co. v. Rucker,537 S.W.2d 326, 331–32 (Tex.Civ.App.1976)(same). Courts enforce a tariff provision limiting liability because a public utility is strictly regulated, and, as a result, its liability should be defined and limited so that it may be able to provide service at reasonable rates. Re U.S. West,131 P.U.R.4th at 505(citing Pilot Indus.,495 F.Supp. at 361).

¶ 13 There are, however, no Arizona cases addressing whether a tariff provision limiting liability for service interruption may be enforced against non-customers.³In ruling on Qwest's motion, the superior court favorably cited a California Court of Appeals case, Colich & Sons v. Pac. Bell,198 Cal.App.3d 1225, 244 Cal.Rptr. 714 (1988). In Colich,an excavation subcontractor damaged a telephone company's underground cable, which caused service interruption for several of the company's customers, including United Airlines. Id.at 1230, 244 Cal.Rptr. 714. United Airlines sued the subcontractor for negligence, and the subcontractor filed a cross-claim for indemnity against the telephone company for failing...